minute, the instant that signal radiates from the transmitting tower; will you accept that?

In other words, as soon as they release it it's gone and they have no more expense involved in the delivery of that signal.

Mr. RAILSBACK. Yes; they don't deliver it by cable, they deliver it by other means.

Mr. COOPER. That's correct.

Mr. RAILSBACK. That is a different system.

Mr. COOPER. Well, not necessarily. On the other hand, our expense only begins where their expense stops.

Mr. RAILSBACK. But they don't charge viewers, do they?

Mr. COOPER. We did a very interesting study on that a few months ago in which we pointed out that based upon the gross receipts of all television stations of all markets in the country we can very quickly determine a cost per household per year; a cost based upon increased costs for all goods and services that were for sale in the marketplace, which included a percentage for advertising cost, half of one percent for Coca-Cola, for example.

If you do this, you very quickly determine that there is some place between $21 and $50 a year per home, is the average cost, nationwide, that we all pay, we all share it, for the broadcasting service that exists.

Mr. RAILSBACK. You know, what really bothers me and this may not be analogous, but we have sat through record piracy hearings where we have received testimony from record companies to the effect that they have to pay rather substantial costs to invest in a particular production. Then certain people pirate that work product, and sell it at a reduced cost. They have gotten the benefit of that capital investment, and the cost of producing that work and they make a big profit. Now, I have difficuty. I see you charging the individual viewer, and I see the networks using advertisers, and I see you both disseminating creative works, which is in the public interest. But to me it is not logical for them to have to pay for copyright, and you do not. Mr. WIGGINS. Will the gentleman yield?

Mr. RAILSBACK. Yes.

Mr. WIGGINS. Would it make any difference if your reception of the signal were taped by you and rebroadcast at your convenience? Mr. COOPER. Would it make a difference philosophically?

Mr. WIGGINS. In terms of your viability for copyright payments. Mr. COOPER. I would expect it would, yes, sir.

Mr. WIGGINS. What is the difference, other than time?

Mr. COOPER. I think there is a very significant difference, the time of showing, the fact that it is not a simultaneous release.

You see, the cable company-and this is an argument that goes back to 1954, that the cable companies participate in the programing and scheduling of the releases that they show upon their system. Well, the factual matter is, we do not. The disseminator, the television broadcast station showing the movie that you refer to, he picks everything that goes in it, the contents. We have absolutely no choice over it. His expenses absolutely stop the minute that signal is broadcast, whereas ours only begin at that point. He gets a free ride through the federally regulated airways of which there is only a limited quantity available, and we must therefore share those airways, so it's not creating a problem.

Mr. RAILSBACK. That free ride is very, very tightly regulated. Mr. COOPER. That is correct. And I assure you, sir, on the other end, we are even more tightly regulated by the Federal Communications Commission for our "free ride" to our actual cable.

See, a broadcaster, take a total capital plant investment of-to pick a round number-$1 million for a million homes, $1 per home. You can't even begin to touch service to a real or potential cable television home for less than $100, or $150 per home invested, going in, to start with. That is because we have a very high expense of delivering the signal from our head-in, if you will, or tower, to the individual home. We don't have free rides on the waves, we don't have free easements, we must pay a local franchise fee tax. The rights-of-way where we string our cables are the same to us as the broadcaster's either through which he transmits from his transmitting tower on top of the Sears Building, except that we have to pay money, we have to pay a substantial amount of money and have a very high risk involved in maintaining our transmission medium; he has none. His stops the minute his signals goes into the public airways.

Mr. KASTENMEIER. I have just one last question to follow up on several questions that have been asked. Do I understand you correctly, Mr. Cooper, that you feel that CATV should not have to pay a copyright fee unless there might be certain other conditions, for example, if he originates; if he tapes and retransmits; if he sells advertising, if he does a series of other things than simple retransmission, extemporaneous, then, are you conceding that you might have to pay a copyright?

