Satellite Home Viewer Act of 1994

This advisory explains the changes made to sections 119 and 111(f) of title 17 of the United States Code by the Satellite Home Viewer Act of 1994 (the “1994 Act”). Section 119 was originally implemented by the Satellite Home Viewer Act of 1988 (the “1988 Act”) and, facing sunset at the end of 1994, was revised significantly.

I. SUMMARY

Congress passed the 1994 Act on September 20, 1994 and it was signed into law on October 18, 1994. In addition to extending the compulsory copyright license for satellite distribution of broadcast stations to the TVRO market until December 31, 1999, the 1994 Act made three significant changes to the current law:

A. Fair Market Value: This standard will be used to establish the compulsory copyright license fees that will go into effect on July 1, 1997. The existing fee structure, established as a result of the arbitration process in 1992, remains in effect until the fees are reestablished by agreement or arbitration in 1997. According to the legislative history of the 1994 Act, the central feature of the fair market value standard for TVRO is to establish parity with cable copyright license fees.

B. White Area Measurements: The 1988 Act originally had provisions allowing for the distribution of network signals only to “unserved households” which were defined as those homes (1) unable to receive a Grade B signal from that network’s local affiliate; and (2) for the prior 90 days had not been cable subscribers receiving the network’s signal. There were no provisions for conducting measurements of the Grade B signal and the 1994 act established transitional signal measurement procedures by which network stations can challenge whether or not a satellite carrier is providing a network station signal to pre-1994 Act subscribers who are capable of receiving a network Grade B intensity signal. This section of the law will expire on December 31, 1996.¹

C. Areas of Dominant Influence: Effective July 1, 1994, the legislation expanded the definition of a television station’s “local service area” to include the Area of Dominant Influence (ADI). This will have the effect of significantly broadening the definition of “local” signals for purposes of cable copyright fee calculation. Most significantly, this will result in many UHF stations being considered “local” signals for cable copyright purposes, which includes many Fox affiliates.

II. ANALYSIS

A. COPYRIGHT COMPULSORY LICENSE FEE:

1) Fees In Effect Until December 31, 1999: The 1994 Act codified the compulsory copyright license fees established by the 1992 arbitration. The fees are 17.5 cents per subscriber for independent superstations without syndicated exclusivity protection, 14 cents per subscriber for superstations with protection; and 6 cents per subscriber for network stations. Section 119(b)(1)(B), as amended by section 2(3)(A) of the Act. These fees will remain in effect, unless changed by voluntary negotiation, until July 1, 1997. Section 119(c)(3)(G), as amended by section 4(D)(iv) of the Act. Any voluntary agreement will remain in effect until December 31, 1999 or in accordance with the terms of the agreement, whichever is later. Section 119(c)(2)(D), as amended by section 2(4)(ii) of the Act.

2) Fair Market Value: The fees to be effective in 1997 will be established according to a new “fair market value” standard. Under the 1988 Act, the determination of TVRO copyright fees included considerations of cable copyright fees, return on investment and market development costs. The “fair market value” standard includes: the competitive environment, the cost for similar signals in similar private and compulsory license marketplace, and any special features and conditions of the retransmission marketplace; the economic impact of such fees on copyrights owners and satellite carriers; and the impact on the continued availability of secondary transmissions to the public. Section 119(c)(3)(B), as amended by section 2(4)(D) of the Act. The legislative history of the Act indicates that copyright license fee parity with cable is the central feature of the “fair market value” standard that the Arbitration panel must consider. ²

3) Definition of Network Station Expanded: The definition of a network station was expanded to include: television broadcasting stations that rebroadcast all or substantially all of the programming broadcast by a network station, that is owned or operated by, or affiliated with, one or more of the television networks in the United States which offer an interconnected program service on a regular basis for 15 or more hours per week to at least 25 of its affiliated television licensees in 10 or more states; or a non-commercial educational broadcast station as defined in section 397. Section 119(d)(2), as amended by section 2(6)(A).

