Mr. SAWYER. The thing I don't see is why it was necessary to go the other route. Is there a reluctance of the broadcasters to license at any cost?

Mr. WOLFF. I think the only answer I could give concerning reluctance is that-and I won't name the superstation or the personnel that I talked to at superstations, but the superstation programs for that satellite buy a baseball team, things of that nature. The cables then, the satellite then wants to pick up the program. The only reason the satellite picks it up is so it can feed it for a fee to cable operators. If he cannot feed it to cable operators, he is not going to pick up the programing of a superstation. The superstation then is very much interested in the success of the satellite operator. I am using lay terms, because I very frankly get all mixed up if I start talking about transponders and things of that nature.

The self-interest of the superstation is such, and it is tied with that of the satellite operator, but it is such that he does not want to have to go, or he doesn't want the cable company to have to come to him in every instance to license the use of his programing material, because he is afraid they are not going to come to him. He is afraid that it is going to be extremely clumsy and awkward for him to have to talk to-and if you would look, sir, at the attachment to the statement that I filed, you would see how many cable operators and communities would be coming to the superstation. That is the only reason I can give.

Mr. SAWYER. One thing on which I am not clear is the definition on the quality that makes a station a superstation?

Mr. WOLFF. The examples abound. There is one station, the first one on the air, which brought the attention of all of us to this thing of superstations. It is just a plain, ordinary station in a town, and that station would probably not prosper in that town-and I take for example the Atlanta situation. It is no secret, because it has been said publicly by people representing the station, it is no secret that were the superstation to be in some way legislated out of business-that is, legislate out of business the satellite picking up the superstation and licensing it to the cable operators-if that procedure were legislated out of business, that station would go out of business, because Atlanta did not need another local station. In Atlanta, the baseball team, the Braves, were purchased as the headline program. It all goes together. So, there is no satellite up there, a pirate just stealing the programing from that superstation. That superstation is proud of its relation with the satellite, and it programs its station in such a way that the cable companies will want to pick it up.

Mr. CHAPIN. May I add one answer to your question. From Muzak's point of view, the doing away with the compulsory license is what we have been for right along, and are still for it, and so we would certainly support an affirmative answer to your question. Mr. KASTENMEIER. The Chair would like to say to the gentleman that I think the next set of witnesses who have a great interest in the compulsory license can perhaps respond further. It may be better to ask the question of them.

Historically, there are a number of compulsory licenses. One of the reasons for this is, when you move from a position of total

nonliability to full marketability, compulsory license is used as a mechanism to cushion the economic effect. It is a compromise between economic forces.

As Mr. Chapin knows, in the recording industry we have had for a long time the compulsory license. Once an author has made his music available he is not able to deny that composition to other companies. That was done a long time ago. That is a compulsory license. The industry of artists have not complained about it. We had no noticeable complaint about the compulsory license in the years it was considered. The only consideration was the amount. Nor is this the only compulsory license. We have had the same thing which happened with respect to jukeboxes. They came from no liability to a total liability position. So we said in essence by statute, we will not deny you the music, except you will pay for it. There will be a liability for it and the same is also true of certain public broadcasts. One can criticize compulsory license, but it is sometimes a useful device to accommodate diverse interests in copyright law. Particularly so when a change in liability is contemplated by the statute.

Mr. RAILSBACK. I apologize for not being here earlier. Is there consensus, in your opinion, that you agree with the motion picture industry generally in the thrust?

Mr. WOLFF. Yes. I think for the first time, at least to my knowledge, for the first time the red room suite is pretty crowded with some very diverse people.

Mr. RAILSBACK. You are even agreeing with the broadcasters. Mr. WOLFF. Yes, they even said hello to me this morning, politely.

Mr. RAILSBACK. May I just ask, what is happening with the superstation, the satellite which is the carrier? They pick up the signals and on some occasions, without even permission

Mr. WOLFF. No permission necessary, no permission granted. Mr. RAILSBACK. Then they are not really required to pay any fee at all. They enter into an agreement with the cable people for a fee to provide――

Mr. WOLFF. Let me do it very quickly. There is a station in Chicago, a powerful station, WGN-TV. A satellite operator decided he was going to pick up WGN-TV. There is nothing WGN-TV can do about it. It is an independent station. The satellite operator goes to the cable operator and says I have all this good programing from WGN-TV in Chicago and I will license it to you. He does, and he gets money for it. If WGN-TV were not as good a station as it is, it would start programing for a satellite, and then make its money by saying we cover 500,000 homes you cannot otherwise get because we have gone to cable, therefore our advertising rates have been increased, come to us.

