U.S. GOVERNMENT PRINTING OFFICE

62–972CC WASHINGTON : 2000

VIDEO ON THE INTERNET: iCraveTV.com AND

OTHER RECENT DEVELOPMENTS IN WEBCASTING

HEARING

BEFORE THE

SUBCOMMITTEE ON TELECOMMUNICATIONS,

TRADE, AND CONSUMER PROTECTION

OF THE

COMMITTEE ON COMMERCE

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

FEBRUARY 16, 2000

Serial No. 106–94

Printed for the use of the Committee on Commerce

(

COMMITTEE ON COMMERCE

TOM BLILEY, Virginia, Chairman

W.J. ‘‘BILLY’’ TAUZIN, Louisiana

MICHAEL G. OXLEY, Ohio

MICHAEL BILIRAKIS, Florida

JOE BARTON, Texas

FRED UPTON, Michigan

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

Vice Chairman

JAMES C. GREENWOOD, Pennsylvania

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

RICHARD BURR, North Carolina

BRIAN P. BILBRAY, California

ED WHITFIELD, Kentucky

GREG GANSKE, Iowa

CHARLIE NORWOOD, Georgia

TOM A. COBURN, Oklahoma

RICK LAZIO, New York

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

JOHN B. SHADEGG, Arizona

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ED BRYANT, Tennessee

ROBERT L. EHRLICH, Jr., Maryland

JOHN D. DINGELL, Michigan

HENRY A. WAXMAN, California

EDWARD J. MARKEY, Massachusetts

RALPH M. HALL, Texas

RICK BOUCHER, Virginia

EDOLPHUS TOWNS, New York

FRANK PALLONE, Jr., New Jersey

SHERROD BROWN, Ohio

BART GORDON, Tennessee

PETER DEUTSCH, Florida

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

RON KLINK, Pennsylvania

BART STUPAK, Michigan

ELIOT L. ENGEL, New York

TOM SAWYER, Ohio

ALBERT R. WYNN, Maryland

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

TED STRICKLAND, Ohio

DIANA DEGETTE, Colorado

THOMAS M. BARRETT, Wisconsin

BILL LUTHER, Minnesota

LOIS CAPPS, California

JAMES E. DERDERIAN, Chief of Staff

JAMES D. BARNETTE, General Counsel

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

SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE, AND CONSUMER PROTECTION

W.J. ‘‘BILLY’’ TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,

Vice Chairman

CLIFF STEARNS, Florida

PAUL E. GILLMOR, Ohio

CHRISTOPHER COX, California

NATHAN DEAL, Georgia

STEVE LARGENT, Oklahoma

BARBARA CUBIN, Wyoming

JAMES E. ROGAN, California

JOHN SHIMKUS, Illinois

HEATHER WILSON, New Mexico

CHARLES W. ‘‘CHIP’’ PICKERING,

Mississippi

VITO FOSSELLA, New York

ROY BLUNT, Missouri

ROBERT L. EHRLICH, Jr., Maryland

TOM BLILEY, Virginia,

(Ex Officio)

EDWARD J. MARKEY, Massachusetts

RICK BOUCHER, Virginia

BART GORDON, Tennessee

BOBBY L. RUSH, Illinois

ANNA G. ESHOO, California

ELIOT L. ENGEL, New York

ALBERT R. WYNN, Maryland

BILL LUTHER, Minnesota

RON KLINK, Pennsylvania

TOM SAWYER, Ohio

GENE GREEN, Texas

KAREN MCCARTHY, Missouri

JOHN D. DINGELL, Michigan,

(Ex Officio)

(II)

2

C O N T E N T S

Page

Testimony of:

Alben, Alex, Vice President, Government Affairs, RealNetworks ................ 42

Beck, Stuart J., President, Granite Broadcasting Corporation .................... 28

Boren, Hon. David L., former United States Senator from the State

of Oklahoma, and President, University of Oklahoma .............................. 21

Jaszi, Peter, Professor, Washington College of Law, American University . 32

Karpowicz, Paul, Vice President, LIN Television .......................................... 37

McCallum, Ian, Vice President, Corporate Sales and Development,

TVRadioNow, Corporation ........................................................................... 14

Roback, Robert D., President, Launch Media ................................................ 25

Valenti, Jack, President and CEO, Motion Picture Association of America 11

Additional material submitted for the record:

American Society of Composers, Authors and Publishers, prepared statement of ........................................................................................................... 75

Engel, Hon. Eliot L., a Representative in Congress from the State of

New York, prepared statement of ................................................................ 75

(III)

(1)

VIDEO ON THE INTERNET: iCraveTV.com AND

OTHER RECENT DEVELOPMENTS IN

WEBCASTING

WEDNESDAY, FEBRUARY 16, 2000

HOUSE OF REPRESENTATIVES,

COMMITTEE OF COMMERCE,

SUBCOMMITTEE ON TELECOMMUNICATIONS,

TRADE, AND CONSUMER PROTECTION,

Washington, DC.

The subcommittee met, pursuant to notice, at 10:23 a.m., in room

2123, Rayburn House Office Building, Hon. W.J. ‘‘Billy’’ Tauzin

(chairman) presiding.

Members present: Representatives Tauzin, Oxley, Stearns,

Gillmor, Cox, Largent, Shimkus, Wilson, Pickering, Ehrlich, Markey, Eshoo, Engel, Wynn, Luther, Sawyer, Green, and McCarthy.

Staff present: Justin Lilley, majority counsel; Cliff Riccio, legislative clerk; and Andy Levin, minority counsel.

Mr. TAUZIN. The subcommittee will please come to order. Today

the subcommittee begins an inquiry into a number of issues involving video on the Internet. I would ask all of our friends and guests

to take seats, and the Chair will recognize himself for an opening

statement.

In many respects, the inquiry today is an extension of a longstanding interest to the chair, that being the state of competition

in the video programming markets. In one sense, the Internet is

much like cable and much like a satellite platform in that it’s capable of casting a wide array of video programming to a large audience of American and international consumers, but in another and

more important sense, the Internet is like no other medium. First,

it is global. It is geographically unconfined. It enables consumers

to quickly and efficiently copy and distribute any digitized product.

That’s what makes it a marvel, and that’s what literally makes it

so potentially important to our country and the world.

But as recent events involving widespread hacking indicate, the

Internet also invites those elements in society that refuse to recognize fundamental rules of fairness and decent conduct. It is for this

reason that Congress must proceed cautiously and deliberately as

it considers whether to extend a compulsory license to Internet

service providers.

I would note for my colleagues that Congress just concluded deliberations that were two separate satellite compulsory licenses,

and in both instances we reaffirmed our commitment to protecting

the broadcaster’s Grade B contour. We reaffirmed our commitment

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to ensuring that copyright holders have adequate protections

against piracy of their works.

Content is our Nation’s richest expert product and should not be

unwittingly exposed to piracy, and localism is still one of

Congress’s most important telecommunications objectives, one that

is enshrined in the Communications Act. So all of you in favor of

Internet-specific licenses have a very high threshold, clearly, before

Congress can proceed with that form of legislation. The Internet by

definition is ill-suited for the types of rules and obligations that

normally come with compulsory licenses. How can you define a

Grade B contour of 6 billion people? Nevertheless, we should ask

and we will ask here today what role can Congress play to facilitate enhanced service and competition in the delivery of video over

the Internet.

Today we will here from some old friends and some new friends,

an expert on copyright law, about the challenges we face in balancing of content owners and the interest of consumers. New video

streaming technology presents potential threats to content owners,

but it also offers vast new opportunities to information consumers.

We will no doubt hear from both, and we no doubt have to be concerned with both of those interests. Without a doubt, consumers

will increasingly seek to expand their viewing options, and in fact

as we know in the digital age, video will become just one part of

a digital stream of data that includes all forms of communications.

Our challenge, as it was in crafting the Digital Millennium Copyright Act, is to ensure that both content owners and consumers

maximally benefit from these exciting advances in technology. As

a committee, we can encourage further electronic commerce if we

get the balance right. We welcome the suggestions of our witnesses

about how best to meet this challenge, and we certainly expect to

learn an awful lot today.

The panel we’ve assembled for our committee today is extraordinary in its depth, knowledge, and impact upon the issues I’ve

outlined, and I expect that not only the written statements we have

already received, which I will ask now unanimous consent be made

a part of the record, and without objection it is so ordered, but the

verbal testimony we receive I think will further enhance our capacity to understand and hopefully one day make decent policy in this

very difficult area.

The Chair has extended his statement long enough to welcome

the incoming and very good friend from Massachusetts, the ranking

minority member of our committee, Mr. Markey.

Mr. MARKEY. Thank you very much, and I think everyone enjoyed being exposed to streaming Tauzin, you know, which is a special treat being here in this Telecommunications Subcommittee.

I want to commend you for calling this hearing on Internet video,

issues related to video streaming and webcasting, including debates

over whether Internet service providers are eligible to utilize the

existing statutory licenses accorded to cable operators and satellite

providers to deliver Internet video. I think that this hearing will

provide a very interesting morning of testimony and serve as a harbinger of conversations to come as packet switch delivery of video

becomes more and more prevalent over different media.

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There is no question that as deployment of Internet-based technology continues at a heady pace, that existing results that were

drawn up based largely upon the geographically rooted architecture

of cable systems or geographically licensed television broadcasting

may come under strain. We already witnessed last fall how new

satellite technology with increased capacity and new local-to-local

service sheds new light and increases scrutiny upon existing FCC

rules such as those addressing network non-duplication, syndicated

exclusivity, and sports blackout.

These rules were drawn up to promote important communications values of localism and diversity, and Congress sought to preserve these values while injecting another important value, competition, into the mix; and while fairness to various market participants and dictating parity, life as the saying, goes is not always

fair, in the new law rough equivalency was sought on many issues

between cable and satellite providers, yet rather than giving the

satellite operators a statutory license like the terrestrial license

that cable operators use which lasts forever, Congress chose to

limit the satellite license to 5 years, and it comes with a higher

rate than cable pays for same programming.

The Internet, on the other hand, is not technology specific, not

territorially limited in its natural unfettered state. It can be delivered over cable systems, phone networks, satellite technology, and

over wireless infrastructure. Once something is on the net, it can

be accessed in Boston, Bermuda, or Beijing. This international aspect of Internet assess is something that will bring many existing

rules under a new examination, and it should not change the values that drove development of our policies.

One of those values is protected intellectual property. Recently,

a Canadian-based company began streaming Canadian- and

Buffalo-based TV signals over the Internet. This company,

iCraveTV.com, argued that its service was permissible under a Canadian statutory licensing law. In the U.S., the motion picture industry and the sports leagues sued and won an injunction against

iCraveTV that ordered it to stop its webcast. This case can be cited

legally as iCraveTV v. iCreateTV.

There is lingering questions, however, that this hearing will explore which is whether the mere fact that something is delivered

through a packet switched Internet-based system means that it is

qualitatively different from other forms of delivery or legally different, and if so, we need to explore what adjustments should be

made in our policies if any adjustments should be made.

I have also found that many people in the emerging Internet industry go through life with binoculars on. They are visionary. They

can see way out into the future and tell us dreams of things to

come. Everything up close, however, is completely out of focus. I

want to encourage our panel to not only give us their vision of

where this mark will be 10 years from now or 15 years from now,

but also where they think it will be 1 or 2 or 3 years from now.

That helps us as policymakers. The vision may or may not ever

come to pass. What happens a year or 2 years or 3 years is very

real in the lives of consumers and competitors in our country.

We have an excellent panel before us today. I look to forward to

hearing from our distinguished witnesses.

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I congratulate you, Mr. Chairman, on this excellent hearing. I

yield back the balance of my time.

Mr. TAUZIN. I thank my friend. The Chair is now pleased to recognize the gentleman, Mr. Shimkus, for an opening statement.

Mr. SHIMKUS. Thank you, Mr. Chairman, and I want to mention

that today is Lithuanian Independence Day. I know Chris would

know that, but it’s important to state that publicly for the record.

Thanks for calling this hearing. The late, great Harry Kari said:

‘‘It might be, it could be, it is a home run.’’ As most of us know,

he was a Cub announcer. Before that, he was a St. Louis Cardinal

announcer. Jack Buck is quoted as saying, ‘‘Go crazy, everyone, go

crazy,’’ when the Cardinals won the pennant in the World Series.

Joe Buck said, ‘‘to the track, well, gone,’’ in reference to Mark

McGuire.

As much as those statements are indelibly sketched into any

mind by listening to St. Louis Cardinal broadcasts over 42 years,

this is also indelibly sketched: ‘‘This broadcast is authorized by the

St. Louis Baseball Cardinals and is solely intended for our listening

audience. Any rebroadcast, retransmission of the account, or description of this game without the express consent of the St. Louis

Baseball Cardinals is strictly prohibited.’’

I think that is going to be part of the major debate today as we

talk about copyright issues, and my wife, who is a church organist,

to her credit went through the library and threw away the Xerox

copies of music because of the unintended use of depriving the artist the compensation due to their works.

Having followed this issue and hearing from various parties

about webcasting, obviously I am intrigued, like all of us are, by

the possibilities the Internet holds. The question is not what if

webcasting, because it is a reality, but what are we going to do to

uphold the copyrights in a webcasting world.

I was extremely intrigued reading Mr. McCallum’s written testimony. Besides a complete lack of remorse for violating U.S. copyright law, I was struck by the utter lack of respect afforded current

copyright holders. Mr. McCallum goes to great length to explain

how Canada is different from countries who do not operate under

similar copyright principals, yet he fails to realize that the improper use of copyright materials, whether in China or Canada is

still illegal. In fact, it may be worse when someone in a country

with similar copyright principles is the violator.

We all know that webcasting is here and it offers great possibilities to consumers. How we can facilitate competition and allow consumers the greatest choices with evolving technologies will be the

next question.

Again, Mr. Chairman, thank you for calling this hearing today,

and I look forward to hearing from the people of the panel. I yield

back my time.

Mr. TAUZIN. I thank the gentleman. The gentlelady from California, Ms. Eshoo, is recognized for an opening statement.

Ms. ESHOO. Thank you, Mr. Chairman, and I want to join all of

my colleagues on the committee in thanking you for holding this

very important hearing today. I look forward to hearing testimony

from our panel of expert witnesses on the distribution of local

broadcast signals over the Internet.

5

Much of what this subcommittee has been focusing on recently

is how the current paradigm of laws will apply to E-commerce and

the new technologies created for utilizing the Internet to its fullest

potential. We are currently dealing with the changes of this paradigm in legislation which governs the use of electronic signatures

and records with the protection of data bases and with the privacy

of our personal information in the online world.

Today, we have another example of this burgeoning public policy

question. This is a very important question we are facing, namely

to investigate whether our current laws protect broadcast content

providers from copyright infringement in the online world. The

courts are likely to decide this sooner than this subcommittee or

the Congress, especially in light of the iCraveTV.com lawsuit that

I’m sure we’re going to hear more about today.

I think it would have been a big mistake if the Congress has

granted Internet webcasters the same compulsory license rights

that cable companies currently operate under. As committee members will I think recall, this was briefly considered during the conference of the Shiva legislation. How we regulate cable companies,

in my view, should not automatically—and I think the operative

word here is ‘‘automatically’’—extend to webcasters and the Internet.

That’s why these hearings are so important. Members will learn,

be able to ask very important questions, get some very important

answers back from these expert witnesses, and I think that out of

this some clarity will emerge. Just because we are having a hearing, I do not believe that that automatically should extend itself to

legislation or the launching of legislation in this area.

So, thank you, Mr. Chairman, for holding the hearing. Thank

you to the witnesses, some of whom we have welcomed back here

again and again; and to those that have not been here, a welcome

to you as well. Yield back.

Mr. TAUZIN. I thank the gentlelady.

The Chair now recognizes the gentleman from Oklahoma, Mr.

Largent, for an opening statement.

Mr. LARGENT. Thank you, Mr. Chairman. Mr. Chairman, I want

to welcome my fellow Oklahoman and former Senator and former

Governor of the State of Oklahoma and current president of the

University of Oklahoma, the Honorable David Boren, who will be

testifying on behalf of the University of Oklahoma and the NCAA.

Senator Boren, welcome. We’re glad to have you back in Washington, DC for a time.

I think this morning’s hearing can be summed up with the following question: Webcasting, a blessing or a curse? The Internet

service provider community views webcasting as a consumer-friendly blessing. ISPs contend that as broad band technologies continue

to deploy, the Internet should be allowed to compete on the same

playing field with cable, satellite, and traditional broadcast television as the legitimate alternative of distributing video programming.

This raises public policy questions of whether Internet ISPs

should have the same statutory rights as cable and satellite operators to retransmit broadcast programming without the consent of

copyright holders. The content community, television networks,

6

movie studios, broadcast stations, sports leagues, and the NCAA

take a more skeptical position of webcasting. They see the unauthorized retransmission of their intellectual property as a threat to

their economic well being.

Copyright holders will argue that the Congress did not intend

cable and satellite licenses to apply Internet-based services because

the Internet has no geographic boundaries, as is the case with

cable and satellite delivery systems. For instance, a broadcast originating in Tulsa, Oklahoma can be easily retransmitted virtually

anywhere in the world via the Internet.

The content industry has also expressed concern that unauthorized delivery of video programming over the Internet will lead to

more piracy because of the ease with which the Internet enables

computer users to copy and redistribute computer files.

I’m looking forward to the hearing from our witnesses this morning who I’m sure will offer compelling arguments on both sides of

this issue. Thank you, Mr. Chairman.

Mr. TAUZIN. I thank the gentleman.

The gentleman from Ohio, Mr. Sawyer, is recognized for an opening statement.

Mr. SAWYER. Thank you very much, Mr. Chairman. I join my colleagues in my thanks for having this hearing. My hope is that it

will touch a far broader arena than the instant case that brings it

before us.

I would like to associate myself with the comments of both you,

Mr. Chairman, and the ranking minority member, as well as a

number of my colleagues in their comments. I have an opening

statement which I will not read and would appreciate it if it could

be inserted into the record.

But let me just simply say that while we all seem to be saying

that we want to strive toward technologically neutral but legally

consistent interpretations of law that make possible the growth of

this extraordinary medium without trampling on the rights of

those who create content, and while it may also be true that courts

may resolve this more quickly than the Congress, I suspect that

that may be only because the violation, if there was one, occurred

within a convenient terrestrial venue.

The real question is whether or not this problem can be dealt

with on a global basis. We face a problem of harmonizing law and

regulation around the world and addressing the question of with

whether or not existing jurisdictional oversight through WTO and

RIPO or other kinds of legal superstructures need to be created in

order to assure that technological neutrality and legal consistency.

I hope that we can talk in terms of those mechanisms and

whether or not mechanisms will serve or whether we need to investigate further global action to deal with this particular undertaking. With that, I yield back my time and thank the chairman

for this opportunity.

Mr. TAUZIN. I thank the gentleman.

The Chair is now pleased to welcome and recognize the vice

chairman of the committee, Mr. Oxley, for an opening statement.

Mr. OXLEY. Thank you, Mr. Chairman, and welcome to all of our

distinguished witnesses.

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The Internet is revolutionizing our lives in ways we never would

have thought possible just 5 or 10 years ago. People of all ages routinely turn to the web as their primary source of news and information, and in fact, many people are listening to a live broadcast

of this hearing through the Commerce Committee’s web site even

as we speak.

Television broadcasters have started to offer their newscasts and

other types of programming to web servers as well, and while the

quality of these Internet broadcasts is currently limited, several

companies are working to perfect their video streaming abilities.

It’s only a matter of time before this technology will allow webbased broadcasts to compete on equal footing with cable and satellite delivered programming.

At the end of the last session, the House gave final approval to

the Satellite Home Viewer Improvement Act designed to promote

satellite television as a competitor to cable. I am a proud supporter

of that measure.

I look forward to this hearing on what role Congress should play,

if any, as Internet video broadcasts emerge as a serious competitor

to cable and satellite. I welcome the opportunity to discuss whether

Congress should establish a separate licensing system for Internet

service providers or if these ISPs should be allowed to use existing

statutory licenses to deliver programming.

In light of the recent court ruling against the Canadian company

iCraveTV.com in which the motion picture studios and sports organizations won an injunction against the company for distributing

their programming on the Internet, I look forward to hearing from

Mr. McCallum of iCraveTV, Mr. Valenti, of course, from the motion

picture association, and our former Congressional colleague, Mr.

Boren, President of the University of Oklahoma, and other witnesses as well.

Thank you all for coming today, and I yield back. Thank you, Mr.

Chairman.

Mr. TAUZIN. I thank the gentlemen.

The gentlelady from Missouri, Ms. McCarthy, is recognized for

an opening statement.

Ms. MCCARTHY. Thank you very much, Mr. Chairman. Like my

colleagues, I seek a balance between advancing technology such as

webcasting and protecting the content creators and their copyright

material. We must be about the business of fostering new opportunities for providing content on the Internet as we assure that intent provides an efficient, secure, and profitable marketplace. Experimentation should be encouraged, and freedom, including the

freedom to exercise property rights in content, should be the basic

rule of the Internet.

Let’s be careful, Mr. Chairman, not to rush to implement policy

that may hamper the development of the Internet freedom of creativity or the technological advancements of the future of the Internet, and that is why I look forward very much to the testimony of

this distinguished panel today and to working with you, Mr. Chairman, on this issue. I yield back.

Mr. TAUZIN. I thank the gentlelady.

The gentlelady from New Mexico, Ms. Heather Wilson is recognized.

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Ms. WILSON. Thank you, Mr. Chairman. I’m interested in hearing from the panel. My district has a number of radio and television stations who are moving to the web. In fact, in the morning

I listen to 770 KKOB from downtown Albuquerque, New Mexico

here in my office, and our three television stations have web sites

which are relatively new but I’m sure will begin streaming their

broadcasts shortly, and the reality is I like it. I’m a consumer of

that information, and I suspect that what’s really driving all of this

is that a lot of people like it.

The question is what if any regulation should apply to those

kinds of broadcasts. I’ll be interested to here what the panelists

say, particularly with respect to the protection of copyrights, in

making sure that advertising revenues go where they really should

go; but with respect to trying to control this, you know, there is

reason for licenses. It’s because we were allocated limited resources

like the broadcast spectrum or we were trying to limit and control

monopolies like the one, cable, that’s provided to your home, but

the wonderful thing about the Internet is that it is so unlimited.

I have a choice between KKOB out of Albuquerque or a whole

lot of other things online, and I think that is the wonderful thing

about this. Thank you, Mr. Chairman.

Mr. TAUZIN. I thank the gentlelady.

The gentleman from Mississippi, Mr. Pickering, is recognized.

Mr. PICKERING. Mr. Chairman, I’ll be very brief. I just want to

thank you for holding this hearing. This is an extremely important

issue as we go forward to new technologies, that we want to make

sure that we maintain the copyright and property rights. It is extremely important, but I do believe that we need to be cautious before we take any specific mandated approaches, and so I look forward to hearing from the panel today and look forward to working

with you on this issue as we go forward.

Mr. TAUZIN. I thank my friend.

The gentleman from California, Mr. Cox, is recognized for an

opening statement.

Mr. COX. Thank you, Mr. Chairman. Webcasting is good. Part of

what we may be debating here is that question, but I do not think

there is a question. I think webcasting is good. It’s good for consumers who are provided with an alternative to cable or satellite

or terrestrial broadcast. It’s also good for the creative content providers, and it’s good for producers of that material and distributors

of that material, because the lesson of the 20th century is that new

technologies create new markets.

The only people who should be threatened by the Internet are

those who want to preserve the status quo and insulate themselves

from new kinds of competition that they have not already met. So

the Internet is a threat. It’s a threat to the status quo, and it’s a

threat to the comfortable, privileged position of industries beyond

what we are talking about here today that have not had to face

this kind of dynamic competition and anyone who wants to keep

competitors out.

The Internet will permit consumers to get what they want unless

the Government passes laws to prevent it. So we need to be attentive to our responsibilities here and make sure that we protect intellectual property, but that at the same time we resist the enVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 62972.TXT HCOM2 PsN: HCOM2
9

treaties of competitors who may use arguments of that type to prevent competition. It requires a good deal of judgment on our part,

but I think that this hearing will help us make that judgment.

I thank you, Mr. Chairman.

Mr. TAUZIN. I thank the gentleman.

The gentleman from Florida, Mr. Stearns, is recognized.

Mr. STEARNS. Mr. Chairman, thank you very much. Now, Mr.

Chairman, I think you have got a tiger by the tail here. You know,

I was thinking about what 40 years ago, maybe in the 1960’s when

cable started, probably these same type of questions were proposed

and thought about, you know, what we source do television stations

have in terms of copyright, what about international treaty organizations where the copyrights are violated.

So I think out of all the hearings both on the House and Senate,

Mr. Chairman, I think you have got the tiger by the tail here.

Mr. TAUZIN. Would the gentleman yield?

Mr. STEARNS. Yes, I’d be glad to.

Mr. TAUZIN. I direct your attention to a little book called A Victorian Internet. It’s a book that describes all these same issues

when the telegraph was first invented.

Mr. STEARNS. Yes. I think that is where we are at, and Mr.

McCallum is going to have to make the argument that what appears to be they have 1, 2, 3, 4, 5, 6, perhaps, and the two of you

are going to have the make your case against these six, but just

remember the cable TV operators made the same argument 40

years ago and they were successful. So you now have to do the

same thing, and I think of all the members have pointed out we

want to be very cautious about this. We want to make sure that

copyrights are protected and that the laws are obeyed, but in the

end we do not want to stymie competition, and as my colleague

from New Mexico said, how great it is just to go up on the Internet

and pull up your local television.

It is really very helpful, particularly if there are negative comments about yourself. You can quickly respond to them, whereas

you would have to wait for some constituent to call you up and say

did you know yesterday they said so and so about you.

So we have a real argument in favor of web TV, so I think the

arguments have to be made, and of course this committee, Mr.

Chairman, has to be very careful and cautious, and I thank the

gentleman.

Mr. TAUZIN. I thank the gentleman.

[Additional statements submitted for the record follow:]

PREPARED STATEMENT OF HON. TOM BLILEY, CHAIRMAN, COMMITTEE ON COMMERCE

Thank you, Mr. Chairman.

I commend you for holding this hearing. The era of Internet video has arrived.

It offers unforeseen benefits. But Internet video also raises a host of thorny issues.

Today’s hearing will help the Subcommittee sort out some of those tough issues.

And the timing couldn’t be better, because I think it is inevitable that, over time,

we will see a proliferation of Web sites like iCraveTV.com.

Many will be offshore. But eventually many will likely emerge here, in the United

States. After all, as the record industry will tell you, it was on America’s college

campuses that the MP3 revolution was born.

So let’s begin to grapple with these issues, and find out what—if any—role Congress should play in their consideration.

10

With today’s hearing, we will explore how advances in technology give consumers

more access to video programming on the Internet... while also recognizing that

technology raises serious copyright issues.

As my colleagues will recall, this debate began—and ended!—prematurely last

Autumn. Without any notice to Members of this Committee, provisions were added

to the Conference Report to the Satellite Home Viewer Improvements Act of 1999

that could have stifled the development of electronic commerce.

These provisions would have permanently excluded any Internet service from retransmitting broadcast programming pursuant to a statutory license.