Mr. COOPER. I think on a point-by-point basis, what we are really talking about in terms of conceding that copyright could and should be paid is specifically on the pay television aspect of our industry where a movie specifically is bought and then shown on the cable.

Mr. DANIELSON. If I may interrupt. You mentioned pay television. If you originate, if you just simply put Bambi on the cable, whether you charge individually for it, or not, do you see any reason why you should not pay copyright, if you originate?

Mr. COOPER. If I have procured Bambi, or the rights to show it on the open market

Mr. DANIELSON. If you originate, put it on your cable

Mr. COOPER. Should I pay copyright for showing Bambi?

Mr. DANIELSON. Yes.

Mr. COOPER. Absolutely, sir.

Mr. DANIELSON. It isn't a matter of whether you charge your subscribers, but if you put it on your cable, you should

pay.

Mr. COOPER. Many systems have a 24-hour movie channel. That is not something you pay extra for, that is just part of the service.

Mr. KASTEN MEIER. Getting back to my question, what I am trying to establish is that if cable systems involve themselves in certain activities-which some of your members must-then to that extent they might, you concede, owe a copyright. So, it isn't a flat no-copyright-atall situation, but no copyright if, or unless a cable system involves itself in certain aspects.

Mr. COOPER. No copyright payment for signal transmission, is, I believe what we are saying. I don't like the word "retransmission," but everybody uses it.

Mr. KASTEN MEIER. But the fact of life is that increasingly cable systems do much more than simple retransmission.

Mr. COOPER. And they do pay for it now, sir, when they are out buying Bambi to show.

Mr. KASTEN MEIER. It is a rather mixed situation, it isn't quite as black and white.

Mr. COOPER. That is exactly right, exactly right. They do pay for it now when they show Bambi.

Mr. DRINAN. One more question. I wonder, sir, if you have statutory language, what would you substitute for 2223, the relevant sections? If you would have that prepared, I think that would give me, at least, a better idea.

Mr. COOPER. I can submit that to you.

Mr. DRINAN. Thank you.

Mr. COOPER. Thank you,sir.

Mr. KASTEN MEIER. Mr. Cooper, I want to compliment you on your presentation here this morning, we appreciate it.

Mr. COOPER. Thank you, sir.

[The prepared statement of Robert Cooper follows:]

STATEMENT OF ROBERT COOPER, EXECUTIVE DIRECTOR, CATA

Mr. Chairman, and members of the subcommittee, I am Robert Cooper, Executive Director of CATV.

CATA, the Community Antenna Television Association, is a trade association organized in 1973 that today has as members some 400 CATV systems throughout the United States. Originally organized to focus on proposed copyright legislation, CATA has broadened its membership and scope of activities to include such matters as participating in FCC proceedings. Generally stated, CATA's philosophy recognizes that the roots of CATV lie within the community-hence our name, a name abandoned in the 1960s by our immediate predecessors in testimony. We are not here to pull punches or present diplomatic truths—just real truths. Nor will we play a lengthy numbers game. By a numbers game. I mean statistics on who does or does not support this bill. However, you should know that some 25 state and regional associations have voted against the NCTA position. And you can count on the fingers of one hand the state and regional associations still supporting the NCTA position. Furthermore, the Pennsylvania State Association and the NCTA's largest single member company, TelePrompTer, have requested and received time on their own to present views contrary to NCTA. TelePrompTer and the Pennsylvania systems serve over two million homes. These statistics reveal only conclusions, not reasons. We submit that the only reason CATV copyright presently has any support is not because the copyright-supporting splinter of the industry believes that CATV should pay: but because it is politically expedient to do so and because of something called the consensus agreement. The NCTA, NAB, and MPAA can try to explain that agreement to you. For our part, we will concentrate on the merits of the copyright issue.

CATA is here today because its membership does not believe that the motion picture industry is entitled to place its hands in the pockets of CATV operators or CATV subscribers. We reject the joint copyright position of NCTA-NABMPAA that CATV owes reasonable copyright.

