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Meadville, Pa., November 12, 1975. Hon. ROBERT W. KASTEN MEIER, Chairman, Subcommittee on Courts, Civil Liberties and the Administration of

Justice, Committee on the Judiciary, U.S. House of Representatives, Washington, D.C. DEAR CONGRESSMAN KASTEN MEIER: We have received your letter of November 4, 1975, with enclosures ; and we very much appreciate your courtesy in affording us the opportunity to review and respond to the TelePrompter proposal concerning the cable issue in H.R. 2223.

Initially, we must emphasize that when I appeared before the Committee, I spoke on behalf of, and presented the Position on Copyright of, Pennsylvania Cable Television Association. The Position was developed over the past seven years with the active participation of the Board of Directors and Officers during a number of meetings, and finally presented to the membership which approved and adopted it. As soon as I received your letter, I attempted to arrange for a special meeting of the Officers and Board of the Pennsylvania Association (which number 25) to consider the TelePrompter proposal; but a meeting could not be arranged until next week. Because this will be after the November 14, 1975, date given in your letter for response, I have determined to comment briefly on the matter, in view of my long involvement with the issue as a cable television operator, as attorney for the Pennsylvania Association, and as a member of the NCTA Copyright Committee.

In my view, the TelePrompter proposal is not based on a sound or correct concept of the nature of cable television service; would operate inequitably and be prohibitive in many fringe area situations; and would be complicated and uncertain in practical application.

The basic error in the concept of the TelePrompter proposal is that it ignores that cable television service is on the reception side of the line, for the proposal attempts to relate cable operations to broadcasting operations which is totally inappropriate because the operations are essentially opposite. Thus, applying the total cost of programing (of which copyright is just a part) or a 28 per cent figure is wholly unrealistic and in no way related to any measure of responsibility for copyright payment.

The proposition that cable operators are to make payment for program costs has never been considered before; no demand has ever been made for any such payment; and there is simply no basis or justification for these added costs to be imposed on subscribers for the benefit of copyright owners. Again, the second percentage factor of “popularity of non-network programming" is not only indefinite, but fails to take into account at all that subscribers participate in supporting all costs, including copyright, through their purchase of advertised products.

Further, the definition of a "copyright qualifying broadcast station" is unrealistic and too restrictive by imposing on catv service an artificial television marketing pattern based on predicted contours which has no relationship to television reception conditions in fringe areas where most catv systems are operating, including in Pennsylvania. We believe that if a television broadcasting signal can be received off-the-air-either by a rooftop antenna or by catv antenna—there should be no payment of copyright, irrespective of whether a station is a "must carry” one under the present rules of the Federal Communications Commission or as the FCC may require in the future.

We recognize that the TelePrompter proposal has the desirable aspect of eliminating the copyright tribunal with its constitutional and other legal weaknesses, as well as the hazard and uncertainty to which the tribunal provision subjects the industry. We have always strongly urged that the rates for any copyright liability must be statutorily set forth (in keeping with the legislative function) and cannot properly be left to a tribunal (which functions primarily in a judicial manner). However, we believe that the TelePrompter proposal has other fundamental weaknesses of its own.

We also appreciate the recognition in the TelePrompter proposal that certain television reception should be exempt from copyright payment. However, we believe the rationale for the definition of the exempt reception includes certain premises which may apply to broadcasting, but have no application whatever to catv. In point of fact, it is not clear that the TelePrompter proposal solves any of the real concerns for catv on the copyright issue, either in terms of the amount or the incidence of copyright payment; furthermore, it introduces new problems, uncertainties and inequities.

To the extent that the TelePrompter proposal recognizes that certain television receiption service should be exempt from copyright payment, we believe it supports the general concept of the Pennsylvania Position. The exempt television reception service under the Pennsylvania Position includes reception of television signals received off-the-air and basic television reception (by whatever means secured), because the broadcasters and copyright owners make use of the public airwaves without payment. Under the Pennsylvania Position, microwaved signals beyond those required for basic television reception are to be subject to copyright at a statutorily determined rate. While there is room for a difference of opinion as to the rate of payment for microwaved signals, the Pennsylvania Position continues to remain the only one that is not only sound in concept but workable and equitable in application.

