[Federal Register Volume 72, Number 72 (Monday, April 16, 2007)]
[Notices]
[Pages 19039-19055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7207]


=======================================================================
-----------------------------------------------------------------------

LIBRARY OF CONGRESS

Copyright Office

[Docket No. 2007-1]


Section 109 Report to Congress

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of Inquiry.

-----------------------------------------------------------------------

SUMMARY: Pursuant to statute, the Copyright Office is seeking comment 
on issues related to the operation of, and continued necessity for, the 
cable and satellite statutory licenses under the Copyright Act.

DATES: Written comments are due July 2, 2007. Reply comments are due 
September 13, 2007. April 16, 2007.

ADDRESSES: If hand delivered by a private party, an original and five 
copies of a comment or reply comment should be brought to the Library 
of Congress, U.S. Copyright Office, Public and Information Office, 101 
Independence Ave, SE, Washington, DC 20559, between 8:30 a.m. and 5 
p.m. The envelope should be addressed as follows: Office of the General 
Counsel, U.S. Copyright Office.
    If delivered by a commercial courier, an original and five copies 
of a comment or reply comment must be delivered to the Congressional 
Courier Acceptance Site (``CCAS'') located at 2nd and D Streets, NE, 
Washington, D.C. between 8:30 a.m. and 4 p.m. The envelope should be 
addressed as follows: Office of the General Counsel, U.S. Copyright 
Office, LM 430, James Madison Building, 101 Independence Avenue, SE, 
Washington, DC. Please note that CCAS will not accept delivery by means 
of overnight delivery services such as Federal Express, United Parcel 
Service or DHL.
    If sent by mail (including overnight delivery using U.S. Postal 
Service Express Mail), an original and five copies of a comment or 
reply comment should be addressed to U.S. Copyright Office, Copyright 
GC/I&R, P.O. Box 70400, Southwest Station, Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Senior Attorney, and Tanya 
M. Sandros, Acting General Counsel, Copyright GC/I&R, P.O. Box 70400, 
Southwest Station, Washington, DC 20024. Telephone: (202) 707-8380. 
Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION:

I. BACKGROUND

    Overview. There are three statutory licenses in the Copyright Act 
(``Act'') governing the retransmission of distant and local broadcast 
station signals. A statutory license is a codified licensing scheme 
whereby copyright owners are required to license their works at a 
regulated price and under government-set terms and conditions. There is 
one statutory license applicable to cable television systems and two 
statutory licenses applicable to satellite carriers. The cable 
statutory license, enacted in 1976 and codified in Section 111 of the 
Act, permits a cable operator to retransmit both local and distant 
radio and television signals to its subscribers who pay a fee for such 
service. The satellite carrier statutory license, enacted in 1988 and 
codified in Section 119 of the Act, permits a satellite carrier to 
retransmit distant television signals (but not radio signals) to its 
subscribers

[[Page 19040]]

for private home viewing as well as to commercial establishments.\1\
---------------------------------------------------------------------------

    \1\ We note that, unlike Section 111, Section 119 does not use 
the term ``distant'' to refer to those broadcast station signals 
retransmitted under the statutory license. For the purposes of this 
NOI, however, the term ``distant'' may be used in the Section 119 
context to describe a television station signal retransmitted by a 
satellite carrier.
---------------------------------------------------------------------------

    The royalties collected under the Section 111 and Section 119 
licenses are paid to the copyright owners or their representatives, 
such as the Motion Picture Association of America (``MPAA''), the 
professional sports leagues (i.e., MLB, NFL, NHL, and the NBA, et. 
al.), performance rights groups (i.e., BMI and ASCAP), commercial 
broadcasters, noncommercial broadcasters, religious broadcasters, and 
Canadian broadcasters for the public performance of the programs 
carried on the retransmitted station signal. Under Chapter 8 of the 
Copyright Act, the Copyright Royalty Judges are charged with 
adjudicating royalty claim disputes arising under Sections 111 and 119 
of the Act. See 17 U.S.C. 801.
    The Section 122 statutory license, enacted in 1999, permits 
satellite carriers to retransmit local television signals (but not 
radio) into the stations' local market on a royalty-free basis. The 
license is contingent upon the satellite carrier complying with the 
rules, regulations, and authorizations established by the Federal 
Communications Commission (``FCC'') governing the carriage of 
television broadcast signals. Section 338 of the Communications Act of 
1934 (``Communications Act''), a corollary statutory provision to 
Section 122 and also enacted in 1999, required satellite carriers, by 
January 1, 2002, ``to carry upon request all local television broadcast 
stations' signals in local markets in which the satellite carriers 
carry at least one television broadcast station signal,'' subject to 
the other carriage provisions contained in the Communications Act. The 
FCC implemented this provision in 2000 and codified the ``carry-one 
carry-all'' rules in 47 CFR 76.66. The carriage of such signals is not 
mandatory, however, because satellite carriers may choose not to 
retransmit a local television signal to subscribers in a station's 
local market.
    Section 109. On December 8, 2004, the President signed the 
Satellite Home Viewer Extension and Reauthorization Act of 2004, a part 
of the Consolidated Appropriations Act of 2004. See Pub. L. No. 108-
447, 118 Stat. 3394 (2004) (hereinafter ``SHVERA''). Section 109 of the 
SHVERA requires the Copyright Office to examine and compare the 
statutory licensing systems for the cable and satellite television 
industries under Sections 111, 119, and 122 of the Act and recommend 
any necessary legislative changes no later than June 30, 2008. The 
Copyright Office has conducted similar analyses of the Section 111 and 
119 statutory licenses at the request of Congress in 1992 and 1997. See 
The Cable and Satellite Compulsory Licenses: An Overview and Analysis 
(March 1992); A Review of the Copyright Licensing Regimes Covering 
Retransmission of Broadcast Signals (August 1997).
    Under Section 109, Congress indicated that the report shall 
include, but not be limited to, the following: (1) a comparison of the 
royalties paid by licensees under such sections [111, 119, and 122], 
including historical rates of increases in these royalties, a 
comparison between the royalties under each such section and the prices 
paid in the marketplace for comparable programming; (2) an analysis of 
the differences in the terms and conditions of the licenses under such 
sections, an analysis of whether these differences are required or 
justified by historical, technological, or regulatory differences that 
affect the satellite and cable industries, and an analysis of whether 
the cable or satellite industry is placed in a competitive disadvantage 
due to these terms and conditions; (3) an analysis of whether the 
licenses under such sections are still justified by the bases upon 
which they were originally created; (4) an analysis of the correlation, 
if any, between the royalties, or lack thereof, under such sections and 
the fees charged to cable and satellite subscribers, addressing whether 
cable and satellite companies have passed to subscribers any savings 
realized as a result of the royalty structure and amounts under such 
sections; and (5) an analysis of issues that may arise with respect to 
the application of the licenses under such sections to the secondary 
transmissions of the primary transmissions of network stations and 
superstations that originate as digital signals, including issues that 
relate to the application of the unserved household limitations under 
Section 119 and to the determination of royalties of cable systems and 
satellite carriers.\2\
---------------------------------------------------------------------------

    \2\ Aside from the requirement to issue a report under Section 
109, the SHVERA also required the Copyright Office to examine select 
portions of the Section 119 license and to determine what, if any, 
effect Sections 119 and 122 have had on copyright owners whose 
programming is retransmitted by satellite carriers. Specifically, 
Section 110 of the SHVERA required the Register of Copyrights to 
report her findings and recommendations on: (1) the extent to which 
the unserved household limitation for network stations contained in 
Section 119 has operated efficiently and effectively; and (2) the 
extent to which secondary transmissions of primary transmissions of 
network stations and superstations under Section 119 harm copyright 
owners of broadcast programming and the effect, if any, of Section 
122 in reducing such harm. The Section 110 report was released in 
2006. See Satellite Home Viewer Extension and Reauthorization Act 
Sec.  110 Report, A Report of the Register of Copyrights (February 
2006).
---------------------------------------------------------------------------

    According to Section 109's legislative history, the Copyright 
Office shall conduct a study of the Section 119 and Section 122 
licenses for satellite, and the Section 111 license for cable, and make 
recommendations for improvements to Congress no later than June 30, 
2008. The legislative history further instructs that the Copyright 
Office must analyze the differences among the three licenses and 
consider whether they should be eliminated, changed, or maintained with 
the goal of harmonizing their operation. See H.R. Rep. No. 108-660, 
108th Cong., 2d Sess., at 19 (2004).
    This Notice of Inquiry (``NOI'') commences our efforts to collect 
information necessary to address the issues posed to us by Congress in 
Section 109 of the SHVERA. We plan to hold hearings on matters raised 
in this NOI later this year to further supplement the record. A 
separate Federal Register notice will be issued announcing the dates 
and procedures associated with those hearings. Interested parties will 
be provided an opportunity to testify at the hearings and respond to 
testimony submitted at those hearings.

II. DISCUSSION

    We hereby seek comment on Sections 111, 119, and 122 of the 
Copyright Act. We analyze the rates, terms, and conditions found in the 
three licenses at issue. We also examine how multichannel video 
competition has been affected by the licenses and whether cable and 
satellite subscribers have benefitted from them. In addition, we 
explore the application of the licenses to new digital video 
technologies. We conclude our inquiry by seeking comment on whether the 
licenses should be maintained, modified, expanded, or eliminated.

    A. Comparison of Royalties

     1. Background

    Section 111. The royalty payment scheme for the Section 111 license 
is complex and is based, in large part, on broadcast signal carriage 
regulations adopted by the FCC over thirty years ago. Cable operators 
pay royalties based on mathematical formulas established in Section 
111(d)(1)(B), (C), and (D) of the Copyright Act. Section 111 segregates

[[Page 19041]]

cable systems into three separate categories according to the amount of 
revenue, or ``gross receipts,'' a cable system receives from 
subscribers for the retransmission of distant broadcast station 
signals. For purposes of calculating the royalty fee cable operators 
must pay under Section 111, gross receipts include the full amount of 
monthly (or other periodic) service fees for any and all services (or 
tiers) which include one or more secondary transmissions of television 
or radio broadcast stations, for additional set fees, and for converter 
(``set top box'') fees. Gross receipts are not defined in Section 111, 
but are defined in the Copyright Office's rules. See 37 CFR 
201.17(b)(1). These categories are: (1) systems with gross receipts 
between $0-$263,800 (under Section 111(d)(1)(C)); (2) systems with 
gross receipts more than $263,800 but less than $527,600 (under Section 
111(d)(1)(D)); and (3) systems with gross receipts of$527,600 and above 
(under Section 111(d)(1)(B)). This revenue-based classification system 
reveals Congress' belief that larger cable systems have a significant 
economic impact on copyrighted works.
    The Copyright Office has developed Statement of Account (``SOA'') 
forms that must be submitted by cable operators on a semi-annual basis 
for the purpose of paying statutory royalties under Section 111. There 
are two types of cable system SOAs currently in use. The SA1-2 Short 
Form is used for cable systems whose semi-annual gross receipts are 
less than $527,600.00. There are three levels of royalty fees for cable 
operators using the SA1-2 Short Form: (1) a system with gross receipts 
of $137,000.00 or less pays a flat fee of $52.00 for the retransmission 
of all local and distant broadcast station signals; (2) a system with 
gross receipts greater than $137,000.00 and equal to or less than 
$263,000.00, pays between $52.00 to $1,319.00; and (3) a system 
grossing more than $263,800.00, but less than $527,600.00 pays between 
$1,319.00 to $3,957.00. Cable systems falling under the latter two 
categories pay royalties based upon a fixed percentage of gross 
receipts notwithstanding the number of distant station signals they 
retransmit. The SA-3 Long Form is used by larger cable systems grossing 
$527,600.00 or more semi-annually. The vast majority of royalties paid 
under Section 111 come from Form SA-3 systems.
    A key element in calculating the appropriate royalty fee involves 
identifying subscribers of the cable system located outside the local 
service area of a primary transmitter. See 17 U.S.C. 111(d)(1)(B); see 
also 17 U.S.C. 111(f) (definition of ``local service area of a primary 
transmitter''). This determination is predicated upon two sets of FCC 
regulations: the broadcast signal carriage rules in effect on April 15, 
1976, and a station's television market as currently defined by the 
FCC. In general, a broadcast station is considered distant vis-a-vis a 
particular cable system where subscribers served by that system are 
located outside that broadcast station's specified 35 mile zone (a 
market definition concept arising under the FCC's old rules), its Area 
of Dominant Influence (``ADI'') (under Arbitron's defunct television 
market system), or Designated Market Area (``DMA'') (under Nielsen's 
current television market system). However, there are other sets of 
rules and criteria (e.g., Grade B contour coverage or ``significantly 
viewed'' status) that also apply in certain situations when assessing 
the local or distant status of a station-even when subscribers are 
located outside its zone, ADI and DMA for copyright purposes. A cable 
system pays a ``base rate fee'' if it carries any distant signals 
regardless of whether or not the system is located in an FCC-defined 
television market area. Form SA-3 cable systems that carry only local 
signals do not pay the base rate fee, but do pay the minimum fee of 
$5,344.59 (i.e. 1.013<INF>%</INF> x $527, 600.00).
    The royalty scheme for Form SA-3 cable systems employs the 
statutory device known as the distant signal equivalent (``DSE''). 
Section 111 defines a DSE as ``the value assigned to the secondary 
transmission of any non-network television programming carried by a 
cable system in whole or in part beyond the local service area of a 
primary transmitter of such programming.'' 17 U.S.C. 111(f). A DSE is 
computed by assigning a value of one (1.0) to a distant independent 
broadcast station (as that term is defined in the Copyright Act), and a 
value of one-quarter (.25) to distant noncommercial educational 
stations and network stations (as those terms are defined in the 
Copyright Act).
    A Form SA-3 cable system pays royalties based upon a sliding scale 
of percentages of its gross receipts depending upon the number of DSEs 
it carries. The greater the number of DSEs, the higher the total 
percentage of gross receipts and, consequently, the larger the total 
royalty payment. For example: (1) 1st DSE = 1.013<INF>%</INF> of gross 
receipts; (2) 2, 3 & 4th DSE = .668<INF>%</INF> of gross receipts; and 
(3) 5th, etc., DSE = .314<INF>%</INF> of gross receipts. Cable systems 
carrying distant television station signals after June 24, 1981, that 
would not have been permitted under the FCC's former rules in effect on 
that date, must pay a royalty fee of 3.75<INF>%</INF> of gross receipts 
using a formula based on the number of relevant DSEs. The cable 
operator would pay either the sum of the base rate fee and the 
3.75<INF>%</INF> fee, or the minimum fee, whichever is higher. Cable 
systems located in whole or in part within a major television market 
(as defined by the FCC), must calculate a syndicated exclusivity 
surcharge (``SES'') for the retransmission of any commercial VHF 
station signal that places a Grade B contour, in whole or in part, over 
the cable system which would have been subject to the FCC's syndicated 
exclusivity rules in effect on June 24, 1981. If any signals are 
subject to the SES, an SES fee is added to the foregoing larger amount 
to determine the system's total royalty fee.\3\
---------------------------------------------------------------------------

