[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]


 
 VIDEO ON THE INTERNET: iCraveTV.com AND OTHER RECENT DEVELOPMENTS IN 
                               WEBCASTING

=======================================================================

                                HEARING

                               before the

                  SUBCOMMITTEE ON TELECOMMUNICATIONS,
                     TRADE, AND CONSUMER PROTECTION

                                 of the

                         COMMITTEE ON COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 16, 2000

                               __________

                           Serial No. 106-94

                               __________

            Printed for the use of the Committee on Commerce




                    U.S. GOVERNMENT PRINTING OFFICE
62-972CC                    WASHINGTON : 2000




                         COMMITTEE ON COMMERCE

                     TOM BLILEY, Virginia, Chairman

W.J. ``BILLY'' TAUZIN, Louisiana     JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio               HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida           EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas                    RALPH M. HALL, Texas
FRED UPTON, Michigan                 RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio                FRANK PALLONE, Jr., New Jersey
  Vice Chairman                      SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania     BART GORDON, Tennessee
CHRISTOPHER COX, California          PETER DEUTSCH, Florida
NATHAN DEAL, Georgia                 BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma              ANNA G. ESHOO, California
RICHARD BURR, North Carolina         RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California         BART STUPAK, Michigan
ED WHITFIELD, Kentucky               ELIOT L. ENGEL, New York
GREG GANSKE, Iowa                    TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia             ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma              GENE GREEN, Texas
RICK LAZIO, New York                 KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming               TED STRICKLAND, Ohio
JAMES E. ROGAN, California           DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois               THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico           BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona             LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING, 
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland

                   James E. Derderian, Chief of Staff

                   James D. Barnette, General Counsel

      Reid P.F. Stuntz, Minority Staff Director and Chief Counsel

                                 ______

   Subcommittee on Telecommunications, Trade, and Consumer Protection

               W.J. ``BILLY'' TAUZIN, Louisiana, Chairman

MICHAEL G. OXLEY, Ohio,              EDWARD J. MARKEY, Massachusetts
  Vice Chairman                      RICK BOUCHER, Virginia
CLIFF STEARNS, Florida               BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio                BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California          ANNA G. ESHOO, California
NATHAN DEAL, Georgia                 ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma              ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming               BILL LUTHER, Minnesota
JAMES E. ROGAN, California           RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois               TOM SAWYER, Ohio
HEATHER WILSON, New Mexico           GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING,       KAREN McCARTHY, Missouri
Mississippi                          JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York                (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
  (Ex Officio)

                                 (ii)




                            C O N T E N T S

                               __________
                                                                   Page

Testimony of:
    Alben, Alex, Vice President, Government Affairs, RealNetworks    42
    Beck, Stuart J., President, Granite Broadcasting Corporation.    28
    Boren, Hon. David L., former United States Senator from the 
      State of Oklahoma, and President, University of Oklahoma...    21
    Jaszi, Peter, Professor, Washington College of Law, American 
      University.................................................    32
    Karpowicz, Paul, Vice President, LIN Television..............    37
    McCallum, Ian, Vice President, Corporate Sales and 
      Development, TVRadioNow, Corporation.......................    14
    Roback, Robert D., President, Launch Media...................    25
    Valenti, Jack, President and CEO, Motion Picture Association 
      of America.................................................    11
Additional material submitted for the record:
    American Society of Composers, Authors and Publishers, 
      prepared statement of......................................    75
    Engel, Hon. Eliot L., a Representative in Congress from the 
      State of New York, prepared statement of...................    75

                                 (iii)




 VIDEO ON THE INTERNET: iCraveTV.com AND OTHER RECENT DEVELOPMENTS IN 
                               WEBCASTING

                              ----------                              


                      WEDNESDAY, FEBRUARY 16, 2000

              House of Representatives,    
                         Committee of Commerce,    
                    Subcommittee on Telecommunications,    
                            Trade, and Consumer Protection,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:23 a.m., in 
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy'' 
Tauzin (chairman) presiding.
    Members present: Representatives Tauzin, Oxley, Stearns, 
Gillmor, Cox, Largent, Shimkus, Wilson, Pickering, Ehrlich, 
Markey, Eshoo, Engel, Wynn, Luther, Sawyer, Green, and 
McCarthy.
    Staff present: Justin Lilley, majority counsel; Cliff 
Riccio, legislative clerk; and Andy Levin, minority counsel.
    Mr. Tauzin. The subcommittee will please come to order. 
Today the subcommittee begins an inquiry into a number of 
issues involving video on the Internet. I would ask all of our 
friends and guests to take seats, and the Chair will recognize 
himself for an opening statement.
    In many respects, the inquiry today is an extension of a 
long-standing interest to the chair, that being the state of 
competition in the video programming markets. In one sense, the 
Internet is much like cable and much like a satellite platform 
in that it's capable of casting a wide array of video 
programming to a large audience of American and international 
consumers, but in another and more important sense, the 
Internet is like no other medium. First, it is global. It is 
geographically unconfined. It enables consumers to quickly and 
efficiently copy and distribute any digitized product. That's 
what makes it a marvel, and that's what literally makes it so 
potentially important to our country and the world.
    But as recent events involving widespread hacking indicate, 
the Internet also invites those elements in society that refuse 
to recognize fundamental rules of fairness and decent conduct. 
It is for this reason that Congress must proceed cautiously and 
deliberately as it considers whether to extend a compulsory 
license to Internet service providers.
    I would note for my colleagues that Congress just concluded 
deliberations that were two separate satellite compulsory 
licenses, and in both instances we reaffirmed our commitment to 
protecting the broadcaster's Grade B contour. We reaffirmed our 
commitment to ensuring that copyright holders have adequate 
protections against piracy of their works.
    Content is our Nation's richest expert product and should 
not be unwittingly exposed to piracy, and localism is still one 
of Congress's most important telecommunications objectives, one 
that is enshrined in the Communications Act. So all of you in 
favor of Internet-specific licenses have a very high threshold, 
clearly, before Congress can proceed with that form of 
legislation. The Internet by definition is ill-suited for the 
types of rules and obligations that normally come with 
compulsory licenses. How can you define a Grade B contour of 6 
billion people? Nevertheless, we should ask and we will ask 
here today what role can Congress play to facilitate enhanced 
service and competition in the delivery of video over the 
Internet.
    Today we will here from some old friends and some new 
friends, an expert on copyright law, about the challenges we 
face in balancing of content owners and the interest of 
consumers. New video streaming technology presents potential 
threats to content owners, but it also offers vast new 
opportunities to information consumers. We will no doubt hear 
from both, and we no doubt have to be concerned with both of 
those interests. Without a doubt, consumers will increasingly 
seek to expand their viewing options, and in fact as we know in 
the digital age, video will become just one part of a digital 
stream of data that includes all forms of communications.
    Our challenge, as it was in crafting the Digital Millennium 
Copyright Act, is to ensure that both content owners and 
consumers maximally benefit from these exciting advances in 
technology. As a committee, we can encourage further electronic 
commerce if we get the balance right. We welcome the 
suggestions of our witnesses about how best to meet this 
challenge, and we certainly expect to learn an awful lot today.
    The panel we've assembled for our committee today is 
extraordinary in its depth, knowledge, and impact upon the 
issues I've outlined, and I expect that not only the written 
statements we have already received, which I will ask now 
unanimous consent be made a part of the record, and without 
objection it is so ordered, but the verbal testimony we receive 
I think will further enhance our capacity to understand and 
hopefully one day make decent policy in this very difficult 
area.
    The Chair has extended his statement long enough to welcome 
the incoming and very good friend from Massachusetts, the 
ranking minority member of our committee, Mr. Markey.
    Mr. Markey. Thank you very much, and I think everyone 
enjoyed being exposed to streaming Tauzin, you know, which is a 
special treat being here in this Telecommunications 
Subcommittee.
    I want to commend you for calling this hearing on Internet 
video, issues related to video streaming and webcasting, 
including debates over whether Internet service providers are 
eligible to utilize the existing statutory licenses accorded to 
cable operators and satellite providers to deliver Internet 
video. I think that this hearing will provide a very 
interesting morning of testimony and serve as a harbinger of 
conversations to come as packet switch delivery of video 
becomes more and more prevalent over different media.
    There is no question that as deployment of Internet-based 
technology continues at a heady pace, that existing results 
that were drawn up based largely upon the geographically rooted 
architecture of cable systems or geographically licensed 
television broadcasting may come under strain. We already 
witnessed last fall how new satellite technology with increased 
capacity and new local-to-local service sheds new light and 
increases scrutiny upon existing FCC rules such as those 
addressing network non-duplication, syndicated exclusivity, and 
sports blackout.
    These rules were drawn up to promote important 
communications values of localism and diversity, and Congress 
sought to preserve these values while injecting another 
important value, competition, into the mix; and while fairness 
to various market participants and dictating parity, life as 
the saying, goes is not always fair, in the new law rough 
equivalency was sought on many issues between cable and 
satellite providers, yet rather than giving the satellite 
operators a statutory license like the terrestrial license that 
cable operators use which lasts forever, Congress chose to 
limit the satellite license to 5 years, and it comes with a 
higher rate than cable pays for same programming.
    The Internet, on the other hand, is not technology 
specific, not territorially limited in its natural unfettered 
state. It can be delivered over cable systems, phone networks, 
satellite technology, and over wireless infrastructure. Once 
something is on the net, it can be accessed in Boston, Bermuda, 
or Beijing. This international aspect of Internet assess is 
something that will bring many existing rules under a new 
examination, and it should not change the values that drove 
development of our policies.
    One of those values is protected intellectual property. 
Recently, a Canadian-based company began streaming Canadian- 
and
Buffalo-based TV signals over the Internet. This company, 
iCraveTV.com, argued that its service was permissible under a 
Canadian statutory licensing law. In the U.S., the motion 
picture industry and the sports leagues sued and won an 
injunction against iCraveTV that ordered it to stop its 
webcast. This case can be cited legally as iCraveTV v. 
iCreateTV.
    There is lingering questions, however, that this hearing 
will explore which is whether the mere fact that something is 
delivered through a packet switched Internet-based system means 
that it is qualitatively different from other forms of delivery 
or legally different, and if so, we need to explore what 
adjustments should be made in our policies if any adjustments 
should be made.
    I have also found that many people in the emerging Internet 
industry go through life with binoculars on. They are 
visionary. They can see way out into the future and tell us 
dreams of things to come. Everything up close, however, is 
completely out of focus. I want to encourage our panel to not 
only give us their vision of where this mark will be 10 years 
from now or 15 years from now, but also where they think it 
will be 1 or 2 or 3 years from now. That helps us as 
policymakers. The vision may or may not ever come to pass. What 
happens a year or 2 years or 3 years is very real in the lives 
of consumers and competitors in our country.
    We have an excellent panel before us today. I look to 
forward to hearing from our distinguished witnesses.
    I congratulate you, Mr. Chairman, on this excellent 
hearing. I yield back the balance of my time.
    Mr. Tauzin. I thank my friend. The Chair is now pleased to 
recognize the gentleman, Mr. Shimkus, for an opening statement.
    Mr. Shimkus. Thank you, Mr. Chairman, and I want to mention 
that today is Lithuanian Independence Day. I know Chris would 
know that, but it's important to state that publicly for the 
record.
    Thanks for calling this hearing. The late, great Harry Kari 
said: ``It might be, it could be, it is a home run.'' As most 
of us know, he was a Cub announcer. Before that, he was a St. 
Louis Cardinal announcer. Jack Buck is quoted as saying, ``Go 
crazy, everyone, go crazy,'' when the Cardinals won the pennant 
in the World Series. Joe Buck said, ``to the track, well, 
gone,'' in reference to Mark McGuire.
    As much as those statements are indelibly sketched into any 
mind by listening to St. Louis Cardinal broadcasts over 42 
years, this is also indelibly sketched: ``This broadcast is 
authorized by the St. Louis Baseball Cardinals and is solely 
intended for our listening audience. Any rebroadcast, 
retransmission of the account, or description of this game 
without the express consent of the St. Louis Baseball Cardinals 
is strictly prohibited.''
    I think that is going to be part of the major debate today 
as we talk about copyright issues, and my wife, who is a church 
organist, to her credit went through the library and threw away 
the Xerox copies of music because of the unintended use of 
depriving the artist the compensation due to their works.
    Having followed this issue and hearing from various parties 
about webcasting, obviously I am intrigued, like all of us are, 
by the possibilities the Internet holds. The question is not 
what if webcasting, because it is a reality, but what are we 
going to do to uphold the copyrights in a webcasting world.
    I was extremely intrigued reading Mr. McCallum's written 
testimony. Besides a complete lack of remorse for violating 
U.S. copyright law, I was struck by the utter lack of respect 
afforded current copyright holders. Mr. McCallum goes to great 
length to explain how Canada is different from countries who do 
not operate under similar copyright principals, yet he fails to 
realize that the improper use of copyright materials, whether 
in China or Canada is still illegal. In fact, it may be worse 
when someone in a country with similar copyright principles is 
the violator.
    We all know that webcasting is here and it offers great 
possibilities to consumers. How we can facilitate competition 
and allow consumers the greatest choices with evolving 
technologies will be the next question.
    Again, Mr. Chairman, thank you for calling this hearing 
today, and I look forward to hearing from the people of the 
panel. I yield back my time.
    Mr. Tauzin. I thank the gentleman. The gentlelady from 
California, Ms. Eshoo, is recognized for an opening statement.
    Ms. Eshoo. Thank you, Mr. Chairman, and I want to join all 
of my colleagues on the committee in thanking you for holding 
this very important hearing today. I look forward to hearing 
testimony from our panel of expert witnesses on the 
distribution of local broadcast signals over the Internet.
    Much of what this subcommittee has been focusing on 
recently is how the current paradigm of laws will apply to E-
commerce and the new technologies created for utilizing the 
Internet to its fullest potential. We are currently dealing 
with the changes of this paradigm in legislation which governs 
the use of electronic signatures and records with the 
protection of data bases and with the privacy of our personal 
information in the online world.
    Today, we have another example of this burgeoning public 
policy question. This is a very important question we are 
facing, namely to investigate whether our current laws protect 
broadcast content providers from copyright infringement in the 
online world. The courts are likely to decide this sooner than 
this subcommittee or the Congress, especially in light of the 
iCraveTV.com lawsuit that I'm sure we're going to hear more 
about today.
    I think it would have been a big mistake if the Congress 
has granted Internet webcasters the same compulsory license 
rights that cable companies currently operate under. As 
committee members will I think recall, this was briefly 
considered during the conference of the Shiva legislation. How 
we regulate cable companies, in my view, should not 
automatically--and I think the operative word here is 
``automatically''--extend to webcasters and the Internet.
    That's why these hearings are so important. Members will 
learn, be able to ask very important questions, get some very 
important answers back from these expert witnesses, and I think 
that out of this some clarity will emerge. Just because we are 
having a hearing, I do not believe that that automatically 
should extend itself to legislation or the launching of 
legislation in this area.
    So, thank you, Mr. Chairman, for holding the hearing. Thank 
you to the witnesses, some of whom we have welcomed back here 
again and again; and to those that have not been here, a 
welcome to you as well. Yield back.
    Mr. Tauzin. I thank the gentlelady.
    The Chair now recognizes the gentleman from Oklahoma, Mr. 
Largent, for an opening statement.
    Mr. Largent. Thank you, Mr. Chairman. Mr. Chairman, I want 
to welcome my fellow Oklahoman and former Senator and former 
Governor of the State of Oklahoma and current president of the 
University of Oklahoma, the Honorable David Boren, who will be 
testifying on behalf of the University of Oklahoma and the 
NCAA.
    Senator Boren, welcome. We're glad to have you back in 
Washington, DC for a time.
    I think this morning's hearing can be summed up with the 
following question: Webcasting, a blessing or a curse? The 
Internet service provider community views webcasting as a 
consumer-friendly blessing. ISPs contend that as broad band 
technologies continue to deploy, the Internet should be allowed 
to compete on the same playing field with cable, satellite, and 
traditional broadcast television as the legitimate alternative 
of distributing video programming.
    This raises public policy questions of whether Internet 
ISPs should have the same statutory rights as cable and 
satellite operators to retransmit broadcast programming without 
the consent of copyright holders. The content community, 
television networks, movie studios, broadcast stations, sports 
leagues, and the NCAA take a more skeptical position of 
webcasting. They see the unauthorized retransmission of their 
intellectual property as a threat to their economic well being.
    Copyright holders will argue that the Congress did not 
intend cable and satellite licenses to apply Internet-based 
services because the Internet has no geographic boundaries, as 
is the case with cable and satellite delivery systems. For 
instance, a broadcast originating in Tulsa, Oklahoma can be 
easily retransmitted virtually anywhere in the world via the 
Internet.
    The content industry has also expressed concern that 
unauthorized delivery of video programming over the Internet 
will lead to more piracy because of the ease with which the 
Internet enables computer users to copy and redistribute 
computer files.
    I'm looking forward to the hearing from our witnesses this 
morning who I'm sure will offer compelling arguments on both 
sides of this issue. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    The gentleman from Ohio, Mr. Sawyer, is recognized for an 
opening statement.
    Mr. Sawyer. Thank you very much, Mr. Chairman. I join my 
colleagues in my thanks for having this hearing. My hope is 
that it will touch a far broader arena than the instant case 
that brings it before us.
    I would like to associate myself with the comments of both 
you, Mr. Chairman, and the ranking minority member, as well as 
a number of my colleagues in their comments. I have an opening 
statement which I will not read and would appreciate it if it 
could be inserted into the record.
    But let me just simply say that while we all seem to be 
saying that we want to strive toward technologically neutral 
but legally consistent interpretations of law that make 
possible the growth of this extraordinary medium without 
trampling on the rights of those who create content, and while 
it may also be true that courts may resolve this more quickly 
than the Congress, I suspect that that may be only because the 
violation, if there was one, occurred within a convenient 
terrestrial venue.
    The real question is whether or not this problem can be 
dealt with on a global basis. We face a problem of harmonizing 
law and regulation around the world and addressing the question 
of with whether or not existing jurisdictional oversight 
through WTO and RIPO or other kinds of legal superstructures 
need to be created in order to assure that technological 
neutrality and legal consistency.
    I hope that we can talk in terms of those mechanisms and 
whether or not mechanisms will serve or whether we need to 
investigate further global action to deal with this particular 
undertaking. With that, I yield back my time and thank the 
chairman for this opportunity.
    Mr. Tauzin. I thank the gentleman.
    The Chair is now pleased to welcome and recognize the vice 
chairman of the committee, Mr. Oxley, for an opening statement.
    Mr. Oxley. Thank you, Mr. Chairman, and welcome to all of 
our distinguished witnesses.
    The Internet is revolutionizing our lives in ways we never 
would have thought possible just 5 or 10 years ago. People of 
all ages routinely turn to the web as their primary source of 
news and information, and in fact, many people are listening to 
a live broadcast of this hearing through the Commerce 
Committee's web site even as we speak.
    Television broadcasters have started to offer their 
newscasts and other types of programming to web servers as 
well, and while the quality of these Internet broadcasts is 
currently limited, several companies are working to perfect 
their video streaming abilities. It's only a matter of time 
before this technology will allow web-based broadcasts to 
compete on equal footing with cable and satellite delivered 
programming.
    At the end of the last session, the House gave final 
approval to the Satellite Home Viewer Improvement Act designed 
to promote satellite television as a competitor to cable. I am 
a proud supporter of that measure.
    I look forward to this hearing on what role Congress should 
play, if any, as Internet video broadcasts emerge as a serious 
competitor to cable and satellite. I welcome the opportunity to 
discuss whether Congress should establish a separate licensing 
system for Internet service providers or if these ISPs should 
be allowed to use existing statutory licenses to deliver 
programming.
    In light of the recent court ruling against the Canadian 
company iCraveTV.com in which the motion picture studios and 
sports organizations won an injunction against the company for 
distributing their programming on the Internet, I look forward 
to hearing from Mr. McCallum of iCraveTV, Mr. Valenti, of 
course, from the motion picture association, and our former 
Congressional colleague, Mr. Boren, President of the University 
of Oklahoma, and other witnesses as well.
    Thank you all for coming today, and I yield back. Thank 
you, Mr. Chairman.
    Mr. Tauzin. I thank the gentlemen.
    The gentlelady from Missouri, Ms. McCarthy, is recognized 
for an opening statement.
    Ms. McCarthy. Thank you very much, Mr. Chairman. Like my 
colleagues, I seek a balance between advancing technology such 
as webcasting and protecting the content creators and their 
copyright material. We must be about the business of fostering 
new opportunities for providing content on the Internet as we 
assure that intent provides an efficient, secure, and 
profitable marketplace. Experimentation should be encouraged, 
and freedom, including the freedom to exercise property rights 
in content, should be the basic rule of the Internet.
    Let's be careful, Mr. Chairman, not to rush to implement 
policy that may hamper the development of the Internet freedom 
of creativity or the technological advancements of the future 
of the Internet, and that is why I look forward very much to 
the testimony of this distinguished panel today and to working 
with you, Mr. Chairman, on this issue. I yield back.
    Mr. Tauzin. I thank the gentlelady.
    The gentlelady from New Mexico, Ms. Heather Wilson is 
recognized.
    Ms. Wilson. Thank you, Mr. Chairman. I'm interested in 
hearing from the panel. My district has a number of radio and 
television stations who are moving to the web. In fact, in the 
morning I listen to 770 KKOB from downtown Albuquerque, New 
Mexico here in my office, and our three television stations 
have web sites which are relatively new but I'm sure will begin 
streaming their broadcasts shortly, and the reality is I like 
it. I'm a consumer of that information, and I suspect that 
what's really driving all of this is that a lot of people like 
it.
    The question is what if any regulation should apply to 
those kinds of broadcasts. I'll be interested to here what the 
panelists say, particularly with respect to the protection of 
copyrights, in making sure that advertising revenues go where 
they really should go; but with respect to trying to control 
this, you know, there is reason for licenses. It's because we 
were allocated limited resources like the broadcast spectrum or 
we were trying to limit and control monopolies like the one, 
cable, that's provided to your home, but the wonderful thing 
about the Internet is that it is so unlimited.
    I have a choice between KKOB out of Albuquerque or a whole 
lot of other things online, and I think that is the wonderful 
thing about this. Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentlelady.
    The gentleman from Mississippi, Mr. Pickering, is 
recognized.
    Mr. Pickering. Mr. Chairman, I'll be very brief. I just 
want to thank you for holding this hearing. This is an 
extremely important issue as we go forward to new technologies, 
that we want to make sure that we maintain the copyright and 
property rights. It is extremely important, but I do believe 
that we need to be cautious before we take any specific 
mandated approaches, and so I look forward to hearing from the 
panel today and look forward to working with you on this issue 
as we go forward.
    Mr. Tauzin. I thank my friend.
    The gentleman from California, Mr. Cox, is recognized for 
an opening statement.
    Mr. Cox. Thank you, Mr. Chairman. Webcasting is good. Part 
of what we may be debating here is that question, but I do not 
think there is a question. I think webcasting is good. It's 
good for consumers who are provided with an alternative to 
cable or satellite or terrestrial broadcast. It's also good for 
the creative content providers, and it's good for producers of 
that material and distributors of that material, because the 
lesson of the 20th century is that new technologies create new 
markets.
    The only people who should be threatened by the Internet 
are those who want to preserve the status quo and insulate 
themselves from new kinds of competition that they have not 
already met. So the Internet is a threat. It's a threat to the 
status quo, and it's a threat to the comfortable, privileged 
position of industries beyond what we are talking about here 
today that have not had to face this kind of dynamic 
competition and anyone who wants to keep competitors out.
    The Internet will permit consumers to get what they want 
unless the Government passes laws to prevent it. So we need to 
be attentive to our responsibilities here and make sure that we 
protect intellectual property, but that at the same time we 
resist the entreaties of competitors who may use arguments of 
that type to prevent competition. It requires a good deal of 
judgment on our part, but I think that this hearing will help 
us make that judgment.
    I thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman.
    The gentleman from Florida, Mr. Stearns, is recognized.
    Mr. Stearns. Mr. Chairman, thank you very much. Now, Mr. 
Chairman, I think you have got a tiger by the tail here. You 
know, I was thinking about what 40 years ago, maybe in the 
1960's when cable started, probably these same type of 
questions were proposed and thought about, you know, what we 
source do television stations have in terms of copyright, what 
about international treaty organizations where the copyrights 
are violated.
    So I think out of all the hearings both on the House and 
Senate, Mr. Chairman, I think you have got the tiger by the 
tail here.
    Mr. Tauzin. Would the gentleman yield?
    Mr. Stearns. Yes, I'd be glad to.
    Mr. Tauzin. I direct your attention to a little book called 
A Victorian Internet. It's a book that describes all these same 
issues when the telegraph was first invented.
    Mr. Stearns. Yes. I think that is where we are at, and Mr. 
McCallum is going to have to make the argument that what 
appears to be they have 1, 2, 3, 4, 5, 6, perhaps, and the two 
of you are going to have the make your case against these six, 
but just remember the cable TV operators made the same argument 
40 years ago and they were successful. So you now have to do 
the same thing, and I think of all the members have pointed out 
we want to be very cautious about this. We want to make sure 
that copyrights are protected and that the laws are obeyed, but 
in the end we do not want to stymie competition, and as my 
colleague from New Mexico said, how great it is just to go up 
on the Internet and pull up your local television.
    It is really very helpful, particularly if there are 
negative comments about yourself. You can quickly respond to 
them, whereas you would have to wait for some constituent to 
call you up and say did you know yesterday they said so and so 
about you.
    So we have a real argument in favor of web TV, so I think 
the arguments have to be made, and of course this committee, 
Mr. Chairman, has to be very careful and cautious, and I thank 
the gentleman.
    Mr. Tauzin. I thank the gentleman.
    [Additional statements submitted for the record follow:]
 Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
    Thank you, Mr. Chairman.
    I commend you for holding this hearing. The era of Internet video 
has arrived. It offers unforeseen benefits. But Internet video also 
raises a host of thorny issues.
    Today's hearing will help the Subcommittee sort out some of those 
tough issues. And the timing couldn't be better, because I think it is 
inevitable that, over time, we will see a proliferation of Web sites 
like iCraveTV.com.
    Many will be offshore. But eventually many will likely emerge here, 
in the United States. After all, as the record industry will tell you, 
it was on America's college campuses that the MP3 revolution was born.
    So let's begin to grapple with these issues, and find out what--if 
any--role Congress should play in their consideration.
    With today's hearing, we will explore how advances in technology 
give consumers more access to video programming on the Internet . . . 
while also recognizing that technology raises serious copyright issues.
    As my colleagues will recall, this debate began--and ended!--
prematurely last Autumn. Without any notice to Members of this 
Committee, provisions were added to the Conference Report to the 
Satellite Home Viewer Improvements Act of 1999 that could have stifled 
the development of electronic commerce.
    These provisions would have permanently excluded any Internet 
service from retransmitting broadcast programming pursuant to a 
statutory license.
    Today, the Commerce Committee will assess how current law applies 
to the delivery of video signals over the Internet. As someone proud to 
represent the State that is home to most of the major Internet service 
providers in the world, I have little doubt about the importance of 
online communications technologies for enhancing consumer choice.
    Online technology has transformed the way consumers receive 
information and entertainment. Because this transformation strengthens 
our economy, it is essential that we give full attention to this issue 
. . . and carefully assess whether Congress needs to amend current law.
    In 1998, this Committee played a critical role in drafting the 
version of the Digital Millennium Copyright Act that was ultimately 
signed into law. We demonstrated that it was possible to strike a fair 
balance between the concerns of content owners and the interests of 
consumers. If necessary, Congress can do so again.
    I look forward to receiving the testimony of our witnesses today 
and working with them in the future to produce legislation, as may be 
appropriate.
    Thank you, Mr. Chairman, and I yield back the balance of my time.
                                 ______
                                 
  Prepared Statement of Hon. Gene Green, a Representative in Congress 
                        from the State of Texas
    Thank you for holding this hearing on webcasting. For the past six 
to seven years the telecommunications landscape has changed 
drastically. Webcasting represents that change and the growing 
convergence of telecommunications technologies. Since its inception, 
webcasting has been dominated mainly by live events: concerts, sporting 
events, press conferences. However, both local and network stations 
have begun to experiment with streaming their local programs over the 
internet.
    In Houston we have a few stations that stream their local 
programming over the internet. Both KHOU, Channel 11, and KPRC, Channel 
2 stream their local news. Spending so much time in DC it is nice to be 
able to keep up with news from Houston as it happens.
    However, I do have some general concerns about webcasting. Such as, 
are adequate protections available for broadcasters and companies that 
produce these programs? The internet has helped fuel our economic boom 
and our technological expansion. However, the one unfortunate facet 
about the Internet is the ease in which something can be copied and 
retransmitted almost instantly. Second, what will happen if programs 
are made strictly for the Internet public. Then we, Congress, need to 
ask the question, ``What about the Americans who don't have access to a 
computer.'' Third, I am concerned that if we do not stop illegal 
webcasting now it will grow and people will become accustomed to having 
illegal programming. Then we would have a situation similar to last 
year's satellite television situation.
    As we continue to look at web casting, from a policy perspective. 
we will have to decide one very important policy question. Do we treat 
ISPs like we do satellite and cable companies and impose existing 
regulations on them, or do we consider ISPs a separate entity with 
completely new regulations.
    Thank you Mr. Chairman for holding this hearing.

