The broadcasters and copyright owners make use of the public resource of the airwaves without payment. In addition, the policy of the 1934 Communications Act favors the widest possible distribution of broadcast services for the general benefit and welfare of all citizens. As a consequence, there must accrue a fundamental right in the public to utilize on an equal basis all signals receivable off the air, whether by conventional rooftop antenna or by cable television.

Again, since the copyright owners choose to distribute their property by broadcasting, there is no reasonable basis for any expectation by them that they should control or limit the distribution as if they were providing for a performance in a theater, arena or hall.

From the point of view of the subscriber, it is incomprehensible that liability to copyright fees should depend on the accident of topography-or in the real life situation of the television viewer-whether he is living in a high area where a conventional antenna provides adequate reception or whether he lives behind the hills or along the river where CATV service is required or desirable to provide satisfactory television reception. These reception conditions can change from street to street in a given community.

A correlating basic principle of the Pennsylvania Position is that inasmuch as CATV can provide the means for equalizing the television reception opportunity for all the viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic television reception should not be subject to copyright, by whatever means reception is secured.

I am unable in the time allotted to me to further detail the philosophical and factual basis for the Pennsylvania Position, and I have, therefore, attached the Position in full to this statement for the record.

In summary, the Pennsylvania Position so far as payment of copyright fees is as follows:

(1) No copyright fees should be payable for television reception of off the air signals, regardless of the total number involved.

(2) No copyright fees should be payable for basic television reception, whether secured off the air or by microwave. While we have stated that basic television reception should include the national networks, three independent television stations and one educational television station, we recognize that there is room for differences of opinion as to what basic television reception should include.

(3) Copyright fees would be payable on the reception of microwaved signals (other than required for basic television reception in (2) above) at the rate of two-tenths of one percent per microwaved channel of the gross receipts from monthly service charges only.

While not included in the Pennsylvania Position, I should mention that a number of individuals favoring the Pennsylvania Position have suggested that as an alternative, fees could be based on the fee schedule in H.R. 2223, prorated against the number of distant signals microwaved as the numerator over the total signals carried as the denominator. Thus, if a system carried a total of ten signals, three of which were microwaved and subject to copyright payment, the system would pay three-tenths of the fee schedule.

Another fundamental concern emphasized in the Pennsylvania Position is that the copyright bill not effect a confirmation of the present FCC regulatory treatment of the industry. For example, the FCC definition of so-called “distant" and "local" signals has little relation to actual reception conditions for signals received off the air; and the application of these artificial and arbitrary definitions results in unreasonable, unfair and discriminatory treatment for television viewers.

To those who are concerned that the Pennsylvania Position may not provide "enough" initial extra payment for copyright owners, I submit that the reasonableness of the resolution of the copyright issue is not determined by the size of any additional copyright payment but by whether or not there is a proper basis for payment. Furthermore, the copyright owners themselves over the years have stated that their primary concern is not with the existing industry or in the off the air television reception, but in the future of the industry in the 89 of the 100 top markets not yet developed.

The prevailing opinion is, and NCTA statistics establish, that these markets can develop only by bringing in additional television signals by microwave and by the purchase of much copyrighted programs for local origination. These markets also have the highest promise for the pay cable market, programs for which will be purchased from copyright owners. In short, the copyright owners themselves will be the beneficiaries of tremendous gain from the increased distribu

tion potential of cable for their copyright product-which will be many multiples of any amount which could possibly be secured from the present industry on any basis.

Finally and most important, cable television viewers-comprising 10,000,000 subscriber homes with over 30,000,000 viewers-have never been informed of the proposal for copyright payment for their television reception service, while payment will not be required for the same reception by their next door neighbor using a conventional rooftop antenna. In this day of consumer concern and special awareness for due process, the lack of fairness and reasonable treatment for cable subscribers for television reception-both off the air and for basic television service is most evident, is not supportable, and certainly should not be countenanced by this Committee whose very title stands as a beacon light for the citizens of our nation for proper protection of their basic rights.

PENNSYLVANIA

CABLE TELEVISION ASSOCIATION

ON COPYRIGHT

POLICY POSITION UPDATE

In October, 1968, the Board of Directors of Pennsylvania Cable Television Association, after careful study and consideration, formulated a position on copyright which was approved by the overwhelming vote of the members of the Association at a special meeting held in April, 1969, together with background explanation.

The background explanation for the position called attention to the distinct difference, both in fundamental concept and practical objectives, between the traditional community antenna television system which operates solely or mainly to provide television reception service in fringe areas, and the much promotedbut still largely undeveloped-cable communications system which is expected to provide broad television and communication services, particularly in metropolitan areas, including distribution of copyrighted programs purchased for showing through the wired system.

The background explanation also particularly noted:

The United States Supreme Court decision in Fortnightly Corporation v. United Artists Corporation, decided in June, 1968, in which service provided by the traditional CATV system was held to be on the "viewer's side of the line" and, therefore, not subject to copyright liability;

The action of the Federal Communications Commission in its Proposed CATV Rules and Inquiry, issued in December, 1968, which-among other things—in effect, foreclosed the industry on the copyright question so far as new system development is concerned and the expansion of system reception service in many areas;

The general precept that the community antenna television reccption function of providing off the air reception for television signals should not be colored in its copyright and FCC regulatory treatment by the future potentials and possibilities for CATV, or traded as an expedient to accelerate or to promote the resolution of product and marketing problems which may be involved in the development of some of these capabilities.