We propose to have the TelePrompter proposal reviewed at the forthcoming meeting of the Board of Directors of the Pennsylvania Association on November 19, 1975, and will inform you of the results of their consideration for such assistance as it may be to you and the Committee on this issue. Very truly yours,


General Counsel.


Washington, D.C., November 19, 1975. Re: CATA's comments on the Teleprompter proposal. Hon. ROBERT E. KASTENMEIER, Chairman, House Subcommittee on Courts, Civil Liberties and the Administration

of Justice, Washington, D.C. DEAR MR. CHAIRMAN : You have requested our comments concerning the Teleprompter (TPT) compromise proposal regarding CATV liability under pending H.R. 2223; we are pleased to make this preliminary response and respectfully request that it be included in the record.


Because of a delay in receipt of your request, the Committee's Counsel has gratiously extended our time for response. We have thus had the unilateral benefit of seeing the comments of some of the other parties. While in a judicial proceeding an element of unfairness might attach to such a result, we believe that our comments are, as a result, more directly keyed to areas of controversy concerning the TPT plan and are thus beneficial to the legislative process. In the interest of fairness, a copy of this letter has been sent to each of the parties whose comments we have seen.

CATA is one of the two national trade associations representing the CATV industry. It commenced in the summer of 1973, primarily because of disaffection with the position taken by the National Cable Television Association (NCTA), concerning the issue of copyright payments by the CATV industry. CATA now engages in a broad range of activities and as a result CATA's membership has increased in just two years from a mere handful to over 435 systems (approxi. mately 600, if counted in accordance with the FCC's definition of CATV). Because CATA's by-laws do not require that an individual or business entity place all CATV systems owned into the membership, the preceding numbers are not fully representative of CATA's membership. CATA estimates, on a conservative count, that between 750-800 CATV system's views are actually represented by its membership roster. This represents, on a system count basis, the views of nearly fifty percent of CATV systems belonging to national trade associations. The above statistics are provided to aid the Congress in evaluating these comments, and assessing support of the TPT plan. In this regard, while CATV members range in nature from independent to multiple ownership and in size from 14 subscribers to over 12,000 subscribers, the average size of member's systems is now at 826 subscribers.

As you know, CATA, the Community Antenna Television Association, has staunchly defended, in these procedings, what the Supreme Court has held : that CATV does not owe copyright. The Supreme Court's recognition that the 1909 Act did not cover CATV and that new copyright legislation was pending in the Congress, was not an invitation to invoke the proposition that the 1909 Act was defective and that CATV should pay. To the contrary, the Court has, on all

occasions it has considered the question, recognized that CATV transmission was not a performance for profit. That is, CATV activity falls on the viewers' side of the line, irrespective of whether the signals transmitted were local or distant. For this and other reasons presented in our testimony, CATA believes that imposition of copyright liability on CATV is an inappropriate application of the copyright delegation of power in the Constitution and is likewise at odds with the goals of the Communications Act of 1934 to secure the general benefits of television programming to all the people of the United States and to encourage its larger and more effective use in the public interest. With the FCC preparing a bill for courtesy introduction concerning its authority over CATV, with the White House Domestic Council on deregulation similarly preparing proposed legislation concerning CATV, and with the various Commerce Committees also apparently considering CATV legislation, there is, at this juncture, an intermixture of copyright and communications policy that cannot be avoided. Given the actual state of the cable television industry, as opposed to the hypothetical projections tendered by the Motion Picture Association of America (MPAA), imposition of copyright would virtually kill off any chance of wiring certain areas of the United States, including rural America, where both Congressional policy and FCC policy have failed to bring television to American citizens. We will return to this matter below.

While Teleprompter, itself, has not deviated from its support of the principal that CATV does not owe copyright, it has offered a compromise proposal in light of its fears that the “no copyright” position favored by Teleprompter, CATA, the Pennsylvania Association and others, does not prevail. CATA thus responds in a similar vein. That is, our comments should be viewed as directed towards the end of perfecting legislation that, in its current form, may be unconstitutional (there is apparently a significant question here as reflected in the TPT and MPAA memoranda) and is certainly cumbersome and unpredictable in its application. Our comments, therefore, are not an endorsement that CATV owes copyright. CATA believes, however, that the Teleprompter proposal is sound in logic and easy of application, thus overcoming the defects of present H.R. 2223. Fine tuning of the TPT plan would meet with a favorable response from CATA.