    Mr. Tauzin. Does the gentleman from Massachusetts have a 
unanimous consent request?
    Mr. Markey. Yes, I would ask unanimous consent that the 
gentleman from Washington, a distinguished visitor to our 
committee today, Mr. Inslee, be allowed to introduce one of the 
witnesses appearing before our committee today.
    Mr. Tauzin. Is there any objection?
    Without objection, it is so ordered, and we welcome you, 
Mr. Inslee.
    Mr. Inslee. Thank you, Mr. Chairman, and thanks for this 
opportunity. I would like to introduce to the panel Alex Alben, 
a constituent whose RealNetworks streaming genius has created 
great opportunities for Americans and great interest of this 
committee in a new issue, and thanks for joining us, Alex.
    Mr. Tauzin. Thank you for that testimony, Mr. Inslee. I 
appreciate it, and welcome, Mr. Alben.
    If there are no other requests for opening statements, we 
will now introduce our distinguished panel, and they are 
distinguished, beginning with the most distinguished Jack 
Valenti, President and CEO of the Motion Picture Association of 
America; Mr. Paul Karpowicz, Vice President of LIN Television 
in Providence, Rhode Island; Mr. Bob Roback of LAUNCH Media; 
the Honorable David Boren, who has been previously introduced, 
and, David, I want to especially welcome you back to the Hill.
    Mr. Boren. Thank you, Mr. Chairman.
    Mr. Tauzin. We miss you a great deal. I'm glad to see you 
again, sir.
    Mr. Alex Alben, who has also been recognized, and we want 
to welcome you, Mr. Alben; Mr. Ian McCallum, Vice President of 
Corporate Sales and Development of iCraveTV; Mr. Stuart Beck, 
President of Granite Broadcasting Corporation; and Peter Jaszi, 
a professor of Washington College of Law, who is going the 
teach us a little bit about copyright, I suspect, before we're 
done today.
    We begin our panel with Mr. Valenti, the President of the 
Motion Picture Association of America. Jack, as we do in our 
all our hearings, your written statements, as you may have 
noticed when I began, are part of our record, and we have read 
them and we will read them over again, and extensively, and we 
want to ask you, please, if you might summarize.
    We have some new incredibly expensive digital equipment 
that is going to signal you when your 5 minutes are up. We 
would appreciate it if you would abide by the 5-minute rule. 
The devices will light up green, yellow, and red to give you an 
indication, and if you will all please try to abide by that 
rule because we have a big panel. I would like to get as much Q 
and A discussion with you as we can reach as soon as we can.
    Mr. Valenti, you are welcome, sir.

 STATEMENTS OF JACK VALENTI, PRESIDENT AND CEO, MOTION PICTURE 
ASSOCIATION OF AMERICA; IAN McCALLUM, VICE PRESIDENT, CORPORATE 
 SALES AND DEVELOPMENT, TVRADIONOW, CORPORATION; HON. DAVID L. 
BOREN, FORMER UNITED STATES SENATOR FROM THE STATE OF OKLAHOMA, 
   AND PRESIDENT, UNIVERSITY OF OKLAHOMA; ROBERT D. ROBACK, 
  PRESIDENT, LAUNCH MEDIA; STUART J. BECK, PRESIDENT, GRANITE 
 BROADCASTING CORPORATION; PETER JASZI, PROFESSOR, WASHINGTON 
   COLLEGE OF LAW, AMERICAN UNIVERSITY; PAUL KARPOWICZ, VICE 
  PRESIDENT, LIN TELEVISION; AND ALEX ALBEN, VICE PRESIDENT, 
                GOVERNMENT AFFAIRS, REALNETWORKS

    Mr. Valenti. Thank you, Mr. Chairman, very much.
    As I begin, I would like to first introduce, by way of 
announcing, a freshly formed group called the Copyright 
Assembly. These are all no surprises in this country to whom 
copyright is absolutely indispensable to their future, and 
probably these names I will read out are the great favorites of 
the American consumer.
    Let me tell you who belongs to this Copyright Assembly: 
First, the ABC television network; the America Association of 
Advertising Agencies; the Association of American Publishers; 
the American Society of Composers, Authors, and Publishers; 
Professional Baseball; Broadcast Music, BMI; Business Software 
Alliance; CBS; Directors Guild of America; ESPN; FOX; 
Interactive Digital Software Association; the LPGA Tour; the 
PGA Tour; Magazine Publishers of America; NBA; the National 
Association of Broadcasters; the National Cable Association; 
NCAA that's going to be represented here today by a former 
Governor and former Senator from Oklahoma, now the President of 
the University of Oklahoma, David Boren; the National Football 
League; the National Hockey League; the National Music 
Publishers Association; NASCAR; NBC; Newspaper Association of 
America; the Recording Industry Association of America; Screen 
Actors Guild; Software and Information Industry Association; 
the Writers Guild of America; MGM Studios; Paramount Pictures; 
Sony Pictures; Time Warner; 20th Century Fox; Universal 
Studios; and Walt Disney.
    Mr. Tauzin. Name dropper.
    Mr. Valenti. That's how I make may way through life, Mr. 
Chairman.
    First, I want to associate myself, I think as is the 
Congress way, although Chris--I mean Congressman Cox is gone, 
he said the Internet is good. I associate myself. He's 
absolutely correct.
    Everyone that I mention is spending hundreds of millions of 
dollars to invent new business models for conveying to 
consumers what they have to offer, presenting to consumers all 
the things that they have created. The Internet is the future, 
as he said, but as legitimate businesses emerge on the 
Internet, illegitimate intruders find this a haven. It always 
happens. There are many people who profess to have a great 
honorable intention about the advancement of technology who 
oftentimes treat with a brazen disregard the rules and the laws 
which govern America's daily labor.
    Now, why is this a matter of concern to this Congress? 
Because, as the chairman pointed out a moment ago, people I 
read comprise the greatest trade export that any country in the 
world could ever have. We dominate the world as favorites for 
people who watch on television or cable or satellite or the 
Internet, whatever. We bring back to this country enormous 
billions in surplus balance of trade when this Congress hears 
nothing but the soiling words of trade deficits for which we 
are hemorrhaging at this time. We bring back more--have more 
international revenues than automobiles and auto parts, than 
aircraft, than agriculture. It is an incredible jewel in 
America's trade crown.
    Now, why are we here? I'm not asking the Congress to do 
anything specific. What I'm asking you to do is to consider 
very carefully the Internet and how to deal with it. The 
Internet is something that is almost uncomprehending to the 
human mind. We have never seen anything like it. It has nothing 
to do with telegraph or cable or satellite. Indeed, the 
difference between satellite and cable and the Internet is the 
difference between lightening and the lightening bug, totally 
different. Therefore we need to see what is going to happen.
    The second thing you ought to consider is the words of the 
former speaker of this House, Sam Rayburn, who many years ago 
said the three most important words in the Congressional 
lexicon, Wait a minute. That's what I'm suggesting that you do. 
Why? This Internet is growing like kudzu. In 1995, there were 
100,000 sites. Today, there are 10 million. In 1995, 5 years 
ago--4 years ago, there were a little less than 10 million host 
computers. Today, there's 73 million. In 1995, there were 10 
million pages on the Internet. Today, they are 1 billion.
    Congressman Markey said, ``Where are we going to be 1 year 
or 2 years from now.'' I'm going to tell you this. All of the 
technology that we find so laudable today, 1 year from now, 2 
years will be primitive, and we all know that. Neither Bill 
Gates nor anyone else in this world can tell you with any 
precision where we are going to be a year from now. This thing 
is growing so fast, piling technological advance upon 
technological advance.
    All I am asking you to do is to be very cautious and wary 
about granting compulsory licenses to anybody until you examine 
the vast and massive difference between something that with one 
click stroke can take you to 6 billion people instantaneously 
with the speed of light. Cable cannot do it. Satellites cannot 
do it. Video cassettes cannot do it, and even what I'm saying 
today is so fascinating to me cannot do it either.
    So I just urge you, Mr. Chairman--the red light. May I use 
the words of the Congress here? I yield back my extra time.
    [The prepared statement of Jack Valenti follows:]
  Prepared Statement of Jack Valenti, President & CEO, Motion Picture 
                         Association of America
    To the honorable members of this Committee, let me introduce the 
freshly formed Copyright Assembly. It enlists into its membership the 
vast array of American enterprises involved in sports (professional 
football, basketball, baseball, hockey, NASCAR, NCAA), music, song-
writing, advertising, software) broadcasters, both networks and 
stations, cable, movies, publishing, television programs, home video. 
These are the enterprises which are America's most wanted exports, in 
addition to being the favorites of the viewing, reading and listening 
public.
    Why form a Copyright Assembly? Because we are deeply concerned 
about the future of creative works. All these valued assets, protected 
by Copyright whose roots are in the Constitution, are indispensable to 
both the culture and the economy of the United States.
    Why this concern? All the members of The Copyright Assembly are 
actively embracing new Internet opportunities for consumers, are 
developing new, inventive business models to deliver our creative works 
to homes, businesses, schools, universities. Many of us are licensing 
our creative material to Internet companies. Hundreds of millions of 
dollars are now being invested by our members to develop this new 
economy, which along with Gutenberg's movable type and the invention of 
television, ranks as one of the great seminal entrants into the human 
society. We are all eager to be part of the revolutionary technological 
magic. But we worry lest the great potential, the immense future worth 
of the Internet, becomes tangled by overt and covert piracy of 
copyrighted material.
    Why is there a problem? As legitimate businesses emerge on the 
Internet, illegitimate intruders find the Internet a haven. These 
invaders steal copyrighted works, assault legal business sites and 
otherwise disrupt the normalities of Internet conduct. Piracy comes in 
all sizes, ingenuity and motivation. Which is why at this moment we 
confront attacks by those who profess to defend technological 
advancement but in truth who treat Copyright with a brazen disdain for 
laws and rules which guide and govern the daily labors of Americans.
    Why should the Congress care? The Congress should hugely care 
because these creative works do not spring from a void. The source bed 
of this creativity lies within the imagination, artistry and ingenuity 
of a community of artists and craftsmen who provision Americans with 
most of what they read, hear and watch. It is the summation of massive 
infusion of risk capital that must be, for the most part, recouped else 
the risk becomes too large, the capital becomes too cautious, and the 
works dry up. We should remind all who read this testimony that the 
members of The Copyright Assembly comprise the greatest trade prize 
available to any country on this planet. Intellectual property gathers 
in over $65 Billion annually in international revenues--more than 
automobiles and auto parts, more than aircraft, more than agriculture! 
It produces new jobs at three times the annual rate of the economy as a 
whole. Moreover America's intellectual property revenue curve is rising 
all over the world. No wonder it is an engine of real growth for this 
nation.
    Why this overture to the Congress? It's really not an overture. We 
are not asking the Congress to do anything specific at this time, 
except to understand the economic and cultural worth of those enlisted 
in The Copyright Assembly. It's a value that cannot be Xeroxed or 
cloned. As the Congress considers public policy issues which connect to 
the New Technologies and the delivery of creative works to American 
consumers, we urge the Members to put our concerns and our optimism at 
the top of congressional priorities. When there is an advocacy for 
enlarging Compulsory Licenses or other congressionally mandated 
marketplace interventions, we recommend that the Congress remember what 
former Speaker Sam Rayburn once declared to be the three most important 
words in the congressional lexicon: ``Wait a minute.''
    The simple fact is this: The protection of copyright and copyrights 
is not antagonistic to the New Technologies, such as the Internet. Not 
at all. The Internet is widened and made more fruitful by our high 
velocity involvement in it. But if we cannot protect what we invest in, 
create and own, then we don't own anything.

    Mr. Tauzin. Again, we'll ask you all to watch those lights 
because we're going to have to get through this today as 
expeditiously as we can.
    We will rotate between content and Internet witnesses 
today, and we will move second to Mr. Ian McCallum, Vice 
President corporate sales and development of iCraveTV. Mr. 
McCallum.

                    STATEMENT OF IAN MCCALLUM

    Mr. McCallum. I thank you, Mr. Chairman, for the invitation 
to speak to you about iCraveTV. My name is Ian McCallum. I am 
the Vice President of Corporate Sales of TV Radio Now 
Corporation which operates iCraveTV. I come from Toronto. I've 
heard a great deal of comments about Toronto and how nice it 
is. Peter Usenoff once described it as a New York run by the 
Swiss.
    Canadian Radio and Video Entertainment, the acronym is 
CRAVE. The I is, of course, the Internet. iCraveTV, a companion 
television service. One of the fundamental principles behind 
the inception of iCraveTV and those of us who operate it is the 
awareness that without copyright revenues flowing to the rights 
holders, content will die. And as in all of the entertainment 
and information mediums, consent is king and therefore it is 
imperative that regimes be established that enable the flow 
from the consumers back to the creators.
    One of the imperatives we realized in starting up is we had 
to move fast. We realized that we were operating in Internet 
time, not regulatory time, and I second everything that Mr. 
Valenti has said about the speed of development of the 
Internet, and we're all caught up in that, Canadian, American 
legislators, content creators, content distributors.
    When we started out, we believed we had a good idea and 
that it would prove a popular service. We did not anticipate 
the level of interest that it would generate and in some 
quarters, unfortunately, the hostility that it has arisen. We 
launched with 17 broadcast signals coming from Buffalo, New 
York and Toronto, converted those signals from analog to 
digital, and distributed them out over the Internet using the 
services of RealNetworks and their streaming system.
    Users would come to the site. They would be ask to complete 
a terms of use agreement. That would be asked to enter the area 
code in Canada from where they were registering. They would 
then be granted access to one of the streams by going to a TV 
listings guide and clicking on that particular stream.
    Our service simultaneously serves less than 4,000 viewers 
which is a tiny fraction compared to the tens of millions of 
viewers the same programs are receiving on Internet at the same 
time, and also using a facility provided by RealNetworks, we 
made sure that nobody could make copies of the programs that 
were being distributed.
    Our service provides broadcast programming with the 
commercials fully intact to people who are not otherwise being 
served, people in remote areas, people in offices, people in 
universities. Furthermore, we are taking broadcast programming 
to the very screen that has cost broadcasters market share over 
the past 5 years. This should enable them to recapture some of 
that market.
    The guided principles, included paying rights to the 
content holders, abide by all applicable laws and regulations, 
be first to market, work through partnerships, and 
operationally be lean.
    We are not pirates, never have been, never will be, and we 
take extreme exception to that characterization. In part, the 
proof of that is that we enjoy the support of the relevant 
parts of the Canadian Government, broadcast regulator, and the 
copyright boards. Canadian law allows us to retransmit over the 
air television signals like cable, like satellite, and we are 
not required to obtain permission of the broadcasters before 
doing so.
    The Canadian compulsory license for the retransmission of 
broadcast signals is, I understand, similar to U.S. law on 
cable and satellite transmission. The difference is that 
Canadian law is not technology specific, and so Canadians do 
not need to have a policy debate every time a new 
retransmission technology such as the Internet is introduced.
    As I mentioned, we believe that an appropriate flow of 
revenues to copyright holders is important, and we initiated 
proceedings with the copyright board in Canada to establish a 
flow, and as of Monday of this week, the collective 
representing many rights holders including the MPAA have agreed 
to work out an appropriate tariff.
    Advertising to Canadians constitutes our only revenue base, 
and due to the systems limitations, users coming from outside 
of Canada cost us telecommunications charges which we can not 
recover because we cannot advertise to them. Initially, we 
tried to enforce this geographic restriction by relying on the 
honesty of the users, and this was implemented at multiple 
levels. When we were looking at the technology, the systems 
that were available to us really resulted in us coming to this 
particular approach. Surprisingly, we also found that by and 
large it worked up to a point.
    However, as the outside world that is outside of Canada 
became aware of iCraveTV, ironically in part due to the 
publicized criticisms of the security system by U.S. rights 
holders, it could not work very satisfactorily for long. We 
were subject to fraudulent and even criminal access to our 
sites. Therefore, we are implementing an enhanced system that 
we have designed that not only isolates our Canadian free 
transmissions from the United States but gives us as the first 
company on the Internet the ability to restrict programming to 
any country in the world.
    Mr. Tauzin. The Chair would note the bells, when they go 
off, signify a vote on the House floor, and this is probably 
going to happen during this hearing. So I want you all the know 
we are occasionally going to have to get up and make votes, and 
that is equally important that we abide by these time limits.
    Mr. McCallum, your time has expired. Can you wrap it up for 
us now?
    Mr. McCallum. I will. Now we hope that this system we will 
be putting into use with content under contract with many of 
the people represented in this room and others. We are a 
Canadian company. We operate in Canada for Canadians. We are 
not trying to make any amendment to America law at this time. 
We hope that in the process, however, you establish rules and 
regulations that do not impact negatively on companies 
operating legally within other countries. After all, 
approximately 70 percent of our retransmission fees flow back 
to American companies, and if there are unrealistic, rigorous 
national regulations this might result in mirroring regulations 
in other countries, and the losers would be us all, and 
certainly the underserved and the consumers and the program 
producing talent would lose as well.
    As a final point, I would like to commend to you a piece of 
existing legislation that comes from the Securities Exchange 
Commission in an analogous content and that deals with the 
attempt by companies to restrict access to securities offerings 
outside of the United States, that is to restrict Americans 
from accessing it, and the Securities Exchange Commission said, 
in conclusion, that it did not require perfection, only serious 
efforts that would discourage a great majority of potential 
purchasers.
    Thank you, Mr. Chairman and members of the subcommittee for 
your interest in iCraveTV. I would be pleased to answer any 
questions you may have.
    [The prepared statement of Ian McCallum follows:]
 Prepared Statement of Ian McCallum, Vice President of Corporate Sales 
                   and Development, TVRadioNow, Corp.
    I am Ian McCallum, Vice President of Corporate Sales and 
Development of TVRadioNow, Corp., which operates the iCraveTV web site. 
I thank you, Mr. Chairman, for the invitation to speak with you about 
iCraveTV. When we started operation of the iCraveTV web site at the end 
of November of last year, we believed we had a good idea that would 
provide a service that many people would want to use, but we did not 
anticipate the level of interest and, in some quarters, unfortunately, 
hostility that our service would arouse. We have learned a great deal, 
and we would certainly do things differently if we knew in November 
what we know now and if we had the technology then that has since 
become available. However, we continue to believe that the idea behind 
iCraveTV is worth pursuing, and we think that we can provide a 
desirable service that makes good use of the unique capabilities of the 
Internet. We are a Canadian company run by Canadians, and we do not 
seek to influence the development of American copyright law. However, 
we hope that American law will not be applied in such a way as to make 
it impossible for those outside the United States who want to operate 
under the laws of their own country, and to pay a fair return to 
American copyright holders, to make American works available over the 
Internet.
    Upon its launch, iCraveTV's operations were structured as follows: 
It received broadcast televisions signals from stations in Toronto and 
Buffalo, New York, converted those signals from analog to digital form, 
and made them available to people using the iCraveTV web site, 
www.icravetv.com. Someone who came to the site could click on the 
``Watch TV'' icon, get a list of television stations, and select a 
station to watch. By clicking on that station, the viewer could see on 
his or her computer monitor the show then being broadcast, either in a 
small corner of the monitor, or, with lower resolution, in a larger 
portion of the screen. (Copies of ``screen captures'' from the iCraveTV 
site are appended hereto at Tab A.)
    From the outset our intention has been to provide this service only 
to Canadians. Advertising to Canadians constitutes our revenue base 
and, due to limitations on our systems' capacity, users coming from 
outside our market cost us money we cannot recover. We initially tried 
to enforce this geographic restriction by relying on the honesty of 
users. First, we required someone wishing to use the video portion of 
the web site to enter a 3-digit Canadian telephone area code in order 
to confirm that he or she was located in Canada. If the user entered a 
number that was not a Canadian area code, a screen appeared denying 
that user any further access. If the user entered a Canadian area code, 
a second screen appeared further warning that the site is intended only 
for use in Canada, and requiring the user to make the affirmative 
certification that he or she was located in Canada, by clicking ``In 
Canada,'' in order to proceed further. A user then reached the ``Terms 
of Use'' screen, which also stated that the site was solely for the use 
of those located in Canada and required acceptance of terms that 
included use only in Canada before proceeding further. Thus, in order 
to access the programming portion of the iCraveTV Web site, a user had 
to affirmatively state, repeatedly, that he or she understood that the 
site was for use only in Canada and that he or she was in fact located 
in Canada.
    Unfortunately, concern has been expressed that these precautions 
did not prove sufficient to keep users from outside Canada from 
accessing the site. I will discuss this problem further in a moment, 
but I want to address first the issue of the source of our television 
broadcasts, because we think that it has been the subject of unfair 
criticism. iCraveTV picked up signals broadcast from the United States 
into Canada, and because we had not first entered into license 
agreements with the United States copyright holders, we have been 
accused of being ``pirates.'' This criticism is unfounded and ignores 
two critical facts. First, it is perfectly legal for us to pick up 
these broadcast signals, which are available free to everyone who has 
an antenna. These programs were intentionally broadcast into Canada as 
well as to the United States, and the broadcasters took advantage of 
that fact, by, for example, obtaining advertising revenue based on 
their Canadian as well as their American audience. Because American 
copyright law does not extend beyond the borders of the United States, 
we did not violate American law, or infringe American copyrights, by 
picking up the signals in Canada or by digitizing and retransmitting 
them over the Internet in Canada.
    Since we operate in Canada we do, of course, have to comply with 
Canadian law, and we have made every effort to do so. Under Canadian 
law, it is not copyright infringement to retransmit over-the-air 
broadcast signals, provided that, among other things, the retransmitter 
pays royalties in accordance with tariffs set by the Canadian Copyright 
Board. The majority of retransmission royalties paid by Canadian 
retransmitters are now, in fact, paid to collectives representing 
United States copyright owners, including the major Hollywood studios, 
broadcasters and major league sports leagues. Under this statutory 
procedure, the retransmitter has an automatic compulsory license to 
communicate the retransmitted broadcast signals to the public and needs 
no consent or permission from either the original broadcaster of the 
retransmitted signals or from any of the owners of the copyrighted 
works that were included in those signals. This arrangement is not 
unlike the compulsory license for retransmission of network programming 
via satellite that now exists under United States law. (A copy of 
Section 31 of the Canadian Copyright Act is appended hereto at Tab B; 
an op ed piece written by a Canadian law professor, Hudson Janisch, 
discussing iCraveTV in the context of the evolution of Canadian 
broadcasting and copyright law is appended hereto at Tab C.)
     The retransmission regime established by the Canadian Copyright 
Act is not limited to specific technologies for the delivery of 
retransmitted broadcast signals. As a result, the Canadian 
retransmission regime applies equally to retransmissions made over the 
Internet as to retransmissions made via other media, including cable 
and satellite. iCraveTV has requested the Canadian Copyright Board to 
set tariffs for royalties for transmissions via the Internet of 
television programs. It should be noted, moreover, that under Canadian 
law Internet transmissions originating from servers located in Canada 
are deemed to take place in Canada, even if received outside Canada, 
and are subject to royalties payable in Canada. Thus, if a tariff for 
Internet transmissions is established in Canada, as iCraveTV has 
sought, the royalty that Canadian Internet retransmitters will pay can 
be expected to take into account the possibility of receipt of the 
retransmissions outside Canada. (An affidavit from another Canadian law 
professor, Michael Geist, discussing the application of Section 31 of 
the Canadian Copyright Act to iCraveTV's service is appended hereto at 
Tab D.)
    Because iCraveTV was a pioneer in this area, the Copyright Board 
had not established a tariff for Internet transmission of television 
programs when we began operation. In order to arrange fair voluntary 
payments until that tariff was established, our Canadian solicitors 
contacted the collectives that collected royalty payments for over-the-
air broadcasts and tried to discuss such an arrangement with them. 
Those collectives were unwilling to work with us to establish such a 
payment arrangement, so our solicitors proposed to the Copyright Board 
that the Board establish an interim Internet retransmission tariff. 
Counsel for certain of the collectives sought additional time to 
respond, thereby delaying the Board's action on the tariff, and the 
Board has not yet had the opportunity to act. During this process, we 
have reiterated to the broadcasters our willingness to negotiate 
royalty payments. It should be noted that the ``collectives'' include 
all of the rights holders involved, including members of the MPAA, NFL 
and the ``border broadcasters''. Indeed, a majority of the funds 
dispersed by the Board go to United States rights holders for carriage 
in Canada. (A copy of an editorial from the Toronto Globe and Mail 
discussing iCraveTV's offer to pay royalties under the Canadian 
copyright regime is appended hereto at Tab E.)
    We are, you can see, acting in good faith to follow the laws of the 
country in which we operate. Although Canadian copyright law differs in 
some ways from American law, it is grounded in the same principles, 
developed in English law, as is American copyright law, and I am sure 
that the United States Congress respects the integrity and good faith 
of Canadian law in this as in other respects. I recognize, of course, 
that there are countries in the world that do not operate under similar 
copyright principles and do not respect the work of content providers, 
and the existence of such countries raises some concerns when we are 
dealing with the ``World Wide Web.'' But it is important not to be 
unduly influenced by the existence of such unsatisfactory copyright 
regimes.
    First, Canada is not such a country, and the conduct of a company 
that operates within the laws of an enlightened country such as Canada, 
which fully respects the creative activities of the authors of 
copyrighted works, should not be judged or restricted because of the 
existence of countries that make little effort to stop copyright 
piracy. Second, one of the essential characteristics of the World Wide 
Web is that it is worldwide, which means that it can be accessible from 
countries whose laws we may disapprove of in many respects. If the 
possibility of such access is allowed to govern the activities of 
countries where the principles underlying our common Anglo-American 
heritage are respected, the benefits of the Web will be greatly 
reduced.
    This brings me back to the issue I referred to before and which has 
been the primary source of concern in the lawsuit brought in federal 
court in Pittsburgh against iCraveTV by a number of major United States 
content providers. This is the fact that, despite our making it 
absolutely clear to users that only those located in Canada were 
permitted to access the video capability of the iCraveTV web site, it 
has been alleged that this restriction was not respected by all users, 
and that some users located in the United States downloaded the video 
stream and viewed programs with American copyrights. As a result, the 
federal court has entered a preliminary injunction that could be read 
as holding us responsible if any of our video programming is accessed 
from the United States, even by hackers. Because we have not yet 
completed enhancing our security system, this decision has resulted in 
our decision to shut down the video portion of the site for now. We 
will have an opportunity to present our case to the court and seek 
modification of the terms of the order within 90 days.
    In the meantime, we are working on security procedures that will 
make it extremely difficult for anyone who is not located in Canada to 
access the video stream from the site. There are two aspects of such 
procedures. First, we have to strengthen the methods used to deny to 
those outside Canada access to the video via the ``front door,'' i.e., 
the iCraveTV home page. In addition to the procedures we previously 
used that rely on the honesty of users, we are implementing software 
that determines the location of the user's Internet Service Provider 
and will permit access only to those using ISPs that are located in 
Canada and serve only Canadian residents. Second, we are developing 
software and procedures that will prohibit access via the ``back 
door,'' i.e., by those who use computer commands to avoid the iCraveTV 
home page and go directly to the computer that provides the video 
stream. In an MPAA letter to us in late December, some suggestions, in 
a different form, were made that we will incorporate into our final 
design.
    As far as we have been able to learn, such Internet security, 
restricting access to a site to users within a particular geographic 
area, has not yet been implemented anywhere, in part because it has not 
previously been required. Its development and implementation has been 
more difficult, expensive, and time-consuming than we had expected, but 
we are making good progress. Whatever the difficulties, before we 
return to court to seek a change in the court's current order, we 
intend to implement security procedures that will make it extremely 
difficult for anyone not located in Canada to access video from the 
iCraveTV web site. However, we do not pretend that we can guarantee 
that no determined hacker will ever be able to access that video. As we 
already knew, but the recent attacks on such Internet leaders as Yahoo 
and Amazon have highlighted, determined hackers, thrill seekers or 
hired guns can wreak havoc on even the strongest and most secure of Web 
sites. Any regime of laws that governs the Web must take account of 
that fact and should not place impossible demands on sites that make 
serious good faith efforts to provide the appropriate security.
    In our case, for example, the plaintiffs, a powerful array of 
studios, networks, and sports leagues, have alleged that by providing a 
site that could be accessed improperly by persons located in the United 
States to receive streamed copyrighted audiovisual works, we have 
infringed the exclusive right of the copyright owners to perform their 
works ``publicly'' in the United States. However, once a web site 
operator located outside the United States has made determined efforts 
to keep persons in the United States from accessing the video portion 
of a site, thereby preventing substantially all persons located in the 
United States from accessing it, excepting only persons having a high 
degree of computer security expertise and deliberately using such 
expertise to avoid the site's safeguards against such access, I do not 
think that such a web site operator can fairly be said to be ``publicly 
performing'' the work in the United States. To the contrary, any 
performance in the United States in the face of such safeguards will be 
a very private one, brought about only by the expertise and effort of a 
hacker who is determined to get around serious barriers so as to access 
something he or she has been expressly prohibited from accessing.
    Imposing a standard that would find a Canadian web site operator, 
operating in accordance with Canadian law and having committed no other 
violation of American law, to have infringed an American copyright--and 
so be subject to being, in effect, shut down by an American court--
simply because a hacker may be able to get around carefully implemented 
security procedures, would, we respectfully submit, unfairly interfere 
with the legitimate operation of Canadian companies and unduly inhibit 
the development and usefulness of the Internet. The United States 
Supreme Court, in its decision in Reno v. ACLU that invalidated 
portions of the Communications Decency Act of 1996, compared the 
Internet to ``a vast library including millions of readily available 
and indexed publications and a sprawling mall offering goods and 
services,'' and held that it was entitled to the full scope of First 
Amendment protection. Indeed, the Court contrasted the freedom of 
cyberspace with the governmental supervision and regulation that has 
traditionally been imposed on the broadcast industry. The Internet, it 
observed, is not as invasive as radio and television, and content does 
not appear on one's computer screen unbidden or ``by accident.'' This 
point is all the clearer when a web site operator has employed 
substantial security technology to disable certain users--users outside 
Canada, in our case--from accessing certain content. Even though your 
First Amendment may not be directly applicable to the activities of a 
Canadian company operating in Canada, it would surely be contrary to 
the vision of the freedom and promise of the Internet embraced by the 
Supreme Court in Reno v. ACLU to impose unrealistic requirements that 
would expose legitimate Internet operations outside the United States 
to crippling penalties in American courts because of the malicious 
activities of some hackers.
    Indeed, American law already recognizes that the universal 
accessibility of web sites cannot be permitted to make it impossible to 
conduct business otherwise in compliance with applicable law, so long 
as reasonable security measures are taken. The Securities and Exchange 
Commission, addressing the question of whether offshore Internet offers 
are being made in the United States (and thus trigger registration 
obligations), reasoned that implementation of adequate measures to 
prevent persons in the United States from participating in the offshore 
Internet offer would lead to the conclusion that the offer was not 
occurring in the United States. The SEC recognized that the types of 
procedures its suggested could not guarantee that someone from the 
United States who was determined to get around the procedures could not 
purchase securities from the site. It did not require perfection, only 
serious efforts that would discourage the great majority of potential 
purchasers located in the United States. See Statement of the 
Commission Regarding Use Of Internet Web Sites To Offer Securities, 
Solicit Securities Transactions Or Advertise Investment Services 
Offshore, March 23, 1998, available at http://www.sec.gov/rules/
concept/33-7516.htm.
    With the security that we will be prepared to implement, we believe 
that any ``leakage'' into the United States will be minimal and could 
not reasonably be considered to be a ``public performance'' in this 
country under United States copyright law. The level will be well below 
the decades of ``leakage'' that have been tolerated between the United 
States and Canada for decades when radio and television broadcasters 
signals cross the border. We will be operating only in Canada under a 
copyright regime that we hope will soon establish a fair tariff under 
which we can pay royalties to American copyright holders for carriage 
in Canada. iCraveTV will then be able to provide the service to 
Canadians that it was intended to provide. That service was not, I want 
to emphasize, to compete with over-the-air broadcasting. Anyone who has 
seen video on a 14-17 inch computer monitor will know that it is not a 
substitute for television. Typically the video picture takes up only a 
small portion of a computer monitor that is itself small compared to 
current television screens, and if the video is enlarged it loses 
resolution. We expect the technology, and so the quality of the 
picture, to improve, but it will not in the foreseeable future improve 
to the point where someone who owns a television set--which includes, 
of course, far more people than own computers--will want to watch a TV 
show on a computer rather than on TV.
    Instead, iCraveTV serves a different audience. It serves those who 
cannot receive broadcast television, such as those in the shadow of the 
huge CN broadcast tower in Toronto, and those in universities and 
offices who cannot receive broadcast television and do not have cable 
access. And it serves those who are working on a computer and would 
like to be able to view a television program in a corner of their 
screen. In these ways we provide a real service to some people, but it 
is not a service that provides any competition to over-the-air 
broadcasters or cable or satellite retransmitters. This is confirmed by 
the limited capacity of the video server used by iCraveTV: we can serve 
no more than about 4,000 viewers at a time. This is hardly a threat to 
television broadcasters with their tens of millions of viewers, and the 
technology will not permit it to become such a threat, even if we 
wanted it to, which we do not.
    What we do want to do is provide audiovisual content over the 
Internet, of the type we started to provide last year, as well as new 
forms of content, such as video that has not been broadcast, and, we 
hope, interactive video. We want to do this in accordance with Canadian 
law and with reasonable safeguards that will keep our broadcast 
retransmission service from being accessed from outside Canada. We do 
not want to take anyone's property, and we are pleased to, and have 
been trying to, work with content providers to ensure that they are 
properly compensated under the copyright regime of our country. We very 
much hope that, as the United States develops its laws to enable its 
citizens to take advantage of the immense opportunities offered by the 
World Wide Web, they will not be developed or construed in a way that 
will keep your neighbors from fairly benefiting from those 
opportunities as well.
    Thank you, Mr. Chairman and members of the Subcommittee, for your 
interest in iCraveTV. I would be pleased to answer any questions you 
may have. [Additional submissions are retained in subcommittee files.]

