THE AUDIO AND VIDEO FLAGS: 

CAN CONTENT PROTECTION AND 

TECHNOLOGICAL INNOVATION 

COEXIST? 

HEARING 

BEFORE THE 

SUBCOMMITTEE ON TELECOMMUNICATIONS 

AND THE INTERNET 

OF THE 

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

JUNE 27, 2006 

Serial No. 109-112 

Printed for the use of the Committee on Energy and Commerce 

Available via the World Wide Web: http://www.access.gpo.gov/congress/house 

U.S. GOVERNMENT PRINTING OFFICE 

WASHINGTON : 2006 

For sale by the Superintendent of Documents, U.S. Government Printing Office 

Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 

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30-218PDF 
COMMITTEE ON ENERGY AND COMMERCE 

JOE BARTON, Texas, Chairman 

RALPH M. HALL, Texas 

MICHAEL BILIRAKIS, Florida 

 Vice Chairman 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

CHARLIE NORWOOD, Georgia 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

JOHN B. SHADEGG, Arizona 

CHARLES W. “CHIP” PICKERING, Mississippi 

 Vice Chairman

VITO FOSSELLA, New York 

ROY BLUNT, Missouri

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

MIKE ROGERS, Michigan 

C.L. “BUTCH” OTTER, Idaho 

SUE MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

JOHN D. DINGELL, Michigan 

 Ranking Member 

HENRY A. WAXMAN, California 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

GENE GREEN, Texas 

TED STRICKLAND, Ohio 

DIANA DEGETTE, Colorado 

LOIS CAPPS, California 

MIKE DOYLE, Pennsylvania 

TOM ALLEN, Maine 

JIM DAVIS, Florida 

JAN SCHAKOWSKY, Illinois 

HILDA L. SOLIS, California 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

BUD ALBRIGHT, Staff Director 

DAVID CAVICKE, General Counsel

REID P. F. STUNTZ, Minority Staff Director and Chief Counsel

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET 

FRED UPTON, Michigan, Chairman 

MICHAEL BILIRAKIS, Florida 

CLIFF STEARNS, Florida 

PAUL E. GILLMOR, Ohio 

ED WHITFIELD, Kentucky 

BARBARA CUBIN, Wyoming 

JOHN SHIMKUS, Illinois 

HEATHER WILSON, New Mexico 

CHARLES W. “CHIP” PICKERING, Mississippi 

VITO FOSSELLA, New York 

GEORGE RADANOVICH, California 

CHARLES F. BASS, New Hampshire 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE FERGUSON, New Jersey 

JOHN SULLIVAN, Oklahoma 

MARSHA BLACKBURN, Tennessee 

JOE BARTON, Texas 

 (EX OFFICIO)

EDWARD J. MARKEY, Massachusetts 

 Ranking Member 

ELIOT L. ENGEL, New York 

ALBERT R. WYNN, Maryland 

MIKE DOYLE, Pennsylvania 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

RICK BOUCHER, Virginia 

EDOLPHUS TOWNS, New York 

FRANK PALLONE, JR., New Jersey 

SHERROD BROWN, Ohio 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

JOHN D. DINGELL, Michigan 

 (EX OFFICIO)

(II)
CONTENTS 

Page 

Testimony of: 

Bainwol, Mitch, Chairman and Chief Executive Officer, Recording Industry 

Association of America................................................................................................. 17 

Levin, Andrew W., Executive Vice President and Chief Legal Officer, Clear Channel 

Communications, on behalf of National Association of Broadcasters.......................... 22 

Harris, Stewart, Songwriter, on behalf of Songwriters Guild of America ......................... 29 

Ziegler, Ruth A., Deputy General Counsel, Sirius Satellite Radio, Inc. ............................ 32 

Attaway, Fritz, Executive Vice President and Special Policy Advisor, Motion Picture 

Association of America.................................................................................................. 72 

Shapiro, Gary, President and Chief Executive Officer, Consumer Electronics 

Association ..................................................................................................................... 78 

Sohn, Gigi, President, Public Knowledge........................................................................... 88 

(III) 

(1) 

THE AUDIO AND VIDEO FLAGS: 

CAN CONTENT PROTECTION AND 

TECHNOLOGICAL INNOVATION 

COEXIST? 

TUESDAY, JUNE 27, 2006 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON ENERGY AND COMMERCE, 

SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in Room 

2322 of the Rayburn House Office Building, Hon. Fred Upton 

(Chairman) presiding. 

 Members present: Representatives Stearns, Gillmor, Cubin, 

Shimkus, Bass, Walden, Terry, Ferguson, Blackburn, Barton (ex officio), 

Markey, Engel, Wynn, Gonzalez, Inslee, Boucher, Towns, and Gordon. 

Also present: Representative Bono. 

 Staff present: Neil Fried, Counsel; Will Nordwind, Policy 

Coordinator; Anh Nguyen, Legislative Clerk; Jaylyn Jensen, Senior 

Legislative Analyst; Johanna Shelton, Minority Counsel; and Davis 

Vogel, Minority Research Assistant. 

 MR. UPTON. Good afternoon. Today’s hearing is entitled “The 

Audio and Video Flags: Can Content Protection and Technological 

Innovation Coexist?” I would like to think that the answer to the 

question posed in the title of this hearing is: “yes, they can coexist.” In 

fact, the marketplace is replete with examples of that fact, which is a 

good thing since one of our Nation’s most precious resources and exports 

is the creative genius and artistic ability of her citizens, otherwise known 

as intellectual property. 

 This then begs the question of where, if at all, is it wise or 

appropriate for the Government to intervene in the marketplace and 

mandate specific content protection technologies, like the audio and 

video broadcast flags which are at issue in today’s hearing. In my view 

it is those who advocate intervention in the marketplace and federal 

technology mandates that bear the burden of the persuasion in this 

debate. 

 Today’s hearing is divided into two panels, one on the audio flag and 

the other on the video flag. This subcommittee has a long record on the 

video broadcast flag since it was a major issue in the subcommittee’s 
2

examination of the transition to digital TV. We held a number of 

hearings in which the broadcast flag was addressed, and under former 

Chairman Billy Tauzin’s leadership we held many, many, numerous 

multi-party roundtables which were, in part, responsible for industry 

consensus on a video broadcast flag. 

 It was that consensus that helped pave the way for the FCC’s video 

broadcast flag order, which was ultimately struck down by the D.C. 

Circuit on the grounds that the FCC lacked authority to issue such rules, 

not on substantive grounds. So, today’s hearing will help refresh our 

record on this important issue, which, at its heart, was always about 

preventing illicit mass distribution on the Internet of digital over-the-air 

broadcast content, a goal that I strongly support. 

 However, this will be the first hearing that we have held on the audio 

broadcast flag. I want to commend Mr. Ferguson for his motivation and 

for focusing our attention on it. As I stated at the outset, I believe it is 

those who advocate intervention in the marketplace and Federal 

technology mandates who bear the burden of persuasion in this debate. I 

believe that digital TV transition, which is government driven with a 

hard date now set into law, is very different than the digital radio 

transition which is purely market driven. It does not require a separate 

spectrum and does not require the shut-off of analog service. As such, I 

believe that the radio marketplace will be much more sensitive to 

government intervention and Federal technology mandates than the TV 

marketplace, and that is of great concern to me. 

In any event, my understanding is that the NAB and the RIAA have 

been engaged in a productive dialogue over the audio flag issue, and I 

commend those organizations for their diligence. I would hope that the 

parties to that dialogue could be expanded to include other interested 

parties to ensure that, if there is ever to be a consensus on audio flag, that 

it is a broad-based consensus. I know from our experience with the 

video broadcast flags that these issues are highly technical. There are 

important consumer issues at stake and ample time needs to be given to 

careful consensus building before the Government intervenes, if a case is 

to be made that it intervenes at all. 

 With that, I look forward to hearing from our witnesses today, and 

with perfect timing I recognize the Ranking Member of the 

subcommittee from Massachusetts, my friend, Mr. Markey. 

 [The prepared statement of Hon. Fred Upton follows:] 

PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN, SUBCOMMITTEE ON 

TELECOMMUNICATIONS AND THE INTERNET

Good afternoon. Today's hearing is entitled: The Audio and Video Flags: Can 

Content Protection and Technological Innovation Coexist ? 
3

I would like to think that the answer to the question posed in the title of this hearing 

is: “YES, they can coexist.” In fact, the marketplace is replete with examples of this 

fact, which is a good thing since one of our nation's most precious resources - and exports 

-- is the creative genius and artistic ability of her citizens, otherwise know as intellectual 

property. 

This then begs the question of where, if at all, is it wise or appropriate for the 

government to intervene in the marketplace and mandate specific content protection 

technologies, like the audio and video broadcast flags which are at issue in today's 

hearing ? In my view, it is those who advocate intervention in the marketplace and 

federal technology mandates that bear the burden of persuasion in this debate. 

Today's hearing is divided into two panels, one on the audio flag and one on the 

video flag. 

This Subcommittee has a long record on the video broadcast flag, since it was a 

major issue in the Subcommittee's examination of the digital television transition. We 

held a number of hearings in which the broadcast flag was addressed, and, under former 

Chairman Billy Tauzin's leadership, we held numerous multi-party roundtables which 

were, in part, responsible for industry consensus on the video broadcast flag. It was that 

consensus that helped paved the way for the FCC's video broadcast flag order, which was 

ultimately struck down by the D.C. Circuit on the grounds that the FCC lacked authority 

to issue such rules, not on substantive grounds. So, today's hearing will help us refresh 

our record on this important issue, which, at its heart, was always about preventing illicit 

mass distribution on the Internet of digital over-the-air broadcast content -- a goal I 

strongly support. 

However, this will be the first hearing we have held on the audio broadcast flag. I 

want to commend Mr. Ferguson for his motivation and for focusing our attention on it. 

As I stated at the outset, I believe it is those who advocate intervention in the marketplace 

and federal technology mandates who bear the burden of persuasion in this debate. I 

believe the digital television transition, which is government driven with a hard date now 

set into law, is very different than the digital radio transition which is purely market 

driven, does not require separate spectrum, and does not require the shut-off of analog 

service. As such, I believe the radio marketplace will be much more sensitive to 

government intervention and federal technology mandates than the television 

marketplace - and this is of great concern to me. 

In any event, my understanding is that the NAB and RIAA have been engaged in a 

productive dialogue over the audio flag issue, and I commend those organizations for 

their diligence. I would hope that the parties to that dialogue could be expanded to 

include other interested parties to ensure that, if there ever is to be a consensus on audio 

flag, it is a broad-based consensus. I know, from our experience with the video broadcast 

flag, that these issues are highly technical, there are important consumer issues at stake, 

and ample time needs to be given to careful consensus-building before the government 

intervenes, if a case is to be made that it intervenes at all. 

With that, I look forward to hearing from our witnesses today, and I thank them for 

their participation. 

 MR. MARKEY. Thank you, Mr. Chairman, and I want to commend 

you for calling this hearing today on content protection technologies for 

broadcast audio and video content. Protecting copyright in the digital era 

is unquestionably important for content owners. The inability of content 

owners to safeguard their financial and creative interests in digital 

versions of their copyrighted products could have an adverse impact on 
4

jobs innovation and the widespread availability of digital audio and video 

programming for consumers. 

 Content owners have a reasonable and lawful expectation that 

privacy of their products will not be condoned in the marketplace or 

countenanced by entities charged with enforcing copyright laws. And I 

believe it is important that we stress as we move even further into the 

digital era our strong opposition to the theft and illegal distribution of 

copyrighted content. The content community has several tools to combat 

piracy. The content community has utilized lawsuits against individuals 

who engage in massive illegal infringement on-line. 

 It has also prevailed the Supreme Court in the Grokster case which 

held that distributors of technologies used for infringement by others 

could be held liable for such activity. The content community has also 

worked closely with universities around the country on educational 

programs about theft and piracy and the risk of lawsuits to students and 

faculty. In addition, many companies have experimented with digital 

rights management and technologies to provide consumers with 

copyrighted content in a way that permits limited reasonable subsequent 

use by consumers. 

 In recent years content providers have also promoted the use of other 

technological tools and protection measures, most notably the so-called 

broadcast and audio flags. Such technology flags, particularly digital 

content with imbedded content protection instructions in order to thwart 

unauthorized use. The broadcast video flag has been advanced by 

leading providers of video content as a technological tool to help impede 

widespread theft of digital content. In contrast, many consumers view 

the broadcast flag as potentially frustrating or prohibiting their ability to 

fully utilize their home electronics equipment, including what they view 

as reasonable use of their computers and the Internet. 

 The broadcast flag rule that the FCC promulgated was successfully 

challenged in the D.C. Circuit which ruled in May of 2005 that the 

Commission lacks sufficient authority to adopt the regulations. 

Presumably this legal interpretation of the Commission’s authority would 

also hold for the broadcast audio flag for radio. Broadcast radio, like its 

television counterpart, is also moving towards digital technology. Yet 

unlike broadcast television, broadcast radio can migrate to digital without 

the need for additional spectrum. 

 As a result, hundreds of radio stations across the country are already 

broadcasting in digital form. In addition, satellite radio providers, XM 

and Sirius, are providing a digital subscription radio service. Each of 

these satellite radio providers offers a device in the marketplace which 

permits subscribers to store songs transmitted over their services. With 

the rise of both terrestrial and satellite-delivered digital radio the music 
5

industry has sought implementation of audio flag technology to limit 

unauthorized copying or distribution of content. 

 I want to thank you, Mr. Chairman, for calling this hearing today. I 

believe this is a very useful inquiry. As we considered developing a 

regulatory approach to these issues, particularly technology regulations 

that will impact a consumer’s use of digital technology and the Internet, 

I believe it is vitally important to assure the public that any new 

regulation appropriately balances the legitimate concerns of both 

consumers and content owners. 

 I would also like to welcome Andy back to the committee today. It 

has been a long time since he has paid us a visit. I yield back the 

balance. 

 MR. UPTON. His year is up, I think. Mr. Gillmor. 

 MR. GILLMOR. Thank you, Mr. Chairman, and I appreciate the 

opportunity for us today to discuss the matter of content protection in the 

digital age. Digital age has presented us with some unexpected and 

exciting public policy challenges, many of which we continue to debate. 

Protecting content has become one of, if not the paramount issue. Many 

of our favorite music, TV, and movie selections are now being 

distributed in digital formats. These advanced digital distribution 

formats give consumers a better listening and viewing experience, 

certainly much better than the grainy images from the 1948 seven-inch 

TV that my family first bought when I was a small child, while at the 

same time offering consumers an increased ability to manage the use of 

both their audio and video content. 

 The ability of a consumer to manage his or her experience has led 

many to question the appropriate nature by which this content is 

protected from illegal use and distribution. Striking a balance between 

consumer fair use and the protection of creative and intellectual property 

is extremely important, and addressing this problem is going to require 

some insight into what technology may yield in the years to come. 

 Dealing specifically with the broadcast video flag, I am glad to see 

that all stakeholders worked together to reach an agreement and, given 

the court’s decision on the FCC’s ability to implement such rules, it is 

now incumbent upon us to act in a responsible manner to ensure the 

protection of the video content. A matter of greater contention surrounds 

the issue of audio flag. Unlike the video flag, I believe it would be in the 

best interest of all consumers and the future of the industry to sit down 

with all affected parties and again try to work out a privately negotiated 

agreement rather than rely on a legislative solution. 

 However, those talks cannot be allowed to be drawn out. I think they 

have to be a priority because as we all know from the 1996 Telecom Act, 

the tech sector changes rapidly. Furthermore, from my discussions with 
6

industry representatives, a privately negotiated solution is preferred 

because recent Congressional efforts have fallen short of a consensus 

approach, and as that negotiation goes forward I would hope that the 

members of this committee could be kept informed as to how it 

progresses. And I yield back, Mr. Chairman. 

 [The prepared statement of Hon. Paul E. Gillmor follows:] 

PREPARED STATEMENT OF THE HON. PAUL E. GILLMOR, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF OHIO

MR. CHAIRMAN: Thank you for holding this important hearing. I appreciate the 

opportunity to openly discuss the matter of content protection in a digital age. 

 The digital age has presented us with many unexpected and exciting public policy 

challenges—many of which we continue to debate. Protecting content has become one 

of, if not the paramount issue as many of our favorite music, TV, and movie selections 

are now being distributed in digital formats. These advanced digital distribution formats 

give consumers a better listening and viewing experience—much better than the grainy 

images from the 1948 seven-inch TV that my family first received when I was nine years 

old—while at the same time offering consumers an increased ability to mange the use of 

both their audio and video content. 

 The ability of a consumer to manage his or her “experience” has led many to 

question the appropriate nature by which this content is protected from illegal use and 

distribution. Striking a delicate balance between consumer “fair use” and the protection 

of creative and intellectual property is extremely important. Addressing this dispute will 

require not only knowledge of the present, but also insight into what technology may 

yield in the years to come. 

Dealing specifically with the broadcast video flag, I was glad to see all stakeholders 

work together to reach an agreement. Given the court’s decision on the FCC’s ability to 

implement such rules, it is now incumbent upon us to act in a responsible manner to 

ensure the protection of video content. 

A matter of greater contention surrounds the issue of the proposed “audio flag.” Let 

me be clear on my current position, like the video flag, I believe it is in the best interest 

of all consumers and the future of the industry to sit down with all affected parties to, 

again, work out a privately negotiated agreement—rather than rely on a legislated 

solution. However, these talks cannot be allowed to be drawn out—they must be a 

priority because, as we all know from the 1996 Telecom Act, the tech sector changes 

rapidly. Furthermore, from my discussions with industry representatives, a privately 

negotiated solution is preferred because recent Congressional efforts have fallen short of 

a consensus approach. 

Mr. Chairman, I look forward to the testimony from today’s witnesses and to 

working closely with you on these lingering public policy issues. Additionally, I would 

respectfully request that should any industry negotiations take place that this committee 

be kept informed of the ongoing status of those discussions. Again, thank you Mr. 

Chairman for yielding me this time. 

 MR. UPTON. Thank you. Mr. Boucher. 

 MR. BOUCHER. Thank you very much, Mr. Chairman. I have no 

hostility to a statutory authorization for a TV broadcast flag if certain key 

conditions are met and are clearly accommodated in the authorizing 

statute. First, there should be clearly stated exemptions from the flag 
7

mandate for news and public affairs programs and for content subject to 

the TEACH Act. These programs should never be flagged. News and 

public affairs broadcasts erode in value over time and should be 

broadcast in the clear so that excerpts can be easily e-mailed from one 

interested party to another. 

 The TEACH Act specifies content that under existing law is 

available for use in distance learning applications. The TV broadcast 

flag should not be permitted to interfere with this well-functioning law. 

The Senate, in fact, has acknowledged these principles in the draft of the 

bill that is being considered in that body. Secondly, it is essential that 

Congress reinforce fair use principles. The DMCA broadly undermined 

fair use for digital media and actually empowers the creators of digital 

content to eliminate fair use altogether. 

 I want to commend Chairman Barton for his determination to protect 

fair use rights for the consumers of digital media and for his 

announcement that the TV broadcast flag will only be considered in the 

broader context of assuring fair use protections for digital media 

consumers. I also appreciate Chairman Barton’s co-sponsorship of H.R. 

1201, which is pending before this committee. That bill is the right 

policy. The proposed audio broadcast flag, however, is an entirely 

different matter. Unlike the TV flag, there is no agreed-upon technical 

standard for an audio flag. 

 After years of work the inter-industry forum known as the Copy 

Protection Technical Working Group produced a TV broadcast flag 

standard which the diverse interested parties have accepted as both being 

workable and effective. That work has really not taken place for an 

audio flag. In fact, even though the technical group has been meeting 

monthly, the industry representing the recording companies elects not to 

attend those sessions, and this is the forum that is comprised of the 

equipment manufacturers and in fact all interested parties. 

 The work to create a technical standard for a broadcast flag has in 

essence not even started. Moreover, if there were agreed-upon technical 

standards, those standards could be effectively implemented without 

Congress having to pass a statute. The technology for high definition 

radio was developed by a company called iBiquity, which holds the 

intellectual property for the equipment the high definition radio stations 

are using. Without Congress doing anything, if a technical standard for 

an audio flag is some day created, iBiquity could easily incorporate that 

standard into its license agreement with radio stations and could have the 

flag implemented simply through that private arrangement. 

 This matter clearly lends itself to a complete private-sector 

resolution, with the private parties creating and implementing the 

technical standard. And I would add my voice to others expressed here 
8

today encouraging that work to occur. Congress really need give the 

matter no further consideration. Thank you, Mr. Chairman, and I yield 

back. 

 MR. UPTON. Mr. Shimkus. 

 MR. SHIMKUS. Thank you, Mr. Chairman. We ought to have our 

colleague, Rick Boucher, just testify. He always puts us to shame and 

we appreciate how smart he is. 

 MR. UPTON. His handwritten notes. 

 MR. SHIMKUS. Here is mine. I think you hear the message. A lot of 

us would like to see private negotiated agreements involved in this 

process and let the system work out. I always talk about in this debate 

you had Guttenberg with the printing press. You had Xerox with the 

copy machine, 8 tracks, cassettes. I am showing my age. Now MP3. 

My wife is a church organist, and we have an artist here and there is an 

issue of church choirs Xeroxing music that should be protected and 

compensated for when the church choirs use that, and my wife went 

through and threw all the Xeroxed copies out. 

 Now it didn’t make the church council very happy because that 

means they had to pay for the sheet music for the entire choir but it is an 

issue of compensating the artist for their work. And so we have a 

tremendously difficult balance here to make sure that we continue to 

encourage the artist and those, and I am not for one, I just married one so 

I now know all this stuff whether I wanted to or not. And as my friend, 

Mr. Boucher, would say the fair use issue and what you pay for is what 

you can use, but what you pay for is not what you can sell in essence. 

 So we appreciate you coming here. We are going to learn a lot, and, 

Mr. Chairman, I yield back. 

 MR. UPTON. Mr. Gonzalez. 

 MR. GONZALEZ. Thank you very much, Mr. Chairman. I think 

regardless of the subject especially in this subcommittee on telecom it 

always strikes me that many times people will say because of the 

technology and it is fast moving and developing and so on, somehow it 

lends itself to different criteria than we have adopted and relied on for 

many, many years in this country, and those are just general principles. 

One of those principles of course is the legislative one and that is not to 

act unless you really have to to let the market forces play out, let the 

innovation, let the stakeholders get together, and obviously we have 

already referred to that. 

 Yet, because--now technology does add something that maybe 

legislators or members of our society and the legal system did not deal 

with, and that is that it moves quickly--here is a whole lot more 

creativity. There is change every day and sometimes the law has to 

anticipate some of that but it surely has to react in a timely mode. So 
9

technology has narrowed the window of what I refer to as timeliness. 

We are not there yet. I don’t believe that. And I would like to think that 

we are still going to have all stakeholders actively engaged knowing that 

they have a vested interest in this before Congress acts because there is 

one eternal truth and that is when we do act very few people walk away 

truly satisfied and many times the problem is not really improved 

measurably. 

 And with that, I look forward to the discussion today and to the 

testimony. And I really had never heard from the artists and the writers 

and the producers until I went to Austin last March to attend South by 

Southwest, and that was very encouraging and enlightening, and for 

anyone that may have been out there, I thank you for engaging in that 

particular discussion. When it comes to industry and others, I have had 

ongoing discussions for a couple of years now and I appreciate your 

input. 

 What I ask now is your active participation as a stakeholder in trying 

to arrive at some solution and giving us some direction. I was talking to 

staff today, and, Mr. Chairman, the Wright amendment, the infamous 

Wright amendment regarding Southwest flights to Dallas finally was 

resolved among the stakeholders. And I thought, gee, if you are a Texas 

and you can resolve that, you can resolve anything. 

 However, he did remind me they took 20 years to come to that. We 

do not have 20 years. And if you indulge me, Mr. Chairman, at this time 

I do want to introduce one of our witnesses who is a fairly new resident 

to my home town of San Antonio, and of course that is Andy Levin, who 

served on the staff of this committee from I think 1995 to 2002, 

invaluable service, was here for some monumental legislation, and I am 

sure that bears some of his handiwork and fingerprints of the outstanding 

job that he does for Clear Channel. And I need to tell you that Clear 

Channel is one of our leading corporate citizens, not just of course in San 

Antonio but throughout the State and this Nation. And the leadership 

that he has brought and the direction that he has provided the past years 

there is exemplary and has really assisted not just the community but I 

think all of what is going on out there with the broadcasters. 

 And, Andy, I want to say welcome. I wasn’t here when you served 

on staff but I have heard great stories about you and they are all fine and 

good. And with that, I yield back. 

 MR. UPTON. Mr. Ferguson. 

 MR. FERGUSON. Thank you, Mr. Chairman, and thank you for 

holding this hearing. Our subcommittee can serve a constructive role in 

the area of digital content protection in the surest way to insure that 

competition in the marketplace and encourage creativity and innovation. 

This hearing is particularly timely regarding the digital audio flag issue. 
10

Protection and compensation for content and new technologies have been 

the subject of negotiations, settlements, and litigation. 

 And as we hold this hearing today, the Senate is considering 

language in their cable franchise and legislation that includes both audio 

and video flags. These are exciting times for consumers. There are more 

options available in the marketplace than ever before. Apple’s iPod has 

permeated the marketplace and is a stunning success story. Digital audio 

can now be heard across multiple platforms from Web casts to wireless. 

The advent of consumer consumption and ultimate success of these 

products was not born out of circumventing copy protection technology 

under the banner of fair use, and it was not achieved by ignoring the 

property rights of those who create content. 

 The preference, of course, is to see the issue of digital content 

protection resolved between the respective parties in the private sector, 

and I hope it can happen and happen quickly. But the fact remains that 

digital audio products are on the market today that allow unauthorized 

downloading and for the potential for illegal uploading to the World 

Wide Web. This is an issue that deserves Congress’ attention but if these 

issues are not resolved soon it may also require Congress’ direction. 

 Early this spring I introduced the Audio Broadcast Flag Licensing 

Act of 2006. The goal of this legislation is to promote maximum 

consumer choice in the marketplace by ensuring that intellectual property 

rights are respected and that content creators are treated fairly. 

Specifically it provides that technical licensing agreements currently 

taking place between satellite and HD radio and developers of digital 

audio broadcast systems include a broadcast flag or similar technology 

that limits the unauthorized dissemination, duplication, and redistribution 

of content. 

 If the products in question allow downloading that was not legally 

authorized, the parties would need to come back to the table with content 

creators and work out fair royalties. My bill makes sure that the 

marketplace and not Congress is where these negotiations happen. Some 

have claimed that these new services fall under the Audio Home 

Recording Act. The AHRA was passed in 1992 at a time when even the 

Internet was mostly unknown to legislators and consumers. This 

argument has a shaky foundation at best. Considering the rapid pace of 

technology, it is hard to believe that Congress could have foreseen over a 

decade ago that some would choose to turn their performance license 

into a distribution license without paying for it. 

 While my bill is clear in its intent to protect content, it also insures 

that American consumers remain unaffected. Legacy devices already in 

the stream of commerce would remain operational, and the bill 

specifically states that the HD radio roll out remain unimpeded. The 
11

bottom line is that if private-sector negotiations are unsuccessful in 

ensuring a level playing field between content creators and distributors, it 

is our responsibility, Mr. Chairman, to help jumpstart those talks in the 

private marketplace. 

 The goals of the Audio Broadcast Flag Licensing Act are not only 

for the good of content creators, more importantly they are for the good 

of our constituents, the consumer. It simply requires that if you are 

going to use these products, make sure it is done fairly. That is my 

definition of fair use. I would like to thank the witnesses for taking out 

their time to be with us today and in particular recognize and commend 

Sirius Satellite Radio in recently negotiating with the recording industry 

to ensure that content creators are compensated with regards to their S50 

satellite radio and download service. It is my hope that your industry 

peers will also follow suit. 

 Mr. Chairman, thanks again for holding this hearing. As we begin to 

debate this issue, we should not focus only on the products marketed 

today but rather the products that will be made available in the future. 

Do we want to see a marketplace where there is a constant flow of new 

and exciting technology to our constituents? Do we want to ensure the 

most options? If we do, then there must be a balance among new radio 

services, property rights of creators, and fair competition among all 

parties. It is our responsibility to ensure that this balance is achieved. 

Thank you, Mr. Chairman. I yield back. 

 MR. UPTON. Mr. Gordon. 

 MR. GORDON. Thank you, Mr. Chairman. Our remarks are 

beginning to sound a little repetitious so I will ask that my remarks be 

made part of the record, and just quickly say that I am a co-sponsor, 

original co-sponsor, of the audio flag bill because I think we do need to 

have a balance between technology and content. Hopefully the parties 

can develop that but if they can’t, we will let the FCC do it and it should 

be done. Thank you. 

 MR. UPTON. I would just make a unanimous consent request for all 

members on the subcommittee that their statements be entered as part of 

the record. And with that, I recognize Mr. Towns. 

 MR. TOWNS. Thank you very much, Mr. Chairman. It is true that 

everything has been said but everybody didn’t get a chance to say it. The 

copyright industries, movies, television programs, and music and 

recording, books, video games, and software provide jobs for 8 percent 

of all United States workers. As Members of Congress, I feel it is 

important that we never lose sight of this human element. These jobs all 

depend on protection of copyrighted works from being devalued by 

piracy and unauthorized use. I call upon all of my colleagues to keep 

this in mind as we proceed. 
12

 As many of you know, I have been a long-time advocate of flagging 

technology because I feel it provides important protection to our artists 

and content providers. In an age when digital radio broadcast can be 

copied and redistributed worldwide over the Internet, I worry that our 

current piracy prevention methods do not go far enough to stem the tide 

of audio and video theft. I share in the concerns of the recording 

industry that the ability to record digital content will allow users to 

compile large song collections for free, and I hope we are able to put a 

stop to this through a solution that is favorable to all of these parties 

sitting before us today. 

 All of you are well aware of how widespread piracy has become and 

I worry about the next wave of creative theft, and I pray that it is not 

born from the devices that we will be discussing today. It is my belief 

that if we enact reasonable mutually agreed precautions now we will not 

leave the door open to rapid manipulation in later years. H.R. 4861 is 

not an attack on traditional home taping services but rather ensures that 

fair licensing agreements are negotiated and piracy is thwarted. Most 

importantly it does this without delaying the final guidelines for HD 

radio. 

 I look forward to working with Congressman Ferguson, the satellite 

radio companies, and the recording industry as we consider H.R. 4861 

and work towards a fair and equitable solution to this dilemma. Also, 

before I yield back, Mr. Chairman, I would like to welcome Andrew 

Levin back to Capitol Hill and to know that you can survive even after 

this committee. On that note, I yield back, Mr. Chairman. 

 MR. UPTON. Thank you. This concludes--oh, Mrs. Cubin. I am 

sorry. 

 MRS. CUBIN. I will submit mine for the record. 

 [The prepared statement of Hon. Barbara Cubin follows:] 

PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF WYOMING

Thank you Mr. Chairman. 

I appreciate that this subcommittee remains engaged on the important issues 

surrounding digital media. As an I-Pod owner myself, I am very aware of the I-Tunes 

music store as a successful means of digital content distribution. Additionally, the video 

component of these devices serves as a great example of how content providers and 

consumer electronics companies can work together for the real benefit of both businesses 

and consumers. 

Technology continues to advance at breathtaking speeds, however, and with this 

new technology comes new challenges to strike the right balance between a consumer’s 

right to enjoy their new gadgets, and the content provider’s right to be paid for their 

innovation and performance. It is safe to say that no one on this subcommittee is 

interested in stifling the innovation of either content providers or consumer electronics 
13

companies. Both provide invaluable service to consumers and both should be promoted 

as examples of American innovation. 

Because both sides in this debate are so integral to each other’s success, I am 

interested in hearing from the witnesses today about any common ground the parties have 

reached in negotiations that could lead to a non-legislative solution. Congress will act if 

we must, and I appreciate your leadership on this Mr. Chairman, but I believe that both 

businesses and consumers are best served by limiting the regulatory involvement of 

Congress. Innovation will not stop no matter what we do in Congress, that is the wonder 

of the economic system we have established in this country. So if this hearing can serve 

as a springboard to a voluntary agreement that benefits all, it will have served its purpose. 

Thank you again Mr. Chairman. I look forward to hearing from the witnesses about 

this important issue. I yield back the remainder of my time. 

[Additional statements submitted for the record follows:] 

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, COMMITTEE ON ENERGY 

AND COMMERCE

Mr. Chairman, thank you for holding this hearing today. Digital content, services, 

and devices allow more artists to create new and innovative content, and allow consumers 

to enjoy that content in increasingly exciting and convenient ways. But the digital age 

also makes it easier to copy and redistribute content in unauthorized ways. 

There is no question that content creators and owners are entitled to compensation 

for their content. Without compensation, they have neither the resources nor the 

incentives to produce more of the music and video content that we enjoy. At the same 

time, consumers are entitled to legitimate ways of enjoying that content. And device 

manufacturers are entitled to make devices that permit consumers to enjoy audio and 

video content. It is critical that we strike the right balance between these interests. I also 

believe that any broadcast flag legislation should include adequate protections for 

consumers’ fair use rights. 

We have already heard much about the broadcast video flag, and, as I have 

previously indicated, I believe there is a compromise that can be struck between content 

protection and legitimate consumer use. We have heard less about the audio flag, and I 

look forward to today’s testimony so that we can flesh out that issue a bit more. 

I yield back. 

PREPARED STATEMENT OF THE HON. ELIOT L. ENGEL, A REPRESENTATIVE IN CONGRESS 

FROM THE STATE OF NEW YORK

Thank you Mr. Chairman – 

I am struggling with this push for an audio flag. I see the broadcasters and satellite 

radio industry battling the record industry – once again. 

And I see the artists, songwriters and performers stuck in the middle along with 

consumers. 

I am a strong supporter of the video flag. The federal government is mandating the 

switch to digital television. Moreover, the federal government ordered the switch in 

1996. And it took 7 years of intense negotiation to find a solution that most found 

acceptable. That solution was adopted by the FCC but thrown out by the courts – not on 

grounds that the agreement was flawed but simply that the FCC did not have the 

authority to implement the agreement. I think the FCC needs that authority. 
14

When it comes to the audio flag, I find myself concerned that negotiations on an 

audio flag began in April – about 3 months. I must wonder why there is a push for 

Congress to intervene so early. 

I would admonish those who seek quick legislative action that what you hope for 

rarely is what you get. Instead, it is better for all parties to meet and come to an 

agreement and, if necessary, ask Congress to pass implementing laws. 

I would think that the old Napster problem would be a case study for the recording 

industry. Don’t fight new technologies. Embrace them and find a simple, legal and 

profitable business plan to meet the needs and wants of consumers. The IPod proves this 

clearly. 

