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[Federal Register Volume 89, Number 239 (Thursday, December 12, 2024)]
[Rules and Regulations]
[Pages 100348-100361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28984]

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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. 2005-6]

Statutory Cable, Satellite, and DART License Reporting Practices

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Final rule.

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SUMMARY: The U.S. Copyright Office (``Office'') is issuing a final rule 
governing royalty reporting practices of cable operators, and the 
Statement of Account form and filing requirements. This final rule 
makes regulatory changes regarding procedures for cable system 
operators. In some areas, similar changes are being made to the 
regulations governing statutory licenses for satellite carriers and 
digital audio recording devices or media.

DATES: Effective January 27, 2025.

FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the 
General Counsel, by email at [email protected], or by telephone at 
202-707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

A. Statutory Background

    Section 111 of the Copyright Act (``Act''), title 17 of the United 
States Code, provides cable operators with a statutory license to 
retransmit a performance or display of a work embodied in a ``primary 
transmission'' made by a television station licensed by the Federal 
Communications Commission (``FCC''). Cable operators that retransmit 
broadcast signals in accordance with this provision are required to pay 
royalty fees to the Copyright Office (``Office''), among other 
requirements. The royalty amounts are determined based on a specified 
percentage of cable operators' reported gross receipts collected for 
secondary transmissions, as well as additional amounts for any distant 
signal equivalent (``DSEs'') carried by the cable system.\1\ These 
royalty fees are remitted semi-annually to the Office, which invests 
the royalties in United States Treasury securities pending distribution 
to copyright owners eligible to receive a share of the royalties.\2\
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    \1\ 17 U.S.C. 111(d)(1)(B).
    \2\ Id. at 111(d)(2). The Office distributes those royalties in 
accordance with periodic distribution orders issued by the Copyright 
Royalty Board (``CRB''). Id.
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    In conjunction with their royalty payments, cable operators must 
complete and file statements of account (``SOAs''), which provide a 
record regarding their retransmissions and associated royalty payments 
to ``promote uniform and accurate reporting, assist cable operators in 
meeting their obligations under the Act and regulations, and aid 
copyright owners, the Copyright Office, and the Copyright [Royalty 
Judges] in reviewing and using the information provided.'' \3\ Section 
111 identifies a variety of information that must be reported to the 
Copyright Office on the SOA, including the number of channels by which 
the system made secondary transmissions, the names and locations of all 
primary transmitters used, and, as particularly relevant here, the 
``total number of [cable system] subscribers'' and the ``gross 
amounts'' paid to the cable system by these subscribers ``for the basic 
service of providing secondary transmissions of primary broadcast 
transmitters.'' \4\
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    \3\ Compulsory License for Cable Systems, 42 FR 61051, 61054 
(Dec. 1, 1977) (explaining benefits of using a standard SOA form, 
referencing the Copyright Royalty Tribunal, a precursor to the 
current Copyright Royalty Judges system). See 17 U.S.C. 
111(d)(1)(A).
    \4\ 17 U.S.C. 111(d)(1)(A).
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    Section 111 tasks the Register of Copyrights (``Register'') with 
prescribing the specific requirements for the SOA by regulation.\5\
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    \5\ 17 U.S.C. 111(d)(1).
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B. Regulatory Background

    As directed by section 111, the Office has adopted regulations to 
implement the statute's reporting requirements \6\ as well as the 
design of the SOA form.\7\ In 1977, to address the law's requirement 
that the ``number of subscribers'' and ``gross amounts'' paid to cable 
operators be reported,\8\ the Office ``proposed . . . that the number 
of subscribers be accompanied by certain related information concerning 
subscriber categories and charges in order reasonably to accomplish 
this

[[Page 100349]]

purpose.'' \9\ In the subsequent 1978 final rule, which adopted 
regulatory language almost identical to the present Sec.  201.17(e)(6), 
the Office noted that ``although this information `will not provide a 
definitive or detailed comparison with the reported gross receipts,' it 
will be useful for at least a rough comparison with the reported gross 
receipts, and gives meaning to the statutory requirement that the 
`number of subscribers' be given.'' \10\ The Office has consistently 
followed this approach in its subsequent rulemakings in this area.
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    \6\ 37 CFR 201.17(e)(6) and (7).
    \7\ Id. Sec.  201.17(d). The SOA forms are available in PDF and 
Excel format on the Office's website at https://www.copyright.gov/licensing/sec_111.html.
    \8\ 17 U.S.C. 111(d)(2) (1977).
    \9\ 42 FR at 61054.
    \10\ 43 FR 958, 959 (Jan. 5, 1978).
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    The Office's current regulations require the following information, 
among other data, to be reported on SOAs by cable operators: ``[t]he 
designation `Area Served', followed by the name of the community or 
communities served by the system''; ``[a] brief description of each 
subscriber category for which a charge is made by the cable system for 
the basic service of providing secondary transmissions of primary 
broadcast transmitters''; ``[t]he number of subscribers to the cable 
system in each such subscriber category''; and ``[t]he charge or 
charges made per subscriber to each such subscriber category for the 
basic service of providing such secondary transmissions.'' \11\ The SOA 
form organizes this information into specific areas, several of which 
are relevant to this rulemaking. Space D of the SOA (titled ``Area 
Served'') requests information identifying ``each separate community 
served by the cable system.'' Space E (titled ``Secondary Transmission 
Service: Subscribers and Rates'') requests information that ``should 
cover all categories of secondary transmission service of the cable 
system,'' including ``the number of subscribers to the cable system, 
broken down by categories of secondary transmission service,'' and the 
``rate charged for each category of service.'' \12\ Space K (titled 
``Gross Receipts'') requires cable operators to ``[e]nter the total of 
all amounts (gross receipts) paid to [the] cable system by subscribers 
for the system's secondary transmission service (as identified in Space 
E) during the accounting period.'' \13\ Finally, Space F (titled 
``Services Other Than Secondary Transmissions: Rates'') requires cable 
operators to list rate information ``with respect to all . . . services 
that were not covered in space E, that is, those services that are not 
offered in combination with any secondary transmission service for a 
single fee.'' \14\
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    \11\ 37 CFR 201.17(e)(4), (6)(i) through (iii).
    \12\ Paper Form SA1-2 at 2, Space E (``Short Form SOA''); Paper 
Form SA3 at 2, Space E (``Long Form SOA'').
    \13\ Short Form SOA at 6, Space K; Long Form SOA at 7, Space K; 
see also 37 CFR 201.17(e)(6) and (7) (describing corresponding SOA 
requirements).
    \14\ Short Form SOA at 2, Space F; Long Form SOA at 2, Space F. 
See 37 CFR 201.17(e)(8).
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C. Procedural Background

    This rulemaking began after the Motion Picture Association of 
America, Inc. (``MPA'') \15\ filed a petition on behalf of its member 
companies and other producers and/or distributors of movies and 
television series (hereinafter ``Program Suppliers'') asking the Office 
to address a number of issues relating to the SOA reporting practices 
of cable operators under section 111.\16\ The Program Suppliers 
expressed concerns that the subscriber and rate information reported by 
cable operators under the Office's regulations failed to provide 
sufficient data to support the intended ``rough comparison'' copyright 
owners should be able to conduct between subscriber information and 
gross receipts. Their concerns focused on the relationship between the 
information provided in Space E and Space K.\17\ They asked the Office 
to ``require greater congruity between the `gross receipts' information 
and the subscriber and rate information provided on the SOAs,'' and 
``greater detail concerning the nature of revenues that a cable 
operator includes and excludes in its `gross receipts.' '' \18\
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    \15\ The Motion Picture Association of America is now known as 
the Motion Picture Association, or MPA.
    \16\ The petition can be found at https://www.copyright.gov/rulemaking/section111/petition20050607.pdf (the ``Petition'').
    \17\ Program Suppliers Initial NOI Comment at 6. Broadcast 
Music, Inc., The American Society of Composers, Authors and 
Publishers, Broadcast Music Inc., and SESAC, Inc. (collectively, 
``Music Claimants'') submitted their own comments in response to the 
NOI, stating that ``as a general matter, [they] support MPAA's 
comments and proposed revisions to the SOAs.'' Music Claimants 
Initial NOI Comment at 2.
    \18\ Petition at 3; see also Program Suppliers Initial NOI 
Comment at 5-7.
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    After reviewing the Petition, the Office published a notice of 
inquiry (``NOI'') seeking comment on the regulatory proposals and 
recommendations raised by the Program Suppliers.\19\ Multiple parties 
submitted responsive comments and reply comments.\20\ After the NOI's 
publication, Congress took action that addressed some of the issue 
raised by the Office. The Satellite Television Extension and Localism 
Act of 2010 (``STELA''), followed by the STELA Reauthorization Act of 
2014 (``STELARA''),\21\ made amendments to section 111, including the 
royalty rate calculations for cable operators and addressing the 
transition to digital television broadcasts.\22\ STELA also added a 
right for copyright owners to conduct confidential audits to verify the 
information provided on the SOAs.\23\ The Register of Copyrights was 
directed to issue regulations establishing the procedure by which 
copyright owners could pursue a confidential audit to ``confirm the 
correctness of the calculations and royalty payments reported'' on SOAs 
commencing on or after January 1, 2010.\24\ These regulations were 
enacted in 2014.\25\
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    \19\ 71 FR 45179 (Aug. 10, 2006).
    \20\ The Office received six comments and three reply comments 
to the NOI. The initial and reply comments to the NOI have been 
posted on the Office's website at https://copyright.gov/rulemaking/section111.
    \21\ See Satellite Television Extension and Localism Act of 
2010, Public Law 111-175, 124 Stat. 1218 (2010); STELA 
Reauthorization Act of 2014, Public Law 113-200, 128 Stat. 2059 
(2014).
    \22\ 17 U.S.C. 111(d)(1)(B) through (F), (f)(4).
    \23\ Id. at 111(d)(6). See 37 CFR 201.16.
    \24\ 17 U.S.C. 111(d)(6); 37 CFR 201.16(h), (1), (o).
    \25\ Verification of Statements of Account Submitted by Cable 
Operators and Satellite Carriers, 79 FR 68628 (Nov. 18, 2014).
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    In 2017, the Office published a notice of proposed rulemaking 
(``NPRM'') on the NOI issues that remained open after the intervening 
statutory and regulatory changes.\26\ In addition, the rulemaking 
proposed revisions to SOA forms and/or the Office's related regulations 
to streamline administration of SOAs. The responses to the NPRM \27\ 
reflected agreement on some proposals, but also raised a number of 
issues for the Office to consider and address before finalizing this 
rule. The Office convened multiple ex parte meetings with groups of 
stakeholders to discuss these issues and to attempt to narrow areas of 
disagreement.\28\ Having reviewed and considered the feedback received 
in response to the NOI and NPRM, the Office is issuing a final rule 
that adopts certain of its proposals, withdraws others, and makes some 
modifications.\29\
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    \26\ Statutory Cable, Satellite, and DART License Reporting 
Practices, 82 FR 56926 (Dec. 1, 2017).
    \27\ The comments are posted on the Office's website at https://copyright.gov/rulemaking/section111.
    \28\ The majority of the ex parte meetings occurred in 2019 and 
2020. The Office requested additional input in late 2022. The 
letters reflecting the ex parte discussions can be found at https://copyright.gov/rulemaking/section111/ex-parte-communications.
    \29\ The Office has adopted the organization and section 
headings in the NPRM for consistency.
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II. Summary of Final Rule

    After careful consideration of the comments and the record as a 
whole, the Office is adopting several changes to

[[Page 100350]]

the regulations governing SOAs. First, the Office is revising the 
regulatory definition of ``gross receipts'' to clarify that equipment 
fees (formerly called ``converter'' fees) and broadcast fees must be 
included and reported in Space E. Second, the final rule removes the 
regulatory provision requiring remitters to provide information 
regarding ``Services Other Than Secondary Transmissions: Rates'' in 
Space F, and eliminates all references to Grade B contour in Sec.  
201.17 and on the cable SOAs. Third, the final rule revises reporting 
requirements related to the name of the community or communities served 
by requiring cable system operators to provide ``county'' information 
in Space D. Fourth, while the Office is withdrawing proposals to amend 
the regulatory definition of the phrase ``cable system'' and to require 
more detailed reporting of subscriber and rate information in Space E, 
it is amending Space E to require that operators fill in the spaces 
requesting information regarding categories of service.
    Finally, the final rule makes several technical amendments and 
revises certain reporting practices that are also pertinent to the 
filing of SOAs for other statutory licenses. For example, it clarifies 
that cable system operators must use the SOA form prescribed by the 
Office, and include any and all information requested in the 
instructions for the SOA, as well as the information required by the 
regulations. The final rule also includes the technical changes 
proposed in the NPRM relating to the processing of refunds, 
supplemental or amended payments, and calculation of interest, as well 
as case management procedures. These latter changes will be reflected 
in parallel amendments to regulations for satellite carrier and digital 
audio recording equipment and media.
    The amendments to the regulations reflected in this rule require 
the development of new SOA forms, which the Office is preparing. Until 
new forms are developed, cable service operators should use the most 
current forms posted on the Office's website while complying with the 
new regulatory requirements regarding the information to be reported.

