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“(a) A final decision of the Tribunal adjusting a royalty may be appealed to any court of appeals of the United States, within fifteen days after its publication in the Federal Register, by an aggrieved party who appeared in the proceeding of the Tribunal resulting in such final decision.

"(b) The court shall review the decision, in accordance with section 706 of title 5, and chapter 158 and section 2112 of title 28, except as otherwise provided in this section, on the basis of the record before the Tribunal. The court may affirm the decision or order that the entire matter be returned for further consideration, but the court may not modify the decision. The court shall make the matter a preferred cause and shall expedite judgement in every way. The court may not suspend the effectiveness of any royalty adjustment, or otherwise prevent it from taking effect until final disposition of the suit by the court. No court shall have jurisdiction to review a final decision of the Tribunal adjusting a royalty except as provided in this section."

On page 61, strike out line 36 and insert in lieu thereof the following: “g 809. Judicial review of royalty distribution determinations"

On page 85, between lines 27 and 28, in the chapter analysis, strike out items 806-809 and insert in lieu thereof the following:

"806. Publication of royalty adjustment decisions.
"807. Judicial review of royalty adjustment decisions.
"808. Effective date of royalty distribution.
"809. Judicial review of royalty distribution determinations."
Mr. VALENTI. Thank you.
Mr. KASTENMEIER. I want to go off the record.
[Discussion off the record.]
Mr. KASTENMEIER. I will call the next witness.

Representing the first representative of the broadcasting industry, Mr. Robert Evans, the vice president of Columbia Broadcasting System.

We have heard from Mr. Evans before on a different question. Now, we will hear Mr. Evans on section 111.

[The prepared statement of Robert V. Evans follows:] STATEMENT OF ROBERT V. Evans, VICE PRESIDENT AND GENERAL COUNSEL, CBS INC.

My name is Robert Evans. I am Vice President and General Counsel of CBS. I appear today to give qualified support to the compulsory license provisions for cable television in section 111—not because we agree with everything in section 111—but because we believe it is critical that a principle be established, the principle of statutory copyright liability for cable system carriage of copyrighted programs contained in broadcast signals. Support has been given for such liability by the present Register of Copyrights and her two immediate predecessors, by the present Chairman of the Federal Communications Commission and his immediate predecessor, and by the present Acting Director of the Office of Telecommunications Policy and his immediate predecessor. But today, as you know, cable television is completely exempt.

Unless the principle of copyright liability is written into the law, the strains in the copyright structure caused by not having a major, growing industry subject to copyright may very well cause the whole system to collapse under the pressure of demands for a similar exemption from other industries. These other industries will also want a free ride. They may even need a free ride to survive the unfair competition from the cable television industry. Economically marginal broadcasters in small markets might logically be first in line for such an exemption.

The cable industry now serves approximately 10 million American homes and its growth has been phenomenal. A recent study predicts that there will be 22 million cable television subscribers by 1983. Some cable television systems originate programs of their own, and as to these originated programs there cannot be any dispute--cable television is subject to the normal operation of the copyright law. Despite this lack of dispute, I understand on excellent authority that no cable television system to this day pays performing rights royalties for the use of the music contained in its originated programs. The only explanation I can give for this fact is that the law of copyright is so distorted in the broadcast signal carriage area that the effects of the distortion have even carried over into the origination area. This is but one of the strains caused by the anomaly of having cable television live outside of the law.

What is so peculiar about the law in the broadcast signal carriage area? First, I remind you that conventional televison is subject to the normal operation of the copyright law. Conventional television's product is a picture delivered on television screens in American homes. To make delivery of that picture, a conventional television station must go into the marketplace for every copyrighted program it includes in its broadcast signal, and negotiate with the copyright owners and pay them for licenses. The product that a cable television system sells to its subscribers is the very same signal containing the very same copyrighted programs. The subscribers may be in the normal broadcast area of the broadcast station or they may be outside of the normal broadcast area. Indeed, the subscribers may be hundreds and hundreds of miles outside of the normal broadcast area of the station. It does not matter—under the present copyright law the cable system sells to its subscribers the same picture on their television screens that conventional broadcasters must pay for, and the cable system does not have to get permission from the copyright owner or to pay him a dime. The scope of this free ride is striking. Listen to what David Foster, President of the National Cable Television Association told the Senate Subcommittee on Antitrust and Monopoly on May 21, 1975: "Today the cable television industry is almost completely reliant upon the broadcasting industry for its product. About 85 percent of what cable television provides to its viewers is what we receive from the broadcasting industries.”

