not discriminate according to market size. Second, it would enforce the FCC deregulation and coordinate the two conflicting policies which exist today.

Mr. Chairman, I look forward to hearing the testimony of the witnesses today. We have an outstanding second panel which will go into a lot more detail than either Sam or I will. I am sure that they will expound on the themes and demonstrate the economic impact of the CRT rate increase which we are living under today. I would like to enclose for the record two items-a copy of H.R. 2902, and also a copy of the statement that I made on the floor upon introduction, which explains in detail the need that we have for this type of legislation.

Mr. KASTENMEIER. Without objection, we will be pleased to receive both and make them a part of the record.

Mr. SYNAR. Again, Mr. Chairman, I want to thank you.

As a member of the subcommittee, I also look forward to the testimony which we will hear today.

[The documents follow:]

I

98TH CONGRESS

1ST SESSION

H. R. 2902

To amend title 17 of the United States Code with respect to the copyright royalty fees of cable systems.

IN THE HOUSE OF REPRESENTATIVES

MAY 4, 1983

Mr. SYNAR introduced the following bill; which was referred to the Committee on the Judiciary

A BILL

To amend title 17 of the United States Code with respect to the copyright royalty fees of cable systems.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 That subparagraph (B) of section 801(b)(2) of title 17 of the 4 United States Code is amended by inserting at the end there5 of the following new sentence: "In no event shall an adjust6 ment in royalty rates under this subclause, which takes effect 7 on or after January 1, 1983, apply to the first three distant 8 independent television signals carried by any cable system.".

[From the Congressional Record, Washington, Wednesday, May 4, 1983]

CABLE COPYRIGHT REFORM

(By Hon. Mike Synar, of Oklahoma)

Mr. SYNAR. Mr. Speaker, today I am introducing legislation to rectify a discrimination among cable television systems caused by an extraordinary rate increase imposed by the Copyright Royalty Tribunal earlier this year. The new rate both increases certain copyright royalty payments by rural and other cable systems by 400 to 1,600 percent and collides head on with recent deregulation rulings by the Federal Communications Commission.

In 1972, when cable television was in its infancy, the FCC restricted the number of the distant signals-television stations imported from outside the local service area-which any cable system could carry. The reason for this restriction was the perceived threat to the viability of local television stations. Since it was thought that this threat was more acute in rural areas where there are fewer stations, the FCC limited the number of distant signals carried by cable systems based on their location. Cable systems in the so-called top 50 television markets were permitted to carry up to three distant independent-that is, nonnetwork-television signals; those in markets 51-100 were permitted up to two distant independent television signals; and those in so-called smaller markets-defined as any town with at least one television station that is not in the top 100 markets-were permitted only one independent television station.

After cable's explosive growth during the 1970's, the FCC and undertook exhaustive economic studies extending for several years to determine if there was a continued need for these distant signal restrictions. In 1980 the FCC finally decided no justification exists and repealed them. The anticipated problems had not materialized. The Commission reported.

"We were unable to establish theoretically or empirically that cable television reduces the quality of local programming. Competition from distant signals may actually, in some circumstances, increase the quality of programming broadcast by local stations."

Paralleling the FCC's deregulation of cable television, Congress enacted a new Copyright Act in 1976 which gave cable systems a compulsory license to carry any television signal permitted by the FCC's rules upon payment of copyright royalties in amounts fixed by the act. The Copyright Royalty Tribunal was created by the new Copyright Act for the purpose of distributing and adjusting royalties. The act gave the Tribunal authority to adjust royalties for additional distant television signals permitted to be carried by cable systems due to changes in the FCC's rules. Thus, when the FCC repealed its distant signal limitations, the Tribunal initiated proceedings to determine an appropriate royalty rate for the new distant signals. While the rate before the FCC action was no more than .675 percent of gross receipts for each signal-with additional signals schedule for lower rates-the new rate which took effect on March 15, 1983, is 3.75 percent gross receipts for each distant signal. This increase is between 400 and 1,600 percent for various systems and many have decided to drop distant signals subject to this rate rather than pay it. The 3.75 percent rate tracks the former FCC rules-and thus discriminates among cable systems based on market location-even though that discrimination was found to be unjustified. A cable system located in a large market might be able to import three distant signals without being subject to the 3.75-percent rate, while a cable system in a smaller market importing the same three distant signals might have to pay 7.5 percent of its gross receipts to carry two of those television stations. By comparison, the large market cable system would have to pay only 1 percent of its gross receipts for the same two signals-.503 percent each.

My legislation would permit all cable systems, regardless of market location, to carry at least three distant independent television signals without being subject to the prohibitive 3.75-percent rate, and thus eliminates the very discrimination among cable systems which the FCC attempted to eliminate when the distant signal rule limitations were repealed.

Mr. KASTENMEIER. I will now call upon our colleague, the gentleman from Texas.

TESTIMONY OF HON. SAM B. HALL, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS

Mr. HALL. Thank you, Mr. Chairman.

