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Fourth, we assume that every system invests in its own origination equipment. For smaller systems, this may well be a generous assumption if methods are devised to share origination facilities.

Finally, the large microwave costs are arbitrary at best. With the development of new competition in microwave common carriage, and the possibility of satellite distribution systems, it seems likely such costs for each system to build and maintain its own microwave equipment will decline substantially.

Our assumption of future mature penetration levels is more generous than that provided by existing statistical demand models, but these models are seriously deficient in their ability to predict even current demand. Since our projections of penetration derive from estimates offered by major cable companies, we believe that they are more soundly based than the relatively pessimistic values advanced by Mitchell.

The resulting estimates of cable profitability find medium to large size systems earning in excess of 20 percent on capital in nearly every situation in the absence of copyright payments. These returns are above those deemed necessary to attract investment capital to the industry. Thus, we conclude that substantial copyright fees could be paid without inhibiting the growth of typical cable systems in the country's major markets as they are presently conceived.

Mr. BRENNAN. Mr. Chairman, the next witnesses appear on behalf of the National Association of Broadcasters and the Association of Maximum Service Telecasters.

This will be a joint presentation on behalf of both broadcasting associations.

Mr. Wasilewski, would you identify yourself and your associates, please ?

STATEMENT OF VINCENT T. WASILEWSKI, PRESIDENT, NATIONAL

ASSOCIATION OF BROADCASTERS; ACCOMPANIED BY: JOHN B. SUMMERS, GENERAL COUNSEL, ERNEST W. JENNES, ASSOCIATION OF MAXIMUM SERVICE TELECASTERS, INC.

Mr. WASILEWSKI. Mr. Chairman, I appear here both in my capacity as president of the National Association of Broadcasters and also on behalf of the Association of Maximum Service Telecasters. With me today are John Summers, NAB's general counsel and Ernest Jennes, MST's general counsel.

NAB and MST are making a joint presentation because of the very limited amount of time allocated to broadcasters. There is no difference in the positions on CATV copyright.

Now, broadcasters have at least two different interests in CATV copyright. First, broadcasters themselves have ownership interests in some copyrighted material that CATV systems continue to take from broadcast stations without payment and sell to the public for a fee.

Second, CATV systems are in direct competition with broadcast stations for viewers, listeners, and advertising revenue. This competition is increasing and will continue to increase. Indeed, leading CATV spokesmen state repeatedly that they hope and intend that cable television will largely, if not entirely, replace free broadcast television.

A law that confers a compulsory copyright license on cable television inherently gives CATV an unfair competitive advantage over free broadcasters, who must bargain for copyrighted material they use. CATV would have this unfair advantage even if it had to pay as much as broadcasters for copyrighted material. In fact, it is clear that CATV would pay much less for the same material, not only under the low CATV fee levels proposed in S. 1361 but even under the levels supported by the copyright owners. For example, FCC figures show that the typical television station pays 34 percent of its total revenue for its nonnetwork program material.

Despite the inherent unfairness, NAB and MST have been willing to support limited compulsory licenses in accordance with the terms of the November 1971 consensus agreement, which was also accepted by NCTA and the copyright owners.

We believe that, as provided in that consensus, the fee levels for such compulsory licenses should be determined by an independent arbitration tribunal, and not by statutory fiat. Such a tribunal would have both the time and the expertise to sort out the conflicting claims of the interested parties and the complex and elaborate economic data advanced in support of those claims.

Traditionally, Congress delegates such complex questions to a body equipped to examine them in detail. If the claims of the CATV industry to a very minimal fee are valid, the industry should not be afraid to submit them to an arbitration tribunal. Moreover, NCTA specifically agreed that the fees would be fixed by arbitration as part of the consensus agreement.

As a result of that consensus, the cable industry has been enjoying the benefit of permissive new FCC rules on the importation of distant broadcast stations for over a year and a half. It ill-behooves NCTA to back away from the consensus now.

NAB and MST reluctantly accepted that consensus and agreed to support a limited compulsory license for CATV only because of our belief that the consensus limitations on the scope of the compulsory license would be implemented. Provided that those limitations are implemented, we continue to support the consensus despite the recent decision of the second circuit holding that all CATV use of distant signals is subject to normal copyright liability.

