[Federal Register: May 6, 1996 (Volume 61, Number 88)]
[Proposed Rules]
[Page 20197-20199]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Ch. II
[Docket No. 96-2]
Eligibility for the Cable Compulsory License
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of inquiry.
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SUMMARY: The Copyright Office of the Library of Congress is opening a
rulemaking proceeding to consider the eligibility for the cable
compulsory license of open video systems of telephone companies which
retransmit broadcast signals. The Office requests interested parties to
submit comments as to whether, and what extent, open video systems may
make use of the cable compulsory license.
DATES: Comments should be received on or before July 5, 1996. Reply
comments are due on or before August 5, 1996.
ADDRESSES: If delivered BY MAIL, fifteen copies of written comments
should be addressed to Office of the General Counsel, Copyright GC/I&R,
PO Box 70400, Southwest Station, Washington, DC 20024. If delivered BY
HAND, fifteen copies of written comments should be brought to: Office
of the General Counsel, Copyright Office, James Madison Memorial
Building, Room LM-407, First and Independence Avenue, SE., Washington,
DC 20540.
FOR FURTHER INFORMATION CONTACT: Marilyn J. Kretsinger, Acting General
Counsel, or William Roberts, Senior Attorney for Compulsory Licenses,
Telephone (202) 707-8380 or Telefax (202) 707-8366.
SUPPLEMENTARY INFORMATION:
Background
Section 111 of the Copyright Act, 17 U.S.C., grants a compulsory
copyright license to cable television systems for the retransmission of
over-the-air broadcast stations to their subscribers. In exchange for
the license, cable operators submit royalty payments, along with
statements of account detailing their retransmissions, to the Copyright
Office on a semi-annual basis, which deposits the royalties with the
United States Treasury in interest bearing accounts for later
distribution to copyright owners of non-network broadcast programming.
Cable systems determine their royalty payments according to a
calculation formula devised by Congress in 1976. 17 U.S.C. 111(d).
Payments are made based upon a cable system's gross receipts from
subscribers for the retransmission of broadcast signals. The statute
subdivides cable systems, based on their gross receipts totals, into
three categories: Small, medium and large. Small systems pay a fixed
amount without regard to the number of broadcast signals they
retransmit, while medium-sized systems pay a royalty within a specified
range, with a maximum amount, based on the number of signals they
retransmit.
Large cable systems, which pay over ninety percent of royalties
submitted by cable systems, calculate their royalties according to the
number of distant broadcast signals which they retransmit to their
subscribers.\1\ These cable systems pay a percentage of their gross
receipts for each distant signal they retransmit, and different royalty
rates apply to different signals, depending upon the total number of
distant signals carried. Determining when a broadcast signal is
distant, what rate must be applied to it, and the royalty due for the
signal is, for the most part, determined by reference to the rules and
regulations of the Federal Communications Commission governing cable
systems that were in effect on April 15, 1976. Copyright payments under
section 111 of the Copyright Act today are, therefore, dependent upon
the manner in which the cable television industry was regulated in
1976.
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\1\ For large cable systems which retransmit only local
broadcast signals, there is still a minimum royalty fee which must
be paid. This minimum fee is not applied, however, once the cable
system carries one or more distant signals.
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Section 111(f) defines a ``cable system'' as follows:
A ``cable system'' is a facility, located in any State,
Territory, Trust Territory, or Possession, that in whole or in part
receives signals transmitted or programs broadcast by one or more
television broadcast stations licensed by the Federal Communications
Commission, and makes secondary transmissions of such signals or
programs by wires, cables, microwave, or other communications
channels to subscribing members of the public who pay for such
service. For purposes of determining the royalty fee under
subsection (d)(1), two or more cable systems in contiguous
communities under common ownership or control or operating from one
head-end shall be considered as one system.
17 U.S.C. 111(f).
At the time of passage of the Copyright Act, the only type of
retransmission system serving subscribers with broadcast programming
was traditional wired cable systems regulated as such by the FCC.
