US Copyright Office: echostar

8/14/2019 US Copyright Office: echostar

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Before theU.S. COPYRIGHT OFFICELIBRARY OF CONGRESS

Washington, D.C.

In the Matter of)Section 109 Report to Congressocket No. 2007-1))COMMENTS OF ECHOSTAR SATELLITE L.L.C.

Linda KinneyBradley Gillen1233 20 t h Street N.W .Washington, D.C. 20036(202) 293-0981

July 2, 2007


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CONTENTS

EXECUTIVE SUMMARYI. CONGRESS HAS REPEATEDLY FOUND COMPULSORY LICENSESNECESSARY FOR A VIABLE MVPD SERVICEA. N o Alterna tive Mechanism to L icense Copyrighted Works Has D eve loped .B. Discont inuat ion of Compulsory Licenses Would Cripple the Indust ry and HarmConsumersII. THE COPYRIGHT OFFICE SHOULD RECOMMEND A SINGLECOMPULSORY LICENSE FOR ALL MVPDS.

A.arket and Regulatory Developments Dem onstrate That an O verhaul of theDual C ompulsory Licenses is Warranted.01. Piecemea l treatment of cable and satellite compulsory licenses is a historicalanomaly.02. Real world conditions muddle clear statutory distinction between "local" and"distant" signals.53. Cong ress should address the treatment of digital signals under cop yright law ina comprehensive fashion.94. New video competitors should be on a level playing field with incumbentoperators1B.Simplified and Streamlined Digital Compulsory License Could Address theIntrinsic Infirmities in the C urrent Rules.3CONCLUSION5


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Before theU.S. COPYRIGHT OFFICELIBRARY OF CONGRESS

Washington, D.C.

In the Matter of

Section 109 Report to Congressocket No. 2007-1COMMENTS OF ECHOSTAR SATELLITE L.L.C.EchoStar Satellite L.L.C. ("EchoStar") responds to the U.S. Copyright Office's

Notice of Inquiry ("NOI") examining the means by which Multichannel VideoProgramming Distributors ("MVPD s") retransmit broadcast signals. 1 The currentcompulsory license regime for the retransmission of broadcast signals rewards cablesystems while penalizing newcomers competing for the same subscribers. A clean breakfrom this dysfunctional regime is needed, and the Cop yright Office has the rareopportunity in this proceeding to propose a new regulatory framew ork fully reflective oftoday's video competition landscape that can resolve a number of intractable issues withthe current bifurcated approac h. In particular, the existing dual analog regime onelicense for cable providers and tw o separate licenses for satellite providers has provenunworkable with markedly anti-competitive results. In its place, the Office shouldrecom mend a single conso lidated compulsory license with bright line rules for thecarriage of digital signals applicable to all MVPD s.

1 S ection 109 Re port to Congress, Notice of Inquiry, Docket No. 2007 -1, 72 FedReg 19039 (Apr. 16, 2007).


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EXECUTIVE SUMMARYEchoS tar, and the DBS industry m ore generally, has been able to offer a

com petitive alternative to dominant cable providers in urban and suburban c omm unities as well as the only video offering in ma ny rural com munities because of the availabilityof a compulsory license. It is critical that the Copyright Office affirm its prior findingsthat a compu lsory license rem ains the only functional vehicle by which to ensure that thecom petitive video marketplace rem ains vibrant. In doing so, the Office should ensure thatthis proceeding does not devolve into a referendum o n the relative merits of com pulsory

licenses under copyright law generally. No one contends that compulsory licenses are anoptimal solution: it is, however, the only solution available to provide broadcast signalsto millions of subscribers nationwide. After thirty years under this regime, it is apparentthat no private clearinghouse or market-based alternative will develop. It is equallyapparent that all affected industry players MVPDs, broadcasters, and copyright holders have adap ted their businesses to reflect the existence of a com pulsory license for theretransmission of broadcast signals.

The more pertinent inquiry for the Copyright Office should be how to harmonizeexisting comp ulsory licenses in a technology-n eutral manner for all video providersgoing forward. Policy decisions made in the infancy of the cable and satellite industrieshave been superseded by technological and market developments. The satellite industry

in 1988 w as not so m uch a com petitor to cable, but rather a lifeline service to offer ruralconsumers unserved by cable or broadcasters some form of video service. Thecom pulsory license designed for cable in 1976 focuse d on delivery of local signals togeograp hically discrete cable systems and thus w as a poor fit for a national satelliteservice, necessitating the establishment o f a separate an d distinct satellite license. But the


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first satellite compulsory license, enacted in 19 88, focused o nly on delivery of distantsignals. It took another decade before Congress enacted a compulsory license thatperm itted satellite carriers to retransm it local television signals.

Fast forward to 2007, and the two DBS providers have approximately 30 m illionsubscribers, and offer all U.S. households a choice in video service v irtuallyinterchangeable with today's cable offerings. To do so, EchoStar has invested hundredsof millions of dollars in the development and launch of new spot-beam satellites capableof providing local service in the 48 contiguous states as well as Hawaii and Alaska.

