Before going on to the second example, let's pause for a moment to consider alternative (3)—where the prospective viewer neither buys the tall antenna nor subscribes to the cable service but simply doesn't watch the programs broadcast by our hypothetical television station. If this happens, what is the result? The station has a smaller audience and therefore its advertising spots are less attractive to potential advertisers. So the station gets less money. And this means there is less money available to the station to pay the copyright owner. From this we can see that cable television, far from stealing from the copyright owner, by increasing the size of the broadcaster's audience actually increases the monies paid to the copyright owner.

Now consider a second situation. In this case imagine a television station in New York City whose programs are imported-via microwave hops-by a cable system and retransmitted over the cable to the cable television system's subscribers in Oswego, New York who otherwise would not be able to view the New York City station.

Is this situation really any different from our first example? Is the copyright owner somehow damaged by the action of the cable station? Is he, perhaps, deprived of the ability to exploit his creation in Oswego after it has been seen there on the cable?

The answer to all these questions is, no. Because of the nature of broadcast economics, the copyright owner cannot be injured by the cable system's importing the New York City station into Oswego. And this is true even without consideration of the complicated FCC exclusivity rules which seek to give added protection to the copyright owner and which may require the cable system to delete programming so as to allegedly protect the copyright owner's markets.

As in the first example, by showing the imported programs in Oswego the cable system increases the audience of the New York City station. And this is not just a theoretical increase. The rating services-Nielsen and ARB-spend large sums of money to keep track of cable subscribers with the result that every single cable subscriber is accounted for in their surveys and so finds his way into some television station's rate base. Thus, by simply checking in Nielsen we find for example, that

In San Luis Obispo County, California, 30% of the television homes view the Los Angeles independent and network stations on a regular basis, In Grant County, New Mexico, 51% of the television homes view the El Paso network stations on a regular basis,

In Chemung County, New York, 19.5% of the television homes view the New York City independent stations on a regular basis,

In Lane County, Oregon, 20% of the television homes view the Portland independent and network stations on a regular basis, and

In Sweetwater County, Wyoming, 81% of the television homes view the Salt Lake City network stations on a regular basis.

In these cases, and in countless others, such coverage would be impossible without cable television.

This fact has not been lost on the broadcasters. For example, the literature put out by the Association of Independent Television Stations, in text accompanying these illustrations in which the white areas show the reach of independent stations as enhanced by cable television, states

"The accompanying illustrations show how cable television can dramatically increase the physical coverage area of independent stations... expanding their influence far beyond the perimeters of the local television market. . . .

"Advertisers on cable-connected independent stations share in this expanded TV coverage . . . reaching a bonus audience of consumers as valuable to the national/regional advertiser as those situated within the defined local market

area."

As a further illustration of this point, I have here a stack of promotional brochures put out by television stations. Each one takes pains to point out that its audience includes cable subscribers in distant markets. So we find that,

KTLA, an independent station in Los Angeles, claims a greater potential audience than any other Los Angeles station, network or independent. The station credits its "significant penetration by way of CATV stations." WGN, an independent station in Chicago, claims substantial viewing far beyond the reach of its signal by virtue of cable systems.

The rate card of KSL, a network affiliate in Salt Lake City, shows coverage by KSL of "Mountain America"-even extending, thanks to cable television, as far as northern Wyoming.

The list could go on and on. But rather than belabor the point, I'll simply submit these brochures themselves to the Committee.

What do the extra viewers that cable adds to the audience of these stations mean to the relationship between station and advertiser? It means that the station time is more valuable and so the advertiser pays more. Listen to what Miss Da Costa, who is in charge of all media related research at Ted Bates, the nation's fifth largest advertising agency, says:

"Viewing occurring on CATV systems has been included in surveys for quite some time in the total audience reported for individual stations. The industry has generally used these total audience figures to establish rates and corresponding cost efficiencies. This practice compensates stations for all viewing including that which takes place within CATV homes (both inside and outside the range of the station's off-air reception).”