Today, the Commerce Committee will assess how current law applies to the delivery of video signals over the Internet. As someone proud to represent the State that

is home to most of the major Internet service providers in the world, I have little

doubt about the importance of online communications technologies for enhancing

consumer choice.

Online technology has transformed the way consumers receive information and

entertainment. Because this transformation strengthens our economy, it is essential

that we give full attention to this issue... and carefully assess whether Congress

needs to amend current law.

In 1998, this Committee played a critical role in drafting the version of the Digital

Millennium Copyright Act that was ultimately signed into law. We demonstrated

that it was possible to strike a fair balance between the concerns of content owners

and the interests of consumers. If necessary, Congress can do so again.

I look forward to receiving the testimony of our witnesses today and working with

them in the future to produce legislation, as may be appropriate.

Thank you, Mr. Chairman, and I yield back the balance of my time.

PREPARED STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS

Thank you for holding this hearing on webcasting. For the past six to seven years

the telecommunications landscape has changed drastically. Webcasting represents

that change and the growing convergence of telecommunications technologies. Since

its inception, webcasting has been dominated mainly by live events: concerts, sporting events, press conferences. However, both local and network stations have begun

to experiment with streaming their local programs over the internet.

In Houston we have a few stations that stream their local programming over the

internet. Both KHOU, Channel 11, and KPRC, Channel 2 stream their local news.

Spending so much time in DC it is nice to be able to keep up with news from Houston as it happens.

However, I do have some general concerns about webcasting. Such as, are adequate protections available for broadcasters and companies that produce these programs? The internet has helped fuel our economic boom and our technological expansion. However, the one unfortunate facet about the Internet is the ease in which

something can be copied and retransmitted almost instantly. Second, what will happen if programs are made strictly for the Internet public. Then we, Congress, need

to ask the question, ‘‘What about the Americans who don’t have access to a computer.’’ Third, I am concerned that if we do not stop illegal webcasting now it will

grow and people will become accustomed to having illegal programming. Then we

would have a situation similar to last year’s satellite television situation.

As we continue to look at web casting, from a policy perspective. we will have to

decide one very important policy question. Do we treat ISPs like we do satellite and

cable companies and impose existing regulations on them, or do we consider ISPs

a separate entity with completely new regulations.

Thank you Mr. Chairman for holding this hearing.

Mr. TAUZIN. Does the gentleman from Massachusetts have a

unanimous consent request?

Mr. MARKEY. Yes, I would ask unanimous consent that the gentleman from Washington, a distinguished visitor to our committee

today, Mr. Inslee, be allowed to introduce one of the witnesses appearing before our committee today.

Mr. TAUZIN. Is there any objection?

Without objection, it is so ordered, and we welcome you, Mr. Inslee.

11

Mr. INSLEE. Thank you, Mr. Chairman, and thanks for this opportunity. I would like to introduce to the panel Alex Alben, a constituent whose RealNetworks streaming genius has created great

opportunities for Americans and great interest of this committee in

a new issue, and thanks for joining us, Alex.

Mr. TAUZIN. Thank you for that testimony, Mr. Inslee. I appreciate it, and welcome, Mr. Alben.

If there are no other requests for opening statements, we will

now introduce our distinguished panel, and they are distinguished,

beginning with the most distinguished Jack Valenti, President and

CEO of the Motion Picture Association of America; Mr. Paul

Karpowicz, Vice President of LIN Television in Providence, Rhode

Island; Mr. Bob Roback of LAUNCH Media; the Honorable David

Boren, who has been previously introduced, and, David, I want to

especially welcome you back to the Hill.

Mr. BOREN. Thank you, Mr. Chairman.

Mr. TAUZIN. We miss you a great deal. I’m glad to see you again,

sir.

Mr. Alex Alben, who has also been recognized, and we want to

welcome you, Mr. Alben; Mr. Ian McCallum, Vice President of Corporate Sales and Development of iCraveTV; Mr. Stuart Beck, President of Granite Broadcasting Corporation; and Peter Jaszi, a professor of Washington College of Law, who is going the teach us a

little bit about copyright, I suspect, before we’re done today.

We begin our panel with Mr. Valenti, the President of the Motion

Picture Association of America. Jack, as we do in our all our hearings, your written statements, as you may have noticed when I

began, are part of our record, and we have read them and we will

read them over again, and extensively, and we want to ask you,

please, if you might summarize.

We have some new incredibly expensive digital equipment that

is going to signal you when your 5 minutes are up. We would appreciate it if you would abide by the 5-minute rule. The devices will

light up green, yellow, and red to give you an indication, and if you

will all please try to abide by that rule because we have a big

panel. I would like to get as much Q and A discussion with you as

we can reach as soon as we can.

Mr. Valenti, you are welcome, sir.

STATEMENTS OF JACK VALENTI, PRESIDENT AND CEO, MOTION PICTURE ASSOCIATION OF AMERICA; IAN McCALLUM,

VICE PRESIDENT, CORPORATE SALES AND DEVELOPMENT,

TVRADIONOW, CORPORATION; HON. DAVID L. BOREN,

FORMER UNITED STATES SENATOR FROM THE STATE OF

OKLAHOMA, AND PRESIDENT, UNIVERSITY OF OKLAHOMA;

ROBERT D. ROBACK, PRESIDENT, LAUNCH MEDIA; STUART

J. BECK, PRESIDENT, GRANITE BROADCASTING CORPORATION; PETER JASZI, PROFESSOR, WASHINGTON COLLEGE OF

LAW, AMERICAN UNIVERSITY; PAUL KARPOWICZ, VICE

PRESIDENT, LIN TELEVISION; AND ALEX ALBEN, VICE

PRESIDENT, GOVERNMENT AFFAIRS, REALNETWORKS

Mr. VALENTI. Thank you, Mr. Chairman, very much.

As I begin, I would like to first introduce, by way of announcing,

a freshly formed group called the Copyright Assembly. These are

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all no surprises in this country to whom copyright is absolutely indispensable to their future, and probably these names I will read

out are the great favorites of the American consumer.

Let me tell you who belongs to this Copyright Assembly: First,

the ABC television network; the America Association of Advertising

Agencies; the Association of American Publishers; the American Society of Composers, Authors, and Publishers; Professional Baseball;

Broadcast Music, BMI; Business Software Alliance; CBS; Directors

Guild of America; ESPN; FOX; Interactive Digital Software Association; the LPGA Tour; the PGA Tour; Magazine Publishers of

America; NBA; the National Association of Broadcasters; the National Cable Association; NCAA that’s going to be represented here

today by a former Governor and former Senator from Oklahoma,

now the President of the University of Oklahoma, David Boren; the

National Football League; the National Hockey League; the National Music Publishers Association; NASCAR; NBC; Newspaper

Association of America; the Recording Industry Association of

America; Screen Actors Guild; Software and Information Industry

Association; the Writers Guild of America; MGM Studios; Paramount Pictures; Sony Pictures; Time Warner; 20th Century Fox;

Universal Studios; and Walt Disney.

Mr. TAUZIN. Name dropper.

Mr. VALENTI. That’s how I make may way through life, Mr.

Chairman.

First, I want to associate myself, I think as is the Congress way,

although Chris—I mean Congressman Cox is gone, he said the

Internet is good. I associate myself. He’s absolutely correct.

Everyone that I mention is spending hundreds of millions of dollars to invent new business models for conveying to consumers

what they have to offer, presenting to consumers all the things that

they have created. The Internet is the future, as he said, but as

legitimate businesses emerge on the Internet, illegitimate intruders

find this a haven. It always happens. There are many people who

profess to have a great honorable intention about the advancement

of technology who oftentimes treat with a brazen disregard the

rules and the laws which govern America’s daily labor.

Now, why is this a matter of concern to this Congress? Because,

as the chairman pointed out a moment ago, people I read comprise

the greatest trade export that any country in the world could ever

have. We dominate the world as favorites for people who watch on

television or cable or satellite or the Internet, whatever. We bring

back to this country enormous billions in surplus balance of trade

when this Congress hears nothing but the soiling words of trade

deficits for which we are hemorrhaging at this time. We bring back

more—have more international revenues than automobiles and

auto parts, than aircraft, than agriculture. It is an incredible jewel

in America’s trade crown.

Now, why are we here? I’m not asking the Congress to do anything specific. What I’m asking you to do is to consider very carefully the Internet and how to deal with it. The Internet is something that is almost uncomprehending to the human mind. We

have never seen anything like it. It has nothing to do with telegraph or cable or satellite. Indeed, the difference between satellite

and cable and the Internet is the difference between lightening and

13

the lightening bug, totally different. Therefore we need to see what

is going to happen.

The second thing you ought to consider is the words of the

former speaker of this House, Sam Rayburn, who many years ago

said the three most important words in the Congressional lexicon,

Wait a minute. That’s what I’m suggesting that you do. Why? This

Internet is growing like kudzu. In 1995, there were 100,000 sites.

Today, there are 10 million. In 1995, 5 years ago—4 years ago,

there were a little less than 10 million host computers. Today,

there’s 73 million. In 1995, there were 10 million pages on the

Internet. Today, they are 1 billion.

Congressman Markey said, ‘‘Where are we going to be 1 year or

2 years from now.’’ I’m going to tell you this. All of the technology

that we find so laudable today, 1 year from now, 2 years will be

primitive, and we all know that. Neither Bill Gates nor anyone else

in this world can tell you with any precision where we are going

to be a year from now. This thing is growing so fast, piling technological advance upon technological advance.

All I am asking you to do is to be very cautious and wary about

granting compulsory licenses to anybody until you examine the

vast and massive difference between something that with one click

stroke can take you to 6 billion people instantaneously with the

speed of light. Cable cannot do it. Satellites cannot do it. Video cassettes cannot do it, and even what I’m saying today is so fascinating to me cannot do it either.

So I just urge you, Mr. Chairman—the red light. May I use the

words of the Congress here? I yield back my extra time.

[The prepared statement of Jack Valenti follows:]

PREPARED STATEMENT OF JACK VALENTI, PRESIDENT & CEO, MOTION PICTURE

ASSOCIATION OF AMERICA

To the honorable members of this Committee, let me introduce the freshly formed

Copyright Assembly. It enlists into its membership the vast array of American enterprises involved in sports (professional football, basketball, baseball, hockey,

NASCAR, NCAA), music, song-writing, advertising, software) broadcasters, both

networks and stations, cable, movies, publishing, television programs, home video.

These are the enterprises which are America’s most wanted exports, in addition to

being the favorites of the viewing, reading and listening public.

Why form a Copyright Assembly? Because we are deeply concerned about the

future of creative works. All these valued assets, protected by Copyright whose roots

are in the Constitution, are indispensable to both the culture and the economy of

the United States.

Why this concern? All the members of The Copyright Assembly are actively embracing new Internet opportunities for consumers, are developing new, inventive

business models to deliver our creative works to homes, businesses, schools, universities. Many of us are licensing our creative material to Internet companies. Hundreds of millions of dollars are now being invested by our members to develop this

new economy, which along with Gutenberg’s movable type and the invention of television, ranks as one of the great seminal entrants into the human society. We are

all eager to be part of the revolutionary technological magic. But we worry lest the

great potential, the immense future worth of the Internet, becomes tangled by overt

and covert piracy of copyrighted material.

Why is there a problem? As legitimate businesses emerge on the Internet, illegitimate intruders find the Internet a haven. These invaders steal copyrighted

works, assault legal business sites and otherwise disrupt the normalities of Internet

conduct. Piracy comes in all sizes, ingenuity and motivation. Which is why at this

moment we confront attacks by those who profess to defend technological advancement but in truth who treat Copyright with a brazen disdain for laws and rules

which guide and govern the daily labors of Americans.

14

Why should the Congress care? The Congress should hugely care because

these creative works do not spring from a void. The source bed of this creativity lies

within the imagination, artistry and ingenuity of a community of artists and craftsmen who provision Americans with most of what they read, hear and watch. It is

the summation of massive infusion of risk capital that must be, for the most part,

recouped else the risk becomes too large, the capital becomes too cautious, and the

works dry up. We should remind all who read this testimony that the members of

The Copyright Assembly comprise the greatest trade prize available to any country

on this planet. Intellectual property gathers in over $65 Billion annually in international revenues—more than automobiles and auto parts, more than aircraft, more

than agriculture! It produces new jobs at three times the annual rate of the economy

as a whole. Moreover America’s intellectual property revenue curve is rising all over

the world. No wonder it is an engine of real growth for this nation.

Why this overture to the Congress? It’s really not an overture. We are not

asking the Congress to do anything specific at this time, except to understand the

economic and cultural worth of those enlisted in The Copyright Assembly. It’s a

value that cannot be Xeroxed or cloned. As the Congress considers public policy

issues which connect to the New Technologies and the delivery of creative works to

American consumers, we urge the Members to put our concerns and our optimism

at the top of congressional priorities. When there is an advocacy for enlarging Compulsory Licenses or other congressionally mandated marketplace interventions, we

recommend that the Congress remember what former Speaker Sam Rayburn once

declared to be the three most important words in the congressional lexicon: ‘‘Wait

a minute.’’

The simple fact is this: The protection of copyright and copyrights is not antagonistic to the New Technologies, such as the Internet. Not at all. The Internet is widened and made more fruitful by our high velocity involvement in it. But if we cannot

protect what we invest in, create and own, then we don’t own anything.

Mr. TAUZIN. Again, we’ll ask you all to watch those lights because we’re going to have to get through this today as expeditiously

as we can.

We will rotate between content and Internet witnesses today,

and we will move second to Mr. Ian McCallum, Vice President corporate sales and development of iCraveTV. Mr. McCallum.

STATEMENT OF IAN MCCALLUM

Mr. MCCALLUM. I thank you, Mr. Chairman, for the invitation to

speak to you about iCraveTV. My name is Ian McCallum. I am the

Vice President of Corporate Sales of TV Radio Now Corporation

which operates iCraveTV. I come from Toronto. I’ve heard a great

deal of comments about Toronto and how nice it is. Peter Usenoff

once described it as a New York run by the Swiss.

Canadian Radio and Video Entertainment, the acronym is

CRAVE. The I is, of course, the Internet. iCraveTV, a companion

television service. One of the fundamental principles behind the inception of iCraveTV and those of us who operate it is the awareness that without copyright revenues flowing to the rights holders,

content will die. And as in all of the entertainment and information

mediums, consent is king and therefore it is imperative that regimes be established that enable the flow from the consumers back

to the creators.

One of the imperatives we realized in starting up is we had to

move fast. We realized that we were operating in Internet time, not

regulatory time, and I second everything that Mr. Valenti has said

about the speed of development of the Internet, and we’re all

caught up in that, Canadian, American legislators, content creators, content distributors.

When we started out, we believed we had a good idea and that

it would prove a popular service. We did not anticipate the level

15

of interest that it would generate and in some quarters, unfortunately, the hostility that it has arisen. We launched with 17 broadcast signals coming from Buffalo, New York and Toronto, converted

those signals from analog to digital, and distributed them out over

the Internet using the services of RealNetworks and their streaming system.

Users would come to the site. They would be ask to complete a

terms of use agreement. That would be asked to enter the area

code in Canada from where they were registering. They would then

be granted access to one of the streams by going to a TV listings

guide and clicking on that particular stream.

Our service simultaneously serves less than 4,000 viewers which

is a tiny fraction compared to the tens of millions of viewers the

same programs are receiving on Internet at the same time, and

also using a facility provided by RealNetworks, we made sure that

nobody could make copies of the programs that were being distributed.

Our service provides broadcast programming with the commercials fully intact to people who are not otherwise being served, people in remote areas, people in offices, people in universities. Furthermore, we are taking broadcast programming to the very screen

that has cost broadcasters market share over the past 5 years. This

should enable them to recapture some of that market.

The guided principles, included paying rights to the content holders, abide by all applicable laws and regulations, be first to market,

work through partnerships, and operationally be lean.

We are not pirates, never have been, never will be, and we take

extreme exception to that characterization. In part, the proof of

that is that we enjoy the support of the relevant parts of the Canadian Government, broadcast regulator, and the copyright boards.

Canadian law allows us to retransmit over the air television signals like cable, like satellite, and we are not required to obtain permission of the broadcasters before doing so.

The Canadian compulsory license for the retransmission of

broadcast signals is, I understand, similar to U.S. law on cable and

satellite transmission. The difference is that Canadian law is not

technology specific, and so Canadians do not need to have a policy

debate every time a new retransmission technology such as the

Internet is introduced.

As I mentioned, we believe that an appropriate flow of revenues

to copyright holders is important, and we initiated proceedings

with the copyright board in Canada to establish a flow, and as of

Monday of this week, the collective representing many rights holders including the MPAA have agreed to work out an appropriate

tariff.

Advertising to Canadians constitutes our only revenue base, and

due to the systems limitations, users coming from outside of Canada cost us telecommunications charges which we can not recover

because we cannot advertise to them. Initially, we tried to enforce

this geographic restriction by relying on the honesty of the users,

and this was implemented at multiple levels. When we were looking at the technology, the systems that were available to us really

resulted in us coming to this particular approach. Surprisingly, we

also found that by and large it worked up to a point.

16

However, as the outside world that is outside of Canada became

aware of iCraveTV, ironically in part due to the publicized criticisms of the security system by U.S. rights holders, it could not

work very satisfactorily for long. We were subject to fraudulent and

even criminal access to our sites. Therefore, we are implementing

an enhanced system that we have designed that not only isolates

our Canadian free transmissions from the United States but gives

us as the first company on the Internet the ability to restrict programming to any country in the world.

Mr. TAUZIN. The Chair would note the bells, when they go off,

signify a vote on the House floor, and this is probably going to happen during this hearing. So I want you all the know we are occasionally going to have to get up and make votes, and that is equally

important that we abide by these time limits.

Mr. McCallum, your time has expired. Can you wrap it up for us

now?

Mr. MCCALLUM. I will. Now we hope that this system we will be

putting into use with content under contract with many of the people represented in this room and others. We are a Canadian company. We operate in Canada for Canadians. We are not trying to

make any amendment to America law at this time. We hope that

in the process, however, you establish rules and regulations that do

not impact negatively on companies operating legally within other

countries. After all, approximately 70 percent of our retransmission

fees flow back to American companies, and if there are unrealistic,

rigorous national regulations this might result in mirroring regulations in other countries, and the losers would be us all, and certainly the underserved and the consumers and the program producing talent would lose as well.

As a final point, I would like to commend to you a piece of existing legislation that comes from the Securities Exchange Commission in an analogous content and that deals with the attempt by

companies to restrict access to securities offerings outside of the

United States, that is to restrict Americans from accessing it, and

the Securities Exchange Commission said, in conclusion, that it did

not require perfection, only serious efforts that would discourage a

great majority of potential purchasers.

Thank you, Mr. Chairman and members of the subcommittee for

your interest in iCraveTV. I would be pleased to answer any questions you may have.

[The prepared statement of Ian McCallum follows:]

PREPARED STATEMENT OF IAN MCCALLUM, VICE PRESIDENT OF CORPORATE SALES

AND DEVELOPMENT, TVRADIONOW, CORP.

I am Ian McCallum, Vice President of Corporate Sales and Development of

TVRadioNow, Corp., which operates the iCraveTV web site. I thank you, Mr. Chairman, for the invitation to speak with you about iCraveTV. When we started operation of the iCraveTV web site at the end of November of last year, we believed we

had a good idea that would provide a service that many people would want to use,

but we did not anticipate the level of interest and, in some quarters, unfortunately,

hostility that our service would arouse. We have learned a great deal, and we would

certainly do things differently if we knew in November what we know now and if

we had the technology then that has since become available. However, we continue

to believe that the idea behind iCraveTV is worth pursuing, and we think that we

can provide a desirable service that makes good use of the unique capabilities of

the Internet. We are a Canadian company run by Canadians, and we do not seek

to influence the development of American copyright law. However, we hope that

17

American law will not be applied in such a way as to make it impossible for those

outside the United States who want to operate under the laws of their own country,

and to pay a fair return to American copyright holders, to make American works

available over the Internet.

Upon its launch, iCraveTV’s operations were structured as follows: It received

broadcast televisions signals from stations in Toronto and Buffalo, New York, converted those signals from analog to digital form, and made them available to people

using the iCraveTV web site, www.icravetv.com. Someone who came to the site

could click on the ‘‘Watch TV’’ icon, get a list of television stations, and select a station to watch. By clicking on that station, the viewer could see on his or her computer monitor the show then being broadcast, either in a small corner of the monitor, or, with lower resolution, in a larger portion of the screen. (Copies of ‘‘screen

captures’’ from the iCraveTV site are appended hereto at Tab A.)

From the outset our intention has been to provide this service only to Canadians.

Advertising to Canadians constitutes our revenue base and, due to limitations on

our systems’ capacity, users coming from outside our market cost us money we cannot recover. We initially tried to enforce this geographic restriction by relying on the

honesty of users. First, we required someone wishing to use the video portion of the

web site to enter a 3-digit Canadian telephone area code in order to confirm that

he or she was located in Canada. If the user entered a number that was not a Canadian area code, a screen appeared denying that user any further access. If the user

entered a Canadian area code, a second screen appeared further warning that the

site is intended only for use in Canada, and requiring the user to make the affirmative certification that he or she was located in Canada, by clicking ‘‘In Canada,’’ in

order to proceed further. A user then reached the ‘‘Terms of Use’’ screen, which also

stated that the site was solely for the use of those located in Canada and required

acceptance of terms that included use only in Canada before proceeding further.

Thus, in order to access the programming portion of the iCraveTV Web site, a user

had to affirmatively state, repeatedly, that he or she understood that the site was

for use only in Canada and that he or she was in fact located in Canada.

Unfortunately, concern has been expressed that these precautions did not prove

sufficient to keep users from outside Canada from accessing the site. I will discuss

this problem further in a moment, but I want to address first the issue of the source

of our television broadcasts, because we think that it has been the subject of unfair

criticism. iCraveTV picked up signals broadcast from the United States into Canada, and because we had not first entered into license agreements with the United

States copyright holders, we have been accused of being ‘‘pirates.’’ This criticism is

unfounded and ignores two critical facts. First, it is perfectly legal for us to pick

up these broadcast signals, which are available free to everyone who has an antenna. These programs were intentionally broadcast into Canada as well as to the

United States, and the broadcasters took advantage of that fact, by, for example,

obtaining advertising revenue based on their Canadian as well as their American

audience. Because American copyright law does not extend beyond the borders of

the United States, we did not violate American law, or infringe American copyrights, by picking up the signals in Canada or by digitizing and retransmitting them

over the Internet in Canada.

Since we operate in Canada we do, of course, have to comply with Canadian law,

and we have made every effort to do so. Under Canadian law, it is not copyright

infringement to retransmit over-the-air broadcast signals, provided that, among

other things, the retransmitter pays royalties in accordance with tariffs set by the

Canadian Copyright Board. The majority of retransmission royalties paid by Canadian retransmitters are now, in fact, paid to collectives representing United States

copyright owners, including the major Hollywood studios, broadcasters and major

league sports leagues. Under this statutory procedure, the retransmitter has an

automatic compulsory license to communicate the retransmitted broadcast signals

to the public and needs no consent or permission from either the original broadcaster of the retransmitted signals or from any of the owners of the copyrighted

works that were included in those signals. This arrangement is not unlike the compulsory license for retransmission of network programming via satellite that now exists under United States law. (A copy of Section 31 of the Canadian Copyright Act

is appended hereto at Tab B; an op ed piece written by a Canadian law professor,

Hudson Janisch, discussing iCraveTV in the context of the evolution of Canadian

broadcasting and copyright law is appended hereto at Tab C.)

The retransmission regime established by the Canadian Copyright Act is not limited to specific technologies for the delivery of retransmitted broadcast signals. As

a result, the Canadian retransmission regime applies equally to retransmissions

made over the Internet as to retransmissions made via other media, including cable

and satellite. iCraveTV has requested the Canadian Copyright Board to set tariffs

18

for royalties for transmissions via the Internet of television programs. It should be

noted, moreover, that under Canadian law Internet transmissions originating from

servers located in Canada are deemed to take place in Canada, even if received outside Canada, and are subject to royalties payable in Canada. Thus, if a tariff for

Internet transmissions is established in Canada, as iCraveTV has sought, the royalty that Canadian Internet retransmitters will pay can be expected to take into account the possibility of receipt of the retransmissions outside Canada. (An affidavit

from another Canadian law professor, Michael Geist, discussing the application of

Section 31 of the Canadian Copyright Act to iCraveTV’s service is appended hereto

at Tab D.)

Because iCraveTV was a pioneer in this area, the Copyright Board had not established a tariff for Internet transmission of television programs when we began operation. In order to arrange fair voluntary payments until that tariff was established,

our Canadian solicitors contacted the collectives that collected royalty payments for

over-the-air broadcasts and tried to discuss such an arrangement with them. Those

collectives were unwilling to work with us to establish such a payment arrangement, so our solicitors proposed to the Copyright Board that the Board establish an

interim Internet retransmission tariff. Counsel for certain of the collectives sought

additional time to respond, thereby delaying the Board’s action on the tariff, and

the Board has not yet had the opportunity to act. During this process, we have reiterated to the broadcasters our willingness to negotiate royalty payments. It should

be noted that the ‘‘collectives’’ include all of the rights holders involved, including

members of the MPAA, NFL and the ‘‘border broadcasters’’. Indeed, a majority of

the funds dispersed by the Board go to United States rights holders for carriage in

Canada. (A copy of an editorial from the Toronto Globe and Mail discussing

iCraveTV’s offer to pay royalties under the Canadian copyright regime is appended

hereto at Tab E.)

We are, you can see, acting in good faith to follow the laws of the country in which

we operate. Although Canadian copyright law differs in some ways from American

law, it is grounded in the same principles, developed in English law, as is American

copyright law, and I am sure that the United States Congress respects the integrity

and good faith of Canadian law in this as in other respects. I recognize, of course,

that there are countries in the world that do not operate under similar copyright

principles and do not respect the work of content providers, and the existence of

such countries raises some concerns when we are dealing with the ‘‘World Wide

Web.’’ But it is important not to be unduly influenced by the existence of such unsatisfactory copyright regimes.

First, Canada is not such a country, and the conduct of a company that operates

within the laws of an enlightened country such as Canada, which fully respects the

creative activities of the authors of copyrighted works, should not be judged or restricted because of the existence of countries that make little effort to stop copyright

piracy. Second, one of the essential characteristics of the World Wide Web is that

it is worldwide, which means that it can be accessible from countries whose laws

we may disapprove of in many respects. If the possibility of such access is allowed

to govern the activities of countries where the principles underlying our common

Anglo-American heritage are respected, the benefits of the Web will be greatly reduced.

This brings me back to the issue I referred to before and which has been the primary source of concern in the lawsuit brought in federal court in Pittsburgh against

iCraveTV by a number of major United States content providers. This is the fact

that, despite our making it absolutely clear to users that only those located in Canada were permitted to access the video capability of the iCraveTV web site, it has

been alleged that this restriction was not respected by all users, and that some

users located in the United States downloaded the video stream and viewed programs with American copyrights. As a result, the federal court has entered a preliminary injunction that could be read as holding us responsible if any of our video

programming is accessed from the United States, even by hackers. Because we have

not yet completed enhancing our security system, this decision has resulted in our

decision to shut down the video portion of the site for now. We will have an opportunity to present our case to the court and seek modification of the terms of the

order within 90 days.

