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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.
Copyright © 2007, Davis Wright Tremaine LLP.
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