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the FCC and the courts in an effort to eliminate its obligation to carry the signals of its local television stations. In short, this is not a simple copyright matter.

In terms of this subcommittee's responsibilities, INTV believes that a fair and reasonable balance can be achieved among the competing aims of the cable industry, the copyright owners and the local television stations. We recommend that any legislation contain these three elements:

1) That cable systems be allowed to carry, without copyright liability, the signals of all the television stations licensed to the ADI in which the cable system is located. Such an arrangement would not alter the FCC's current mandatory carriage rules, but would allow many cable systems to carry, free of charge, signals which are now subject to distant signal copyright rates.

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2) That copyright owners, and their licensees, be able to enforce territorial exclusivity contracts against cable systems importing distant signals. In short, this would make the concept of syndicated exclusivity a copyright issue instead of a communications issue a change we believe is fully justified. Should this be done, INTV would not object to an increase in the number of distant signals a cable system could import before being subject to the so-called Post-Malrite rate of 3.75% per signal. 3) In particular reference to Mr. Hall's bill, H.R. 3419, that to be exempt from distant signal copyright liability,

a National Cable Broadcast Network be required to demon-
strate that it has purchased the national rights to the
programming to be aired. For example, in the case of
WTBS in Atlanta, this would merely require that all its
programming fall in the category of the Atlanta Hawks
basketball or the Braves' baseball games, the special
package of 17 NCAA football games, or such series as
Jacques Cousteau's Amazon or the syndicated version of
Centennial programming carried by WTBS for which it
holds national rights.

Mr. Chairman, Members of the Subcommittee, INTV is willing to work with you to accomplish changes in the Copyright Act which will be fair to all concerned and help create and maintain a level playing field in local television market places. Thank you for the

opportunity to testify this morning.

TESTIMONY OF DAVID POLINGER, SENIOR VICE PRESIDENT AND ASSISTANT TO THE PRESIDENT, WPIX, INC. AND CHAIRMAN, COPYRIGHT COMMITTEE, NATIONAL ASSOCIATION OF BROADCASTERS; AND JAMES B. HEDLUND, VICE PRESIDENT OF GOVERNMENT RELATIONS, ASSOCIATION OF INDEPENDENT TELEVISION STATIONS

Mr. POLINGER. First, the National Association of Broadcasters opposes H.R. 3419, the Hall bill, as an unnecessary private relief act for Ted Turner's WTBS. Mr. Turner has suffered little if any negative impact from the rate adjustment established by the Copyright Royalty Tribunal.

He is certainly being received in over some 27 million homes and reporting profits well in excess of $10, $15, or $20, or even $30 million, as Jack's exhibits reflect.

The evidence would seem to indicate that where cable systems have dropped distant signals because of the 3.75-percent rate, such signals have often been replaced by one or more of Mr. Turner's cable-originated programs, either CNN or CNN II. Significantly, the bill is drafted so that only WTBS would presently qualify as a national cable broadcast network, which is a new genetic hybrid, I guess, in our lexicon.

Even though any TV station could apply for the exemption, there is no evidence that others would be interested in seeking that exemption.

Additionally, it would seem inappropriate for Congress to intervene on Mr. Turner's behalf, in any event, during the pendency of

the so-called Hubbard suit, which questions whether or not cable systems carrying TBS are even entitled to a compulsory license.

NAB also opposes Mr. Synar's bill, H.R. 2902. By permitting all cable systems to carry three distant independent stations at the old rate, the bill would effectively, of course, gut the CRT's 3.75 percent decision.

The bill assumes that systems in the top 50 markets may now carry 3 distant independents at the old rate. Ergo, why shouldn't all systems be created equal?

But there never was equality; and let me try to clarify exactly what the FCC rules were in that respect.

In the top 50 markets you were allowed to carry 3 independents unless there was an independent in the market. In that event you were allowed only two. Since most of the top 50 markets did have an independent, you could put down two for the top 50.

In the market sizes 50 to 100 you were allowed 2. Therefore, equal to the top 100; 2 for the top 50 if there was an independent, and 2 for 50 to 100.

In the 100-plus markets you were allowed the following: One independent, one specialty station and the right to import enough network-affiliated stations to yield a total complement of three, the three major networks.

So, in a sense, those smaller markets, which apparently appeared to be deficient, had an opportunity to import three network affiliates, one independent and one specialty station giving them a prospective total of five.

If my recollection is correct, those were the FCC rules.
Mr. KASTENMEIER. Mr. Polinger, to aid us on this,--

Mr. POLINGER. Yes.

Mr. KASTENMEIER [continuing]. What would a specialty station be?

Mr. POLINGER. An ethnic station or a religious station.

Mr. SYNAR. Not a distant signal.

Mr. POLINGER. I beg pardon?

Mr. SYNAR. Not a distant signal.

Mr. KASTENMEIER. It would be, yes.

Mr. POLINGER. Of course.

Mr. KASTENMEIER. A distant signal.

Mr. POLINGER. It would have to be a distant signal because such a station would not be licensed to that market. You, in Oklahoma, could import Pat Robinson's station from Virginia, if you could get it, as a specialty station, if there were a system in your hometown that qualified in the 100-plus category.

In the 200-plus market category, as has been discussed, you can import as many distant signals as you wanted.

Mr. MAZZOLI. Mr. Polinger, when you use the terms "100-plus" and "200-plus," I'm not quite sure what you mean. You said the top 50 markets.

