Page:H.R. Rep. No. 94-1476 (1976) Page 362.djvu

 It may seem that a compulsory license is a drastic invasion of the rights of private property. Yet, when we remember that a cable system is passive in its program selection and must intercept and distribute whatever the primary transmitter transmits then we must recognize that it is impossible and impractical for the cable system to negotiate for a license with the copyright owner in advance of transmitting the programing. At the same time item by item negotiating between users and owners of copyright prior to each performance would be so burdensome as to destroy this valuable means of communication and would also effectively deny a valuable market to the copyright owners. Those facts have long since been recognized by copyright owners and the broadcast and entertainment industries which use such organizations ASCAP and BMI as mediums through which they adjust their copyright liabilities and benefits.

I submit that the royalty fee schedule which the committee has agreed upon is fair and equitable to all concerned. There are those who disagree and feel that so-called “rural” cable systems are called upon to pay higher fees than “urban” cable systems.

It has been asserted that cable systems in non-metropolitan areas bear the burden of royalty payments while urban systems will pay minimal fees. I respectfully disagree with this point of view.

Under the fee schedule proposed in this bill all systems with up to $160,000 in revenue semi-annually ($320,000 annually) will pay under a sliding scale based on revenue, not on the number of distant signals carried. This small system adjustment was enacted specifically to avoid excessive impact on small, rural systems. These systems, because they are located in areas without adequate local service, import a large number of distant signals. Payment based solely on the number of distant signals would be onerous. Thus, the “adjustment”.

Under the formula in this bill, systems with revenue over $320,000 per year will pay royalties based on the number and type of distant signals. Distant independent stations count as one full distant signal while distant network stations count as one-fourth of one distant signal. Among other reasons, this significantly lower cost for network stations was instituted to avoid undue burden on those larger rural systems carrying a great many distant networks. Due to the relative scarcity of independent stations, carriage of networks by rural systems usually greatly overshadows the carriage of independents.

Under current FCC regulations, urban cable systems are authorized to import a maximum of three distant independent signals. Some cable operators have argued that this limitation effectively diminishes the copyright burden on major market systems. It is vitally important to note that payment is based on both number and type of signal. Because independent signals each count as one full distant signal, an urban system will pay for three full distant signals. Rural systems will generally carry network stations, being able to carry 12 distant network signals (an unrealistic and unlikely situation) before bearing the same liability as an urban system.

It has been suggested that all signals imported from markets less than 150 miles distant should be considered local for purposes of fee determination. This change in definition would affect only those systems with annual revenue over $160,000 semi-annually ($320,000 annual revenue) and therefore paying on the basis of distant signal carriage