I am told that one of the major concerns is that satellite radio companies have 

devices that allow people to record a song and create playlists. I am having real trouble 

seeing how this is an infringement of fair use. 

In my day, I could go to the store and by a TDK audio tape, put it into my expensive 

Kenwood Stereo, tape songs from albums of many record companies, take that tape and 

play in my cheap car stereo. I make this point because many companies were involved in 

making music portable for me. 

As I understand the satellite radio recording device does not make the music 

portable. In fact, it can only be played on that device – it cannot be transferred to a 

computer or a CD or even an old audio tape. 

But, I am always mindful of the talent, such as the Nashville songwriters. They are 

the working men and women of the music industry. And they deserve to be compensated 

for their work. 

So I fall back on what I have said many times before. I will continue to strive to 

find balance. We must ensure the talent is fairly compensated while the fair use rights of 

the American people are maintained. 

I believe we should move forward on the video flag but give the record companies, 

broadcast and satellite radio, talent and consumers time to work out a solution. I know 

one can and will be found. 

I yield back. 

 MR. UPTON. Okay. Thank you. This concludes the opening 

statements. We are delighted to have really two outstanding panels. It 

will be led by--maybe we should have Mr. Levin go first with all these 

accolades, a friend on this side of the aisle too. But we welcome Mr. 

Mitch Bainwol, Chairman and CEO of the Recording Industry 

Association of America, certainly an old friend of mine for sure; Mr. 

Andrew Levin, Executive VP and Chief Legal Officer for Clear Channel 

on behalf of the National Association of Broadcasters; Mr. Stewart 

Harris, Songwriter, on behalf of the Songwriters Guild of America; and 

Ms. Ruth Ziegler, Deputy General Counsel of Sirius Satellite Radio from 

New York. 

 We welcome all four of you. We appreciate your willingness to 

submit your testimony in advance. It is made part of the record in its 

entirety. If you would try to limit your remarks to 5 minutes, that would 

be terrific. Mr. Bainwol, we will start with you. Welcome. 

STATEMENTS OF MITCH BAINWOL, CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER, RECORDING INDUSTRY 
15

ASSOCIATION OF AMERICA; ANDREW W. LEVIN, 

EXECUTIVE VICE PRESIDENT AND CHIEF LEGAL 

OFFICER, CLEAR CHANNEL COMMUNICATIONS, ON 

BEHALF OF NATIONAL ASSOCATION OF 

BROADCASTERS; STEWART HARRIS, SONGWRITER, ON 

BEHALF OF SONGWRITERS GUILD OF AMERICA; AND 

RUTH A. ZIEGLER, DEPUTY GENERAL COUNSEL, 

SIRIUS SATELLITE RADIO, INC. 

 MR. BAINWOL. Thank you very much, Chairman Upton, members 

of the subcommittee. Thank you for focusing on the timely issues 

arising from radio’s transition to distribution platform for music. Today 

has special meaning. It is the one year anniversary of the Supreme 

Court’s nine to zero Grokster decision. That unanimous decision 

reminds us that finding a balance between technical and creative 

innovation is in fact possible. Not long ago, I read about Clear 

Channel’s new program at their concert venues where the live 

performance is immediately burned to CDs to sell as people leave, so the 

venue has two chances to make money, one for the ticket, the 

performance, and one for the sale of a CD, the distribution. 

 The consumer though does not get a free copy ownership after 

paying for the listening experience. They have to buy it. The same 

should hold true as radio morphs from a place to listen to music to a 

place for acquiring it. I will back up for a second. Today’s marketplace 

is a dynamic competition between a variety of platforms seeking to 

become a place where the fans listen to music, discover music, store 

music, and acquire music. Listen, discover, store, and acquire whether 

by iPod, by Nano, by cell phone, by Trio, Zen Creative for a subscription 

service or by a radio device. The competition between platforms 

increasingly is all about the portable device. That competition is a good 

thing. Fans will benefit and if the competition is fair music creators will 

benefit too. 

 Competition isn’t fair. iTunes and Wal-Mart download services pay 

to distribute our music. Rhapsody and Napster subscription services pay. 

Cingular and Verizon pay. Even new legitimate P to P sites pay to 

distribute our music but radio does not. We don’t quarrel with the choice 

by radio to transition their business model. We have done it. But 

concocting a legal shell game so some radio services can get out of 

paying for content just isn’t right. XM in particular seems to think they 

should enjoy the unique right to be exempt from paying for the music 

they give to consumers as a mechanism to attract and retain subscribers. 

 This is an ad running at Sky Mall magazine. The slogan for XM is 

hear it, click it, save it. Left unsaid, of course, is don’t bother paying for 
16

it. There is a word for this, hutzbah. We also think it is illegal. 

Regardless, it is unfair and certainly bad policy. Because of anomalies in 

comp rate law, satellite radio and over the air radio are different when it 

comes to paying a fee for the right to broadcast. The important point is 

this, neither is licensed to compete as a distributor. 

 The situation is also more complicated because different players are 

pursuing varying approaches. The NAB has joined with us to suggest 

two goals should be paramount. One, addressing the problem of cherry 

picking songs from a program in a broadcast, and, two, ensuring that the 

rollout of HD happens quickly, worthy goals. We applaud the 

broadcasters for adopting this responsible approach. Sirius, here today, 

sought a license for its first device, the S50. We hope they view it as a 

precedent, though I was troubled when Mr. Karmazin was quoted as 

stating that Sirius might adopt the XM tactic, that the device adheres to 

the law. 

 Let me be clear about what unlicensed feature we find concerning. If 

radio wants to provide traditional TiVo-like time shifting of programs, 

that is not a problem. If radio wants to provide traditional manual 

recording features, that is fine too. But it is not okay for radio to allow 

cherry picking of individual songs from a broadcast program without 

first obtaining a license so that the songwriter, the publisher, the artist, 

and the label investor get their due compensation. 

 Our members want to license radio. Broadcasters are our partners. 

Fans are enriched when broadcasters innovate, when device 

manufacturers innovate, and, yes, when creators innovate. You might 

say it takes three to tango. As broadcasters, manufacturers, and creators 

do their thing, the concept of a level playing field makes a ton of sense. 

Platforms should be subject to comparable content protection 

requirements when providing comparable services, and that of course is 

the objective underlying the Ferguson bill co-sponsored by 

Representative Towns, Bono, Gordon, Blackburn, Waxman, Terry, and 

Davis. 

 The bill requires the use of a broadcast flag or similar technology to 

provide content protection that is quickly achievable and not disruptive, 

allowing digital radio devices to roll out expeditiously, without making 

older models obsolete. You may hear the time isn’t right for legislation 

or that the issue hasn’t been through the rigorous voluntary process that 

generated the broadcast flag consensus. Well, there is a reason for that. 

There is a reason that it hasn’t worked out. Unlike our video colleagues, 

we have no performance rights over the air and the license for satellite is 

compulsory, so we can’t withhold our content if we are not satisfied with 

its protection. Our video colleagues could. 
17

 If record companies were able to license in the marketplace like 

other copyright owners, content protection would be resolved in these 

marketplace discussions. There is a marketplace failure and that is what 

we are trying to address. Moreover, because of the limitation on our 

performance rights, Congress has set up a system that makes record 

companies almost totally reliant on distribution revenue, yet the 

limitations on performance rights are now threatening even that revenue 

stream. That is more than ironic to us. It is our life blood. 

 We suffered significant losses in recent years. Our glimmer of hope 

for the future and our ability to invest in new music and new creativity is 

predicated on the integrity of the emerging digital marketplace. We are 

now seeing digital revenues replace physical lawsuits. That is very 

exciting. It is very important, but it highlights why we are so interested 

in seeing that the problems we have outlined are addressed. Thank you 

very much. 

 [The prepared statement of Mitch Bainwol follows:] 

PREPARED STATEMENT OF MITCH BAINWOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,

RECORDING INDUSTRY ASSOCIATION OF AMERICA

• As the music industry struggles to emerge from several difficult years due to 

online piracy, we are looking to the success of legitimate digital offerings from 

services such as iTunes, Napster, and Yahoo!. The sales from these services 

are what songwriters and artists rely on to make a living, and what record labels 

rely on to be able to invest in new music. 

• New devices and services from satellite and HD Radio threaten to replace those 

sales by allowing listeners to automatically record, sort, label, and store the 

music they hear on their radios, just like they can do through online stores and 

subscription services, but without having to buy it. 

• We truly understand and appreciate the appeal of these devices and services. In 

fact, we have no problem with them in themselves. We simply believe that by 

using such offerings to effectively become a distributor of digital downloads, 

services should be required to pay the appropriate distribution license fee. That 

doesn’t mean getting rid of the devices; it just means paying appropriately 

when they are used to transform radio into download services. 

• We also do not intend to prohibit any of the activities listeners have come to 

expect from radio. Listeners can still record as they have for generations and 

can, in fact, engage in automatic recording (and time-shifting) by time, 

program, or channel. We only ask that the line be drawn at automatic 

searching, copying, and disaggregation features that exceed the experience 

listeners, the FCC, and Congress expect from over-the-air terrestrial and 

satellite radio. 

• Content protection can not only coexist with technological innovation, it is in 

many ways necessary to drive it. Today, we bring music to consumers in a 

multitude of platforms and services, all made possible because of the content 

protection that defines their parameters and safeguards investment. 

• Broadcast flag provisions, including those present in H.R. 4861, The Audio 

Broadcast Flag Licensing Act, are a perfect way to balance the interests of 

technology and content protection. 
18

Chairman Upton, Ranking Member Markey, and Members of the Subcommittee, 

thank you for allowing me to participate today in this discussion on audio flag. To 

answer the titular question posed in this hearing, yes, we believe that content protection 

and technological innovation can coexist. And we believe that implementation of an 

audio flag is a fair and effective way to balance content protection and the wide range of 

new digital features. But to understand why measures such as an audio flag are needed, it 

is necessary to consider how we arrived at this point. 

As you are aware, the music industry has faced an immense challenge in online 

piracy over the past several years. In addition to sharply declining sales figures, 

composers, artists, musicians, technicians, and a multitude of others engaged in the music 

industry have seen their jobs disappear. There are fewer people, and much less money, to 

invest in new artists and new music. Fewer resources to invest in the future, with an 

impact ultimately felt by consumers. 

In response, we have not sought to stifle new technology, we have embraced it. 

Today, consumers have more choices in how they obtain their music than ever before: 

online downloads such as iTunes; subscription services such as Napster and Rhapsody, 

including portability features such as Napster to Go, and special discounted rates for 

subscription services at colleges; ringtones; ringbacks; mobile downloads; mobile videos; 

online videos on demand; kiosks in retail stores; legitimate peer-to-peer services; 

interactive web radio; and instant post-concert recorded CDs are just some of the new 

formats in which we are making music available. These are in addition to new physical 

formats such as DVD-Audio, Super Audio CD, and DualDiscs. 

Not only does the content protection present on these systems coexist perfectly with 

the technology that makes them work, these new technologies and services are, in fact, 

dependent upon that content protection to succeed. Technological innovation requires 

financial risk, which relies upon an expected return. Satellite broadcast services, for 

example, protect their signal to prevent others from free riding off their investment. In 

addition, the content carried on those signals is just as – if not more – valuable. If 

satellite services knew that anyone would be able to offer the exact same content – 

including music, sports, and multi-million dollar radio personalities – at a fraction of the 

cost (or free), they would never have invested in it. This is true for any new platform or 

service. 

As with satellite and other services, content protection has allowed us in the music 

industry to innovate in the digital world, which has presented us with an opportunity to 

once again grow after several years of decline. The legal online download market, in 

particular, has been growing at a spectacular rate. Authorized download services such as 

emusic, Napster, and iTunes have truly taken root and are, for the first time, promising to 

offset the loss in CD sales. This year, we are on track to see close to $1 billion in legal 

online downloads – that is, unless we are derailed. 

Unfortunately, just as we are emerging from under the cloud of online piracy, we are 

facing a new challenge on the digital front. HD Radio and satellite services have begun, 

or plan to begin, offering features and companion devices that enable listeners to 

transform the passive listening experience into a download one. These services allow 

broadcast programs to be automatically captured and then disaggregated, song-by-song, 

into a massive library of music, neatly filed in a portable device’s digital jukebox and 

organized by artist, title, and genre. Simply, users can download music and create a 

digital music library on their portable devices, in much the same way that iTunes offers 

permanent downloads. Of course, the big difference is that in the case of iTunes, Apple 

compensates artists, creators and copyright owners through a distribution fee. 

To be clear: we are in no way against these new devices themselves. They are 

undeniably cool and, like everyone else, we understand their appeal. We are truly excited 

about the new opportunities digital radio and these devices will provide to expose new 

artists and offer consumers new choices in the way they get our music. Rather, our 
19

concern is when these devices and their corresponding services change radio into a 

download store without paying the fair market price for licensing music that other 

services offering the same content must pay. We have no issue with the convergence of 

radio and downloads, as long as they are licensed for that purpose. 

We believe listeners should continue to be able to engage in the kinds of activities 

they’ve come to expect from radio, including recording. In fact, we look forward to 

users’ ability to enhance this customary recording, by enabling automatic recording by 

time, program, or channel, digital read-outs, music purchase options, time-shifting 

capabilities, in addition to storage and great new sound. Given all of these new 

amenities, our requests are actually strikingly modest – that the line be drawn at 

automatic searching, copying, and disaggregation features that exceed the experience 

listeners, the FCC, and Congress expect from over-the-air terrestrial and satellite radio. 

The market for digital music operates on the basis of a continuum of content 

ownership. Distributors pay rights holders based on how much control over the content 

they give away. At one end we have radio, where users typically have little or no control 

over the content – they listen to whatever comes on. For offering this service, satellite 

pays content owners an amount based upon a statutorily set fee; in the case of terrestrial 

radio, due to a statutory anomaly, the broadcaster actually pays nothing. As we move up 

the continuum, through customized radio, tethered downloads, and portable tethered 

downloads, distributors pay content owners an increasing amount to be able to give their 

consumers greater control. At the other end of the continuum, we have permanent 

downloads and other forms of complete ownership, which give consumers the greatest 

flexibility in use of their content. For this, distributors pay a market rate, deservedly 

higher than the free or statutory license amount at the other extreme. 

What we are seeing with these certain satellite and HD Radio services is a gaming of 

the system as they leapfrog from the limited control offerings of radio to the greater 

control of content offered by download services, but without paying the equivalent 

license fee. This not only fails to properly compensate creators, it threatens the licensed 

services that are playing by the rules – the very services we and so many others in the 

music community are relying on to deliver us from years of loss due to online theft. (It is 

interesting that, as noted above, satellite services guard their investment by protecting 

their signal but, in the case of XM Radio, fail to understand the need to protect the 

valuable content they carry. After all, without content protection, there will be less 

investment in music; and music is the primary reason why customers purchase XM 

subscriptions.) 

XM claims that it is already paying content creators. That is true, but what they are 

paying for is the performance of music – the statutorily-based license fee at the lower end 

of the ownership continuum. That is very different from (and much less than) the freemarket distribution license required for download services. One is not a substitute for the 

other. XM's claim is tantamount to saying that if someone buys a ticket to watch a movie 

in a theater, he’s entitled to take a DVD of the movie home with him afterwards. These 

are two distinct purchases, worth distinctly different amounts, and this principle is no less 

true when found in the digital world. 

The transformation from a passive to an interactive listening experience without 

obtaining the proper license to pay the creator is especially troubling because, again, 

record labels and artists receive absolutely no payment from the performance of their 

works on terrestrial over-the-air radio. This unfair situation means that revenue, if any, 

comes only from the ultimate sale of that music to listeners. We are told that terrestrial 

radio’s exemption from paying artists and record labels for the performance of their work 

is appropriate because radio serves a promotional purpose. We fundamentally disagree 

with this argument (the U.S. is in fact one of only a few countries not to grant artists and 

labels a performance right) but, even if true, it means nothing if there are no resulting 

sales. If the broadcast and its accompanying recording and archiving features replicates 
20

the sale it is intended to generate, no amount of “promotion” will benefit content creators. 

Simply, we rely on sales. Without them, we cannot realize the return necessary to invest 

in new works and new artists, and songwriters cannot earn a living to continue writing the 

songs we all want to hear. 

Fortunately, there are solutions. These are best worked out in the marketplace, and 

we have seen progress in that respect on a couple fronts. For satellite, we have entered 

into an agreement with Sirius that will ensure that content creators are properly 

compensated for their work. For HD Radio, we have been engaged in extremely 

productive talks with the broadcast industry. These talks certainly are based on our long 

and positive relationship with broadcasters, but were facilitated by the request of 

Chairman Stevens and Senator Inouye in the Senate Committee on Commerce, Science 

and Transportation during a January hearing on Broadcast and Audio Flag. We have 

come a long way since then and remain optimistic that a market-based solution that will 

protect content and compensate creators can be found. 

Nevertheless, we are mindful that a true marketplace solution is not necessarily 

available to us. Unlike our friends in the movie industry, given our lack of a performance 

right for over-the-air radio and the compulsory license granted to satellite services, we are 

unable to withhold our content to ensure its proper use and compensation. Therefore, 

while we are encouraged that the broadcasters will continue to negotiate in good faith, we 

appreciate the introduction of legislation such as H.R. 4861, The Audio Broadcast Flag 

Licensing Act. This bill, introduced by Representatives Ferguson, Towns, Bono, Gordon 

and Blackburn, addresses this marketplace failure by granting the FCC jurisdiction to 

promulgate rules regarding content protection for digital radio. H.R. 4861 requires 

digital radio services that use the government spectrum and the government-granted 

compulsory license to implement certain content protection technology. The bill also 

prevents unfair competition between radio services and download services by 

appropriately providing for private market negotiations of an “audio broadcast flag” that 

will differentiate between radio broadcasts and download services, and require a market 

license only for download services. 

The bill assures that no one device or technology manufacturer has an advantage 

over another and will maximize the range of broadcast receiving devices made available 

to the public. Further, it makes clear that the adoption and implementation of an audio 

broadcast flag will in no way delay the final operational rules for digital radio and assures 

that legacy devices are not affected. By using broadcast flag technology, devices already 

on the market prior to the enactment of legislation will not be made obsolete, but will 

remain fully functional. 

H.R. 4861 strikes the right balance between creating new radio services that bring 

more choices to consumers, and protecting the property rights of creators. In the 

meantime, we look forward to continued discussions with broadcasters and remain 

optimistic that we can arrive at an acceptable solution for everyone. 

As we celebrate the one-year anniversary of the U.S. Supreme Court’s decision in 

Grokster, we are reminded that content protection and technological innovation can, in 

fact, coexist. But the success of technological innovation and content creation is each 

dependent upon mutual respect for the value of the other. Mr. Chairman, I am here today 

in the hope that we can all continue on in the spirit of that Grokster decision – to 

recognize the value of creation and the importance of protecting it. Once again, our 

message is simple: radio services should not be allowed to act like a download service 

without paying the appropriate license for distributions. An audio flag, and legislation 

such as the Audio Broadcast Flag Licensing Act which implements it, is an effective way 

to attain the proper balance of interests. We look forward to working with you and all of 

our partners in the broadcast and electronics industries to ensure a healthy and strong 

digital radio future. 

Thank you. 
21

 MR. UPTON. Mr. Levin. 

MR. LEVIN. Good afternoon, Chairman Upton, Chairman Barton, 

and distinguished members of the committee. My name is Andrew 

Levin. I am Executive Vice President of Clear Channel 

Communications. I am here today on behalf of the National Association 

of Broadcasters, and I thank you for the opportunity to speak on this 

issue. Just 5 years ago free radio faced a major shift in consumer 

behavior. Our listeners began to migrate to new digital music platforms, 

creating some very daunting business challenges for us, but we stepped 

up to the plate because history is littered with once thriving industries 

that have failed, some with their heads in the sand, others trying to deny 

and even to rail the changes in technology and consumer behavior 

around them. 

 Consumer shifts are never easy for the businesses that have to adapt 

to them, but we realize that is the price of admission to compete, so today 

Clear Channel finds itself a leading programmer for the Internet, for cell 

phones, the iPod, and even satellite radios. And after nearly 15 years of 

research and development, countless hours of technology negotiations, 

millions of dollars in human capital and effort, we are successfully 

rolling out HD radios, the next generation of free radio broadcasts. 

 Today, 800 radio stations air their primary broadcasts in HD, 1,200 

more will convert in the next year that will cost nearly $100,000 per 

station. Industry players will spend $400 million over the next 2 years 

just to promote these new services. HD radios are now shipping from 

factories, are being sold by retailers like Radio Shack and Tweeter. 

BMW is now shipping factory-installed HD radios in their 5, 6, and 7 

series cars. But getting to this point has been far from easy. Not only 

has it required a tremendous amount of investment, but also an enormous 

amount of collaboration across a variety of different industries. 

 We have had some great successes so far, but this massive rollout of 

HD digital radio is now entering its most important and delicate phase. 

Like all new technologies the success of the digital radio revolution will 

depend on whether a critical mass will follow these so-called early 

adopters and that will only come if there is reasonable certainty 

regarding technological requirements and consumer expectations. 

 Any uncertainty about the ability to meet the reasonable expectations 

of consumers and the technological requirements that are at the core of 

this massive effort could deal a fatal blow to the most significant 

innovation we have seen for free radio in nearly 100 years. We believe 

the biggest threat to the future of free digital freedom would be preemptive legislation mandating a particular copyright copy protection 

technology and strict usage controls for consumers. These actions would 

create enormous uncertainty for every major stakeholder involved, 
22

including consumers who will be the ultimate drivers whether this 

succeeds. 

 A technological mandate by Congress, at best, would cause a delay 

to market of at least 2 years, or more likely the disruption and business 

uncertainty would simply kill the plans of broadcasters, manufacturers, 

automakers, and retailers, and leave a wake of stranded investment in its 

path. There is no reason to enact a technological mandate at this point 

and there are several reasons not to. 

First, the affected industries can and will find a solution. Remember 

that the final inter-industry consensus on the digital television broadcast 

flag was found without government intervention and without disabling 

the existing base of digital televisions, nor interfering with consumer 

uses inside the home. 

 Second, talks are currently underway between the NAB and the 

recording industry to forge a consensus on digital radio copy protection. 

It is still early, but we are confident that if all the affected players are 

represented at the table, we will find a solution that is acceptable to 

everyone. And, third, litigation is now pending between the recording 

industry and XM over the very issue that is essential to the development 

of a content protection scheme, that is, what constitutes fair use by 

consumers with regard to today’s devices. 

 Admittedly, it is not easy to adapt to new technologies but that is 

precisely what we are doing and the jury is still out on how the market 

will develop. It is simply premature to enact a mandate when we have 

no idea how the marketplace is going to respond. It would have to be 

based on little more than pure speculation. Be assured broadcasters 

completely oppose copyright infringement, but there are a myriad of 

complex and technical issues at stake, with enormous consequences for 

the future of a fledging new service. 

 We believe these issues deserve the requisite scrutiny that is best 

accomplished through arm’s-length negotiations between private parties. 

We urge the committee to give us that time to develop a well-vetted, 

industry-wide solution that will move the HD rollout forward while 

balancing all of the competing interests involved. Thank you. 

 [The prepared statement of Andrew W. Levin follows:] 

PREPARED STATEMENT OF ANDREW W. LEVIN, EXECUTIVE VICE PRESIDENT AND CHIEF 

LEGAL OFFICER, CLEAR CHANNEL COMMUNICATIONS, ON BEHALF OF NATIONAL 

ASSOCIATION OF BROADCASTERS

Summary of Written Statement 

Good afternoon, my name is Andrew W. Levin. I am the Executive Vice President 

and Chief Legal Officer for Clear Channel Communications, which operates 1150 local 

radio stations, 35 television stations, and 140,000 outdoor advertising displays 
23

worldwide. I am testifying today on behalf of the National Association of Broadcasters 

(NAB). NAB is a trade association that advocates on behalf of more than 8,300 free, 

local radio and television stations and broadcast networks before Congress, the Federal 

Communications Commission and the Courts. 

Free radio is currently investing huge human and financial capital to complete its 

own transition to digital broadcasting. Given the importance of the digital transition to 

consumers and broadcasters alike, the design and implementation of an audio broadcast 

flag must not compromise reasonable and lawful consumer expectations, or in any 

manner impede the successful rollout of digital radio. 

 Currently, 824 digital radio stations are on the air and broadcasters have individually 

committed to upgrade more than 2,000 stations to high definition (HD) radio technology 

this year, at a cost of $100,000 per station in engineering alone. The possibilities are 

endless, and drive home the point that we need to make sure these technological 

innovations are not stopped dead in their tracks. 

NAB has been diligently working with RIAA to develop and forge a consensus on a 

digital radio copy protection system that will not interrupt the digital roll out or create 

uncertainty that would lead to a slow down of adoption rates by manufacturers, 

consumers or even broadcasters. Thus, NAB does not believe that legislation mandating 

any particular system of digital radio copy protection is necessary or appropriate at this 

time. Rather, we encourage the committee to permit the parties’ adequate time to work 

through these complicated issues. 

There is one type of protection system that has been discussed that NAB strongly 

opposes: encryption at the source. No U.S. free, over-the-air broadcast service, analog or 

digital, has ever been required to encrypt its transmissions. Any encryption requirement 

would also likely risk stalling the digital radio transition by requiring a change in the 

technical digital radio broadcasting standard of such magnitude that a year’s delay and 

likely more would be inevitable. 

Further, the issue of an appropriate digital audio copyright scheme has been further 

complicated by the ongoing lawsuit by the recording industry against XM Satellite Radio, 

Inc. The federal court in that case will be addressing the very issue that is essential to the 

development of an audio flag, i.e., what constitutes “fair use” of a copyrighted work, 

especially by consumers. Any discussion about digital audio copy protection must take 

into account Congress’ long-standing policy of protecting and preserving the public’s 

right to make home recordings of sound recordings for personal use. 

Nothing in the audio flag discussion is related to nor provides a basis to support a 

new performance right tax on broadcasters. Congress has consistently recognized that 

recording companies reap very significant promotional benefits from the exposure given 

their recordings by radio stations and that placing burdensome restrictions on 

performances could alter that relationship, to the detriment of both industries. 

 Finally, NAB believes Congress should legislate specific authority for the FCC to 

re-instate its regulations implementing a broadcast flag for digital television adopted in 

2003. Although the D.C. Circuit Court of Appeals ultimately decided that the FCC 

lacked authority to impose regulations, the policy judgments explained in the agency 

decision remain valid and should be implemented. However, NAB opposes any attempt 

to exempt broadcasters’ news or public affairs programs from the protection of the flag. 

 In sum, the deployment of digital radio is essential for terrestrial broadcasters to 

better serve their listeners and to remain competitive in today’s digital media 

marketplace. Because of the importance of a timely and successful roll out of digital 

radio, any system to protect digital content must not impede the transition. In addition, 

the issues presented by the audio flag are complicated, involve numerous stakeholders, 

including consumers and their right to “fair use.” NAB will continue to work with RIAA 

to develop a consensus on digital radio copy protection. Congress should allow this 

industry process to continue without the adoption of premature legislative mandates. 
24

Good afternoon, my name is Andrew W. Levin. I am the Executive Vice President 

and Chief Legal Officer for Clear Channel Communications, which operates 1150 local 

radio stations, 35 television stations, and 140,000 outdoor advertising displays 

worldwide. I am testifying today on behalf of the National Association of Broadcasters 

(NAB). NAB is a trade association that advocates on behalf of more than 8,300 free, 

loca4l radio and television stations and broadcast networks before Congress, the Federal 

Communications Commission and the Courts. 

Like the television broadcast industry, free radio is currently investing huge human 

and financial capital to complete its own transition to digital broadcasting. Given the 

importance of the digital transition to consumers and broadcasters alike, our first and 

foremost concern is that any content protection scheme must do no harm. By that I mean 

that the design and implementation of an audio broadcast flag must not compromise 

reasonable and lawful consumer expectations, or in any manner impede the successful 

rollout of digital radio. 

One thing I’d like to make perfectly clear at the outset: broadcasters oppose piracy 

in all shapes and forms. But in order to protect against unlawful uses, we believe that a 

well-vetted, industry-wide solution is the key to developing a system that balances the 

competing interests of everyone involved. And by everyone I mean, most especially, 

consumers who will either enjoy the great new benefits this technology can bring, or be 

left behind with fewer choices and less functionality. Too often it is consumers who are 

forgotten in the fractious bickering that takes place when new technologies are introduced 

in the marketplace. We urge this committee to allow the broadcast industry, the 

recording industry and other vital stakeholders, including consumer groups, to continue 

working toward a consensus on a digital radio copy protection scheme. 

Any System to Protect Digital Content Must Not Impede the Digital Radio Roll-Out 

 Digital audio broadcasting will enable broadcasters to better serve our local 

communities and to remain competitive in today’s ever-expanding digital media 

marketplace. But we face many challenges as we work toward a successful and timely 

transition to digital radio. If radio is not allowed to continue this roll out on a timely 

basis, and remain competitive with other providers of digital audio content, the issue of 

digital radio copyright protection will quickly become moot. And, as we learned from 

the broadcast video flag process, there is no “quick fix” technical system to provide copy 

protection for digital media. 

 The radio industry in America has begun its massive roll out of digital broadcast 

transmissions and all-new digital radio receivers. Currently, 824 digital radio stations are 

on the air. Broadcasters have individually committed to upgrade more than 2,000 

stations to high definition (HD) radio technology this year, at a cost of $100,000 per 

station for engineering alone. In fact, Clear Channel Radio itself already has more than 

238 stations offering broadcasts in HD digital quality today, and more are added every 

day. HD radio not only offers listeners crystal-clear audio, it also permits the 

broadcasting of an additional free, over-the-air program stream that will bring additional 

content (including much more local content) to the public on the radio stations’ current 

allocation of spectrum. 

In fact, the best part is that these additional streams are currently free of advertising. 

Clear Channel believes creating new, compelling formats is essential to the future of free 

radio. Hence, our company’s Research and Development Group created the Format Lab 

in 2004 to create more than 75 brand new niche formats. These exciting new program 

formats are fully customized by our local programmers to meet the specific needs of their 

communities and thus create a new radio channel in HD markets all across the country. 

This transition to digital radio will enable other great new services, including 

wireless data providing information such as song titles and artists or weather and traffic 

alerts. Even more innovative features are under development, such as program menus 
25

giving listeners instant access to a favorite drive time show, special music information, 

news, weather and traffic alerts that are not only local, but will be interoperable with a 

listener’s in-car navigation system. The possibilities are endless, and drive home the 

point that we need to make sure these technological innovations are not stopped dead in 

their tracks. Digital radio will allow broadcasters to provide tremendous new services to 

consumers, and is the only way to remain a vital and vibrant part of the media landscape 

of the future. 

 But beyond thousands of radio stations converting to digital, the HD radio 

revolution also involves the consumer electronics industry and, most importantly, 

consumers. New digital radio receivers have been launched in the marketplace across a 

range of product categories. Major radio groups are engaged in a massive marketing 

campaign to promote digital radio to consumers through the creation of the HD Digital 

Radio Alliance. And automakers and after-market manufacturers are beginning to 

produce digital radio products for car sound systems. 2006 and 2007 promise to be 

pivotal years for the roll-out of digital radio, with auto makers signing up for factoryinstalled radios, retail outlets prominently featuring many new digital radio products, and 

hundreds more broadcasters commencing digital transmissions. Given this investment by 

broadcasters and equipment manufacturers and the benefits that consumers will receive 

from a successful deployment of digital radio, it is of paramount importance that any 

copy protection mechanism not impede the digital radio rollout. 

NAB has been diligently working with RIAA to develop and forge a consensus on a 

digital radio copy protection system that will not interrupt the digital roll out or create 

uncertainty that would lead to a slow down of adoption rates by manufacturers, 

consumers or even broadcasters. Thus, NAB does not believe that legislation mandating 

any particular system of digital radio copy protection is necessary at this time. Rather, 

we encourage the committee to permit the party’s adequate time to work through these 

complicated issues. 

Encryption at the Source Should be Rejected

There is one type of protection system that has been discussed that NAB strongly 

opposes: encryption at the source. Such a mandate would be antithetical to the concept of 

free, over-the-air broadcasting. No U.S. free, over-the-air broadcast service, analog or 

digital, has ever been required to encrypt its transmissions. Any encryption requirement 

would also risk stalling the digital radio transition by requiring a change in the technical 

digital radio broadcasting standard that could delay the digital radio roll-out by more than 

one year. Unlike the video flag, encryption of DAB signals would obsolete receivers 

now in the field, as well as receivers and component parts currently in the production 

pipeline. Resulting uncertainty in the marketplace and potential loss of confidence and 

interest in digital audio broadcasting by manufacturers now ready to roll out DAB 

receivers would harm broadcasters and threaten the public’s receipt of digital radio. 

The Public’s Right to Make Private Copies of Sound Recordings for Personal Use 

Must Be Taken Into Account 

The issue of an appropriate digital audio copyright scheme has been further 

complicated by the ongoing lawsuit by the recording industry against XM Satellite Radio, 

Inc.1

 The federal court in that case will be addressing the very issue that is essential to 

the development of an audio flag, i.e., what constitutes “fair use” of a copyrighted work, 

especially by consumers. Indeed, any discussion about digital audio copy protection 

must take into account Congress’ long-standing policy of protecting and preserving the 

public’s right to make home recordings of sound recordings for personal use. The House 

Report accompanying the Sound Recording Act of 1971 stated: 

 

1 Atlantic Recording Corp., et al. v. XM Satellite Radio Inc., Docket No. 06 CV 3733 (S.D.N.Y.). 
26

HOME RECORDING 

In approving the creation of a limited copyright in sound recordings it is the 

intention of the Committee that this limited copyright not grant any broader rights 

than are accorded to other copyright proprietors under the existing title 17. 

Specifically, it is not the intention of the Committee to restrain the home recording, 

from broadcasts or from tapes or records, of recorded performances, where the 

home recording is for private use and with no purpose of reproducing or otherwise 

capitalizing commercially on it. This practice is common and unrestrained today, 

and the record producers and performers would be in no different position from that 

of the owners of copyright in recorded musical compositions over the past 20 

years.2

In the Audio Home Recording Act of 1992 (“AHRA”), Congress definitively 

addressed the issue of home recording of sound recordings and musical works, and in 

section 1008 provided an exemption for home copying. This Act was intended to be 

comprehensive, forward-looking legislation designed to end, once and for all, the 

“longstanding controversy” surrounding the home recording of prerecorded music.3

 

Indeed, then-President of RIAA, Jay Berman, described the bill that became the AHRA 

as “a generic solution that applies across the board to all forms of digital audio 

recording technology.”4

 

The lawsuit against XM raises the question of whether the recording, downloading 

and creating of a personal library of copyrighted music is a permitted “fair use” under 

copyright law. The lawsuit centers on a recently released device called the Inno, which, 

among other uses, allows consumers to record up to 50 hours of XM’s programming. 

