Appendix 1.-Cable television and the compulsory license A. Materials submitted by Hon. Henry Geller, Assistant Secretary of 1. Comments submitted to the Federal Communications Commis- 2. Reply comments submitted to the Federal Communications 3. Comments submitted to the Federal Communications Commis- 4. Comments submitted to the Federal Communications Commis- 1. Application for recordation of coin operated phonorecord players. 316 316 318 382 401 438 452 452, 456 2. Statement of account for secondary transmissions by cable systems. (Forms CS/SA-1, CS/SA-2 and CS/SA-3)....... 458, 470, 486 C. Material submitted by Bowie K. Kuhn, Commissioner of Baseball: Comments before the Federal Communications Commission, in the matter of cable television syndicated program exclusivity rules and the inquiry into the economic relationship between television broadcasting and cable television 506 D. Statement from Southern Satellite Systems, Inc 593 609 656 G. Statement from Gill Industries, submitted by Robert L. Heald and 672 H. Article from the New York Times, November 12, 1979, "Canadian Cable 676 678 Appendix 2.-Performance rights in sound recordings A. H.R. 997 introduced by Mr. Danielson, January 18, 1979 D. Statement from National Broadcasting Co., Inc 678 699 779 656 E. Article from Broadcasting, December 10, 1979, "1978: Radio's Star 781 COPYRIGHT ISSUES: CABLE TELEVISION AND PERFORMANCE RIGHTS THURSDAY, NOVEMBER 15, 1979 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES, AND THE ADMINISTRATION OF JUSTICE OF THE COMMITTEE ON THE JUDICIARY, The subcommittee met, pursuant to notice, at 10 a.m., in room 2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier (chairman of the subcommittee) presiding. Members present: Representatives Kastenmeier, Danielson, Gudger, and Railsback. Staff present: Bruce A. Lehman, counsel; and Thomas E. Mooney, associate counsel. Mr. KASTENMEIER. The subcommittee will come to order. Three years ago last month the Congress enacted the fruit of a 23-year effort to rewrite the copyright law of the United States. That 1976 act, which became fully effective on January 1 last year, attempted to create a new legal order to guide individuals and industries as to the applicability of copyright to the many uses of intangible intellectual creations. These uses which could not have been foreseen by our predecessors in the 60th Congress, who drafted the now archaic 1909 statute. By and large I believe that the nearly 2 years of experience we have had with the 1976 act have demonstrated it to be a sound legislative work product. However, there are some loose ends which require further consideration, and it is for that reason that we have convened this morning. Specifically, we will hear testimony on two separate issues: performance rights in sound recordings and the compulsory license for cable retransmission of copyrighted broadcast programing. The issue of performance rights in sound recordings is reflected in pending legislation, H.R. 997, sponsored by Congressman George Danielson and 48 colleagues. An identical Senate bill, S. 1552, has been introduced by Senator Pete Williams and five cosponsors. There is presently no legislation on the question of copyright liability for cable retransmission. Therefore, the hearings will simply focus on the two primary areas of controversy surrounding cable television-the adequacy of the royalty revenue generated by the 1976 copyright law and the possible impact of deregulation by the Federal Communications Commission on the existing compulsory copyright license. (1) Only two witnesses are scheduled for this morning: The Honorable Henry Geller, Assistant Secretary of Commerce for Communications and Information, and the Honorable Barbara Ringer, U.S. Register of Copyrights. Ms. Ringer will address both issues and Mr. Geller will address only the cable television issue. The need for future consideration of the performance rights issues was recognized in the 1976 act itself which mandated the Register of Copyrights to submit a report and recommendations on the issue to the Congress. It was in recognition of this promise of future consideration that proponents of a performance right in sound recordings receded from their request that such a right be recognized in the 1976 act. On January 3 of last year a 1,300-page report on performance rights was submitted to us by the Register of Copyrights. Following submission of the report we held 4 days of hearings on the issue, but because of lack of time, and because there were certain elements of the issue still unresolved, we were unable to further consider legislation. In view of the extensive record already developed, these hearings will be somewhat brief in their review of the issue. With respect to cable television, the 1976 act has been rapidly overtaken by changing business practices brought about by satellite technology and by the new emphasis in Washington on deregulation of the broadcast industry. Earlier this year our sister House subcommittee, chaired by our colleague Lionel Van Deerlin, considered legislation which would have deregulated the cable industry but at the same time imposed the equivalent of full copyright liability-retransmission consent-on cable systems. The future of that legislation is in doubt. However, the