MS. PETERS. There is some confusion in terms of superstation. It sounds as though it is owned by one station. We think in terms of Ted Turner as being the originator of the concept. Originally he did own the whole thing. He was then told he could not be a common carrier and a broadcaster, so he sold the common carrier portion to a friend for a dollar. We are having unwilling broadcasters picked up by satellite-

Mr. RAILSBACK. Are there a number of satellites now that are doing it?

Mr. WOLFF. Yes.

Mr. GUDGER. May I inject one question here? It is my impression a satellite may carry as many as 20 signals. Can those be packaged so as to restrict a cable station, so that it can only gain limited access?

Mr. WOLFF. Can the satellite operator restrict use of the material it picks up?

Mr. GUDGER. Use of the material by the cable TV.

Mr. WOLFF. Yes, sir. I cannot tell you how, but it is like you cannot get tuned in. I think it is a scrambling type of thing. You have to turn to the right place on the dial.

Mr. RAILSBACK. I just flew in, so I have not had a chance to carefully study the statements. Are you as concerned as others have been in conversations I have had with them, like the motion picture industry, for one, about all the problems confronting the Copyright Tribunal, the fact they have not made their distribution, that it is tied up? What should be done in addition to extending the authority of the Copyright Tribunal, which I understand you want to do? But what about the sad fact that it apparently has all it can do to deal with the problems now confronting it?

Mr. WOLFF. I only have one answer to that. Get down to the business entirely and have retransmission consent.

Mr. RAILSBACK. That probably will not happen. Based on your experience, do they need more staff, more clearly defined guidelines?

Mr. WOLFF. Well, in order for it to be made meaningful, they will have to somehow increase the rates of compensation. Now whether that should be left to the tribunal to make its own survey and establish how many homes are being serviced in this manner by cable, et cetera, or whether a legislated increase such as a cost-ofliving-I do not know how that would work. I would say at the moment, I would like to see a fence put around the area and no hunting allowed by any of the other regulatory or executive or administrative branches.

Mr. RAILSBACK. Do you see that as providing stability which you feel are incursions by other regulatory agencies which could disrupt the function of the tribunal?

Mr. WOLFF. I do not want the FCC to throw this thing wide open without some concern being expressed by the legislative body. Mr. RAILSBACK. Thank you.

Mr. KASTENMEIER. Ms. Peters, you represent Screen Actors Guild. Is Kathleen Nolan still president?

Ms. PETERS. No, Bill Shellig is the new president.

Mr. KASTENMEIER. Thank you. Indeed, the committee thanks all four of you for your testimony.

Right now, the Chair would like to greet Mr. Tom Wheeler, president of the National Cable Television Association; Steve Effros, counsel, Community Antenna Television Association; and Mr. Barry Simon, vice president and general counsel of Teleprompter.

PANEL REPRESENTING THE CABLE INDUSTRY: THOMAS E. WHEELER, PRESIDENT, NATIONAL CABLE TELEVISION ASSOCIATION; STEPHEN EFFROS, EXECUTIVE DIRECTOR, COMMUNITY ANTENNA TELEVISION ASSOCIATION; BARRY P. SIMON, VICE PRESIDENT AND COUNSEL, TELEPROMPTER CORP.

TESTIMONY OF THOMAS E. WHEELER

Mr. WHEELER. We appreciate your diligence and patience for wading through an arcane situation at best.

I am Tom Wheeler, president of the National Cable Television. Association. Thank you for the opportunity to appear before you today. I do confess, however, a certain degree of amazement that the cable copyright question is once again a matter of congressional concern so quickly after the passage of the Copyright Act of 1976.