This amendment broadened the scope of broadcast signals that are considered “network stations” under the compulsory license regime. The previous definition of a network signal in section 119 duplicated that found in section 111(f) of the cable compulsory license section. The two essential elements of that definition – nationwide transmissions and network programming broadcast for a substantial portion of the broadcast day – limited the definition to the three major commercial television networks: CBS, ABC, and NBC. The new definition will now include newer television networks such as Fox.³ H.R. Rep. No. 103-703, 103d Cong. 2d Sess. at 16 ( 1994); S. Rep. No. 103-407, 103d. Cong. 2d Sess. at 12 (1994).

The second part of the amendment to this section added “non-commercial educational stations” to the definition of networks. This amendment was intended to address the concern that PBS stations may not be considered network stations under the 1994 Act. This amendment clarifies that PBS stations are to be reported as network stations. Id.

4) Definition of Satellite Carrier Expanded: The definition was expanded to include: an entity that uses the facilities of a satellite or satellite service licensed by the Federal Communications Commission and operates in the fixed-satellite service under Part 25 of title 47 of the Code of Federal Regulations or the Direct Broadcast Satellite Service under part 100 of title 47 of the Code of Federal Regulations. The effect of this change was to include Direct Broadcast Service within the definition of satellite carriers for the purposes of the compulsory license scheme. Further, by placing DBS within Section 119, the unserved household restrictions on the secondary transmissions will apply. Section 119(d)(6), as amended by section 2(6)(B) of the Act.

5) Local Market Defined: The following definition was added to the Act. “The term ‘local market’ means the area encompassed within a network station’s predicted Grade B contour as that contour is defined by the Federal Communications Commission.” The legislative history states that the purpose of this amendment was to limit the extent of the liability for a “pattern or practice” violation of the 1994 Act where the violation occurs only on a “local” basis. Thus, liability for violations would be limited to only those areas covered by the network signal’s predicted Grade B Contour. H.R. Rep. No. 103-703, 103d Cong. 2d Sess. at 15.

B. WHITE AREAS:

1) Burden of Proof Standard: The provision in Section 119(a)(5)(D), as added by section 2(2) of the Act, creates a statutory burden of proof for satellite carriers to prove that the secondary transmission of a primary transmission by a network station is being provided to an unserved household. This statutory burden of proof will not go into effect until January 1, 1997. The legislative history of this section states that in response to concerns that the testing regime established by § 119(a)(8) would require some time to get running smoothly, the statutory burden of proof was given a delayed starting date to January 1, 1997 (the day after the expiration of the transitional testing regime) for subscribers who subscribed to service before the date of the 1994 Act. However, the statutory burden of proof is effective on the date of enactment with respect to households that subscribe to service on or after the date of enactment. H.R. Rep. No. 103-703, 103d Cong. 2d Sess. at 16.

2) Transitional Signal Intensity Measurement Procedures: The Act establishes a transitional testing regime for determining whether or not a subscriber falls into the definition of an “unserved” household. The testing procedures are embodied in Section 119(a)(8)(9)and (10), as added by Section 2(5)(b) of the Act. These procedures shall remain in effect until December 31, 1996.⁴

The Transitional Signal Intensity Measure Procedures are as follows:

A network can challenge whether a subscriber is an unserved household within the predicted Grade B Contour of the station. Within 60 days of the challenge, the satellite carrier must either:

(a) terminate service and notify network within 30 days of terminating service that service has been terminated; Section 119(a)(8)(A)(i), or

(b) conduct a measurement of the signal intensity of the subscriber’s household to determine whether the household is an unserved household, after giving reasonable notice to the network that it will conduct the test. Section 119(a)(8)(A)(ii).

• If the test shows that the household is not an unserved household then the carrier has 60 days to terminate service, and within 30 days from date service was terminated, inform the network that service has been terminated. Under this scenario, the network is not required to reimburse the carrier for the cost of the test. Section 119(a)(8)(B)(i).
• If the test shows that the household is an unserved household, then the station challenging the service must reimburse the carrier for the cost of the test within 60 days after receipt of the measurement results and a statement of the costs of the measurement. Section 119(a)(8)(B(ii).