Without such limitations, the unfair subsidy which compulsory licenses exact from broadcasters would undermine the economic viability of free television broadcasting, thus depriving the public of free programing they now receive and impairing the principal source of the revenues to program producers necessary to stimulate program creation and development.

Specifically, NAB and MST submit that compulsory licenses for CATV systems should cover only CATV retransmission of local broadcast stations and such programs from distant stations as are contemplated under the FCC's 1972 CATV rules.

An openended compulsory license—one for example that covered all CATV retransmission of distant stations which the FCC may hereafter authorize—would be a sweeping delegation to four or fewer members of the FCC to change and even radically revise the copyright law at any time in the future.

We strongly oppose any such openended compulsory license. We assume, in view of the letter of January 31, 1972, from the chairman of this subcommittee to Chairman Burch and the fact that the current hearings are not focusing specifically on the critical question of the terms and conditions of the compulsory license, that this subcommittee does not have doubts about the approach agreed to by NCTA, the copyright owners, NAB, and MST when they accepted the 1971 consensus.

If there are doubts, we urge that such hearings be held. In any event, because the question of the scope of the compulsory license is of paramount importance, we plan to submit a supplemental written statement on that subject, together with suggested statutory language.

Although broadcasters have not been invited to participate in the hearings this afternoon on copyright treatment of sports events, broadcasters fully support normal copyright liability for cable retransmission of sports events not available to a local station as proposed in S. 1361. We also plan to submit a supplementary statement which will deal with this vital question.

Let me close, Mr. Chairman, by saying on behalf of NAB that, while the record is not being opened with respect to section 114 of S. 1361, NAB and broadcasters generally are steadfastly opposed to the creation of a new proprietary right in the form of copyright recording right for record manufacturers and performers.

Thank you vey much for inviting me to appear today.

Senator McCLELLAN. Very well.
Any questions, Senator?

Senator BURDICK. Well, the sense of your testimony, or the essence of it, is, you are willing today, to abide by the consensus agreement.

Mr. WASILEWSKI. Yes, sir. On an all together basis.

Senator BURDICK. That seems to be the essence on your testimony. I have no further questions.

Mr. WASILEWSKI. Yes, sir. That is.

Mr. BRENNAN. Mr. Wasilewski, could you indicate whether or not you support the position taken by the subcommittee previously on the sport provision of section 111?

Mr. WASILEWSKI. As contained in the present bill?
Mr. BRENNAN. As contained in the present bill.
Mr. WASILEWSKI. Yes, sir. I did say that we support that position.

Senator McCLELLAN. You indicate that you had not been invited. I wonder if you felt that you should participate?

Mr. Wasilewski. I just wanted to point out, sir, that I was testifying on behalf of something that was not part of this morning's hearing, and we do not necessarily want to come in this afternoon. We would like the opportunity to rebut.

Senator McCLELLAN. If you wanted to appear, I was going to consider your interest and give you the opportunity. That was all I wanted to be sure of.

Mr. WASILEWSKI. I said all that I wanted to say about it.
Senator McCLELLAN. All right.
Thank you very much.
Call the next witness.
Mr. WASILEWSKI. Thank you.
[The prepared statement of Mr. Vincent T. Wasilewski follows:]

JOINT STATEMENT ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS

AND THE ASSOCIATION OF MAXIMUM SERVICE TELECASTERS BY VINCENT T. WasiLEWSKI, PRESIDENT, NATIONAL ASSOCIATION OF BROADCASTERS, BEFORE THE SUBCOMMITTEE ON COPYRIGHTS, PATENTS, AND TRADEMARKS, SENATE COMMITTEE ON THE JUDICIARY

Mr. Chairman, I appear here both in my capacity as President of the National Association of Broadcasters and also on behalf of the Association of Maximum Service Telecasters. With me today are John Summers, NAB's General Counsel, and Ernest Jennes, MST's General Counsel. NAB and MST are making a joint presentation because of the very limited amount of time allocated to broadcasters. There is no difference in their positions on CATV copyright.

Broadcasters have at least two different interests in CATV copyright. First, broadcasters themselves have ownership interests in some copyrighted material that CATV systems continue to take from broadcast stations without payment and sell to the public for a fee. Second, CATV systems are in direct competition with broadcast stations for viewers, listeners and advertising revenue. This competition is increasing and will continue to increase. Indeed, leading CATV spokesmen state repeatedly that they hope and intend that cable television will largely, if not entirely, replace free broadcast television.

