[Federal Register: August 12, 1994]
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LIBRARY OF CONGRESS
Copyright Office
[Docket No. RM 93-5A]
Cable Compulsory License; Major Television Market List
AGENCY: Copyright Office, Library of Congress.
ACTION: Notice of policy decision.
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SUMMARY: In light of the 1992 Cable Act's direction to the Federal
Communications Commission (FCC) to update the Sec. 76.51 major
television market list, the Copyright Office is reaffirming its 1987
Policy Decision accepting Commission market redesignation for purposes
of the copyright cable compulsory license. Broadcast signals entitled
to mandatory carriage status under the FCC's must-carry rules in effect
on April 15, 1976, as a result of a Commission market redesignation
order, are to be treated as local signals for purposes of the cable
compulsory license. The Copyright Office declines to take a position at
this time as to the possible copyright effect of a future FCC reranking
of major television markets.
EFFECTIVE DATE: Effective date August 12, 1994.
FOR FURTHER INFORMATION CONTACT: Eric Schwartz, Acting General Counsel,
U.S. Copyright Office, Library of Congress, Washington, D.C. 20559.
Telephone: (202) 707-8380; Telefax (202) 707-8366.
SUPPLEMENTARY INFORMATION:
I. Background
On June 28, 1993, the Copyright Office issued a Notice of Inquiry
(NOI) informing the public that it was considering the impact of the
Federal Communications Commission's recent update of its major
television market list, 47 CFR 76.51, on copyright liability under the
cable compulsory license, 17 U.S.C. 111. 58 FR 34594 (June 28, 1993).
The Commission's action, Report and Order in MM Docket 92-259, 8 FCC
Rcd 2965 (1993), was in response to the ``Cable Television Consumer
Protection and Competition Act of 1992'' (1992 Cable Act) which adds a
new section 614(f) to the Communications Act of 1934 requiring the FCC
to ``update section 76.51 of title 47 of the Code of Federal
Regulations.'' The Commission amended three markets on the list by
adding Chillicothe to the Columbus, Ohio market; New London to the
Hartford-New Haven-New Britain-Waterbury, Connecticut market; and Rome
to the Atlanta, Georgia market. 8 FCC Rcd at 2978. The Commission also
announced that a major revision of the major television market list was
not necessary at that time, and that any future changes would be made
on a case-by-case basis. Id.
The NOI fully described the history and copyright significance of
the major television market list. See 58 FR at 34594 (June 28, 1993).
To summarize briefly, the major television market list contained in
Sec. 76.51 of the Commission's rules is a ranking, based on audience
size, of the top 100 television markets in the country derived from
Arbitron's 1970 prime time household rankings. Adopted in 1972, the
list named the communities comprising each individual market<SUP>1 and
related, inter alia, to the carriage obligations of cable systems under
the former FCC distant signal and must-carry rules. With the
elimination of the distant signal rules in 1981 and, especially, the
invalidation of the must-carry rules in the Quincy Cable T.V., Inc. v.
FCC, 768 F.2d 1434 (D.C. Cir. 1985), cert. denied, 476 U.S. 1169 (1986)
and Century Communications v. FCC, 838 F.2d 292 (D.C. Cir. 1987), cert.
denied, 486 U.S. 1032 (1988) cases, the FCC no longer made changes to
Sec. 76.51. The 1992 Cable Act<SUP>2 resuscitated the major-market list
by requiring the Commission to update it.
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\1\Markets containing the names of more than one community are
known as ``hyphenated'' markets. E.g., Roanoke-Lynchburg, Virginia.
\2\The 1992 Act restored must-carry requirements, but adopted a
different standard (``area of dominant influence'' or ``ADI'') for
applying them. The Supreme Court has reviewed the must-carry rules
and, while they currently remain in force, remanded them to the
trial court to make factual findings justifying their retention.
Turner Broadcasting, Inc. v. F.C.C., 62 U.S.L.W. 4647 (June 27,
1994).
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Section 76.51 has relevance for the section 111 copyright cable
compulsory license in two ways. The first is in determining whether a
broadcast signal is local or distant. Compulsory license royalties are
determined, for the most part, by the number of distant signals a cable
system carries. When Congress created the cable license in 1976, it
defined a broadcast station as being local to a cable system when the
station ``is entitled to insist upon its signal being retransmitted by
a cable system pursuant to the rules, regulations, and authorizations
of the Federal Communications Commission in effect on April 15, 1976.''
17 U.S.C. 111(f). This passage is a direct reference to the FCC's 1976
must-carry rules, in which the major television market list played a
significant role. Under those earlier rules, any cable system community
within 35 miles of a market identified in the Sec. 76.51 list was
subject to mandatory carriage of any broadcast station licensed to a
community within the market. Hence, as provided by section 111 of the
Copyright Code, cable systems in those circumstances may carry stations
located within the major market as a ``local'' signal, thereby avoiding
the distant signal cable compulsory license royalty fee.
Aside from the local/distant status of broadcast signals,
Sec. 76.51 also serves a purpose in determining the applicable royalty
rate for distant signals to be paid by cable systems. The earlier FCC
must-carry rules determined when a broadcast signal was distant, and in
turn the Commission's distant signal carriage rules in effect in 1976
determined how many distant signals a cable operator in a top 100
television market could carry. 47 C.F.R. Secs. 76.61 and 76.63 (1976).