    \3\ In 1980, the FCC eliminated its distant signal carriage and 
syndicated exclusivity rules. The Copyright Royalty Tribunal 
(``CRT''), in response to the FCC's actions, conducted a rate 
adjustment proceeding to establish two new rates applicable only to 
Form SA-3 systems: (1) to compensate for the loss of the distant 
signal carriage rules, the CRT adopted the 3.75<INF>%</INF> fee; and 
(2) to compensate for the loss of the syndex rules, the CRT adopted 
the SES fee. See 47 FR 52146 (1982). The FCC reinstituted its 
syndicated exclusivity rules in the late 1980s.
---------------------------------------------------------------------------

    At this juncture, it is important to note that the FCC does not 
currently restrict the kind and quantity of distant signals a cable 
operator may retransmit. Nevertheless, the FCC's former market quota 
rules, which did limit the number of distant station signals carried 
and were part of the FCC's local and distant broadcast carriage rules 
in 1976, are still relevant for Section111 purposes. These rules are 
integral in determining: (1) whether broadcast signals are permitted or 
non-permitted; (2) the applicable royalty fee category; and (3) a 
station's local or distant status for copyright purposes. Broadcast 
station signals retransmitted pursuant to the former market quota rules 
are considered permitted stations and are not subject to a higher 
royalty rate. To put these rules in context, a cable system in a 
smaller television market (as defined by the FCC) was permitted to 
carry only one independent television station signal under the FCC's 
former market quota rules. Currently, a cable system in a smaller 
market is permitted to retransmit one independent station signal. A 
cable system located in the top 50 television market or second 50 
market (as defined by the FCC), was permitted to carry more independent 
station signals under the former market quota rules; a cable system in 
these markets is currently permitted under Section 111 to retransmit 
more independent station signals than a cable system in a smaller 
market. The former market quota rules did not apply to

[[Page 19042]]

cable systems located ``outside of all markets'' and these systems 
under Section 111 are currently permitted to retransmit an unlimited 
number of television station signals without incurring the 3.75<INF>%</INF> 
fee (although these systems still pay at least a minimum copyright fee 
or base rate fee for those signals).
    There are other bases of permitted carriage under the current 
copyright scheme that are tied to the FCC's former carriage 
requirements. They include: (1) specialty stations; (2) grandfathered 
stations; (3) commercial UHF stations placing a Grade B contour over a 
cable system; (4) noncommercial educational stations; (5) part time or 
substitute carriage; and (6) a station carried pursuant to an 
individual waiver of FCC rules. If none of these permitted bases of 
carriage are applicable, then the cable system pays a relatively higher 
royalty fee for the retransmission of that station's signal.
    The Copyright Office has divided the royalties collected from cable 
operators into three categories to reflect their origin: (1) the 
``Basic Fund,'' which includes all royalties collected from Form SA-1 
and Form SA-2 systems, and the royalties collected from Form SA-3 
systems for the retransmission of distant signals that would have been 
permitted under the FCC's former distant carriage rules; (2) the 
``3.75<INF>%</INF> Fund,'' which includes royalties collected from Form 
SA-3 systems for distant signals whose carriage would not have been 
permitted under the FCC's former distant signal carriage rules; and 3) 
the ``Syndex Fund,'' which includes royalties collected from Form SA-3 
systems for the retransmission of distant signals carrying programming 
that would have been subject to black-out protection under the FCC's 
old syndicated exclusivity rules. We note that royalties collected from 
the syndex surcharge decreased considerably after the FCC reimposed 
syndicated exclusivity protection in 1988.
    In order to be eligible for a distribution of royalties, a 
copyright owner of broadcast programming retransmitted by one or more 
cable systems under Section 111 must submit a written claim to the 
Copyright Royalty Judges. Only copyright owners of non-network 
broadcast programming are eligible for a royalty distribution. Eligible 
copyright owners must submit their claims in July for royalties 
collected from cable systems during the previous year. If there are no 
controversies, meaning that the claimants have settled among themselves 
as to the amount of royalties each claimant is due, then the Copyright 
Royalty Judges distribute the royalties in accordance with the 
claimants' agreement(s) and the proceeding is concluded.\4\
---------------------------------------------------------------------------

    \4\ The Copyright Royalty and Distribution Reform Act of 2004 
(Pub. L. No. 108-419) eliminated the Copyright Arbitration Royalty 
Panel (``CARP'') system that had been part of the Copyright Office 
since 1993. The Act replaced CARP (which itself replaced the 
Copyright Royalty Tribunal in 1993) with a system of three Copyright 
Royalty Judges (``CRJs''), who now determine rates and terms for the 
copyright statutory licenses and make determinations on distribution 
of statutory license royalties collected by the Copyright Office.
---------------------------------------------------------------------------

    Section 119. The satellite carrier statutory license, first enacted 
through the Satellite Home Viewer Act (``SHVA'') of 1988, and codified 
in Section 119 of the Act, establishes a statutory copyright licensing 
scheme for satellite carriers that retransmit the signals of distant 
television network stations and superstations to satellite dish owners 
for their private home viewing and for viewing in commercial 
establishments. Satellite carriers may use the Section 119 license to 
retransmit the signals of superstations to subscribers located anywhere 
in the United States. However, the Section 119 statutory license limits 
the secondary transmissions of network station signals to no more than 
two such stations in a single day to persons who reside in unserved 
households. An ``unserved household'' is defined as one that cannot 
receive an over-the-air signal of Grade B intensity of a network 
station using a conventional rooftop antenna. 17 U.S.C. 119(d). 
Congress created the unserved household provision to protect the 
historic network-affiliate relationship as well as the program 
exclusivity enjoyed by television broadcast stations in their local 
markets.
    The Section 119 license is similar to the cable statutory license 
in that it provides a means for satellite carriers to clear the rights 
to television broadcast programming upon semi-annual payment of royalty 
fees to the Copyright Office. However, the calculation of royalty fees 
under the Section 119 license is significantly different from the cable 
statutory license. Rather than determine royalties based upon old FCC 
rules, royalties under the Section 119 license are calculated on a 
flat, per subscriber per station basis. Television broadcasts are 
divided into two categories: superstations (i.e., commercial 
independent television broadcast stations), and network stations (i.e., 
commercial televison network stations and noncommercial educational 
stations); each with its own attendant royalty rates. Satellite 
carriers multiply the respective royalty rate for each station by the 
number of subscribers, on a monthly basis, who receive the station's 
signal during the six-month accounting period to calculate their total 
royalty payment. Each year, satellite carriers submit royalties to the 
Copyright Office which are, in turn, distributed to copyright owners 
whose works were included in a retransmission of a broadcast station 
signal and for whom a claim for royalties was timely filed with the 
Copyright Royalty Judges.
    Section 122. The Section 122 license allows satellite carriers to 
retransmit local television signals. Because there are no royalty fees 
or carriage restrictions for local signals retransmitted under Section 
122, there is no need to distinguish between network stations and 
superstations as is the case in Section 119. The Section 122 statutory 
copyright license, permits, but does not require, satellite carriers to 
engage in the satellite retransmission of a local television station 
signal into the station's own market (DMA) without the need to identify 
and obtain authorization from copyright owners to retransmit the 
owners' programs. See 17 U.S.C. 122.

     2. Payments and Rate Increases

    Congress has asked us to compare the royalties paid by licensees 
under Sections 111, 119, and 122, and report on the historical rates of 
increases in these royalties.
    Royalties Paid. Cable operators have paid, on average, 
$125,000,000.00 in royalties annually since the implementation of 
Section 111 by the Copyright Office in 1978. While royalty payments 
under the cable statutory license have increased over the past seven 
years, there have been periods of fluctuation in the past 29 years. For 
example, royalties decreased 30<INF>%</INF> in 1998 from the year 
before partly because WTBS changed its status from a distant 
superstation to a basic cable network. Royalties also decreased by 
13<INF>%</INF> in 1994 from the year before likely because cable 
operators dropped distant signals in order to accommodate the carriage 
of local signals mandated by Sections 614 and 615 of the 1992 Cable 
Act. See Cable Television Consumer Protection and Competition Act of 
1992, Pub. L. No. 102-385, 106 Stat. 1460.
    We estimate that smaller cable operators (SA-1/SA-2 systems) pay, 
on average, .4<INF>%</INF> of their gross receipts into the royalty 
pool. In comparison, larger cable operators (SA-3 systems) pay, on 
average, 1.2<INF>%</INF> of their gross receipts into the royalty pool. 
These figures, based on the 2001/1 and 2001/2 accounting periods (as 
typical periods), are derived by dividing a system's royalty fees by 
its

[[Page 19043]]

gross receipts. \5\ These percentages are generally consistent over 
other accounting periods as well.
---------------------------------------------------------------------------

    \5\ We note that in the 2001/1 accounting period, for example, 
there were: (1) 5,517 SA-1 form filers paying $202,193.37 in cable 
royalties; (2) 2,117 SA-2 form filers paying $2,186,554.15 in cable 
royalties; and (3) 1,844 SA-3 form filers paying $57,773, 352.29 in 
royalties. This figure was calculated by adding the base fee 
($51,497,381.75) + 3.75<INF>%</INF> fee ($6,020,168.47) + SES fee 
($$48,369.30) + interest ($207,432.77).
---------------------------------------------------------------------------

