[Federal Register Volume 62, Number 74 (Thursday, April 17, 1997)]
[Rules and Regulations]
[Pages 18705-18710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9919]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 86-7B]


Cable Compulsory Licenses: Definition of Cable Systems

AGENCY: Copyright Office, Library of Congress.

ACTION: Final rule.

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SUMMARY: The Copyright Office of the Library of Congress is adopting 
final regulations recognizing that satellite master antenna television 
(SMATV) systems are eligible as cable systems under section 111 of the 
Copyright Act to obtain a compulsory license to retransmit broadcast 
signals to their subscribers. The regulations provide guidance as to 
who should file and how to report distant signals.

EFFECTIVE DATE: July 1, 1997.

FOR FURTHER INFORMATION CONTACT: Nanette Petruzzelli, Acting General 
Counsel, or Tanya Sandros, Attorney Advisor, Copyright Office, Library 
of Congress, Washington, D.C. 20540, (202-707-8380) or Telefax (202-
707-8366).

SUPPLEMENTARY INFORMATION:

Background

    Section 111 of the Copyright Act, 17 U.S.C., establishes a 
mechanism by which cable systems may obtain a compulsory license to 
make secondary transmissions to their subscribers of copyrighted works 
performed on broadcast stations. A compulsory license is attractive to 
users of copyrighted material because it gives them guaranteed access 
to and a guaranteed price for copyrighted works, and avoids the costs 
of negotiating with each individual copyright owner. As a result, many 
providers of broadcast signals have sought to qualify as cable systems 
under section 111, so that they may obtain a cable compulsory license.
    Consequently, on October 15, 1986, the Copyright Office published a 
Notice of Inquiry inviting public comment on whether satellite master 
antenna television systems (SMATV), multichannel multipoint 
distribution

[[Page 18706]]

systems (MMDS),<SUP>1 or satellite carriers\1\ qualify as cable systems 
under section 111 of the Copyright Act. 51 FR 36705 (Oct. 15, 1986). As 
part of the inquiry, the Office solicited specific comments on how an 
individual SMATV operation qualifying as a cable system would file 
statements of account, and on who would be deemed the owner of a SMATV 
system. The inquiry concerning SMATV systems was based on the following 
understanding of how a SMATV operates:

    \1\ On January 29, 1992, the Office concluded its inquiry into 
the definition of a ``cable system'' in Docket No. 86-7B and issued 
a regulation denying both ``wireless'' cable operators and satellite 
carriers eligibility for the cable compulsory license. 57 FR 3284 
(January 29, 1992). Subsequent to the issuance of this regulation, 
Congress passed the Satellite Home Viewer Act of 1994, Public Law 
103-369, which amended the definition of a ``cable system'' in 
section 111 to include ``wireless'' cable systems, such as the 
multichannel multipoint distribution systems.
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    SMATV systems use TVROs [television receive-only satellite dish] 
to receive transmissions via satellite, and a master antenna for 
receipt of over the air television signals. The programming is then 
combined and distributed by cable to subscribers, primarily in 
apartment houses and other multi-unit residential buildings.

51 FR 36706 (1986).
    After analysis of the comments to the Notice of Inquiry, the 
Copyright Office concluded that SMATV systems could qualify as cable 
systems and issued a Notice of Proposed Rulemaking proposing 
regulations by which SMATV systems could obtain a compulsory license to 
retransmit broadcast signals. 56 FR 31580 (July 11, 1991). At that 
time, the Office also acknowledged its practice of accepting filings 
from SMATV operators, without ruling on their sufficiency or adequacy, 
during the period that the Office considers whether such filings are 
appropriate. 56 FR 31596 (1991). The Office further advised those SMATV 
operators, who had previously filed Statements of Account during prior 
accounting periods without guidance or knowledge of the new rules, that 
they need not amend these filings. This understanding, however, does 
not preclude any facility from amending its prior filings under the new 
regulations, after they are issued in final form.