Forget for a moment the obvious injustice to the copyright owner. Imagine yourself a conventional television broadcaster, in competition for audience, which is your lifeblood, against a cable system in your market which carries two or three or four imported distant broadcast signals without paying anything for the programs in them; which may originate programs of its own on several channels; which may sell advertising on those channels, competing with you for the local advertiser's dollar; and which, perhaps, has a pay cable channel as well; and you will readily understand why broadcasters believe the copyright law is distorted in the cable television area. And this massive, involuntary subsidy of the free use of broadcast signals not only affects broadcasters adversely; it also affects all others who are subject to the normal operation of copyright law, such as motion picture theater owners who see this involuntary subsidy making it possible for cable to exhibit feature films on its pay channels in competition—I say unfair competition-with them.

It seems to us that cable television should be compelled to bargain in the marketplace for the programs in broadcast signals, just as broadcasting, which is completely subject to the operation of the copyright law, must bargain.

However, we have reluctantly concluded that there is just no possibility that the Congress will pass legislation subjecting cable television to the full operation of the law. Consequently, CBS supports a compromise under which the original fee schedule suggested by the McClellan Subcommittee-one percent to five percent-would be reincorporated in subsection (d) (2) (B) of section 111 and section 801 (b) would remain unchanged so that the Copyright Royalty Tribunal will be available to assure the possibility that future royalty rates will be reasonable.

The Copyright Royalty Tribunal's power to adjust rates is vital not only to prevent the obvious injustice of a permanently inflexible compulsory license royalty fee, but also to get the job done. The Congress will never be finished with the cable television fee schedule if it puts itself into the position where only it can provide relief from royalty fee injustice.

TESTIMONY OF ROBERT V. EVANS, VICE PRESIDENT AND

GENERAL COUNSEL, CBS INC. Mr. Evans. My name is Robert Evans. I am vice president and general counsel of CBS. I appear today to give qualified support to the compulsory license provisions for cable television in section 111, not because we agree with everything in section 111, but because we believe it is important and critical that a principle be established, the principle of statutory copyright liability for cable television carriage of copyrighted programs contained in broadcast signals.

Support has been given for such liability by the present Register of Copyrights and her two immediate predecessors, by the present Chairman of the Federal Communications Commission and his immediate predecessor, and by the present Acting Director of the Office of Telecommunications Policy and his immediate predecessor. But today, as you know, cable television is completely exempt.

Unless the principle of copyright liability is written into the law, the strains in the copyright structure caused by not having a major, growing industry subject to copyright may very well cause the whole system to collapse under the pressures of demands for a similar exemption from other industries.

These other industries will also want a free ride. They may even need a free ride to survive the unfair competition from the cable television industry. Economically marginal broadcasters in small markets might logically be first in line for such an exemption.

The cable industry now serves approximately 10 million American homes and its growth has been truly phenomenal. A recent study predicts that there will be 22 million cable television subscribers by 1983. Some cable television systems originate programs of their own, and as to these originated programs there cannot be any dispute-cable television is subject to the normal operation of the copyright law. Despite this lack of dispute, I understand on very good authority that no cable television system to this day pays performing rights royalties for the use of the music contained in its originated programs. The only explanation I can give for this fact is that the law of copyright is so distorted in the broadcast signal carriage area that the effects of the distortion have even spilled over into the origination area. This is but one of the strains caused by the anomaly of having cable television live outside the law.

What is so peculiar about the law in the broadcast signal carriage area? First, I remind you that conventional television is subject to the normal operation of the copyright law. Conventional television's product is a picture delivered on the television screens in American homes. To make delivery of that picture, a conventional television station must go into the marketplace for every copyrighted program it includes in its broadcast signal, and negotiate with the copyright owners and pay them for licenses.

The product that a cable television system sells to its subscribers is the very same signal containing the very same copyrighted programs. The subscribers may be in the normal broadcast area of the station or they may be outside of the normal broadcast area. Indeed, the subscribers may be hundreds and hundreds of miles outside of the normal broadcast area of the station.

It does not matter-under the present copyright law, the cable system sells to its subscribers the same picture on their television screens that conventional broadcasters must pay for, and the cable system does not have to get permission from the copyright owner or to pay him a dime. The scope of this free ride is striking.

Listen to what David Foster, past president, I believe, of the National Cable Television Association told the Senate Subcommittee on Antitrust and Monopoly on May 21, 1975, “Today the cable television industry is almost completely reliant upon the broadcasting industry for its product. About 85 percent of what cable television pro

vides to its viewers is what we receive from the broadcasting industries."

Forget for a moment if you can, the obvious injustice to the copyright owner. Imagine yourself a conventional television broadcaster, in competition for audience, which is your lifeblood, against a cable system in your market which carries two or three or four imported distant broadcast signals without paying anything for the programs in them; which may originate programs of its own on several channels; which may sell advertising on those channels, competing with you for the local advertiser's dollar; and which, perhaps, has a pay cable channel as well; consider these things, and you will readily understand why broadcasters believe the copyright law is distorted in the cable television area.

