date of the CRT's cable rate adjustment to March 15. We responded to the specific question which was asked of us. I want to emphasize, as we made clear in the correspondence with the representatives from the cable industry who made the inquiries, we were deliberately exercising bureaucratic restraint, in answering exactly that question that was asked.

The question was, if a cable system carries the affected signals at any time-strike that-this question was, if a cable system discontinues a signal prior to March 15, 1983, the new effective date, will the system be required to pay the statutory royalty for the entire period? And our answer to that question was yes. That answer is based on a regulation which was adopted after a full rulemaking proceeding in 1980, to the effect that if a signal is carried at any time during an accounting period, except for a few precise statutory exceptions not relevant here, payment must be made for that signal at the established rate, whether it is carried 1 day or for the entire period.

The industry, however, has other questions. One of the reasons that we refrained from expressing any further views was that we were hopeful that there would be expedited consideration of the appeal of the CRT rate adjustment, and that we would have guidance from the court. It is now apparent from the briefing schedule that it is unlikely, probably impossible, for the court to render a decision before March 15, 1983.

It goes without saying that whatever the courts decide controls what we do, and we will be guided by that. But now, since we are so close to March 15, it will be our intention that, if the rate is sustained, and if there are no directions by the court to the contrary, we will apply the old, lower rate prior to March 15 and the new, adjusted rate, beginning March 15.

Having said that, I do want to put in a caveat. We issue opinion letters. I am not so foolish as to say that courts and other people do not take into account what our opinions are. But on the basis of our opinion, the cable systems make up their own minds about what filing they are going to make and what royalties they are. going to pay, depending upon their interpretation of the act. If the cable systems misinterpret the act and underpay royalties, we have no authority to police that, punish that, or anything of the sort. If there is a remedy, it is because the copyright owners then sue in a private action.

Having said that, there is no doubt that attention is paid to our interpretation of the act and our position is expressed in terms of what we require in the forms that are used by the industry.

Mr. KASTENMEIER. Well, I think that is a very helpful clarification and I appreciate your taking this opportunity to make a statement concerning it. It is clear that we are going to have many issues arise during the next 12 months. I do not know that this subcommittee will spend quite as much time in the copyright area as it has in the past.

We spent a great deal of time in the last Congress-
Mr. LADD. A lot.

Mr. KASTENMEIER [continuing]. On copyright matters and, except for a couple minor administrative matters, largely we were spinning our wheels. So, the early part of the 98th Congress, certainly

the 1st session, we will devote to matters other than copyright. But there are some things, some of them relatively new, which will come to our attention, and it will be appropriate for us to deal with them.

We will again solicit your views on those matters. As you say, your views are important.

We appreciate your appearance this morning and that of Ms. Schrader and your Assistant General Counsel Dick Glasgow. I again urge members to read the Register's full statement as submitted for the record to this subcommittee.

Thank you very much.

Mr. LADD. I might point out, Mr. Chairman, in leaving, that the report on photocopying is formidable. What you have is the main report and seven appendixes. There is, however, an executive summary in the front of the report which I think is a useful and economical introduction to the issue.

Thank you, Mr. Chairman.

Mr. KASTENMEIER. Thank you.

Our next and last witness this morning is Commissioner Edward W. "Eddie" Ray, Chairman of the Copyright Royalty Tribunal. Appointed in 1982 by President Reagan as a Commissioner on the Tribunal, Mr. Ray has previously had a successful professional career as a music and entertaining executive, both in Hollywood and in Memphis.

He has been involved in the development of a number of successful recording careers, including Fats Domino, the Osmonds, Sammy Davis, Jr., and others. Mr. Ray has also founded and operated a commercial music school.

Mr. Ray, you are welcome. You have a statement which I think involves many collateral materials, since it is 32 pages in length. The first eight pages are devoted to your remarks in brief. You may proceed as you wish.

TESTIMONY OF EDWARD W. RAY, CHAIRMAN, COPYRIGHT ROYALTY TRIBUNAL, ACCOMPANIED BY THOMAS C. BRENNAN, COMMISSIONER, DOUGLAS E. COULTER, COMMISSIONER; MARY LOU BURG, COMMISSIONER, AND KATHERINE D. ORTEGA, COMMISSIONER

Mr. RAY. If I may, I would like to read my statement. It is quite brief, it is only six or seven pages, and only takes a moment. But before I do, I do want to call to your attention, and to the committee's attention, that I am also submitting a more detailed report that describes the CRT's activities during fiscal year 1983 and the projected activities for the balance of 1983 and 1984.

