TELEVISION SATELLITE AND CABLE RETRANSMISSION OF BROADCAST VIDEO PROGRAMMING UNDER THE COPYRIGHT ACT'S COMPULSORY LICENSES
CRS Report for Congress
Television Satellite and Cable
Retransmission of Broadcast Video
Programming Under the Copyright Act’s
Compulsory Licenses
Updated October 5, 1998
Dorothy Schrader
Senior Specialist
American Law Division
Congressional Research Service ˜ The Library of Congress
ABSTRACT
This report reviews the history and background of the cable and television satellite licenses
of the Copyright Act (title 17 U.S.C., sections 111(c)-(f) and 119, respectively), reviews the
Satellite Home Viewer Act of 1994, and notes recent developments, including: the 1997
satellite license rate adjustment; pending bills relating to the compulsory licenses
(H.R.3210, H.R.2921, H.R. 4449, S.1720, S.1422, and S. 2494); and the August 1997 report
of the Copyright Office on these licenses.
Television Satellite and Cable
Retransmission of Broadcast Video Programming Under the
Copyright Act’s Compulsory Licenses
Summary
The cable and satellite compulsory licenses of the Copyright Act require
rightsholders to permit the retransmission of certain broadcast signals by cable
systems and “wireless cable” in the case of the §111 license and by satellite providers
(including direct broadcasting entities) in the case of the §119 license. The licenses
have some common features (such as rate adjustment and distribution proceedings).
The licenses differ markedly, however, in their overall structure, signal coverage,
conditions of carriage, and copyright royalty payment mechanisms.
The satellite carrier license of the Copyright Act authorizes retransmission of
“superstation” and network television programming by satellite carriers to home
satellite “dish” owners, upon payment of a copyright royalty of 27 cents per signal
per subscriber each month and compliance with other statutory conditions. The
license, which is codified as section 119 of title 17 U.S. Code, applies only for
purposes of private home viewing.
Legislation creating the license was originally enacted for 6 years, effective
January 1, 1989. Before its expiration, the satellite carrier license was extended for
another 5 years by the Satellite Home Viewer Act of 1994 (“SHVA of 1994"), Public
Law 103-369. The §119 license expires December 31, 1999, unless Congress acts
to extend it.
The cable compulsory license of §111 of the Copyright Act permits
retransmission of any broadcast signals by wired or “wireless” cable systems, subject
to the payment of copyright royalties essentially for signals “distant” to the
community served by the cable system. The cable license is permanent law.
Recent developments relating to the satellite and cable licenses include: the
2921, which would delay implementation of the new 27 cent rate; an August 1997
Report to Congress by the Copyright Office, which reviews policy issues relating to
both licenses and recommends new legislation; the introduction of H.R. 3210 and
S. 1720, which would reform the rate adjustment and royalty distribution mechanism
for the compulsory licenses and apply the retransmission consent and must-carry
provisions of the Communications Act to satellite carriers; enactment of Public Law
105-80, which makes technical corrections to the satellite license; and the
introduction of S. 2494 and H.R. 4449, which would authorize retransmission of
local signals under the section 119 license and generally apply the Federal
Communications Commission’s cable signal carriage rules to retransmission of
broadcast signals by satellite service providers.
This report summarizes the main features of the satellite and cable licenses,
reviews the Satellite Home Viewer Act of 1994, and discusses recent developments,
including proposals for amendment of these licenses.
Contents
Most Recent Developments......................................1
Background ..................................................3
Satellite Carrier License.....................................3
The Cable Compulsory License...............................7
The Satellite Home Viewer Act of 1994...........................14
Statutory License and Arbitration Phases......................15
Network Station Redefined.................................15
Unserved Households.....................................16
Direct Broadcasting Services................................18
Fair Market Value Royalty Adjustment Criteria.................18
Local Signals Under the Cable License........................19
Legislative Policy Issues.......................................21
1997 Rate Adjustment and Proposals to Stay Its Implementation....21
Signal Measurement and Termination of Satellite Service: Determination
of “Unserved” Status..................................22
Local Signals: Expansion of the Satellite License To Permit
Retransmission of Any Local Broadcast Signal..............22
PBS Satellite Feed Proposal.................................23
Review of Cable and Satellite Licenses........................23
Brief Summary of H.R. 3210 and S. 1720..........................24
Brief Summary of H.R. 4449 and S. 2494..........................25
Conclusion ..................................................26
Television Satellite and Cable Retransmission of
Broadcast Video Programming Under the
Copyright Act’s Compulsory Licenses
Most Recent Developments
New copyright policy issues have arisen regarding the television satellite carrier1
and cable2 compulsory licenses of the Copyright Act.3 H.R. 3210 and the Senate
companion bill (S. 1720) — known as the “Copyright Compulsory License
Improvement Act” — would revise the satellite and cable licenses of the Copyright
Act in an attempt to create more parity in the operation of the licenses.
These bills would: 1) reform the system for rate adjustment and distribution of
copyright royalties paid under the licenses by replacing the existing Copyright
Arbitration Royalty Panels (“CARPs”) with a Board composed of 3 or more
administrative law judges; 2) make the satellite license permanent, allow new
satellite subscribers to receive network signals without the existing 3 month delay if
they dropped cable service, and allow satellite providers to retransmit local signals
and the national satellite feed of the Public Broadcasting Service (“PBS”); 3) apply
the retransmission consent provisions of the Communications Act of 1934 to carriage
of network signals by satellite providers; 4) amend the Communications Act to
impose “must-carry” requirements on satellite carriers who retransmit local signals;
5) require the Federal Communications Commission (“FCC”) to conduct a
rulemaking proceeding and apply its cable carriage rules concerning network
nonduplication, syndicated exclusivity, and sports blackouts to satellite carriers; and
Another pair of similar but different bills — S. 2494 and H.R. 4449 — would
also generally apply the FCC’s signal carriage rules to satellite services, in an attempt
to create parity between the satellite and cable licenses and promote competition in
multichannel video programming services. These bills would also authorize local-to-
local retransmission of network signals by direct-to-home satellite services.
The copyright royalty rate paid by satellite carriers for the privilege of
retransmitting copyrighted broadcast programming was adjusted by the Librarian of
Congress in October 1997 (effective January 1, 1998) based on the recommendations
of a duly constituted Copyright Arbitration Royalty Panel (“CARP”). The new
117 U.S.C. §119.
217 U.S.C. §111(c)-(f).
3Title 17 of the United States Code, §§101 et seq.
monthly rate of 27 cents per signal per subscriber is under appeal to the Court of
Appeals for the District of Columbia. Bills were introduced at the end of the first
session of the 105th Congress (S. 14224 and H.R. 2921) which, if enacted, would
delay implementation of this rate increase.
H.R. 672, which corrected certain technical errors in the existing satellite
license law, was enacted as Public Law 105-90 on November 13, 1997.
On the administrative-regulatory front, the Copyright Office submitted a report
to Congress on August 1, 1997 entitled “A Review of the Copyright Licensing
Regimes Covering Retransmission of Broadcast Signals,” which, as requested by the
Senate Judiciary Committee, included policy recommendations for reform of the
cable and satellite licenses.5 The Copyright Office also 1) initiated a separate Notice
of Inquiry public proceeding to determine if the satellite license permits the
retransmission of network programming to subscribers in the local markets of
network affiliates (“local signals inquiry”)6 and 2) closed its public proceeding
concerning the eligibility of open video systems of the telephone companies for the
cable compulsory license.7
Satellite service providers and their subscribers continue to press for
amendments of the §119 license to clarify what is a viewable network signal in
determining whether or not a household is “unserved” by a network. The
transitional provisions of the Satellite Home Viewer Act of 1994,8 which were
intended to address the viewable signal issue, have expired.9 Satellite service
providers generally terminate service of a signal if reception of the signal by a given
household is challenged by the network or its affiliate. Broadcasting entities have
4The Senate Commerce Committee favorably reported S. 1422 on March 12. 1998.
5Oversight hearings were held on the Copyright Office report and the policy issues
concerning the cable and satellite compulsory licenses in 1997 by committees in the House
and the Senate. House hearings were held on October 30, 1997 before the Subcommittee
on Courts and Intellectual Property. Senate hearings were held on November 12, 1997
before the Senate Judiciary Committee.
663 Fed. Reg. 3685 (January 26, 1998).
7The open video proceeding had been published at 61 Fed. Reg. 20197 (May 6, 1996). The
notice of termination was published at 62 Fed. Reg. 25213 (May 8, 1997). In closing this
proceeding, the Copyright Office said that these issues would be considered as part of the
report on the cable and satellite licenses that had been requested by the Senate Judiciary
Committee, which, as noted, was submitted to the Congress in August 1997.
8Pub. L. 103-369, 108 Stat. 3477, Act of October 18, 1994 (Hereafter, the “SHVA of 1994"),
which extended the section 119 satellite license for another five years.
9Clause (8) of 17 U.S.C. §119(a), captioned the “transitional signal intensity measurement
procedures.” This clause was in effect only from enactment in October 1994 through the
end of 1996. The statutory procedures were never fully implemented because the private
sector parties never reached an agreement, as contemplated, concerning the standards for
determining what is a viewable signal and how to measure signal intensity.
filed copyright infringement lawsuits against satellite service providers if challenged
service is not terminated.10
In one of their lawsuits against a satellite provider — ABC v. PrimeTime 24 —11
broadcasters have prevailed. A district court has issued an injunction against the
satellite service defendant for violation of section 119's restrictions on retransmission
of network signals to ineligible households. By agreement of the parties to the
litigation, enforcement of the injunction against existing subscriber-households will
be delayed until February 28, 1999.12
In a development that implicates the §111 cable compulsory license, the
Supreme Court in a 5-4 decision13 upheld the constitutionality of the statutory must-
carry rules enacted by the 1992 Cable Act14 (which amended the existing
Communications Act of 1934).