In the meantime, we are working on security procedures that will make it extremely difficult for anyone who is not located in Canada to access the video stream

from the site. There are two aspects of such procedures. First, we have to strengthen the methods used to deny to those outside Canada access to the video via the

‘‘front door,’’ i.e., the iCraveTV home page. In addition to the procedures we previously used that rely on the honesty of users, we are implementing software that

determines the location of the user’s Internet Service Provider and will permit acVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00021 Fmt 6633 Sfmt 6621 62972.TXT HCOM2 PsN: HCOM2
19

cess only to those using ISPs that are located in Canada and serve only Canadian

residents. Second, we are developing software and procedures that will prohibit access via the ‘‘back door,’’ i.e., by those who use computer commands to avoid the

iCraveTV home page and go directly to the computer that provides the video stream.

In an MPAA letter to us in late December, some suggestions, in a different form,

were made that we will incorporate into our final design.

As far as we have been able to learn, such Internet security, restricting access

to a site to users within a particular geographic area, has not yet been implemented

anywhere, in part because it has not previously been required. Its development and

implementation has been more difficult, expensive, and time-consuming than we

had expected, but we are making good progress. Whatever the difficulties, before we

return to court to seek a change in the court’s current order, we intend to implement security procedures that will make it extremely difficult for anyone not located

in Canada to access video from the iCraveTV web site. However, we do not pretend

that we can guarantee that no determined hacker will ever be able to access that

video. As we already knew, but the recent attacks on such Internet leaders as Yahoo

and Amazon have highlighted, determined hackers, thrill seekers or hired guns can

wreak havoc on even the strongest and most secure of Web sites. Any regime of laws

that governs the Web must take account of that fact and should not place impossible

demands on sites that make serious good faith efforts to provide the appropriate security.

In our case, for example, the plaintiffs, a powerful array of studios, networks, and

sports leagues, have alleged that by providing a site that could be accessed improperly by persons located in the United States to receive streamed copyrighted audiovisual works, we have infringed the exclusive right of the copyright owners to perform their works ‘‘publicly’’ in the United States. However, once a web site operator

located outside the United States has made determined efforts to keep persons in

the United States from accessing the video portion of a site, thereby preventing substantially all persons located in the United States from accessing it, excepting only

persons having a high degree of computer security expertise and deliberately using

such expertise to avoid the site’s safeguards against such access, I do not think that

such a web site operator can fairly be said to be ‘‘publicly performing’’ the work in

the United States. To the contrary, any performance in the United States in the face

of such safeguards will be a very private one, brought about only by the expertise

and effort of a hacker who is determined to get around serious barriers so as to access something he or she has been expressly prohibited from accessing.

Imposing a standard that would find a Canadian web site operator, operating in

accordance with Canadian law and having committed no other violation of American

law, to have infringed an American copyright—and so be subject to being, in effect,

shut down by an American court—simply because a hacker may be able to get

around carefully implemented security procedures, would, we respectfully submit,

unfairly interfere with the legitimate operation of Canadian companies and unduly

inhibit the development and usefulness of the Internet. The United States Supreme

Court, in its decision in Reno v. ACLU that invalidated portions of the Communications Decency Act of 1996, compared the Internet to ‘‘a vast library including millions of readily available and indexed publications and a sprawling mall offering

goods and services,’’ and held that it was entitled to the full scope of First Amendment protection. Indeed, the Court contrasted the freedom of cyberspace with the

governmental supervision and regulation that has traditionally been imposed on the

broadcast industry. The Internet, it observed, is not as invasive as radio and television, and content does not appear on one’s computer screen unbidden or ‘‘by accident.’’ This point is all the clearer when a web site operator has employed substantial security technology to disable certain users—users outside Canada, in our

case—from accessing certain content. Even though your First Amendment may not

be directly applicable to the activities of a Canadian company operating in Canada,

it would surely be contrary to the vision of the freedom and promise of the Internet

embraced by the Supreme Court in Reno v. ACLU to impose unrealistic requirements that would expose legitimate Internet operations outside the United States

to crippling penalties in American courts because of the malicious activities of some

hackers.

Indeed, American law already recognizes that the universal accessibility of web

sites cannot be permitted to make it impossible to conduct business otherwise in

compliance with applicable law, so long as reasonable security measures are taken.

The Securities and Exchange Commission, addressing the question of whether offshore Internet offers are being made in the United States (and thus trigger registration obligations), reasoned that implementation of adequate measures to prevent

persons in the United States from participating in the offshore Internet offer would

lead to the conclusion that the offer was not occurring in the United States. The

20

SEC recognized that the types of procedures its suggested could not guarantee that

someone from the United States who was determined to get around the procedures

could not purchase securities from the site. It did not require perfection, only serious efforts that would discourage the great majority of potential purchasers located

in the United States. See Statement of the Commission Regarding Use Of Internet

Web Sites To Offer Securities, Solicit Securities Transactions Or Advertise Investment Services Offshore, March 23, 1998, available at http://www.sec.gov/rules/concept/33-7516.htm.

With the security that we will be prepared to implement, we believe that any

‘‘leakage’’ into the United States will be minimal and could not reasonably be considered to be a ‘‘public performance’’ in this country under United States copyright

law. The level will be well below the decades of ‘‘leakage’’ that have been tolerated

between the United States and Canada for decades when radio and television broadcasters signals cross the border. We will be operating only in Canada under a copyright regime that we hope will soon establish a fair tariff under which we can pay

royalties to American copyright holders for carriage in Canada. iCraveTV will then

be able to provide the service to Canadians that it was intended to provide. That

service was not, I want to emphasize, to compete with over-the-air broadcasting.

Anyone who has seen video on a 14-17 inch computer monitor will know that it is

not a substitute for television. Typically the video picture takes up only a small portion of a computer monitor that is itself small compared to current television

screens, and if the video is enlarged it loses resolution. We expect the technology,

and so the quality of the picture, to improve, but it will not in the foreseeable future

improve to the point where someone who owns a television set—which includes, of

course, far more people than own computers—will want to watch a TV show on a

computer rather than on TV.

Instead, iCraveTV serves a different audience. It serves those who cannot receive

broadcast television, such as those in the shadow of the huge CN broadcast tower

in Toronto, and those in universities and offices who cannot receive broadcast television and do not have cable access. And it serves those who are working on a computer and would like to be able to view a television program in a corner of their

screen. In these ways we provide a real service to some people, but it is not a service

that provides any competition to over-the-air broadcasters or cable or satellite retransmitters. This is confirmed by the limited capacity of the video server used by

iCraveTV: we can serve no more than about 4,000 viewers at a time. This is hardly

a threat to television broadcasters with their tens of millions of viewers, and the

technology will not permit it to become such a threat, even if we wanted it to, which

we do not.

What we do want to do is provide audiovisual content over the Internet, of the

type we started to provide last year, as well as new forms of content, such as video

that has not been broadcast, and, we hope, interactive video. We want to do this

in accordance with Canadian law and with reasonable safeguards that will keep our

broadcast retransmission service from being accessed from outside Canada. We do

not want to take anyone’s property, and we are pleased to, and have been trying

to, work with content providers to ensure that they are properly compensated under

the copyright regime of our country. We very much hope that, as the United States

develops its laws to enable its citizens to take advantage of the immense opportunities offered by the World Wide Web, they will not be developed or construed in a

way that will keep your neighbors from fairly benefiting from those opportunities

as well.

Thank you, Mr. Chairman and members of the Subcommittee, for your interest

in iCraveTV. I would be pleased to answer any questions you may have. [Additional

submissions are retained in subcommittee files.]

Mr. TAUZIN. Thank you, Mr. McCallum. Let me announce to the

committee that Mr. Shimkus has gone to vote early. He will come

back and take the Chair so that I can make the vote. We will continue the hearing.

I am pleased now to welcome former Senator David Boren, our

friend from Oklahoma and now President of Oklahoma University

and also on behalf of the National Collegiate Athletic Association.

Senator Boren.

21

STATEMENT OF HON. DAVID L. BOREN

Mr. BOREN. Thank you very much, Mr. Chairman and Mr. Markey and members of the committee. It Is a pleasure to be back

among you, and I want to thank my friend from Oklahoma, especially for his warm welcome, Congressman Largent. We are privileged to have his son at the University of Oklahoma, and now we

have his daughter at the University of Oklahoma. So we feel especially a close relationship.

I am here as president of the University of Oklahoma today to

testify on behalf of that institution and also on behalf of the NCAA.

University of Oklahoma is one of nearly 1,000 universities and colleges which comprise the NCAA and is devoted to the well being

of over 330,000 male and female student athletes across the country.

And, of course, at universities, we recognize all of the benefits of

the Internet. We are excited by all the possibilities. We are already

benefiting by the educational opportunities, but we also understand

the vital importance of intellectual property to the collegiate athletic community and the need to preserve copyright owners’ interests as we embrace these opportunities of the Internet about which

we have such enthusiasm.

In the world of intercollegiate athletics, the revenue derived from

copyrighted sports programming is absolutely essential to our programs. The University of Oklahoma, our athletic department budget for this coming academic year is $23.6 million, and we are not

atypical. This budget funds the operation of 20 men’s and women’s

varsity teams. OU student athletes who are members of these

teams receive over $4 million in athletically based scholarships and

financial aid.

It is important to know that of the nearly 1,000 NCAA member

institutions, fewer than 80 athletic departments are financially

self-sufficient. Fewer than 80 out of 1,000. The University of Oklahoma, I am happy to say today, given the fact the that we have

had a good basketball and football season this year, is among this

small group; however, all collegiate athletic departments, including

ours, confront significant budget pressures while simultaneously

striving to expand opportunities for the student athletes. We have

to determine what sports can we afford, when are there tradeoffs

between our academic mission and our academic budget, and what

we can afford to invest in athletics.

Television rights for the broadcast of men’s football and basketball are a significant source of revenue for our program and for others. The revenue is essential to our institutions to help us support

the funding of athletic scholarships and operations in our 18 nonrevenue producing sports. The revenue received by the athletic department from television rights comes from, of course, big television agreements for men’s football and basketball, conference participation and football games, and 87 percent or $62 million will

come from basketball and football this year.

It is then distributed, along with the CBC funds, through our

basketball agreements back to the university. For us, just to give

you an example, that is $4 million from our conference, and we

have an additional almost $2 million that is generated with agreeVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
22

ment through what we call Sooner Sports Properties through radio

rights and the rest.

Now to put that into perspective, that’s over a fourth of our athletic department budget. If that revenue is there, you face the kind

of choice; for example, it costs a million dollars for every percentage

increase in faculty salaries. That tells you that that amount of revenue generated when you have to talk about tradeoffs is 6 percent

of faculty salaries. I can make the same kind of comments about

libraries, and then you get into doing away with opportunities in

those sports which do not generate so much revenue for both

women and for men. These are very significant tradeoffs.

So as you can see, sports, like movies and music, this is intellectual property, and the copyright attached to sports programming is

a vital source of revenue to the athletic community. We have created our own SoonerSports.com. We are utilizing the Internet

where fans can access a number of video and audio offerings, and

we are already exploring new ways to enhance and deliver programming. When we had the advent of satellite and cable television, of course sports were among the first to embrace it to find

ways to expand our offerings.

Now, of course, the focus of this hearing, it really is brought

about by the iCraveTV case which is already will be discussed. This

case reveals how some could use the Internet to ignore the intellectual property rights, deprive the copyright owners of the benefit

and value and control of their works. This case not only posed a

threat to copyright owners here in the United States, but threatened international sales and distribution rights, and once sports

programming was retransmitted over the Internet, the entire world

had unlimited access.

I am not one quick to say that I can profess to be an expert on

copyright law. I do, however, want to urge this body to resist the

kind of knee-jerk reaction of granting a compulsory license for the

Internet. Compulsory licenses violate a fundamental principle of

the free market, and it is not a wise oversight to take intellectual

property out of the patrol of those who create it. Under a compulsory license regime, I worry, for example, that a gambling web site

legally transmitting NCAA football and basketball games to ensure

their clients could wager without missing a play could be established. Without the control of the property copyright holders, they

cannot ensure that their works will be used in an acceptable or an

appropriate way.

My message is really simple. When it comes to the Internet, I

urge you to let the marketplace work. It is already beginning to

work. For example, the NCAA has recently negotiated and awarded

CBS with Internet rights to men’s basketball tournaments for the

next 11 years, and this agreement benefits viewers and providers,

NCAA, and member institutions and more importantly our students a valuable source of revenue. Just this month it has been reported in the Wall Street Journal that baseball is moving in an

similar direction.

The one thing that I have learned about it, it has been especially

a clear lesson since I left this great institution, is that we must always legislate, keeping in mind that there can be unintended consequences of our actions and particularly dealing with the situation

23

that is so fluid, changing so quickly where already those of us who

are creating this property have a very strong incentive to get it to

the widest possible audience as soon as possible.

I would say let’s look at this for a while. Let’s see how it evolves,

and my guess is the marketplace is going to take care of itself, provide the competition, and with the legal rights already in place,

protect those who are creating the property. So I urge you the let

the marketplace work, make sure that while we have open competition and the widest possible distribution of this property including

our sports programming, that we do so in a way that protects the

interests of those who own that property and have a right to it.

Thank you very much for letting me be with you today.

[The prepared statement of Hon. David L. Boren follows:]

PREPARED STATEMENT OF DAVID L. BOREN, PRESIDENT, UNIVERSITY OF OKLAHOMA

Mr. Chairman, Congressman Markey, thank you for the opportunity to testify before you today on the issue of video on the Internet. As President of the University

of Oklahoma, I am appearing on behalf of that great institution and on behalf of

the National Collegiate Athletic Association (NCAA). The University of Oklahoma

is one of nearly 1,000 universities and colleges that comprise the NCAA. This member organization is devoted to the regulation and promotion of intercollegiate athletics for over 330,000 male and female student-athletes.

I am here today to discuss the vital importance of intellectual property to the collegiate athletics community and the need to preserve copyright owners’ interests as

we embrace the new opportunities of the Internet.

VALUE OF COPYRIGHT TO THE INTERCOLLEGIATE ATHLETICS COMMUNITY:

In the world of intercollegiate athletics, the revenue derived from copyrighted

sports programming is essential to our programs. At the University of Oklahoma,

our athletic department budget for the 1999-2000 academic year is $23.6 million.

This budget funds the operation of 20 men’s and women’s varsity teams. O.U. student-athletes who are members of these teams, receive over $4 million in athletically-based scholarships and financial aid.

It is important to note that of the nearly 1,000 NCAA member institutions, fewer

than 80 athletics departments are financially, self-sufficient (i.e., revenues exceed

expenses). The University of Oklahoma is fortunate to be among this small group.

However, today all college athletic departments, including ours, confront significant

budget pressures while simultaneously striving to expand opportunities for their

student-athletes.

Television rights fees from the broadcast of men’s football and basketball are a

significant source of revenue for the University of Oklahoma athletics program. This

revenue is essential to our institution as it helps support the funding of athletics

scholarships and the operation of our 18 non-revenue sports for both men and

women. The revenue received by our university athletic department from television rights

fees comes from three sources. The largest portion of revenue is generated by our

athletic conference’s (the Big 12) television agreements for men’s football and basketball and from conference member participation in football bowl games. This year,

the Big 12 conference will receive 87% of its revenues, or $62.4 million, from television rights fees for men’s football and basketball. This revenue is divided among

the conference’s 12 member institutions.

Another important source of revenue is obtained from the television rights fees

paid by CBS for the NCAA Division I Men’s Basketball Tournament. In total, the

University of Oklahoma receives more than $4 million from the Big 12 Conference

and the NCAA; all of this coming from rights fees paid for copyrighted collegiate

sports programming. In addition, the University of Oklahoma athletic department negotiated a $1.8

million agreement with Sooner Sports Properties for radio rights, a select number

of televised basketball games and the rights to operate our Sooners.com Internet

site.

As you can see, sports, like movies and music, is intellectual property. The copyright attached to sports programming is a vital source of revenue to the athletics

community and the preservation of these rights is essential in the dawning of the

digital age.

24

SPORTS COPYRIGHT HOLDERS EMBRACE NEW TECHNOLOGY:

The University of Oklahoma recognizes the unique opportunities the Internet presents and is already exploring ways to supply college sports content over this new

communications medium. We have created www.soonersports.com where fans can

access a number of video and audio offerings.

In fact, both the college and professional sports leagues have always been quick

to take advantage of new technologies in the delivery of sports programming. For

example, with the advent of cable and satellite television, today sports fans can

watch thousands of hours of college and professional games on ESPN and other

cable networks. In addition, through agreements with DirectTV, special packages

ensure that viewers can have access to every NFL game as well as each contest during the NCAA basketball tournament.

Now, with the emergence of the Internet, sports entities are already exploring

new ways to enhance and deliver their programming. Furthermore, in November

1999, the NCAA became the first sports organization to sign a major television pact

that included the awarding of Internet rights to CBS. Video streaming of college

sports contests will undoubtedly expand if copyright holders can be assured that

they will maintain control of their works. After all, as long as copyright holders

maintain control over their intellectual property on the Internet, it will be in their

best interests to pursue new technological innovation.

THE INTERNET MUST NOT POSE A THREAT TO THE PRESERVATION OF INTELLECTUAL

PROPERTY:

At the focus of this hearing is the iCraveTV case. This case reveals how some people can use the Internet to ignore intellectual property rights and deprive copyright

owners of the value, benefits and control of their works. As we are all aware, commencing on November 30, 1999, iCraveTV.com streamed 17 over-the-air television

stations from Toronto, Canada and Buffalo, New York on the Internet, 24 hours a

day around the world. During this time, those that paid substantial rights fees for

NFL, NBA, NHL, and NCAA basketball and football games were faced with having

the value of their programming diluted. iCraveTV not only posed a threat to copyright holders here in the U.S., but it also threatened international sales and distributions rights. Once sports programming was retransmitted by iCraveTV over the

Internet, the entire world had unlimited access.

While I certainly do not profess to be an expert on copyright law, I do, however,

want to urge this body to resist granting a compulsory license for the Internet. This

simply is not a good idea. Compulsory licenses violate fundamental principles of capitalism and the free-market. Furthermore, it is not wise oversight to take intellectual property out of the control of those who create it. Under a compulsory license

regime, I can easily envision a gambling Web site legally retransmitting NCAA football and basketball games to ensure their clients can wager without missing a play.

Without control of their property, copyright holders cannot ensure that their works

will be used in an acceptable or appropriate manner.

MESSAGE—ALLOW THE FREE-MARKET TO OPERATE:

My message to you today is simple—When it comes to the Internet, I urge you

to let the marketplace work. It is already working. For example, the NCAA has recently negotiated and awarded CBS with the Internet rights to the men’s basketball

tournament for next 11 years (beginning in 2003). This agreement benefits viewers

and provides the NCAA and its member institutions (and most importantly, our students) with a valuable source of revenue.

As a college president, I am acutely aware of the importance to the university

community of preserving our intellectual property rights. By allowing the market

to work while respecting intellectual property rights, Congress can ensure that universities will provide greater and better services to our students, faculty, staff and

our communities.

Mr. SHIMKUS [presiding]. Thank you, Senator.

We will now move to Mr. Bob Roback, President of LAUNCH

Media. He will talk on the aspect of the streaming issue as far as

music videos to which is all part of the this debate.

So welcome. Your written statement is submitted for the record.

If you could summarize, and you have 5 minutes.

25

STATEMENT OF ROBERT D. ROBACK

Mr. ROBACK. Thank you on behalf of the over 200 employees of

LAUNCH Media. Thank you all for inviting me to testify today at

this important hearing. I’m Bob Roback, president and cofounder

of LAUNCH Media, a publicly traded, California-based company

that for over 6 years has developed innovative and compelling ways

to help consumers discover new music through interactive media

and in particular the Internet where we operate our music destination at LAUNCH.com.

We founded LAUNCH Media in 1994 in response to a growing

demand from the music consumer; specifically, music consumers

have long relied on traditional media such as radio and MTV as

ways to discover new music. Record companies and artists also

profited from the market’s current opportunities created by these

traditional outlets, and certainly the outlets themselves have benefited handsomely.

The nature of traditional broadcast media, however, is such that

it must be programmed at the consumer. In the music space, MTV

is a perfect example of how broadcast media has negatively impacted both the music consumer and the record industry. In response to its advertisers who were frustrated that MTV’s valuable

viewers were switching in and out of the channel based on whether

the currently played music video was appealing, MTV embraced a

new programming strategy around half-hour lifestyle shows that

kept viewers tuned it through the commercials.

While this strategy has fueled impressive growth at MTV, it has

significantly curtailed the number of music videos played, reducing

the opportunities for consumers to discover music and for music

companies to market their repertoire. By creating an intent destination for consumers to discover new music through music video,

LAUNCH Media helps artists and copyright owners reach consumers that otherwise might not known of their works.

We have worked very closely with the major record companies to

ensure that all our video content is appropriately licensed and that

copyright holders are appropriately compensated. I can assure you

that in spite of bandwidth limitations, there is a large audience of

music consumers that thirsts for such video content. We currently

stream over 2 million music videos per month to more than 2.8 million registered members.

In our experience, LAUNCH provides value consumer exposure

to music that would otherwise not be effectively marketed, and we

are able to turn new consumer interests directly into a purchase

that may not otherwise have happened. We firmly believe that

LAUNCH should not be limited in its pro-consumer competitive offering by technology-based laws that favor cable or satellite in contrast to the Internet. If the content is compelling, the service reliable, and the price fair, then consumers do not care whether it was

delivered through a cable, a satellite dish, a terrestrial broadcast,

or over the Internet.

The law should be equally technology neutral. As a general

premise we believe that distributors of content should be permitted

to compete against one another regardless of technology.

LAUNCH’s long-term goal is to be the consumer’s content provider

of choice. We are eager for the day when webcasting is on a level

26

playing field with terrestrial cable and satellite television including

with respect to compulsory retransmission licenses.

Having stated the long-term goal of open competition and broad

consumer choice, let me also clearly state that LAUNCH has no

immediate plans to seek a compulsory television retransmission license or to seek legislation that guarantees our ability to obtain

such a license, particularly as the law exists today.

Most importantly, however, while we at LAUNCH may consider

new forms of music-related programming, we are not certain that

we can develop a compelling business model around webcasting

preprogrammed broadcasts whether retransmitted or created specifically for the web.

Let me reiterate the ultimate desire of LAUNCH, that consumers

be empowered to listen, watch, and purchase entertainment and

educational content how, when, and where they choose and by

whatever technology their enjoy most. Competition is the foundation of the American economy, and entrenched industries should

never be exempt from competition merely because the laws on the

books were developed when they were the only ones in the room.

Thank you very much for having me.

[The prepared statement of Robert D. Roback follows:]

PREPARED STATEMENT OF ROBERT D. ROBACK, PRESIDENT, LAUNCH MEDIA, INC.

Mr. Chairman and members of the subcommittee, on behalf the over 200 employees of LAUNCH Media, thank you for inviting me to testify today at this important

hearing regarding the Internet’s future as a competitively-priced, consumer-friendly

distributor of audiovisual programming. I am Bob Roback, President and Co-Founder of LAUNCH Media, a publicly traded (NASDAQ NMS: LAUN) California-based

company that for six years has developed innovative and compelling ways to help

consumers discover new music through interactive media. Our distribution methods

over the years has included a monthly CD-ROM and, of course, the Internet where

we operate our music destination at www.launch.com.

Mr. Chairman, I am pleased to be joined before you today by RealNetworks’ Alex

Alben. RealNetworks is a key strategic partner of LAUNCH and a fellow member

of the Digital Media Association. DiMA has more than 40 members that develop and

deploy digital technologies to market and distribute music and entertainment media

to consumers worldwide over the Internet.

Earlier this month the President of BMG Entertainment, a company that owns

one of the world’s largest repertoires of copyrighted music and media, said, ‘‘it has

been proven time and again that new media in entertainment don’t kill pre-existing

media.’’ I am here to tell this Committee that we are in full agreement with this

statement. LAUNCH and our DiMA company colleagues market, disseminate, popularize, and sell pre-existing media. Internet media companies add new value for the

music industry, and expand the opportunity pie so dramatically that copyright owners and creators get a larger slice than ever before. In our experience, LAUNCH

provides valuable consumer exposure to music that would otherwise not be effectively marketed and we are able turn new consumer interest directly into a purchase that may not otherwise have happened.

We founded LAUNCH Media in 1994 in response to a growing dilemma for the

music consumer. Specifically, music consumers have long relied on traditional media

such as radio and MTV as ways to discover new music. Record companies and artists also profited from the marketing opportunities created by these traditional outlets and certainly the outlets themselves have benefited handsomely.

The nature of traditional broadcast media, however, is such that it must be programmed at the consumer. In the music space, MTV is a perfect example of how

traditional broadcast media has negatively impacted both the music consumer and

the record industry. In response to its advertisers who were frustrated that MTV’s

valuable viewers were switching in and out of the channel based on whether the

currently played music video was appealing, and therefore were not sitting through

commercials, MTV embraced a new programming strategy around half-hour lifestyle

shows that kept viewers tuned in. While this strategy has fueled impressive growth

at MTV, it has significantly curtailed the number of music videos played, reducing

27

the opportunities for consumers to discover music and for music companies to market their repertoire. Similarly, consolidation in the radio industry has led to shorter

playlists and more homogenized formats that, in turn, limit consumer access to new

artists and diverse music styles.

By creating an Internet destination for consumers to discover new music,

LAUNCH Media helps artists and copyright owners reach consumers that otherwise

might not know of their works. LAUNCH Media has been built on the premise that

an intermediary can develop a relationship with both the creative community and

the consumer, and deliver value to both sides of an opportunity. The power of the

Internet is that the consumer is in control. We believe that if consumers can access

content where they want, when they want, and in a format or medium they want,

artists and copyright owners will benefit so long as the Constitutionally-mandated

economic and legal balance between owners and consumers of copyrighted content

is not undermined.

One of the most popular content areas on launch.com is our music video section.

This area is already populated with over 2000 music videos created by both the

record companies and exclusively by LAUNCH in our studios. We continue to add

hundreds of new videos each week.

Our focus on video content may surprise you in light of the fact that most consumers still access the Internet at relatively low connection speeds and, therefore,

receive lower quality video. Notwithstanding these limitations, I can assure you that

there is a large audience of music consumers that thirst for such video content. We

currently stream over 2 million music videos per month to more than 2.8 million

registered members. We expect that the addition of more video content, and the advent of broadband technology, will only serve to push these numbers higher. Looking closely at our audience and at the most popular videos it is clear that much of

this consumer demand for music video content on the Web is driven by the scarcity

of music videos on broadcast, cable and satellite.

We have worked very closely with major record companies to ensure that all of

our video content is appropriately licensed and that copyright holders are appropriately compensated. We count Warner Music Group, Sony Music and EMI among

our close record company partners.

Mr. Chairman, we firmly believe that LAUNCH should not be limited in its proconsumer competitive offerings by technology-based laws that favor cable or satellite

in contrast to the Internet. This Committee and all the witnesses before you know

that consumers purchase entertainment programming based on quality, price and

the reliability of the distribution service. If the content is compelling, the service reliable and the price fair, then consumers do not care whether it is delivered through

a cable, a satellite dish, a terrestrial broadcast or over the Internet. The law should

be equally technology-neutral.