Mr. POLINGER. Right.

Mr. MAZZOLI. You said that you could have three signals unless there's an independent in which case you have two, and since most of the big ones have independents you basically have two

Mr. POLINGER. Right.

Mr. MAZZOLI [continuing]. Top 50 markets.

Mr. POLINGER. Right.

Mr. MAZZOLI. New York, DC-is that?-Los Angeles and so forth. Mr. POLINGER. That's correct.

Mr. MAZZOLI. The second 50, is that when you say the 100-plus? Is that it?

Mr. POLINGER. No. Market size number 50 to 100.

Mr. MAZZOLI. All right.

Mr. POLINGER. And that 100-plus is market size 100-

Mr. MAZZOLI. So 1 to 50 is the rule of 3 or 2 plus 1 independent

Mr. POLINGER. That's right.

Mr. MAZZOLI [continuing]. And from 50 to 100, the bottom 50 in effect to the top 100——

Mr. POLINGER. Yes.

Mr. MAZZOLI [continuing]. You have the situation of having two, but regardless of having independents or not▬▬▬

Mr. POLINGER. Doesn't make any difference.

Mr. MAZZOLI [continuing]. You gain two.

Mr. POLINGER. That's correct.

Mr. MAZZOLI. Then below that would be 101 down to 200?
Mr. POLINGER. TO 199.

Mr. MAZZOLI. 101 to 199 was the rule which said specialty stations and that kind of thing that you explained to the chairman. Mr. POLINGER. And you could import as many affiliates to make up the three major networks.

Mr. MAZZOLI. So you have three major networks and you can import signals up to three-

Mr. POLINGER. That's correct.

Mr. MAZZOLI [continuing]. Which could be a specialty or what

ever.

Mr. POLINGER. You can import up to three affiliate stations, up to one independent and one specialty station.

Mr. MAZZOLI. OK. So you can import the three networks--
Mr. POLINGER. One independent.

Mr. MAZZOLI. One independent-

Mr. POLINGER. One specialty.

Mr. MAZZOLI [continuing]. And one specialty. So essentially speaking, then, in markets 101 to 199, the people are getting one imported signal; in effect, one superstation or one nearby independent. Is that essentially what's happening?

Mr. POLINGER. Mr. Mazzoli, under the structure, as the FCC had established it, it was presumed that in the top 100 markets there were all 3 affiliates present in the first place. In the 100-plus markets, it would not necessarily have held true that there were all affiliates which was why they established the rule that a system could import as many as were necessary to equal the top 100 market coverage.

Mr. KASTENMEIER. Gentlemen, of course Mr. Polinger is explaining what was.

Mr. MAZZOLI. No, I understand; because what was, you know, deals with the fairness issue.

Mr. POLINGER. There were two different types of information offered to you and, at least from my recollection of the FCC rules after some 30 years in the business, I believe this is the way it

started out. It may not be that way now and I'd like to come back to

Mr. Mazzoli. You know, just because there wasn't equality then doesn't mean that we ought to not

Mr. POLINGER. I'd like to continue that, if I may--
Mr. MAZZOLI. I understand.

Mr. POLINGER [continuing]. When I finish my prepared remarks. Mr. MAZZOLI. I didn't want to get our committee off track but I think it's important because what the gentleman is addressing is a question I had earlier, which is why did they do that in the first place? Why did they have what appears to be a lack of equality? It may not be a lack of equality. It may have been a reason for having it that way which then suggests that trying to make equality may not be really doing fairness either. So I think it's a

Mr. POLINGER. Well, I think it's that latter suggestion that I would like to touch on when I finish this.

It's important to remember that the 3.75-percent rate affects only, as Jack said before, a relative handful of cable systems, to the form 3 systems, those with at least $428,000 in gross annual revenues from basic service.

Roughly two-thirds of the cable systems are not form 3's. Moreover, the 3.75-percent rate does not apply to even form 3 systems if they are located outside all TV markets and, therefore, not covered by the former distant signal rules.

The Tribunal's 3.75 percent rate represents an approximation of true market compensation. It has been upheld by the court.

The effect of this market rate upon the distribution of distant signals is a matter of business judgment. Each cable operator makes the decision whether to drop or add a distant signal based on his marketplace conditions; but, in any event, the public never loses a channel of programming because where distant signals were dropped they were replaced by other cable program services or networks, or CNN perhaps.

For the reasons indicated, neither of the bills under consideration, we think, is very well advised or really very necessary; but NAB does recognize, and it asks this subcommittee to also recognize, that the issues they do address are very small isolated parts of a larger and very complex cable copyright picture.

One critical element of that picture is mandatory cable coverage of local television signals; a principle NAB urges be codified. Appendix B of my formal statement outlines the case for codifying must carry and we do hope that you'll review that carefully.

Now, NAB stands ready, as always, to confer with other interested parties concerning possible very comprehensive legislation to address the cable copyright issues. ÑAB also recognizes that in some instances the rate of adjustment, though valid and warranted overall, has unintended negative impact upon some broadcast television stations, particularly new UHF licensees which depend upon cable carriage for audience they need to become financially viable and provide new local service to the public.

The 3.75-percent rate may act as a disincentive to cable carriage of such signals which do not qualify for what we call must carry or local carriage status. NAB, therefore, would not oppose exemption from the 3.75 percent for voluntary cable carriage of all television

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