This report summarizes the main features of the satellite and cable compulsory
licenses; reviews the Satellite Home Viewer Act of 1994 (“SHVA of 1994") and
other recent developments affecting the satellite and cable licenses; and briefly
summarizes the pending bills to revise the copyright compulsory licenses (H.R. 3210,
S. 1720, H.R. 4449, and S. 2494) and the bills intended to delay implementation of
the 1997 satellite license rate increase (S. 1422 and H.R. 2921).
Background
Satellite Carrier License. The satellite carrier license of the Copyright Act
authorizes retransmission of “superstation” and network television programming by
satellite carriers to satellite home “dish” owners upon payment of a copyright royalty
and compliance with other statutory conditions.
The Satellite Home Viewer Act of 1988 (“SHVA of 1988"),15 which created the
satellite carrier license, was scheduled to “sunset” on December 31, 1994. Congress
10In the 104th Congress, legislation was considered but not enacted that would have
addressed the viewable network signal issue. H.R. 3192 would have required satellite
carriers, broadcast networks, and their affiliated stations to agree upon signal intensity
measurement procedures or, failing agreement, compel arbitration of the issue.
11 __ F. Supp. 2d __, 1998 WL 544297 (M.D.N.C. August 19, 1998).
12 “Joint Press Statement of NAB and SBCA,” NAB Press Release (September 21, 1998).
The parties have agreed jointly to file a stipulation with the district court, delaying
enforcement until after February 28, 1999. They have also agreed on procedures for
notifying existing subscribers of possible termination of satellite network service, including
information about options for receiving the network signal and possible waivers of the
“unserved household” restriction by the broadcast station.
13Turner Broadcasting System, Inc. v. Federal Communications Commission,
14Pub. L. 102-385, 106 Stat. 1460, Act of October 5, 1992.
15Act of November 16, 1988, Title II of Pub. L. 100-667, 102 Stat. 3949.
(Hereafter the “SHVA of 1988").
extended the life of the satellite carrier license through December 31, 1999 by
passage of the Satellite Home Viewer Act of 1994 (“SHVA of 1994").16
Congress originally enacted the satellite carrier statutory license, section 119 of
the Copyright Act,17 effective January 1, 1989, to facilitate access to “superstation”
and network programming through reception by home satellite “dish” owners. The
license applies only for purposes of private home viewing. The section 119 license
does not authorize retransmission of television broadcasts to bars, hotels, restaurants,
and similar commercial establishments.18
Satellite carriers19 must meet special conditions for the retransmission of
network programming. Since this programming reaches a high percentage of
television households by direct transmission, the statutory license applies to network
16If Congress had not extended the satellite carrier license, presumably the satellite carriers
would have been able to retransmit broadcast television programming to their home “dish”
owner subscribers after 1994 only if the carriers had negotiated voluntary licensing
agreements with every copyright owner of the works embodied in the broadcast
programming. But see the later discussion concerning the satellite carriers’ argument that
they might qualify for the 17 U.S.C. §111 cable license.
17The Copyright Act is codified as title 17 of the United States Code, sections 101 et. Seq.
The Copyright Act of 1976, Pub. L. 94-553, Act of October 19, 1976, is the most recent
general revision of the copyright law. The 1976 Act went into effect January l, 1978.
18Other provisions of the Copyright Act may authorize retransmission to commercial
establishments, either under an exemption to the rights of the owner of copyright, or under
the cable compulsory license of section 111. Section 111(a)(1) exempts a local
retransmission to the private rooms of hotels, if no direct charge is made for the guest to see
or hear the retransmission. Cable systems may retransmit local and distant broadcasts to
paying subscribers, including bars, restaurants, hotels, and other commercial establishments
under the cable license of section 111(c)-(f). Also, public reception of the primary
transmission by a commercial establishment may be exempt under section 110(5), if
reception occurs via a single receiving apparatus of a kind commonly used in private homes,
no direct charge is made to see or hear the transmission, and there is no further transmission
to the public. With respect to the section 110(5) exemption, however, satellite receiving
equipment would not qualify as an “apparatus of a kind commonly used in private homes,”
according to several lower court decisions.
19Satellite carriers are entities authorized by the Federal Communications Commission
(“FCC”) to use a satellite in the point-to-multipoint distribution of television signals. They
are essentially common carriers but have been exempted by the FCC from regulation as
ordinary common carriers.
signals only for their retransmission to households “unserved”20 by the networks and
their affiliate stations.21
“Superstations” are independent broadcast stations, like WTBS-Atlanta, WOR-
New York, and WGN-Chicago, not affiliated with any of the commercial networks.
The over-the-air signal of these independent stations is retransmitted on an essentially
nationwide basis, principally by wired cable services under the authority of the
separate cable compulsory license of section 111 of the Copyright Act.
The section 119 satellite carrier license requires a monthly royalty payment for
each broadcast station retransmitted, based on the number of subscribers to the signal
multiplied by the statutory rate for that type of station. The current rate if 27 cents per
month per signal per subscriber, for both superstation and network signals.22
20Unserved households are those that fall into the so-called “white areas.” Originally this
phrase referred to the approximately one to two percent of the television households in the
United States which could not receive one or more of the three major commercial networks
(ABC, CBS, and NBC). These households were located primarily in remote, rural areas
where terrain or distance from the nearest transmitter (whether primary or translator station)
make over-the-air reception of a viewable signal not feasible. In some cases, cable service
is available to retransmit a viewable signal. The satellite carrier license does not apply to
a household that subscribed to cable service within 90 days before starting satellite carrier
service. As discussed later, the expansion of the definition of “network station” to include
the Fox stations (and probably United Paramount and Warner Brothers stations) also
expands the reach of the satellite carrier license to areas outside the traditional “white
areas.” Of course, this expansion only relates to these smaller networks, which do not have
the number of affiliates and nationwide coverage that the three major networks have.
21The Satellite Home Viewer Act of 1988 (“SHVA of 1988") incorporated several key
definitions from the section 111 cable license, including the definition of network station.
Under this definition, neither PBS member stations nor Fox Broadcasting affiliates clearly
qualified as network stations. The absence of a fully nationwide television service excluded
the Fox affiliates. Their noncommercial status apparently excluded PBS stations from the
“network” category under the SHVA of 1988, notwithstanding a reference in the legislative
history of the SHVA of 1988 which referred to PBS as a network. H.R. REP. 887 (Part 2),th
100 Cong., 2d Sess. 19 (1988). (The Copyright Office, however, did not refuse to accept
satellite license statements of account that characterized PBS stations as “network” signals.)
As discussed later, the SHVA of 1994 clarified the status of PBS stations and also
broadened the definition of “network” to include the Fox network and new smaller
“networks.”
22The current rate took effect January 1, 1998. The former rates were 6 cents for network
signals and 17.5 or 14 cents per month per signal per subscriber for superstation signals,
depending upon whether or not the broadcast station was entitled to protection under the
FCC’s “syndicated exclusivity” rules. Syndicated television programming is off-network or
post-network programming licensed directly to individual broadcast stations. The FCC’s
rules basically require respect for the contractual rights obtained by broadcasters in the
syndicated programming. Superstation programming subject to these rules must be “blacked
out” upon request in areas where other stations hold exclusive rights, unless the superstation
has obtained nationwide rights in the same programming, in which case, the other station’s
rights would be nonexclusive.
The compulsory phase of the satellite carrier law applied for the first four years
after enactment (that is, from 1989 through 1992). For the last 2 years of the SHVA
of 1988 (1993-94), the satellite retransmission license could have been obtained
either through voluntary negotiations between copyright owners and satellite carrier
systems, or through arbitration. In fact, since voluntary negotiations did not lead to
a licensing agreement in 1992, the former Copyright Royalty Tribunal23 (“CRT”)
convened an arbitration panel, which ultimately set the current royalty rates.
Satellite carrier operators report to the Copyright Office by January 31 and July
month period. The carriers remit payment of the appropriate royalties at that time.
Originally, the former Copyright Royalty Tribunal distributed to copyright
owners the royalties received by the Copyright Office and deposited with the United
States Treasury in interest-bearing accounts, pending their distribution. With the
abolition of the CRT in December 1993, its distribution function was transferred to
ad hoc arbitration panels, which are convened and supervised by the Copyright
Office, under the direction of the Librarian of Congress. The Librarian also now
convenes any arbitration panel for purposes of adjusting the satellite license rates.24
To justify carriage of network programming, the satellite carrier submits to each
network, within 90 days after commencing retransmission, the names and addresses
of its subscribers. The networks and their affiliates can use this list to determine
whether the subscriber resides in an “unserved household,” which is a condition of
the license as applied to network programming. A household is “unserved” by a
particular network if (i) it cannot receive the signal of a primary network station of
that network over-the-air (at Grade B intensity, as defined by the FCC), or (ii)
within 90 days before the date service begins to that household, the household has
not received the signal through subscription to a cable system.
A network or one of its affiliate stations can challenge reception of its signal on
the ground the household is not “unserved” by the network. Upon receiving an
objection, the satellite service provider can either conduct a signal measurement test
to prove the household is unserved, terminate the service, or risk that the network
or affiliate station will sue for copyright infringement.