The Inno gives users the option of disaggregating songs from XM’s airing, and storing 

them on the device for later playback. Although the songs cannot be removed from the 

Inno, the recording industry’s suit asserts that the recording and disaggregating function 

equates with illegal downloading, and is therefore a copyright violation. XM has stated 

that the device was designed to comply with fair use principles and the AHRA. The 

resolution of this lawsuit could well impact the interpretation of what constitutes fair use 

and, thus, how any digital audio copy protection system should be designed and 

implemented under copyright law. 

Congress Should Reject Efforts to Impose a Sound Recording Performance Right in 

Digital Broadcasts 

As NAB has stated numerous times, nothing in the audio flag discussion is related to 

nor provides a basis to support a new performance right tax on broadcasters. Throughout 

the history of the debate over sound recording copyrights, Congress has consistently 

recognized that recording companies reap very significant promotional benefits from the 

exposure given their recordings by radio stations and that placing burdensome restrictions 

on performances could alter that relationship, to the detriment of both industries. For that 

reason, in the 1920s and for five decades following, Congress regularly considered 

proposals to grant copyright rights in sound recordings, but repeatedly rejected such 

proposals. 

When Congress did first afford limited copyright protection to sound recordings in 

1971, it prohibited only unauthorized reproduction and distribution of records, but did not 

create a sound recording performance right. During the comprehensive revision of the 

 

2

 H. Rep. No. 92-487, 92d Congress, 1st Sess. at 7 (Sept. 22, 1971) (emphasis added). 3 See S. Rep. No. 102-294, 102d Cong., 2d Sess. 30, 51 (June 9, 1992). 4

 Hearing Before the Senate Subcommittee on Communications, S. Hrg. 102-908, Serial No. J-102-

43, at 111 (Oct. 29, 1991) (statement of Jason Berman, President of RIAA) (emphasis added). 
27

Copyright Act in 1976, Congress again considered, and rejected, granting a sound 

recording performance right. Congress continued to refuse to provide any sound 

recording performance right for another twenty years. During that time, the recording 

industry thrived, due in large measure to the promotional value of radio performances of 

their records.5

 It was not until the Digital Performance Rights in Sound Recordings Act of 1995 

(the "DPRA") that even a limited performance right in sound recordings was granted. In 

granting this limited right, Congress stated it "should do nothing to change or jeopardize 

the mutually beneficial economic relationship between the recording and traditional 

broadcasting industries."6

 Consistent with this intent, the DPRA expressly exempted 

from sound recording performance right liability non-subscription, non-interactive 

transmissions, including “non-subscription broadcast transmission[s]” – transmissions 

made by FCC licensed radio broadcasters.7

 

 In sum, the transition of traditional local radio stations from analog to digital 

presents no basis to alter fundamentally the long-standing mutually beneficial 

relationship between the recording and broadcasting industries by imposing a new 

performance right in digital broadcasts, when one does not exist in analog. 

The DTV Broadcast Flag

 NAB believes Congress should legislate specific authority for the FCC to re-instate 

its regulations implementing a broadcast flag for digital television adopted in 2003. The 

DTV broadcast flag mechanism was developed over many years of intense negotiations 

by scores of participants from a wide array of industry sectors. The purpose, concept and 

methodology of the DTV flag were then debated at the FCC in voluminous comments 

and reply comments from affected industry and consumer groups, companies and 

organizations. Although the D.C. Circuit Court of Appeals ultimately decided that the 

FCC lacked authority to impose regulations, the policy judgments explained in the 

agency decision remain valid and should be implemented. 

Further, NAB opposes any attempt to exempt local broadcasters’ news or public 

affairs programs from the protection of the flag. While broadcasters freely and widely 

distribute their news and public affairs programming, NAB believes it vitally important 

that broadcasters retain the right to protect their copyrighted news and public affairs 

programs, which typically are the main or only product of local broadcasters. 

Unauthorized internet redistribution could well eviscerate the program exclusivity of 

news or public affairs programs of stations in local markets, as well as undermine the 

original broadcast and its accompanying revenue by re-distributing programs across time 

zones, thus allowing Internet viewing before the original show is seen on local stations in 

western U.S. markets. Such results would wreak havoc on stations’ audience ratings and 

threaten its continued viability. 

Conclusion

 The deployment of digital radio is essential for terrestrial broadcasters to better serve 

their listeners and to remain competitive in today’s digital media marketplace. Because 

of the importance of a timely and successful roll out of digital radio, any system to 

protect digital content must not impede the transition. In addition, the issues presented by 

 

5 See, e.g., S. Rep. No. 93-983, at 225-26 (1974) (“The financial success of recording companies and 

artists who contract with these companies is directly related to the volume of record sales, which, in 

turn, depends in great measure on the promotion efforts of broadcasters.”). 6

 S. Rep. No. 104-129, at 15 ("1995 Senate Report"); accord, id. at 13 (Congress sought to ensure 

that extensions of copyright protection in favor of the recording industry did not "upset[] the longstanding business relationships among record producers and performers, music composers and 

publishers and broadcasters that have served all of these industries well for decades."). 7

 17 U.S.C. § 114(d)(1)(A). 
28

the audio flag are complicated, involve numerous stakeholders, including consumers and 

their right to “fair use.” NAB will continue to work with RIAA to develop a consensus 

on digital radio copy protection. Congress should allow this industry process to continue 

without the adoption of premature legislative mandates. 

 MR. UPTON. Mr. Harris, welcome. 

MR. HARRIS. Chairman Upton, Representative Markey, 

Representative Ferguson, and members of the subcommittee, thank you 

very much for having me here today to speak on the issue of protecting 

the value of the songs I write when they are broadcast over a digital radio 

service that enables consumer to keep it without buying it. First of all, 

let me say that I love the fact that new technologies exist that will allow 

consumers to listen to my music in different ways on different platforms, 

but please excuse me if I insist on being paid for it, even if it is 

consumed by you in a new and different way. 

 I have been fortunate enough to write nine number one songs by 

some of today’s biggest artists. However, the number of talented young 

songwriters who choose to dedicate their lives to music will decrease 

even more than it already has with the problem of massive piracy on the 

Internet and now XM format. Choosing to be a professional songwriter 

has become a risky business. 

 As a professional songwriter, you are your own business. There is 

no health insurance or 401K. You live on royalties from the intellectual 

property you create. When I write a song, I get a royalty when it is 

performed or when it is played on radio. I also get a royalty when a 

consumer buys a copy of it. When you go to see a concert you pay to 

listen to the music. When you buy a download you pay to keep that 

song. 

 We are here today because certain digital radio services do not want 

to pay for music. By allowing listeners to record broadcasts and build up 

entire juke boxes of music on portable devices, radio services are 

becoming download services without paying for the download license. I 

am not talking about recording off the radio. Certainly, we have all done 

that and I have no interest in seeing that disappear, but imagine my 

reaction when XM offers a service that allows someone to get an entire 

collection of my works automatically recorded, labeled, sorted, and 

transferred to them in pristine, permanent, and portable digital copies 

without seeing a cent from the sale in return. 

 This is not radio. This is Napster, Rhapsody, Yahoo or any number 

of other digital music subscription services that pay the appropriate 

license for this type of distribution. Those are the services necessary to 

make the sales we need to survive. Those services cannot compete with 

others that offer the exact same service without paying the same license. 

This is a matter of survival for the creators of music and those who 
29

provide legal downloads. Everyone can win in the digital world if we 

cooperate in creating a fair and equitable licensing system. This has 

been the tradition since the days of Cole Porter. A song is a commodity 

like any other. Attorneys are not working pro bono today. If digital 

radio can pay market rates for their technology, equipment, and legal 

services, they certainly could pay for the songs because without the 

songs there is no artist. Without the song there is no XM radio. 

 I applaud Representative Ferguson for introducing the Audio 

Broadcast Flag Licensing Act. This allows the songwriters to receive 

fair compensation for their work. We are all grateful for your insight. 

On behalf of everyone in the music community, I hope you will support 

this bill and create for all songwriters a secure digital future. Thank you. 

 [The prepared statement of Stewart Harris follows:] 

PREPARED STATEMENT OF STEWART HARRIS, SONGWRITER, ON BEHALF OF SONGWRITERS 

GUILD OF AMERICA

Chairman Upton, Representative Markey, Representative Ferguson, and Members of 

the Subcommittee, thank you very much for having me here today to speak on the issue 

of protecting the value of the songs I write -- my property -- when it is broadcast over a 

digital radio service that enables a consumer to keep it without buying it. 

First of all, let me say that I love the fact that new technologies exist that will allow 

consumers to listen to my music in different ways on different platforms. But please 

excuse me if I insist on being paid for it even if it is consumed in a new and different 

way. 

I have been fortunate enough to write several #1 songs recorded by some of the 

biggest artists. But getting there was not easy. And the number of talented young 

songwriters who choose to dedicate their lives to bringing their gifts to American 

consumers will decrease even more than it already has with the problem of massive 

piracy on the Internet if they do not get paid as the delivery of music evolves. 

Choosing to be a professional songwriter is a risky business. As a professional 

songwriter you are your own small business – in fact the smallest. You pay your own 

health insurance and your own retirement. There is no “flex plan.” What you get to live 

on are royalties from the use of what you create. From your property. When I write a 

song, I get a royalty when it is performed, or broadcast over radio. I also get royalties 

when a consumer keeps a copy of it. Different uses of my songs deserve separate 

payments. When you go see a concert you pay to listen to that performance. And when 

you buy a download you pay to keep that song. But you don’t go to iTunes and demand a 

song for free because you listened to it on the radio or at a concert. Consumers get the 

difference. Digital radio services should get the difference too. 

We are here today because certain digital radio services do not want to pay me when 

they offer a service that allows a consumer to keep my song instead of having to buy it. 

By allowing listeners to record broadcasts and build up entire jukeboxes of music on 

portable devices, radio services are becoming download services – but without paying the 

download license. 

I’m not talking about casual recording off the radio. Certainly, we’ve all done that 

and I have no interest in seeing that disappear. I love it when someone runs to the radio 

to record one of my songs that has come on. But imagine my frustration when XM offers 

a service that allows someone to get an entire collection of my works, automatically 

recorded, labeled, sorted, and transferred to them in pristine permanent and portable 
30

digital copies without seeing a cent from a sale in return. This is not radio; this is 

Napster, Rhapsody, Yahoo!, or any one of the number of other digital music subscription 

services that pay the appropriate license for this type of distribution. Those are the 

services we need to make the sales we need to survive. But those services can not 

compete with others that offer the exact same functionality without paying the same 

license. 

This is a matter of fairness – to other broadcasters, to download services, and to all 

of us making the music for those services. This is a matter of treating platforms that offer 

the same services equally. 

I applaud Representative Ferguson for introducing the Audio Broadcast Flag 

Licensing Act, that will allow consumers to continue taping of the radio, but prevent the 

automatic “collecting” of my songs with no payment to me. You are directly affecting 

my livelihood with this bill and for that I am extremely grateful. 

Seems to me that if digital radio services can pay market rates for their technology 

and equipment, they can do the same for my music. After all, without songwriters to 

write the songs, what is there to deliver over all that technology? 

I always explain it this way: suppose I was a general contractor and you provided 

me with all of the bricks I needed to build my project, and then when it came time to pay 

I said thanks and handed you back your invoice. You would probably punch me in the 

nose. While I promise there will be no punching here today, I hope you understand how I 

feel. I am not a lawyer like these other guys at the table. I’m just a songwriter. And all I 

ask is that when the lawyers for the radio services sitting here get their paychecks, they 

urge their companies to reward me for my work, too. 

On behalf of everyone in the music community, I hope you will support this bill and 

secure for all songwriters a bright digital future. 

Thank you. 

 MR. UPTON. Ms. Ziegler. 

MS. ZIEGLER. Chairman Upton, Congressman Markey, and 

members of the subcommittee, my name is Ruth Ziegler, and I am the 

Deputy General Counsel of Sirius Satellite Radio. I very much 

appreciate the opportunity to appear today on behalf of Sirius and its 

over four million subscribers. Sirius is bringing exciting technical 

innovation to American consumers, and at the same time we are opening 

enormous new opportunities for the music industries, paying the millions 

of dollars in royalties, and applying strong technological measures to 

protect their content. 

 Sirius takes great pride in presenting a breadth and depth of 

programming that is unparalleled on radio and gives our millions of 

listeners a way to discover and rediscover music and artists. In less than 

a decade, Sirius has developed infrastructure necessary to deliver a 

national satellite service and we now broadcast over 125 digital quality 

channels including 67 channels of commercial free music, plus over 60 

channels of sports, news, talk, and entertainment. Unfortunately, from 

our perspective, it appears the music industries have declared a multifront legal assault on innovation on well-settled and congressionally 

recognized consumer home reporting rights and on legislative 

agreements they made and Congress enacted. 
31

 I would first emphasize and mention that the so-called audio flag 

proposal in substance bears no resemblance to the video flag that will be 

discussed by the panel later today. The video flag seeks to prevent mass 

and discriminate redistribution of content over the Internet. Our products 

already prohibit such redistribution. Our transmissions are encrypted at 

the source. In contrast, the audio flag proposals take as their primary 

target consumer home recording, conduct long considered to be fair use. 

Moreover, the video flag proposal is the result of years of open multiindustry negotiations. Nothing similar has occurred in connection with 

the audio flag proposal to date, although the NAB and the RIAA as we 

have heard have begun discussions. 

 To be clear, the issue here today certainly with respect to satellite 

radio is not piracy or mass redistribution. It is about the very first copy a 

consumer makes in his or her own home of lawfully received broadcasts. 

Let me tell you a little bit about one of our innovative products, our 

portable hand-held device called the S50. The S50 is a traditional 

satellite receiver that allows users to listen live to our programming. It 

also allows them to save our programming for listening later while 

commuting, exercising, or simply exercising at a time when you can’t 

receive our satellite signal. The S50 also allows the user to save 

individual songs from Sirius broadcasts manually with a push of a 

button. 

 Contrary to some reports, the S50 does not provide for any kind of 

automated searches, cannot program the device to seek an individual 

song or artist. It is our firm view that this ability to record individual 

songs and to play them back in any order is nothing more than a 

convenient form of the kind of home recording from radio that the public 

has been doing lawfully for decades. In the past, Congress has 

consistently affirmed and reaffirmed the rights of Americans to make 

copies of music they receive over the air. This right was expressly 

codified in the Audio Home Recording Act of 1992, at the urging of the 

recording and the music industries. The S50 was designed to comply 

with that Act. Songs recorded from the broadcast are encrypted and 

can’t be taken off the device. 

 Royalty payments required by the Audio Home Recording Act are 

paid for each device and these royalties are shared by the recording 

industry and its artists and by the music industry and its songwriters. 

Those payments are in addition to the enormous royalties Sirius pays to 

those parties for the right to make its satellite transmissions. Moreover, 

as you may be aware, despite our rights under the Audio Home 

Recording Act, Sirius has sought good relations with these industries and 

we negotiate in good faith and resolve issues related to the S50 with 

recording companies. 
32

 Mr. Chairman and subcommittee members, Congress should not 

enact legislation unless and until the recording and music industries 

clearly identify what they seek to prevent with this legislation, carry the 

burden of demonstrating that they face a concrete and significant threat, 

and make the necessary showing that the technology exists to implement 

the solution and it will reduce the threat without unreasonably harming 

consumers’ values, rights, and innovation, and we are far from that point 

as we sit here today. The law as it now exists has been beneficial to 

consumers, innovators, and copyright owners. Consumers have rights to 

record lawfully acquired content for non-commercial purposes in their 

homes. 

 We have a legislative framework in the Audio Home Recording Act 

that protects content and consumers, compensates copyright owners, 

artists, and writers, and provides some certainty to technology 

companies. There is no justification at this time in our view to change 

the successful formula. Thank you for the opportunity to speak with you 

today. 

 [The prepared statement of Ruth A. Ziegler follows:] 

PREPARED STATEMENT OF RUTH A. ZIEGLER, DEPUTY GENERAL COUNSEL, SIRIUS 

SATELLITE RADIO, INC. 

Chairman Upton, Representative Markey and Members of the Subcommittee, my 

name is Ruth Ziegler, and I am Deputy General Counsel of Sirius Satellite Radio. I very 

much appreciate the opportunity to appear today on behalf of Sirius, its employees, 

stockholders and more than four million subscribers. 

 Technological innovation and furthering consumer enjoyment are the core of our 

business. In less than a decade, we have developed and launched the infrastructure 

necessary to deliver a national satellite service and we now broadcast over 125 digitalquality channels, including 67 channels of 100% commercial-free music, plus over 60 

channels of sports, news, talk, entertainment, traffic, weather and data to consumers 

across the country. We already pay the music and recording industries millions of dollars 

to make these performances. 

 The audio flag proposal that we discuss today is part of a multi-front legal assault by 

the recording and music industries on innovation, on well-settled and Congressionally 

recognized consumer fair-use home recording rights, on legislative agreements that they 

made (and Congress enacted), and, specifically, on satellite radio. 

 Further, the so-called audio flag proposal, in its substance, bears no resemblance to 

the video broadcast flag that also is being discussed during today’s hearing. The video 

flag seeks only to prevent mass, indiscriminate redistribution of digital broadcast 

television over the Internet. Home recording is not affected. Our products already 

prevent Internet redistribution. The audio flag proposal targets private consumer home 

recording, long considered to be fair use. 

 Congress has consistently affirmed and reaffirmed the rights of Americans to make 

copies of music that they receive over the air. This right was expressly codified in the 

Audio Home Recording Act, legislation negotiated by the recording and music publishing 

industries with the consumer electronics industry and strongly advocated by all three of 

those industries as a complete, forward-looking “generic solution that applies across the 

board to all forms of digital audio recording technology.” 
33

 Nor has a clear audio flag proposal been offered. Rather, the proponents have 

offered vague buzz words, like “disaggregation,” or have tried to redefine previously well 

understood terms, like “distribution.” However, it is reasonable to predict that any audio 

flag regime will result in the imposition of new encryption obligations on all in-home 

consumer devices designed to receive or playback radio—not only receivers, but 

complete stereo systems to which those receivers are attached, recording devices, 

playback devices, and even speakers. 

 It is not appropriate to leave the hard public policy decisions to the FCC, which is 

not an agency that traditionally has concerned itself with copyright law or with consumer 

fair use rights. Congress should not enact audio flag legislation unless and until the 

recording and music industries (i) clearly identify what they seek to prevent, (ii) carry the 

burden of demonstrating that they are facing a concrete and significant threat that 

outweighs the threat to consumer fair use rights and innovation, (iii) propose a clear, 

definite solution and (iv) make the necessary showing that technology exists to 

implement the solution and can be applied in a way that is likely to reduce the threat 

without unreasonably harming consumers and innovation. We are far from that point 

today. 

The law as it now exists has been beneficial to consumers, innovation, and copyright 

owners. There is no justification for changing this successful recipe. 

Chairman Upton, Representative Markey and Members of the Subcommittee, my 

name is Ruth Ziegler, and I am Deputy General Counsel of Sirius Satellite Radio. I very 

much appreciate the opportunity to appear today on behalf of Sirius, its employees, 

stockholders and more than four million subscribers. I am testifying on behalf of Sirius 

as a company that is bringing exciting technical innovation to American consumers. We 

are doing that while at the same time opening enormous new opportunities for the music 

and recording industries, paying them millions of dollars in royalties and, in addition, 

applying strong technological measures to protect their content. Sirius takes great pride 

in presenting our millions of listeners with a breadth and depth of musical programming 

that is unparalleled on radio and in providing a means for our listeners to discover—and 

rediscover—music and artists. Such a rich and diverse offering of musical choice 

benefits all segments of the music industry – today and in the future. 

 Technological innovation and furthering consumer enjoyment are the core of our 

business. In less than a decade, we have developed and launched the infrastructure 

necessary to deliver a national satellite service and we now broadcast over 125 digitalquality channels, including 67 channels of 100% commercial-free music, plus over 60 

channels of sports, news, talk, entertainment, traffic, weather and data to consumers 

across the country. 

 Unfortunately, the recording and music industries have declared a multi-front legal 

assault on innovation, on well-settled and Congressionally recognized consumer fair-use 

home recording rights, on legislative agreements that they made (and Congress enacted) 

in the past, and, quite frankly, specifically, on satellite radio. In addition to lawsuits and 

threats of lawsuits, this anti-consumer, anti-competitive front includes advocacy of three 

different proposed bills. 

 In addition to the misnamed audio flag proposal that is the subject of this hearing, 

the equally misnamed “PERFORM” Act and important sections of the Section 115 

Reform Act, each seeks to outlaw long-accepted and permitted consumer recording, for 

which the music and recording industries are already paid a royalty. Each seeks to give 

the recording and music industries veto power over technological innovation. Each 

would renege on the Audio Home Recording Act deal, made by the recording and music 

industries and sold to Congress in 1992 as “a generic solution that applies across the 

board to all forms of digital audio recording technology.” And on the promise that 
34

“Congress will not be in the position after enactment of this bill of having to enact 

subsequent bills to provide protection for new forms of digital audio recording 

technologies.”1

 It is equally important to emphasize that the so-called audio broadcast flag proposal, 

in its substance, bears no resemblance to the video broadcast flag that also is being 

discussed during today’s hearing. As I will discuss in greater detail, the video flag seeks 

only to prevent mass, indiscriminate redistribution of digital television broadcasts over 

the Internet. Our products already prevent all Internet redistribution of SIRIUS 

broadcasts. In contrast, the audio flag proposals take several ill-defined forms, each of 

which uses recording and music industry buzz words like “disaggregation” or 

“distribution,” and all of which have as their primary target consumer home recording; 

conduct long considered to be fair use. The battlefield here today is not piracy or mass 

redistribution, it is the very first copy a consumer makes in their own home of lawfully 

received broadcasts. 

Sirius and Innovation

 Sirius has built its business on innovation. The company began with the invention 

of a new, miniature antenna technology that, for the first time, permitted the receipt of 

low power satellite radio transmissions in vehicles. In the late 1990s, the company paid 

almost $90 million to the U.S. Treasury for spectrum rights auctioned by the Federal 

Communications Commission. Since then, our company has invested nearly $3 billion in 

the complex infrastructure necessary to run a state-of-the-art satellite radio company – 

from satellites to transmitters to innovative new receivers to the programming of our 

channels by our skilled and creative employees. 

 There is no question that Sirius is changing the way people listen to music, and for 

that matter -- sports, news, and entertainment. Operating from our corporate 

headquarters in New York City's Rockefeller Center, Sirius broadcasts over 125 digitalquality channels, including 67 channels of 100% commercial-free music, plus over 60 

channels of sports, news, talk, entertainment, traffic, weather and data. 

 SIRIUS' music channels cover nearly every genre - from heavy metal and hip-hop to 

country, dance, jazz, Latin, classical and beyond. The music on each channel is selected, 

arranged, prepared and hosted by SIRIUS staff, all of whom are recognized experts in 

their music fields, along with contributing musicians and performers who lend their talent 

and expertise. This ensures that SIRIUS subscribers can regularly listen to unparalleled 

music selections, insights and perspectives. 

This unique listening experience is available to subscribers from coast-to-coast in 

the United States. Our service can be used in cars, trucks, RVs, homes, offices, stores, 

and even outdoors. Boaters around the country, and up to 200 miles offshore, can also 

hear Sirius. For a monthly subscription fee, Sirius provides premium quality 

programming delivered by three dedicated satellites orbiting in special orbits to maximize 

their time directly over the United States. 

The nerve center for SIRIUS operations is at Avenue of the Americas and 49th 

Street in New York City, where the company’s state-of-the art studios are located. 

Artists including Burt Bacharach, The Beach Boys, Emmylou Harris, Dolly Parton, YoYo Ma, Phoebe Snow, The White Stripes, Mary J. Blige, Sting and Randy Travis have 

visited the studios for performances and interviews. 

 

1 Audio Home Recording Act of 1991: Hearing Before the Subcomm. on Patents, Copyrights, and 

Trademarks of the S. Comm. on the Judiciary, S. Hrg. 102-908, 102nd Cong., 2d Sess. 111 (Oct. 29, 

1991) (statement of Jason S. Berman, President, Recording Industry Association of America). Mr. 

Berman also argued “[m]oreover, enactment of this legislation will ratify the whole process of 

negotiation and compromise that Congress encouraged us to undertake.” Id. at 120. There could be 

nothing more deleterious to that process than allowing the recording industry to renege on the 

legislative deal that it made. 
35

Sirius and Innovative Consumer Recording

In addition, responding to the demands of our subscribers, Sirius has developed a 

portable, hand-held device called the S50. The S50 is an intelligent leap forward in 

Satellite Radio technology providing integration of both live content and up to 50 hours 

of time shifted content storage. The device provides our subscribers with the ability to 

enjoy their favorite music—on a time-shifted basis—while traveling, exercising, 

commuting or simply relaxing. 

The S50 includes several different capabilities. While attached to its docking station 

and connected antenna, the S50 receives live SIRIUS broadcasts and includes a shortterm buffer that allows the listener to pause and replay those broadcasts. 

 Apart from the replay buffer, most of the recording performed by the S50 consists of 

recording the subscriber’s three most-listened to channels, while the device is tuned to 

one of the channels, so that the subscriber can have the full SIRIUS experience while 

traveling or otherwise away from his or her docking station. These channels are 

refreshed on a first-in/first-out basis. 

In addition, the subscriber can program timed blocks of programming to record and 

save. These blocks cannot be broken into individual songs or programs. The device also 

allows the subscriber to upload his or her own collection of digital music files, including 

MP3 files, from a home computer. 

Finally, the device allows the user to save individual songs from SIRIUS broadcasts, 

while they are playing. The device includes a one-touch record function, to make 

convenient the kind of home recording that the public has been doing for decades—the 

kind of recording recognized by the Audio Home Recording Act to be wholly lawful. It 

is this function that has drawn the attention and ire of the recording and music industries.2

The S50 was designed to comply with the Audio Home Recording Act. Songs recorded 

from SIRIUS broadcasts are encrypted and cannot be removed from the device. In other 

words, there is no threat of Internet redistribution, let alone “mass, indiscriminate Internet 

redistribution.” 

And, of course, the royalty payments required by the AHRA are made for each 

device. These royalties are shared, under a statutory formula, by the recording industry 

and its artists and by the music industry and its songwriters. Those payments are in 

addition to the enormous royalties SIRIUS already pays to the recording industry for the 

right to make public performances of the record companies’ sound recordings and to 

ASCAP, BMI and SESAC for the right to make public performances of musical works. 

Moreover, as I am sure you have seen in the press, despite its rights under the AHRA, 

SIRIUS has sought good relations with the recording and music industries. Thus, we have 

negotiated in good faith over the S50, and reached an agreement with the record 

companies. 

The Audio Flag Proposals Advocated by the Recording and Music Industries Seek 

To Renege on the AHRA and Ban Conduct Long Permitted to the Public.

 Congress has consistently affirmed and reaffirmed the rights of Americans to make 

copies of music that they receive over the air. This right was expressly codified in the 

Audio Home Recording Act, legislation negotiated by the recording and music publishing 

industries with the consumer electronics industry and strongly advocated by all three of 

those industries as a complete, forward-looking resolution of home recording issues. 

 When Congress first granted copyright protection to sound recordings in the 1970’s, 

it confirmed consumers’ historical right to record radio transmissions: 

 

2

 Contrary to what some may have heard, the S50 contains no automated search function. You 

cannot program the device to seek individual songs or artists, period. 
36

In approving the creation of a limited copyright in sound recordings it is the 

intention of the Committee that this limited copyright not grant any broader rights 

than are accorded to other copyright proprietors under the existing title 17. 

Specifically, it is not the intention of the Committee to restrain the home recording, 

from broadcasts or from tapes or records, of recorded performances, where the 

home recording is for private use and with no purpose of reproducing or otherwise 

capitalizing commercially on it. This practice is common and unrestrained today, 

and the record producers and performers would be in no different position from that 

of the owners of copyright in recorded musical compositions over the past 20 

years.3

 

 Since that Act, Congress has expanded the sound recording right only sparingly, in 

careful response to specific and well-documented threats, all the while reiterating the 

importance of preserving the public’s right to make home copies for personal use. When 

Congress enacted the record rental amendments,4

 for example, it declined to make any 

statements or take any actions regarding home taping, instead referring to its previous 

statements in the Sound Recording Act house report, quoted above, and stating that “no 

precedential value” with regard to home taping should be given to the fact of the record 

rental amendment’s passage.5 

 Congress squarely addressed the issue of home recording of sound recordings and 

musical works in the Audio Home Recording Act of 1992. The bill was negotiated by 

the recording industry, music publishing industry and consumer electronics industry, and 

was strongly advocated by all three industries as the definitive solution to the home 

recording issue.6

 

 The Senate Report, which discusses the bill in the form negotiated by the recording, 

music and consumer electronics industries, notes that “the copyright law implications of 

private audio recording for noncommercial use have been the subject of longstanding 

debate” and states “[a] central purpose of the [AHRA] is conclusively to resolve this 

debate, both in the analog and digital areas, thereby creating an atmosphere of certainty to 

pave the way for the development and availability to consumers of new digital recording 

technologies and new musical recordings.”7

 

 The legislative history is not ambiguous. The Senate Report opens its discussion of 

the bill with the assertion that “[t]he purpose of S.1623 is to ensure the right of 

consumers to make analog or digital audio recordings of copyrighted music for their 

private noncommercial use.”8 This specifically includes “the making of [a copy] by a 

consumer for use in his or her home car, or portable tape player, or for a family member.” 

All are “protected by the prohibition against copyright infringement actions contained in” 

the AHRA.9

 

 The same sentiments were expressed in the House of Representatives. As one cosponsor in the House explained, the Audio Home Recording Act was enacted to 

make it clear that noncommercial taping of music by consumers is not a violation of 

copyright law. The debate over home taping of records goes back to 1970 when 

Congress first extended copyright protection for records but this legislation will end 

 

3

 House Judiciary Committee Report No. 92-487, 92nd Cong., 1st Sess. at 7 (1971). 

4

 Record Rental Amendment of 1984, Pub. L. No. 98-450, 98 Stat. 1727 (1984). 

5 See H.R. Rep. 98-987 (Aug. 31, 1984). 6 See, e.g., S. Rep. 102-294, 102nd Cong., 2nd Sess. 33 (June 9, 1992). 7

 S. Rep. No. 102-294, 102nd Cong., 2nd Sess. 51 (June 9, 1992) (emphasis added). 8

 S. Rep. 102-294, 102nd Cong., 2nd Sess. 30 (June 9, 1992); id. at 51 (“key purpose of [AHRA] is to 

insure the right of consumers to make analog or digital recordings of copyrighted music for private, 

noncommercial use”). 

9 Id. at 51. 
37

the 22-year-old debate and make it clear that home taping does not constitute 

copyright infringement.10 

The provision of the AHRA providing the exemption for home copying, section 1008, 

was considered “one of the cornerstones of the bill” because it 

removes the legal cloud over home copying of prerecorded music in the most 

proconsumer way possible: It gives consumers a complete exemption for 

noncommercial home copying of both digital and analog music, even though the 

royalty obligations under the bill apply only to digitally formatted music. No longer 

will consumers be branded copyright pirates for making a tape for their car or for 

their children.11 

 The Ninth Circuit confirmed this conclusion in Recording Industry Association of 

America v. Diamond Multimedia Systems, Inc., 180 F.3d 1072 (9th Cir. 1999). There, the 

court found that the purpose of the AHRA “is to ensure the right of consumers to make 

analog or digital audio recordings of copyrighted music for their private, noncommercial 

use.”12 Even in holding that the Rio device itself did not meet the statutory requirements 

of the AHRA, the Diamond court noted that “the Rio’s operation is entirely consistent 

with the Act’s main purpose – the facilitation of personal use.”13

 Further, the AHRA includes an explicit technology mandate applicable to home 

recording—the obligation to use the Serial Copy Management System on digital audio 

recording devices. 17 U.S.C. § 1002. In imposing this mandate, Congress evaluated the 

competing interests and concluded that first generation copies made by digital audio 

recording devices should be permissible, and that technology should only act to stop 

second-generation copies. 17 U.S.C. § 1001(11) (definition of “serial copying”). As the 

Senate Report described SCMS, “[o]ne can make an unlimited number of copies from the 

original, but one cannot copy the copy.”14

 The AHRA explicitly addressed home recordings made from digital transmissions, 

such as terrestrial and satellite radio. The key definition of “digital audio recording 

device” includes devices with a recording function that has, as its primary purpose, the 

making of digital copies “from a transmission.”15 Moreover, the Act contains rules 

governing the encoding of SCMS in digital transmissions intended to protect 

broadcasters. 17 U.S.C. § 1002(e). The Senate Report eliminates any doubt about 

Congress’s (and the recording and music industries’) intent, explaining that SCMS sets 

 

10 138 Cong. Rec. H9033 (daily ed., Sept. 22, 1992)(Statement of Rep. Moorhead). 

11 138 Cong. Rec. H9029, H9033 (daily ed., Sept. 22, 1992)( Statement of Rep. Hughes, emphasis 

added). 

12 Diamond, 180 F.3d at 1079, quoting S. Rep. No. 102-294 at 86. 13 Id. at 179. 14 S. Rep. 102-294 at 36. Congress chose SCMS as a pre-approved technology because “SCMS has 

been subjected to extensive review by the affected industries and relevant international scientific 

standards bodies,” H.R. Rep. No. 102-873 Part 1 at 19. Further, Congress explicitly granted 

regulatory authority to the Secretary of Commerce, not the FCC, to approve technological protection 

measures other than SCMS, subject to the requirement that they have the same functional 

characteristics of SCMS. 17 U.S.C. § 1002(a)(3). 

15 Although the Act uses a set of nested definitions that are somewhat complex, it defines a “digital 

audio recording device” as a device “the digital recording function of which is designed or marketed 

for the primary purpose of making a digital audio copied recording for private use.” 17 U.S.C. 

§1001(3). A “digital audio copied recording” is, in turn,” a “reproduction in a digital recording 

format of a digital musical recording, whether that reproduction is made directly from another digital 

musical recording or indirectly from a transmission.” Id., §1001(1) (emphasis added). A “digital 

musical recording,” in turn, is material object in which are fixed, in a digital recording format, only 

sounds, and material, statements, or instructions incidental to those fixed sounds, if any.” 
38

forth rules governing the receipt of digital broadcasts, and, that “as a result, digital 

broadcast and cable transmissions generally will be recordable by consumers, but second 

generation digital copies will not be able to be made from those first generation copies.”16

Any Resemblance Between the Audio Flag and Video Flag Proposals Are 

Superficial and Misleading

 The audio flag advocated by the recording and music industries bears no 

resemblance to the video flag proposal being considered at this hearing, either in 

substance or in the process by which it was developed. 

