FR Doc 06-7927

[Federal Register: September 20, 2006 (Volume 71, Number 182)]
[Proposed Rules]
[Page 54948-54953]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20se06-29]

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LIBRARY OF CONGRESS

37 CFR Part 201

[Docket No. RM 2005-5]

Retransmission of Digital Broadcast Signals Pursuant to the Cable
Statutory License

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of Inquiry.

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SUMMARY: The Copyright Office is seeking comment on copyright issues
associated with the secondary transmission of digital television
broadcast signals by cable operators under the Copyright Act.

DATES: Written comments are due November 6, 2006. Reply comments are
due December 4, 2006. September 20, 2006.

ADDRESSES: If hand delivered by a private party, an original and five
copies of a comment or reply comment should be brought to Library of
Congress, U.S. Copyright Office, 2221 S. Clark Street, 11th Floor,
Arlington, VA. 22202, between 8:30 a.m. and 5 p.m. The envelope should
be addressed as follows: Office of the General Counsel, U.S. Copyright
Office.
If delivered by a commercial courier, an original and five copies
of a comment or reply comment must be delivered to the Congressional
Courier Acceptance Site (``CCAS'') located at 2nd and D Streets, NE,
Washington, D.C. between 8:30 a.m. and 4 p.m. The envelope should be
addressed as follows: Office of the General Counsel, U.S. Copyright
Office, LM 430, James Madison Building, 101 Independence Avenue, SE,
Washington, DC. Please note that CCAS will not accept delivery by means
of overnight delivery services such as Federal Express, United Parcel
Service or DHL.
If sent by mail (including overnight delivery using U.S. Postal
Service Express Mail), an original and five copies of a comment or
reply comment should be addressed to U.S. Copyright Office, Copyright
GC/I&R, P.O. Box 70400, Southwest Station, Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Senior Attorney, and Tanya
M. Sandros, Associate General Counsel, Copyright GC/I&R, P.O. Box
70400, Southwest Station, Washington, DC 20024. Telephone: (202) 707-
8380. Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION: Section 111 of the Copyright Act (``Act''),
title 17 of the United States Code (``Section 111'') provides cable
systems with a statutory license to retransmit a performance or display
of a work embodied in a primary transmission made by a television
station licensed by the Federal Communications Commission (``FCC'').
Cable systems that retransmit broadcast signals in accordance with the
provisions governing the statutory license set forth in Section 111 are
required to pay royalty fees to the Copyright Office. Payments made
under the cable statutory license are remitted semi-annually to the
Copyright Office which invests the royalties in United States Treasury
securities pending distribution of these funds to those copyright
owners who are entitled to receive a share of the fees.
The Motion Picture Association of America, Inc. (``MPAA''), its
member companies and other producers and/or distributors of movies,
series and specials broadcast by television stations (``Program
Suppliers'') and the Office of the Commissioner of Baseball, the
National Basketball Association, the National Football League, the
National Collegiate Athletic Association, the National Hockey League
and the Women's National Basketball Association (``Joint Sports
Claimants'' or ``JSC'') (collectively, ``Copyright Owners'') have
requested that the Copyright Office commence a rulemaking to clarify
the applicability of existing Copyright Office rules to the
retransmission of digital broadcast signals under the statutory license
set forth in Section 111 of the Copyright Act.
The regulatory actions requested by Copyright Owners are properly
within the authority of the Copyright Office. 17 U.S.C.111(d) and 702.
However, the retransmission of digital broadcast signals under Section
111 raises many issues, some of which require further elucidation
before amending Section 201.17 of title 37 of the Code of Federal
Regulations (``CFR'' or ``Section 201.17'') and the associated cable
Statement of Account forms (``SOAs''). We therefore initiate this
Notice of Inquiry (``NOI'') to address the matters raised by the
Copyright Owners' Petition for Rulemaking\1\and to seek comment on
other possible changes to the Copyright Office's existing rules and
cable SOA forms.
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\1\ The petition and the attachments may be viewed on the
Copyright Office website at: http://copyright.gov/docs/cable/digitalsignals.pdf and http://copyright.gov/docs/cable/

