[Federal Register Volume 63, Number 93 (Thursday, May 14, 1998)]
[Proposed Rules]
[Pages 26756-26758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-12652]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Parts 201 and 256

[Docket No. RM 98-4]


Cable Compulsory Licenses: Application of the 3.75% Rate

AGENCY: Copyright Office, Library of Congress.

ACTION: Proposed amendments and policy statement.

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SUMMARY: On April 30, 1997, the Copyright Office published an amendment 
to its rules to allow a cable system to calculate its copyright 
liability for carriage of distant signals on a partially permitted/
partially non-permitted basis where applicable. Under the new rule, a 
cable system will apply the current base rates and the syndicated 
exclusivity surcharge, where applicable, to those subscribers in 
communities where the signal would have been permitted on or before 
June 24, 1981, and the 3.75% rate to those subscribers in communities 
where the signal would not have been permitted before that date. Both 
the base rate fee

[[Page 26757]]

and the 3.75% fee shall be applied toward the required minimum fee. 
These changes, however, are not reflected clearly in the current 
regulations. Therefore, the Copyright Office is proposing amendments 
which would harmonize the existing regulations with the new methodology 
for calculating the royalty fees for carriage of partially permitted/
partially non-permitted distant signals.

DATES: Comments on the proposed technical amendments are due June 15, 
1998.

FOR FURTHER INFORMATION CONTACT: David O. Carson, General Counsel, or 
Tanya M. Sandros, Attorney Advisor, Copyright GC/I&R, P.O. Box 70400, 
Southwest Station, Washington, D.C. 20024. Telephone (202) 707-8380 or 
Telefax (202) 707-8366.

SUPPLEMENTARY INFORMATION: Section 111 of the Copyright Act, 17 U.S.C., 
establishes a compulsory license which authorizes a cable system to 
make secondary transmissions of copyrighted works embodied in broadcast 
signals provided that it pays a royalty fee according to the fee 
structure set out in section 111 and meets all other conditions of the 
statutory license. The license also provides for an opportunity to 
adjust the statutory royalty rates once every five years, see 17 U.S.C. 
803(a)(2), or whenever the Federal Communications Commission (FCC) 
amends its rules to allow a cable system to carry additional signals 
beyond the local service area of the primary transmitter, or its rules 
governing syndicated program and sports exclusivity. See 17 U.S.C. 
801(b)(2)(B)-(C).
    The FCC's distant signal and syndicated program exclusivity rules 
were promulgated in 1972. Cable Television Report and Order, 36 F.C.C. 
2d 143 (1972). In 1976 after Congress created the cable compulsory 
license, the FCC conducted an inquiry to reexamine the need for these 
rules and determined ultimately that there was no longer a need for 
maintaining the distant signal and syndicated program exclusivity 
rules. Report and Order in Docket Nos. 20988 and 21284, 79 FCC2d 663 
(1980).
    In response to the FCC's order repealing its distant signal 
carriage and program syndication exclusivity restrictions on cable 
retransmissions, see Report and Order in Docket Nos. 20988 and 21284, 
79 F.C.C. 2d 663 (1980), <SUP>1</SUP> the National Cable Television 
Association (NCTA) filed a petition with the former Copyright Royalty 
Tribunal (CRT) to initiate a cable rate adjustment proceeding in 1981. 
<SUP>2</SUP> In that proceeding, the CRT set two new rate structures, 
apart from those specified in the statute, to compensate the copyright 
owners for the loss of the surrogate copyright protection afforded them 
under the FCC rules: a 3.75% rate for the secondary transmission of 
formerly non-permitted distant signals, and a syndicated exclusivity 
surcharge for the secondary transmission of permitted signals that had 
been subject to the FCC's former syndicated program exclusivity 
regulations. 47 FR 52146 (November 19, 1982).
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    \1\ The U.S. Court of Appeals for the Second Circuit stayed the 
FCC order pending an appeal of its decision. On June 16, 1981, the 
court upheld the FCC order, see Malrite T.V. of New York, Inc. v. 
F.C.C., 652 F.2d 1140 (2d Cir. 1981), cert. denied, 454 U.S. 1143 
(1982), and vacated the stay on June 25, 1981.
    \2\ The American Society of Composers, Authors, and Publishers 
(ASCAP), and the Motion Picture Association of America (MPAA) also 
filed separate petitions requesting an adjustment of the cable rates 
with the CRT in 1981.
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    In 1984, the Copyright Office adopted final regulations to 
implement the new rate decision of the CRT, but when questions 
concerning the proper application of the rules concerning the 3.75% 
rate arose, the Office decided to take no position on this issue. See 
49 FR 26722, 26726 (June 29, 1984). Instead, the Office allowed each 
cable system to decide whether to report a distant signal as entirely 
permitted, entirely non-permitted, or in some instances as partially 
permitted and partially non-permitted, and calculate its copyright 
liability accordingly.
    This practice comes to an end under a regulation promulgated last 
year which directs cable systems to calculate the 3.75% rate fee for 
distant signals on a ``partially permitted/partially non-permitted'' 
basis. 62 FR 23360 (April 30, 1997). Under the new rule, a cable system 
shall calculate its royalty fees for a partially permitted/partially 
non-permitted signal on the basis of gross receipts from subscribers 
within the relevant communities, without regard to whether the 
subscriber actually receives the signal. If the distant signal is 
considered permitted with respect to particular communities under the 
Federal Communication Commission's former distant carriage rules in 
effect on June 24, 1981 (or in the case of those systems that commenced 
operation after June 24, 1981, would have been considered permitted 
subject to these regulations), then the cable system shall apply the 
base rate to the signal in those communities. Alternatively, if the FCC 
rules would not have allowed carriage of the signal with respect to 
specific communities, then the cable system must apply the 3.75% rate 
to the signal. 62 FR 23360 (April 30, 1997). In an effort to clarify 
how to file a statement of account in those instances where the cable 
system carries partially permitted/partially non-permitted signals, the 
Office proposes additional regulatory language describing how to create 
discrete subscriber groups for calculating the appropriate 3.75% fee, 
the base fee, and any applicable syndicated exclusivity surcharge. 
Similarly, for the accounting period beginning January 1, 1998, we have 
begun revision of the statement of account form to include some 
specific changes and special instructions to guide cable systems in 
making these computations.
    The Office also proposes amending 37 CFR 256.2 by specifying 
``paragraphs (a)(2) through (4)'' when the reference is to the base fee 
in place of the more general reference to ``paragraph (a).'' The Office 
makes this proposal because paragraph (a)(1) explains how to calculate 
the minimum fee whereas paragraphs (a)(2) through (4) explain the 
methodology for calculating the base fee. The Office also suggests 
adding amendatory language to Sec. 256.2(a)(1) which makes it clear 
that both the base fee and the 3.75% fee shall be applied toward the 
cable system's obligation to pay a statutory minimum.<SUP>3</SUP> 17 
U.S.C. 111(d)(1)(B)(i). These suggested changes do not effect the 
substance of the current regulations in any material way.
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    \3\ In a policy statement issued in 1986, the Office considered 
whether a cable system could apply both the base fee and the 3.75% 
fee toward the minimum fee imposed by law, see 17 U.S.C. 
111(d)(1)(B)(i), and determined that the minimum fee would not be 
added to the base fee in those instances where the 3.75% fee 
exceeded the minimum fee. 51 FR 599 (January 7, 1986). In making 
this decision, the Office relied upon statements in the House report 
accompanying the Copyright Act of 1976, which indicated that any fee 
for a distant signal should be applied against the minimum. H.R. 
Rep. No. 94-1476, at 96 (1976).
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List of Subjects