    In comparison, satellite carriers have paid, on average, nearly 
$50,000,000.00 in royalties annually, since the Copyright Office began 
implementing the Section 119 license in 1989. Like the Section 111 
royalties described above, there have been fluctuations due to changed 
circumstances. For example, satellite royalties decreased by over 
26<INF>%</INF> in 1999 from the year before likely because satellite 
carriers began offering local-into-local service under Section 122 of 
the Copyright Act and Section 338 of the Communications Act and because 
of a royalty rate decrease announced in December 1999. See http://www.copyright.gov/fedreg/1999/64fr71659.pdf. We cannot determine how 
much satellite carriers paid in royalties as a percentage of revenue 
because Section 119 royalties are based on a flat fee per subscriber 
and not on a gross receipt basis as is the case under Section 111. 
However, Copyright Office records do indicate that DirecTV has paid 
more than $326 million in royalty fees between the second half of 1997 
through the end of 2006, while Echostar has paid more than $158 million 
during the same period. Other (existing and defunct) satellite 
carriers, such as Primetime 24, Primestar Partners, and Satellite 
Communications, have also paid royalties under Section 119 over the 
last ten years. The payment of royalties by these and other companies 
are included in the average total discussed above.
    As for Section 122, we reiterate that satellite carriers may carry 
local broadcast station signals on a royalty-free basis as long as they 
abide by the carry-one carry-all requirements of Section 338 of the 
Communications Act. Therefore, there are no royalty data to examine for 
our purposes here.
    Stations Carried. According to data obtained from the SA-3 forms 
filed with the Copyright Office, there has been a slow, but steady, 
increase in the number of unique distant broadcast station signals 
retransmitted by cable operators across the United States over the last 
15 years. For example, during the 1992/1 accounting period, cable 
operators retransmitted 822 unique distant signals. During the 2000/1 
accounting period, that number increased to 918. And, during the 2005-1 
accounting period, the number of unique distant signals retransmitted 
by cable operators reached 1,029. This increase is partly attributable 
to the retransmission of new distant analog television signals as well 
as new digital television signals (see infra) which are counted 
separately from their analog counterparts. This increase could also be 
due to the increased retransmission of distant low power television 
signals over the past decade.
    However, there has been a decrease in the average number of distant 
station signals retransmitted by cable operators over the same time 
period. Copyright Office data gleaned from the SA-3 forms suggests that 
during the 1992-1 accounting period, a cable system retransmitted an 
average of 2.74 distant signals (2,256 SA3s divided by 822 distant 
signals). During the 2000/1 accounting period, the average number of 
distant signals retransmitted by cable operators dropped to 2.52. And, 
during the recent 2005/1 accounting period, records show that a cable 
system retransmitted an average of 1.5 distant signals. There were, of 
course, some SA-3 systems that reported retransmitting more than four 
distant signals, and some that reported no distant signals being 
retransmitted at all, but these types of systems are atypical.
    The average decrease reflected in these accounting periods can be 
attributed to various factors, such as: (1) WTBS no longer being 
carried as a distant television signal since its conversion to a basic 
cable network in the late 1990s; (2) cable operators being required to 
carry local television signals, per Sections 614 and 615 of the 
Communications Act, and having had to drop distant signals to 
accommodate the carriage of such stations; (3) fewer SA-3 forms being 
filed with the Copyright Office because of cable system mergers and 
acquisitions; and (4) statutory changes to the definition of ``local 
service area'' in the early 1990s.
    As for the retransmission of distant television signals under 
Section 119, we note that the type and number of signals retransmitted 
varies from carrier to carrier. For example, Echostar's SOA for the 
2006/2 accounting period shows that it retransmitted six superstation 
signals (KTLA, KWGN, WGN, WPIX, WSBK, and WWOR) and paid royalties in 
excess of $13 million for service to residential subscribers for 
private home viewing over the six month period. Echostar paid an 
additional $21,000.00 in royalties for service to commercial 
establishments for the retransmission of these same superstation 
signals in the 2006/2 period. Echostar also reported that it 
retransmitted network station signals to subscribers in 168 DMAs in the 
first five months of the 2006/2 accounting period, and paid nearly $3 
million in royalties, before it had to terminate such service per a 
Federal court injunction issued in December, 2006. See infra. Satellite 
carriers do not have to report on the number of local television 
signals carried under Section 122, but Echostar states on its website 
that it provides local-into-local service in all but the smallest 36 
DMAs in the nation.\6\
---------------------------------------------------------------------------

    \6\ Echostar reports that it serves 174 DMAs (out of 210) with 
the signals of local television stations. See https://customersupport.dishnetwork.com/customernetqual/prepAddress.do. 
DirecTV reports that it serves 142 DMAs (out of 210) with the 
signals of local television stations (and notes that this number 
accounts for more than 94<INF>%</INF> of the nation's television 
households).  See http://www.directv.com/DTVAPP/packProg/localChannel.jsp?assetId=900018. However, the number of signals 
carried in each market is not specifically listed on either website.
---------------------------------------------------------------------------

    Questions. We seek comment on the accuracy of the above-stated 
figures and ask for further explanation for the historic trends 
described above. Are there different reasons, other than the ones 
stated, explaining why royalties have fluctuated in the periods 
examined? We ask commenters to provide a granular analysis of the 
trends in royalty payments so that we may provide Congress with the 
information it seeks. On this point, we note that the Copyright Office 
periodically releases data showing the royalty amounts paid by cable 
operators and satellite carriers under their respective licenses. See 
http://www.copyright.gov/licensing/lic-receipts.pdf. These data should 
be used by commenters when responding to this request.
    We also seek comment on current distant signal trends under Section 
111. For example, are distant television signals mainly retransmitted 
by cable operators serving smaller markets who are underserved by local 
television programming? Alternatively, are they retransmitted to 
subscribers who live on the fringes of television markets and are in 
need of valued broadcast programming unavailable from their local 
market stations? For example, do cable operators serving the 
Springfield-Holyoke DMA retransmit signals from the adjacent Boston 
(Manchester) DMA so that their subscribers have access to state 
government news from Boston as well as popular sports programming 
carried by Boston television stations?
    We also seek comment on the number of distant and local signals 
retransmitted by satellite carriers. For example, are the six 
superstations listed

[[Page 19044]]

above typically retransmitted under Section 119? If so, why? How does a 
satellite carrier decide which superstation and network station signals 
it will retransmit? Does it decide based on the amount of royalties it 
has to pay or does the satellite carrier retransmit signals based on 
subscriber demand? Are there certain ``must-have'' distant television 
signals, including superstation signals, that satellite carriers 
retransmit to remain competitive with cable operators? What factors 
will likely affect the retransmission of distant television signals, 
and the concomitant royalties paid, by satellite carriers in the 
future? On average, does a subscriber to a cable service receive the 
same broadcast signal channel line-up as a subscriber to a satellite 
service? If not, what are the differences and why do they exist?

     3. Marketplace Rates Compared

    Congress has also asked us to compare the royalties under Sections 
111, 119, and 122 and the prices paid in the marketplace for comparable 
programming. The difficult issue here is parsing the term ``comparable 
programming'' so that the analysis is clear. The inquiry assuredly 
includes an examination of the local broadcast station market, but the 
term could be read more expansively to include an analysis of the 
prices (license fees) paid by cable operators and satellite carriers to 
carry non-broadcast programmers, such as basic cable networks. Given 
the ambiguous wording in the statute, we shall consider both local 
broadcast stations and basic cable networks in the analysis. With 
regard to broadcast stations, we will analyze the rates, terms, and 
conditions of carriage privately negotiated by cable operators, 
satellite carriers, and broadcast stations under the retransmission 
consent provisions found in Section 325 of the Communications Act of 
1934, as amended by the 1992 Cable Act.
    A brief history of broadcast-cable carriage negotiations is 
necessary here. Prior to 1992, cable operators were not required to 
seek the permission of a local broadcast station before carrying its 
signal nor were they required to compensate the broadcaster for the 
value of its signal. Congress found that a broadcaster's lack of 
control over its signal created a ``distortion in the video marketplace 
which threatens the future of over-the-air broadcasting.'' See S. Rep. 
No. 102-92, 102d Cong., 1st Sess. (1991) at 35. In 1992, Congress acted 
to remedy the situation by giving a commercial broadcast station 
control over the use of its signal through statutorily-granted 
retransmission consent rights. Retransmission consent effectively 
permits a commercial broadcast station to seek compensation from a 
cable operator for carriage of its signal. Congress noted that some 
broadcasters might find that carriage itself was sufficient 
compensation for the use of their signal by an MVPD while other 
broadcasters might seek monetary compensation, and still others might 
negotiate for in-kind consideration such as joint marketing efforts, 
the opportunity to provide news inserts on cable channels, or the right 
to program an additional channel on a cable system. Congress emphasized 
that it intended ``to establish a marketplace for the disposition of 
the rights to retransmit broadcast signals'' but did not intend ``to 
dictate the outcome of the ensuing marketplace negotiations.'' Id. at 
36.
    With regard to copyright issues, the legislative history indicates 
that Congress was concerned with the effect retransmission consent may 
have on the Section 111 license stating that ``the Committee recognizes 
that the environment in which the compulsory copyright [sic] operates 
may change because of the authority granted broadcasters by section 
325(b)(1).'' Id. The legislative history later stated that cable 
operators would continue to have the authority to retransmit programs 
carried by broadcast stations under Section 111. Id.
    During the first round of retransmission consent negotiations in 
the early 1990s, broadcasters initially sought cash compensation in 
return for retransmission consent. However, most cable operators, 
particularly the largest multiple system operators, were not willing to 
enter into agreements for cash, and instead sought to compensate 
broadcasters through the purchase of advertising time, cross-
promotions, and carriage of affiliated non-broadcast networks. Many 
broadcasters were able to reach agreements that involved in-kind 
compensation by affiliating with an existing non-broadcast network or 
by securing carriage of their own newly-formed, non-broadcast networks. 
See FCC, Retransmission Consent and Exclusivity Rules: Report to 
Congress Pursuant to Section 208 of the Satellite Home Viewer Extension 
and Reauthorization Act of 2004 (Sept. 8, 2005)(noting that the new 
broadcast-affiliated MVPD networks included Fox's FX, ABC's ESPN2, and 
NBC's America's Talking, which later became MSNBC). Broadcast stations 
that insisted on cash compensation were forced to either lose cable 
carriage or grant extensions allowing cable operators to carry their 
signals at no charge until negotiations were complete. Fourteen years 
later, cash still has not emerged as the sole form of consideration for 
retransmission consent, but the request and receipt involving such 
compensation is increasing. See Peter Grant and Brooks Barnes, 
Television's Power Shift: Cable Pays For Free Shows, Wall Street 
Journal, Feb. 5, 2007, at A1, A14 (noting that broadcast television 
station owners may be able to collect almost $400 million in 
retransmission fees from cable by 2010, increasing each subscriber's 
bill by $2.00 per month).
    Under Section 325 of the Communications Act, as amended, 
retransmission consent for the carriage of commercial broadcast signals 
applies not only to cable operators, but also to other multichannel 
video programming distributors (``MVPDs''), such as satellite carriers 
and multichannel multipoint distribution services (``MMDS'' or 
``Wireless Cable'').
    Cable operators generally do not need to obtain retransmission 
consent for the carriage of established superstations under the 
Communications Act. Satellite carriers generally do not need to obtain 
retransmission consent to retransmit established superstations or 
network stations (if the subscriber is located in an area outside the 
local market of such stations and resides in an unserved household.) 
See 47 U.S.C. 325(b)(1).
    We also must point out that retransmission consent is a right given 
to commercial broadcast stations. Copyright owners of the programs 
carried on such stations do not necessarily benefit financially from 
agreements between broadcasters and cable operators or satellite 
carriers.
    We seek comment on how the prices, terms, and conditions of 
retransmission consent agreements between local broadcast stations and 
MVPDs relates to the statutory licenses at issue here. Specifically, we 
seek comment on how retransmission consent agreements reflect 
marketplace value for broadcast programming and how this value compares 
with the royalties collected under the statutory licenses. As noted 
above, it may be difficult to analyze these two variables because the 
benefits of retransmission consent inures to broadcast stations while 
the statutory royalty fees are paid to copyright owners (which include, 
but are not limited to, broadcast stations). In any event, we believe 
that the compensation paid for retransmission consent for local 
stations may serve as a proxy for prices paid for the carriage of 
distant broadcast stations and the programs retransmitted

[[Page 19045]]

therein. We seek comment on whether this approach is correct.
    We also seek comment on what the marketplace rate for distant 
signals would be if a basic cable network was used as a surrogate. 
There are hundreds of basic cable networks that may be used as a point 
of comparison. Which ones should we select for our analysis? We could 
use the TBS license fee structure (i.e., as dictated in the affiliation 
agreement between the network and the MVPD) as a model since it was 
formerly a superstation carried under the Section 111 and Section 119 
licenses, but is now paid a per subscriber licensing fee as a basic 
cable network. Is this an appropriate comparison? We understand that it 
may be easier for cable operators and satellite carriers to license 
basic cable networks, like TBS and CNN, than it would be for distant 
broadcast signals. To wit, a non-broadcast program network obtains 
licenses from each copyright owner for all of the works in its line-up 
to enable a cable operator or satellite carrier to retransmit the 
network, but there is no equivalent conveyance of rights where cable or 
satellite retransmission of a broadcast station signal is concerned. Is 
this difference relevant to the analysis? What are the similarities 
between basic cable networks and distant broadcast stations that we 
should be aware of? Are there other ways to determine the value of 
copyrighted content carried by distant signals?

