Cable drops signals as fee hike begins Advertising Age 3/21/83 Why must I choose which station to drop? The St. Petersburg (Fla.) Evening Independent 3/16/83 Fee hike forces channels off cable The Columbus Dispatch 3/24/83 Cable customers protest dropping of stations The Montgomery (Ala.) Advertiser and Journal 3/13/83 Milwaukee Journal Kastenmeier rips boost in cable fees By Frank A. Ankofer Journal Washington Buress Washington, D.C. Like a father whose offspring has turned against him, Rep. Robert W. Kastenmeier is angry at the Copyright Royalty Tribunal for a decision increasing fees for some cable tellvision operations. The new royalty rates, scheduled to go into effect Tuesday,, will be six times higher-then previously and could cause CONGRESSIONAL some cable television systems to drop Kastemmerer denounced the tribunal's devision to increase the royalties as and comer. He said cable operators, including several in Wisconsin, had told hit they would simply cancel some of their programs rather than pay the high er rates. Fates apply to about 1,000 of the larger cable systems, among about 4,500 around the country, that re-broadcast signals from commercial television stadard outside their areas. Such stations, for example, pick up signals from the socalled super stations in Atlanta, Chicago and New York, and send them to their customers. The viewer will find that his cable system will not be able to carry the distas signals because his cable system will not be able to afford it," Kastenmeier sa"And this is not a premium. This is part of the regular service you are being denied because of these high fees.... The viewer is the loser." But Mary Lou Burg of West Bend, Wis., a member of the tribunal, said the record in the case showed that only about 150 stations had been taking advantage of the x-called distant signals since they became available in June of 1981-the result of court decision that upheld a ruling by the Federal Communications Commission. Where a station decided to discontinue re-broadcasting those signals, she said, viewers would lose only that part of the programing that had been added since June, 1981 She said the tribunal had anticipated that some of the stations would drop the re-broadcasts. But she said some stations probably also would resume them once they had made business decisions regard ing the new royalties. Kastanmeier, a Democrat from Sun Prairie, has more than an ordinary interest in the situation. As chairman of a House Judiciary Committee with jurisdicdon over copyright, he was the author of a new copyright law that, among other things, created the Copyright Royalty Tribunal in 1976. Burg, a longtime Democratic Party ac tivist who once served as the national. party's vice-chairman, was appointed as one of the original members of the tribunal by former President Jimmy Carter. The tribunal's function is to establish compensation for owners of copyrights. In the case of cable television, for exampie, royalties paid by operators are distributed to owners of movies and syndicated programs, sports interests such as the national baseball and basketball leagues, and performing rights societies that represent musicians and songwriters Kastenmeier contends that the tribunal in effect exceeded its authority by what be said was a quantum leap in the royalty rates for distant signals. The rate had been established by Congress at about six-tenths of 1% of a cable operator's gross annual revenues. The tribunal's decision last October. which has been appealed to the federal courts, raised the rate to 3.75% of reve nues, or six times as much as before. Kastenmeier said he had expected some modest increase in the rate, but nothing like an increase of that magnitude, which he said came "out of the clear blue sky." The effect, he said, is to change cable television patterns around the country even though that is not the tribunal's business. "They are not supposed to make pollcy," he said. "They went so far to favor the proprietary interests that if it's not scandalous it's incomprehensible." But Burg defended the tribunal's 4-0 decision in the case, which she said was reached after months of daily hearings in which witnesses from all interests testified and submitted documents, studies and surveys to buttress their positions. "Generally we tried to look at the prices paid for alternative programing in the marketplace by cable operators and tried to use that as a benchmark for this," she said. "We had long proceedings, and we sat through every day of it ourselves. "We listened to all the evidence and witnesses, we asked questions, we read all the stuff and, on the basis of the entire record, we felt the copyright owners had made a case for a higher rate for these signals than what the copyright users were paying for the prior signals." Burg pointed out that the new rate Robert W. Kastenmeier applied only to the larger cable systems -those with more than $428,000 in annual revenues from subscribers. Smailer operations are not affected, she said. She said tribunal members knew that however they voted the decision would be appealed to the courts. Because the tribunal is so new and is establishing precedents, every one of its decisions has been appealed. So far, Burg said, the courts have upheld all of them. "You have to come out the way the evidence leads you," Burg said, "not what you would want or like, and that's what we think we did." But, she said, "It's a no-win situation. It's calculated that someone would complain." THURSDAY, MARCH 24, 1983 The Paducah Sun --Editorials Mystery agency should be curbed When we started looking into Paducah's loss of three cable television channels, and were told it resulted from a decision by the Copyright Royalty Tribunal, we were embarrassed. We had never heard of the Copyright Royalty Tribunal What we were able to learn of the tribunal and its action from Paducah people left us pretty much in the dark. It sounded to us like one of those shadowy agencies created by Congress to issue arbitrary orders