Statement of Marybeth Peters
The Register of Copyrights
Subcommittee on Courts and Intellectual Property
Committee on the Judiciary
United States House of Representatives
106th Congress, 1st Session
February 25, 1999
Copyright Compulsory License Improvement Act (H.R. 768)
The Copyright Office is pleased to present its views on H.R.
768, the “Copyright Compulsory License Improvement Act.” This is
important legislation designed to address important issues that have arisen
relating to the Satellite Home Viewer Act in recent years and to provide the
satellite industry with the necessary copyright clearances to allow it to compete
equally in the multichannel video marketplace.
In 1997, Senator Hatch, Chairman of the Senate Judiciary Committee, requested
that the Copyright Office present him with recommendations and suggested revisions
to the cable and satellite compulsory licenses. After seeking the comments of
the affected industries through written submissions and public hearings, the
Office submitted a report recommending a comprehensive revision of the Satellite
Home Viewer Act. H.R. 768 incorporates the most important recommendations that
we made in our 1997 report.
The Satellite Home Viewer Act was enacted in 1988 as a means
of allowing Americans access to broadcast television programming that they were
not receiving through other conventional means. The Act created a copyright
compulsory license for the then-fledgling satellite industry modeled after the
compulsory license for the cable television industry enacted in 1976. Satellite
carriers could retransmit the signals of broadcast television stations to their
subscribers upon semi-annual submission of royalty fees to the Copyright Office
for later distribution to copyright owners of the programs contained on those
signals. Although similar to the cable license in many respects, there were
two significant differences between the new satellite license and the prior
First, rather than pay royalties based upon a complex calculation method contingent
upon outdated Federal Communications Commission cable rules, as is the case
with the cable license, the new satellite license instituted a flat, per-subscriber-per-month
royalty fee for carriage of each broadcast station. The statute initially prescribed
a 12-cent per-subscriber- per-month fee for independent television stations
(known as superstations), and a 3-cent per- subscriber-per-month fee for network
signals. The rates are currently 27 cents per subscriber per month for both
superstations and network stations, respectively.
Second, satellite carriers can make use of the satellite license for retransmission
of network stations only to subscribers who reside in unserved households. An
"unserved household" is one that cannot receive a signal of Grade
B intensity (as defined by the FCC) from a local network station using a conventional
outdoor rooftop antenna, and has not subscribed to cable within the previous
90 days. If a satellite carrier provides a network signal to a subscriber who
is not an unserved household, then the carrier is liable for copyright infringement
and must terminate the service of that signal.
The reason that the unserved household limitation on network signals is in
the Copyright Act is largely historical. Unlike the cable industry, which was
heavily regulated by the FCC at the time of passage of the cable license in
1976, the satellite industry was virtually unregulated by the Commission in
1988. Cable was long subjected to regulations -- known as the network nonduplication
rules -- which prevented a cable operator from importing distant network stations
to its subscribers when the subscribers were already receiving their local network
signals. The reason for network nonduplication protection was to allow both
network broadcasters and copyright owners to enjoy the benefits of exclusive
licensing. Copyright owners/licensors could grant exclusive licenses to local
broadcasters to perform their programs in the broadcasters' local markets without
concern that a cable operator could negatively affect the value of these licenses
by importing the same programming shown on a distant network station.
The satellite industry in 1988 did not possess the technology to provide local
signals to subscribers, and consequently in virtually all markets all of the
retransmitted network signals were distant signals. Copyright owners could not
license their programs to local network broadcasters on a truly exclusive basis
if satellite carriers were allowed to import distant network signals into those
markets. Because the FCC's network nonduplication rules did not apply to satellite
(and still do not), Congress included the unserved household limitation in the
satellite license as a means of protecting the exclusivity rights of copyright
owners/licensors and broadcasters. Only those households that cannot receive
an over-the-air signal from their local network station, and are not subscribing
to cable, can receive a network station from a satellite carrier.