CATA understands the Teleprompter plan as follows: CATV would pay copyright for distant signals only. Payment would be based on the popularity of the signal carried in the distant (CATV) market, multiplied by a percentage of CATV subscriber revenue for reception service that would hypothetically be available for copyright payment. The popularity factor is the market share of an independent station or the market share of a network station when not broadcasting network fare; i.e., when broadcasting non-network or "independent" programming. Market shares would be determined by comparing total viewing hours of the stations or programs in question with total viewing hours in the county of the CATV system.


Teleprompter proposes that the popularity of the distant signal in the cable community be multiplied by a theoretical factor of CATV's ability to pay copyright. In the interest of compromise, Teleprompter suggests that the factor be the same percentage number that all television stations pay for programming costs of their total revenue in each year (which was 28% in 1974). In making this proposal, Teleprompter suggested that the factor was "generous" in the sense that the capital costs of the cable industry are much greater than those of broadcasters and that no consideration is made of the fact that broadcasters use a publicly owned scarcity, spectrum space, for free. CATA believes that Teleprompter's proposal, in this regard, is more than generous; it is philanthropic.

The 28% figure (or whatever it might be in a future year), does not reflect a measure of "copy right costs” for broadcasters, at least as such costs bear on the broadcaster-program supplier-CATV interface. The factor employed by Teleprompter is derived from FCC Form 324, which requires broadcasters to report financial information concerning television station operation. On Form 324, program expenses are broken down into several categories including such matters as: (1) payroll for employees considered talent, (2) payroll for all other program employees, (3) records and transcriptions, (4) cost of outside news service, (5) music license fees, etc. Many of these classifications are inappropriate to the

question at hand. Testimony in this proceeding has focused principally on the extent that a program supplier is deprived of an opportunity to sell his program fare in a market where it has been “previewed" through CATV carriage. Thus, only the program cost to broadcasters for the purchase of syndicated materials should be considered. "Syndicated” here is used to encompass all forms of nonnetwork materials, which is the product CATV allegedly impacts through its ability to present programming in a distant market before the syndicator has a chance to make a sale in that market. Costs of producing local programming, e.g., local news, play no part in the consideration at hand, because these are not products that are syndicated in distant markets by the program suppliers.

While CATA recognizes the use of the cost of programming to broadcasters is not analogous with CATV transmission concepts, we believe that if the TPT proposal included only those costs associated with purchase of programming from syndicators, an acceptable compromise would emerge for the multiplication factor involved in Teleprompter formula. We make this determination based largely on the fact of a readily accessible multiplication factor computed by the FCC yearly and based also on the fact that TPT has caused to surface the only concept thus far related to known programming costs.

Finally, the rate base, extrinsically defined, rids H.R. 2223 of perhaps its most obnoxious clause-the ability of a royalty tribunal to set rates and to define the rate base. As tenuous as is the claim of program suppliers to be dipping into CATV pocketbooks, the claim of MPAA that the program suppliers should be able to receive their copyright tax from other CATV services (pay TV revenues, burglar alarm service, etc.) is double dipping in the worst possible connotation. MPAA advocates nothing more than that CATV be a rate-regulated industry. This is expressly contrary to the position of the FCC that (ATV is not a utility, is not a common carrier, and that it should not be a rate regulated industry in the vein that such other industries are.

The MPAA stated prospect that CATV can, in effect, cheat the program supplier by reducing basic subscriber rates and increasing pay TV rates is absurd. Because CATV pays 30–50% of every dollar of pay TV revenue to the program supplier, it is completely illogical that CATV would "cheat" itself from a 1-5% rate to a 30–50% rate.


The premise of the Teleprompter proposal is that no CATV liability would attach for the retransmission of local signals or for network programming. This premise is sound because program suppliers cannot lose money (sale opportunities) by local transmissions; and network programming is meant for one time distribution to the entire nation and is thus compensated. We believe that there are serious omissions in the TPT plan that, if included, would be consistent with the TPT rationale, and would contribute to the making of a more reasonable piece of legislation. First, programming viewed on cable television systems located beyond the service area (Grade B contour) of any television stations should be exempt. There is no logic behind charging systems located outside the service area of any broadcast stations because program suppliers risk no exposure of watering down their potential licensing markets in areas outside of those markets. Thus, the MPAA dilution of marketplace argument does not crist when applied to the small groups of CATV's located beyond all television markets (approximately 250 CATV systems).