Comments

    Responding to the proposed regulations on the eligibility of SMATV 
systems for the cable compulsory license, the Office received direct 
comments from:

--Liberty Cable Company, Inc. (Liberty), a SMATV system operator in the 
New York City area.
--MaxTel Cablevision, a SMATV system owner and operator, Western Cable 
Communications, Inc., a SMATV system owner and operator, and National 
Private Cable Association, an association of SMATV systems operators, 
equipment manufacturers, vendors, and program distributors, jointly 
(MaxTel et. al.);
--Mid-Atlantic Cable, Stellar Communications, Inc., TeleCom Satellite 
Systems Corp., Telesat Cablevision, Inc., 21st Century Technology 
Group, Inc., all SMATV system operators, and National Satellite 
Programming Network, Inc., a provider of programming and support 
services to SMATV systems operators, jointly (Mid-Atlantic et. al.);
--the Motion Picture Association of America, Inc. (MPAA), a trade 
association that represents copyright owner-claimants for section 111 
royalties;
--the National Cable Television Association (NCTA), a cable television 
trade association;
--National CableSystems Associates, (NCSA) owner and operator of 25 
SMATV systems in the Atlanta, Georgia area;
--Pepper & Corazzini, a law firm representing independently owned and 
cable-affiliated SMATV systems;
--Satellite Television of New York Associates, d/b/a Community Home 
Entertainment, (Community), the SMATV operator of Co-Op City, Bronx, 
New York;
--Spectradyne, Inc. (Spectradyne), provider of free-to-guest satellite 
video programming to hotels; and
--Turner Broadcasting System, Inc. (TBS), licensee of superstation 
WTBS, Atlanta, Georgia.

    The Office also received reply comments from:

--MaxTel, et. al.;
--MPAA;
--Major League Baseball, the National Basketball Association, and the 
National Hockey League (the Professional Sports Leagues); and
--NCTA.

Eligibility for the Section 111 Compulsory License

    The following commentators agree with the Copyright Office's 
conclusion that SMATV systems qualify as cable systems for section 111 
purposes: Community, Liberty, Maxtel et. al., Mid-Atlantic et. al., 
MPAA, NCSA, Pepper & Corazzini, Spectradyne, and TBS.
    NCTA takes no position on the question of SMATV eligibility.
    The Professional Sports Leagues oppose the eligibility of SMATV 
systems as cable systems because they argue that Congress intended to 
draw a distinction between traditional cable and other retransmission 
media, such as MATV systems (the predecessor systems to SMATVs, similar 
in all respects to SMATV systems except without the capacity to receive 
satellite transmissions) when they exempted MATV systems from copyright 
liability in section 111, so long as they retransmitted only local 
signals to their subscribers. Professional Sports Leagues, reply 
comments at 7-8. Thus, having afforded MATV systems such an exemption, 
the Professional Sports Leagues argue that the remainder of section 111 
is intended to apply to traditional cable systems. The Professional 
Sports Leagues also argue that the section 111 compulsory license was 
based on economic necessity, and that in 1976, traditional cable 
systems could not exist without the compulsory license, but such 
economic necessity was not true of MATV systems then, or SMATV systems 
now. Reply comments at 8.
    This argument was raised in the previous round of comments and 
responded to by the Office in the 1991 Notice of Proposed Rulemaking 
where the Office said that the section 111(a)(1) exemption was intended 
merely to ensure that residents of multiple unit dwellings had access 
to local television signals. 56 FR 31595 (July 11, 1991). The section 
111(a)(1) exemption does not prohibit a master antenna television 
system from importing distant signals nor does it address the 
consequences of importing distant signals. The Office considered that 
such a system would have copyright liability. Whether it must meet that 
liability through negotiation with the copyright owners or could meet 
it by obtaining a compulsory license is the issue, and the fact that 
Congress gave MATV systems an exemption for local retransmissions does 
not affect the analysis.
    Nor does the Office agree that the analysis should depend on 
whether SMATV systems would still be economically viable without the 
compulsory license. As the Professional Sports Leagues themselves point 
out, many cable systems today would be economically viable without the 
compulsory license, but nothing in section 111 would render a cable 
system ineligible because it was economically sound. The viability of a 
provider of broadcast signals with or without the compulsory license is 
not the question; the question is whether Congress intended the 
providers to be included in section 111.
    TBS agrees that SMATV systems qualify as cable systems, but 
disagrees

