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ing suits against cable operators for very minor or even inadvertent violations of FCC regulations. Such a provision is, we think, an aberration, unprecedented in copyright law. It should be stricken from the bill. Adequate remedies for violations of FCC regulations already are available under the Communications Act.

Mr. Chairman, in earlier testimony before this subcommittee Deputy Assistant Attorney General Irwin Goldbloom, of the Justice Department, urged that CATV systems not be required to pay copyright on local signals carried. He further stated that by carrying local signals, the cable system enhances the broadcaster's market, and that the copyright holder is helped, not hurt, by cable system carriage. NCTA fully supports this line of thinking. We note also that Thomas Keller, Acting General Counsel for OTP, stated to the subcommittee last week that local signals should not be liable for copyright.

While Mr. Goldbloom did not suggest to this subcommittee a method or mechanism for imposing liability only on signals outside the area of free use, the logic of his recommendation is undeniably sound. NCTA has addressed internally this question in great detail. We have researched and studied a variety of possible approaches to the Justice Department's concept of an area of free use.

We have, however, determined that it is apparently impossible to arrive at a fee formula embodying this concept applied on a systemby-system basis, which does not discriminate unfairly against one portion of the cable television industry, and consequently against the public receiving service from such systems.

We believe that the concept advanced by the Justice Department can and should be embraced in the following manner. Copyright liability for CATV distribution of broadcast signals should be imposed without respect to signals carried. There appears to be no fair way to impose liability for carriage of certain signals and not others.

By retaining the present fee schedule in H.R. 2223 and exempting from liability the first $25,000 in gross quarterly subscriber receipts for all cable television systems, copyright legislation can give some recognition to that portion of cable service which fills gaps, or improves reception in the service areas of broadcast stations.

Such an exemption involves a reasonably small dollar amount in relationship to the total copyright revenues to be derived from cable now and in the future. It also has the benefit of providing substantial relief to the smaller, traditional community antenna systems. The owners of copyrighted product themselves have frequently stated that they are not primarily concerned with this type of cable system. Indeed, the 1971 consensus agreement envisioned a total exemption from liability for all cable systems serving fewer than 3,500 subscribers. The blanket exemption we propose would have the practical effect of exempting nearly all systems with fewer than 1,500 subscribers. We believe this kind of exemption to be an equitable and fair approach to the problem of copyright liability for local signals. We submit for your serious consideration an amendment to achieve this.

Mr. Chairman, I will now turn to the third matter NCTA would like to comment on. Earlier in my testimony I have alluded to the FCC's cable television regulations and to the close historical interrelationship between copyright and regulation as applied to cable. For your convenience, the most pertinent of those regulations are in

cluded in my text, but, in the interest of time I will skip over those and not read them.

It has been remarked, and I think not too facetiously, that while the Congress has been laboring to develop copyright provisions applicable to cable, the FCC has for some time now been guarding the copyright gate by promulgating copyright regulations of its own.

Earlier this year, in an address to the NCTA convention, Barbara Ringer, Register of Copyrights, stated that the FCC rules "contained the most elaborate copyright provisions I have ever seen anywhere.” She continued:

I don't know much about communications law, but I know copyright law when I see it, and the exclusivity provisions of the FCC regulations are copyright regulations; in effect, the enactment of a copyright law through the regulatory process. And they are unquestionably the most complex and difficult to understand of anything I've ever read in this field.

Absent legislation, or specific congressional direction, and in spite of Supreme Court decisions, the Federal Communications Commission has consistently invoked copyright principles to protect broadcasting from competition. The pervasive nature of the Commission's forays in a variety of regulatory matters into "exclusivity" of all types is in and of itself a subject for broad independent investigation.

For the purpose of these hearings, however, one thing ought to be indisputably clear. While the FCC's 1972 rules have granted cable systems the right to carry a limited number of broadcast signals, that right-and the value and marketability of those signals for cable operators has in very large part been negated by the Commission's syndicated and network program exclusivity provisions. Stated in the simplest of terms, a cable operator has the right to carry signals, but has an obligation to black out most of the programing on those signals. And this is achieved through the Commission's "copyright regulations."

