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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.
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.
& study by NCTA revealed that, in all, 76 per cent of the systems
affected by the CRT decision were forced to drop distant signals.
million hoces across the country lost the availability of alternative
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.
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
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
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
A dramatic illustration of this inequity recently occurred in
A cable company,
which owned cable systems in.
several suburbs of Pittsburgh, acquired the franchise for the
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
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
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.