To go back to our example, we see that the copyright owner whose creation is broadcast by the New York City station and imported, by cable, to viewers in Oswego, has not been deprived of the chance to earn money by showing his production in Oswego. For the advertising revenues to be derived from showing the program to the cable subscribers in Oswego have already been derived by the New York City station. And, as a result, the New York City station will pay the copyright owner more than if the station were unable to reach the Oswego audience.

To allow the copyright holder to be compensated again-this time directly by the Oswego cable system-would be giving him the windfall of an undeserved second payment. This is a windfall that neither the cable television industry nor the 15% of the American households which are cable television subscribers can afford.

Thank you.

[Whereupon, at 2:55 p.m., the subcommittee adjourned, to reconvene at 9:30 a.m., Thursday, June 12, 1975.]

To allow the copyright holder to be compensated again-this time directly by the Oswego cable system-would be giving him the w.rdfall of an undeserved second payment. This is a windfall that nee the cable television industry nor the 15 percent of the American house holds, which are cable television subscribers, can afford.

Thank you.

Mr. KASTEN MEIER. Thank you, Mr. Bresnan.

You make a consistent point that regular broadcasters bencfit, as de advertisers, and potentially the copyright owner, by virtue of the ai tional audience that cable television provides. Do the broadcastes agree to that, or do they dispute that fact?

Mr. BRESNAN. I will be submitting to you the brochures from the broadcasters who claim all of these additional market areas Te two charts are the work of the Association of Independent Televisa Broadcasters. Now, there may be times when they claim one tig and at times another, but when they construct the rate chart, t do claim these territories.

[The material referred to is in the files of the subcommittee Mr. KASTEN MEIER. I am only asking for the purpose of ascerta ing whether that is a point in dispute, or whether the broadcasters agree to that, that this includes your subscribers, in terms of tier sold audience.

Mr. BRESNAN. I'm not sure I understand the question clearly. Tre is no dispute that broadcasters claim coverage of the CATV sate scribers who are provided the signals by the CATV system.

I have been advised by Miss De Costa on my left

Mr. KASTEN MEIER. Yes, I thought perhaps Miss De Costa migt know more precisely, as a matter of technical expertise, whether tat is correct. It is a matter of fact rate cards are built on the bass of cable audiences, as well as normal audiences. Do the broad asters dispute that?

Miss DE COSTA. No. As a matter of fact, they look towards tha audience to increase the size of their delivery.

Mr. BRESNAN. Miss De Costa has advised me, Mr. Chairman that to her knowledge every single cable television customer finds his way into a broadcaster's rate base.

Mr. KASTEN MEIER. Does the Teleprompter Corp. have a nut ber of different types of systems! That is to say, does it have systems which retransmit only, and other systems which originate, use II. po waves predominantly? What sort of systems do you have!

Mr. BRESNAN. Our company is a pretty good cross section of a" types of cable systems, from coast to coast, from large to very small We originate in some, and in others we do not. It is a good cross sent on of the industry.

Mr. KASTENMEIER. Were you a party to the consensus agreen; ef, or were you present at that time; or on the basis of litigation, dəd you absent yourself!

Mr. BRESSAN. I am glad you asked that because that so called con sensus agreement came up quite a bit today, and I do have some pretty strong feelings about it.

The consensus agreement come about at a time si ortly after the tre that the company I had been with merged into 1. leprompter and Ise prompter's ther matagement pretty much carried the ball. A treng I was on the NCTA board I believe I was vice chairman came about.

I wou'd like to state that the consensus agreement, in my opinion, was really a legend. It was pushed down the throat of the cable televis on industry, in my opinión, by the White House. If you like, I can ex vid on that.

Mr. KASTEN METER. I'm sorry, did you say that you were present

at the time!

Mr. BRESNAN. I was present at the NCTA board meeting.
Mr. KASTEN METER. For a different corporation!

Mr. BRESNAN. No; I was with Teleprompter. But Teleprompter's posetion was being determined by the then Teleprompter management. I had just jo.ned the company shortly before then by virtue of the merger of my company into Teleprompter.

Mr. KASTEN METER. And you said it was “shoved down the throat” of the cable people. How about the other parties, might they also have been somewhat unwilling, or unenthusiastic about the compromises they received

Mr. BRESNAN. I doubt that they had too little to be unenthusiastic about, sir. At the time that that happened, the cable television industry had been frozen for about 51, to 6 years. And we were in a very deep freeze for about 3 years, from 1968 through 1971.

