II. PERTINENT PROVISIONS OF H.R. 2223 Briefly, Section 106 gives an exclusive right to a copyright owner to "display" or "perform the copyrighted work publicly" subject to Sections 107-117. Section 111 provides an exemption for certain secondary transmissions, including hotels and apartment houses, institutional material, certain carriers and non-profit groups. Subsection (b) provides for full liability for the retransmission of a Pay-TV work. Subsection (c) provides certain compulsory licenses for the community antenna function of cable systems. Notwithstanding the compulsory license, full copyright liability is imposed if the secondary transmission is not permissible under the FCC rules or authorizations. In short, the public will ultimately have to respond in cash for an operator's violation of FCC rules which certainly has nothing to do with copyright. Subsection (d) provides for filing certain information with the Office of Copyright, depositing royalty payments there, based on a sliding percentage scale of gross receipts from subscribers, and for the distribution of those funds. Subsection (e) contains various definitions. Section 801 provides for a Copyright Tribunal to adjust the royalty base as the arbitrators think, if not overruled by the House or Senate within 90 days. III. DIVERSE POSITIONS There are strong differences of opinion between the Register of Copyrights, broadcasters, copyright owners and most CATV operators concerning liability of CATV for copyright fees. The Register of Copyrights, broadcasters and copyright owners favor liability of community antennas for copyright. As I understand the situation, the Register of Copyrights' position is not whether but how much CATV should pay. Copyright owners would like the Congress to impose complete liability on community antenna systems. The broadcasters' interest, in whether or not community antennas pay copyright has always been obscure to me, unless the more expenses community antennas have, the higher the rate and the fewer subscribers they will have. Copyright then becomes a device to protect broadcasters-not to compensate the author. The broadcasters were not very obscure, however, in 1971 when NCTA and the copyright owners were about to compromise their differences. The National Association of Broadcasters and the Association of Maximum Service Telecasters went to the White House Office of Telecommunications Policy3 and sparked enough pressure by it and the FCC to cause the NCTA Board of Directors to capitulate by a one vote majority into accepting the iniquitous "Consensus Agreement" without change. Apparently, the NCTA still feels committed in principle to pay "reasonable" copyright despite the coercion and even though the FCC repudiated the "Consensus Agreement" within three months after it was initialed as it had to do. But the commitments of the NCTA Board then or now really have no bearing on the issue facing this Subcommittee. Those commitments cannot determine the public interest or, in our opinion, justify this Committee in recommending that the public pay twice to see the same show. The Ad Hoc Committee opposes the payment of copyright on the community antenna function and suggests an amendment to the Bill to eliminate copyright liability of community antennas for carriage of television signals. 2 What defense can there be for the provisions of this Bill that establishes copyright liability based on the method of the viewers' payment? To wit, hotels and apartments are exempted, as indirect payors, and CATV şubscribers are included as direct payors. It is unlikely that the Courts would accept such an arbitrary distinction-even if the industries involved agree to it. 3 NTCA & Copyright, The History. Recent Board Action, The Future (Dec. 1974, p. 9). Cable Television Report and Order, 36 FCC 2d 3. 27 (1972). See to same effect, First Report and Order in Docket No. 19995, 40 Fed. Reg. 17727 (1975). 5 The following amendment to section 106 is suggested: Notwithstanding the provisions of section 106, the following are not infringements of copyright: "(5) the further transmitting to the public, by means of broadcast receiving equipment of whatever design, including antennas, and related equipment, wherever located, which receives and makes available by means of cable or wires and related equipment to individual reception sets of the kind commonly used in private homes, of a transmission embodying a performance or exhibition of a work; Provided: The further transmission is made without altering or adding to the content of the original transmission and no direct admission fee is charged for the privilege of seeing or hearing such transmission and the receiving apparatus is not coin operated.' IV. THE ISSUE The Ad Hoc Committee does not view the matter of copyright payments as an issue between it and the Office of Copyrights, the copyright owners, the NAB, AMST, or NCTA, because none of them will pay copyright-only the public ultimately pays copyright on television programs. The issue here is between the copyright owners and the subscribing members of the public to community antennas. That issue is as follows: "Should the Congress, contrary to the reason and logic of the United States Supreme Court, on two occasions, create the legislative fiction that CATV is engaged in the display or performance