Cable systems operating in the top 50 markets listed in Sec. 76.51 were
generally allowed to carry three distant signals, while systems in the
second 50 markets could generally carry only two. When the distant
signal carriage rules were eliminated in 1981, see Malrite T.V. of New
York, Inc. v. FCC, 652 F.2d 1140 (2d Cir. 1981), cert. denied sub.
nom., National Football League, Inc. v. FCC, 454 U.S. 1143 (1982), the
Copyright Royalty Tribunal adjusted the royalty rates under the
Copyright Code provision permitting adjustment ``[i]n the event that
the rules and regulations of the [FCC] are amended . . . to permit the
carriage of additional television broadcast signals beyond the local
service area of such signals. . . .'' 17 U.S.C. 801(b)(2)(B). The
result was that cable carriage of formerly non-permitted distant
signals triggered a substantially higher copyright royalty rate (3.75%
of gross receipts per signal) than that applicable to carriage of
formerly permitted signals (less than 1% of gross receipts per signal).
See Adjustment of the Royalty Rates for Cable Systems, 47 FR 52146
(Nov. 19, 1982). Cable systems in the top fifty Sec. 76.51 markets,
therefore, can generally carry one more non-3.75% distant signal than
cable systems located in the second 50 markets.
Except for redesignation of the scope of a particular market, the
markets listed in Sec. 76.51 and their ranking have remained unchanged
since the section's inception in 1972. In 1985, the FCC amended the
list to include Melbourne and Cocoa, Florida in the Orlando-Daytona
Beach, Florida hyphenated market, and added Visalia, Hanford, and
Clovis, California to the Fresno, California market. See Report and
Order in MM Docket No. 84-11 RM 4557, 102 FCC2d 1062 (1985)(Florida);
Report and Order in MM Docket No. 84-439, FCC-85-59 (1985)(California).
That action raised some of the same issues presented in this
proceeding, and we asked for public comment concerning the implications
of the FCC action on the copyright cable compulsory license. Notice of
Inquiry in Docket No. RM 85-2, 50 FR 14725 (Apr. 15, 1985). We asked
the public to respond to a series of questions, including:
(1) What is the impact on the copyright law of a change by the FCC
in the major television market list;
(2) Whether the amendment of Sec. 76.51 was a rule change requiring
an adjustment in the royalty rates;
(3) How should the 3.75% royalty for distant formerly nonpermitted
signals be applied to the changed market; and
(4) What action, if any, should the Copyright Office take to
clarify the issues raised by the FCC changes in the major television
market list.
We received 12 comments from interested parties, including comments
from the FCC. The commentators were in unanimous agreement that the
redesignations of the Orlando-Daytona Beach, Florida and Hanford-
Clovis, California hyphenated markets were not changes in the FCC rules
in effect on April 15, 1976, and that the Copyright Office should treat
signals in the newly defined markets that were local for communications
purposes as local for purposes of computing copyright royalties as
well.
We issued a policy decision in 1987 accepting the Florida and
California market changes for compulsory license purposes. 52 FR 28362
(July 29, 1987). We stated that we were--* * * formally adopt[ing] the
view that signals entitled to mandatory carriage status under the FCC's
former must-carry rules as a result of an FCC market redesignation
order are to be treated as local signals for purposes of the cable
compulsory license. This position is necessarily based upon the
interpretations that (1) Congress did not intend Sec. 76.51 to be
frozen to its April 15, 1976 status for purposes of determining cable
systems' local service area and copyright royalty fees; and (2) when
the FCC amends its major television market list in 47 CFR 76.51, there
has been no substantive rule change effected so as to impact
calculation of cable copyright royalties.
Id. at 28366 (July 29, 1987).
While we noted that our ``interpretation [was] based on the
legislative history of the Copyright Act,'' we underscored the moot
nature of our policy decision by what then appeared to be the end of
changes to Sec. 76.51: [T]he changes in the FCC's must-carry-rules
following the Quincy decision have essentially mooted the subject of
this Notice. When this inquiry began the Copyright Office had concerns
about enlargement of the class of local signals under the Copyright Act
due to the approximately 400 petitions for market redesignation at that
time pending at the FCC. However, it would appear that this policy
concern is now eliminated because under the FCC's amended must-carry
rules, the major market list is not determinative of must-carry status,
and it is unlikely that a large number of market redesignations will be
effected by the FCC in the future.
Id. The above statement proved to be accurate, especially with the
elimination of all must-carry obligations later that year. See Century
Communications v. FCC, 835 F.2d 292 (D.C. Cir. 1987), cert. denied, 486
U.S. 1032 (1988).
II. 1992 Cable Act
The composition of the major television market list remained intact
until the passage of the 1992 Cable Act. The 1992 Cable Act amends the
Communications Act of 1934 by, among other things, adding a new section
614 governing the cable carriage obligations for local commercial
television stations, i.e., new must-carry rules. As noted above, the
1992 must-carry requirements no longer involve the major-market list.
Nevertheless, section 614(f) of the 1992 Act requires that the FCC's
regulations adopted to implement the new must-carry rules ``shall
include necessary revisions to update section 76.51 of title 47 of the
Code of Federal Regulations.'' As we noted in our NOI, the instruction
of Sec. 614(f) may seem somewhat anomalous since the Sec. 76.51 major
television market list has nothing to do with the new must-carry
obligations of cable systems.<SUP>3 See 58 FR at 34594 n.1 (June 28,
1993). In compliance with the statutory directive, however, the Federal
Communications Commission on November 19, 1992, published a Notice of
Proposed Rulemaking in MM Docket No. 92-259, 7 FCC Rcd 8055 (1992) to
consider changes to the Sec. 76.51 list. The Commission stated that,
while the Cable Act was silent as to the reason for changes to
Sec. 76.51, ``it appears that this [congressional] action would
primarily affect copyright liability under the compulsory license.'' 7
FCC Rcd at 8059 (1992).