    B. Differences in the Licenses

     1. Terms and Conditions.

    Congress has asked us to analyze the differences in the terms and 
conditions of the statutory licenses. First, there is a difference in 
how royalties are based. Satellite carriers pay a flat royalty fee on a 
per subscriber basis while cable operators pay royalties based on a 
complex system tied to cable system size and old FCC carriage rules. 
Compare 17 U.S.C. 119(b) with 17 U.S.C. 111(d). Second, satellite 
carriers are permitted to market and sell distant network station 
signals only to unserved households (i.e., those customers who are 
unable to receive the signals of local broadcast stations) while cable 
operators are not so restricted. Compare 17 U.S.C. 119(a)(2)(B) with 17 
U.S.C. 111(c). Third, satellite carriers cannot provide the signals of 
more than two network stations in a single day to its subscribers in 
unserved households while cable operators may carry as many distant 
network station signals as they wish so long as they pay the 
appropriate royalty fee for each signal carried. Compare 17 U.S.C. 
119(a)(2)(B)(i) with 17 U.S.C. 111(c) and (d). Fourth, cable operators 
are permitted to retransmit radio station signals under Section 111 
while satellite carriers do not have such a right. See 17 U.S.C. 
111(f). Fifth, Congress specifically accounted for the retransmission 
of digital television station signals by satellite carriers in the last 
revision of Section 119 in 2004, but has not yet addressed the 
retransmission of digital television signals by cable operators under 
Section 111. Finally, the Section 119 statutory license expires after a 
five year period, unless renewed by Congress, while the Section 111 
statutory license, as well as the Section 122 license, are permanent. 
We seek comment on other differences between the statutory licenses, 
that are not noted above, that are relevant to this proceeding.

     2. Justifications for Differences.

    Congress also asked for an analysis of whether these differences 
are required or justified by historical, technological, or regulatory 
differences that affect the satellite and cable industries. We provide 
a broad overview to put this inquiry into perspective.

     a. Historical Differences.

    Section 111. The years leading up to the enactment of the Copyright 
Act of 1976 were marked by controversy over the issue of cable 
television. Through a series of court decisions, cable systems were 
allowed under the Copyright Act of 1909 to retransmit the signals of 
broadcast television stations without incurring any copyright liability 
for the copyrighted programs carried on those signals. See Fortnightly 
Corp. v. United Artists Television, 392 U.S. 390 (1968) (pertaining to 
the retransmission of local television station signals), Teleprompter 
Corp. v. Columbia Broadcasting System, Inc., 415 U.S. 394 (1974) 
(pertaining to the retransmission of distant television station 
signals). The question, at that time, was whether copyright liability 
should attach to cable transmissions under the proposed Copyright Act, 
and if so, how to provide a cost-effective means of enabling cable 
operators to clear rights in all broadcasting programming that they 
retransmitted.
    In the mid-1970s, cable operators typically carried multiple 
broadcast signals containing programming owned by dozens of copyright 
owners. At the time, it was not realistic for hundreds of cable 
operators to negotiate individual licenses with dozens of copyright 
owners, so a practical mechanism for clearing rights was needed. As a 
result, Congress created the Section 111 statutory license for cable 
systems to retransmit broadcast signals. Congress enacted Section 111 
after years of industry input and in light of (1) FCC regulations that 
inextricably linked the cable and broadcast industries and (2) the need 
to preserve the nationwide system of local broadcasting. See H.R. Rep. 
No. 1476 at 88-91; see also, Cable Compulsory Licenses: Definition of 
Cable Systems, 62 FR 18705, 18707 (Apr. 17, 1997) (``The Office notes 
that at the time Congress created the cable compulsory license, the FCC 
regulated the cable industry as a highly localized medium of limited 
availability, suggesting that Congress, cognizant of the FCC's 
regulations and market realities, fashioned a compulsory license with a 
local rather than a national scope. This being so, the Office retains 
the position that a provider of broadcast signals be an inherently 
localized transmission media of limited availability to qualify as a 
cable system.''). It is important to note that at the time Section 111 
was enacted, there were few local media outlets and virtually no 
competition to the Big 3 television networks (ABC, CBS, and NBC).
    The structure of the cable statutory license was premised on two 
prominent congressional considerations: (1) the perceived need to 
differentiate between the impact on copyright owners of local versus 
distant signals carried by cable operators; and (2) the need to 
categorize cable systems by size based upon the dollar amount of 
receipts a system receives from subscribers for the carriage of distant 
signals. These two considerations played a significant role in 
determining what economic effect cable systems had on the value of 
copyrighted works carried on broadcast stations. Congress concluded 
that a cable operator's retransmission of local signals did not affect 
the value of the copyrighted works broadcast because the signal is 
already available to the public for free through over-the-air 
broadcasting. Therefore, the cable statutory license permits cable 
systems to retransmit local television signals without a significant 
royalty obligation. Congress did determine, however, that the 
retransmission of distant signals affected the value of copyrighted 
broadcast programming because the programming was reaching larger 
audiences. The increased viewership was not compensated because local 
advertisers, who provide the principal remuneration to broadcasters, 
were not willing to pay increased advertising rates for cable viewers 
in distant markets who could not be reasonably expected to purchase 
their goods. As a result, Congress believed that

[[Page 19046]]

broadcasters had no reason or incentive to pay greater sums to 
compensate copyright owners for the receipt of their signals by viewers 
outside their local service area.
    The Section 111 statutory license has not been the only means for 
licensing programming carried on distant broadcast signals. Copyright 
owners and cable operators have been free to enter into private 
licensing agreements for the retransmission of broadcast programming. 
Private licensing most frequently occurs in the context of particular 
sporting events, when a cable operator wants to retransmit a sporting 
event carried on a distant broadcast signal, but does not want to carry 
the signal on a full-time basis. The practice of private licensing has 
not been widespread and most cable operators have relied exclusively on 
the cable statutory license to clear the rights to broadcast 
programming. Section 111 has been lightly amended since enacted in 
1976.
    Section 119. From the time of passage of the Copyright Act of 1976 
through the mid-1980s, the developing satellite television industry 
operated without incurring copyright liability under the passive 
carrier exemption of Section 111(a)(3) of the Act. That subsection 
provides an exemption for secondary transmissions of copyrighted works 
where the carrier has no direct or indirect control over the content or 
selection of the primary transmission or over the particular recipients 
of the secondary transmission, and the carrier's activities with 
respect to the secondary transmission consist solely of providing 
wires, cables, or other communications channels for the use of others.
    In the mid-1980s, however, many resale carriers and copyright 
holders began scrambling their satellite signals to safeguard against 
the unauthorized reception of copyrighted works. Only authorized 
subscribers were able to descramble the encrypted signals. Scrambling 
presented several concerns, including whether it would impede the free 
flow of copyrighted works and whether it took satellite carriers out of 
the passive carrier exemption since it represented direct control over 
the receipt of signals. At the same time, several lawsuits were pending 
against certain satellite carriers who claimed to operate under Section 
111. In 1992, the Copyright Office decided that satellite carriers were 
not cable systems within the meaning of Section 111, notwithstanding an 
11th Circuit Court of Appeals decision holding otherwise. See 57 FR 
3284 (1992), citing National Broadcasting Company, Inc. v. Satellite 
Broadcast Networks, 940 F.2d 1467 (11th Cir. 1991).
    The satellite statutory license under Section 119 was enacted in 
1988 to respond to these concerns and to ensure the availability of 
programming comparable to that offered by cable systems (i.e., an 
affiliate of each of the broadcast television networks, superstations, 
and non-broadcast programming services) to satellite subscribers until 
a market developed for that distribution medium. See Satellite Home 
Viewer Act (``SHVA''), Pub. L. No. 100-667 (1988); H.R. Rep. No. 887, 
Part I, 100th Cong., 2d Sess. 8-14 (1988). Section 119 was created at a 
time when there was no competition to cable operators in the provision 
of multichannel video programming and there were no rules in effect 
mandating the cable carriage of local broadcast signals.\7\
---------------------------------------------------------------------------

    \7\ The United States Court of Appeals for the District of 
Columbia Circuit struck down, as unconstitutional under the First 
Amendment, two different sets of must carry rules promulgated by the 
FCC. See Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 
1985); Century Communications Corp. v. FCC, 835 F.2d 292 (D.C. Cir. 
1987). Congress did not enact Sections 614 and 615 of the 
Communications Act until 1992.
---------------------------------------------------------------------------

    The Section 119 statutory license created by the SHVA was scheduled 
to expire at the end of 1994 at which time satellite carriers were 
expected to be able to license the rights to all broadcast programming 
that they retransmitted to their subscribers. However, in 1994, 
Congress decided to reauthorize Section 119 for an additional five 
years and made two significant changes to the terms of the license. See 
Pub. L. No. 103-369, 108 Stat. 3477 (1994). First, in reaction to 
complaints against satellite carriers concerning wholesale violations 
of the unserved household provision, the 1994 Act instituted a 
transitional signal strength testing regime in an effort to identify 
and terminate the network service of subscribers who did not reside in 
unserved households. Second, in order to assist the process of 
ultimately eliminating the Section 119 license, Congress provided for a 
Copyright Arbitration Royalty Panel proceeding to adjust the royalty 
rates paid by satellite carriers for the retransmission of network 
station and superstation signals. Unlike cable systems which pay 
royalty rates adjusted only for inflation, Congress mandated that 
satellite carrier rates should be adjusted to reflect marketplace 
value. It was thought that by compelling satellite carriers to pay 
statutory royalty rates that equaled the rates they would most likely 
pay in the open marketplace, there would be no need to further renew 
the Section 119 license and it could expire in 1999.
    The period from 1994 to 1999, however, was the most eventful in the 
history of the Section 119 license. The satellite industry grew 
considerably during this time and certain satellite carriers provided 
thousands of subscribers with network station signals in violation of 
the unserved household limitation. Broadcasters sued certain satellite 
carriers and many satellite subscribers lost access to the signals of 
distant network stations. These aggrieved subscribers, in turn, 
complained to Congress about the unfairness of the unserved household 
limitation. In the meantime, the Library of Congress conducted a CARP 
proceeding to adjust the royalty rates paid by satellite carriers. 
Applying the new marketplace value standard as it was required to do, 
the CARP raised the rates considerably.
    To address these events, Congress enacted the Satellite Home Viewer 
Improvement Act of 1999 (``SHVIA''). Pub. L. No. 106-113, 113 Stat. 
1501 (1999). The SHVIA, inter alia, permitted satellite carriers to 
retransmit non-network signals to all served and unserved households in 
all markets. In reaction to industry complaints about the 1997 CARP 
proceeding that raised the Section 119 royalty rates, Congress 
abandoned the concept of marketplace-value royalty rates and reduced 
the CARP-established royalty fee for the retransmission of network 
station signals by 45 percent and the royalty fee for superstation 
signals by 30 percent. More importantly, the SHVIA instituted a new 
statutory licensing regime for the retransmission of local broadcast 
station signals by satellite carriers. By 1999, satellite carriers were 
beginning to implement local service in some of the major television 
markets in the United States. In order to further encourage this 
development, Congress created a new, royalty-free license under Section 
122 of the Copyright Act permitting the retransmission of local 
television signals. The SHVIA extended the revised Section 119 
statutory license for five years until the end of 2004.
    Congress also made several changes to the unserved household 
limitation itself. The FCC was directed to conduct a rulemaking to set 
specific standards whereby a satellite subscriber's eligibility to 
receive service of a network station could accurately be predicted 
(based on new signal strength measurements). For those subscribers that 
were not eligible for distant network service, a process was codified 
whereby they could seek a waiver of the unserved household limitation 
from

[[Page 19047]]

their local network station. In addition, three categories of 
subscribers were exempted from the unserved household limitation: (1) 
owners of recreational vehicles and commercial trucks, provided that 
they supplied certain required documentation; (2) subscribers receiving 
network service which was terminated after July 11, 1998, but before 
October 31, 1999, and did not receive a strong (Grade A) over-the-air 
signal from their local network broadcaster; and (3) subscribers using 
large C-band satellite dishes.
    The most recent authorization of Section 119 occurred in 2004 with 
the enactment of the SHVERA. Until the end of 2009, satellite carriers 
are authorized to retransmit distant network station signals to 
unserved households and superstation signals to all households, without 
retransmission consent, but with the requirement to pay royalties. In 
the SHVERA, Congress adopted a complex set of rules to further limit 
the importation of distant network station signals into local 
television markets. For example, the law requires satellite carriers to 
phase out the retransmission of distant signals in markets where they 
offer local-into-local service. Generally, a satellite carrier will be 
required to terminate distant station service to any subscriber that 
elected to receive local-into-local service and would be precluded from 
providing distant network station signals to new subscribers in markets 
where local-into-local service is available. It also provided for the 
delivery of superstation signals to commercial establishments and for 
the delivery of television station signals from adjacent markets that 
have been determined by the FCC to be ``significantly viewed'' in the 
local market (so long as the satellite carrier provides local-into-
local service to those subscribers under the Section 122 statutory 
license).\8\
---------------------------------------------------------------------------

    \8\ Pursuant to SHVERA, satellite carriers were granted the 
right to retransmit out-of-market significantly viewed station 
signals to subscribers in the community in which the station is 
deemed significantly viewed, provided the local station affiliated 
with the same network as the significantly viewed station is offered 
to subscribers. Satellite carriers are not required to carry out-of-
market significantly viewed signals, and, if they do carry them, 
retransmission consent is required.
---------------------------------------------------------------------------