Consequently, it was generally well understood in 1976 what was meant
by ``cable system'' for purposes of section 111. However, beginning in
the early to mid-1980's, retransmission services other than traditional
wired cable systems came into existence. Like traditional wired cable
systems, these other services were capable of delivering broadcast
signals to their subscribers, and they sought eligibility for the
section 111 license.
The addition of new retransmission providers significantly altered
the
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complexion of the video marketplace as it existed at the time of
passage of the Copyright Act. Not only did new faces appear, but the
FCC of the late 70's and early 80's took a decidedly deregulatory
stance with respect to the industry. The Commission lifted its distant
signal and syndicated exclusivity restrictions, see Malrite T.V. of New
York, Inc. v. FCC, 652 F.2d 1140 (2d Cir. 1981), cert. denied sub.
nom., National Football League, Inc. v. FCC, 454 U.S. 1143 (1982),
which formed the bedrock of determining section 111 copyright fees, and
the Commission's must-carry rules fell to court challenge. See Quincy
Cable T.V., Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 1985), cert. denied,
476 U.S. 1169 (1986) and Century Communications v. FCC, 835 F.2d 292
(D.C. Cir. 1987), cert. denied, 486 U.S. 1032 (1988). Thus, three sets
of rules--distant signal carriage, syndicated exclusivity and must-
carry--while still applicable by statute to the compulsory license
royalty calculation, no longer had a life of their own. The Copyright
Office has been attempting to deal with the consequences of these
eliminations ever since.
With new retransmission providers seeking to use 17 U.S.C. 111, the
Copyright Office opened a rulemaking proceeding to consider the issue.
Specifically, the Office considered the eligibility of wireless cable
systems (MMDS and MDS), satellite master antenna television systems
(SMATVs), and satellite carriers.\2\ In a Notice of Proposed
Rulemaking, the Office proposed new regulations that would govern the
conditions under which SMATVs would qualify for compulsory licensing
under section 111, announced a preliminary decision that wireless cable
was not eligible, and a policy decision that satellite carriers were
not eligible. 56 FR 31580 (July 11, 1991). The Office confirmed that
wireless cable and satellite carriers were not eligible in final
regulations. 57 FR 3284 (January 29, 1992).\3\ The decision, with
respect to satellite carriers, has withstood judicial challenge. See
Satellite Broadcasting Communications Association v. Oman, 17 F.3d 344
(11th Cir.), cert. denied, 115 S.Ct. 88 (1994).
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\2\ The proceeding initially considered the eligibility of only
SMATVs and wireless cable. 51 FR 36706 (October 15, 1986). The
comment period was later reopened to consider satellite carriers. 52
FR 28731 (August 3, 1987).
\3\ The Office has yet to issue final regulations for SMATVs,
but has made a preliminary finding that they are eligible for 17
U.S.C. 111. See 56 FR 31593 (July 11, 1991).
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In late 1994, Congress passed legislation to overturn the Office's
final regulations with respect to wireless cable. The Satellite Home
Viewer Act of 1994, Pub.L.No. 103-369, amended the section 111(f)
definition of a ``cable system'' to specifically include systems which
retransmit broadcast programming via microwave. It is now clear that
wireless cable systems are eligible for section 111. Satellite
carriers, however, still do not qualify, and must use the license found
in 17 U.S.C. 119.
Telecommunications Act
The Copyright Office's SMATV, wireless cable and satellite carrier
rulemaking proceeding was prompted by a video marketplace in the 80's
that differed significantly from that of the 70's. It is readily
apparent that the video marketplace of the 90's and the future will be
ever more different.
In February 1996, Congress enacted the Telecommunications Act.
Pub.L.No. 104-104, 110 Stat. 56 (1996). Among the sweeping reforms and
actions of this legislation is recognition and authorization of
telephone company entry into the video marketplace. Section 653 of the
Communications Act, as amended, now provides that ``[a] local exchange
carrier may provide cable service to its cable service subscribers in
its telephone service area through an open video system that complies
with this section.'' 47 U.S.C. 653(a)(1).
