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FCC has removed the regulatory debris of a previous de cade; we have thus

expanded the choices that consumers will have in the future."6/

Unfortunately for consumers,

a mere two years later the Copyright

Royalty Tribunal took action to undo that expansion of choice.

The 1976 Act established statutory rates for the importation of distant

signals, but also provided that the CRT could adjust those rates if the FCC

changed its signal carriage rules.

Following the elimination of the distant

signal carriage restrictions by the FCC, the CRT in 1982 issued a ruling

which raised the copyright royalty fees for distant signals added as a

result of the deletion of the FCC's rules.

The new rates for these added

signals were almost 400% over the average rate, and as much as 1500% over

the lowest rate, paid by cable operators prior to the CRT ruling.

The

result of this draconian increase was predictable:

consumers were hurt.

After the CRT decision, subscribers in many markets were unwilling or

unable to finance the huge cost increase, so signals such as Ted Turner's WTBS superstation and the Chicago Cubs' station won'were dropped from cable

6) Id., Separate Statement o Chairman Charles Ferris, at 890.

systems.

& study by NCTA revealed that, in all, 76 per cent of the systems

affected by the CRT decision were forced to drop distant signals.

Over 10

million hoces across the country lost the availability of alternative

programming.

Even worse, this CRT rate adjustment was more than simply a one-time

di saster for cable consumers. The economic ceiling imposed in 1982 by the

CRT still acts today as an artificial, regulatory barrier to providing more

programming on cable television.

While tbe provision of distant signals over cable systems is of value to

consumers in terms of diversity and freedom of choice, the economics of

these signals historically have been marginal to cable operators.

Cable

consumers frequently have indi cated a desire to receive these distant,

condercial television signals, but they have not generally been willing to

pay the kind of premium prices paid for ad-free programming such as Home Box

orfice and Showtime.

The imposition of the CRT copyright royalty rate bas

severely in påcted this marginal situation and made carrying these additiona!

signals simply too costly for many consumer s.

Accordingly, these consumers

are denied the expanded choice in programming that federal communications

policy has sought to provide.

In 1982, when the CRT handed down its decision, there were approxicatel;

29 million cable homes across the country.

Now there are over 38 million.

Mos: of the cities which were unwired in 1982 have since coupleted the

franchise process and either now have, or soon will have, cable television

available to their consumers.

Perhaps more important, where cable systems

have been in operation for several years, there exists a pattern in the

industry for systems to upgrade the facilities and services available to

their consumers,

There is technical capacity in cable systems all around

the country to bring consumers additional programming through importation of

distant signals, but carriage of these signals is effectively prohibited by

the copyright royalty rates established by the CRT.

Some fine-tuning of the CRT and Copyright office rules also may be

ne cessary in order to relieve this ana chronistic, anti-consumer impact and

allow consumers access to the greatest possible choice in programming.

Here are basic principles that should be followed to ensure a fair and

balanced copy right policy for consumers:

o consumers should not pay copyright royalties on programming they

do not receive.

Consumers today are forced in three different

ways to pay copyright royalties for programming they do not even

receive.

The Copyright office currently treats contiguous systems under

common ownership and operating out of the same headend as a

single cable system for copy right royalty purposes, regardless of

the programming carried by each system.

Yet these systems are

generally programed independently of each other and frequently

do not provide all of the same programming. Under Copyright

office rules on contiguous systems, consumers are charged

copy right royalties for distant signals imported into a

neighboring system, even if their sy stem does not even carry

those signals.

A dramatic illustration of this inequity recently occurred in

Pittsburgh.

A cable company,

which owned cable systems in.

several suburbs of Pittsburgh, acquired the franchise for the

city itself.

A total of six distant signals were provided over

all the systems; but the most any single sy stem carried was two,

and which two varied from sy stem to system.

With the acquisition

of the franchise for the city of Pittsburgh, these independent

sy stems be came one giant, contiguous system for copyright royalty

pur po ses. Under the Copyright orfice's rules, roy al ty would be

charged against the revenues for all cable subscribers for all

six different signals, even though the total number of distant

signals received by any individual cable subscriber was only two.

Because the copyright rules consider Pittsburgh and its suburbs now to be a single sy stes, local consumers would be forced to pay

more than $2,000,000 a year extra for copyright royalties without

receiving any additional programming.

Where cable systems are operated as independent, franchised

entities, they should be treated as separate entities for

copy right purposes.

In addition to the problem of contiguous, commonly-owned systems,

consumers are required in another way to pay for programming they

don't receive,

Beca use of the accounting mechanisms established

by the Copyright office under the Act, consumers must pay

copy right royalties on distant signals based on the system's

subscriber revenues for a six-month period, even if the signal

was not provided throughout that six-month period.

A major component of the Cable Communications Policy Act of 1984

provides cable operators with greater flexibility to change their

programming line-up offered to consumers.

When consumers act

through the marketplace to reject a particular programming

service, operators will remove that service from the system and

switch to another.

Yet under the current copyright law,

consumers would continue to pay royalties for the service they do

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Finally, the Act currently forces payment of a minimum copy right

fee by consumers through their cable systems even if the system

carries no distant signals at all.

This problem could be solved

by eliminating the minimum payment provision, allowing consumers

to pay only for those signals they actually receive.

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