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[[Page 54949]]

Background

Digital television technology enables a television broadcast
station to provide, over-the-air, an array of quality high-definition
digital television signals (``HDTV''), standard-definition digital
television signals (``SDTV''), and many different types of ancillary
programming and data services. In 1997, the FCC adopted its initial
rules governing the transition of the broadcast television industry
from analog to digital technology,\2\ and authorized each individual
television station licensee to broadcast in a digital format. Advanced
Television Systems and Their Impact on Existing Television Broadcast
Service, 12 FCC Rcd. 12809 (1997). Since that time, hundreds of
television stations have been transmitting both analog and digital
signals from their broadcast facilities,\3\ and television stations may
choose to broadcast in a ``digital-only'' mode of operations, pursuant
to FCC authorization. See, e.g., Second Periodic Review of the
Commission's Rules and Policies Affecting the Conversion to Digital
Television, 19 FCC Rcd 18279, 18321-22 (2004). Moreover, a significant
number of cable operators have agreed to voluntarily carry both analog
and digital broadcast signals from the same broadcast licensee. See
http://www.ncta.com/IssueBrief.aspx?contentId=2716&view=3 (Cable

operators voluntarily carrying at least 500 digital television station
signals).
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\2\ Recently, Congress established February 17, 2009, as the
date for the completion of the transition from analog to digital
broadcast television. See Pub. L. No. 109-171, Section 3002(a), 120
Stat. 4 (2006).
\3\ As of October 2005, more than 1,537 television stations
nationwide were broadcasting in a digital format. See Annual
Assessment of the Status of Competition in the Market for the
Delivery of Video Programming, 21 FCC Rcd 2503 (2006) (``12th Annual
Video Competition Report'') at ]95.
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It is this trend toward carriage of digital signals, often
simultaneously with the transmission of an analog counterpart, that has
prompted Copyright Owners to seek clarification of the rules governing
a cable system's carriage of broadcast signals under Section 111.
However, before proposing new rules, the Copyright Office seeks comment
on the proposed changes and a number of associated issues related to
the carriage of digital signals.