    Mr. Tauzin. Thank you, Mr. McCallum. Let me announce to the 
committee that Mr. Shimkus has gone to vote early. He will come 
back and take the Chair so that I can make the vote. We will 
continue the hearing.
    I am pleased now to welcome former Senator David Boren, our 
friend from Oklahoma and now President of Oklahoma University 
and also on behalf of the National Collegiate Athletic 
Association. Senator Boren.

                STATEMENT OF HON. DAVID L. BOREN

    Mr. Boren. Thank you very much, Mr. Chairman and Mr. Markey 
and members of the committee. It Is a pleasure to be back among 
you, and I want to thank my friend from Oklahoma, especially 
for his warm welcome, Congressman Largent. We are privileged to 
have his son at the University of Oklahoma, and now we have his 
daughter at the University of Oklahoma. So we feel especially a 
close relationship.
    I am here as president of the University of Oklahoma today 
to testify on behalf of that institution and also on behalf of 
the NCAA. University of Oklahoma is one of nearly 1,000 
universities and colleges which comprise the NCAA and is 
devoted to the well being of over 330,000 male and female 
student athletes across the country.
    And, of course, at universities, we recognize all of the 
benefits of the Internet. We are excited by all the 
possibilities. We are already benefiting by the educational 
opportunities, but we also understand the vital importance of 
intellectual property to the collegiate athletic community and 
the need to preserve copyright owners' interests as we embrace 
these opportunities of the Internet about which we have such 
enthusiasm.
    In the world of intercollegiate athletics, the revenue 
derived from copyrighted sports programming is absolutely 
essential to our programs. The University of Oklahoma, our 
athletic department budget for this coming academic year is 
$23.6 million, and we are not atypical. This budget funds the 
operation of 20 men's and women's varsity teams. OU student 
athletes who are members of these teams receive over $4 million 
in athletically based scholarships and financial aid.
    It is important to know that of the nearly 1,000 NCAA 
member institutions, fewer than 80 athletic departments are 
financially self-sufficient. Fewer than 80 out of 1,000. The 
University of Oklahoma, I am happy to say today, given the fact 
the that we have had a good basketball and football season this 
year, is among this small group; however, all collegiate 
athletic departments, including ours, confront significant 
budget pressures while simultaneously striving to expand 
opportunities for the student athletes. We have to determine 
what sports can we afford, when are there tradeoffs between our 
academic mission and our academic budget, and what we can 
afford to invest in athletics.
    Television rights for the broadcast of men's football and 
basketball are a significant source of revenue for our program 
and for others. The revenue is essential to our institutions to 
help us support the funding of athletic scholarships and 
operations in our 18 nonrevenue producing sports. The revenue 
received by the athletic department from television rights 
comes from, of course, big television agreements for men's 
football and basketball, conference participation and football 
games, and 87 percent or $62 million will come from basketball 
and football this year.
    It is then distributed, along with the CBC funds, through 
our basketball agreements back to the university. For us, just 
to give you an example, that is $4 million from our conference, 
and we have an additional almost $2 million that is generated 
with agreement through what we call Sooner Sports Properties 
through radio rights and the rest.
    Now to put that into perspective, that's over a fourth of 
our athletic department budget. If that revenue is there, you 
face the kind of choice; for example, it costs a million 
dollars for every percentage increase in faculty salaries. That 
tells you that that amount of revenue generated when you have 
to talk about tradeoffs is 6 percent of faculty salaries. I can 
make the same kind of comments about libraries, and then you 
get into doing away with opportunities in those sports which do 
not generate so much revenue for both women and for men. These 
are very significant tradeoffs.
    So as you can see, sports, like movies and music, this is 
intellectual property, and the copyright attached to sports 
programming is a vital source of revenue to the athletic 
community. We have created our own SoonerSports.com. We are 
utilizing the Internet where fans can access a number of video 
and audio offerings, and we are already exploring new ways to 
enhance and deliver programming. When we had the advent of 
satellite and cable television, of course sports were among the 
first to embrace it to find ways to expand our offerings.
    Now, of course, the focus of this hearing, it really is 
brought about by the iCraveTV case which is already will be 
discussed. This case reveals how some could use the Internet to 
ignore the intellectual property rights, deprive the copyright 
owners of the benefit and value and control of their works. 
This case not only posed a threat to copyright owners here in 
the United States, but threatened international sales and 
distribution rights, and once sports programming was 
retransmitted over the Internet, the entire world had unlimited 
access.
    I am not one quick to say that I can profess to be an 
expert on copyright law. I do, however, want to urge this body 
to resist the kind of knee-jerk reaction of granting a 
compulsory license for the Internet. Compulsory licenses 
violate a fundamental principle of the free market, and it is 
not a wise oversight to take intellectual property out of the 
patrol of those who create it. Under a compulsory license 
regime, I worry, for example, that a gambling web site legally 
transmitting NCAA football and basketball games to ensure their 
clients could wager without missing a play could be 
established. Without the control of the property copyright 
holders, they cannot ensure that their works will be used in an 
acceptable or an appropriate way.
    My message is really simple. When it comes to the Internet, 
I urge you to let the marketplace work. It is already beginning 
to work. For example, the NCAA has recently negotiated and 
awarded CBS with Internet rights to men's basketball 
tournaments for the next 11 years, and this agreement benefits 
viewers and providers, NCAA, and member institutions and more 
importantly our students a valuable source of revenue. Just 
this month it has been reported in the Wall Street Journal that 
baseball is moving in an similar direction.
    The one thing that I have learned about it, it has been 
especially a clear lesson since I left this great institution, 
is that we must always legislate, keeping in mind that there 
can be unintended consequences of our actions and particularly 
dealing with the situation that is so fluid, changing so 
quickly where already those of us who are creating this 
property have a very strong incentive to get it to the widest 
possible audience as soon as possible.
    I would say let's look at this for a while. Let's see how 
it evolves, and my guess is the marketplace is going to take 
care of itself, provide the competition, and with the legal 
rights already in place, protect those who are creating the 
property. So I urge you the let the marketplace work, make sure 
that while we have open competition and the widest possible 
distribution of this property including our sports programming, 
that we do so in a way that protects the interests of those who 
own that property and have a right to it.
    Thank you very much for letting me be with you today.
    [The prepared statement of Hon. David L. Boren follows:]
Prepared Statement of David L. Boren, President, University of Oklahoma
    Mr. Chairman, Congressman Markey, thank you for the opportunity to 
testify before you today on the issue of video on the Internet. As 
President of the University of Oklahoma, I am appearing on behalf of 
that great institution and on behalf of the National Collegiate 
Athletic Association (NCAA). The University of Oklahoma is one of 
nearly 1,000 universities and colleges that comprise the NCAA. This 
member organization is devoted to the regulation and promotion of 
intercollegiate athletics for over 330,000 male and female student-
athletes.
    I am here today to discuss the vital importance of intellectual 
property to the collegiate athletics community and the need to preserve 
copyright owners' interests as we embrace the new opportunities of the 
Internet.
     value of copyright to the intercollegiate athletics community:
    In the world of intercollegiate athletics, the revenue derived from 
copyrighted sports programming is essential to our programs. At the 
University of Oklahoma, our athletic department budget for the 1999-
2000 academic year is $23.6 million. This budget funds the operation of 
20 men's and women's varsity teams. O.U. student-athletes who are 
members of these teams, receive over $4 million in athletically-based 
scholarships and financial aid.
    It is important to note that of the nearly 1,000 NCAA member 
institutions, fewer than 80 athletics departments are financially, 
self-sufficient (i.e., revenues exceed expenses). The University of 
Oklahoma is fortunate to be among this small group. However, today all 
college athletic departments, including ours, confront significant 
budget pressures while simultaneously striving to expand opportunities 
for their student-athletes.
    Television rights fees from the broadcast of men's football and 
basketball are a significant source of revenue for the University of 
Oklahoma athletics program. This revenue is essential to our 
institution as it helps support the funding of athletics scholarships 
and the operation of our 18 non-revenue sports for both men and women.
    The revenue received by our university athletic department from 
television rights fees comes from three sources. The largest portion of 
revenue is generated by our athletic conference's (the Big 12) 
television agreements for men's football and basketball and from 
conference member participation in football bowl games. This year, the 
Big 12 conference will receive 87% of its revenues, or $62.4 million, 
from television rights fees for men's football and basketball. This 
revenue is divided among the conference's 12 member institutions.
    Another important source of revenue is obtained from the television 
rights fees paid by CBS for the NCAA Division I Men's Basketball 
Tournament. In total, the University of Oklahoma receives more than $4 
million from the Big 12 Conference and the NCAA; all of this coming 
from rights fees paid for copyrighted collegiate sports programming.
    In addition, the University of Oklahoma athletic department 
negotiated a $1.8 million agreement with Sooner Sports Properties for 
radio rights, a select number of televised basketball games and the 
rights to operate our Sooners.com Internet site.
    As you can see, sports, like movies and music, is intellectual 
property. The copyright attached to sports programming is a vital 
source of revenue to the athletics community and the preservation of 
these rights is essential in the dawning of the digital age.
            sports copyright holders embrace new technology:
    The University of Oklahoma recognizes the unique opportunities the 
Internet presents and is already exploring ways to supply college 
sports content over this new communications medium. We have created 
www.soonersports.com where fans can access a number of video and audio 
offerings.
    In fact, both the college and professional sports leagues have 
always been quick to take advantage of new technologies in the delivery 
of sports programming. For example, with the advent of cable and 
satellite television, today sports fans can watch thousands of hours of 
college and professional games on ESPN and other cable networks. In 
addition, through agreements with DirectTV, special packages ensure 
that viewers can have access to every NFL game as well as each contest 
during the NCAA basketball tournament.
    Now, with the emergence of the Internet, sports entities are 
already exploring new ways to enhance and deliver their programming. 
Furthermore, in November 1999, the NCAA became the first sports 
organization to sign a major television pact that included the awarding 
of Internet rights to CBS. Video streaming of college sports contests 
will undoubtedly expand if copyright holders can be assured that they 
will maintain control of their works. After all, as long as copyright 
holders maintain control over their intellectual property on the 
Internet, it will be in their best interests to pursue new 
technological innovation.
the internet must not pose a threat to the preservation of intellectual 
                               property:
    At the focus of this hearing is the iCraveTV case. This case 
reveals how some people can use the Internet to ignore intellectual 
property rights and deprive copyright owners of the value, benefits and 
control of their works. As we are all aware, commencing on November 30, 
1999, iCraveTV.com streamed 17 over-the-air television stations from 
Toronto, Canada and Buffalo, New York on the Internet, 24 hours a day 
around the world. During this time, those that paid substantial rights 
fees for NFL, NBA, NHL, and NCAA basketball and football games were 
faced with having the value of their programming diluted. iCraveTV not 
only posed a threat to copyright holders here in the U.S., but it also 
threatened international sales and distributions rights. Once sports 
programming was retransmitted by iCraveTV over the Internet, the entire 
world had unlimited access.
    While I certainly do not profess to be an expert on copyright law, 
I do, however, want to urge this body to resist granting a compulsory 
license for the Internet. This simply is not a good idea. Compulsory 
licenses violate fundamental principles of capitalism and the free-
market. Furthermore, it is not wise oversight to take intellectual 
property out of the control of those who create it. Under a compulsory 
license regime, I can easily envision a gambling Web site legally 
retransmitting NCAA football and basketball games to ensure their 
clients can wager without missing a play. Without control of their 
property, copyright holders cannot ensure that their works will be used 
in an acceptable or appropriate manner.
               message--allow the free-market to operate:
    My message to you today is simple--When it comes to the Internet, I 
urge you to let the marketplace work. It is already working. For 
example, the NCAA has recently negotiated and awarded CBS with the 
Internet rights to the men's basketball tournament for next 11 years 
(beginning in 2003). This agreement benefits viewers and provides the 
NCAA and its member institutions (and most importantly, our students) 
with a valuable source of revenue.
    As a college president, I am acutely aware of the importance to the 
university community of preserving our intellectual property rights. By 
allowing the market to work while respecting intellectual property 
rights, Congress can ensure that universities will provide greater and 
better services to our students, faculty, staff and our communities.

    Mr. Shimkus [presiding]. Thank you, Senator.
    We will now move to Mr. Bob Roback, President of LAUNCH 
Media. He will talk on the aspect of the streaming issue as far 
as music videos to which is all part of the this debate.
    So welcome. Your written statement is submitted for the 
record. If you could summarize, and you have 5 minutes.

                  STATEMENT OF ROBERT D. ROBACK

    Mr. Roback. Thank you on behalf of the over 200 employees 
of LAUNCH Media. Thank you all for inviting me to testify today 
at this important hearing. I'm Bob Roback, president and 
cofounder of LAUNCH Media, a publicly traded, California-based 
company that for over 6 years has developed innovative and 
compelling ways to help consumers discover new music through 
interactive media and in particular the Internet where we 
operate our music destination at LAUNCH.com.
    We founded LAUNCH Media in 1994 in response to a growing 
demand from the music consumer; specifically, music consumers 
have long relied on traditional media such as radio and MTV as 
ways to discover new music. Record companies and artists also 
profited from the market's current opportunities created by 
these traditional outlets, and certainly the outlets themselves 
have benefited handsomely.
    The nature of traditional broadcast media, however, is such 
that it must be programmed at the consumer. In the music space, 
MTV is a perfect example of how broadcast media has negatively 
impacted both the music consumer and the record industry. In 
response to its advertisers who were frustrated that MTV's 
valuable viewers were switching in and out of the channel based 
on whether the currently played music video was appealing, MTV 
embraced a new programming strategy around half-hour lifestyle 
shows that kept viewers tuned it through the commercials.
    While this strategy has fueled impressive growth at MTV, it 
has significantly curtailed the number of music videos played, 
reducing the opportunities for consumers to discover music and 
for music companies to market their repertoire. By creating an 
intent destination for consumers to discover new music through 
music video, LAUNCH Media helps artists and copyright owners 
reach consumers that otherwise might not known of their works.
    We have worked very closely with the major record companies 
to ensure that all our video content is appropriately licensed 
and that copyright holders are appropriately compensated. I can 
assure you that in spite of bandwidth limitations, there is a 
large audience of music consumers that thirsts for such video 
content. We currently stream over 2 million music videos per 
month to more than 2.8 million registered members.
    In our experience, LAUNCH provides value consumer exposure 
to music that would otherwise not be effectively marketed, and 
we are able to turn new consumer interests directly into a 
purchase that may not otherwise have happened. We firmly 
believe that LAUNCH should not be limited in its pro-consumer 
competitive offering by technology-based laws that favor cable 
or satellite in contrast to the Internet. If the content is 
compelling, the service reliable, and the price fair, then 
consumers do not care whether it was delivered through a cable, 
a satellite dish, a terrestrial broadcast, or over the 
Internet.
    The law should be equally technology neutral. As a general 
premise we believe that distributors of content should be 
permitted to compete against one another regardless of 
technology. LAUNCH's long-term goal is to be the consumer's 
content provider of choice. We are eager for the day when 
webcasting is on a level playing field with terrestrial cable 
and satellite television including with respect to compulsory 
retransmission licenses.
    Having stated the long-term goal of open competition and 
broad consumer choice, let me also clearly state that LAUNCH 
has no immediate plans to seek a compulsory television 
retransmission license or to seek legislation that guarantees 
our ability to obtain such a license, particularly as the law 
exists today.
    Most importantly, however, while we at LAUNCH may consider 
new forms of music-related programming, we are not certain that 
we can develop a compelling business model around webcasting 
preprogrammed broadcasts whether retransmitted or created 
specifically for the web.
    Let me reiterate the ultimate desire of LAUNCH, that 
consumers be empowered to listen, watch, and purchase 
entertainment and educational content how, when, and where they 
choose and by whatever technology their enjoy most. Competition 
is the foundation of the American economy, and entrenched 
industries should never be exempt from competition merely 
because the laws on the books were developed when they were the 
only ones in the room.
    Thank you very much for having me.
    [The prepared statement of Robert D. Roback follows:]
 Prepared Statement of Robert D. Roback, President, Launch Media, Inc.
    Mr. Chairman and members of the subcommittee, on behalf the over 
200 employees of LAUNCH Media, thank you for inviting me to testify 
today at this important hearing regarding the Internet's future as a 
competitively-priced, consumer-friendly distributor of audiovisual 
programming. I am Bob Roback, President and Co-Founder of LAUNCH Media, 
a publicly traded (NASDAQ NMS: LAUN) California-based company that for 
six years has developed innovative and compelling ways to help 
consumers discover new music through interactive media. Our 
distribution methods over the years has included a monthly CD-ROM and, 
of course, the Internet where we operate our music destination at 
www.launch.com.
    Mr. Chairman, I am pleased to be joined before you today by 
RealNetworks' Alex Alben. RealNetworks is a key strategic partner of 
LAUNCH and a fellow member of the Digital Media Association. DiMA has 
more than 40 members that develop and deploy digital technologies to 
market and distribute music and entertainment media to consumers 
worldwide over the Internet.
    Earlier this month the President of BMG Entertainment, a company 
that owns one of the world's largest repertoires of copyrighted music 
and media, said, ``it has been proven time and again that new media in 
entertainment don't kill pre-existing media.'' I am here to tell this 
Committee that we are in full agreement with this statement. LAUNCH and 
our DiMA company colleagues market, disseminate, popularize, and sell 
pre-existing media. Internet media companies add new value for the 
music industry, and expand the opportunity pie so dramatically that 
copyright owners and creators get a larger slice than ever before. In 
our experience, LAUNCH provides valuable consumer exposure to music 
that would otherwise not be effectively marketed and we are able turn 
new consumer interest directly into a purchase that may not otherwise 
have happened.
    We founded LAUNCH Media in 1994 in response to a growing dilemma 
for the music consumer. Specifically, music consumers have long relied 
on traditional media such as radio and MTV as ways to discover new 
music. Record companies and artists also profited from the marketing 
opportunities created by these traditional outlets and certainly the 
outlets themselves have benefited handsomely.
    The nature of traditional broadcast media, however, is such that it 
must be programmed at the consumer. In the music space, MTV is a 
perfect example of how traditional broadcast media has negatively 
impacted both the music consumer and the record industry. In response 
to its advertisers who were frustrated that MTV's valuable viewers were 
switching in and out of the channel based on whether the currently 
played music video was appealing, and therefore were not sitting 
through commercials, MTV embraced a new programming strategy around 
half-hour lifestyle shows that kept viewers tuned in. While this 
strategy has fueled impressive growth at MTV, it has significantly 
curtailed the number of music videos played, reducing the opportunities 
for consumers to discover music and for music companies to market their 
repertoire. Similarly, consolidation in the radio industry has led to 
shorter playlists and more homogenized formats that, in turn, limit 
consumer access to new artists and diverse music styles.
    By creating an Internet destination for consumers to discover new 
music, LAUNCH Media helps artists and copyright owners reach consumers 
that otherwise might not know of their works. LAUNCH Media has been 
built on the premise that an intermediary can develop a relationship 
with both the creative community and the consumer, and deliver value to 
both sides of an opportunity. The power of the Internet is that the 
consumer is in control. We believe that if consumers can access content 
where they want, when they want, and in a format or medium they want, 
artists and copyright owners will benefit so long as the 
Constitutionally-mandated economic and legal balance between owners and 
consumers of copyrighted content is not undermined.
    One of the most popular content areas on launch.com is our music 
video section. This area is already populated with over 2000 music 
videos created by both the record companies and exclusively by LAUNCH 
in our studios. We continue to add hundreds of new videos each week.
    Our focus on video content may surprise you in light of the fact 
that most consumers still access the Internet at relatively low 
connection speeds and, therefore, receive lower quality video. 
Notwithstanding these limitations, I can assure you that there is a 
large audience of music consumers that thirst for such video content. 
We currently stream over 2 million music videos per month to more than 
2.8 million registered members. We expect that the addition of more 
video content, and the advent of broadband technology, will only serve 
to push these numbers higher. Looking closely at our audience and at 
the most popular videos it is clear that much of this consumer demand 
for music video content on the Web is driven by the scarcity of music 
videos on broadcast, cable and satellite.
    We have worked very closely with major record companies to ensure 
that all of our video content is appropriately licensed and that 
copyright holders are appropriately compensated. We count Warner Music 
Group, Sony Music and EMI among our close record company partners.
    Mr. Chairman, we firmly believe that LAUNCH should not be limited 
in its pro-consumer competitive offerings by technology-based laws that 
favor cable or satellite in contrast to the Internet. This Committee 
and all the witnesses before you know that consumers purchase 
entertainment programming based on quality, price and the reliability 
of the distribution service. If the content is compelling, the service 
reliable and the price fair, then consumers do not care whether it is 
delivered through a cable, a satellite dish, a terrestrial broadcast or 
over the Internet. The law should be equally technology-neutral.
    As a general premise, LAUNCH Media and the Digital Media 
Association believe that distributors of content should be permitted to 
compete against one another regardless of technology: more entrants 
into the programming distribution marketplace will bring more 
competition, lower prices and higher quality. If satellite television 
spurred cable television to improve, then the Internet will, in time, 
lead to even more improvements and better service for consumers. I 
believe that launch.com's early success in the music video space 
suggests that this has already started. In that context, let me be very 
clear: LAUNCH's long-term goal is to be consumers' content provider of 
choice, and we are eager for the day when we have an equal opportunity 
to compete for consumers' allegiance, when webcasting is on a level-
playing field with terrestrial, cable, and satellite television--
including with respect to compulsory retransmission licenses. 
Similarly, DiMA members believe that consumers deserve full choice--
full competition--and a level-playing field that lets the marketplace 
rather than the law determine winners.
    I expect, Mr. Chairman, that you and members of this Committee may 
be concerned about the effect of the Internet on local broadcasters and 
local news service, which is a core component of every thriving 
American community. I propose to you, Mr. Chairman, that local 
television would not suffer at the hands of the World Wide Web, but 
rather would thrive. When Chairman Tauzin can watch your local 
Louisiana television news, no matter how late the House debates proceed 
or where in the world you might be that night, the Louisiana television 
station will know it has more viewers, will charge more for 
advertisements, and the local economy and broadcast service will 
benefit. Mark Cuban started broadcast.com because his local network 
stations in Dallas did not broadcast Indiana University basketball 
games. With the Internet, Chairman Tauzin could always watch LSU games, 
and perhaps even the local high school games.
    We need only to look to the experience of other media, Mr. 
Chairman, to see that national distribution does not harm localism. 
Major metropolitan newspapers are available in major cities in other 
states, for decades in hard copy and in the last few years over the 
Internet. Yet, our nation's local newspapers thrive and retain their 
local character both in print and on-line. Thousands of local radio 
stations are available today over the Internet, broadcasting their 
signals to an expanded local and national audience. People tune to 
these out-of-market stations to hear first-hand local news, musical 
tastes and cultural and sporting events. For the stations, Internet 
broadcasting expands their market--after all, many more people have 
computers at their desks than radios. For the consumer, Internet 
broadcasting brings new information and understanding, and provides a 
cure for homesick sports fans, college students and Congressional 
legislative aides.
    Making television network programming available over the Internet 
similarly will not harm localism or local stations. Indeed, hundreds of 
local television stations already are broadcasting their own local 
programming over the Internet, to tens of thousands of viewers. But 
when the local news is over, and the stations resume transmitting 
network shows, the computer screen goes blank. If the Internet is ever 
to provide effective competition to cable and satellite services, with 
the resulting benefits to consumers, Internet media companies must find 
a way to license the entire local station's broadcast signal to the 
viewing audience.
    Having stated the long-term goal of open competition and broad 
consumer choice, let me also clearly state that LAUNCH has no immediate 
plans to seek a compulsory television retransmission license or to seek 
legislation that guarantees our ability to attain a compulsory 
television retransmission license, particularly as the law exists 
today. Candidly, Internet technology to ensure limited geographic 
distribution is just beginning to approach the levels of security 
generally associated with cable television, and we are not yet 
confident that all other technological hurdles have been overcome. Most 
importantly, however, while we at LAUNCH may consider new forms of 
music related programming, we are not certain that we could develop a 
compelling business model around webcasting pre-programmed broadcasts, 
whether retransmitted or created specifically for the Web.
    Mr. Chairman, let me reiterate the ultimate desire of LAUNCH and 
the Digital Media Association: that consumers be empowered to listen, 
watch and purchase entertainment and educational content how, when and 
where they choose, and by whatever technology they enjoy most. 
Competition is the foundation of the American economy, and entrenched 
industries should never be exempt from competition merely because the 
laws on the books were developed when they were the only ones in the 
room. The law must be open to evolution and adaptation, to assure fair 
treatment and equivalent rights for new businesses using new 
technologies.
    Thank you.