    Moreover, for the first time, the law distinguished between the 
retransmission of signals in an analog format and those transmitted in 
a digital format. SHVERA expanded the copyright license to make express 
provision for digital signals. In general, if a satellite carrier 
offers local-into-local digital signals in a market, it is not allowed 
to provide distant digital signals to subscribers in that market, 
unless it was offering such digital signals prior to commencing local-
into-local digital service. If a household is predicted to be unserved 
by the analog signals of a network station, it can qualify for the 
digital signal of the distant network station with which the station is 
affiliated if it is offered by the subscriber's satellite carrier. If 
the satellite carrier offers local-into-local analog service, a 
subscriber must receive that service in order to qualify for distant 
digital signals. A household that qualifies for distant digital signal 
service can receive only signals from stations located in the same time 
zone or in a later time zone, not in an earlier time zone.
    SHVERA also provides for signal testing at a household to determine 
if it is ``served'' by a digital signal over-the-air. In some cases, if 
a household is shown to be unserved, it would be eligible for distant 
digital signals, provided the household subscribes to local-into-local 
analog service, if it is offered. However, this digital testing option 
was not available until April 30, 2006, in the top 100 television 
markets, and will be available by July 15, 2007, in all other 
television markets. Such digital tests also are subject to waivers that 
the FCC may issue for stations that meet specified statutory criteria. 
Unlike SHVIA, SHVERA did not determine the royalty rates during the 
five-year extension because representatives of satellite carriers and 
copyright owners of broadcast programming negotiated new rates for the 
retransmission of analog and digital broadcast station signals. See 
infra. A procedure was created to implement these negotiated rates and 
they were adopted by the Librarian of Congress in 2005.
    Section 122. The Section 122 license was enacted eleven years after 
the Section 119 license and was intended to make the satellite industry 
more competitive by permitting the retransmission of local television 
signals on a royalty-free basis. The license is permanent and its 
history is relatively non-controversial. In fact, satellite carriers 
have increasingly relied upon the license in the last seven years to 
provide local television signals to their subscribers in over 150 local 
markets. See n. 8, supra.
    Issues. As illustrated above, the statutory licenses were enacted 
by Congress, at various times, to respond to historical events and in 
response to technological developments. The key difference between the 
licenses is the relative rigidity of the applicable statutory language. 
Section 111 has effectively locked the cable industry into a royalty 
scheme tied to antiquated FCC rules (i.e. the local and distant signal 
carriage regulations in effect in 1976, but later repealed). On the 
other hand, Congress has been able to modify Section 119 to reflect 
current marketplace and legal developments because the license must be 
renewed every five years. We seek comment on the accuracy of our 
historical overview and ask if there are any other historical 
differences among the licenses that merit discussion.

     b. Technological Differences

    Cable systems and satellite carriers are technologically and 
functionally very different. Cable systems deliver video and audio (in 
analog, digital, and high definition formats), voice, and broadband 
services through fiber and coaxial cable to households, apartment 
buildings, hotels, mobile home parks, and local businesses. The cable 
industry has invested billions of dollars to upgrade transmission 
facilities over the last ten years so that cable systems are able to 
provide the services described above. Currently, cable operators offer 
separate tiers of traditional analog channels and newer digital 
channels to their subscribers, as well as premium services and video-
on-demand. Despite system upgrades, some cable systems still lack 
channel capacity to offer all of the new programming services 
available. Although there are many large cable operators, each system 
is franchised to a discrete geographical area. Local or state franchise 
authorities have authority to condition a franchise grant on the 
operator's offering, see 47 U.S.C. 541, and most cable headends serve 
specific geographic regions. A cable system's terrestrial-based 
technology has allowed cable operators to specifically tailor delivery 
of distant broadcast signals to the needs of their subscriber base.
    Satellite carriers use satellites to transmit video programming to 
subscribers, who must buy or rent a small parabolic ``dish'' antenna 
and pay a subscription fee to receive the programming service. 
Satellite carriers digitally compress each signal they carry and do not 
sell separate analog and digital tiers as most cable operators now do. 
They have nationwide footprints and a finite amount of transponder 
space which currently limits the number of program services carried. To 
make the most use of available channel capacity, satellite carriers 
have begun to use spot beam technology to deliver local television 
signals into local markets, but they do not have the level of technical 
sophistication to provide distant station

[[Page 19048]]

signals on the same basis as cable operators. In any event, satellite 
carriers have recently launched, or plan to launch, new satellites in 
order to increase channel capacity and to offer much more high 
definition television programming to subscribers across the country. 
Because satellite television is a space-based technology, carriers are 
technically unable to provide the bundle of video, voice, and data in 
the same manner as cable systems. We seek comment on these and other 
technological differences relevant to this discussion.

     c. Regulatory Differences

    Copyright Act. There are a host of regulatory differences between 
the cable and satellite statutory licenses. As stated elsewhere in this 
NOI, Section 111 is grounded in old FCC rules while the regulatory 
structure of Section 119 has evolved every time it has been renewed. 
Cable operators are required to pay royalties based on gross receipts 
while satellite carriers pay a flat fee on a per subscriber basis. Also 
important to consider is that Section 119 does not make any distinction 
based on the size of the satellite carrier. Section 111, on the other 
hand, purposefully differentiates between large and small cable systems 
based upon the dollar amount of receipts a cable operator receives from 
subscribers for the carriage of broadcast signals. In 1976, Congress 
determined that the retransmission of copyrighted works by smaller 
cable systems whose gross receipts from subscribers were below a 
certain dollar amount deserved special consideration because they 
provide broadcast retransmissions to more rural areas. Therefore, in 
effect, the cable statutory license subsidizes smaller systems and 
allows them to follow a different, lower-cost royalty computation. 
Large systems, on the other hand, pay in accordance with a highly 
technical formula, principally dependent on how the FCC regulated the 
cable industry in 1976. Aside from these differences, and those noted 
elsewhere in this NOI, we seek input on other notable variations which 
are integral in this analysis.
    Communications Act and FCC Rules. At this juncture, it is important 
to note the differences between Section 122 of the Copyright Act and 
Section 338 of the Communications Act (the local-into-local regulatory 
paradigm) and the local broadcast signal carriage requirement for cable 
operators under the Communications Act. A satellite carrier has a 
general obligation to carry all television station signals in a market, 
if it carries one station signal in that market through reliance on the 
statutory license, without reference to a channel capacity cap. In 
contrast, a cable system with more than 12 usable activated channels is 
required to devote no more than one-third of the aggregate number of 
usable activated channels to local commercial television stations that 
may elect mandatory carriage rights. See 47 U.S.C. 534(b)(1)(B). A 
cable system is also obligated to carry a certain number of qualified 
local noncommercial educational television stations above the one-third 
cap. See 47 U.S.C. 535(a). Further, only cable operators, and not 
satellite carriers, have a legal obligation to have a basic service 
tier that all subscribers must purchase. See 47 U.S.C. 543(b)(7).\9\ 
But, Section 338(d) does requires satellite carriers to position local 
broadcast station signals on contiguous channels and are permitted to 
sell local television station signals on an a la carte basis.
---------------------------------------------------------------------------

    \9\ In the context of analog broadcast signal carriage, it has 
been the FCC's view that the Communications Act contemplates there 
be one basic service tier. In the context of digital carriage, the 
FCC found that it is consistent with Section 623 of the 
Communications Act to require that a broadcaster's digital signal 
must be available on a basic tier such that all broadcast signals 
are available to all cable subscribers at the lowest priced tier of 
service, as Congress envisioned. According to the FCC, the basic 
service tier, including any broadcast signals carried, will continue 
to be under the jurisdiction of the local franchising authority, and 
as such, will be rate regulated if the local franchising authority 
has been certified under Section 623 of the Act. The FCC noted, 
however, that if a cable system faces effective competition under 
one of the four statutory tests found in Section 623, and is 
deregulated pursuant to an FCC order, the cable operator is free to 
place a broadcaster's digital signal on upper tiers of service or on 
a separate digital service tier. See Carriage of Digital Television 
Broadcast Signals, 16 FCC Rcd 2598, 2643 (2001).
---------------------------------------------------------------------------

    The FCC has adopted a host of rules governing the exclusivity of 
programming carried by television broadcast stations. For example, the 
FCC's network non-duplication rules protect a local commercial or non-
commercial broadcast television station's right to be the exclusive 
distributor of network programming within a specified zone, and require 
programming subject to the rules to be blacked out when carried on 
another station's signal imported by an MVPD into the local station's 
zone of protection. The FCC's syndicated exclusivity rules are similar 
in operation to the network non-duplication rules, but they apply to 
exclusive contracts for syndicated programming, rather than for network 
programming. The FCC's sports blackout rule protects a sports team's or 
sports league's distribution rights to a live sporting event taking 
place in a local market. As with the network non-duplication and 
syndicated exclusivity rules, the sports blackout rule applies only to 
the extent the rights holder has contractual rights to limit viewing of 
sports events. The SHVIA required the FCC to extend its cable 
exclusivity rules, including syndicated exclusivity, to satellite 
carriers but only with respect to the retransmission of nationally 
distributed superstations; however, the sports blackout rules apply to 
both superstations and network stations. See SHVIA Sec.  1008, creating 
17 U.S.C. 339(b).
    We note that in the Copyright Office's Section 110 Report, there 
was considerable discussion concerning the fact that the syndicated 
exclusivity rules, sports blackout rules, and network non-duplication 
rules, do not apply to the retransmission of network station signals to 
unserved households by satellite carriers under Section 119. The 
Copyright Office found that a copyright owner's right to license its 
programming in a local market is threatened in the absence of these 
requirements. For this reason, the Copyright Office proposed that these 
rules extend beyond just superstations to also include the 
retransmission of network station signals to unserved households. See 
Satellite Home Viewer Extension and Reauthorization Act Sec.  110 
Report, A Report of the Register of Copyrights (February 2006) at vii.
    We seek comment on these and other regulatory differences between 
cable operators and satellite carriers regarding the retransmission of 
broadcast station signals. How do these communications law-related 
requirements affect the royalties collected under the Sections 111 and 
119 statutory licenses?
    Copyright Office. The Copyright Office has implemented the royalty 
fee structures of Sections 111 and 119 by adopting substantive and 
procedural rules in the Code of Federal Regulations. Section 201.11 of 
title 37 contains the licensing requirements for satellite carriers 
while Section 201.17 of title 37 contains the licensing requirements 
for cable operators. The Copyright Office has also adopted separate 
statement of account forms for satellite carriers and cable operators 
that comport with its rules. While Congress did not specifically 
request an analysis of the Copyright Office's rules and statement of 
account forms under Section 109, we seek comment on the structure and 
substance of the requirements and their effect on the competition 
between satellite carriers and cable operators.

     3. Competitive Disadvantages

    Congress asked for an analysis of whether the cable or satellite 
industry is placed in a competitive disadvantage

[[Page 19049]]