And this massive, involuntary subsidy of the free use of broadcast signals not only affects broadcasters adversely; it also affects all others who are subject to the normal operation of the copyright law, such as motion picture theater owners who see this involuntary subsidy making it possible for cable to exhibit feature films on its pay channels in competition, and I say unfair competition, with them.

It seems to us that cable television should be compelled to bargain in the marketplace for the programs in broadcast signals, just as broadcasting, which is completely subject to the operation of the copyright law, must bargain.

However, we have reluctantly concluded that there is just no possibility that the Congress will pass legislation subjecting cable television to the full operation of the law.

Consequently, CBS supports a compromise under which the original fee schedule suggested by the McClellan subcommittee, 1 percent to 5 percent, would be reincorporated in subsection (d) (2) (B) of section 111 and section 801(b) would remain unchanged so that the Copyright Royalty Tribunal would be available to assure the possibility that future royalty rates will be reasonable.

The Copyright Royalty Tribunal's power to adjust rates is vital not only to prevent the obvious injustice of a permanently inflexible compulsory license royalty fee, but also to get the job done. The Congress will never be finished with the cable television fee schedule if it puts itself into the position where only it can provide relief from royalty fee injustice.

Mr. DANIELSON (presiding]. Thank you very much.
The gentleman from Illinois.
Mr. RAILSBACK. No questions, and thank you for coming.
Mr. DANIELSON. You are within the 5-minute rule, Father Drinan.
Mr. DRINAN. Thank you very much, Mr. Chairman.

And Mr. Evans, you are not quite fair to the Congress, it seems to me, when you say you and your colleagues have concluded there is just no possibility that the Congress will pass legislation subjecting cable television to the full operation of the law. That is your interpretation of the law. What is the law? What would be the full operation of the law? And what are you saying we do not have the guts to do?

Mr. Evans. I do not say you do not have the guts to do it.
Mr. DRINAN. We do not have the brains to do it.
Mr. Evans. Looking at the long history of efforts to reform-

Mr. DRINAN. What is the full operation of the law, sir?

Mr. Evans. The full operation of the law would be to subject cable people to normal payments that every other user of copyright

Mr. Drinan. What are normal payments? We have never had cable in the history of mankind before.

Mr. Evans. Normal payments are usually the payments that you negotiate in the marketplace. Normal payments, I would agree, are not compulsory license fee payments. But it has taken us a long time to get where we are now, and it is our judgment that it is more important for the broadcasting industry to get a principle established of liability, of an obligation to pay copyright fees, and we will take what we can get as long as that principle is established, because we think once that is done, there will be an opportunity at least to collect some money. And whether it is a revision by Congress, which I think would tie the Congress up indefinitely, or whether it is a review and revision by a Copyright Royalty Tribunal, there will be an opportunity for people to bring in evidence and talk about what they think they ought to pay, from both sides.

Mr. Drinan. Suppose the Congress came to the conclusion that cable should not be subjected to copyright, that we would say that the 1909 law did not provide for it? The Supreme Court said it is up to Congress. Suppose the Congress decided that there is no such thing as what you call the full operation of the law; copyright does not apply here. How much would CBS lose?

Mr. Evans. What we lose is the gradual erosion of the economic wellbeing of o’r affiliates. Put it this way—suppose there is a cable system in Rockford, Ill., which is some 100 miles or so away from Chicago. There are 1,000 subscribers there, 1,000 subscribers that cannot be reached from Chicago. Suppose that a cable system in Rockford imports a movie, runs it on its system. A local advertiser in Chicago is not going to buy that coverage, because he does not want to be in Rockford. A national advertiser goes on the network; he is not going to pay any money for that, because he says, I am on the network; I am going to get into Rockford on the affiliate there; I do not need to buy that sort of coverage. A regional advertiser who sells in northern Illinois says he might I sell some things in Rockford; I will pay something for those 1,000 people there, but I am not going to pay the full rate that the local Rockford station could get. Once that movie has gone into Rockford, that market is killed for that movie, or at least severely damaged in terms of either the motion picture company that owns the movie or the broadcaster who licenses it and tries to sell it to an advertiser. It is killed for those people, or severely damaged in the sense that they are never going to get what they ordinarily would get.

Mr. DRINAN. How many CBS-affiliated stations are there?
Mr. EVANS. About 200.

Mr. DRINAN. So you are protecting the 200 against competition,
against the pluralism I spoke of before?
Mr. Evans. I think it is unfair competition, I would say.
Mr. DRINAN. Why, because of copyright?

Mr. Evans. Yes; that cable system is not paying anybody anything. As I see it, he is taking somebody else's product and he is selling it for a profit.

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