    Mr. Shimkus. Thank you for your testimony.
    We will next go to Mr. Stuart Beck, President of Granite 
Broadcasting Corporation. Again, your full testimony was 
submitted for the record, and if you would summarize for 5 
minutes.

                   STATEMENT OF STUART J. BECK

    Mr. Beck. Thank you, sir, and thank you all. Thank you for 
the opportunity to appear before you today to discuss video and 
broadcasting on the Internet. As you have said, my name is 
Stuart Beck, and I am the president and I am the cofounder of 
Granite Broadcasting Corporation.
    Granite, which was founded 12 years ago, owns and operates 
nine television stations around the country. Our markets 
include Detroit, Fort Wayne, Fresno, Peoria, Bloomington, San 
Francisco, San Jose, Syracuse, and Buffalo. Each of our 
television stations is distinctly community oriented. The 
backbone of our service is the strength of your local daily 
news, weather, and sports operations.
    For many, local television is the primary source of 
accurate information about the people and events in their 
communities, and although the Internet has indeed begun to 
supplement television programming in this regard, as I will 
explain, as such, the community building function of the 
programming provided by local operations cannot be over 
emphasized.
    My dad was a local broadcaster, and I am proud to follow in 
his foot steps, but times have changed broadcasting, and I 
actually think they have changed for the better. Technology is 
providing us with expanded reach to our customers by addressing 
a wider audience and by supplying more comprehensive news and 
information.
    Granite is recognized as an innovator in the development of 
new media services that combine TV and Internet platforms. We 
have established complimentary web sites for our local stations 
on which we stream live news coverage from our stations and 
post items of local interest such as traffic, weather, school 
closings, and high school sports. We have put managing editors 
into each of our news rooms to re-purpose our news content and 
put it out on the web.
    We have spent a lot of money on administrative systems that 
allow the people in our news room to type in plain English on a 
computer screen that which will appear on the web once 
extracted from our television programming. Our services, 
therefore, include webcasts which we love, as well as 
supplementary news content local advertising and other unique 
features.
    The Granite Group includes WKBW in Buffalo, New York. 
That's the No. 1 station is Northern New York, with due respect 
to my colleague, Mr. Karpowicz. WKBW TV is an ABC affiliate 
that has been an integral part of the Buffalo community for 
many years. The station launched its related web site 
WWW.WKBW.com in 1996. It receives about 300,000 page views, a 
month and members of the Buffalo community rely on the site for 
timely news and information about community events.
    Last year, Granite learned that another web site, 
iCraveTV.com was also carrying WKBW's local programming and 
other copyrighted works including all ABC network programming. 
iCraveTV was converting our TV signal into computerized data 
and streaming it over the Internet from its web site.
    What Mr. McCallum failed to tell this committee is that not 
only was iCrave carrying our programming without authorization, 
but the Internet site was displaying our programming on web 
page surrounded by iCrave advertisements which presumably were 
sold by McCallum. Thus it would be possible for a local Ford 
dealer to sign a contract for exclusive rights for WKBW's local 
11 p.m. newscast, only to find its advertisement on iCraveTV 
surrounded by competing advertisements for Chevrolet. 
Similarly, an advertiser may purchase a banner ad for the KBW 
web site during the airing of a particular program, only to 
find it replaced by a competitor's banner advertisement on 
iCrave's site.
    On January 20, a coalition of TV networks, studios, and 
sports leagues got a temporary restraining order against 
iCrave, a fairly rare legal remedy but employed in this case. 
Under the court order, iCrave is prohibited from infringing on 
rights set forth in copyright and trademark law, and we are 
satisfied with how effectively our courts enforced the rule of 
law in this situation. It is clear that under the U.S. 
copyright law it is illegal to take copyrighted programming 
such as the stuff we spend so much money producing and stream 
it on the Internet without permission of the owner. iCrave 
plainly and openly did that and the court ruled promptly to 
stop.
    Copyright owners such as Granite Broadcasting are already 
transferring content through the use of streaming and other 
innovative applications. There is no need whatsoever to change 
the law, in our opinion, to allow third parties to use our 
copyrighted material in ways which are now illegal. Copyright 
owners are already taking full advantage of new media to 
distribute content in unconventional and creative ways. If our 
greater public policy goal is to increase a flow of 
information, then entertainment copyright owners are already 
doing this, and I assure you that we are aggressive and 
innovative in this approach.
    In the course of our business, ladies and gentlemen, 
Granite needs assurances that all copyright law and related 
protections can be provide to us. For example, we need to 
assure advertisers with whom we contract that they will not 
find our programming surrounded by somebody else's 
advertisements and potentially a diminution of the quality of 
our product by people who did not make that product. So there 
is no fair use about it in changing it.
    Mr. Shimkus. Mr. Beck, if you would quickly----
    Mr. Beck. I think I am completed. I think all the points 
that I have not yet made have been made.
    Mr. Shimkus. I am sure this will be followed up in the 
question and answer, and my colleagues will be back and I think 
that we will go into it in greater detail.
    [The prepared statement of Stuart J. Beck follows:]
 Prepared Statement of Stuart J. Beck, Granite Broadcasting Corporation
    Chairman Tauzin, Ranking Member Markey, and Members of the 
Subcommittee, thank you for the opportunity to appear before you today 
to discuss video and broadcasting on the Internet. My name is Stuart 
Beck, and I am President of Granite Broadcasting Corporation.
    Granite, which was founded just twelve years ago, owns and operates 
nine television stations in geographically diverse markets reaching a 
substantial number of the nation's television households. Granite is 
also the largest minority-controlled owner of major market television 
stations in the country. In every market where we produce news, Granite 
strives to be the leading provider of local news and community 
programming. The markets served by Granite include: Detroit, Michigan; 
Duluth, Minnesota/Superior, Wisconsin; Fort Wayne, Indiana; Fresno, 
California; Peoria-Bloomington, Illinois; San Francisco, California; 
San Jose California; Syracuse, New York; and Buffalo, New York.
    Each of the broadcast television stations operated by Granite is 
distinctly community-oriented. The backbone of our service is the 
strength of our local daily news operations. For many, local television 
news is the primary source of accurate and up-to-date information about 
the people, trends, and events in their communities, although the 
Internet has begun to supplement television programming in this regard, 
as I will explain. As such, the community-building function of the 
programming provided by local news operations cannot be overemphasized.
Granite Broadcasting Corporation: Using the Internet to Reach our 
        Audience
    My father was a local broadcaster, and I am proud to follow in his 
footsteps. But times have changed since the day my dad was at the peak 
of his career, and I might add that they have changed for the better. 
Technological breakthroughs provide today's broadcasters with expanded 
opportunities to reach our customers--both in terms of addressing a 
wider audience and in supplying more comprehensive news and 
information.
    Granite is recognized as an innovator in the development of new 
media services that combine television broadcasting and Internet 
platforms. We have established complementary websites for our local 
stations on which we stream live news coverage from our stations and 
post items of local interest such as traffic, weather, school closings 
and high school sports. Local Granite stations consider themselves 
responsible members of the communities in which they serve, and make it 
a point to serve those communities comprehensively. The services 
Granite provides to local audiences include:
    Webcasts: Granite stations stream live news and other original 
programming over the Internet. Web users also have access to previously 
aired news programs and other station-generated programs. San Jose-
based KNTV streams its original ``TechNow!'' program live on its site, 
and it is possible to access archives of the program up to a year old.
    Written News Content: Our stations hire reporters to supplement 
over-the-air and streamed news programming with additional written 
news, sports, and other stories such as reviews of local entertainment 
and restaurants for their sites. Our web sites also provide links to 
related sites with more extensive local entertainment information.
    Advertising: Granite news sites typically carry banner ads at the 
top of the screen and contain many links to the sites of other 
businesses, bolstering the local economy.
    Unique Features: Granite has created an election news site called 
``Political 2000,'' to which all of its stations are linked. This link 
contains national, state and local political news and campaign 
information tailored to the local Granite station from which the 
Internet user accessed the ``Political 2000'' site.
    Some Granite stations have online sites especially for children and 
teens. These include ``Kids Club'' areas with information of interest 
to young Internet users, and ``Homework Help'' areas, which contain 
links to Internet sites that can assist students in completing research 
or other projects. KBJR-TV, based in Duluth, Minnesota and Superior, 
Wisconsin, has created a site featuring local high school hockey 
information (www.highschoolhockey.com).
Resolving the iCraveTV.com Threat and Letting the Markets Work
    The Granite television broadcasting group includes WKBW-TV in 
Buffalo, New York. WKBW-TV is an ABC affiliate that has been an 
integrated part of the Buffalo community for many years. The station 
launched its related web site--www.wkbw.com--in 1996. It receives 
approximately 300,000 page views every month, and members of the 
Buffalo community rely on the site for timely news and information 
about community events.
    Last year, Granite learned that another web site--iCraveTV.com--was 
also carrying WKBW-TV's local programming and other copyrighted works, 
including all ABC network programming. ICraveTV was converting our 
television signal into computerized data and streaming it over the 
Internet from its website. Not only was iCrave carrying WKBW-TV 
programming without authorization, but the Internet site was displaying 
our programming on its web page surrounded by iCrave advertisements. 
Thus, it would be possible for a local Ford car dealer to sign a 
contract for exclusive rights to WKBW-TV's local I 1:00 p.m. newscast 
only to find its advertisements on iCrave surrounded by competing 
advertisements by Chevrolet. Similarly, an advertiser may purchase a 
banner add for the WKBW web site during the airing of a particular 
program, only to find it replaced by a competitor's banner 
advertisement on iCrave's site.
    On January 20, 2000, a coalition of television networks, studios 
and sports leagues filed a Motion in the U.S. District Court for the 
Western District of Pennsylvania for a Temporary Restraining Order 
against iCrave. That Motion was granted on January 28, 2000. On 
February 8, 2000, the court granted a Preliminary Injunction. Under 
this court order, iCrave is prohibited from infringing on rights set 
forth in copyright and trademark law or otherwise making any false 
representation with regard to sponsorship of iCraveTV. ICrave is 
specifically barred from streaming copyrighted programming into the 
United States.
    It is clear that under U.S. copyright law, it is illegal to take 
copyrighted programming--such as local news, movies or sports--and 
stream it on the Internet without permission of the owner. ICrave 
plainly and openly violated copyright law, and the court was sound in 
ruling as such. Copyright owners, such as Granite Broadcasting, are 
already transferring content through the use of streaming and other 
innovative applications. There is no need to change the law to allow 
third parties to use copyrighted materials in ways that are now 
illegal. Copyright owners are already taking advantage of new media to 
distribute content in unconventional and creative ways. If our greater 
public policy goal is to increase the flow of information and 
entertainment, copyright owners are already doing this, and I assure 
you that we are aggressive and innovative in our approach.
    In the course of our business, Granite needs certain assurances 
that only copyright law and related protections can provide. For 
example, we need to assure advertisers with whom we contract that they 
will not find our programming surrounded by advertisements of a 
competitor. Granite also needs to know that other web sites will not 
take our recognized trademark or otherwise imply our endorsement of 
their site. Finally, Granite needs to know that the programming we 
create and license for our stations, such as WYBW-TV in Buffalo, will 
not be misappropriated, jeopardizing the copyright protections and 
rights of parties with interests at stake. The recent iCrave 
preliminary injunction provides these types of assurances for Granite 
and allows us to pursue the business of entertaining, educating and 
informing our audience.
    Previous Congresses have established a solid legal framework to 
provide copyright and trademark owners control of their works and 
symbols. Chairman Tauzin, Ranking Member Markey, and Members of the 
Subcommittee, I urge you to refrain from passing any laws that could 
jeopardize the intellectual property protections provided under the 
present legal framework. There is no need to expand the purview of 
government regulation of the Internet or otherwise change a legal 
approach that, so far, has proven to work.
Conclusion
    Granite is proud to be a leader in the extension of local 
television service to new media. We are reaching our customers with 
valuable and comprehensive information and creating a better informed 
population. Our web sites demonstrate that it is possible to enjoy the 
free flow of information on the Internet without breaking any laws--
laws that have held the United States in good stead for centuries and 
continue to serve a valuable purpose. I urge the Members of the 
Subcommittee to continue to encourage the potential of the Internet, 
but also to step back and let the markets work within the framework of 
the existing, effective legal system.

    Mr. Shimkus. I would like to now recognize Mr. Peter Jaszi, 
professor, Washington College of Law, American University. 
Again, welcome, and you have 5 minutes.

                    STATEMENT OF PETER JASZI

    Mr. Jaszi. Mr. Chairman, members of the subcommittee, I am 
honored to appear in my individual capacity to offer an 
overview of how copyright has evolved with technology.
    Mr. Shimkus. Professor Jaszi, can you pull your microphone 
just a little bit closer?
    Mr. Jaszi. With pleasure.
    Mr. Shimkus. It is a high-tech conference room here.
    Mr. Jaszi. During the debate over the Digital Millennium 
Copyright Act of 1968, this subcommittee demonstrated that it 
understood the need to balance the interests of information 
consumers and content owners affected by new technology. Then 
content owners were concerned that advances in digital 
technology threatened the economic viability of their 
businesses and legislation proposed by the administration would 
have substantially curtailed the fair use doctrine.
    You recognized that while new technology may present 
potential threats, it also offers vast new opportunities to the 
public, and you produced balanced legislation that advanced 
electronic commerce, and you have heard the radio and 
television signals now can be distributed via the Internet.
    Internet radio already enables consumers to listen to 
stations from around the world in part because you incorporated 
the DMCA and a compulsory license for retransmission of 
copyrighted sound recordings performed by Internet 
broadcasters. Improvements in quality can soon establish 
Internet television delivery as the market competitor for other 
consumer video services.
    In my view, the appropriate question to ask now is this: 
How can Congress facilitate enhanced service and competition? 
And to begin to answer that question, I would like to take you 
back do 1455 when Europe got its first glimpse of the 
Guttenberg Bible and discovered that multiple copies of a 
document could be produced by mechanical means. Fortunately, 
early printers' hopes of maintaining a monopoly on this new 
technology proved unavailing. By 1500, roughly 30,000 titles 
had made it into print and the world has never been the same.
    Copyright began as the law's response to movable type. In 
the United States, it has served to promote a single 
Constitutional objective, the progress of science and use for 
arts. It accomplishes this by balanced regulation of 
information use and not of the means by which information is 
delivered to consumers. Copyright has contributed to the 
dissemination of knowledge and successive waves of new 
technology from photography to satellite retransmission have 
swept over our information environment.
    In situations where copyright owners have been most 
concerned that new distributions mechanisms might destabilize 
an established business model, Congress has prevented 
technological stalemate by legislating compulsory licenses. In 
1909, music copyright owners were locked in a standoff with the 
fledgling phonograph record industry whose new products 
threatened sales of sheet music. The Congressional compromise 
made it clear that unauthorized recordings did infringe 
copyright while providing a compulsory license to assure that 
authorizations to record would not be unreasonably withheld.
    Section 111 of the 1976 Copyright Act cut the knot our 
courts had tied around cable television and unleashed a 
transformative force in the entertainment industry. Section 119 
was introduced and extended in 1999 to provide a space for 
direct broadcast satellite technology. Compulsory licensing 
often has helped to open other promising channels for 
delivering content by breaking a decade's old standoff around 
performance rights and sound recordings.
    In short, compulsory licensing is alive and well and the 
American copyright system is a common and appropriate 
legislative response to the tensions that new information 
technologies can generate. When the technological potential of 
Internet TV is fulfilled, the real question will not be whether 
it qualifies under the Section 111 and 119 compulsory licenses 
as now written, but on what terms it should be made available 
to consumers through existing or new legislation and how 
content owners can be fairly compensated for delivery of their 
works.
    Given the wildfire growth of Internet radio, Mr. Chairman, 
there can be no doubt that Internet TV transmissions that 
include popular network programming would be equally 
successful. This could be facilitated by statutory provisions 
like those now available to cable and satellite distributors 
or, alternatively, local stations could be empowered by law or 
agreement to grant permission to retransmit network programming 
with compensation flowing back to the networks.
    To the extent that it was appropriate to impose 
geographical restrictions on Internet retransmission of TV 
signals, technologies now in existence or in development, 
password systems and encryption, could be employed. Thus the 
concerns expressed by the copyright office back in 1997 about 
extending compulsory licensing to the Internet may no longer be 
relevant.
    More fundamentally, however, Congress should reconsider the 
role of geographic restrictions as conditions on compulsory 
licensing for the Internet. If each TV station could make its 
signals available over the Internet, then all stations could 
compete freely and attract new viewers and additional 
advertising. Such a change would advance electronic commerce 
and information availability if it could be accomplished in way 
that adequately protects the interests of content owners, 
broadcasters, and other stakes in this system.
    Consumers will increasingly seek to expand the ways they 
can access video content. The challenge, of course, is to 
assure that all effective parties benefit from these 
advancements in technology. Thank you.
    [The prepared statement of Peter Jaszi follows:]
Prepared Statement of Peter Jaszi, Professor of Law, Washington College 
                      of Law, American University
    Mr. Chairman and Members of the Subcommittee, I am honored to 
appear before you today in my individual capacity as a professor of law 
who specializes in copyright and new media law. To help put in 
perspective the testimony of the other distinguished witnesses on the 
panel, I have been asked to provide an overview of how copyright and 
related laws have evolved as technology has changed over time.
    Introduction. During the debate over the Digital Millennium 
Copyright Act of 1998, this Subcommittee certainly demonstrated that it 
understood the need to balance the interests of information consumers 
and content owners affected by new technology. As you will recall, 
content owners were deeply concerned that advances in digital 
technology threatened the economic viability of their businesses. Under 
legislation proposed by the Administration, the fair use rights of 
ordinary consumers would have been substantially curtailed in the 
effort to provide additional protections to content owners. 
Fortunately, as you recognized, new digital technology may present 
potential threats to content owners, but it also offers vast new 
opportunities to information consumers. In the end, you produced 
balanced legislation that advanced electronic commerce and promoted the 
interests of both content owners and information consumers.
    As you will hear in greater detail today, radio and television 
signals now can be distributed via the Internet to consumers. Internet 
radio retransmissions already enable consumers to listen to radio 
stations from around the world, in part because you incorporated into 
the DMCA a compulsory license for retransmission of copyrighted sound 
recordings performed by Internet broadcasters.
    Incremental improvements in quality could soon establish Internet 
television delivery as a market competitor for other consumer video 
services. In my view, the appropriate question to be asking now is 
this: What role can and should Congress play to facilitate enhanced 
service and competition? To answer that question, I think it useful to 
go back over five centuries and consider how the law has adapted to 
changes in technology.
    The Evolution of Technology and the Law. In 1455, visitors to the 
Frankfurt Trade Fair got their first glimpse of what we know today as 
the Gutenberg Bible. The appearance of just a few pages of text was 
quite a revelation to Western eyes, for it was apparent that multiple 
copies of a document could be produced by mechanical means. Whatever 
hopes early printers may have had of maintaining a monopoly on this new 
method of producing the written word for the masses proved, they were 
unavailing--fortunately for all of us. By 1500, roughly 30,000 titles 
had made it into print. The world has never been the same.
    As Representative Sawyer so eloquently put it during the hearing 
this Subcommittee held during its consideration of the DMCA, 
``Gutenberg's action had a powerful effect on western culture. It was 
the bridge from the Renaissance to the Reformation and was a direct 
pathway in this country to the First Amendment.''
    Copyright had its beginnings as the law's response to the spread of 
the new technology of movable type. Reflecting the broad societal 
interest in the wide dissemination of information, Article 1, section 
8, clause 8 of the Constitution authorizes Congress to promulgate laws 
governing the scope of proprietary rights in, and use privileges with 
respect to, intangible ``works of authorship.'' As set forth in the 
Constitution, the fundamental goal is ``[t]o promote the Progress of 
Science and useful Arts . . .'' In the more than 200 years since 
enactment of the first federal copyright law in 1790, the maintenance 
of this balance in our copyright laws has contributed significantly to 
the growth of markets for works of the imagination and of the 
industries that enable the public to have access to and enjoy such 
works.
    Congress has historically advanced this constitutional objective 
and promoted technological development by regulating the use of 
information--not the devices or means by which the information is 
delivered or used by information consumers. Section 106 of the 
Copyright Act of 1976, for example, establishes certain rights 
copyright owners have in their works, including limitations on the use 
of these works without their authorization. As a countervailing 
balance, Sections 107 through 121 of the Copyright Act set forth the 
circumstances in which such uses will be deemed permissible or 
otherwise lawful even though unauthorized. In general, these provisions 
are technology neutral. They do not regulate information commerce or 
information technology. Instead, they prohibit certain actions and 
create exceptions to permit certain conduct deemed to be in the greater 
public interest, all in a way that appropriately balances the interests 
of copyright owners and users of copyrighted works.
    Evolution of Compulsory Licenses. In general, the copyright system 
of the United States has an excellent--if by no means perfect--record 
of accommodating technological change and adapting itself to the 
conditions created by new modes of information commerce. This is so, at 
least in part, because the fundamental values underlying that system, 
with their emphasis on the importance of achieving an appropriate 
balance between proprietary control and public access, have stood so 
robustly through all the waves of ``new technology'' which have swept 
over our information environment in the last century: photography, 
motion pictures, broadcasting, photocopying, cable and satellite 
retransmission--and more. In this connection, it is worth remembering 
that some of those waves appeared--in their own times--as threatening 
to the copyright status quo as networked digital technology seems 
today.
    From time to time, of course, the process of accommodation and 
adaptation has been less than perfectly smooth--especially in 
situations where copyright owners have been intensely concerned about 
the potential of new distribution technologies to destabilize 
established business models. In these situations, to avoid stalemates 
that might retard the growth of information commerce, the Congress 
repeatedly has responded by legislating ``compulsory'' or ``statutory'' 
licenses. These mechanisms allow (either in the first instance or as a 
``back-up'' where attempts at voluntary negotiation have failed) the 
dissemination of copyrighted works by means of specific technologies, 
when--and only when--prescribed conditions (including the payment of 
licensing fees) have been satisfied. Far from being out of the 
ordinary, compulsory licensing is embedded in the grain of the American 
copyright system.
    In 1909, for example, the Congress was faced with a stand-off 
between owners of copyright in musical compositions, on the one hand, 
and the fledgling phonograph record industry--whose new business model 
threatened continued sales of sheet music--on the other. The compromise 
Congress struck involved making it clear that the unauthorized 
``mechanical reproduction'' of songs did indeed infringe copyright, 
while providing a compulsory license (now found in Section 115 of the 
Copyright Act) to assure that authorization for recordings would not be 
unreasonably withheld.
    The 1976 Copyright Act incorporated other compulsory licenses: 
Section 116 (repealed in 1993) was designed to strike a fair compromise 
between the interests of music copyright owners and jukebox operators, 
while Section 118 aimed specifically to promote the performance of 
copyrighted music by means of the then-novel technology of public 
broadcasting. Of greatest significance, however, were the Section 111 
compulsory licensing provisions that cut the Gordian Knot of law and 
technology that courts had tied over the previous decade, enabling the 
rise of cable television and thus unleashing a transformative force in 
the entertainment and information industries.
    Since 1976, the Congress frequently has resorted to compulsory 
licensing to avoid other potential impasses between content owners and 
distributors. Section 119 of the Copyright Act was introduced in the 
Satellite Home Viewer Act of 1988 to provide a space in which direct 
broadcast satellite technology could flourish as cable TV had done 
before it. In 1999, the provision was revised and extended by (among 
other things) the addition of a new compulsory license for ``local-
into-local'' transmissions. Recently, compulsory licensing also was 
employed to open up yet other promising channels for delivering 
copyrighted content to consumers by breaking the decades-old standoff 
between recording companies and broadcasters around performance rights 
in sound recordings. Central to the design of the Digital Performance 
Right in Sound Recordings Act (DSPRA) of 1995 were a back-up compulsory 
license for certain subscription music services and another for the so-
called ``digital delivery'' of sound recordings. In 1998, as part of 
the Digital Millennium Copyright Act, the DSPRA was expanded to add a 
the new compulsory license for the retransmission of copyrighted sound 
recordings by Internet broadcasters to which I referred earlier.
    In short, compulsory licensing is alive and well in the American 
copyright system. It is a common and appropriate legislative response 
to the tensions that new technological modes of information commerce 
inevitably will generate.
    Last year, we saw a further evolution of the debate over the future 
of compulsory licensing. In 1997, in anticipation of the renewal of the 
Satellite Home Viewer Act, the Copyright Office conducted a study to 
determine whether and how that Act should be extended. The Copyright 
Office concluded that compulsory licenses should not be extended to the 
Internet, largely because of the perceived inability of Internet 
technology to geographically restrict signals to areas unserved by 
terrestrial broadcast signals.
    In 1999, potentially harmful language was included in the 
Conference Report of the Satellite Home Viewer Improvements Act that 
explicitly would have precluded Internet carriage of retransmitted 
video signals. As I understand it, proponents of the change contended 
that this merely reflected existing law, since Internet companies did 
not currently qualify for such a license. Internet and 
telecommunications companies objected, arguing that, if they could meet 
the geographic restrictions in the current Act, they should be entitled 
to a compulsory license. In the end, principally as a result of the 
efforts of many Members of this Committee, the language was removed 
from the legislation that ultimately was signed into law.
    Next Steps. In the near future, Internet companies believe they 
will be able to provide effective competition to cable and satellite 
companies delivering television to consumers. Natural markets include 
the workplace, where interference prevents clear reception, and rural 
and remote areas unserved or undeserved by broadcast, cable, and 
satellite services. When this technological potential is fulfilled, the 
real question will not be whether Internet TV service qualifies under 
the Section 111 and 119 compulsory license, as now written, but on what 
terms it should be made available to consumers under existing or new 
legislation--and how content owners can be fairly and adequately 
compensated for delivery of their works.
    As other witnesses have stated, the tens of thousands of hours of 
audiovisual content available over the Internet demonstrates a growing 
consumer interest in Internet video. There are sites dedicated to 
independent films, independently produced news, talk and public service 
programming, and original animation. Live concerts, news events, 
conferences, and business meetings from around the world are broadcast 
five daily. Television programming from past decades have been licensed 
for rebroadcast on various Internet sites.
    But despite the wealth of video content available over the 
Internet--far more than any one cable or satellite system could 
possibly offer--what is missing is current television network content. 
Several hundred local television stations are retransmitted over the 
Internet today, but these retransmissions are limited to content 
created by the stations themselves. When such material is on the air, 
it is made available to all Internet users in all geographic regions, 
without subscription. At other times of the day, such as when network 
programming is broadcast, the station signals are not available over 
the Internet.
    Given the wildfire growth of Internet radio, Mr. Chairman, there 
can be no doubt that television transmissions over the Internet that 
include today's popular network programming would be equally 
successful. To enable transmission of the complete broadcast day would 
require a license from the owner of the network content. This could be 
facilitated by statutory provisions of the type now available to cable 
and satellite distributors. Alternatively, the Copyright Office study 
suggested that local stations could be empowered, by law or agreement, 
to grant permission to retransmit network programming, with 
compensation flowing back to the networks.
    As I noted earlier, in its study the Copyright Office concluded 
that compulsory licenses should not be extended to the Internet, 
largely because of the perceived inability of Internet technology to 
geographically restrict signals to areas unserved by terrestrial 
broadcast signals. That may have been true in 1997, but it will 
increasingly be of limited relevance in the future. While the Internet 
has generally been utilized as a global medium, various means have been 
developed in recent years to restrict access to material over the 
Internet. Private web sites are available on a member-only basis. 
Videoconferences restricted to certain participants have been conducted 
over the Internet. Methods such as password protection or cryptographic 
authentication can be used to limit access to authorized persons. Other 
technologies, such as hardware cards or smart cards, theoretically 
could be implemented for this purpose.
    As I also have noted, even under current law Internet services 
argue that they could be included within the compulsory video licenses 
for cable or satellite services to retransmit station signals if they 
limit distribution of signals to particular geographic regions. In my 
view, however, Congress should reconsider the requirement to implement 
geographic restrictions as a condition to compulsory licensing for the 
Internet. If every television station can make its signals available 
over the Internet, without spectrum or bandwidth limitations faced by 
cable and satellite systems, then all local stations can compete freely 
and attract new viewers (and, therefore, more advertising revenue). 
Such a change would advance electronic commerce and the availability of 
information to consumers, and can undoubtedly be accomplished by means 
that will adequately and fairly protect the interest of content owners, 
broadcasters, and others with a vested interest in the status quo.
    Conclusion. Consumers will increasingly seek to expand the ways 
they can access video content. Whether viewing broadcast programming on 
a computer monitor, a handheld personal device, or a television screen 
using relatively new market entrants such as Web TV, AOL TV, 
RealNetworks G2, or a host of products still being developed in garages 
and labs around the world, consumers will seek access to new content 
and to share their experiences with others. As the technology further 
evolves, the breadth of their experiences and enjoyment can increase as 
well. The challenge, of course, is to ensure that both content owners 
and consumers benefit from these advances in technology.
    As it did in rewriting the DMCA, this Subcommittee can advance 
technological development and electronic commerce by balancing the 
interests of these important stakeholder groups.
    Thank you.