[[Page 18707]]

with certain aspects of the Copyright Office's analysis. It argues that 
the Office should not look to whether a particular video provider 
constitutes a ``local medium of limited availability,'' or to whether 
the FCC has affirmatively approved retransmissions by a particular type 
of facility, but should confine itself to addressing whether a SMATV 
system ``retransmits broadcast signals to paying subscribers by wires, 
cables, or other communications channels.'' TBS, comments at 13-14. In 
other words, TBS argues that the Copyright Office should only look at 
the section 111 definition of a cable system. However, as the Office 
has stated previously, section 111 must be construed in accordance with 
Congressional intent and as a whole, not just in reference to one 
particular section. 57 FR 3292 (Jan. 29, 1992). 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 the 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. 56 FR 31595 (July 11, 1991).
    It is therefore the Office's conclusion, after considering the 
above comments, that SMATV systems are cable systems for purposes of 
section 111.

Identifying a SMATV System

    While the Copyright Office has discussed the eligibility of SMATV 
systems for the cable compulsory license and described how a SMATV 
system operates in its initial Notice of Inquiry, the Office has chosen 
not to define a SMATV system in its regulations, although SMATV systems 
present unique compulsory license reporting issues which require 
clarification in the Copyright Office's rules. None of the commentators 
raised the issue, suggesting that the nature and operation of a SMATV 
system is generally understood within the industry. We note, too, that 
the Federal Communications Commission, while regulating SMATV systems 
in various ways, has never defined a SMATV system in its regulations. 
Yet, all parties must operate with a common understanding as to what is 
a SMATV system. To this end, the Office believes an examination of the 
FCC regulatory policy toward SMATV systems is useful for determining 
the characteristics of a SMATV system.
    Since 1966, the FCC's definition of a cable system excluded those 
systems serving multiple unit dwellings. See, Second Report and Order 
on CATV Regulation, 2 FCC 2d 725 (1966). These excluded systems were 
apparently originally MATVs (Master Antenna Television Systems), but 
were later thought to include SMATVs. In the 1984 Cable Act, Congress 
specifically excluded from the definition of a ``cable system'' ``a 
facility that serves only subscribers in 1 or more multiple unit 
dwellings under common ownership, control, or management, unless such 
facility or facilities uses any public right-of-way * * *.'' 47 U.S.C. 
522(7) (1984). The House Report to the Cable Act described the 
exemption as applying to ``a facility or combination of facilities that 
serves only subscribers in one or more multiple unit dwellings (in 
other words, a satellite master antenna television system), unless such 
facility or facilities use a public right-of-way.'' H.R. Rep. No. 934, 
98th Cong., 2d Sess. 44 (1984).
    Congress modified the section 522(7) exemption in the 
Telecommunications Act of 1996. The section now exempts from the 
definition of a cable system ``a facility that serves subscribers 
without using any public right-of-way.'' 47 U.S.C. 522(7) (1996). The 
new exemption certainly continues to include SMATV systems, but has 
been broadened to include other types of retransmission facilities such 
as wireless cable.
    While the Office believes that the history of communications 
regulation of SMATV systems is relevant to determining what is a SMATV 
system, we acknowledge that it is not dispositive for the copyright 
inquiry. We do not believe that the FCC requirement of not crossing a 
public right-of-way is important for section 111 purposes because the 
distinction only determines whether such a facility will be regulated 
as a cable system for FCC purposes, as opposed to defining what a SMATV 
system is or does. Consequently, we are identifying as SMATV systems 
only those facilities which receive television signals from satellites 
and retransmit them to subscribers residing in multiple unit dwellings, 
such as apartment complexes and hotels.