III. Section 111--Specific Changes

A. Program Suppliers' Request for Greater Congruity Between Reported 
Subscriber and Rate Information (Space E) and Gross Receipts (Space K)

    In response to the Program Suppliers' original request that cable 
operators provide more detailed information on the SOA, the NPRM 
proposed a number of changes to the information sought in Space E 
regarding subscribers. Having reviewed and considered all of the 
comments received, the Office has been persuaded not to make the 
majority of the proposed changes and only to make minor adjustments to 
accommodate its conclusions about reporting equipment fees and 
broadcast fees. Its specific findings and conclusions are explained 
below.
1. Proposed Requirement To Provide More Detailed Reporting of 
Subscriber and Rate Information (Space E)
    37 CFR 201.17(e)(6) currently requires remitters to provide in 
Space E ``[a] brief description of each subscriber category for which a 
charge is made by the cable system for the basic service of providing 
secondary transmissions of primary broadcast transmitters.'' \30\ The 
regulation further states that ``[e]ach entity (for example, the owner 
of a private home, the resident of an apartment, the owner of a motel, 
or the owner of an apartment house) . . . shall be considered one 
subscriber'' \31\ subject to charges by the cable system for the basic 
service of providing secondary transmissions. These requirements are 
intended to complement the regulatory definition of ``gross receipts,'' 
which includes ``the full amount of monthly (or other periodic) service 
fees for any and all services or tiers of services which include one or 
more secondary transmissions of television or radio broadcast signals, 
for additional set fees, and for converter fees.'' \32\
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    \30\ 37 CFR 201.17(e)(6)(i). As a result of other changes made 
in this rule, Sec.  201.17(e)(6) will be renumbered as Sec.  
201.17(e)(2).
    \31\ Id. Sec.  201.17(e)(6)(iii)(B).
    \32\ Id. Sec.  201.17(e)(6)(i).
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    In response to the request for more granularity, the NPRM proposed 
to update the subscriber and rate information required in Space E to 
require remitters to break out subscription data into separate tiers of 
service and list the per-tier rate or range of rates. The intent was to 
provide copyright owners with more information when deciding whether to 
make use of the audit right included in section 111.
    In its initial comments to the NPRM, AT&T disagreed with the 
Office's proposal.\33\ It stated that the availability of audits after 
passage of STELA, through which companies make their books available 
for inspection by copyright owners, rendered unnecessary the additional 
information proposed in the NPRM. In addition, AT&T noted that 
compliance with the proposed regulations would result in significant 
extra work and expense for cable companies.\34\ NCTA--The Internet and 
Television Association (``NCTA'') also opposed the proposal. It stated 
that, due to the bundling of services and ``promotional discounts,'' 
providing the information proposed in the NPRM would be onerous and 
could lead to the disclosure of the cable companies' proprietary 
information.\35\
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    \33\ AT&T Initial NPRM Comments at 2-5.
    \34\ Id. at 3-6.
    \35\ NCTA Initial NPRM Comments at 6-7.
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    In their initial comments, the Copyright Owners observed that ``the 
disparities [between Space K and Space E] seem to rest largely, though 
not fully, on a disconnect between (1) the monthly rate that 
subscribers must actually pay to receive broadcast signals and (2) the 
monthly service fees that cable operators report in Space E.'' \36\ 
They questioned whether the NPRM's Space E proposal would provide 
``rough comparability'' with Space K ``unless the rate information 
reflects what subscribers actually pay to receive broadcast signals.'' 
\37\ They suggested instead that cable operators report ``each category 
of service that includes retransmitted broadcast signals, with the 
number of subscribers in each group, the published rate card fee for 
each, and average monthly fee actually paid.'' \38\ In its reply 
comments, NCTA opposed the Copyright Owners' proposed requirement for 
reporting monthly subscriber information. Instead, it suggested 
reducing the number of categories of service reported on Space E.\39\
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    \36\ Copyright Owners I Initial NPRM Comments at 5. In their 
initial NPRM comments, the Copyright Owners included the MPA, Joint 
Sports Claimants, the National Association of Broadcasters 
(``NAB''), Public Broadcasting Service, Settling Devotional 
Claimants, and Canadian Claimants Group (``Copyright Owners I'').
    \37\ Id. at 6.
    \38\ Id. at 6-7.
    \39\ NCTA Reply NPRM Comments at 11-12, 14-15.
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    In subsequent ex parte meetings with the Office, NCTA and MPA 
jointly proposed that the current Space E requirements be replaced with 
requirements that cable operators report aggregated average number of 
monthly subscribers for the six-month accounting period and average 
monthly per subscriber fees collected during that period.\40\ In 
response to the joint NCTA-MPA proposal, the Copyright Owners,\41\

[[Page 100351]]

in a separate ex parte meeting, stated that section 111 permits the 
Office to require reporting of ``other data,'' and is not limited to an 
aggregated six month report.\42\ They further stated that reporting 
monthly averages, as opposed to a six-month aggregate, would not be 
``unduly burdensome.'' \43\ Responding to these statements, NCTA and 
MPA expressed concern that by providing monthly data, instead of a six-
month average, ``competitors could use that information to their 
competitive advantage by closely tracking the operator's relative 
success and failure under discrete promotional campaigns.'' \44\
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    \40\ Letter from Mary Beth Murphy, Vice Pres. & Dep. Gen. Coun. 
NCTA to Regan A. Smith, Gen. Coun. & Assoc. Register of Copyrights, 
U.S. Copyright Office, May 20, 2020, attachment at 2 (``NCTA-MPA Ex 
Parte Letter #1'').
    \41\ As referenced here, the Copyright Owners no longer include 
the MPA. However, they have stated that they collectively received 
approximately 78% of the royalty fees distributed in the most recent 
distribution by the CRB. Letter from Daniel A. Cantor, Esq., Arnold 
& Porter, to Anna B. Chauvet, Esq., Assoc. Gen. Coun., U.S. 
Copyright Office, Sept. 16, 2020, at 1 (``Copyright Owners II Ex 
Parte Letter #5'').
    \42\ Letter from John I. Stewart, Jr., Crowell & Moring, to 
Regan A. Smith, Gen. Coun. & Assoc. Register of Copyrights, U.S. 
Copyright Office, June 18, 2020, at 2-3 (``Copyright Owners II Ex 
Parte Letter #4'').
    \43\ Id. at 3.
    \44\ Letter from Mary Beth Murphy, Esq., NCTA, and Dennis Lane, 
Esq., Stinson, LLP, to Regan A. Smith, Gen. Coun. & Assoc. Register 
of Copyrights, U.S. Copyright Office, July 30, 2020, at 7 (``NCTA-
MPA Ex Parte Letter #3'').
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    The Office appreciates the inputs from stakeholders, including 
their efforts to narrow their differences. It is apparent from the 
comments of the parties, and their statements at ex parte meetings, 
that they do not support the NPRM proposal to provide more detail in 
Space E. The Office is therefore withdrawing its proposal. At the same 
time, it declines to adopt the NCTA-MPA proposal to limit Space E 
reporting to a six-month aggregation of subscribers and average rates. 
It concludes that this proposal would not provide sufficient 
information to allow the Copyright Owners to make the ``rough 
comparison'' between the gross receipts reported in Space K and the 
subscriber information reported in Space E. Therefore, except as 
described below, the Office is not changing the requirements of Space E 
at this time. It will continue to monitor the issue of comparability 
between Space E and Space K going forward.
    The final rule includes several changes to Space E that were either 
raised by the NPRM or introduced during the comment process and fully 
considered by stakeholders during the rulemaking proceeding. Specially, 
the Office is revising the regulatory definition of ``gross receipts'' 
to make clear that equipment fees (formerly called ``converter'' fees) 
and broadcast fees must be included in gross receipts and reported in 
Space E. The Office will revise its Section E instructions for the SOA 
accordingly. The rationale for these amendments is discussed in Section 
3 below.
    In addition, as discussed in the NPRM, the Office will require that 
spaces on the SOA seeking information regarding categories of service 
not be left blank.\45\ If a cable operator does not serve a specific 
category, a ``zero'' or a ``N/A'' (not applicable) must be reported in 
the appropriate space. These revisions are intended to facilitate the 
review of cable SOAs by the Office's Licensing Division; they will be 
implemented in the instructions to Space E in the SOA and do not 
require amending the regulations.
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    \45\ 82 FR at 56930.
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2. Reporting of Bundled Services in Gross Receipts (Space K)
    The NPRM also addressed how gross receipts should be reported when 
cable services are offered by cable operators as part of a ``bundle'' 
of services to subscribers. For example, many cable operators now offer 
video services plus internet and/or voice services together at a price 
that is less than what a subscriber would pay to subscribe to each 
service separately (so-called ``double play'' and ``triple play'' 
bundles).\46\ Noting that the Office receives questions on how gross 
receipts for cable services should be reported when sold as part of a 
bundle, the NPRM stated that it was ``considering whether to amend its 
regulations to provide specific guidance on how remitters should report 
cable television services sold as a bundled service.'' It proposed the 
addition of the following new language in its regulatory definition of 
``gross receipts'' to address bundled services: when cable services are 
bundled with non-cable services, ``gross receipts shall not include any 
fees collected from subscribers for the sale of internet services or 
telephony services when such services are bundled together with cable 
service.'' ``[I]nstead, when cable services are sold as part of a 
bundle of other services, gross receipts shall include fees in the 
amount that would have been collected if such subscribers received 
cable services as an unbundled stand-alone product.'' \47\ The Office 
sought public comment on the proposed definition and ``on how cable 
operators currently report the price of cable television service in 
gross receipts on their SOAs when it is sold as part of a bundle of 
services, and whether the Office's regulations should be amended to 
provide more guidance.'' \48\
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    \46\ Id. at 56931.
    \47\ Id. at 56937.
    \48\ Id. at 56931.
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    The NPRM proposal is consistent with the Office's decades-long 
interpretation of ``gross receipts'' in section 111 as requiring 
reporting of all subscription fees collected by a cable operator when 
its service includes broadcast stations. For example, when a video 
service tier includes both broadcast and non-broadcast stations, the 
Office requires the cable operator to report all of the revenues from 
the broader tier to be included in gross receipts, not just the 
revenues that would have been garnered from a broadcast-only tier. This 
interpretation of gross receipts, barring proration of mixed cable 
channel tiers, was issued in 1984.\49\ In other words, cable operators 
are not permitted to prorate gross receipts within tiers of service 
that contain broadcast channels according to the ratio of broadcast to 
non-broadcast channels in a given tier.
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    \49\ See 49 FR 13029, 13035 (1984).
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    In their initial comments, NCTA agreed that the exclusion of 
internet and voice services in the proposed rule was proper.\50\ At the 
same time, however, it suggested that the Office substantively change 
its approach to the reporting of revenue in this circumstance. It asked 
the Office to recognize generally accepted accounting principles, or 
GAAP, as the method for determining the amount of revenue to be 
reported for bundled services.\51\ It suggested that employing GAAP 
would be a more appropriate standard for reporting the video portion of 
the bundled revenue than the proposed rule and pointed out that other 
compulsory licenses use GAAP in their analyses.\52\ NCTA criticized the 
proposed rule on the grounds that it purportedly assigns the discount 
for the bundled services to the non-video services and therefore allows 
royalty payments to be computed against revenue from services that do 
not include broadcast video.\53\
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    \50\ NCTA Initial NPRM Comments at 12.
    \51\ Id. at 10-18.
    \52\ Id. at 13-14 & n.37.
    \53\ Id. at 14-15. NCTA stated that, under GAAP, the discount 
for the bundle would be assigned in a manner proportionate to the 
unbundled prices of the separate services. Id. at 14.
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    In support of its comments, NCTA submitted the declaration of 
Professor William Holder, which states that GAAP is the method 
recognized as the most authoritative for businesses to prepare their 
financial statements.\54\ As explained by Prof. Holder, the