    Mr. Tauzin. Thank you, gentleman.
    The Chair now recognizes Mr. Paul Karpowicz, the Vice 
President of LIN Television of Providence, Rhode Island.

                   STATEMENT OF PAUL KARPOWICZ

     Mr. Karpowicz. Thank you, Mr. Chairman. I am vice 
president of LIN Television which owns and operates 15 TV 
stations nationwide. I am also vice chairman of the NAB 
Television Board and chairman of the CBS Affiliates Board.
    Lintel vision employs 1,500 people including nearly 140 at 
our station in Buffalo, New York, WIVB, Channel 4. Of those 140 
employees, 60 are part of our local news department. WIVB is 
our station in Buffalo that was one of those stations hijacked 
by iCraveTV and put on the Internet illegally.
    I am here today to tell this committee that we must oppose 
and remain vigilant against this sort of thievery. The activity 
iCraveTV engaged in was a direct attack or American copyright 
law. More importantly, it was a frontal assault upon the 
locally based network affiliate system of broadcasting that is 
the hallmark of American television. Both Congress and the FCC 
have consistently recognized the benefits of having American 
broadcasting licensed and entrusted to serve the local public 
interest.
    As a result, we have created a nationwide network of local 
stations that provides both national and local programming. 
iCraveTV's actions do violence to that system and ultimately 
threaten the ability of all Americans to have access to local 
programming. Let me explain how. My station in Buffalo, WIVB, 
is a ABC affiliate and carries their network fare. In addition 
to that network programming, we offer local produced 
programming, syndicated shows that we purchase as the exclusive 
station in our market. Providing all of these programs allows 
us to generate local advertising that runs under all of the 
local service we provide.
    For example, we spend almost $5 million a year on local 
news, a commitment that would not be possible without some of 
the revenue that we generate from our advertising within local 
network and syndicated programs. As you know, Congress has 
created compulsory license for both cable and satellite 
services that gives those industries the ability to retransmit 
local stations in a discrete geographic area, in this case, our 
DMA with some very limited exceptions.
    These licenses also carry certain obligations such as must-
carry, Syntax, and sports blackout rules, but no such license 
or obligations exist for the Internet which can literally serve 
the entire world.
    Why is this a concern? If you look at my station, it 
provides all kinds of local programming throughout the day 
including local advertising, promotional material that drives 
viewers to our local news, weather warnings and alerts, public 
service announcements, and numerous other offerings. If a 
viewer in Buffalo can access their network programming from the 
Internet, they will lose access to all of that local 
information, and it will only diminish our ability to provide 
it.
    The same holds true for syndicated programs. We pay hefty 
fees to obtain the rights to show Oprah in the Buffalo market, 
but if some Internet site streams Oprah from elsewhere or vice 
versa, that destroys the syndicated exclusivity we have paid 
for and our station and its viewers will suffer as a result.
    The bottom line is that this lawless activity will create 
economic harm which necessarily translates into reduced local 
services for our audience. Further, the way in which the 
programs are presented on iCraveTV degrades the entire viewing 
experience by squeezing my station's picture inside a frame 
that includes extraneous banner advertising. Not only does the 
picture quality suffer, but by doing this, iCraveTV also 
removes the data stream that gives viewer closed captioning and 
lets them activate the V-chip technology in their TV set.
    In addition, iCraveTV or some other network provider could 
insert advertising for competing advertisers that would 
severely dilute the ads my station carries. There is no reason 
for General Motors to advertise on my station if iCraveTV is 
running a banner ad for Ford around the edge of my picture.
    Local advertisers pay for local viewers. Viewers in Buffalo 
watching programming from some other market will not see the 
local car ads, the local PSAs, or those ever important local 
political ads, and that same situation would hold true for 
viewers in other markets watching WIVB from Buffalo.
    The Federal Court in Pittsburgh fortunately stepped in and 
did the right thing. It forced iCraveTV to cease and desist in 
this illegal activity. We believe that the laws currently on 
the books are sufficient to make sure that this does not happen 
again, so long as the courts remain vigilant in enforcement.
    The situation can only change if Congress were to become 
convinced to pass legislation by granting the compulsory 
license for the Internet. The Internet is and can be a 
wonderful thing. Our stations are already using it to provide 
news, Doppler radar, traffic cameras, and other local 
information to our viewers.
    Make no mistake, we are not against the Internet, but what 
we are against is allowing the Internet to take advantage of 
our copyright material and use it illegally to hurt us and our 
local viewers. We all want the Internet to enhance our local 
markets through innovative technology, but we cannot allow 
those without the copyright to control those uses.
    We will continue to fight for our rights against iCraveTV 
or any other web site that attempts to steal our product, and I 
would urge of you to join us in that effort. Thank you very 
much.
    [The prepared statement of Paul Karpowicz follows:]
 Prepared Statement of Paul Karpowicz, Vice President, LIN Television 
   Corporation on Behalf of the National Association of Broadcasters
    My name is Paul Karpowicz. I am the Vice President for Television 
of LIN Television Corporation, the owner of television station WIVB, a 
CBS-affiliated station in Buffalo, New York as well as network stations 
in many other markets. I am the Vice Chairman of the Television Board 
of the National Association of Broadcasters and the Chairman of the CBS 
Television Affiliates Association. Thank you very much for giving me 
the opportunity to testify today.
The Network/Affiliate System
    Our station in Buffalo, like the hundreds of other network stations 
across the United States, exists as a result of the uniquely American 
partnership between national networks and local TV stations. Under this 
system, local TV stations in markets large and small across the United 
States provide a unique combination of national TV programming (such as 
NFL football and ``60 Minutes''), syndicated programming (such as 
``Oprah Winfrey''), and local news, weather, and public affairs 
programming.
    The network/affiliate system provides the solution to a problem 
that Congress has long tried to solve: how to ensure that as many 
communities as possible have their own local TV ``voices,'' rather than 
accepting a world in which viewers in Buffalo, Baton Rouge, or Boise 
must rely solely on programming originating in New York or Los Angeles. 
The network/affiliate system has also ensured that virtually all 
Americans have access to free, over-the-air television, rather than 
forcing viewers to pay intermediaries (such as cable systems or 
satellite companies) to provide them with TV programming.
    In short, the network/affiliate system has been a tremendous 
American success story. But the continued vitality of this system 
depends on local stations enjoying a substantial degree of exclusivity 
in providing network programming to local viewers. Local stations make 
much of their revenues by selling advertising time during popular 
network programs, particularly primetime programs. During these same 
programs, local stations run promotional spots designed to attract 
viewers to local news programs; these spots are a key way that stations 
build audiences for their news programs. If local viewers are able to 
watch network programs on distant stations imported by third parties--
whether cable systems, satellite carriers, or Internet companies--the 
basic economics of network affiliates are put in grave jeopardy.
    Exclusivity in providing local audiences with syndicated 
programming is also important to the continued viability of local 
stations, both network and independent. Our stations simply cannot 
continue to pay large fees to program syndicators to keep high quality 
syndicated shows on free over-the-air television, if the same programs 
are being imported day and night into our local markets by cable, 
satellite, or the Internet.
    Protection of stations from importation of duplicative programming 
into their markets is thoroughly woven into the fabric of our legal 
system. Since the 1960s, for example, the Federal Communications 
Commission has adopted and enforced network nonduplication, syndicated 
exclusivity, and sports blackout rules that bar cable systems from 
importing duplicative programming from distant stations. Congress 
acknowledged and supported these rules when in created the cable 
compulsory license in 1976, and reaffirmed its strong support of those 
rules in the Telecommunications Act of 1996.
    When satellite television appeared on the scene, Congress created a 
similar set of rules in 1988 to protect the network/affiliate 
relationship. Congress reaffirmed those rules last year in the 
Satellite Home Viewer Improvement Act, and directed the Commission to 
apply syndicated exclusivity and sports blackout rules to satellite 
carriers as well. In doing so, Congress ``reassert[ed] the importance 
of protecting and fostering the system of television networks as they 
relate to the concept of localism,'' and pointed out that ``television 
broadcast stations provide valuable programming tailored to local 
needs, such as news, weather, special announcements and information 
related to local activities.'' SHVIA Conference Report, 145 Cong. Rec. 
at 11792 (daily ed. Nov. 9, 1999).
Internet Transmissions of TV Broadcasts and the iCraveTV Case
     Although this Subcommittee is very familiar with the harm (and 
resulting consumer complaints) caused by satellite industry importation 
of distant network stations, the threat posed by unauthorized Internet 
delivery of broadcast television programming is vastly worse.
    Let me start by telling you what iCraveTV is and what it has done. 
iCraveTV is a company based in Toronto, Ontario that late last year 
began picking up over-the-air TV signals from 17 stations in Buffalo, 
New York and Toronto and retransmitting them throughout the world via 
the Internet. ICraveTV's business plan was simple: use broadcasters' 
copyrighted product, in which broadcasters have invested billions of 
dollars, and then ``frame'' it with iCraveTV's own advertisements. In 
the process, iCraveTV also degraded the quality of our signal, omitted 
the part of the signal required for closed captioning and parental 
advisories, and made it appear that iCraveTV was itself the author of 
the programming. iCraveTV did not obtain permission from any TV 
station--including our Buffalo station--or any other copyright owner 
before pirating their programming.
    iCraveTV pretended that its service was limited to Canada, where it 
claims it is permitted to retransmit TV programming through the 
Internet. (We strongly disagree with that claim about Canadian law, and 
iCraveTV has been sued in Canada as well.) The reality is that iCraveTV 
was available throughout the United States and throughout the world.
    As soon as they learned of iCraveTV's unlawful activities, American 
broadcasters and copyright owners immediately demanded that iCraveTV 
stop infringing their copyrights. When iCraveTV refused, a coalition of 
TV networks, motion picture studios, and sports leagues filed suit in 
federal court in Pittsburgh on January 20, 2000 against iCraveTV and 
its principals.
    Judge Ziegler of the United States District Court for the Western 
District of Pennsylvania instantly saw through the ``only in Canada'' 
sham. As Judge Ziegler explained, the evidence showed that the iCraveTV 
web site ``was established, used, promoted, advertised and sold to 
attract users in the United States to circumvent the trade[mark] and 
copyright laws of the United States and to circumvent the trade[mark] 
and copyright rights of the plaintiffs.''
    The Court also found that by transmitting TV programming through 
the Internet into the United States, iCraveTV is ``publicly 
performing'' those programs in violation of the plaintiffs' exclusive 
rights under the Copyright Act. Notably, iCraveTV did not argue--and 
could not argue--that it is allowed to transmit TV programming through 
the Internet to U.S. viewers without obtaining permission from the 
copyright owners. As the Register of Copyrights made clear in letters 
to Congress last fall, U.S. law simply does not permit such 
transmissions, and Internet companies are not entitled to transmit TV 
programming under any existing compulsory license.
    Judge Ziegler has issued a preliminary injunction barring iCraveTV 
from transmitting the plaintiffs' copyrighted programming into the 
United States. To comply with that court order, iCraveTV has terminated 
its online transmissions of TV programming.
Why Internet Retransmissions of TV Station Programming is So Dangerous
    The very substantial harm that stations have experienced as a 
result of unlawful retransmissions by satellite companies would be 
incalculably worse if Internet infringers such as iCraveTV were allowed 
to continue to stay in business, or if Congress were (mistakenly) to 
create a new Internet compulsory license that would override the rights 
of stations and other copyright owners. The reason is simple: 
unauthorized Internet transmissions of TV broadcast programming can 
reach everyone in the United States--in fact, everyone in the world--
who has a computer and a modem. In the United States alone, there are 
110 million Americans with Internet access, and there are hundreds of 
millions of Internet users worldwide. These figures are, of course, 
growing every day, as is access to broadband that makes delivery of 
video over the Internet even more appealing to consumers. As local 
stations have lost millions of local viewers to unlawful retransmission 
of distant TV stations by satellite companies, they would now face 
unauthorized Internet companies delivering the station's own product to 
more than 100 million local viewers in the United States, including 
those in many of the most affluent households that are the most 
appealing to advertisers.
    And it is not just the national programming that is at issue here. 
Our Buffalo station invests millions of dollars every year in producing 
top quality local news programming, of which we are the sole copyright 
owner. Having invested the money and hired the talent to produce this 
programming, our station--and not some third party who has invested not 
a penny in our programming--is entitled to decide how to deliver that 
programming to viewers.
    Our Buffalo station, like many stations, also buys syndicated 
programming, and often pays top dollar to ensure that only our station 
will offer a particular program in its local market. FCC rules ensure 
that those contracts must be respected by cable systems when they 
import out-of-town stations. Unauthorized Internet transmissions would, 
of course, make those contractual protections meaningless, since TV 
stations carrying the same programming in distant cities would be 
available to every viewer in Buffalo with an Internet connection.
    Nor is this just a domestic issue. By delivering U.S. television 
programming throughout the world on the Internet, unauthorized Web 
transmissions of TV stations would sabotage the ability of U.S. 
broadcasters and other copyright owners to sell their programming in 
foreign markets. That is, owners of valuable U.S. television 
programming would find themselves ``scooped'' in selling their own 
programming by third parties who could simply appropriate the entire 
output of the U.S. television programming and deliver it 
instantaneously throughout the world.
    It is not an exaggeration to say that unauthorized Internet 
transmissions of TV stations would cripple, if not destroy, our 
spectacularly successful system of free, local, over-the-air 
television. Exclusivity would become a meaningless concept, since 
dozens, if not hundreds, of stations would offer the same programming 
that local stations once used as their calling card. Local weather 
emergency information--such as blizzard warnings in Buffalo--would go 
unheard by many local viewers, since there would be no reason to watch 
network or syndicated programming on a viewer's local station rather 
than on a station imported from some distant market. And with those 
viewers lost to local stations, the revenues needed for stations for 
local stations to provide this programming would be diminished. And 
local political advertisements, along with local news coverage, would 
go unseen by many local viewers for the same reasons.
    Let me be clear: broadcasters are not opposed to technological 
change, and we are eager to harness the extraordinary power of the 
Internet in ways that are consistent with our roles as providers of 
free, over-the-air local television. To exploit the magic of the 
Internet properly, however, requires that free market forces be left to 
work, rather than having the government seize our copyrighted works and 
hand them over to third parties who have done nothing to create them.
    Broadcasters are already taking advantage of the power of the 
Internet--and benefiting consumers--through purely voluntary, 
marketplace transactions. For example, many TV stations today offer 
their own local newscasts throughout the United States on their Web 
sites, thereby enabling interested viewers--including former 
residents--to keep on top of local news developments. Of course, these 
Webcasts feature (and are financed in part by) advertisements sold by 
the station that created the programming, not ads placed by third party 
parasites. Other broadcast TV programs may soon be offered through the 
Internet, through normal, marketplace transactions, if copyright owners 
determine that it can be done consistent with the fundamental 
principles of their businesses.
    Although authorized Webcasts of TV broadcast programming are an 
exciting new development, unauthorized Webcasts pose one of the most 
devastating threats that over-the-air television has ever faced. We 
should take to heart the lesson that the satellite experience has 
taught us: as Chairman Tauzin has pointed out, it is crucial to stop 
unauthorized transmissions of TV programming before they become 
widespread and viewers become accustomed to receiving illegal 
programming. Just as Congress does not want to hear complaints from 
viewers about another round of turnoffs--this time from an illegal 
Internet service--stations do not want to field the complaints that 
will inevitably result if this type of piracy becomes widespread and is 
then halted by the courts.
    For now, the laws appear to be working well to permit TV 
broadcasters and other copyright owners to protect themselves against 
this new, ultra-high-tech form of piracy: the iCraveTV court correctly 
found that Internet transmissions of TV programming in the United 
States, without the permission of the broadcaster and copyright owners, 
are against the law. We will keep you closely advised of developments, 
and will let you and other concerned members of Congress know 
immediately if it turns out that there needs to be some adjustment to 
U.S. law to prevent iCraveTV or anyone else from engaging in this 
outrageous form of misappropriation.

    Mr. Tauzin. Thank you very much, sir.
    And our final witness is Mr. Alex Alben, Vice President of 
Government Affairs of RealNetworks, referred to you earlier I 
think by Mr. McCallum as a distributor of iCrave. Mr. Alben.