23The Copyright Royalty Tribunal Reform Act of 1993, Pub. L. 103-198 (December 17,
1993) abolished the Tribunal and replaced it with a system of ad hoc copyright arbitration
royalty panels (CARP’s), administered by the Copyright Office under the direction of the
Librarian of Congress.
24The first rate adjustment proceeding by a CARP under the new procedures was conducted
in 1997. The Librarian of Congress confirmed the basic recommendation of the CARP,
setting the new rate of 27 cents per signal per month per subscriber, in an Order published
in the Federal Register on October 28, 1997. 62 Fed. Reg. 55742. The new rate took effect
on January 1, 1998. The Court of Appeals for the District of Columbia is considering an
appeal of the rate adjustment, but has refused to stay the fee increase pending appeal.
The Cable Compulsory License. The Satellite Home Viewer Act of 1994 also
addressed the eligibility for the separate section 111 cable compulsory license of
another video retransmission service — multichannel, multipoint distribution
services (“MMDS”; also known as “wireless cable”).25
The cable compulsory license is set out in section 111(c)-(f) of the Copyright26
Act, title 17 U.S.C. It was enacted in the Copyright Act of 1976, effective January
1, 1978, to compensate copyright owners for cable retransmission of their works
embodied in broadcast programming and to facilitate access by wired cable systems
to broadcast programming under reasonable rates and conditions for the benefit of
cable subscribers and the public.
Early History of Cable Television. Cable television systems began as
community-based, reception-enhancing services in the late 1940s and early 1950s.
Known originally as “community antenna television (CATV),” cable systems
initially provided a simple antenna service that improved reception of over-the-air
local broadcast signals. Very soon, however, cable system technology was used to
“import” distant broadcast stations not available over-the-air in the cable system’s
service area. Premium or “pay cable” programming services also were developed by
the early 1970s. Cable operators purchased transmission rights for the premium/pay
cable programming from their copyright owners. Cable operators paid nothing to
broadcasters for retransmission of broadcast signals and did not obtain any voluntary
copyright licenses for this retransmission.
Broadcast stations were concerned about the competitive impact of cable
technology and the unauthorized use of their broadcast programming without any
payment of royalties. Broadcasters strenuously objected to importation of distant
signals. Throughout the 1960s, broadcasters sought administrative relief through
regulations of the Federal Communications Commission (“FCC”), petitioned
Congress to make cable systems liable for copyright infringement by amendment of
the copyright law, and challenged in court the legality of cable carriage of broadcast
signals. When it became possible to count cable viewership for ratings purposes,
some broadcasters preferred mandatory cable carriage of local signals to copyright
relief and the FCC obliged the broadcasters by issuing must-carry rules in 1972.
The networks and most commercial broadcasters (both network affiliates and
independent stations) remained strongly opposed to importation of distant broadcast
signals. They felt the distant signals cost the local broadcaster viewers and diluted
the value of their programming, for which they had paid significant sums to obtain
exclusive rights in their own television market. In the 1960s, the distant broadcast
station itself could not generally sell advertisements directed to the distant television
25The SHVA of 1994 did not, however, address the cable compulsory license eligibility of
satellite master antenna systems (“SMATVs,” also known as “private cable”) or video
telephone services. The Copyright Office has addressed the status of SMATVs in its
regulations. The Office ruled that SMATVs are eligible for the cable license, essentially
under the same conditions as those applied to traditional wired cable systems. 62 Fed. Reg.
26Pub. L. 94-553, Act of October 19, 1976, codified as title 17 U.S.C.
market because many of its advertisers did not conduct business in the distant
television market.27 Copyright owners, who licensed broadcast rights to broadcasters,
also strongly objected to cable retransmission of distant signals because it eroded
their ability to license exclusive broadcast rights in a given television market.28
In order to protect broadcasters from the perceived unfair use by cable systems
of broadcast signals, the FCC in 1966 asserted jurisdiction over cable systems.29 At
first, the FCC required cable systems to obtain FCC approval in a full administrative
hearing for importation of distant signals into a major television market. This rule
had the practical effect of “freezing” distant signal importation (except for
“grandfathered” signals). In late 1968, after the Supreme Court ruled against
copyright liability for cable retransmissions,30 the FCC began its experimentation
with “retransmission consent.” The FCC proposed rules, which were implemented
experimentally but never adopted in final form, requiring cable systems to obtain
retransmission consent from the broadcaster to carry new signals.31 (The FCC, as
it generally does, “grandfathered” existing cable carriage.) The retransmission
consent mechanism proved unworkable: the broadcasters with few exceptions
27The economic situation changed later for some distant stations as national or regional
advertisers became aware of the possibilities of advertising on broadcast stations imported
into distant television markets. With the advent of satellite technology and the creation of
the “superstation,” national and regional advertisers could place ads at rates less than
network rates and still reach a large national (or regional) audience. Except for station
WTBS (Atlanta) (a “willing” superstation, which from its inception as a superstation sought
to sell ads nationally), the independent broadcast stations that were turned into
“superstations” without their permission continued to join the networks and their affiliates
in opposing uncompensated retransmission of their broadcast programming by cable
systems.
28Copyright owners licensed some works to networks for nationwide transmission, for
which the networks paid large sums of money. Because broadcast stations (both network
affiliates and independents) operate in the specific television markets they are authorized
by the FCC to serve, copyright owners were able (before the advent of cable retransmission)
to market exclusive rights in their works in each television market. That is, the same movie
or syndicated television program could be licensed “exclusively” in Los Angeles, Chicago,
New York, Wichita, Peoria, etc. The broadcast networks purchased nationwide rights for
limited times and repeat showings. When those rights expired, the copyright owner could
license the work “exclusively” to stations in each separate television market. Cable system
importation and retransmission of distant signals threatened to dilute and perhaps
significantly erode the value of these television market rights.
29Second Report and Order in Docket No. 15971, 2 FCC 725 (1966). The Supreme Court
upheld the FCC’s assertion of cable jurisdiction (within limits) and the 1966 Order
specifically in United States v. Southwestern Cable Co., 392 U.S. 157 (1968).
30Fortnightly Corp. V. United Artists Television, Inc., 392 U.S. 390 (1968).
31Notice of Proposed Rulemaking and Notice of Inquiry in Docket 18397, 15 FCC 2d 417
(1968).
refused consent to allow cable retransmission.32 Following this experiment, the FCC
in 1972 promulgated its major body of cable carriage rules.33
In the Congress, the copyright liability of cable systems became a stumbling
block in the effort to enact a general revision of the copyright law. The last general
revision had been enacted in 1909. No legislation was passed in the 1960s, as
broadcasters and copyright owners attempted to obtain judicial relief by suing cable
operators for copyright infringement under the existing 1909 Act.34 While
broadcasters/copyright owners won some lower court cases, the cable operators
ultimately prevailed before the Supreme Court in two historic copyright cases.
In Fortnightly Corp. v. United Artists Television, Inc.,35 the Court applied a
“functional” test to determine whether cable operators “performed” copyrighted
works in retransmitting those works as embodied in broadcast signals. Noting that
broadcasters “perform” in transmitting works and asserting that viewers do not
“perform” in receiving works embodied in signals,36 the Court found cable systems
in the 1960s functioned as viewers and had no copyright liability for retransmission
of essentially local broadcast signals. When the issue of distant signal importation
finally came before the Supreme Court in Columbia Broadcasting System, Inc. v.
Teleprompter Corp.,37 broadcasters lost and cable systems prevailed again. The
Court said that the “reception and rechanneling of these [broadcast] signals for
simultaneous viewing is essentially a viewer function, irrespective of the distance
between the broadcasting station and the ultimate viewer.”38
The Fortnightly-Teleprompter decisions gave cable systems complete
exemption from copyright liability for retransmission of broadcast signals. The
practical effect was not to end the policy debate, which now returned to the
legislative forum (since the general revision of the 1909 Act was yet pending), but
32See, Second Further Notice of Proposed Rulemaking in Docket No. 18397-A, 24 FCC 2d
33Cable Television Report and Order (issued February 2, 1972), 36 FCC 2d 143 (1972).
34Copyright Act of March 4, 1909, 35 Stat. 1075.
35392 U.S. 390 (1968).
36While recognizing the analytical difficulties of applying the 1909 Copyright Act to a new
technology like wired cable, copyright experts generally criticized the Court’s assertion that
viewers do not “perform” when receiving works on ordinary home television sets.
Copyright experts generally argued that viewers have no copyright liability because they
engage in a private performance; the copyright law restricts public performances of works.
Lower appellate courts had so ruled. If the Supreme Court had followed this principle, cable
operators would probably have been held liable for retransmission of broadcast
programming. (Alternatively, the Court could have decided that the term “perform” in the
1909 Act could not be stretched to cover a technology not even contemplated when the 1909
Act was passed.)