 The video flag proposal is the result of years of multi-industry negotiations, held 

under the auspices of the Copy Protection Technical Working Group, which resulted in a 

detailed report. While there was not consensus on all issues, there was broad consensus 

on many, including the issue of the scope of appropriate technological protections. That 

scope is carefully limited to preventing mass, indiscriminate redistribution of digital 

broadcast television over the Internet. Nothing similar, to date, has occurred in 

connection with the recording industry’s audio flag proposal. 

 To the contrary, the audio flag proposal and the restrictions it seeks to impose, have 

never been clearly defined by the recording industry. The proposal has been circulated in 

various formulations, which have consistently been wrapped in vague buzz words, as the 

recording industry attempts to make it look like the video flag. Audio flag language 

advocated by the recording and music industries has included either undefined, novel 

terms such as “disaggregation” (apparently intended to prohibit consumers from 

recording programs and listening in an order of their choosing to the recorded songs) or 

terms that the recording industry and music industry are seeking to redefine, such as 

“distribution,” which they now argue includes home recording. Nor have any candidate 

technologies been identified to effectuate the flag regime. 

 Indeed, there is no evidence whatsoever that either satellite or terrestrial radio 

broadcasts are meaningful sources of content used for mass, indiscriminate Internet 

redistribution. To the contrary, broadcasts are a poor source of content for redistribution. 

They include music segues and DJ chatter. By comparison, the recording industry itself 

provides millions of unprotected copies of better sources. They are called CDs and 

authorized digital downloads that may be copied to CD. If there is any redistribution 

problem, the cause is the content sold by the record companies themselves. 

Perhaps most perplexing is the inclusion of satellite radio industry in a proposed audio 

flag regime at all. The whole purpose of a broadcast audio flag regime is to provide for 

encryption of content transmitted in the clear. Satellite radio content is fully encrypted at 

the source, providing the same level of protection against redistribution as the protection 

provided by the video flag adopted by the FCC. Particularly as applied to the satellite 

radioindustry, the audio flag makes no sense. 

The Audio Flag Proposals Threaten Innovation and Would Establish the Music and 

Recording Industries as Gatekeepers Over Technology

 Without a clear proposal from the recording and music industries it is difficult to 

assess the full potential impact of the flag regime they seek. However, some of the likely 

effects of audio flag proposals include: 

• the imposition of new encryption obligations on all in-home consumer devices 

designed to receive or playback radio. The rules would likely affect not only 

receivers, but complete stereo systems to which those receivers are attached, 

recording devices, playback devices, and even speakers. Depending on the 

scope of the prohibitions, existing systems on which consumers have invested 

 

16 S. Rep. No. 102-294 at 66. 
39

thousands of dollars could be cut off from radio and satellite radio – including 

systems that do not facilitate any home recording. 

• The FCC, or even the copyright owners themselves, would have authority to 

determine the scope of consumer fair use rights and to determine which 

technologies should be permitted to be made available in the marketplace. 

Such a shift of power is not warranted and is certain to only heighten the lack 

of certainty for consumer electronics companies and deprive consumers of 

innovative new products and product features. 

• Innovative devices will need to license technologies mandated by the FCC. If 

the radio flag regime ultimately resembles the video regime, those licenses 

will include further restrictions on products that will be subject to approval 

from the recording and music industries. Any device that does not conform to 

the regime would need specific approval from the recording and music 

industries before it is sold. And if the major copyright owners don’t like a 

feature, don’t like the manufacturer, or otherwise seek leverage against 

satellite radio, consumers will be deprived of the device and potentially 

desirable features. That is too much power for the copyright holders and too 

high a price for consumers. 

Mr. Chairman and Subcommittee members, it is not enough to leave the hard 

decisions to the FCC, which is not an agency that traditionally has concerned itself with 

copyright law or with consumer fair use rights. Congress should not enact audio flag 

legislation unless and until the recording and music industries (i) clearly identify what 

they seek to prevent, (ii) carry the burden of demonstrating that they are facing a concrete 

and significant threat that outweighs the threat to consumer fair use rights and innovation, 

(iii) propose a clear, definite solution and (iv) make the necessary showing that 

technology exists to implement the solution and can be applied in a way that is likely to 

reduce the threat without unreasonably harming consumers and innovation. We are far 

from that point as we sit here today. 

The law as it now exists has been beneficial to consumers, innovation, and copyright 

owners. Consumers have clear rights with respect to what they can do with lawfully 

acquired content for non-commercial purposes within the privacy of their own homes and 

we have a legislative framework—in the AHRA—that protects content, permits 

consumers to make first generation copies, compensates copyright owners, artists and 

writers, and provides some certainty to technology companies. There is no justification 

to change this successful recipe. 

Conclusion

 Thank you again for the opportunity to present our views on this important issue. 

We look forward to working with the Subcommittee members and staff to help ensure 

that traditional consumer home recording rights are protected, technological innovation is 

encouraged and, just as importantly, the creative works of musicians of every genre 

are exposed to the millions of people who have discovered and rediscovered their artistic 

contributions on satellite radio. 

 MR. UPTON. Thank you, all of you. At this point we will take 

questions of the panel, each with 5 minutes up here. 

 MR. SHIMKUS. Mr. Chairman, would you make sure you ask the 

panelists to make sure their microphones are moved a little closer. 

 MR. UPTON. Yeah, if you would put the mics a little closer. That 

happens when you get older, right? I guess the first question I have, Mr. 
40

Harris, is I would like to know your nine number one songs. That was 

the first thing that I thought. 

 MR. HARRIS. Well, it has been over a 25-year period. You can tell 

that I have earned the gray hair along the way. I started out, my first 

number one song was by a one-hit wonder in 1979, a guy named Leon 

Evert from South Carolina. He had a number one on CBS Records. And 

it was great for his career and it was very good for mine. It was my first 

number one. He had the Hurricane tour and the Hurricane bus and the 

Hurricane van. And then it all kind of disappeared after that. But my 

next one was Mickey Gilley’s “Lonely Nights.” That was in 1982. 1988 

was Waylon Jennings’ last number one. It was “Rose in Paradise.” 

Then I had three on a young guy from Georgia that I went down and 

wrote with. His name is Travis Tritt. I had “I’m Going to Be 

Somebody,” “Dream Off to Dream,” “Can I Trust You With My Heart,” 

those three. And seven other, actually nine other, cuts on his album 

during that period of time. Wynonna Judd on her first solo album, I have 

had what has now become her signature record called “No One Else on 

Earth.” And, let’s see, Little Texas, “You and Forever and Me.” 

 MR. UPTON. Mr. Barton would like that one, I know. 

 MR. HARRIS. The band did very well, and John Berry’s “Standing 

on the Edge of Goodbye.” My latest one was a top ten record in 2000 

and topped out in 2002, “Angels in Waiting,” Tammy Cochran. I also 

co-wrote the lyrics to America’s Funniest Home Videos. So that was-- 

 MR. UPTON. Actually I knew that one. That is one I did know. 

 MR. HARRIS. It has been primarily in the country field but other 

artists, I have worked out of London, and I worked with Neil Diamond 

when he was there on his last album. 

 MR. UPTON. Ms. Ziegler, in your testimony you indicated you didn’t 

see a need for legislation, and I guess one of the--as I wrestle with this 

issue and as I hear all parties, one of the things that has been pointed out 

is that these devices in fact could do these automatic searches so you 

could get all of Bruce Springstein’s albums, et cetera, come up with all 

these different things. In fact, you indicated that your devices don’t 

allow you to do that, is that right? 

 MS. ZIEGLER. That is right. There is no-- 

 MR. UPTON. Is there some intent down the road that they will be 

able to have that technology? 

 MS. ZIEGLER. We have no present intent to. 

 MR. UPTON. That is another question for Mr. Shapiro, who is in the 

audience, one that is on panel two. Mr. Levin, you talked about one of 

the things that I felt proud to participate in with Mr. Tauzin, Mr. Barton, 

and others, Mr. Stearns, Mr. Dingell, and Mr. Markey. We had a number 

of these different roundtable discussions, you might have even been in 
41

those rooms for a couple of those discussions as we tried to see a private 

solution to this versus a government-mandated one. 

 In your remarks, you in essence suggested that those be given 

another chance to give you the time to try and negotiate those. Tell us 

what is the progress of these discussions. We have heard about--our 

subcommittee has not been involved like we were once before but where 

are things? 

 MR. LEVIN. Well, I think we have made very productive progress so 

far. I think, obviously the issues are extremely complex. And I was 

there during the time that you are recalling where all of these different 

stakeholders in the video flag got together and they spent hours and 

hours and in fact years actually negotiating out those very complicated 

issues. And that is precisely, I think, that this kind of thing-- 

 MR. UPTON. One of the reasons, as I recall, was we didn’t want to 

go back with the DCR, the data versus-- 

 MR. LEVIN. Exactly. Exactly. I think we were very interested in 

making sure that everybody’s rights were balanced properly and that the 

ultimate technology could provide as many benefits as possible to 

consumers while at the same time protecting the copyright owners. And 

I think that worked very well, but I think a key distinction between the 

video flag and what is happening now with the audio flag proposals is 

that the video flag, as some people mentioned, only dealt with 

indiscriminate redistribution over the Internet. That was the primary 

thing that everybody was concerned about over those main years, and it 

took an awfully long time to figure out just what technology ought to be 

used in order to be able to prevent that. 

 With the audio flag it is much, much broader. It is more vague. It is 

overly broad. And we are frankly concerned that it impinges on 

consumer’s reasonable expectations and lawful uses to a point that not 

only hurts consumers, but then in turn obviously affects our business 

model. 

 MR. UPTON. Mr. Bainwol, do you want to comment on the 

negotiations? 

 MR. BAINWOL. Sure. Sure. We began the negotiations in March. 

They have been fruitful. We have fundamentally-- 

 MR. UPTON. They haven’t or have? 

 MR. BAINWOL. They have been fruitful. We have fundamentally 

agreed on the proposition that cherry picking is wrong, ought to be dealt 

with, and that is aggregation of content and without ever listening to the 

radio choose the songs you want to keep. You scroll down the data and 

say I will keep this one, that one is Julie Roberts, and that Toby Keith, 

and this 50 Cent, never listening. You got them stored in your digital 

jukebox. The conversations have been very good. But the point I think 
42

that is crucial here is that we really don’t have market leverage. Getting 

to yes--we can get to a conversation, it took 3 years to get to the point 

where we had folks willing to sit down and that was because Members of 

the Congress said you need to. 

 But getting over the hump to the point where we say solve the 

problem, that is an entirely different challenge and we are not going to 

get there unless we got something that forces action. Now there is one 

other critical point here. Because we don’t have the performance right, 

we don’t have the leverage to move them, but the other difference with 

the video guys is this. By the time they show up on TV, they have 

already been in theater. They have got multiple windows of revenue. 

We sell music. That is what we do. We derive the bulk of our ability to 

reinvest in new art from the sale of music. It is that very window that 

has been compromised here. We’ve got to protect that window or else 

the venture capital that goes into creativity will dry up. 

 MR. UPTON. Mr. Boucher. 

 MR. BOUCHER. Thank you, Mr. Chairman, and I want to say thank 

you to our witnesses for their informative testimony this afternoon. Mr. 

Levin, a quick question for you. In my opening statement I mentioned 

the rather unique position that iBiquity has with regard to high definition 

radio, having developed the technology and holding today the intellectual 

property it licenses to the HD stations. Would you agree that if someday 

a technical standard for an audio flag for HD radio was created that 

iBiquity through that unique position could implement it without 

Congressional action? 

 MR. LEVIN. I think you are absolutely right on the money. 

 MR. BOUCHER. And so we should defer to the private sector entirely 

with regard to this matter, first to create the flag and the technical 

standard to assure that it is effective, and then secondly through iBiquity 

for its implementation. 

 MR. LEVIN. I think that works, and at the end of the day if there is a 

need to come to Congress for implementing legislation, I think the 

parties can do that without any problem whatsoever. I think we need to 

come to a solution though before we come to Congress. 

 MR. BOUCHER. Thank you, Mr. Levin. You are just a great witness. 

I applaud that answer. 

 MR. LEVIN. You are a good questioner. 

 MR. BOUCHER. And we got along this well when he was on the 

staff. 

 MR. LEVIN. It is called good staff work, right? 

 MR. BOUCHER. Always good staff work. Mr. Bainwol, I noted with 

interest your discussion about the progress of the negotiations, but those 

negotiations really only include your industry and the broadcasters. It is 
43

my understanding that the device manufacturers who are in my mind a 

critical part of this are not at the table. Why do you not take this 

conversation over to the well-established industry forum, which is the 

Copyright Protection Technical Working Group, a long-standing 

organization that has been in existence 10 years. It meets every month. 

Per my information, you haven’t been there in 7 years. Why not get the 

device manufacturers involved in this conversation, because even if you 

and the broadcasters come to an agreement, if the device manufacturers 

say, well, this doesn’t work for the following 15 technical reasons you 

really haven’t accomplished very much. So why not take this 

conversation over to the Copyright Technical--well anyway. 

 MR. BAINWOL. The short answer to the last question is because 

CPTWG has evidenced no interest in solving this problem. That is a 

place for this problem to die, not to be solved. 

 MR. BOUCHER. Well, they are the ones who created the broadcast 

flag. 

 MR. BAINWOL. Well, that is because there was marketplace pressure 

to make that happen. They had no choice. 

 MR. BOUCHER. They also created the content protection DRM for 

DVDs. I mean these are the people who have a great track record in 

making this happen. You haven’t even been there to ask them to take it 

up. 

 MR. BAINWOL. I have been at the RIAA for almost 3 years, and 

about 3 years ago, I went to the FCC to say we have got a problem here 

with the emerging roll out of HD radio. And I was hit on one side by the 

broadcasters and hit on the other side by the manufacturers. One said 

premature, no demonstration of harm, the other one said too late. And 

that is the quicksand that we find ourselves in because we don’t have 

market pressure, we don’t have a market right to force people to the 

table, not just to the table but to get the settlement. We have got a real 

challenge. 

 Because of Congressional interest we now have a very fruitful 

conversation going on with the broadcasters. It is with the broadcasters 

because that was the request from the Senate. 

 MR. BOUCHER. Let me ask you a simple question. I understand 

maybe Senator Inouye had asked you to sit down with the broadcasters. 

Let me ask you to sit down with the device manufacturers. I think to 

make this conversation really effective you are going to need the people 

involved in it who at the end of the day are going to have to pass on 

whether or not the technical standard really works and you need their 

input as that is developed. 

 So a simple question. If the Copyright Protection Technical 

Working Group, I got it right that time, expressed a willingness and 
44

interest in addressing the subject, would you be interested in taking this 

conversation to them? 

 MR. BAINWOL. If they provide you an assurance and us an assurance 

that they mean business, that they are prepared to get ES, that the scope 

of the problem is not simply with distribution but also this aggregation, 

then we will talk to anybody. But let me make one additional point. 

iBiquity has said to us this is not terribly complicated stuff. This is radio 

science, not rocket science. What we need help with here is somebody to 

tell us to do it because we are not here to do it on our own. We need an 

instruction either from Congress or from the FCC. 

 MR. BOUCHER. Well, my time is up so let me briefly say I 

appreciate your expression of willingness to involve the device 

manufacturers in this discussion, your expression of willingness under 

rather carefully stated conditions to have that conversation with the 

group that can make the technical difference. And for my part, I would 

certainly encourage all of the interested parties to work toward an 

agreement on this. I had some rather critical comments of the proposals 

put forward so far, but I think it is in the public interest for us to develop 

the DRM technology and then have that implemented. That provides the 

kinds of protections that you are looking for. 

 And so I share with you the overall goal. I just think legislation is 

not needed to get us there, perhaps encouraging all the parties to work 

together is, and your expression of willingness to expand this 

conversation, I think is a helpful step in that direction. Thank you, Mr. 

Chairman. 

 MR. UPTON. Mr. Barton. 

 CHAIRMAN BARTON. Thank you, Mr. Chairman. I am really 

stunned that Mr. Boucher made a mistake in one of his questions. You 

know, I think I know the reason. He got married about a month ago. He 

used to be a very boring guy who had nothing else to do but study for 

these hearings. Now he has got other outside interests and he is a much 

more fun guy, but he slips up every now and then. He has lost focus 

which is a good thing. 

 You know, between Mr. Harris and myself, we have nine number 

one records. 

 MR. UPTON. You had the big Texas hit, right, not the little one. 

 CHAIRMAN BARTON. If we get this panel right and we get this 

hearing right between Mr. Harris and I, we may have one law passed that 

solves this problem. So my only real question, I am a co-sponsor with 

Mr. Boucher of the fair use bill, and it would seem to me that technology 

is converging with political ability and that we might be able to solve 

two or three issues at one time. We could do a broadcast flag, a video 

flag, and get some fair use language that help our consumers, so my real 
45

question would--I guess start with Mr. Bainwol. Do you think that is 

possible? I have seen some technology that was presented to me by the 

Disney folks that would seem to think we could solve all these problems 

in one boot, in one swoop. Do you agree or disagree? 

 MR. BAINWOL. The movie folks have now moved in a direction in 

the recording industry where we have for many years allowed people to 

make multiple copies of our product. So your fundamental fair use 

concern is something that we have accommodated for a long time. We 

have concerns about Mr. Boucher’s bill, H.R. 1201, that we fear will 

have some serious consequences. If the objective is really fair use for the 

recording side, that is being satisfied. 

 And let me make one other point about fair use. We often hear about 

it from the standpoint of just purely what the consumer is entitled to. 

The fourth standard in the fair use sequence of four standards is this: 

You have to consider the effect of the use upon the potential market for 

or value of the copyrighted work. And the absence of that consideration 

blows a hole in the digital marketplace, and whatever we do we need to 

protect that and that is precisely why we are here at the table, because the 

fundamental value of our copyrighted work, the genius of Mr. Harris, is 

going to be compromised because there won’t be any basis for 

reinvestment. 

 What you have going on in society is the iPodization of America. It 

is all about this device. If you get music from iTunes you pay for it. If 

you get music from Creative Zone you pay for it. If you get it from 

satellite radio you don’t pay for it. You store it. It says, if you made a 

purchase of my tunes, Mr. Harris is not being compensated and neither 

are we. That is fundamentally wrong. That violates our standard and 

fair use. That needs to be dealt with. 

 CHAIRMAN BARTON. Well, if we can--for the first time in about 4 

years, I really see that there is a possible convergence. I want to protect 

Mr. Harris, and I want to protect the content providers. They are the 

geniuses that create the product that you said we consume, but I also 

want to protect the consumer so that you can make a few copies for 

personal use, and the technology appears to be there. Now if we can just 

get the political parties to agree, I think we have got a deal here that we 

can work on pretty quickly, and I think Mr. Ferguson’s bill, with some 

tweaking to make sure that Mr. Boucher and I are happy, may be the way 

to do it. So with that, Mr. Chairman, I yield back. 

 MR. UPTON. Mr. Gonzalez. 

 MR. GONZALEZ. Thank you very much, Mr. Chairman. I alluded in 

my opening statement regarding technology, and I am trying to get this 

all straight and have some working knowledge, and you all can help me 
46

with this. Ms. Ziegler, if I want to subscribe to Sirius, what does it cost 

me? 

 MS. ZIEGLER. $12.95 a month. 

 MR. GONZALEZ. Now I want--is it the S50? I am not sure. What is 

the feature that allows me to basically store, save? 

 MS. ZIEGLER. The S50 permits you to--you can listen live but you 

can also record blocks of recording and you can also, if you are listening 

live and listening to the recording, save an individual song. 

 MR. GONZALEZ. And how much does that cost me in addition to my 

$13 a month, whatever? 

 MS. ZIEGLER. It costs you $12.95 a month, the same subscription 

price. 

 MR. GONZALEZ. It is a feature that is included in my standard fee. 

In other words, it is not something that is added. It is not a premium that 

you charge extra for? 

 MS. ZIEGLER. The device itself, the recording device itself, will cost 

you more. The service-- 

 MR. GONZALEZ. So let us say the recording device is $100 or 

whatever it is but to have the S50 feature it is now much more? 

 MS. ZIEGLER. The S50 feature to the consumer is still $12.95. 

 MR. GONZALEZ. Okay. I guess what I am trying to figure out is if I 

am going to have to pay extra in order to have the capability to save and 

store music, right? I am trying to figure out how much extra would I be 

paying. 

 MS. ZIEGLER. It is the cost of the device itself. 

 MR. GONZALEZ. The device itself. 

 MS. ZIEGLER. So you could buy a very low end receiver and not 

have-- 

 MR. GONZALEZ. Now let me ask you, in the marketplace where do I 

acquire this device? 

 MS. ZIEGLER. You can buy it at various retailers, I mean most large 

retailers. 

 MR. GONZALEZ. Because the question really comes I think in the 

old days of fair use Charlie Gonzalez goes out there and gets his cassette, 

double cassette or whatever it is, and, you transfer it yourself. What has 

happened out there in the marketplace especially with Sirius and such the 

feature that you are providing now which is pretty unique, and I guess we 

get prepared for expanding that capability for the reasons that digital or 

HD radio allows that enhancement and the ability to do these things, 

quality and such, you are making the distinction though that what you 

really are guarding against really is just the big boogey man of 

redistribution. 
47

 You hang your whole argument that you should be able to do this 

because it is fair use. I am recording it for my own use. And there is no 

danger or anything, nothing is happening by way of redistribution 

because it is not allowed. The technology that you utilize is not available 

for that use. 

 MS. ZIEGLER. Right. We have brought out the S50 in compliance 

on the Audio Home Recording Act of 1992, and that framework we 

believe provided a framework that codifies fair use and is in compliance 

with that statute. 

 MR. GONZALEZ. And, Mr. Bainwol, what is your argument on that 

particular, I guess, understanding of the present law and where we are 

going? 

 MR. BAINWOL. Let me do two cuts of that. One is, if you take 500 

songs and you get them on your iPod or you get them from Zen, then Mr. 

Harris is compensated. If you get those same 500 songs, you put them 

into your radio receiver, which is where you store your music, you 

import your other stuff, this is now your hub. XM calls it the mother 

ship. It is not a pod. It is the mother ship. So you’ve got the same 500 

songs and not a dime is going to the creator for that distribution for the 

right to have ownership of that product. 

 MR. GONZALEZ. This technology is just allowing me an enhanced 

way of having better quality, greater quantity, but it is still fair use. 

 MR. BAINWOL. It is not fair use because fair use also requires that 

the creator be compensated. We have no problem with time shifting. 

We have no problem with manual recording. But when you can replicate 

the iTunes experience and not pay for it, that will devastate an industry 

and that will destroy creativity. 

 MS. ZIEGLER. Can I comment? 

 MR. GONZALEZ. Yes, please. 

 MS. ZIEGLER. Thank you. One part of the Audio Home Recording 

Act is that we need to pay a royalty on each device and that-- 

 MR. BAINWOL. And may I comment on that? 

 MR. GONZALEZ. I am going to give you a chance. I got about 42 

seconds. You take 20 of those seconds. 

 MS. ZIEGLER. Okay. I just want to say the artists, the recording 

labels, as well as the songwriters, are compensated through that royalty 

so to say that there is no compensation, there is. 

 MR. BAINWOL. The Audio Home Recording Act pays the industry 

about $2 million a year. Today in America there will be 2 million 

downloads or more that will pay the industry about that today, so the 

Audio Home Recording Act will starve, literally starve, creativity. It is 

not the right answer. It is for serial copying. It is not for replicating the 

iTunes or the Rhapsody experience. 
48

 MR. GONZALEZ. My time is up. Thank you all very much. 

 MR. HARRIS. Mr. Chairman, could I comment on that? 

 MR. UPTON. Go ahead. Why don’t you comment, Mr. Harris, and 

then we will go to Mr. Shimkus. 

 MR. HARRIS. I would just like to comment on the fact that by 

someone being able to download in this iTunes mode, and we all have 

them in the music industry, for instance. But the traditional way has 

been performance royalties and mechanical royalties. This completely 

takes any kind of mechanical--mechanical is based on the sale of a 

record. Every time my song was played on the radio, I got a royalty. 

Every time that someone bought a CD, I got a royalty. Songwriters 

make pennies on the dollar. We always have, even since 1928 when they 

created--1923, excuse me, when they created the intellectual copyright 

protection laws. 

 There is no protection in this way when someone can cherry pick, 

download a particular one. There is no need for them to go out and 

either buy it on iTunes or to buy the CD itself. There is no reason for 

them to do that because they get it free. I have been up here before not 

testifying in a committee, this is all new to me, but lobbying with the 

National Songwriters Association and the Guild, but since 1997, I and a 

lot of others, but I, in particular, because my accountant gave me the 

information, I lost about 28 percent of my income. At my age that is 

disturbing. 

 If this goes unchecked without the flag, I could lose another 50 

percent on top of that, so that would make it nearly impossible for me to 

stay in the industry. And I have done well. There are others that will 

just have to go get jobs. 

 MR. UPTON. Mr. Shimkus. 

 MR. SHIMKUS. Thank you. And I want to encourage Mr. Gonzalez 

and anybody else, this line of questioning and this discussion that Mr. 

Gonzalez was addressing was just what we need to hear and address and 

talk about. One thing I learned in one of the private industry junkets to 

the CEA convention was how artists really drive technology 

advancements, and I think it was the year they rolled out the MP3, and it 

was people wanted music and it drove the technology. 

 You all have a symbiotic relationship that if a part of the chain 

breaks everyone is going to get penalized and that is why I think we are 

really working hard to try to come to some agreement and understanding. 

But this S50 issue is at the heart of I think Mr. Gonzalez’s questions and 

a lot of our questions. Mr. Harris in his opening statement talked about 

how people can get his songs without compensation--he is not--through 

your product all his songs are stored on this device without compensation 

to him other than that we just found out through the device. There is 
49

what you would say minimal compensation provided by the device itself 

but per song there is not, is that--Mr. Harris, is that what you said, and, 

Ms. Ziegler, is that what I interpreted right, and then, Mr. Bainwol, am I 

following this debate correctly? 

 MR. HARRIS. That is correct. 

 MR. SHIMKUS. Do you agree? 

 MR. HARRIS. Basically, I would not receive any compensation with 

the exception of the performance, which I think has already been 

negotiated. But it is when a user--and I understand consumers. We have 

had radio for years. We all thought it was free. I thought it was free 

when I got in the music business. I wanted to be in the business when I 

was a young man because I wanted to be a star. Now that I understand 

the industry, that music was always paid for. 

 The threat to us now is that it could go out on the airways en masse. 

If we had pennies on the dollar as we have always had, it would be the 

greatest thing. This is what all songwriters have said. It would be the 

greatest thing in the world because then we would be able to reach some 

Third World countries. We would be able to reach countries that 

necessarily we were not able to reach before. However, it is such in the 

psyche of the young generation to be able to download for free. It took 

us years to get Napster to pay. 

 And every day, it is going on right now. It is going on. I am losing 

money as we are sitting here because somewhere, somebody is loving 

something that I did, hearing it, downloading it on a device, and I receive 

no compensation. 

 MR. SHIMKUS. Okay. I don’t want to cut you off but I want to make 

sure we got a chance. Ms. Ziegler. 

 MS. ZIEGLER. We want Mr. Harris to be paid, and we do pay. We 

pay two times with Sirius satellite radio. We pay performance royalties 

that were negotiated and millions of dollars for all of our transmissions. 

In addition, we pay with respect to the S50 Audio Home Recording Act 

royalty. That goes directly to artists as well as to songwriters. In fact-- 

 MR. SHIMKUS. Mr. Harris, how do you see that money? 

 MS. ZIEGLER. We haven’t gone through the year yet so it is working 

its way through the copyright. 

 MR. SHIMKUS. Okay, so he hasn’t received any money yet, the 

device portion. 

 MR. HARRIS. I was given some numbers today just for me to look at 

and they got $150 million for baseball, $50 million for Oprah, $600 

million for Howard Stern, $3 billion for technology. These were just 

numbers that I had, but am I correct, Mr. Bainwol, in that ours is 

somewhere around $2 million? 

 MR. BAINWOL. On the audio side, that is about right. 
50

 MR. HARRIS. Yes. 

 MR. SHIMKUS. And we don’t want to beat up on Ms. Ziegler 

because you are here and you are making a good faith effort to work on 

this. Other folks aren’t here. 

 MS. ZIEGLER. Just to be clear. Performance royalties are in the 

millions. It is a part of a confidential deal, an arm’s length transaction 5 

years ago with the label, so that is not a $2 million deal. The Audio 

Home Recording Act fees, frankly, the S50 just came out and that is just 

entering the market and those fees are just beginning to be paid. But we 

do pay. We pay twice. In addition to that, obviously we did sit down 

and then do a deal with the recording industry. 

 MR. SHIMKUS. Mr. Bainwol, and then I will-- 

 MR. BAINWOL. You have an anomaly in law. We get paid for 

distributions on phones like the one that went off, on iPods and on 

subscription. We don’t get paid for the distribution. We get paid for the 

performance, for the broadcast. We don’t get paid for distribution when 

it comes to satellite. S50 has negotiated a private deal, but as a matter of 

policy, there is a competitive breakdown in the legal structure here, and 

what radio is doing is exploiting the loophole in the law and that is what 

needs to be fixed. 

 MR. SHIMKUS. That is why you guys need to fix it because if you 

ask us to, it is going to be a disaster. 

 MR. BAINWOL. But we can’t get them to the table to get to yes. 

That is the challenge. 

 MR. SHIMKUS. I yield back. 

 MR. UPTON. Mr. Gordon. 

 MR. GORDON. Thank you, Mr. Chairman. Earlier, Mr. Gonzalez 

mentioned that it took 25 years to find a consensus and a compromise for 

the Wright amendment. What he didn’t mention is it was phased in 

during over an additional 9 years. So Mr. Harris, despite his pleas, 

probably can survive that but the next generation of writers can’t. And 

when the music stops that is the foundation of the entire industry and the 

whole ball of wax collapses, and that is why I think we really have to 

keep that in mind. 

 Following up on this most recent sort of trial log, I guess, that was 

going on, Mr. Bainwol, what is different about the satellite services, new 

devices, and consumers taping off the radio as they have done in the past 

and why is it different than say a TiVo device? 

 MR. BAINWOL. What they used to do in terms of manual recording 

we are fine with and moving that into the digital age is fine. It is 

different than TiVo. We are fine with TiVo time shifting. What we are 

not fine with is this aggregation of a program. When you take out 

individual songs on an automatic basis, without ever listening to the 
51

radio you have fundamentally transformed what radio is. That is not oldfashioned recording off the record. That is replicating either the iTunes 

experience or the subscription model and just avoiding payment to the 

creator. 

 MR. GORDON. And do you believe that the Audio Home Recording 

Act of 1992 was intended for digital audio tape players only? 

 MR. BAINWOL. It was certainly not intended to cover what we are 

seeing today. 1992 was before the iBiquity of the Internet, it was before 

broadband surge. Napster had never been conceived. Peer to Peer was a 

notion that meant something entirely different. Satellite radio was 

nowhere near rollout, if it had been conceived. It was a totally different 

world. 

 You can have lawyers debate whether or not the AHRA covers it, 

and one lawyer will say yes, another lawyer will say no because we don’t 

think you threaded the needle just right. But as a matter of just basic 

common sense, as a matter of policy, should you be able to get away 

with this modest fee to allow you to replicate an iTunes model and a 

subscription model that is the foundation for reinvestment and creativity, 

the answer is obviously no. 

 MR. GORDON. Anyone want to have a comment to that? 

 MS. ZIEGLER. I have a few comments. As to the Audio Home 

Recording Act, yes, you can debate it both ways but I think that there 

were many statements made at the time it was entered into. First of all, it 

was a private negotiation that was then brought to Congress. It was a 

deal that was cut. The recording industry was at the table, quotes at the 

time it is a generic solution that applies across the board to all forms of 

digital audio recording technology. In fact, what has happened is we 

have finally exploited that. A technology company has come up and 

exploited a particular legislative framework, and we get to market and 

suddenly we hear, oh, that wasn’t enough money. That is not enough 

money. That is not the right framework. We need something new. It is 

in fact the framework that is there today and it is the framework that we 

relied upon and we do pay under it. 

 The other thing that I would just like to discuss for a moment is what 

we do in fact-- 

 MR. GORDON. Keep it back to this subject. Okay. Mr. Bainwol, 

would you want to have any rebuttal to that? 

 MR. BAINWOL. Yeah, just a simple point. If you get 1,000 songs, 

5,000 songs--1,000 songs, let us say, you put 1,000 songs on radio, you 

have not paid a dime for the distribution for the right for ownership. You 

do it from iTunes. You do. There is a basic question of equity here and 

no amount of fancy kind of legal footwork gets you through that 

fundamental point of equity. We have got to deal with the reality here 
52

that you got a wave of new devices coming that we are perfectly happy 

to license, but we are not happy to have our shirt taken off our back. 

 Sirius went nuts when people were able to go and tape Howard 

Stern, so you could access Howard Stern without being a Sirius 

subscriber. That is how we feel. It is the same thing. We are having our 

content taken from us without there being a compensation for it. That is 

absurd. And legal niceties, legal loopholes are interesting legal 

arguments, but they miss the fundamental point of equity here. Creators 

are being victimized here, and we need to deal with it. 

 MR. GORDON. I yield back the balance of my time. 

 MR. UPTON. Mr. Ferguson. 

 MR. FERGUSON. Thanks, Mr. Chairman. Mr. Levin, welcome back. 

 MR. LEVIN. Thank you. 

 MR. FERGUSON. I wasn’t here when you were here, but you 

obviously have a lot of fans up here so welcome back. 

 MR. LEVIN. I hope I can keep them. 

 MR. FERGUSON. My bill, the Audio Broadcast Flag Licensing Act, 

requires that the implementation of a broadcast flag, not encryption at the 

source, would be privately done through licensing agreements. It cannot 

make obsolete legacy devices or slow down the roll out of HD radio. In 

addition, we have taken great pains to make sure that fair use is 

protected. These elements seem to comport with the requirements that 

you lay out in your testimony. Why do you still oppose my bill? 

 MR. LEVIN. Well, I think that there are a number of things in your 

bill that obviously will stimulate discussion in a positive, constructive 

way. 

 MR. FERGUSON. They seem to have. 