                     STATEMENT OF ALEX ALBEN

    Mr. Alben. We are not a distributor. We are the technology 
platform that is utilized for streaming.
    Mr. Tauzin. I stand corrected.
    Mr. Alben. Mr. Chairman, members of the subcommittee, on 
behalf of RealNetworks, thank you for inviting me to testify 
today.
    I'm Alex Alben, and since 1997, I've had the pleasure of 
developing and implementing RealNetworks' Internet media 
strategy. It has also been my pleasure to represent 
RealNetworks as one of the founding members of the Digital 
Media Association which today represents over 40 Internet media 
companies.
    Mr. Valenti, we do not have as distinguished a list of 
members in terms of name recognition, but our members are also 
technology exporters and are building the infrastructure for 
the worldwide interpret economy which hopefully will also be a 
great export for the United States as we continue to develop.
    RealNetworks was founded by Rob Glazer in 1994 with the 
bold premise that the Internet would be a mass audio-visual 
medium. To accomplish this, Mr. Grazer and his development team 
developed the Real Player, a software application that receives 
plays packets of audio and video, and then delivers or streams 
them over the Internet. Because we have always made a free 
version of the Real Player available to end users, our platform 
has rapidly proliferated, as you are aware.
    From 5 million unique registered users in 1995, our 
audience has grown to over 95 million today with 33 percent 
watching video and 75 percent tuning into audio programming 
every week. This growth would not have been possible without 
the creation of attractive content from over 300 content 
partners from individuals to schools and community groups to 
large media companies.
    The barriers to entry in the field of mass communications 
have never been so low as on the Internet. Streaming media, as 
you've heard today, is being widely embraced by local radio and 
television stations. As a result of these forces, over 300,000 
hours of programming are created and webcast each week, 
creating a medium that enriches video content with interactive 
features.
    Mr. Chairman, we appreciate the opportunity to come here 
today, and I would like to alert you to three critical trends 
in our business. First, we firmly believe that the a level 
playing field fosters competition and is essential for growth 
of the Internet. The Telecommunications Act of 1996 called for 
breaking down the barriers of distribution in the United States 
communications marketplace. The Internet is accelerating this 
process in ways that we could not have predicted even 4 years 
ago. A horde of businesses across all industry sectors are 
pushing the barriers for wider distribution of content over the 
Internet.
    Our sole concern is that we have a level playing field to 
compete with these established forms of mass media. We are not 
asking for Government regulation. We are not asking for 
Government intervention. We believe none is required at this 
time when the marketplace is finding new ways to meet consumer 
appetite for interactive online news and entertainment 
products.
    Second, the web must be allowed to bring local programming 
to a global audience. Much like cable access and low-powered 
TV, streaming media promotes localism and presents a platform 
for more speakers to reach the general public, creating new 
media outlets to serve the public. Any solution to an Internet 
compulsory license must take the global nature of the Internet 
into account and not artificially limit the audience for 
webcast content by imposing artificial geographic restrictions 
that make little sense for a global medium.
    Our challenge, therefore, is to present new business models 
for media companies to stream their programming to this new 
audience so that they can immediately appreciate the upside of 
full-fledged distribution of their programming over the 
Internet.
    Third, streaming media will establish new online revenue 
streams for traditional media. As you have heard today, it 
already is, but we must also respect intellectual property 
rights. The web has already created these new revenue streams 
for Internet broadcasters and other broadcasters who can sell 
Internet ads and do E-commerce on a global basis. It is a 
wonderful thing to hear of stations from Buffalo, New York 
distributing their programming over the world and selling ads 
now on an international basis. It's remarkable.
    Traditional sports entertainment, and news programs made 
available to the 250 million member Internet audience will only 
grow the revenues for the talented artists, athletes including 
colleagiates, producers, and others who create this popular 
programming. We want to offer content to consumers at 
attractive prices with the greatest convenience in terms of 
what they can watch and where they want to watch it. By 
offering the online audience the widest possible array of live 
and on-demand programming, we will work with content providers 
to create this huge new market for new and old copyrighted 
works.
    In the long run, every program will be globally distributed 
over the Internet. The technology allows for it and consumers 
demand it. Our critical task to do so in a way that fairly 
compensates copyright owners and demonstrates the promise of 
this rich and interactive global medium.
    Mr. Chairman, thank you for inviting us here today. I'd 
like to also add to Mr. Valenti's comments. We are interested 
in the copyright assembly, and if we can afford the membership 
fees, we may be interested in signing up. So please give us 
some information.
    Mr. Valenti. We will give you a compulsory license.
    Mr. Tauzin. Compulsory dues.
    Thank you very much, Mr. Alben.
    [The prepared statement of Alex Alben follows:]
 Prepared Statement of Alex Alben, Vice President, Government Affairs, 
                           RealNetworks, Inc.
    Mr. Chairman and members of the subcommittee, on behalf of 
RealNetworks, Inc., thank you for inviting me to testify today at this 
very important hearing regarding the future of video distribution on 
the Internet. I am Alex Alben, and since 1997, I have had the 
remarkable pleasure of participating in the development and 
implementation of RealNetworks' groundbreaking Internet media strategy. 
It has also been my pleasure to represent RealNetworks as one of the 
founding members of the Digital Media Association, which today 
represents forty digital music, e-commerce and digital video companies. 
Today I would like to briefly review the history of RealNetworks and 
streaming media, and discuss the future of our company, the digital 
media industry, and the exciting future that consumers will enjoy as we 
implement our vision to distribute music and video to the global 
Internet audience.
RealNetworks Revolutionary Technology Creates The Streaming Media 
        Market
    RealNetworks was founded by Rob Glaser in 1994 with the bold 
premise that the Internet would one day be a mass audiovisual medium. 
For those of us who built early web businesses on a foundation of text 
and simple graphics, the notion that one day high quality video would 
stream to 250 million connected consumers around the world was as 
farfetched as predicting that two sluggers would break Babe Ruth's 
single season home run record two years in a row. Yet just as Mark 
McGwire and Sammy Sosa have accomplished this feat, RealNetworks 
technology has delivered on the promise of inter-active video. You 
might remember the first Seattle Mariner's baseball game, broadcast 
over the Internet in April of 1995 using the RealAudio 1.0 format. This 
AM-quality broadcast was not only streamed to fans at their desktops in 
Seattle, but, complete with commercials, was enjoyed by displaced fans 
as far away as Stockholm and Tokyo.
    To accomplish this, Mr. Glaser and his team had developed the Real 
Player--a software application that receives and plays ``packets'' of 
audio or video data that are delivered from remote computers, or 
``servers,'' across the Internet. By breaking rich media files such as 
video into a series of small packets, Real technology gives the 
computer user a continuous listening or viewing experience, even over 
low bit rate connections. The RealPlayer and server system facilitates 
both live and on-demand delivery of streaming programming. Unlike 
digital downloads, which require storage space on the user's pc and 
relatively fast Internet connections, streaming represents an 
incredibly efficient and inexpensive way for broadcasters--or 
``webcasters''--to deliver audiovisual content to their online 
audience. As a consequence, the technology fulfills Mr. Glaser's 
original vision that millions of Internet users can create new content 
for a new medium, without reliance on traditional media outlets.
    Fast forward to February of 1997, when Spike Lee helped us launch 
RealVideo with a short film featuring tap dancer Savion Glover that was 
widely distributed over the Internet. It's unfortunate that Al Jolson 
wasn't available, because he might have said, ``You ain't seen nothing 
yet.''
    In November of 1999, the RealPlayer 7.0 brought consumers a package 
of audio and video programming that delivers on the promise of 
streaming media, incorporating better video and audio quality with a 
revolutionary format that allows for simultaneous presentations of 
multimedia, text, pictures and graphics.
    Because we have always made a free version of the RealPlayer 
available to end users, the platform has rapidly proliferated. From 
500,000 unique registered users in 1995, our audience grew to 14.4 
million in 1997, 48 million in 1998 and stands at 95 million at the 
beginning of this month, with five downloads of the RealPlayer 7 
occurring every second.
    To underscore the popularity of streaming media on the web, 
Arbitron New Media and Northstar Interactive report that of the 95 
million RealPlayer base, 33% watch video programming and 75% tune into 
audio programming on a weekly basis!
Connecting 95 Million RealPlayer Users To a Wide Array of Content 
        Created Both By Traditional Media Companies and New Voices.
    This growth would not have been possible without the creation of 
attractive content from wide variety of sources, enabled by the 
distribution of our low-cost encoding and production tools. We also 
offer a free server that will connect a content publisher with up to 
sixty simultaneous viewers or listeners. From individuals, to community 
groups, to clubs, to broadcasters and large media companies, the 
barriers to entry in the field of mass communications have never been 
so low as on the Internet. Virtually anyone with a connected computer 
can distribute information over the World Wide Web, realizing our 
Founding Fathers' vision of a robust marketplace of ideas.
    RealNetworks has over 300 content partners, ranging from Chuck D's 
RapStation, to NPR, the BBC, Comedy Central, Atom Films and Leonard 
Nimoy's ``Alien Voices.'' Independent and non-traditional programmers 
have found an efficient channel in the Internet to cost-effectively 
reach niche audiences. Similarly, CNN, ESPN, NBC, MTV, Fox, CBS and 
other major media companies have embraced RealSystem G2 as a leveraged 
way to expand their reach on the web and drive consumers to both their 
web sites and to their off-line media outlets.
    And this is an international phenomenon--from broadcasts of special 
services from the Vatican to underground radio transmissions during the 
war in Bosnia--streaming media has presented unique ways for speakers 
and dissidents to reach their community of listeners on the World Wide 
Web.
    Streaming media has also been widely embraced by local radio and 
television stations. Our best estimates are that on a global basis over 
3000 radio stations have put their signal up on the web on a 24 hour 
basis. This phenomenon has turned businesses aimed at local audiences 
(and advertisers) into global media outlets. Following suit, over 200 
TV affiliates offer some selection of their news programming on the 
Internet in RealVideo, creating convenience for viewers who seek out 
particular stories or who might have missed the 5 o'clock News.
    As a result of these forces, over 300,000 hours of programming are 
created and webcast each week in RealMedia formats.
    Motion picture studios, TV networks, and local broadcasters have 
all affirmatively decided to employ streaming media to expand beyond 
their core consumers and reach the vital Internet audience. The 
promotional value of distributing content over the web and the 
potential for tapping into increased ad revenues perpetuates this 
``virtuous circle.'' RealNetworks views these copyright owners and 
programmers as our partners in this enterprise to create a new 
programming medium--a medium that takes the best of TV and Radio 
content and enriches it with interactive features that ``add value'' 
for the American and global consumer.
Looking to the Future--
    Mr. Chairman, we appreciate the opportunity to come before this 
Subcommittee and reflect not only on the rapid growth of our industry, 
but to alert you to trends we have noticed, with a view toward helping 
you craft the best approach to government policy in this area. We can 
encapsulate these observations in a set of three fundamental 
principles:
First--A Level Playing Field Fosters Competition And Is Essential For 
        the Growth Of This Important New Medium
    The Telcommunications Act of 1996 called for breaking down the 
barriers to distribution in the U.S. communications marketplace. The 
Internet has accelerated this process in ways we could not have 
predicted even four years ago. A horde of businesses--software vendors, 
media companies, telcos and others--are pushing the barriers for wider 
distribution of content to more consumers. RealNetworks and other 
Internet media delivery companies have not asked for special 
legislation to address the particular aspects of our distribution 
channel. In fact, as the statistics I have cited clearly demonstrate, 
the web audience is growing without any regulatory favoritism.
    Our sole concern is to have a level playing field to compete with 
established forms of mass media. We are not asking for government 
regulation or intervention and believe none is required at this time 
when the marketplace is finding new ways to meet consumer appetite for 
interactive online news and entertainment products. It would also be 
unfair--and probably unwise--for government to devise new sets of rules 
to regulate this nascent medium as it evolves and grows in sometimes 
unpredictable ways. We are simply asking that all laws passed be 
technologically neutral and that Congress refrain from erecting special 
barriers to digital distribution simply because it is digital, without 
thinking through the implications for the important policy goals served 
by online media.
Second--The Web Must Be Allowed To Bring Local Programming To A Global 
        Audience
    The impressive growth of streaming on the Internet demonstrates 
consumer demand for online audio and visual content. People today 
expect to find radio shows and film clips on web sites. They want to 
experience both traditional and non-traditional content and they want 
to do so on their own schedule and in places that are not well-served 
by analog audio and video signals. By its nature, the Internet is an 
unscheduled interactive medium that offers consumers more choice and 
more voices. Clearly, this medium dovetails with our longheld public 
policy principles of free speech and breaking content distribution 
bottlenecks.
    Much like Cable Access, Low Power TV and the old-fashioned soapbox, 
streaming media promotes localism and presents a platform for more 
speakers to reach the general public. I'm sure the members of this 
Committee are keenly aware that much of the unprecedented media 
consolidation and relaxation of cross-ownership rules over the past 
decade are premised on this development--that new media outlets are 
serving the public through new means of distribution such as the 
Internet.
    The challenge in creating a compulsory license for the Internet is 
not to shoehorn the Internet into local topographies, but to fairly 
compensate program owners for the distribution of their content beyond 
the boundaries of their terrestrial signals. The technology allows a 
soccer fan in the U.S. to watch a World Cup match in France in real 
time over a modem. Surely, along with the sports leagues, we should be 
smart enough to figure out how to expand the audience for such 
programming in a way that doesn't undermine traditional revenue streams 
and licensing arrangements.
    Any solution to an Internet compulsory license must take the global 
nature of the Internet into account and not artificially limit the 
audience for webcast content by imposing artificial geographic 
restrictions that make little sense for a global medium. Our challenge, 
therefore, is to present new business models for media companies and 
producers to stream their programming to this new audience, so that 
they can immediately appreciate the upside of full-fledged distribution 
of their programming over the Internet.
Third--Streaming Media Will Establish New Online Revenue Streams for 
        Traditional Media, While Respecting Intellectual Property 
        Rights
    As a person who participated on the studio side of the Sony Betamax 
case, I can only smile now at the outcome where the VCR created both 
the $7 billion Video Rental market and the $8 billion Video Sale 
market, while the Theatrical Box Office continues to grow and in fact 
set new records. Quite simply, new technologies created new markets for 
old content in a way that did not cannibalize long-established revenue 
streams. The web is already creating new revenue streams for local 
broadcasters who can now sell Internet ads and do e-commerce on a 
global basis, while their terrestrial signal market continues to 
thrive.Traditional sports, entertainment and news programs made 
available to the 250 million member Internet audience will only grow 
revenues for the talented artists, athletes, producers and others who 
create this popular programming.
    We are mindful that we need to balance the incentives to create 
great programming with the benefits of achieving the widest possible 
distribution. RealNetworks upholds this principle, both as an inventor 
of intellectual property and as the first company to successfully bring 
a legal action under the Digital Millenium Copyright Act to ensure that 
content owners can distribute their streaming media programming in ways 
that they intend.
    We want to offer content to consumers at attractive prices with the 
greatest convenience in terms of when they want to watch and where they 
want to watch. By offering the online audience the widest possible 
array of live and on-demand programming, we will work with content 
producers to create a huge new market for new and old copyrighted 
works.
    Many traditional models--pay-per-view, syndication, subscription 
and even ``rental'' can be replicated online. In the long run, every 
program will be globally distributed over the Internet. The technology 
allows for it and consumers demand it. Our critical task is to do so in 
a way that fairly compensates copyright owners and demonstrates the 
promise of this richly interactive global medium
Conclusion
    In conclusion, let me reiterate the ultimate desire of RealNetworks 
and our fellow companies with the Digital Media Association: that 
consumers be empowered to listen, watch and purchase entertainment and 
educational content how, when and where they choose, and by whatever 
technology they enjoy most. We pledge to continue to work with our 
content partners, as RealNetworks has since its inception, to fully 
realize Rob Glaser's vision of the Internet as a robust, interactive 
medium for audio and video communication by all people around the 
globe.
    Thank you for the opportunity to testify this morning. I would be 
pleased to answer any questions you may have.