[[Page 100352]]

application of GAAP by the Financial Accounting Standards Board 
(``FASB'') is intended to provide financial information that is 
relevant and a ``faithful representation'' of the financial status of 
the business that is neutral and non-biased.\55\ His declaration states 
that several regulatory bodies require businesses to present their 
financial statements in accordance with GAAP.\56\ According to Prof. 
Holder, applying the principles of GAAP, the FASB has created a method 
of allocating the revenue received in a bundled discount 
arrangement.\57\ In his view, this allocation is ``based on the 
relative proportion of each element in the arrangement to the total 
consideration that is expected to be received.'' \58\ He concludes that 
using a GAAP approach would allocate the discount in the bundled price 
to each element according to its relative percentage of the unbundled 
price of the group of discounted goods or services.\59\
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    \54\ Declaration of Prof. William Holder, October 3, 2018, at 5, 
attached as Exhibit A to NCTA Initial NPRM Comments (``Holder 
Declaration'').
    \55\ Holder Declaration at 6.
    \56\ Id. at 7.
    \57\ Id. at 9. Prof. Holder's declaration further states that 
this methodology is not limited to cable service bundling; it is 
applicable generally to businesses offering a group of products or 
services at a discounted price from the sum of their separate 
prices. Id.
    \58\ Id.
    \59\ Thus, if the unbundled prices of cable, internet, and voice 
services were $10, $10, and $5 per month respectively, and the 
bundled price was $20 per month for all three, the cable portion 
would be allocated at 40% of the bundled price ($10/$25), or $8. The 
proposed rule, by contrast, would require reporting of $10 per month 
in the gross receipts.
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    In their initial comments, Copyright Owners I, whose members then 
included the MPA, Joint Sports Claimants, the National Association of 
Broadcasters (``NAB''), Public Broadcasting Service, Settling 
Devotional Claimants, and Canadian Claimants Group,\60\ stated that 
there was disagreement among the group as to the proper method of 
reporting bundled services.\61\ They agreed with the Office that 
internet and voice services should not be included in gross receipts 
\62\ and noted that the language of the proposed rule appeared to track 
``prior Office and judicial guidance concerning the meaning of the term 
Gross Receipts.'' \63\ In their first reply comments responding to 
NCTA's proposal, the they stated that they ``do not have a common 
position on the issue'' and indicated that they would file separate 
comments.\64\
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    \60\ As noted below, in later comments the MPA sided with NCTA 
on this issue.
    \61\ Copyright Owners I Initial NPRM Comments, at 7-8.
    \62\ Id. at 8.
    \63\ Id.
    \64\ Copyright Owners I NPRM Reply Comments, at 7.
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    In their second reply comments, the Copyright Owners II--
representing the same groups as before except for the MPA--stressed 
that the Office's proposed rule ``is consistent with (and indeed 
mandated by) the Office's longstanding interpretation of the term Gross 
Receipts.'' \65\ They stated that ``where CSOs [cable service 
operators] offer bundled products or services that include broadcast 
signals, they must include in Gross Receipts the full amount that they 
charge subscribers to receive the Basic Service alone.'' \66\ They 
suggested that NCTA's proposal would be contrary to the Cablevision 
decision, in which the court upheld the Office's interpretation of 
gross receipts as including the total revenues from any tier of video 
services that includes broadcast services.\67\ They took the position 
that, whatever the merits of GAAP in various other contexts, the 
statutory mandate of section 111 was to the contrary.\68\ From their 
perspective, employing GAAP would permit greater subjectivity in the 
reporting of revenues than was implied by NCTA's comments,\69\ and 
would be unfair to copyright owners.\70\ For example, different bundles 
offered by a single cable operator might contain a variety of different 
video services, not all of which would have a stand-alone price.\71\
---------------------------------------------------------------------------

    \65\ Copyright Owners II NPRM Reply Comments at 2.
    \66\ Id. at 3. Copyright Owners II also dispute the assertion in 
the Holder Declaration that cable operators ``generally'' use GAAP 
when reporting gross receipts for bundled services. Rather Copyright 
Owners II assert that their audits have found that ``while some CSOs 
improperly utilize what they interpret to be GAAP, other CSOs 
properly follow the Office's existing rules and have included in 
Gross Receipts the subscriber revenues as required by precedent and 
not GAAP.'' Id. at 4.
    \67\ Copyright Owners II NPRM Reply Comments at 3. See id. at 4-
8 (discussing the applicability of Cablevision).
    \68\ Id. at 10-11.
    \69\ Id. at 4, 11-14.
    \70\ Id. at 14.
    \71\ Id. at 12-13.
---------------------------------------------------------------------------

    Copyright Owners II submitted a declaration from Sam D. Wild, CPA, 
in response to Prof. Holder's declaration submitted by NCTA.\72\ Mr. 
Wild stated that although it is appropriate to use GAAP in financial 
reporting, ``calculating royalties is different than and distinct from 
preparing financial statements.'' \73\ He stated that royalties are 
calculated according to contracts or statutory mandates, which may 
differ from the requirements of GAAP.\74\ He also stated that GAAP 
would not provide an easy answer if each service in the bundle does not 
have a separate stand-alone price; he asserted that in such a 
circumstance, using GAAP would increase the subjectivity of the 
calculation.\75\
---------------------------------------------------------------------------

    \72\ Declaration of Sam D. Wild, CPA, October 24, 2018, attached 
as Exhibit 1 to Copyright Owners II Reply Comments (``Wild 
Declaration'').
    \73\ Wild Declaration at 2.
    \74\ Id.
    \75\ Id. at 3.
---------------------------------------------------------------------------

    In its reply comments, NCTA repeated its suggestion that GAAP 
provides the proper method for reporting revenues from bundled 
services.\76\ It reiterated that the proposed rule would apply the 
bundle discount to the non-video services only, which NCTA claimed 
would result in royalties being paid on non-video revenues.\77\ It 
suggested that using GAAP aided consumers by allowing cable operators 
to offer bundles in a competitive market, giving consumers additional 
choices at a variety of price levels.\78\ NCTA again stated that GAAP 
is a well-recognized method of accounting for revenues, and that it is 
used by the government, including the Office, in other contexts.\79\
---------------------------------------------------------------------------

    \76\ NCTA Reply NPRM Comments at 2-6.
    \77\ Id. at 3.
    \78\ Id.
    \79\ Id. at 5-6.
---------------------------------------------------------------------------

    In their separate reply comments, Program Suppliers also supported 
the use of GAAP for reporting bundled revenues. They stated that the 
circumstances in the cable industry today are significantly different 
from those in 1988, when Cablevision was decided and when the Office 
issued regulations implementing that decision.\80\ They took the 
position that the bundling of non-video with video services at a single 
price is not the same as combining broadcast and non-broadcast channels 
in a single tier at a single price.\81\ They stated that the changed 
circumstances ``demonstrates that the Office could adopt a new gross 
receipts interpretation to allow use of GAAP methodology, . . . but 
still leaves open the question of whether adoption of the GAAP 
methodology would be consistent with Section 111's purpose and 
intent.'' \82\ Program Suppliers stated that the use of GAAP 
``represents a change from how gross receipts were calculated under the 
1988 Notice's policy,'' but argued that GAAP now represents the more 
appropriate method of reporting bundled revenues.\83\
---------------------------------------------------------------------------

    \80\ Reply Comments of Program Suppliers at 2-3 (Oct. 25, 2018).
    \81\ Id. at 5.
    \82\ Id. at 4 (emphasis in original).
    \83\ Id. at 7-8. The 1988 Notice refers to the Office's Notice 
of Policy Decision, issued on January 28, 1988. See Compulsory 
License for Cable Systems, Reporting of Gross Receipts, 53 FR 2493 
(Jan. 28, 1988). In subsequent ex parte meetings with the Office, 
the parties reiterated their positions relating to the applicability 
of GAAP. See Letter from Mary Beth Murphy, Esq., NCTA and Dennis 
Lane, Esq., Stinson, LLP, to Regan A. Smith, Gen. Coun. & Assoc. 
Register of Copyrights, U.S. Copyright Office, May 22, 2020, at 4-5 
(``NCTA-MPA Ex Parte Letter #2''); NCTA-MPA Ex Parte Letter #3, at 
4-6; Letter from Daniel A. Cantor, Esq., Arnold & Porter, to Regan 
A. Smith, Esq., Gen. Coun., U.S. Copyright Office, June 10, 2020, at 
2-3 (``Copyright Owners II Ex Parte Letter #2''); Copyright Owners 
II Ex Parte Letter #5 at 3-4.

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[[Page 100353]]

    The Office appreciates the efforts of the commenters to assist its 
decision-making through their comments and by supplying declarations of 
accounting experts.\84\ After careful consideration of the comments and 
declarations, as well as ex parte meetings held in 2020 and 2022 which 
are publicly captured in ex parte letters provided to the Office, the 
Office has decided that its proposal in the NPRM is most consistent 
with its longstanding interpretation of gross receipts under section 
111, which it has applied consistently. On the current record, the 
Office believes that its proposed rule reflects the appropriate 
interpretation of the statute and is not persuaded that GAAP 
necessarily leads to a simpler and more appropriate calculation of the 
value of the video services in a bundle in the context of section 111 
and congressional intent. To the contrary, the Office concludes that 
changing its interpretation of gross receipts at this time is not 
supported by the record or by the statute.
---------------------------------------------------------------------------

    \84\ See generally Holder Declaration; Wild Declaration.
---------------------------------------------------------------------------

    For example, Professor Holder's implementation of GAAP in his 
declaration assumes that consumer preferences and valuation of the 
constituent services in a bundle are accurately measured by the 
proportionate ``rack rate'' of each service sold separately. But that 
assumption is not necessarily correct.\85\ Bundling may be a reflection 
of the cable operator's desire to maximize revenue, with the 
understanding that consumers may not value the other services in the 
bundle (e.g., internet and/or voice) enough to pay the full asking 
price, and that a discounted bundle that includes those other services 
at a price slightly higher than the video alone, maximizes cable system 
revenue. The record does not provide information on this issue, nor is 
it clear that the calculation would be the same for every bundle of 
services. Moreover, there is no evidence in the record about the cost 
of including the additional services in the bundle; if the marginal 
cost of including internet and voice services is very small, then a 
revenue maximizing cable system could increase revenue and profit by 
including those services at just above their marginal cost.\86\ 
Finally, the record does not supply information about the extent to 
which bundled services are available as stand-alone offerings. Thus, it 
is difficult for the Office to determine whether the use of GAAP in 
these circumstances would be an appropriate measure of the value of the 
video services that must be included in gross receipts. Moreover, it is 
not clear that GAAP must be interpreted as Professor Holder's example 
indicates. If GAAP is more subjective than his example suggests--for 
example, because the bundled services are not all available at a stand-
alone price--then one of the goals of section 111, namely, simplicity 
of calculating gross receipts, would be undermined.\87\ As noted by the 
Program Suppliers, the use of GAAP is not mandated by the statute, and 
using GAAP would represent a change from the Office's existing 
interpretation of the statute.
---------------------------------------------------------------------------

