months we'll be back where we were. Despite our December The situation for Eastern Microwave has not been so favorable: since the announcement of the CRT decision, WOR has yet to recover all the 800,000 homes that were affected. However, as of last December, all but 100,000 of its lost subscribers were replaced and Eastern Microwave "expects to replace the last of its lost subscribers by the end of the month" (December 1983). 11/ Moreover, many cable operators, when they dropped a distant signal, did not allow the cable channel to go black, but replaced the signal with one of the advertiser-supported cable networks. The Copyright Office, however, has no data on how often this was done. In sum, the Congress may choose not to consider as relevant the financial condition and prospects of the resale carriers and the willing superstation distributed by one of them; but since contentions have been made that the new CRT-set rates have adversely affected them, the contention can be examined. 3. Review of the Recent Experience of the Copyright Office Under License The Licensing Division of the Copyright Office is the repository of Notices of Identity, Notices of Change, Statements of Account and statutory royalties under the cable television compulsory license. As you will note from the chart on the following page, both the number of cable systems in 10/ Cable Television Business, (March 15, 1983) at 30. Summary of Cable TV Activity as of February 9, 1984 *Covers only the January June, 1983 accounting period. Note: The Copyright Office has not yet collected royalty fees for 1983 due under the CRT's October 20, 1982 rate adjustment. operation and the level of statutory royalties paid by cable systems has increased steadily since the compulsory licensing system became effective on January 1, 1978. 12/ The CRT rate adjustment, and the appropriations measure which delayed the effective date of one of its two parts, led to several inquiries by cable representatives concerning the implementation of the new rates by the Copyright Office. The Office responded to these inquiries in letters of opinion to the National Cable Television Association dated December 27, 1982 and December 30, 1982 and in a tentative Statement of Views published in the Federal Register on March 30, 1983 (copies attached). On each occasion, while attempting to respond to their immediate concerns, the Office noted its reluctance to reach any broad conclusions. The Office hoped that some or all of the questions raised would be brought to the attention of U.S. Court of Appeals for the District of Columbia Circuit, to whom the Tribunal's rate adjustment decision was then pending. The Court's opinion affirming the CRT decision, however, provides little, if any, guidance on these questions. The Copyright Office is taking several further actions to implement the rate adjustment. First, immediately following the Court's decision, the Office distributed an announcement to cable operators alerting them of the decision and noting that they will receive further direction later concerning their compliance (copy attached). Second, the Licensing Division is preparing Supplemental Statement of Account forms to be completed by cable systems for the two accounting periods of 1983 so that they can recalculate their royalty 12/ The statistics for 1983 are incomplete for two reasons. First, the Copyright Office has yet to receive a complete set of Statements of Account and royalty fees for the second half of 1983; these are not required to be filed until March 1, 1984. Second, the total royalty fees for 1983 do not include the amounts due and still to be collected by the Office under the recent CRT rate adjustment. totals and deposit any additional fees due. Third, new Statement of Account forms reflecting the new rate structure are being prepared for distribution at the conclusion of the present accounting period. Finally, the Office is reviewing further the issues addressed in the Statement of Views noted earlier and plans to issue regulations shortly in an effort to provide additional guidance with respect to these questions. 4. Comments and Recommendations on H.R. 2902 and H.R. 3419 The CRT rate adjustment led to two proposals for reform of the cable television compulsory licensing system. While each proposal provides some financial relief for certain cable system operators, their approaches differ significantly. The Free Market. Copyright Royalty Act of 1983, H.R. 3419, introduced by Representative Hall, presents a marketplace model and is discussed first. I then will turn to H.R. 2902, introduced by Congressman Synar. This bill, is intended to correct a copyright imbalance between cable systems located in large and small markets. H.R. 3419 As already noted, the signals of three independent television stations presently are distributed nationally to cable systems via satellite. While WTBS, Atlanta, clearly programs its broadcasts with cable in mind, and as we understand it, contends that it compensates program suppliers for its added cable distribution, the two other superstations claim to be unwilling participants. The copyright obligations of cable systems that carry these superstations presently are the same. The Free Market Copyright Royalty Act of 1983 allows for differing copyright treatment for such stations. It would reduce the copyright obligations of cable systems for carriage of willing superstations that can qualify as "national cable broadcast networks" is, the cable system carrying such a superstation classified as "national cable broadcast network" would pay not the new CRT-set rate of 3.75%, but an alternative lower rate. In addition, the bill as drafted also is susceptible of the interpretation that the new syndicated exclusivity surcharge would not apply. As explained by Mr. Hall upon introducing his bill, Where market forces are adequate to insure fair reimbursement to copyright owners who willingly license their programming to such networks, there is no need for Government intervention and regulation. 13/ The proposal as presently drafted may not necessarily meet this objective. a. Recognition of Marketplace Negotiations for National Distribution Section 3 of H.R. 3419 creates a new category of stations "national cable broadcast networks." The bill directs the CRT to classify any television broadcast station that requests such classification as a national cable broadcast network upon the station's certification of four factors. Only the fourth of these criteria takes into account the licensing arrangements made between the broadcast station and the program suppliers to the station. This factor states that, (IV) copyright owners who supply works for performance or display over the station are aware of the national distribution of the station's signal. Few would argue with the proposition that most, if not all, copyright owners who supply programming to superstations are "aware of the national distribution of the station's signal." It may not necessarily follow, however, that they have been compensated for such distribution. 13/ 129 Cong. Rec. E3722 (daily ed. July 25, 1983) (statement of Rep. Hall). |