Thus, any former technological or market-driven impediment to a single compulsorylicense for all MV PDs has been eliminated.2

Moreover, the dual analog compulsory license regime has proven inadequate,failing to ensure regulatory parity for all MVPDs. Despite repeated efforts of Congress,the Copyright Office, and the Federal Com munications Com mission ("FCC"), thereremain significant disparities in treatment between the cab le and satellite comp ulsorylicenses, such as the type of broadc ast signals that can be provided, the prop er royaltypayment, and the license term. Similarly, the current stark division between "local" and"distant" broadcast signals does not properly capture a num ber of unique conditionsfrustrating consu mer exp ectations.

The timing of this proceeding is also opportune, providing the Cop yright Office

with the occasion to recommend changes in its 2008 Report to Congress. The CopyrightOffice has the exp ertise to look holistically at the licensing sche me and p rovide neededguidance to avoid repeating the problems with the current schizophrenic analog regime.

2 Any continuing need for technological or service-based differences can bereflected within a single, consolidated license.


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Indeed, the upcom ing digital transition in 2009 p rovides a natural transition point toestablish a new licensing scheme that could ensure the consistent treatment of all MVP Dsvis--vis digital signals, free from the pitfalls of today's analog licenses. Similarly, therise of telephone, Internet, and wireless MVP D platform s underscores the need for abetter m eans to accom modate new technologies under copyright law.

We have all tried to make two separate technology-specific licenses operate asone. Those good faith efforts to reach regulatory parity within the pre-existing regulatorystructure have prov en futile -- separate is not equal. Competitive, technological, market,

and legal developments point to the need for a new approach. Accordingly, the CopyrightOffice should recommend to Congress that a single compulsory license should beestablished to govern the carriage of digital signals for all MVPD s. The new digitallicense should incorporate those p rovisions from either the satellite or cable licenses thathave proven the most effective, offer the industry the greatest possible clarity, and makethe most sense in a rapidly changing video marketplace. Above all, it must offer MVPDscom peting for the same subsc ribers equal footing and a level playing field.

I.ONGRESS HAS REPEATEDLY FOUND COMPULSORY LICENSESNECESSARY FOR A VIABLE MVPD SERVICE.W hen implementing the various provisions of the Copyright Act, Congressrecognized that, in the then current conditions of the mark et, the MVPD industry couldnot function without com pulsory licenses. In considering the cable compulsory license inSection 111 of the Copyright Act, the House Judiciary Committee expressly recognized"that this would be imp ractical and unduly burdensom e to require every cable system to


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negotiate with every copyright owner whose work was retransmitted by a cable system."3Similarly, when the same Committee considered the Satellite Home Viewer Act in 1988,it recognized that: "Neg otiations of individual copyright royalty agreem ents is neitherfeasible nor economic. It would be costly and inefficient for copyright holders to attemp tto negotiate and enforce agreem ents with distributors and individual households when therevenues prod uced by a sing le earth station are so small."4

A.o Alternative Mechanism to License Copyrighted Works HasDeveloped.The marketplace has not developed any mechanism for copyrighted work to beefficiently licensed absen t a comp ulsory licensing regime. This is evidenced by theconsistent reauthorization of the "sunset" provisions of the Copyright Act in 1994, 1999,and 2004. 5 In the three years since the sunset provisions of the Copyright Act were lastreauthorized, the market still has not produced a so lution that would warrant thediscontinuation of compu lsory licenses. Simp le math bears this out. EchoS tar currently

carries close to 150 0 television stations. Each station airs, on average, 5 000 sep arateprograms during the year. 6 For the comp ulsory license to be replaced, a mechanism

3 H.R. Rep. No. 94-146, at 89 (1976).4 H.R. Rep. No. 100-887, at 24 (1988 ).5 S ee Satellite Hom e V iewer Extension and Reauthorization A ct 110 Report: ARep ort of the R egister of C opyrights, U.S. Copyright Office at 8 (February 2006) ("2006

Report").6 See C opyright Law Rev ision: Hearing on S. 1361 B efore the Subcom m . onPatents, Trademarks, and Copyrights of the S. Comm. On the Judiciary, 94th Cong. 401(1973) (Statement of David, Foster, President, National Cable Television Association) ("Iwould like to answer the question that you asked about wh y we should have acom pulsory license with one flat fee across the board for the industry. The averagetelevision station carries approximately 5 ,000 prog rams per year. Let's say that theaverage cab le television system carries five television stations. That would m ean that the


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would have to spring into existence that on day one could accommodate thousands ofsimultaneous contract neg otiations.

B.iscontinuation of Compulsory Licenses Would Cripple the Industry andHarm Consumers.

Many industries have grown and prospered under the Copyright Act's compulsorylicenses and any changes to the system m ust seek to both preserve and equalize thesystem. Discontinuation of compulsory licenses would cause irreparable harm to theindustry, because nego tiation of cop yright licenses in the private market is not feasible.W ithout compu lsory licenses, there is a significant risk that DBS op erators would not beable to offer broadcast content at all. Indeed, such substantial transaction costs may limitthe ability of a distributor to operate a profitable business.