 MR. LEVIN. Yes. There are a few things though that we are 

concerned about. Some of the terms are undefined. You give the FCC 

authority to implement rules, technology prescriptions without really 

setting out the parameters of what consumers and broadcasters should be 

entitled to do. You talk about the fair use, laying out the fair use 

principles that mandate that they must be complied with, but it is very 

unclear what they are right now. 

 So I think my main position is that it is simply premature. We are 

waiting on a court case, the XM court case, to determine what the court 

believes fair use principles ought to be in this context. And I think, you 

know, I did want to just mention that Mr. Bainwol’s point about the last 

prong of the fair use requirements that are in law that the content owners 

be considered in the equation is extremely important but that just 

reinforces how difficult the debate is. 
53

 If it was all one-sided, it would be easy. When we bring in both 

sides that is when it gets harder so to legislate that would be a very 

difficult thing. 

 MR. FERGUSON. And you have talked about how we need more 

time, the private sector should handle this. 

 MR. LEVIN. Right. 

 MR. FERGUSON. It seems that the negotiations didn’t really get 

started from what it sounds like. It didn’t really get started until there 

was a threat of legislation. iBiquity, my understanding is that iBiquity 

itself which holds the patent on this technology to begin with, they have 

asserted all along that they need legislation or regulation requiring them 

to include content protection so it just seems to me this might be exactly 

how these negotiations can move forward. Mr. Bainwol, you said 

before, when were the negotiations first begun? 

 MR. BAINWOL. The actual face to face contact didn’t begin until 

March of this year, but it took us 40 months to get there. 

 MR. FERGUSON. You said ‘03, did you say ‘03? 

 MR. BAINWOL. We started certainly since I began in ‘03 and then 

effort began at that point and it was fruitless. 

 MR. FERGUSON. Mr. Boucher and others have said we’ve got to let 

the marketplace or we’ve got to let these negotiations happen. Delay 

helps your side, Mr. Levin, it advantages your side and disadvantages the 

other side. 

 MR. LEVIN. I am not sure I would agree with that. 

 MR. FERGUSON. Talking about bringing new people to the 

negotiating table, all that is real nice, but the fact remains that today there 

are devices on the market that allow the abuses that we are all talking 

about that we think are a bad thing. 

 MR. LEVIN. Well, Mr. Ferguson, I do want to make the point that 

there are no HD radio devices today that can record a single song. The 

HD radios that are being sold at Radio Shack and Tweeter and that are in 

the production pipeline do not record, and they don’t go further to permit 

people to search for particular songs or do all the things that Mr. Bainwol 

is concerned about. So I don’t really think there is a problem today with 

free radio. 

 MR. FERGUSON. I am very short on time. Do you want to comment 

on that? 

 MR. BAINWOL. I am just curious whether Andy would be willing to 

commit to a date certain for closure on this-- 

 MR. FERGUSON. Mr. Levin, how long do you need? 

 MR. LEVIN. It would be nice to be able to predict how long we need 

to do it. One of the problems is that we-- 
54

 MR. FERGUSON. I am willing to give you more time. Do you need a 

year? 

 MR. LEVIN. I can’t say precisely how long, but I do know that there 

are all the affected parties at the table. We can’t agree to put mandates 

on device manufacturers without them sitting at the table. I mean it is 

just not-- 

 MR. FERGUSON. What if they won’t come to the table? We are 

hearing that they won’t even come to the table. I think it is a lame 

argument to say we really need to negotiate this out. We really just need 

everybody at the table, and as soon as everybody is at the table we can 

figure this out. If some people are not going to come to the table, that 

doesn’t cut it to me. 

 MR. LEVIN. Well, I think the recording industry would prefer that 

the consumer electronics manufacturers-- 

 MR. FERGUSON. Chairman Barton wanted me to ask you if we 

schedule a markup on my bill next week will everybody be at the table 

tomorrow? 

 MR. LEVIN. I would hope so. 

 MR. UPTON. I am in Michigan, I just want you to know. Are you 

coming to Michigan? 

 MR. LEVIN. Mr. Ferguson, we have asked for CEA to be represented 

at the table ever since day one-- 

 MR. FERGUSON. My time is up, Mr. Levin. I suspect that until we 

start marking up this legislation or have some other direction as Senator 

Inouye has kind of directed this, that frankly it is to your advantage to 

not talk. It is to your advantage to delay. It is to your advantage to say, 

yeah, we should really figure this out and we are going to do it in due 

time. But until there is a threat of you being forced to do it, my guess is, 

and this is just a hunch, is not going to happen. 

 MR. LEVIN. Well, I would like the opportunity to talk to you more 

about it because-- 

 MR. FERGUSON. I would be delighted to. 

 MR. LEVIN. --I disagree with that. 

 MR. FERGUSON. It sounds like you want to talk a lot but it sounds 

like we don’t want to solve the problem. 

 MR. LEVIN. We do. We are content owners ourselves. It is our 

interest to have content protection. 

 MR. FERGUSON. I am all for talking but I am also for action, and it 

seems like the action isn’t going to happen. 

 MR. LEVIN. Well, if Mr. Bainwol’s laundry list wasn’t this big, we 

might get something done. 

 MR. BAINWOL. Our laundry list is not that big. I mean the default 

position right now is for artists and creators to be disadvantaged and that 
55

is not fair, and it is the default position that we have no market leverage. 

We need to force action. It isn’t that complicated. iBiquity has said to 

us this is simple. Just give us an instruction to do it. So we made it 

sound like it is building a ship to go to the moon, but it is not. All you 

have to decide is what those user rules are going to be and then the 

implementation of it is very simple. And we are not that far apart on 

usage rules, and I am happy for Gary to be involved in that discussion. 

He had to be involved, but we need to know that Gary and CEA will say 

to the question will you support getting to yes, will you deal with the 

cherry picking problem. Broadcasters have said yes. The satellite folks, 

it is not clear. And I haven’t heard anything near that from CEA. 

 MR. FERGUSON. Mr. Chairman, my time is up. I think this is a very 

constructive conversation going on. I thank you and I thank Chairman 

Barton. 

 MR. UPTON. I am just glad Mr. Shapiro came early to the hearing so 

that he will be prepared to answer that question when his time comes up 

shortly. Mr. Inslee. 

 MR. INSLEE. Thank you. A small technical question. Mr. Levin, 

you said there is nothing in the market that can record these songs. Mr. 

Bainwol made reference to the mother ship. Are you guys talking about 

the same thing? 

 MR. LEVIN. No. I think he is talking about XM satellite radio. 

 MR. BAINWOL. Yeah, that is correct. You have the satellite devices 

in the market. Sirius has a device which has been licensed. XM has a 

device which has not been licensed. They refer to that as the mother 

ship. It is not a pod, it is the mother ship. The HD rollout is behind that. 

They are comparable issues. It is radio morphing into a distribution 

service to compete with iTunes and compete with Rhapsody. It is part of 

this competition. 

 MR. INSLEE. So, Mr. Bainwol, in regard to that let us assume a 

consumer gets the mother ship, would want to use it as a replacement 

iPod essentially is what you are talking about and how they use that 

infinite number of replays for personal use. What is your position on 

compensation in that situation? 

 MR. BAINWOL. What you call personal use here is replicating 

purchases. When you can automatically cherry pick--this is not a manual 

record. This is taking a block of programming, scrolling, not live, 

scrolling through the meta data and saying I want this Toby Keith, I want 

this Travis Tritt, and that is going to get Mr. Harris, I want this 50 Cent 

and I want this whatever. That is replicating a sale that is draining our 

one window of revenue and it is a challenge for us. 

 MR. INSLEE. Any other comments? 
56

 MR. LEVIN. That can be done today. That can be done today by 

recording off the radio. That can be done today by buying a CD in a 

record store and making a copy of that and copying that onto your iPod. 

You can develop a library of music on your iPod through other means. 

And it appears that they don’t want to be able to-- 

 MR. BAINWOL. So let us just let it get worse. Let us go ahead and-- 

 MR. LEVIN. Well, but you don’t have any copy protection in the 

audio CDs that you sell. You know that this is a tough nut to crack 

because we saw with the Sony experience that as soon as they started to 

put copy protections in the Sony audio CDs there was a huge consumer 

backlash and they backed up. But there is nothing to stop record labels 

from protecting their own content and, instead, we feel that they are 

trying to shift the burden to us along with the expense, and in effect 

dampen the appetite for consumers for our products. 

 MR. BAINWOL. So the consumer is left with a choice. I want to get 

these ten songs. Do I go to iTunes and make a purchase or do I go to the 

mother ship and just simply tag them, keep them, and not pay a dime to 

the creator. A rational consumer will do exactly that, but it is certainly 

not fair. 

 MR. INSLEE. Yes. 

 MR. HARRIS. If I may, they really have referred to this. I didn’t 

realize it wasn’t licensed yet, but if this is the mother ship if you would, 

please, when it comes time to look at this bill, just imagine the 

songwriter as the wind beneath the wings because that is basically what 

this is. We will lose tremendously if some kind of agreement, and we are 

all for it as creators because, frankly, we would like to get on with the 

business of creating for the future, and this could be to our advantage 

too. But we do need a license that will guarantee us that when this is 

downloaded on satellite we have the equivalent of a sale. 

 MR. INSLEE. Did you write Wind Beneath My Wings, Mr. Harris? 

 MR. HARRIS. No, sir. I have two good friends that wrote that song 

and I have told them never to do that without me again. 

 MR. INSLEE. I think the rule is if they are your friends it is not a 

copyright violation so we will let that one go. 

 MR. HARRIS. It is not in this context. 

 MR. INSLEE. Let me ask generally to each of you to describe 

philosophical, however you want to describe this, who should have the 

economic burden of protecting intellectual property here between the 

three points of the stool. How should that be looked at? Should we look 

at ease, should we look at it as fairness so that everybody has got the 

same share? Give me your best arguments that somebody else should do 

it, I guess is what I am asking. 

 MR. BAINWOL. Do you want to start? 
57

 MS. ZIEGLER. I think that it is a shared burden but certainly we as 

content distributors take very seriously protection of the content that we 

put out over our broadcast as well as what is into our product. Our 

content is all encrypted at the source. It is decrypted when it comes into 

the receiver. So we take that very seriously and we don’t believe that we 

have any significant issues with respect to piracy with our content. 

 MR. HARRIS. I am going to respectfully bow out on that and just say 

that we trust that something can be done for this and that the songwriter 

would appreciate it very much. 

 MR. LEVIN. I think it is--I agree with Ms. Ziegler that it is a shared 

burden. The radio industry has content that it produces that is 

proprietary, and we also have an interest in protecting that. But at the 

same time, Congress and the courts have for decades and decades and 

decades recognized the rights of consumers to record free over the air 

broadcasts, and so we want to make sure that we do nothing to tramp on 

those rights. 

 MR. BAINWOL. We think it is a shared burden, but we think that Mr. 

Ferguson’s bill hits the nail just perfectly. What it does is it says release 

these devices, don’t impede rollout, go ahead and let consumers do what 

they do in a customary way in terms of home recording. Just don’t put 

the burden on the creator to allow this automatic cherry picking until 

there is a deal. 

 MR. INSLEE. Thank you. 

 MR. UPTON. Mrs. Cubin. 

 MRS. CUBIN. Thank you, Mr. Chairman. I think I have kind of 

made up my mind as to which way it ought to go as far as whether or not 

the artist should be compensated in this situation more than they are, but 

when Andy was talking and you were talking, Mr. Bainwol, Andy said 

you have a laundry list about this long and you said you didn’t. So 

besides the issue of the payment, what are the other items that are on 

your laundry list? 

 MR. BAINWOL. It isn’t even really the payment. The question that I 

think Andy was referring to is the question of what are the usage rules. 

And that is something I think our folks have met on a number of times 

and my sense of those discussions is that they are very productive and 

these usage rules are very close, that we do need to bring in CEA and 

others, but I think the usage piece of this is not that complicated. I think 

it is a false premise to suggest that this is just an enormous challenge. It 

isn’t. You agree on what they ought to be and the fundamental point is 

don’t allow automatic cherry picking which is something that the 

broadcasters have already said I think is a foundation of the argument, 

and then you implement it with play. 
58

 MR. LEVIN. I think the conversations have also been very 

productive, and while we agree in concept to the notion of no cherry 

picking there are nuances to that that still need to be worked out. I think 

that the recording industry’s view at this point is fairly broad with regard 

to what that means and it would in effect turn back the clock on what is 

already lawfully used by consumers. So to the extent we were to agree 

to all of the recording industry’s demands, the consumer is the one that 

gets left out in the cold. 

 So I think that we really need to take a hard look at just what 

consumers are entitled to and what their expectations are before we agree 

on usage rules that get memorialized in any kind of statute or regulation. 

 MRS. CUBIN. Well, it is certainly those users that elect me to my seat 

but I don’t think that their expectations are that hard-working people 

shouldn’t be paid for what they do. And it just seems-- 

 MR. LEVIN. Absolutely. I am sorry. I didn’t mean to interrupt you. 

But we are talking about things like making a recording off the radio and 

being able to retransmit that recording through a home network and be 

interoperable with stereo equipment, existing home audio equipment that 

is in the house. 

 MRS. CUBIN. But that isn’t what is costing the artists the money. 

 MR. BAINWOL. And those are issues we can solve. 

 MRS. CUBIN. Pardon me? 

 MR. BAINWOL. Those are issues we can solve. That is not the 

problem. And the Ferguson bill says this, that the implementation shall 

not be consistent with customer use of broadcast content by consumers, 

period. 

 MR. LEVIN. But that is customary as of the date it is written. 

 MR. BAINWOL. But what we are trying to do is preserve customary 

practice. This isn’t about winding back the clock. This is about 

devastating the property right of the creator. 

 MR. LEVIN. But it is also about making sure the consumers can take 

advantage of the new capabilities and technology that comes down the 

road. 

 MR. BAINWOL. But if technology in effect-- 

 MRS. CUBIN. Well, my time is just-- 

 MR. BAINWOL. I am sorry. 

 MRS. CUBIN. Well, we are just going in a circle. And so I think that 

if it comes to this committee, this committee, I think that they will 

probably take some kind of action and it is kind of the motto of 

Congress, if it is worth doing, it is worth over-doing, so that is not good. 

So I hope that it can be worked out, but if it can’t be, I think, we are 

ready to get to work and fix it. So I thank you, Mr. Chairman. 

 MR. UPTON. Mr. Engel. 
59

 MR. ENGEL. Thank you, Mr. Chairman. I have been listening to the 

back and forth, and this has been very helpful to me because rarely do we 

have hearings where you actually have the back and forth, people 

answering other people, and it really presents both side of the issue, and, 

frankly, both sides make good points. I mean for me, and I think for all 

of us really, it is the issue of fairness because we want people to be 

compensated. We don’t want them to feel they are having this stolen 

from them. 

 On the other hand, we want to do what is best for the consumer as 

well, and so I think it is kind of a delicate balance. Mr. Levin, let me ask 

you, first of all, how does it feel to be on that side of the table? 

 MR. LEVIN. It was a lot comfortable up there, more comfortable. 

 MR. ENGEL. I testified at another committee about 2 weeks ago, and 

I didn’t realize how daunting it was to face all of us. I want to ask you 

how long did it take for consensus of the video industry to develop 

before a workable video flag standard was set, how many years was that? 

 MR. LEVIN. About six. 

 MR. ENGEL. About six. To develop an audio flag, do you think it 

will take 6 years? 

 MR. LEVIN. No, I don’t. I don’t think that the issues are as 

complicated as they were, and I think that based on the work of the video 

flag, if we narrow down the issues to be akin to what was addressed in 

the video flag rules, I think we could do it tomorrow. The video flag, 

don’t forget that is just about indiscriminate redistribution over the 

Internet, that is what the film industry was concerned about, 

broadcasters, all the content owners at the time. Now it seems that the 

concerns have expanded beyond that. 

 If we were back on that, we would say as broadcasters absolutely, we 

will put a flag in and we will protect indiscriminate redistribution 

tomorrow. It is agreeing on all these other usage rules. 

 MR. ENGEL. So you have been saying that we need more time to 

work this out, and the other side has been saying, yeah, but you can’t 

work it out forever because you keep talking and talking. What do you 

think is a reasonable goal? What are we talking about here in terms of 

working on it, another year, another 6 months, another 2 years? What do 

you think is a reasonable or would be a reasonable time? 

 MR. LEVIN. I would say that we have got two groups. We have got 

the Audio Flag Task Force that looks at the policy, what the policies are 

to be, and then we have another group, the Technical Implementation 

Working Group, that looks at whether or not it is technologically feasible 

to do what the policy agreements have been. I think if we get the right 

folks on both of those task forces that we should be able to do it in 6 to 
60

12 months. We should be able to have some kind of an agreement nailed 

down. I am hopeful that it could be sooner than that but I hate to be late. 

 MR. ENGEL. So in your view Congress shouldn’t rush into anything 

because you think that in a reasonable amount of time-- 

 MR. LEVIN. Well, that is right. And there is another thing, Mr. 

Engel, we don’t know how the marketplace is going to react to HD radio. 

We don’t believe that recording off the radio or certainly what the 

recording industry is calling downloads is the killer application in HD 

radio. That is not why we are developing it. We think the killer 

application of HD radio is the improved quality and the improved 

programming that we are going to be doing. You have to remember 

radio is different. It is not a pristine copy or recording that is made of a 

CD or a download from Sirius or iTunes or anyone else. You know, you 

still have the DJ banter. You still have the looping over of one song into 

another. You have a lot of things that are endemic just to the radio 

industry. That is the kind of entertainment promotion that we do on 

radio. So I don’t think that it is going to displace sales, but we don’t 

know yet, and I think that is really the key. 

 MR. ENGEL. Mr. Bainwol, you seem to be jumping out of your skin. 

 MR. BAINWOL. Yeah, I am, through my suit. If it is not the killer ap, 

then why not go with the Ferguson bill which gives us plenty of time to 

work out this aggregation place, this so-called non-killer ap. Why is it so 

vital that they have to have that for the rollout? 

 MR. LEVIN. Well, for one thing what you all want to do is to--really 

you say you are not against the TiVo-like device but in actuality it does 

become a prohibition on a TiVo-like device because it is not just about 

prohibiting--it is not just allowing time shifting. What it would do when 

you say disaggregating with TiVo you are effectually disaggregating. 

 MR. BAINWOL. You are not watching the monologue when you tape 

Leno. 

 MR. LEVIN. You are not watching the monologue. You are 

specifying which programs you want to watch, and those are the ones 

that come up on your TiVo. And, frankly, history has shown that when 

people can do that it hasn’t displaced sales, it has increased sales. You 

go into any video store or Best Buy and all you see are lines. They can’t 

keep enough Family Guy on the shelf or Simpsons or other serial 

programs that are on television. These sales have skyrocketed despite 

TiVo. 

 MR. ENGEL. Mr. Bainwol, let me ask you. Isn’t a lot of this 

compensation too? The Audio Home Recording Act, that would not be 

at the jurisdiction of this committee from what I understand. Isn’t a lot 

of things you are talking about a need to from your point of view 
61

renegotiate fees under that Act? Would that not be better than you to do 

it in legislation here? 

 MR. BAINWOL. Some of our satellite friends said this is about 

leverage in the discussion about the performance rate, and that is a totally 

separate question and that is a flawed diversionary argument. This is 

simply about our one window, our primary window, of deriving the 

revenue which would reinvest new creativity which is sales. The XM 

device slogan, it is the mother ship, it is not a pod. What that means is 

you get content for free. They are giving away our stuff in order to make 

their service more viable. And I understand why, but it is not fair. 

 MR. ENGEL. But is it not true, and I would just like to give Ms. 

Ziegler a chance to respond to that, but is it not true if I purchase Sirius 

and I record stuff on the S50 and then I cancel, I lose that stuff, don’t I? 

 MS. ZIEGLER. Currently, no, only because we couldn’t technically 

implement it. It is true, all the XM devices and any future device, it 

should be tied to the subscription, you are correct. I would like to make 

that distinction. Mr. Bainwol talks about it as a download, it is the same 

thing. We are much more. We are recording of a transmission that 

comes from radio. When you get a download, what you want, when you 

want it. It is available to you. When you record off the radio it is 

whatever the DJs happen to play, whatever you are there to listen to. The 

quality is just simply not the same. 

 There is DJ talk over their segways. There are things in there. It is a 

much, much lower rate. But most fundamentally what you are talking 

about, you can only listen to it on one device. If you owned a download 

you could listen to it on your computer, you could burn it on to CD, you 

could listen to it on another device. The ownership right is very, very 

limited. It is just the ability to listen to it on one particular device, and as 

you are saying it is tied to the subscription. So to talk about it as a 

complete replacement for a download those are two different 

experiences, two different products. 

 MR. UPTON. The gentleman’s time has expired. Mr. Bass. 

 MR. BASS. Thank you, Mr. Chairman. I just have one question. I 

have been following this discussion, and as others have said I think this 

is very informative. Can somebody clarify for the record the difference 

if there is a work out on the video flag but not the audio. If the video 

flag is okay, what is wrong with the audio flag as well, and why is it 

different? 

 MR. LEVIN. The video flag, and it is a great question, the video flag 

prohibits indiscriminate redistribution over the Internet. That was what 

all the content owners were very concerned about several years ago and 

that is the extent to which the video flag regulates the content, the 

distribution. The audio flag, depending on what proposals you look at, 
62

could very likely affect how the content is distributed within the home, 

what people can do with it, whether they can take it from their home to 

the car to the beach to the gym. There are an awful lot of open-ended 

questions with regard to these proposals that were not a part of the flag. 

 MR. BASS. Ms. Ziegler makes a point that on the what are being 

called the S50 the content is lost when you stop subscribing. Is the same 

true of the iPod? 

 MR. BAINWOL. In the case of the iPod you don’t have to subscribe. 

You are actually moving--it is total ownership. There is a continuum 

here. In the old days, you had a radio which you listened to and you had 

ownership where you bought either an album or a cassette or-- 

 MR. BASS. Mr. Bainwol, are you willing to concede that the quality 

or the ownership of the material in the S50 is not as good or not the same 

as the iPod? 

 MR. BAINWOL. There are two different issues. There is ownership 

and quality. The quality relative to the iPod for most applications is 

virtually indistinguishable. 

 MR. BASS. The voice-over question is when it is vastly overblown? 

 MR. BAINWOL. This is nitch channeling where it is commercial free. 

I listen to XM all the time and you get lots of pristine quality. It is not a 

problem. The ownership question I think is a more complicated one. 

There was a continuum of ownership in the radio. Now you have all 

these different elements along the continuum including subscription and 

this is-- 

 MR. BASS. When that subscription expires there is nothing whereas 

on iPod when there is no subscription essentially, if the iPod breaks you 

still have the music on your main storage in your computer. Now you 

can’t use the iPod--is there a difference in quality of ownership between-

- 

 MR. BAINWOL. There is a difference in control, correct. We would 

say that in terms of the user, while they have the subscription, it is very 

much like the iPod, but in terms of enduring it is closer to the 

subscription model. It is like Rhapsody. It is like a tethered download 

that when your subscription expires you have lost. We are not 

suggesting that this has to be a one for one like an iPod. We are 

suggesting that you are deriving some control and there should be an 

additional-- 

 MR. BASS. So there should be some compensation. It doesn’t 

necessarily have to be equivalent. Fair enough. I will yield back, Mr. 

Chairman. 

 MR. FERGUSON. [Presiding] I think Mrs. Blackburn is next. 

 MRS. BLACKBURN. I was trying to be certain that Ms. Bono was not 

overlooked. She and I kind of like this issue a little bit. We kind of like 
63

this legislation so I wanted to be sure that all of you heard from both of 

us on this. Mr. Harris, I want to say a special welcome to you. I am 

sorry that I was not here at the beginning-- 

 MR. HARRIS. Thank you. 

 MRS. BLACKBURN. --of the hearing, but we appreciate your being 

here. And I understand what while I have run to the MPAA meeting on 

behalf of some of my constituents that we had a discussion of what you 

are paid when you have a paid for performance and comparing that with 

a download. 

 MR. HARRIS. Congresswoman, basically under the present format if 

something can’t be worked out I basically will not be compensated at all, 

which would if you compared it to mechanical royalties as I have 

received for quite a few years now and performance royalties, those 

mechanical royalties are basically gone. They are history. And in my 

case, this varies from writer to writer, but in my case my mechanicals, 

which are sales, and my performances are approximately equal, I found 

this out, in sales. So I would be losing at least half of my income. 

 MRS. BLACKBURN. At least half. Well, you know, Ms. Ziegler said 

in her testimony that she didn’t consider the current situation to be a 

serious threat so you would disagree with that comment, I guess? 

 MR. HARRIS. It is very hard for me to understand how people cannot 

see that as many years as we have been through this in other forms that 

this is a continuum but now it is threatening the livelihoods of not only 

the songwriters, but at one point I had my own publishing company in 

the late ‘90s and I had secretaries, I had people that pitched songs, I had 

people working in the tape room making copies so those people could go 

out and pitch the songs. All these people had to be paid. There are so 

many--over half of those-- 

 MRS. BLACKBURN. To a songwriter or a publisher it is a serious 

threat. 

 MR. HARRIS. It is a serious, serious threat. These are things that are 

around the songwriter now who independently employ somebody 

because things have gotten tighter and tighter and tighter. 

 MRS. BLACKBURN. Okay. Mr. Levin, I think I want to come to you. 

I found your choice of words, you made a reference to protecting content 

and paying for performance, paying those royalties as a content 

protection scheme. I found that an interesting choice of words. You 

know, I think that the Constitution is a pretty good protection scheme if 

that is going to be your choice of words for being certain that our 

creative community in this country are fairly compensated for the works 

that they do create. 

 So I think that they deserve to have that compensation. I have got 

another question for you. You know, is Clear Channel or the NAB 
64

working with the device manufacturers to look at the next generation 

devices that are going to operate similarly to the XM and Sirius device, 

and how do you plan to address the download licensing issue for that 

next generation of devices? 

 MR. LEVIN. I talked to our chief engineer yesterday and asked that 

very question, and the answer was that there are no discussions right now 

on the next generation devices. Right now all of the impetus and all the 

energy is being put into getting first generation devices produced. It is a 

market-driven phenomenon unlike the DTV transition. Consumers don’t 

have to adopt digital radio, and so we are in a very precarious position in 

trying to persuade consumer electronics manufacturers to produce the 

devices, trying to persuade retailers to sell them, and trying to persuade 

auto makers to stick them in the cars. 

 It is really a Catch 22 because you need to have consumers out there 

who will demand them in order for all of those different constituencies to 

agree to produce them. Much different than DTV where everybody 

needs to buy a digital television set or a DTV converter box or they 

won’t get television. Totally different. This is completely market 

driven. 

 MRS. BLACKBURN. Well, my time is up. I have some other 

questions. I think we could keep you here asking questions all day long 

but thank you for your interest in the issue. 

 MR. FERGUSON. Ms. Bono, do you have a unanimous consent 

request? 

 MS. BONO. Thank you, Mr. Chairman. Just a UC that I might be 

allowed to ask a question since I am not a member of the subcommittee. 

 MR. FERGUSON. Without objection. Hush, Shimkus. 

 MS. BONO. Boy, he is crotchety today. Thank you, Mr. Chairman, 

and Mr. Shimkus for allowing me to ask a question. And I am going to 

jump ahead, I guess, before Greg if that is all right. Thank you. Again, 

being so close to last so many great questions have been answered and 

there have been moments I think between Mr. Levin and Bainwol, you 

two look like you are negotiating a prenuptial agreement. It is 

postnuptial and you are beginning to say--one of you said we need this, 

and the other one argued you don’t need it, but if you don’t need it as Mr. 

Bainwol said then why not go ahead and do it. 

 And I think the question that was just asked, Mr. Levin also said no 

discussions on next generation devices. Then why not do it anyway? 

You know, last night I saw a commercial for I think it was a Nissan 

Quest, and I talked about this in the last hearing we had, this Quest, and 

again it might be another minivan, whatever it was, it was showing you 

probably the plug in for the iPod, it was showing you probably the rear 

boom box speakers that now lower down out of the lift gate. It not once 
65

talked about the engine that was beneath the hood, the tires that were on 

the vehicle, the brakes that were on the vehicle or the air bags. But it 

really talked about iPods and boom boxes. 

 So clearly there is a value on music in our society that goes well 

beyond this discussion today. So when we talk about Mr. Levin said it is 

not a problem today, I am one of the first people who can criticize the 

music industry for failing to react to the Internet. I have always said the 

Enter key is the artist’s greatest tool whether it is your songwriter, 

performer, whoever it might be. And now we are simply saying we 

don’t know what the future holds but we know that the songwriter 

deserves protection. I think that is a laudable goal. 

 MR. LEVIN. I agree with you, Congresswoman Bono, and in fact we 

are involved in those discussions, and those discussions do extend to the 

capabilities of future devices even though we are not currently 

negotiating those kinds of specs with the device manufacturers. 

 MS. BONO. But, you know, years ago I sat with the Magineers from 

Disney and they talked about the future actually not even coming into 

place for the written word. There is no question, we don’t know where 

we are going to go, and for you to say currently we are not talking about 

this, that does not mean innovation nor high school--I mean college 

students are going to entirely break your system and start downloading 

your HD radio. Even though you don’t think it will happen, we don’t 

know that it won’t. So I am just encouraged to hear my Chairman say let 

us mark it up. I was very encouraged to hear him say that. 

 I would like to go a little bit to a point that he made. And again I 

will--and I know with Mrs. Blackburn, Mr. Ferguson, Mrs. Cubin, a 

number of us will encourage the Chairman to go ahead and move for a 

markup. But I am curious, I would like to actually--Mr. Bainwol, he 

talked about something that is problematic for me too and that is 

including H.R. 1201 in that because I still--we have come a long way and 

the Chairman believes now that we are at this perfect point, with DRM, 

the iPod, that is fair use. How many devices can you marry now your 

iPod to--how many--one computer can support how many iPods, six, 

five? 

 MR. BAINWOL. With Apple you have lots of flexibility both with the 

number of downloads you make of a single song and the number of 

applications that you use it for. 

 MS. BONO. But again the H.R. 1201 to me, the basis of it is so we 

can make it legal to circumvent encryption technologies that are the very 

thing that we are touting today as being so good, so why would we want 

to marry H.R. 1201 into the broadcast flag? 

 MR. BAINWOL. I think Mr. Barton, Chairman Barton, was referring 

to a desire to make sure that there can be backup copies, and the music 
66

community is long past the point where we have made that available. 

The challenge we spoke about at some point before in terms of copy 

protection was about copy protection. It was about allowing multiple 

copies. We are fine with that. If a consumer buys Stairway to Heaven 

and they want to play it in a cabin and play it in the car and play it at 

home, that is perfectly fine. 

 And I think that is what Mr. Barton wants to see happen across the 

content community. I don’t know that he necessarily was making 

reference to the anti-circumvention piece of this. 

 MS. BONO. Thank you. Mr. Harris, I just wanted to also let you 

know that Mrs. Blackburn and I hosted a town hall meeting in Nashville 

about 2 weeks ago during Fan Fare Music Fest. We had a very 

constructive dialogue with a number of songwriters, and I just wanted to 

actually take this opportunity to point out what a champion Marsha 

Blackburn has been. And as we were in Nashville, we had a songwriter 

talk about the INO, which we haven’t talked about the INO devices 

much today as we should have. But this songwriter was actually in tears 

when she said that her livelihood, that her mother--she saw this device, 

the advertisement for it and she told her mother, Mom, my future has just 

been written out, that I no longer have the opportunity to make a living to 

take care of my children. So, Mr. Harris, if you want to make any last 

comments--oh, I have got 9 seconds. It is all yours. 

 MR. HARRIS. I would only thank you for that story, that it is just one 

in literally thousands over the last little bit, and as I was saying to 

Congressman Blackburn, they come in all forms, songwriters and all of 

the support people that go along with the fact that these songwriters can 

no longer make the kind of living to even have publishing deals and 

publishers are cut way back, so all of this has transpired since about 

1995. That is when it really started to go down the hill. We had been on 

a roll prior to that. 

 But it is quite sad and what pains me when I was growing up, I 

listened to Cole Porter, I listened to the songs that Sammy Kahn wrote, 

and then of course Elvis came along and changed all of that for me, and 

moved on into a new genre. But I am desperately afraid that the talented 

people that want to make music now if we don’t do something now, if 

we don’t do something at this point, we will be up here as we have for 

the last 20 years over and over and over and over with every new 

technology. 

 MR. FERGUSON. Mr. Walden is next. 

 MR. HARRIS. Thank you. 

 MR. WALDEN. Thank you, Mr. Chairman. Mr. Levin, there was 

some discussion about I think the term was indiscriminate redistribution 
67

on the Internet that either you or Mr. Bainwol have opposition to some 

sort of flag to preclude that, is that accurate? 

 MR. BAINWOL. That is correct. It is not sufficient but it is 

necessary. 

 MR. WALDEN. And obviously I think I am the only person here that 

is actually in the radio business so I always just claim that up front for 20 

years. And I thought back to something my father told me. He started in 

radio in 1934. When television came along everybody in radio said, 

well, that is the end of radio. And there are those who say with satellite 

coming along it is the end of radio or it is the end of something else. 

And I go back far enough to remember when we would track albums at 

night. The recording industry wasn’t exactly excited about that because 

you would have the whole album tracked at night. 

 And that was something that was objected to. I am just trying to 

figure out how we roll out a new technology here in HD radio that still 

allows for the artists and all to be compensated but also allows the 

consumer to take advantage of a new device. I know I have an iPod. I 

have one of those gadgets you plug in. I shouldn’t admit this but 

sometimes I am out of the range of the over the air broadcast and I refuse 

to sign up for satellite for different reasons. 

 But none of those have done away--it seems like we have enhanced 

the marketplace and enhances to gather music. Now I am trying to sort 

out here. I know when I download or my son does onto the computer or 

iPod a song, that remains resident on my computer. It can be put onto 

his iPod. We can still use our computer and connect it into our home 

audio system, and you don’t have any problem with those uses, correct? 

 MR. BAINWOL. Correct. That is fine. 

 MR. WALDEN. So if I have it on my digital player device, you don’t 

have a problem if I collected that song. 

 MR. BAINWOL. We want you to. We simply want to license it. 

 MR. WALDEN. Okay. But today I could collect that audio off of a 

broadcast over the air, correct, and put it on some device. Now the 

question is quality of that audio. 

 MR. BAINWOL. Correct. Quality and ease. 

 MR. WALDEN. Well, now talking about ease. 

 MR. BAINWOL. What you can do in today’s world and the analog 

world is press record button as you are listening to the radio so you are 

listening, you do have talk over issues, you do have timing issues. It got 

to be part of it. This is an entirely different animal. This is scrolling 

through and saying by meta data I am going to keep this one, that one 

and that one. 

