than mine from those in the cable television and motion picture industries-that the tendency is that cable systems are being rebuilt with expanded channel capacity, and expanded program offerings to the consuming public. That tendency to broaden the channel capacity and the programming that is available might very well offset the argument that local programming would be crowded out by this subsidized superstation program supply service. Mr. MAZZOLI. Then the other side of that, perhaps, is that the argument for a reexamination of compulsory licensing is stronger. We should get right into the market because if the new system has all the offerings on cable which are available to the people who live in smaller towns, they already have enough beckoning their attention that the local station may not get their time. Let's let everybody pay the price, whatever the price is. So again, as we say, that's a chapter for another day; but still that might be the lead. I gather from your statement, Mr. Ladd, that the Copyright Office draws no conclusions from this. In your analysis have you come upon data to show how many stations may have dropped programming Mr. LADD. No. Mr. MAZZOLI [continuing]. Anticipatorily or whatever? Mr. LADD. I'll tell you what we have found. Mr. Mazzoli. Yes. Mr. LADD. That day, March 15, 1983, became known as Black Tuesday and there were very dire forecasts about what was going to happen to the financial condition and prospects of cable systems. There was some evidence in the press, that I can't quantify, that very few channels went black; and, as a matter of fact, one of the trade publications said that it was not Black Tuesday, but Fat Tuesday in the sense that while imported distant signals were dropped those were, in many cases, replaced by cable origination services. There is evidence, which we cite in our statement, to the effect that the long term trend in customers for the superstations has continued to rise, and that evidence is given in our opinion. Right now, at this point, I suspect that the superstations have recovered almost everything that they temporarily lost when those signals were dropped in anticipation of the rate increases. Mr. MAZZOLI. So it's possible that some of the mail that we've received on the Hill came early on when they were being told by their cable outlets that "We are going to have to do this," or "We think we must," or something to that effect. In reality, a more current survey may show that there hasn't been that much dislocation, that viewers have still had available to them a range of things. So that the CRT's jump from a low amount to 3.75 percent hasn't really been harmful. Mr. LADD. Yes. I will answer that on the one hand with data, and on the other hand with an opinion. The data are that the number of customers for superstations has continued to rise and that their prospects are very good. An allusion was made in earlier testimony that a new superstation is ex pected to come into service very soon, I don't think that that would be happening if they were looking at a bleak financial future. My opinion is that the dangers of Black Tuesday were vastly exaggerated. Mr. MAZZOLI. Mr. Chairman, I have two questions that can be answered very quickly. One is: When we're talking about importing distant signals, are those superstations, for the most part, rather than independent stations that are Mr. LADD. For the most part, yes. Mr. MAZZOLI. That's the case. Essentially speaking, when we're talking about importation it's WOR, WTTG, and WGN. Mr. MAZZOLI. Essentially- Mr. LADD. Yes. Mr. MAZZOLI [continuing]. Speaking is that right? My last question, Mr. Ladd, is: Do you agree with the statement of Mr. Valenti that essentially speaking the CRT used this authority it had because of this deregulation, but that essentially speaking for the future their focus will have to be more upon tinkering with the question of the cost-of-living adjustments and making that kind of determination? Could you see the CRT, the next time around, going another 4, 5, or 6 percent rather than trying to adjust the rates for cost of living changes? Mr. LADD. Well, first of all, as far as the old complement of signals, those which were controlled by the formed FCC rules, they are by statute limited to the minor adjustments which we've been discussing. If you're asking me whether the CRT in the future will be barred from arriving at a revised estimate of what the market rate is in place of the 3.75 percent, I don't think so. Mr. Mazzoli. Thank you very much. Thank you, Mr. Chairman. Mr. KASTENMEIER. I thank my colleague from Kentucky. I might add that we're not just worried here about superstations. There are people who write on a whole series of area television stations that are not being carried as distant signals. So I don't know that we, statistically, need to worry about whether WTBS survives. Mr. LADD. I agree. Mr. KASTENMEIER. That's not the problem. Or even necessarily whether cable operators survive. The question to some extent is whether you convert people to having to pay an