Copyright Office Says AT&T, Verizon Can Use Compulsory License

Participants in the proceeding at the office, started in 2007, still were reviewing the 274-page document Tuesday. AT&T, DirecTV and Dish Network officials declined to comment.

The NAB “agrees” on the importance of many of the report’s recommendations, said a spokesman. But there’s “an urgent need to address and correct a technical provision in the existing distant signal satellite license, which, if left unresolved, could result in serious harm to a local broadcaster’s ability to serve viewers after the DTV transition,” he added. NCTA thinks today’s royalty system for cable “is appropriate,” said a spokesman, saying rates were negotiated up twice the past decade. “It not only provides program producers with fair value, but also enables consumers to access distant signal programming at reasonable prices.” The Motion Picture Association of America said it’s “gratified” that the office again found that compulsory licenses underpay program owners.

Cable and satellite-TV providers no longer need compulsory licenses given their growth in recent years, the office said. To “remedy” a “disparity” between section 111 of the 1976 Copyright Act for cable and section 119 for satellite, it recommended capping at four the distant network signals that a cable operator can retransmit. It also urged eliminating parts of section 119 by “imposing the same exclusivity rules now applicable to cable operators on the satellite retransmission of distant network signals.” For both cable and satellite, the office said, “distant broadcast signals represent a minute portion” of channel lineups. Cable operators have paid $3.75 billion in royalties since section 111 took effect in 1978, the office said, and satellite has paid $933.6 million since section 119 licenses took effect in 1989.

Satellite providers still should be able to use section 122 local-into-local licenses because that practice supports “the goals of providing local service to satellite subscribers and promotes inter-industry competition,” the report said. A gross-receipts system demanding that cable operators make what some say are complicated calculations to determine royalties should be replaced with a flat fee imposed by Congress, it said. That would reduce the “administrative burden for users of the license and the Copyright Office,” it added.

Cable and satellite companies pay what seem to be “below-market rates,” so statutory licenses for both industries should be phased out, with copyright owners able to negotiate deals directly with pay-TV companies, the report said. Data provided the office “strongly indicate” than the companies pay less to carry signals by distant TV stations than for cable networks, it said. That may have been “justifiable when cable and satellite were nascent industries,” but pay-TV companies are “robust” and have, “for a long time, overshadowed the broadcast industry,” the report said. “The record evidence in this proceeding supports the long held view that the distant signal licenses have interfered in the marketplace for programming and have unfairly lowered the rates paid to copyright holders.” That’s “one of the principal reasons why the cable and satellite industries have supported” keeping the licenses, it added. “The time has come when private negotiations would serve the public interest.” Collective licensing, often used for music, might work for TV, as would sublicensing in which broadcasters “act as copyright clearance agents” for pay-TV firms, the office said.

The office said Congress should enact a new, limited compulsory license at the end of 2009, when section 119 expires. Industry officials expect lawmakers to address the report’s proposals -- necessarily following all of them -- when reviewing that section, now part of the Satellite Home Viewer and Reauthorization Act. The office seeks a “short- term five year license” so subscribers can get a few distant network and superstation signals “in the early years after the DTV transition.” That would “provide a lifeline distant broadcast signal service to subscribers that does not radically compromise broadcast localism,” it said. In 2015, the distant signal provisions would end, letting Congress “consider whether to maintain the license for the purpose of permitting local-into-local transmissions of broadcast signals,” the office urged. By 2015, DTV “issues” will be “settled,” broadband penetration will have surged and homes will be able to get broadcast-type video “from a multitude of different providers,” it said. “It will be a whole new era by then and the copyright law should be able to reflect that fact.”

If AT&T and Verizon follow all FCC broadcast signal carriage rules, they should be able to use the section 111 license, though AT&T uses Internet Protocol, the office said. “By its terms, the statutory license applies only to cable systems, and Section 111(f) defines ‘cable system’ quite broadly.” The companies sought the finding. But wireless companies shouldn’t get a compulsory license, the office said. “Marketplace dynamics have usurped the need for wireless carriers to rely upon a regulated copyright license.” Capitol Broadcasting’s “novel and interesting” plan to stream video of a station to in-market viewers doesn’t meet the definition of a cable system, so the broadcaster can’t use a compulsory license, the office said. “Massive signal security does not immunize the system from the potential pitfalls of a distribution model that essentially relies on the Internet,” it added. “Once a secure system is ‘cracked,’ content leakage will ensue and massive unauthorized redistribution will occur.”

“Serious questions” on signal security likewise led the office to recommend against letting webcasters use compulsory licenses, it said. Free trade agreements between the U.S. and several other countries preclude such use of the license, the office said. “Statutory licensing has not been needed” in many Web content deals, the office said. “A new video marketplace has developed free from government regulation and with the ability to quickly respond to consumer demand. The continued growth and evolution of the Internet video marketplace may likely supplant the demand for distant broadcast programming and obviate the need for any type of distant signal license.”