First, negotiations on a n individual copyright basis are p rohibitive becausebroadcast stations generally do not own the copyrigh ts to all their programm ing. Further,broadcast stations' licensing agreements with third-party copyright holders typically donot include the right to sub-license copyrighted p rogram ming for further distribution.7This means that, without a co mpu lsory license, a video distributor wou ld have tonegotiate and obtain copyright licenses from a m osaic of different copyright holders tocarry a broadc ast signal, including broadc ast network, the local broadcast station, majorstudios, sports leagues and sport teams, independent production companies and many

individual cable system operator would have to negotiate a copyright for about 25,000individual programs.").

7 S ee In the M atter of R ate A djustme nt for the Satellite Carrier Com pulsoryLicense, Report of the Panel, Docket No. 96-3 CA RP-SRA , at 41-42 (Aug. 28, 1997)(recognizing that broadcasters do not have the right to sublicense the program s theycarry).


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others.Indeed, DBS operators would have to ascertain a broadcast station's programming

far enough a head of time to enab le the copyright holders to be identified and for licensingagreements to be negotiateda practical difficulty that Congress previously hasrecognized. 8 A station's schedule can change with little or no advanced notice, leavingthe DBS operator with no practical way to secure rights to the alternative content. Inaddition, DBS opera tors would have to identify the copyright holders behind eachprogram and reach agreement with each of them before retransmitting the program. A

broadcast station broadcasts thousands of programs a year, with each program potentiallyhaving ma ny copyright holders. An imp ortant benefit of compulsory licensing is that itminimizes the transaction costs associated with the carriage of the multitude of copyrightmaterial included in a broadcast signal.

Second , the compulsory license also eliminates the "hold-up" problem inherent inhaving to obtain rights from so m any partiesa phenomenon that is well documented inthe econom ics literature. Examining the negotiation process for just one broadcast stationeasily illustrates the "hold up" problem. When the last content owner in a station'sbroadcast line-up com es to the table to negotiate, the copyright holder has an unfairadvantage. The copyright holder can "hold up" the negotiations by demanding excessivecompensation for broadcast rights because without the agreement the DBS provider will

8 See C opyright Law Rev ision: Hearing on S. 1361 B efore the Subcom m . onPatents, Trademarks, and Copyrights of the S. Comm. On the Judiciary, 94th Cong. 2991(1973) ("Senator M cClellan. The point is the CATV stations picks up some think [sic]that is being broadcast somewhere else. He has no way of k nowing what is going to bebroadcast ahead of time. How can he m ake an agreement w ith each copyright proprietorwith respect to each particular show? I do not see how from a practical standpoint it canbe done.").


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have a "hole" in its schedule. Either this would result in the DBS provider paying what isdeman ded by the copyright holder or broadc asting a black screen in lieu of actualprogramming during the time that that copyright holder's programming was beingbroadcast. The "hole" in the schedule would weaken the DBS product's value to thesubscriber and likely lead to at least some subsc ribers disconnecting service. Further,every cop yright holder would w ant to be the last one to com e to the negotiation table inthe hopes of extrac ting higher fees, which w ould likely further delay the negotiatingprocess. A c omp ulsory license helps to ensure that negotiations for the licenses will not

break down because of "hold up" by individual copyright holders.Such a regim e is also anti-consum er. The FCC ha s long noted the fact that a

"Swiss chees e" schedule is not in the public interest and has crafted its carriage rules torequire MVPDs to carry all of the programming of the broadcast stations they offer,except for very limited deletions under the network nondup lication, syndicatedexclusivity (Syndex), and spo rts blackout rules. 9 Scrapping the current system for one inwhich subscribers could constantly be faced with a TV screen indicating that "Copyrightrules require the deletion of this program" w ould be untenable.

II. HE COPYRIGHT OFFICE SHOULD RECOMMEND A SINGLECOMPULSORY LICENSE FOR ALL MVPDS.The distinct cable and satellite compulsory license regimes ad dress the same

subset of copyright issues: the manner in which MVPDs offer broadcast signals withinand beyond broadcasters' local communities. A fresh approach to these issues is critical.The original technical basis for this dual ap proach i.e., nascent satellite providers'inability to offer local signals has been superseded by tech nological developme nt and

9 See 47 C .F.R. Sec. 76.62 (a)&(e) ; 76.66(j) (cable and satellite carriage rules).


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investment. Nonetheless, two separate regimes remain that continue to have unintendedcom petitive implications for cable and satellite carriers, as well as new entrants, such astelco and wireless video providers.

The need for a new ap proach is suppo rted further by the contentious history ofthese dual regimes coupled with recent market developments. First, repeated efforts toharmo nize the two separate but unequal regimes have failed, exacerbating disputesbetween cable, satellite, broadcast, and copyright holders. Moreover, significantdisparities remain. Second, the clear division between "local" and "distant" signals

codified in the compulsory licenses does not mirror real world conditions or consum erexpectations. Third, the digital transition in 2009 offers the Copyright Office andCongress an opportunity for a new beginning: the historical anomalies and complicationsof the analog compulsory licenses need not be replicated for digital signals. Fourth, theadvent of IPTV , telco-based video com petition, as well as wireless and online videoservices, highlights that all video comp etitors do not fit neatly within either regime.