extra $10 per month for HBO when they were getting some programming on that channel for the basic rate before. I might say that I think the concern about the impact on local television stations in sparsely populated areas is really, as Mr. Leibowitz suggested, an FCC question. They are the people who should be concerned with whether local television stations will exist or will provide local programming for local people. In a sense I suppose it can be argued that the FCC answered that a couple of years ago when they deregulated distant signals. They apparently were led to believe it wasn't that important; or at least the local stations were in a better position to survive. Well, in any event, I want to thank the Register. We're glad that he and his staff are here this morning to give guidance in these question. Mr. LADD. Thank you, Mr. Chairman. Mr. KASTENMEIER. I'm going to invite our next witnesses to speak as a panel there are: Mr. David Polinger, who is senior vice president and assistant to the president of the Tribune Co., WPIX, Înc. He also is chairman of the NAB Copyright Committee. Also appearing is Mr. James Hedlund representing the Association of Independent Television Stations, Incorporated. Mr. Polinger, would you like to go first? Mr. POLINGER. Thank you, Mr. Chairman. You know, it was such a beautiful day when I got up this morning. I felt so great. I walked in here and there's nothing more exhilerating than to know that you're on the same panel with Jack Valenti; but then it's so chagrining to find out that you're speaking after instead of before him. But I think we have some different perspectives. Mr. KASTENMEIER. Will you also be standing during your testimony? Mr. POLINGER. I don't know yet. I haven't had time to figure out how standing or sitting would be preferable. [Laughter.] I'll sit. I'd like to request that my prepared statement be made a part of the official record, but I'd just like to precis what we did file with you; and since Mr. Synar, Mr. Mazzoli, Mr. Sawyer, and Mr. Moorhead asked a number of questions that seemed to relate particularly to broadcasting I should like after I'm finished with my prepared comments to respond from the NAB perspective which, indeed, may differ from Jack Valenti's observations. Mr. KASTENMEIER. Without objection, your full statement will be placed in the record. [The complete statements of Messrs. Polinger and Hedlund follow:] Statement of David Polinger New York, New York National Association of Broadcasters Before the Subcommittee on Courts, Civil Liberties February 22, 1984 Thank you for this opportunity to present the views of broadcasters during these hearings on H.R.3419 and H.R.2902. Summary of Position These bills would effectively eliminate the Copyright Royalty Tribunal's 3.75 percent royalty rate paid by the nation's largest cable systems for the privilege of retransmitting distant television broadcast signals and programming. Neither bill is what it seems to be. H.R.3419, which would exempt the carriage of "national cable broadcast networks" from the 3.75 percent rate, is styled the "Copyright Royalty Tribunal Reform Act." But below the surface analysis suggests that fundamentally the bill amounts to little more than private relief legislation for Ted Turner and WTBS. If reform of the Tribunal is desireable, it may be accomplished without this unnecessary and inappropriate "rider." H.R.2902 is touted as an attempt to create equality among cable systems. In reality, though, all this bill would achieve is an increase in the number of distant signals that cable systems may carry without having to pay the reasonable marketplace rate. In October, 1982, the Copyright Royalty Tribunal established a rate of 3.75 percent of gross receipts from basic services for each distant television broadcast signal added by the largest and most successful cable operators. The Tribunal determined that this 3.75 percent rate reflects the value of programming in the current marketplace, one vastly different and more favorable to cable than was the case earlier when the FCC limited the number of distant signals which could be imported by cable to local television markets. The United States Court of Appeals for the District of Columbia Circuit recently affirmed the Tribunal's decision. In doing so, the Circuit Court rejected the cable industry's contention that the Tribunal had acted unreasonably in setting a marketplace rate. The court upheld the Tribunal's decision as a valid exercise of the powers given it by the Congress and as a reasonable judgment considering the absence of a true functioning market. The Tribunal's rate adjustment was an attempt to restore some equity to the cable/broadcast program market situation following FCC deregulation of the distant signal and other cable rules. Broadcasters oppose legislation that will disturb this new-found equilibrium. H.R.3419 would carve out a massive special exemption from the 3.75 percent rate for cable operators carrying WTBS. Although under the bill any television station could apply to be classified as |