Applicability of Section 111 to Digital Broadcast Signals

Copyright Owners request that the Copyright Office address the
recordkeeping and royalty calculation issues that arise in connection
with the carriage of digital broadcast signals by cable operators,
provided that the Copyright Office is of the view that Section 111
covers retransmissions of digital broadcast signals. Petition at 5.
In 1976, Congress amended the Copyright Act by adding, inter alia,
the cable statutory license. In so doing, it explained the rationale
supporting the addition of Section 111. According to the legislative
history accompanying Section 111 of the Act, Congress recognized that
``cable systems are commercial enterprises whose basic retransmission
operations are based on the carriage of copyrighted program material
and that copyright royalties should be paid by cable operators to the
creators of such programs.'' H.R. Rep. No. 94-1476, 94th Cong., 2d
Sess. at 89 (1976). It also recognized that ``it would be impractical
and unduly burdensome to require every cable system to negotiate with
every copyright owner whose work was retransmitted by a cable system.''
Id. Consequently, Congress established a statutory copyright license
for the retransmission of those over-the-air broadcast signals that a
cable system is authorized to carry pursuant to the FCC regulations
then in place.
In structuring the license, Congress made a distinction between
primary and secondary transmissions and local versus distant ones in
order to identify which transmissions are subject to the statutory
license and at what rate. It did not define a broadcast transmission or
identify whether a transmission was subject to the statutory license on
the basis of the signal's technical characteristics (i.e., an analog
signal vs. a digital signal) nor was there a need to make such
distinctions because all transmissions at that time were broadcast in
an analog format.\4\
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\4\ Section 111 stands in contrast to Section 119, the satellite
statutory license, which Congress has amended to cover satellite
carrier retransmission of digital broadcast signals. See Satellite
Home Viewer Extension and Reauthorization Act of 2004, Pub. L. No.
108-447, Title IX, Section 103, 118 Stat. 3393 (2004) (``SHVERA'').
The SHVERA contains separate provisions concerning the royalties to
be paid for the retransmission of digital broadcast signals by
satellite carriers and it affords copyright owners and satellite
carriers the opportunity to negotiate royalty rates for digital
broadcast signals separate from analog signals. It also contains
special rules, exceptions, and limitations regarding the carriage of
digital signals, including provisions on the use of one satellite
dish to receive all such signals, which subscribers are eligible to
receive distant digital signals, and how to test the technical
availability of such signals.
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Specifically, Section 111(f) of the Act broadly defines ``primary
transmission'' as ``a transmission made to the public by the
transmitting facility whose signals are being received and further
transmitted by the secondary transmission service, regardless of where
or when the performance or display was first transmitted,'' and a
``secondary transmission'' as ``the further transmitting of a primary
transmission simultaneously with the primary transmission, or
nonsimultaneously with the primary transmission [under a narrowly
prescribed set of circumstances]...'' It is these secondary
retransmissions to the public, where the carriage of the signals
comprising the secondary transmission is permissible under the rules,
regulations, or authorizations of the FCC, which are subject to
statutory licensing.
Such transmissions are then categorized as local or distant based
upon the statutory definition of the ``local service area of the
primary transmitter,''which ``in the case of a television broadcast
station, comprises the area in which such station is entitled to insist
upon its signal being retransmitted by a cable system pursuant to FCC
requirements in effect on April 15, 1976, or such station's television
market as defined in section 76.55(e) of the FCC's rules (as in effect
on September 18, 1993), or any modifications to such television market
made, on or after September 18, 1993, pursuant to sections 76.55(e) or
76.59 of the FCC's rules . . . .''\5\
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\5\ Section 201.17(b)(5) of the Copyright Office's rules states
that the terms primary transmission, secondary transmission, local
service area of a primary transmitter, distant signal equivalent,
network station, independent station, and noncommercial educational
station have the meanings set forth in Section 111 of the Act.
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As seen above, there is nothing in the Act, its legislative
history, or the Copyright Office's implementing rules, which limits the
cable statutory license to analog broadcast signals. Instead, the cited
provisions broadly state that the statutory license applies to any
broadcast stations licensed by the FCC or any of the signals
transmitted by such stations. Thus, use of the statutory license for
the retransmission of a digital signal would not be precluded merely
because the technological characteristics of a digital signal differ
from the traditional analog signal format. See Consumer Electronics
Association v. FCC, 347 F.3d 291(D.C. Cir. 2003) (FCC had authority to
issue order requiring that 13-inch and larger televisions include
tuners capable of receiving and decoding digital television signals
under plain language of the 1962 All Channel Receiver Act (``ACRA''),
even though ACRA's original intent was to promote and support the
viability of analog UHF broadcast stations).

[[Page 54950]]

Even so, questions remain with regard to the application and
operation of the cable statutory license structure in the digital
television context. For this reason, we are seeking comment on the
issues raised by the Copyright Owners' Petition and on additional
issues raised herein.