As a general premise, LAUNCH Media and the Digital Media Association believe

that distributors of content should be permitted to compete against one another regardless of technology: more entrants into the programming distribution marketplace will bring more competition, lower prices and higher quality. If satellite television spurred cable television to improve, then the Internet will, in time, lead to

even more improvements and better service for consumers. I believe that

launch.com’s early success in the music video space suggests that this has already

started. In that context, let me be very clear: LAUNCH’s long-term goal is to be consumers’ content provider of choice, and we are eager for the day when we have an

equal opportunity to compete for consumers’ allegiance, when webcasting is on a

level-playing field with terrestrial, cable, and satellite television—including with respect to compulsory retransmission licenses. Similarly, DiMA members believe that

consumers deserve full choice—full competition—and a level-playing field that lets

the marketplace rather than the law determine winners.

I expect, Mr. Chairman, that you and members of this Committee may be concerned about the effect of the Internet on local broadcasters and local news service,

which is a core component of every thriving American community. I propose to you,

Mr. Chairman, that local television would not suffer at the hands of the World Wide

Web, but rather would thrive. When Chairman Tauzin can watch your local Louisiana television news, no matter how late the House debates proceed or where in

the world you might be that night, the Louisiana television station will know it has

more viewers, will charge more for advertisements, and the local economy and

broadcast service will benefit. Mark Cuban started broadcast.com because his local

network stations in Dallas did not broadcast Indiana University basketball games.

With the Internet, Chairman Tauzin could always watch LSU games, and perhaps

even the local high school games.

We need only to look to the experience of other media, Mr. Chairman, to see that

national distribution does not harm localism. Major metropolitan newspapers are

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available in major cities in other states, for decades in hard copy and in the last

few years over the Internet. Yet, our nation’s local newspapers thrive and retain

their local character both in print and on-line. Thousands of local radio stations are

available today over the Internet, broadcasting their signals to an expanded local

and national audience. People tune to these out-of-market stations to hear firsthand local news, musical tastes and cultural and sporting events. For the stations,

Internet broadcasting expands their market—after all, many more people have computers at their desks than radios. For the consumer, Internet broadcasting brings

new information and understanding, and provides a cure for homesick sports fans,

college students and Congressional legislative aides.

Making television network programming available over the Internet similarly will

not harm localism or local stations. Indeed, hundreds of local television stations already are broadcasting their own local programming over the Internet, to tens of

thousands of viewers. But when the local news is over, and the stations resume

transmitting network shows, the computer screen goes blank. If the Internet is ever

to provide effective competition to cable and satellite services, with the resulting

benefits to consumers, Internet media companies must find a way to license the entire local station’s broadcast signal to the viewing audience.

Having stated the long-term goal of open competition and broad consumer choice,

let me also clearly state that LAUNCH has no immediate plans to seek a compulsory television retransmission license or to seek legislation that guarantees our ability to attain a compulsory television retransmission license, particularly as the law

exists today. Candidly, Internet technology to ensure limited geographic distribution

is just beginning to approach the levels of security generally associated with cable

television, and we are not yet confident that all other technological hurdles have

been overcome. Most importantly, however, while we at LAUNCH may consider new

forms of music related programming, we are not certain that we could develop a

compelling business model around webcasting pre-programmed broadcasts, whether

retransmitted or created specifically for the Web.

Mr. Chairman, let me reiterate the ultimate desire of LAUNCH and the Digital

Media Association: that consumers be empowered to listen, watch and purchase entertainment and educational content how, when and where they choose, and by

whatever technology they enjoy most. Competition is the foundation of the American

economy, and entrenched industries should never be exempt from competition merely because the laws on the books were developed when they were the only ones in

the room. The law must be open to evolution and adaptation, to assure fair treatment and equivalent rights for new businesses using new technologies.

Thank you.

Mr. SHIMKUS. Thank you for your testimony.

We will next go to Mr. Stuart Beck, President of Granite Broadcasting Corporation. Again, your full testimony was submitted for

the record, and if you would summarize for 5 minutes.

STATEMENT OF STUART J. BECK

Mr. BECK. Thank you, sir, and thank you all. Thank you for the

opportunity to appear before you today to discuss video and broadcasting on the Internet. As you have said, my name is Stuart Beck,

and I am the president and I am the cofounder of Granite Broadcasting Corporation.

Granite, which was founded 12 years ago, owns and operates

nine television stations around the country. Our markets include

Detroit, Fort Wayne, Fresno, Peoria, Bloomington, San Francisco,

San Jose, Syracuse, and Buffalo. Each of our television stations is

distinctly community oriented. The backbone of our service is the

strength of your local daily news, weather, and sports operations.

For many, local television is the primary source of accurate information about the people and events in their communities, and although the Internet has indeed begun to supplement television programming in this regard, as I will explain, as such, the community

building function of the programming provided by local operations

cannot be over emphasized.

29

My dad was a local broadcaster, and I am proud to follow in his

foot steps, but times have changed broadcasting, and I actually

think they have changed for the better. Technology is providing us

with expanded reach to our customers by addressing a wider audience and by supplying more comprehensive news and information.

Granite is recognized as an innovator in the development of new

media services that combine TV and Internet platforms. We have

established complimentary web sites for our local stations on which

we stream live news coverage from our stations and post items of

local interest such as traffic, weather, school closings, and high

school sports. We have put managing editors into each of our news

rooms to re-purpose our news content and put it out on the web.

We have spent a lot of money on administrative systems that

allow the people in our news room to type in plain English on a

computer screen that which will appear on the web once extracted

from our television programming. Our services, therefore, include

webcasts which we love, as well as supplementary news content

local advertising and other unique features.

The Granite Group includes WKBW in Buffalo, New York. That’s

the No. 1 station is Northern New York, with due respect to my

colleague, Mr. Karpowicz. WKBW TV is an ABC affiliate that has

been an integral part of the Buffalo community for many years.

The station launched its related web site WWW.WKBW.com in

1996. It receives about 300,000 page views, a month and members

of the Buffalo community rely on the site for timely news and information about community events.

Last year, Granite learned that another web site, iCraveTV.com

was also carrying WKBW’s local programming and other copyrighted works including all ABC network programming. iCraveTV

was converting our TV signal into computerized data and streaming it over the Internet from its web site.

What Mr. McCallum failed to tell this committee is that not only

was iCrave carrying our programming without authorization, but

the Internet site was displaying our programming on web page surrounded by iCrave advertisements which presumably were sold by

McCallum. Thus it would be possible for a local Ford dealer to sign

a contract for exclusive rights for WKBW’s local 11 p.m. newscast,

only to find its advertisement on iCraveTV surrounded by competing advertisements for Chevrolet. Similarly, an advertiser may

purchase a banner ad for the KBW web site during the airing of

a particular program, only to find it replaced by a competitor’s banner advertisement on iCrave’s site.

On January 20, a coalition of TV networks, studios, and sports

leagues got a temporary restraining order against iCrave, a fairly

rare legal remedy but employed in this case. Under the court order,

iCrave is prohibited from infringing on rights set forth in copyright

and trademark law, and we are satisfied with how effectively our

courts enforced the rule of law in this situation. It is clear that

under the U.S. copyright law it is illegal to take copyrighted programming such as the stuff we spend so much money producing

and stream it on the Internet without permission of the owner.

iCrave plainly and openly did that and the court ruled promptly to

stop.

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Copyright owners such as Granite Broadcasting are already

transferring content through the use of streaming and other innovative applications. There is no need whatsoever to change the law,

in our opinion, to allow third parties to use our copyrighted material in ways which are now illegal. Copyright owners are already

taking full advantage of new media to distribute content in unconventional and creative ways. If our greater public policy goal is to

increase a flow of information, then entertainment copyright owners are already doing this, and I assure you that we are aggressive

and innovative in this approach.

In the course of our business, ladies and gentlemen, Granite

needs assurances that all copyright law and related protections can

be provide to us. For example, we need to assure advertisers with

whom we contract that they will not find our programming surrounded by somebody else’s advertisements and potentially a diminution of the quality of our product by people who did not make

that product. So there is no fair use about it in changing it.

Mr. SHIMKUS. Mr. Beck, if you would quickly——

Mr. BECK. I think I am completed. I think all the points that I

have not yet made have been made.

Mr. SHIMKUS. I am sure this will be followed up in the question

and answer, and my colleagues will be back and I think that we

will go into it in greater detail.

[The prepared statement of Stuart J. Beck follows:]

PREPARED STATEMENT OF STUART J. BECK, GRANITE BROADCASTING CORPORATION

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

thank you for the opportunity to appear before you today to discuss video and broadcasting on the Internet. My name is Stuart Beck, and I am President of Granite

Broadcasting Corporation.

Granite, which was founded just twelve years ago, owns and operates nine television stations in geographically diverse markets reaching a substantial number of

the nation’s television households. Granite is also the largest minority-controlled

owner of major market television stations in the country. In every market where

we produce news, Granite strives to be the leading provider of local news and community programming. The markets served by Granite include: Detroit, Michigan;

Duluth, Minnesota/Superior, Wisconsin; Fort Wayne, Indiana; Fresno, California;

Peoria-Bloomington, Illinois; San Francisco, California; San Jose California; Syracuse, New York; and Buffalo, New York.

Each of the broadcast television stations operated by Granite is distinctly community-oriented. The backbone of our service is the strength of our local daily news

operations. For many, local television news is the primary source of accurate and

up-to-date information about the people, trends, and events in their communities,

although the Internet has begun to supplement television programming in this regard, as I will explain. As such, the community-building function of the programming provided by local news operations cannot be overemphasized.

Granite Broadcasting Corporation: Using the Internet to Reach our Audience

My father was a local broadcaster, and I am proud to follow in his footsteps. But

times have changed since the day my dad was at the peak of his career, and I might

add that they have changed for the better. Technological breakthroughs provide today’s broadcasters with expanded opportunities to reach our customers—both in

terms of addressing a wider audience and in supplying more comprehensive news

and information.

Granite is recognized as an innovator in the development of new media services

that combine television broadcasting and Internet platforms. We have established

complementary websites for our local stations on which we stream live news coverage from our stations and post items of local interest such as traffic, weather,

school closings and high school sports. Local Granite stations consider themselves

responsible members of the communities in which they serve, and make it a point

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to serve those communities comprehensively. The services Granite provides to local

audiences include:

Webcasts: Granite stations stream live news and other original programming over

the Internet. Web users also have access to previously aired news programs and

other station-generated programs. San Jose-based KNTV streams its original

‘‘TechNow!’’ program live on its site, and it is possible to access archives of the program up to a year old.

Written News Content: Our stations hire reporters to supplement over-the-air and

streamed news programming with additional written news, sports, and other stories

such as reviews of local entertainment and restaurants for their sites. Our web sites

also provide links to related sites with more extensive local entertainment information.

Advertising: Granite news sites typically carry banner ads at the top of the screen

and contain many links to the sites of other businesses, bolstering the local economy.

Unique Features: Granite has created an election news site called ‘‘Political 2000,’’

to which all of its stations are linked. This link contains national, state and local

political news and campaign information tailored to the local Granite station from

which the Internet user accessed the ‘‘Political 2000’’ site.

Some Granite stations have online sites especially for children and teens. These

include ‘‘Kids Club’’ areas with information of interest to young Internet users, and

‘‘Homework Help’’ areas, which contain links to Internet sites that can assist students in completing research or other projects. KBJR-TV, based in Duluth, Minnesota and Superior, Wisconsin, has created a site featuring local high school hockey information (www.highschoolhockey.com).

Resolving the iCraveTV.com Threat and Letting the Markets Work

The Granite television broadcasting group includes WKBW-TV in Buffalo, New

York. WKBW-TV is an ABC affiliate that has been an integrated part of the Buffalo

community for many years. The station launched its related web site—

www.wkbw.com—in 1996. It receives approximately 300,000 page views every

month, and members of the Buffalo community rely on the site for timely news and

information about community events.

Last year, Granite learned that another web site—iCraveTV.com—was also carrying WKBW-TV’s local programming and other copyrighted works, including all

ABC network programming. ICraveTV was converting our television signal into

computerized data and streaming it over the Internet from its website. Not only was

iCrave carrying WKBW-TV programming without authorization, but the Internet

site was displaying our programming on its web page surrounded by iCrave advertisements. Thus, it would be possible for a local Ford car dealer to sign a contract

for exclusive rights to WKBW-TV’s local I 1:00 p.m. newscast only to find its advertisements on iCrave surrounded by competing advertisements by Chevrolet. Similarly, an advertiser may purchase a banner add for the WKBW web site during the

airing of a particular program, only to find it replaced by a competitor’s banner advertisement on iCrave’s site.

On January 20, 2000, a coalition of television networks, studios and sports

leagues filed a Motion in the U.S. District Court for the Western District of Pennsylvania for a Temporary Restraining Order against iCrave. That Motion was granted

on January 28, 2000. On February 8, 2000, the court granted a Preliminary Injunction. Under this court order, iCrave is prohibited from infringing on rights set forth

in copyright and trademark law or otherwise making any false representation with

regard to sponsorship of iCraveTV. ICrave is specifically barred from streaming

copyrighted programming into the United States.

It is clear that under U.S. copyright law, it is illegal to take copyrighted programming—such as local news, movies or sports—and stream it on the Internet without

permission of the owner. ICrave plainly and openly violated copyright law, and the

court was sound in ruling as such. Copyright owners, such as Granite Broadcasting,

are already transferring content through the use of streaming and other innovative

applications. There is no need to change the law to allow third parties to use copyrighted materials in ways that are now illegal. Copyright owners are already taking

advantage of new media to distribute content in unconventional and creative ways.

If our greater public policy goal is to increase the flow of information and entertainment, copyright owners are already doing this, and I assure you that we are aggressive and innovative in our approach.

In the course of our business, Granite needs certain assurances that only copyright law and related protections can provide. For example, we need to assure advertisers with whom we contract that they will not find our programming surrounded by advertisements of a competitor. Granite also needs to know that other

32

web sites will not take our recognized trademark or otherwise imply our endorsement of their site. Finally, Granite needs to know that the programming we create

and license for our stations, such as WYBW-TV in Buffalo, will not be misappropriated, jeopardizing the copyright protections and rights of parties with interests

at stake. The recent iCrave preliminary injunction provides these types of assurances for Granite and allows us to pursue the business of entertaining, educating

and informing our audience.

Previous Congresses have established a solid legal framework to provide copyright

and trademark owners control of their works and symbols. Chairman Tauzin, Ranking Member Markey, and Members of the Subcommittee, I urge you to refrain from

passing any laws that could jeopardize the intellectual property protections provided

under the present legal framework. There is no need to expand the purview of government regulation of the Internet or otherwise change a legal approach that, so

far, has proven to work.

Conclusion

Granite is proud to be a leader in the extension of local television service to new

media. We are reaching our customers with valuable and comprehensive information and creating a better informed population. Our web sites demonstrate that it

is possible to enjoy the free flow of information on the Internet without breaking

any laws—laws that have held the United States in good stead for centuries and

continue to serve a valuable purpose. I urge the Members of the Subcommittee to

continue to encourage the potential of the Internet, but also to step back and let

the markets work within the framework of the existing, effective legal system.

Mr. SHIMKUS. I would like to now recognize Mr. Peter Jaszi, professor, Washington College of Law, American University. Again,

welcome, and you have 5 minutes.

STATEMENT OF PETER JASZI

Mr. JASZI. Mr. Chairman, members of the subcommittee, I am

honored to appear in my individual capacity to offer an overview

of how copyright has evolved with technology.

Mr. SHIMKUS. Professor Jaszi, can you pull your microphone just

a little bit closer?

Mr. JASZI. With pleasure.

Mr. SHIMKUS. It is a high-tech conference room here.

Mr. JASZI. During the debate over the Digital Millennium Copyright Act of 1968, this subcommittee demonstrated that it understood the need to balance the interests of information consumers

and content owners affected by new technology. Then content owners were concerned that advances in digital technology threatened

the economic viability of their businesses and legislation proposed

by the administration would have substantially curtailed the fair

use doctrine.

You recognized that while new technology may present potential

threats, it also offers vast new opportunities to the public, and you

produced balanced legislation that advanced electronic commerce,

and you have heard the radio and television signals now can be

distributed via the Internet.

Internet radio already enables consumers to listen to stations

from around the world in part because you incorporated the DMCA

and a compulsory license for retransmission of copyrighted sound

recordings performed by Internet broadcasters. Improvements in

quality can soon establish Internet television delivery as the market competitor for other consumer video services.

In my view, the appropriate question to ask now is this: How can

Congress facilitate enhanced service and competition? And to begin

to answer that question, I would like to take you back do 1455

when Europe got its first glimpse of the Guttenberg Bible and disVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
33

covered that multiple copies of a document could be produced by

mechanical means. Fortunately, early printers’ hopes of maintaining a monopoly on this new technology proved unavailing. By 1500,

roughly 30,000 titles had made it into print and the world has

never been the same.

Copyright began as the law’s response to movable type. In the

United States, it has served to promote a single Constitutional objective, the progress of science and use for arts. It accomplishes this

by balanced regulation of information use and not of the means by

which information is delivered to consumers. Copyright has contributed to the dissemination of knowledge and successive waves of

new technology from photography to satellite retransmission have

swept over our information environment.

In situations where copyright owners have been most concerned

that new distributions mechanisms might destabilize an established business model, Congress has prevented technological stalemate by legislating compulsory licenses. In 1909, music copyright

owners were locked in a standoff with the fledgling phonograph

record industry whose new products threatened sales of sheet

music. The Congressional compromise made it clear that unauthorized recordings did infringe copyright while providing a compulsory

license to assure that authorizations to record would not be unreasonably withheld.

Section 111 of the 1976 Copyright Act cut the knot our courts

had tied around cable television and unleashed a transformative

force in the entertainment industry. Section 119 was introduced

and extended in 1999 to provide a space for direct broadcast satellite technology. Compulsory licensing often has helped to open

other promising channels for delivering content by breaking a decade’s old standoff around performance rights and sound recordings.

In short, compulsory licensing is alive and well and the American

copyright system is a common and appropriate legislative response

to the tensions that new information technologies can generate.

When the technological potential of Internet TV is fulfilled, the real

question will not be whether it qualifies under the Section 111 and

119 compulsory licenses as now written, but on what terms it

should be made available to consumers through existing or new

legislation and how content owners can be fairly compensated for

delivery of their works.

Given the wildfire growth of Internet radio, Mr. Chairman, there

can be no doubt that Internet TV transmissions that include popular network programming would be equally successful. This could

be facilitated by statutory provisions like those now available to

cable and satellite distributors or, alternatively, local stations could

be empowered by law or agreement to grant permission to retransmit network programming with compensation flowing back to

the networks.

To the extent that it was appropriate to impose geographical restrictions on Internet retransmission of TV signals, technologies

now in existence or in development, password systems and

encryption, could be employed. Thus the concerns expressed by the

copyright office back in 1997 about extending compulsory licensing

to the Internet may no longer be relevant.

34

More fundamentally, however, Congress should reconsider the

role of geographic restrictions as conditions on compulsory licensing

for the Internet. If each TV station could make its signals available

over the Internet, then all stations could compete freely and attract

new viewers and additional advertising. Such a change would advance electronic commerce and information availability if it could

be accomplished in way that adequately protects the interests of

content owners, broadcasters, and other stakes in this system.

Consumers will increasingly seek to expand the ways they can

access video content. The challenge, of course, is to assure that all

effective parties benefit from these advancements in technology.

Thank you.

[The prepared statement of Peter Jaszi follows:]

PREPARED STATEMENT OF PETER JASZI, PROFESSOR OF LAW, WASHINGTON COLLEGE

OF LAW, AMERICAN UNIVERSITY

Mr. Chairman and Members of the Subcommittee, I am honored to appear before

you today in my individual capacity as a professor of law who specializes in copyright and new media law. To help put in perspective the testimony of the other distinguished witnesses on the panel, I have been asked to provide an overview of how

copyright and related laws have evolved as technology has changed over time.

Introduction. During the debate over the Digital Millennium Copyright Act of

1998, this Subcommittee certainly demonstrated that it understood the need to balance the interests of information consumers and content owners affected by new

technology. As you will recall, content owners were deeply concerned that advances

in digital technology threatened the economic viability of their businesses. Under

legislation proposed by the Administration, the fair use rights of ordinary consumers

would have been substantially curtailed in the effort to provide additional protections to content owners. Fortunately, as you recognized, new digital technology may

present potential threats to content owners, but it also offers vast new opportunities

to information consumers. In the end, you produced balanced legislation that advanced electronic commerce and promoted the interests of both content owners and

information consumers.

As you will hear in greater detail today, radio and television signals now can be

distributed via the Internet to consumers. Internet radio retransmissions already

enable consumers to listen to radio stations from around the world, in part because

you incorporated into the DMCA a compulsory license for retransmission of copyrighted sound recordings performed by Internet broadcasters.

Incremental improvements in quality could soon establish Internet television delivery as a market competitor for other consumer video services. In my view, the

appropriate question to be asking now is this: What role can and should Congress

play to facilitate enhanced service and competition? To answer that question, I

think it useful to go back over five centuries and consider how the law has adapted

to changes in technology.

The Evolution of Technology and the Law. In 1455, visitors to the Frankfurt

Trade Fair got their first glimpse of what we know today as the Gutenberg Bible.

The appearance of just a few pages of text was quite a revelation to Western eyes,

for it was apparent that multiple copies of a document could be produced by mechanical means. Whatever hopes early printers may have had of maintaining a monopoly on this new method of producing the written word for the masses proved,

they were unavailing—fortunately for all of us. By 1500, roughly 30,000 titles had

made it into print. The world has never been the same.

As Representative Sawyer so eloquently put it during the hearing this Subcommittee held during its consideration of the DMCA, ‘‘Gutenberg’s action had a

powerful effect on western culture. It was the bridge from the Renaissance to the

Reformation and was a direct pathway in this country to the First Amendment.’’

Copyright had its beginnings as the law’s response to the spread of the new technology of movable type. Reflecting the broad societal interest in the wide dissemination of information, Article 1, section 8, clause 8 of the Constitution authorizes Congress to promulgate laws governing the scope of proprietary rights in, and use privileges with respect to, intangible ‘‘works of authorship.’’ As set forth in the Constitution, the fundamental goal is ‘‘[t]o promote the Progress of Science and useful

Arts . . .’’ In the more than 200 years since enactment of the first federal copyright

law in 1790, the maintenance of this balance in our copyright laws has contributed

35

significantly to the growth of markets for works of the imagination and of the industries that enable the public to have access to and enjoy such works.

Congress has historically advanced this constitutional objective and promoted

technological development by regulating the use of information—not the devices or

means by which the information is delivered or used by information consumers. Section 106 of the Copyright Act of 1976, for example, establishes certain rights copyright owners have in their works, including limitations on the use of these works

without their authorization. As a countervailing balance, Sections 107 through 121

of the Copyright Act set forth the circumstances in which such uses will be deemed

permissible or otherwise lawful even though unauthorized. In general, these provisions are technology neutral. They do not regulate information commerce or information technology. Instead, they prohibit certain actions and create exceptions to

permit certain conduct deemed to be in the greater public interest, all in a way that

appropriately balances the interests of copyright owners and users of copyrighted

works.

Evolution of Compulsory Licenses. In general, the copyright system of the

United States has an excellent—if by no means perfect—record of accommodating

technological change and adapting itself to the conditions created by new modes of

information commerce. This is so, at least in part, because the fundamental values

underlying that system, with their emphasis on the importance of achieving an appropriate balance between proprietary control and public access, have stood so

robustly through all the waves of ‘‘new technology’’ which have swept over our information environment in the last century: photography, motion pictures, broadcasting,

photocopying, cable and satellite retransmission—and more. In this connection, it is

worth remembering that some of those waves appeared—in their own times—as

threatening to the copyright status quo as networked digital technology seems

today.

From time to time, of course, the process of accommodation and adaptation has

been less than perfectly smooth—especially in situations where copyright owners

have been intensely concerned about the potential of new distribution technologies

to destabilize established business models. In these situations, to avoid stalemates

that might retard the growth of information commerce, the Congress repeatedly has

responded by legislating ‘‘compulsory’’ or ‘‘statutory’’ licenses. These mechanisms

allow (either in the first instance or as a ‘‘back-up’’ where attempts at voluntary negotiation have failed) the dissemination of copyrighted works by means of specific

technologies, when—and only when—prescribed conditions (including the payment

of licensing fees) have been satisfied. Far from being out of the ordinary, compulsory

licensing is embedded in the grain of the American copyright system.

In 1909, for example, the Congress was faced with a stand-off between owners of

copyright in musical compositions, on the one hand, and the fledgling phonograph

record industry—whose new business model threatened continued sales of sheet

music—on the other. The compromise Congress struck involved making it clear that

the unauthorized ‘‘mechanical reproduction’’ of songs did indeed infringe copyright,

while providing a compulsory license (now found in Section 115 of the Copyright

Act) to assure that authorization for recordings would not be unreasonably withheld.

The 1976 Copyright Act incorporated other compulsory licenses: Section 116 (repealed in 1993) was designed to strike a fair compromise between the interests of

music copyright owners and jukebox operators, while Section 118 aimed specifically

to promote the performance of copyrighted music by means of the then-novel technology of public broadcasting. Of greatest significance, however, were the Section

111 compulsory licensing provisions that cut the Gordian Knot of law and technology that courts had tied over the previous decade, enabling the rise of cable television and thus unleashing a transformative force in the entertainment and information industries.

Since 1976, the Congress frequently has resorted to compulsory licensing to avoid

other potential impasses between content owners and distributors. Section 119 of

the Copyright Act was introduced in the Satellite Home Viewer Act of 1988 to provide a space in which direct broadcast satellite technology could flourish as cable

TV had done before it. In 1999, the provision was revised and extended by (among

other things) the addition of a new compulsory license for ‘‘local-into-local’’ transmissions. Recently, compulsory licensing also was employed to open up yet other

promising channels for delivering copyrighted content to consumers by breaking the

decades-old standoff between recording companies and broadcasters around performance rights in sound recordings. Central to the design of the Digital Performance

Right in Sound Recordings Act (DSPRA) of 1995 were a back-up compulsory license

for certain subscription music services and another for the so-called ‘‘digital delivery’’ of sound recordings. In 1998, as part of the Digital Millennium Copyright Act,

the DSPRA was expanded to add a the new compulsory license for the retransVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 62972.TXT HCOM2 PsN: HCOM2
36

mission of copyrighted sound recordings by Internet broadcasters to which I referred

earlier.

In short, compulsory licensing is alive and well in the American copyright system.

It is a common and appropriate legislative response to the tensions that new technological modes of information commerce inevitably will generate.

Last year, we saw a further evolution of the debate over the future of compulsory

licensing. In 1997, in anticipation of the renewal of the Satellite Home Viewer Act,

the Copyright Office conducted a study to determine whether and how that Act

should be extended. The Copyright Office concluded that compulsory licenses should

not be extended to the Internet, largely because of the perceived inability of Internet

technology to geographically restrict signals to areas unserved by terrestrial broadcast signals.