At this time, I will read my brief statement.

Mr. Chairman, my name is Edward "Eddie" Ray, Chairman of the Copyright Royalty Tribunal. Appearing with me are Commissioners Thomas C. Brennan, Douglas E. Coulter, Mary Lou Burg, and Katherine Ortega.

We are pleased to appear before you in order to present this subcommittee testimony on the activities of the Copyright Royalty Tribunal. Since a detailed activity report is submitted as part of the

record, it is unnecessary to burden the subcommittee with repetitive testimony on most of these matters.

However, Mr. Chairman, I do have a brief statement that reflects the Tribunal's views on other matters that may be useful to the subcommittee in the performance of its legislative responsibilities. First, I would like to turn to the Tribunal's recent proceeding for the adjustment of certain cable television copyright royalties. On this subject, the Tribunal must observe a narrow line between our obligation to preserve the integrity of the judicial process and the need of this subcommittee for information necessary to the performance of its legislative responsibilities. Because of the substantial change in the membership of the subcommittee, it may be useful to briefly describe the background of the Tribunal's proceeding.

The Federal Communication Commission commenced a proceeding to consider essentially deregulating the cable industry by the complete repeal of their rules restricting the importation of distant signals and providing protection for program syndication exclusivity. During the Commission's proceedings, Chairman Kastenmeier and other members of the subcommittee expressed concern to the Commission at their proposed course of action. The thrust of these comments was that the Congress, in enacting the cable copyright provisions of the Copyright Act of 1976, did not contemplate the complete elimination of the cable rules. Piecemeal revision of the regulations, rather than outright repeal, was said to be what Congress clearly had in mind.

Chairman Kastenmeier, in a letter of March 13, 1980, to FCC Chairman Charles Ferris, said:

The announced intention of the Commission to deregulate the cable industry is particularly of interest because we did not contemplate such a sweeping change in the regulatory structure when we drafted Public Law 94-533. Complete deregulation of the cable industry at this time would not only have the effect of placing enormous burdens on a Tribunal not fully prepared to meet them, but would also precipitate a panicked rush to Capitol Hill for remedial copyright legislation.

Mr. KASTENMEIER. As far as I am concerned, Mr. Ray, you are quoting my own letter, that has already been a matter of public record, and it has nothing whatsoever to do with your decision. That was a letter from myself to the FCC Chairman in advance of contemplated rule changes.

Mr. RAY. Yes, sir, we understand that, sir, thank you.

Mr. KASTENMEIER. But if there was to be a change in policy, then the FCC and the Congress were responsible, not your Tribunal, sir. Mr. RAY. Yes, sir.

The Commission did deregulate the cable industry, which action was repealed in the second circuit. In the case of Malrite TV v. FCC, the court of appeals affirmed the Commission's action and described the relationship between the FCC and the Tribunal.

The court said, and I quote:

The plain import of paragraph 801 is that the FCC, in its development of communications policy, may increase the number of distant signals that cable systems can carry and may eliminate the syndicated exclusivity rules, in which event, the Tribunal is free to respond with rate increases.

This subcommittee proceeded with a protracted examination of the cable copyright issue in light of the FCC action. The cable in

dustry asserted that no legislative action was necessary, as the Tribunal had authority to make any necessary rate adjustments. The chairman and other members of the subcommittee maintained that the FCC action had undermined the basis for the cable copyright provisions, and that this balance could not be fully restored by the Tribunal adjusting rates.

The National Cable Television Association [NCTA] petitioned the Tribunal to commence a rate proceeding. NCTA argued that a decision by the Tribunal was urgent, so that cable operators would have knowledge of the copyright fees, and could make an informed judgment as to which signals they desired to carry. The Tribunal approved the request and commenced the proceeding. During much of 1982, the Tribunal proceeding and congressional consideration of significant changes in the cable copyright law proceeded simultaneously.