Cable television operators have, as the result of this committee's decision, recently reversed 30 years of precedent and have begun making copyright payments. In the Copyright Act of 1976 this committee vacated two Supreme Court decisions which found that cable had no copyright liability. The Court found that cable merely enhanced the capacity of viewers to receive broadcast signals, and did not perform copyrighted material. To paraphrase the Court, cable copyright liability is the equivalent of buying two tickets to one performance.

Judging from your statement in the Congressional Record, Mr. Chairman, there are two key issues around which any decision to reopen the Copyright Act should revolve. These issues are the impact of new technological developments, such as satellite distribution of television signals, and the proposed Federal Communications Commission deregulation of the cable signal carriage rules. Briefly, let us address each of these.

SATELLITE IMPACT

Cable television systems are the largest users of communications satellites in the country. However, the vast minority of programs so transmitted are broadcast retransmissions and thus the topic of today's hearing. The majority of satellite-fed cable programs are not available on broadcast television and have been purchased specifically for cable use.

As the chart indicates, out of the top 20 satellite-fed channels, only four are retransmitted broadcast signals. Even that number is about to diminish, as KTVU is being taken off the satellite for lack of interest.

In the top 12 satellite-fed cable programs, there is only one socalled_superstation, channel 17 from Atlanta. I should hasten to point out that the program prices charged channel 17 as a result of its superstation status have been equally super-up 171 percent in 1 year.

The second-ranked broadcast signal, WGN, ranks 14th in overall cable usage, with one-sixth as many subscribers as channel 17. The next ranked broadcast station, WOR, is ranked 17th, and only has one-twentieth the subscribers as WTBS. As I mentioned before, No. 19, KTVU, is going off the satellite.

Clearly, there is only one superstation, channel 17, and it is paying dearly for that right. To assume a flood of superstations resulting in the radical overhaul of television production and broadcasting is erroneous for several reasons. For one, FCC studies and cable industry experience have demonstrated that while distant signals are important to cable's consumer acceptance there is, nonetheless, a decreasing marginal value to each additional signal. One reason this occurs is because of the duplicated programing which makes independent stations look alike. In addition, the fact that cable operators must pay the double costs of satellite transmission and copyright fees raises real bottom-line considerations. The basic fact is that most cable systems have 12 channels and just do not have room for unlimited duplicated programing on which they pay twice.

While we are discussing WGN and WOR, however, it is important to note that these so-called reluctant superstations do not hesitate to promote their cable audience. For example, the rate cards for WGN and WOR indicate that these stations are actively selling the additional cable audience to advertisers. This produces extra cable-induced income which the program producers should treat the same way as channel 17's increased income is created-by increasing program prices to reflect increased audience.

PROPOSED CABLE DEREGULATION

Presently, the Federal Communications Commission is in the midst of a rulemaking to consider the elimination of the restrictions on cable carriage of broadcast signals. The inquiry which led to this rulemaking began 3 years ago and the Commission has yet to make a decision.

The FCC rules in question limit the number of signals a cable system may import. In addition, the FCC requires that syndicated programs under contract to local broadcasters be blacked out on the cable-imported distant signals.

Attempting to reopen the Copyright Act based on the potential of an FCC rule change is a specious argument. First, the FCC has yet to act in this proceeding and the specifics of the outcome are totally speculative and uncertain.

Second, linking revision of the Copyright Act to possible changes in FCC rules is putting the cart before the horse. As the Court of Appeals for the D.C. Circuit held just a few weeks ago in Geller vs. FCC, the 1972 rules were adopted as a copyright surrogate in the expectation that they would facilitate enactment of copyright legislation. Passage of the 1976 Copyright Act requires Commission consideration of the continuing need for those rules.

This point is emphasized by the fact that the Congress anticipated future changes in FCC rules and created a Copyright Royalty Tribunal to adjust cable fees in response to FCC rule changes. Section 801(b)(2)(B) of the Copyright Act clearly states in pertinent part:

"In the event that the rules and regulations of the Federal Communications Commission are amended at any time after April 15, 1976, the royalty rates established by section 111(d)(2)(B) may be adjusted to insure that the rates for the additional distant signal equivalents resulting from such carriage are reasonable in the light of the changes effected by the amendment to such rules and regulations.