of a copyrighted work publicly and is, therefore, liable for the payment of copyright fees which, of course, it would have to collect from the public as a part of its antenna service?" The proposed legislation would create this legislative fiction by defining the right to display or "perform the copyrighted work publicly." "The definitions of "perform," "display," "publicly" and "transmit" in Section 101 of the Bill intend, according to the Committee Report, to mean that "A cable television system is performing when it retransmits the broadcast to its subscribers." The right of public performance in the copyright owner is not limited by any "for profit" requirement. Section 111 of the Bill proposes limited exceptions from liability of CATV and establishes communications policy—the proper function of the Commerce Committee." V. THE PUBLIC SHOULD NOT BE REQUIRED TO PAY A SECOND COPYRIGHT FEE FOR THE SAME PROGRAM BECAUSE OF THE TYPE ANTENNA IT USES The Office of Copyright makes its case for CATV copyright liability on the fact that CATV charges its subscribers a fee for its antenna services which makes a profit and failure to share these profits could damage the copyright. The Supreme Court disagreed with these assumptions and found otherwise in TelePrompTer Corp. v. CBS, supra n.2. If the Office of Copyrights' theory of liability is correct, which it is not, then anyone who makes a profit, directly or indirectly, from a performance of a copyrighted work should be liable. This liability would run to wire and receiver manufacturers and countless other business enterprises which enable the public to view the performance. The fact that CATV makes a profit, by assisting the TV station to deliver its programs to the public it is obligated to serve and for which the copyright owner has been paid, has no bearing on whether the public should pay copyright fees via CATV. CATV services keeps the copyright owner honest by delivering the signal carrying his program to the public for which he has been paid. At the present time, a sponsor who buys a program usually pays the copyright owner for one performance over one or more stations. The sponsor pays the copyright owner, directly or indirectly, for tickets to the show for everyone within the grade B contour of the stations televising it and as far beyond that contour as it can be received. This cost is passed on to the public eventually in the purchase price of the product. It is a scientific fact, recognized in the Sixth Report and Order,10 however, that over average terrain only 90% of the locations in the Grade A contour receive an adequate signal 50% of the time, and within the Grade B contour only 70% of the locations receive an adequate signal 50% of the time. I will venture that most sponsors paying for a program think they are getting a potential of 100% of the locations 100% of the time, but that just isn't so, even though the copyright owner is probably collecting for 100% of the locations 100% of the time. A community antenna television system within the Grade B contour merely aids the sponsor in getting his money's worth from the copyright owner and the station by assuring the sponsor that anyone who desires the signal will receive it clearly, and thus increase the potential audience. Certain copyright owners are not satisfied with this. They collect from the sponsor who recovers his cost from the public and they would like to collect again from the CATV operator who must also pass his cost on to the public. Some way or other it does not seem right for the public to have to pay for "two tickets to the same performance." No one has Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968); TelePrompTer, Inc. v. CBS, 415 U.S. 394 (1974). 7 Sections 102, 106, H.R. 2223. 94th Cong., 1st Sess. S Senate Report No. 93-983, 93rd Cong. on S. 1361, p. 113. See Senate Report No. 93-1035, 93rd Cong., 2d Sess. on S. 1361, p. 66. 10 41 FCC 148. attempted successfully, to my knowledge, to refute this argument. They merely ignore it and talk about something else. The copyright owners by virtue of their access to the air, with no charges by the Government to transport their product to the public compared to CATV companies which pay up to $10,000 a mile for their channels of communication to subscribers, should certainly be required to forgo a second fee from a reception service for the public. This is particularly true here when a handful of companies seek this double payment from the American people across the country for what Congressional policy and judicial rulings now dictate is in the public domain." Cable television or its advertisers will pay for any copyrighted programs it originates, whereas the public would receive nothing for the cash the broadcasters would have the copyright owner siphon from the public via CATV which otherwise could be used for copyright fees for more diverse programming. There is a basic conflict between communications policy and any copyright law in which a cable antenna system is required to pay copyright on any signal it is authorized to receive and distribute on its system by the Federal Communications Commission. The Supreme Court has construed the Communications Act to empower the Commission to regulate CATV. In exercising this power, the Commission requires, as a condition of receiving and carriage