Cable Loses Bid to End Phantom Signal Royalty Fees
Cable operators lost a bid to escape paying royalties for distributing out-of-town stations to residents of the broadcaster’s market (CD Aug 24 p6/05). A little-noticed Copyright Office decision last month ended the so-called phantom signal proceeding, in which NCTA sought to avoid royalty payments to out-of-town stations in portions of cable headends in the same market as the broadcaster. In a separate rulemaking notice this week, the office proposed that cable systems be required to pay royalties for the multicast signals of so-called distant stations.
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NCTA failed to show that section 111 of the 1976 Copyright Act lets a cable operator segment cable systems in different markets served by a single headend for royalty purposes, the office found. The end of the phantom signal proceeding was marked in the Federal Register May 7. Cable had since 1983 been seeking clarification on the matter, which the office called “long-debated.” The act makes clear that cable operators using statutory licenses for imported non-network programming “must pay royalties for such use no matter if some subscribers are unable to receive it,” the office said. Phantom signals occur when cable operators combine systems in geographic clustering, it noted. A cable lawyer said the issue crops up most often in rural and suburban areas, but isn’t common. Cable lawyers say it costs their industry millions annually. In 2007 cable paid $144.4 million to the office for distribution to rights holders, an NCTA spokesman said.
Cable operators no longer can cite Copyright Office inaction on phantom signals to justify paying less than full royalties, the agency said. “While the NCTA argues that the Office has the authority to adopt its proposed rule change, it ignores our limited role under Section 111,” in which the office has “no discretion to alter that scheme,” it said. NCTA has made “cogent policy arguments” on “inadequacies” of current law, but that’s an issue for Congress, it said. NCTA disagreed. “The Copyright Office got it wrong, as it’s an irrational policy that the Copyright Act does not mandate,” the spokesman said. An NAB spokesman declined to comment right away.
The Copyright Office seeks comments on its finding that multicast signals, not just primary digital broadcast signals, command royalties, it said in a rulemaking notice in Monday’s Federal Register. “Congress specifically intended to provide a broadcast ’station’ with a mechanism to extract the value of its ’signal’ when being retransmitted by a cable operator,” it said. Technology has changed drastically since passage of the Act, which is “not a model of statutory clarity” and “Congress certainly did not contemplate the advent of multicasting,” it said.
Cable operators don’t face increased fees when carrying a broadcaster’s digital and analog signal, but the office proposed they pay up when carrying channels with different programming: “We propose that copyright owners must be compensated because there is new non-network programming being carried by the cable operator regardless of whether multiple digital signals are broadcast from a single transmitter.” Comments on the notice are due July 17, replies Sept. 2.
Audio and video “embedded” in digital signals aren’t subject to more fees, the office said, citing “new interactive content like multiple camera angles.” It proposed that digital radio broadcasts carried on cable, such as on music channels, be treated like analog stations. “We are not instituting a new regulatory framework for the carriage of digital radio.” It proposed that cable operators include fees from leasing set-top boxes or selling or renting CableCARDs in calculating royalties.