During the sun.mer of 1971 the FCC studied proposed new rules whch would lift the free ze on ede television, and things started to look pretty good for ca le television, after a long dry spell.

And in August of 1971 the then Chairman of the FCC set a letter of intent to Congress, explaing the rules that the Commission proposed to adopt. Shortly thereafter, representatives of the broad isting, copyright, and cable teley ston industries were invited to a White Hove meeting "The net res alt of that meeting was that the calle tele

* Lastry Falked at these charges. T ́ ́ey were told in no uncerta'n terns by Peter Flanigan that if they didn't agree to this thing they wold get nothing, the White House world we to that

That story was delivered back to the National Cable Television

ation board of directors. Some of the d rectors voted for it fartly, some voted against it; bat it was a pretty sad day for CON TV.

ME KASENMenn Do I understand the context ti at was ned, "you would get nothing." not or 'y to potest al copyr git legation that the xhur trafor me ght take a post on on, but particularly the FCC ཏི་ར :.. raketter pet g

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at had to do with the FCC 11'cs The FCC Ed 25 a letter of intent stated that it be cred it should hvÈe atory ate t- of 5% IV, ar A leave up to the Congress the

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f I folow this correst's and
at transpired that as
„ to an aggrement, the
flat comj tot.

Well, this committee is not party to such a bargain, but I suppe we might take note of it.

Mr. BRESNAN. The rules that we were hoping to get out of the FO we did not get. And I recall such powerful words-I think they we attributed to Peter Flanigan-"There will be a blood bath for cate television."

Mr. KASTEN MEIER. Well, that has not happened either, has it!
Mr. BRESNAN. We seem to have gotten everything.

Mr. KASTENMEIER. The Chair yields to the gentleman from I
Mr. Railsback.

Mr. RAILSBACK. The blood bath was earlier, wasn't it? [Laughter,
Do you think we could have a copy of your annual report that a
referred to in your earlier testimony, would that be possible!
Mr. BRESNAN. Yes, sir.

[The material referred to is in the files of the subcommittee.j Mr. RAILSBACK. Do you recall the reason for what appears to be a extraordinary loss to your company in 1973?

Mr. BRESNAN. Yes. Teleprompter Corp. was expanding into several of the top markets. Teleprompter, I guess, was probably atten.pdf to do more to prosecute the intention of the FCC rules than any other company. It was not getting subscribers as fast as it was budg plant. It stopped construction in a number of systems, and siowed down construction in others. It changed its whole mode of operatics if you will, from that of a construction company to that of an operat ing company.

There were significant operating costs and losses, and there was some write down of assets due to this change.

Mr. RAILSBACK. So, it really was, or could be characterized as an extraordinary loss, or a nonrecurring loss.

Mr. BRESNAN. Well, of part of it you could say that. However, in 1974 the industry also had a loss.

Mr. RAILSBACK. You went from $29 million down to about $7 milllion?

Mr. BRESNAN. Yes. And the interesting thing, Mr. Rail-back, wẹ picked up a bit of information this morning from a very well respected cable analyst, and he tells us that of the 15 publicly held companies which represent 4.2 million of the 10 million cable subscribers; t se those systems combined showed a net loss in 1974 of $31 million.

Now, we don't know how much profit or loss privately held com panies would have because we don't have access to that information But we estimate that the entire industry last year did not operate at a profit.

Mr. RAILSBACK. Let me just mention, the exhibit attached to your testimony reflects that the nine largest publie CATV compar ies, there was a 1974 loss of $16,3 million; but 17.2 percent of that total figure was Telecommunications; and in the year 1973 there was a loss, a net income loss of $279. There is a figure that you had that year, and this is part of the total figure, that your company had a 297. Two companies have a rather severe impact on the total figure in both years your Telecommunications and Teleprompter.

Mr. BRESNAN. No question about that, sir. However, the fact r mains that in 1974, at which time Teleprompter did not have a real large loss, as we had in 1973, the top 15 publicly held companies I referred to just a moment ago, had a net result of a $31 million loss.