of television broadcast signals, that CATV systems carry all local signals. The definition of local signal varies according to the size market where the system is located. Neverthelss, the Commission exercises its power to require carriage of certain signals and permits the carriage of others. Such regulations now constitute CATV a supplemental service to make the Commission's allocations of frequencies more effective. Until set aside, revised or revoked, CATV systems must comply with those carriage rules. The proposed legislation would compel CATV to pay copyright owners for distributing signals carrying their copyrighted works. The broadcaster has the right to pick and choose the copyrighted works he will buy and broadcast. Congress should set the record straight. If the Commission is confirmed by Congress in the power to require carriage of particular signals by CATV, then CATV will remain a supplemental reception service, perform nothing, and owe nothing. If it is desired to require copyright payment by CATV for its supplemental role, then CATV should be entitled to carry whatever programs it desires, delete the advertising and substitute its own. This is strictly a communications policy question. The broadcaster should not be permitted to have it both ways-collect additional revenue from sponsors for the added carriage of CATV and require CATV to pay copyright fees. In short, the broadcaster is arguing for the morality of unjust enrichment to copyright owners at the expense of the public CATV serves as a means of using copyright to restrict the growth of CATV. It is the public who will unjustly enrich the broadcaster and/or the copyright owner-not the CATV operators. These anti-consumer provisions should not be enacted into law. We urge the Congress not to compromise the fundamental legal principles established by the United States Supreme Court on two occasions-decisions that are on the side of the viewer. The broadcaster-whatever his motives are— is wrong in trying to saddle its viewers with extra copyright payments to view its "free" programs through use of a more efficient rented antenna. Imposing copyright fees on the community antenna function and, in effect, making the American public pay tribute twice to the 28 corporations in New York and Hollywood that own substantially all of the copyrighted material on TV, to watch "free TV" is wrong. If the copyright owners or merchandisers exercise forbearance on the short term profit of double payment and permit cable television to flourish, they will be amply rewarded with even greater profits from the insatiable requirements of cable television for material to fill its many origination channels in the years to come. The Commission's power to limit the number of distant signals imported by microwave has been confirmed. No further power is needed to protect the copyright owner and the public interest. 11 Section 605 of the Communications Act of 1934, as amended, prohibits unauthorized disclosure of interstate wire or radio communications except "This section shall not apply to the receiving, developing, publishing, or utilizing the contents of any radio communication which is broadcast or transmitted by amateurs or others for use of the general public. . . ." (Italic supplied.) Now that the "unfair competition" shibboleth has been discredited," the only bases for contending that CATV should pay copyright are (1) that it makes a profit from the use of copyrighted material and (2) that it really does engage in a public performance for profit. Neither one of these positions are sound. There is no principle of copyright law which assesses liability for copyright based on profit alone and certainly none exists in the pending Bill. As to the display or performance of copyrighted works publicly by community antennas, the complete answer is that a reception antenna does not perform. The cable operator does not convert the electronic signal into pictures and sound— he merely delivers a signal to the subscriber who furnishes his own equipment to convert the signal to pictures and sound in order to receive and view the performance. The CATV operator does not use or sell any program or the performance thereof either publicly or privately. A CATV operator sells a receiving antenna service, just as a manufacturer sells a receiving antenna from which he makes a profit, but community antennas do not perform anything. They are, factually and logically, on the side of the viewer. The only way this can be changed is by enactment of the legislative fiction that furnishing an antenna is a performance publicly. Despite the FCC's push for copyright liability, the copyright law is not the place to bypass the Commerce Committees and embed regulatory flexibility in concrete. The Senate Commerce Committee, in its Report on S. 1361 stated that it “*** believes that in view of the potential impact of certain provisions in S. 1361 on our Nation-wide communications service, ample opportunity should have been afforded it to consider those provisions in-depth and to have held hearings on the communications issues." Certainly, CATV should be eliminated from this Bill, if for no other reason than to permit the Commerce Committees to develop a national communications policy on cable television before any copyright policy on the community antenna