ment in rates. I don't know. But I think the contention is that the quantums did such economic damage as to consist of more than an adjustment.

Mr. MAZZOLI. More of a policy matter.

Thank you, Mr. Chairman.

Mr. SYNAR. My question, Mr. Chairman, would be, why is it reasonable on the first two and not the third? We are looking at different things at different levels here.

Mr. MAZZOLI. Well, I think back-I think I am right, Mike, it isn't originally the idea of this number, because this 3.75 rate is only for the additional signals that they got since deregulation. Mr. SYNAR. Why haven't they——

Mr. MAZZOLI. I am just saying that I think the idea of the whole thing was to promote within these communities an area of some locally generated activity and-

Mr. SYNAR. Most of these cable things are going to have enough channels to do both.

I might add this one thing. The CRT was supposed to take in the impact of any rate decision on the end user. It is obvious by this decision that that was not part of the decision and, not only are we limiting the number of signals, depending on where you live, but by the rate and the quality.

Mr. KASTENMEIER. This gets into a larger question-the communications policy question. Several members here-the gentleman from Oklahoma and the gentleman from California who just came in-are on the Commerce Committee. They know that the gentleman from Kentucky's discussion about originating local programming mostly has to do with the franchising question. It has to do with whether the local school proceedings and council meetings and the like are carried. That is the local programming that is intended.

This is not the form of entertainment program that is a principal inducement to subscription to cable systems. Let's face it. This is a burden that is placed presumably by the franchising method on the selected cable system. This has not much to do with something competitive to a distant signal, which is essentially entertainment, news, and so forth.

Mr. Mazzoli. Thank you, Mr. Chairman.

Mr. KASTENMEIER. I yield to the gentleman from Kansas, Mr. Glickman.

Mr. GLICKMAN. Just a quick comment. I share the views of those who believe that the CRT exceeded at least congressional intent in terms of the increases.

But I would say that there are a lot of parallels between this issue and what is happening downstairs in this room on the AT&T breakup. I would urge caution before we would move headlong, into deciding that the marketplace is the exclusive place by which proprietors should have the right to argue about what fees should be charged, perhaps at the expense of the public.

We broke up AT&T by reason of an antitrust suit filed nearly 10 years ago. The parties deciding what the public interests are going to be in that case are essentially the Bell System, one Federal judge and, theoretically, a Justice Department who is supposed to

be representing us, but that Justice Department is essentially limited to what the specifics of the case were.

So, while I happen to share the views of both the gentlemen, particularly the gentleman from Texas, that there is an excessive use of discretionary authority by the CRT, perhaps caused by our lack of being specific in the earlier legislation, I think that the marketplace, while serving as a good place for proprietors to argue, may not protect the public. I would hate to see us get into the situation where we totally and utterly destroy a conceivable place where the public interest can be well represented.

Mr. HALL. Mr. Chairman, may I just ask Mr. Glickman a question, and comment about something he has just said?

Don't you also think that if you increase these amounts from between 400 and 1,600 percent, that you are not taking into consideration the best interests of the public?

Mr. GLICKMAN. You bet. That is why I think that there needs to be a revision of that decision, and much more specific authority placed upon the CRT.

I just have come to the conclusion that it would be a mistake to abolish the CRT because private negotiation of fees will have the public interest often as the last interest.

Thank you.

Mr. KASTENMEIER. Would the gentleman from California care to make any comments?

Mr. MOORHEAD. I have no comments.

Mr. KASTENMEIER. If not, on behalf of all of us here-and we have had a very good turnout this morning-I wish to thank our colleagues for opening up the discussion debate on your two pieces of legislation. May I say that we have profited from it, and we will be in further touch with you on this as matters develop. Thank you both very much.

Mr. FRANK. If the chairman would yield, I would just inform the chairman of the Committee on Administrative Law that all of his business was done in his absence. Everything is OK. He can go back to his office.

Mr. HALL. I just want to say that every member of my committee is here.

Mr. FRANK. That is because we finished downstairs.

Mr. HALL. All right.