announced intention of the Federal Communications Commission to consider removing the exclusivity and signal carriage limitations now encumbering cable have brought into sharp focus the copyright problems which continue to plague the program producer-broadaster-cable system relationship. While we have no specific legislative proposal at this time, our hearings will attempt to identify the problems and possible solutions in the difficult area of public policy. At this time, I am pleased to welcome as a witness an individual with a national reputation in the field but who is new to this subcommittee, the Honorable Henry Geller. TESTIMONY OF HENRY GELLER, ASSISTANT SECRETARY FOR COMMUNICATIONS AND INFORMATION, U.S. DEPARTMENT OF COMMERCE, ACCOMPANIED BY RUTH REEL Mr. GELLER. Thank you, Mr. Chairman, I am pleased to be here. As you say, I will address just cable. I would like to go to the issue of deregulation, and not so much the adequacy of the present fee schedule. I would have no views on that at all. If I may, I would like to have my statement introduced in the record, and also the filings that we made with the FCC and the main filings of the other executive branch agencies, the Council on Wage and Price Stabilization, and the Department of Justice. As you will see, the views of NTIA are different from the others. It is a lot of paper, but if those could be submitted, I believe they would be helpful in your consideration of this issue. Mr. KASTENMEIER. Without objection, your 11-page statement will be received and will be printed in the record in its entirety, and the other material will be received and be reprinted in the appendix. (See app. 1A at p. 316.) [The information follows:] STATEMENT OF HENRY GELLER, ASSISTANT SECRETARY FOR COMMUNICATIONS AND Mr. Chairman, I welcome this opportunity to testify before the Subcommittee on the subject of cable television copyright legislation. The views I am presenting today are my own and do not necessarily represent those of the Administration. We believe that contracts and bargaining among the parties with full copyright liability of all users rather than a government administered pricing system for commercial cable's future in major urban area should be the paramount objective of public policy. The core problem of cable has been the fact that it has always stood outside the competitive TV programming market, although it is clearly another means for distributing TV programming. As a result, the Commission initially adopted complex and restrictive regulations to compensate for cable's exclusion from the market. Congress, when it dealt with the copyright issues in 1976, took into account the industry structure which had grown up around the Commission's rules and adapted a copyright scheme to that structure-compulsory license, legislated fee schedule, Copyright Royalty Tribunal. We have no quarrel with that scheme as a means for dealing with the existing cable industry. Disruptive action is neither desirable nor feasible. But we strongly believe that this is a most unsual way to deal with cable's future development in the large markets. Cable is moving in directions that Congress did not full address in 1976-nationwide satellite distribution of "superstations" like WTBS, Atlanta, and cable operations in the largest cities. The Commission is now proposing to do away with it distant signal and syndicated exclusivity rules, which served as the background for the copyright compromise. All this poses a most important policy dilemma. The circular development between copyright and FCC cable regulations has led to the flawed present arrangement. We call it flawed because it relies so heavily on direct government intervention rather than a market with full copyright liability for all commercial users. Until urban cable is brought into this marketplace, we believe that any administrative or legislative attempt to remedy the present situation will continue to be fundamentally unsound. Our basic position can be simply stated: The copyright owner should be fairly compensated when a non-network program sold for broadcast distribution in one major market is retransmitted by cable in another major market or nationwide. The marketplace-not Government fiatshould determine that compensation. Elimination of the present complex set of FCC rules will not bring the marketplace into play. The power of the Copyright Royalty Tribunal to change the statutory fees in light of FCC rule changes is not a marketplace solution but only another Government agency adjusting a Government ordained schedule. Indeed, elimination of the Commission's syndicated exclusivity rules results in more Government intervention-not less. Under the rules, a broadcaster or cable system obtains exclusivity only by bidding for it in the marketplace. With the rules' elimination, a Government entity will be called upon to fix the compensation for this lost marketplace opportunity to afford reasonable exclusivity. Because of the compulsory license copyright scheme, affirmative Government action is needed to bring the marketplace into operation. This affirmative action could appropriately take either of the two forms: FCC or Congressional action to bring urban cable within Section 325(a) of the Communications Act on communictions policy