Digital Broadcast Signal Retransmission Issues

Retransmission of a digital television broadcast signal. Today,
television broadcasters may choose to transmit their signals in either
a digital format or an analog format, or simultaneously in both
formats. Some stations have also chosen to make the initial
transmission of a new station signal solely in the digital format.\6\
Carriage of digital signals by a cable system under the Section 111
license, however, requires a review of the current regulations and
reporting practices as developed for analog signals to determine if
these practices need to be readjusted in order to ensure accurate and
complete reporting under the provisions of Section 111.
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\6\ For example, WHDT-TV-DT, Stuart, Florida, operates as a
digital facility but never had a paired analog station. See Petition
for Declaratory Ruling that Digital Broadcast Stations Have
Mandatory Carriage Rights, 16 FCC Rcd 2692 (2001).
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First, in the case where the digital signal has or has had an
analog counterpart, would the digital broadcast station's television
market for Section 111 purposes be the same as the broadcast station's
television market for the analog signal? And if the analog signal is
considered distant, can the digital counterpart ever be considered
local, or vice versa? Second, how should the Copyright Office determine
whether a distant digital broadcast signal is permitted or non-
permitted for Distant Signal Equivalent (``DSE'') purposes? Third, how
does the Copyright Office determine the basis of carriage for a distant
digital signal (i.e. market quotas, grandfathered status, etc.)?
Fourth, what DSE values (for network, educational, independent) should
be assigned to digital signals? Fifth, how would the Copyright Office
determine the coverage area of a broadcast licensee's digital
television transmission for cable copyright purposes, especially in the
context of significantly viewed signals?\7\
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\7\ As a point of reference, the Copyright Office notes that
digital television station's coverage areas are measured by noise
limited service contours under current FCC rules, not Grade B
contours as is the case for analog stations, see 47 CFR 76.54(c).
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Would the resolution of these questions be the same in the case
where the signal never had an analog counterpart? The Copyright Office
seeks answers to these questions concerning the carriage of a digital
signal and will consider any related issues identified by the
commenters.
Simultaneous Retransmission of Analog and Digital Broadcast
Signals. Currently, hundreds of television stations are broadcasting in
both an analog and digital format. For example, WRC in Washington,
D.C., broadcasts both an analog signal (Channel 4, WRC-TV) and a
digital signal (Channel 48, WRC-DT). See http://www.nbc4.com/tvlistings/index.html
.

Copyright owners acknowledge that some cable systems are separately
reporting carriage of digital and analog broadcast signals and, in
their view, doing so appropriately.\8\ However, they state that it is
unclear whether all cable systems are identifying carriage of both
types of signals or are doing so in a consistent and uniform manner.
According to Copyright Owners, the lack of uniformity in reporting the
carriage of both analog and digital broadcast signals necessitates
clarification of the Copyright Office's existing regulations.
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\8\ Cable operators are not required by the FCC to carry both
the analog and digital signals of local broadcast stations. See
Carriage of Digital Television Broadcast Signals, 20 FCC Rcd 4516
(2005).
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Specifically, they urge the Copyright Office to clarify that, if a
cable operator chooses to carry a television broadcast station's analog
and digital signals, that cable operator should identify those signals
separately in Space G on its SOA (e.g., as WRC-TV on channel 4 and WRC-
DT on channel 48). Copyright Owners assert that separate designation
provides notice that a cable operator is carrying digital signals and