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\3\Section 76.51 does have relevance for the Commission's non-
network territorial exclusivity, network non-duplication and
syndicated exclusivity rules. 47 C.F.R. Secs. 73.658(m), 76.92 and
76.151.
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In its final regulation issued in 1993, the Commission confirmed
its copyright observation and redesignated three Sec. 76.51 markets: 1)
it added Chillocothe to the Columbus, Ohio market; 2) it added New
London to the Hartford-New Haven-New Britain-Waterbury, Connecticut
market; and 3) it added Rome to the Atlanta, Georgia market. Report and
Order in MM Docket 92-259, 8 FCC Rcd 2965 (1993). Nonetheless, the
Commission took a conservative approach in updating Sec. 76.51: We do
not believe that a major update of the Sec. 76.51 market list is
necessary on the basis of the record before us. Wholesale changes in or
reranking the markets on the list would have significant implications
for copyright liability and for the Commission's broadcast and cable
program exclusivity rules. We are not prepared to make such changes on
the present record.
8 FCC Rcd at 2979 (1993). Future revisions of the major television
market list are to be done on a ``case-by-case'' basis by petition for
rulemaking. Id.
Although the Commission confined its discussion to the
redesignation of markets, it neither embraced nor ruled out the
possibility of reordering markets. (``We are not prepared to make such
changes on the present record.'') It is therefore possible that future
changes to the Sec. 76.51 list may include not only redesignations but
also reranking and deletions and additions to the market list, although
probably in limited circumstances.
III. Notice of Inquiry
In order to determine the copyright implications, if any, of the
1992 Cable Act's instruction to the FCC to update the major television
market list, we published a NOI initiating this proceeding. 58 FR 34594
(June 28, 1993). We requested direct response to a series of questions:
(1) The section 111(f) definition of a ``local service area of a
primary transmitter'' is ``the area in which such station is entitled
to insist upon its signal being retransmitted by a cable system
pursuant to the rules, regulations, and authorizations of the Federal
Communications Commission in effect on April 15, 1976''--i.e., the 1976
must-carry rules. Is the amendment to the Sec. 76.51 major television
market list required by the 1992 Cable Act an amendment of the 1976
rules, or is it a separate and independent action of Congress? If it is
an independent act with no bearing on the 1976 rules, under what
statutory justification should the Copyright Office follow the present
and future changes to the Sec. 76.51 list?
(2) The FCC has stated its belief that ``Congress intended for our
updated Sec. 76.51 list to be applied to assess copyright liability.''
What evidence is there in the 1992 Cable Act to support this
contention?
(3) If the Copyright Office accepts the redesignations of Ohio,
Connecticut, and Georgia for copyright purposes, should the Office
accept any future redesignations? Should such acceptance be as a matter
of course, or should it be on a case-by-case basis?
(4) If the Commission at some future date reranks markets on the
list, and/or adds or subtracts markets, should the Copyright Office
recognize these changes as applicable to the cable compulsory license?
If so, in the situation where a reranking results in a cable system
reducing its number of permitted distant signals, should the cable
system be allowed to continue to carry a former permitted distant
signal on a grandfathered basis as a non-3.75% distant signal?
We received comments from the following parties: Federal
Communications Commission (FCC); National Association of Broadcasters
(NAB); Motion Picture Association of America, Inc. (MPAA); National
Cable Television Association (NCTA); Association of Independent
Television Station, Inc. (INTV); Commissioner of Baseball, National
Basketball Association and National Hockey League (Professional
Sports); Press Broadcasting, Company, Inc.; R&R Media Corporation;
United Video, Inc.; Force Amusement Enterprises, Inc.; Providence
Journal Company and Multivision Cable TV Corporation; WLIG-TV, Inc.; TV
14, Inc.; and Cablevision Industries Corporation, Comcast Cable
Communications, Inc., Cox Cable Communications, Jones Intercable, Inc.
and Newhouse Broadcasting Corporation (Joint Cable Operators).
IV. Summary of the Comments
The comments reveal a general unanimity as to the effect of the
1992 Cable Act and the Commission's recent action regarding Sec. 76.51;
the parties generally agree Congress did intend to affect copyright
through the 1992 Cable Act, and that the Copyright Office should
observe the Ohio, Connecticut, and Georgia redesignations for cable
compulsory license purposes. While there is a slight difference of
opinion as to how the Office should treat future FCC redesignations,
most parties stated that the issue of FCC rerankings of the top 100
television markets was not ripe for decision.
a. Response to Question 1.
Question #1 addresses an extremely important legal issue: whether
the 1992 Cable Act's direction to the FCC to update Sec. 76.51
constituted an amendment of the FCC must-carry rules which were in
effect in 1976. The Copyright Code requires application only of the
1976 must-carry rules. See 17 U.S.C. 111(f) (definition of a ``local
service area of a primary transmitter''). With the exception of the
MPAA, all of the parties who addressed the issue agreed that the 1992
Cable Act's direction to the FCC to amend Sec. 76.51 was not an
amendment of the 1976 must-carry rules.