Prior to passage of the Telecommunications Act, the telephone
companies had been prohibited from entering the cable television
business within their own service areas. The Federal Communications
Commission was, however, considering the possibility of authorizing
telephone companies to lease channel capacity over its phone lines to
third parties who would provide video service to phone company
subscribers. See First Report & Order in Docket No. 87-266, 56 FR 65464
(December 17, 1991). Known as video dialtone, the FCC issued
experimental licenses to a handful of video dialtone operators, several
of whom have already begun service to subscribers. These operators
provide original and source licensed programming, as well as
retransmission of over-the-air broadcast signals.
The Telecommunications Act has terminated the FCC's video dialtone
proceeding by expressly allowing telephone entry into cable through
``open video systems.'' See section 302(b)(3); Report and Order in
Docket No. 96-46, 61 FR 10475 (March 14, 1996)(eliminating video
dialtone rulemaking proceeding). Under the Telecommunications Act's
authorization, telephone companies can act not only as common carriers
providing the pipeline between third party program providers and
subscribers, but can offer programming services themselves. This
creates a possibility, with respect to broadcast retransmission, of
several program providers using the same facility to provide
subscribers with broadcast signals.
The structure and appearance of open video systems remains largely
unresolved at this time. Private industry is still very much in the
planning stage, while the FCC is conducting a rulemaking proceeding to
determine the amount and extent of regulation that open video systems
will require. See Notice of Proposed Rulemaking in Docket No. 96-46, 61
FR 10496 (March 14, 1996). The Telecommunications Act directs the
Commission to apply much of its cable regulations to open video
systems,<SUP>4 but of course the FCC's cable rules in effect in 1976
will have no application to such systems.
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\4\ Examples are the sports exclusivity, network non-
duplication, and syndicated exclusivity rules.
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While Congress has cleared the path for telephone entry into the
broadcast retransmission business for communications law purposes, it
has not taken any action to resolve the copyright licensing aspects.
Section 653(c)(4) of the Communications Act, as amended, provides that
``[n]othing in this Act precludes a video programming provider making
use of an open video system from being treated as an operator of a
cable system for purposes of section 111 of title 17, United States
Code.'' Some have argued that this provision is a congressional
affirmation that open video systems are eligible for section 111
licensing. The plain language of the provision, however, belies that
argument. Section 653(c)(4) simply states that nothing in the
Telecommunications Act, by itself, shall be construed as preventing
open video systems from being considered as a section 111 cable system;
it says nothing about whether such systems can be considered cable
systems under the terms of section 111 of the Copyright Act. It matters
little to the copyright inquiry that an open video system is a cable
system under the Telecommunications Act if it is not a cable system
under the Copyright Act. Further, there is not any legislative history
to the Telecommunications Act that demonstrates congressional intention
to amend or otherwise clarify the eligibility of open video systems for
section 111 under the Copyright Act.<SUP>5
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\5\ Section 653(c)(4) comes from the Senate bill, which stated
`` [n]othing in this Act precludes a video programming provider
making use of a common carrier video platform from being treated as
an operator of a cable system for purposes of section 111 of title
17, United States Code.''
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Recent Filings
Although telephone entry into the cable business was under
consideration at the FCC for some time before enactment of the
Telecommunications Act, the Copyright Office has not considered such
entry in terms of the cable compulsory license.<SUP>6 As noted above,
through agency interpretation and legislative amendment, the section
111 license is available to traditional wired cable systems, wireless
cable systems, and SMATV systems. The Office now must consider the
eligibility of open video systems.
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\6\ During the legislative process of the Telecommunications
Act, proposals were considered to specifically address telephone
company eligibility for 17 U.S.C. 111. Such amendments, however,
were not included in the Telecommunications Act.
