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it will result in marginal locations, or a certain percentage anyway in marginal locations, being taken out.

Mr. KASTENMEIER. My last question is, you have heard, I believe it was Mr. Korman's suggestion, how if there were tribunal effective after July 1, 1977, how it would work, how you would negotiate, and what the history has been of ASCAP, talking about his own performing rights society, in negotiations with others up or down, as a matter of fact. How do you see it working? How would it work? Supposing the Senate bill as it came out of committee were, in fact, then enacted into law, despite your protestations. How would it work? That is, how do you see it working any differently than Mr. Korman suggested it might work operationally in terms of your getting together and negotiating?

Mr. ALLEN. Well, Mr. Chairman, the bill as it came out of the Senate does not have this in it.

Mr. KASTENMEIER. No; I understand. This is a hypothesis only, that somehow a bill as it came out of committee were adopted and you found yourselves, your industry, in a position of having a tribunal, a $8 fee, the other thing that you agreed upon, but there would be a tribunal. Then there would be notice in the Federal Register by the Register of Copyrights and so forth. How do you see it working? Presumably you and others, perhaps you and Mr. Patterson, and various others here, the officers of the organization would be involved as well, and we would be getting together with representatives of the performing rights societies and negotiating some way. I was wondering how you see it working if you were, you know, in that position, if that happened to you!

Mr. PATTERSON. I would think, Mr. Chairman, that there would be the alternative of negotiating with the representatives of the societies when they advise that they felt that the fee should be $12 per year or alternatively, trying to develop in depth and in detail the economics of the industry and whether there had been changes that merit that. And as Mr. Korman said, under the consent decree, ASCAP has yet to have the Federal court establish a decree although there have been a number of proceedings. The parties have arrived at a negotiated rate. But I think again, using the term you did, in candor, the reason the exception has prevailed for 40 years or more is because the jukebox industry has been a grassroots, rural industry in terms of image and in terms of looking to Congress for protection, while the performing rights societies have essentially been urban or metropolitan in image. And going to a copyright tribunal, the operators, in my judgment, feel that they would be at a disadvantage from a standpoint of sheer weight of bargaining strength, whereas if they were looking to their Congressman to accept as reasonable or not an increase in the statutory rate, their position would be more effective.

Mr. KASTENMEIER. But you do not take any major difference from the way Mr. Korman suggested it would operate, what he suggested in terms of hypothetically how it would operate?

Mr. PATTERSON. If it were there, for practical purposes I think that is how it would operate.

Mr. KASTENMEIER. Well, thank you very much.

If Mr. Pattison has no more questions, I would like to thank all the members of the panel for their contribution this morning. And in terms

of the case of Mr. Nicholas Allen and Mr. Perry Patterson, we want to greet you back to a hearing before this committee after an absence of many years. And I would express gratitude of the committee to the rest of you who as officers of the organizations and who have otherwise appeared before us this morning. Thank you.

Mr. COLLINS. Thank you, Mr. Chairman.

Mr. KASTEN MEIER. This concludes this morning's hearing on one aspect of copyright, section 116 on the impact on jukeboxes in America.

On next Thursday morning, June the 5th in this room at 10 o'clock, the committee shall hear from Mr. Ashton Hardy, General Counsel of the Federal Communications Commission; Mr. Thomas Keller, the Acting General Counsel of the Office of Telecommunications Policy; Mr. Fulton Brylawski, professor; Mr. Rondo Cameron and Mr. Donald Merry of Sicom Electronics Corp. So until that time the subcommittee stands adjourned.

Mr. ALLEN. I am sorry, I forgot to request permission. We are not going to be present, I think, at the later hearings having to do with mechanical fee and the royalty for the recording arts, and we would like to have permission to file whatever reply we think might be appropriate


Mr. ALLEN [continuing]. To the statements that will be made.

Mr. KASTENMEIER. Without objection, not only will the prepared statements that you have made today be accepted for the record in full, in addition to your oral statements, but any statement the Music Operators of America or Mr. Patterson may have in connection with the question of mechanical royalty will be accepted for the record.

Until Thursday next, 10 o'clock in this room, the subcommittee stands adjourned.

[Whereupon, at 12:35 p.m. the subcommittee recessed to reconvene on Thursday, June 5, 1975, at 10 a.m.]