and annoy the American people. But we didn't know, so we wound up pretty much giving the tribunal the benefit of our doubts, and mildly criticizing the local cable company and authority for not giving subscribers more of a voice in the decision to drop the New York and Nashville channels instead of raising rates slightly to cover the extra fees. Now the New York Times News Service has written an informative piece about the tribunal, which was published in the Wednesday edition. And now, after we have read it, the tribunal still sounds like one of those shadowy agencies created by Congress to issue arbitrary orders and annoy the people. It seems to be a little group whose function is to exercise great power without accountability. And it seems to us that Comcast of Paducah and Allie Morgan, our resident authority on these matters, are right on target in urging a protest to Congress to change this arbitrary action. The tribunal, the Times reports, operates from a tiny office and on, by Washington standards, a shoestring budget - $487,000. Its job is to set the royalty fees that cable television systems, like Comcast, must pay to owners of copyrighted shows. Last year, after an exhaustive series of hearings, the tribunal decided to raise royalty fees for the cable systems' right to pick up distant stations by eight to 15 times the existing rates. So far as the Times story reveals the tribunal had absolute authority to do this. There appears to be no appeal, no higher body to which the tribunal is accountable. It orders, and everybody has to obey. There does seem to be one higher authority, Congress itself. It had the authority to delay the effective date of the new fees. But finally, on March 15, the order became effec tive, and Paducah Comcast subscribers lost the two big stations. (It's an additional eccentricity that has cost us WDDD in Marion, . It's classified as a "distant station" just like WOR in New York and WZTV in Nashville.) If Congress can delay the tribunal's action, it can also modify it. We'll bet Rep. Robert W. Kas tenmeier of Wisconsin speaks for many of his countrymen when he called the rate increases which the tribunal ordered "arbitrary, capricious and an abuse of the discretion placed in the tribunal by Congress." So Congress expected the tribunal to use discretion, according to Mr. Kastermeier. We take it that means that it should have as much regard for the people whom congressmen represent as for the show business entrepreneurs who own the copyrights. For it isn't struggling writers and artists starving in the garrets of New York and Hollywood who are getting the big new fees. No, it's the owners of the copyrights to the television shows. And these are the motion picture companies and broadcasters. The people getting the increased royalties, then, are more likely to be found lolling beside a Hollywood swimming pool than in a garret. And who has decided that we must all pay higher royalties to receive the benefits of distant cable television? It appears to be a wholly political body. The chairman is the former chairman of the Blacks for Reagan-Bush Committee in California. Another is a former broadcasting executive and deputy chairman of the Democratic National Committee. Three of the five commissioners were appointed by former President Carter, two by President Reagan. The Carter appointees are Democrats, the Reagan appointees Republicans. Only one of the ave has a background in copyright law. We recognize that there must be some place in a political system for a certain amount of patronage rewards for political supporters. We have no particular objection to a modest amount of this kind of thing. But such political people should be so harnessed as to do as much useful work and as little mischief as possible. None of this is to say that there is no justification for higher royalty fees. People are entitled to sell the products of their brains and talent, and we have no way to judge whether those fees have hitherto been too high or too low. But as the Times story suggests, there must be a better way to find out than by giving a tiny, faceless body the unchecked power to disrupt cable systems and impose huge increases in contractual charges on viewers over the whole country. Such decisions should be made either by the free market or, if that is impracticable, by a body with as much regard for, and responsibility to, the people who pay the fees as to those who receive them. Mr. KASTENMEIER. I think we will go on to our other witnesses. I hope that those who have questions for Mr. Wheeler will remember them and raise them at the end. Next we will hear from Mr. Bliss. Mr. Bliss, we will now call on you. Mr. BLISS. Mr. Chairman, subcommittee members, thank you for inviting me to present facts regarding cable copyright and H.R. 2902. I run United Video, which is the satellite common-carrier transmission company for WGN, the Chicago superchannel. We transmit WGN via satellite to cable systems throughout the United States WGN is one of only three superstations. There used to be four, now there are only three, WGN, WTBS, and WOR. The Copyright Royalty Tribunal's recent 3.75 percent penalty fee cost my company, United Video, a loss of out-of-pocket revenues of $1,143,274 this year. It also cost us another $1,480,000 in customers who would have taken the service this year but cannot now take it because of the 3.75 percent penalty fee. This equates to roughly $2,600,000 every year forever; $2,600,000 represents three times our last year's after-tax profit. In terms of viewers or, in political jargon, constituents, this equates to pulling the plug on approximately 4 million viewers of the WGN superchannel. This is a list of-and it is in the record-of the approximately 4 million viewers who lost WGN's services on a State-by-State basis. [The list to be furnished follows:] Systems That Dropped WGN Due to CRT Newburyport; Newburyport Cablesystems. North Attleboro; UA Columbia Cablevision.. Watertown/Newton Centre; Continental Cablevision |