In 1999, potentially harmful language was included in the Conference Report of

the Satellite Home Viewer Improvements Act that explicitly would have precluded

Internet carriage of retransmitted video signals. As I understand it, proponents of

the change contended that this merely reflected existing law, since Internet companies did not currently qualify for such a license. Internet and telecommunications

companies objected, arguing that, if they could meet the geographic restrictions in

the current Act, they should be entitled to a compulsory license. In the end, principally as a result of the efforts of many Members of this Committee, the language

was removed from the legislation that ultimately was signed into law.

Next Steps. In the near future, Internet companies believe they will be able to

provide effective competition to cable and satellite companies delivering television

to consumers. Natural markets include the workplace, where interference prevents

clear reception, and rural and remote areas unserved or undeserved by broadcast,

cable, and satellite services. When this technological potential is fulfilled, the real

question will not be whether Internet TV service qualifies under the Section 111

and 119 compulsory license, as now written, but on what terms it should be made

available to consumers under existing or new legislation—and how content owners

can be fairly and adequately compensated for delivery of their works.

As other witnesses have stated, the tens of thousands of hours of audiovisual content available over the Internet demonstrates a growing consumer interest in Internet video. There are sites dedicated to independent films, independently produced

news, talk and public service programming, and original animation. Live concerts,

news events, conferences, and business meetings from around the world are broadcast five daily. Television programming from past decades have been licensed for rebroadcast on various Internet sites.

But despite the wealth of video content available over the Internet—far more than

any one cable or satellite system could possibly offer—what is missing is current television network content. Several hundred local television stations are retransmitted

over the Internet today, but these retransmissions are limited to content created by

the stations themselves. When such material is on the air, it is made available to

all Internet users in all geographic regions, without subscription. At other times of

the day, such as when network programming is broadcast, the station signals are

not available over the Internet.

Given the wildfire growth of Internet radio, Mr. Chairman, there can be no doubt

that television transmissions over the Internet that include today’s popular network

programming would be equally successful. To enable transmission of the complete

broadcast day would require a license from the owner of the network content. This

could be facilitated by statutory provisions of the type now available to cable and

satellite distributors. Alternatively, the Copyright Office study suggested that local

stations could be empowered, by law or agreement, to grant permission to retransmit network programming, with compensation flowing back to the networks.

As I noted earlier, in its study the Copyright Office concluded that compulsory licenses should not be extended to the Internet, largely because of the perceived inability of Internet technology to geographically restrict signals to areas unserved by

terrestrial broadcast signals. That may have been true in 1997, but it will increasingly be of limited relevance in the future. While the Internet has generally been

utilized as a global medium, various means have been developed in recent years to

restrict access to material over the Internet. Private web sites are available on a

member-only basis. Videoconferences restricted to certain participants have been

conducted over the Internet. Methods such as password protection or cryptographic

authentication can be used to limit access to authorized persons. Other technologies,

such as hardware cards or smart cards, theoretically could be implemented for this

purpose.

As I also have noted, even under current law Internet services argue that they

could be included within the compulsory video licenses for cable or satellite services

to retransmit station signals if they limit distribution of signals to particular geoVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00039 Fmt 6633 Sfmt 6621 62972.TXT HCOM2 PsN: HCOM2
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graphic regions. In my view, however, Congress should reconsider the requirement

to implement geographic restrictions as a condition to compulsory licensing for the

Internet. If every television station can make its signals available over the Internet,

without spectrum or bandwidth limitations faced by cable and satellite systems,

then all local stations can compete freely and attract new viewers (and, therefore,

more advertising revenue). Such a change would advance electronic commerce and

the availability of information to consumers, and can undoubtedly be accomplished

by means that will adequately and fairly protect the interest of content owners,

broadcasters, and others with a vested interest in the status quo.

Conclusion. Consumers will increasingly seek to expand the ways they can access video content. Whether viewing broadcast programming on a computer monitor,

a handheld personal device, or a television screen using relatively new market entrants such as Web TV, AOL TV, RealNetworks G2, or a host of products still being

developed in garages and labs around the world, consumers will seek access to new

content and to share their experiences with others. As the technology further

evolves, the breadth of their experiences and enjoyment can increase as well. The

challenge, of course, is to ensure that both content owners and consumers benefit

from these advances in technology.

As it did in rewriting the DMCA, this Subcommittee can advance technological

development and electronic commerce by balancing the interests of these important

stakeholder groups.

Thank you.

Mr. TAUZIN. Thank you, gentleman.

The Chair now recognizes Mr. Paul Karpowicz, the Vice President of LIN Television of Providence, Rhode Island.

STATEMENT OF PAUL KARPOWICZ

MR. KARPOWICZ. Thank you, Mr. Chairman. I am vice president

of LIN Television which owns and operates 15 TV stations nationwide. I am also vice chairman of the NAB Television Board and

chairman of the CBS Affiliates Board.

Lintel vision employs 1,500 people including nearly 140 at our

station in Buffalo, New York, WIVB, Channel 4. Of those 140 employees, 60 are part of our local news department. WIVB is our station in Buffalo that was one of those stations hijacked by iCraveTV

and put on the Internet illegally.

I am here today to tell this committee that we must oppose and

remain vigilant against this sort of thievery. The activity iCraveTV

engaged in was a direct attack or American copyright law. More

importantly, it was a frontal assault upon the locally based network affiliate system of broadcasting that is the hallmark of American television. Both Congress and the FCC have consistently recognized the benefits of having American broadcasting licensed and

entrusted to serve the local public interest.

As a result, we have created a nationwide network of local stations that provides both national and local programming.

iCraveTV’s actions do violence to that system and ultimately

threaten the ability of all Americans to have access to local programming. Let me explain how. My station in Buffalo, WIVB, is a

ABC affiliate and carries their network fare. In addition to that

network programming, we offer local produced programming, syndicated shows that we purchase as the exclusive station in our

market. Providing all of these programs allows us to generate local

advertising that runs under all of the local service we provide.

For example, we spend almost $5 million a year on local news,

a commitment that would not be possible without some of the revenue that we generate from our advertising within local network

and syndicated programs. As you know, Congress has created comVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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pulsory license for both cable and satellite services that gives those

industries the ability to retransmit local stations in a discrete geographic area, in this case, our DMA with some very limited exceptions.

These licenses also carry certain obligations such as must-carry,

Syntax, and sports blackout rules, but no such license or obligations exist for the Internet which can literally serve the entire

world.

Why is this a concern? If you look at my station, it provides all

kinds of local programming throughout the day including local advertising, promotional material that drives viewers to our local

news, weather warnings and alerts, public service announcements,

and numerous other offerings. If a viewer in Buffalo can access

their network programming from the Internet, they will lose access

to all of that local information, and it will only diminish our ability

to provide it.

The same holds true for syndicated programs. We pay hefty fees

to obtain the rights to show Oprah in the Buffalo market, but if

some Internet site streams Oprah from elsewhere or vice versa,

that destroys the syndicated exclusivity we have paid for and our

station and its viewers will suffer as a result.

The bottom line is that this lawless activity will create economic

harm which necessarily translates into reduced local services for

our audience. Further, the way in which the programs are presented on iCraveTV degrades the entire viewing experience by

squeezing my station’s picture inside a frame that includes extraneous banner advertising. Not only does the picture quality suffer,

but by doing this, iCraveTV also removes the data stream that

gives viewer closed captioning and lets them activate the V-chip

technology in their TV set.

In addition, iCraveTV or some other network provider could insert advertising for competing advertisers that would severely dilute the ads my station carries. There is no reason for General Motors to advertise on my station if iCraveTV is running a banner ad

for Ford around the edge of my picture.

Local advertisers pay for local viewers. Viewers in Buffalo watching programming from some other market will not see the local car

ads, the local PSAs, or those ever important local political ads, and

that same situation would hold true for viewers in other markets

watching WIVB from Buffalo.

The Federal Court in Pittsburgh fortunately stepped in and did

the right thing. It forced iCraveTV to cease and desist in this illegal activity. We believe that the laws currently on the books are

sufficient to make sure that this does not happen again, so long as

the courts remain vigilant in enforcement.

The situation can only change if Congress were to become convinced to pass legislation by granting the compulsory license for

the Internet. The Internet is and can be a wonderful thing. Our

stations are already using it to provide news, Doppler radar, traffic

cameras, and other local information to our viewers.

Make no mistake, we are not against the Internet, but what we

are against is allowing the Internet to take advantage of our copyright material and use it illegally to hurt us and our local viewers.

We all want the Internet to enhance our local markets through inVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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novative technology, but we cannot allow those without the copyright to control those uses.

We will continue to fight for our rights against iCraveTV or any

other web site that attempts to steal our product, and I would urge

of you to join us in that effort. Thank you very much.

[The prepared statement of Paul Karpowicz follows:]

PREPARED STATEMENT OF PAUL KARPOWICZ, VICE PRESIDENT, LIN TELEVISION

CORPORATION ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS

My name is Paul Karpowicz. I am the Vice President for Television of LIN Television Corporation, the owner of television station WIVB, a CBS-affiliated station

in Buffalo, New York as well as network stations in many other markets. I am the

Vice Chairman of the Television Board of the National Association of Broadcasters

and the Chairman of the CBS Television Affiliates Association. Thank you very

much for giving me the opportunity to testify today.

The Network/Affiliate System

Our station in Buffalo, like the hundreds of other network stations across the

United States, exists as a result of the uniquely American partnership between national networks and local TV stations. Under this system, local TV stations in markets large and small across the United States provide a unique combination of national TV programming (such as NFL football and ‘‘60 Minutes’’), syndicated programming (such as ‘‘Oprah Winfrey’’), and local news, weather, and public affairs

programming.

The network/affiliate system provides the solution to a problem that Congress has

long tried to solve: how to ensure that as many communities as possible have their

own local TV ‘‘voices,’’ rather than accepting a world in which viewers in Buffalo,

Baton Rouge, or Boise must rely solely on programming originating in New York

or Los Angeles. The network/affiliate system has also ensured that virtually all

Americans have access to free, over-the-air television, rather than forcing viewers

to pay intermediaries (such as cable systems or satellite companies) to provide them

with TV programming.

In short, the network/affiliate system has been a tremendous American success

story. But the continued vitality of this system depends on local stations enjoying

a substantial degree of exclusivity in providing network programming to local viewers. Local stations make much of their revenues by selling advertising time during

popular network programs, particularly primetime programs. During these same

programs, local stations run promotional spots designed to attract viewers to local

news programs; these spots are a key way that stations build audiences for their

news programs. If local viewers are able to watch network programs on distant stations imported by third parties—whether cable systems, satellite carriers, or Internet companies—the basic economics of network affiliates are put in grave jeopardy.

Exclusivity in providing local audiences with syndicated programming is also important to the continued viability of local stations, both network and independent.

Our stations simply cannot continue to pay large fees to program syndicators to

keep high quality syndicated shows on free over-the-air television, if the same programs are being imported day and night into our local markets by cable, satellite,

or the Internet.

Protection of stations from importation of duplicative programming into their

markets is thoroughly woven into the fabric of our legal system. Since the 1960s,

for example, the Federal Communications Commission has adopted and enforced

network nonduplication, syndicated exclusivity, and sports blackout rules that bar

cable systems from importing duplicative programming from distant stations. Congress acknowledged and supported these rules when in created the cable compulsory

license in 1976, and reaffirmed its strong support of those rules in the Telecommunications Act of 1996.

When satellite television appeared on the scene, Congress created a similar set

of rules in 1988 to protect the network/affiliate relationship. Congress reaffirmed

those rules last year in the Satellite Home Viewer Improvement Act, and directed

the Commission to apply syndicated exclusivity and sports blackout rules to satellite

carriers as well. In doing so, Congress ‘‘reassert[ed] the importance of protecting and

fostering the system of television networks as they relate to the concept of localism,’’

and pointed out that ‘‘television broadcast stations provide valuable programming

tailored to local needs, such as news, weather, special announcements and information related to local activities.’’ SHVIA Conference Report, 145 Cong. Rec. at 11792

(daily ed. Nov. 9, 1999).

40

Internet Transmissions of TV Broadcasts and the iCraveTV Case

Although this Subcommittee is very familiar with the harm (and resulting consumer complaints) caused by satellite industry importation of distant network stations, the threat posed by unauthorized Internet delivery of broadcast television programming is vastly worse.

Let me start by telling you what iCraveTV is and what it has done. iCraveTV is

a company based in Toronto, Ontario that late last year began picking up over-theair TV signals from 17 stations in Buffalo, New York and Toronto and retransmitting them throughout the world via the Internet. ICraveTV’s business plan was simple: use broadcasters’ copyrighted product, in which broadcasters have invested billions of dollars, and then ‘‘frame’’ it with iCraveTV’s own advertisements. In the

process, iCraveTV also degraded the quality of our signal, omitted the part of the

signal required for closed captioning and parental advisories, and made it appear

that iCraveTV was itself the author of the programming. iCraveTV did not obtain

permission from any TV station—including our Buffalo station—or any other copyright owner before pirating their programming.

iCraveTV pretended that its service was limited to Canada, where it claims it is

permitted to retransmit TV programming through the Internet. (We strongly disagree with that claim about Canadian law, and iCraveTV has been sued in Canada

as well.) The reality is that iCraveTV was available throughout the United States

and throughout the world.

As soon as they learned of iCraveTV’s unlawful activities, American broadcasters

and copyright owners immediately demanded that iCraveTV stop infringing their

copyrights. When iCraveTV refused, a coalition of TV networks, motion picture studios, and sports leagues filed suit in federal court in Pittsburgh on January 20, 2000

against iCraveTV and its principals.

Judge Ziegler of the United States District Court for the Western District of Pennsylvania instantly saw through the ‘‘only in Canada’’ sham. As Judge Ziegler explained, the evidence showed that the iCraveTV web site ‘‘was established, used,

promoted, advertised and sold to attract users in the United States to circumvent

the trade[mark] and copyright laws of the United States and to circumvent the

trade[mark] and copyright rights of the plaintiffs.’’

The Court also found that by transmitting TV programming through the Internet

into the United States, iCraveTV is ‘‘publicly performing’’ those programs in violation of the plaintiffs’ exclusive rights under the Copyright Act. Notably, iCraveTV

did not argue—and could not argue—that it is allowed to transmit TV programming

through the Internet to U.S. viewers without obtaining permission from the copyright owners. As the Register of Copyrights made clear in letters to Congress last

fall, U.S. law simply does not permit such transmissions, and Internet companies

are not entitled to transmit TV programming under any existing compulsory license.

Judge Ziegler has issued a preliminary injunction barring iCraveTV from transmitting the plaintiffs’ copyrighted programming into the United States. To comply

with that court order, iCraveTV has terminated its online transmissions of TV programming.

Why Internet Retransmissions of TV Station Programming is So Dangerous

The very substantial harm that stations have experienced as a result of unlawful

retransmissions by satellite companies would be incalculably worse if Internet infringers such as iCraveTV were allowed to continue to stay in business, or if Congress were (mistakenly) to create a new Internet compulsory license that would

override the rights of stations and other copyright owners. The reason is simple: unauthorized Internet transmissions of TV broadcast programming can reach everyone

in the United States—in fact, everyone in the world—who has a computer and a

modem. In the United States alone, there are 110 million Americans with Internet

access, and there are hundreds of millions of Internet users worldwide. These figures are, of course, growing every day, as is access to broadband that makes delivery of video over the Internet even more appealing to consumers. As local stations

have lost millions of local viewers to unlawful retransmission of distant TV stations

by satellite companies, they would now face unauthorized Internet companies delivering the station’s own product to more than 100 million local viewers in the United

States, including those in many of the most affluent households that are the most

appealing to advertisers.

And it is not just the national programming that is at issue here. Our Buffalo

station invests millions of dollars every year in producing top quality local news programming, of which we are the sole copyright owner. Having invested the money

and hired the talent to produce this programming, our station—and not some third

party who has invested not a penny in our programming—is entitled to decide how

to deliver that programming to viewers.

41

Our Buffalo station, like many stations, also buys syndicated programming, and

often pays top dollar to ensure that only our station will offer a particular program

in its local market. FCC rules ensure that those contracts must be respected by

cable systems when they import out-of-town stations. Unauthorized Internet transmissions would, of course, make those contractual protections meaningless, since TV

stations carrying the same programming in distant cities would be available to

every viewer in Buffalo with an Internet connection.

Nor is this just a domestic issue. By delivering U.S. television programming

throughout the world on the Internet, unauthorized Web transmissions of TV stations would sabotage the ability of U.S. broadcasters and other copyright owners to

sell their programming in foreign markets. That is, owners of valuable U.S. television programming would find themselves ‘‘scooped’’ in selling their own programming by third parties who could simply appropriate the entire output of the U.S.

television programming and deliver it instantaneously throughout the world.

It is not an exaggeration to say that unauthorized Internet transmissions of TV

stations would cripple, if not destroy, our spectacularly successful system of free,

local, over-the-air television. Exclusivity would become a meaningless concept, since

dozens, if not hundreds, of stations would offer the same programming that local

stations once used as their calling card. Local weather emergency information—such

as blizzard warnings in Buffalo—would go unheard by many local viewers, since

there would be no reason to watch network or syndicated programming on a viewer’s local station rather than on a station imported from some distant market. And

with those viewers lost to local stations, the revenues needed for stations for local

stations to provide this programming would be diminished. And local political advertisements, along with local news coverage, would go unseen by many local viewers

for the same reasons.

Let me be clear: broadcasters are not opposed to technological change, and we are

eager to harness the extraordinary power of the Internet in ways that are consistent

with our roles as providers of free, over-the-air local television. To exploit the magic

of the Internet properly, however, requires that free market forces be left to work,

rather than having the government seize our copyrighted works and hand them over

to third parties who have done nothing to create them.

Broadcasters are already taking advantage of the power of the Internet—and benefiting consumers—through purely voluntary, marketplace transactions. For example, many TV stations today offer their own local newscasts throughout the United

States on their Web sites, thereby enabling interested viewers—including former

residents—to keep on top of local news developments. Of course, these Webcasts feature (and are financed in part by) advertisements sold by the station that created

the programming, not ads placed by third party parasites. Other broadcast TV programs may soon be offered through the Internet, through normal, marketplace

transactions, if copyright owners determine that it can be done consistent with the

fundamental principles of their businesses.

Although authorized Webcasts of TV broadcast programming are an exciting new

development, unauthorized Webcasts pose one of the most devastating threats that

over-the-air television has ever faced. We should take to heart the lesson that the

satellite experience has taught us: as Chairman Tauzin has pointed out, it is crucial

to stop unauthorized transmissions of TV programming before they become widespread and viewers become accustomed to receiving illegal programming. Just as

Congress does not want to hear complaints from viewers about another round of

turnoffs—this time from an illegal Internet service—stations do not want to field

the complaints that will inevitably result if this type of piracy becomes widespread

and is then halted by the courts.

For now, the laws appear to be working well to permit TV broadcasters and other

copyright owners to protect themselves against this new, ultra-high-tech form of piracy: the iCraveTV court correctly found that Internet transmissions of TV programming in the United States, without the permission of the broadcaster and copyright

owners, are against the law. We will keep you closely advised of developments, and

will let you and other concerned members of Congress know immediately if it turns

out that there needs to be some adjustment to U.S. law to prevent iCraveTV or anyone else from engaging in this outrageous form of misappropriation.

Mr. TAUZIN. Thank you very much, sir.

And our final witness is Mr. Alex Alben, Vice President of Government Affairs of RealNetworks, referred to you earlier I think by

Mr. McCallum as a distributor of iCrave. Mr. Alben.

42

STATEMENT OF ALEX ALBEN

Mr. ALBEN. We are not a distributor. We are the technology platform that is utilized for streaming.

Mr. TAUZIN. I stand corrected.

Mr. ALBEN. Mr. Chairman, members of the subcommittee, on behalf of RealNetworks, thank you for inviting me to testify today.

I’m Alex Alben, and since 1997, I’ve had the pleasure of developing and implementing RealNetworks’ Internet media strategy. It

has also been my pleasure to represent RealNetworks as one of the

founding members of the Digital Media Association which today

represents over 40 Internet media companies.

Mr. Valenti, we do not have as distinguished a list of members

in terms of name recognition, but our members are also technology

exporters and are building the infrastructure for the worldwide interpret economy which hopefully will also be a great export for the

United States as we continue to develop.

RealNetworks was founded by Rob Glazer in 1994 with the bold

premise that the Internet would be a mass audio-visual medium.

To accomplish this, Mr. Grazer and his development team developed the Real Player, a software application that receives plays

packets of audio and video, and then delivers or streams them over

the Internet. Because we have always made a free version of the

Real Player available to end users, our platform has rapidly proliferated, as you are aware.

From 5 million unique registered users in 1995, our audience has

grown to over 95 million today with 33 percent watching video and

75 percent tuning into audio programming every week. This growth

would not have been possible without the creation of attractive content from over 300 content partners from individuals to schools and

community groups to large media companies.

The barriers to entry in the field of mass communications have

never been so low as on the Internet. Streaming media, as you’ve

heard today, is being widely embraced by local radio and television

stations. As a result of these forces, over 300,000 hours of programming are created and webcast each week, creating a medium that

enriches video content with interactive features.

Mr. Chairman, we appreciate the opportunity to come here today,

and I would like to alert you to three critical trends in our business. First, we firmly believe that the a level playing field fosters

competition and is essential for growth of the Internet. The Telecommunications Act of 1996 called for breaking down the barriers

of distribution in the United States communications marketplace.

The Internet is accelerating this process in ways that we could not

have predicted even 4 years ago. A horde of businesses across all

industry sectors are pushing the barriers for wider distribution of

content over the Internet.

Our sole concern is that we have a level playing field to compete

with these established forms of mass media. We are not asking for

Government regulation. We are not asking for Government intervention. We believe none is required at this time when the marketplace is finding new ways to meet consumer appetite for interactive

online news and entertainment products.

Second, the web must be allowed to bring local programming to

a global audience. Much like cable access and low-powered TV,

43

streaming media promotes localism and presents a platform for

more speakers to reach the general public, creating new media outlets to serve the public. Any solution to an Internet compulsory license must take the global nature of the Internet into account and

not artificially limit the audience for webcast content by imposing

artificial geographic restrictions that make little sense for a global

medium.

Our challenge, therefore, is to present new business models for

media companies to stream their programming to this new audience so that they can immediately appreciate the upside of fullfledged distribution of their programming over the Internet.

Third, streaming media will establish new online revenue

streams for traditional media. As you have heard today, it already

is, but we must also respect intellectual property rights. The web

has already created these new revenue streams for Internet broadcasters and other broadcasters who can sell Internet ads and do Ecommerce on a global basis. It is a wonderful thing to hear of stations from Buffalo, New York distributing their programming over

the world and selling ads now on an international basis. It’s remarkable.

Traditional sports entertainment, and news programs made

available to the 250 million member Internet audience will only

grow the revenues for the talented artists, athletes including

colleagiates, producers, and others who create this popular programming. We want to offer content to consumers at attractive

prices with the greatest convenience in terms of what they can

watch and where they want to watch it. By offering the online audience the widest possible array of live and on-demand programming, we will work with content providers to create this huge new

market for new and old copyrighted works.

In the long run, every program will be globally distributed over

the Internet. The technology allows for it and consumers demand

it. Our critical task to do so in a way that fairly compensates copyright owners and demonstrates the promise of this rich and interactive global medium.

Mr. Chairman, thank you for inviting us here today. I’d like to

also add to Mr. Valenti’s comments. We are interested in the copyright assembly, and if we can afford the membership fees, we may

be interested in signing up. So please give us some information.

Mr. VALENTI. We will give you a compulsory license.

Mr. TAUZIN. Compulsory dues.

Thank you very much, Mr. Alben.

[The prepared statement of Alex Alben follows:]

PREPARED STATEMENT OF ALEX ALBEN, VICE PRESIDENT, GOVERNMENT AFFAIRS,

REALNETWORKS, INC.

Mr. Chairman and members of the subcommittee, on behalf of RealNetworks, Inc.,

thank you for inviting me to testify today at this very important hearing regarding

the future of video distribution on the Internet. I am Alex Alben, and since 1997,

I have had the remarkable pleasure of participating in the development and implementation of RealNetworks’ groundbreaking Internet media strategy. It has also

been my pleasure to represent RealNetworks as one of the founding members of the

Digital Media Association, which today represents forty digital music, e-commerce

and digital video companies. Today I would like to briefly review the history of

RealNetworks and streaming media, and discuss the future of our company, the digVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6621 62972.TXT HCOM2 PsN: HCOM2
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ital media industry, and the exciting future that consumers will enjoy as we implement our vision to distribute music and video to the global Internet audience.

RealNetworks Revolutionary Technology Creates The Streaming Media Market

RealNetworks was founded by Rob Glaser in 1994 with the bold premise that the

Internet would one day be a mass audiovisual medium. For those of us who built

early web businesses on a foundation of text and simple graphics, the notion that

one day high quality video would stream to 250 million connected consumers around

the world was as farfetched as predicting that two sluggers would break Babe

Ruth’s single season home run record two years in a row. Yet just as Mark McGwire

and Sammy Sosa have accomplished this feat, RealNetworks technology has delivered on the promise of inter-active video. You might remember the first Seattle

Mariner’s baseball game, broadcast over the Internet in April of 1995 using the

RealAudio 1.0 format. This AM-quality broadcast was not only streamed to fans at

their desktops in Seattle, but, complete with commercials, was enjoyed by displaced

fans as far away as Stockholm and Tokyo.

To accomplish this, Mr. Glaser and his team had developed the Real Player—a

software application that receives and plays ‘‘packets’’ of audio or video data that

are delivered from remote computers, or ‘‘servers,’’ across the Internet. By breaking

rich media files such as video into a series of small packets, Real technology gives

the computer user a continuous listening or viewing experience, even over low bit

rate connections. The RealPlayer and server system facilitates both live and on-demand delivery of streaming programming. Unlike digital downloads, which require

storage space on the user’s pc and relatively fast Internet connections, streaming

represents an incredibly efficient and inexpensive way for broadcasters—or

‘‘webcasters’’—to deliver audiovisual content to their online audience. As a consequence, the technology fulfills Mr. Glaser’s original vision that millions of Internet

users can create new content for a new medium, without reliance on traditional

media outlets.

Fast forward to February of 1997, when Spike Lee helped us launch RealVideo

with a short film featuring tap dancer Savion Glover that was widely distributed

over the Internet. It’s unfortunate that Al Jolson wasn’t available, because he might

have said, ‘‘You ain’t seen nothing yet.’’

In November of 1999, the RealPlayer 7.0 brought consumers a package of audio

and video programming that delivers on the promise of streaming media, incorporating better video and audio quality with a revolutionary format that allows for

simultaneous presentations of multimedia, text, pictures and graphics.

Because we have always made a free version of the RealPlayer available to end

users, the platform has rapidly proliferated. From 500,000 unique registered users

in 1995, our audience grew to 14.4 million in 1997, 48 million in 1998 and stands

at 95 million at the beginning of this month, with five downloads of the RealPlayer

7 occurring every second.

To underscore the popularity of streaming media on the web, Arbitron New Media

and Northstar Interactive report that of the 95 million RealPlayer base, 33% watch

video programming and 75% tune into audio programming on a weekly basis!

Connecting 95 Million RealPlayer Users To a Wide Array of Content Created Both

By Traditional Media Companies and New Voices.