may be charging subscribers additional fees that should be included in
the gross receipts calculation.\9\ Moreover, in the context of distant
signal carriage, Copyright Owners argue that separate reporting of both
the digital and the analog signal is necessary because such carriage
would generate an additional royalty obligation.
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\9\ Gross receipts for the basic service of providing secondary
transmissions of primary broadcast transmitters include the full
amount of monthly (or other periodic) service fees for any and all
services or tiers of services which include one or more secondary
transmissions of television or radio broadcast signals, for
additional set fees, and for converter fees. See 37 CFR
201.17(b)(1).
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For purposes of ascertaining the royalties owed, Copyright Owners
suggest that where the programming is identical, the DSE values for
carriage of a distant analog and a digital signal would be the same.
Alternatively, if the programming on the two signals is different
(e.g., where the digital signal does not carry network programming),
they assert that the DSE values may be different and should be computed
separately in accordance with the provisions of Section 111(f). But in
either case, Copyright Owners imply that the cable operator would still
have to pay for each signal.
Must a cable operator pay separately for carriage of a digital
signal and an analog signal where the signals carry identical
programming to the subscriber, or does the statutory license allow for
a single payment for the delivery of the same programming albeit in two
different formats?\10\ Would the programming be considered
``different'' if the digital signal included only a subset of the
programming from the analog signal or if the digital signal was
broadcast in a high definition format? Are cable systems offering such
combinations to subscribers and is the Copyright Owners' method of
valuation appropriate?
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\10\ We note, for example, that Metrocast Cablevision of New
Hampshire has assigned a single value for a number of television
stations transmitting both an analog and digital signal. Metrocast
Cablevision SA3 Long Form, 2005/1 period, Cable ID 7438
(as assigned by the Licensing Division of the Copyright Office).
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We ask commenters to provide examples of where cable operators are
retransmitting the analog and digital signals of the same licensee, but
the programming on the primary (or main) digital signal is different
than that of the analog signal. We also seek comment on how a cable
operator should report the carriage of a digital signal that has been
downconverted to an analog signal (at the cable operator's headend) so
that subscribers without a digital set top box are able to view such
signals.
Retransmission of Digital Multicast Streams. Multicasting is the
process by which multiple streams of digital television programming are
transmitted at the same time over a single broadcast channel. The
eleven largest broadcast groups and their affiliates broadcast more
than 937,000 hours of multicast programming during the month of October
2005. This multicast programming included news, weather, sports,
religious material, music videos and coverage of local musicians and
concerts, as well as foreign language programming (especially, but not
limited to, Spanish programming). See 12th Annual Video Competition
Report, 21 FCC Rcd. 2503 at ]101.\11\
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\11\ The FCC has decided that if a digital broadcaster elects to
divide its digital spectrum into several separate, independent and
unrelated multicast programming streams, only one of these streams,
the ``primary'' digital video stream, is entitled to mandatory
carriage under the Communications Act. See Carriage of Digital
Television Broadcast Signals, 16 FCC Rcd 2598 (2001). In any event,
cable systems have voluntarily agreed to carry multicast digital
programming streams from broadcast stations across the country. See
Carriage of Digital Television Broadcast Signals, 20 FCC Rcd 4516 at
] 38 (2005).