The mo st straightforward means to address these ch allenges is to adopt a singlecom pulsory license for all MV PDs . Absent a comp elling operational distinction, allMVPDs should be subject to the same copyright rules and requirements. A consolidatedcompulsory license could take from each current regime the components that haveworked e ffectively and eliminate particularly troublesome provisions within each

com pulsory license. In doing so, Con gress should address analogou s distinctions incommunications law.


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A. Market and Regulatory Developments Demonstrate That an Overhaul ofthe Dual Compulsory Licenses is Warranted.

The Copyright Office has concluded that "any existing differences between the

copyrigh t treatment of cable retransmission and of satellite retransmissions should beremoved." 1 0 Similarly, the Federal Communications Commission has held that "everyeffort should be made to app ly the same rules to cable operators, DBS op erators, andother MVPDs." 1 1 This universal objective, however, continues to be frustrated in bothcopyright and communications law by the continued operation of two separate anddistinct compulsory license regimes.

1. Piecemeal treatment of cable and satellite compulsory licenses is ahistorical anomaly.

Cable and satellite providers compete for the same c ustomers, but are treateddifferently under copyright and communications law in a number of critical areas. Thiscontinued disparate treatment is more attributable to vestiges of copyright andcommunications law than any current technological differences between the two videoplatforms.

Section 111 was enacted in 1976 at a time when the cable industry was highlyregulated by the FCC, and cable systems were local and geographically confined innature. This is in contrast to the DBS industry, which developed in the 1980s. WhenSection 119 was enac ted in 1988 , the satellite industry had a national footprint and hadnot yet deployed spot beam technology. Thus, DBS providers could only deliver a

1 0 A Rev iew of the Copyright Licensing R egimes Cov ering Retransmission ofBroadcast Signals, U.S. Copyright Office, at v (Aug. 1, 1997) ("1997 Report").

1 1 Retransmission Consent and Exclusivity Rules: Report to Congress Pursuantto Section 208 of the Satellite Home V iewer Extension and Reauthorization A ct of 2004,MB D ocket No. 05-28, 75 (Sept. 8, 2005) ("FCC 2005 Report").


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limited number of "d istant" broadcast signals nationwide, rather than local broadcastsignals in individual Designated Market Areas ("DMAs"). The differences between thehighly regulated and extremely local cable industry and the unregulated and nationalsatellite carriers promp ted Cong ress to create a different compulsory license that wouldbe responsive to the differences between cable and satellite.12

In 1999, when Section 122 was implemented, the DBS providers were competingmore directly with the cable industry. Congress' recognition that the industries should betreated equally lead to the passage of Sec tion 122 allowing loca l-into-localretransmissions by DBS providers. "Local-into-local service allows DBS subscribers toreceive the local broadcast stations in their area (e.g., the ABC, C BS, Fox, and NB Caffiliates) from the D BS prov ider, just as cable subscribers receive local broadcaststations from their cable operator." 1 3 The ability to provide local broadcast stations hasproven essential to the competitive viability of the DBS industry. Buying decisions in themarke t place are usu ally tied to differences in content, quality, price, and availability ofservice, not to the technology assoc iated with any particular delivery metho d.Accordingly, prior to Section 119 and 122, DBS providers were at a distinct disadvantagecom pared with cable providers. W ithout the ability to provide the content that consumers

1 2 The Cop yright Office notes that the separate statutory treatment of satellite wasbased initially on two policy considerations: (1) "the relative newness of the satelliteindustry" and (2) "the technological differences betw een the cable and satellite industries.Satellite was a nationwide retransm ission service that did not offer local programm ing tosubscribers."

1 3 Direct Broadcast Satellite Subscribership Has Grown Rapidly, but V ariesA cross Different Ty pes of M arkets, U.S. Government Accountability Office, GAO-05 -257, a t 15 (15 Apr. 2005) ("GA O R eport").


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had grow n to expect from their cable provider, DB S providers could not substantiallygrow the DBS m arket.

As of December 2006, approximately 29 m illion U.S. households subscribed toDBS service. 1 4 This represents a growth of 20 million subscribers in the seven and a halfyears since the ab ility to offer local-into-local was created by statute. "Analysts attributeDB S continued grow th to the increase in local-into-local broadcast stations" 1 5 Asreported by GAO , the DBS penetration rate is 12 percent higher in areas where DB Scustome rs can receive local-into-local service versus areas wh ere it is not available.'6"Since individual programming appearing on broadcast stations generally has higherratings than individual program ming ap pearing on cable chann els, the ability of DB Sproviders to offer local broadcast stations to their customers rem ains an importantcompetitive factor."17

Ever since the dual regimes we re established, a primary objective of Con gress andthe Copyright Office has been to harmonize these two regimes and minimize thedifferences to the extent p racticable. 1 8 As a result, satellite providers are on closer

1 4 http://www.sbca.com/site_files/child.asp?page=Facts&secindustry.1 5 A nnual A ssessment of the Status of Com petition in the M ark et for the Deliveryof V ideo Programm ing, 2005 Report, 21 FCC Rcd. 2503 72 (2006) (2005 Competition

Report).1 6 GA O R eport at 15.17 Id .1 8 The Com mission explains that [t]hrough SHVIA, C ongress sought to placesatellite "on an equal footing" c omp etitively with the dom inant cable industry. 2005 FCC

Report, 13. Consumer groups too share the desire to "[Ii]armonize the compulsorylicense between cable and satellite." Testimony of Gene Kimmelman, Consumer Unionto Subcomm ittee on Telecomm unications and the Internet, House Energy and C omm erceComm ittee (Mar. 10, 2004).