37415 U.S. 394 (1974).
38415 U.S. at 408.
to place the cable operators in a strong position in forging a compromise concerning
their copyright liability under the proposed revision.39
1976 Copyright Revision. Congress legislated the cable compulsory license in
1976 to resolve the copyright policy issues stemming from retransmission of
copyrighted works by wired cable systems. Since the FCC had engaged in substantial
regulation of wired cable, the Congress employed the fabric of FCC regulations to
shape the contours of the cable compulsory license. In essence, the FCC’s cable
regulations infused the copyright law and were incorporated by reference almost
bodily into the copyright law. These regulations included the distant signal carriage
rules,40 the syndicated exclusivity rules,41 the network nonduplication rules,42 the
must-carry rules,43 and originally the anti-leapfrogging44 and anti-siphoning rules.45
39Indeed, copyright owners were in the weakest posture of any of the contending interests
among cable operators, broadcasters, and rightsholders. Cable operators had prevailed in
court. Broadcasters had prevailed before the FCC, whose 1972 rules seriously restricted
cable carriage of distant signals but required carriage of local signals. Rightsholders were
not getting any money from cable for retransmission and would have difficulty negotiating
increased payments from broadcasters. Rightsholders could not get regulatory relief; they
had to obtain relief from the Congress through an amendment of the copyright law.
40The distant signal rules governed the permissibility of importing broadcast signals from
a distant television market into the service area of the cable system. The rules established
rigid quotas for the number of distant independent station signals (that is, commercial non-
network signals) that could be carried by a cable system based on the division of television
markets into top-50, lower-50, “smaller market,” and “outside all markets” categories. The
“distant signal” demarcation was drawn by application of the must-carry rules: if the
broadcast station could insist upon cable carriage, the signal was local; all other signals
were distant. These rules were eliminated by the FCC, effective June 25, 1981, but remain
highly significant under the Copyright Act for calculation of the copyright royalties payable
by cable systems.
41The syndicated exclusivity rules allowed a broadcast station to object to cable carriage of
specific nonnetwork programming for which the broadcast station had purchased exclusive
transmission rights within its television market. Most of this programming was
“syndicated,” that is, marketed by independent producers to one broadcast station in each
television market under an exclusive license. These rules remain in effect on a modified
basis.
42The network nonduplication rules prohibit cable importation of a network signal into a
service area already served by that network. For example, if an NBC affiliate station
operates in the television market served by the cable system, the system may not duplicate
the network programming by importing another NBC station (whether a network owned and
operated station or an affiliate station) into that television market. The signal can be
imported to retransmit the nonnetwork portion of the broadcast day (i.e., local news, local
television shows, and syndicated programming). These rules remain in effect.
43The must-carry rules in effect on April 15, 1976 were incorporated by reference into the
Copyright Act in the section 111(f) definition of “local service area of a primary
transmitter,” which essentially defines “local” signals.” Under these rules, a broadcast
station licensed to operate in a particular community served by a cable system could insist
upon carriage by that system, within certain limits. The principal criteria were: i) geography
— must-carry rights applied within a 35-mile radius from the transmitter site; ii)
(continued...)
Above all, the FCC’s former cable regulations form an integral part of the
calculation of the amount of royalties that must be paid for cable retransmission
under the cable compulsory license.46
Recognizing that many local broadcasters now wanted to be carried by the cable
system operating in the local television market, the cable compulsory license defined
local signals by employing the FCC’s must-carry rules as the demarcation between
local and distant. Since cable carriage of local signals was mandatory, in general,
cable operators would not have to pay copyright royalties for carriage of local signals
generally. Copyright royalties are paid for distant signals primarily. Royalties are
paid twice a year at six-month filing periods.
At the present time, small cable systems (with gross receipts of $146,000 or less
for the six month filing period) pay a flat fee of $28 every six months. Medium-sized
systems (with gross receipts above $146,000 but less than $292,0900 for the filing
43(...continued)
significantly viewed status —that the signal was viewed by 5 percent of television
households, as demonstrated by rating surveys. The original must-carry rules were held
unconstitutional in Quincy Cable TV, Inc. v. FCC, 768 F.2d 1434 (D.C. Cir. 1985), but the
same court noted that the 1976 must-carry rules remain viable for purposes of the Copyright
Act’s cable compulsory license. In the 1992 Cable Act, Pub. L. 102-385, 106 Stat. 1460,
Congress adopted statutory must-carry rules. The Supreme Court initially vacated a district
court grant of summary judgment holding the must-carry rules valid and remanded the case
for further findings on the justification for the carriage regulations. Turner Broadcasting
System, Inc. v. FCC, 114 S.Ct. 2445 (1994). The Court indicated that an intermediate level
of scrutiny is appropriate for the must-carry rules. The Government must show, however,
that the remedy adopted does not burden substantially more speech than is necessary to
further its legitimate interests. On remand, a divided district court again upheld the
constitutionality of the must-carry rules. Turner Broadcasting System, Inc. v. FCC, 910 F.
Supp. 734 (D.D.C. 1995). On its second look, the Supreme Court recently upheld the
constitutionality of the statutory must-carry rules in Turner Broadcasting System, Inc. v.
FCC, 117 S. Ct. 1174 (1997).
44Originally, the distant signal rules prioritized signals and required importation of the
nearest distant signal of a given category (independent or network). The cable system was
prohibited from “leapfrogging” the closer station to import a more distant one. The FCC
withdrew the “anti-leapfrogging” rules in 1977.
45The former anti-siphoning rules restricted the migration of television programming from
“free” over-the-air television to subscriber-based cable systems. These rules were
invalidated by the courts in 1977. Home Box Office, Inc. v. FCC, 567 F.2d 9 (D.C. Cir.
46The “distant signal equivalent” value, which is a critical component of the royalty formula,
is defined by the terms of FCC regulations in effect on either April 15, 1976 (the must-carry
rules) or October 19, 1976 (the date of enactment of the 1976 Copyright Act). The royalty
rates vary in accordance with the number of “distant signal equivalents” attributable to cable
carriage of broadcast programming. In simple terms, a value of one is assigned to carriage
of independent broadcast stations and a value of one-quarter is assigned to carriage of
network stations and noncommercial stations. These values are further qualified depending
upon the FCC’s rules governing substitution of programming (e.g., in “black out”
situations), part time carriage of late night or specialty programming, and part time carriage
because of lack of channel capacity to carry all the authorized signals.
period) pay a fee that is a percentage of their gross receipts from broadcast
retransmissions (0.5 of 1 percentum of any gross receipts up to $146,000 plus 1
percentum of the gross receipts in excess of $146,000 but less than $292,000),
regardless of the number of distant signals carried. Large systems pay in accordance
with a complex statutory formula which has three components: “gross receipts from
secondary transmissions,” the number of “distant signal equivalents” carried by the
system, and the royalty rate (which is a percentage amount for different distant
signals).
Like the satellite license, the royalties fees due under the cable compulsory
license are paid into the Copyright Office and deposited with the United States
Treasury in interest-bearing accounts, pending their distribution to those entitled to
compensation under the §111 license. The distribution proceedings are conducted
by ad hoc arbitration panels, which are convened and supervised by the Copyright
Office, under the direction of the Librarian of Congress.
The royalty rates and gross receipt limitations that define small, medium, and
large systems are subject to adjustment for inflation at five-year intervals. The rates
are also subject to adjustment following an FCC rule change that impacts the cable
carriage of broadcast signals. To adjust the rates or gross receipt limitations, the
Copyright Office would convene a Copyright Arbitration Panel.
Wireless Cable. In 1976, satellite transmission of television programming was
in its infancy. For example, the FCC did not authorize the operations of the first
satellite resale carriers (the predecessors of satellite carriers) until December 1976 —
after passage of the 1976 Copyright Act. When the cable compulsory license was
created, satellite transmission was not used to deliver broadcast signals.47
(Terrestrial microwave was used by many cable systems to import signals not
receivable with over-the-air reception equipment.) “Wireless cable” and SMATVs
(also known as “private cable”) did not exist. (One or two channel multipoint
distribution systems —”MDS”— did exist, but they lacked the multichannel capacity
that was developed later and given FCC authorization in the mid-1980's. In 1976,
MDS was a pay broadcast service.) Telephone services were prohibited by FCC
regulations from providing video retransmissions until recently.48 This limited FCC
authorization for video telephone service has been superseded now by passage of the
47A pay cable service, Home Box Office (HBO), began using a domestic communications
satellite (Western Union’s Westar) to distribute programming to its cable system customers.
Hearings Before the Subcommittee on Communications of the Senate Comm. Onst
Commerce, Science, and Transportation, 102d Cong., 1 Sess. 11 (1991) (Statement of
Charles C. Hewitt, President, Satellite Broadcasting and Communications Association).
48By 1993, the FCC had begun to experiment with video dial tone service. Bell Atlantic was
authorized to offer this interactive video service to New Jersey viewers. According to press
accounts, Bell Atlantic offered selected viewers 60 channels of service at prices 20% less
than competing cable systems. Baby Bells Branch Out, Time, July 18, 1994, col. 1, page
15. The Copyright Office opened a public notice of inquiry proceeding to consider the
eligibility of “open video telephone” systems for the cable license, but terminated the
proceeding without reaching any decision on eligibility when the Senate tasked the
Copyright Office with preparation of a general report on the cable and satellite licenses. 62
Fed. Reg. 25213 (May 8, 1997).
Communications Act of 1996,49 which removes most of the regulatory constraints
on telephone video services.
During the mid-1980's, the Copyright Office began to receive cable statements
of account and royalty payments from video retransmission services other than wired
cable.50 These new video retransmission services claimed eligibility under the
section 111 cable license either because they were unable to obtain voluntary licenses
from copyright owners or could not meet the price demanded for voluntary licenses.