This growth would not have been possible without the creation of attractive content from wide variety of sources, enabled by the distribution of our low-cost encoding and production tools. We also offer a free server that will connect a content publisher with up to sixty simultaneous viewers or listeners. From individuals, to community groups, to clubs, to broadcasters and large media companies, the barriers

to entry in the field of mass communications have never been so low as on the Internet. Virtually anyone with a connected computer can distribute information over the

World Wide Web, realizing our Founding Fathers’ vision of a robust marketplace of

ideas.

RealNetworks has over 300 content partners, ranging from Chuck D’s RapStation,

to NPR, the BBC, Comedy Central, Atom Films and Leonard Nimoy’s ‘‘Alien

Voices.’’ Independent and non-traditional programmers have found an efficient channel in the Internet to cost-effectively reach niche audiences. Similarly, CNN, ESPN,

NBC, MTV, Fox, CBS and other major media companies have embraced RealSystem

G2 as a leveraged way to expand their reach on the web and drive consumers to

both their web sites and to their off-line media outlets.

And this is an international phenomenon—from broadcasts of special services

from the Vatican to underground radio transmissions during the war in Bosnia—

streaming media has presented unique ways for speakers and dissidents to reach

their community of listeners on the World Wide Web.

45

Streaming media has also been widely embraced by local radio and television stations. Our best estimates are that on a global basis over 3000 radio stations have

put their signal up on the web on a 24 hour basis. This phenomenon has turned

businesses aimed at local audiences (and advertisers) into global media outlets. Following suit, over 200 TV affiliates offer some selection of their news programming

on the Internet in RealVideo, creating convenience for viewers who seek out particular stories or who might have missed the 5 o’clock News.

As a result of these forces, over 300,000 hours of programming are created and

webcast each week in RealMedia formats.

Motion picture studios, TV networks, and local broadcasters have all affirmatively

decided to employ streaming media to expand beyond their core consumers and

reach the vital Internet audience. The promotional value of distributing content over

the web and the potential for tapping into increased ad revenues perpetuates this

‘‘virtuous circle.’’ RealNetworks views these copyright owners and programmers as

our partners in this enterprise to create a new programming medium—a medium

that takes the best of TV and Radio content and enriches it with interactive features that ‘‘add value’’ for the American and global consumer.

Looking to the Future—

Mr. Chairman, we appreciate the opportunity to come before this Subcommittee

and reflect not only on the rapid growth of our industry, but to alert you to trends

we have noticed, with a view toward helping you craft the best approach to government policy in this area. We can encapsulate these observations in a set of three

fundamental principles:

First—A Level Playing Field Fosters Competition And Is Essential For the Growth

Of This Important New Medium

The Telcommunications Act of 1996 called for breaking down the barriers to distribution in the U.S. communications marketplace. The Internet has accelerated this

process in ways we could not have predicted even four years ago. A horde of businesses—software vendors, media companies, telcos and others—are pushing the barriers for wider distribution of content to more consumers. RealNetworks and other

Internet media delivery companies have not asked for special legislation to address

the particular aspects of our distribution channel. In fact, as the statistics I have

cited clearly demonstrate, the web audience is growing without any regulatory favoritism.

Our sole concern is to have a level playing field to compete with established forms

of mass media. We are not asking for government regulation or intervention and

believe none is required at this time when the marketplace is finding new ways to

meet consumer appetite for interactive online news and entertainment products. It

would also be unfair—and probably unwise—for government to devise new sets of

rules to regulate this nascent medium as it evolves and grows in sometimes unpredictable ways. We are simply asking that all laws passed be technologically neutral

and that Congress refrain from erecting special barriers to digital distribution simply because it is digital, without thinking through the implications for the important

policy goals served by online media.

Second—The Web Must Be Allowed To Bring Local Programming To A Global Audi- ence

The impressive growth of streaming on the Internet demonstrates consumer demand for online audio and visual content. People today expect to find radio shows

and film clips on web sites. They want to experience both traditional and non-traditional content and they want to do so on their own schedule and in places that are

not well-served by analog audio and video signals. By its nature, the Internet is an

unscheduled interactive medium that offers consumers more choice and more voices.

Clearly, this medium dovetails with our longheld public policy principles of free

speech and breaking content distribution bottlenecks.

Much like Cable Access, Low Power TV and the old-fashioned soapbox, streaming

media promotes localism and presents a platform for more speakers to reach the

general public. I’m sure the members of this Committee are keenly aware that much

of the unprecedented media consolidation and relaxation of cross-ownership rules

over the past decade are premised on this development—that new media outlets are

serving the public through new means of distribution such as the Internet.

The challenge in creating a compulsory license for the Internet is not to shoehorn

the Internet into local topographies, but to fairly compensate program owners for

the distribution of their content beyond the boundaries of their terrestrial signals.

The technology allows a soccer fan in the U.S. to watch a World Cup match in

France in real time over a modem. Surely, along with the sports leagues, we should

be smart enough to figure out how to expand the audience for such programming

46

in a way that doesn’t undermine traditional revenue streams and licensing arrangements.

Any solution to an Internet compulsory license must take the global nature of the

Internet into account and not artificially limit the audience for webcast content by

imposing artificial geographic restrictions that make little sense for a global medium. Our challenge, therefore, is to present new business models for media companies and producers to stream their programming to this new audience, so that they

can immediately appreciate the upside of full-fledged distribution of their programming over the Internet.

Third—Streaming Media Will Establish New Online Revenue Streams for Traditional Media, While Respecting Intellectual Property Rights

As a person who participated on the studio side of the Sony Betamax case, I can

only smile now at the outcome where the VCR created both the $7 billion Video

Rental market and the $8 billion Video Sale market, while the Theatrical Box Office

continues to grow and in fact set new records. Quite simply, new technologies created new markets for old content in a way that did not cannibalize long-established

revenue streams. The web is already creating new revenue streams for local broadcasters who can now sell Internet ads and do e-commerce on a global basis, while

their terrestrial signal market continues to thrive.Traditional sports, entertainment

and news programs made available to the 250 million member Internet audience

will only grow revenues for the talented artists, athletes, producers and others who

create this popular programming.

We are mindful that we need to balance the incentives to create great programming with the benefits of achieving the widest possible distribution. RealNetworks

upholds this principle, both as an inventor of intellectual property and as the first

company to successfully bring a legal action under the Digital Millenium Copyright

Act to ensure that content owners can distribute their streaming media programming in ways that they intend.

We want to offer content to consumers at attractive prices with the greatest convenience in terms of when they want to watch and where they want to watch. By

offering the online audience the widest possible array of live and on-demand programming, we will work with content producers to create a huge new market for

new and old copyrighted works.

Many traditional models—pay-per-view, syndication, subscription and even ‘‘rental’’ can be replicated online. In the long run, every program will be globally distributed over the Internet. The technology allows for it and consumers demand it. Our

critical task is to do so in a way that fairly compensates copyright owners and demonstrates the promise of this richly interactive global medium

Conclusion

In conclusion, let me reiterate the ultimate desire of RealNetworks and our fellow

companies with the Digital Media Association: that consumers be empowered to listen, watch and purchase entertainment and educational content how, when and

where they choose, and by whatever technology they enjoy most. We pledge to continue to work with our content partners, as RealNetworks has since its inception,

to fully realize Rob Glaser’s vision of the Internet as a robust, interactive medium

for audio and video communication by all people around the globe.

Thank you for the opportunity to testify this morning. I would be pleased to answer any questions you may have.

Mr. TAUZIN. The Chair will recognize himself and then other

members for 5 minutes.

Let me point out that I think we are going to follow this hearing

with what I think is the behind-the-mirror issues that are going to

envelope a consideration of the issues you have presented us today,

and that is the issues of privacy on the Internet and how information may or may not be restricted by consumers, and we are talking about how you may or may not restrict the movement of content or isolate its delivery, isolate access to it.

Consumers, I think as we further develop privacy technology and

privacy policy, are going to also have some ability to control growing information over the Internet, and much of what you discussed

today that do with advertiser-based support for content and obviously privacy controls exercised by consumers can have very inVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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creasingly important effects upon the ability of advertisers to work

the new markets, and we are probably going to follow up with a

hearing on that. I just want you to know this so you can be thinking about how you may be able the contribute to that hearing.

Let me confess to you that I think I share with many of my colleagues I’ve talked to about the issues you have presented today

some of the tension I think Americans feel about these issues. Let

me try to express them for you and get some feedback.

One, I think Americans like the idea that they can see all the

television they could possibly want to see from as many different

places as possible on the Internet. I kind of like the notion that I

can watch my local news here in Washington on the stations back

in new Orleans and Baton Rouge. I kind of like the idea that I can

watch what the candidates are saying in New Hampshire before

they come to campaign in Louisiana to see if they are saying the

same things. It is kind of nice. I kind of like the idea that I can

watch that incredibly interesting campaign in New York. That is

going to be interesting for all Americans, and yet, you know, the

question is how can we accommodate to that and yet are we going

to lose localism.

Are we going to lose some of the features of network distribution

that has characterized network programming distribution, network

non-dupe rules, and the systems that have supported the local station’s ability to finance local news programs and local important

events, and how do we settle those tensions, and I’ll ask you to respond.

I also want to tell you that from what I am hearing from you,

I sense that there are two real concerns expressed out here in addition to consumer concern for more and more video programming

and the one on the side of broadcasters, and video content providers has to do with, indeed, localism and protecting the base of

advertiser support and network distribution of products. And on

the other side, on the content side, is the concern for copying and

distribution of digital products that still have value, that still have

value in terms of its ability to make profit for the content creator

in various ports, either at Blockbuster and other area distributions.

At the same time, you know, Mr. Alben, you said it as boldly as

I ever heard it. You predicted that every television, every video

content program is one day going to be available to the world

whether we want it to or not. It is sort of like MP3.com reached

on university campuses. The question is when will university students be able to pick up digital video signals and put them on their

web site and broadcast from around the world.

You know, iCrave is just the first puff of wind in this brewing

storm, and how do we settle it? So give me some feedback.

Mr. McCallum, first of all, technologically, you tell me you have

software, you have equipment that can protect this product, and

you have equipment that can isolate the delivery to a certain designated class of subscribers. How certain can you or any of us be

that that technology is going to be sustained in the face of kids in

any college in America who have been able to break the best codes

our best scientists have been able to put together?

Mr. MCCALLUM. Mr. Chairman, in the next 2 weeks, we hope to

have an efficiency level set for the software that we’re impleVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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menting. The invasion by young people and by people intent on

hacking into systems knows no bounds. They are driven largely by

curiosity. Increasingly, unfortunately, there’s a large number driven by commercial intent, but the industry, RealNetworks and other

companies, are working to be ahead of those to try to put in place

ever increasing protective systems with encryption and so on, and

we are part of that process because it is important to us from a

business model that we be able to guarantee protection to a certain

degree.

Mr. TAUZIN. Mr. Valenti, the copyright assembly is being organized. Will it invest in technology that perhaps can help us resolve

some of these conflicts?

Mr. VALENTI. Mr. Chairman, I think that Mr. McCallum will do

very well in the motion picture business. He can sure write good

fiction.

The fact is that in the trial before Chief Judge Ziegler, the Chief

Judge of the Western District of Pennsylvania, as my memory

serves me correct, on that trial document on pages 48, 98, 102 and

113, McCallum plainly admits they cannot do it, and Judge Ziegler

in his decision said you cannot. There are no technological fixes to

restrict it to Canada.

For example, I’m a 16 year old, and I’m in my base in Toronto.

I can mirror iCrave to the world instantaneously, and that can

happen and we all know that, and he has admitted that in the trial

that went on. You have to understand what iCrave is doing. They

take these television stations from the twenty-ninth parallel and

above, bring them into their web site, alter the picture, and then

sell advertising around it, do not ask anybody’s permission to do

it, do not pay anybody, and they expect you to believe that they are

doing something nobel, advancing human society.

Fifty-seven percent of all the users of iCrave were in what country? The United States.

Mr. TAUZIN. Why don’t you respond, Mr. McCallum and Mr.

Alben if you’d like to join in. How do you answer that argument?

Mr. MCCALLUM. Thank you for anticipating, Mr. Chairman, that

I might have a response. I might start off my response by reading

a short E-mail. It says:

‘‘Hello. I live in northwestern Ontario, and I am not able to get

access to cable, and I do not have the money for a satellite dish

and service. I live 35 miles away from the nearest city of Thunder

Bay. Your web page gave me access, but now they have taken that

away. I wish they would let you bring back your rebroadcasting

service so that I could have access to shows and programs that I

presently do not have access to. Signed, Missing my TV access.’’

This is from Linda, somewhere 35 miles outside of North Bay in

very deep snow, I assume. The plaintiffs would have you believe

that this woman 35 miles outside of Thunder Bay, Canada is living

in Richmond, Virginia because she sent this E-mail through her

AOL account. All Canadian AOL subscribers are registered through

the system as being in the United States.

The system that we put in place at the time we launched was

using what we asked was the best available technology. Since that

time, a number of developments have taken place by other companies, and we are taking advantage of those as we build the new

49

system. We have also augmented those by some proprietary software development that is taking place within our own company

and our suppliers, and so we believe that this system which will

be available in the next month will be in a quantum leap toward

not only the security of our system but for security for other program suppliers on the Internet.

Mr. TAUZIN. Mr. Alben, is that technology reliable in your view?

Mr. ALBEN. We have not tested that specific technology that Mr.

McCallum referred to, and I think that any means of trying to deny

access based on the URL of the user is probably not going to be

sufficient if that is what is being used. So you need to get information from the consumer in order to verify where they are from, and

that is a hurdle to entering into the access.

Mr. TAUZIN. My time is up, but, Mr. Karpowicz, you wanted to

respond to my earlier comments. I’ll let you do that, and then I’ll

move to Mr. Markey.

Mr. KARPOWICZ. Yes, sir. Thank you, Mr. Chairman. Really, I

just wanted to start off by saying broadcasters are not against the

Internet. We think the Internet is a wonderful, innovative technology, and it has provided us with many opportunities to provide

new services to our viewers that currently did not exist.

As I indicated in my testimony, we do stream news and weather

and traffic cameras. A lot of information is being streamed currently. It is my understanding that over 200 stations across the

United States currently stream all or part of their newscasts. So

to your question about being able to receive New Orleans stations

in New York, I think that time is coming.

I think the issue there is those stations have chosen to do that.

Those stations who are the copyright holders of that news product

have chosen to make that decision. The product was not just

plucked out of the air waves and taken away, and it is presented

in a format that the stations are very comfortable with.

Mr. TAUZIN. The Chair is pleased to recognize Mr. Markey for a

round of questions.

Mr. MARKEY. Thank you, Mr. Chairman, very much.

Opening day last year, Red Sox, WEEI radio up in Boston, I am

able to put it up and listen to it in my office down here in Washington, DC. That is great. I want to be able to watch it to. That

would be great, fabulous. You know?

Back in the 1920’s, we actually passed laws which cleared signals

all the way for 10,000 miles, and I listen to WBC radio every night

when I go home here in Washington, DC. I listen to the 6 or 7

o’clock news in WBZ radio in Boston. We know that there is 25 or

so channels across the country that we can do that.

Over the years, of course, this subcommittee panel, we have ensured that we create a balance that makes it possible for new technologies, for new competitors to get into the marketplace. There are

always controversial decisions which we make. Back in 1962, this

subcommittee had to pass a law so that all TVs in America could

carry UHF channels. ABC, CBS, and NBC bitterly opposed that

law. They, of course, did not want new UHF channels. They said

that would undermine their ability to be able to create just the

right kind of a marketplace for the existing three big net works.

50

In 1978, this subcommittee had to pass a law that insured that

the cable industry would have access to telephone and utility poles

across the country so that they would also get preferential treatment. Those existing industries, they did not like those laws.

Similarly, back in the 1960’s and 1970’s, we passed a compulsory

license for the cable industry whereby the rates were set by Congress so that we could again give a nurturing hand to the cable industry, and in 1987 and 1988, we forced, this subcommittee forced

the Federal Communications Commission to not, in fact, levy access charges on Prodigy and CompuServe, and then AOL as they

were in their early stage, and in fact that is what today makes flat

rate pricing of the Internet possible and drives its growth, that decision by this subcommittee in 1987 and 1988, otherwise AOL

would not be able to purchase Time Warner and the Atlanta

Braves.

It was this subcommittee that actually made it possible. It would

have died in its infancy or grown very slowly, and, believe me, a

lot of people opposed that as well at the time, and even last year

Congress acted to allow DVS providers to start local-to-local services and let them wait until 2002 before they had to start full

must-carry service. That helps the new service, the satellite service

get off the ground, so to speak.

The point of this story line is that this subcommittee has always

tried to break down barriers. So the questions before us are multiple, balancing the rights of existing copyright holders against the

new technology and the competition which we like to see in the

marketplace.

Mr. Valenti, do the copyright owners need protection or tools for

enforcement beyond that contained in the RIPO implementing legislation and otherwise contained in existing laws? Do you need new

laws?

Mr. VALENTI. I do not think any law is needed, Mr. Chairman.

That is what, in my awkward way, I was trying to say. I used Sam

Rayburn’s words, ‘‘Wait a minute to see how this develops’’, and I

think you have been in the forefront of that, you and the chairman.

That is all that is needed, is watchful waiting to see who is being

denied what.

I think today, except for this loan fellow that Mr. McCallum referred to, that just about 99 percent people in this country can get

just about anything that they want to get, and this has been expressed by Mr. Beck and Senator Boren and others here, but we

are going to have television stations all over this Internet.

Mr. MARKEY. Let me ask Mr. Alben then. Let me ask, Mr. Alben,

do ISPs have the ability to use existing licenses if they adhere to

existing rules?

Mr. ALBEN. I don’t think any Internet company to date has applied for a compulsory license to transmit television programming,

and frankly I think the laws are ambiguous as to whether an Internet company could avail itself, but under certain circumstances, potentially it could.

I think if I can talk about localism for a second, because I think

it is a very important principle, that is the bedrock principle of our

communications laws. You want to watch the Boston Red Sox

games. We broadcast the first Seattle Mariners game in 1995 to a

51

worldwide audience over the Internet in a radio broadcast, and people in Japan called us and said, Hey, I love Ken Griffey, and now

I can finally at least hear about Ken Griffey on the Internet.

Consumers want this, and the Internet——

Mr. MARKEY. Well, when can I see the Red Sox and how much

will it cost me?

Mr. ALBEN. We would love to see a marketplace where the Red

Sox are putting their signal up on the Internet, and in fact I think

that many of them are going to start doing that because they realize they are serving the so-called displaced fan. You are a displaced

fan, Mr. Markey, and you want to watch the broadcasting of the

Red Sox and perhaps even the Patriots.

Mr. MARKEY. If blackout rules are ambiguous, will you be denied

the ability to do that? Do we have to clarify the blackout rules in

order for you to be able to do that?

Mr. ALBEN. I think you need to look at what the blackout rules

were designed to serve. Clearly, if the goal of the blackout rule is

to increase the physical gate attendance at the stadium, then the

fact that you are being blacked out from watching the game when

you’re in Washington DC does not meet that stated goal.

Mr. MARKEY. Does the law have to be clarified?

Mr. ALBEN. I don’t know if the law needs to be clarified, frankly.

I think that blackout rules should be revised in certain circumstances where there is a consumer demand for the program

and where the station can get additional revenue.

Mr. MARKEY. Mr. McCallum, does the law have to be clarified,

the black out rule?

Mr. MCCALLUM. I cannot answer for the United States. Sorry.

Mr. MARKEY. Okay. Thank you. Thank you, Mr. Chairman.

Mr. TAUZIN. Thank you, Mr. Markey. The Chair is now pleased

to welcome and now recognize Mr. Shimkus for a round of questions.

Mr. SHIMKUS. Thank you. Clarification: He is not a displaced fan.

He is a misplaced fan.

I am a Cardinal fan, for the record.

Mr. TAUZIN. He is a Cardinal fan. That is the nicest thing that

has been said about him in a long time.

Mr. SHIMKUS. A long time. I have two questions. Hopefully, I will

get to both of them.

Mr. Alben, I was fortunate to hear Rob Glazer at a conference

in January, and what he did was he pulled in a data stream of

music on an MP3 player, played it for the whole convention hall.

Then it took it from the MP3 player to a desk in which he burned

the CD. You know, it is all digital. My question is how does the

artist get compensated for that?

Mr. ALBEN. Well, in that specific example I am familiar with, the

artist was compensated when we purchased the CD. So let’s say it

was a Beck CD. Beck received whatever payments he gets from his

record label when the physical CD is purchased, and I think it is

very clear that people have personal use rights to take their CDs

and play them on their computers and also to put them on to a

portable device, and in fact that is going to increase the sales of

CDs because then people realize, hey, there is a great new way of

enjoying music, I’m going to go out and buy more CDs.

52

I think the case that you are worried about, legitimately, is when

a user would then take that CD, multiply it a hundred times and

send it out over the Internet, and clearly there is a point where

personal use rights have limits and where they start to deteriorate

from the market.

Mr. SHIMKUS. I agree, and I think that is our challenge.

And, Senator Boren, I did not hear all the testimony because I

was coming back from the vote, but SoonerSports.com is an attempt to make sure that you capture the web TV or the stream

market; is that correct?

Mr. BOREN. That’s correct. In other words, of course we have our

negotiations for live broadcast, but typically after the time of the

live broadcast, we will then put some of this up for our fans all

over to enjoy, and this allows us to have control over the way it

is done and to keep control of our intellectual property; but we all

have the strong incentive to get it out as quickly as we can to those

misplaced fans around.

Mr. SHIMKUS. If they are Sooner fans, most of them are going to

search, and they are going to use Sooners, and it is going to pull

up. They are not going to pull up iCrave to try to find a Sooner

football game.

Mr. BOREN. No.

Mr. SHIMKUS. So my question to the local broadcasters, I am a

big defender of local broadcasting. I have seen how it has helped

save communities. I guess the question for me is I do believe this

is a debate of a rising tide, expanded markets. Are you or why are

not you taking advantage of the competitive atmosphere and developing a similar Sooner sports.com to be prepared to more broadly

disseminate your signal so that you are in direct competition to industries like iCrave.

Mr. BECK. We are doing that. We own the URL High

SchoolHockey.com, and what is so wonderful about the Internet is

that came out of Duluth, Minnesota, our little station there. They

created that site. We own a big chunk of something called

MyTVSshop.com which is about television and its electronic commerce sites.

So we are perfectly willing and able to compete on a national or

international basis with anybody.

Mr. SHIMKUS. My point is for the specific station. Again talking

baseball today, KMOX is a carrier of the St. Louis Cardinals.

Mr. KARPOWICZ. Right.

Mr. SHIMKUS. It would be easy for me in a remote location to be

a displaced fan to call up KMOX, and if they are streaming the

audio, then they are capturing that market, and they may be competing with someone else, but it is more likely for me knowing the

locality to go to a KMOX versus an iCrave.

Mr. KARPOWICZ. I think in those cases where we own the copyright, specifically with our local news, we are very prepared to

stream that video. The issue comes in which we are running syndicated product like Friends or Oprah or CBS product or NBC

product. We have no rights to let that go out. So to the extent that

over 200 local television stations currently stream all or part of

their local news product, clearly that is the direction this is going.

53

Mr. SHIMKUS. Okay. You brought up a good point about your

rights to stream outside of your geographical barrier based on your

agreement with the network, and I think that is something I did

not think about.

So I yield back my time. Thank you, Mr. Chair.

Mr. TAUZIN. I thank the gentleman.

The Chair recognizes the gentleman from Ohio, Mr. Sawyer, for

a round of questions.

Mr. SAWYER. Thank you very much, Mr. Chairman. I am not

sure that we have really gotten a full answer to the question about

how you actually limit geographically what can be done with the

signal. Maybe I am just not understanding what you are saying,

but even if encryption technology is implemented to create these

geographical barriers, how do you prevent a subscriber from turning around and distributing the product received in that way?

Mr. JASZI. To me?

Mr. SAWYER. Yes, or anybody. I mean I am just at a loss to understand the argument that you can create these barriers, and I

have not heard the answer to that question. I was addressing it to

Mr. McCallum, but more broadly I am particularly interested in

how the absence of geography on the Internet creates circumstances where law or regulation can be enforced in a compatible way across a variety of national legal jurisdictions. But answer

the first question first, and then others can respond as well.

Mr. MCCALLUM. We had a problem drawn to our attention in

January that there were pirate sites out there were just drawing

our stream to the sites and then redirecting them to anybody who

came on. They came in through what is known as the back door.

Part of the work that we are currently doing is locking that back

down solidly tight.

Mr. SAWYER. Okay. They were not subscribers; is that correct?

Mr. MCCALLUM. No.

Mr. SAWYER. Okay. What do you do about subscribers?

Mr. SAWYER. The nature of the security system is that the

stream is sent to an individual computer, to an individual IP address. We have locked down the ability from the beginning putting

the streams up, preventing copying so that nobody could copy it to

their computer, and we believe that the current system that we are

implementing is a system that will prevent the retransmission

from that computer to others.

Mr. SAWYER. Does everyone else subscribe to that?

Mr. VALENTI. Mr. Congressman?

Mr. SAWYER. Yes, sir.

Mr. VALENTI. That ain’t so, and you go to see any expert in Internet or computer, you cannot do it because anyone can pick up that

signal and do what is called mirror, and that is transmitted then

to a waiting global world of 6 billion people instantaneously. There

is no way you can do it.

Mr. SAWYER. Yes, sir?

Mr. MCCALLUM. Congressman, there would be, I would think, little difficulty in the individual who currently takes his cam corder

into a movie theater, captures a new release, exhibits it on the

Internet, and takes the same cam corder and pointing it at a comVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00056 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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puter screen and doing the same thing. I would suggest that part

of the solution——

Mr. SAWYER. But the medium of distribution is substantially different, of course.

Mr. MCCALLUM. No, they are both on the Internet. I’m suggesting that they are both being distributed to be Internet, and

they are obtained in that exactly the same fashion. What I would

suggest that part of the solution may be to make these products

so readily available under arrangements to allow the flow of copyright payments back to the original creators that you effectively reduce the temptation to go to these means in order to get a substandard product.

Mr. SAWYER. Mr. Beck, you have been trying to——

Mr. BECK. Sorry. Mr. Valenti actually responded as I would have,

Congressman.

Mr. VALENTI. Let me just say that I do not want to dominate

here, but I have got to respond to this. When a man goes with a

cam corder into a theater and picks that up that, records that program and then distributes it, he goes to jail for that.

Mr. SAWYER. Yes, he is in violation of law.

Mr. VALENTI. It is a felony offense.

Mr. SAWYER. Yes.

Mr. VALENTI. And as a matter of fact, we have put a number of

such people in the slammer over the last year or 2. That is exactly

what happened. So you cannot take digital which is ephemeral. It

comes into your computer, then goes to world, and then equate it

was a physical video cassette in analog format or digital format or

whatever you want to call it. It’s totally different.

That is what I said in my opening remarks. This is a miraculous,

fantastic new entrant into the human society, ranking with

Guttenberg movable type and the invention of television, and it

cannot be equated with satellites or cable or video cassettes in the

analog format; totally different, sir.

Mr. SAWYER. And it should not be possible with a license to go

through that medium what would be illegal through any other medium; is that what you’re saying?

Mr. VALENTI. You want to be on a level playing field. Then you

take your chances by going to jail by doing what iCrave is doing.

Mr. SAWYER. Thank you.

