Broadcast Advisory Bulletin
Copyright
Office Begins Inquiry to Reexamine Cable and Satellite Statutory
Licenses – and Asks if Statutory Licenses are Appropriate
for Internet Video
By David
D. Oxenford and Steven
J. Horvitz
[April 2007]
Last week, the Copyright Office released a wide-ranging Notice
of Inquiry, asking many questions about the statutory licenses that
allow cable and satellite companies to retransmit broadcast television
signals without getting the specific approval of all copyright holders
who provide programming to those stations. The Notice was released
so that the Copyright Office can prepare a report to Congress, due
June of 2008, presenting its views as to whether the various statutory
licenses still perform necessary functions, and whether any reforms
are necessary. To complete its report, the Notice asks many questions
about how these licenses currently work, whether they function efficiently,
and if they should be retained, modified or abolished in favor of
marketplace negotiations. The Notice even asks whether the existing
statutory licenses should be expanded to take into account the different
ways video programming is now delivered to the consumer, including
various Internet and mobile delivery systems. Thus, virtually anyone
involved in the video programming world may want to be part of this
proceeding. Comments are due July 2, with reply comments due September
13.
Cable and satellite statutory licenses were adopted by Congress
to allow multi-channel video systems to retransmit broadcast signals.
Without these licenses, individual owners of copyrighted material—including
syndicated, network, sports, and music programming—would have
to be consulted to secure necessary copyright approval. As multi-channel
video providers would, in many cases, not know who held all these
rights and from whom they could secure all these rights, they instead
pay a statutory license which is collected, pooled, and then distributed
to the various copyrights holders in proportions agreed to by those
holders or, in the absence of agreement, set by the Copyright Royalty
Board.
As the Notice sets out, the statutory rights held by cable and
by satellite are different in many ways. Cable systems pay certain
minimum fees which vary depending on the revenue of the cable system,
and increase when a system carries a “distant signal,”
i.e., a television signal from outside its market area. However,
the definitions of a distant signal for purposes of these rules
is based on byzantine FCC rules from 1977-- long ago eliminated
except for purposes of these copyright calculations. Satellite carriers
also pay fees to the Copyright Office, but these fees are based
on a per-subscriber fee, and the importation of distant signals
by satellite carriers remains heavily regulated. At the same time,
while cable operators pay a “minimum fee” to carry any
broadcast signals, satellite carriers are able to carry local broadcast
signals at no cost.
Comments, reply comments and hearing to address many questions.
The Notice requests comment on whether these different licensing
schemes, and the various royalties entailed, continue to make sense.
Should systems be modified to provide greater parity between the
platforms? Do the statutory royalties paid now approximate the royalties
that would be received by copyright holders if there were negotiations
for the rights in an open market, unfettered by the statutory license?
Should these licenses even continue to exist or should parties simply
negotiate for the rights to the programs they retransmit (perhaps
by shifting the burden to broadcasters to obtain the underlying
rights, which the broadcaster would then grant as part of the retransmission
consent negotiation process)? Obviously, these are fundamental questions
about the manner in which the statutory license operates—and
recommendations from the Copyright Office could have an impact on
virtually every aspect of the video marketplace—from the course
of retransmission consent negotiations between broadcasters and
multichannel video providers, to the prices and terms that burden
those providers under their statutory license, to the competition
that broadcasters face in their marketplace (if, for instance, the
higher rates for cable importation of distant signals were reduced,
or if the limits on such importation by satellite carriers were
relaxed, more competition to the local broadcaster could result).
Finally, in its discussion of the future of statutory licenses,
the Copyright Office asks if the existing statutory licenses should
be modified or new licenses adopted, to facilitate the emergence
of new video technologies. For instance, the Notice asks if such
licenses would hasten the inclusion of local television programs
on video mobile phones. The Copyright Office also asks whether new
IPTV systems using Internet technologies to retransmit broadcast
programs are covered by the existing cable statutory license, or
whether a new license should be adopted to cover some or all of
these systems. The Copyright Office simultaneously asks whether
the on-demand availability of much broadcast programming through
the Internet, by the programming networks and by services like You
Tube, undercut the need for the statutory licenses. As the statutory
license was designed to foster the distribution of programming by
making it easier to obtain the necessary copyright rights, if that
programming is already available on-line, has the underlying purpose
of the license been met?
The Notice also specifically mentions several discrete issues affecting
the existing cable statutory license. For example, it specifically
asks how the ongoing digital transition should impact cable royalty
calculations. The Copyright Office also appears prepared to address
how a “network” should be defined for purposes of the
cable royalty calculations, as FOX broadcast affiliates historically
received different treatment than ABC, CBS, and NBC broadcast affiliates.
The Notice also raises long-standing concerns regarding system consolidation
and the relationship between subscriber groups, the signals they
receive, and the resulting royalty calculation. The Copyright Office
suggests that a reform to the statutory license might remove the
troubling “phantom signal” issue, under which cable
systems pay royalties for signals not actually delivered to certain
subscriber groups.
In addition to comments and reply comments, the Copyright Office
plans a hearing on these important issues. It is clear that this
proceeding should be closely monitored by video industry participants.
The full text of the Notice of Inquiry can be found on the Copyright
office’s website: http://www.copyright.gov/fedreg/2007/72fr19039.html.
For further information on this important proceeding, please contact
the firm.
For more information, please contact:
This advisory is a publication
of the Broadcast Group of Davis Wright Tremaine LLP. Our purpose
in publishing this advisory is to inform our clients and friends
of recent developments in the broadcasting industry. It is not intended,
nor should it be used, as a substitute for specific legal advice
as legal counsel may only be given in response to inquiries regarding
particular situations. Attorney Advertising. Prior results do not
guarantee a similar outcome. Thank you.
Copyright © 2007, Davis Wright Tremaine
LLP.
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