I am sympathetic to the problems that some producers and distributors of syndicated programs may increasingly face as a result of the FCC's Cable Deregulation action. I am not very sympathetic to the position that some in the cable television Industry have taken on this controversial issue. It is highly unlikely that the future development of the cable industry will depend on its ability to retransmit "Leave It to Beaver" ΟΙ "Hogan's Heroes" paying only a nominal, statutory royalty fee. Too, to the extent that cable television systems are, essentially, encouraged to fill up their channels with this kind of programming fare for which they now pay very little --they will have less of an incentive to offer the public new program choices and options.

-

Having said this, we are nonetheless opposed to the reimposition of the syndicated exclusivity rules, as H.R. 5949 proposes. The sound solution here lies not in reinstituting a web of regulatory constraints regarding permissible cable programming. Rather it lies in moving toward the kind of marketplace solution to cable television copyright issues that many have proposed.

A former Member of the Copyright Royalty Tribunal, for example, recommended that the entire compulsory licensestatutory fee system be abolished, in favor of full and immediate reliance on private marketplace negotiations. Other proposals have included continuing the present arrangements for that complement of non-local signals the FCC previously allowed, but requiring all cable systems to negotiate for "new" signals and programs. Under a marketplace approach, Congress could provide special copyright arrangements for cable systems below a certain number of subscribers and located in smaller markets or in rural areas.

98-703 0-82-7

The Administration has taken the position that we should move promptly toward full copyright liability. Simply trying to "fine-tune" the present cable copyright system is not the answer.

Sports Programming

The FCC's 1980 Cable Deregulation order left in place the earlier signal carriage rules regarding sports events. See 47 CFR Sec. 76.67 (1980). These rules afford local teams "gate protection" against the local cable exhibition of their Own games. Under section 401 of H.R. 5949, the FCC's cable sports rules would essentially be codified. The section would also prohibit cable systems from retransmitting from distant markets the local, non-network telecasts of college football games during the period September 1 through the second Saturday in December of each year. Cf. 15 U.S.C. Sec. 1293 (1976). Collegiate football organizations thus would retain the control not only over the local exhibition of their games they now enjoy, but would also gain control over the distribution of their games outside their home territories.

H.R. 5949 would not resolve the controversy over whether professional sports should be able to control the distribution of their games outside their home territories. Our recommended solution to both professional and collegiate sports issues is not the adoption of a highly regulatory system governing the distribution or nondistribution of sports programming on cable. Rather here, as in the case of syndicated programming, we believe that the soundest approach would be to change the present compulsory license system.

Conclusion

It is axiomatic that regulation tends to beget further regulation, especially when it is imposed on a technologically.

services they want to buy and sell. There is no sound public policy justification for continuing the present highly regulatory system regarding cable television programming. There is even less justification for legislation, such as H.R. 5949, which seeks essentially to perfect the present regulatory system by striking an intensely complicated balance among a diversity of competing private interests.

-

In the next few years, we will continue to experience the rapid growth and further development of both established broadcast and new communications media cable television, low power television, video cassettes, low power TV, direct broadcast satellites, and perhaps others. The key public policy question Congress must resolve is how best to ensure an adequate supply of the programming that all of these new and competing media will need to compete. The principal question is not whether any given system is "fair" or "unfair" to any particular interest group. Fairness is an important consideration bearing upon the efficient functioning of markets. But, again, the key question remains: what system will provide producers of programming the maximum incentive to produce?

The Administration strongly believes that this necessary incentive to produce is most likely to be ensured, indeed maximized under conditions of free and unregulated competition. Accordingly, we urge the Subcommittee to report unfavorably with respect to this highly regulatory legislation, and recommend that

* See generally Report of the National Commission for Review of the Antitrust Laws & Procedures 177 (1979); Report of the Attorney General's National Committee to Study the Antitrust Laws 261 (1955).

Congress instead seek to pass legislation ensuring that cable television copyright issues will be dealt with and resolved in

the marketplace.

Mr. SWIFT. Thank you very much.

One of the things I was going to suggest to the other panel was that sometimes Congress did its best work when it was able to urge or bring pressure to or otherwise get legitimate conflicting interests in the marketplace to sit down and work out their own compromises because they tend to have the expertise and, in that fashion, they are their own advocate rather than Congress, which however expert we may get is never as expert as the individual himself, rather than us superimposing some solution on them.