Party Responsible for Filing the Statement of Account and Remitting 
Royalties

    In the Notice of Proposed Rulemaking, the Office proposed that the 
party responsible for filing the statement of account and remitting 
royalties on behalf of a SMATV system should be the building owner 
where the SMATV system is operating, not the entity that provides the 
signals and maintains the facility.
    This was proposed for two reasons. First, it was observed that 
satellite carriers are often the signal providers for a building, and 
to allow a satellite carrier to designate itself as the owner of the 
cable system could qualify a satellite carrier as a cable system, a 
result contrary to the Office's conclusion that satellite carriers are 
not cable systems.
    Second, designating the distributors of the broadcast signals as 
the filer might result in lower reported gross receipts, because the 
distributor would report the rate it charged the building, but not any 
add-ons, if there were any, that the building owner might charge the 
residents or guests.

1. Concerns About Requiring Building Owners To File

    The Office's question about who should be the filer elicited the 
greatest amount of discussion from the commentators. Uniformly, the 
comments state that the filer should not necessarily be the building 
owner. The commentators' greatest concern is that if the responsibility 
to file is placed on the building owner, many building owners will be 
inclined to avoid the responsibility by either replacing the SMATV 
system with a traditional cable system or ceasing to provide video 
programming altogether. These concerns were addressed in the comments. 
See Spectradyne, comments at 3-4; NCSA, comments at 6-7; Mid-Atlantic 
et. al., comments at 4; and Community, comments at 3-4.

2. Comments Addressing Copyright Office's Concerns

    Many of the commentators who believe the system operator, not the 
building owner, should be the filer, sought to allay the Office's 
concerns about satellite carrier eligibility and the potential for 
underreporting gross receipts.
    As to whether satellite carriers that distribute signals to SMATV 
systems would qualify as cable systems, Pepper and Corazzini assert,

    The satellite carrier would never be in a position to designate 
itself as the cable system. Where the owner of a hotel or multi-unit 
dwelling provides the service itself, it purchases the signals from 
the satellite carrier or the carrier's distributor. The satellite 
carrier does not exercise any control or management responsibility 
over the SMATV system, nor does the carrier have

[[Page 18708]]

any contractual privity with the subscribers. This is true whether 
the SMATV service is provided by the hotel or an owner of a multi-
unit dwelling or by an [sic] SMATV operator.

Pepper & Corazzini, comments at 5.
    Similarly, Maxtel et. al. states,

    It is not the satellite carrier who is the signal distributor to 
the customers of the SMATV operator any more than that satellite 
carrier is the signal distributor to the customers of the 
traditional franchised cable television operator. The satellite 
carrier merely distributes signals to the headend facility of either 
the SMATV operator or the cable franchisee * * * Contrary to the 
direct transmission between a satellite carrier and an individual 
single family home TVRO [television receive-only satellite dish], 
there is always an intermediary retransmitter between the satellite 
carrier and the subscriber residing within an apartment complex, for 
example. Thus, the satellite carrier would never be designated as 
the owner of the cable system for filing purposes and the Copyright 
Office need not be concerned over any anomaly with its determination 
that ``satellite carriers do not and cannot qualify for the cable 
compulsory license.''

MaxTel et. al., comments at 5.
    Spectradyne addresses the possibility, disputed by Pepper & 
Corazzini and MaxTel et. al., that a satellite carrier could both 
deliver the distant signal and be the SMATV system operator. It argues 
that the Copyright Office's concerns can be met in the case of a 
satellite carrier which happens also to be a SMATV operator, because 
``the [compulsory] license would apply only to the SMATV element of the 
satellite carrier's business. In order to be free from copyright 
infringement liability for the remaining portions of its operation 
(ground to transponder to ground) the satellite carrier would either 
have to qualify as a passive carrier or negotiate copyright licenses. 
There is no anomaly in this.'' Spectradyne, comments at 5.
    The commentators also believe that the potential for underreporting 
the gross receipts can be avoided.
    Spectradyne states that ``any fear of revenue under-reporting can 
be relieved by imposing on system operators the obligation to report 
not only amounts received by them but the higher of the amounts they 
receive and any amounts collected by the hotel operator from guests for 
the privilege of viewing the tier of service at issue.'' Spectradyne, 
comments at 6-7.
    MaxTel et. al. posits three possible situations concerning bulk 
rates that may or may not reflect the total gross receipts.