A law that confers a compulsory copyright license on cable television inherently gives CATV an unfair competitive advantage over free broadcasters, who must bargain for copyrighted material they use. CATV would have this unfair advantage even if it had to pay as much as broadcasters for copyrighted material. In fact, it is clear that CATV would pay much less for the same material, not only under the low CATV see levels proposed in S. 1361 but even under the levels supported by the copyright owners. For example, FCC figures show that the typical television station pays 34 percent of its total revenue for its non-network program material.

20-34473-25

Despite the inherent unfairness, NAB and MST have been willing to support limited compulsory licenses in accordance with the terms of the November 1971 "Consensus Agreement” which was also accepted by NCTA and the copyright owners. We believe that, as provided in that Consensus, the fee levels for such compulsory licenses should be determined by an independent arbitration tribunal, and not by statutory fiat. Such a tribunal would have both the time and the expertise to sort out the conflicting claims of the interested parties and the complex and elaborate economic data advanced in support of these claims. Traditionally Congress delegates such complex questions to a body equipped to examine them in detail. If the claims of the CATV industry to a very minimal fee are valid, the industry should not be afraid to submit them to an arbitration tribunal. Moreover, NCTA specifically agreed that the fees would be fixed by arbitration as part of the “Consensus Agreement." As a result of that Consensus, the cable industry has been enjoying the benefit of permissive new FCC rules on the importation of distant broadcast stations for over a year and a half. It ill behooves NCTA to back away from the Consensus now.

NAB and MST reluctantly accepted that Consensus and agreed to support a limited compulsory license for CATV only because of our belief that the Consensus limitations on the scope of the compulsory license would be implemented. Provided that those limitations are implemented, we continue to support the Consensus despite the recent decision of the Second Circuit holding that all CATV use of distant signals is subject to normal copyright liability. Without such limitations, the unfair subsidy which compulsory licenses exact from broadcasters would undermine the economic viability of free television broadcasting, thus depriving the public of free programming they now receive and impairing the principal source of the revenues to program producers necessary to stimulate program creation and development.

Specifically, NAB and MST submit that compulsory licenses for CATV systems should cover only CATV retransmission of local broadcast stations and such programs from distant stations as are contemplated under the FCC's 1972 CATV rules. An open-ended compulsory license–one for example that covered all CATV retransmission of distant stations which the FCC may hereafter authorize—would be a sweeping delegation to four or fewer members of the FCC to change and even radically revise the copyright law at any time in the future. We strongly oppose any such open-ended compulsory license. We assume, in view of the letter of January 31, 1972, from the Chairman of this Subcommittee to Chairman Burch and the fact that the current hearings are not focusing specifically on the critical question of the terms and conditions of the compulsory license, that this Subcommittee does not have doubts about the approach agreed to by NCTA, the copyright owners, NAB, and MST when they accepted the 1971 Consensus. If there are doubts we urge that such hearings be held. In any event, because the question of the scope of the compulsory license is of paramount importance, we plan to submit a supplemental written statement on that subject, together with suggested statutory language.

Although broadcasters have not been invited to participate in the hearings this afternoon on copyright treatment of sports events, broadcasters fully support normal copyright liability for cable retransmission of sports events not available to a local station as proposed in S. 1361. We also plan to submit a supplementary statement which will deal with this vital question.

Let me close by saying on behalf of NAB that, while the record is not being opened with respect to Section 114 of S. 1361, NAB and broadcasters generally are steadfastly opposed to the creation of a new proprietary right in the form of a copyright recording right for record manufacturers and performers.

Thank you very much for inviting me to appear today.

Mr. BRENNAN. We now have a joint presentation by the three performing rights societies, ASCAP, BMI, and SESAC.

Mr. Herman Finkelstein, would you make your presentation ? Could you identify

Mr. CRAMER. Mr. Counsel, Mr. Chairman, my name is Edward M. Cramer. I am president and chief executive officer, of Broadcast Music, Inc. Seated on my far left is Albert F. Ciancimino, counsel for SESAC, Inc., and to my immediate left is Herman Finkelstein, general counsel for ASCAP. In order to conserve the time of this com

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