Mr. ALBEN. Mr. Sawyer, if I may talk a little bit about mirroring,

there are technologies that allow for mirrors. The fact is that once

someone mirrors a stream, in order words starts to retransmit

what you would call a signal, they are visible. Right? They have

to be visible to the whole world, and you can know where they are

and where they are operating from, and they should be taken down

if they are mirroring a stream without permission.

Most mirroring that occurs on the Internet is done with the

blessing of the content producer. In terms of the security of the

stream itself, the RealNetwork system as well as the Microsoft system and Apple system for streaming all have copy protection mechanisms built in, and in the rare circumstances where hackers have

been able to hack into a stream and record the stream, we have

invoked the Digital Millennium Copyright Act to get injunctions beVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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cause clearly someone should not be able to make the technology

that’s primarily designed to copy pirate streams.

Mr. SAWYER. Thank you, Mr. Chairman.

Mr. TAUZIN. The gentlelady from New Mexico, Ms. Wilson is recognized for 5 minutes.

Ms. WILSON. Thank you, Mr. Chairman. I had some questions

that arose from some of the previous answers and some of the testimony which I have been reviewing here.

Mr. Karpowicz, you talked about the television stations now cannot—you do not believe that a television station now could broadcast its signal over the Internet, it could not broadcast Friends because that would be outside of its broadcast area. Is it your interpretation or do most television broadcasters have the view that

they are constrained by current law from doing that?

Mr. KARPOWICZ. I believe so because we do not hold the Internet

copyright on Friends, for example. When we buy that program, we

buy that specifically for our DMA or our market area, and that is

really the issue with the Internet, is that it is not bound by any

geography, and there are no geographic boundaries. So to the extent that when we buy that program, and when we purchase that,

we have bought it for a very specific area.

Now, with our newscasts which is content that we produce and

we have the copyright on that, it can be widely distributed. That

can go out on the Internet because as far as we are concerned, that

is our product.

Ms. WILSON. Thank you. Mr. Alben, you were talking about the

Digital Millennium Copyright Act and injunctions that you would

get on mirror sites and things. Is it your view that—does the law

need to be changed in any way to protect or further protect copyright holders or are the mechanisms there in place now to do what

needs to be done?

Mr. ALBEN. I think we believe that right now both at the existing

what you could call the old U.S. copyright law and the Digital Millennium Copyright Act provide really specific penalties. After all,

the Motion Picture Association and the other plaintiffs were successful in invoking copyright law to get the TRO. So it’s clear that

if someone is violating copyright by duplicating something without

the permission of the copyright owner, that that is against U.S.

copyright law.

Now, when Congress passed the DMCA, they also recognized exactly what Mr. Valenti said, is that analog and digital present different problems. With digital, you can make near perfect copies and

redistribute those copies. So Congress took the extra step of creating new laws that say if you are specifically going to create a

technology that breaks encryption or that breaks a copy protection

mechanism, that in and of itself is a violation of the DMCA.

So I think that these two laws are working together, and over

the last few weeks we have seen, what, four or five lawsuits filed

regarding distribution of sound recordings, distribution of motion

pictures where you can see that the laws are being put to the test.

Ms. WILSON. Mr. Valenti, do you think that there needs to be

changes at this point? I know you have put your copyright coalition

together. Is it working but cumbersome? Are people ignoring it?

What is your sense?

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Mr. VALENTI. You mean what is working right now?

Ms. WILSON. With respect to any changes needed to the copyright

law.

Mr. VALENTI. No, I said earlier to the chairman, Madam Congressman, that I did not think that any new laws were required.

As Mr. Alex pointed out and rightly so, the Digital Millennium

Copyright Act is working, and indeed the courts are instantly recognizing that there is no ambiguity to this law. What I am saying

is that I think the Internet should be allowed to continue its spiralling growth and you keep a watchful eye to make sure that all goes

well in the marketplace.

I do not think there is need to change anything at this time or

add anything at this time.

Ms. WILSON. Thank you. I yield my time, Mr. Chairman.

Mr. TAUZIN. Thank the gentlelady. The gentlelady from Missouri,

Ms. McCarthy, is recognized.

Ms. MCCARTHY. Thank you, Mr. Chairman. I would like to visit

with Mr. Valenti. It is always a pleasure to have you here, and I

congratulate you on accomplishing the copyright assembly that you

announced to us today which I think creates an important new

voice in the private sector on copyright matters.

However, I noted a very important voice is missing from your assembly, and they are my constituents. I suspect, actually, they are

constituents of every member on this committee and in fact perhaps are even family members of some members on this committee.

So I would like for you to tell the committee why they’ve been

excluded from the assembly. They are the recording artists, and

their voices make movie theme songs hits for your assembly members such as Disney and Universal and the other studios that are

members of the assembly. Their songs make hit programs like

MTV for your assembly members like the National Cable and Television Association. Their music creates the sales for your assembly

members such as the Recording Industry Association of America,

Sony and other record labels. Their performances at pregame and

half-time encourage viewers to tune in and stay tuned at sporting

events such as the Super Bowl, earning your assembly members

such as ESPN and other TV corporations lucrative revenue from

advertising.

I myself am a Faith Hill fan, and I stayed tuned at half time because I wanted to hear her. These recording artists are represented

by the National Academy of Recording Arts and Sciences. Next

week it’s NARAS that is going to produce the Grammys which 25

million people domestically watch on TV. That is the second largest

viewing audience after the Oscars, which I believe you have some

interest in.

So why is NARAS missing from this new assembly, and clearly

since copyright laws affect recording artists personally, why are

they not included in the room?

Mr. VALENTI. Well, I am right now trading phone calls with Mr.

Michael Green who puts on the Grammys, and I am hopeful of having his organization in there. Ms. McCarthy, I want you to know

that this assembly is open to every person or enterprise to whom

copyright is indispensable to their future, and we welcome it. We

have all of the creative guilds in here. We have all the music orgaVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00059 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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nizations, and those that are not in here will be before the next few

days are out.

Mr. MCCARTHY. I anticipated that would be your answer. When

you made this announcement, I excused myself from the committee

and called Mr. Green to find out why he was not on the list. He

said they learned about it through the net, the Internet, and that

he initiated the call to you.

Mr. VALENTI. He did, and as a matter of fact, may I just say I

blundered. The fact is putting together this list, I frankly did not

think about it. It was a terrible blunder on my part, and I deeply

apologize.

Ms. MCCARTHY. Well, I just want to tell you that I represent

Kansas City where there are a whole lot of artists. You know, this

is a jazz historical place, and I would love you to come and visit,

but it seems to me that this Congress even overlooks including recording artists in the room at critical times.

Last year, during the discussions of the omnibus appropriation

bill, a change was made in the copyright laws that now deny

them—artists who have signed recording contracts after 1978, they

will not be able to regain their rights after the 35-year waiting period that is specified in current law. Nobody told them to come in

the room and talk about it. Nobody told them to be there at the

table. So special interest decided to make this change, and frankly

on behalf of the recording artists, I think it is time we all woke up

and made them part of whatever the future holds on things like

the Internet. Without them, as I said in my remarks, do you think

you could sing like Faith Hill did at half—time and make me tune

in? Maybe once, but, honestly, they are what fuels the larger entertainment industry, and I appreciate your honesty and I hope you

will think in the future of the recording artists in all that you do

with regard to property rights, and intellectual property rights in

particular are personal to them.

Thank you Mr. Chairman.

Mr. VALENTI. I cannot wait to embrace Mr. Green and his organization if I can just get him on the phone.

Mr. TAUZIN. We got a computer in the back room.

Mr. VALENTI. Maybe he has got a web site so I can contact him.

Mr. TAUZIN. I thank the gentlelady.

The Chair now recognizes the gentleman from Florida, Mr.

Stearns, for a round of questions.

Mr. STEARNS. Thank you, Mr. Chairman, and listening to this debate has been very edifying. Let me take my colleagues and also

the panelists and the people in the audience to this comparison: Direct TV, satellite TV when you broadcast that, it is not going to

just a region. It is going hemispheric. So when people say satellite

TV and cable TV are much different than the Internet, that might

be true for cable, but I do not see it that different for Direct TV

where it is going hemispheric.

Okay. Now this committee, and as Mr. Markey pointed out, the

incremental steps in the last 30 years we have done to protect

virgining new industries, and as he pointed out, AOL would not be

existing today if we had not in 1997 gave them permanent access

to the FCC. So I say to the broadcasters, I understand Sam

Rayburn’s ‘‘Wait a minute’’, those three dynamic words, ‘‘wait a

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minute’’, and I am a conservative and I believe in wait a minute,

but I cannot help but think when I am sitting here looking at this,

probably that it could correlate to broadcasting of direct television.

Now, these people, Prime Star and all these people, they pay

compulsory license fees. They pay a local-to-local fee. Then they

pay for a distance signal, and it is digital. It is not analog like Mr.

Valenti was talking about. This is digital that goes hemispheric. So

tell me, somebody on the committee, why we cannot bring an analogy for the satellite broadcast television to the Internet television

and say, okay, either the FCC, the Library of Congress, or Congress or somebody could not allow access for Internet companies in

the same of analogy that we have done for satellite TV?

Mr. BECK. Can I address myself to that?

Mr. STEARNS. Okay.

Mr. BECK. The satellite companies do not alter our programming,

period. If these people had come to us then—you know, we have

got a lot of Canadians. We have got this poor woman in Thunder

Bay, and she really wants WKBW’s programming, and we are

going to do you the service of redistributing it to her. We would

have said that is a pretty good idea. What he does is take our programming and puts his ads on it and alters it. So no satellite company does that, sir.

Mr. STEARNS. Okay, but Mr. Beck, let’s say we stipulated that

they could not do that, and we made it against the law for the

Internet companies to do that. We can do that and prevent them

from doing it. So that would allay your fear and concern.

Mr. BECK. Yes, it would. I mean he would not be on the panel

anymore. He would have to make his own content and redistribute

it, but if people are just interested in the redistribution of the good

stuff we do, hey, that’s all right.

Mr. STEARNS. Okay.

Mr. KARPOWICZ. The biggest issue, Congressman, is with the satellite example that you are using. That is why local into local was

implemented, to prevent the importation of distant signals coming

in over the top of my copyrighted material. So there is a very distinct and huge difference between the satellite model and the Internet model.

Now, currently, as we know, there is no technological fix to limit

the Internet to my specific marketplace, whereas with satellite in

fact no distance signals can be brought into my market, and that

is why we created the provision or, in fact, you all created the provision.

Mr. STEARNS. How do you know that when a person broadcasts

a satellite that it is only going into one region?

Mr. KARPOWICZ. Well, there are cards that go into the satellite

receiver.

Mr. STEARNS. No, but I mean we have had up here in the hearings what we have gotten is going way out the region and these

people want to have access to it, and suddenly they get cutoff and

they get upset about it.

Mr. KARPOWICZ. But no distance signals should be coming in.

That is the whole concept behind local to local.

Mr. STEARNS. Okay.

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Mr. KARPOWICZ. That it protects my franchise in my unique marketplace.

Mr. STEARNS. Mr. Alben, am I wrong that there is some kind of

analogy between what I am trying to look for? And I think every

elected official, before they do anything, they want to say is is there

something that we have already done here, without rediscovering

the wheel? And is there some way to allow RealNetworks in the

very near future to start broadcasting local-to-local, as well as, you

know, other information without being crimped here and have the

copyright to do so?

Mr. ALBEN. Well, I think the geographic restriction of local into

local is a problem because of the nature of the Internet being a

global medium, as I said in my testimony. There would be ways devised to limit people from accessing a signal if they were not in a

local market, but what we would rather do is say when we rebroadcast the transmission—for instance, let’s take a baseball game.

When we did the Seattle Mariners baseball game, when we sent it

to Japan, I’m sure the local advertising for the local beauty parlor

did not make much sense the people in Tokyo or Yokohama who

are listening to that game even in English.

What we would like to do is say with the broadcaster, hey, we

are going to sell an ad that will have a national or international

audience, but we will share our ad revenue in some way so that

the broadcasters benefit from the expansion of the terrestrial signal, and that’s really the way that this is going to go. That is why

I say that this is going to happen, because we are smart enough

with broadcast stations and others to figure out ways of creating

new revenue and sharing that revenue.

Mr. STEARNS. But would not you like to go to one place to get

a copyright license so that you can do it?

Mr. ALBEN. It would be much more convenient if you could have

a mechanism to get a license rather than going to each individual

station. I do not know how many broadcast stations there are in

the United States, 30,000.

Mr. STEARNS. 1,600, I’m told.

Mr. ALBEN. 1,600, so the physical challenge of just negotiating license deals——

Mr. STEARNS. It’s impossible.

Mr. ALBEN. [continuing] would prevent it from happening, and it

would be very nice to have some sort of clearinghouse, some sort

of mechanism where someone who wanted to retransmit a signal

could go and with permission get that done and pay for the content.

Mr. STEARNS. And, in fact, the broadcasters would benefit.

Mr. ALBEN. They would if we——

Mr. STEARNS. I mean we would make the copyright license and

the royalties expensive, and if they wanted to do it, they just had

to pay a high amount of money.

Mr. KARPOWICZ. That exists right now with companies like

Broadcast.com. Television stations can work out a deal with Broadcast.com to stream their news broadcasts which they own the copyright to. So it exist today.

Mr. STEARNS. Just with one group and not the whole——

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Mr. KARPOWICZ. Well, each individual station would have to

make their own deal.

Mr. STEARNS. Which makes it impossible.

Mr. ALBEN. But the history of Broadcast.com was an incredibly

innovative company, and Mark Kuben, in all of his energy, he went

around for 3 years in the banging of the doors of sports leagues

local stations, the NCAA, and all the leagues and saying, Hey, I

want to put your signal up on the Internet. It took him 3 years to

assemble that kind of base, and now we have a Broadcast.com and

others that you can go to, but it took—it was solving the licensing

issue that took so long, and I do not think that is going to work

going forward.

Mr. MCCALLUM. Mr. Stearns, might I add something?

Mr. STEARNS. Sure.

Mr. MCCALLUM. The simple system you are describing is the one

that exists in Canada today. That is why we are legal in Canada.

Mr. STEARNS. So the question is are you arguing for this same

kind of system in the United States?

Mr. MCCALLUM. Well, I am not arguing for it or against it. I am

just offering it as an example of another jurisdiction. Clearly, the

broadcast conditions in Canada are distinct and different from

what they are in the U.S. The complexities here may be different.

The history is different.

Mr. STEARNS. But you are saying it is a working model that

works in Canada.

Mr. MCCALLUM. Correct.

Mr. STEARNS. And you are saying this is a model, Mr. Chairman,

that works in Canada and does not restrict television on the Internet and so the real question is when will it come to the United

States, and in what way, and how can we be sure that the broadcasters are protected, and so I think it is a challenge for this committee.

Mr. TAUZIN. It certainly is. The gentleman’s time has expired,

but I will allow any response.

Mr. ALBEN. There is another element to your challenge, Mr.

Sterns. I think it is an excellent question. Is the international dimension of this medium. Let’s say we had a signal, but you were

requiring under a compulsory license to have a geographic restriction. Well, then you are going to have the French perhaps saying,

oh, well, if you are going to let this retransmission go out over the

Internet, it has to be the French language or it has to be 38 percent French content.

The strength of our market is that our programming, the programming of local stations and of the networks and of the sports

leagues, has an international audience. We don’t want to go down

the road of geographic restrictions if we are not willing to live with

foreign countries saying, oh, I do not want that content coming

across my border.

First of all, it is almost impossible to police. Second of all, it is

not good for our industry. We want these revenue streams to be

driven all over the world.

Mr. VALENTI. May I just say, Mr. Congressman, first I allay myself with what Mr. Alben is saying. We oppose geographic restrictions. That is anti-freedom, but in the interest of full disclosure,

61

Mr. McCallum did not tell you that the broadcast stations in Canada are suing him right now in the courts saying he does not have

any mantle of compulsory license. That is in the courts right now,

and we will just have to wait and see what the Canadian judicial

system say says about this.

Mr. TAUZIN. The Chair is now pleased to recognize the gentleman for New York, Mr. Engel for a round of questions.

Mr. ENGEL. Thank you, Mr. Chairman, I would ask unanimous

consent to put my statement into the record.

Mr. TAUZIN. Without objection.

Mr. ENGEL. Thank you very much.

Everybody, the issue to me is really balancing the rights of current copyright holders. I think it is only fair that we do that with

the public desire to have access. The copyright holders versus unlicensed distribution, Mr. Markey I thought said it very well when

he said that he liked to listen to games. I would like to listen to

Yankees and Mets games, and I very often try to get the signal

here as well.

I am wondering as I listen, and Mr. Sterns had really gone down

the line of what I was going to say. It seems to me that in the future there has to be some common ground, because obviously this

is new technology and you cannot put a lid on it forever. Sooner

or later, people are going to demand that they have access to it.

And so it seems very simple to me, in a way, that how do we

again balance the rights of the current copyright holders with the

public’s desire to have this technology? I would like to hear from

the broadcaster side. Compulsory license, why cannot there not be

a compulsory license? I think Mr. Alben suggested it as similar to

what cable and satellite has today with the exception that the

Internet companies will not have to comply with the geographical

limitations.

You know, what does this all mean, the future of local broadcasting license, with the Internet taking distribution in a global direction? What happens to location? I would like to hear from the

broadcasting side. Why can there not be a common ground? There

seems to me, you know, we talked a little bit in the answers about

compensating people with advertising revenues. I mean everyone

on the panel is very bright and there are lot of bright minds out

there. Why can we not come to a common ground for the future?

Mr. KARPOWICZ. To your point about the compulsory licenses, I

think you cannot ignore the geographic limitations. I think the geography is the key here, and the inability of the Internet to be limited to one market, one specific market is really the fatal flaw that

we see in that system. In addition to that, with compulsory license

comes must-carry, retransmission consent, Syntax, sports blackouts. There are a lot of other issues associated with that. So to the

extent that we cannot just put geography aside, geography is critical to this whole discussion.

The other point I’d like to make, and Senator Boren mentioned

it in his comments, the ground-breaking deal that CBS did with

the NCAA this year for basketball tournaments included not only

the broadcast rights but the Internet rights as well. Now, I think

this is one of the first major sports deals that has included the

Internet provision, and I think this is the direction we’re going to

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see more and more major deals with sports leagues and the NCAA

take place as we go along, that deals will include not just have the

broadcast rights but the Internet rights as well.

Mr. BOREN. Just a week ago the baseball owners now have also

moved in that direction and are establishing a mechanism for bargaining for baseball rebroadcast rights. So I think really what is

happening is there is such a strong push for those who are creating

the program that want to get it out to widest possible audience as

long as you have some control over the appropriate way, for example, as we would want to see it with intercollegiate athletics and

the way it’s broadcast and that you have assurance of the revenue

stream, that the revenue stream will not be destroyed.

So I think this market is already beginning to work without

going into the scamp of what might have to be attached to compulsory licensing that might have unintended consequences and actually begin to limit what the Internet possibilities might be in the

long run.

So I would say I think the market over the next—things have

moved so quickly already. Over the next 12 to 24 months, I think

the market is going to play out in a way that is probably going to

make unnecessary additional regulatory schemes.

Mr. ENGEL. I would like to hear why not an exception for geographical limitations, as Mr. Alben suggests, given the Internet nature as global medium. Why would that not be something that

would be feasible? Would anybody like to comment? Mr. Valenti?

Mr. VALENTI. Well, I don’t think—the truth is we can say geographical limitations. It’s like President Johnson used to say. ‘‘You

can tell a man to go to hell, but getting him to go there is another

proposition.’’ And you can say you’ve got the technological image to

do this, but it does not exist. That’s the key point. It does not exist.

Mr. ENGEL. Mr. Beck, do you have any comment on that?

Mr. BECK. We really have a wonderful system now. You flow.

You have got local broadcasters providing extraordinary penetrating local news, weather, and sports in their markets and in

partnership with the studios and the networks who provide us with

extremely good content with which to pair our good work. If his

content needs to be exclusive in Buffalo, and he does not want to

sell the Internet rights, then that’s up to him. I want to be his

partner. I want Friends on my air. So I will negotiate with him and

get it. If he does not want to sell it to iCraveTV, that’s up to him.

He has the best idea of about how to use his product.

So I think we have the most extraordinary system in the world

and nobody can compare the penetration of our local broadcasters

into their communities, and that’s because of the partnership that

exists. So I’m not only proud to be here sitting with Mr. Valenti,

but our business is based upon the partnership with these copyright holders, and it’s necessary for them to really—I’m following

their lead. They are great partners, and if he does not want to

change the copyright laws, I cannot see any reason why we should

do it. It seems to be working awfully well.

Mr. JASZI. If I might say I’m less skeptical than Mr. Valenti

about the possibility of implementing appropriate geographical restrictions if such restrictions would be deemed appropriate through

a combination of new technology and the very stringent criminal

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penalties against the violation of technical safeguards that have

been discussed earlier today. Those are a very potent combination

taken together, and I see no reason to assume that at the beginning of this discussion that that combination would not be sufficient to implement meaningful geographical restrictions were it the

will of Congress to impose such restrictions on an Internet TV compulsory license.

Mr. ALBEN. If I could add a second to Mr. Engel’s question, I

guess our question, and forgive us we have been accused of wearing

binoculars and only seeing far into the future, but why would a

broadcaster not want their local programming, sports, news, weather, to be transmitted from Buffalo to Florida if someone was on vacation if there is not that somebody that is extending the signal

reach and therefore extending your advertiser base?

Mr. KARPOWICZ. Let me answer that question. As it relates to

iCraveTV, the first part of that equation is the signal is distorted.

Our picture, by the time it gets to that individual in Florida, has

been brought down to a little-bitty box. There is advertising all

around it that is inconsistent, potentially, with the advertising that

we have already sold. So that is—you know, that is the first problem.

The second problem, if it’s our entire broadcast day, we do not

own the copyright to Friends, or we do not own the copyright to

NFL football. We do not own the copyright to a lot of the programming that we carry.

Mr. ALBEN. Just your local programming.

Mr. KARPOWICZ. Then it should be the decision of the local broadcaster to do that.

Mr. BECK. We do that.

Mr. KARPOWICZ. And as I indicated, there are over 200 stations

in America that currently do that, and that number is growing

every day. I think local broadcasters are starting to understand

what Congressman Markey mentioned earlier, is that people who

are displaced do have interest in what may be going on in their old

hometown or in a distant place.

So local broadcasters are taking the initiative and making that

happen, but we should not have that taken from us.

Mr. BECK. Mr. Engel?

Mr. ENGEL. Yes.

Mr. BECK. I’m sorry. Excuse me——

Mr. TAUZIN. The gentleman’s time has expired, but you can respond.

Mr. ENGEL. Thank you, Mr. Chairman.

Mr. BECK. We do that, and we broadcast all of our local news,

weather, and sports. To demonstrate in an anecdote just how effectively our system works now, we take our local news and we, in

the past, have put major league baseball clips into our news. We

believe it’s fair use to do that. Well, our friends and colleagues at

major league baseball have decided to tell us to no longer to carry

the clips in streaming video. They want it to be on our air, but they

are not happy to have it on our television station’s streamed video

because our streamed video, being digital, can be archived and

might prevent them from profiting from that picture of Sosa hitting

the home run.

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So when they called us and said would you please take that out,

I argued with them as best I could—I’m trained as a litigator—and

I gave in because they are right. It is theirs, and we said that’s

fine, from now on we will put up a board that says, I’m sorry,

Major League Baseball does not want us to stream this 30-second

clip, and that’s what we did.

So the system works great. iCrave never called us.

Mr. ALBEN. It does not work for the baseball fan, though, that

wants to watch that highlight, and if I’m a Seattle Seahawks fan

and I want to watch my game and NBC have decided for that day

that I’m supposed to watch the Pittsburgh game, it does not work

for me either, and the fact is if I’m an additional member of the

audience and want to tune it, I’m going to paying somehow. Right?

I mean they are going to be paying by subscribing to the service,

or I am going to be paying by watching an advertisement that

somebody sells so the audience can be increased, and the sports

leagues, while they want to maintain the current system of geographic limitation, have a revenue opportunity that they are not

recognizing.

And it is very good to hear the CBS Internet deal because those

are the kind of deals that are going to move things forward.

Mr. VALENTI. Mr. Alben, let me just say to him if you want to

have a Real Player, I’m told he will sell it to you on your web site

for $35; is that correct?

Mr. ALBEN. The Real Player is distributed for free.

Mr. VALENTI. What do you charge $35 for?

Mr. TAUZIN. Mr. Alben, use the mike, sir. We have to record this.

Mr. ALBEN. I’m sorry. The Real Player is distributed for free, and

we have distributed over 90 million of them for free. We have distributed several million of our Plus Product which we sell for

$29.99.

Mr. VALENTI. All right. Since I’m a consumer and I want to have

the best, I want the compulsory license to buy that $35 thing for

$2. Would you agree to that? A compulsory license or since you believe everybody ought to have the right to see and do everything,

I want the right to have your enhanced machine or whatever you

call it, and I want to do it for $2. How do you deal with that?

Mr. ALBEN. I’m sure you want to go into a dealership and buy

a Mercedes for, you know, $100, but the consumer sees the utility

in buying the enhanced product, and the compulsory license is not

going to necessarily cannibalize the revenue stream of stations. It’s

going to extend it in the long run.

Mr. TAUZIN. I want to thank the gentleman from New York for

stirring this up.

Mr. ENGEL. Mr. Chairman, I did not realize my mischievous

question would have such an enlightened discourse.

Mr. TAUZIN. You had one more thing you wanted to add, Jack?

Mr. VALENTI. No, the only thing I wanted to add was, again, as

LBJ would say, ‘‘It always depends on whose ox is getting gored,’’

and that’s what this whole proposition is all about.

Mr. TAUZIN. Then the chairperson will recognize the gentleman

from Oklahoma, Mr. Largent, for a round of questions.

Mr. LARGENT. Thank you, Mr. Chairman.

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Mr. Alben, I wanted to go back to something that you said about

the CD scenario when my colleague, Mr. Shimkus, was talking.

Sometimes what we say and what we hear in this room is not what

really is happening on the street, and I had an on-the-street discussion with my 15-year-old son who is a freshman in high school, and

he was mocking my daughter who is 18 years old and a freshman

at the University of Oklahoma because she had signed up for one

of these CD-a-month clubs. She had just received a big stack of

CDs in the mail, and he was mocking her because of how foolish

it was for her to pay so much more for her CDs, $10, $11, whatever

they are, a couple dollars less than you get them in a store, and

he said nobody is buying CDs anymore. He said everybody is burning their own CDs. They just pull it off the Internet. You can put

whatever songs you want on there, burn them in there, and he said

I’ll never buy a CD again in my life, it’s too expensive.

So that’s a real world example in Tulsa, Oklahoma. I am going

to be really curious to see if in a year from now we do not see a

decline in the purchase of CDs, and I’m curious, if it came to pass

that the latest release, The Hurricane was available in digital quality that was streamed on the Internet, if in fact Blockbuster Video’s

stock would not decline over the course of a year as well. I think

it absolutely would because people could pull it off the net and

make a DVD quality reproduction, and they would never have to

rent another movie on VHS.