In the first years after its enactment, the Satellite Home Viewer Act worked
well. However, as the expiration of the license approached in 1994, it became
apparent to some that large numbers of subscribers who did not reside in unserved
households were nevertheless receiving network signals from their satellite
carrier. In order to preserve the integrity of the unserved household limitation,
Congress reauthorized the Satellite Home Viewer Act in 1994 for an additional
five years, but implemented a two-year testing regime designed to weed out ineligible
subscribers of network signals. Under this testing regime, a local network broadcaster
could issue written challenges to subscribers in its local market that it suspected
were not unserved households. Upon receipt of the written challenge, the satellite
carrier had two options: either terminate service of the network station immediately,
or conduct a test at the subscriber's household to determine whether the subscriber
was receiving an over-the-air signal of Grade B intensity from the local network
broadcaster. If the test revealed that the subscriber was unserved, satellite
service could continue and the broadcaster was required to pay the cost of the
test. If the subscriber was not unserved, satellite service was required to
be terminated and the carrier absorbed the cost of the test. Though it was not
written into law, satellite and broadcaster representatives offered assurances
in 1994 that the standards and parameters of a correct household test would
be worked out by the industries.
Unfortunately, the two-year signal testing regime was a complete failure. The
satellite carriers and broadcasters could never agree to a test, and the practical
result for most subscribers was termination of their service upon written challenge
whether or not they were an unserved household. Both the Copyright Office and
the FCC were flooded with angry calls from subscribers who had no means to prove
that they were not receiving one or more local network signals and had no recourse
for the loss of the challenged signals from their satellite service.
The expiration of the signal testing regime at the end of 1996 led to the filing
of lawsuits by broadcasters against a single satellite carrier, PrimeTime 24,
alleging massive violations of the unserved household limitation. To date, two
federal district courts, in Florida and North Carolina, have issued injunctions
against carriage of network signals by PrimeTime 24; and large numbers of subscribers
will lose their network service at the end of this month and again at the end
of April. A third lawsuit in federal district court in Texas is still pending.
H.R. 768 attacks the heart of the problems surrounding the
satellite compulsory copyright license. Specifically, by creating a new, permanent
license for the retransmission of local network signals by satellite to subscribers
who reside in the local markets of those signals, the bill protects the integrity
of the exclusivity rights of copyright owners/licensors and local broadcasters
while affording satellite carriers a means of providing network service to all
their subscribers. The Copyright Office submits the following comments regarding
the new section 122 license for local-into-local retransmissions, as well as
other key elements of the legislation.
1. Local-into-local retransmissions. When the Copyright Office considered
revisions of the satellite license in 1997, it considered a number of possible
solutions to the problems associated with the unserved household limitation.
The Office's conclusion was
[T]he best solution to the issue of subscriber eligibility
for satellite service of network signals is a technological one. If satellite
carriers were to provide subscribers who reside within the local market of
a network affiliate the signal of that affiliate, the need for the unserved
household restriction with respect to that affiliate would be eliminated.
The subscriber would be served with the local network affiliate, and the satellite
carrier would no longer be required to import a distant network affiliate
in order to provide network service to the subscriber. The Copyright Office,
therefore, recommends that retransmission of any broadcast station, network
or independent, within that station's local market be permissible....
A Review of the Copyright Licensing Regimes Covering
Retransmission of Broadcast Signals, Report of the Register of Copyrights
at 119-120 (August 1, 1997) (footnote omitted).
H.R. 768 sets into law that recommendation by creating a new and separate compulsory
license for the retransmission by satellite of television broadcast stations
to subscribers who reside within the local markets of those stations. There
are several advantages to this provision. First, it provides satellite carriers
with a license that allows them to compete directly with the cable industry.
Under current law, it is unclear whether satellite carriers have a compulsory
license to retransmit local signals. Cable has enjoyed such a license since
1976. Second, by retransmitting local signals, satellite carriers will no longer
have the need to import distant signals to these subscribers; and the local
broadcasters will enjoy the benefits of having their local viewers watch their
signals on digital quality satellite.