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competitive footing today with dominant cable providers under copyright law. That said,substantial differences in the two licenses re main w ithout a clear policy justification.

A m ajor stumbling block to m ore comprehensive and rational reform has been theinterdependence of copyright and communications law. NCTA explains correctly that"communications policy and the copyright compulsory licenses have always beenintertwined." 1 9 A piecemeal change to a provision of copyright law or communicationslaw risks unsettling policy determinations of the other agency predicated upon theexisting rules. 2 0 The resulting stalemate has led to sub stantial disparities in the treatmentof cable and satellite providers objectionable to both sets of comp anies despiterepeated efforts of Cong ress, the Copyright Office, and the FCC to ensure a level playingfield within the existing dual structure. Indeed, NCTA laments DBS regulatoryadvantages and seeks "recomm end[ations] that Congress make changes to ensure thatcable operators can achieve regulatory parity" with DBS . 21 In turn, the Copyright Officeis well aware that satellite providers have long soug ht the same advantage s undercopyright law available to dominant cable providers.

The N OI provides a laund ry list of the current compe titive disparities still in thecopyright rules, which are of significant competitive import. Three broad categories ofdifferences warrant particular attention. First and foremost, cable providers have thecertainty that their "local" and "distant" signal authority is permanent, while D BS

1 9 Comments of NCTA, MB D ocket No. 05-28 (Mar. 1, 2005) ("NCTA FCCComments").2 0 See e.g., 1992 Cable License Order (explaining that "the operation of Section111 is hinged on the FC C rules regulating the cable industry.").21 NCT A FCC Comments at 2.


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providers are at risk every five years of being s tripped of their ability to com pete withstill dominant cable providers due to the sunset of Section 1 19 authority.22

Second, cab le providers have significantly broader authority to provide distantsignals to customers under copyright law. 2 3 In contrast, DBS providers are subject to theunwieldy unserved household limitation. Similarly, a cable provider may provide anunlimited numbe r of distant signals even in those markets in w hich it offers local signals,whereas satellite providers' rights under Section 119 are significantly more limited inboth regards.

The mariner in which co pyright holders are com pensated is also vastly different.Cable providers con tinue to pay royalties based on an antiquated system tied to cablesystem size and gross receipts. In contrast, satellite providers are required to pay in amore straight-forward manner a flat per-subscriber fee. NCTA asserts that DBS"enjoys a significant discount over cable for purposes of copyright royalty feepayments." 2 4 A cursory review of the Copyright Office's royalty records does notsupport cable's view, but does underscore the need for uniformity. In a competitivemarke t, it does not make sense to have pro viders paying either higher or lower royalties

2 2 It should be noted that EchoS tar is no longer permitted to provide ana log distantnetworks to its customers und er Section 119 as a result of a long-standing dispute with asubset of broadcasters. See C B S B roadcasting, Inc. v. EchoStar Com m . Corp., 472 F.Supp.2d 1367 (S.D.Fla. 2006). This proceeding is not the proper forum to re-litigate theunderlying dispute. Regardless, the court's action did not strip EchoStar of all Section119 authority, i.e., rights to retransmit superstations, and, therefore, EchoS tar maintains astrong interest in the continuation of Section 119 .

23It bears highlighting that the Commission's must carry, retransmission consent,network n on-duplication, and other rules have similar disparities. An overlay of thecopyright and co mm unications rules for distant signals reveals substantial remainingdifferences in treatment between cable and satellite providers.2 4 NCTA FCC Comments at 10.


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based on the techn ology used to deliver content -- particularly now that video se rvices areoften viewed as interchangeable by the consumer. Furthermore, adding new videoentrants to one royalty payment schem e versus the other also has compe titiveramifications and further exacerbates inequities. Resolving these troublesome differencesin a piecemeal fashion w ithin the current dual structure has proven infeasible and shouldbe avoided.

In sum , although historical differences initially required disparate statutoryschemes, the equalizing effect of Section 119 and 122 allowed the DBS industry to growand prosper. Now technology advancements allow DBS providers to offer local service inmost D MA s just like a cable operator, but the compulsory licenses continue to treat theservices differently in many im portant respects. Bringing all video comp etitors, currentand future, under a single regime will level the playing field and foster com petition.

2. Real world conditions muddle clear statutory distinction between"local" and "distant" signals.

The com pulsory license regime is structured so as to categorize broadcast signalsas either local or distant, in part to facilitate consumers' expec tations of receiving localnews, weather, and entertainment. This division is starkest for satellite providers thathave a separate distant license (Sec tion 119) an d a local license (Section 12 2) .Idiosyncrasies in real world c onditions, however, frustrate those c lear distinctions.Congress and the Copyright Office should address a number of aberrations under currentlaw to ensure that all "local" services are treated accordingly under c opyright law.