The imposition of copyright on CATV is, in part, a tax on the viewing public. It is also a deception to an American television-viewing public which has been told time and time again of the benevolence of broadcaster-delivered "free television". As we all know, it is not a free system-it is an advertiser-supported system which means we all pay once for the programs we watch by paying higher prices for television-advertised products. Also, approximately ten million households must pay a second time to actually receive television signals or clear pictures by subscribing to CATV. And now, through copyright legislation, they will be asked to pay yet a third time. Remember, CATV probably would never have come into existence if the FCC had fastidiously followed the Congressional mandate of Section One of the Communications Act "to make available, so far

as possible, to all the people of the United States, a rapid, efficient, nation-wide, and world-wide wire and radiocommunications service." Yet, twenty-five years after the FCC commenced fumbling with television allocations, two million households or 3 percent of all homes, receive absolutely no over-the-air television signals. It is estimated that over ten million homes, or 15 percent of the population, do not receive the three national network signals.off the air. It is CATV, however, that over the last 25 years has filled gaps in the FCC's allocations voids and lent a boost to UHF television in tandem with your all channel receiver law.

It is antithetical, then, to your Communications Act purposes to saddle CATV, and through it, the American television-viewing public with a tax for the privilege of watching.

Copyright is a creation of the legislature under a constitutionally delegated power: "To promote the progress of science and useful acts by securing for limited times to authors and inventers the exclusive rights to their respective writings and discoveries."

Also under the Constitution, you have specifically been delegated power to make laws affecting interstate commerce and have done so vis-a-vis broadcasting by passage of the Communications Act. Today, the Communications Act and Copyright Act are in a state of apparent tension. I say apparent because the program suppliers would have you believe that the main purpose of copyright is to give authors money so that they will have incentive to write. Not true. The main purpose is not to reward authors, but to insure that creative works find their way to the public. The Supreme Court has pointed out that in economic terms, copyright grants are made in "the connection that encouragement of individual effort by personal gain is the best way to advance public welfare. * * *" Thus, the tension dissolves when it is realized that Congress has also established a Communications Act and created the FCC to fulfill similar, if not identical, purposes: those being to secure the general benefits of radio and television programming to all the people of the United States and to encourage their larger and more effective use in the public interest. In these stated purposes, it is inconceivable that the FCC's own general counsel could testify before you that CATV should pay just because the argument has been around for a long time. We submit that if the FCC testifies in support of copyright, it ought to relate that testimony to some area of concern within its jurisdiction. If Mr. Hardy desires to see resolution of the issue merely for the sake of resolution, his desire can be accommodated just as well by deleting CATV from this bill.

There are other voices in and out of the CATV industry who say that "the copyright issue must be solved-it must be put behind us, because until it is laid to rest, the investment community will not advance the capital required by cable to expand and grow."

We have no quarrel with this line of reasoning, except when it is expanded to the illogical conclusion that the industry should simply pay copyright merely to expedite the removal of this uncertainty when CATV's future is better served by the removal of CATV from copyright legislation.

And then, there are voices in our industry who say "We can afford to pay" with remarks like "What is one or two or 22 percent of our gross?" Let me tell you what it is.

In December, 1973, CATA turned into Senator John McClellan an economic study of more than 250 CATV systems, ranging in size from 40 subscribers to 5,800 subscribers. In that study, which we will submit for the record, CATA found that in the singular "rate" level of one percent of gross proceeds to copyright that, among other breakdowns by system size, systems of 1,001-1,500 subscribers would experience reduction of net revenues of 13.8 percent.

Frankly, the industry cannot afford to pay and that is the truth. Lest this be considered solely a pitch for a small system exemption, that is, a flat dollar exemption, such as $100,000, it is not. For copyright will adversely affect larger systems, including multiply owned systems.