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For the second accounting period of 1995, the Copyright Office has
received statements of account and royalty filings from three systems
identifying themselves as video dialtone operators. Interface
Communications Group, Inc. identifies itself as a ``video dialtone
system being conducted by U.S. West Communications, Inc. in Omaha,
Nebraska.'' California Standard Television Corp. identifies itself as a
video dialtone programmer whose ``physical facilities'' are owned by
Pacific Bell. And Anchor Pacific Corp. also identifies itself as a
video dialtone programmer whose ``physical facilities'' are owned by
Pacific Bell.
These three filings represent the first claims of eligibility under
17 U.S.C. 111 by an open video system (formerly known as video
dialtone). The Office expects that the number of filings for future
accounting periods will increase, particularly in light of the
Telecommunications Act. We, therefore, feel that now is an appropriate
time to open a rulemaking proceeding to consider the eligibility issue.
Request for Comments
The threshold issue in this rulemaking proceeding is whether open
video systems are cable systems within the meaning of 17 U.S.C. 111.
The initial filings we have received appear to be from independent
program providers leasing access on an open video system created by a
telephone company. The Telecommunications Act now allows telephone
companies to act as program providers as well. We solicit comment on
whether both independent program providers and telephone companies
should be eligible for section 111 and, if so, under what
circumstances. We also seek comment as to whether a telephone company
providing an open video system, and not itself engaged in
retransmitting broadcast programming, is eligible for the passive
carrier exemption of section 111(a)(3), and under what circumstances.
In addressing the threshold eligibility issue, we request that the
commentators direct their responses to a consideration of 17 U.S.C. 111
as a whole, as opposed to solely the section 111(f) definition of a
``cable system.'' In the wireless/SMATV/satellite carrier rulemaking
proceeding some commentators focused on the section 111(f) definition,
and did not discuss how the rest of section 111 might or might not
apply to a particular system. The Office stated in the 1992 final rules
that section 111 must be interpreted as a whole in determining whether
a particular retransmission provider is eligible for compulsory
licensing. See 57 FR 3292 (1992) (``[E]ach part of a section should be
construed in connection with every other part or section so as to
produce a harmonious whole. Thus, it is not proper to confine
interpretation to the one section to be construed,'' citing 2A
Sutherland, Stat. Const. 46.05 (5th ed. 1992)). Consequently, we direct
the commentators' attention to the particular applicability of all 17
U.S.C. 111 provisions, particularly the royalty calculation scheme. In
particular, we are interested in how the 1976 distant signal carriage
and syndicated exclusivity rules might or might not be applicable to
open video systems. We are also interested in how an open video system
would apply the 1976 must-carry rules, plus ADI, to determine local/
distant status, particularly where there is not an established
traditional wired cable system operating in the same service area as
the open video system. And, we are interested in knowing how the
``contiguous communities'' provision of the section 111(f) cable
definition might or might not apply to open video systems.
Aside from the threshold eligibility question, the Office directs
the commentators to practical questions arising from the filing of
statements of account and payment of royalty fees. Thus, we request
commentators favoring 17 U.S.C. 111 eligibility of open video systems
to detail what changes, if any, are required in the Copyright Office
statement of account forms to accommodate open video system filings. We
are especially interested in a detailed analysis of how an open video
system would calculate its gross receipts, and what fees and charges
would be included. We also seek comment as to whether the statement of
account form should require all filers to identify what type of cable
system they are (SMATV, wireless, traditional wired, etc.). Finally, we
seek comment as to how current Office policies and practices, such as
application of the 3.75% rate, non-allocation among subscriber groups,
and the grandfathering of broadcast signals would apply.
In directing interested parties' attention to the above-identified
issues, we do not wish to limit the scope or focus of the comments in
any way. We therefore welcome all comments regarding application of 17
U.S.C. 111 to open video systems.
Dated: May 1, 1996.
Marybeth Peters,
Register of Copyrights.
Approved by:
James H. Billington,
The Librarian of Congress.
[FR Doc. 96-11226 Filed 5-3-96; 8:45 am]
***5/14/96***