The Tribunal proceeding was exhaustive with 23 days of hearings. As in all Tribunal cases, the Commissioners personally heard the testimony and examined the witnesses. At a Sunshine Act meeting on October 20, 1982, the Tribunal, by unanimous vote, adopted its final rule.

The Tribunal determination was based on the record evidence presented in the proceeding. We note that some of those most active in discussing our determination did not participate in the proceeding, or present evidence. As the chairman is aware, the Tribunal is without authority to compel the presentation of evidence. We have on several occasions brought this matter to the attention of this subcommittee. The General Accounting Office has supported our position, stating that they knew of no body in the Federal Government performing similar rate functions without such authority. I request that a copy of the Tribunal's opinion, as published in the Federal Register of November 19, 1982, be made part of my testimony. The Tribunal shortly will file with the subcommittee a copy of the brief being filed by the Department of Justice in support of the Tribunal's determination. I request that the document also be made part of the record. These documents must speak for the Tribunal on the particular matters before the Tribunal. During the pendancy of the appeal, the Tribunal will not discuss particular evidentiary matters, or specific rate determination. We will, independent of the record of a particular proceeding, discuss our views on cable matters which may receive consideration by the subcommittee in this Congress.

The Tribunal, in previous testimony before the Senate and House legislative committees, has expressed our view concerning the existing statutory compulsory licenses on the basis of the experience garnered from our proceedings. It has been our position that the test to be applied to a compulsory license is whether, in the absence of the license, does a user have the opportunity without unreasonable clearance burdens to obtain timely access to copyrighted works at a reasonable price. As to the cable compulsory license, we testified before this subcommittee in 1981 that:

It is our view that central to the consideration of this issue is the finding of Congress in 1976 that "it would be impractical and unduly burdensome" to require the operators of cable systems to negotiate with copyright owners whose works are retransmitted by cable systems. We are not aware of any changes in copyright clear

ance procedures that presently provide justification for altering the judgment of the Congress that a cable compulsory license is currently necessary.

We currently have no reason to alter our 1981 testimony. Another issue to be considered in the justification of the cable license is the current and future role of distant signals in the operations of cable systems. Because of the current appeal, we must refrain from discussing this issue. The subcommittee staff might find it useful to review our hearing record on this subject.

On the basis of our cable proceedings, we cannot find any public policy justification for now fixing cable copyright royalties below the value of the copyrighted works in the distant signal market. Not only is such a practice unfair to copyright owners and conventional broadcasters, it serves to distort the competition among a variety of sources providing product to cable operators.

If the Congress retains the compulsory license, but undertakes to amend section 111, we recommend that a fee schedule be adopted which would provide that the rates for all distant signals now be established at reasonable marketplace rates, and without any discounts to assist the development of the cable industry. This schedule could be established in such manner as the Congress determines to be appropriate.

Chairman Kastenmeier, in a letter to the Tribunal of January 7, 1983, stated, with regard to the statutory fee schedule, that the payment scheme was carefully crafted to insure adequate payment to the owners of copyrighted material. We testified on April 29, 1981, before the Senate Committee on the Judiciary that there is absolutely no empirical economic justification for the statutory schedule. Our review of the public legislative history in the Senate, where the copyright bill and fee schedule originated, provides considerable support for our testimony. Of the amended fee schedule adopted by the House, the Judiciary Committee, at page 91 of its report, stated that it believes that such payments are modest. In a letter of November 26, 1979, to Chairman Ferris, Chairman Kastenmeier stated that this subcommittee was conducting hearings to examine the adequacy of revenue generated by the existing statutory license.

On this subject, we wish to correct the record concerning incorrect statements relating to the Tribunal in the minority views of Messrs. Harold Sawyer, M. Caldwell Butler, Barney Frank and Dan Lungren to accompany H.R. 5949 of the 97th Congress, the cable copyright bill. They assert that the Tribunal's bureaucratically fixed royalties were unrealistically lower than their true market value. The fee schedule was adopted by the Congress, not by the Tribunal.

Any serious examination of the cable issue must acknowledge that consideration must be given to both communications and copyright policy issues. This general observation does not address the allocation of functions among coequal agencies of the Federal Government. As Congressman Railsback said on this subject on the House floor in 1976, "The Federal Communications Commission and the Copyright Royalty Commission are two separate commissions with entirely separate jurisdictions, proceedings and functions."