grounds, so that consent of the originating broadcast station would be necessary for cable's retransmission of a distant broadcast signal in a major market; or Amendment of the Copyright Act to make cable fully liable for secondary transmissions of non-network programs on distant broadcast signals in major television markets. NTIA has pursued the communications policy alternative-retransmission consent by the originating broadcaster-before the FCC, most recently in its proceeding to delete the distant signal and program exclusivity rules. We offer copies of these filings for the record in the belief that much of that discussion is pertinent here also. We recognize that there are differing views on this subject within the Federal government and also offer copies of the filings of the Council on Wage and Price Stability and the Department of Justice. Under either approach we believe that the existing service of existing cable systems should be grandfathered in order not to disrupt the exisiting industry structure. Present systems were built upon the basis of either no copyright payment, a right twice judicially confirmed, or of compulsory licensing under the 1976 Copyright Act. It would be inequitable now to change the rules of the game for them. Nor should either approach be applied to network or local signals in any market. Network programs are sold for nationwide distribution and programs on local signals are sold for local distribution, so that cable retransmission does not skew the operation of the marketplace or deprive the copyright owner of fair compensation in the marketplace. The crucial issue is how cable will develop in the major markets, rather than how it will develop in small towns. After several decades of progress in "small town America", we doubt if there is substantial growth potential for new systems in these smaller areas. The reality of cable development today rests on its expansion into major urban markets. In pay cable there is already a model (and bell weather) as to how cable can develop within an urban market in which full copyright liability applies. Pay cable entrepreneurs deal within the competitive market to obtain product for distribution on cable systems. All parties to the transaction must respond to market forces; there is no advantage given to any party. Transactional costs have been minimized by consolidated purchasing arrangements. This system has worked well, with the help of these "middlemen" like Home Box Office and Showtime and the use of the satellite. The Congress would do well to look to pay cable as a model in its consideration of how to deal with future urban cable growth. Now another avenue of major market growth-national advertiser-based distribution of broadcast signals via satellite-recently has begun to emerge. NTIA views this, and other future distribution arrangements, as welcome developments with the potential for enhancing diversity, enlarging the supply of non-network programs, and providing a base for other services to the home. We believe that if a market exists for advertiser-based programming on distant signals in major markets, it will be brought to cable systems under full copyright liability or under a requirement for broadcaster retransmission consent. It may be argued that full copyright liability for secondary transmission of non-network programs in major markets is not practicable for cable because it would be difficult for individual systems to bargain program by program. But there is a great difference between the situation today and the sixties and early seventies. The satellite has come into the picture. Interested broadcasters, like WTBS, have emerged. Cable, particularly the multiple system owner, can put its own stations on the air as "flagship" stations which can purchase urban cable distribution rights. Common carriers are interested in obtaining broadcast signals for distribution by satellite; middlemen are eager to enter the picture; and program suppliers, as always, are aiming for increased sales of their products. Cable now has abundant means of aggregating for negotiations with the copyright owners. But if the market gives a negative answer, if the market is not there for rebroadcast TV signals, it should be accepted rather than having the Government seek to affect the market in this competition between multi-million dollar enterprises in major markets. Stated differently, why should the Government intervene for example, on the side of Cox Cable or Teleprompter against Taft Broadcasting in Philadelphia or Washington (or vice versa)? In these large cities cable must seek to provide services people will pay for, and if that proves not to be distant signals, then cable should supply whatever alternative services consumers may demand (e.g., pay, Qube, etc.). The important point is that with a retransmission consent requirement or full copyright liability for distant signals in major markets, cable would be brought into the marketplace, free and fair competition would apply to all, and its application would be clearly understood. Under such a structure, Government need not control or supervise the distribution of non-network programs except for judicial enforcement of the copyright laws and FCC policing of abusive practices, such as "warehousing". |