In order to do business, they asserted that the cable compulsory license could be
interpreted as applicable to them.51
The Copyright Office conducted a public rulemaking proceeding to clarify
whether or not the section 111 compulsory license applies to entities other than
traditional wired cable systems, regulated as such by the FCC. While this
rulemaking proceeding was pending, a television network, the National Broadcasting
Company, and an affiliate sued a satellite carrier for copyright infringement. The
district court ruled in NBC’s favor in 1988, finding that satellite carriers are not
eligible for the cable compulsory license. Pacific & Southern Co., Inc. v. Satellite
Broadcast Network, Inc.,(SBN) 694 F. Supp. 1565 (N.D. Ga. 1988).
49Pub. L. 104-66, Act of February 8, 1996. This historic revision of the communications law
will have an enormous impact on competition in video services. The changes wrought by
the 1996 Telecommunications Act are beyond the scope of this Report, except to note a few
points. Although the Telecommunications Act removes most of the regulatory constraints
from the telephone companies in providing video services, the telephone companies
presumably will not have the privilege of the cable and satellite carrier compulsory licenses
of the Copyright Act for carriage of broadcast programming absent further legislation. The
telephone companies may seek access to these licenses by merger with cable or satellite
service providers that are eligible for the compulsory licenses, or by obtaining a local
government franchise to operate as a cable system. Those telephone companies that do not
gain access to the compulsory licenses will be at a serious competitive disadvantage in
providing video services. It is not likely that they could obtain the right to retransmit the
broadcast programming through voluntary negotiations, except possibly in the case of
superstations. For further information about the 1996 Telecommunications Act, see A.
Gilroy, Telecommunications Regulatory Reform: Issue Brief, IB95067.
50At different time periods, these retransmission services included SMATVs, wireless cable,
and satellite carriers.
51Before the advent of signal scrambling technology, satellite carriers operated free of
copyright liability under the “passive carrier” exemption of 17 U.S.C. §111(a)(3). The
conditions of that exemption are that the carrier have “no direct or indirect control over the
content or selection of the primary transmission or over the particular recipients of the
secondary transmission.” After the mid-1980's, satellite carriers elected to scramble some
of their signals. The 1984 amendments to the Communications Act had legalized home
“dish” reception of unscrambled satellite signals (unless the program owner had a licensing-
marketing plan to which the public could subscribe). The satellite carriers and many
program owners scrambled their transmissions to assert proprietary control over them. By
scrambling their signals, satellite carriers were able to “control... the particular recipients
of the secondary transmission,” which violated the conditions of the section 111(a)(3)
passive carrier exemption. Satellite carriers were no longer “passive.” At this point, they
asserted their eligibility for the cable license.
In response to the SBN decision, Congress created the satellite carrier statutory
license by enacting the Satellite Home Viewer Act of 1988.
In July 1991, the Copyright Office issued a Policy Decision and proposed
regulations consistent with the SBN district court opinion.52 Before final regulations
were issued, however, the 11th Circuit reversed and held satellite carriers were
eligible for the cable compulsory license. National Broadcasting Company, Inc. v.
Satellite Broadcast Networks, Inc., 940 F.2d 1467 (11th Cir. 1991).
After careful evaluation of the Copyright Act of 1976, its legislative history, and
the 11th Circuit’s SBN decision, the Copyright Office ruled in 1992 that video
retransmission services other than wired cable and certain SMATVs53 are ineligible
for the cable compulsory license,54 notwithstanding the initial contrary opinion of the
11th Circuit in the SBN case. Ultimately, after judicial review of the Copyright
Office’s regulation, the 11th Circuit deferred to agency expertise and upheld the
validity of the regulation.55
Wireless cable operators, in particular, petitioned Congress to provide
legislative relief from the impact of the 1992 Copyright Office regulation56 by
amendment of section 111 of the Copyright Act.
The Satellite Home Viewer Act of 1994
The Satellite Home Viewer Act (SHVA) of 1994 extended for 5 years the 17
U.S.C. §119 statutory license for retransmission of superstation and network signals
5256 Fed. Reg. 31580 (July 11, 1991).
53The eligible SMATVs are those regulated by the FCC as cable systems. In its 1990 Report
and Order in Docket No. 89-35, Definition of a Cable System, the FCC ruled that SMATVs
may become cable systems if operate in multiple buildings interconnected by cable except
where the buildings are commonly owned, controlled or managed and there is no crossing
of a public right-of-way to install the wires. 1990 Cable Report and Order at 4.
5457 Fed. Reg. 3284 (January 29, 1992). The effective date of the regulation was postponed
twice, however, to allow time for amendment of the Copyright Act to resolve the status of
video service providers other than wired cable systems.
55Satellite Broadcasting and Communications Association of America v. Oman, 17 F.3d 344
(11th Cir. 1994).
56The Copyright Office’s regulation defining “cable systems” for purposes of the 17
U.S.C.§111 license also had great significance in the legislative consideration of the satellite
carrier license extension. Satellite carriers have been granted a separate, but only temporary,
license in 17 U.S.C.§119. While the section 119 license is available, it is clear that satellite
carriers are excluded from the section 111 cable license, in accordance with 17 U.S.C.
§119(e). The satellite carriers argue, however, that if the section 119 license is allowed to
lapse by the Congress, then the carriers are eligible for the cable license. The Copyright
Office’s rule, however, excludes satellite carriers from access to the cable license by
declaring they do not satisfy the statutory definition of a “cable system.” Application of the
regulation to satellite carriers is now mooted by extension of the section 119 license by the
SHVA of 1994, but the issue could arise again at the end of this decade, when extension of
the section 119 license after the year 1999 will inevitably be presented to the Congress.
by satellite carriers for purposes of private home viewing via home satellite receiving
equipment.
With respect to the section 119 license, the Act also redefined the phrase
“network station,” established a statutory burden of proof for determining which
households are “unserved” by one or more networks, established transitional
procedures for determining viewability of broadcast signals over-the-air, established
the eligibility of direct broadcasting services for the section 119 license, and
identified fair market value criteria for setting royalty rates through arbitration.
With respect to the section 111 cable license, the SHVA of 1994 made wireless
cable eligible for the cable compulsory license. The Act also amended the definition
of local signals in 17 U.S.C. §111(f) to make those broadcast signals that are must-
carry signals under the 1992 Cable Act local signals under the cable compulsory
license of the Copyright Act.
Statutory License and Arbitration Phases. The SHVA of 1994 retained the
bifurcated statutory scheme of the Satellite Home Viewer Act of 1988, but
established a new date (July 1, 1996) to begin the voluntary negotiations to adjust the
rates. These negotiations were not successful. Consequently, the rates were adjusted
in 1997 by a copyright arbitration royalty panel (CARP) under the auspices of the
Copyright Office and the Librarian of Congress.57
Network Station Redefined. The term “network station” was redefined in the
SHVA of 1994 to clarify the status of noncommercial educational stations (members
of the public broadcasting network —”PBS”) and of the affiliates of the Fox
Broadcasting “network.”58 This new definition replaced one that simply incorporated
the 17 U.S.C. §111(f) definition of a network station into the section 119 license.
Under the SHVA of 1988 it had been unclear whether the superstation royalty rate
or the network rate (and the other network station restrictions) applied to PBS
stations and Fox affiliates. PBS and Fox are probably not considered “networks”
(for different reasons) for purposes of the cable license.59
57The Panel set the rate for both superstation and network signals at 27 cents per subscriber
per signal per month. The Librarian of Congress confirmed the new rate in an Order
published on October 18, 1997 in the Federal Register. 62 Fed. Reg. 55742. The rate
decision is under appeal to the Court of Appeals for the District of Columbia. Since the
court declined to stay the rate increase pending appeal, the new rate took effect on January
1, 1998. Unless it is changed by a court decision or affected by new legislation, the 27 cent
rate remains in effect until the satellite license sunsets at the end of 1999. For further details
about the background of, and justification for, the 1997 rate adjustment, see an American
Law Division, CRS, general distribution memorandum by Dorothy Schrader entitled
“Satellite Television License (17 U.S.C.§119) and the 1997 Rate Adjustment.”
58At the time the satellite license extension bills were under consideration in 1994, the
status of PBS and Fox stations as “network” stations was doubtful.
59The section 111(f) definitions of the cable license divide broadcast stations into three,
separately defined, mutually exclusive categories: independent stations, network stations,
and noncommercial educational stations. Fox stations presumably fail to meet the section
(continued...)
The SHVA of 1994 provided that any PBS member station is a “network
station.”
Under the SHVA of 1994, commercial network stations are those that are owned
or operated by, or affiliated with, one of the television networks in the United States.
Networks are defined as entities offering an interconnected program service on a
regular basis for 15 hours or more per week to at least 25 affiliated television
licensees in 10 or more states. The definition also includes any translator station or
terrestrial satellite station that rebroadcasts all or substantially all of the programming
of a primary network station. Under this definition, Fox affiliates would clearly be
network stations.60
Unserved Households. The SHVA of 1994 established special procedures for
ascertaining if an existing subscriber to a satellite carrier service resides in an
“unserved household.” These provisions were intended to facilitate nonjudicial
enforcement of section 119(a)(5) — the territorial restriction on the satellite carrier61
license as applied to network stations. Also, in any action to enforce the territorial
restriction, satellite carriers will bear the burden of proving the household is
unserved by the particular broadcast network.
Transitional signal intensity measurement. The transitional signal intensity
measurement provisions established procedures for testing the viewability of signals
to determine whether a particular household is served by a particular network. The
procedures distinguished between signals that are within or without the station’s62
predicted Grade B contour. The procedures were in effect only in 1995 and 1996.