    \85\ See also Determination of Rates and Terms for Preexisting 
Subscription Services and Satellite Digital Audio Ratio Services, 82 
FR 56725, 56734 (CRB, Nov. 30, 2017) (discussing the economic effect 
of bundling certain types of audio services).
    \86\ To be sure, if a consumer highly valued internet services 
and placed little value on video services, the calculation would 
work in reverse; the revenue maximizing cable operator would want to 
sell the internet services to that consumer at close to full price 
and add the other services at closer to their marginal cost. 
However, the record also does not contain information about the 
marginal cost of providing video services in addition to internet 
and/or voice services.
    \87\ See Cablevision Systems Development Co. v. Motion Picture 
Association of America, Inc., 836 F.2d 599, 611 (D.C. Cir. 1988) 
(``Congress never contemplated a precise congruence of the royalties 
paid and the amount of distant non-network programming actually 
carried. Instead, Congress picked a convenient revenue base and used 
the DSEs to discount it in a reasonable manner.'') (emphasis in 
original); id. at 612 (``Congress . . . chose an easily calculable 
revenue base and used the DSEs to approximate the value received by 
the cable companies.'').
---------------------------------------------------------------------------

    The Office believes that including the full, non-bundled value of 
the video services is consistent with Congress' intent that the ``gross 
receipts'' reported serve as the baseline against which royalties are 
calculated, and further concludes that its proposal is consistent with 
Congress' intent for gross receipts to be calculated simply (and, by 
implication, audited simply).
3. Reporting of Equipment Fees, Broadcast Fees, and Franchise Fees in 
Gross Receipts (Space E)
a. Equipment Fees
    The current regulations require cable operators to include 
``converter'' fees in their gross receipts. In the NPRM, the Office 
proposed to change the terminology in the definition of gross receipts 
from ``converter'' fees to ``equipment'' fees, in recognition that the 
latter is a more accurate description of what is currently sold or 
leased to cable subscribers.\88\ The Office viewed this proposal as a 
technical one ``intended to modernize regulatory terminology'' to align 
with cable operator's current practices.\89\
---------------------------------------------------------------------------

    \88\ 82 FR at 56930.
    \89\ Id.
---------------------------------------------------------------------------

    In initial comments to the NPRM, NCTA expressed no opposition to 
the proposal.\90\ At the same time, Copyright Owners I, which includes 
the MPA, supported the Office's technical change, while adding more 
broadly that ``if the cable operator charges subscribers for its use, 
and subscribers use the converter/equipment/app/device to obtain the 
basic service of providing retransmitted broadcast signals, the 
subscriber revenues should be included in gross receipts.'' \91\ In its 
reply comments, NCTA opposed the inclusion of any equipment fees in 
gross receipts, arguing that ``equipment fees are not service fees'' 
under section 111.\92\ It contended that such fees are becoming less 
important as more cable operators offer free apps to allow subscribers 
to view broadcast and video services on different devices.\93\
---------------------------------------------------------------------------

    \90\ See generally NCTA Initial NPRM Comment.
    \91\ Copyright Owners I Initial NPRM Comments at 7.
    \92\ NCTA Reply NPRM Comment at 6-7, 8-11.
    \93\ Id. at 10.
---------------------------------------------------------------------------

    In subsequent ex parte meetings with the Office, NCTA and the MPA 
announced that, as part of a compromise of their previous disagreements 
related to the rulemaking's proposals, they now jointly opposed the 
inclusion of equipment fees in gross receipts, while Copyright Owners 
II continued to express support for including them.\94\ Specifically, 
NCTA and MPA argued that, if a subscriber is given the option of 
accessing video services (including broadcast signals) through a free 
software application on the subscriber's television, and the subscriber 
still chooses to receive video services through equipment provided by 
the cable operator, then the equipment fees should not be included in 
gross receipts.\95\
---------------------------------------------------------------------------

    \94\ E.g., NCTA-MPA Ex Parte Letter #2, at 3-4 (opposing 
inclusion of equipment fees); Copyright Owners II Ex Parte Letter 
#2, at 1, 2 (supporting inclusion of equipment fees); Copyright 
Owners II Ex Parte Letter #5, at 2-3 (supporting inclusion of 
equipment fees).
    \95\ NCTA-MPA Ex Parte Letter #4, at 4.
---------------------------------------------------------------------------

    Consistent with its long-held view, the Office believes that, 
regardless of the descriptor used, equipment fees are properly included 
in gross receipts. The Office's approach in this area is well-
established.\96\ It requires the fees

[[Page 100354]]

charged to subscribers for the equipment necessary to access broadcast 
services be included in gross receipts.\97\ Due to a concern that some 
cable operators may be uncertain as to whether the regulations' current 
reference to ``converter fees'' includes modern equipment fees, the 
NPRM proposed amended language to eliminate that confusion.
---------------------------------------------------------------------------

    \96\ Since 1978, the Office's regulations have incorporated the 
concept that equipment fees--or ``converter fees''--would be 
included in gross receipts if they were necessary to access basic 
secondary transmissions. 43 FR 27827, 27832 (June 27, 1978).
    \97\ Letter from Dorothy Schrader, Gen. Coun., to James F. 
Ireland, Cole, Raywid & Braverman, October 11, 1989, attached as 
Exhibit A to NCTA Reply NPRM Comments.
---------------------------------------------------------------------------

    NCTA and MPA's position would eliminate equipment fees from gross 
receipts reported by a cable operator regardless of the amount of 
equipment fees that cable operators continue to collect from 
subscribers who choose the equipment option to access broadcast 
channels. The record does not support this result.
    Having fully considered all comments and ex parte submissions, the 
Office concludes that, when a cable operator offers to provide video 
services through a free software application, but a subscriber opts to 
forego the software application in favor of a cable box, then that 
equipment is no less necessary to the subscriber's ability to receive 
broadcast signals than before.\98\ Thus, gross receipts shall include 
all equipment charges collected for any equipment used to access 
broadcast signals. If the cable operator charges a fee for the use of a 
software application to be used in lieu of physical equipment used to 
receive broadcast services, then that fee should be included in gross 
receipts and the final rule so indicates.\99\
---------------------------------------------------------------------------

    \98\ See Copyright Owners II Ex Parte Letter #5, at 3.
    \99\ The Office notes that the record does not include 
information regarding whether cable operators offering subscribers a 
free software application for video services condition access to the 
application on the purchase of internet service, or other services, 
from the cable operator.
---------------------------------------------------------------------------

b. Broadcast Fees/Surcharges and Franchise Fees
    As background, the Office is aware that many cable operators 
separately itemize various fees in their bills to subscribers. In 
particular, many include separate charges for what are often termed a 
``Broadcast fee,'' or a ``Broadcast Surcharge,'' as well as a 
``Franchise fee.'' Broadcast surcharges represent some portion of fees 
paid by cable operators to broadcasters for permission to retransmit 
their signals. Franchise fees represent fees paid to local governments 
for permission to operate a cable television service in a particular 
area.
    The NPRM did not address broadcast fees or franchise fees. However, 
questions about whether these fees should be included in gross receipts 
were raised by commenters during the rulemaking proceeding and all 
parties had an opportunity to be heard on the question. The Office 
accordingly addresses the treatment of these fees in this final rule.
    The question of whether broadcast fees should be included within 
the definition of gross receipts was raised by Copyright Owners I in 
their initial comments to the NPRM.\100\ In written comments, NCTA 
initially expressed no opinion on broadcast surcharges.\101\ However, 
in subsequent ex parte meetings with the Office, NCTA and the MPA 
stated that they agreed to the inclusion of franchise fees and 
broadcast fees in gross receipts as part of their agreement referenced 
above.\102\ The Copyright Owners, for their part, stated that they 
believe broadcast fees (as well as equipment fees and franchise fees) 
should be included in gross receipts.\103\
---------------------------------------------------------------------------

    \100\ See Copyright Owners I Initial NPRM Comments at 10 (urging 
the Office to include broadcast surcharges in gross receipts 
``[b]ecause cable subscribers cannot receive broadcast signals 
without paying the broadcast surcharge (where imposed)'').
    \101\ NCTA Reply NPRM Comments at 7-8.
    \102\ NCTA-MPA Ex Parte Letter #2, at 3. See NCTA-MPA Ex Parte 
Letter #3, at 1-2 (noting that their agreement to include franchise 
fees and broadcast fees in gross receipts was predicated on an 
overall settlement of the other issues in the rulemaking).
    \103\ Copyright Owners II Ex Parte Letter #2, at 2.
---------------------------------------------------------------------------

    After careful consideration, the Office has determined that 
broadcast fees (whether denominated ``broadcast fees,'' broadcast 
surcharges,'' or other similar descriptions) should be included in 
gross receipts. By their very nature, broadcast fees are charges for 
the service of providing broadcast transmissions. Subscribers cannot 
receive broadcast transmissions without paying those charges. Thus, 
they fit comfortably within the scope of charges that traditionally 
have been included in gross receipts.
    The treatment of franchise fees was also raised by Copyright Owners 
I in their initial comments.\104\ As noted above, franchise fees are 
fees paid to local governments for the privilege of operating a cable 
service franchise within the territory of that government. As stated by 
NCTA, franchise fees could be described as a kind of tax levied on 
cable operators.\105\ While a tax or assessment imposed on cable 
operators that is passed on to all subscribers, and that subscribers 
must pay regardless of their tier of service, could fit within the 
traditional bounds of the definition of gross receipts, franchise fees 
do not appear to be directly linked to the service of broadcast 
transmissions in the same way that broadcast fees are linked. Thus, the 
Office concludes that, on the current record, franchise fees should not 
be included in gross receipts.
---------------------------------------------------------------------------

    \104\ See Copyright Owners I Initial NPRM Comments at 10 (urging 
the Office to include franchise in gross receipts ``[b]ecause 
franchise fees are part of the total amount cable subscribers pay to 
receive broadcast signals'').
    \105\ See NCTA Reply NPRM Comments at 7 (describing the 
franchise fee as ``an indirect tax for rights-of-way'').
---------------------------------------------------------------------------

4. Elimination of Space F in the SOA
    In the NPRM, the Office invited ``suggestions on streamlining or 
otherwise improving reporting practices for the section 111 license.'' 
\106\ In response, NCTA suggests eliminating Space F, stating that the 
information collected ``does not relate to the provision of secondary 
transmissions of broadcast service and thus its collection is neither 
mandated by Section 111(d)(1)(A) of the Act nor relevant to cable 
operators' payments of royalties pursuant to the compulsory license.'' 
\107\ Space F of the SOA, titled ``Services Other Than Secondary 
Transmissions: Rates,'' requires cable operators to list rate 
information ``with respect to all . . . services that were not covered 
in space E, that is, those services that are not offered in combination 
with any secondary transmission service for a single fee.'' \108\ The 
Office of the Commissioner of Baseball, Public Broadcasting Service, 
and attorneys Dennis Lane, Philip Hochberg, John Stewart, Ann Mace, 
Dustin Cho, John Beiter, Brian Coleman, Matthew Maclean, and Benjamin 
Sternberg (collectively, ``Owner Representatives'') agreed that Space F 
can be eliminated \109\ and Copyright Owners I commented they ``do not 
object'' to NCTA's proposal.\110\ In light of these comments, the 
Office has determined that eliminating Space F would help streamline 
reporting practices for cable

[[Page 100355]]

operators. The final rule thus eliminates the regulatory provision 
requiring remitters to provide information regarding ``Services Other 
Than Secondary Transmissions: Rates,'' \111\ and Space F will be 
removed from the cable SOA forms.\112\
---------------------------------------------------------------------------

