Page:H.R. Rep. No. 94-1476 (1976) Page 175.djvu

 of the Commission from among persons who have demonstrated professional competence in the field of copyright policy.

Adjustment of Cable Television Royalty Rates

Section 801(b)(2) authorizes the Commission to make determinations concerning the adjustment of the copyright royalty rates contained in Section 111. Such determinations are to be made solely in accordance with the provisions contained in Section 801(b)(2)(A), (B), (C), and (D). The time periods when such adjustments may be made are set forth in Section 804.

Under Section 801(b)(2)(A), the Commission may adjust the rates established in Section 111(d)(2)(B) to reflect (1) national monetary inflation or deflation, or (2) changes in the average rates charged cable subscribers for the basic service of providing secondary transmission to maintain the real constant dollar level of the royalty fee per subscriber which existed as of the date of enactment of this legislation. The purpose of this provision is to assure that the value of the royalty fees paid by cable systems is not eroded by changes in the value of the dollar or changes in average rates charged cable subscribers. The Committee recognizes, however, that no royalty fees will be paid by cable systems until the legislation is effective on January 1, 1978, and accordingly that the royalty fee per subscriber base calculated at the time of enactment must necessarily constitute an estimated value. In the Committee’s view, and based on projections supplied by the interested parties, the total royalties produced under the fee schedule at the time of enactment should approximate $8.7 million.

In adjusting the fee the Copyright Royalty Commission is limited to changes reflecting national monetary inflation or deflation or changes in the average rates charged cable subscribers for the basic service of providing secondary transmissions. Concern was expressed during the hearings on the revision legislation that cable systems may reduce the basic charge for the retransmission of broadcast signals as an inducement for individuals to become subscribers to additional services (e.g., pay-cable). Such a shift of revenue sources would have the effect of understating basic subscriber revenues and would deny copyright owners the level of royalty fees for secondary transmission contemplated by this legislation. Accordingly, such shifts of revenue sources, if they do occur, should be taken into account by the Commission in adjusting the basic rates.

There are also two limitations on the power of the Commission to adjust rates under Section 801(b)(2)(A). The first provides that no change in the rates established by Section 111(d)(2)(B) is permitted if the average rates charged cable system subscribers for the basic service of providing secondary transmissions exceeds the change in national monetary inflation. Thus, in the situation where subscriber rates during a particular adjustment period increase 20 percent but national monetary inflation increases only 10 percent no change or reduction in the rates is permitted.

The second limitation provides that no shall be permitted based on any reduction in the average number of distant signal equivalents per subscriber. The purpose of this limitation is to make clear that if the average number of distant signals carried by a cable system is reduced in the future (and thereby