    First, most SMATV operators contracting with private property 
owners do not provide such service on a bulk rate basis, but rather 
charge individual subscribers directly for the service. Second, most 
property owners desiring a bulk rate contract do so to increase 
occupancy, and thus do not even charge a premium for the cable 
service. Third, traditional franchised cable television operators 
also enter into bulk rate contracts with private property owners, in 
which the owner can charge the residents a higher fee than the 
property owner paid the cable franchisee for the service. Yet the 
Copyright Office has not found the cable system owner in that 
circumstance to be the property owner as opposed to the cable 
franchisee * * * If the Copyright Office wishes to rectify the fact 
that the gross receipts figure will necessarily not include any 
additional charges rendered by a property owner authorizing service 
under a bulk rate contract, then the Copyright Office should adopt 
regulations applicable to both SMATV operators and cable 
franchisees.

MaxTel et. al., comments at 7.
    Mid-Atlantic et. al. argues that the definition of the SMATV system 
operator can be made flexible enough so that if there is no additional 
charge by the building owner, the business operating the SMATV system 
is the SMATV system operator, but if there is an additional charge by 
the building owner, as reflected in subscription agreements with the 
individual subscribers in the building, then the building owner would 
be the one designated in that instance as the SMATV system operator. 
Mid-Atlantic et. al., comments at 5.

3. Commentators' Recommended Definition of Filer

    Community recommends that the filer be ``the entity that provides 
the service to the actual subscriber or to the tenant or unit owner.'' 
Community, comments at 4.
    Liberty recommends a definition of the filer that would allow 
either the building owner or the SMATV system operator to make the 
filings and the payments, according to whichever arrangement made sense 
to the SMATV system operator and building operator, provided that the 
building operator could designate an agent to sign the Statement of 
Account. Liberty, comments at 1-2. Similarly, Spectradyne recommends 
``permitting either the building owner or the system operator to file 
the statement of account.'' Spectradyne, comments at 4.
    Mid-Atlantic et. al. recommends that the filer should be the 
operator of the SMATV system, whether that is the building owner or a 
third party who has a contract with the building owner to provide the 
service. Mid-Atlantic et. al., comments at 2.
    MaxTel et. al. recommends that the filer should be ``the owner of 
the headend facility and the recipient of the subscriber revenues.'' 
MaxTel et. al., comments at 9. MPAA supported this recommendation. 
MPAA, reply comments at 16. Similarly, NCSA recommends defining the 
filer as ``that party who both provides the cable TV service to the 
ultimate subscriber or television viewer and also receives payment from 
said subscriber or television viewer for the service either directly or 
indirectly through a third party.'' NCSA, comments at 11. Likewise, 
Pepper & Corazzini recommends that the filer be ``the entity that is in 
charge of the operation of the system and the collection of subscriber 
revenues.'' Pepper and Corazzini, comments at 8.

4. Discussion

    The Office appreciates the concern expressed by SMATV system 
operators that if the building owner is required to be the filer, some 
building owners might refuse to take on that responsibility, to the 
detriment of the SMATV system operator. Therefore, the Office agrees 
that the building owner who is uninvolved with the SMATV system 
operation may not, in that circumstance, be the best one to file the 
statement of account.
    In searching for the best solution, the Office is inclined to agree 
with NCSA, that the filer should be the party that provides the 
retransmission service and receives the payment, either through a bulk 
rate charged to the building owner, or by individually billing the 
subscriber, or by any other billing arrangement.
    The Office also appreciates the distinction drawn by Spectradyne 
between a satellite carrier acting in its capacity as a SMATV system 
operator and a satellite carrier acting in its capacity as the 
deliverer of the distant signal. The Office agrees that the satellite 
carrier could also be the SMATV system operator for that portion of the 
satellite carrier's operation for which it performs the functions of a 
SMATV system operator, but not for the direct delivery of the distant 
signals.
    Similarly, a building owner could also be a SMATV system operator, 
if the building owner is the one that provides the retransmission 
service and collects the payments from the subscribers.
    Furthermore, the Office acknowledges the points raised by MaxTel et 
al. about bulk rates and the importance of ensuring that any rules 
adopted for SMATV system are consistent with the Office's policy toward 
traditional cable systems. Therefore, the gross receipts that shall be 
reported shall be those collected by the filer, either directly from 
the subscribers or indirectly through a third party.