Specifically, the Copyright Office should recommend to C ongress that MVPD shave the ability to offer as "local": (1) a full complem ent of network signals in eachcom munity; (2) all signals that can be received by an over-the-air antenna; and (3) c ritical


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local in-state news, weather, and entertainment. Each of these modifications to the"local" copyright authority will encourag e further localism in broadcasting and ensurethat consumers have access to the full range of network signals. It will also bring allMV PD s in line with the original intent of the cable carriage rules adopted by the FCC in1972.25

First, there over 20 rural DM As in which broadc asters have not invested ininfrastructure, so a full complemen t of national network affiliates does not exist. In fact,over 40 ne twork stations are missing and, in a number of "short mark ets," only a singlenetwork affiliate operates today, e.g. Zainesville, OH (N BC only); St. Joseph, MO (ABConly); Mankato, MN (CBS only). The compulsory license structure, however, presumesthat all national networks (NBC , CBS, A BC, FO X) are available in each local market.Encourag ingly, the Copyright Office has recog nized correctly that "there will alwaysbeen a need for a d istant license for subsc ribers who reside in rural areas of the country orin markets wh ere they can't get a full complem ent of their network signals."26Nevertheless, there is no means to provide a "local" network from e ither a neighboringor regional DMA to a short market under the Section 122 satellite compulsory license.

25 Cable Television Report and Order, 36 FCC 2d 177 (1972 ) ("We believe,however, that hose who are not accomm odated [with many over-the-air broadcastsignals] as are New Y ork or Los An geles viewers should be entitled to the degree ofchoice that will afford them a sub stantial amount of diversity and the public servicesrendered by local stations. Cable television can and should help in ach ieving thediversification sought by our allocations policies.") From this the Com mission concludedthat all cable subscribers should be provided acc ess to all network television stations andat least one independent station. Id .

26 Copy right Com pulsory L icense Im provem ent A ct: Hearing Bef ore theSubcomm. on Courts and Intellectual Property of the H Comm. On Judiciary, 106thCong. 31 (Feb. 25, 199 9) (statement of W illiam R oberts, Copyright Office of the UnitedStates).


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For each short market, a MVPD seeking to provide local service should have theflexibility to designate another DMA's affiliate of each missing major network as the"local" affiliate under the compulsory license. This would provide dual incentives forboth broadcaster and MVPD that would enhance "localism." First, this would providebroadcasters with a clear incentive to ensure that all 210 DMAs have a full complementof network affiliates: the presence of a local broadcaster is the lynchpin of any localism-based system. Second, it would address MVPDs' concern with the competitiveness of a"local" offering missing a major network , and jump start the entry of MVPD s into

additional rural markets w ith missing affiliates.Second , satellite providers currently have the right to offer "significantly viewed"

stations, but only as a distant signal. Treating "significantly viewed" as a distant signalis, however, counter to the express p urpose of pro viding satellite carriers with the right toretransmit local significantly viewed stations. The Copyright Office advocated for suchauthority because it would "perm it many satellite subscribers to receive the stations thatthey have traditionally w atched over-the-air for free in their respec tive comm unities."27The FCC has explained that such stations are "treated as local for carriage purposes."28As a prac tical matter, copyright holders have agre ed that these signals are "local" giventhat "network stations that are significantly viewed ... do not require a royalty paymentunder certain cond itions." 2 9 The authority to provide this "local" service should be

27 Th e Satellite Home V iewer A ct: Hearing Bef ore the Subcom m . on the Judiciary,108 t h Cong. (May 12, 2004) (statement of David C arson, General Counsel, CopyrightOffice of the United States).28 FCC 2005 Report, 7.29 In this regard, the mann er in which access to significantly viewed stations wascodified is probative. Even though significantly viewed stations are within the Section


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within the broader local authority under the com pulsory license, and the statutoryprovision should no t treat significantly viewed signals as "distant."

Third, the definition of "local" under the compulsory licenses is based upon thearbitrary DM A line drawing made by Nielsen Media. 3 0 Like political districts, these linesneither necessarily capture comm unities of interest nor ensure that all consum ers receivetruly local news and information. The House SHVERA Report notes that "Stateboundaries, just like the reach o f over-the-air signals, do not necessarily coincide with theNielsen-defined local markets."31

These anomalies leave some subscribers randomly assigned to DMAs primarily inother states without access to in-state news, emergency, weather, or sports. The HouseReport explains that these consumers are "prevent[ed] from receiving ... programmingfrom w ithin their states that they consider truly local." 3 2 For example, Wyoming isdivided into seven DMAs with "local" signals imported from Montana, Colorado, Idaho,South Dakota, and Utah. Two of the three DMAs in Vermont receive New York orMassachusetts local signals. Residents of Michigan may receive their "local" signalsfrom Minnesota, Wisconsin, Ohio, or Indiana. Section 119 includes a number of specificprovisions that address similar DMA anomalies. 3 3 All consumers should have the

119 d istant authority, that authority can only be triggered by the p rovision of "local"service under Section 122. It is a complement to a "local" offering.3 0 Ac cording to Nielsen, DM As "are used to identify specific media markets forthose interested in buying and selling television, advertising and prog ramm ing."31 Satellite Home Viewer Extension and Reauthorization Act of 2004, H.R. REP.108-634 (July 22, 2004 ) ("House SHV ERA Report"). .3 2 id.33 17 U.S.C. 119 (C).