    Mr. Tauzin. The Chair will recognize himself and then other 
members for 5 minutes.
    Let me point out that I think we are going to follow this 
hearing with what I think is the behind-the-mirror issues that 
are going to envelope a consideration of the issues you have 
presented us today, and that is the issues of privacy on the 
Internet and how information may or may not be restricted by 
consumers, and we are talking about how you may or may not 
restrict the movement of content or isolate its delivery, 
isolate access to it.
    Consumers, I think as we further develop privacy technology 
and privacy policy, are going to also have some ability to 
control growing information over the Internet, and much of what 
you discussed today that do with advertiser-based support for 
content and obviously privacy controls exercised by consumers 
can have very increasingly important effects upon the ability 
of advertisers to work the new markets, and we are probably 
going to follow up with a hearing on that. I just want you to 
know this so you can be thinking about how you may be able the 
contribute to that hearing.
    Let me confess to you that I think I share with many of my 
colleagues I've talked to about the issues you have presented 
today some of the tension I think Americans feel about these 
issues. Let me try to express them for you and get some 
feedback.
    One, I think Americans like the idea that they can see all 
the television they could possibly want to see from as many 
different places as possible on the Internet. I kind of like 
the notion that I can watch my local news here in Washington on 
the stations back in new Orleans and Baton Rouge. I kind of 
like the idea that I can watch what the candidates are saying 
in New Hampshire before they come to campaign in Louisiana to 
see if they are saying the same things. It is kind of nice. I 
kind of like the idea that I can watch that incredibly 
interesting campaign in New York. That is going to be 
interesting for all Americans, and yet, you know, the question 
is how can we accommodate to that and yet are we going to lose 
localism.
    Are we going to lose some of the features of network 
distribution that has characterized network programming 
distribution, network non-dupe rules, and the systems that have 
supported the local station's ability to finance local news 
programs and local important events, and how do we settle those 
tensions, and I'll ask you to respond.
    I also want to tell you that from what I am hearing from 
you, I sense that there are two real concerns expressed out 
here in addition to consumer concern for more and more video 
programming and the one on the side of broadcasters, and video 
content providers has to do with, indeed, localism and 
protecting the base of advertiser support and network 
distribution of products. And on the other side, on the content 
side, is the concern for copying and distribution of digital 
products that still have value, that still have value in terms 
of its ability to make profit for the content creator in 
various ports, either at Blockbuster and other area 
distributions.
    At the same time, you know, Mr. Alben, you said it as 
boldly as I ever heard it. You predicted that every television, 
every video content program is one day going to be available to 
the world whether we want it to or not. It is sort of like 
MP3.com reached on university campuses. The question is when 
will university students be able to pick up digital video 
signals and put them on their web site and broadcast from 
around the world.
    You know, iCrave is just the first puff of wind in this 
brewing storm, and how do we settle it? So give me some 
feedback.
    Mr. McCallum, first of all, technologically, you tell me 
you have software, you have equipment that can protect this 
product, and you have equipment that can isolate the delivery 
to a certain designated class of subscribers. How certain can 
you or any of us be that that technology is going to be 
sustained in the face of kids in any college in America who 
have been able to break the best codes our best scientists have 
been able to put together?
    Mr. McCallum. Mr. Chairman, in the next 2 weeks, we hope to 
have an efficiency level set for the software that we're 
implementing. The invasion by young people and by people intent 
on hacking into systems knows no bounds. They are driven 
largely by curiosity. Increasingly, unfortunately, there's a 
large number driven by commercial intent, but the industry, 
RealNetworks and other companies, are working to be ahead of 
those to try to put in place ever increasing protective systems 
with encryption and so on, and we are part of that process 
because it is important to us from a business model that we be 
able to guarantee protection to a certain degree.
    Mr. Tauzin. Mr. Valenti, the copyright assembly is being 
organized. Will it invest in technology that perhaps can help 
us resolve some of these conflicts?
    Mr. Valenti. Mr. Chairman, I think that Mr. McCallum will 
do very well in the motion picture business. He can sure write 
good fiction.
    The fact is that in the trial before Chief Judge Ziegler, 
the Chief Judge of the Western District of Pennsylvania, as my 
memory serves me correct, on that trial document on pages 48, 
98, 102 and 113, McCallum plainly admits they cannot do it, and 
Judge Ziegler in his decision said you cannot. There are no 
technological fixes to restrict it to Canada.
    For example, I'm a 16 year old, and I'm in my base in 
Toronto. I can mirror iCrave to the world instantaneously, and 
that can happen and we all know that, and he has admitted that 
in the trial that went on. You have to understand what iCrave 
is doing. They take these television stations from the twenty-
ninth parallel and above, bring them into their web site, alter 
the picture, and then sell advertising around it, do not ask 
anybody's permission to do it, do not pay anybody, and they 
expect you to believe that they are doing something nobel, 
advancing human society.
    Fifty-seven percent of all the users of iCrave were in what 
country? The United States.
    Mr. Tauzin. Why don't you respond, Mr. McCallum and Mr. 
Alben if you'd like to join in. How do you answer that 
argument?
    Mr. McCallum. Thank you for anticipating, Mr. Chairman, 
that I might have a response. I might start off my response by 
reading a short E-mail. It says:
    ``Hello. I live in northwestern Ontario, and I am not able 
to get access to cable, and I do not have the money for a 
satellite dish and service. I live 35 miles away from the 
nearest city of Thunder Bay. Your web page gave me access, but 
now they have taken that away. I wish they would let you bring 
back your rebroadcasting service so that I could have access to 
shows and programs that I presently do not have access to. 
Signed, Missing my TV access.'' This is from Linda, somewhere 
35 miles outside of North Bay in very deep snow, I assume. The 
plaintiffs would have you believe that this woman 35 miles 
outside of Thunder Bay, Canada is living in Richmond, Virginia 
because she sent this E-mail through her AOL account. All 
Canadian AOL subscribers are registered through the system as 
being in the United States.
    The system that we put in place at the time we launched was 
using what we asked was the best available technology. Since 
that time, a number of developments have taken place by other 
companies, and we are taking advantage of those as we build the 
new system. We have also augmented those by some proprietary 
software development that is taking place within our own 
company and our suppliers, and so we believe that this system 
which will be available in the next month will be in a quantum 
leap toward not only the security of our system but for 
security for other program suppliers on the Internet.
    Mr. Tauzin. Mr. Alben, is that technology reliable in your 
view?
    Mr. Alben. We have not tested that specific technology that 
Mr. McCallum referred to, and I think that any means of trying 
to deny access based on the URL of the user is probably not 
going to be sufficient if that is what is being used. So you 
need to get information from the consumer in order to verify 
where they are from, and that is a hurdle to entering into the 
access.
    Mr. Tauzin. My time is up, but, Mr. Karpowicz, you wanted 
to respond to my earlier comments. I'll let you do that, and 
then I'll move to Mr. Markey.
    Mr. Karpowicz. Yes, sir. Thank you, Mr. Chairman. Really, I 
just wanted to start off by saying broadcasters are not against 
the Internet. We think the Internet is a wonderful, innovative 
technology, and it has provided us with many opportunities to 
provide new services to our viewers that currently did not 
exist.
    As I indicated in my testimony, we do stream news and 
weather and traffic cameras. A lot of information is being 
streamed currently. It is my understanding that over 200 
stations across the United States currently stream all or part 
of their newscasts. So to your question about being able to 
receive New Orleans stations in New York, I think that time is 
coming.
    I think the issue there is those stations have chosen to do 
that. Those stations who are the copyright holders of that news 
product have chosen to make that decision. The product was not 
just plucked out of the air waves and taken away, and it is 
presented in a format that the stations are very comfortable 
with.
    Mr. Tauzin. The Chair is pleased to recognize Mr. Markey 
for a round of questions.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Opening day last year, Red Sox, WEEI radio up in Boston, I 
am able to put it up and listen to it in my office down here in 
Washington, DC. That is great. I want to be able to watch it 
to. That would be great, fabulous. You know?
    Back in the 1920's, we actually passed laws which cleared 
signals all the way for 10,000 miles, and I listen to WBC radio 
every night when I go home here in Washington, DC. I listen to 
the 6 or 7 o'clock news in WBZ radio in Boston. We know that 
there is 25 or so channels across the country that we can do 
that.
    Over the years, of course, this subcommittee panel, we have 
ensured that we create a balance that makes it possible for new 
technologies, for new competitors to get into the marketplace. 
There are always controversial decisions which we make. Back in 
1962, this subcommittee had to pass a law so that all TVs in 
America could carry UHF channels. ABC, CBS, and NBC bitterly 
opposed that law. They, of course, did not want new UHF 
channels. They said that would undermine their ability to be 
able to create just the right kind of a marketplace for the 
existing three big net works.
    In 1978, this subcommittee had to pass a law that insured 
that the cable industry would have access to telephone and 
utility poles across the country so that they would also get 
preferential treatment. Those existing industries, they did not 
like those laws.
    Similarly, back in the 1960's and 1970's, we passed a 
compulsory license for the cable industry whereby the rates 
were set by Congress so that we could again give a nurturing 
hand to the cable industry, and in 1987 and 1988, we forced, 
this subcommittee forced the Federal Communications Commission 
to not, in fact, levy access charges on Prodigy and CompuServe, 
and then AOL as they were in their early stage, and in fact 
that is what today makes flat rate pricing of the Internet 
possible and drives its growth, that decision by this 
subcommittee in 1987 and 1988, otherwise AOL would not be able 
to purchase Time Warner and the Atlanta Braves.
    It was this subcommittee that actually made it possible. It 
would have died in its infancy or grown very slowly, and, 
believe me, a lot of people opposed that as well at the time, 
and even last year Congress acted to allow DVS providers to 
start local-to-local services and let them wait until 2002 
before they had to start full must-carry service. That helps 
the new service, the satellite service get off the ground, so 
to speak.
    The point of this story line is that this subcommittee has 
always tried to break down barriers. So the questions before us 
are multiple, balancing the rights of existing copyright 
holders against the new technology and the competition which we 
like to see in the marketplace.
    Mr. Valenti, do the copyright owners need protection or 
tools for enforcement beyond that contained in the RIPO 
implementing legislation and otherwise contained in existing 
laws? Do you need new laws?
    Mr. Valenti. I do not think any law is needed, Mr. 
Chairman. That is what, in my awkward way, I was trying to say. 
I used Sam Rayburn's words, ``Wait a minute to see how this 
develops'', and I think you have been in the forefront of that, 
you and the chairman. That is all that is needed, is watchful 
waiting to see who is being denied what.
    I think today, except for this loan fellow that Mr. 
McCallum referred to, that just about 99 percent people in this 
country can get just about anything that they want to get, and 
this has been expressed by Mr. Beck and Senator Boren and 
others here, but we are going to have television stations all 
over this Internet.
    Mr. Markey. Let me ask Mr. Alben then. Let me ask, Mr. 
Alben, do ISPs have the ability to use existing licenses if 
they adhere to existing rules?
    Mr. Alben. I don't think any Internet company to date has 
applied for a compulsory license to transmit television 
programming, and frankly I think the laws are ambiguous as to 
whether an Internet company could avail itself, but under 
certain circumstances, potentially it could.
    I think if I can talk about localism for a second, because 
I think it is a very important principle, that is the bedrock 
principle of our communications laws. You want to watch the 
Boston Red Sox games. We broadcast the first Seattle Mariners 
game in 1995 to a worldwide audience over the Internet in a 
radio broadcast, and people in Japan called us and said, Hey, I 
love Ken Griffey, and now I can finally at least hear about Ken 
Griffey on the Internet.
    Consumers want this, and the Internet----
    Mr. Markey. Well, when can I see the Red Sox and how much 
will it cost me?
    Mr. Alben. We would love to see a marketplace where the Red 
Sox are putting their signal up on the Internet, and in fact I 
think that many of them are going to start doing that because 
they realize they are serving the so-called displaced fan. You 
are a displaced fan, Mr. Markey, and you want to watch the 
broadcasting of the Red Sox and perhaps even the Patriots.
    Mr. Markey. If blackout rules are ambiguous, will you be 
denied the ability to do that? Do we have to clarify the 
blackout rules in order for you to be able to do that?
    Mr. Alben. I think you need to look at what the blackout 
rules were designed to serve. Clearly, if the goal of the 
blackout rule is to increase the physical gate attendance at 
the stadium, then the fact that you are being blacked out from 
watching the game when you're in Washington DC does not meet 
that stated goal.
    Mr. Markey. Does the law have to be clarified?
    Mr. Alben. I don't know if the law needs to be clarified, 
frankly. I think that blackout rules should be revised in 
certain circumstances where there is a consumer demand for the 
program and where the station can get additional revenue.
    Mr. Markey. Mr. McCallum, does the law have to be 
clarified, the black out rule?
    Mr. McCallum. I cannot answer for the United States. Sorry.
    Mr. Markey. Okay. Thank you. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, Mr. Markey. The Chair is now pleased 
to welcome and now recognize Mr. Shimkus for a round of 
questions.
    Mr. Shimkus. Thank you. Clarification: He is not a 
displaced fan. He is a misplaced fan.
    I am a Cardinal fan, for the record.
    Mr. Tauzin. He is a Cardinal fan. That is the nicest thing 
that has been said about him in a long time.
    Mr. Shimkus. A long time. I have two questions. Hopefully, 
I will get to both of them.
    Mr. Alben, I was fortunate to hear Rob Glazer at a 
conference in January, and what he did was he pulled in a data 
stream of music on an MP3 player, played it for the whole 
convention hall. Then it took it from the MP3 player to a desk 
in which he burned the CD. You know, it is all digital. My 
question is how does the artist get compensated for that?
    Mr. Alben. Well, in that specific example I am familiar 
with, the artist was compensated when we purchased the CD. So 
let's say it was a Beck CD. Beck received whatever payments he 
gets from his record label when the physical CD is purchased, 
and I think it is very clear that people have personal use 
rights to take their CDs and play them on their computers and 
also to put them on to a portable device, and in fact that is 
going to increase the sales of CDs because then people realize, 
hey, there is a great new way of enjoying music, I'm going to 
go out and buy more CDs.
    I think the case that you are worried about, legitimately, 
is when a user would then take that CD, multiply it a hundred 
times and send it out over the Internet, and clearly there is a 
point where personal use rights have limits and where they 
start to deteriorate from the market.
    Mr. Shimkus. I agree, and I think that is our challenge.
    And, Senator Boren, I did not hear all the testimony 
because I was coming back from the vote, but SoonerSports.com 
is an attempt to make sure that you capture the web TV or the 
stream market; is that correct?
    Mr. Boren. That's correct. In other words, of course we 
have our negotiations for live broadcast, but typically after 
the time of the live broadcast, we will then put some of this 
up for our fans all over to enjoy, and this allows us to have 
control over the way it is done and to keep control of our 
intellectual property; but we all have the strong incentive to 
get it out as quickly as we can to those misplaced fans around.
    Mr. Shimkus. If they are Sooner fans, most of them are 
going to search, and they are going to use Sooners, and it is 
going to pull up. They are not going to pull up iCrave to try 
to find a Sooner football game.
    Mr. Boren. No.
    Mr. Shimkus. So my question to the local broadcasters, I am 
a big defender of local broadcasting. I have seen how it has 
helped save communities. I guess the question for me is I do 
believe this is a debate of a rising tide, expanded markets. 
Are you or why are not you taking advantage of the competitive 
atmosphere and developing a similar Sooner sports.com to be 
prepared to more broadly disseminate your signal so that you 
are in direct competition to industries like iCrave.
    Mr. Beck. We are doing that. We own the URL High
SchoolHockey.com, and what is so wonderful about the Internet 
is that came out of Duluth, Minnesota, our little station 
there. They created that site. We own a big chunk of something 
called MyTVSshop.com which is about television and its 
electronic commerce sites.
    So we are perfectly willing and able to compete on a 
national or international basis with anybody.
    Mr. Shimkus. My point is for the specific station. Again 
talking baseball today, KMOX is a carrier of the St. Louis 
Cardinals.
    Mr. Karpowicz. Right.
    Mr. Shimkus. It would be easy for me in a remote location 
to be a displaced fan to call up KMOX, and if they are 
streaming the audio, then they are capturing that market, and 
they may be competing with someone else, but it is more likely 
for me knowing the locality to go to a KMOX versus an iCrave.
    Mr. Karpowicz. I think in those cases where we own the 
copyright, specifically with our local news, we are very 
prepared to stream that video. The issue comes in which we are 
running syndicated product like Friends or Oprah or CBS product 
or NBC product. We have no rights to let that go out. So to the 
extent that over 200 local television stations currently stream 
all or part of their local news product, clearly that is the 
direction this is going.
    Mr. Shimkus. Okay. You brought up a good point about your 
rights to stream outside of your geographical barrier based on 
your agreement with the network, and I think that is something 
I did not think about.
    So I yield back my time. Thank you, Mr. Chair.
    Mr. Tauzin. I thank the gentleman.
    The Chair recognizes the gentleman from Ohio, Mr. Sawyer, 
for a round of questions.
    Mr. Sawyer. Thank you very much, Mr. Chairman. I am not 
sure that we have really gotten a full answer to the question 
about how you actually limit geographically what can be done 
with the signal. Maybe I am just not understanding what you are 
saying, but even if encryption technology is implemented to 
create these geographical barriers, how do you prevent a 
subscriber from turning around and distributing the product 
received in that way?
    Mr. Jaszi. To me?
    Mr. Sawyer. Yes, or anybody. I mean I am just at a loss to 
understand the argument that you can create these barriers, and 
I have not heard the answer to that question. I was addressing 
it to Mr. McCallum, but more broadly I am particularly 
interested in how the absence of geography on the Internet 
creates circumstances where law or regulation can be enforced 
in a compatible way across a variety of national legal 
jurisdictions. But answer the first question first, and then 
others can respond as well.
    Mr. McCallum. We had a problem drawn to our attention in 
January that there were pirate sites out there were just 
drawing our stream to the sites and then redirecting them to 
anybody who came on. They came in through what is known as the 
back door. Part of the work that we are currently doing is 
locking that back down solidly tight.
    Mr. Sawyer. Okay. They were not subscribers; is that 
correct?
    Mr. McCallum. No.
    Mr. Sawyer. Okay. What do you do about subscribers?
    Mr. Sawyer. The nature of the security system is that the 
stream is sent to an individual computer, to an individual IP 
address. We have locked down the ability from the beginning 
putting the streams up, preventing copying so that nobody could 
copy it to their computer, and we believe that the current 
system that we are implementing is a system that will prevent 
the retransmission from that computer to others.
    Mr. Sawyer. Does everyone else subscribe to that?
    Mr. Valenti. Mr. Congressman?
    Mr. Sawyer. Yes, sir.
    Mr. Valenti. That ain't so, and you go to see any expert in 
Internet or computer, you cannot do it because anyone can pick 
up that signal and do what is called mirror, and that is 
transmitted then to a waiting global world of 6 billion people 
instantaneously. There is no way you can do it.
    Mr. Sawyer. Yes, sir?
    Mr. McCallum. Congressman, there would be, I would think, 
little difficulty in the individual who currently takes his cam 
corder into a movie theater, captures a new release, exhibits 
it on the Internet, and takes the same cam corder and pointing 
it at a computer screen and doing the same thing. I would 
suggest that part of the solution----
    Mr. Sawyer. But the medium of distribution is substantially 
different, of course.
    Mr. McCallum. No, they are both on the Internet. I'm 
suggesting that they are both being distributed to be Internet, 
and they are obtained in that exactly the same fashion. What I 
would suggest that part of the solution may be to make these 
products so readily available under arrangements to allow the 
flow of copyright payments back to the original creators that 
you effectively reduce the temptation to go to these means in 
order to get a substandard product.
    Mr. Sawyer. Mr. Beck, you have been trying to----
    Mr. Beck. Sorry. Mr. Valenti actually responded as I would 
have, Congressman.
    Mr. Valenti. Let me just say that I do not want to dominate 
here, but I have got to respond to this. When a man goes with a 
cam corder into a theater and picks that up that, records that 
program and then distributes it, he goes to jail for that.
    Mr. Sawyer. Yes, he is in violation of law.
    Mr. Valenti. It is a felony offense.
    Mr. Sawyer. Yes.
    Mr. Valenti. And as a matter of fact, we have put a number 
of such people in the slammer over the last year or 2. That is 
exactly what happened. So you cannot take digital which is 
ephemeral. It comes into your computer, then goes to world, and 
then equate it was a physical video cassette in analog format 
or digital format or whatever you want to call it. It's totally 
different.
    That is what I said in my opening remarks. This is a 
miraculous, fantastic new entrant into the human society, 
ranking with Guttenberg movable type and the invention of 
television, and it cannot be equated with satellites or cable 
or video cassettes in the analog format; totally different, 
sir.
    Mr. Sawyer. And it should not be possible with a license to 
go through that medium what would be illegal through any other 
medium; is that what you're saying?
    Mr. Valenti. You want to be on a level playing field. Then 
you take your chances by going to jail by doing what iCrave is 
doing.
    Mr. Sawyer. Thank you.
    Mr. Alben. Mr. Sawyer, if I may talk a little bit about 
mirroring, there are technologies that allow for mirrors. The 
fact is that once someone mirrors a stream, in order words 
starts to retransmit what you would call a signal, they are 
visible. Right? They have to be visible to the whole world, and 
you can know where they are and where they are operating from, 
and they should be taken down if they are mirroring a stream 
without permission.
    Most mirroring that occurs on the Internet is done with the 
blessing of the content producer. In terms of the security of 
the stream itself, the RealNetwork system as well as the 
Microsoft system and Apple system for streaming all have copy 
protection mechanisms built in, and in the rare circumstances 
where hackers have been able to hack into a stream and record 
the stream, we have invoked the Digital Millennium Copyright 
Act to get injunctions because clearly someone should not be 
able to make the technology that's primarily designed to copy 
pirate streams.
    Mr. Sawyer. Thank you, Mr. Chairman.
    Mr. Tauzin. The gentlelady from New Mexico, Ms. Wilson is 
recognized for 5 minutes.
    Ms. Wilson. Thank you, Mr. Chairman. I had some questions 
that arose from some of the previous answers and some of the 
testimony which I have been reviewing here.
    Mr. Karpowicz, you talked about the television stations now 
cannot--you do not believe that a television station now could 
broadcast its signal over the Internet, it could not broadcast 
Friends because that would be outside of its broadcast area. Is 
it your interpretation or do most television broadcasters have 
the view that they are constrained by current law from doing 
that?
    Mr. Karpowicz. I believe so because we do not hold the 
Internet copyright on Friends, for example. When we buy that 
program, we buy that specifically for our DMA or our market 
area, and that is really the issue with the Internet, is that 
it is not bound by any geography, and there are no geographic 
boundaries. So to the extent that when we buy that program, and 
when we purchase that, we have bought it for a very specific 
area.
    Now, with our newscasts which is content that we produce 
and we have the copyright on that, it can be widely 
distributed. That can go out on the Internet because as far as 
we are concerned, that is our product.
    Ms. Wilson. Thank you. Mr. Alben, you were talking about 
the Digital Millennium Copyright Act and injunctions that you 
would get on mirror sites and things. Is it your view that--
does the law need to be changed in any way to protect or 
further protect copyright holders or are the mechanisms there 
in place now to do what needs to be done?
    Mr. Alben. I think we believe that right now both at the 
existing what you could call the old U.S. copyright law and the 
Digital Millennium Copyright Act provide really specific 
penalties. After all, the Motion Picture Association and the 
other plaintiffs were successful in invoking copyright law to 
get the TRO. So it's clear that if someone is violating 
copyright by duplicating something without the permission of 
the copyright owner, that that is against U.S. copyright law.
    Now, when Congress passed the DMCA, they also recognized 
exactly what Mr. Valenti said, is that analog and digital 
present different problems. With digital, you can make near 
perfect copies and redistribute those copies. So Congress took 
the extra step of creating new laws that say if you are 
specifically going to create a technology that breaks 
encryption or that breaks a copy protection mechanism, that in 
and of itself is a violation of the DMCA.
    So I think that these two laws are working together, and 
over the last few weeks we have seen, what, four or five 
lawsuits filed regarding distribution of sound recordings, 
distribution of motion pictures where you can see that the laws 
are being put to the test.
    Ms. Wilson. Mr. Valenti, do you think that there needs to 
be changes at this point? I know you have put your copyright 
coalition together. Is it working but cumbersome? Are people 
ignoring it? What is your sense?
    Mr. Valenti. You mean what is working right now?
    Ms. Wilson. With respect to any changes needed to the 
copyright law.
    Mr. Valenti. No, I said earlier to the chairman, Madam 
Congressman, that I did not think that any new laws were 
required. As Mr. Alex pointed out and rightly so, the Digital 
Millennium Copyright Act is working, and indeed the courts are 
instantly recognizing that there is no ambiguity to this law. 
What I am saying is that I think the Internet should be allowed 
to continue its spiralling growth and you keep a watchful eye 
to make sure that all goes well in the marketplace.
    I do not think there is need to change anything at this 
time or add anything at this time.
    Ms. Wilson. Thank you. I yield my time, Mr. Chairman.
    Mr. Tauzin. Thank the gentlelady. The gentlelady from 
Missouri, Ms. McCarthy, is recognized.
    Ms. McCarthy. Thank you, Mr. Chairman. I would like to 
visit with Mr. Valenti. It is always a pleasure to have you 
here, and I congratulate you on accomplishing the copyright 
assembly that you announced to us today which I think creates 
an important new voice in the private sector on copyright 
matters.
    However, I noted a very important voice is missing from 
your assembly, and they are my constituents. I suspect, 
actually, they are constituents of every member on this 
committee and in fact perhaps are even family members of some 
members on this committee.
    So I would like for you to tell the committee why they've 
been excluded from the assembly. They are the recording 
artists, and their voices make movie theme songs hits for your 
assembly members such as Disney and Universal and the other 
studios that are members of the assembly. Their songs make hit 
programs like MTV for your assembly members like the National 
Cable and Television Association. Their music creates the sales 
for your assembly members such as the Recording Industry 
Association of America, Sony and other record labels. Their 
performances at pregame and half-time encourage viewers to tune 
in and stay tuned at sporting events such as the Super Bowl, 
earning your assembly members such as ESPN and other TV 
corporations lucrative revenue from advertising.
    I myself am a Faith Hill fan, and I stayed tuned at half 
time because I wanted to hear her. These recording artists are 
represented by the National Academy of Recording Arts and 
Sciences. Next week it's NARAS that is going to produce the 
Grammys which 25 million people domestically watch on TV. That 
is the second largest viewing audience after the Oscars, which 
I believe you have some interest in.
    So why is NARAS missing from this new assembly, and clearly 
since copyright laws affect recording artists personally, why 
are they not included in the room?
    Mr. Valenti. Well, I am right now trading phone calls with 
Mr. Michael Green who puts on the Grammys, and I am hopeful of 
having his organization in there. Ms. McCarthy, I want you to 
know that this assembly is open to every person or enterprise 
to whom copyright is indispensable to their future, and we 
welcome it. We have all of the creative guilds in here. We have 
all the music organizations, and those that are not in here 
will be before the next few days are out.
    Mr. McCarthy. I anticipated that would be your answer. When 
you made this announcement, I excused myself from the committee 
and called Mr. Green to find out why he was not on the list. He 
said they learned about it through the net, the Internet, and 
that he initiated the call to you.
    Mr. Valenti. He did, and as a matter of fact, may I just 
say I blundered. The fact is putting together this list, I 
frankly did not think about it. It was a terrible blunder on my 
part, and I deeply apologize.
    Ms. McCarthy. Well, I just want to tell you that I 
represent Kansas City where there are a whole lot of artists. 
You know, this is a jazz historical place, and I would love you 
to come and visit, but it seems to me that this Congress even 
overlooks including recording artists in the room at critical 
times.
    Last year, during the discussions of the omnibus 
appropriation bill, a change was made in the copyright laws 
that now deny them--artists who have signed recording contracts 
after 1978, they will not be able to regain their rights after 
the 35-year waiting period that is specified in current law. 
Nobody told them to come in the room and talk about it. Nobody 
told them to be there at the table. So special interest decided 
to make this change, and frankly on behalf of the recording 
artists, I think it is time we all woke up and made them part 
of whatever the future holds on things like the Internet. 
Without them, as I said in my remarks, do you think you could 
sing like Faith Hill did at half--time and make me tune in? 
Maybe once, but, honestly, they are what fuels the larger 
entertainment industry, and I appreciate your honesty and I 
hope you will think in the future of the recording artists in 
all that you do with regard to property rights, and 
intellectual property rights in particular are personal to 
them.
    Thank you Mr. Chairman.
    Mr. Valenti. I cannot wait to embrace Mr. Green and his 
organization if I can just get him on the phone.
    Mr. Tauzin. We got a computer in the back room.
    Mr. Valenti. Maybe he has got a web site so I can contact 
him.
    Mr. Tauzin. I thank the gentlelady.
    The Chair now recognizes the gentleman from Florida, Mr. 
Stearns, for a round of questions.
    Mr. Stearns. Thank you, Mr. Chairman, and listening to this 
debate has been very edifying. Let me take my colleagues and 
also the panelists and the people in the audience to this 
comparison: Direct TV, satellite TV when you broadcast that, it 
is not going to just a region. It is going hemispheric. So when 
people say satellite TV and cable TV are much different than 
the Internet, that might be true for cable, but I do not see it 
that different for Direct TV where it is going hemispheric.
    Okay. Now this committee, and as Mr. Markey pointed out, 
the incremental steps in the last 30 years we have done to 
protect virgining new industries, and as he pointed out, AOL 
would not be existing today if we had not in 1997 gave them 
permanent access to the FCC. So I say to the broadcasters, I 
understand Sam Rayburn's ``Wait a minute'', those three dynamic 
words, ``wait a minute'', and I am a conservative and I believe 
in wait a minute, but I cannot help but think when I am sitting 
here looking at this, probably that it could correlate to 
broadcasting of direct television.
    Now, these people, Prime Star and all these people, they 
pay compulsory license fees. They pay a local-to-local fee. 
Then they pay for a distance signal, and it is digital. It is 
not analog like Mr. Valenti was talking about. This is digital 
that goes hemispheric. So tell me, somebody on the committee, 
why we cannot bring an analogy for the satellite broadcast 
television to the Internet television and say, okay, either the 
FCC, the Library of Congress, or Congress or somebody could not 
allow access for Internet companies in the same of analogy that 
we have done for satellite TV?
    Mr. Beck. Can I address myself to that?
    Mr. Stearns. Okay.
    Mr. Beck. The satellite companies do not alter our 
programming, period. If these people had come to us then--you 
know, we have got a lot of Canadians. We have got this poor 
woman in Thunder Bay, and she really wants WKBW's programming, 
and we are going to do you the service of redistributing it to 
her. We would have said that is a pretty good idea. What he 
does is take our programming and puts his ads on it and alters 
it. So no satellite company does that, sir.
    Mr. Stearns. Okay, but Mr. Beck, let's say we stipulated 
that they could not do that, and we made it against the law for 
the Internet companies to do that. We can do that and prevent 
them from doing it. So that would allay your fear and concern.
    Mr. Beck. Yes, it would. I mean he would not be on the 
panel anymore. He would have to make his own content and 
redistribute it, but if people are just interested in the 
redistribution of the good stuff we do, hey, that's all right.
    Mr. Stearns. Okay.
    Mr. Karpowicz. The biggest issue, Congressman, is with the 
satellite example that you are using. That is why local into 
local was implemented, to prevent the importation of distant 
signals coming in over the top of my copyrighted material. So 
there is a very distinct and huge difference between the 
satellite model and the Internet model.
    Now, currently, as we know, there is no technological fix 
to limit the Internet to my specific marketplace, whereas with 
satellite in fact no distance signals can be brought into my 
market, and that is why we created the provision or, in fact, 
you all created the provision.
    Mr. Stearns. How do you know that when a person broadcasts 
a satellite that it is only going into one region?
    Mr. Karpowicz. Well, there are cards that go into the 
satellite receiver.
    Mr. Stearns. No, but I mean we have had up here in the 
hearings what we have gotten is going way out the region and 
these people want to have access to it, and suddenly they get 
cutoff and they get upset about it.
    Mr. Karpowicz. But no distance signals should be coming in. 
That is the whole concept behind local to local.
    Mr. Stearns. Okay.
    Mr. Karpowicz. That it protects my franchise in my unique 
marketplace.
    Mr. Stearns. Mr. Alben, am I wrong that there is some kind 
of analogy between what I am trying to look for? And I think 
every elected official, before they do anything, they want to 
say is is there something that we have already done here, 
without rediscovering the wheel? And is there some way to allow 
RealNetworks in the very near future to start broadcasting 
local-to-local, as well as, you know, other information without 
being crimped here and have the copyright to do so?
    Mr. Alben. Well, I think the geographic restriction of 
local into local is a problem because of the nature of the 
Internet being a global medium, as I said in my testimony. 
There would be ways devised to limit people from accessing a 
signal if they were not in a local market, but what we would 
rather do is say when we rebroadcast the transmission--for 
instance, let's take a baseball game. When we did the Seattle 
Mariners baseball game, when we sent it to Japan, I'm sure the 
local advertising for the local beauty parlor did not make much 
sense the people in Tokyo or Yokohama who are listening to that 
game even in English.
    What we would like to do is say with the broadcaster, hey, 
we are going to sell an ad that will have a national or 
international audience, but we will share our ad revenue in 
some way so that the broadcasters benefit from the expansion of 
the terrestrial signal, and that's really the way that this is 
going to go. That is why I say that this is going to happen, 
because we are smart enough with broadcast stations and others 
to figure out ways of creating new revenue and sharing that 
revenue.
    Mr. Stearns. But would not you like to go to one place to 
get a copyright license so that you can do it?
    Mr. Alben. It would be much more convenient if you could 
have a mechanism to get a license rather than going to each 
individual station. I do not know how many broadcast stations 
there are in the United States, 30,000.
    Mr. Stearns. 1,600, I'm told.
    Mr. Alben. 1,600, so the physical challenge of just 
negotiating license deals----
    Mr. Stearns. It's impossible.
    Mr. Alben. [continuing] would prevent it from happening, 
and it would be very nice to have some sort of clearinghouse, 
some sort of mechanism where someone who wanted to retransmit a 
signal could go and with permission get that done and pay for 
the content.
    Mr. Stearns. And, in fact, the broadcasters would benefit.
    Mr. Alben. They would if we----
    Mr. Stearns. I mean we would make the copyright license and 
the royalties expensive, and if they wanted to do it, they just 
had to pay a high amount of money.
    Mr. Karpowicz. That exists right now with companies like 
Broadcast.com. Television stations can work out a deal with 
Broadcast.com to stream their news broadcasts which they own 
the copyright to. So it exist today.
    Mr. Stearns. Just with one group and not the whole----
    Mr. Karpowicz. Well, each individual station would have to 
make their own deal.
    Mr. Stearns. Which makes it impossible.
    Mr. Alben. But the history of Broadcast.com was an 
incredibly innovative company, and Mark Kuben, in all of his 
energy, he went around for 3 years in the banging of the doors 
of sports leagues local stations, the NCAA, and all the leagues 
and saying, Hey, I want to put your signal up on the Internet. 
It took him 3 years to assemble that kind of base, and now we 
have a Broadcast.com and others that you can go to, but it 
took--it was solving the licensing issue that took so long, and 
I do not think that is going to work going forward.
    Mr. McCallum. Mr. Stearns, might I add something?
    Mr. Stearns. Sure.
    Mr. McCallum. The simple system you are describing is the 
one that exists in Canada today. That is why we are legal in 
Canada.
    Mr. Stearns. So the question is are you arguing for this 
same kind of system in the United States?
    Mr. McCallum. Well, I am not arguing for it or against it. 
I am just offering it as an example of another jurisdiction. 
Clearly, the broadcast conditions in Canada are distinct and 
different from what they are in the U.S. The complexities here 
may be different. The history is different.
    Mr. Stearns. But you are saying it is a working model that 
works in Canada.
    Mr. McCallum. Correct.
    Mr. Stearns. And you are saying this is a model, Mr. 
Chairman, that works in Canada and does not restrict television 
on the Internet and so the real question is when will it come 
to the United States, and in what way, and how can we be sure 
that the broadcasters are protected, and so I think it is a 
challenge for this committee.
    Mr. Tauzin. It certainly is. The gentleman's time has 
expired, but I will allow any response.
    Mr. Alben. There is another element to your challenge, Mr. 
Sterns. I think it is an excellent question. Is the 