Mr. KASTENMEIER. Next we are going to hear from a panel of witnesses representing, in broad perspective, cable television interests. First, Thomas E. Wheeler, president of the National Cable Television Association. He has been president of that association for about 5 years and is well known to this committee. He has testified before it many times.

We would also like to call on Mr. Ted Turner, who is also well known to this subcommittee, and indeed to the entire country. He, of course, is the president and chairman of the board of the Turner Broadcasting System. Mr. Turner has had a possibly good year but, in some respects, a very sad year with America's Cup and the Atlanta Braves ending up second in their respective divisions. And, I am sure this CRT decision didn't help. [Laughter.]

I would like to invite up Mr. Roy Bliss, who has been involved with cable television for approximately 30 years. He is the executive vice president of United Video.

Also appearing on the panel is, Mr. Stephen Effros. He is executive director of Community Antenna Television Association, an association that represents many cable operators, possibly more particularly in nonurban areas than in urban areas. In many other respects, it is a very large and important trade association similar to the National Cable Television Association.

We are fortunate to have such an illustrious and experienced panel of witnesses.

Unless you agreed differently, I will recognize Mr. Wheeler first, and the panel may proceed. We will see how it goes. I would like to hear from the entire panel before questions, but perhaps that may not be possible. We will try to move as best we can.

In any event, it is good to greet you again, Mr. Wheeler. TESTIMONIES OF THOMAS E. WHEELER, PRESIDENT, NATIONAL CABLE TELEVISION ASSOCIATION; TED TURNER, PRESIDENT AND CHAIRMAN OF THE BOARD, TURNER BROADCASTING SYSTEM, ACCOMPANIED BY ROBERT W. ROSS, GENERAL COUNSEL, TURNER BROADCASTING SYSTEM; ROY BLISS, EXECUTIVE VICE PRESIDENT, UNITED VIDEO; AND STEPHEN EFFROS, EXECUTIVE DIRECTOR, COMMUNITY ANTENNA TELEVISION ASSOCIATION

Mr. WHEELER. Thank you very much, Mr. Chairman. We appreciate the interest and concern you and members of the subcommittee are showing in this issue.

I don't know whether it is an accident or by just some fortune of fate, but the hearing today is extremely appropriate because it was exactly a year ago tomorrow that the CRT came down with its cable rate adjustment.

[Chart shown.]

Mr. WHEELER. That decision meant that 10 million homes across the country lost cable television channels, because 76 percent of all affected systems had to drop signals and, on average, had to drop 1.76 signals per system. That is an incredible impact. We are talking about 25 million people being affected in roughly 10 million homes.

But the most incredible aspect is the Copyright Royalty Tribunal knew what it was doing. It knew that this would be the impact. Two days after the decision in a statement to the Washington Post, the acting Chairman of the CRT said, "We think it is reasonable that they may drop some distant signals they are now carrying." That is an amazing statement. It is a statement that indicates that the CRT knew that they were reversing communications policy, fostered by the FCC to encourage program diversity. It is a statement that they knew that cable operators would be dropping signals as a result of this heavy assessment which masqueraded as copyright policy.

Let's ask what is reasonable-in Mr. Brennan's term-what is reasonable to those 10 million households up there?

We have appended to our statement a collection of clippings from across the country detailing the chaos that came in community after community across the country as cable operators were forced to drop signals as a result of this decision.

Let's look at a couple illustrative examples. In Rockford, IL, for instance, one signal there would have cost $180,000 a year additional as a result of this decision, or $4.39 per subscriber per year additional out of the consumer's pocket.

In Springfield, MA, three signals were affected by this decision. They would have cost an additional $540,000 a year, or $1.40 per subscriber per month on a basic cable bill of $3.95 a month. That is an incredible impact that would have to be borne by the consum

ers.

[Chart shown.]

Mr. WHEELER. The operators had two choices-to drop signals or to increase rates. The CRT, as Commissioner Brennan said, wanted them to drop signals. But the trouble was that the CRT decision put cable operators in conflict with their local franchising bodies. Many franchises specify the channels that a cable operator has to carry, and the cities would not permit the dropping of channels, despite the fact that the rate may have gone up 1,500 percent. Most franchises provide for rate regulation, and the cities would permit rate increases to recover those increased costs.