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oppo rtunity to receive in-state information and news, and there are a numb er of ways toaddress this concern within copyright and/or communications law. Congress couldprovide the Copyright Office or the FCC with the authority to modify DM A boundariesto ensure all consumers have in-state service. A recent bill introduced in the House ofRepresentatives by Representative Ross of Arkansas proposes another simple solution tothis problem, expanding "local" authority to encomp ass adjacent DMA s.34

For each of these m odifications, there is no elegant solution to address theseunique circumstances within the current Section119/122 licenses because of the clear

division in the law for satellite providers between "distant" and "local" signals. The moststraight-forward means to accomplish true "local" rules is within a broader overhaul ofthe compulsory license regime.

3. Congress should address the treatment of digital signals undercopyright law in a comprehensive fashion.

The compulsory license regime is based on an analog broadcasting model. TheNO I recognizes that Section 1 11 is silent as to applicability to digital signals, becausethere was no "need to m ake distinctions because all transmissions at that time werebroadcast in an analog form at." Initial consideration for digital signals in the satellitelicense did not occur until 2003 , and the cable license has never been re visited to addressdigital signals at all. Given the contentious nature of the analog licenses, it would be amistake to simply expa nd the broken analog rules to digital signals.

Mo reover, the NOI notes that digital signals have different technological andoperational challenges than those affecting analog signals. SHVERA introduced some ofthe com plications associated with the transition to digital signals for satellite carriers, but

34Television Freedom A ct of 2007, H.R. 2821 (June 21, 2007).


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a number of critical issues remain outstanding. The Copyright Office has noted correctlythat "[t]he 2004 A ct, however, did not directly address the problems associated with theintroduction of digital broadcast signals." 3 5 By way of example, Congress has yet toadopt a digital predictive model to address which households are unserved b y digitalsignals. 3 6 In turn, the Com mission has y et to finalize digital testing rules.37

Similarly, the NOI explains that Congress "has not yet addressed theretransmission of digital television signals by cable operators under Section 111." Evenif the Section 111 license co uld be read broadly so as to ap ply to digital signals, there area number of significant policy considerations that warrant clear Cong ressional directive.Many of these issues have been at the forefront of the Copyright Office's openproceeding. 3 8 Among the most contentious issues are how to address multi-cast signals,digital tiers and set-top box rev enues under the c able royalty rules, and the proper

3 5 2006 R eport at iii.3 6 2006 Report at 30.37 Measurement S tandards for Digital Television Signals Pursuant to the SatelliteHom e V iewer Extension and Reauthorization A ct of 2004, Notice of ProposedRulemaking, FCC 06-51 (Apr. 28, 2006) . Further, given the contentious history of the"unserved hou sehold" exception in the analog c ontext, it is unclear if adopting a digitalversion of the unserved household test and mo del would be productive for the industry or

consumers.38 S ee R etransm ission of Digital Broadcast Signals to the Cable Statutory L icense,71 Fed Reg 549 48 (Sept. 20, 2006).


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definition of "station" in Section 111 . 3 9 The Copyright Owners note correctly that "[i]t ishardly surprising that Congress did not contemplate such scenarios in 197 6."40

In this regard, the Cop yright Office should act with care and recom mend ex plicitCong ressional action to address the treatment of digital signals under the compulsorylicenses in a comprehensive manner. The Office's reluctance to expand the definition ofcable system und er Section 111 to include cable-like open video system s is instructive. Inthat case, the Office found "it to be vastly preferable for C ongress to m odify the existingcable com pulsory license to clarify how ope n video systems fit into the licensing

scheme." 4 1 The Office has similarly found that it "is not imbued with authority to expandthe comp ulsory license according to public policy objectives."42

The Copyright Office should recommend that Congress craft a new statutoryprovision to address the retransm ission of digital signals by cable and satellite providers.There is no basis for applying the du al treatment of cable and satellite authority to a newregime.

4. New video competitors should be on a level playing field withincumbent operators.

The video mark et has begun to be transformed by the introduction of newtechnologies and new competitive platforms. Telephone providers have moved forwardaggressively with new Internet-based IPTV services to compete directly against

3 9 Compare Comm ents of N CTA , Docket No. RM 2005-5 (Nov. 6, 2006) to ReplyCom m ents of the Copyright Ow ners, Docket No. RM 2005-5 (Dec. 18, 2006) ("CopyrightOw ners R eply Comm ents").

4 0 Copyright Owners Reply Com m ents at 21.41 1997 R eport.

4 2 S e e 1 9 9 2 C a b l e L i c e n s e O r d e r


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traditional cable and satellite providers. There are also a number of non-traditional videodelivery mechan isms e.g., wireless devices and a host of online video services thatmay also need to be addressed.