For example, the cable system under construction in Wauwatosa, Wis., must under the FCC's syndicated exclusivity regulation delete 62 percent of the programing on one channel it imports, and 58 percent on the other channel. What, the operator can fairly ask, is the value of carrying the signal? Appendix C of my testimony contains a more detailed explanation of this problem.

It ought to be beyond any logical dispute that if cable systems are to incur liability for the distribution of these signals, then they should have the right to show what has been paid for. Yet, if copyright legislation of H.R. 2223 were enacted today, that would not be the case. We believe it is imperative that the Congress should insure that cable operators get what they pay for. This should be done in this legislation, and we are submitting language to accomplish this aim.

I would like to invite the subcommittee's attention to several additional recommendations for perfecting changes in section 111 of the bill.

Section 111(b) of H.R. 2223 appears to make the secondary transmission of over-the-air pay-television signals an act of infringement, and one subject to civil and criminal penalties. This subcommittee Ishould be aware that Federal Communications Commission regulations require CATV systems to carry the signals of all television broadcast stations in specified geographical areas, regardless of whether

those signals are originated by commercial broadcast stations or STV stations. Therefore, under section 111(b) the cable system would be faced with either violating FCC rules and regulations, or the copyright law.

Next, section 111(a) (4) exempts government-owned and non-profit translators from the requirement to pay fees. As a matter of law, we believe that no rational distinction can be made between CATV systems whose purpose is to improve reception of television signals, and translators which serve the same purpose. Additionally, of course, H.R. 2223 does not exempt nonprofit and government-owned CATV systems. Should not such translators be placed on an even competitive footing with commercial translators and cable systems?

Third, section 111(a) (3), as currently drafted, raises the possibility that cable operators providing leased channels to the public or others could incur copyright liability for the material programed on those channels by the lessees. Federal Communications Commission regulations require that certain cable systems make available channels for lease on a nondiscriminatory basis and that the cable operator may exercise no control over the program content on those channels. We respectfully suggest that the language of section 111 (a) (3) be changed to insure that the cable operator does not incur copyright liability on leased channels. The lessee, of course, would remain liable for the payment of copyright.

Finally, portions of section 111 and the language of section 801 (a) raise the possibility that copyright fees in the future could be based on cable revenues from sources other than basic CATV distribution of broadcast signals.

I believe it is not the intent of Congress to impose copyright liability on cable operations beyond the basic reception service, and indeed there would be no logic to such an approach. The liability contemplated in this legislation has no relationship to revenues derived from local origination, pay cable operations, or any other such service initiated by a cable operator.

We are submitting suggested clarifying language to deal with these four matters.

In conclusion I would like to say, Mr. Chairman, NCTA has for 8 years now worked hard under very trying circumstances to assist in achieving fair and reasonable copyright legislation for CATV. We will continue those efforts, and we stand ready to assist this subcommittee in every way possible. We are handing you copies of the amendments I have mentioned, and I will be very happy to respond to questions. Mr. KASTEN MEIER. Thank you, Mr. Bradley. One point you mentioned, the "Consensus Agreement of 1971."

Mr. BRADLEY. Yes, sir.

Mr. KASTEN MEIER. Is that agreement, as far as you know, or as far as you are concerned, is that agreement still in effect?

Mr. BRADLEY. It's in effect to the extent that its effect has not been denied by actions of the Senate in developing their version of the copyright bill; and certain actions of the FCC, and certain actions of certain broadcasters. Some of the provisions of the Consensus Agreement have been overlooked, or have been ignored. So, it is, in effect, a general type of agreement with some violations.

Mr. KASTENMEIER. Was that agreement set down in writing, and does it appear in a public document, incorporated in the Senate hearings? I don't happen to know that.

Mr. BRADLEY. I don't know whether it's incorporated in the Senate hearings. It has been published in the Television Digest.

Mr. KASTEN MEIER. Was this an agreement of parties, was it verbal, or was it subscribed to?

Mr. BRADLEY. It was written.

Mr. KASTEN MEIER. It's written down, set down in writing?

Mr. BRADLEY. Yes, sir.

Mr. KASTENMEIER. Mr. Bradley, do you happen to have a copy of that?

Mr. BRADLEY. Yes, sir; I have a published copy, it appeared in a magazine.

Mr. KASTENMEIER. Would you make that available to the committee? Mr. BRADLEY. Yes, sir.