So what is the result? Not only do you have bad consumer feelings, not only do you have this kind of press around the country, but also you have lawsuits and legal fights between cable operators and cities, and you have a loss of revenue which would otherwise be spent on improving the service, and on expanding the capacity of the system. Instead this revenue is siphoned off to maintain services that are now more costly than the value to consumer, but the city says you have to keep it on and you cannot increase your rates.

As I said before, the CRT knew of the negative consumer impact of its decision. Amazingly, it ignored the repeated warnings during the proceeding that this would happen. The report is replete with such warnings. However, the most unconscionable action by the CRT was their ignoring the Copyright Act formula. They ignored the mandate of the Congress.

The Congress set out a couple of key instructions to the CRT. They said that there was a formula in the Copyright Act of the diminishing marginal value of each additional signal-in essence, that the third signal is worth more than the fourth signal, which is worth more than the fifth signal-a diminishing marginal value. That is written into the Copyright Act.

The testimony by the copyright owners, the sports interests and the Motion Picture Association, said that is right, they agree there is diminishing marginal value. The CRT threw that concept out the window and said there is no such thing as a diminishing value, we will just require an across-the-board 3.75 percent of gross revenues. As a matter of fact, we will hit the last added signals the hardest. In addition, the CRT ignored the Copyright Act requirement that it should base its rate adjustment on, and let me quote from the act, "among other factors, the economic impact on copyright owners and users." This is the point that you were discussing pre

viously, that Mr. Synar brought up. The decision as to the impact on the consumers was known by the CRT. They were warned of it, and they ignored it. In their decision, they justified their rate as a rate based on marketplace expectations of the copyright owners-not what is good for the end user, not obeying the schedule established in the Copyright Act, but what the expectations may be of the copyright owners.

Mr. Chairman, your amicus curiae brief was cited previously, and I think there is another provision that best sums up how the CRT ignored the Congress. You said,

I agree that the Tribunal's refusal to consider the public interest in its decision or to adopt the declining fee schedule to reflect as does the Copyright Act schedule, the declining marginal value of additional distant television broadcast signals are arbitrary, capricious and an abuse of the discretion placed on the Tribunal by Congress. The Tribunal's decision will cause irreparable harm to the public and the cable industry which serves it.

Clearly Congress must reassert its will over this maverick agency. Mr. Synar and Mr. Hall have proposed legislation to do just this, and we applaud their efforts.

Since you have had a discussion this morning of the details of those bills, and the others on the panel will be discussing those, I won't talk about the specifics of those bills. Rather would ask that we spend a couple of minutes looking at the broader implications which demand congressional intervention, specifically, how the Copyright Royalty Tribunal has derailed cable copyright policy by shaking the foundation of that policy, the compulsory license.

There has been a lot of talk about the compulsory license this morning. Let's don't forget what it is. The compulsory license is the only way for thousands of cable systems with multiple channels to pay for and receive the rights to thousands of broadcast programs. The mathematics alone suggest you have to have some kind of blanket licensing provision.

In the words of the former Registrar of Copyrights, Barbara Ringer, there is a "practical impossibility of each of the cable systems independently sitting down and bargaining in advance with the literally thousands of possible or potential or actual copyright holders of the programming to be retransmitted."

By forcing cable operators to drop signals, by penalizing 10 million households, the CRT has gutted the effectiveness of the compulsory license and has reversed the thrust of communications policy, which is to provide program diversity rather than restricting through artificially high prices or other regulatory mechanisms.

After having said all that, I guess one good thing can be said for the CRT's decision. After they decided that it is reasonable that cable systems drop signals, after ignoring the instructions of the Congress, after disregarding repeated warnings about the impact of its actions on consumer, after adversely affecting 10 million homes, they did one wise thing. They invited the Congress to review their actions. They said if the payment of fees, based on the reasonable value of the programs, causes operators to drop distant signals with resulting adverse public policy consequences, the Congress may wish to consider if some form of assistance for the cable industry is appropriate.