Based on these considerations, the central concept and principle of the "Pennsylvania Position" on copyright was set forth as follows:

To the extent that a wired system of any kind anywhere is performing the television reception function of an antenna as the traditional CATV system, the reception should not be subject to restrictions or to copyright liability any more than reception by a conventional antenna and, accordingly, that there should be no copyright payment for television reception provided of signals received off the air.

Correlating principles were also set forth regarding the availability of "basic" television reception service to all and regarding the desirability of exploring the possible basis upon which microwaving of signals might provide increased programming.

In the intervening period since the adoption of this position, the following significant developments and occurrences must be taken into account as bearing upon the copyright issue:

(1) The Federal Communications Commission has demonstrated conclusively that with its rigid conditioning to the broadcasting environment of scarcitycreated by the inherent limitations in frequency allocations-its primary commitment is to the existing broadcasting market order of things, with the accompanying characteristics of market monopoly and lack of program diversity. So strong is the FCC's commitment and concern in this respect that it has been

supercautious in its restraint of CATV to assure that there is no possibility that CATV will effect any change in the status quo.

This predilection was manifested most clearly in the FCC's action with regard to the Consensus Agreement of November, 1971, which was notable not only because the FCC exacted the requirement of copyright payment as the condition for any relaxation of its rules, but also because of the scant quantum of relief given in exchange for this exaction. The nature and extent of the FCC's signal carriage restrictions constitute a clear declaration of the FCC determination that any development in CATV technology can occur only on the condition that there be no change in the existing television broadcasting order.

(2) The extended negotiation efforts by representatives of National Cable Television Association with representatives of the copyright owners have established that the position and attitude of the copyright owners do not allow for the usual business bargaining process, the demands of the copyright owners being consistently exorbitant and unrealistic, and without regard for the consequences either for the industry or the subscribing public.

(3) In addition to the restraints placed by the FCC rules on CATV television reception services, and in turn on catv system development and growth, the 1972 Rules as related to local franchising, taken with the related actions of state and/or municipal governments, have resulted in a multi-structured regulation of CATV which is duplicative, inconsistent, costly and most burdensome.

(4) While the bright promise of the potential and capacity of cable television has not dimmed, special difficulties have been encountered in system construction and operation in large and metropolitan city areas, and the feasibility and acceptance of CATV service in such areas are yet to be established.

(5) In keeping with the earlier expressed opposition of the United States Department of Justice to the extension of copyright liability of CATV because of the harmful anticompetitive consequences and because the extension is not justified by the appropriate considerations for copyright protection, the Department of Justice in its December, 1970, filing before the FCC concluded that CATV's not paying for retransmission of broadcast signals is not unfair competition and the FCC's attempted application of this concept in the circumstances has obscured the basic policy issues presented.

(6) The United States Supreme Court in Teleprompter Corporation v. Columbia Broadcasting System, Inc., decided in March, 1974, extended the United Artists decision in holding that: "By importing signals that could not normally be received with current technology in the community it serves, a CATV system does not, for copyright purposes, alter the function it performs for its subscribers. When a television broadcaster transmits a program, it has made public for simultaneous viewing and hearing the contents of that program. The privilege of receiving the broadcast electronic signals and of converting them into the sights and sounds of the program inheres in all members of the public who have the means of doing so. The reception and rechanneling of these signals for simultaneous viewing is essentially a viewer function, irrespective of the distance between the broadcasting station and the ultimate viewer."

Against the perspective of these developments and occurrences, the soundness of the central concept and principle of the Pennsylvania position on copyright has been confirmed. Furthermore, the application of this concept and principle must be reinforced and supplemented in view of the broad and long-term implications of any departure from them, both in terms of the consequences to basic television reception service and to the development of cable communication services. Concerning the television reception function of CATV, an overriding and fundamental public interest concern must be that basic television reception for everyone should be free and not subject to the burdens and risks involved in a commitment to copyright payment.

This concern gives strong reinforcement to the principle that television reception service for signals off the air should not be subject to copyright payment, simply because of the CATV means used to receive them. On the other hand, inasmuch as CATV and related technology can provide the means for equalizing the television reception opportunity for all viewers, thereby correcting a limitation or deficiency in broadcasting technology, service for at least basic or minimum television reception should not be subject to copyright payment, by whatever means reception is secured.

To the extent that reception is being provided by CATV of signals received off the air or to furnish basic television reception, there is no proper basis whatever upon which there can be any complaint or objection by any broadcaster or copy

right owner, since such reception is substantially in keeping with the present marketing order.