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[[Page 54951]]

For example, Station WRAL in Raleigh, North Carolina, transmits its
analog signal (WRAL-TV) on channel 5 and its digital signal (WRAL-DT)
on channel 5.1, which simulcasts (in some cases in HDTV) certain of the
programming on channel 5. It also transmits a 24-hour news channel
(WRAL-NC) on channel 5.2. And, it transmits locally-produced
programming on channels 5.3 (WRAL-DT3) and 5.4 (WRAL-DT4). See http://www.wral.com/wralinfo/index.html
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Copyright Owners ask the Copyright Office to clarify that a cable
operator carrying multicast signals must identify those signals
separately in Space G on its SOA form. They state that a cable operator
choosing to carry all of the digital channels transmitted by WRAL, for
example, should state in Space G of its SOA that it carried WRAL-DT on
channel 5.1; WRAL-NC on channel 5.2; WRAL-DT3 on channel 5.3; and WRAL-
DT4 on channel 5.4. Copyright Owners assert that separate reporting is
necessary in the case of carriage of multiple digital channels, where
the copyright owners of the programming on such separate channels may
be wholly different from the copyright owners of the programming on the
primary digital video stream. We seek comment on the Copyright Owners'
suggestions.
Copyright Owners also urge the Copyright Office to require separate
calculation of DSE values and royalty payments for carriage of multiple
streams of distant digital signals. If, for example, a cable operator
chose to import two streams from a particular digital multicast
television signal, one of which contained network programming and the
other of which did not, that operator should be considered as importing
1.25 DSEs. We seek comment on Copyright Owners' proposals.
Retransmission of Datacast Streams. DTV technology allows
television stations to use part of their digital bandwidth for new
ancillary programming and data services. These services can be provided
simultaneously with high definition or standard definition DTV
programs, and can deliver virtually any type of data, audio or video,
including text, graphics, software, web pages, video-on-demand, and
niche programming. See 12th Annual Video Competition Report, 21 FCC
Rcd. 2503 at ]105. Some of the content produced and distributed by the
television station may be related to the program being broadcast (i.e.,
``program-related material''). For example, a television station may
transmit interactive sports statistics along with the local major
league baseball game being digitally broadcast.
Copyright Owners did not directly discuss the retransmission of
digital program-related material under Section 111 in their Petition
for Rulemaking. However, they did suggest that if one digital broadcast
stream contained only material that was part of the copyrighted
programming on the other digital broadcast stream, the cable operator
would report only a single DSE (or .25 DSE if the stream qualified as a
``network station'' as defined in the Copyright Act). Copyright Owners
cite to WGN v. United Video, 693 F.2d 622 (7th Cir. 1982) in support of
their proposal. In WGN, the 7th Circuit held that additional material
broadcast with a television program that ``is intended to be viewed
with and as an integral component of that program'' is covered by the
copyright on the television program.
We seek comment on Copyright Owners' recommendation. We also ask
whether the 1982 WGN case, decided in an analog context, is still good
precedent for our purposes here.\12\ In other words, have time and
technology eroded the precedential value of the 7th Circuit's decision?
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\12\ With regard to the mandatory carriage of digital program-
related material, the FCC decided to use the same factors enumerated
in WGN, that are used in the analog context, to determine what
material is considered program-related for must carry purposes, at
least for the time being. See Carriage of Digital Television
Broadcast Signals, 16 FCC Rcd at 2624 (2001); but see id. at 2651
(FCC seeking further comment ``on the proper scope of program-
related in the digital context.'')
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We note that satellite carriers and copyright owners have agreed
that no separate copyright royalty payment would be due for any
program-related material contained on the digital broadcast stream
within the meaning of WGN. See Rate Adjustment for the Satellite
Carrier Compulsory License, 70 FR 39178, 39179 (July 7, 2005). Should
we consider this agreement as authoritative guidance in the Section 111
context?
Retransmission of Digital Audio Broadcast Signals. Like television
station licensees, terrestrial radio station licensees are also
converting to digital broadcasting. Using in band on channel (``IBOC'')
technology, radio stations have initiated a new service known as
digital audio broadcasting (``DAB''). DAB provides for enhanced sound
fidelity and improved reception while giving radio stations the
capability to multicast and offer new data services to the public (such
as station, song and artist identification, stock and news information,
as well as local traffic and weather bulletins). This technology allows
broadcasters to use their current radio spectrum to transmit AM and FM
analog signals simultaneously with new higher quality digital signals.
IBOC technology makes use of the existing AM and FM bands (In Band) by
adding digital carriers to a radio station's analog signal, allowing
broadcasters to transmit digitally on their existing channel
assignments (On Channel). There is, however, no government mandated
transition for radio station licensees as there is for television
station licensees. See generally, Digital Audio Broadcasting Systems
and Their Impact on the Terrestrial Radio Broadcast Service, 19 FCC Rcd
7505 (2004).
Nevertheless, we seek comment on what changes in our rules and the
SOAs are necessary to accommodate the secondary transmission of digital
audio signals by cable systems. How should cable systems report the
retransmission of digital audio multicast streams? Will cable
subscribers need specialized equipment or set top boxes to receive
these digital radio signals? If so, how would this affect a cable
operator's gross receipts calculations?

Marketing of Digital Broadcast Signals and the Cable Statutory License

The Copyright Office's regulations require reporting of the gross
receipts, as defined in Section 201.17(b), for any tier of service that
must be purchased in order to access the tier which contains the
broadcast signals. Compulsory License for Cable Systems: Reporting of
Gross Receipts, 53 FR 2493, 2495 (Jan. 28, 1988); see also 37 CFR
201.17(b)(1); Form SA 1-2, General Instructions, p. v; Form SA 3,
General Instructions, p. vi.
Copyright Owners state that cable operators often carry digital
broadcast signals on a digital service tier, but for subscribers to
access such signals, they must purchase other tiers of service. They
note, for example, that Time Warner's Lincoln, Nebraska cable system
offers several digital broadcast signals in a package as a ``free''
service. However, in order to receive this ``free'' package, a
subscriber must not only rent an HDTV set top box for $7.65 per month,
the subscriber must also purchase the system's ``digital tier,'' which
contains many non-broadcast digital programming services, for an
additional $6.95 per month.
Accordingly, Copyright Owners request that the Copyright Office
clarify that a cable operator must include in its gross receipts any
revenues from the tiers of service consumers must