Senator Boren, you said something in your testimony that’s been

mentioned several times. I wanted to ask you about this. You

talked about a TV deal that CBS did with the NCAA, and it included an Internet agreement. Does that agreement insulate you

from iCraveTV or is that still an issue?

Mr. BOREN. Well, that’s still an issue because, of course, if people

can stream over, overstream the people that are paying us for the

rights to rebroadcast, you know, they are no longer going to go into

those packages with us that are such an important source of revenue. So, you know, we are talking about something that provided

a very large amount of funding over an 11-year period with CBS.

It was a minimum of $6 billion, and if others can simply not pay

anything and be able to get that, then they are not going to be able

to negotiate with us in the future with those kind of rights, so your

revenue stream for intercollegiate sports begins to dry up, and as

I pointed out, 90 percent, over 90 percent of the 1,000-member colleges and universities of the NCAA are not breaking even on their

sports now, especially as they’re struggling to provide more opportunities for women’s sports, for example, and so these universities

are already having to make these kind of decisions about putting

central university funds into sports versus faculty salaries, libraries, and other things.

The pressure if that stream dries up, the pressure to reduce opportunities for student athletes is going to be enormous. So all

we’re saying is the market is beginning to work. This is working

in a way that protects our intellectual property. It’s going to be get

out on the Internet, more and more of this sports programming including ours, but it’s doing it in a way in which we, the NCAA negotiates for us will be able to continue that revenue stream to

intercollegiate sports.

66

So it’s working and we should not plunge in at this point and try

to change something that is working.

Mr. LARGENT. Well, let me rephrase my question if I can. You

are saying that since you have this licensing agreement with CBS,

now they are putting on the NCAA game of the week on CBS.com

so that people will flow to CBS.com which they can get in Thunder

Bay, Canada just as easily as they can get——

Mr. BOREN. That is exactly right.

Mr. LARGENT. Okay. But what would prevent rebroadcasting

that? In other words, somebody pulls that signal off and wants to

put their own special ad around the border.

Mr. BOREN. Well, the current copyright law protects us in that

regard, and that is exactly what happened in this case, and when

you have people collecting their own revenue, their own advertising

and altering then the original programming, at least so far the

courts have enforced that right. Now, if the courts ever stopped enforcing that right what would happen is our revenue stream would

vanish because those that are now paying us for exclusive rights

would not have exclusive rights and they would not be able to afford to pay you, certainly not at the level they are now paying us.

So it is a real threat and it is the reason why I also say that we

also have a tremendous incentive. I want to see what we are creating in terms of sports programming. I want to see the contribution of that expanded because as that market grows and it is expanded through the Internet, there is going to be, in theory, a

greater revenue stream back to us, back to LSU, and other institutions around the country, but we have to be very careful about how

we do that.

Mr. LARGENT. Thank you, Mr. Chairman.

Mr. TAUZIN. Thank you, sir. The Chair recognizes himself.

Let me see if I can make an observation and get your reaction

to it. It seems to me that we are still debating some of these issues

or thinking of some of these issues in a world still defined by the

differences in pipes and delivery systems of information. It also

seems to me that that’s about to change pretty radically, that as

we move to broad band digital services delivered over enhanced

systems capable of extraordinary capacity and data that includes

video, that anyone who thinks they can survive in that world by

being a telephone company or a cable video company or a satellite

video company is going to find out they get left behind quickly in

the dust bin of economic history, that as we move into the broad

band digital age, the television set will be the monitor for the

Internet, and data services flow to it that are going to include massive amounts of video and audio and other data services to us.

And if we begin to think of what that record looks like, does not

it make sense for us to have a common policy as it applies to the

protection of content and distribution of content rights over that

kind of a system? Because it does not matter whether you are a

satellite company or telephone company or electric company, for

that matter, or a cable company. If you are all delivering broad

band services, and that’s where the world is going, to a mix of digital data that includes all those services combined into my television set on a worldwide global network, does not it make sense

for us to be thinking of policy that will cut across that whole specVerDate 11-SEP-98 12:59 May 01, 2000 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 62972.TXT HCOM2 PsN: HCOM2
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trum and apply the delivery of these services and the protection of

content rights in all of these areas, policy that permits the contracting and the technology developments that will enforce the contracts, protect the consent or protect the delivery of the content, if

that is possible, to whomever is contracted to send it or receive it

rather than thinking of trying to define a policy for cable and one

for satellites and one for telephones and one for who knows what,

other wireless or other wide systems when they eventually develop?

Please feedback to me on that, any one of you.

Mr. BOREN. Mr. Chairman, as the novice in this in terms of the

technical details, I would just say in many ways what you are talking about is happening. Just look at the NCAA-CBS-internet package. In a way, that is happening right now in the marketplace. In

other words, we are now negotiating contracts for the use of the

Internet fully. It is in its fledgling stages. Some of those details will

even been worked out in terms of appropriateness in programs and

the way it is done, but if I think we watch the market over the

next year or 2, given the current status and the ability to go into

courts and protect yourself through the existing copyright law, you

may find this will work itself out without a tremendous amount of

governmental intervention.

Mr. TAUZIN. You see the problem, though, Senator Boren, is that

we have laid down a whole series of laws that are pipe specific.

Mr. BOREN. Right.

Mr. TAUZIN. That we designed to try to create parity of stream

but in different ways for different pipes, and in our best sense of

fairness, we not only encourage new entrants into the marketplace

but give them a head start as we did with the satellites, delaying

the day for must-carry and what have you.

We have created all these different sets of laws designed for different pipes. We defined them differently. Some are telecommunications carries and some are not, and yet they will all be doing the

same thing pretty soon, using the same kind of broad band digital

systems to do it, and consumers, I assume some day will not care

too much how it gets there just so long as they can get to everything they want and somehow have a choice among providers so

that they do not have to count on us to regulate prices and terms

and conditions of service, and if that is true, if we are moving in

that direction, if 10-minute caps that cable put on video stream are

not going to hold in that world, how do we somehow let all that

happen and at the same time have all these old laws on the books

that define content and carriage and rights of carry.

I mean, in the telephone world we still have a massive defining

when a distance call becomes issue and is incredibly relevant in

Internet, and certainly in broad global Internet traffic. What I’m

saying is I hear you saying you do not have to do anything, the

laws are fine, the market is going to work, but I’m looking at the

laws we have on the books, and I am saying wait a minute, they’re

pretty archaic. They’re pretty out of date, and they are becoming

more outdated every day, and while you struggle to find market solutions, maybe our policy needs to keep abreast of those changes

in the marketplace and maybe we need to be thinking now how we

settle those tensions that exist among Americans such as the tension between wanting to maintain localism and at the same time

68

wanting to be able to reach out and acquire any signal, any program from anywhere and enjoy it.

Can we maintain some of those systems, those old laws? Do they

make any sense anymore? I would appreciate, frankly, if you would

just think that through a little bit and respond back to us with perhaps some additional writings and some offerings.

Mr. Roback, I have not heard you in a while. Can you feed back

to me just a bit? Am I right about that? I mean music videos is

not where you’re going to stop, I assume. Your company is probably

going to want the expand into all forms of video, and as broad band

services are allowing you to do it, where are you taking it?

Mr. ROBACK. Yes. First of all, I completely agree with you about

needing to recognize a change and start to treat things equally. I

think the biggest thing that you also always have to look at in the

Internet space is that the consumer is more in control than they

have ever been before and preserving a lot of the things that we

have talked about today, I mean certainly we are in complete

agreement with the need to protect the intellectual property and

making sure that the intellectual property holder is compensated,

but for issues like localism and diversity and competition, I think

really the Internet breeds exactly that.

You put yourself in a box where, I mean, we have talked a little

bit today, about some of the geographic guidelines, for example,

that have been drawn which really suggest that people need to be

protected and that they’re anointed with the opportunity to have

advertising revenue in a local market, and I would argue that the

advertising benefits should really accrue to the people that are delivering the best programming and therefore attracting the best audience for whoever that advertiser that’s willing to pay, and so by

opening up the playing field and allowing there to be more providers of whether it be local content or any content to the consumer

who cares, we are going to end up with higher quality contents,

and we’re going to end up with whether it be web site or channels

that prevail around things that really are things that the consumer

wants.

And we have seen that in a number of different categories, music

in particular, where the consumer is gravitating toward exactly

those things they cannot find elsewhere, the things that they really

crave, and that is what has been our opportunity in the music

space, and I think we will translate, you know, as we open up more

of these opportunities as well.

Mr. TAUZIN. I will stop just a second and acknowledge that several of our witnesses had plane schedules, and I will try to accommodate them, and we thank them privately for their appearance

today.

My time is up, but I will allow any of you to respond and then

I will move to Mr. Markey.

Mr. KARPOWICZ. Yes, Mr. Chairman, I would just say that to

your point about the other distribution systems, each of those distribution systems that you have described does have a component

of geography, and, again, as a local broadcaster, I have to continue

to go back to my basic tenet that if we do not protect the local market, we really cut away at the foundation of our system, and if we

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69

ketplace fundamentally, the very fragile network affiliate studio

system dissolves completely.

So to the education at the present time, the technology does not

exist today to limit the Internet access to my specific market. That

is why we have a problem. Now, if, in fact, that technology changes

down the road, and certainly there is very real possibility, at that

point, I think we are highly receptive to having those discussions.

Mr. TAUZIN. Mr. Jaszi.

Mr. JASZI. I just wanted to say that in my view, the history genius of American copyright law is this it is not and has not been

technological specific, and to an extent Section 111 and Section

119, as they now exist in the act, derogate from that general and

I think very salutary basic copyright principle.

The other thing that is true about the history of copyright law,

especially in the last 25 years, is that it has been marked by a very

strong degree of convergence, not only nationally but increasingly

internationally, and so it seems to me nearly inevitable that the

kind of legal and policy convergence that you foresee as the consequence of technological convergence will, must, should come

about, but I would say one thing about the form that that convergent mode of regulation might take, and that is I think that we

have sometimes today been working with what I regard as a false

opposition, that is an opposition between a system based on principles of compulsory licensing on the one hand and a system based

on freely negotiated market mechanisms on the other hand.

The fact of the matter is that historically, at least, what we have

seen in copyright law is mixed systems which accommodate elements of statutory licensing and elements of free market negotiated

licenses. The system business which music is authorized for—sound

recordings is a good example, although if Section 115 in the statutory license still operates, many sound recordings are now prepared

under negotiated arrangements between copyright owners and recording companies.

It’s a mixed model. It has evolved as a mixed model. It is stable

and it works well. I see no reason to see that the mixed model

could not be the solution to this convergent regulation of the delivery of video services that you describe.

Mr. ALBEN. Mr. Chairman, it is true the Internet is forcing us

to rethink old models. The model of cable compulsory license is a

problem which was that there were some local areas where you

would not get the local terrestrial signal, and then the satellite license adds another layer of complexity on top of that, and I think

when you look at the Internet, it is very appropriate to pause and

think about how these policies all work together, and I think the

best thing might be to look at—go back to the first principles.

What was the first principle of granting that broadcast license

under the, you know, by the FCC? It was you were going do encourage local broadcasting and protect local markets for public

service. We are not just talking about, you know, city-wide type

broadcasting. My daughter’s YMCA Indian Princess group has

their own web site, and they will be broadcasting 1 day, and the

soccer club has their own web site. So all of a sudden when you

have been spending 30 or 40 years regulating to promote localism,

70

here comes a medium that is so local you cannot get more granular.

Each one of us at this table could put this testimony up, and we

could add commentary and we could have the ideal local broadcasting. So maybe it is time, and I say this very hesitatingly, to

rethink local protections because local content is strong. There is

market for local content. No one can do what the Buffalo station

does better than the Buffalo station. They are there. They know

the community. They have made the investment, and I think that

when you think through these policies, we have to look at our first

principles again.

Mr. KARPOWICZ. Could I add one of those other first principles

is free over-the-air availability of television service for everyone,

and we want to be able to continue to provide that, and we want

to be able to maintain our marketplace so that we can continue to

provide that. So I think that is a principle that we do not want to

get too for away from.

Mr. TAUZIN. Thank you very much.

The Chair would like to acknowledge that if any of the other witnesses need to be temporarily excused to catch a quick plane and

return, you are also welcome to do so.

Mr. Markey is recognized.

Mr. MARKEY. Thank you, Mr. Chairman, very much.

To quote another speaker of the House, Tip O’Neal, his most important aphorism was ‘‘all politics are local’’. Well, what we tried

to do last year and is already a success in the marketplace is that

we took the satellite industry and we transformed it by saying all

politics is local into local.

You can take this local TV station, beam it up to some satellite

and then beam it right back down again and create new competition. Here with the Internet, what we have is this mixture of global

localism. Every local site is also a global site simultaneously by definition, and so that creates a whole series of issues that have to

be resolved. None of them are unsolvable, but there is no one simple template that you can use anymore than when used in any

other area of jurisdiction that this committee has had to deal with.

We work it through. We try to be fair. We want to encourage

technology and competition. This committee is the not the Judiciary Copyright Subcommittee. We have a slightly different agenda,

but we think that they can be harmonized. If we listen to witnesses

from the entertainment broadcast industry back in the fifties and

sixties and seventies, we would not have much of a technological

revolution which we have today. We just would not have had it because they would have stopped it dead in its tracks.

They would go back in a time capsule now, many of them if they

could to the good ole days of three TV stations and no cable and

no satellite because they had total control. So that is a balance that

we have, and we deal with the internal contradictions, by the way,

of broadcasters even, that maybe they want to broadcast, webcast

local programs today but want to maintain exclusivity on programming.

Perhaps up in Seattle, perhaps, you know, you want to broadcast

this Seattle Mariners across the country, but on the other hand,

the Seattle Mariners say keep that antitrust law in place, we do

71

not want my new baseball teams. So that the very same people

that are investing in the Seattle Mariners saying, no, we want

antitrust protection, no competition for baseball, but yet say would

not it be great if everyone was free to have their own little local

webcast, broadcast station across the station.

So you wide up with this set of contradictions. Everyone has kind

of a narrow perspective when it comes to their own little internal

monopoly, but when it comes to somebody else’s monopoly, they are

more than willing to provide all the competition in the world to

that monopoly. And that is just a duality of it all, and we have to

deal with that here.

And as Tip used to say, Everyone likes to be asked. So we appreciate you coming to us and asking because that helps us to get into

this discussion in a way that is going the ultimately, I think, result

in a proper balance being struck.

So I thank you, Mr. Chairman. I think that we have the future

sitting in front of us today. I think that 10 years from now, to put

on my binoculars, we are going to have a transformed marketplace,

and I will be able to see the Red Sox here in Washington. I will

probably have to pay some fee for it, rather, to make it marketable.

I think that Mr. Karpowicz is right about his ability to control

his Buffalo station, but I personally believe that if Doug Flute was

quarterbacking in some game, even if it was a shakey picture and

it was only five inches in diameter and someone was in Oklahoma,

that they would take that as the highest quality service that technology ever delivered to a human being who comes to Buffalo.

So I think that there is going to be attention here. Each of you

desire to maintain the perfection of the original product which you

have been able to create, and on the other hand the ability of technology to deliver that product in some imperfect form across the

country, and we want to make sure, however, that the old is not

destroyed by the new but rather it coexists with the new, and we

believe that that kind of compatibility is possible, and if we work

together, we will be able to achieve that.

So I thank each of you. It has been highly illuminating. You have

given us a window onto the future, and I think that if we work together, we can instruct a new regulatory and legal frame work that

allows all of you to come back here 10 years from today great successes in this new universe.

Thank you, Mr. Chairman.

Mr. TAUZIN. I thank the gentleman for his comments and his insight.

Let me conclude by going back do where we started, and that is

an examination of the policy and technological challenges that you

presented to us today, I think would be incomplete if we do not also

look at the other side of the mirror at the consumer, and the consumer’s role in this evolving complex of issues, and the consumer

role is going to be in large measure determined by what kind of

privacy policy is made in the marketplace and here in Washington.

My friend, Mr. Markey has been a strong advocate of consumer

privacy rights for a long time and privacy rights causes being

formed. I intend to establish a privacy task force of this subcommittee to begin examining that particular element of our role,

72

our policymaking role in this area, and we will ask your help and

advice in terms of where we should take it.

We will do that in is another hearing where I will ask you to be

thinking on how you might be able to contribute to that process.

The concept will literally turn on the question of how the consumer’s control or lack of control of the flow of information about

the consumer, his location, his identity, his likes, his dislikes, what

he browses on the Internet or what he browses in a store, albeit

a virtual reality store, how that information is or is not available

to this system and how it works with controls that some of you are

talking about today in terms of technologically defining the recipient of some of this content.

There were several television shows just recently exploring the

concept of the cookie that is built into most software and most of

our personal computers. This allows the person to track our movements over the web, and it demonstrated the consumers how they

might disable that cookie, and I would be very surprised to learn

that most Americans know that there is the capacity in their computers for others to track all their moves.

So what I would also be concerned about is that once all Americans knew they could simply disable it and shut off the flow of information, they probably will choose to do so and to use the cookie

cutter, in fact, and we are going to have to think about what kind

of policy we ought to make to give consumers the rights to control

the flow of information about sensitive and personal investigation

and yet at the same time not put them in the spot where they have

got to shut off everything, and that is going to be critical to the

movement of video programs and to advertiser-based video programming in the Internet world.

So I would urge you to be thinking of that and to think about

what contributions you might make in a future hearing on that

issue as well.

Mr. Markey suggests, and I think it is a good suggestion, that

I ask each of you to use a minute of time, if you do not mind, in

giving us a summary of what you would like us to remember from

this hearing today. What do you want to leave us with? One

minute apiece starting with you, Mr. Karpowicz.

Mr. KARPOWICZ. I think, Mr. Chairman, that what will I leave

you with today is simply that we have to protect local television

station’s ability to maintain a discreet marketplace and that any

distribution system that threatens that and that can take other

product and distribute beyond our market area, certainly without

our knowledge or without our approval, is very disruptive to the

very fabric of the relationship that exists today between networks,

affiliates, studios and content providers.

Mr. TAUZIN. Mr. Alben.

Mr. ALBEN. I think that we want to thank the committee for involving us in this debate because this is the first time we have ever

testified before a Congressional subcommittee.

Mr. TAUZIN. Thanks for coming.

Mr. ALBEN. We think that the Internet is doing fine, the market

is evolving. I think people have prudently stated that we need to

wait a minute before we overreact on what we do not understand,

and I do not think there is a need to change the compulsory license

73

laws at this time, but I do think that we should continue to resist

efforts, as they were in the last session, to erect some laws or language in laws that specifically said that you could not have digital

performance rights, that you could not have a digital right to transmit programming. That is equally not a good idea, and I think that

we are going to work as we have worked with the 300 content partners that we have now to license programming.

Would we like a compulsory license down the road? Sure we

would, because I think that would facilitate the transmission of

programming to consumers.

Mr. TAUZIN. Mr. Boren?

Mr. BOREN. Well, I would just say that the colleges and universities certainly welcome the opportunity for broader distribution of

our sports programming as we do with many other educational

funds, but we hope the committee will remember as this goes forward to do it in a way that will not destroy our ability to negotiate

in the marketplace for a revenue stream that is absolutely essential to intercollegiate athletics. Otherwise, if that revenue stream

dries up, many colleges and universities are simply going to have

to greatly reduce those athletic opportunities for our student athletes, reduce the financial support, be faced with the choice between men’s and women’s athletics and also between academic programs and athletic participation in a way that is really going to

end up hurting a lot of young people across the country. So we

hope you would keep that in mind.

Mr. TAUZIN. Mr. McCallum.

Mr. MCCALLUM. First and foremost, Mr. Chairman, I would like

to thank you very much for inviting us to come and speak and be

part of these discussions. I think if I would like to leave a message,

first and foremost, is that we are legal in Canada. We operate, fortunately, within a regime that has enabled us, under the circumstances, to operate in that fashion. There are is still some

housekeeping that is being tidied up in the nature of the tariff and

so on, but we have, in fact, operated that way and intend to be that

way.

We are developing a security system which does enable us and

will enable others to define territories. At this point, we are looking

on the national basis. Whether it could be done on a local basis or

not will require some additional examination.

You, as we were are, facing the reality that we are dealing in

Internet time, not regulatory time, and I think the deliberations

that you are going through have to be somewhat accelerated, bearing in mind the interest of all the parties, specifically the copyright

holders, and as the—I think it was Ms. McCarthy mentioned, not

leaving out the creators, the performers, the writers, the musicians

as part of that process.

So we wish shall you God speed, and we will look forward and

look on your discussing things with great interest. Thank you.

Mr. TAUZIN. Mr. Jaszi.

Mr. JASZI. Mr. Chairman, I hardly need to remind this subcommittee that balancing the copyright system is one that takes

appropriate account of the interests of consumers and access as

well as the interest of owners and proprietary control. Historically,

compulsory licenses has been one mechanism that has been used

74

in moments of technological stress when that balance has been

lessened by the response of content proprietors to new technologies,

and I think, therefore, that is an option that has to remain in the

mix that the subcommittee and the Congress consider as they take

account of the converging phenomenon on television service delivery by means of the Internet and equivalent technologies.

I guess the last point I would add is that it seems to me that

when all is said and done, what we are likely to have for cable, for

satellite, and for Internet is a mixed model for the authorization

of retransmission, a model that has some compulsory licensing features with many free market features.

Mr. TAUZIN. Mr. Beck.

Mr. BECK. Mr. Chairman, it has been gratifying to hear so many

of your colleagues and you, yourself, say that you have often wanted affiliate television right here in Washington from your Districts.

We did that. We brought our resources together. We pay the photographers. We pay the camera men. We even pay for the streaming to companies like his companies down there.

So we are thrilled to be operating in this new environment, repurposing our content to make your lives hopefully a little bit better when you want to learn about your Districts. I think things are

working fine. Just prevent the pirates from stealing our products

and punish where it is appropriate, and we will do just fine.

We are not an old business. We are as new as anybody else. We

think we are doing a fine job of competing in this new space. Please

let us do that.

Mr. TAUZIN. Mr. Roback.

Mr. ROBACK. Thank you. I guess I would just like to say that for

every bad mark like something that has happened in this iCraveTV

incident, I would like you all to know that there will be a lot of

Internet companies like ours and the other members of if Digital

Media Association that Alex mentioned that are going and licensing content appropriately, providing value to both sides of an equation by expanding the marketing and distribution for a lot of this

value content and still compensating rights holders for use of that

content.

The second thing I would like to say is that I think we all have

to be mindful, as I mentioned earlier, of the fact that the consumer

will be the final arbiter of what works on the net, what works generally when it comes to how they receive content and what content,

frankly, is successful. If local content continues to be something

that people demand, it will be out there, and it will be the best because there will be so much competition.

I think we should just be mindful of the fact that at the end of

the day, the consumer has the final say.

Mr. TAUZIN. And that will be the final say.

Gentlemen, again, thank you very much for your testimony. The

record will remain open for 30 days, and I have invited you to supplement it. I wish you would, and we will look forward to hearing

your comments also on the privacy issue when we do arrive at one.

Thank you very much. The hearing stands adjourned.

[Whereupon, at 1:23 p.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]

75

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

FROM THE STATE OF NEW YORK

Mr. Chairman, please accept my gratitude for scheduling this hearing today. It

is timely and foreshadows the future of what television programming Americans

will receive and how they will receive it.

With increasing deployment of broadband internet access, more and more Americans will be able to enjoy close to video-quality reception on their computer. The

boundaries and rules for who can distribute programming and the arrangements for

distribution are at the heart of this hearing. On the one hand, a representative of

‘‘iCraveTV’’, which exceeded the boundaries of copyright protection, is testifying.

‘‘iCraveTV’’ rebroadcast signals of a U.S. TV station without a licensing arrangement to fairly compensate the owners of copyrighted content. This was wrong and

seriously infringed on the intellectual property rights of the content owners.

‘‘iCraveTV’s’’ infringements have only emphasized the bright line beyond which ebusiness should not stray. In addition, though, by showing what a webcasting company shouldn’t do, ‘‘iCraveTV’’ has helped to spotlight the actions of the many

webcasters who play by the rules and distribute content only under license.

I am, indeed, optimistic as I look forward to today’s hearing because I believe that

the content industry and the streaming media community may actually move closer

together as the internet becomes an increasingly important tool for distribution of

music, television, sports, and other creative works.

As I preview the statements of my friend, Jack Valenti, of the Motion Picture Association of America, and Alex Alben, of RealNetworks, with whom I met yesterday,

I am struck by the convergence of elements of their testimony. Jack Valenti is proud

to ‘‘embrace new Internet opportunities for consumers... licensing our creative material to Internet companies.’’ Likewise Alex Alben says, ‘‘By offering the online audience the widest possible array of live on-demand programming, we will work with

content producers to create a huge new market for new and old copyrighted works.’’

Thus, Mr. Chairman, I am grateful you have scheduled this hearing today and

look forward to exploring whether internet companies should be given a so-called

compulsory license and how copyrighted music, TV, sports, and other media will be

distributed on the internet in the future.

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND

PUBLISHERS

The American Society of Composers, Authors and Publishers (ASCAP) submits

this statement concerning the question of compulsory licensing of copyrighted works

used by webcasters.

ASCAP is an unincorporated membership association of over 90,000 American

composers, lyricists and music publishers. These writer and publisher members,

who are the creators and the copyright owners of millions of copyrighted musical

compositions, give ASCAP the nonexclusive right to license the nondramatic public

performance of their music. ASCAP thus licenses many different types of music

users, including radio and television broadcast stations and networks, cable program

services and systems, concert promoters, hotels and motels, bars, grills, restaurants

and nightclubs, and, increasingly over the last five years, Internet websites, including webcasters. ASCAP’s license are blanket licenses, in that they give access to,

and the user may perform, any and all works in the ASCAP repertory. Further,

music users are guaranteed that ASCAP will license them at reasonable fees, and

have recourse to have a federal court set license fees if they believe ASCAP’s offers

are unreasonable.

ASCAP strongly opposes the enactment of any new compulsory licenses for

webcasters, for many reasons:

First, insofar as music is concerned, any webcaster can obtain all necessary performance rights in copyrighted musical compositions it is transmitting, by obtaining

a license from ASCAP (and the two other American performing rights organizations). As ASCAP cannot deny that license, as it must be at a reasonable license

fee, and as it covers all the music in the ASCAP repertory, webcasters are assured

that they can get all the rights that they need. Further, pursuant to the amendments to the Performance Rights in Sound Recordings Act of 1995 made by the Digital Millennium Copyright Act of 1998, webcasters have a statutory license for the

performing rights in the sound recordings that they perform as well, and hence have

all the rights they need.

As for any other compulsion to allow the use of the property of others, the basic

principles of our free enterprise system make the thought abhorrent. We believe, as

we trust and believe Congress does as well, in the sanctity of private property. The

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fact is that intellectual property is no different from tangible property in this regard. The product of a person’s mind is as much property as the product of a person’s hands. The law should protect both equally. Webcasters do not obtain any

other property they use on a compulsory basis. And the fact that they need intellectual property to provide service does not change that basic principle, for they need

tangible property to provide their services as well. Thus, for example, a webcaster

cannot operate without a computer. The law does not, and should not, require IBM

or Apple to provide computers to webcasters (let alone at a price that is not determined in the free marketplace). The same holds true for copyrighted property.

We appreciate the opportunity to share our views with the Committee, and stand

ready to help further in any way we can.