59(...continued)
111(f) definition of “network station” because Fox Broadcasting does not provide fully
nationwide service. Since “noncommercial broadcast stations” are separately defined in
section 111(f), it has seemed clear that the “network station” definition of the cable license
applies only to commercial broadcast stations. In the case of the satellite carrier license,
however, the status of PBS stations was doubtful because of a comment in H.R. REP. 103-
703 (Part II), 103d Cong., 2d Sess. 19 (1988), which referred to PBS stations as subject to
the network royalty rate. Because of this reference in the legislative history, the Copyright
Office accepted filings from satellite carriers that applied the network royalty rate to PBS
station signals. PBS, however, apparently did not acknowledge that the “white areas”
restrictions for “network signals” applied to its stations.
60Since the enactment of the SHVA of 1994, additional commercial networks have arisen
that probably also meet the Act’s amended definition of a network. These include the
United Paramount Network and the Warner Brothers Network.
61In essence, satellite carriers are not permitted under the section 119 license to retransmit
network stations except to provide service in the so-called “white areas.” Originally, this
phrase referred to the one to two percent of the television households unserved by one or
more of the three major national television networks (ABC, CBS, and NBC). Under the
1994 SHVA’s new definition of network station, the satellite carrier license will be more
broadly available for carriage of Fox, United Paramount, Warner, and PBS member stations.
62The predicated Grade B contour of a broadcast station is a technical standard established
by the regulations of the Federal Communications Commission (“FCC”) to assure
compliance with appropriate broadcast service standards. The required signal strength is
(continued...)
The Senate Judiciary Committee report stated the “provisions are designed to be a
mechanism for resolving disputes, without litigation, over whether existing
subscribers are unserved within the meaning of the act.”63
Within the predicted Grade B contour, the satellite carrier had the burden of
conducting a signal intensity measurement to determine whether the household was
unserved, if the network station challenged the satellite service. If the test had
shown the household was not unserved, the carrier immediately had to deauthorize
the service. If, however, the test showed the household was unserved, the
broadcast affiliate challenging the service had to reimburse the carrier for the cost of
the signal measurement within 45 days of receiving the bill.64
Within the predicted Grade B contour, a network affiliate could have conducted
its own signal intensity measurement. If the household was not unserved, the carrier
immediately had to deauthorize service and reimburse the affiliate for the cost of the
test.
Outside the station’s predicted Grade B contour, a network affiliate had the
burden of conducting the signal intensity measurement. If the household was not
unserved, the satellite carrier immediately had to deauthorize service and reimburse
the affiliate for the cost of the test within 45 days of billing. If, however, the
household was unserved, the affiliate would have paid the cost of the test.
The transitional signal intensity measurement clause of the SHVA of 1994 is
now a “dead letter.” The policy issue of determining what is a viewable network
signal remains, however. Unless there is legislative action, the issue may be
litigated and some clarification of “viewable signal” may be provided by the courts.
Burden of proof. In any civil action litigating the status of the household
receiving the network signal, the satellite carrier bears the burden of proving that the
retransmission of the network signal is for private home viewing to an unserved
62(...continued)
intended to provide a certain level of viewability for the public receiving the signal and to
prevent interference with other broadcast stations.
63S.REP. 103-407, 103d Cong., 2d Sess. 10 (1994).
64Signal intensity measurements were not in fact conducted as envisioned by the SHVA of
1994. Congress expected that the satellite carriers and the broadcasters would agree among
themselves about the detailed procedures and standards for the signal intensity test. For
example, where will the measurement be taken — inside the household or on the rooftop
antennae; how high must the antennae be; where must the antennae be located; how will the
measurement be taken for condominiums and other multiple dwellings? The negotiationsth
did not result in any agreement, and the bill in the 104 Congress, H.R. 3192, which would
have compelled arbitration, was not enacted. Consequently, if satellite carrier delivery of
a network signal is challenged within the station’s predicted Grade B contour, the satellite
carrier ordinarily deactivates service for that signal. The householder is then left with the
options of receiving the signal over the air, if possible; of subscribing to a cable service,
if it is available; or of doing without the signal.
household. The losing party must pay for the costs of any signal intensity
measurement tests.
This burden of proof provision took effect January 1, 1997,65 with respect to
actions relating to subscribers who subscribed to satellite service as an unserved
household before October 18, 1994 — the effective date of the SHVA of 1994. The
now obsolete transitional intensity measurement procedures were intended to
complement the burden of proof clarification.
ABC v. PrimeTime case. A federal district court in North Carolina recently
held a satellite carrier liable to violation of the “unserved household” restriction of
the section 119 license.66 The defendant, according to the court, exceeded the scope
of the license through a pattern of willful or repeated retransmissions of network
signals to ineligible subscribers. The satellite carrier was permanently enjoined from
retransmitting the particular signal within the broadcast station’s predicted Grade B
contour (which was a circular area with a radius of about 75 miles).
As a result of an agreement by the National Association of Broadcasters (NAB),
the Satellite Broadcasting and Communications Association (SBCA), and the parties
to the litigation, enforcement has been delayed until after February 28, 1999. The
agreement also includes procedures for notifying existing subscribers of possible
termination of their network signals. The notification will provide information about
options for receiving the network signals and about possible waivers of the “unserved
household” restriction by the broadcast station.67
Direct Broadcasting Services. The SHVA of 1994 redefined “satellite
carriers” to mean carriers who operate in the Fixed Satellite Service or the Direct
Broadcast Satellite Service, parts 25 and 100 respectively, of the FCC’s regulations.
This revised definition established for the first time the eligibility of direct
broadcasting services for the section 119 license.
Fair Market Value Royalty Adjustment Criteria. Under the SHVA of 1988,
absent voluntary agreements, the statutory royalty rates could be adjusted by an
arbitration procedure. The law included some general criteria to guide the discretion
of the arbiters in adjusting the rates.68 These criteria were revised by the SHVA of
65The coming into effect of the burden of proof provision may trigger litigation over alleged
infringing satellite transmissions to home satellite “dish” owners.
66 ABC v. PrimeTime 24, __ F. Supp. 2d __, 1998 WL 544297 (M.D.N.C. 1998).
67 “Joint Press Statement of NAB and SBCA,” (NAB Press Release, September 21, 1998;
Washington, D.C.) (Online at “www.nab.org/).
68The criteria were originally set forth in 17 U.S.C. §119(c)(3)(D). As a result of
amendments made by the statute abolishing the Copyright Royalty Tribunal [Pub. L. 103-
198, 107 Stat. 2304, Act of December 17, 1993), this provision was redesignated
§119(c)(3)(B).
The arbitration panel shall establish royalty rates that “most clearly represent the
fair market value” of the superstation and network signals retransmitted by satellite
carriers. The CARP shall base its decision on “economic, competitive, and
programming information presented by the parties,” including three specific factors:
the competitive environment, the cost of signals in similar private and compulsory
marketplaces, and the special features of the retransmission marketplace; the impact
of the rates on continued availability of the satellite service to the public; and the
economic impact on copyright owners and satellite carriers.
Wireless Cable. The SHVA of 1994 amended the term “cable system” in
section 111(f) of the Copyright Act by inserting the word “microwave” in between
“wires” and “cables.” The purpose of this change was to make MMDS or “wireless
cable” systems eligible for the cable compulsory license.
The question arose, however, about computation of the royalties payable by
wireless cable under the cable license. As noted earlier, wireless cable was not
subject to the FCC’s cable carriage regulations since most of the regulations had been
abolished by the FCC before wireless cable became operational in the mid-1980's.
Yet, these FCC cable carriage regulations are indispensable to the computation of
the cable royalties.
Congress resolved this dilemma not by statutory text but by comments in the
committee reports. The Senate Judiciary Committee report says the “committee
intends `wireless’ cable and traditional wired cable systems to be placed on equal
footing with respect to their royalty obligations under the cable compulsory license,
so that one not have an unfair advantage over the other due to differences in their69
regulatory status under FCC rules.” The Senate Report therefore directed the
Copyright Office to “treat `wireless’ cable systems as if they were subject to the same
FCC rules and regulations that are applicable to wired cable systems, and `wireless’
cable systems must file their royalty payments and statements of account accordingly,70
in order to qualify for the section 111 license.”
Local Signals Under the Cable License.. The SHVA of 1994 made one other
adjustment to the section 111 cable compulsory license. The definition of “local
service area of a primary transmitter” — that is, the definition of local signals71 —
was amended. The change, in essence, expanded the concept of local signals to
include not only signals entitled to “must-carry” status under the FCC’s 1976 rules
(the former law), but also those entitled to must-carry status under the statutory rules
69S. REP. 103-407 at 14.
70Ib i d .
71The concept of “local signals” originally applied only to the cable license. It had no
application or relevance to the satellite license. The SHVA of 1994 did temporarily add a
definition of “local market” since this term was used in the transitional signal intensity
measurement clause [17 U.S.C. §119(a)(8)], which was in effect during 1995 and 1996. The
clause has expired and the term “local market” is obsolete. Recently, certain direct
broadcasting services have sought expansion of the satellite license to permit carriage of
“local” broadcast signals by DBS services. See the discussion under legislative proposals
in a later section of this report.
enacted by the Cable Television Consumer Protection and Competition Act of 199272
(“1992 Cable Act”), which amended the Communications Act of 1934.