Each of these services has different technical parameters, and there have beenopen questions about whether these new systems fit within FCC regulations or the currentcopyright compulsory licenses. The NOI asks broadly "whether a statutory license forIPTV-based services" is warranted or whether the new technologies "may availthemselves of any of the existing statutory licenses." The NOI's questions underscore the

uncertainty in the current rules and the need for a more efficient means under copyrigh tlaw to reflect new competitive entrants. To date, the Copyright Office has been generallyunwilling to expand the Section 111 compulsory license to reflect new video platforms,finding that the cable license "should not be given a w ide scale interpretation whichcould, or will, encompass any and all new forms of retransm ission technology."43

The resulting uncertainty had a co gnizable effect on early satellite investmen t andoperation, which was not addresse d until a separate satellite com pulsory license wasadopted by Congress. As discussed above, DBS's experience under an unequaltechnology-specific compulsory license should not be replicated: a new IPTV or wirelessvideo com pulsory license would be fraught with the same inheren t failings of the currentSection 119/Section 122 rules. Instead, a new approach should be adopted that betteraccom modates new com petitors that may not fit neatly within either the cable or satellitelicense. The most competitively neutral means to accomplish this objective is to adopt a

43 Cable Compulsory License; Definition of Cable Systems, 56 FR 31580 (1991).


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new, consolidated license that applies to all competitive video providers regardless oftechnology. 4 4

B. A Simplified and Streamlined Digital Compulsory License Could Addressthe Intrinsic Infirmities in the Current Rules.

The current bifurcated analog com pulsory license regime fails to offer a clearroadmap as to how to address the four key challenges facing the compulsory licenseregime for digital signal carriage in the coming ye ars how to ensure regulatory parity;how to acco unt for quasi-local services; how to account approp riately for digital signals;and how to incorporate new technologies. In contrast, a single compulsory regime anew Section 123 applicable to all MV PDs holds great promise to address each of thesechallenges effectively and efficiently. 4 5 The NOI notes the appeal of a uniform licenseand its ability to "effectively level competition among the providers."

In general, regulatory parity is best achieved through ap plication of the same rulesacross all technological platforms. Contrary to 1976 or 1988, all of today's MVPD

offerings whether provided by c able, satellite, or IPTV share m ore in comm on than

4 4 W hile we identify with entities that would prefer a bro ad interpretation of cablesystem under S ection 111 to avoid the need for a statutory solution, the expansion of thatdefinition would have sev ere comp etitive implications. Expanding the m ore attractivecable license to additional comp etitive platforms w ould only exacerbate needlessly theinequities faced by satellite providers unable to provide serv ice under Section 11 1.

4 5 This docum ent is not intended to provide an explicit provision-by-provisionproposal for a new Se ction 123, but rather to provide an analytical framework to facilitatesuch discussions. We w ould be happy to work w ith the Copyright Office on a m oregranular proposal during this pendency of this proceeding.


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they do differ and should be governed by the same copyright rules. Any continuing needfor technological or service-based d ifferences can be reflected within that single license.46

Similarly, the stark divisions between "distant" and "local" in the currentcom pulsory licenses com plicate greatly efforts to address quasi-local signals in a logicalmanner. A new compulsory license focused on consum er expectations and real worldmarket conditions would better accommodate these unique situations. The controversialand adversarial nature of the analog licenses also calls for a fresh app roach for digitalsignals: the Copyright Office should deviate from that broken bifurcated structure.Lastly, two techno logy-specific licenses the cable and satellite licenses are ill-equipped to provide a viable means to accommodate new competitive platforms. A newdigital license applicable to all qualified facilities-based M VPD s would pro vide morecertainty to new entrants regardless of their underlying technology.

In developing a new reg ime, bright line rules and regulations should be adoptedwherever feasible to provide max imum c ertainty to all interested parties and consum ers.A new license should prov ide long-term certainty to the industry, and include specificprovisions addressing a uniform royalty paym ent structure, and clear and consistent rulesfor the delivery of local and distant signals. It is critical to note that copyright law cannotbe viewed in a vacuum: any changes in the compulsory license structure will requirecorresponding changes in communications law. The interplay of communications and

copyright law provides an opportunity for the Copyright Office to cherry pick between

46 The clearest exam ple is that satellite providers do not have sufficient cap acityto offer analog or digital local-into-local service into all 210 mark ets based on cu rrentsatellite technology and availability.


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both sets of rules for the simp lest manner in which to protect the interests of copyrightholders, broadcasters, MVPD s, and customers.47

CONCLUSIONThe Cop yright Office should recomm end a new consolidated com pulsory license

for carriage of digital signals to provide greater certainty, more uniform ity, and a levelregulatory playing field for all video prov iders.

1233 20 t h Street N.W.Washington, D.C. 20036(202) 293-0981July 2, 2007

4 7 The Office should be cautious of any attempt by opponents of com pulsorylicenses in general to achieve their goals (the elimination of comp ulsory licenseauthority) throug h the infliction of a thousand cuts on a new license i.e., perverselytaking the provisions from each regime that have not worked or imposing duplicative andonerous requirements under both copyright and communications law, e.g., imposing theunserved hou sehold limitation in addition to the network no n-duplication rules.

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