37 CFR Part 201

    Cable television, Copyright, Jukeboxes, Literary works, Satellites.

37 CFR Part 256

    Cable television, Copyright.

    In consideration of the foregoing, parts 201 and 256 are proposed 
to be amended as follows:

PART 201--GENERAL PROVISIONS

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

    Authority: 17 U.S.C. 702.

    2. Section 201.17(h)(2)(iv) is amended by adding the phrase ``and 
the

[[Page 26758]]

syndicated exclusivity surcharge, where applicable,'' after the phrase 
``the current base rate''.
    3. Section 201.17(h)(2)(iv) is amended by adding three sentences to 
the end of the paragraph to read as follows:


Sec. 201.17  Statements of Account covering compulsory licenses for 
secondary transmissions by cable systems.

* * * * *
    (h) * * *
    (2) * * *
    (iv) * * * The calculations shall be based upon the gross receipts 
from subscribers within the relevant communities. No cable system shall 
make its calculations based solely on the number of subscribers 
receiving a particular signal. For partially-distant stations, gross 
receipts shall be the total gross receipts from subscribers outside the 
local service area.''
* * * * *

PART 256--ADJUSTMENT OF ROYALTY FEE FOR CABLE COMPULSORY LICENSE

    4. The authority citation for part 256 continues to read as 
follows:

    Authority: 17 U.S.C. 801-803.

    5. Section 256.2(a)(1) is amended by removing the word ``fee'' and 
adding the word ``fees'' before the phrase ``, if any,''.
    6. Section 256.2(a)(1) is amended by adding the phrase ``and (c)'' 
after ``(4)''.
    7. Section 256.2(c) is amended by adding the phrase ``(2) through 
(4)'' after the ``(a)'' in the phrase which reads ``the royalty rate 
shall be in lieu of the royalty rates specified in paragraphs (a) and 
(d) of this section,''.

    Dated: May 7, 1998.
Marybeth Peters,
Register of Copyrights.
[FR Doc. 98-12652 Filed 5-13-98; 8:45 am]
BILLING CODE 1410-31-P