The 1992 Cable Act created statutory must-carry provisions and directed the
FCC to issue regulations governing mandatory carriage of certain broadcast signals
by cable systems, at the election of the broadcast station. Before passage of the
SHVA of 1994, if the station requesting cable carriage was considered a distant
signal under the Copyright Act (because it fell outside the range of the 1976 must-
carry rules), the broadcast station had to reimburse the cable system for the copyright
costs of the requested carriage.73
The SHVA of 1994 expanded the area of local signals (and decreased the
number of distant signals, as a result)74 under the cable compulsory license of the
Copyright Act. The amendment conformed the Copyright Act’s definition of “local
signals” to the definition in the 1992 Cable Act. Broadcast stations are now relieved
of any copyright costs when they request cable carriage pursuant to either the 1976
FCC rules or the statutory must-carry provisions since the signal is considered
“l ocal .”75
The must-carry provisions of the 1992 Cable Act have been the subject of a
lawsuit, challenging their constitutionality. On its second look at the must-carry
provisions, the Supreme Court recently upheld their constitutionality in a 5-4
decision.76 The Court analyzed the First Amendment issues under the “intermediate
72Pub. L. 102-385, 106 Stat. 1460, October 5, 1992. Congress overrode a presidential veto
to pass the legislation.
73This obligation existed only between the effective date of the statutory must-carry rules
(apparently December 4, 1992) and passage of the SHVA of 1994 on October 18, 1994. The
obligation was largely theoretical since a broadcast station was unlikely to insist upon
carriage if the carriage meant the station had to reimburse the cable operator for copyright
royalty fees attributable to the difference between the two statutory definitions of local
signals. In lieu of must-carry, the 1992 Cable Act gave a broadcast station the right to grant
or deny its consent to retransmission of its signal by cable systems (“retransmission
consent”). To date, this broadcaster right has also been largely theoretical. Cable systems
have refused to pay money for the privilege of carrying non-must carry signals. Some
broadcast networks may have obtained non-monetary benefits, such as additional cable
channels or favorable channel positions, in exchange for their retransmission consent.
74Under the cable compulsory license, a broadcast signal is either local or distant. The
definition of “local service area of a primary transmitter” governs the demarcation between
local and distant. If a broadcast signal is not local, it is distant.
75In essence, no copyright royalties are paid by cable systems for carriage of local signals
under the section 111 cable license. Copyright royalties are paid only for distant signals,
except for small systems who pay a nominal or small fee as a percentage of gross receipts
and the minimum payment for those large systems that carry no distant signals, if any such
systems exist.
76Turner Broadcasting System, Inc., et al. V. Federal Communications Commission et al.,
117 S. Ct. 1174 (1997). An analysis of the specific must-carry rules is beyond the scope of
this Report, except to note a few main requirements: cable systems with more than 12 usable
(continued...)
scrutiny” test of United States v. O’Brien, 391 U.S. 367 (1968), as it had announced
it would in an earlier phase of this litigation.77 The majority ruled that Congress “has
an independent interest in preserving a multiplicity of broadcasters to ensure that all
households have access to information and entertainment on an equal footing with
those who subscribe to cable.”78 The “Congress could conclude from the substantial
body of evidence before it that `absent legislative action, the free local off-air
broadcast system is endangered.’”79 Given this compelling governmental interest in
preserving a national system of “local” broadcast television, the must-carry
provisions were upheld notwithstanding their burden on the free speech of cable
systems and programmers since the rules are “narrowly tailored to preserve a
multiplicity of broadcast stations for the 40 percent of American households without
cabl e.”80
Legislative Policy Issues
1997 Rate Adjustment and Proposals to Stay Its Implementation. The first
and only rate adjustment proceeding by a CARP under the 1993 amendments (which
abolished the Copyright Royalty Tribunal and replaced the Tribunal with Copyright
Arbitration Royalty Panels) has proved controversial. The CARP also applied for the
first time the new rate adjustment criteria legislated by the SHVA of 1994. Under
the original adjustment criteria of the 1988 Act, comparability of cable and satellite
licensing rates was the key criterion. Under the SHVA of 1994, however, the “fair
market value” of the retransmitted broadcasts became the key criterion.
In setting a new rate of 27 cents per subscriber per signal per month, the CARP
looked primarily to the royalty fees paid for cable origination networks (such as
76(...continued)
channels must use up to one-third of their channel capacity to carry qualifying full service
local commercial broadcast stations; systems with 13-36 channels must also carry up to
three local noncommercial broadcast stations; systems with more than 36 channels must
carry all non-duplicating local noncommercial stations; any cable system must generally
“grandfather” carriage of any local noncommercial stations it carried as of March 29, 1990
(unless 30 day notice is given to drop the stations or change its channel position).
77In that first phase, the Supreme Court remanded the case to a special three-judge district
court, ruling that the panel erred in granting summary judgment to the government based on
the record before it. Turner Broadcasting System, Inc., et al. V. Federal Communications
Commission et al., 114 S.Ct. 2445 (1994). The Court found, that the must-carry provisions
are subject only to an intermediate level of First Amendment scrutiny, but it also found the
record inadequate at that time to assess their speech-restriction impact, even under the lesser
standard applied to content-neutral regulations. On remand, a divided three-judge district
court panel received further evidence into the record and again upheld the constitutionality
of the statutory must-carry rules, as implemented by the FCC. Turner Broadcasting System,
Inc. v. FCC, 910 F. Supp. 734 (D.D.C. 1995).
78Turner Broadcasting System, Inc. v. FCC, 117 S. Ct. 1174 (1997) (Slip Op. At 11).
79Turner Broadcasting System, Inc. v. FCC, Slip Op. At 27.
80Turner v. FCC, Slip Op. At 34. At this time, cable now serves about 67 percent of
television households; the must-carry rules protect one-third of the viewing public.
USA, ESPN, CNN, A & E, etc.) rather than the fees paid under the cable
compulsory license for broadcast retransmissions.
Pending bills (S. 1422 and H.R. 2921 would postpone implementation of the 27
cent rate for one year or pending proceedings by the Federal Communications
Commission.81
Signal Measurement and Termination of Satellite Service: Determination
of “Unserved” Status. H.R. 3192 in the 104th Congress would have responded to
the failure of private sector interests to agree on implementation of the transitional
signal intensity measurement procedure enacted by the SHVA of 1994.
The bill would have amended the satellite carrier license to require satellite
carrier notification to subscribers of the statutory limits on network service; require
the satellite carriers and network broadcasters to agree on signal measurement
procedures within 30 days after enactment or submit the issues to binding arbitration;
require that the subscriber decides whether or not to measure the signal intensity of
the network signal within the station’s predicted grade B contour; if no test was
conducted, service had to be terminated; if a test was conducted, the objecting
broadcaster would have paid if the test showed the household was unserved; if the
test showed the household was not “unserved,” the subscriber would have paid the
cost of the test.
Satellite providers and members of the public interested in receiving satellite
television continue to seek legislative action to resolve this policy issue. Pending a
legislative solution or a private sector agreement, broadcasters have filed copyright
infringement suits for violation of the section 119 license.
Local Signals: Expansion of the Satellite License To Permit
Retransmission of Any Local Broadcast Signal. The satellite license, in contrast
to the cable license, does not permit retransmission of every local broadcast signal.82
Satellite providers offer nationwide services ordinarily; cable systems serve specific
communities (in accordance with FCC and local regulation). Until recently, it has
not been technologically feasible to consider satellite retransmission of a large
number of “local” signals.83 Recent technological developments hold the promise that
81 For additional details concerning the October 1997 rate adjustment and the bills to
postpone its implementation, see, D. Schrader, Satellite Television License of the Copyright
Act (17 U.S.C. 119) and the 1997 Rate Adjustment, CRS Report 98-140 A.
82The reasons for the distinctions are in part historical and in part relate to the nature,
technology, and economic structures of the satellite and cable industries. Cable began as
a terrestrial, local community service, which added satellite technology after developing its
structure through cable, telephone leased lines, and microwave technologies. Even with the
proliferation of multiple system ownership (“MSOs”), cable remains a fundamentally
community-based service, subject to some regulation by local franchising authorities as well
as the FCC. The satellite television industry is fundamentally a nationwide programming
service, which is subject to FCC regulation but is not regulated locally.
83The potential pool of “local” signals is huge since there are now approximately 1500
(continued...)
satellite providers can deliver 300-500 programming “channels.”84 Distribution
systems have improved; channel capacity has increased.
In 1997 hearings before the Senate Committee on Commerce, Science, and
Transportation, DBS entities testified about their request for a broadened
compulsory license to allow DBS retransmission of any local broadcast signal.85
“Local signals” for any DBS provider would have been defined in relation to the
subscriber’s county of residence and the ADI (“area of dominant influence”) of the
broadcast stations serving that county.
The Copyright Office opened a notice of inquiry public proceeding in January
1998 to determine if the satellite license can be interpreted to permit satellite service
of local signals, without enacting amendatory legislation.86 The Copyright Office
will apparently defer to possible legislative action on this issue. As discussed later,
pending bills (H.R. 3210 and S. 1720; H.R. 4449 and S. 2494) would amend the
satellite license of the Copyright Act to permit satellite retransmission of local signals
and amend the Communications Act to subject satellite providers to the must-carry,
retransmission consent, network nonduplication, and other FCC signal carriage rules.
PBS Satellite Feed Proposal. The Public Broadcasting Service (“PBS”) is
seeking an amendment of the satellite license to allow PBS to offer its own national
satellite feed to a DBS service for further national distribution. PBS says that the
purpose of the proposal is to facilitate universal access to PBS programming. PBS
has begun the process of clearing national DBS rights through voluntary negotiations
with program owners, but has encountered legal “gray” areas and difficulties in
updating contracts negotiated years ago.