Professional Sports argues that amendment of Sec. 76.51 by the FCC
is not an amendment of the 1976 must-carry rules because Sec. 76.51 was
not part of the must-carry rules. Rather, the applicability of the 1976
must-carry rules was determined only by reference to the Sec. 76.51
list. Sports, however, qualifies the separability of Sec. 76.51 from
the 1976 must-carry rules by noting that a fundamental change in
Sec. 76.51 could amount to a de facto amendment of the 1976 must-carry
rules: [S]o long as the underlying structure of the [Sec. 76.51] list
remains unchanged, a case-by-case modification of individual components
of the list is an external event--comparable to modification in the
reach of a station's Grade B contour--which may affect a station's
local service area under the 1976 must-carry rules, but which does not
alter the underlying principles by which calculation of a station's
local service area is made under those rules. * * * However, if at any
time in the future the Commission reverses itself and chooses to
redefine the underlying structure of the 76.51 list, such a change
could--depending on the nature of the change--constitute an amendment
of the 1976 must-carry rules requiring a different response from the
Copyright Office.
Professional Sports, comments at 7-8.
NAB supports the position that the 1992 Cable Act is not an
amendment of the 1976 must-carry rules. NAB notes that the House
Judiciary Committee Report accompanying the 1976 Copyright Act
specifically omits mention of Sec. 76.51 in its discussion of the must-
carry rules, thereby indicating that Congress did not intend to freeze
Sec. 76.51 for compulsory license purposes: In explaining the
definition of the ``local service area'' in Section 111(f) as being
that area in which stations were entitled to must carry under the FCC's
rules in effect on April 15, 1976, this report specifically referenced
Sections 76.57, 76.59, 76.61 and 76.63. It did not reference Section
76.51. . . . The logical explanation for the omission of Section 76.51
is that Congress did not intend to freeze, in perpetuity, the list of
top 100 markets as they existed on April 15, 1976.
NAB, comments at 3 n.4. Press Broadcasting also argues that Congress
must have intended not to freeze Sec. 76.51; otherwise the 1992 Cable
Act direction to update the list would not make sense. Press
Broadcasting, comments at 4.
The MPAA, unlike the other commentators, takes the position that
the 1992 Cable Act is a separate and independent action of Congress and
is an amendment of the 1976 must-carry rules. MPAA, comments at 4.
According to MPAA, however, the Copyright Office still has authority to
adopt the FCC changes to the Sec. 76.51 list, but it is not statutorily
bound by such changes. MPAA compares the Cable Act amendment with the
invalidation of the 1976 must-carry rules in the Quincy case. The
invalidation of the must-carry rules ``was effectively an amendment of
the 1976 regulations'' but the ``Copyright Office did not eliminate
local station carriage for royalty purposes.'' Id. The statutory
justification for the Copyright Office to either accept or reject
amendments of Sec. 76.51 does not come from whether there has been a
change of the 1976 rules, but is the ``responsibility assigned . . .
[the office] to implement the provisions of the [compulsory license]
plan. That responsibility requires the Office to determine the
appropriate copyright policy related to the circumstances.'' Id. MPAA
asserts that the Copyright Office is free to either follow or reject
FCC changes to Sec. 76.51 depending upon how they affect copyright
policy.
b. Response to Question 2.
The FCC's Report and Order redesignating the Ohio, Connecticut, and
Georgia markets concluded that Congress specifically intended to affect
copyright liability through its direction to the Commission to update
Sec. 76.51. In question #2 we sought specific evidence to back the
FCC's conclusion.
The FCC argues that the legislative history of the 1992 Cable Act
clearly reflects Congress' intention to affect liability under the
cable compulsory license through its direction to the 1992 Commission
to update the Sec. 76.51 list. Although we noted in our NOI that the
amendment to the Cable Act offered by Congressman McEwen did not
explain the reasons for updating Sec. 76.51, see 58 FR at 34594 n. 1
(June 28, 1993), the FCC reveals that Rep. John Dingell, Chairman of
the House Committee on Energy and Commerce, did include a statement
accompanying the McEwen amendment. ``The McEwen amendment requires the
FCC to update the list of the Nation's television markets in order to
clarify whether a signal of a television station is considered to be
local or distant.'' Amendment No. 14, 138 Cong. Rec. H6529 (daily ed.
July 23, 1992). Furthermore, the FCC notes that Congressman McEwen
represented the Sixth District of Ohio, which is where Chillocothe, one
of the Commission's redesignated markets, is located. FCC comments at
5. The FCC urges that it is therefore clear that Congress attempted to
affect copyright liability through the Cable Act: In short, the
sequence of events, including the hyphenation of the Orlando market by
the Commission and the acceptance of that amendment of Section 76.51
for copyright purposes by the Copyright Office; the Copyright Office's
[1992 cable] report specifically bringing this to the attention of
Congress; the specific problem associated with the Columbus-Chillocothe
television market and the response thereto; and the legislative
history's indication that such changes were to define stations as
``local'' or ``distant;'' all point to or are entirely consistent with
a Congressional intention that changes resulting from the inclusion of
Section 614(f) in the 1992 Cable Act were intended to have both
communications and copyright consequences.
Id at 6. See generally comments of R&R Media Corp. and NAB.
c. Response to Question 3.