    \106\ 82 FR at 56927.
    \107\ NCTA Initial NPRM Comment at 10; NCTA Ex Parte Letter Jan. 
24, 2019 at 2; NCTA & MPA Ex Parte Letter May 22, 2020 at 8 (``[T]he 
Office should not only delete Space F (and all references thereto) 
from the SOA forms, but also remove Section 201.17(e)(8) from its 
rules.'').
    \108\ Short Form SOA at 2, Space F; Long Form SOA at 2, Space F. 
See 37 CFR 201.17(e)(8).
    \109\ Owner Representatives Ex Parte Letter Aug. 15, 2019 at 2.
    \110\ Copyright Owners I Reply NPRM Comment at 6. See NCTA & MPA 
Ex Parte Letter May 22, 2020 at 10 (stating that commenting parties 
agree Space F can be eliminated); see NCTA & MPA Ex Parte Letter May 
20, 2020 Ex. at 3 (same).
    \111\ See 37 CFR 201.17(e)(8).
    \112\ As noted above, cable operators may continue to use the 
Office's existing SOA forms until the Office's new forms without 
Space F have been made publicly available. Until the new SOA forms 
are provided, cable operators need not complete Space F.
---------------------------------------------------------------------------

B. Definition of Phrase ``Cable System''

    The Office has maintained a consistent interpretation of the 
statutory definition of a cable system for many years, i.e., that cable 
systems are limited to systems providing only localized retransmissions 
of limited availability and that internet-based retransmission services 
are excluded from the section 111 compulsory license. This 
interpretation has been included in testimony before Congress, as well 
as policy reports issued by the Office.\113\ It also has been accorded 
deference by courts examining whether satellite carriers and internet-
based services are eligible for the section 111 license.\114\
---------------------------------------------------------------------------

    \113\ See, e.g., Register of Copyrights, A Review of the 
Copyright Licensing Regimes Covering Retransmission of Broadcast 
Signals 97-99 (1997), https://www.copyright.gov/reports/study.pdf; 
Copyrighted Webcast Programming on the Internet: Hearing Before the 
H. Subcomm. on Courts and Intell. Prop., 106th Cong. 5-6 (2000) 
(statement of Marybeth Peters, Register of Copyrights and Dir., U.S. 
Copyright Office); Register of Copyrights, Satellite Home Viewer 
Extension and Reauthorization Act Section 109 Report 193-94 (2008), 
http://www.copyright.gov/reports/section109-final-report.pdf 
(``Section 109 Report''); Register of Copyrights, Satellite Home 
Viewer Extension and Localism Act Section 302 Report 47-49 (2011), 
https://www.copyright.gov/reports/section302-report.pdf.
    \114\ E.g., Fox Television Stations, Inc. v. Aereokiller, LLC, 
851 F.3d 1002, 1013-15 (9th Cir. 2017) (finding the Office's view 
concerning the ineligibility of internet services under section 111 
to be longstanding, consistent, and ``persuasive'' and deferring to 
the Office's interpretation); WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 
283-84 (2d Cir. 2012) (deferring to the Office's interpretation 
regarding internet-based services and eligibility for section 111 
license); Satellite Broad. & Commc'ns Ass'n of Am. v. Oman, 17 F.3d 
344, 346-48 (11th Cir. 1994) (upholding the Office's determination 
that satellite carriers are ineligible for section 111 license).
---------------------------------------------------------------------------

    In the NPRM, the Office proposed amending its regulatory definition 
of the phrase ``cable system'' to specifically reflect this 
position.\115\ In their comments, stakeholders expressed reservations 
about the proposed change. Copyright Owners I, while agreeing that the 
proposed language comported with the Office's longstanding 
interpretation of the statute, stated that they ``do not believe that 
an amendment is needed to give full effect to that consistent 
interpretation.'' \116\ NCTA also opposed implementation of the 
proposed change. It stated that the proposed change ``may inadvertently 
create a new target for [people] to try to invent around in ways not 
intended by the Copyright Office.'' \117\
---------------------------------------------------------------------------

    \115\ 82 FR at 56931-32; see, e.g., Fox Television Stations, 
Inc. v. Aereokiller, LLC, 851 F.3d 1002, 1007 n.1 (9th Cir. 2017) 
(noting that seven other federal courts held that ``internet-based 
transmission services'' did not qualify as a ``cable systems'' under 
the Copyright Act); WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 276 (2d 
Cir. 2012); Fox Television Stations, Inc. v. FilmOn X, LLC, 150 F. 
Supp. 3d 1, 7 (D.D.C. 2015).
    \116\ Copyright Owners I Initial NPRM Comments at 11.
    \117\ NCTA Initial NPRM Comments at 19.
---------------------------------------------------------------------------

    After reviewing the comments to the NPRM, the Office concludes 
that, while its interpretation of section 111 has not changed, 
amendment of the phrase ``cable system'' in its regulations at this 
time may create unintended confusion regarding the Office's position. 
To avoid any unintended consequences, it therefore has decided not to 
memorialize its longstanding interpretation in the regulations as part 
of this rulemaking.

C. Interpretation of Community and Reporting of Area Served (Space D)

1. Cable Headend Location
    Remitters are currently required to identify only the community or 
communities in which they operate and not the location of the 
headend(s) serving those communities.\118\ While the Program Suppliers' 
original petition requested that Space D be revised to require cable 
operators to identify the location of each headend and the specific 
communities served from that headend,\119\ the Office declined to 
include this change in the NPRM, concluding that it was not clear that 
artificial fragmentation by cable systems seeking to avoid paying a 
higher royalty rate was a pressing concern.\120\ In response to the 
NPRM, Copyright Owners I and NCTA agreed that headend location 
information is not necessary to be reported on cable SOAs.\121\ 
Accordingly, the final rule does not require remitters to include 
headend location information in Space D.
---------------------------------------------------------------------------

    \118\ See 37 CFR 201.17(e)(4); Short Form SOA at 1b, Space D; 
Long Form SOA at 1b, Space D.
    \119\ Petition at 10-11.
    \120\ 82 FR at 56932.
    \121\ NCTA Initial NPRM Comments at 20; Copyright Owners I 
Initial NPRM Comments at 14.
---------------------------------------------------------------------------

2. County Information
    The Office's regulations currently require a cable operator to 
report the name of the community or communities served by its cable 
system in Space D of the SOA.\122\ A cable operator must identify the 
communities it serves, listing the ``city or town'' and ``state'' 
served, but not the county in which the given community is located 
(although some operators report counties on a voluntary basis). In 
response to a request by Program Suppliers, the Office proposed 
revising Space D to require ``county'' information, noting that a 
regulatory change would not be necessary to implement this update to 
the SOA, but sought comment on whether this proposed change remained 
desirable to stakeholders.\123\ Copyright Owners I supported this 
proposed change,\124\ and AT&T and NCTA stated that they did not 
object.\125\ Accordingly, the Office will adopt this change by updating 
the instructions for filling out the SOA to require county information 
be included.
---------------------------------------------------------------------------

    \122\ 37 CFR 201.17(e)(4).
    \123\ 82 FR at 56933.
    \124\ Copyright Owners I Initial NPRM Comments at 14.
    \125\ NCTA Initial NPRM Comments at 21; AT&T Initial NPRM 
Comments at 8.
---------------------------------------------------------------------------

3. Definition of the Term ``Community''
    Under the Copyright Act and the Office's regulations, two or more 
cable systems constitute a single cable system for purposes of section 
111 if, as relevant here, they are under common ownership or control 
and are located in the same or ``contiguous communities.'' \126\ Where 
common ownership of cable systems is established, defining the 
``community'' served is important to determine whether two or more 
cable facilities operate in ``contiguous communities,'' and whether 
those facilities should file as a single cable system, preventing 
artificial fragmentation of large cable systems into smaller systems 
and avoiding the higher royalty payments that Form 3 cable systems 
\127\ pay under section 111.\128\ The Office's existing regulations 
state that a cable system's ``community,'' for purposes of section 111, 
is the same geographic area as that specified under the definition of 
``community unit'' as defined in the FCC's rules and regulations.\129\ 
FCC regulations define ``community unit'' as ``[a] cable television 
system, or portion of a cable television system, that operates or will 
operate within a separate and distinct community or

[[Page 100356]]

municipal entity (including unincorporated communities within 
unincorporated areas and including single, discrete unincorporated 
areas).'' \130\
---------------------------------------------------------------------------

    \126\ 17 U.S.C. 111(f)(3); 37 CFR 201.17(b)(2).
    \127\ Form 3 cable systems are cable systems that use the Long 
Form SOA.
    \128\ See 43 FR 958 (Jan. 5, 1978) (``[T]he legislative history 
of the Act indicates that the purpose of this sentence [in section 
111(f)] is to avoid the artificial fragmentation of cable 
systems.'').
    \129\ 37 CFR 201.17(e)(4); see also Short Form SOA at 1b, Space 
D; Long Form SOA at 1b, Space D.
    \130\ 47 CFR 76.5(dd).
---------------------------------------------------------------------------

    In their original petition, Program Suppliers had requested that 
the Office amend the regulatory definition of ``community'' so that a 
cable operator's ``franchise area'' would be the de facto regulatory 
boundary for defining communities, rather than the FCC's community unit 
definition.\131\ However, based on comments received in response to the 
NOI, the Office explained in the NPRM that it was not proposing to 
replace the regulatory definition, because ``the facts and the law 
[did] not support replacing the community unit definition with a 
franchise area definition,'' \132\ noting that it was not aware of a 
practice of fragmentation, but inviting public comments on whether this 
issue was still significant to stakeholders.\133\ In its comments, NCTA 
stated that the Office was correct in its decision not to amend the 
regulations to reflect a franchise area,\134\ and Copyright Owners I 
did not object.\135\ Accordingly, the Office declines to amend the 
regulatory definition of the term ``community.
---------------------------------------------------------------------------

    \131\ Petition at 19.
    \132\ 82 FR at 56933.
    \133\ Id.
    \134\ NCTA Initial NPRM Comments at 20.
    \135\ Copyright Owners I Initial NPRM Comments at 14. (In their 
initial comments, the Copyright Owners included the MPA.)
---------------------------------------------------------------------------

D. Grade B Contour Versus Noise-Limited Contour

    In the NPRM, the Office noted that parts of the Long Form SOA 
referencing the ``Grade B contour'' appeared to be obsolete given the 
advent of digital television signals and the new ``noise-limited 
service contour'' \136\ standard. It proposed two changes described 
below to delete these references.
---------------------------------------------------------------------------

    \136\ 82 FR at 56934.
---------------------------------------------------------------------------

    As background, section 111 defines the ``local service area of a 
primary transmitter.'' The definition establishes the difference 
between ``local'' and ``distant'' signals and ``therefore the line 
between signals which are subject to payment under the compulsory 
license [under section 111] and those that are not.'' \137\ It 
originally relied on an FCC construct, referred to as the ``Grade B 
contour'' construct, used to determine the local service area of 
certain signals. Adopted in 1976, the Grade B contour applies to analog 
television stations.\138\ In connection with the advent of digital 
television signals, the FCC has established a new ``noise-limited 
service contour'' \139\ standard. In 2010, as part of STELA, the 
definition of local service area in section 111 was amended to 
incorporate this new standard.\140\
---------------------------------------------------------------------------

    \137\ H.R. Rep. No. 94-1476, at 99 (1976), as reprinted in 1976 
U.S.C.C.A.N. 5659, 5714.
    \138\ 17 U.S.C. 111(f)(4).
    \139\ 82 FR at 56934.
    \140\ STELA at sec.104, 124 Stat. at 1235; 17 U.S.C. 111(f)(4).
---------------------------------------------------------------------------