[[Page 18709]]

    In no case shall gross receipts for the SMATV facility be less than 
the cost of obtaining the signals of primary broadcast transmitters for 
subsequent retransmission by the SMATV facility. As a result, if the 
building owner is the SMATV system operator because he or she provides 
the retransmission service, but does not charge his or her residents, 
tenants, or guests, because it is a ``free'' service, the building 
owner, nonetheless, reports as gross receipts the amount that he or she 
pays the satellite carrier for the cost of bringing in the broadcast 
signals.

Calculation of Royalties for Form 3 SMATV Systems

    In the Notice of Proposed Rulemaking, the Office stated that SMATV 
systems that file as Form 3 systems--those grossing $292,000 or more 
per semiannual accounting period--would be required to comply with the 
signal carriage and market quota regulations applied by the FCC to 
cable systems when making their royalty calculations, even though SMATV 
systems that did not use the public rights-of-way were not, in fact, 
subject to such regulations.
    This proposal is supported by MPAA and NCTA, who each argued that 
if SMATV systems are to qualify as cable systems, they should be 
treated the same way as traditional cable systems. MPAA, reply comments 
at 16-17; NCTA, comments at 2.
    This proposal is opposed by Community. Community argues that the 
Copyright Office is bound to follow the law, and that, under FCC rules, 
SMATV systems not using the public rights-of-way were not subject to 
distant signal quotas. Therefore, the Copyright Office may not impose 
3.75% rate charges for signals that SMATV systems were permitted to 
import before 1981. Furthermore, Community states that it received an 
opinion letter from the General Counsel of the Copyright Office in 1984 
confirming Community's interpretation of the law. Community, comments 
at 2-3, Attachment C.
    In reply, NCTA argues that the Copyright Office is not so 
restrained as Community asserts, and that the Office may make common 
sense responses to problems that arise during the implementation of 
section 111, so long as those responses are not inconsistent with 
congressional intent. NCTA believes it is logical for the Office to 
conclude that since Congress intended new technologies to be eligible 
for the cable license, it did not intend to treat these new 
technologies more favorably than traditional cable systems. Finally, 
NCTA notes that the Copyright Office requires newly constructed cable 
systems to pay 3.75% rate royalties even though they were never subject 
to the FCC's distant signal rules. NCTA, reply comments at 1-3.
    The Office's main goal in administering section 111 is to implement 
Congress' intent. Congress recently addressed the issue of how to apply 
the definition of a cable system to new technologies when it amended 
section 111(f) to include multichannel multipoint distribution service 
systems, otherwise known as MMDS or ``wireless cable,'' as cable 
systems. Satellite Home Viewer Act of 1994, Public Law 103-369, 108 
Stat. 3477. Congressional intent is manifest in both the Senate and 
House reports. The Senate report stated:

    The committee intends ``wireless'' cable and traditional wired 
cable systems to be placed on equal footing with respect to their 
royalty obligations under the cable compulsory license, so that one 
not have an unfair advantage over the other due to differences in 
their regulatory status under FCC rules. The committee expects the 
Copyright Office, in applying section 111 to ``wireless'' cable 
systems, should treat ``wireless'' cable systems as if they were 
subject to the same FCC rules and regulations that are applicable to 
wired cable systems.

Sen. Rep. 407, 103d Cong., 2nd Sess., at 14 (1994).
    Similarly, the House Report stated,

    Because the purpose of this legislation is to place wired and 
wireless cable systems on a level playing field, in calculating the 
fees payable by wireless systems, reference should be made to the 
same FCC rules that would be applicable if the system were wired, 
e.g., the distant signal quota rules for purposes of determining 
whether the 3.75% of gross receipts rate is applicable.