H.R. 3210 and S. 1720 would amend the Copyright Act to allow PBS to make
its national satellite feed available to commercial satellite services.
Review of Cable and Satellite Licenses. The Senate Judiciary Committee, in
a letter of February 6, 1997, requested a report from the Copyright Office of the
Library of Congress about issues and reforms related to the cable and satellite
compulsory licenses of the Copyright Act. The Copyright Office submitted its report
on August 1, 1997 on the following issues:
83(...continued)
broadcast stations in the United States, any one of which is “local” to a given community.
According to testimony before the Senate Committee on Commerce, Science, and
Transportation, there are 328 local broadcast stations in the top 20 television markets alone.
Statement of Stanley S. Hubbard, Chairman of the Board, United States Satellite
Broadcasting Company, Before the Senate Committee on Commerce, Science, andthst
Transportation, 105 Cong., 1 Sess. (April 10, 1997)(unpublished statement at 8).
84Mega-channel cable systems are also being built.
85Hearing on Multi-Channel Video Competition Before the Committee on Commerce,
Science, and Transp Statement of Rupert Murdoch, CEO of American Sky Broadcasting andthst
the Fox Broadcasting Network. ortation, U.S. Senate, 105 Cong., 1. Sess. (April 10, 1997).
8663 Fed. Reg. 3685 (January 26, 1998)
!possible extension of the Satellite Home Viewer Act (SHVA);
!disputes about application of the SHVA, such as the determination of which
households are “unserved;”
!harmonization of the satellite and cable compulsory licenses;
!application of the licenses to new spot beam technology and new markets for
public television;
!the applicability of the licenses to the Internet; and
!the eligibility of telephone companies’ “open video systems” for the licenses.87
Senate hearings were held on the Copyright Office’s Report and the policy
issues and recommendations discussed in the Report on November 12, 1997.
Brief Summary of H.R. 3210 and S. 1720
H.R. 3210 and S. 1720, the “Copyright Compulsory License Improvement
Act,” are nearly identical bills that would reform the cable, satellite, and other
compulsory licenses of the Copyright Act, especially with respect to the mechanism
for adjusting the royalty rates and for distribution of royalties collected by the
Copyright Office on behalf of copyright owners. The major changes include the
following:
!reform the structure of the administrative body that adjusts compulsory license
rates and distributes copyright royalties to copyright owners, by replacing the
Copyright Arbitration Royalty Panels with administrative law judges;
!make the satellite license permanent;
!allow satellite service subscribers who terminate cable service to receive
network signals immediately from the satellite service without waiting 90
days, as required by existing law;
!allow satellite service providers to retransmit a local television station to
subscribers within the station’s local market;88
!allow satellite service providers to retransmit the national satellite feed of the
Public Broadcasting Service; and
87Report of the Register of Copyrights entitled “A Review of the Copyright Licensing
Regimes Covering Retransmission of Broadcast Signals.” U.S. Copyright Office, August
88The “local market” of a broadcast station would be defined as the station’s “Designated
Market Area” (DMA), as determined by the Nielsen Media Research television market
research company.
!in order to achieve regulatory parity between the cable and satellite licenses,
apply the must-carry rules, retransmission consent requirements, network
nonduplication rules, syndicated exclusivity rules, and sports blackout rules
of the Communications Act or the Federal Communications Commission rules
to satellite service providers.
The first five of the above changes would be effected by amendments to the
Copyright Act, title 17 of the U.S. Code. While the bills would reform the
administrative structure for rate adjustments, no changes are proposed in the
statutory criteria for the cable and satellite license rate adjustments. In the case of the
satellite license, this means that the “fair market value” of the secondary
transmissions is the guiding principle for adjusting the rate. The cable license rates,
however, can only be adjusted for national monetary inflation or deflation, or in
response to changes in the cable carriage rules of the Federal Communications
Commission (“FCC”).
The changes noted in item 6 above would be made by amendment of the
Communications Act of 1934 and through FCC rulemaking. Satellite providers who
retransmit local signals must obtain retransmission consent for network signals or,
at the option of the network station, retransmit subject to the must-carry rules. The
retransmission consent requirement does not apply to superstations in existence on
January 1, 1998 or to noncommercial broadcast stations, however. Also, once the
network nonduplication provisions are applied to satellite providers, network
stations not subject to the nonduplication rules will also be exempt from the
retransmission consent requirement.
The FCC would be directed to commence rulemaking proceedings within 45
days of enactment to adjust its rules concerning retransmission consent, must-carry,
network nonduplication, syndicated exclusivity, and sports blackout protection to
satellite retransmission for private home viewing.
Brief Summary of H.R. 4449 and S. 2494
H.R. 4449 and S. 2494 are similar but different bills that share the common
purposes of promoting multichannel video programming competition and also of
authorizing local-to-local retransmission of broadcast signals by satellite distributors.
The “Satellite Access to Local Stations Act” (H.R. 4449) would amend both the
Copyright Act and the Communications Act to facilitate local-to-local retransmission
of broadcast signals by satellite carriers and generally subject the satellite carriers to
either the must carry or retransmission consent requirements of the communications
law, as well as other FCC signal carriage rules.
A new statutory license for retransmission of local signals would be added in
a new section 122 of the Copyright Act, title 17 U.S.C. The new license applies to
local-to-local retransmissions by a satellite carrier to the public if the retransmission
if permissible under the FCC’s rules and the satellite carrier makes a direct or indirect
charge to each subscriber, or if the distributor has contracted with a satellite carrier
to retransmit to the public. No royalty fee is paid for local signal retransmissions, but
the satellite carrier must report its signal carriage to the Copyright Office twice a
year.
Satellite carriers cannot invoke the proposed section 122 license to retransmit
local signals unless they carry all local signals that the broadcasters want to be
carried.
The “Multichannel Video Competition Act of 1998" (S. 2494) would amend
only the Communications Act. A new Section 337 of title 47 U.S.C. would
essentially mandate local-to-local retransmission of broadcast signals by direct-to-
home satellite distributors through the “must carry” provisions of the
Communications Act. In recognition of existing technical limitations on satellite
carriage of all local signals, S. 2494 establishes an interim regime requiring
compensation for non-carriage of local stations, pursuant to a formula to be
developed by the FCC. The full mandatory carriage provisions of 47 U.S.C. 614
would apply to satellite distributors no later than January 1, 2002.89
Conclusion
The cable and satellite compulsory licenses of the Copyright Act require
rightsholders to permit the retransmission of certain broadcast signals by cable
systems and “wireless cable” in the case of the §111 license and by satellite providers
(including direct broadcasting entities) in the case of the §119 license. The licenses
have some common features (such as rate adjustment and distribution of royalties
under ad hoc arbitration panels supervised by the Copyright Office and the Librarian
of Congress). The licenses differ markedly, however, in their overall structure,
signal coverage, conditions of carriage, and copyright royalty payment mechanisms.
The Satellite Home Viewer Act of 1994 (“SHVA of 1994") amended both the
satellite and cable licenses. It extended the life of the §119 satellite license for 5
years, until December 31, 1999.
The extended satellite license begins with a compulsory phase (royalty rates set
by statute), which is followed by a voluntary negotiation-arbitration phase (royalty
rates set by voluntary agreement or, as a last resort, by compulsory arbitration). A
1997 public proceeding by a Copyright Arbitration Royalty Panel adjusted the
satellite rates and fixed the new rate at 27 cents per month per signal per subscriber.
The Panel applied the statutory criterion of the “fair market value” of the
retransmitted signals.
Under the SHVA of 1994, satellite carriers have the burden of proving that a
household is unserved by a given network to justify the §119 license. Special
transitional procedures in effect for 2 years have now expired. They were intended
to facilitate nonjudicial enforcement of the satellite license’s restriction to “white
areas” for retransmission of network programming, but were never implemented
89 For further details concerning H.R. 4449 and S. 2494, see, D. Schrader, Satellite
Television License of the Copyright Act (17 U.S.C. 119) and the 1997 Rate Adjustment, CRS
Report 98-140 A.
because no agreement was reached on signal measurement standards and procedures.
Restriction of satellite service to “unserved” households, determination of
“unserved” status, and termination of service to “served” households continue to
engender public discussion and debate.
An amendment to the definition of “satellite carrier” in the SHVA of 1994
qualified direct broadcasting services (DBS) for the satellite license for the first time.
More recently, the Public Broadcasting Service has sought amendment of the §119
satellite license to allow national distribution by direct broadcasting entities of PBS’
own satellite feed. Some DBS entities seek expansion of the §119 license to allow
them to retransmit “local” broadcast signals.
Other recent developments include: submission to Congress by the Copyright
Office of a report in August 1997 reviewing the cable and satellite licenses;
adjustment of the royalty rates by a CARP proceeding, which was confirmed by an
order of the Librarian of Congress in October 1997; introduction of S. 1422 and H.R.
introduction of H.R. 3210 and S. 1720 to reform the administrative mechanism for
adjusting certain royalty rates and distributing the royalty fees under the Copyright
Act’s compulsory licenses and to make other changes affecting the cable and satellite
licenses; enactment of Public Law 105-80, which made technical corrections to the
satellite license; the opening by the Copyright Office of a rulemaking proceeding
concerning satellite retransmission of local signals; broadcaster enforcement of the
“unserved household” restriction through litigation; and introduction of H.R. 4449
and S. 2494 to authorize local-to-local retransmission of network signals under the
satellite license and generally to subject satellite carriers to the FCC’s signal carriage
regulations such as the must carry, retransmission consent, and network
nonduplication rules