The next level of concern is with respect to other systems located in predominantly rural areas. These give rise to a concern referred to earlier involving the tension between Communications Act purposes and copyright purposes. Mainly, we are talking about television service in the rural areas of the United States. The Office of Telecommunications Policy has conducted a study, "Television Distribution in Rural Areas", February 1975, in which it found that over one million households in the United States (approximately one and a half percent of all households) receive no adequate television service at all because they are located beyond the Grade B contour of any television station. According to the OTP study, nearly six million households (approximately 9% of the U.S. households) receive fewer than three channels of TV and approximately twenty two million households receive service of fewer than five channels of TV. Although many of these towns have been CATV-built, there is a ready market for small system construction ; i.e., systems serving between 100 and 1.000 subscribers, The hard question concerns these television disenfranchised Americans.

Imposition of copyright places a burden of such magnitude that cable construction in these areas would be unlikely under the present H.R. 2223 proposal. In this regard, it is instructive to turn to the consensus agreement, not to rely on it, but to see how we arrived here. The FCC adoption of the Cable Television Report and Order, 36 FCC 2d 143 (1972), pursuant to the consensus agreement, was supposed to be the lifting of the FCC imposed freeze on CATV growth. It did not work. CATA research reveals that 525 new systems have been activated since the “lifting" of the freeze. Unfortunately, 1972 was not an ice-breaking year at all: one finds significantly greater new CATV construction during the freeze (841 new systems started in the period 1968–1972). In further sampling, CATA found that internal growth patterns of CATV systems in the last year were as follows:

System size

Subscriber growth Average cable plant past 12 mo (percent) growth, 12 mo (miles)

50 to 250
251 to 1,000
1,001 to 3,500
3,501 to 10,000.
10,000 and up.

2.8 6.03 7.8 8.03 7.08

0.1 2.5 2. 96 3. 38 4.97

CATA's study further indicates that new systems begun in the twelve month period, August 1974 through August 1975, amounted to 68 systems with only 2% new systems with growth in the most recent twelve month period.

This sampling enabled CATA to prepare a study of the number of new CATA plant miles added nationwide, by all systems, during the most recent year. We find them to be approximately as follows:

National total System size :

new plant-Miles 50 to 250.

59 251 to 1,000.

3, 217 1,001 to 3,500.-

2, 540 3,501 to 10,000_

1, 227 10,001 and up---

984 Thus, just under 8,000 miles of new plant was generated by the industry in the most recent year (not inclusive of the new miles added to the industry by 68 new system starts). Extrapolating to a national total of 130,100 miles of CATV plant (inclusive of new starts in 1974-1975), we find that the internal growth amounted to no more than 6.1%. CATV is a significantly depressed industry. We believe that in the small, unbuilt rural communities that budget versus income structure of the small CATV system constructed to serve a small town is so tight that the administrative costs for meeting the reporting and recordkeeping functions effectively double the copyright taxation to be extracted. To set up with competent legal and accounting help, to just file the quarterly report, etc., would make the difference between profit and loss when added to the copyright tax, thus foreclosing new construction in rural areas. Previously, CATA conducted a study concerning small system operation for consideration by Senator McClellan to which we referred to in our testimony, and which reveals the low profit status of rural CATV and that the claim made here is without exaggeration. That study is attached hereto as Exhibit A.

While the MPAA would have you believe that communications policy and Copyright policy have always been separate and apart, such is not the case.

CATA, as the trade association interface with that part of the CATV industry that is presently represented largely by independent operations, many of them located in rural areas, believe that the following suggestions, if incorporated into the bill would remove the communications/copyright interplay of H.R. 2223.

There are several solutions, for example:

(1) The Pennsylvania position--no copyright payments for signals received off the air or necessary to make un an available complement of three networks, three independents and one educational station.

(2) A complete exemption for CATV systems located beyond the television markets as defined by the FCC (35-mile zones). This is, in effect, a shrinking

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