[[Page 54952]]

purchase in order to receive HDTV or other digital broadcast signals-
notwithstanding that the operator may market its offering of such
digital signals as ``free.'' Copyright Owners also recommend that the
Copyright Office include in Space E of the cable SOAs a specific
reference to ``Digital and HDTV Tiers,'' and explain that such
reference includes all service tiers that a consumer must purchase in
order to receive digital broadcast signals. We seek comment on these
proposals. We also ask commenters to submit other examples of cable
industry marketing practices that require subscribers to purchase
tiers, services, or gateways, in order to access digital broadcast
signals.

Digital Equipment and Reception Issues Under Section 111

Digital Set Top Boxes. Any fees charged for converters necessary to
receive broadcast signals must be included in the cable system's gross
receipts used to calculate its Section 111 royalty payment. 37 CFR
201.17(b)(1); Form SA 1-2, General Instructions, p. v; Form SA 3,
General Instructions, p. vi. As the Copyright Office stated nearly
thirty years ago: ``In either case, the subscriber must have a
converter to receive, in usable form, the signals of all of the
television stations that constitute the cable system's `basic service
of providing secondary transmissions of primary broadcast
transmitters.' Subscriber fees associated with converters, therefore,
are clearly amounts paid for the system's secondary transmission
service and are included in that system's `gross receipts.'''
Compulsory License for Cable Systems, 43 FR 27827-27828 (June 27,
1978).
Currently, cable subscribers are generally unable to receive
digital (including broadcast) signals offered by their cable operator
unless they obtain a special converter, i.e. digital set top box,
regardless of whether those signals are available as part of the
lowest-priced basic service. Copyright Owners assert that some cable
operators may not be including set top box fees in their calculation of
gross receipts. They note, for example, that Time Warner's Lincoln,
Nebraska system lists its ``HD Converter'' fee (as well as its ``basic
converter'' fee) in Block 2 of Space F of its 2004-1 SOA (labeled as
``Services Other Than Secondary Transmission Rates'') and not in Block
1 of Space E (labeled as ``Secondary Transmission Service: Subscribers
and Rates''). Copyright Owners argue that only fees identified in Space
E are included in the cable operator's calculation of gross receipts
(and thus in the calculation of the cable operator's Section 111
royalty). Copyright Owners assert that Time Warner's Nebraska cable
system (if it were carrying digital broadcast signals) may have been
incorrectly reporting its revenues from the carriage of retransmitted
broadcast signals.
Copyright Owners are not suggesting that all cable operators are
failing to include digital converter fees in their gross receipts. They
note, for example, the 2004-1 SOA for Comcast's Montgomery County,
Maryland cable system does appear to include digital converter fees in
its calculation of gross receipts. According to Copyright Owners, the
fact that some cable systems are including such converter fees in their
gross receipts while others are apparently not doing so underscores the
need for the Copyright Office to clarify this issue to ensure
consistency in the application of the relevant rules.
Copyright Owners, therefore, request the Copyright Office to
clarify that, in accordance with Section 201.17(b), a cable operator
must include in its gross receipts any fees charged subscribers for
digital set top boxes used to receive HDTV or other digital broadcast
signals, notwithstanding that the operator may market its offering of
such signals as ``free.'' Copyright Owners also recommend that the
Copyright Office include in Space E of the cable statement of account
form specific reference to ``Digital and HDTV Converters'' and explain
that this line item refers to converters used to receive HDTV or other
digital broadcast signals. We seek comment on these proposed changes.
Cable Cards. As stated earlier, under Section 201.17(b) of the
Copyright Office's rules, gross receipts for the retransmission of
broadcast signals include the full amount of service fees for any and
all services or tiers of service which include one or more secondary
transmissions of television or radio broadcast signals, for additional
set fees, and for converter fees. (Emphasis added)
Section 624A of the Communications Act, 47 U.S.C. 544a, governs the
compatibility between cable systems and navigation devices (e.g., cable
set-top boxes, digital video recorders, and television receivers with
navigation capabilities) manufactured by consumer electronics
manufacturers not affiliated with cable operators. In connection with
the digital television transition, the cable industry and the consumer
electronics industry have engaged in ongoing inter-industry discussions
seeking to establish a cable ``plug and play'' standard. With the
standard in place, consumers are able to directly attach their DTV
receivers to cable systems and receive cable television service without
the need for a digital set top box. To receive cable service, consumers
would only need to use a point-of-deployment module (``POD''), now
marketed as ``CableCARD,'' that would fit into a slot built into the
television set. The POD acts as a key to unlock encrypted programming.
In October 2003, the FCC adopted initial ``plug and play'' and POD
requirements that were generally proposed by the cable and consumer
electronics industries. Compatibility Between Cable Systems and
Consumer Electronics Equipment, 18 FCC Rcd 20885 (2003). The current
rules, however, apply only to unidirectional programming (i.e.
programming coming from the cable headend) and does not apply to bi-
directional programming, such as Video On Demand and impulse pay-per-
view. The industries are currently working on a bi-directional plug and
play agreement. In the meantime, cable subscribers will still need a
digital set top box to access these types of advanced services.
We seek comment on whether cable subscribers have been required to
purchase CableCards in order to access digital broadcast television
signals. If so, we ask whether the Copyright Office's definition of
gross receipts should be amended to include subscriber revenue
generated through the lease of CableCards. How are cable operators
currently treating the lease of CableCards on their SOAs? What space
and block on the SOAs should be changed, or possibly added, to list
CableCard revenue?
Second Television Set Fees. Cable operator fees for service to
second television sets are included in a cable system's gross receipts
for the purposes of Section 111. 37 CFR 201.17(b)(1); Form SA 1-2,
General Instructions, p. v; Form SA 3, General Instructions, p. vi; see
also Compulsory License for Cable Systems, 43 FR 958, 959 (Jan. 5,
1978) (``The additional set fee is, we believe, clearly a payment for
basic secondary transmission service . . .'').
Copyright Owners state that some cable systems charge additional
fees for access to digital broadcast signals to a second television set
in the household. They note, for example, that Susquehanna's York,
Pennsylvania, cable system charges its customers $6.95 per month for
``Additional HDTV Terminals,'' even though it does not charge customers
for service to additional television sets receiving only an analog
service. See http://www.suscom.com/home/sites/pricing.php?city=york).

