Copyright Office Blueprints Path Toward Elimination of Statutory Licensing

Congress should specify a date to begin the phase-out of distant signal licenses, while leaving the repeal of local signal licenses until later, the U.S. Copyright Office said in a report to Congress released late Monday. The report (http://xrl.us/bmbx7j) on phasing out Sections 111, 119 and 122 of the Copyright Act, which let pay-TV providers carry broadcast programming without signing deals with every program copyright holder, was required under last year’s Satellite TV Extension and Localism Act (STELA). The FCC Media Bureau also released a report also required under STELA to Congress (http://xrl.us/bmbx69) on so-called ‘orphan counties’ -- those getting broadcast signals as part of designated market area based in another state.

The office floated Dec. 31, 2014, and Dec. 31, 2019 -- the first date is when Section 119 would expire and the latter is when the section would expire if it were reauthorized for five years -- as possible dates to begin the sunset. Congress may decide on a different date to begin and “a key consideration is the amount of time that stakeholders would need to restructure contractual arrangements and establish new approaches to licensing,” it said. Congress should first look at the concerns of involved parties “who operate with limited resources in the broadcast programming distribution chain and determine whether special consideration is advisable” before setting the phase-out trigger date, said the office. It’s advised Congress in the past to eliminate distant signal licenses as part of previous versions of STELA, though under the act the office was asked to propose a path toward getting rid of statutory licensing.

Next, during the “interim transitional period,” TV stations that have either opted for retransmission consent or are guaranteed cable carriage could participate in the trial period, the office advised. During that phase, pay-TV providers would be required to negotiate directly with those stations for carriage of the broadcaster’s programming, it said. “Those broadcast stations that decline to participate in this early marketplace experiment would continue to operate under the existing regulatory structure -- on an interim basis -- until each of the statutory licenses has been phased out."

The final part should include “phasing out the distant signal licenses under Sections 111 and 119 first while retaining the local station provisions of Section 111 and the local-into-local license found in Section 122,” said the office. Pay-TV operators retransmit “far fewer distant signals than local signals,” meaning “they only have to negotiate licenses to carry the content of a relatively small number of broadcast stations,” said the report. It’s also easier to eliminate distant signals under current circumstances, it said. A tiered approach to the phase out “will help mitigate risk” and “provide stakeholders with an opportunity to test new business models with the least likelihood of disruption to consumers, and give Congress the advantage of drawing on that experience when considering when and how to address the local signal licenses,” said the office. The report also said Congress could choose “to retain the local licenses on an indefinite basis.”

MPAA was supportive of the office’s recommendations. “We are pleased that the Copyright Office has vindicated our position that the broadcast retransmission compulsory licenses for cable and satellite companies is no longer justified,” said Jane Saunders, a senior vice president. “We look forward to working with the Copyright Office and the Congress on a phase out of these anachronisms."

The NAB also backed the elimination of distant signal licenses. “NAB supports the Copyright Office’s recommendation that the distant signal compulsory licenses for cable and satellite be eliminated by Congress on a date certain,” said a spokesman. “While NAB favors retention of the local signal compulsory licenses, we appreciate the Office’s sensitivity to the importance of these licenses for local viewers as expressed in the Office’s recommendation to defer consideration of elimination those licenses. Regarding the Report’s discussion of communications signal and program carriage rules, NAB agrees that ultimately the Copyright Office must defer to the FCC. Congress should avoid considering any changes to must-carry and retransmission consent rules, which are working just as lawmakers intended.”

The American Cable Association disagreed with the office’s recommendations. The ACA “is troubled that the Copyright Office would target the ‘distant’ TV license for elimination in its new report,” said President Matt Polka. “Abolishing this license would harm consumers, particularly those who reside in rural areas and value receipt of out-of-market TV signals. However, the Copyright Office’s recommendations to eliminate the cable and satellite compulsory licenses must be put in context. The Copyright Office first recommended abolishing the cable license in 1981. It has made this same recommendation to Congress numerous times in reports over the last 30 years, most recently in 2008. Yet, despite these many suggestions, Congress has always decided that the best course of action for consumers was to renew the license. ACA hopes that Congress will once again stay this wise course."

The Media Bureau report found that all but two states -- Alaska and Hawaii -- included households that received out-of-state stations. Fewer than 10 percent of the households in California, Montana, Utah and Arizona receive out-of-state transmissions, while in Washington D.C., Delaware, New Jersey and Rhode Island all households have access to at least one out-of-state station, the report said. Minnesota had the highest number of households that receive only out-of-state stations, though Pennsylvania, New Hampshire, Tennessee, Washington and Kansas also have more than 10,000 households with no in-state signals, the bureau said. About 99.98 percent of the U.S.’s 117.2 million households have access to at least one in-state station via a broadcast antenna or pay TV, the bureau found. And 98.4 percent of households can get at least one in-state broadcast station through DBS signals, it said.

NAB was pleased with the finding that “99.98 percent of U.S. homes can access in-state TV programming either over-the-air or on a pay TV platform,” the group said. “These and other findings in the report demonstrate that TV viewers are well served by their local television stations and that further changes to the law are unnecessary.” The NCTA declined to comment on the bureau and Copyright Office reports.