Mr. KASTEN MEIER. In referring to the tribunal, you indicate thatreferring to section 501-you indicate that broadcasters would have other remedies, adequate remedies, you state, for violations of FCC regulations are already available under the Communications Act.

What remedies do you have reference to, in connection with broadcasters pursuing their rights against cable television operators?

Mr. BRADLEY. Well, there are two aspects of this, Mr. Chairman. Where the broadcaster owns the copyright, he has the same remedy that any copyright owner has.

And with reference to the FCC regulations, where the broadcaster alleges that a cable system has violated the regulations, he can file a complaint with the FCC, who will then take appropriate action.

Mr. KASTENMEIER. Under the bill that the Senate passed, and given the economics of your industry, say, for calendar year 1974, if that is possible, what do you assume the cost would be under the formula of the Senate bill to at least your member/subscribers as opposed to others?

Mr. BRADLEY. The cost to the industry in total would be, in our estimation, $6,700,000.

Mr. KASTENMEIER. That is the entire industry.

Mr. BRADLEY. Yes, sir.

Mr. KASTEN MEIER. And that is obviously an estimate, $6.6, or $6.7 million?

Mr. BRADLEY. $6.7 million. And to the members of our association it would be slightly over $4 million.

Mr. KASTEN MEIER. Thank you, Mr. Bradley. I yield to my colleague from California, Mr. Wiggins.

Mr. WIGGINS. Mr. Bradley, do you accept, or reject the proposition that cable should pay a royalty fee to the holder of the copyright for the transmission of copyrighted material?

Mr. BRADLEY. We are willing, Mr. Wiggins, to pay copyright, as I have indicated, to a pool which would distribute the proceeds to the copyright owners.

Mr. WIGGINS. Having accepted in principle the payment of a copyright royalty, what is the justification for exempting from that payment those cable systems with gross revenues of less than $25,000?

Mr. BRADLEY. The point there, sir, is that within our industry, as I have mentioned, there is a wide divergence of opinion on property. There are many members of our association, and many members of the industry who are not members of our association who are violently opposed to any copyright payment. There has been testimony, as I mentioned, to the effect that various people feel that there certainly should be no payment for local stations which can be received locally over the air.

Our suggestion is simply an effort to exclude those small systems which would encounter an unusual financial burden as a result of copyright payments; and pass a token recognition of the fact that there should be no payment for the local signals. And while you can't relate the dollars to the value of local signals, at least it is an effort to recognize that.

Mr. WIGGINS. What part of the cable industry-if your answer can reflect it in percentage-would be exempt by the $25,000 gross receipt exemption?

Mr. BRADLEY. Slightly over 50 percent would be exempt.

Mr. WIGGINS. Now, in that connection, I think it's well that we keep in mind that the royalty fee schedule is not a tax, which might be subject to policy reasons for granting preferred tax rates to socially or economically deprived units in furtherance of a governmental policy.

Rather, this is a statutory payment to the owner of the property. The bill before us proposes a fee schedule commencing at one-half of 1 percent of the gross revenues up to $40,000, and graduated up to 212 percent. As you have indicated in your testimony, and as we all know, this represents about a 50-percent reduction from that originally considered by the Senate.

Can you enlighten me and the members of the committee what considerations entered into that judgment by the Senate, why was that reduced?

Mr. BRADLEY. There was a study prepared by someone named Mitchell, to the Senate, which indicated the economic impact of these dollars on the cable industry. I, to some degree, am speculating for a moment, since I was not there personally. But, in discussions which related to this point, there is this continual recognition that we should not be paying for local signals that are receivable over the air.

And that in paying this schedule we are paying an amount substantially in excess of the fee schedule for these signals that we might be legitimately required to pay for, if you exclude the local ones. If you accept that point, which we do, any payment is substantially higher than the numbers would indicate because we are paying for, in effect, all service.

Mr. WIGGINS. Well, would it be fair for me to conclude that the Senate listened to your argument that local signals should not be subject to royalty payments, and perhaps your argument that all signals should be exempt, and simply made an accommodation to these arguments by reducing by 50 percent the fee schedule proposed in the original House bill and thus reached a compromise?

Mr. BRADLEY. Perhaps so, I really don't know. I do know that in our experience it would be extremely difficult to relate a dollar amount to be paid to a value to be established in any scientific fashion for the

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