[[Page 54953]]

unclear whether this system, and others like it, are including fees for
service to additional sets that receive HDTV and other digital
broadcast signals within their calculation of gross receipts.
Copyright Owners thus ask the Copyright Office to clarify that, in
accordance with Section 201.17(b) of the rules, fees for service to
additional digital television sets or ``HDTV Terminals'' must be
included in a cable system's gross receipts. Copyright Owners also
recommend that the Copyright Office include in Space E of the cable SOA
specific reference to ``Digital and HDTV Additional Set Fees'' and
explain that such line item refers to fees charged for service to
additional television sets receiving HDTV or other digital broadcast
signals. We seek comment on the changes proposed by the Copyright
Owners. Moreover, some cable operators offer their subscribers in-home
digital networks where one digital set top box provides digital signals
to all sets in the household. We seek comment on whether the fees
associated with such a service, if any, should be included in the
operator's gross receipts calculation.

Conclusion

We hereby seek comment from the public on the issues identified
herein associated with the retransmission of digital broadcast signals
by cable systems under Section 111 of the Copyright Act. If there are
any additional issues concerning the treatment of digital television
retransmissions not discussed above, we encourage interested parties to
bring those matters to our attention.

Dated: September 14, 2006.
Marybeth Peters,
Register, U.S. Copyright Office.
[FR Doc. 06-7927 Filed 9-19-06; 8:45 am]

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