Once you can get those diverse sources to come to an agreement-and Congress obviously has to take a look at that agreement from the standpoint of the public interest, and then past that I think sometimes those are the kinds of things we do best. But, unfortunately, we rarely can make that occur.

It seems to me that it has occurred. It seems diverse forces with some very different, conflicting interests-and from the perspective of each industry legitimate have worked out something that they all think will serve them well and which the Judiciary Committee, in a judgment I don't disagree with, feels will also serve the public well.

They have provided a solution. Now, interestingly in an argument based on free market, you are both objecting to the implementation of that solution.

I suppose my question comes, do you define free market so narrowly that you don't let industries in that market negotiate together to determine how they would work out conflicting interests? It seems to me that that is very free. This is not a government or a congressionally superimposed solution on those industries. It is one that they, in fact, arrived at.

Is that not in some way consistent with the philosophies that both of you would present to the committee?

Mr. FOWLER. I would respond by generally observing that I think you are exactly right, Mr. Chairman, in saying that the Congress must now look at this to see whether the public interest is served. I think our problem, if I can speak on behalf of both Mr. Wunder and myself, is that although it may serve the parties' interests, in our view it doesn't serve the public's interests terribly well.

What is at issue here, among other things, is that people will see less programing if you have syndicated exclusivity and their ability to see sports programing will be even further restricted.

Our experience at the Commission when we had syndicated exclusivity rules was, for example, when MASH came on at 7:30 on a cable channel and there was a blackout, because of syndicated exclusivity rules, the cable operator would cable cast a notice to that effect, telling subscribers to call William Johnson. We got thousands of calls because the public hated that rule. They had a sense that somehow something was terribly wrong.

So what we are saying is, from the people's standpoint, there will be less programing available, and there will be greater restrictions than there are now. It may serve the interests of those who entered into the agreement, but it is hard to see what the public interest would be.

I think it goes in the wrong direction. Instead of unregulation, or deregulation, or reregulation, this is new regulation. So, I think it

goes in the wrong direction. We believe that there has not been a showing that these kinds of regulatory solutions are necessary and, until you make that showing, we don't think that there is any need not to go to a marketplace solution, where the consumers can then buy what they want and indicate what they want with what intensity.

So, it is kind of a long answer to your question, but we think the consumer loses under this bill.

Mr. SWIFT. It was a long question, so a long answer is appropriate. I assumed that would be your answer, that you would argue this is not in the public interest. On the other hand, I think there are some assumptions contained in what you say concerning narrowing the choice for the consumer in terms of programing availability and so forth.

We are in a period of enormous growth in the methods by which programing is going to be achieved. I just don't know that the restrictions that you claim will occur, and if it did occur in a marketplace that is growing in terms of the number of programing sources, I would think that whatever restrictions might have occurred will be replaced, if it is not already replaced in advance, if that is possible, but would be replaced very soon.

In the meantime-and this is what has concerned me as a member of this and particular subcommittee for so long-there has been so much effort on the part of these three industries to hash over this issue for years and years, and it is time they put it behind them and get on with other things.

It seems to me this is a way that does it and, in my judgment, one that is not contrary to the public interest, though I do see where it runs afoul of your rather absolutist sense of how the marketplace should work.

My view is not in total contradiction with that, though, Mr. Chairman, I do think sometime over a dry martini we might want to explore what I see as some limitations to your particular philosophy in that regard.

It just seems to me you can't make a clearcut case that this is not in the public interest. I think you can, in fact, make a case that with the diversity of sources that are on line and coming in, that what this really does is resolve some horrendous disputes that have put more blood on the floor of the communications industry over the last 10 years, resolves those, cauterizes those wounds and gets broadcasting and cable and the program producers off into doing something future oriented rather than hassling with these issues that have been around every since cable put its head up over the table.

Mr. WUNDER. I am going to bring up something I know you will recall, because you and I sat in room 2322 of this building in a hearing on a bill known as H.R. 3333. What we were talking about was a previous agreement entered into in 1976, worked out under similar circumstances.

I remember the gentleman from the cable industry holding up the agreement that was enlarged about 25 times and saying, "There is Jack Valenti's name.' What was the issue? The grand solution of 1976. It has outlived its usefulness.