    Under the FCC's old ``market quota'' rules, which were incorporated 
by reference into section 111, a cable operator could carry a certain 
number of distant signals based upon a complex scheme involving the 
type of television market and signal available. A cable operator, 
however, could carry more signals than its market quota of distant 
signals if the station was considered ``permitted'' by the FCC's 1976-
era rules. The concept of ``permitted'' stations was imported into the 
section 111 license. Under section 111, an operator that carries a non-
permitted signal above its market quota is generally subject to a 3.75% 
fee for carriage of that signal, in lieu of the minimum royalty 
rate.\141\ There are several bases of ``permitted'' carriage, however, 
for which retransmission will not trigger the 3.75% fee. One of these 
bases--basis ``G''--includes carriage of commercial UHF stations within 
a Grade B contour.\142\ On cable SOAs, permitted signals, including 
those under basis ``G,'' must be reported in Part 6, Block B, or be 
subject to the 3.75% fee calculation in Part 6/Block C.\143\
---------------------------------------------------------------------------

    \141\ See 37 CFR 387.2.
    \142\ See Long Form SOA at 13.
    \143\ See id. All cable systems filing Long Form SOAs must pay 
at least the minimum fee which is 1.064% of gross receipts. The 
cable system pays either the minimum fee or the sum of the base rate 
fee and the 3.75% fee, whichever is larger, and a Syndicated 
Exclusivity Surcharge, as applicable. Long Form SOA at 10.
---------------------------------------------------------------------------

    In the NPRM, the Office explained that, post-STELA, this area would 
include the area within the noise limited service contour; \144\ thus, 
the noise limited service contour would be the proper standard by which 
to measure the reach of digital television signals with respect to the 
section 111 license, including digital UHF signals.\145\ It proposed 
revising Part 6, Block B of the Long Form SOA which asks for 
information related to ``permitted'' UHF signals carried by a cable 
operator for purposes of calculating royalties paid under a 3.75% fee. 
The NPRM's proposal would eliminate the option in Block B of Part 6 on 
the cable SOAs for commercial UHF stations within a Grade B contour 
(referred to as permitted basis ``G'').\146\ Because royalty rates 
under the section 111 license are calculated based on 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 the 
primary transmitter of such programming,'' \147\ and because any 
digital signals within the noise-limited service contour are ``local'' 
and thus are not subject to the section 111 royalty rate, the Office 
concluded that ``there is no need to treat any station within the noise 
limited contour as `permitted,' because locally retransmitted stations 
do not count against the market quota in the first place.'' \148\
---------------------------------------------------------------------------

    \144\ See STELA at sec.104, 124 Stat. at 1235; 17 U.S.C. 
111(f)(4).
    \145\ 82 FR at 56934.
    \146\ Id.
    \147\ 17 U.S.C. 111(f)(5) (emphasis added).
    \148\ Id.
---------------------------------------------------------------------------

    In addition, the Office noted that permitted basis ``G'' in Part 6/
Block B is rarely, if ever, used, and that in the few cases where cable 
operators have reported the permitted basis of carriage category ``G,'' 
cable operators ``may have used the noise-limited contour (for digital 
signals) interchangeably with the Grade B contour (for analog signals) 
because they historically reported `G' in the all-analog world (prior 
to the mandated FCC digital conversion in 2009), and continue to report 
the `G' permitted basis out of habit.'' \149\
---------------------------------------------------------------------------

    \149\ Id.
---------------------------------------------------------------------------

    Second, the Office invited public comment on whether Part 7, Block 
B of the cable SOA--which allows for calculation of a syndicated 
exclusivity surcharge for the carriage of any commercial VHF station 
that places a Grade B contour, in whole or in part, over the cable 
system that would have been subject to the FCC's syndicated exclusivity 
rules in effect on June 24, 1981--should be amended, and whether, more 
generally, the Office's related regulations should be amended to remove 
references to a Grade B contour.\150\ It explained that based on 
database queries of submitted SOAs, ``the last time Part 7 of the cable 
SOA [had been] used (i.e., Computation of the Syndicated Exclusivity 
Charge) was in 2013, on a single SOA.'' \151\
---------------------------------------------------------------------------

    \150\ Id.
    \151\ Id.
---------------------------------------------------------------------------

    The comments received in response to these proposed changes were 
generally positive. While NCTA initially expressed concern that the 
Office's proposal ``might have more significant substantive 
ramifications,'' such as eliminating the ability to rely on a station's 
Grade B contour in assessing local and distant signals, it later 
acknowledged that the Office's

[[Page 100357]]

proposed changes ``would only eliminate from the rules and the Form SA3 
a handful of specific Grade B references, to which NCTA is not 
opposed.'' \152\ NCTA and MPA supported ``eliminat[ing] references to 
the `Grade B contour' in Sections 201.17(i)(l)(ii) and 201.17(i)(2)(ii) 
and, with respect to the DSE Schedule in Form SA3, references to the 
`Grade B contour' in Parts 7 and 9 (and the instructions for those 
Parts) and the `G' category in Part 6, Block B.'' \153\ Both commenters 
asked, however, for the Office to clarify that ``in the unlikely event 
a cable operator needs to continue relying on a station's Grade B 
contour to establish its `permitted' status, the operator may report 
that reliance under the existing `O--Other' designation in Part 6, 
Block B.'' \154\ For their part, Copyright Owners I supported 
eliminating basis ``G'' in Part 6 and ``amend[ing] Part 7 (and the 
accompanying regulations) to remove references to a Grade B contour.'' 
\155\
---------------------------------------------------------------------------

    \152\ NCTA & MPA Ex Parte Letter May 22, 2020 at 9; see NCTA 
Initial NPRM Comment at 21-23; NCTA Reply NPRM Comment at 15. See 
also Copyright Owners I Reply NPRM Comment at 6-7 (noting that 
contrary to NCTA's initial interpretation, the Office did not 
propose ``eliminating use of the Grade B contour in determining 
whether a signal is distant or local for Section 111 purposes,'' but 
rather proposed ``only two discrete, very limited places where the 
Grade B contour reference would be eliminated'').
    \153\ NCTA & MPA Ex Parte Letter May 22, 2020 at 9.
    \154\ Id. at 9 n.41.
    \155\ Copyright Owners I Reply NPRM Comment at 6. See NCTA & MPA 
Ex Parte Letter May 20, 2020 Ex. at 3 (stating none of the 
commenting parties opposed ``the Office's proposal to eliminate 
references to the use of the Grade B contour in the SOA, subject to 
the clarification that cable operators may continue to rely on the 
Grade B contour to determine the status of a broadcast signal to the 
same extent as is currently allowed''); NCTA & MPA Ex Parte Letter 
May 22, 2020 at 9 (similar).
---------------------------------------------------------------------------

    After carefully considering these comments, the Office will 
eliminate the permitted basis ``G'' in Part 6/Block B on the cable SOAs 
(i.e., commercial UHF stations within a Grade B contour), and if a 
cable operator needs to continue relying on a station's Grade B contour 
to establish its ``permitted'' status, it may report that reliance 
under the existing ``O--Other'' designation. The Office will also 
eliminate references to the ``Grade B contour'' in Sec. Sec.  
201.17(i)(l)(ii) and 201.17(i)(2)(ii) and, with respect to the DSE 
Schedule in Form SA3, references to the ``Grade B contour'' in Parts 7 
and 9 (and the instructions for those Parts).

E. Changes to SOA Due to Copyright Royalty Board's Rule Relating to the 
Retransmission of Sports Programming

    The NPRM noted that in response to the repeal of the FCC's Sports 
Blackout Rule, the CRB had issued a notice of proposed settlement and 
proposed rule to require covered cable systems to pay a separate per-
telecast royalty (a ``Sports Surcharge'') in addition to the other 
royalties that they must pay under section 111.\156\ The Office stated 
that ``[a]ssuming the CRB's rule is adopted, the Office intends to 
amend its cable SOA forms to account for the new Sports Surcharge for 
semi-annual accounting periods,'' and that ``[n]o amendments to the 
Office's regulations [would be] needed to accommodate this change.'' 
\157\
---------------------------------------------------------------------------

    \156\ NPRM, 82 FR at 56934-35; Adjustment of Cable Statutory 
License Royalty Rates, 82 FR 24611 (May 30, 2017).
    \157\ NPRM, 82 FR at 56935.
---------------------------------------------------------------------------

    Effective January 1, 2019, the CRB adopted a final rule under which 
certain cable systems may be required to pay the Sports Surcharge.\158\ 
To facilitate Sports Surcharge payments, the Office created a Sports 
Surcharge Addendum for remitters to complete, if necessary, in addition 
to their SOAs.\159\ Because no regulatory amendments were necessary to 
implement the Sports Surcharge Addendum, the Office considers this 
issue closed for purposes of this rulemaking.
---------------------------------------------------------------------------

    \158\ 83 FR 62714 (Dec. 6, 2018). See 37 CFR 387.2(e). The 
Sports Surcharge is calculated separately for each community in 
which a cable system carried one or more Sports Surcharge triggering 
programs during an accounting period (i.e., live, non-network 
broadcasts of sports events on a distant television station carried 
by the cable system that would have been subject to blackout under 
the FCC's sports exclusivity rule prior to its repeal in 2014 and 
that meet certain other requirements established by the CRB). To 
calculate the Sports Surcharge, the system multiplies the gross 
receipts attributable to each such community by the number of Sports 
Surcharge triggering programs carried in the community by the Sports 
Surcharge rate of 0.025 percent (.00025). 37 CFR 387.2(e).
    \159\ The Sports Surcharge Addendum is available through pay.gov 
at www.copyright.gov/licensing/sec_111.html, or directly at pay.gov/public/form/start/584643809. Instructions for the Sports Surcharge 
Addendum are available at www.copyright.gov/licensing/111/sports-addendum-instructions.
---------------------------------------------------------------------------

F. Removing Outdated References to STELA

    In the NPRM, the Office proposed amending Sec.  201.17 by deleting 
outdated references to STELA, and adding language directing remitters 
to contact the Licensing Division for instructions should they need to 
file SOAs for accounting periods further back than the last five 
years.\160\ The Office received no comments on this proposal. 
Accordingly, the proposed amendments are included in the final rule.
---------------------------------------------------------------------------

    \160\ 82 FR at 56935.
---------------------------------------------------------------------------

G. Technical Amendments

    The NPRM proposed several technical amendments. Because certain 
regulatory provisions are duplicative of information provided on cable 
operator SOA forms and/or on the Office's website, the proposed rule 
would remove these duplicative provisions. In addition, the Office's 
current regulations instruct which information must be provided as part 
of the electronic funds transfer (``EFT'') to pay royalty fees. The 
Office proposed removing this language and incorporating it into the 
instruction for the SOA forms. There were no comments on either of 
these proposed changes. The final rule will include these changes.
    The final rule makes additional nonsubstantive changes to Sec.  
201.17 of the CFR. It clarifies the introductory language in Sec.  
201.17(e), which is not intended as a substantive change, and corrects 
references in Sec.  2017.17(i)(3), and (k)(3). It reorders parts of 
Sec.  201.17(c), and adopts the technical changes of the proposed rule, 
by adding provisions to give guidance to remitters when a cable 
operator ceases to operate or when a cable operator is sold during an 
accounting period.
    Finally, the Office is developing a new enterprise information 
technology system (the ``Enterprise Copyright System'' or ``ECS'') that 
will improve its administration of the section 111 license. To 
accommodate the planned technological improvements and integration into 
ECS, the final rule modifies language in Sec.  201.17(d) to make clear 
that remitters must use the Statement of Account forms provided by the 
Office on its website when the new forms have been adopted. The final 
rule also updates the references to various provisions in Sec.  201.17 
that are contained in Sec.  201.16, to conform to the changes being 
made to Sec.  201.17, and makes technical changes to Sec.  201.17 to 
correct issues within the regulation and update references to other 
regulations.
    These changes are intended to update the references and improve the 
readability and understanding of existing regulations and do not 
represent substantive changes in policy.