due to the above-stated terms, conditions or circumstances. We first 
ask whether there are certain provisions found in Section 119, and not 
in Section 111, that affect competition between satellite carriers and 
cable operators. For example, cable operators, but not satellite 
carriers, may retransmit distant station signals without regard to 
whether its subscribers are able to receive local broadcast stations 
over-the-air. Does Section 119's unserved household limitation 
competitively disadvantage satellite carriers against cable operators? 
If so, should Congress correct this imbalance?
    We also note that Section 119's unserved household limitation has 
given rise to significant litigation between Echostar and the broadcast 
television networks. The case began nearly nine years ago and arose out 
of claims that Echostar was delivering network station signals to 
subscribers who were not eligible to receive such stations under 
Section 119. In May 2006, the United States Court of Appeals for the 
Eleventh Circuit upheld the district court's determination that 
Echostar had engaged in a ``pattern or practice'' of violating the 
unserved household limitation and found that, as a matter of law, it 
was required to issue a permanent injunction barring Echostar from 
delivering network station signals to any subscribers (served or 
unserved) pursuant to the Section 119 license. CBS v. Echostar, 450 
F.3d 505 (11th Cir. 2006). The appellate court's decision specifically 
directed the district court to issue the required injunction.
    In August, 2006, after its efforts to appeal the Eleventh Circuit's 
ruling were rejected (but before the district court had implemented the 
appellate court's order), Echostar entered into a $100 million post-
judgment settlement agreement with the affiliates of ABC, NBC, and CBS 
under which Echostar would, notwithstanding the appellate court's 
decision, be permitted to continue to provide network station signals 
to legitimately ``unserved'' customers. However, Fox did not join in 
the settlement and filed a motion with the district court demanding 
that it reject the settlement and implement the injunction as directed 
by the Court of Appeals.
    The district court agreed with Fox and rejected the post-judgment 
settlement. The court stated that it was bound by the Eleventh 
Circuit's decision and lacked the discretion to alter that court's 
clear mandate. The court emphasized the fact that, as the Eleventh 
Circuit found, Section 119 requires the issuance of a permanent 
nationwide injunction where it has been determined that a satellite 
carrier engaged in a ``pattern or practice''of statutory violations. 
The court also rejected Echostar's claim that the issuance of a 
permanent nationwide injunction preventing the delivery of distant 
affiliates of any of the Big Four networks (ABC, CBS, NBC, and Fox), 
even to households that could not receive over-the-air network station 
signals, would ``work a manifest injustice on consumers.'' According to 
the court, Congress made the determination in Section 119 that a 
permanent injunction is the appropriate remedy for the illegal acts 
committed by Echostar. The district court issued an order directing 
Echostar to cease all retransmissions of distant broadcast station 
signals affiliated with ABC, CBS, NBC, and Fox, effective December 1, 
2006. See CBS v. Echostar, ---- F.Supp. 2d ----, 2006 WL 4012199 (S.D. 
Fla. Oct. 20, 2006). We seek comment on the effect that the court's 
injunction has had on Echostar and its subscribers. For example, how 
many subscribers has Echostar lost to a competing satellite carrier or 
to a local cable operator because it can no longer provide distant 
network station signals to its subscribers? Do any Echostar subscribers 
currently receive distant network station signals through a third party 
provider? Are subscribers disadvantaged because of the Echostar 
injunction or are there other options? We seek comment on other 
significant court cases, or pending litigation, that are relevant to 
our inquiry here.
    There are certain provisions found in Section 111, and not Section 
119, that disadvantage satellite carriers. For example, are satellite 
carriers disadvantaged because they are unable to carry radio station 
signals under the Section 119 statutory license? Would it be 
appropriate for Congress to establish a satellite carrier statutory 
license for the retransmission of terrestrial radio station signals? 
Who would be harmed if Congress amended Section 119 to include the 
retransmission of local radio station signals? Alternatively, is there 
a continuing need for Section 111 to cover the retransmission of radio 
station signals? Are there any other provisions in Section 111, but not 
in Section 119, that create a competitive disparity between cable 
operators and satellite carriers?
    We ask whether cable operators are hobbled by the terms of Section 
111 that are not found in, or are different from, Section 119. As noted 
elsewhere, Section 111 contains definitions, terms, and conditions that 
are based on the FCC's old carriage requirements. The term ``network 
station'' under Section 111, for example, is part of a regulatory 
construct from 30 years ago when ABC, CBS, and NBC were the only 
networks, while the ``network station'' definition found in Section 119 
is more current and comparable to the FCC's current definitions.\10\ 
Fox, for example, is considered a network station for Section 119 
purposes, but it is unclear whether it can be considered a network 
station for Section 111 purposes. Cable operators currently have to pay 
higher royalties for the retransmission of distant Fox station signals, 
as ``independent stations,'' than it would for distant ABC, NBC, or CBS 
station signals, that are ``network stations.'' Does this result 
disadvantage cable operators? Are there other terms in Section 111, and 
not Section 119, that competitively burden cable operators?
---------------------------------------------------------------------------

    \10\ We note that both Paxson Communications and the NCTA have 
filed separate requests for clarification and rulemaking, 
respectively, on the scope of the network station definition under 
Section 111(f) of the Act. The Copyright Office has opened a 
proceeding to address Paxson's petition. See 65 FR 6946 (Feb. 11, 
2000). The Copyright Office will soon be issuing a new NOI to elicit 
comment on NCTA's petition and to update the record on this subject.

---------------------------------------------------------------------------
    C. Necessity of the Licenses

    Congress has asked us to analyze whether the statutory licenses are 
still justified by their initial purposes. In this section, we describe 
the different purposes behind each license and ask if they are still 
valid today. We also seek comment on whether the licenses have been 
successful in furthering the goals they were designed to achieve.
    Section 111. As discussed earlier, before the Copyright Act was 
amended in 1976, cable operators had no copyright liability, and paid 
no fees at all, for the retransmission of either local or distant 
broadcast station signals. At the time, the FCC, the courts, and 
Congress, recognized the public benefits inherent in the delivery of 
distant signals by cable systems, but also recognized the property 
rights of the owners of content transmitted by broadcast stations. As 
such, the 1976 Copyright Act imposed liability for the first time, but 
it also provided cable operators an important and limited right to 
retransmit broadcast station signals without requiring the consent of 
copyright owners. Section 111 was enacted to respond to the needs of 
cable operators, who were much smaller at the time, and their 
subscribers, who valued the content transmitted by distant broadcast 
stations. In so doing, Congress recognized ``that it would be 
impractical and unduly burdensome to require every cable system to 
negotiate with every copyright owner whose work was transmitted by a 
cable system.''

[[Page 19050]]

H.R. Rep. No. 1476, 94th Cong., 2d Sess. 89 (1976).
    Section 119. The satellite statutory license, adopted by Congress 
in the 1988 SHVA, was created to facilitate the delivery of broadcast 
network programming by satellite to (mostly rural) subscribers who, 
because of distance or terrain, were unable to receive a signal of at 
least Grade B intensity from a local television station affiliated with 
a particular television network. See, e.g., 134 Cong. Rec. 28,582 
(1988) (``The goal of the bill...is to place rural households on a more 
or less equal footing with their urban counterparts.'') (remarks of 
Rep. Kastenmeier); 134 Cong. Rec. 28,585 (1988) (``This legislation 
will increase television viewing choices for many rural Americans.'') 
(remarks of Rep. Slattery).
    Section 119 of the Act had the dual purpose of: (1) enabling 
households located beyond the reach of a local affiliate to obtain 
access to broadcast network programming by satellite and (2) protecting 
the existing network/affiliate distribution system. H.R. Rep. No. 100-
887, Part 1 on H.R. 2848, 100th Cong., 2d Sess., at 8 (Aug. 18, 1988). 
Congressional intent, as expressed in the House Judiciary Committee 
Report on the 1988 bill, stated, ``The bill rests on the assumption 
that Congress should impose a compulsory license only when the 
marketplace cannot suffice.'' Id. at 15. Similarly, the House Energy 
and Commerce Committee Report called the satellite carrier license ``a 
temporary, transitional statutory license to bridge the gap until the 
marketplace can function effectively.'' H.R. Rep. No. 887, Part 2, 
100th Cong. 2d Sess. 15 (1988). In 1994, the satellite carrier license 
was extended for another five years on the basis that ``a marketplace 
solution for clearing copyrights in broadcast programming retransmitted 
by satellite carriers is still not available.'' S. Rep. No. 407, 103d 
Cong. 2d Sess. 8 (1994). Section 119 was extended in 1999 and 2004 
through the SHVIA and SHVERA, respectively, as described above.
    Section 122, which was enacted as part of the 1999 SHVIA, created a 
royalty-free statutory license for satellite carriers who wanted to 
carry the signals of local television stations. The provision was 
designed to promote competition among multichannel video programming 
distributors (i.e., satellite carriers and cable operators) while, at 
the same time, increase the programming choices available to consumers. 
See 145 Cong. Rec. H11811 (Nov. 9, 1999).
    Statutory licenses are an exception to the copyright principle of 
exclusive rights for authors of creative works, and, historically, the 
Copyright Office has only supported the creation of statutory licenses 
when warranted by special circumstances. With respect to the cable 
license, the special circumstance was initially the apparent difficulty 
and expense of clearing the rights to all program content carried by 
distant television stations. We seek comment on whether the 
circumstances that warranted creation of Section 111, as reflected in 
its legislative history, still exist. If so, how? With regard to the 
Section 119 satellite carrier license, we note that the special 
circumstance warranting its creation was to provide rural and unserved 
households with valuable broadcast service. Has this goal been met? If 
so, how? As for Section 122, its primary mission was to strengthen 
satellite's competitive position against the incumbent cable industry. 
Has this goal been met? If so, how? If the licenses are no longer 
justified upon the bases for which they were created, what should 
Congress do with them? Alternatively, are there any new justifications 
for the retention of the statutory licenses for cable and satellite 
carriers?

    D. Effect on Subscribers

     1. Rate Increases

    Section 109 of the SHVERA requires us to analyze the correlation, 
if any, between the royalties, or lack thereof, under Sections 111, 
119, and 122 and the fees charged to cable and satellite subscribers. 
This is an area that we have not fully explored in any of our past 
reports on the statutory licenses. Thus, the novel threshold issue is 
how to properly gauge subscriber rate increases if any, due to Sections 
111, 119, and 122. We therefore seek comment on the appropriate 
methodologies to perform this type of analysis. As noted above, cable 
operators, depending on size, generally pay anywhere between .4<INF>%</INF> 
and 1.5<INF>%</INF> of their gross receipts as royalties to copyright 
owners. We seek comment on whether cable operators are passing off 
these costs to subscribers as programming cost increases. While we do 
not have specific cost figures for satellite carriers, we similarly ask 
whether they too are passing off the royalties paid under Section 119 
to their subscribers. We reiterate here that all broadcast station 
signals must be carried on a cable system's basic service tier that 
must be purchased by all cable subscribers. Satellite subscribers, on 
the other hand, are not required by law to purchase a package of local 
or distant station signals. How does this circumstance affect the 
analysis here? We also seek comment on whether cable operators or 
satellite carriers are offering any distant broadcast station signals 
on an a la carte basis so that only those subscribers who wish to 
purchase them bear the cost of any possible rate increase arising under 
the royalty fee structure.

     2. Rate Savings

    Section 109 also requires us to address whether cable and satellite 
companies have passed to subscribers any savings realized as a result 
of the royalty structure and amounts under such sections.
    On this point, we note that our endeavor here is a difficult one 
because neither cable operators nor satellite carriers have been 
required to provide the Copyright Office with information regarding the 
costs of retransmitting distant broadcast station signals. Without such 
information, a determination as to whether ``savings'' are passed onto 
subscribers is hard to quantify. Further, the concept of ``savings'' is 
nonspecific and assumes a difference between actual and perceived cost. 
If what is meant by ``savings'' is the lesser fees that the cable and 
satellite industry pay by virtue of enjoying statutory licenses as 
opposed to negotiating private licenses, it must be remembered there 
are no private licenses precisely because of these licenses. In other 
words, it is difficult for us to determine what satellite carriers and 
cable operators might be paying for distant broadcast signals if they 
did not have statutory licensing. Without knowing the current 
marketplace rates for the retransmission of distant broadcast signals 
for cable and satellite, it is difficult to measure the value of 
``savings'' that these industries enjoy as a result of statutory 
licensing. We do know, however, that any increases in the cost of local 
signals delivered by satellite carriers cannot be due to Section 122 
because it is a royalty-free license. Given these circumstances, we 
seek comment on how to define the term ``savings'' and how to calculate 
if any ``savings'' have occurred under the existing regulatory 
structure, or may occur, through any proposed change in the licenses at 
issue. On this point, we seek comment on whether cable subscribers may 
realize ``savings'' if Congress were to adopt a flat fee structure or 
other change in the way royalties are calculated under Section 111. 
Further, is there any way to change the Section 119 license so that 
satellite subscribers may see a cost savings, if such are not evident 
today?

    E. Application to Digital Signals


[[Page 19051]]