I am surprised that Mike Synar would be seated next to me today. Last week he wanted me to get him tickets to the Texas-OU game, and I did. [Laughter.]

Mr. SYNAR. I will get you next year, Buddy.

Mr. HALL. Mr. Chairman, I want to thank you.

I might add that I have had a problem getting people at my committee this morning. I see them all here. I hope they will leave here when we finish and go back to where your prior commitment was in B-352.

Mr. Chairman, I want to thank you and members of this distinguished subcommittee for taking time to examine copyright aspects of cable television. My statement will be brief, and will be confined to the need for passage of H.R. 3419, the so-called Free Market Copyright Royalty Act of 1983.

I realize that the subcommittee is looking into a very difficult and complex subject. The advent of cable television, like so many recent technological achievements in communication and electronics has caught many of us off guard. The result has been a legal quagmire for Congress, the courts, and the Federal communications system.

Of course, cable television is here to stay. It has given millions of people access to a variety of sources of news, sports and public interest programs for the localized flavor. In rural areas, cable gives people an avenue for programs which they have never seen before. Like any medium of communications, cable must not receive preferential treatment. It should, however, enjoy the right to compete in an open, free marketplace. In essence, this is all I am asking for in H.R. 3419; the right to compete fairly without inordinate Government controls.

The need for this bill came about because of a ruling last year by the Copyright Royalty Tribunal which said, in effect, that cable television systems must pay to carry the signals of distant broadcast signals above a minimum number. Of course, what the tribunal intended to do was to compensate program owners for the additional use of a property on cable systems. However, as a practical matter, the tribunal failed to distinguish different categories of broadcast signals on cable and, hence, the price for distant signals was set far above what the market would bear.

The result was the immediate discontinuation of many distant broadcast systems by cable systems, and the wholesale loss of programming to the public. Literally millions of cable viewers lost access to one or more distant signals due to this unwarranted rate increase. The loss was especially severe in rural areas where diverse television is often lacking. Systems in my area of east Texas were particularly hard hit.

It is widely recognized that the tribunal decision did not take into consideration the basic articles of copyright law. It failed to recognize that, when copyright holders are compensated in the marketplace by free negotiations, then there is no need to compensate them through a Government mandated licensing system.

H.R. 3419 would not directly exempt any superstation from the rate increase. It does, however, establish a congressional policy that when the market is adequate to ensure compensation of copyright holders, the tribunal's rate increase would not apply. It reserves to

the tribunal the authority to implement that policy pursuant to standards provided in the bill to determine the existence and operation of the marketplace.

The prerequisite to the operation of such a free market and to the classification of a cable retransmitted distant broadcast system as a national cable broadcast network, under these standards include five things. In order to be a national cable broadcast network, you must meet these five requirements: first, the national distribution of the signal; second, the active promotion of the signal as a national program service; third, the institution of national advertising sales practices to capitalize on the availability of a national cable audience; fourth, the availability of national audience measurement data; and fifth, the full knowledge of affected parties of the characteristics and operation of the market.

H.R. 3419 also recognizes that the tribunal itself needs improvement. The tribunal currently is authorized to have five commissioners, but the Copyright Act does not provide professional staff to have analyzed the evidence presented to it.

H.R. 3419 would reduce the tribunal from five to three commissioners and, with the funds saved from this reduction, add a General Counsel and Chief Economist. This provision follows a recommendation to the 1981 GAO report which urged that the tribunal be provided with the resources necessary to perform its job effectively.

Mr. Chairman, I want to read what you stated when you filed your amicus curiae in this case that you mentioned, which I think basically covers the problem that we are having today with what the tribunal did. I am reading the last page of that statement:

My interest in this appeal is based on my view that the decision of the Copyright Royalty Tribunal, which is the subject of this appeal, upsets the delicate balance between opposing policies achieved in the Act and thereby thwarts the intent of Congress. The Tribunal's decision will have severe adverse consequences for both the cable industry and the public it serves, particularly if allowed to take effect on January 1, 1983.

I think that, in itself, spells out the problem that we have, in that the position that the Copyright Tribunal took in my area of Texas, which is a rural area in east Texas, as I pointed out-Texarkana, Henderson, Longview, Mount Pleasant, Mount Vernon, and Omaha, TX-they have had to drop stations because they could not pay this increased amount, which would average an increase of 400 to 1,600 percent. That is an astronomical increase to pay.

We believe that is too high. We think it is a terrible situation to affect the cable industry and the people who are relying upon the cable industry to try to get objective news gathering today with reference to news, sports and the other things.

I appreciate very much the opportunity of submitting this statement. This concludes my statement. I would ask that it be made a part of the record.

Mr. KASTENMEIER. Certainly, without objection, your statementand if you desire to include the text of your bill, that, too—will be included in the record.

Mr. HALL. I would ask that it also be made a part of the record. Mr. KASTENMEIER. We are very pleased to have your testimony. [The statement of Mr. Hall and text of H.R. 3419 follow:]