Question #3 asks whether the Copyright Office, assuming it accepts
the FCC's redesignations of the Ohio, Connecticut, and Georgia markets,
should accept future Commission redesignations as a matter of course or
on a case-by-case basis. With the exception of the MPAA, all parties
addressing the issue believed that the Office should accept FCC
redesignations as a matter of course. See, e.g., Force Amusement
Enterprises, Inc., comments at 1-2; NCTA, comments at 4; NAB, comments
at 1-2; INTV, comments at 4; WLIG-TV, Inc., comments at 1; Professional
Sports, comments at 5-6; TV 14, Inc., comments at 1; Press
Broadcasting, comments at 3-4. Since the FCC announced in its Report &
Order that redesignations will be made on a case-by-case basis, the
parties argue that this approach will provide the necessary
governmental scrutiny and avoid widescale market changes affecting the
copyright status of distant signals. One commentator declared: ``The
addition or deletion of individual communities to or from designated
markets listed in Sec. 76.51 of the Commission's Rules should have
little overall effect on the cable copyright compulsory license royalty
scheme.'' Professional Sports, comments at 5. According to this
commentator, reconsideration of each Commission redesignation by the
Copyright Office is therefore not only unnecessary, but unwise.
Furthermore, several commentators noted that acceptance of future
redesignations for copyright purposes is consistent with the position
taken by the Office in its 1987 Policy Decision accepting the Florida
and California redesignations, and with other Copyright Office
declarations on the subject.
The MPAA is the one commentator arguing that we should not accept
FCC redesignations as a matter of course. MPAA supports acceptance of
the Ohio, Connecticut, and Georgia redesignations by the Office for
compulsory license purposes, but states that the ``acceptance should be
specifically limited to the current circumstances and should have no
controlling effect on future cases.'' MPAA, comments at 5. MPAA is
concerned that the FCC may apply ADI (Area of Dominant Influence),
adopted by the 1992 Cable Act for determining must-carry status, to
future redesignations. Widescale use of ADI could, according to MPAA,
transform the mere ``renaming'' of markets into a virtual
``reordering'' of the top 100 markets, thereby dramatically affecting
the compulsory license royalty scheme. MPAA, comments at 3 n.1. While
this has not yet happened, MPAA urges the Copyright Office to ``set
clear guidelines now to govern cable royalty reporting and payment
practices in the event the FCC replaces the 1970 major market list with
one based on current ADI designations.'' Id. at 3.
Parties submitting reply comments in this proceeding were critical
of the MPAA's rejection of acceptance of future redesignations and its
admonition urging the Copyright Office to set guidelines. See Force
Amusement Enterprises, Inc., reply comments at 2; NAB, reply comments
at 4; INTV, reply comments at 6. Force underscores that the Commission
specifically declined in its Report & Order to make wholesale changes
in the major television market list, and that ``[u]nless and until such
a major policy shift is actually considered by the FCC,'' reason
dictates following the Commission's case-by-case redesignations. The
reply commentators were also critical of the MPAA's recommendation that
we adopt guidelines to evaluate the copyright consequences of future
redesignations. They state that MPAA offers no argument or suggestions
as to--1) why the criteria used by the FCC in making such
redesignations are inadequate for copyright purposes; 2) what criteria,
other than those employed by the FCC, the Copyright Office should use
independently to evaluate market redesignations; or 3) the policy
justification for, in essence, creating two separate major market
lists.
NAB, reply comments at 4. Another commentator argued that adoption of
guidelines would also be an unjustified rejection of our 1987 Policy
Decision to accept Commission redesignations for cable license
purposes. INTV, reply comments at 6-7.
d. Response to Question 4.
Question #4 raises the issue of possible future reranking of
markets on the Sec. 76.51 list and asks what effect reranking should
have on the copyright status of distant signals. Since the FCC has not
received a petition for reranking of markets, several commentators have
suggested that the copyright implications of such an action are not
ripe for decision. Parties aligned with cable interests support the
view that current cable system carriage of permitted distant signals
should be grandfathered, while copyright interests argue that the
grandfathering of distant signals would be bad copyright policy
resulting in considerable harm to the compulsory license royalty
scheme.
In announcing its practice for handling future revisions of the
Sec. 76.51 list, the FCC did not address the possibility of
reorganizing the order of the top 100 markets. See Report & Order, 8
FCC Rcd at 2979 (1993) (FCC not ready to consider reranking on basis of
present record). We noted in our NOI to this proceeding that since the
Commission did not announce a definitive position on reranking of
markets, ``[i]t is therefore possible that future changes to the
Sec. 76.51 list may include both reranking and renaming, although
probably in limited circumstances.'' NOI, 58 FR at 34595 (June 28,
1993). Reranking would present the possibility of changes in the number
of permitted/non-permitted distant signals that a cable system located
in a top 100 market could carry, since the Sec. 76.51 list also had
significance for the Commission's former distant signal carriage rules.
For example, a cable system located in a second 50 market can
generally carry two distant signals at the permitted base rate
copyright royalty fee. Additional distant signals must be reported at
the more expensive non-permitted 3.75% royalty fee. If a reranking of
markets occurs and the cable system moves into the top 50 markets,
then, according to the FCC's former distant signal carriage rules, the
cable system could potentially carry three permitted base rate signals,
instead of just two. If a reranking resulted in a cable system moving
from the top 50 to the second 50, then the cable system would lose a
base rate distant signal and possibly incur the 3.75% royalty for that
signal. Concerned about the potential for a change in royalty status of
current distant signals, we sought in Question #4 to elicit comment as
to the possibility of grandfathering the royalty status of signals
despite the effects of market reordering.