(c) A network affiliate cannot require a satellite carrier to conduct a test during any calendar year in excess of 5 percent of the number of subscribers within the network station’s local market for subscribers after the date of enactment of the 1994 Act. Section 119 (a)(8)(C)(i).⁵

(d) If the network challenges more than 5 percent of the subscribers in their broadcast area, the network has to conduct the test itself. Section 119(a)(C)(ii). Similarly, the network must conduct the test itself if the network challenges a household that is outside of the network’s predicted Grade B Contour. If the test reveals, however, that the subscriber can nonetheless receive a Grade B signal, then the carrier must (1) within 60 days after receipt of the measurement, terminate service; (2) within 30 days of terminating service, notify the network that service has been terminated; and (3) within 60 days of receipt of the measurement and statement of costs, reimburse the network station. Id.

(e) A network station has the option of conducting the test itself to determine if the subscriber is an unserved household. If the network is going to conduct its own test, it must give the satellite carrier reasonable notice of its intent to conduct the measurement. If the test establishes that the household is an unserved household then the network bears its own costs. If the household is not an unserved household then within 60 days of forwarding the test results to the carrier, the carrier must terminate service and within 60 days of receipt of a statement of the network’s costs, the carrier must reimburse the network for the cost of the measurement. Section 119(a)(8)(D).

• If a Network makes a reasonable attempt to conduct a measurement (legislative history indicates that the “reasonable attempt” means there is no “exhaustion concept” requiring network stations to exhaust all means of conducting a test before the satellite carrier must terminate service) and is denied access, or is otherwise unable to conduct a measurement, the satellite carrier shall within 60 days, terminate the distribution of the network to that household. Section 119(a)(10).⁶

(f) Within 90 days of commencing such secondary transmissions, the carrier must submit to the network a list identifying by name and street address including county and zip codes all subscribers to which satellite carrier currently makes secondary transmissions or primary transmissions. The 1994 Act amendments added the requirement of providing a name and street address for each subscriber. Section 119(a)(2)(c), as amended by Section 2(1)(A) of the Act.

C. AREAS OF DOMINANT INFLUENCE

In addition to the changes to the satellite compulsory licensing scheme, the Satellite Home Viewer Act of 1994 amended section 111(f) of title 17 to expand the definition of a “local service area of a primary transmitter” to include the Area of Dominant Influence (“ADI”). Section 111(f), as amended by section 3(b). This amendment ensures that television stations that have recently gone on-line, including those so-called emerging networks such as Fox, will be treated as local signals for royalty purposes if those stations are located in the areas where pre-existing affiliates of the established network stations are regarded as local. The effect is that many UHF stations will now be considered “local” along with Fox.

The Act also amended this same section to now place “microwave” carriers expressly within the definition of a “cable system” for purposes of the compulsory license regime. This amendment was in response to a prior interpretation issued by the Copyright Office finding that MMDS operators did not qualify for the cable compulsory license.

III. EFFECTIVE AND EXPIRATION DATES

A. EFFECTIVE DATES

1. Except for section 119(a)(5)(D) and the amendment to section 111(f) (both noted below) all other provisions of the Act became effective on October 18, 1994.
2. Section 119(a)(5)(D), Burden of Proof: This provision has a delayed effective date of January 1, 1997.
3. Section 111(f), “Local Service Area of a Primary Transmitter”: This provision takes effect retroactively to July 1, 1994.

B. EXPIRATION DATES

1. Section 119(a)(8), “Transitional Signal Intensity Measurement Procedures,” expires on December 31, 1996.
2. The entirety of Section 119 expires on December 31, 1999.

IV. GRADE A & B CONTOURS:

A. The term “Predicted Grade B Contour” as used in the 1994 Act refers to the area defined in Commission Rule 73.684. It is the area predicted to receive a Grade B signal from a network station. By contrast, the definition of an “unserved” household in § 119(d)(10) (unchanged by the 1994 Act) refers to the use of a conventional outdoor rooftop receiving antenna to actually receive a Grade B signal. Thus, to qualify as an “unserved” household, the presence of the household outside of the predicted Grade B Contour is not enough; the household must be determined to not actually receive a signal of Grade B intensity as a result of actual measurement.