Third, the new license is royalty free. This should provide a strong incentive
to satellite carriers considering implementation of local service, and places
the satellite industry on par with the cable industry which likewise does not
pay royalties for retransmission of local signals.
Fourth, the new license will allow satellite carriers to provide their subscribers
with the programming they want most: their local broadcast stations.
Finally, the new license presents the opportunity to eliminate most of the
consumer acrimony surrounding the unserved household limitation. When a subscriber
signs up with a satellite carrier that provides local service, there is no testing
associated with the subscriber's eligibility for network service and no angst
about the possibility that such service may be terminated at a future date.
In short, the section 122 license is a win/win situation for consumers and the
satellite and broadcaster industries.
2. Extension of the section 119 license. H.R. 768 extends the current
section 119 license for a period of five years. In principle, the Copyright
Office believes that the licensing of secondary transmissions of broadcast signals
should be left to the marketplace. However, the Office took the position in
its 1997 report to Senator Hatch that the section 119 satellite license should
remain in effect for as long as the cable compulsory license does (the cable
license is currently permanent). The Office recognizes and supports Congress's
desire to maintain oversight of the satellite license, and agrees that a five-year
extension would permit assessment of the continuing function of the license
and allow for legislative amendment, if necessary, at the expiration of the
3. Notice requirements. Section 7 of the bill amends section 119(a)(2)
by requiring satellite carriers who make use of the section 119 license for
retransmission of distant network stations to disclose to their potential subscribers
prior to the point of sale that they may not be able to receive network service
from the carrier. For those subscribers currently receiving network service,
carriers are given 60 days from the date of enactment to provide such notification.
The Copyright Office believes this is an important amendment.
Much of the consumer confusion and anger directed at the unserved household
limitation comes from subscribers' lack of information. Many subscribers sign
up without being informed that they may be ineligible to receive network signals,
and are only made aware of the law at the time their service is terminated.
If satellite carriers are required to disclose to potential subscribers the
provisions of the unserved household limitation, then these potential subscribers
can make more informed choices about their purchase of satellite service and
will not be suddenly surprised that their network service is being terminated
due to enforcement of the unserved household limitation.
4. Royalty rate reduction. As described above, Congress initially set
the royalty rates in the Satellite Home Viewer Act of 1988 at 12 cents per subscriber
per month for superstations, and 3 cents per subscriber per month for network
stations. These figures were based upon a rough approximation of what cable
paid at that time under its compulsory license for retransmission of the same
signals. The satellite rates were adjusted by an independent arbitration panel
in 1991 to either 14 cents or 17.5 cents for superstations (depending upon syndicated
exclusivity protection) and 6 cents for network signals. These rates were subsequently
approved by the Copyright Royalty Tribunal.
When Congress extended the Satellite Home Viewer Act in 1994, it provided for
another rate adjustment and changed the standard for adjusting rates. Rather
than hinge the adjustment on the fee that cable paid under its license, the
new standard required an adjustment of the rates to reflect the fair market
value of the programming retransmitted on network and superstations. The Librarian
of Congress empaneled a Copyright Arbitration Royalty Panel (CARP) to adjust
the rates in 1997, and the CARP determined that a fee of 27 cents per subscriber
per month represented the fair market value of a network and superstation signal,
respectively. The Librarian approved the CARP's determination because it was
neither arbitrary nor contrary to the Copyright Act.
Neither the Librarian nor the Copyright Office have a stake in the royalty
fee charged under the section 119 license for the retransmission of broadcast
stations. The Court of Appeals for the District of Columbia Circuit has recently
affirmed the Librarian's decision accepting the 27-cent fee, confirming that
the Librarian correctly performed his duties under the section 119 license.
H.R. 768 reduces the 27-cent fee by 30 percent for superstations, and 45 percent
for network stations. The reduction is in the interest of bringing the fee for
the section 119 license more in line with the fee for the section 111
cable license. Because this is more a matter of competition in the video retransmission
marketplace than copyright policy, the Office expresses no opinion as to the
advisability of the reduction.
The Copyright Office looks forward to working with the Subcommittee on this