IV. Reporting Practices--Cable, Satellite, and DART

    The NPRM proposed a number of regulatory changes, detailed below, 
relating to cable SOA reporting practices that are also pertinent to 
the filing of SOAs for other statutory licenses. After reviewing all 
comments, the Office is issuing a final rule amending certain reporting 
requirements for cable operators (under Sec.  201.17), satellite

[[Page 100358]]

carriers (under Sec.  201.11), and digital audio recording equipment 
manufacturers and importers (under Sec. Sec.  201.27 and 201.28), where 
applicable, so that there are parallel requirements for all three 
licenses in the Office's regulations. The final rule also deletes 
references in the proposed rules to payment by ``a single'' EFT to 
reflect the elimination of that requirement in 2018.\161\ In addition, 
each of the following changes are reflected in the regulatory language 
below.
---------------------------------------------------------------------------

    \161\ See 83 FR 51840 (Oct. 15, 2018).
---------------------------------------------------------------------------

A. Closing Out Statements of Account

    To streamline the administrative process and encourage timely 
responses to Office inquiries, the NPRM proposed closing out SOA 
examination if a filer fails to reply to an Office correspondence 
request after 90 days from the date of the last correspondence with the 
Office. After the SOA is closed, it will be placed with other publicly 
available SOA records. At that point, a cable operator wishing to 
submit a reply or pay additional royalties or make necessary 
corrections will need to file an amended SOA along with a filing fee as 
prescribed in 37 CFR 201.3(e). To be clear, operators failing to 
respond within the prescribed 90-day window will forfeit any potential 
refund of an overpayment associated with any issue with the SOA 
identified by the Office in its correspondence.
    AT&T and Copyright Owners I supported this proposal.\162\ There 
were no other comments on this issue.\163\ After reviewing all 
comments, the Office adopts these changes in the final rule.
---------------------------------------------------------------------------

    \162\ AT&T Initial NPRM Comments at 8; Copyright Owners I 
Initial NPRM Comments at 14; Copyright Owners I Reply NPRM Comments 
at 3.
    \163\ In an ex parte letter, NCTA and MPA listed this as an 
undisputed issue. NCTA-MPA Ex Parte Letter #1, attachment at 3.
---------------------------------------------------------------------------

B. Royalty Refunds

    The NPRM proposed that royalty refunds for amounts of $50.00 or 
less would issue only where the refund is specifically requested before 
the SOA is closed and made available for public inspection. It further 
proposed that, if a refund is not requested before the SOA is closed, 
the amount will be added to the relevant royalty pool. The Office 
proposed harmonizing this practice across the regulations affecting 
royalty refunds for cable operators, satellite carriers, and digital 
audio recording equipment manufacturers and importers.
    AT&T and Copyright Owners I submitted comments agreeing with these 
proposals.\164\ There were no other comments on this issue.\165\ 
Accordingly, these changes are adopted into the final rule.
---------------------------------------------------------------------------

    \164\ AT&T Initial NPRM Comments at 8; Copyright Owners I 
Initial NPRM Comments at 14; Copyright Owners I Reply NPRM Comments 
at 3.
    \165\ See NCTA-MPA Ex Parte Letter #1, attachment at 3 (all 
parties support this proposal).
---------------------------------------------------------------------------

C. Payment of Supplemental Royalty Fees and Filing Fees by EFT

    The NPRM proposed that all payments of supplemental royalty fees 
and filing fees by cable operators, satellite carriers, and digital 
audio recording equipment manufacturers and importers be made only by 
EFT.\166\ In its comments, AT&T supported the Office's proposal.\167\ 
NCTA was generally supportive, but suggested that operators filing Form 
1 and Form 2 be allowed to request a waiver of the EFT 
requirement.\168\ The Office's records indicate that almost no Form 1 
and Form 2 cable operators have insisted on remitting payment by other 
than EFT. Moreover, the use of EFT has proven to be a more efficient 
and effective means for the Office to receive and invest payments than 
payment by check or other means. Therefore, in the final rule, the 
Office has decided to retain the original proposal and require all 
payments to be made by EFT.
---------------------------------------------------------------------------

    \166\ 82 FR at 56936.
    \167\ AT&T Initial NPRM Comments at 9.
    \168\ NCTA Initial NPRM Comments at 24.
---------------------------------------------------------------------------

D. Interest Assessment

    In the NPRM, the Office proposed harmonizing the regulations 
relating to the assessment of interest for late payments or 
underpayments of royalties among cable operators, satellite carriers, 
and digital audio equipment manufacturers and importers, including the 
specification of the relevant Current Value of Funds Rate. Interest 
payments shall not be required if the interest charge is less than 
$5.00.
    Only NCTA and AT&T submitted comments in response to this proposal 
and supported the Office's proposals.\169\ As there were no other 
comments on this proposal, the final rule adopts the proposed changes.
---------------------------------------------------------------------------

    \169\ Id. at 23; AT&T Initial NPRM Comments at 9. See NCTA-MPA 
Ex Parte Letter #1, attachment at 3 (stating that all parties agree 
to the Office's proposal).
---------------------------------------------------------------------------

List of Subjects in 37 CFR Part 201

    Cable television, Copyright, Recordings, Satellites.

    For the reasons set forth in the preamble, the Copyright Office 
amends 37 CFR part 201 as follows:

PART 201--GENERAL PROVISIONS

0
1. The authority citation for part 201 continues to read as follows:

    Authority:  17 U.S.C. 702.
    Section 201.10 also issued under 17 U.S.C. 304.

0
2. Amend Sec.  201.11 by:
0
a. Revising paragraph (f)(1).
0
b. Revising paragraph (h)(3)(iv).
0
c. Adding paragraph (h)(3)(vii).
0
d. Adding paragraphs (h)(5) and (6).
    The revisions and additions read as follows:

Sec.  201.11  Satellite carrier statements of account covering 
statutory licenses for secondary transmissions.

* * * * *
    (f) * * *
    (1) All royalty fees, including supplemental royalty payments, must 
be paid by electronic funds transfer (EFT), and must be received in the 
designated bank by the filing deadline for the relevant accounting 
period. Satellite carriers must provide specific information as part of 
the EFT and as part of the remittance advice, as listed in the 
instructions for the Statement of Account form.
* * * * *
    (h) * * *
    (3) * * *
    (iv) All requests for correction or refunds must be accompanied by 
a filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, paid by EFT. No request will be 
processed until the appropriate filing fees are received, and no 
supplemental royalty fee will be deposited until an acceptable 
remittance in the full amount of the supplemental royalty fee has been 
received.
* * * * *
    (vii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part of the royalty fee. A request for a refund payment 
in an amount of over fifty dollars ($50.00) is not necessary where the 
Licensing Division, during its examination of a Statement of Account or 
related document, discovers an error that has resulted in a royalty 
overpayment. In this case, the Licensing Division will affirmatively 
send the royalty refund to the satellite carrier owner named in the 
Statement of Account without regard to the time limitations provided 
for in paragraph (h)(3)(i) of this section.
* * * * *
    (5) Royalty fee payments submitted as a result of late or amended 
filings shall

[[Page 100359]]

include interest. Interest shall begin to accrue beginning on the first 
day after the close of the period for filing statements of account for 
all underpayments or late payments of royalties for the satellite 
carrier statutory license for secondary transmissions for private home 
viewing and viewing in commercial establishments occurring within that 
accounting period. The accrual period shall end on the date the full 
payment submitted by a remitter is received by the Copyright Office. 
The interest rate applicable to a specific accounting period beginning 
with the 1992/2 period shall be the Current Value of Funds Rate, as 
posted on the Treasury Department's website and published in the 
Federal Register, in effect on the first business day after the close 
of the filing deadline for that accounting period. Satellite carriers 
wishing to obtain the interest rate for a specific accounting period 
may do so by consulting the Federal Register for the applicable Current 
Value of Funds Rate, or by consulting the Copyright Office website. 
Interest is not required to be paid on any royalty underpayment or late 
payment from a particular accounting period if the interest charge is 
less than or equal to five dollars ($5.00).
    (6) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary, ninety days from the 
date of the last correspondence from the Office.
* * * * *

Sec.  201.16  [Amended]

0
3. Amend Sec.  201.16 by:
0
a. Removing ``201.17(m)'' from paragraph (b)(8), and adding in its 
place ``201.17(l)'';
0
b. Removing ``Sec.  201.17(e)(9)(iv)'' from paragraph (e)(2), and 
adding in its place ``Sec.  201.17(e)(4)(iv)'';
0
c. Removing ``Sec.  201.17(e)(9)(iv)'' from paragraph (h)(1), and 
adding in its place ``Sec.  201.17(e)(4)(iv)'';
0
d. Removing ``201.17(m)'' from paragraph (j)(1), and adding in its 
place ``201.17(l)''; and
0
e. Removing ``201.17(m)(4)(i)'' and adding in its place 
``201.17(l)(4)(i)'' and removing ``201.17(m)(4)'' and adding in its 
place ``201.17(l)(4)'' in paragraph (j)(2).

0
4. Amend Sec.  201.17 by:
0
a. Revising paragraph (b)(1);
0
b. Revising the heading to paragraph (c) and paragraph (c)(3);
0
c. Redesignating paragraph (c)(4) as paragraph (c)(5) and adding a new 
paragraph (c)(4);
0
d. Revising paragraph (d) and the introductory text of paragraph (e);
0
e. Removing paragraphs (e)(1), (2), (3), (4), (8), (10), (12), and 
(13);.
0
f. Redesignating paragraphs (e)(5), (6), (7), (9), (11), and (14) as 
paragraphs (e)(1) through (6), respectively;
0
g. Removing `` ``Secondary Transmission Service: Subscribers and 
Rates'','' and adding in its place `` ``Secondary Transmission Service: 
Subscribers and Rates,'' '' in the newly redesignated paragraph (e)(2);
0
h. Adding ``or, in the case of a cable system ceasing operations during 
the accounting period, the facts existing on the last day of 
operations'' after the word ``Statement'' in the newly redesignated 
paragraph (e)(2)(iii)(A);
0
i. Removing `` ``Gross Receipts'','' and adding in its place `` ``Gross 
Receipts,'' '' in the newly redesignated paragraph (e)(3) introductory 
text;
0
j. Removing ``Television'','' and adding in its place ``Television,'' 
'' and removing ``(e)(11)'' and adding in its place ``(e)(5)'' in the 
newly redesignated paragraph (e)(4) introductory text;
0
k. Revising the newly redesignated paragraphs (e)(4)(iv) and (vi);
0
l. Removing ``(e)(9), paragraphs (v) through (viii) of this section'' 
and adding in its place ``paragraphs (e)(4)(v) through (viii) of this 
section'' in newly redesignated paragraph (e)(4)(ix);
0
m. Revising newly redesignated paragraphs (e)(5) introductory text, 
(e)(5)(i), and (e)(5)(ii) introductory text;
0
n. Removing paragraphs (g)(2) and (4);
0
o. Redesignating paragraph (g)(3) as paragraph (g)(2);
0
p. Revising paragraphs (i)(1)(ii) and (i)(2)(ii);
0
q. Removing ``37 CFR 308.2(c)'' from paragraph (i)(3) introductory text 
and adding in its place ``37 CFR 387.2(c)'';
0
r. Revising paragraphs (k)(1) and (2);
0
s. Removing ``(i)(1)'' from paragraph (k)(3) and replacing it with 
``(k)(1)'';
0
t. Removing ``satellite carrier'' and adding in its place ``cable 
operator'' in paragraph (k)(4).
0
u. Revising paragraph (l)(1);
0
v. Removing ``(m)(4)'' and adding in its place ``(l)(4)'' in paragraph 
(l)(2) introductory text;
0
w. Removing ``, for any reason except that mentioned in paragraph 
(m)(2)(iii) of this section,'' from paragraph (l)(2)(ii);
0
x. Removing ``(m)(2)'' and adding in its place ``(l)(2)'' in paragraph 
(l)(4) introductory text;
0
y. Removing ``(m)(2)(i)'' and adding in its place ``(l)(2)(i)'' in 
paragraph (l)(4)(iii)(A);
0
z. Removing ``(m)(2)(ii)'' and adding in its place ``(l)(2)(ii)'' in 
paragraph (l)(4)(iii)(B);
0
aa. Revising paragraph (l)(4)(iv);
0
bb. Removing ``(m)'' and adding in its place ``(l)'' and removing 
``(e)(14)'' and adding in its place ``(e)(6)'' in paragraph (l)(4)(v);
0
cc. Removing ``(m)(4)(i)'' and adding in its place ``(l)(4)(i)'' in 
paragraph (l)(4)(vi);
0
dd. Adding paragraph (l)(4)(vii);
0
ee. Redesignating paragraph (l)(5) as (l)(7);
0
ff. Adding new paragraph (l)(5) and paragraph (l)(6); and
0
gg. Removing ``(m)'' and adding in its place ``(l)'' in newly 
redesignated paragraph (l)(7).
    The revisions and additions read as follows:

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

* * * * *
    (b) * * *
    (1) Gross receipts for the ``basic service of providing secondary 
transmissions of primary broadcast transmitters'' include the full 
amount of monthly (or other periodic) service fees for any and all 
services or tiers of services which include one or more secondary 
transmissions of television or radio broadcast signals. For these 
purposes, the full amount of such service fees includes separately 
itemized fees, such as broadcast fees or broadcast surcharges, that are 
directly related to the provision of basic service and that a 
subscriber is required to pay to the cable operator in order to receive 
secondary transmissions of television or radio broadcast signals. Gross 
receipts also include fees for non-broadcast tier(s) of services if 
such purchase is required to obtain tiers of services with broadcast 
signals, and fees for any other type of equipment, device, or software 
necessary to receive broadcast signals that is supplied by the cable 
operator, even if the cable operator offers to provide services through 
a free software application. In no case shall gross receipts be less 
than the cost of obtaining the signals of primary broadcast 
transmitters for subsequent retransmission. All such gross receipts 
shall be aggregated and the distant signal equivalent (DSE) 
calculations shall be made against the aggregated amount. Gross 
receipts for secondary transmission services do not include 
installation (including connection, relocation, disconnection, or 
reconnection) fees, franchise fees, separate charges for security, 
alarm or facsimile services, charges for late

[[Page 100360]]

payments, or charges for pay cable or other program origination 
services: Provided that, the origination services are not offered in 
combination with secondary transmission service for a single fee. In 
addition, gross receipts shall not include any fees collected from 
subscribers for the sale of internet services or telephony services 
when such services are bundled together with cable service; instead, 
when cable services are sold as part of a bundle of other services, 
gross receipts shall include fees in the amount that would have been 
collected if such subscribers received cable service as an unbundled 
stand-alone product.
* * * * *
    (c) Submission of Statement of Account, accounting periods, and 
deposit.
* * * * *
    (3) Statements of Account and royalty fees received before the end 
of the particular accounting period they purport to cover will not be 
processed by the Copyright Office except for cases where the cable 
system has ceased operation before the account period closes. 
Statements of Account and royalty fees received after the filing 
deadlines of August 29 or March 1, respectively, will be accepted for 
whatever legal effect they may have, if any.
    (4) A cable system that changes ownership during an accounting 
period is obligated to file only a single Statement of Account at the 
end of the accounting period. Statements of Account and royalty fees 
received after the filing deadlines of August 29 or March 1, 
respectively, will be accepted for whatever legal effect they may have, 
if any.
* * * * *
    (d) Statement of Account forms and submission. Cable systems shall 
submit each Statement of Account using an appropriate form provided by 
the Copyright Office on its website and following the instructions for 
completion and submission provided on the Office's website or the form 
itself. To file a Statement of Account for an accounting period that 
includes dates prior to five years from submission of the form, please 
contact the Licensing Division for instructions.
    (e) Contents. In addition to the information requested by the 
instructions for completion and submission provided on the Office's 
website or the form itself, each Statement of Account shall contain the 
following information:
* * * * *
    (4) * * *
    (iv) A designation as to whether that primary transmitter is a 
``network station,'' an ``independent station,'' or a ``noncommercial 
educational station.''
* * * * *
    (vi) If that primary transmitter is a ``distant'' station, a 
specification of whether the signals of that primary transmitter are 
carried:
    (A) On a part-time basis where full-time carriage is not possible 
because the cable system lacks the activated channel capacity to 
retransmit on a full-time basis all signals which it is authorized to 
carry; or
    (B) On any other basis. If the signals of that primary transmitter 
are carried on a part-time basis because of lack of activated channel 
capacity, the Statement shall also include a log showing the dates on 
which such carriage occurred, and the hours during which such carriage 
occurred on those dates. Hours of carriage shall be accurate to the 
nearest quarter-hour, except that, in any case where such part-time 
carriage extends to the end of the broadcast day of the primary 
transmitter, an approximate ending hour may be given if it is indicated 
as an estimate.
* * * * *
    (5) A special statement and program log, which shall consist of the 
information indicated below for all nonnetwork television programming 
that, during the period covered by the Statement, was carried in whole 
or in part beyond the local service area of the primary transmitter of 
such programming under:
    (i) Rules or regulations of the FCC requiring a cable system to 
omit the further transmission of a particular program and permitting 
the substitution of another program in place of the omitted 
transmission; or
    (ii) Rules, regulations, or authorizations of the FCC in effect on 
October 19, 1976, permitting a cable system, at its election, to omit 
the further transmission of a particular program and permitting the 
substitution of another program in place of the omitted transmission:
* * * * *
    (i) * * *
    (1) * * *
    (ii) If the 3.75% rate does not apply to certain DSE's in the case 
of a cable system located wholly or in part within a top 100 television 
market, the current base rate together with the surcharge shall apply. 
However, the surcharge shall not apply for carriage of a particular 
signal first carried prior to March 31, 1972. The surcharge will not 
apply if the signal is exempt from the syndicated exclusivity rules in 
effect on June 24, 1981.
    (2) * * *
    (ii) If the 3.75% rate does not apply to certain DSE's in the case 
of a cable system located wholly or in part within a top 100 television 
market, the current base rate together with the surcharge shall apply. 
However, the surcharge shall not apply for carriage of a particular 
signal first carried prior to March 31, 1972. The surcharge will not 
apply if the signal is exempt from the syndicated exclusivity rules in 
effect on June 24, 1981.
* * * * *
    (k) * * *
    (1) All royalty fees, including supplemental royalty fees, must be 
paid by electronic funds transfer (EFT), and must be received in the 
designated bank by the filing deadline for the relevant accounting 
period. Cable systems must provide specific information as part of the 
EFT and as part of the remittance advice, as listed in the instructions 
for the Statement of Account form and on the Office's website.
    (2) A copy of the remittance advice shall be attached to the 
Statement(s) of Account. In addition, if payment is not made by 
pay.gov, a copy of the remittance advice shall be emailed or sent by 
facsimile to the Licensing Division.
* * * * *
    (l) * * *
    (1) To amend or request a refund relating to a Statement of Account 
for an accounting period that includes dates prior to five years from 
submission of the form, please contact the Licensing Division for 
instructions.
* * * * *
    (4) * * *
    (iv) All requests for correction or refunds must be accompanied by 
a filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, and all requests that a supplemental 
royalty fee payment be received for deposit under this paragraph (l) 
must be accompanied by a remittance in the full amount of such fee, 
paid by EFT. No request will be processed until the appropriate filing 
fees are received, and no supplemental royalty fee will be deposited 
until an acceptable remittance in the full amount of the supplemental 
royalty fee has been received.
* * * * *
    (vii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part

[[Page 100361]]

of the royalty fee. A request for a refund payment in an amount of over 
fifty dollars ($50.00) is not necessary where the Licensing Division, 
during its examination of a Statement of Account or related document, 
discovers an error that has resulted in a royalty overpayment. In this 
case, the Licensing Division will affirmatively send the royalty refund 
to the cable system owner named in the Statement of Account.
* * * * *
    (5) Royalty fee payments submitted as a result of late or amended 
filings shall include interest. Interest shall begin to accrue 
beginning on the first day after the close of the period for filing 
statements of account for all underpayments or late payments of 
royalties for the cable statutory license occurring within that 
accounting period. The accrual period shall end on the date the payment 
submitted by a remitter is received by the Copyright Office. The 
interest rate applicable to a specific accounting period beginning with 
the 1992/2 period shall be the Current Value of Funds Rate, as posted 
on the Treasury Department website, in effect on the first business day 
after the close of the filing deadline for that accounting period. 
Cable operators wishing to obtain the interest rate for a specific 
accounting period may do so by consulting the Federal Register for the 
applicable Current Value of Funds Rate, or by consulting the Copyright 
Office website. Interest is not required to be paid on any royalty 
underpayment or late payment from a particular accounting period if the 
interest charge is less than or equal to five dollars ($5.00).
    (6) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary, ninety days from the 
date of the last correspondence from the Office.
* * * * *

0
5. Amend 201.28 by:
0
a. Revising paragraph (e)(7);
0
b. Revising paragraph (h)(1);
0
c. Revising paragraph (j)(3)(v);
0
d. Adding paragraph (j)(3)(viii); and
0
e. Adding paragraphs (j)(4) and (5).
    The revisions and additions read as follows:

Sec.  201.28  Statement of Account for digital audio recording devices 
or media.

* * * * *
    (e) * * *
    (7) Oath and signature. (i) Each Statement of Account shall include 
a legally binding signature, including an electronic signature as 
defined in 15 U.S.C. 7006, of an authorized officer, principal, or 
agent of the filing party. The signature shall be accompanied by:
    (A) The printed or typewritten name of the person signing the 
quarterly Statement of Account;
    (B) The date the document is signed;
    (C) The following certification:
    I, the undersigned, hereby certify that I am an authorized officer, 
principal, or agent of the ``manufacturing or importing party'' 
identified in Space B.
    (ii) Penalties for fraud and false statements are provided under 18 
U.S.C. 1001 et seq.
* * * * *
    (h) * * *
    (1) All royalty fees, including supplemental royalty fee payments, 
must be paid by electronic funds transfer (EFT), and must be received 
in the designated bank by the filing deadline for the relevant 
accounting period. Remitters must provide specific information as part 
of the EFT and as part of the remittance advice, as listed in the 
instructions for the Statement of Account form.
* * * * *
    (j) * * *
    (3) * * *
    (v) All requests for correction or refunds must be accompanied by a 
filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, paid by EFT. No request will be 
processed until the appropriate filing fees are received, and no 
supplemental royalty fee will be deposited until an acceptable 
remittance in the full amount of the supplemental royalty fee has been 
received.
* * * * *
    (viii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part of the royalty fee. A request for a refund payment 
in an amount of over fifty dollars ($50.00) is not necessary where the 
Licensing Division, during its examination of a Statement of Account or 
related document, discovers an error that has resulted in a royalty 
overpayment. In this case, the Licensing Division will affirmatively 
send the royalty refund to the manufacturing or importing party named 
in the Statement of Account.
    (4) Interest on late payments or underpayments. Royalty fee 
payments submitted as a result of late or amended filings shall include 
interest. Interest shall begin to accrue beginning on the first day 
after the close of the period for filing statements of account for all 
underpayments or late payments of royalties for the digital audio 
recording obligation occurring within that accounting period. The 
accrual period shall end on the date the payment submitted by a 
remitter is received by the Copyright Office. The interest rate 
applicable to a specific accounting period beginning with the 1992/2 
period shall be the Current Value of Funds Rate, as posted on the 
Treasury Department website, in effect on the first business day after 
the close of the filing deadline for that accounting period. 
Manufacturers or importing parties wishing to obtain the interest rate 
for a specific accounting period may do so by consulting the Federal 
Register for the applicable Current Value of Funds Rate, or by 
consulting the Copyright Office website. Interest is not required to be 
paid on any royalty underpayment or late payment from a particular 
accounting period if the interest charge is less than or equal to five 
dollars ($5.00).
    (5) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary, ninety days from the 
date of the last correspondence from the Office.

    Dated: December 3, 2024.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.

    Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2024-28984 Filed 12-11-24; 8:45 am]
BILLING CODE 1410-30-P
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