Because the FCC has yet to receive a petition for reranking of the
Sec. 76.51 list or to consider the issue, several commentators urge
that the copyright implications of a reranking are not ripe for
decision. Press Broadcasting, comments at 9; Professional Sports,
comments at 1; NCTA, comments at 3. Noting that the questions involving
market ranking versus market redesignation involve ``very different
considerations,'' INTV urges that ``until the FCC is willing to revisit
the ranking aspect of Sec. 76.51, the Copyright Office need not rush
into the matter.'' INTV, comments at 22. Professional Sports also urges
restraint, encouraging the Office to seek further comment at such time
as the Commission does consider reranking. Professional Sports,
comments at 9-10.
Commentators aligned with cable argue that the Copyright Office
must apply grandfathering principles to any reranking of television
markets. See comments of United Video, Providence Journal, NCTA, INTV,
and Joint Cable Operators. Citing the ``no rollback policy'' used by
the Commission to apply its former distant signal carriage rules, these
commentators state that the grandfathering of carriage of distant
signals is critical to continued carriage of existing distant signals.
The FCC specifically allowed for grandfathering of distant signals
which had been carried prior to a rule change, so as to prevent
carriage disruption. See, e.g., 36 FCC2d 143 (1972) (grandfathering
signals carried prior to new distant signal and syndicated exclusivity
rules); 54 FCC2d 265 (1975) (grandfathering distant signal sports
imported prior to new restriction). The commentators note that the
Copyright Office has also observed the practice of grandfathering. See
Letter of Dorothy Schrader, Copyright Office General Counsel, to Peter
H. Feinberg of January 31, 1990 (grandfathering of permitted signal
after change in station's community of license from major market to
nearby smaller market community); Letter of Dorothy Schrader, Copyright
Office General Counsel, to Irving Gastfreund of December 11, 1986
(grandfathering of permitted distant signals where area formerly
located outside all markets becomes smaller market). Joint Cable
Operators argue that there is no precedent for the Copyright Office to
refuse to grandfather carriage of existing distant signals at the
permitted base royalty rate. Thus, where a cable system moves from the
top 50 to a second 50 market, or from a top 50 or second 50 market to a
smaller market, we could not assess the 3.75% royalty rate against
distant signals formerly carried on a permitted basis. Joint Cable
Operators, comments at 3, Providence Journal, comments at 3, United
Video, comments at 2-3.
MPAA opposes application of the practice of grandfathering
permitted signals. According to MPAA, if the Commission engages in a
reranking of markets, ``the Office must either accept the reordering
entirely or not at all for copyright royalty purposes.'' MPAA, comments
at 5. If reranking results in a second 50 market moving to the first
50, cable systems in that newly reranked market would gain an
additional permitted signal. However, cable systems located in a market
that loses one or more permitted signals as a result of reordering
would have to pay the increased 3.75% royalty rate for those signals.
This must be so because the practice of grandfathering would unfairly
advantage cable systems: they would gain the benefit of additional
permitted signals when their markets move up the Sec. 76.51 list, but
would not lose any permitted signals when their markets move down the
list. Id. at 6. Permitting grandfathering would, in MPAA's opinion,
create as a practical result a Sec. 76.51 list which, for copyright
purposes, would treat more than 50 markets as being top 50 markets
since cable operators in markets dropping out of the top 50 as the
result of an FCC reranking would still retain the copyright benefits of
being a top 50 market. Id. at 7. Full acceptance or rejection of a
Commission reranking will preserve balance in the royalty scheme. Id.
United Video criticizes MPAA's position, submitting that ``the
issue should not be maintaining precise balance or `imbalance' in the
royalty plan or whether cable systems receive some minimal advantage or
disadvantage. The primary issue and consideration in this proceeding
should be the public interest in avoiding disruption of television
signal carriage.'' United Video, reply comments at 2. Joint Cable
Operators state that ``[w]hile the idea of cable systems gaining or
losing permitted signals as they move up or down the major market list
has a certain `symmetrical' appeal to it, the result will be needless
disruption in service to viewers.'' Joint Cable Operators, comments at
3.
e. Policy Considerations.
In addition to responding to our questions, several commentators
offered other reasons for accepting any and all changes to the
Sec. 76.51 list. In what can loosely be categorized as ``policy
considerations,'' these parties ask us to continue our 1987 Policy
Decision accepting FCC redesignations and give effect to Congressional
efforts to harmonize the cable compulsory license with the 1992 Cable
Act.
Several commentators aligned with broadcast and cable interests
argue that the current proceeding is unnecessary because we already
resolved the handling of Sec. 76.51 redesignations in our 1987
proceeding. See, e.g., Press Broadcasting, comments at 3-4; NCTA,
comments at 4; INTV, comments. They underscore that the Office's 1987
statement ``formally adopts the view that signals entitled to mandatory
carriage status under the FCC's former must-carry rules as a result of
an FCC market redesignation order are to be treated as local signals
for purposes of the cable compulsory license,'' 52 FR 28362 (July 29,
1987), and argue that nothing supports a change in this position. They
argue that if the Office ignored its 1987 Policy Decision and did not
follow Commission redesignations, then the Office would in effect be
making its own determination of market status. R&R Media Corp.,
comments at 6. See also NAB, comments at 4-5 (Copyright Office has no
authority to ignore FCC changes to Sec. 76.51).
According to INTV, maintaining the 1987 practice is ``more likely
to promote the basic policy goal of copyright.'' INTV, comments at 18.