function is undertaken. IV. CONCLUSION Based on the foregoing review of the background and the provisions of this legislation, it must be concluded that the provisions of H.R. 2223 concerning CATV are philosophically unsound. An across-the-board payment, including payment by the public for two tickets to the same performance or for distant signals as limited by the Commission's rules, is, in our opinion, soaking the consumer. We believe that this Subcommittee is justified and should adopt the community antenna industry's historical position by amending this Bill to eliminate any copyright liability for the community antenna function, under Section 106 or other provisions of H.R. 2223, but not, of course, the origination function of cable television systems for which it should be liable like anyone else. Thank you. 12 Comments of U.S. Department of Justice in FCC Docket No. 18397A (1970). "II. THE COMMISSION'S ANALYSIS "Two premises pervade the Commission's analysis and proposals with respect to importation of distant signals, not only in this immediate proceeding, but throughout its consideration of CATV problems: The first is that television broadcasters are being subjected to 'unfair competition' from CATV operators: and the second is that there is a public interest in preserving marginal television broadcasters from failure by various cross-subsidy devices and restrictions aimed at CATV. We submit that both of these are incorrect as a matter of policy. "1. Unfair Competition. The Commission's theory of 'unfair competition' is relatively simple: As a result of the Supreme Court's decision in Fortnightly Corp. v. United Artists Television, Inc., 392 U.S. 390 (1968). CATV operators do not have to pay copyright fees on broadcast signals, and this the Commission says, results in 'unfair competition' against broadcasters who do have to pay copyright fees for programming. "Certainly the Fortnightly decision frees the CATV operator from an expense which broadcasters must bear; but if the Commission is to employ an analysis based on equating lower costs with 'unfair competition,' then it cannot look at CATV cost savings in isolation. [Footnote omitted.] It has, for example, turned over to broadcasters publiclyowned spectrum at no charges, and allows them to use it at nominal charges. This publiclyowned spectrum, when combined with a broadcast transmitter. constitutes a program delivery system which CATV operators cannot duplicate at anything approaching the unit cost per viewer. Under the Commission's analysis. this constitutes 'unfair competition' by broadcasters against all other media of communications including CATV. "The Commission's basic error is misapplying the concept of 'unfair competition.' If this concept is to have any meaning it must refer to specific acts by one competitor which are intended to harm others. See generally Callman, The Law of Unfair Competition, Trademarks and Monopolies, Ch. 2. The Theory of Unfair Competition.' By treating CATV cost savings as 'unfair competition.' the Commission has obscured the basic public policy issues with which it is confronted, and has introduced unnecessarily emotional terminology into the making of policy for both broadcasters and CATV operators." This memorandum is in response to your request for an analysis of United Sates Senate Bill No. 1361 which was passed on September 11, 1974 and is now pending in the House of Representatives. In addition, this will respond to your further request, by letter of October 29, 1974, that we discuss the reasons that community antenna systems, as distinguished from other phases of cable television systems, should not be liable for copyright. Finally, you ask that an appropriate revision of Section 111 of S.1361 be prepared. I - BACKGROUND Before undertaking an analysis of the bill, it is important to understand its background. A brief history of the copyright revision program will aid in appreciating the various positions of the cable industry as they have evolved during the past 10 years. The present Copyright Law of the United States was enacted in 1909 to carry out the following language of Article 1, Sec. 8 of the Constitution of the United States: "To promote the Progress of Science and useful Arts, by securing for limited The Legislative Appropriations Act of 1955 appropriated funds for a comprehensive program of research and study of Copyright Law revision by the Copyright Office of the Library of Congress. A number of reports were published, including the Supplementary Report of the Register of Copyrights on the General Revision of the U.S. Copyright Law: 1965 Revision Bill (89th Cong., 1st Sess., House Committee Print), explaining the thinking behind its various sections. The bill proposed by the Register of Copyrights was introduced on February 4, 1965 (H.R. 4347, 89th Cong., 2nd Sess.). In describing the basic approach of the bill, the Register of Copyrights stated at page 13: When some commentators discuss copyright and the incentives to the starving writer in the cold garret, they are not talking about television. There may be starving writers in cold garrets but, if there are any such people involved in television, it is 28 companies, including the networks, that are keeping them there. This copyright bill probably will not put one penny in any of their pockets. |