Washington, D.C.

The subcommittee met, pursuant to call, at 10:15 a.m., in room 2226, Rayburn House Office Building, the Honorable Robert W. Kastenmeier [chairman of the subcommittee] presiding.

Present: Representatives Kastenmeier, Danielson, Drinan, Pattison, and Railsback.

Also present: Herbert Fuchs, counsel, and Thomas E. Mooney, associate counsel.

Mr. KASTENMEIER. The committee will come to order.

The committee is meeting this morning for the purpose of continuing hearings on the copyright revision bill, H.R. 2223, and other bills relating to the subject. This morning we have a series of witnesses, the first two representing the Federal Government.

I would first like to call Mr. Ashton Hardy, the General Counsel, Federal Communications Commission. Mr. Hardy.

Mr. HARDY. Thank you, sir.

Mr. KASTEN MEIER. You are most welcome. We would appreciate it if you would proceed.


Mr. HARDY. Thank you, Mr. Chairman.

Mr. Chairman, I am pleased to have the opportunity to present the views of the Federal Communications Commission with respect to H.R. 2223, a bill for the general revision of the copyright law.

The committee is to be commended for addressing the very serious need for comprehensive reform of our Federal copyright laws. As you know, the statute governing this subject was enacted in 1909 and was drafted in terms of the problems of that era. Motion pictures and sound recordings as we now know them were not envisioned at that time, nor were radio and television.

Mr. Chairman, I realize that the scope of this legislation is broad. and that your subcommittee is concerned with such diverse subjects as library photocopying, bootlegging of film and sound recordings, and the ownership of presidential documents. The Commission has no jurisdiction over matters such as these and consequently I will not comment on them. However, the Commission has asserted juris

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diction and promulgated comprehensive rules governing the cable television industry, the subject of section 111 (c) and (d) of the proposed legislation, and thus my testimony addresses some of the background of the cable copyright problem.

Cable television is among those forms of communication which were not foreseen or provided for in the 1909 act. For this reason a complex controversy arose over the copyright liability of cable systems. I would like to trace briefly the evolution of this controversy and the Commission's involvement in it.

When the first cable systems began to operate, most merely extended local television service to rural areas where it had not been previously available. They did not import distant signals into markets where television service already existed, nor did they originate programing or serve major metropolitan areas. For these reasons, broadcast licensees did not anticipate that the new industry would pose the copyright problems that now exist. Similarly, copyright proprietors were generally unconcerned about the growth of cable because they continued to receive royalties from conventional broadcasters and did not anticipate that ČATV would affect this revenue.

Initially the FCC expressed reluctance to assert jurisdiction over cable in the absence of specific legislative authorization. In 1959, 26 FCC 402, the Commission ruled that cable systems could retransmit programs without the express authority of the originating station. We reasoned that cable was merely a means of extending television service and did not pose an economic threat to the broadcast industry. Pursuant to this ruling, cable operators were free to distribute programing without paying copyright royalties.

However, the attitude of the various parties changed abruptly when cable systems began to import distant signals, originate programing, and provide service in metropolitan markets which posed clear competitive threats to broadcasters. Copyright questions then came into focus and broadcasters and copyright proprietors sought protection from the FCC and the courts.

The Commission responded by abandoning its former laissez-faire posture on cable and in 1962 denied a cable system permission to import additional distant signals by microwave. I refer, of course, to the Commission's ruling in the Carter Mountain Transmission Corp. case, which was first affirmed by the District of Columbia Circuit Court of Appeals and certiorari was denied by the Supreme Court. [32 FCC 459, aff'd 321 F. 2d 359 (D.C. Cir.), cert. denied, 375 U.S. 951 (1963).] The Commission was influenced in its decision by the fact that the proposed importation would pose an economic threat to a television licensee which could deprive the public of his service.

In 1965 the Commission further asserted its jurisdiction over cable in its first report and order on cable television-38 FCC 683-which contained the so-called nonduplication rule. This rule manifested the Commission's desire to protect the public interest in existing television service, and to encourage the development of local broadcast stations. It prevented duplication of the originating station's signal on a cable system for a certain period before and after carriage by that station. Under the rule, a copyright proprietor could limit the time and area in which a program was shown and a broadcaster could present

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