H. R. Rep. 703, 103d Cong., 2nd Sess., at 19 (1994).
    Any reliance that Community believes should be placed on the 1984 
opinion letter from the Office's General Counsel is now clearly 
superseded by this expression of Congress' intent. Therefore, the 
Office will require Form 3 SMATV systems to calculate their distant 
signal royalties on the same basis as traditional cable systems.

Commonly Owned or Controlled SMATV Systems in Contiguous Communities 
and SMATV Systems Operating From the Same Headend

    Section 111(f) states that for purposes of determining the royalty 
fee, two or more cable systems in contiguous communities under common 
ownership or control, or operating from one headend, shall be 
considered as one system.
    In the Notice of Proposed Rulemaking, the Office stated that it had 
received a request from NCTA to address its petition to reinterpret 
section 111(f) to provide that two or more cable systems would have to 
be in contiguous communities under common ownership and control and 
operating from one headend before they would be required to file as one 
individual cable system. The Office responded to NCTA's petition by 
stating that the issue was being addressed in another rulemaking 
proceeding and would not be examined here. 56 FR 31596 (July 11, 1991).
    However, several commentators submitted comments on a related issue 
asking what constitutes ``contiguous communities'' in the context of 
SMATV systems.
    Pepper & Corazzini argues that because most SMATV systems do not 
use the public rights-of-way, by their very nature, they are stand 
alone operations and are not contiguous with each other, even when they 
are in the same community. Pepper & Corazzini believe they should be 
considered contiguous only when they are physically on adjoining 
properties or are interconnected by wire or radio. Pepper & Corazzini, 
comments at 7. These comments are supported by MaxTel et al. MaxTel, 
reply comments at 3-4.
    MPAA and NCTA disagree with Pepper & Corazzini and MaxTel et al. 
They both argue that SMATV systems should be treated the same way as 
cable systems and that the same interpretation of contiguous 
communities should apply. NCTA proposes that the Office should require 
commonly owned or controlled SMATV systems to be considered a single 
cable system when they are located in the same or contiguous 
communities, or when they operate from the same headend. NCTA, comments 
at 2-3. MPAA supports NCTA's proposal. MPAA, reply comments at 16.
    The Copyright Office agrees with MPAA and NCTA that Congress' 
intent is to treat new technologies on the same basis as traditional 
cable systems. It would be inequitable if a SMATV system operator, 
serving several buildings within a community, were considered to be 
operating separate cable systems, while a cable operator in that same 
community serving several non-adjoining households is considered a 
single system.
    Therefore, the Office concludes that a SMATV system operator is a 
single cable system when it serves multiple unit dwellings in the same 
community or in contiguous communities, using political boundaries to 
determine when communities are contiguous.

[[Page 18710]]

    Accordingly, the Copyright Office and the Library of Congress 
adopts the following rules.

List of Subjects in 37 CFR Part 201

    Cable compulsory license, Cable systems, Satellite master antenna 
television systems.

Final Regulations

    In consideration of the foregoing, part 201 of 37 CFR, chapter II, 
is amended in the manner set forth below.

PART 201--GENERAL PROVISIONS

    1. The authority citation for part 201 is revised to read as 
follows:

    Authority: 17 U.S.C. 702.


Sec. 201.17  [Amended]

    2. Section 201.17(b)(1) is amended by adding ``In no case shall 
gross receipts be less than the cost of obtaining the signals of 
primary broadcast transmitters for subsequent retransmission.'' after 
the first sentence.
    3. Section 201.17(b)(2) introductory text is amended by adding 
``The owner of each individual cable system on the last day of the 
accounting period covered by a Statement of Account is responsible for 
depositing the Statement of Account and remitting the copyright royalty 
fees.'' after the third sentence.
    4. Section 201.17(e)(2)(i) is amended by adding ``The ``owner'' of 
the cable system is the individual or entity that provides the 
retransmission service and collects payment from the end user either 
directly or indirectly through a third party.'' after the first 
sentence.

    Dated: April 3, 1997.
Marybeth Peters,
Register of Copyrights.

    Approved By:
James H. Billington,
The Librarian of Congress.
[FR Doc. 97-9919 Filed 4-16-97; 8:45 am]
BILLING CODE 1410-31-P