We ``must resist the superficial notion which suggests that enlarging
stations' copyright local area would decrease the cable royalty pool,''
and recognize that the addition of communities to Sec. 76.51 markets
will increase carriage of broadcast stations not previously carried by
cable systems in those markets because of distant royalty fees. Id. at
19. Increased carriage will make more broadcast stations stronger, and
``stations then will be in a position to pay more for programming. This
enhances the value of the program owners' copyrights and assures an
enhanced reward for use of their works. Program production is
stimulated, and the goal of copyright is furthered.'' Id. at 20.
Several commentators also argue that the Copyright Office's refusal
to follow Sec. 76.51 changes would frustrate policy goals of the 1992
Cable Act. Press Broadcasting notes the language in the House version
of the 1992 Cable Act, stating ``[n]othing in this section shall be
construed to modify or otherwise affect title 17, United States Code,''
was deliberately omitted from the Senate version that ultimately became
the law. Press Broadcasting, comments at 8. ``By deleting language
which would have rendered the Copyright Act immutable in the face of
the 1992 Cable Act, Congress has at least strongly suggested that the
latter legislation, being Congress' most recent action in the area,
should be deemed to take precedence over the 17 year-old Copyright Act
to the limited extent that any conflict between the two may be
perceived.'' Id. at 8.
INTV argues that Congress' direction in the 1992 Cable Act to
update Sec. 76.51 is an effort to harmonize what is a local signal for
both the Cable Act and section 111 of the Copyright Code. INTV, reply
comments at 1-2. Through the 1992 Cable Act, Congress abandoned the
unnecessarily restrictive and difficult to administer 1976 must-carry
definition of a local signal, employing the more rationally based ADI
concept. Congress also gave the FCC authority to adjust ADI
determinations in situations where application of ADI would result in
broadcast stations in the same market being treated differently. INTV,
comments at 8 (citing H.R. Rep. No. 268, 102 Cong., 2d Sess. 98
(1992)). According to INTV, updating Sec. 76.51 promotes both goals of
ADI-wide carriage and parity among stations. Failure to recognize
market redesignations for compulsory copyright license purposes ``would
hinder ADI-wide carriage and promote competitive disparity among
broadcast stations in the same market.'' Id. at 9.
V. Policy Decision
We have fully considered the record in this proceeding and are
satisfied that the 1992 Cable Act's amendment of the Communications Act
of 1934 requiring that the FCC make ``necessary revisions to update
section 76.51 of title 47 of the Code of Federal Regulations'' is not a
substantive change of the ``rules, regulations, and authorizations of
the Federal Communications Commission in effect on April 15, 1976.'' As
a matter of sound copyright policy, we will therefore observe the
redesignations of the Ohio, Connecticut, and Georgia markets contained
in the Commission's March 29, 1993, Report & Order for purposes of
calculating royalty fees under the cable compulsory license, 17 U.S.C.
111. We will also observe for cable compulsory license purposes other
FCC redesignations--defined as the addition or deletion of communities
to the markets contained on the Sec. 76.51 list--made after March 29,
1993. We do not, at this time, take a position with respect to the
reranking of markets by the FCC--defined as the reordering and/or
addition or deletion of markets contained on the Sec. 76.51 list--and
its effects on the calculation of the royalty fees under 17 U.S.C. 111.
The Copyright Code defines the local service area of a broadcast
station as the area in which the station would be entitled to insist
upon its signal being retransmitted by a cable system in accordance
with ``the rules, regulations, and authorizations of the Federal
Communications Commission in effect on April 15, 1976''--i.e., the 1976
must-carry rules. 17 U.S.C. 111(f). There is no question that in
creating the cable compulsory license, Congress chose to freeze the
1976 must-carry rules for purposes of calculating cable copyright
royalties. H.R. Rep. No. 1476, 94th Cong., 2d Sess. 99 (1976). The
purpose of freezing the must-carry rules was to insure that any
subsequent rule amendments by the FCC that either increase or decrease
the size of the local service area for its purposes do not change the
definition for copyright purposes. The Committee believes that any such
change for copyright purposes, which would materially affect the
royalty fee payments provided in the legislation, should only be made
by an amendment to the statute.
Id.
Because Congress froze the 1976 must-carry rules for copyright
purposes in determining local signals, we must resolve whether Congress
also intended to freeze the major television market list as it was in
1976. We are persuaded by the legislative history of the Copyright
Code, and the supporting views of the majority of commentators to this
proceeding, that Congress did not intend to freeze Sec. 76.51, and that
FCC redesignations of markets on the list are not substantive changes
to the 1976 must-carry rules. In describing the must-carry area for the
definition of the local service area of a broadcast signal, the 1976
House Committee Report specifically listed the FCC rules that contained
must-carry provisions: ``Under FCC rules and regulations this so-called
must-carry area is defined based on the market size and position of
cable systems in 47 C.F.R. Secs. 76.57, 76.59, 76.61 and 76.63.'' Id.
Omission of Sec. 76.51 is not surprising since Sec. 76.51 is not a
must-carry rule; Sec. 76.51 is only incorporated by reference to must-
carry determinations. We therefore reaffirm the conclusions announced
in our 1987 Policy Decision: (1) Congress did not intend Sec. 76.51 to
be frozen to its April 15, 1976 status for purposes of determining
cable systems' local service area and copyright royalty fees; and (2)
when the FCC amends its major television market list in 47 CFR 76.51,
there has been no substantive rule change effected so as to impact
calculations of cable copyright royalties.