    Section 109 of the SHVERA requires us to analyze issues that may 
arise with respect to the application of the licenses to the secondary 
transmissions of the primary transmissions of network stations and 
superstations that originate as digital signals, including issues that 
relate to the application of the unserved household limitations under 
Section 119, and to the determination of royalties of cable systems and 
satellite carriers.
    At this juncture, it is important to recognize the differences 
between analog television and digital television. Analog television 
technology, which has been available to consumers for over sixty years, 
essentially permits a television broadcast station to transmit a single 
stream of video programming and accompanying audio. Digital television 
technology, on the other hand, enables a television station to 
broadcast an array of quality high-definition digital television 
signals (``HD''), standard-definition digital television signals 
(``SD''), and many different types of ancillary programming and data 
services. In 1997, the FCC adopted its initial rules governing the 
transition of the broadcast television industry from analog to digital 
technology, and authorized each individual television station licensee 
to broadcast in a digital format. Advanced Television Systems and Their 
Impact on Existing Television Broadcast Service, 12 FCC Rcd. 12809 
(1997). Since that time, hundreds of television stations have been 
transmitting both analog and digital signals from their broadcast 
facilities, and television stations may choose to broadcast in a 
``digital-only'' mode of operation, pursuant to FCC authorization. See, 
e.g., Second Periodic Review of the Commission's Rules and Policies 
Affecting the Conversion to Digital Television, 19 FCC Rcd 18279, 
18321-22 (2004). This dual mode of broadcast television operation will 
soon end as Congress has established February 17, 2009 as the date for 
the completion of the transition from analog to digital broadcast 
television. See Pub. L. No. 109-171, Section 3002(a), 120 Stat. 4 
(2006).
    In 2006, the Copyright Office sought comment on several issues 
associated with the secondary transmission of digital television 
signals by cable operators under Section 111 of the Copyright Act. The 
Copyright Office initiated a Notice of Inquiry to address matters 
raised in a Petition for Rulemaking, filed jointly by several copyright 
owner groups, including the Motion Picture Association of America and 
sports rights holders. See 71 FR 54948 (Sept. 20, 2006) (``Digital 
Signals NOI''). Specifically, the copyright owners requested that the 
Copyright Office address recordkeeping and royalty calculation issues 
that have arisen in connection with the simultaneous retransmission of 
the signals of digital and analog broadcast stations by cable operators 
and whether and how cable operators should report the carriage of 
digital multicast programming streams on their SOAs. For example, they 
urged the Copyright Office to clarify that, if a cable operator chooses 
to carry a television broadcast station's analog and digital signals 
(either in high definition or as a multicast) that the cable operator 
should identify those signals separately in Space G on its SOA The 
Digital Signal NOI also sought comment on cable operator marketing and 
sales practices and equipment issues associated with the retransmission 
of digital broadcast signals that may result in possible changes to the 
Copyright Office's existing rules and the cable statements of account 
forms. For example, copyright owners requested that the Copyright 
Office clarify that a cable operator must include in its gross receipts 
any revenues from the tiers of service consumers must purchase in order 
to receive HDTV or other digital broadcast signals notwithstanding that 
the operator may market its offering of such digital signals as 
``free.''
    Comments and reply comments have been filed in the Digital Signals 
proceeding and the Copyright Office is currently analyzing the facts 
and legal arguments raised and addressed by the parties. In the Digital 
Signal NOI, the Copyright Office did conclude however, without relying 
on input from the parties, that there is nothing in the Copyright Act, 
its legislative history, or the Office's implementing rules, which 
expressly limits the cable statutory license to only analog broadcast 
signals.
    We find that the issues discussed in this proceeding, regarding the 
retransmission of distant digital signals by cable operators, are 
essentially the same type of issues Congress has directed us to address 
in the Section 109 Report. As such, we do not believe it is necessary 
to seek comment on those same issues here. Rather, we will incorporate 
by reference the issues and arguments raised by the parties in the 
pending proceeding as we move forward with the Report. However, if any 
party, for any reason, missed the opportunity to file comments in 
response to the Digital Signals NOI, or would like to clarify certain 
points already raised, they may do so in this proceeding or in response 
to any further notices that the Copyright Office may issue in the 
future pertaining to the retransmission of digital television signals.
    There are, however, some new questions we would like to raise here. 
For example, are digital television signals worth more or less in the 
marketplace? If so, how much and why? How should Congress treat the 
retransmission of digital low power and digital translator television 
station signals under Section 111? Should the language of Section 111 
be substantially modified to take the retransmission of digital signals 
into account? Are there any other associated issues not yet addressed?
    With regard to Section 119, we note that in 2005, the Copyright 
Office codified an agreement reached between satellite carriers and 
copyright owners setting rates for the secondary transmission of 
digital television broadcast station signals under Section 119 of the 
Copyright Act. The agreement set rates for the private home viewing of 
distant superstation and network station signals for the 2005-2009 
period, as well as the viewing of superstations in commercial 
establishments. See 37 CFR 258.4. The agreement specified that distant 
superstations and network stations that are significantly viewed, as 
determined by the FCC, do not require a royalty payment under certain 
conditions, in compliance with 17 U.S.C. 119(a)(3), as amended. In 
addition, the agreement proposed that, in the case of multicasting of 
digital superstations and network stations, each digital stream that is 
retransmitted by a satellite carrier must be paid for at the prescribed 
rate but no royalty payment is due for any program-related material 
contained in the stream within the meaning of WGN v. United Video, 
Inc., 693 F.2d 622, 626 (7th Cir. 1982) and Carriage of Digital 
Television Broadcast Signals, 20 FCC Rcd 4516 (2005) at 44 & n.158. See 
70 FR 39178 (July 7, 2005).
    We seek comment on whether there are any new issues that we should 
be aware of regarding Section 119 and the retransmission of digital 
television signals. For example, how is the unserved household 
provision affected by the above agreement? What affect has the Echostar 
litigation had on the retransmission of distant digital television 
signals. What affect will the end of the digital transition in 2009 
have on satellite carriers and the Section 119 statutory license? Given 
that Section 119 will expire about eleven months after the digital 
transition is scheduled to end, should the current version of the 
license be repealed in its entirety and replaced with one focusing only 
on the retransmission of distant digital television signals?

[[Page 19052]]

    As for Section 122, we believe that the digital transition will not 
significantly affect the operation of this license. However, it may 
well affect the ``carry-one carry-all'' provisions of Section 338 of 
the Communications Act. In January 2001, the FCC sought comment on what 
type of digital carriage rules it should apply to satellite carriers 
under Section 338. See Carriage of Digital Television Broadcast 
Signals, 16 FCC Rcd 2598, 2658 (2001). This matter has been pending 
before the FCC for the last six years. We cannot gauge the effect a 
digital ``carry-one carry-all'' will have on the Section 122 statutory 
licenses until the FCC establishes policy in this area.

    F. The Future of the Statutory Licenses

    While not specifically enumerated in the language of Section 109, 
the statute's legislative history instructs the Copyright Office, based 
on an analysis of the differences among the three licenses, to consider 
whether they should be eliminated, changed, or maintained with the goal 
of harmonizing their operation. We now seek comment on the future of 
the statutory licenses. As detailed above, the cable statutory license, 
enacted in 1976, represents a number of compromises and requirements 
necessitated by the technological and regulatory framework in existence 
at that time. Since 1976, it is generally recognized that the cable 
industry has grown considerably larger,\11\ and the video marketplace 
has evolved. It is also axiomatic that the license is based upon a 
defunct regulatory structure promulgated by the FCC in the 1970s. The 
Section 119 license, first enacted in 1988, was designed to allow 
satellite carriers to provide services comparable to cable to 
subscribers on the fringes of television markets. Congress intended for 
the license to sunset after a period of five years, but it has been 
renewed three times since 1988. Interestingly, rather than being phased 
out, the license has been significantly expanded over the years (e.g., 
more restrictions and conditions on the retransmission of network 
station signals to unserved households, the retransmission of 
significantly viewed signals, application to digital television 
signals, etc.) while DirecTV and Echostar have dramatically increased 
subscribership in non-rural areas of the country. Based on the 
preceding, and taking into consideration the issues outlined below, we 
ask whether Section 111 and Section 119 should be retained in their 
current state, restructured, or discarded altogether.
---------------------------------------------------------------------------

    \11\ There are currently 65 million U.S. households that 
subscribe to cable television. See http://ncta.com/ncta--com/PDFs/
NCTAAnnual<INF>%</INF>20Report4-06FINAL.pdf. But see, Steve Donohue, 
Cable Penetration Hits 17-Year Low, Multichannel News, March 19, 
2007(stating that there are 68.3 million cable television households 
according to Nielsen Media Research data). In comparison, there are 
about 29 million satellite television households. See http://www.directv.com (DirecTV has over 16 million subscribers) and http://www.dishnetwork.com (Echostar has have 13 million subscribers).
---------------------------------------------------------------------------

    Retention. If retention is the proper option, we seek comment on 
why this would be the best approach. On this point, we note that while 
the cable and satellite industries have grown substantially over the 
last decade, neither has any control over the particular programs that 
broadcast stations provide to the public or how such programs are 
scheduled. Further, there are hundreds more television stations today, 
including analog and digital stations (with some splitting their signal 
into as many as five individual multicasts) than there were thirty 
years ago. In addition, there are now significantly more television 
stations and networks targeting the nation's growing Latino population. 
Is the public's interest in continued access to a variety of diverse 
distant broadcast signals a significant consideration that merits 
retention? Are smaller cable operators who serve less populated and/or 
lower income households still in need of the license? Are there any 
other facts supporting retention? Section 119 requires satellite 
carriers to phase out the retransmission of network station signals to 
unserved households in markets where they offer local-into-local 
service. Generally, a satellite carrier will be required to terminate 
network station service (to unserved households) to any subscriber that 
elected to receive local-into-local service and would be precluded from 
providing network station signals (to unserved households) to new 
subscribers in markets where local-into-local service is available. See 
17 U.S.C. 119(a)(4). Assuming that Section 122 is retained, does it 
make sense to also retain Section 119, when in 2009, most television 
markets likely will be provided with local-into-local service by 
Echostar and DirecTV?
    Modification. If Section 111 were to be amended, we seek comment in 
support of this approach and on the scope of the proposed changes. On 
this point, we note that in 2006, the Copyright Office sought comment 
on several issues associated with cable operator reporting practices 
under the Copyright Office's regulations found in 37 CFR 201.17. The 
Copyright Office initiated a Notice of Inquiry to address matters 
raised in a Petition for Rulemaking filed jointly by several copyright 
owner groups. The Notice of Inquiry sought comment on proposals 
requiring additional information to be reported on a cable operator's 
SOA, particularly information relating to gross receipts, service 
tiers, subscribers, headend locations, and cable communities. The 
Notice of Inquiry also sought comment on the need for regulatory 
clarification regarding the effect of cable operator'' interest 
payments that accompany late-filed SOAs or amended SOAs. Finally, the 
Notice of Inquiry sought comment on the need to clarify the definition 
of the term cable ``community'' in its regulations to comport with the 
meaning of ``cable system'' as defined in Section 111. See 71 FR 45749 
(Aug. 8, 2006). Comments and reply comments have been filed in response 
to this NOI and the docket remains pending.
    In this context, we ask whether the entire section should be 
amended to reflect the current marketplace (such as the advent of 
digital television described above) and the existing regulatory 
framework established by the FCC? Alternatively, should the amendments 
be limited to certain subject matter, such as the royalty fee 
structure? For example, should the royalty payment scheme of the 
license, based upon each cable system's gross receipts for the 
retransmission of broadcast signals, be simplified so as to remove 
reliance upon the old FCC rules? Under the Section 111 license, distant 
network station signals are currently paid for at a lower royalty rate 
(.25 DSE) than distant independent station signals (1.0 DSE). Should 
this disparity be eliminated, so that all stations are paid for at the 
same rate? Should Congress enact a flat fee royalty system for cable 
operators like that in place for satellite carriers? If so, how could 
Congress build into the flat fee structure a surrogate for the 3.75 
percent rate for additional non-permitted distant signal 
retransmissions? Should the gross receipts requirements in the cable 
license be eliminated under a flat fee approach? Would a flat rate 
structure for determining royalties under Section 111 have any adverse 
consequences for copyright owners? Would such a restructuring be more 
disruptive than beneficial?
    Small cable operators may experience a significant increase in 
royalty payments under a flat fee system. This increase in turn could 
lead to a loss of broadcast service for rural cable subscribers that 
lack the variety of broadcast stations found in the top 100 television 
markets. We ask whether

[[Page 19053]]