Concerning the potential of CATV systems for increasing program choices, in part through the microwaving of distant signals, a number of policy and practical situations come into play, and all of these strongly indicate that there should be no copyright payment for such reception. In addition to the reasons in support of this conclusion in the CBS case and in the Justice Department position to which reference has been made, it is generally accepted that the copyright owners (who use the public resource of the airwaves without cost) have no right to impose an absolute control on the distribution of the copyright property which they choose to distribute by broadcasting.

At the same time, it is also generally accepted that a method can be developed whereby copyright owners can be fully compensated for the actual exhibitions and performances of their property, without the necessity of restricting or burdening CATV systems or services which may well be the means for dramatically increasing the distribution possibilities for copyright property. Finally, there is a public interest in encouraging the investment of the huge capital commitments required for the construction of CATV systems with their greatly increased communications capacities, and also in encouraging the utilization of these capacities. Recognizing that such microwaving may require some marketing adjustments and to respond by way of compromise to the overall objections of the broadcasters and copyright owners, a payment of two-tenths of one per cent per channel of the monthly service charge gross receipts would apply in exchange for a compulsory license for such reception.

With regard to both of these aspects of CATV, it is essential that the resolution of the CATV copyright issue not include a confirmation of the nature and extent of regulation undertaken by the Federal Communications Commission over cable television or of its present rules governing CATV. The copyright law should include no provision regarding the regulation of CATV which must be a matter of separate congressional legislative determination.

In summary, the policy position update on copyright is as follows:

I. No copyright fees should be payable for television reception of off the air signals provided by a CATV system to subscribers, with such service to be specifically exempt from copyright.

II. No copyright fees should be payable on reception provided by a CATV system to its subscribers of at least basic or minimum television reception, consisting of reception of the national networks (at this time three), of three independent television stations and of one educational television station, whether reception is secured off the air, by microwave or other means, with such service to be specifically exempt from copyright.

III. A compulsory license for reception of microwaved signals (other than required for minimum reception service as described above) should be granted, for which there should be a payment of two-tenths of one per cent per microwaved channel of the gross receipts from monthly service charges only. This rate should be statutorily fixed and payable into a copyright pool, to be distributed by an equitable formula.

IV. There should be no restriction or interference by the Federal Communications Commission with regard to any of the above services.

Finally, in any resolution of the copyright issue, there must be a recognition of the interests of the CATV subscribers, who up to this date have never been independently represented in any of the hearings and discussions on the subject and who have never had an opportunity to be heard. CATV companies should undertake the responsibility of fully informing subscribers of the various aspects of the issue in the course of the legislative process, particularly if copyright payment must be added to the service costs paid by the subscriber.

Mr. KASTEN MEIER. The Chair would now like to call Mr. William Bresnan who is the president of the Cable Television Division of Teleprompter Corp.

Mr. Bresnan, we apologize for the delay in reaching you this morning, but we are interested in the subject. I see you have a prepared statement which is not particularly lengthy, you may proceed from it.

TESTIMONY OF WILLIAM J. BRESNAN, PRESIDENT, CABLE

TELEVISION DIVISION OF TELEPROMPTER CORP.

Mr. BRESNAN. Thank you very much.

Good afternoon, I am William J. Bresnan, senior vice president of Teleprompter Corp., and president of our Cable Division. Teleprompter is the Nation's largest cable television company, having approximately twice as many cable television subscribers as the second largest company.

On my right is Jay Ricks, a partner in the firm of Hogan & Hartson. On my left is Jacqueline Da Costa, director of Media Information and Analysis at Ted Bates & Co., and to her left is Barry P. Simon, Teleprompter's vice president and general counsel.

Teleprompter's position on copyright is straight forward. We believe cable television systems should not be required to pay any copyright fee for the carriage of broadcast signals.

To understand this position, it is necessary to understand a basic fact about the broadcast industry-a fact which makes that industry unique among all other distributors of copyrighted materials. The broadcaster, unlike the movie producer or the book publisher, does not sell a copyrighted product. What the broadcaster sells is the attention of the viewers. The purchaser is the advertiser. The more viewers the broadcaster can deliver to the advertiser, the more the advertiser will pay. And the more the advertiser pays, the more money is available for the broadcaster to pay the copyright owner.

Cable television affects this relationship only by enlarging the audience available to the broadcaster. In many cases this actually increases the advertising revenues available to pay the copyright owner. In no case does it deprive the copyright owner of anything to which he is entitled.

Thus, a cable system operator is not like a record pirate, as has been previously questioned in this hearing, rather, he is more like a network affiliate. And a network affiliate, I might add, actually receives compensation from the network for expanding the network market area.

I would like to cite two examples. First, imagine a television station located in a community part of which is in a valley where television reception is poor. Imagine also that a cable television system offers its service to the people of the community. The people who live in the valley have three choices:

One, they can install a rooftop antenna to watch the programs broadcast by the television station;

Two, they can subscribe to the cable television system and thereby get the benefit of the antenna tower erected by the cable television system; or,

Three, they can do neither and simply not watch the TV station's programs.

As the Supreme Court has twice recognized, choices 1 and 2 are functionally identical. Since no copyright liability attaches when the viewer erects his own antenna, why should there be any liability when the viewer avails himself of the antenna tower erected by the cable television station?