 MR. WALDEN. All right. But, Mr. Levin, you are saying you don’t 

have a problem with trying to restrict that, right? 
68

 MR. LEVIN. That is correct. The devil obviously is in the details but, 

yeah, we don’t want people to be able to go out and cherry pick. 

 MR. WALDEN. Without listening in order. 

 MR. LEVIN. Without listening to the radio at all. Obviously, that 

would be worse for our business more than anything else. But there are 

certain proposals that you have to record, you know, hours, a big block 

of time. 

 MR. WALDEN. Is that what you are saying, Mr. Bainwol, you got the 

big blocks? 

 MR. BAINWOL. We have already, I think, agreed on in terms of this 

piece that--am I allowed to say, where are we? 

 MR. LEVIN. Well, these are private discussions. 

 MR. BAINWOL. Put it this way. 

 MR. WALDEN. In the theoretical. Do you have any problem with 

recording in blocks of time and then--okay, let me put it this--I get Led 

Zeppelin and I have the whole CD, and there is one song I really like and 

I want to get rid of the rest. 

 MR. LEVIN. You can’t do that under their proposal. 

 MR. BAINWOL. That is automatic cherry picking and that we have a 

problem with, but a block of programming, time shifting, not a problem. 

Manual recording, not a problem. Ability to scroll through data and say I 

am going to keep these top 20 hits instead of going to the store to buy 

them, that we have a problem with. 

 MR. LEVIN. So it is like recording three hours of prime time in the 

evening just to get one sitcom at 9:00, and you have to listen to it in 

order to get it. 

 MR. WALDEN. But, you know, Mr. Bainwol, you said you didn’t 

have any problem with TiVo. 

 MR. BAINWOL. Correct. 

 MR. WALDEN. With TiVO I can, and I don’t have that either, not 

that I am technologically challenged, I am actually a HAM radio 

operator, but in the broadcast industry the only way we get paid is 

through advertising. So what you are saying is it is okay to have TiVo 

and zap the commercials and only run the programming that you want to 

see. You don’t have a problem with TiVo, you said. 

 MR. BAINWOL. We are trying to accommodate, and we don’t have a 

problem with time shifting, but this is different than TiVo because what 

you are doing is you are taking the monologue from Carson or Leno’s 

opening gamut. When you TiVo something you are getting the whole 

block of the program. A song is not a program. The program is a block-

- 

 MR. WALDEN. That I can zap and get just what I want and then only 

save what I want, can’t I? 
69

 MR. LEVIN. Yes. 

 MR. WALDEN. So I can archive only the parts I want, correct? 

 MR. LEVIN. Yes, but-- 

 MR. WALDEN. So I end up at the same place that you are objecting 

to. 

 MR. BAINWOL. But there is a big difference, and that is they get paid 

when they broadcast over the air, we don’t, and that is true over the air 

and it is not true on satellite. 

 MR. WALDEN. Well, they are not supposed to localize but anyway 

that is another subject for another day because they agreed never to do 

that. But anyway, Mr. Levin, do you have any final comment? 

 MR. LEVIN. Well, Mr. Bainwol keeps bringing up the performance 

rights fee and the fact that radio doesn’t pay for it and says that that is an 

issue that is completely separate and a red herring but keeps bringing it 

up, so I feel like I need to respond to it. Historically, as you know, radio 

has been exempt from the performance rights fees-- 

 MR. WALDEN. Although we pay ASCAP. 

 MR. LEVIN. We pay ASCAP. We pay the publishers. We pay all of 

that. But we don’t pay the recording industry for the performance right. 

And the reason we don’t do that is it is a very--there are mutuality-- 

 MR. WALDEN. It is a symbiotic relationship. 

 MR. LEVIN. It is a symbiotic relationship. We provide a tremendous 

amount of promotion for those songs which later get sold and so when 

we talk about artists being compensated, radio air play is the number one 

way that artists make a living because their music is purchased as a direct 

result of radio air play and the record labels agree with that. 

 MR. BAINWOL. I know this has run long and we cut into Gary’s time 

and for that I think I should probably filibuster some more, but let me 

make two very quick points. One is that it is true in the U.S., and I think 

only true in China and Singapore, that we don’t have a performance 

right. This is not about the performance right. This is a different fight. 

But the point is sales is our window of revenue. Okay. 

 MR. WALDEN. But nobody has a broadcast structure like the U.S. 

has, do they? It is mostly state run and controlled. 

 MR. BAINWOL. The reality though is that creators have multiple 

streams of compensation and, here, the investor and the artist do not 

enjoy a right, that is factual. So what they are doing is they are creating a 

device that creates promotional value--I am sorry, broadcast does create 

interest but they are satisfying that interest with the very device 

mitigating the probability of a sale so they are promoting and satisfying 

the promotion. That doesn’t do us a whole lot of good. We have one 

window that generates the reinvestment and new art, and that window is 

being compromised by this device. 
70

 MR. WALDEN. But that is not a broadcast device. 

 MR. BAINWOL. This particular one is not but in a couple of years we 

will be right back at the table. 

 MR. FERGUSON. That is going to have to be the last word. We have 

a vote on. Ms. Ziegler, Mr. Harris, Mr. Levin, Mr. Bainwol, thank you 

all very much. We are going to end this panel. We very much 

appreciate it. This has been very enlightening, I think, for all of us. We 

are going to take about a 30-minute break for our vote. We have a series 

of votes. We are going to come back. We will do the second panel in 

about 30 minutes. 

 [Recess.] 

 MR. FERGUSON. We will reconvene. I am sorry. It took a little 

longer than any of us thought. If I could ask our second panel to be 

seated at the table. We have Mr. Fritz Attaway who is Executive Vice 

President and Special Policy Advisor to the MPAA; Ms. Gigi Sohn, who 

is President of Public Knowledge; and Mr. Gary Shapiro, President and 

CEO of the Consumer Electronics Association. Welcome to two of the 

three of you--all three. Here we are. Mr. Attaway, why don’t you go 

ahead, 5 minutes for your opening statement, please. 

STATEMENTS OF FRITZ ATTAWAY, EXECUTIVE VICE 

PRESIDENT AND SPECIAL POLICY ADVISOR, MOTION 

PICTURE ASSOCIATION OF AMERICA; GARY SHAPIRO, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, 

CONSUMER ELECTRONICS ASSOCIATION; AND GIGI 

SOHN, PRESIDENT, PUBLIC KNOWLEDGE 

 MR. ATTAWAY. Thank you very much. Thank you for giving me 

this opportunity to talk about the video broadcast flag, and I want to 

emphasize that the video flag is very different from the audio flag, so 

take everything that you learned in the last panel and file it away for a 

few minutes and focus on the video flag. I also should mention that the 

National Association of Broadcasters is very supportive of the video flag 

so it is a little different position that you heard on the audio flag. 

 You have my written statement in which I have attempted to set forth 

a comprehensive view of why the video broadcast flag is in the public 

interest. In the few minutes I have here, I would like to just focus on a 

couple of key points. First of all, the flag is narrowly focused to prevent 

mass redistribution of digital content, nothing more. The FCC news 

release when the rule was adopted makes clear that the flag will not 

require consumers to purchase new equipment. It will not in any way 

effect the ability of consumers to make digital copies. It will not limit 

functionality of existing devices and yet will not affect digital VCRs, 
71

DVD players, computers, or any other device that does not contain a 

digital tuner. 

 When the broadcast slide was in effect, only 13 technology 

applications were filed with the FCC for certification. These 13 

technologies were sufficient to implement the video flag in every 

covered consume, device that was scheduled to enter the marketplace 

when the flag was to become effective in July of 2005. The claim that 

the FCC would have to pre-approve every TV set, computer, and digital 

video recorder is simply false. The primary point I want to make today 

is that the sole purpose of the flag is to provide a level playing field for 

off-air broadcasters and to protect consumers who rely on free off-air TV 

for entertainment and information. 

 I put up a poster there. I know it is hard to read but that is a listing of 

all the channels available on one of the major multi-channel video 

program distributors. The vast majority of these program channels are 

not off-air broadcasts and the content on these channels can be protected 

against indiscriminate redistribution. Many provide protection against 

redistribution today, and I point out that at least I am not aware of any 

consumer complaints. 

 Only off-air broadcasters, those few that are highlighted in yellow, 

don’t have the ability to prevent redistribution over the Internet and other 

digital networks. The broadcast flag will give broadcasters the stability 

so they can continue to attract high value content that must be protected 

against mass redistribution in order to preserve its value. Eighty-five 

percent of households subscribe to a multi-channel service that can 

require content protection. The TV devices in those households will 

have to provide the same kind of protection that the flag would require. 

 That is why device manufacturers do not oppose the flag. They are 

going to have to build devices that have that functionality in any case. 

Whether or not the flag is reinstituted, the vast majority of digital TV 

channels received by the American public will be capable of protecting 

content against mass redistribution. The question presented by this 

hearing is whether free off-air broadcasters will be able to provide the 

same protection and continue to have access to high-value content. I 

hope that you will give them that ability to compete on a level playing 

field by adopting or reinstituting the broadcast flag. And I also hope that 

you will not do that while repealing the DMCA, which is unfortunately 

what H.R. 1201 would do. Thank you very much. 

 [The prepared statement of Fritz Attaway follows:] 

PREPARED STATEMENT OF FRITZ ATTAWAY, EXECUTIVE VICE PRESIDENT AND SPECIAL 

POLICY ADVISOR, MOTION PICTURE ASSOCIATION OF AMERICA

SUMMARY 
72

Thank you for giving me this opportunity to speak to you today about the Broadcast 

Flag and whether content protection and technological innovation can coexist. 

The short answer is that content protection and technological innovation CAN 

coexist, and ARE coexisting. American consumers, and indeed consumers around the 

world, have entered a golden age of access to audiovisual content. Never before have 

consumers had so much choice in terms of the movies and TV shows available to them 

and the means by which they are delivered. 

Digital rights management (DRM) technology enables secure delivery of movies 

and TV shows to consumers, exponentially expanding consumer choice. The high-tech 

and movie industries share a common interest in providing consumers new viewing 

opportunities, which will create vast new markets for both consumer technology and 

content. 

The greatest challenge facing the motion picture industry today is the widespread 

trafficking of movies and television shows on the Internet. Because it is transmitted 

without encryption or other technological protections (i.e., "in the clear"), there is no 

technological protection against anyone redistributing digital broadcast television content 

over the Internet and other digital networks. By contrast, cable and satellite, and even 

authorized Internet, distribution can include protections against such redistribution. The 

likelihood of wide-scale redistribution of content distributed over digital broadcast 

television creates a disincentive for program owners to license high value content through 

that distribution channel. Without this high-value programming, local stations would 

lose viewership and, correspondingly, revenue. Loss of this revenue would threaten their 

continued existence, jeopardizing the source of local news and public affairs 

programming for millions of Americans. 

In order to provide a level playing field for off-air broadcasters, and protect the 

millions of consumers who rely on free TV, the Federal Communications Commission 

(FCC) adopted narrowly targeted regulations allowing digital TV stations to prevent the 

indiscriminate redistribution of their programming. The basic outline of the Broadcast 

Flag was developed and approved in principle by a large and diverse group of consumer 

electronics, computer technology and video content companies. Use of the Flag allows 

broadcasters to offer content creators the same protection against Internet redistribution 

that conditional access systems like cable and satellite can provide. Nothing in the 

Broadcast Flag regulation requires broadcasters to embed the Flag in content; the 

Broadcast Flag regime merely allows a content provider to choose whether to include 

protection against Internet redistribution. 

The FCC certified thirteen separate technologies for implementing the Flag, 

including one that provides for remote access of recorded TV programs. It is important to 

note that the Broadcast Flag would have no effect on the copying of TV programs or 

distributing protected digital broadcast content within the personal digital network 

environment. The Broadcast Flag solution will have no impact on existing consumer 

equipment. The cost impact on affected equipment going forward will be insignificant. 

The D.C. Circuit Court of Appeals, invalidated the FCC's regulations on purely 

jurisdictional grounds. Significantly, no consumer electronics or computer technology 

company required to implement the Broadcast Flag challenged the FCC regulation. 

It is imperative that Congress act quickly to enact narrowly crafted legislation to 

reinstate the FCC's Broadcast Flag ruling. The marketplace has already anticipated that 

the Broadcast Flag will be required and many manufacturers of digital television devices 

are now producing equipment in compliance with the FCC Broadcast Flag regulations. It 

is worthy of note that there has been no discernable consumer resistance to these 

broadcast flag compliant devices and no surge of consumer complaints. 

Let me add one cautionary note. While we strongly support legislation that will 

reinstate the Broadcast Flag, we cannot support legislation that will do that at the expense 

of the anti-circumvention provisions of the DMCA. It has been suggested that HR 1201 
73

be attached to Broadcast Flag legislation. However, that type of legislation would as a 

practical matter repeal Section 1201 of the DMCA, would compromise efforts to fight 

piracy and inflict devastating harm on an important American industry. 

I appreciate this opportunity to discuss these matters of concern to our industry. 

Chairman Upton, Ranking Member Markey, members of the Subcommittee, thank 

you for giving me this opportunity to speak to you today about the Broadcast Flag and 

whether content protection and technological innovation can coexist. 

 The short answer is that content protection and technological innovation CAN 

coexist, and ARE coexisting. American consumers, and indeed consumers around the 

world, have entered a golden age of access to audiovisual content. Never before have 

consumers had so much choice in terms of the movies available to them and the means by 

which they are delivered – theaters, VHS, DVD, cable, satellite, broadcast TV, Internet, 

advertiser supported, subscription, pay-per-view, video-on-demand – the list is long and 

growing. And television programming is being made available to consumers in even 

more ways (e.g., via mobile phones). 

 The engine that is driving us into this golden age of consumer choice is technology. 

The motion picture industry has enthusiastically embraced innovative technology to 

create new markets and bring new choices to consumers. Here are a few of the recent 

announcements: 

 Warner Bros. partners with Free Record Shop using P2P distribution 

 Universal partners with LoveFilm in UK, offering downloads 

 CBS and Verizon FiOS TV partner to carry select programs 

 Disney offers feature length film on ITunes 

 CBS delivers college basketball “March Madness” online 

 ABC offers free streaming of shows at ABC.com 

 Disney re-launches MovieBeam as a new digital VOD distribution 

channel 

 NBC Universal launches Aeon Digital set top box 

 MTV Networks partners with Microsoft to offer digital music and 

video downloads via URGE. 

 MTV Networks offers thousands of free on-demand videos via its 

broadband channels, including MTV Overdrive, Nick Turbo, V-Spot 

and Motherload 

 CBS offers select programs on demand 

 Warner Bros. launches P2P service In2Movies in Germany 

 Fox announces VOD and DVD windows collapsed 

 NBC Universal announces Peer Impact deal 

 Disney announces download-to-own deal for full-length feature films 

with CinemaNow 

 Google Video beta launched – essentially going with a wholesale 

reseller model – creating an iTunes-like store. 

 However, technology brings challenges as well as opportunities. The greatest 

challenge is to maintain control over the distribution of movies and TV shows in order to 

recoup the cost of production and spur investment in new projects. 

 Fortunately, technology itself is a big part of the solution to illegal distribution. 

Digital rights management (DRM) technology enables secure delivery of movies and TV 

shows to consumers, exponentially expanding consumer choice. The high-tech industry 

is our partner in this endeavor. Contrary to the perception of some, the high-tech and 

movie industries are not enemies. To the contrary, we share a common interest in 
74

providing consumers new viewing opportunities, which will create vast new markets for 

both consumer technology and content. 

 The greatest challenge facing the motion picture industry today is the widespread 

trafficking of movies and television shows on the Internet, mostly through so-called peerto-peer “file sharing.” The term “file sharing” is a popular euphemism for copying, 

which in the case of copyrighted motion pictures and TV programming is stealing. 

 DRM technology is being employed by movie distributors to prevent unauthorized 

reproduction and redistribution of digital works. However when movies and TV shows 

leak out of a protected environment, whether through hacking of DRM measures, 

copying through the "analog hole," illegally camcording off theater screens, or other 

means, they can be made available to literally tens of millions of people over the Internet, 

instantaneously and with little or no degradation of quality. 

 Movie studios are actively engaged in finding ways to stem this leakage, such as 

through use of more sophisticated DRM measures. They are also heavily involved in 

encouraging awareness of and respect for their rights under copyright laws around the 

world, not only through infringement actions, but through consumer education and 

working with colleges and universities to develop codes of conduct for students using 

digital networks. 

 One source of leakage that only can be addressed by the Congress is digital 

broadcast television. Because it is transmitted without encryption or other technological 

protections (i.e., "in the clear"), there is no technological protection against anyone 

redistributing digital broadcast television content over the Internet and other digital 

networks. By contrast, cable and satellite, and even authorized Internet, distribution can 

include protections against such redistribution. The likelihood of wide-scale 

redistribution of content distributed over digital broadcast television creates a 

disincentive for program owners to license high value content through that distribution 

channel. 

 The effects of this disparity will become yet more pronounced as more and more 

consumers access their content from digital broadcasts, in preparation for the mandated 

switch-over from analog to digital broadcasting in 2009. Program owners may determine 

that the value of their programming is diminished so significantly by redistribution over 

the Internet that they choose to distribute their programming only through distribution 

channels that can offer some protection. Without this high-value programming, local 

stations would lose viewership and, correspondingly, revenue. Loss of this revenue 

would threaten their continued existence, jeopardizing the source of local news and 

public affairs programming for millions of Americans. 

 In order to provide a level playing field for off-air broadcasters, and protect the 

millions of consumers who rely on free TV, the Federal Communications Commission 

initiated a proceeding aimed at adopting narrowly targeted regulations prohibiting the 

indiscriminate redistribution of digital broadcast television programming. In November 

2003, with the purpose of speeding consumer transition to digital television, the FCC 

issued a regulation requiring implementation of the “Broadcast Flag” as of July 1, 2005. 

 The basic outline of the Broadcast Flag was developed and approved in principle by 

a large and diverse group of consumer electronics, computer technology and video 

content companies participating in the Broadcast Protection Discussion Group, an 

informal, open forum created for the purpose of finding a solution to the broadcast 

redistribution problem. The BPDG proposed implementation of a Broadcast Flag as the 

most appropriate and efficient solution for the protection of digital broadcast television. 

Use of the Flag allows broadcasters to offer content creators the same protection against 

Internet redistribution that conditional access systems like cable and satellite can provide. 

Nothing in the Broadcast Flag regulation requires broadcasters to embed the Flag in 

content; the Broadcast Flag regime merely allows a content provider to choose whether to 

include protection against Internet redistribution. 
75

 Subsequent to its adoption of its Broadcast Flag regulation, the FCC certified 13 

separate technologies for implementing the Flag, including one that provides for remote 

access of recorded TV programs. It is important to note that the Broadcast Flag would 

have no effect on the copying of TV programs. The Broadcast Flag solution will not 

prevent consumers from making an unlimited number of physical recordings of DTV 

programs, or from distributing protected digital broadcast content within the personal 

digital network environment. Furthermore, implementation of the Broadcast Flag 

solution will have no impact on existing consumer equipment. The cost impact on 

affected equipment going forward will be insignificant. 

 Despite the broad consensus in favor of the Broadcast Flag, the FCC's authority to 

adopt Broadcast Flag regulations was challenged before the D.C. Circuit Court of 

Appeals, which invalidated the FCC's regulations on purely jurisdictional grounds. 

Significantly, no consumer electronics or computer technology company required to 

implement the Broadcast Flag challenged the FCC regulation. 

 It is imperative that Congress act quickly to enact narrowly crafted legislation to 

reinstate the FCC's Broadcast Flag ruling. The marketplace has already anticipated that 

the Broadcast Flag will be required and many manufacturers of digital television devices 

are now producing equipment in compliance with the FCC Broadcast Flag regulations. 

Moreover, consumer equipment that includes one or more of the same 13 content 

protection technologies approved for use under the Flag regime is already being 

deployed, so most manufacturers will be building equipment that will work seamlessly 

under the Broadcast Flag regime in any event. It is worthy of note that there has been no 

discernable consumer resistance to these broadcast flag compliant devices and no surge 

of consumer complaints. 

 Let me add one cautionary note. While we strongly support legislation that will 

reinstate the Broadcast Flag, we cannot support legislation that will do that at the expense 

of the anti-circumvention provisions of the DMCA. It has been suggested that HR 1201 

be attached to Broadcast Flag legislation. However, that type of legislation would as a 

practical matter repeal Section 1201 of the DMCA, would compromise efforts to fight 

piracy and inflict devastating harm on an important American industry. 

Chairman Upton, Ranking Member Markey, members of the Committee, I 

appreciate this opportunity to discuss these matters of concern to our industry and I look 

forward to answering any questions you may have regarding what I have just discussed. 

 MR. FERGUSON. Thank you very much. Mr. Shapiro, 5 minutes, 

please. 

MR. SHAPIRO. Thank you for this invitation to testify on behalf of 

the technology industry. We represent 2,100 companies and $180 

billion, and we believe that we are igniting the greatest explosion of 

human creativity since the Renaissance and it is driving America’s rise to 

global leadership and innovation and ingenuity. We believe that the 

rationale actually for the video flag is debatable and for the audio flag it 

is actually non-existent. The fact is that both of these bills would involve 

taking rights away from lawful consumers and giving it to the content 

industry. 

 That is why if the committee chooses to move forward on either of 

the flag bills we would hope that it should also protect consumers by 

putting H.R. 1201 as part of the package. Let us review the facts. We 

have a symbiotic relationship between the content and technology 
76

industries. We need each other and in the long term we do great things 

for each other. The problem is in the short term the content industry 

reacts to every new technology with fear, apprehension and cries for 

government intervention. The track record is unbroken. They opposed 

the player piano, FM radio, television, the cassette recorders, the VCR, 

the MP3 player, the TiVo, and I could go on and on and on. But again 

and again the content industries come here to Congress asking you to 

stop or limit technologies. And most of the time you have chosen the 

free market over regulation, and what has happened? Well, somehow the 

sky doesn’t fall. New revenue streams are created and the economy and 

consumers have benefited. 

 The new villains today at this hearing are digital television, digital 

radio or HD radio, and satellite radio. Right now we are barraged by 

bills and lawsuits that would impose government mandates on our 

products and limit private non-commercial activities of consumers. The 

television broadcast flag and audio flag are two such proposals. They are 

radically different in terms of technology, implementation and impact on 

innovation and consumers, and that is why we have two separate panels 

and that is why I urge you to consider them separately. 

 The television broadcast flag emerged from a very rigorous multiyear, multi-industry technical process. It was implemented by the FCC 

and was only addressing redistribution over the Internet. By contrast the 

audio flag bill, H.R. 4861, is aimed to stop the copying, in other words, 

non-commercial recording inside your own home. The bill targets 

unauthorized copying, not illegal copying, but just unauthorized. And, 

secondly, no audio flag actually exists. Unlike the video flag, the audio 

flag was not the result of an industry process. The RIAA does not even 

have a technical proposal. Instead, they come with a theoretical mandate 

and so they come with a theoretical mandate and ask you to legislate on 

it. 

 The audio flag bill also contradicts the Audio Home Recording Act. 

Congress challenged us to come make a deal with the recording industry. 

We did. It said digital audio recording products shall not be restricted 

except by the law that was already in there so you cannot make copies of 

copies and royalties shall be paid and then they shall be produced. But 

yet here they are with legislation and lawsuits. Also significant, a flag 

would bring digital radio transition to a halt. The only way to 

accomplish the bill’s ban on copying is through an encryption scheme 

which would obsolete all existing digital radios notwithstanding the 

prohibition in the legislation. 

 Basically the RIAA is showing up very late to the party. They 

ignored the CPTWG, they ignored the FCC. They have no evidence of 

real harm and they are demanding that everyone bring their lawful 
77

businesses to a full stop. The bill’s proposal to lock down satellite radio 

is even more outrageous. Exciting new products are being sold by XM 

and Sirius that allow consumers to record lawfully acquired material 

recording off of radio. They comply with the Audio Home Recording 

Act. They cannot be used for piracy and all digital recordings are locked 

into the device. There is no demonstrated problem and there is no 

evidence of harm to music sales. 

 These proposals are merely the latest step in a long-standing attempt 

to tip the balance of copyright. We always hear about balance, but we 

never hear about consumer rights and consumer balance. The lawsuit 

provides an example that you should focus on how much copyright has 

spun out of control. The record labels have sued XM radio for these 

devices. They are suing for statutory damages of $150,000 per song. 

That translates into $115 million per XM device already sold. That 

liability against five devices would exceed XM’s 2005 revenues. 

Against 100 devices it would exceed the entire revenue of the recording 

industry and if the INO just becomes one-quarter as successful as the 

iPod, claim damages would exceed the gross domestic product of the 

United States of America. 

 This is all for a product that merely allows private recording. I can’t 

imagine a stronger disincentive to new innovation, but for the RIAA, that 

is exactly the point. In the past two decades Congress has passed some 

20 bills expanding copyright owners’ rights and restricting consumer 

rights. That is why if Congress chooses to give even more powers to the 

copyright owners, it must protect the rights of consumers by passing 

H.R. 1201. It balances the copyright laws and it allows the real pirates to 

be put in jail. It codifies the Supreme Court Betamax decision and 

allows consumers to bypass technical protection measures to exercise 

their fair use rights. It is tough on pirates. 

 In conclusion, I ask you to be suspicious of claims that government 

limits on consumers and innovation are necessary to protect the content 

industry. Perhaps they are finally right. Maybe this time the sky is really 

falling. But I believe you have earned the right to be skeptical. 

 [The prepared statement of Gary Shapiro follows:] 
78

PREPARED STATEMENT OF GARY SHAPIRO, PRESIDENT AND CHIEF EXECUTIVE OFFICER,

CONSUMER ELECTRONICS ASSOCIATION

Chairman Upton and members of the subcommittee, thank you for inviting me to 

appear today on behalf of the Home Recording Rights Coalition and the Consumer 

Electronics Association. At CEA, we have more than 2,000 corporate members who 

contribute more than $120 billion to our economy and serve almost every household in 

the country. We thus believe it is vital to preserve the innovation, integrity, and 

usefulness of the products that our members deliver to consumers. The Home Recording 

Rights Coalition was founded almost 25 years ago, in response to a court decision that 

said copyright proprietors could, via a lawsuit, stop the distribution of a new and useful 

product – the VCR. Even the motion picture industry has admitted that it is glad that the 

VCR was allowed to come to market. Congress should be very careful not to impose any 

mandates that would be regretted later. 

Before discussing the advisability of any sort of “flag” legislation, I want to 

emphasize that both CEA and the HRRC share and applaud Chairman Barton’s and Mr. 

Boucher’s determination that if the Congress should find it appropriate to proceed, it 

should do so only while enacting H.R. 1201 at the same time. We believe this legislation, 

as formulated and introduced in this Congress, would protect consumers without 

threatening any legitimate service. It would not remove any tools against pirates. It has 

been unfairly caricatured by some, and deserves consideration on its own merits. 

On the subject at hand, we have grave concerns. While the rationale for a video flag 

is questionable, we have not seen any rationale whatsoever for an “audio flag,” nor have 

we seen any actual technical proposal on the subject. Moreover, based on experience this 

year, we are deeply concerned about how the entertainment industry will interpret, 

tomorrow, the legislative language that it accepts today. These industries are turning now 

to both the Congress and the courts to seek new, damaging, and unreasonable 

interpretations of legislation which, in retrospect, we were perhaps naïve enough to join 

them in supporting. 

 We worked closely with the music industry and this Committee to help draft and 

enact the Audio Home Recording Act of 1992. The music industry, then, agreed with us, 

and told the Congress, that the AHRA was forward-looking legislation that would cover 

all digital audio recorders, even devices that recorded music from digital cable, satellite 

and terrestrial radio services. What they told the Congress then is not what they tell you 

now; nor is it what they tell the courts. The music industry no longer agrees that a 

consumer’s right to make a first generation copy of a song includes the right to play it 

back when and how the consumer wishes. Nor do they any longer agree that the words 

“No action may be brought under this title alleging infringement of copyright ...” have 

the meaning they told the Congress they had in 1992. (They do seem still to appreciate 

the word “royalties” – though apparently they are becoming ever more fond of the word 

“damages.”) 

We worked with this Committee and the motion picture industry on the Digital 

Millennium Copyright Act of 1998 (the “DMCA”) as well. Yet, we have also been 

surprised at some of the later interpretations of this law, and at the reluctance of some to 

consider the clarifications proposed by Chairman Barton and Congressman Boucher. We 

therefore are very cautious in discussing any legislation that may impose a mandate on 

new technology and consumer devices. Both of today’s subjects have that potential. 

Any “Flag” Provision Should Be Proven Necessary And Accompanied By H.R. 1201

The most vital requirement is that the legislation be necessary in the first place. 

There has been much discussion and review on this subject by the FCC with respect to 

the Video Broadcast Flag, which addresses only the mass, indiscriminate redistribution of 

content over the Internet. There has been no such focused discussion about an “audio 
79

flag” because we have not yet seen any actual proposal for such a “flag.” It seems 

evident that addressing “mass, indiscriminate redistribution” is very far from what the 

recording industry actually has in mind when it asks for a “flag.” The Video Broadcast 

Flag, as promulgated by the FCC, assured consumers’ rights to record from broadcast 

television. The recording industry seems intent on targeting, and preventing or taxing, 

consumers’ rights to record from terrestrial and satellite radio. 

Concerns About Technical Mandates In General

Hard experience counsels that you establish some touchstones before even 

considering any such legislation. First, given the inherent difficulty of anticipating the 

timetable and course of specific technological developments, it should be shown 

unequivocally that the drastic step of a technology mandate is necessary. In addition: 

• Any technical terms, and their consequences, must be absolutely clear and well 

understood before legislation is passed. 

• The mandated technologies, their effects in the marketplace and on consumers, 

and the entire terms under which technology would be available to makers of the 

covered products must similarly be subject to a clear, common, and immutable 

understanding. 

• Mandating the use of the technology should not harm technological progress or 

unduly burden legitimate products. 

• It is no longer enough that, as we have previously insisted, a mandate must be 

accompanied by affirmative language that protect a consumer’s right to make 

private, noncommercial recordings at home. It is now clear to us, as I discuss 

below, that any mandate legislation also needs to protect, specifically, the 

consumer’s right to search for, index, store, and play back any home recorded 

content, in the desired order, and to shift content in terms of time and place -- 

just as consumers lawfully do with their personal video and audio recorders 

today. 

This Hearing Is About Very Different Subjects

The first thing our experience teaches us is that the issues noticed for this hearing 

are very different subjects. If I can emphasize one fundamental point, it is that these 

subjects should not be conflated or confused. Each is a separate and distinct issue, 

whether perceived from the content side as a “problem,” from the “technology” side as a 

potential “burden,” or from the consumer side as an obstacle to convenient and quiet 

enjoyment of products and services at home. 

The “Broadcast Flag Authorization Act”

 The proposals for a “broadcast flag” emerged from two forums in which CEA, the 

HRRC, and various members have been very active – the Advanced Television Systems 

Committee (ATSC) and the Copy Protection Technical Work Group. In ATSC 

committees, members of the content community for years pushed for a “descriptor” for 

the purportedly limited purpose of marking content, for possible control over mass 

Internet transmission. Members of the consumer electronics industry were greatly 

concerned that such a “flag” might be abused or used for other purposes, resulting in 

unwarranted control over consumer devices inside the home – something that had never 

been imposed on free, over-the-air commercial broadcasting. In response to these 

concerns, the content and broadcasting representatives agreed to clarify that the flag was 

meant to govern not transmission, but retransmission, outside the home. 

 Our members led in forming a Broadcast Flag work group at the CPTWG, and in 

drafting a final report. While the concept of a passive “flag” proved simple enough, the 

digital means of securing content, in response to such a flag, and the potential effect on 

consumers and their devices, proved highly controversial and contentious. The pros and 
80

cons finally were sorted out in the FCC Report & Order, which specified that the Flag 

was meant solely to address “mass, indiscriminate redistribution” of content over the 

Internet. This is the Order that the Court of Appeals nullified on jurisdictional grounds, 

and which, we assume, any “flag” legislation would reinstate. 

 While our members have a variety of views on the FCC action, CEA and HRRC 

have a couple of very clear concerns: 

• First, we have been disappointed to see the “ATSC Descriptor” show up in a 

number of standards proceedings, proposed by the content industry for uses that 

go well beyond those originally described to the ATSC. 

• Second, some of the legislative language that at times has been circulated and 

attributed to the Motion Picture Association of America and its members would 

go well beyond the FCC’s “mass, indiscriminate redistribution” standard, and 

could be interpreted as constraining distribution on networks inside the home. 

• Third, the flag regulations were invalidated before they ever took effect. It 

should be clearly understood that, if legislation is enacted that would put the FCC 

regulations into force for the first time, manufacturers must be given a 

commercially reasonable period of time to manufacture and include the 

necessary circuitry in their devices. 

• Fourth, exceptions for consumer fair use, news and public affairs programming, 

and distance education, as we proposed to the FCC, should be part of any 

legislation addressing this subject. 

The “Audio Flag”

 It is hard to think of a phrase that has been more abused in Washington this year 

than the words “Audio Flag.” From the context of the “Video Broadcast Flag” discussed 

above, one would naturally think that “audio flag” represents some proposal that: 

(a) refers to some known technology 

(b) is aimed only at “mass, indiscriminate redistribution of content over the Internet, 

and 

(c) is not aimed at restricting consumers’ in-home use of content that they have 

lawfully obtained. 

Unfortunately, this is not the case. 

Most Proposals Are Not For “Flags” At All

Flying generally under “flag” colors in both bodies this year, either legislatively or 

in the PR wars, have been proposals that would govern the playback of lawfully received 

satellite radio content,1

 require a license for and then deny it to music services that are 

deemed to encourage lawful home recording,2

 define a “flag” as pertaining to music 

“distribution” rather than to the public performance in question,3

 or require a radio 

 

1

 The “Perform Act,” H.R. 2466, would require any device that can record from a satellite radio 

service to play back songs only in the order transmitted on a particular channel -- not in the order 

desired by the owner of the device. 

2

 The “Section 115 Reform Act,” H.R. 5553, would revoke the necessary license in the case of any 

service that “takes affirmative steps to authorize, enable, cause, or induce the making of 

reproductions of musical works by or for end users that are accessible by such end users for future 

listening” – “future listening” meaning even the type of time-shift recording that the Supreme Court 

protected as fair use in the Betamax case. 3

 The “Digital Audio Broadcast” provisions of S. 2686, telecommunications reform legislation under 

consideration by the Senate Commerce Committee at the time of submission of this written 

statement, would require the Federal Communications Commission to impose regulations governing 

such purported “distributions” – apparently, by implication, reclassifying broadcast performances as 

“distributions” and so by implication amending copyright law. 
81

service to stop consumers from “disaggregating” music by playing back the songs they 

lawfully record at home in the order they choose.4

 

 While we would have very strong concerns over legislation – if there ever really is 

any – that would propose an “audio flag” that is remotely similar to the Video Broadcast 

Flag, I wish to emphasize that the sorts of proposals I have described have nothing to do 

with a “flag” and are inherently unfounded, unreasonable, and objectionable for a number 

of reasons. 