these concerns are justified. Are lower rates still needed as an 
inducement for small cable systems to retransmit distant signals to 
communities unserved or underserved by local broadcast stations? If 
not, should Congress eliminate the historical disparities between small 
and large cable systems contained within the Section 111 regulatory 
structure? For example, should the SA1-2 rate be aligned with the 
minimum SA-3 rate? Should the distinction between SA1-2 and SA-3 be 
eliminated? Is it possible for Congress to modify the subsidy for small 
cable systems under Section 111 in a way that is fair and equitable for 
both cable operators and copyright owners?
    The cable industry has experienced considerable marketplace change 
since 1997. The FCC's examination of the state of the cable industry in 
the last several years demonstrates that the cable industry has become 
far more concentrated and integrated. See Annual Assessment of the 
Status of Competition in the Market for the Delivery of Video 
Programming, 21 FCC Rcd 2503 (2006). Given this trend, should the cable 
statutory license be amended to address the significant amount of 
mergers and acquisitions in the cable industry over the last thirty 
years? At the same time, cable franchising authority has become more 
concentrated as well. We note that several states, such as California, 
have enacted new laws that transfer franchising authority from local 
governments to state governments. See Corey Boles, Verizon Gets 
California Video Franchise, Wall Street Journal, March 9, 2007, at B4. 
We ask whether and how statewide franchises affect the Section 111 
license.
    Since the implementation of the cable statutory license by the 
Copyright Office in 1978, the cable industry has raised concerns about 
the ``cable system'' definition found in Section 111(f) of the Act. 
Recently, the NCTA petitioned the Copyright Office to commence a 
rulemaking proceeding to address cable copyright royalty anomalies 
arising from the current ``cable system'' definition as it has been 
implemented by the Copyright Office. In its Petition, NCTA states that 
where two independently built and operated systems subsequently come 
under common ownership due to a corporate acquisition or merger, the 
Copyright Office's rules require that the two systems be reported as 
one. Similarly, where a system builds a line extension into an area 
contiguous to another commonly-owned system, the line extension can 
serve as a ``link'' in a chain that combines several commonly-owned 
systems into one entity for copyright purposes. NCTA asserts that, in 
either of these cases, dramatically increased royalties can result. 
NCTA states that royalty obligations may increase as a result of the 
Copyright Office's policy of attributing carriage of a signal to all 
parts of a cable system, whether or not the station is actually carried 
throughout the system. In NCTA's view, a ``phantom signal'' event 
arises when a cable system pays royalties based on the carriage of the 
signals of distant broadcast stations after a cable system merger, even 
if those signals are not, and even may not be, delivered to all 
subscribers in the communities served by the cable system. Industry 
concerns about phantom signals have steadily increased as cable 
operators have merged and grown. While we may open an inquiry into this 
issue in the future, we nevertheless seek comment on whether Congress 
should amend Section 111 and provide a legislative solution to the 
problem.
    In 1997, the Copyright Office recommended that Congress amend 
Section 111(f) to define when two cable systems under common ownership 
or control are, in fact, one system for purposes of Section 111 in 
light of technological advances in headends and for other reasons. If a 
flat, per subscriber fee is not adopted, the same part of Section 
111(f) should also be amended to calculate cable rates only on those 
subscriber groups that actually receive a particular broadcast signal. 
The Copyright Office believed that this recommendation would help 
eliminate the ``phantom signal'' problem. See 1997 Report at 46-47.
    We ask whether the cable license should be subject to renewal every 
certain number of years, perhaps in synchronization with the renewal of 
the satellite carrier statutory license. This would allow Congress to 
update Section 111 on a periodic basis and examine, in tandem with 
Section 119, whether the licenses are serving their intended purposes. 
Are there any drawbacks related to this proposal?
    With regard to reforming Section 119, we ask what particular 
sections should be modified. For example, should the unserved household 
provision be amended? Should the provision account for the recent 
distant network signal injunction involving Echostar? If so, how? The 
current satellite carrier license will expire at the end of 2009. 
Assuming that Section 119 remains a standalone provision, should the 
license be extended on a permanent basis, or is temporary extension 
still an appropriate solution? As discussed above, should the 
provisions directed at the retransmission of distant analog signals be 
replaced with ones directed at the retransmission of distant digital 
signals?
    Section 122 is a relatively noncontroversial provision that has 
served satellite carriers, broadcasters, and consumers well. In any 
event, we seek comment on whether this license should be modified, and 
if so, how? For example, does it need to be amended to reflect the 
retransmission of digital television signals? Could the license be 
improved to function better?
    Uniform License. We seek comment on whether Congress should instead 
adopt a uniform statutory license encompassing the retransmission of 
local and distant signals by both cable operators and satellite 
carriers. If such a license is recommended, how should it be 
structured? Would a uniform rate for the retransmission of distant 
broadcast signals, applicable to both cable operators and satellite 
carriers, effectively level competition among the providers? Would 
reporting of cable royalties be easier and less intrusive? What are the 
barriers regarding the formation of a single license? How would Section 
122's provisions fit into a uniform license?
    Expansion. Content delivery technology has evolved and changed at 
an incredibly rapid pace since 1997 when the Copyright Office last 
examined the cable and satellite statutory licenses. Whereas ten years 
ago, the Copyright Office was concerned about open video systems and 
the Section 111 license, See 1997 Report at 62-76, today that delivery 
system and the concerns it generated seems antiquated. Currently, video 
programming streamed or downloaded through the Internet to computers, 
mobile devices, and digital television sets, are commanding the 
attention of the media and content industries. Given that we are 
obliged to provide Congress with recommendations based on current 
circumstances, we seek comment on whether the current statutory 
licensing schemes should be expanded to include the delivery of 
broadcast programming over the Internet or through any video delivery 
system that uses Internet Protocol. In the alternative, we ask whether 
licensing of discrete broadcast programming should be allowed to evolve 
in the marketplace. It is important to note here, that unlike cable 
systems and satellite carriers, Internet video providers do not own any 
transmission facilities; rather, they host and distribute video 
programming through software, servers, and computers connected to the 
Internet.
    There are currently three different technological paradigms for 
openly

[[Page 19054]]

distributing video programming, including broadcast content, over the 
Internet. One method is to stream video content that may be accessed by 
anyone with an Internet connection. Youtube, Yahoo, MSN, AOL are the 
most popular distributors of streamed video content. The second method 
to deliver video content to end users is through server downloads. This 
type of delivery system has been used by such firms' as Apple's iTunes, 
CinemaNow, and MovieLink. The last method is peer-to-peer video 
delivery. This involves the sharing and delivery of user specified 
files among groups of people who are logged on to a file sharing 
network. BitTorrent and Joost deliver video content in such a manner. 
There are two prevailing business models that reign over these 
distribution technologies. Internet video programming distributors may 
adopt a download-to-own (or rent) model where users pay a fee to access 
content. Alternatively, they may provide content to end users under an 
ad-supported model, just like traditional commercial broadcast 
television. See Todd Spangler, BitTorrent Goes Legit With Online Store, 
Multichannel News, March 12, 2007, at 32.
    We recognize that the Internet is not analogous to the technologies 
originally licensed under Section 111, 119, and 122, but the move 
toward technological convergence and the advent of broadcast quality 
video over the Internet during the last five years calls for a close 
re-examination of the licenses at issue here. For example, Virtual 
Digital Cable (``VDC''), a new Internet video programming provider, 
currently offers multiple channels of video programming to subscribers 
across the United States and plans to carry local broadcast television 
stations as part of its service offerings. See http://www.vdc.com.; see 
also Bid to Put Local TV Signals Online Tests Internet Broadcast 
Rights, Communications Daily, July 19, 2006, at 6. Given the advent of 
VDC, and similar outlets such as TVU Networks (http://www.tvunetworks.co/index.htm), we seek comment on whether a new 
statutory license should be created to cover the delivery of broadcast 
signals over the Internet. If so, how could this be achieved? Could the 
availability of broadcast content distributed over the Internet be 
considered a ``retransmission'' as that term has been used in the 
Copyright Act? Would the answer to this question be different if the 
owner of the broadcast content, such as the television network, is 
delivering the content rather than a third party website? Would the 
retransmission of a broadcast station's signal implicate the 
reproduction right under Section 106 of the Copyright Act, in addition 
to the performance right, given that Internet retransmissions require 
the making of temporary copies on servers necessary for retransmission? 
Is there any evidence of marketplace failure requiring a statutory 
license to ensure the public availability of broadcast programming?
    There are also video programming distribution systems that use 
Internet Protocol technology (``IPTV'') to deliver video content 
through a closed system available only to subscribers for a monthly 
fee. AT&T, for example, currently uses IPTV to provide multichannel 
video service in competition with incumbent cable operators and 
satellite carriers. We seek comment on whether new types of video 
retransmission services, such as IPTV-based services offered by AT&T, 
may avail themselves of any of the existing statutory licenses. Must a 
new license be created, instead? We also seek comment on whether a 
statutory license for IPTV-based services, if confined to a closed 
system available only to subscribers in the United States, would 
violate any international agreements and treaty obligations.
    Recent advances in wireless technology have enabled the reception 
of video content on mobile telephones and similar devices. For example, 
Verizon Wireless, in partnership with MediaFLO USA, has recently 
introduced V Cast Mobile TV service in several markets across the 
United States. This service features a full complement of eight 
channels available to Verizon Wireless voice customers for an 
additional fee. Programming on V Cast Mobile TV is provided by CBS, 
NBC, Fox, ESPN, and others. AT&T's Cingular Wireless has announced that 
it too will offer mobile television service, in addition to wireless 
voice service, in the near future. See Rhonda Wickham, V Cast Mobile TV 
Goes Live, WirelessWeek, March 1, 2007; see also, Mike Shields, CBS, 
NBC and ESPN Unveil Plethora of New Mobile Content, Mediaweek, March 
27, 2007. The mobile phone industry, including Verizon and AT&T, have 
not announced any plans to retransmit local or distant television 
station signals over their wireless networks. Nevertheless, we seek 
comment on whether Sections 111, 119, and 122 should be expanded to 
include the retransmission of broadcast signals over wireless networks 
and to mobile reception devices. Should there be a single new statutory 
license that encompasses the retransmission of broadcast signals for 
use by cable, satellite, IPTV, the Internet, and wireless networks/
mobile devices? Or, do the examples provided above demonstrate that the 
video marketplace is functioning smoothly and there is no need for a 
statutory license at all?
    Elimination. We seek comment on whether the licenses should be 
eliminated rather than expanded. As noted above, the cable industry has 
grown significantly since 1976, in terms of horizontal ownership as 
well as subscribership, and generally has the market power to negotiate 
favorable program carriage agreements. Given these facts, has Section 
111 served its purpose and is no longer necessary? Do these factors 
alone merit the elimination of the license? DirecTV and Echostar did 
not serve any customers in 1988, but now count at least 27 million 
subscribers among the both of them. They, too, have the market power 
and bargaining strength to negotiate favorable program carriage 
agreements. Given these developments, should Section 119 also be phased 
out? A year ago, we concluded that the Section 119 license harms 
copyright owners because the current statutory rates do not reflect 
fair market value of the signals being transmitted. See Satellite Home 
Viewer Extension and Reauthorization Act Sec.  110 Report, A Report of 
the Register of Copyrights (February 2006) at 44-45. Is this an 
additional reason to eliminate Section 119?
    On the content side, we note that broadcast television networks, 
such as Fox and NBC, have begun to offer streamed network video content 
on their owned and operated websites. See Mike Shields, YouTube Faces 
Challenge, Mediaweek, March 22, 2007 (describing News Corp. and NBC 
Universal's new partnership to launch an Internet video distribution 
channel). Moreover, some affiliates of Fox plan to stream network and 
local content over the Internet into their local markets. See Harry 
Jessell, Affils To Offer Fox Shows On Local Web Sites, TVNEWSDAY, March 
1, 2007. We seek comment on whether there are similar streaming 
arrangements being planned by other television broadcast networks. Is 
there any evidence that this type of video distribution model will 
become ubiquitous? If so, we ask whether statutory licenses are 
necessary when anyone with an Internet connection may watch broadcast 
television content without the need to subscribe to an MVPD.\12\
---------------------------------------------------------------------------

    \12\ One company recently petitioned the FCC to declare that the 
Commission has no authority to regulate the distribution of video 
content over the Internet. See Network2 Petition for Declaratory 
Ruling That Internet Video is not Subject to Regulation Under Title 
III or Title VI of the Communications Act, filed March 20, 2007. The 
Petition did not raise for comment whether Internet video 
programming distributors may still avail themselves of the statutory 
licenses under the Copyright Act.

---------------------------------------------------------------------------

[[Page 19055]]

    In the absence of the statutory licenses, cable operators, 
satellite carriers, and copyright owners would have to negotiate the 
rights to carry programs according to marketplace rates, terms, and 
conditions. As stated earlier, cable operators and satellite carriers 
have successfully negotiated the right to carry local television 
broadcast signals of the major broadcast networks under the 
retransmission consent provisions found in Section 325 of the 
Communications Act. We seek comment on whether we should recommend to 
Congress that Sections 111 and 119 be repealed and superceded by 
Section 325 so that distant broadcast stations can freely negotiate 
signal carriage rights with cable operators and satellite carriers 
without reference to a statutory license.\13\ Could retransmission 
consent perform the same payment functions as Section 111 and Section 
119? In other words, is there any way a retransmission consent 
agreement can be structured so that the monetary value of the 
underlying content is collected by broadcast stations and then paid to 
the copyright owners of the programs that are retransmitted? Is there 
any reason why retransmission consent would not work for the 
retransmission of distant television signals? Are there any contractual 
impediments, such as network-station affiliation arrangements, that 
would preclude the retransmission of distant television signals under a 
privately negotiated agreement? Are there any legal impediments, such 
as the FCC's network non-duplication rules, that would frustrate 
private agreements? Is it difficult for small cable operators to 
negotiate the rights necessary to carry the signals of distant 
television stations? Would the elimination of the statutory licenses 
cause harm to cable or satellite subscribers? If so, how?
---------------------------------------------------------------------------

    \13\ One cable operator appears to advocate the replacement of 
retransmission consent with a new statutory license covering the 
cable retransmission of local broadcast television signals. See Ted 
Hearn, Willner Calls for Tax to Aid TV Stations, Multichannel News, 
March 13, 2007 (Insight Communications CEO Michael Willner has 
proposed a ``TV tax'' to replace retransmission consent that would 
fund a ``federal royalty pool'' ``similar to the one used to 
compensate sports leagues and Hollywood studios'').
---------------------------------------------------------------------------

III. CONCLUSION

    We hereby seek comment from the public on the legal and factual 
matters identified herein associated with the retention, reform, or 
elimination of Sections 111, 119, and 122 of the Copyright Act. If 
there are any additional issues not discussed above, we encourage 
interested parties to bring those matters to our attention.

    Dated: April 11, 2007
Marybeth Peters,
Register of Copyrights.
[FR Doc. E7-7207 Filed 4-13-07; 8:45 am]
BILLING CODE 1410-30-S