52 FR 28365 (July 29, 1987).
Our NOI questioned whether the 1992 Cable Act's direction to the
FCC to update Sec. 76.51 sought to bring a change in the copyright laws
or the cable compulsory license. See 58 FR at 34594 n. 1 (June 28,
1993) (``It cannot be definitively said that Congress sought to bring
about a change in the copyright laws or the administration of the cable
compulsory license through this provision.''). Some of the commentators
to this proceeding have produced evidence in the legislative history
that is strongly suggestive of a congressional effort to clarify the
local/distant status of broadcast signals. This history includes
correspondence between the licensee of WWAT (TV) Chillocothe, Ohio, one
of the communities subject to the 1993 FCC redesignation; and Rep.
McEwen requesting an amendment to the 1992 Cable Act to redesignate the
Columbus, Ohio market to include Chillocothe, R & R Media Corp.
comments, at appendix; and a statement of Rep. John Dingell, Chairman
of the House Committee on Energy and Commerce, endorsing the adoption
of the McEwen amendment into the 1992 Cable Act requiring the FCC to
update Sec. 76.51 of its rules, 138 Cong. Rec. H6529 (daily ed. July
23, 1992). Moreover, the Senate version, which ultimately became the
law, omitted the language in the 1992 House cable bill, stating that
nothing in the bill should be construed to affect the Copyright Act.
We conclude that it is sound copyright policy to accept the FCC's
redesignations<SUP>4 of markets in the Sec. 76.51 list for cable
compulsory license purposes beginning with the Commission's March 29,
1993, Report & Order redesignating the Ohio, Connecticut, and Georgia
markets. Acceptance of redesignations promotes greater uniformity
between the operation of the copyright and communications laws, and is
a better assessment of the reality of modern television marketplaces.
Broadcast stations that for all intents and purposes compete and
operate in a major television market can, through FCC redesignation,
establish their location within that market. Their localition within
that market should be recognized with respect to the cable compulsory
license. All of the commentators agree that it is permissible for the
Copyright Office to recognize FCC market redesignations of Sec. 76.51
for purposes of 17 U.S.C. 111. We therefore reaffirm our 1987 Policy
Decision by ``formally adopt[ing] the view that signals entitled to
mandatory carriage status under the FCC's former must-carry rules as a
result of an FCC market redesignation order are to be treated as local
signals for purposes of the cable compulsory license.'' 52 FR 28366
(July 29, 1987).
---------------------------------------------------------------------------
\4\By ``redesignation,'' we mean the addition or deletion of
communities to the top 100 television markets already appearing on
the Sec. 76.51 list.
---------------------------------------------------------------------------
While we will accept market redesignations now and in the future,
we are aware of the possibility that, over time, a large number of
market redesignations could dramatically affect the royalty structure
of the cable compulsory license. There were approximately 400 petitions
for redesignation pending at the FCC when the Copyright Office began
its inquiry into Sec. 76.51 in 1985, see 52 FR at 28366, and while
there is nowhere near that number before the FCC at this time, it is
difficult to predict how many redesignation petitions the Commission
will receive in the future. Extensive addition of new communities to
existing markets could significantly raise the number of local signals
carried by cable systems, thereby resulting in considerable decreases
in royalties paid for distant signals. While we have said that we will
accept future FCC redesignations as a matter of course, we are mindful
that Congress expressly chose to freeze the 1976 must-carry rules for
copyright purposes so as not to ``materially affect the royalty fee
payments provided in the legislation.'' H.R. Rep. No. 1476, 94th Cong.,
2d Sess. 99 (1976). Should there come a day when the number of
redesignations ``materially affect[s] the royalty fee payments'' under
the cable compulsory license, the Copyright Office may find it
necessary to make its concerns public, to call the issue to the
attention of Congress, and petition for a legislative solution.
In addition to market redesignations, we have also considered the
issue of possible future reranking of markets on the Sec. 76.51 list.
Reranking would be the reordering of markets as they appear in
Sec. 76.51, including the addition or deletion of markets. Because the
FCC has currently declined to consider the reranking of major
television markets, see Report & Order, 8 FCC Rcd 2965, 2978 (1994),
and there is no petition before the Commission seeking a reranking of
Sec. 76.51, we agree with the majority of commentators that the results
of reranking on Copyright Office policy are not ripe for decision at
this time.
We are, however, troubled by the implications of reranking. In its
comments the Federal Communications Commission, in discussing its 1993
Report & Order updating Sec. 76.51, noted that the commentators to that
proceeding ``generally suggested that the FCC not rerank markets.''
FCC, comments at 3. In a footnote, the FCC added: Those opposing a
reranking of the markets generally contend that such action was
unnecessary, impractical or would result in confusion and instability.
However, in recognition of the dual communications and copyright
implications of Section 76.51, virtually all commentators agreed that
any changes with respect to market rankings be done in conjunction with
the Copyright Office.
Id. n. 11. We heartily agree that, should the FCC consider a reranking
of Sec. 76.51 in the future, it is both necessary and proper for the
Commission and the Copyright Office to consult with one another, and we
welcome the opportunity to work with the Commission on such an
important issue, should the need arise.
In spite of our considerable doubts on the matter, we do not take a
position as to what effect, if any, an FCC reranking of the Sec. 76.51
major television market list would have on the section 111 cable
compulsory license because a decision on this issue would be premature
at this time.
Dated: August 8, 1994.
Marybeth Peters,
Register of Copyrights.
Approved:
James H. Billington,
Librarian of Congress.
[FR Doc. 94-19668 Filed 8-11-94; 8:45 am]
BILLING CODE 1410-08-P