 First, there is no established basis whatsoever for congressional or FCC meddling 

with home recording from the ongoing satellite radio services, or with the terrestrial 

digital audio broadcast services that are just being launched. Whatever consumers will be 

able to do with these services in the future – including the recording, indexing, storing, 

and compilation of playlists -- it has been equally feasible for decades to do the same 

things with existing FM radio service, with comparable quality. Yet, every time the 

Congress has reformed the Copyright Act, it has declined to grant phonorecord producers 

any right or control of whether their albums are broadcast in the first place. 

There is no demonstrated problem, and there is no reason to take control of these 

services away from broadcasters and satellite radio providers, or to interfere with the 

customary enjoyment of these services by consumers, and put those controls solely in the 

hands of the record companies or music publishers. The Congress has consistently 

declined to do so. As a result, the United States remains a world leader in developing 

new broadcast and consumer technologies and services. 

 Second, the Congress did address the advent of digital recording, by passing a law 

in 1992 that went in a different and opposite direction. As you know, the Audio Home 

Recording Act provides for a royalty payment to the music industry on Digital Audio 

Recording devices and media. While the AHRA addressed devices’ ability to make 

digital copies from digital copies, it never imposed any constraints on the “first 

generation” copies that consumers were explicitly allowed to make in return for that 

royalty payment. Yet, several legislative drafts now interpret the AHRA as saying: 

“Sure you can make the recording, you just can’t always play it back!” 

 Apparently the Recording Industry Association of America, which took the lead in 

working with us on the Audio Home Recording Act, has forgotten that the AHRA exists. 

In 1991, Jay Berman, then head of the RIAA and later head of the industry’s umbrella 

organization, IFPI, told the Senate that the AHRA – 

“... will eliminate the legal uncertainty about home audio taping that has clouded 

the marketplace. The bill will bar copyright infringement lawsuits for both analog 

and digital audio home recording by consumers, and for the sale of audio recording 

equipment by manufacturers and importers. It thus will allow consumer electronics 

manufacturers to introduce new audio technology into the market without fear of 

infringement lawsuits ....”5

Yet, on May 16, the major record labels filed suit against the XM satellite radio 

service, explicitly based on its support of a royalty-paid device, covered by the AHRA, 

that in addition to allowing consumers to make home recordings (that cannot be output 

from the device), allows consumers to choose the order in which the recordings are 

played back. According to the labels, apparently such consumer choice violates the law. 

 

4

 This was contained in a minority discussion draft of the legislation referenced directly above. 5 The Audio Home Recording Act of 1991: Hearing before the Senate Committee on the Judiciary, 

S. Hrg. 102-98 at 115, October 29, 1991, written statement of Jason S. Berman.at 119. Mr. Berman, 

in fact, emphasized that the comprehensive compromise nature of the AHRA was a reason for the 

Congress to pass it: “Moreover, enactment of this legislation will ratify the whole process of 

negotiation and compromise that Congress encouraged us to undertake.” Id. at 120. 
82

Moreover, they apparently see no relevance to the legislative language they agreed to in 

our joint support of the AHRA in 1992: 

§ 1008. Prohibition on certain infringement actions 

No action may be brought under this title alleging infringement of copyright based 

on the manufacture, importation, or distribution of a digital audio recording device, 

a digital audio recording medium, an analog recording device, or an analog 

recording medium, or based on making digital musical recordings or analog musical 

recordings. 

 In addition to establishing a royalty fund, the AHRA gave technical oversight 

authority to the Department of Commerce. Proposing an overhaul of the laws regarding 

recorders from satellite and terrestrial radio services without addressing or amending the 

AHRA is like moving city hall without telling the mayor. 

HRRC And CEA Oppose H.R. 4861 

H.R. 4861, though styled as the “Audio Broadcast Flag Licensing Act of 2006,” 

actually addresses both “redistribution” and the “unauthorized copying” of content. 

Although the language “unauthorized copying and redistribution” might be deemed 

simply ambiguous, if this legislation were aimed solely at “redistribution,” it would be 

irrelevant whether the prior in-home copying had been authorized or not. In other words, 

a true “flag” bill would be aimed at mass, indiscriminate redistribution -- it would not 

matter whether the copy that was “redistributed” had been lawfully made or not. 

This legislation, therefore, although styled as a narrow bill giving the FCC ‘limited 

authority’ to impose licensing conditions on new HD radios and satellite radios, actually 

is a fundamental attack on traditional home taping practices that consumers have engaged 

in since the first analog cassette recorder reached the U.S. market in 1964, and the reelto-reel recorder decades before. The bill would give the FCC remote control over 

consumers’ rights to engage in reasonable and customary “unauthorized” recording, even 

in the privacy of their homes for noncommercial purposes. Virtually all home recording 

is “unauthorized” by copyright owners. But as the Supreme Court held in the Betamax

case, that does not make it unlawful. Exercising their “fair use” rights under the law, 

consumers have lawfully been making unauthorized tapes of music off the radio for more 

than 50 years. 

In Congressional testimony earlier this year, the head of the RIAA said that “the 

one-way method of communication [enabled by HD radio] allows individuals to boldly 

engage in piracy with little fear of detection.” In other words, the RIAA believes that 

when Members of Congress, their staff, and their constituents tape a song off the radio 

they have engaged in piracy and ought to be criminally prosecuted. This subcommittee 

ought not consider any legislation that proceeds from the premise that Americans 

listening to broadcasts at home are actually “pirates evading detection.” 

We Have Not Seen An Actual “Flag” Proposal Because No Such Thing Exists

Perhaps one reason we have not seen any legislation addressed strictly and only to 

mass, indiscriminate redistribution over the Internet is that we have also not seen any 

technical proposal, from the music industry, that would be so limited. Unlike the video 

Flag, the “proposal” made by the RIAA to the FCC in 2004 was aimed, instead, at 

frustrating the long-accepted, reasonable private and noncommercial practices of 

consumers inside the home. As to distribution outside the home, the RIAA never 

explained to the FCC how it could accomplish its objectives in a non-intrusive manner, 

and we are still not aware of any such technical proposal. 

The FCC’s Digital Audio Broadcast proceeding was begun by the Commission in 

1999 and its initial emphasis was almost entirely technical. Nevertheless, neither the 
83

RIAA nor any other music industry interest ever made a single filing in that proceeding 

until 2004 – and even then it did not disclose or propose what specific technology would 

be imposed on consumers. But no matter what technology ultimately is chosen, there has 

simply never been any case made for the need of an “audio flag.” A mandate in aid of 

one would be an unwarranted, unnecessary, and probably unworkable intrusion into 

consumer use, and into the very viability of the new digital radio format on which so 

many have worked so long and hard for so many years. 

The proposal to suddenly lock down satellite radio comes even more “out of the 

blue.” There is no indication that the new devices being rolled out by these services 

depart from the requirements of the Audio Home Recording Act, most of which were 

drafted by the music industry itself. Indeed, the products that form the basis of the record 

labels’ suit against XM do not have any outputs, other than a headphone jack, via which 

music from the satellite broadcast content can be obtained. It is true that, in theory, the 

output of a headphone jack can be digitized and potentially sent to the Internet. Is it the 

music industry’s “flag agenda” to impose some copy protection scheme on all headphone 

jacks and other analog interfaces of all music players and stereo system components? If 

so, they should say so, and return to the multi-industry Copy Protection Technical 

Working Group (which they left 6 or 7 years ago) for such an idea to be given 

appropriate consideration in the private sector. 

In short, we see no justification to undo the provisions of the AHRA and the DMCA 

that specifically were enacted by Congress to address digital and satellite radio services. 

There is no reason for the Congress to give further consideration to an “audio flag” or to 

any of the very restrictive legislation, aimed at “distribution” or “disaggregation,” which 

are also thinly veiled attacks on lawful, private, noncommercial, in-home consumer 

recording practices. Instead, we respectfully urge that this subcommittee give renewed 

attention and impetus to protecting consumers, libraries, and educators by taking 

affirmative action on H.R. 1201. 

* * * 

Finally, we must not ignore the overarching issue of technological progress and U.S. 

competitiveness. While other countries are busy developing their technology industries 

in order to compete more efficiently with the United States, we face proposals from the 

content community to suppress technological development on arbitrary or insufficient 

bases. This is a trend that ought not to be encouraged. 

Again, thank you, Mr. Chairman, for the opportunity to appear before this 

Subcommittee to address these important issues. We appreciate being asked to be here 

today and look forward to working with you and your staff as you examine the important 

issues that have been raised for discussion today. 

 MR. FERGUSON. Thank you. For our third panelist on the video flag 

panel, Ms. Sohn. 

MS. SOHN. Thank you for inviting me to testify here today to give a 

consumer perspective on the broadcast flags. We are living in a digital 

gold age and consumers, your constituents, are the beneficiaries. 

Consumers have numerous choices for buying digital content and for 

buying devices on which to play that content. They have never had so 

much flexibility and so much opportunity to be creators themselves. 

 New opportunities in the content industry to profit from these digital 

technologies arise every day. Sales of DVDs continue to generate 

enormous revenues. In just months, iTunes sold 12 million video 

downloads for use on its video iPod. The broadcast networks, ESPN and 
84

Warner Brothers, are making for pay and advertiser-supported content 

available either through streaming or as downloads over a variety of online platforms. As the content industry has ramped up on-line delivery of 

content, it has been testing a variety of protection measures that provide 

both security for the industry and flexibility for consumers. 

 So to answer the question, can content protection technological 

innovation coexist? It is a resounding yes. Look at the robust market for 

on-line content distribution facilitated by the technologies and networks 

consumers love. But apparently success is not enough for the content 

industry which is asking you to interfere with this market and impose 

two technology mandates that could bring this technological and artistic 

renaissance to a grinding halt. 

 The first to reinstate the FCC’s vacated broadcast flag rule, Public 

Knowledge opposes this rule first and foremost because it would give the 

FCC unprecedented and broad control over technological design. On 

this point the D.C. Circuit emphatically agreed. Moreover, the rule 

would allow the agency to set the limits of consumers’ rights and the 

copyright law. It would prohibit lawful uses of content, including use of 

broadcast TV excerpts on-line and for distant education. 

 And let me clarify with all due respect to my colleagues on the first 

panel while the broadcast flag purports to be about indiscriminate 

redistribution, it also prohibits discriminate redistribution. So if you, Mr. 

Chairman, would like to send a clip of you appearing on broadcast news 

to your home office in New Jersey, you wouldn’t be able to do that under 

the broadcast flag scheme. The flag scheme will also cause great 

consumer inconvenience, confusion, and cost, which will slow rather 

than expedite the transition to digital TV. 

 Again, with all due respect to Mr. Attaway, flag-compliant devices 

may not work with non-compliant devices, making millions of obsolete 

legacy machines. Digital media recorded on a flag-compliant device 

may not play on a non-compliant device meaning that the DVD that you 

burn in one room of the house may not play in a DVD player in a 

different room. In addition, TV flag scheme will increase consumer cost 

because none of the 13 technologies the FCC has certified work with 

each other. Therefore, if you have a Phillips flag-compliant TV set, a 

consumer must purchase devices from that same manufacturer. This is 

profoundly anti-competitive and anti-consumer. 

 And with your permission, I would like to submit for the record 

some diagrams that demonstrate how devices become obsolete when you 

mix flag-compliant and non-compliant devices. 

 MR. FERGUSON. Without objection, we will include those. 

 [The information follows:] 
85
86
87

 MS. SOHN. Nevertheless, if Congress decides to impose a TV flag 

scheme, it must also ensure that consumers’ rights under the copyright 

act are preserved. Thus, any broadcast flag legislation must be coupled 

with legislation that would permit circumvention of technological 

protection measures for lawful uses. We are grateful that Chairman 

Barton has recommended that any flag legislation also include H.R. 

1201. In addition, any TV flag legislation should have meaningful 

exemptions for news and public affairs programming, distant education, 

and public domain programming. The former is particularly important as 

news programming is the public’s compensation for permitting 

broadcasters to use the public airways for free. 

 We have similar concerns about the audio flag which are discussed 

in detail in my written statement. Proponents of the audio flag do not 

even purport to be concerned with so-called indiscriminate redistribution 

of songs. Instead, they want to extinguish the long-protected consumer 

right to make personal home recordings of radio transmissions. There 

are far better alternatives to the heavy-handed technology mandates 

being discussed today. As Mr. Markey said, they include a multi-prong 

approach of consumer education, enforcement of copyright laws, and use 

of technological tools developed in the marketplace which Public 

Knowledge supports. 

 The Grokster decision and the Family Entertainment Copyright Act 

are just two of several new legal tools that the content industry has at its 
88

disposal to protect its content. Members of the subcommittee, the TV 

and audio flags are controversial and do not reflect consensus. That is 

another myth. I am confident that you will conclude that the Federal 

Communications Commission should not become the Federal Computer 

Commission or the Federal Copyright Commission, and that the 

marketplace, not the Government is the best arbiter of what technologies 

succeed or fail. The flag rules place unacceptable limits on innovation, 

competition and consumer rights. I urge you to reject them. Thank you. 

 [The prepared statement of Gigi Sohn follows:] 

PREPARED STATEMENT OF GIGI SOHN, PRESIDENT, PUBLIC KNOWLEDGE

Chairman Upton, Ranking Member Markey and other members of the 

subcommittee, my name is Gigi B. Sohn. I am the President of Public Knowledge, a 

nonprofit public interest organization that addresses the public's stake in the convergence 

of communications policy and intellectual property law. I want to thank the 

subcommittee for inviting me to testify on the audio and video broadcast flags. I 

specifically want to focus on the impact of these technological mandates on consumers. 

I served as counsel to the nine public interest and library groups that successfully 

challenged the Federal Communications Commission’s (FCC) broadcast flag rules in the 

United States Court of Appeals for the District of Columbia Circuit. My organization 

financed and coordinated the case, which is titled American Library Association v. FCC, 

406 F.3d 689 (D.C. Cir. 2005). I have attached a copy of the court’s decision in the case, 

and I respectfully request that it be placed into the record of this hearing. 

Introduction 

This is the digital golden age for consumers. They have numerous choices for 

buying digital content and for buying devices on which to play that content. Far away 

from the copyright and technology battles in which we engage in Washington, newly 

forged partnerships between technology companies and content companies are 

revolutionizing the way we view and listen to digital media. Here are just a few 

examples: 

• New versions of Microsoft’s Media Center software enable the playback of a 

consumer’s favorite media, whether on the individual’s home office monitor, 

living room television, or PDA. The company has also developed a new music 

service in conjunction with MTV, VH1, and CMT music channels. 

• Innovators like DigitalDeck, NewSoft, SlingMedia, and Sony each have 

developed competing technologies that allow consumers to remotely watch the 

television playing in their living rooms on a laptop, mobile phone, or portable 

gaming console. 

• Yahoo! has developed software and services that enable consumers to view, 

create, and share content between their mobile phones, computers and living 

rooms, all using the Internet. 

• Google has developed a distribution system to allow anyone to provide videos 

for free or for sale, and allow others to download that content to a computer, 

Apple iPod, or Sony Play Station Portable (PSP). Google has announced 

content distribution agreements with large content providers like CBS and the 

NBA. This follows the recent success of NBC, ABC, and ESPN, which 

distribute programming in partnership with Apple’s iTunes. 

• TiVo’s most recent software update makes it simple for consumers to watch 

their favorite television shows on popular players like the iPod and PSP. And 
89

soon, the next generation TiVo recorder will help consumers record over-the-air 

high-definition television. 

• Together, XM Radio and Pioneer developed an innovative portable satellite 

radio player that, like a TiVo, allows consumers to automatically record their 

favorite songs or shows while they are being broadcast. A consumer’s 

preferences are stored on the radio, and when connected to a computer, XM’s 

software helps the consumer to find more information about the artists, 

purchase music through the new Napster, and discover other songs and shows 

by similar artists. 

 These and many other examples demonstrate that the market for delivering content 

digitally over new technologies is working. Consumers can watch and listen to the 

content they purchase anytime and anywhere they want. Some of that content will be 

protected, and consumers can decide whether that protection is flexible enough. All of 

these great developments happened without government intervention. 

 The public appetite for buying individual TV shows and songs online is growing by 

leaps and bounds. There are more ways than ever to watch TV and movies and listen to 

the radio. Here are some of the newest legal services that offer consumers the 

opportunity to view, either for free or for a charge, content provided by the TV networks 

and Hollywood studios: 

• Last winter, CBS Sports and the NCAA announced that they would stream the 

NCAA tournament for free over the Internet. Over the course of the 

tournament, they served up a record 268,000 simultaneous streams, with a total 

of 14 million streams served and 4 million unique visitors.1

• The iTunes Video store, launched in October 2005, now carries television 

programs from ABC, NBC, Fox and CBS, along with many cable networks. In 

its first five months of operation, the movie store sold more than 12 million 

videos at $1.99 a piece. 

• In May, ABC began offering downloads of many of its most popular shows, 

including Lost, Alias, and Desperate Housewives for free on a trial basis. Last 

week ABC reported that more than 11 million viewers used the service in the 

first month of operation. 

• Services like CinemaNow and WorldCinemaOnline allow consumers to 

download Digital Rights Management (DRM) protected movies and TV shows 

to their computers. Consumers can opt for a limited time rental, or choose to 

keep the movie for a higher price. 

• Akimbo and MovieBeam use a special set-top box that enables the user to 

download and watch movies on demand, with variable pricing based on the 

length of viewing. 

• Warner Brothers has entered into a partnership with BitTorrent to provide 

DRM-protected media using BitTorrent technology. This innovative model 

will use BitTorrent's distributed model to provide high speed downloads, and 

shared compensation for the content owners. 

 Yet even as innovators in the motion picture and recording industries promote these 

alternative distribution models and the technologies that facilitate them, their colleagues 

in Washington are asking Congress to step in and give them protection from the vague 

threat of massive copyright infringement the industry says these new technologies could 

facilitate. Let us be clear. The content industry has not shown that any infringement has 

resulted from these technologies. And it certainly has not shown that government 

 

1http://www2.ncaa.org/portal/media_and_events/press_room/2006/march/20060320_mmod_rls.html 
90

technology mandates will work to stop actual copyright pirates rather than prevent 

ordinary consumers from engaging in lawful activities. 

The content industry is asking Congress to impose three technology mandates: the 

TV broadcast flag, an audio broadcast flag, and an end to the analog hole. Each mandate 

1) injects government into technological design; 2) restricts lawful consumer activities; 

and 3) increases consumer costs by making obsolete millions of digital devices. Once 

consumers start to purchase devices that are compliant with these technology mandates, 

the costs will be enormous. For example: 

• A consumer would not be able to record over-the-air local news on her 

broadcast-flag compliant digital video recorder in her living room and play it 

back on a non-compliant player in her bedroom (broadcast flag). 

• A member of Congress could not email a clip of his appearance on the national 

news to his home office (broadcast flag). 

• A student would be prohibited from recording excerpts from a DVD for a 

college Powerpoint presentation (analog hole). 

• A consumer would be unable to record individual songs off digital broadcast 

and satellite radio (audio flag). 

• Current versions of TiVos (and other digital video recorders), and Slingboxes 

may not work with analog hole closing compliant devices, rendering them 

virtually obsolete (analog hole and broadcast flag). 

• A university could not use digital TV video clips for distance learning classes 

(broadcast flag). 

I urge the Committee to think very long and hard about trying to fix what is not 

broken. Ask yourselves, in light of recent marketplace developments, is it good policy to 

turn the Federal Communications Commission into the Federal Computer Commission or 

the Federal Copyright Commission? Is it good policy to impose limits on a new 

technology like HD Radio (that unlike digital television, consumers need not adopt) that 

may well kill it? Is it good policy to impose technological mandates (like the broadcast 

flag and closing the analog hole) that would result in consumers having to replace most 

of the new devices that they just purchased? 

There are better alternatives for protecting digital content than heavy-handed 

technology mandates. An effective multi-pronged approach would utilize consumer 

education, enforcement of copyright laws, new business models for content distribution 

and the use of technological tools developed in the marketplace, not mandated by 

government. The recent Grokster decision and the passage of the Family Entertainment 

and Copyright Act are just two of several new tools that the content industry has at its 

disposal to protect its content. 

Technology Mandates Harm Innovation and are Costly and Inconvenient for 

Consumers 

For Public Knowledge, its members and its public interest allies, the impact of the 

D.C. Circuit’s decision vacating the broadcast flag rules goes far beyond citizens' ability 

to make non-infringing uses of copyrighted material they receive on free over-the-air 

broadcast television. Equally as important, the decision limited the power of a 

government agency that, in the court’s own words, has never exercised such “sweeping” 

power over the design of a broad range of consumer electronics and computer devices. 

This hands-off approach has fostered a robust market place for electronic devices that has 

in turn made this country the leader in their development and manufacture. 

For this reason, any attempt to portray legislative reinstatement of the broadcast flag 

rules as “narrow” should be viewed with great skepticism. The rules put the FCC in the 

position of deciding the ultimate fate of every single device that can demodulate a digital 

television signal. The broadcast flag rules require the FCC to pre-approve television sets, 

computer software, digital video recorders, cellphones, game consoles, iPods and any 
91

other device that can receive a digital television signal.2 Thus, the broadcast flag scheme 

places the FCC in the position of dictating the marketplace for all kinds of electronics. 

The agency has neither the resources nor the expertise to engage in this kind of 

determination. This type of government oversight of technology design will slow the 

rollout of new technologies and seriously compromise US companies’ competitiveness in 

the electronics marketplace. 

Some argue that the initial FCC certification process worked because all thirteen 

technologies submitted to the agency were approved. That is a very superficial view of 

that process. First, it is widely known that several manufacturers removed legal and 

consumer-friendly features of their devices before submitting them to the FCC, largely at 

the behest of the movie studios. Second, the changing nature of the FCC and its 

commissioners is likely to make for widely varying results. Given the fervor of thenCommissioner Martin’s dissent to the Commission’s approval of TiVo-To-Go, it is 

unlikely that such technology would be certified today under Chairman Martin’s FCC.3

The certification process also exacerbates equipment incompatibility problems 

caused by the broadcast flag scheme. Not only will the scheme prevent consumers from 

making copies of a TV show on one system and play it on another, none of the 13 

different technologies approved by the FCC in its interim certification process work with 

each other. This means that a consumer who buys one Philips brand flag-compliant 

device must buy all Philips brand flag compliant devices. This raises consumer costs, 

and also raises serious questions about competition among and between digital device 

manufacturers. 4

Proposals to mandate content protection for digital broadcast and satellite radio 

would similarly place the FCC in the position of mandating the design of new 

technologies. For example, H.R. 4861, the Audio Broadcast Flag Licensing Act of 2006 

(“Ferguson bill”), gives the FCC the authority to promulgate regulations governing “all 

technologies necessary to make transmission and reception devices” for digital broadcast 

and satellite radio. In the case of so-called High Definition (or HD) Radio,5 this could 

destroy this new technology at birth. Digital broadcast radio benefits consumers through 

improved sound quality (particularly for AM radio) and gives radio broadcasters the 

capacity to provide additional program streams and metadata. Unlike digital television, 

however, consumers need not purchase digital broadcast receivers to continue receiving 

free over the air broadcast radio. Certainly, if digital radio receivers have less 

functionality than current analog radio receivers, consumers will reject them and the 

market for HD radio will die. 

In the case of digital satellite radio, mandated radio content protection has the 

potential to cripple this increasingly popular, but still nascent, technology. XM Radio 

now has more than six and a half million subscribers, and Sirius Radio last year passed 

the four million subscriber mark. Consumers are buying all types of receivers for those 

 

2 D.C. Circuit Court Judge Harry Edwards noted this reach at oral argument when he said, 

“You’re beyond transmission...I mean you’re out there in the whole world regulating****I mean, I 

suppose it will be washing machines next.” ALA v. FCC, Oral Argument Transcript at 31. 

3 For a detailed analysis of the flaws of the FCC’s certifications process, see Center for 

Democracy and Technology, Lessons of the FCC Broadcast Flag Process (2005), found at 

http://cdt.org/copyright/20050919flaglessons.pdf 

4 For a detailed discussion of these issues, see

http://www.publicknowledge.org/content/presentations/bflagpff.ppt 

5 I say “so called,” because calling a digital radio broadcast signal “High Definition” is quite 

misleading. Whereas in the television context, High Definition connotes a far clearer and sharper 

picture, an HD radio signal simply raises the quality of AM radio to FM standards, and permits the 

reception of broadcast radio in places where an analog signal would get cut off, such as in a tunnel or 

at a traffic light. Indeed, an “HD” quality signal is not even a CD quality signal. See, Ken Kessler, 

Digital Radio Sucks, it’s Official, found at http://www.stereophile.com/newsletters/. 
92

services, based in part on the new flexibility and features the equipment offers. The type 

of content protection the recording industry seeks would likely slow this incredible 

growth. 

The Content Industry Has Not Justified the Need for Technology Mandates 

Hollywood’s core justification for imposition of the TV broadcast flag scheme can 

be paraphrased thusly: if the threat of indiscriminate redistribution of “high value” high 

definition television content is not reduced, broadcasters will not make that content 

available, thus slowing this country’s transition to digital TV.6

 

One of the most vocal proponents of this argument was Viacom, which told the FCC 

in 2002 that “if the broadcast flag is not implemented and enforced by next summer, CBS 

will cease providing any programming in high definition for the 2003-2004 television 

season. And without the security afforded by a broadcast flag, Paramount will have less 

enthusiasm to make digital content available.”7

Viacom never did carry out its threat to withhold HD programming, and the 

argument that the broadcast flag is necessary to encourage the broadcast of high value 

content and the orderly transition to digital TV transmission has been repudiated in the 

marketplace. 8 First, broadcasters are making “high value” content available for HDTV 

or, "in HD": 50%9

 of TV shows, including 66 %10 of prime time programming, is 

broadcast in high definition. A number of "high value" sports programming broadcasts, 

including Monday Night Football, the Super Bowl, the NBA Finals, the NCAA Final 

Four college basketball championship, the FIFA World Cup, Major League Baseball's 

All-Star Game and World Series games, all NBC NASCAR races, the U.S. Open golf 

tournament, and the Olympics, are broadcast in HD along with many other select sporting 

events throughout the year.11 Second, the country’s transition to digital TV is 

accelerating, not slowing down, as sales of digital TV sets continue to increase. 

According to the Consumer Electronics Association, sales of digital TV sets grew 60% to 

$17 billion dollars.12 According to Forrester Research, 16 million American homes have 

digital television sets. In 2006, that number is expected to rise to 26 million, or one in 

four households.13 Indeed, the case could be made that rather than accelerate the DTV 

transition, the broadcast flag could slow the transition when consumers discover that 

expensive new television sets have less functionality than their current sets. 

The recording industry has similarly not demonstrated that an audio flag is 

necessary. The industry does not cite to even one instance of a digital broadcast or 

satellite radio transmission being copied illegally or retransmitted over the Internet. 

Indeed, RIAA chief Mitch Bainwol’s testimony and comments on the subject make clear 

that the real rationale for seeking radio content protection is not copyright infringement, 

but the recording industry’s displeasure over the licensing fees it receives from broadcast 

 

6 See In the Matter of Digital Broadcast Content Protection, FCC 03-273, 18 FCC Rcd 23550, 

23553 (November 4, 2003). 

7 See Comments of Viacom In the Matter of Digital Broadcast Content Protection, MM Docket 

No. 02-230 at 12 (December 6, 2002). 

8 D.C. Circuit Judge Edwards also rejected this argument. See ALA v. FCC Oral Argument 

Transcript at 32 (Judge Edwards: “This in no way -- what you do here or not in no way impairs the 

ability to . . . stay on the digital deadline. . . . In no way.”). 

9 http://www.ati.com/products/hdtvwonder/ 

10 For the week of Jan. 19 to Jan. 25, ABC broadcast 13 of 32 prime-time shows in HD. During 

the same week, CBS broadcast 31 of 34 prime-time shows in HD; NBC broadcast 32 of 50 primetime shows in HD during the same period. For all 3 networks combined, 76 of 116 (66%) prime-time 

shows were broadcast in HD for one week in January 2006. 

11 http://www.cnet.com/4520-7874_1-5119938-1.html 

12 http://www.ce.org/Press/CurrentNews/press_relesae_detail.asp?id=10913 

13 See, http://biz.yahoo.com/prnews/051220/nytu017.html?.v=36 
93

and satellite radio broadcasters.14 The recording industry does not even pretend that 

audio flag legislation is intended to do anything other than stop personal home recording. 

Video and Audio Flag Schemes Will Transform the Federal Communications 

Commission into the Federal Copyright Commission 

Despite the FCC’s protestations to the contrary, any video or audio broadcast flag 

scheme will necessarily involve the agency in shaping the rights of content owners and 

consumers under copyright law. Making copyright law and policy is not the FCC’s job. 

It is Congress’ job. 

While it is true that the TV broadcast flag scheme does not completely bar a 

consumer from recording her favorite TV show, it does prevent consumers from 

engaging in other lawful activities under copyright law. For example, as the D.C. Circuit 

noted in ALA v. FCC, the broadcast flag would limit the ability of libraries and other 

educators to use broadcast clips for distance learning via the Internet that is permitted 

pursuant to the TEACH Act, Pub. L. No. 107-273, 116 Stat. 1758, Title III, Subtitle C, 

§1330, amending 17 U.S.C. §§ 110, 112 & 882 (2002). See ALA v. FCC, 406 F.2d at 

697. 

This and other examples highlight that while proponents of the flag may justify it as 

prohibiting only “indiscriminate” redistribution of content over the Internet, flagcompliant technologies actually prohibit any and all distribution, no matter how limited 

or legal. For example, if a member of this Committee wants to email a snippet of his 

appearance on the national TV news to his home office, the broadcast flag scheme would 

prohibit him from doing so. Video bloggers and other TV watchdogs would similarly be 

unable to post broadcast TV clips on their blogs. For example, the Parents Television 

Council, which rates television programs according to how child friendly they are, would 

be prevented from posting clips from those programs for parents to see.15

The fact that the broadcast flag will limit lawful uses of copyrighted content was 

detailed in the Congressional Research Service Report entitled Copy Protection of Digital 

Television: The Broadcast Flag (May 11, 2005). CRS concluded there that 

While the broadcast flag is intended to “prevent the indiscriminate redistribution of 

[digital broadcast] content over the Internet or through similar means,” the goal of 

the flag was not to impede a consumer’s ability to copy or use content lawfully in 

the home, nor was the policy intended to “foreclose use of the Internet to send 

digital broadcast content where it can be adequately protected from indiscriminate 

redistribution.” However, current technological limitations have the potential to 

hinder some activities that might normally be considered “fair use” under existing 

copyright law. For example, a consumer who wished to record a program to watch 

at a later time, or at a different location (time-shifting, and space-shifting, 

respectively), might be prevented when otherwise approved technologies do not 

allow for such activities, or do not integrate well with one another, or with older, 

“legacy” devices. In addition, future fair or reasonable uses may be precluded by 

these limitations. For example, a student would be unable to email herself a copy of 

a project with digital video content because no current secure system exists for 

email transmission.16 

 

14 See testimony of Mitch Bainwol before House Committee on the Judiciary, Subcommittee 

on Courts, the Internet, and Intellectual Property for the hearing on "Content Protection in the Digital 

Age: The Broadcast Flag, High-Definition Radio, and the Analog Hole," November 3, 2005 at 4, 

found at http://judiciary.house.gov/media/pdfs/bainwol110305.pdf; and Mitch Bainwol, Out, P2P 

Paranoia, In: Platform Parity, Billboard Magazine, January 7, 2006 at 4. 

15 See www.parentstv.org. 

16 CRS Report at 5. 
94

Proposals for an audio flag for broadcast and satellite radio similarly, and perhaps 

even more directly, place the FCC in the position of determining consumers’ rights under 

copyright law. For example, the Ferguson bill gives the FCC authority to issue licenses 

for satellite and digital broadcast radio transmission and reception devices that must 

include prohibitions against unauthorized copying and redistribution of transmitted 

content through the use of a broadcast flag or other similar technology, in a manner 

consistent with the purposes of other applicable law. 

 

Under this proposal, the FCC is placed in charge of determining both 1) the extent to 

which unauthorized copying (which is legal is some circumstances) of digital broadcast 

and satellite radio content is permitted; and 2) determining what kind of copying and 

redistribution of audio content is permissible. In other words, the FCC is given the power 

to control the extent to which consumers can engage in personal copying. 

Not only does this language give the FCC power to set copyright law, it also directly 

conflicts with current copyright law, specifically the Audio Home Recording Act – which 

explicitly gives consumers the right to record digital radio transmissions for 

noncommercial use.17 

Any Broadcast Flag Legislation Must Be Coupled With DMCA Reform and Include 

Public Interest Exceptions 

As discussed above, Public Knowledge believes that technology mandates like the 

video and audio broadcast flags are misguided industrial policies that would constitute a 

radical expansion of the FCC’s powers while radically diminishing consumers’ rights. If 

the first rule for policymakers in technology and copyright debates is “first do no harm,” 

then your course of action should be to let an already thriving market continue to grow. 

Nevertheless, if Congress decides to impose flag schemes for digital television 

and/or digital radio, it must attempt to ensure that consumer’s rights under the Copyright 

Act and the public interest under the Communications Act are preserved. The latter is 

particularly critical given that Hollywood seeks to limit access to free over-the-air 

broadcasting, which by law exists to serve the American people with, among other things, 

local news and public affairs programming. Thus, any broadcast flag legislation must be 

coupled with legislation to permit circumvention of technological protection measures for 

lawful uses and must include meaningful exceptions for 1) news and public affairs 

programming; 2) distance education; and 3) programming in the public domain. 

DMCA Reform 

 We urge Chairman Barton to keep his promise to consumers that the full Energy and 

Commerce Committee will not approve any broadcast flag legislation unless it is coupled 

with legislation to permit circumvention of technological protection measures for lawful 

uses. Because of broadcasting’s special role in American society, it is imperative that 

consumers be able to circumvent technological protection measures like the broadcast 

flag in order to engage in lawful uses of that content. This is particularly important as 

more and more people use weblogs to comment or criticize our culture. 