Under the transitional signal measurement provisions established by the 1994 Act, a network station can challenge whether a subscriber is actually receiving a signal of Grade B intensity as measured by a conventional outdoor rooftop receiving antenna if that subscriber’s location falls within or without the predicted Grade B Contour of that station. As set for above, the cost shifting aspect of the measurement provision assumes that a household inside the predicted Grade B Contour is actually receiving the Grade B signal, while one outside the Grade B Contour is not.

The chart below indicates the outer limits of signal intensity for Grade A and B contours. Hence, by using a conventional outdoor rooftop receiving antenna, the signal strength at that household must at a minimum be at the following signal strength or the household is not receiving a signal of Grade A or Grade B intensity, regardless of predicted Grade B contours.

B. Predicted Grade A and B Contours: The standards for establishing a predicted Grade A and B Contour are set forth in detail by the Federal Communications Commission in 47 C.F.R. § 73.684. 

FOOTNOTES

1 It is important to note that it is as yet unclear whether or not existing subscribers are grandfathered under the new Act. The section of the old law that created a cause of action for violating the “white area restriction” was amended to provide that previous subscribers, as of the date of enactment of “this section,” were excluded from the violation provisions of the Act. The insertion of the language “this section” replaced a reference to the 1988 Act. The General Counsel’s office of the Copyright Office has interpreted this amendment to mean that subscribers as of the date of enactment of the 1994 Act are excluded. The House Subcommittee on Intellectual Property and Judicial Administration has stated that while the amendment to the law striking the reference to the 1988 Act was unnecessary, the language can and should be interpreted to still refer only to those existing subscribers as of the 1988 Act.

Moreover, the legislative history of the 1994 Act provides that the transitional testing regime only applies to subscribers who have subscribed prior to the date of enactment of the 1994 Act. This understanding has been confirmed by Congressional staff and we have been informed that subsequent corrective legislation needed to correct other inconsistencies in the law will perhaps clarify this intent. H. Rep. No. 103-703, 103d Cong. 2d Sess. at 14; n.36 (1994).

2 Many Satellite TV lobbyists contended that tying these fees to cable would help prevent TVRO fees from skyrocketing.

3 This amendment is commonly referred to as the “Fox Amendment”.

4 Again, the legislative history states that this regime will only apply to subscribers who subscribed to service prior to the date of enactment of the Act.

5 The legislative history of the Act (from both the House and Senate) state that the 5% cap is to be applied against all network stations within the relevant area. Thus, a satellite carrier would not be obligated to test up to 5% of the subscribers for ABC, 5% of the subscribers for NBC, and 5% of the subscribers for CBS in a local market. The 5% figure is a cap for all subscribers to all network signals within the local market. H.R. Rep. No. 103-703, 103d Cong. 2d Sess. n.41. ( 1994); S. Rep. No. 103-407, 103d Cong. 2d Sess. at 10, n. 5. (1994).

6 In the statements on the floor of the House upon passage of S.2406, Congressmen Hughes stated that: “In order to minimize disputes, the industry agreement should require network stations to provide satellite carriers with a map of the station’s predicted grade B contour along with a list of zip codes that fall within the stations predicted Grade A and B Contours. After receipt of this information, the satellite carrier should be required to promptly return a marked-up copy of the Contour map to the station reflecting a breakdown of the subscriber information.” 132 Cong. Rec. H9271 (daily ed. September 20, 1994)

In the Committee Report to S.1485 (which was incorporated into S.2406) this same notion was repeated but in a stronger fashion: “So that disputes between satellite carriers and network stations can be minimized in the future, each side is expected to enter into an industry agreement concerning the establishment of procedures for mutual analysis of the marketplace, including the requirement that each network station provide each satellite carrier with a map of the station’s Grade B contour. After receipt of all that information, the satellite carrier should be required to return a marked-up copy of the map reflecting subscriber information.” S.Rep., No. 103-407, 103d Cong. 2d Sess. at 10 (1994). (emphasis added)

It is also confusing that the floor statement to S.2406 required that the maps contain the zip codes for both predicted Grade A and B Contours, while the Senate Report only stated the Grade B contour. In terms of according weight to the various statements, the statements made on the floor of the House pursuant to the final version of the legislation arguably carry more weight. Congressional staff indicates that an industry agreement is strongly encouraged and that if the zip code procedure is not followed, further legislative action could result.