We also regard as fundamental considerations the following questions which should be asked of every proponent of copyright liability for CATV:

1. Why should this industry pay?

2. Who will really pay?

3. Who will receive the payments?

CATV should not pay copyright because there is no debt owing. There are hundreds of thousands of hospital rooms in this country offering television service at a price. Patients rent a television set and the set supplier, the hospital,

and maintenance man profit. Rates are as high as $3 a day. There is an unmolested industry-hospital television-possibly with gross revenues exceeding CATV. Why are they not in the copyright bill? Because they are providing the service of facilitating television viewing. The Supreme Court has twice held that the same rationale applies to CATV. These cases are instructive. First, one must lay aside the program-supplier sponsored line that the cases are irrelevant because they dealt with the 1909 Copyright Act. Of course, the Supreme Court was dealing with a 1909 Copyright Act. But they said, in Fortnightly that the decision was made "with due regard to changing technology. * * *", i.e., not based on 1909 concepts. The Court held: *** mere quantitative contribution cannot be the proper test to determine copyright liability in the context of television broadcasting. If it were, many people who make large contributions to television viewing might find themselves liable for copyright infringement-not only the apartment house owner who erects a common antenna for his tenants, but the shopkeeper who sells or rents television sets, and, indeed, every television set manufacturer. Rather, resolution of the issue before us depends upon a determination of the function that CATV plays in the total process of television broadcasting and reception."

The Court reasoned television viewing was a combined activity of broadcasters and viewers; that broadcasters perform and viewers do not; broadcasters are active performers and viewers passive beneficiaries and CATV "falls on the viewer's side of the line."

The Court concluded as a matter of separation of powers-not as a matter of copyright policy-that the job of accommodating “various competing considerations of copyright, communications, and antitrust" belonged to Congress. The Court did not intend that Congress, in fact, adopt CATV copyright liability.

Then came TelePrompTer-CBS, where the Court was faced with microwaved, long-distance signal importation-more than 450 miles-by CATV systems that also originated their own programs, also sold local advertising and interconnected with other systems. It was contended that this entire package moved CATV to the broadcaster side of the line. The Court found no copyright significance to the other CATV activities and found that the distance that signals travelled did not "alter the function [CATV] performs for its subscribers." The Court stated: "When a television broadcaster transmits a program, it has made public for simultaneous viewing and hearing the contents of that program. The privilege of receiving the broadcast electronic signals and of converting them into the sights and sounds of the program inheres in all members of the public who have the means of doing so. The reception and rechanneling of these signals for simultaneous viewing is essentially a viewer function, irrespective of the distance between the broadcasting station and the ultimate viewer." (Emphasis added.) Mr. Chairman, members of this committee, two points: (1) When a television station broadcasts, the broadcast is in the public domain; (2) The Supreme Court's characterization of what CATV does is as true today as it was when the Court made its decision. What CATV does-its viewer function-is not altered by the words of the 1909 Act or H.R. 2223.

Those advocating CATV liability have a high burden of persuasion because CATV fulfills Communications Act goals by making television more widely available or available for the first time. It is a viewer-oriented medium, as are translators, master antennae, rooftop antennae, and television sets themselves. None of these entities are prospectively liable for copyright under your bill. None should be, for they are all part of the process of nationwide dissemination of programming that you have legislated in the Communications Act.

In TelePrompTer-CBS, the copyright holders argued that CATV prerelease of programs (which would not apply to network television) would dilute the profitability of reruns and other syndicated properties, thus removing incentives to produce television programs. The Court rejected this argument. It recognized that the appropriate nexus was missing, that is, copyright holders do not receive money from the ultimate user-the television viewer-but from the advertisers "who use the drawing power of the copyrighted material to promote their goods and services."

The Court recognized: that distant signal carriage does not interfere with the "copyright holders' means of extracting recompense for their creativity and labor"; and that, in fact, CATV provides a larger viewer market (to the benefit of both the advertiser and copyright holder).

We submit that CATV should not pay because it does not owe. Copyright holders are paid by advertisers, not currently, and hopefully, not in the future, by viewers or by those that help the viewing process-CATV systems.