Public Knowledge is grateful that Chairman Barton has co-sponsored H.R. 1201, the 

Digital Media Consumers Rights Act. H.R. 1201 would provide an exception to the anticircumvention provisions of the Digital Millennium Copyright Act (DMCA), for lawful 

uses of copyrighted content. We believe that it is a narrowly tailored law that will 

preserve fair use rights for the digital age. Critics contend that H.R. 1201 is an invitation 

to piracy – but determined pirates do not need or use fair use to engage in illegal activity. 

H.R. 1201 only permits lawful activity. Those who flout copyright law will continue to 

be subject to all the penalties that the law permits. 

 

17 17 U.S.C. §§1000-1010. 
95

News and Public Affairs Programming 

Under the Communications Act of 1934, broadcasters are tasked with serving as 

public trustees in exchange for the free use of public spectrum. As part of that duty, 

broadcasters are tasked with providing news and public affairs programming which serve 

the needs of the local communities that they serve. This programming, in essence, is 

payback to local viewers for the right to use a valuable resource: the public airwaves. 

Broadcast news and public affairs programming is also a common source of 

comment, criticism and follow-up news on a variety of digital media. Websites and 

weblogs abound with fair use clips of such broadcast programming. Such comment and 

criticism would not be possible under a broadcast flag scheme. 

For these reasons, any broadcast flag legislation should exempt news and public 

affairs programming. To the extent that the studios claim the need for a broadcast flag to 

protect secondary markets for programming, there is no such market for news and public 

affairs programming, since it is outdated soon after it airs.18 

The exceptions language included in the broadcast flag provision which is part of 

the pending Senate telecommunications reform bill, S. 2686, is wholly inadequate. That 

provision exempts news and public affairs programming “the primary commercial value 

of which depends on timeliness.” However, it is entirely up to the broadcaster to decide 

whether that test is met. Undoubtedly, the studios will pressure the broadcaster to decide 

that the primary commercial value of such programming does not depend on timeliness – 

ensuring that most, if not all, news and public affairs programming is flagged. This is an 

exception that swallows the exception. 

Distance Education 

Any broadcast flag law must also exempt distance learning for non-profit and forprofit libraries and higher educational institutions. As more and more Americans receive 

their educations online, those institutions must be able to redistribute broadcast 

programming that is part of a distance education curriculum. For non-profit higher 

education institutions, the ability to do so is guaranteed by the TEACH Act, Pub. L. 107-

273. While for-profit educational institutions are not protected by the TEACH Act, there 

is no rationale for treating these institutions differently than non-profits. Both are 

dedicated to distance education and both use broadcast programming to engage in that 

activity. 

The broadcast flag provision in the Senate telecommunications reform bill also is 

inadequate to protect the rights of libraries and universities to engage in distance learning. 

Under that provision, libraries and universities must seek FCC permission before they 

can engage in a task that is critical to their mission, and at least with respect to non-profit 

libraries, protected by law. 

Programming in the Public Domain 

The public domain is the reservoir of creative works that are no longer protected by 

copyright. Thus, they are free for the public to use in whatever way they please. As such 

they should not be subject to technological protection measures like the broadcast flag. 

To the extent that content owners consider the public domain to be a dumping ground of 

works with little commercial value, it is unlikely that this exemption will be used very 

often. Moreover, if content owners are concerned that a program under copyright that 

only uses a small bit of a public domain work would be required to be exempted, the 

 

18 One MPAA executive stated at a recent public forum that the studios opposed such an 

exemption because they wanted to reserve the right to sell boxed sets of shows like Meet the Press. 

This strains credulity, since if there was a secondary market for public affairs programming of this 

type, then the studios would already be selling it. 
96

legislative language or legislative history can be drafted to emphasize that only that 

programming which primarily consists of public domain materials should be exempted. 

A Technology Mandate to Close the Analog Hole is Unnecessary and Would Cause 

Great Consumer Confusion, Cost and Inconvenience 

While this hearing does not specifically address the content industry’s efforts to 

close the so-called analog hole through legislative means, those efforts are closely related 

to the broadcast flag and radio content protection initiatives, and are therefore worthy of 

mention. 

As many of you know, a bill was introduced in the House of Representatives last 

year19 that would mandate that all digital devices read and obey two specific technologies 

– an encryption technology called CGMS-A and a watermarking technology called VEIL.

The content industry claims that both of these technologies are necessary to ensure that 

analog content cannot be captured and digitized for possible indiscriminate distribution 

over the Internet. 

 I will not mince words – a government mandate to close the analog hole would be 

profoundly anti-consumer and a radical change in the historic copyright balance. Closing 

the analog hole would immediately restrict lawful uses of technology and make millions 

of consumer devices obsolete. It would not be far-fetched to predict that closing the 

analog hole will cause a consumer backlash with ramifications for device manufacturers, 

retail stores, content producers and Congress. 

Moreover, Hollywood has not clearly defined the problem it wants to fix. They 

have provided no evidence that use of the analog hole has resulted in any significant 

copyright infringement. The mere fact that a consumer can buy an analog to digital 

converter device is not evidence that such a device is being used illegally any more than 

the sale of kitchen knives indicates that they are being used for stabbings. If the concern 

is that certain individuals are taking analog content, digitizing it and placing it on peer-topeer networks, then the answer is not to close the analog hole, but to use the many legal, 

technological and marketplace tools the industry has at its disposal to combat illegal use 

of those networks. 

 Specifically, the proposed legislation suffers from a number of important substantive 

flaws. Here are just a few: 

• The analog hole technology mandate would be more intrusive than the 

broadcast flag: The content industry’s proposal mandates that each and every 

device with an analog connection obey not one, but two copy protection 

schemes. Thus, while the broadcast flag would put the FCC in charge of design 

control just for technologies that demodulate a broadcast signal, the proposal 

would put the inexperienced and overworked Patent and Trademark Office in 

charge of mandating the design of every device with an analog connector, 

including printers, cellphones, camcorders, etc. Like the broadcast flag, it sets 

in stone a copy protection technology for technologies that are always 

changing. 

• The analog hole mandate would impose a detailed set of encoding rules that 

would restrict certain lawful uses of content. The House bill includes tiered 

levels of restriction based on the type of programming (e.g., pay-per-view, 

video on demand) that limit lawful uses in a manner that ignores the four fair 

use factors of 17 U.S.C. §107. This upsets the balance established in copyright 

law between the needs of copyright holders and the rights of the public by 

placing far too much control over lawful uses in the hands of the content 

producers. 

 

19 H.R. 4569: The Digital Transition Content Security Act of 2005, 109th Cong. 2005. Found at: 

<http://www.publicknowledge.org/issues/hr4569> 
97

• The mandate would eliminate the DMCA’s safety valve. This Committee has 

been the leader in ensuring that the anti-circumvention provisions of the Digital 

Millennium Copyright Act do not unintentionally impinge on fair use. A 

common justifications for limitations on fair use imposed by the DMCA is that 

individuals who want to use excerpts of digitally protected content like DVDs 

can copy snippets using the analog outputs on a TV set or by recording the 

screen with a video camera.20 An analog hole mandate would eliminate this 

safety valve. 

• The bill would mandate and unproven and disputed technology. While the 

CGMS-A + VEIL technology was discussed at the Analog Hole Reconversion 

Discussion Group, a standards group with both industry and public interest 

participation, it was quickly dismissed as not worthy of further consideration. 

Thus, this technology has not been fully vetted by industry and public interest 

groups. If Congress feels it must do something about the analog hole, at a 

minimum it should refer the technology back to industry and public interest 

groups so CGMS-A + VEIL can be thoroughly analyzed for its impact on 

consumers and the cost to technology companies. In the complete absence of 

any such review, the one-sided imposition of such a detailed technology 

mandated would be unprecedented. 

The Proper Balance Between Content Protection and Consumer Rights Should Be 

Set by Copyright Law and Marketplace Initiatives 

I am often asked the following question: if Public Knowledge opposes the broadcast 

flag, radio content protection and closing the analog hole, what are better alternatives to 

protect digital television and radio content from infringing uses? The best approach to 

protecting rights holders' interests is a multi-pronged approach: by better educating the 

public, using the legal tools that the content industry already has at its disposal, and the 

technological tools that are being developed and tested in the marketplace every day. In 

the past eighteen months alone, content industry has used and won several important new 

tools to protect content, including: 

• The Supreme Court’s decision in MGM v. Grokster and its aftermath. The 

Supreme Court gave content owners a powerful tool against infringement when 

it held that manufacturers and distributors of technologies that are used to 

infringe could be held liable for that infringement if they actively encourage 

illegal activity. As a result, a number of commercial P2P distributors have gone 

out of business, moved out of the U.S., or sold their assets to copyright holders. 

• Lawsuits against mass infringers using P2P networks. Both the RIAA and the 

MPAA continue to sue individuals who are engaged in massive infringement 

over peer-to-peer (P2P) networks. By their own admission, these lawsuits have 

 

20 See Testimony of Dean Marks, Senior Counsel Intellectual Property, Time Warner, Inc., and 

Steve Metalitz, Representing Content Industry Joint Commenters, before the Copyright Office in 

Rulemaking Hearing: Exemptions From Prohibitions On Circumvention Of Technological Measures 

That Control Access To Copyrighted Works, May 13, 2003 at 60-61: “I think the best example I can 

give is the demonstration that Mr. Attaway [MPAA Executive Vice President for Government 

Relations and Washington General Counsel] gave for you [Marybeth Peters, Registrar of 

Copyrights] earlier this month in Washington in which he demonstrated that he used a digital 

camcorder viewing the screen on which a DVD was playing to make a excerpt from a DVD film and 

have a digital copy that could then be used for all the fair use purposes....” (Mr. Metaliz at 60.) “I 

agree with everything Steve has just said about fair use copying or taking clips ... with digital 

camcorders and analog camcorders being widely available ...” (Mr. Marks at 61). 
98

had both a deterrent and educative effect. The RIAA now characterizes the P2P 

problem as “contained.”21

• Passage of the Family Entertainment and Copyright Act. The FECA gave 

copyright holders a new cause of action to help limit leaks of pre-release works 

and made explicit the illegality of bringing a camcorder into a movie theatre. It 

also provided for the appointment of an intellectual property “czar” to better 

enforce copyright laws. 

• Agreements by ISPs to pass on warning notices. The war between Internet 

Service Providers and content companies has begun to cool. Last year, Verizon 

and Disney entered into an agreement by which Verizon will warn alleged 

copyright infringers using its networks, but will not give up their personal 

information to Disney. Verizon officials have told me that they intend to enter 

into similar agreements with other content providers. 

• Increased use of copy protection and other digital rights management tools in 

the marketplace. As discussed above, there are numerous instances of the use 

of digital rights management tools in the marketplace. iTunes Fairplay DRM is 

perhaps the most well known, but other services that use DRM include MSN 

music and video, Napster, Yahoo Music, Wal-mart, Movielink, CinemaNow 

and MovieBeam. The success of some of these business models are a testament 

to the fact that if content companies make their catalogues available in an easily 

accessible, flexible and reasonably priced manner, those models will succeed in 

the marketplace without government intervention. 

These tools are in addition to the strict penalties of current copyright law. To the 

extent that the content industries are looking for a “speed bump” to keep “honest people 

honest,” I would contend that many such speed bumps already exist, while more are 

being developed every day without government technology mandates. 

Finally, by far the most effective means of preventing massive copyright 

infringement involves the content industry doing what it took the music industry far too 

long to do22 – satisfy market demand by allowing consumers to enjoy fair and flexible 

access to content at reasonable prices (inevitably produced in a free market). DVDs are 

the best example of the market working. There, a government mandate –the Digital 

Video Recording Act--was rejected and an industry-agreed upon fairly weak “keep 

honest people honest” protection system was adopted. Despite the fact that the protection 

system was defeated long ago, the DVD market has grown at an astounding rate – from 

zero in 1997 to $25,000,000,000 in sales and rentals last year. Moreover as I noted 

above, many other new digital music and video distribution models, developed with 

content industry support and industry-agreed upon content protection, are emerging in the 

market. We believe that these efforts make government intervention in the free market 

unnecessary. 

Conclusion 

The content and technology industries are moving forward, together, to provide the 

digital content and the digital machinery that consumers are buying and enjoying. 

Technology mandates like the broadcast flag and radio content protection are a step 

 

21 Jefferson Graham, RIAA Chief Says Illegal Song-Sharing “Contained”, USATODAY.COM, 

June 12, 2006, at: http://www.usatoday.com/tech/products/services/2006-06-12-riaa_x.htm. 

22 See Keynote Address of Edgar Bronfman, Chairman and CEO of Warner Music at 

http://www.tvworldwide.com/events/pff/050821/agenda.htm. “The Music Industry, like almost 

every industry faced with massive and rapid transformation first reacted too slowly and moderately, 

inhibited by an instinctive and reflexive reaction to protect our current business and business 

models.” 
99

backward from this progress, limiting both innovation and consumer choice while 

increasing costs to innovators and consumers. I urge the subcommittee to look at recent 

marketplace developments and consider whether government action here would do far 

more harm than good. Thank you. 

MR. FERGUSON. Thanks very much to all three of you. I will begin 

the questioning. Mr. Attaway, will video content providers be less 

willing to invest in digital content absent a broadcast video flag and why 

or why not? 

 MR. ATTAWAY. Absolutely. Ms. Sohn just said that she supports 

the use of technology to prevent content. Well, we are using technology 

on the vast majority of the services you see on that chart to protect our 

content against redistribution. Only over the air broadcasters lack the 

ability to do that because they broadcast free in the clear. They are not 

encrypted. What we are trying to do is get broadcasters on a level 

playing field by using the same technology that all these other services 

are using to protect against redistribution. If broadcasters can’t do that, it 

is axiomatic that the owners of valuable content, if given a choice 

between licensing the services that protect against redistribution and 

those that don’t, are going to license to the ones that protect the content. 

They have to. They have to protect their content against--they have to 

protect their markets. 

 So absolutely, yes, without reinstituting the broadcast flag, highvalue content is going to migrate away from over the air broadcasters to 

cable and satellite services, where it could be protected. 

 MR. FERGUSON. Ms. Sohn, the FCC, and I want to make sure I get 

through my questions here, the FCC adopted broadcast flag rules that by 

many accounts were fair. They are workable for content owners. They 

are workable for manufacturers, for consumers. Those rules were struck 

down but not on substantive grounds. They were struck down on 

jurisdictional grounds. Why shouldn’t Congress just grant the FCC 

authority to implement the rules that have already been sort of vetted 

through this whole process? 

 MS. SOHN. Well, because they are profoundly anti-consumer and 

they put an agency-- 

 MR. FERGUSON. We sort of went through this long process that 

everyone says was a great process, it was an important process, sort of 

common ground was found, it was vetted through all sorts of players, 

everybody at the table, how many years it took to do it, and then it was 

struck down again. Not because of the content of the agreement but just 

because they didn’t have the jurisdiction to do it. 

 MS. SOHN. Well, except that the court said that the FCC had never 

exercised such sweeping powers. I mean, yeah, it was a jurisdictional-- 

 MR. FERGUSON. But again that has nothing to do with the content. 
100

 MS. SOHN. What is that? 

 MR. FERGUSON. That has nothing to do with the substance. It just 

says it is a jurisdictional issue. 

 MS. SOHN. Well, unless you believe that the FCC, a government 

agency, should have power to dictate technology design for every single 

device that demodulates a television. 

 MR. FERGUSON. But this is something that has gone through this 

incredible vetting process. All the court said was Congress hasn’t given 

FCC the power to do that. Why wouldn’t we just do it if it has gone 

through this process? 

 MS. SOHN. Because it is anti-consumer and it does obsolete devices. 

And the notion that there was a consensus is way overblown. So the 

FCC certified 13 technologies but-- 

 MR. FERGUSON. We had folks who were on your side of this 

argument on a previous panel saying this was the model, this is Utopia, 

this was the Nirvana of coming up with a solution. 

 MS. SOHN. But if there is consensus-- 

 MR. FERGUSON. You are telling me that they were just wrong? 

 MS. SOHN. Well, if there is consensus then why do we need 

Government to act? Then let them just do it. 

 MR. FERGUSON. Because the court said jurisdictionally they kind of 

found this technical jurisdictional issue. We’ve got a solution for that. 

The Congress has a solution for jurisdictional issues. We just grant them 

the authority to implement something which all the players have already 

worked out. 

 MS. SOHN. Well, again, the reason even if you construe this as a 

narrow jurisdictional decision the broadcast flag scheme would place the 

FCC as an arbiter of what technologies come to market and what don’t. 

It would be bad for the lawful uses that consumers make of technology, 

and it would also be bad for cost and the digital television transition 

purposes. 

 MR. FERGUSON. Mr. Gonzalez. 

 MR. GONZALEZ. Thank you very much, Mr. Chairman. I will just 

go back to some basics so I can try to get an understanding of what this 

whole thing is all about. And that is you have the content people. They 

actually have the product. Then we have broadcasters that deliver the 

product. Then we have manufacturers that obviously manufacture all the 

equipment to accommodate all that, that whole scheme. But in that mix 

we have certain legal principles, certain rights that are recognized since 

time and memorial, the royalty scheme, copyright scheme and such, and 

I don’t ever want to toss that away. Something that is always 

predominant of course is the consumer, the customer, the citizen, and 
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what we are getting out there, when we get it, is it fair, it is a level 

playing field and so on. 

 And I said this earlier, the big boogey man has always been 

redistribution because one of the principles that I think we are always 

going to adhere to is fair use. When I got to this committee it was I love 

all these concepts but fair use. What is fair in any particular context 

depending where technology is and so on kind of changes. It is not what 

it used to be with the Xerox machine and so on which we have gone 

over. But it is still there and we have to either expand it, narrow it, or 

whatever we are going to do. Part of the solution appears to be this 

flagging system. 

 But it seems to me that as technology moves forward, the business 

concerns that used to come under the heading of redistribution are now 

coming under the heading of distribution. And what I mean is Sirius is a 

good example of that. That is you don’t have an individual that is just 

going to go and record one or two songs and eventually one or two films 

or whatever it is for personal use or to go to the lake house or back home 

and one up here in the district when we come up. It is totally different. 

 And if you listen to Ms. Ziegler and what they are providing it is 

fairly extraordinary, and that is for a fee and the right equipment you 

have a whole library that if you think in terms of numbers and you think 

in terms of royalties and copyrights and all of that, these are conceivably, 

and I am not saying that the sky is falling with every technological 

advance, but I think we do have to recognize that at some point you 

could reach where the distribution system itself equates to or is equal to 

what we are trying to avoid in the redistribution system. 

 And I don’t know if I am making myself anywhere near clear on this 

thing but I think if you are a business person out there--and I am not sure, 

Gary, that I am making myself too clear on this thing, but are we 

reaching a point where technology in a business model when it comes to 

the product itself, the content people, what they are putting out there, is 

going to be so distributed without recognizing, let us say, the royalty 

payments, the artist, the writer, Sony or whoever it is. Are we reaching 

that point? Is that possible? 

 MR. SHAPIRO. It is a good point and I do applaud you for 

recognizing the difference between redistribution and what is in the 

home. The broadcast flag for the most part is about redistribution on the 

Internet and it is a potential problem. There was a lot--it took 10 years of 

discussion. It is a technical solution which definitely works. There 

needs to be exceptions. There needs to be other things. And it is very 

different than when we are talking about the audio broadcast flag. 

 When you are talking about the audio broadcast flag, first of all, we 

cut a deal. Congress sent us away 10 years ago or so and said come back 
102

and solve this problem. We came back. We agreed to pay royalties for 

every digital audio recording product. We are paying those. The 

products are just being introduced. It is a hefty royalty. I think it is 

about $10 or $12 a pop. We are also paying--we have also agreed to 

design the devices in a way we can never make copies of copies. That is 

the Audio Home Recording Act. And in turn we got the right to produce 

audio home recording products. 

 Now what you are saying, as I hear you, is that because technology is 

advancing, consumers are being able to exercise their fair use rights 

established by Congress repeatedly. The right to record off radio has 

been recognized over and over again by Congress. But what you are 

saying is technology is advancing in such a way that maybe that is not a 

good idea anymore. I think what the prior panel totally missed was the 

concept if Congress wants to take away the right that consumers have to 

record off the radio, they should say they are doing that because that is 

what Mitch Bainwol is arguing for. 

 It wasn’t about redistribution over the Internet. It was the fact that 

consumers are exercising their rights and technology is allowing them to 

do it easier and easier. They paid for the right to their fee. They paid for 

the royalty manufacturer. The devices are restricted. But the test really 

should be a cynical one, as I said earlier, by Congress. It should be really 

an effect on innovation and creation. And I think if you look at what has 

changed in society dramatically in the last 20 years with the digital 

revolution is we made every American a creator, and we have to stop 

measuring our creativity by the financial results of 10 companies that 

compose the MPPA and the RIAA. 

 I think we have to measure by the fact that there is all sorts of new 

creativity out there, and if you listen to the content community we would 

have shut down the iPod, we would have shut down all these new 

services, we would have shut down the VCR, and that is why you have to 

be skeptical. And what I heard in the prior panel to be so dangerous you 

have the broadcasting industry, radio broadcasters only, not the satellite 

people, negotiating with the RIAA over how satellite radio will be 

regulated and how devices will be regulated. And that is considered 

negotiation. 

 Hillary Rosen, the President of the RIAA, Jack Valenti, the President 

of Motion Pictures Association, and I created the CPTWG, the Copyright 

Protection Trade Working Group, and the RIAA was part of that. We 

created a DVD standard together. We created the broadcast flag. The 

RIAA walked away. They said we have nothing to do--digital radio 

went through the FCC. The RIAA had nothing to do with it until 3 years 

ago, Mitch comes in and said, my God, we have this huge problem with 
103

digital radio, and now they are killing the product that radio broadcasters 

need and are threatening satellite radio. 

 And what is the result? It will be a doubling or tripling of price for 

satellite radio subscribers. Ten million subscribers are going to have to 

pay a lot more. 

 MR. GONZALEZ. And I know I am over my time but would you 

indulge me, Mr. Chairman, to allow the other two witnesses to respond 

on this particular point or anything else that they feel they need to 

address? 

 MR. FERGUSON. I would just ask that they do it very briefly. Mrs. 

Blackburn is here and it is her turn. 

 MR. ATTAWAY. Thank you. I just want to respond to the point that 

Mr. Shapiro was making. He accused us of being Chicken Little but yet 

he is the one that is saying that if you protect content it is going to stifle 

innovation and bar technology. Well, the facts show that that simply 

isn’t true. Movies are available today in more venues, on more different 

types of devices than ever before in history, and it is the movies, it is the 

content that is driving this new technology. The studios are at the 

forefront of using new technology to offer consumers greater choice. We 

are not Chicken Little. 

 MR. FERGUSON. Ms. Sohn, very briefly. 

 MS. SOHN. Yeah. Mr. Attaway just undercut the answer to your 

question, Mr. Ferguson, to the extent he said movies are everywhere. 

Okay. So they are making high quality content available. Sixty-six 

percent of prime time programming is in HD, high definition, so the 

notion that they are not going to make their content available if they 

don’t have this flag is belied by the facts. In 2002, Viacom threatened to 

not do any HD programming unless they got a broadcast flag. Well, 

guess what? CBS is doing tons of high definition broadcasting. 

 MR. FERGUSON. Mrs. Blackburn is recognized for questions. 

 MRS. BLACKBURN. Thank you all. Thanks for staying here for the 

afternoon. Not any of you probably thought that you were going to be 

spending the afternoon with us but this is always a good debate and 

being certain that we protect all of our content creators is a discussion 

that I am enjoying having on an ongoing basis with Mr. Shapiro. 

 He has great innovators that are members of his organization. So, 

Mr. Shapiro, let us continue our dialogue, how about that? And go back 

to Mr. Ferguson’s bill, and you are critical of the bill and there are some-

-and I appreciate being invited to speak to your groups and sometimes 

there are some that will say we are trying to confuse the issue or that you 

guys are trying to confuse the issue by saying that new devices from XM 

will comply with the Audio Home Recording Act, and we have great 

discussions about it. 
104

 Some people think this is a red herring because the fee paid is 

minimal and it is not sufficient for the download service that they are 

providing, and we have our entertainers that, basically as we heard Mr. 

Harris say that some of these devices, his revenue is going to be gone, 

and he is not going to be making revenue. So, don’t you think there 

ought to be some kind of new services compensation for the songwriters 

so that they are being compensated? Don’t you think there should be a 

way with these new devices that they are going to be compensated? 

 MR. SHAPIRO. Well, thank you, and thank you for coming back and 

I was looking forward to the moment you had your voice back. The last 

time I was up here, I was terrified when you didn’t have a voice. 

 MRS. BLACKBURN. Oh, I made sure that I was ready for today. 

 MR. SHAPIRO. What you are asking as I hear it, is because 

technology is changing there must be new ways to compensate creators, 

and what I would ask you to recognize is we did cut a deal with the 

music industry as Congress asked us to. We came back, and that deal is 

kicking in now because every one of these devices that they are so 

concerned about, as a result there would be an enormous royalty paid. 

That is why when they say it is only $2 million, yeah, because they 

haven’t been sold yet. 

 Now if they will be sold, well, depending on what happens with the 

lawsuit obviously, there will be significant amounts of money. 

 MRS. BLACKBURN. Let us qualify that because it is fractions of a 

penny. 

 MR. SHAPIRO. No, let me--can I just explain? 

 MRS. BLACKBURN. Okay. Go ahead. 

 MR. SHAPIRO. I need some help here. I think it is $8 to $10 per 

device sold goes directly to the music industry, and the reason it is very--

this is just per device. 

 MRS. BLACKBURN. Yes. Yes. 

 MR. SHAPIRO. In addition, there is the monthly fee which they get a 

very large cut of. I understand Sirius and XM are the largest payers of 

royalties to the music industry. And then there is also the fact that we are 

by law, the deal we cut with the music industry at the request of 

Congress, we have agreed to restrict every device so that it may not make 

copies of copies. So essentially the sky is not falling. 

 MRS. BLACKBURN. We are here for the flag. 

 MR. SHAPIRO. Yes, we all are. 

 MRS. BLACKBURN. And we all support a flag. 

 MR. SHAPIRO. And I think it is good to talk about--we want this 

great creativity, but I think the fact is that we believe the devices 

encourage great creativity by everyone. I think what I would like to do is 

define the difference that we have because I think we do have a 
105

difference. And I think what I have heard you say earlier today is that 

you do not think that consumers in all cases should have the right to 

record from radio and aggregate it, and that is what Mr. Bainwol is 

asking to change and that is why there is this proposal out there. 

 And that is where the difference is right now, and the question is do 

consumers have the right to record off of radio or at least off of satellite 

and HD radio, and that is the question. And if it is a TiVo in the 

broadcast world they do with TiVo because the video broadcast flag is 

just about sending stuff over the Internet, and if we want to talk about 

sending stuff over the Internet, we want to negotiate about a flag, let us 

do that. We have been asking the RIAA to talk about that for years. But 

talking about what consumers do in their home is what we are focused on 

here. 

 If Congress wants to take away the right that consumers have to 

record off the radio that is what Congress has the right and privilege to 

do, but that is what this is about. 

 MRS. BLACKBURN. Well, I think that what we have to look at there 

too is--and all of that sounds good but, Mr. Shapiro, if you can sort a file 

and you can store that file and then you can redistribute that file you are 

playing with something that is a horse of a different color, and that is 

where we have such a difference of opinion. And it works out, when you 

look at what is paid by radio there is very little that ends up going to that 

songwriter on that royalty, very little on per song but, we have-- 

 MR. SHAPIRO. Excuse me, could I just correct one thing? The 

redistribution is not permitted with these devices so what you are talking 

about is recording in the home. Every device-- 

 MRS. BLACKBURN. In a perfect world. 

 MR. SHAPIRO. No, that is what we are talking about today. 

 MRS. BLACKBURN. Mr. Chairman, my time is over, and I will yield 

back. 

 MR. FERGUSON. Thank you, Mrs. Blackburn. I have one follow-up 

question with Ms. Sohn. When we are talking about this video flag 

provision, I believe your organization and perhaps others have argued for 

a news exception, and I just want to explore that a little bit. Now 

obviously broadcasters and others have talked about without this content 

protection they have less of an incentive or less of an ability to protect 

their intellectual property, their investment and their product, et cetera. 

 Obviously news organizations do the same thing when they produce 

a product, when they produce a newscast. They have invested resources 

to produce that news content. If the FCC’s flag rules still allow personal 

copying and limited Internet sharing, why is there a need for a news 

exception, and how do we define what is news? 
106

 MS. SOHN. Well it doesn’t allow limited Internet sharing. That was 

the point I made in the testimony is that broadcast flag not only prohibits 

indiscriminate redistribution over the Internet, it prohibits all distribution 

over the Internet so that is number one. Number two, news and public 

affairs programming, the thing about news and public affairs is that the 

day after it plays it doesn’t have any value, all right, and I have heard 

some people say, well, we might want to sell DVD sets of Meet the 

Press. Well, if that was the case why don’t we see it on the shelves 

already? 

 So one of the rationales for the broadcast flag is that, well, if our 

movies are pirated then we are not going to be able to put them on DVD. 

We won’t be able to have secondary markets for them. Well, that is 

clearly not the case. Nobody really wants to buy the 7:00 news on DVD. 

That is number one. The second point is to the extent that broadcasters 

get free use of the public air waves, they do so because they are supposed 

to provide news and public affairs programming, and that is the type of 

programming that people blog on, they comment on, they criticize online. 

 So to take that away from the American public is basically saying, 

okay, you can spend your taxpayer dollars and give them all to the 

broadcasters for nothing and get absolutely nothing in return. 

 MR. SHAPIRO. Can I just add to that? 

 MR. FERGUSON. Forgive me. How do we define news content? 

 MS. SOHN. It is actually defined in the Communications Act. The 

exceptions to Section 315, the equal time rules, is defined there and there 

is a whole-- 

 MR. FERGUSON. Not all of us have read 315. 

 MS. SOHN. Those are the exceptions to the equal time rule. There 

are certain occurrences for news and documentary programming where 

you basically don’t have to follow the equal time rules. The FCC has a 

huge body of law defining what is, and I will say as somebody who lost 

many of these cases when I was at Media Access Project, the definition 

actually is not too broad but somewhat broad. It would cover enough to 

make us comfortable. 

 MR. FERGUSON. It just seems that that is a sticky area particularly 

with the way coverage today and broadcasts today are changing. I mean 

you could flip through the channels at any point during the day and find 

news coverage when it just sort of seems to me that those lines are 

blurring a little bit and that might be a difficult exception to both define 

and enforce. 

 MS. SOHN. Well, again, like I said, the FCC has a very large body of 

law in that area so it not like they are going blind. And I also think that 

the broadcasters are pretty smart. They know what news and public 
107

affairs programming is. Now I do have a problem with the Senate 

provision and the telecom bill because it basically allows the 

broadcasters to have the exception swallow the exception. They 

obviously have to have some discretion but the FCC has to be able to 

also enforce any concerns that the public has with them defining news 

and public affairs programming too broadly. 

But under the FCC’s case law, I don’t think it is a problem actually. 

 MR. FERGUSON. Does 60 Minutes fit under that? 

 MS. SOHN. I would think so, yeah. 

 MR. FERGUSON. So that would be considered a news-- 

 MS. SOHN. News and public affairs programming, probably. I 

would have to see what the FCC has decided as far as equal time rules 

are concerned but is anybody selling 60 Minutes reruns on DVD? 

 MR. FERGUSON. Yeah. 

 MR. SHAPIRO. Mr. Ferguson, can I give you a real life example? 

 MR. FERGUSON. Sure. 

 MR. SHAPIRO. I assume you are running for re-election in New 

Jersey and you have an opponent, I don’t know. But the opponent runs 

an attack ad on your local television station against you which is totally 

unfair and your staff is incensed about it. And they call you up in 

Washington-- 

 MR. FERGUSON. Any attack ads somebody would run against me 

would be terribly unfair. 

 MR. SHAPIRO. Then you want to see it. Here you are in 

Washington. Under today they could basically copy it and send it to you 

over the Internet. No broadcast flag. In fact, as was said earlier, there is 

no exceptions. If this all passed as proposed, I don’t know what would 

happen. They would probably have to Federal Express it, a hard copy, so 

you lose 12 or 24 or 36 hours waiting for that Fed Ex to actually see how 

bad it really was. 

 There are a lot of exceptions like that which come in, and which is 

why the exceptions are important. And I don’t know if that would 

qualify as news and public affairs. I don’t know if attack ads are actually 

news. But it would affect--and there are a lot of real life situations like 

that. 

 MR. FERGUSON. Can you comment on that? 

 MR. ATTAWAY. That is simply not true. The FCC rule does 

provide-- 

 MR. FERGUSON. You have a disagreement? 

 MR. ATTAWAY. --for discriminate redistribution and in fact one of 

the 13 technologies that was certified by the FCC would permit you to 

get your attack ad sent from your district to your office here in 

Washington. I just don’t understand why I keep hearing this that the rule 
108

would prevent all redistribution when it is just simply not true, and the 

technologies certified by the FCC would permit it. 

 MS. SOHN. But what the rule says and what the technology allows 

you to do, Fritz, are two separate things, okay, so the FCC kept saying, 

well, we are not changing copyright law and this is only about 

indiscriminate redistribution. They can say that all they want but the 

technology does not permit what Gary just talked about. 

 MR. FERGUSON. When we are talking about Dateline or, what do 

you call it, 60 Minutes or Newsmakers or some of these other programs 

which seem to kind of blur the lines a little bit that is where I was going. 

I appreciate your varied viewpoints on this. One thing we have heard 

today is a lot of varied viewpoints. I know there was some comment 

from some of you on my bill which we discussed at the first panel. I 

know, Mr. Shapiro, you were cautioning against sweeping 

generalizations and Chicken Little and the sky is falling, and I would just 

respectfully ask that you not practice that either. 

 MR. SHAPIRO. I would never do that. 

 MR. FERGUSON. In your description of my bill or whatever Mr. 

Bainwol or someone else was saying, my sense is that there is certainly a 

reasonable common ground solution that folks if they just get to the 

negotiating table can come up with. It has happened before. It can 

happen again. I don’t happen to believe that government and the 

Congress getting involved in every problem is necessarily the solution, 

but when it seems like folks aren’t necessarily perhaps negotiating 

effectively and one party is severely disadvantaged by the lack of a 

negotiation that seems to me to be a market failure as someone said 

earlier today, and that is frankly the goal of my bill. 

 Thank you all, all three of you, very much for being here today. We 

appreciate it very much. 

 MR. SHAPIRO. Thank you for listening. 

 MR. FERGUSON. You are welcome. And we will adjourn this 

hearing. 

 [Whereupon, at 5:53 p.m., the subcommittee was adjourned.] 

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