international dimension of this medium. Let's say we had a 
signal, but you were requiring under a compulsory license to 
have a geographic restriction. Well, then you are going to have 
the French perhaps saying, oh, well, if you are going to let 
this retransmission go out over the Internet, it has to be the 
French language or it has to be 38 percent French content.
    The strength of our market is that our programming, the 
programming of local stations and of the networks and of the 
sports leagues, has an international audience. We don't want to 
go down the road of geographic restrictions if we are not 
willing to live with foreign countries saying, oh, I do not 
want that content coming across my border.
    First of all, it is almost impossible to police. Second of 
all, it is not good for our industry. We want these revenue 
streams to be driven all over the world.
    Mr. Valenti. May I just say, Mr. Congressman, first I allay 
myself with what Mr. Alben is saying. We oppose geographic 
restrictions. That is anti-freedom, but in the interest of full 
disclosure, Mr. McCallum did not tell you that the broadcast 
stations in Canada are suing him right now in the courts saying 
he does not have any mantle of compulsory license. That is in 
the courts right now, and we will just have to wait and see 
what the Canadian judicial system say says about this.
    Mr. Tauzin. The Chair is now pleased to recognize the 
gentleman for New York, Mr. Engel for a round of questions.
    Mr. Engel. Thank you, Mr. Chairman, I would ask unanimous 
consent to put my statement into the record.
    Mr. Tauzin. Without objection.
    Mr. Engel. Thank you very much.
    Everybody, the issue to me is really balancing the rights 
of current copyright holders. I think it is only fair that we 
do that with the public desire to have access. The copyright 
holders versus unlicensed distribution, Mr. Markey I thought 
said it very well when he said that he liked to listen to 
games. I would like to listen to Yankees and Mets games, and I 
very often try to get the signal here as well.
    I am wondering as I listen, and Mr. Sterns had really gone 
down the line of what I was going to say. It seems to me that 
in the future there has to be some common ground, because 
obviously this is new technology and you cannot put a lid on it 
forever. Sooner or later, people are going to demand that they 
have access to it.
    And so it seems very simple to me, in a way, that how do we 
again balance the rights of the current copyright holders with 
the public's desire to have this technology? I would like to 
hear from the broadcaster side. Compulsory license, why cannot 
there not be a compulsory license? I think Mr. Alben suggested 
it as similar to what cable and satellite has today with the 
exception that the Internet companies will not have to comply 
with the geographical limitations.
    You know, what does this all mean, the future of local 
broadcasting license, with the Internet taking distribution in 
a global direction? What happens to location? I would like to 
hear from the broadcasting side. Why can there not be a common 
ground? There seems to me, you know, we talked a little bit in 
the answers about compensating people with advertising 
revenues. I mean everyone on the panel is very bright and there 
are lot of bright minds out there. Why can we not come to a 
common ground for the future?
    Mr. Karpowicz. To your point about the compulsory licenses, 
I think you cannot ignore the geographic limitations. I think 
the geography is the key here, and the inability of the 
Internet to be limited to one market, one specific market is 
really the fatal flaw that we see in that system. In addition 
to that, with compulsory license comes must-carry, 
retransmission consent, Syntax, sports blackouts. There are a 
lot of other issues associated with that. So to the extent that 
we cannot just put geography aside, geography is critical to 
this whole discussion.
    The other point I'd like to make, and Senator Boren 
mentioned it in his comments, the ground-breaking deal that CBS 
did with the NCAA this year for basketball tournaments included 
not only the broadcast rights but the Internet rights as well. 
Now, I think this is one of the first major sports deals that 
has included the Internet provision, and I think this is the 
direction we're going to see more and more major deals with 
sports leagues and the NCAA take place as we go along, that 
deals will include not just have the broadcast rights but the 
Internet rights as well.
    Mr. Boren. Just a week ago the baseball owners now have 
also moved in that direction and are establishing a mechanism 
for bargaining for baseball rebroadcast rights. So I think 
really what is happening is there is such a strong push for 
those who are creating the program that want to get it out to 
widest possible audience as long as you have some control over 
the appropriate way, for example, as we would want to see it 
with intercollegiate athletics and the way it's broadcast and 
that you have assurance of the revenue stream, that the revenue 
stream will not be destroyed.
    So I think this market is already beginning to work without 
going into the scamp of what might have to be attached to 
compulsory licensing that might have unintended consequences 
and actually begin to limit what the Internet possibilities 
might be in the long run.
    So I would say I think the market over the next--things 
have moved so quickly already. Over the next 12 to 24 months, I 
think the market is going to play out in a way that is probably 
going to make unnecessary additional regulatory schemes.
    Mr. Engel. I would like to hear why not an exception for 
geographical limitations, as Mr. Alben suggests, given the 
Internet nature as global medium. Why would that not be 
something that would be feasible? Would anybody like to 
comment? Mr. Valenti?
    Mr. Valenti. Well, I don't think--the truth is we can say 
geographical limitations. It's like President Johnson used to 
say. ``You can tell a man to go to hell, but getting him to go 
there is another proposition.'' And you can say you've got the 
technological image to do this, but it does not exist. That's 
the key point. It does not exist.
    Mr. Engel. Mr. Beck, do you have any comment on that?
    Mr. Beck. We really have a wonderful system now. You flow. 
You have got local broadcasters providing extraordinary 
penetrating local news, weather, and sports in their markets 
and in partnership with the studios and the networks who 
provide us with extremely good content with which to pair our 
good work. If his content needs to be exclusive in Buffalo, and 
he does not want to sell the Internet rights, then that's up to 
him. I want to be his partner. I want Friends on my air. So I 
will negotiate with him and get it. If he does not want to sell 
it to iCraveTV, that's up to him. He has the best idea of about 
how to use his product.
    So I think we have the most extraordinary system in the 
world and nobody can compare the penetration of our local 
broadcasters into their communities, and that's because of the 
partnership that exists. So I'm not only proud to be here 
sitting with Mr. Valenti, but our business is based upon the 
partnership with these copyright holders, and it's necessary 
for them to really--I'm following their lead. They are great 
partners, and if he does not want to change the copyright laws, 
I cannot see any reason why we should do it. It seems to be 
working awfully well.
    Mr. Jaszi. If I might say I'm less skeptical than Mr. 
Valenti about the possibility of implementing appropriate 
geographical restrictions if such restrictions would be deemed 
appropriate through a combination of new technology and the 
very stringent criminal penalties against the violation of 
technical safeguards that have been discussed earlier today. 
Those are a very potent combination taken together, and I see 
no reason to assume that at the beginning of this discussion 
that that combination would not be sufficient to implement 
meaningful geographical restrictions were it the will of 
Congress to impose such restrictions on an Internet TV 
compulsory license.
    Mr. Alben. If I could add a second to Mr. Engel's question, 
I guess our question, and forgive us we have been accused of 
wearing binoculars and only seeing far into the future, but why 
would a broadcaster not want their local programming, sports, 
news, weather, to be transmitted from Buffalo to Florida if 
someone was on vacation if there is not that somebody that is 
extending the signal reach and therefore extending your 
advertiser base?
    Mr. Karpowicz. Let me answer that question. As it relates 
to iCraveTV, the first part of that equation is the signal is 
distorted. Our picture, by the time it gets to that individual 
in Florida, has been brought down to a little-bitty box. There 
is advertising all around it that is inconsistent, potentially, 
with the advertising that we have already sold. So that is--you 
know, that is the first problem.
    The second problem, if it's our entire broadcast day, we do 
not own the copyright to Friends, or we do not own the 
copyright to NFL football. We do not own the copyright to a lot 
of the programming that we carry.
    Mr. Alben. Just your local programming.
    Mr. Karpowicz. Then it should be the decision of the local 
broadcaster to do that.
    Mr. Beck. We do that.
    Mr. Karpowicz. And as I indicated, there are over 200 
stations in America that currently do that, and that number is 
growing every day. I think local broadcasters are starting to 
understand what Congressman Markey mentioned earlier, is that 
people who are displaced do have interest in what may be going 
on in their old hometown or in a distant place.
    So local broadcasters are taking the initiative and making 
that happen, but we should not have that taken from us.
    Mr. Beck. Mr. Engel?
    Mr. Engel. Yes.
    Mr. Beck. I'm sorry. Excuse me----
    Mr. Tauzin. The gentleman's time has expired, but you can 
respond.
    Mr. Engel. Thank you, Mr. Chairman.
    Mr. Beck. We do that, and we broadcast all of our local 
news, weather, and sports. To demonstrate in an anecdote just 
how effectively our system works now, we take our local news 
and we, in the past, have put major league baseball clips into 
our news. We believe it's fair use to do that. Well, our 
friends and colleagues at major league baseball have decided to 
tell us to no longer to carry the clips in streaming video. 
They want it to be on our air, but they are not happy to have 
it on our television station's streamed video because our 
streamed video, being digital, can be archived and might 
prevent them from profiting from that picture of Sosa hitting 
the home run.
    So when they called us and said would you please take that 
out, I argued with them as best I could--I'm trained as a 
litigator--and I gave in because they are right. It is theirs, 
and we said that's fine, from now on we will put up a board 
that says, I'm sorry, Major League Baseball does not want us to 
stream this 30-second clip, and that's what we did.
    So the system works great. iCrave never called us.
    Mr. Alben. It does not work for the baseball fan, though, 
that wants to watch that highlight, and if I'm a Seattle 
Seahawks fan and I want to watch my game and NBC have decided 
for that day that I'm supposed to watch the Pittsburgh game, it 
does not work for me either, and the fact is if I'm an 
additional member of the audience and want to tune it, I'm 
going to paying somehow. Right? I mean they are going to be 
paying by subscribing to the service, or I am going to be 
paying by watching an advertisement that somebody sells so the 
audience can be increased, and the sports leagues, while they 
want to maintain the current system of geographic limitation, 
have a revenue opportunity that they are not recognizing.
    And it is very good to hear the CBS Internet deal because 
those are the kind of deals that are going to move things 
forward.
    Mr. Valenti. Mr. Alben, let me just say to him if you want 
to have a Real Player, I'm told he will sell it to you on your 
web site for $35; is that correct?
    Mr. Alben. The Real Player is distributed for free.
    Mr. Valenti. What do you charge $35 for?
    Mr. Tauzin. Mr. Alben, use the mike, sir. We have to record 
this.
    Mr. Alben. I'm sorry. The Real Player is distributed for 
free, and we have distributed over 90 million of them for free. 
We have distributed several million of our Plus Product which 
we sell for $29.99.
    Mr. Valenti. All right. Since I'm a consumer and I want to 
have the best, I want the compulsory license to buy that $35 
thing for $2. Would you agree to that? A compulsory license or 
since you believe everybody ought to have the right to see and 
do everything, I want the right to have your enhanced machine 
or whatever you call it, and I want to do it for $2. How do you 
deal with that?
    Mr. Alben. I'm sure you want to go into a dealership and 
buy a Mercedes for, you know, $100, but the consumer sees the 
utility in buying the enhanced product, and the compulsory 
license is not going to necessarily cannibalize the revenue 
stream of stations. It's going to extend it in the long run.
    Mr. Tauzin. I want to thank the gentleman from New York for 
stirring this up.
    Mr. Engel. Mr. Chairman, I did not realize my mischievous 
question would have such an enlightened discourse.
    Mr. Tauzin. You had one more thing you wanted to add, Jack?
    Mr. Valenti. No, the only thing I wanted to add was, again, 
as LBJ would say, ``It always depends on whose ox is getting 
gored,'' and that's what this whole proposition is all about.
    Mr. Tauzin. Then the chairperson will recognize the 
gentleman from Oklahoma, Mr. Largent, for a round of questions.
    Mr. Largent. Thank you, Mr. Chairman.
    Mr. Alben, I wanted to go back to something that you said 
about the CD scenario when my colleague, Mr. Shimkus, was 
talking. Sometimes what we say and what we hear in this room is 
not what really is happening on the street, and I had an on-
the-street discussion with my 15-year-old son who is a freshman 
in high school, and he was mocking my daughter who is 18 years 
old and a freshman at the University of Oklahoma because she 
had signed up for one of these CD-a-month clubs. She had just 
received a big stack of CDs in the mail, and he was mocking her 
because of how foolish it was for her to pay so much more for 
her CDs, $10, $11, whatever they are, a couple dollars less 
than you get them in a store, and he said nobody is buying CDs 
anymore. He said everybody is burning their own CDs. They just 
pull it off the Internet. You can put whatever songs you want 
on there, burn them in there, and he said I'll never buy a CD 
again in my life, it's too expensive.
    So that's a real world example in Tulsa, Oklahoma. I am 
going to be really curious to see if in a year from now we do 
not see a decline in the purchase of CDs, and I'm curious, if 
it came to pass that the latest release, The Hurricane was 
available in digital quality that was streamed on the Internet, 
if in fact Blockbuster Video's stock would not decline over the 
course of a year as well. I think it absolutely would because 
people could pull it off the net and make a DVD quality 
reproduction, and they would never have to rent another movie 
on VHS.
    Senator Boren, you said something in your testimony that's 
been mentioned several times. I wanted to ask you about this. 
You talked about a TV deal that CBS did with the NCAA, and it 
included an Internet agreement. Does that agreement insulate 
you from iCraveTV or is that still an issue?
    Mr. Boren. Well, that's still an issue because, of course, 
if people can stream over, overstream the people that are 
paying us for the rights to rebroadcast, you know, they are no 
longer going to go into those packages with us that are such an 
important source of revenue. So, you know, we are talking about 
something that provided a very large amount of funding over an 
11-year period with CBS. It was a minimum of $6 billion, and if 
others can simply not pay anything and be able to get that, 
then they are not going to be able to negotiate with us in the 
future with those kind of rights, so your revenue stream for 
intercollegiate sports begins to dry up, and as I pointed out, 
90 percent, over 90 percent of the 1,000-member colleges and 
universities of the NCAA are not breaking even on their sports 
now, especially as they're struggling to provide more 
opportunities for women's sports, for example, and so these 
universities are already having to make these kind of decisions 
about putting central university funds into sports versus 
faculty salaries, libraries, and other things.
    The pressure if that stream dries up, the pressure to 
reduce opportunities for student athletes is going to be 
enormous. So all we're saying is the market is beginning to 
work. This is working in a way that protects our intellectual 
property. It's going to be get out on the Internet, more and 
more of this sports programming including ours, but it's doing 
it in a way in which we, the NCAA negotiates for us will be 
able to continue that revenue stream to intercollegiate sports.
    So it's working and we should not plunge in at this point 
and try to change something that is working.
    Mr. Largent. Well, let me rephrase my question if I can. 
You are saying that since you have this licensing agreement 
with CBS, now they are putting on the NCAA game of the week on 
CBS.com so that people will flow to CBS.com which they can get 
in Thunder Bay, Canada just as easily as they can get----
    Mr. Boren. That is exactly right.
    Mr. Largent. Okay. But what would prevent rebroadcasting 
that? In other words, somebody pulls that signal off and wants 
to put their own special ad around the border.
    Mr. Boren. Well, the current copyright law protects us in 
that regard, and that is exactly what happened in this case, 
and when you have people collecting their own revenue, their 
own advertising and altering then the original programming, at 
least so far the courts have enforced that right. Now, if the 
courts ever stopped enforcing that right what would happen is 
our revenue stream would vanish because those that are now 
paying us for exclusive rights would not have exclusive rights 
and they would not be able to afford to pay you, certainly not 
at the level they are now paying us.
    So it is a real threat and it is the reason why I also say 
that we also have a tremendous incentive. I want to see what we 
are creating in terms of sports programming. I want to see the 
contribution of that expanded because as that market grows and 
it is expanded through the Internet, there is going to be, in 
theory, a greater revenue stream back to us, back to LSU, and 
other institutions around the country, but we have to be very 
careful about how we do that.
    Mr. Largent. Thank you, Mr. Chairman.
    Mr. Tauzin. Thank you, sir. The Chair recognizes himself.
    Let me see if I can make an observation and get your 
reaction to it. It seems to me that we are still debating some 
of these issues or thinking of some of these issues in a world 
still defined by the differences in pipes and delivery systems 
of information. It also seems to me that that's about to change 
pretty radically, that as we move to broad band digital 
services delivered over enhanced systems capable of 
extraordinary capacity and data that includes video, that 
anyone who thinks they can survive in that world by being a 
telephone company or a cable video company or a satellite video 
company is going to find out they get left behind quickly in 
the dust bin of economic history, that as we move into the 
broad band digital age, the television set will be the monitor 
for the Internet, and data services flow to it that are going 
to include massive amounts of video and audio and other data 
services to us.
    And if we begin to think of what that record looks like, 
does not it make sense for us to have a common policy as it 
applies to the protection of content and distribution of 
content rights over that kind of a system? Because it does not 
matter whether you are a satellite company or telephone company 
or electric company, for that matter, or a cable company. If 
you are all delivering broad band services, and that's where 
the world is going, to a mix of digital data that includes all 
those services combined into my television set on a worldwide 
global network, does not it make sense for us to be thinking of 
policy that will cut across that whole spectrum and apply the 
delivery of these services and the protection of content rights 
in all of these areas, policy that permits the contracting and 
the technology developments that will enforce the contracts, 
protect the consent or protect the delivery of the content, if 
that is possible, to whomever is contracted to send it or 
receive it rather than thinking of trying to define a policy 
for cable and one for satellites and one for telephones and one 
for who knows what, other wireless or other wide systems when 
they eventually develop?
    Please feedback to me on that, any one of you.
    Mr. Boren. Mr. Chairman, as the novice in this in terms of 
the technical details, I would just say in many ways what you 
are talking about is happening. Just look at the NCAA-CBS-
internet package. In a way, that is happening right now in the 
marketplace. In other words, we are now negotiating contracts 
for the use of the Internet fully. It is in its fledgling 
stages. Some of those details will even been worked out in 
terms of appropriateness in programs and the way it is done, 
but if I think we watch the market over the next year or 2, 
given the current status and the ability to go into courts and 
protect yourself through the existing copyright law, you may 
find this will work itself out without a tremendous amount of 
governmental intervention.
    Mr. Tauzin. You see the problem, though, Senator Boren, is 
that we have laid down a whole series of laws that are pipe 
specific.
    Mr. Boren. Right.
    Mr. Tauzin. That we designed to try to create parity of 
stream but in different ways for different pipes, and in our 
best sense of fairness, we not only encourage new entrants into 
the marketplace but give them a head start as we did with the 
satellites, delaying the day for must-carry and what have you.
    We have created all these different sets of laws designed 
for different pipes. We defined them differently. Some are 
telecommunications carries and some are not, and yet they will 
all be doing the same thing pretty soon, using the same kind of 
broad band digital systems to do it, and consumers, I assume 
some day will not care too much how it gets there just so long 
as they can get to everything they want and somehow have a 
choice among providers so that they do not have to count on us 
to regulate prices and terms and conditions of service, and if 
that is true, if we are moving in that direction, if 10-minute 
caps that cable put on video stream are not going to hold in 
that world, how do we somehow let all that happen and at the 
same time have all these old laws on the books that define 
content and carriage and rights of carry.
    I mean, in the telephone world we still have a massive 
defining when a distance call becomes issue and is incredibly 
relevant in Internet, and certainly in broad global Internet 
traffic. What I'm saying is I hear you saying you do not have 
to do anything, the laws are fine, the market is going to work, 
but I'm looking at the laws we have on the books, and I am 
saying wait a minute, they're pretty archaic. They're pretty 
out of date, and they are becoming more outdated every day, and 
while you struggle to find market solutions, maybe our policy 
needs to keep abreast of those changes in the marketplace and 
maybe we need to be thinking now how we settle those tensions 
that exist among Americans such as the tension between wanting 
to maintain localism and at the same time wanting to be able to 
reach out and acquire any signal, any program from anywhere and 
enjoy it.
    Can we maintain some of those systems, those old laws? Do 
they make any sense anymore? I would appreciate, frankly, if 
you would just think that through a little bit and respond back 
to us with perhaps some additional writings and some offerings.
    Mr. Roback, I have not heard you in a while. Can you feed 
back to me just a bit? Am I right about that? I mean music 
videos is not where you're going to stop, I assume. Your 
company is probably going to want the expand into all forms of 
video, and as broad band services are allowing you to do it, 
where are you taking it?
    Mr. Roback. Yes. First of all, I completely agree with you 
about needing to recognize a change and start to treat things 
equally. I think the biggest thing that you also always have to 
look at in the Internet space is that the consumer is more in 
control than they have ever been before and preserving a lot of 
the things that we have talked about today, I mean certainly we 
are in complete agreement with the need to protect the 
intellectual property and making sure that the intellectual 
property holder is compensated, but for issues like localism 
and diversity and competition, I think really the Internet 
breeds exactly that.
    You put yourself in a box where, I mean, we have talked a 
little bit today, about some of the geographic guidelines, for 
example, that have been drawn which really suggest that people 
need to be protected and that they're anointed with the 
opportunity to have advertising revenue in a local market, and 
I would argue that the advertising benefits should really 
accrue to the people that are delivering the best programming 
and therefore attracting the best audience for whoever that 
advertiser that's willing to pay, and so by opening up the 
playing field and allowing there to be more providers of 
whether it be local content or any content to the consumer who 
cares, we are going to end up with higher quality contents, and 
we're going to end up with whether it be web site or channels 
that prevail around things that really are things that the 
consumer wants.
    And we have seen that in a number of different categories, 
music in particular, where the consumer is gravitating toward 
exactly those things they cannot find elsewhere, the things 
that they really crave, and that is what has been our 
opportunity in the music space, and I think we will translate, 
you know, as we open up more of these opportunities as well.
    Mr. Tauzin. I will stop just a second and acknowledge that 
several of our witnesses had plane schedules, and I will try to 
accommodate them, and we thank them privately for their 
appearance today.
    My time is up, but I will allow any of you to respond and 
then I will move to Mr. Markey.
    Mr. Karpowicz. Yes, Mr. Chairman, I would just say that to 
your point about the other distribution systems, each of those 
distribution systems that you have described does have a 
component of geography, and, again, as a local broadcaster, I 
have to continue to go back to my basic tenet that if we do not 
protect the local market, we really cut away at the foundation 
of our system, and if we are not able to control what happens 
to our signal in our local marketplace fundamentally, the very 
fragile network affiliate studio system dissolves completely.
    So to the education at the present time, the technology 
does not exist today to limit the Internet access to my 
specific market. That is why we have a problem. Now, if, in 
fact, that technology changes down the road, and certainly 
there is very real possibility, at that point, I think we are 
highly receptive to having those discussions.
    Mr. Tauzin. Mr. Jaszi.
    Mr. Jaszi. I just wanted to say that in my view, the 
history genius of American copyright law is this it is not and 
has not been technological specific, and to an extent Section 
111 and Section 119, as they now exist in the act, derogate 
from that general and I think very salutary basic copyright 
principle.
    The other thing that is true about the history of copyright 
law, especially in the last 25 years, is that it has been 
marked by a very strong degree of convergence, not only 
nationally but increasingly internationally, and so it seems to 
me nearly inevitable that the kind of legal and policy 
convergence that you foresee as the consequence of 
technological convergence will, must, should come about, but I 
would say one thing about the form that that convergent mode of 
regulation might take, and that is I think that we have 
sometimes today been working with what I regard as a false 
opposition, that is an opposition between a system based on 
principles of compulsory licensing on the one hand and a system 
based on freely negotiated market mechanisms on the other hand.
    The fact of the matter is that historically, at least, what 
we have seen in copyright law is mixed systems which 
accommodate elements of statutory licensing and elements of 
free market negotiated licenses. The system business which 
music is authorized for--sound recordings is a good example, 
although if Section 115 in the statutory license still 
operates, many sound recordings are now prepared under 
negotiated arrangements between copyright owners and recording 
companies.
    It's a mixed model. It has evolved as a mixed model. It is 
stable and it works well. I see no reason to see that the mixed 
model could not be the solution to this convergent regulation 
of the delivery of video services that you describe.
    Mr. Alben. Mr. Chairman, it is true the Internet is forcing 
us to rethink old models. The model of cable compulsory license 
is a problem which was that there were some local areas where 
you would not get the local terrestrial signal, and then the 
satellite license adds another layer of complexity on top of 
that, and I think when you look at the Internet, it is very 
appropriate to pause and think about how these policies all 
work together, and I think the best thing might be to look at--
go back to the first principles.
    What was the first principle of granting that broadcast 
license under the, you know, by the FCC? It was you were going 
do encourage local broadcasting and protect local markets for 
public service. We are not just talking about, you know, city-
wide type broadcasting. My daughter's YMCA Indian Princess 
group has their own web site, and they will be broadcasting 1 
day, and the soccer club has their own web site. So all of a 
sudden when you have been spending 30 or 40 years regulating to 
promote localism, here comes a medium that is so local you 
cannot get more granular.
    Each one of us at this table could put this testimony up, 
and we could add commentary and we could have the ideal local 
broadcasting. So maybe it is time, and I say this very 
hesitatingly, to rethink local protections because local 
content is strong. There is market for local content. No one 
can do what the Buffalo station does better than the Buffalo 
station. They are there. They know the community. They have 
made the investment, and I think that when you think through 
these policies, we have to look at our first principles again.
    Mr. Karpowicz. Could I add one of those other first 
principles is free over-the-air availability of television 
service for everyone, and we want to be able to continue to 
provide that, and we want to be able to maintain our 
marketplace so that we can continue to provide that. So I think 
that is a principle that we do not want to get too for away 
from.
    Mr. Tauzin. Thank you very much.
    The Chair would like to acknowledge that if any of the 
other witnesses need to be temporarily excused to catch a quick 
plane and return, you are also welcome to do so.
    Mr. Markey is recognized.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    To quote another speaker of the House, Tip O'Neal, his most 
important aphorism was ``all politics are local''. Well, what 
we tried to do last year and is already a success in the 
marketplace is that we took the satellite industry and we 
transformed it by saying all politics is local into local.
    You can take this local TV station, beam it up to some 
satellite and then beam it right back down again and create new 
competition. Here with the Internet, what we have is this 
mixture of global localism. Every local site is also a global 
site simultaneously by definition, and so that creates a whole 
series of issues that have to be resolved. None of them are 
unsolvable, but there is no one simple template that you can 
use anymore than when used in any other area of jurisdiction 
that this committee has had to deal with.
    We work it through. We try to be fair. We want to encourage 
technology and competition. This committee is the not the 
Judiciary Copyright Subcommittee. We have a slightly different 
agenda, but we think that they can be harmonized. If we listen 
to witnesses from the entertainment broadcast industry back in 
the fifties and sixties and seventies, we would not have much 
of a technological revolution which we have today. We just 
would not have had it because they would have stopped it dead 
in its tracks.
    They would go back in a time capsule now, many of them if 
they could to the good ole days of three TV stations and no 
cable and no satellite because they had total control. So that 
is a balance that we have, and we deal with the internal 
contradictions, by the way, of broadcasters even, that maybe 
they want to broadcast, webcast local programs today but want 
to maintain exclusivity on programming.
    Perhaps up in Seattle, perhaps, you know, you want to 
broadcast this Seattle Mariners across the country, but on the 
other hand, the Seattle Mariners say keep that antitrust law in 
place, we do not want my new baseball teams. So that the very 
same people that are investing in the Seattle Mariners saying, 
no, we want antitrust protection, no competition for baseball, 
but yet say would not it be great if everyone was free to have 
their own little local webcast, broadcast station across the 
station.
    So you wide up with this set of contradictions. Everyone 
has kind of a narrow perspective when it comes to their own 
little internal monopoly, but when it comes to somebody else's 
monopoly, they are more than willing to provide all the 
competition in the world to that monopoly. And that is just a 
duality of it all, and we have to deal with that here.
    And as Tip used to say, Everyone likes to be asked. So we 
appreciate you coming to us and asking because that helps us to 
get into this discussion in a way that is going the ultimately, 
I think, result in a proper balance being struck.
    So I thank you, Mr. Chairman. I think that we have the 
future sitting in front of us today. I think that 10 years from 
now, to put on my binoculars, we are going to have a 
transformed marketplace, and I will be able to see the Red Sox 
here in Washington. I will probably have to pay some fee for 
it, rather, to make it marketable.
    I think that Mr. Karpowicz is right about his ability to 
control his Buffalo station, but I personally believe that if 
Doug Flute was quarterbacking in some game, even if it was a 
shakey picture and it was only five inches in diameter and 
someone was in Oklahoma, that they would take that as the 
highest quality service that technology ever delivered to a 
human being who comes to Buffalo.
    So I think that there is going to be attention here. Each 
of you desire to maintain the perfection of the original 
product which you have been able to create, and on the other 
hand the ability of technology to deliver that product in some 
imperfect form across the country, and we want to make sure, 
however, that the old is not destroyed by the new but rather it 
coexists with the new, and we believe that that kind of 
compatibility is possible, and if we work together, we will be 
able to achieve that.
    So I thank each of you. It has been highly illuminating. 
You have given us a window onto the future, and I think that if 
we work together, we can instruct a new regulatory and legal 
frame work that allows all of you to come back here 10 years 
from today great successes in this new universe.
    Thank you, Mr. Chairman.
    Mr. Tauzin. I thank the gentleman for his comments and his 
insight.
    Let me conclude by going back do where we started, and that 
is an examination of the policy and technological challenges 
that you presented to us today, I think would be incomplete if 
we do not also look at the other side of the mirror at the 
consumer, and the consumer's role in this evolving complex of 
issues, and the consumer role is going to be in large measure 
determined by what kind of privacy policy is made in the 
marketplace and here in Washington.
    My friend, Mr. Markey has been a strong advocate of 
consumer privacy rights for a long time and privacy rights 
causes being formed. I intend to establish a privacy task force 
of this subcommittee to begin examining that particular element 
of our role, our policymaking role in this area, and we will 
ask your help and advice in terms of where we should take it.
    We will do that in is another hearing where I will ask you 
to be thinking on how you might be able to contribute to that 
process. The concept will literally turn on the question of how 
the consumer's control or lack of control of the flow of 
information about the consumer, his location, his identity, his 
likes, his dislikes, what he browses on the Internet or what he 
browses in a store, albeit a virtual reality store, how that 
information is or is not available to this system and how it 
works with controls that some of you are talking about today in 
terms of technologically defining the recipient of some of this 
content.
    There were several television shows just recently exploring 
the concept of the cookie that is built into most software and 
most of our personal computers. This allows the person to track 
our movements over the web, and it demonstrated the consumers 
how they might disable that cookie, and I would be very 
surprised to learn that most Americans know that there is the 
capacity in their computers for others to track all their 
moves.
    So what I would also be concerned about is that once all 
Americans knew they could simply disable it and shut off the 
flow of information, they probably will choose to do so and to 
use the cookie cutter, in fact, and we are going to have to 
think about what kind of policy we ought to make to give 
consumers the rights to control the flow of information about 
sensitive and personal investigation and yet at the same time 
not put them in the spot where they have got to shut off 
everything, and that is going to be critical to the movement of 
video programs and to advertiser-based video programming in the 
Internet world.
    So I would urge you to be thinking of that and to think 
about what contributions you might make in a future hearing on 
that issue as well.
    Mr. Markey suggests, and I think it is a good suggestion, 
that I ask each of you to use a minute of time, if you do not 
mind, in giving us a summary of what you would like us to 
remember from this hearing today. What do you want to leave us 
with? One minute apiece starting with you, Mr. Karpowicz.
    Mr. Karpowicz. I think, Mr. Chairman, that what will I 
leave you with today is simply that we have to protect local 
television station's ability to maintain a discreet marketplace 
and that any distribution system that threatens that and that 
can take other product and distribute beyond our market area, 
certainly without our knowledge or without our approval, is 
very disruptive to the very fabric of the relationship that 
exists today between networks, affiliates, studios and content 
providers.
    Mr. Tauzin. Mr. Alben.
    Mr. Alben. I think that we want to thank the committee for 
involving us in this debate because this is the first time we 
have ever testified before a Congressional subcommittee.
    Mr. Tauzin. Thanks for coming.
    Mr. Alben. We think that the Internet is doing fine, the 
market is evolving. I think people have prudently stated that 
we need to wait a minute before we overreact on what we do not 
understand, and I do not think there is a need to change the 
compulsory license laws at this time, but I do think that we 
should continue to resist efforts, as they were in the last 
session, to erect some laws or language in laws that 
specifically said that you could not have digital performance 
rights, that you could not have a digital right to transmit 
programming. That is equally not a good idea, and I think that 
we are going to work as we have worked with the 300 content 
partners that we have now to license programming.
    Would we like a compulsory license down the road? Sure we 
would, because I think that would facilitate the transmission 
of programming to consumers.
    Mr. Tauzin. Mr. Boren?
    Mr. Boren. Well, I would just say that the colleges and 
universities certainly welcome the opportunity for broader 
distribution of our sports programming as we do with many other 
educational funds, but we hope the committee will remember as 
this goes forward to do it in a way that will not destroy our 
ability to negotiate in the marketplace for a revenue stream 
that is absolutely essential to intercollegiate athletics. 
Otherwise, if that revenue stream dries up, many colleges and 
universities are simply going to have to greatly reduce those 
athletic opportunities for our student athletes, reduce the 
financial support, be faced with the choice between men's and 
women's athletics and also between academic programs and 
athletic participation in a way that is really going to end up 
hurting a lot of young people across the country. So we hope 
you would keep that in mind.
    Mr. Tauzin. Mr. McCallum.
    Mr. McCallum. First and foremost, Mr. Chairman, I would 
like to thank you very much for inviting us to come and speak 
and be part of these discussions. I think if I would like to 
leave a message, first and foremost, is that we are legal in 
Canada. We operate, fortunately, within a regime that has 
enabled us, under the circumstances, to operate in that 
fashion. There are is still some housekeeping that is being 
tidied up in the nature of the tariff and so on, but we have, 
in fact, operated that way and intend to be that way.
    We are developing a security system which does enable us 
and will enable others to define territories. At this point, we 
are looking on the national basis. Whether it could be done on 
a local basis or not will require some additional examination.
    You, as we were are, facing the reality that we are dealing 
in Internet time, not regulatory time, and I think the 
deliberations that you are going through have to be somewhat 
accelerated, bearing in mind the interest of all the parties, 
specifically the copyright holders, and as the--I think it was 
Ms. McCarthy mentioned, not leaving out the creators, the 
performers, the writers, the musicians as part of that process.
    So we wish shall you God speed, and we will look forward 
and look on your discussing things with great interest. Thank 
you.
    Mr. Tauzin. Mr. Jaszi.
    Mr. Jaszi. Mr. Chairman, I hardly need to remind this 
subcommittee that balancing the copyright system is one that 
takes appropriate account of the interests of consumers and 
access as well as the interest of owners and proprietary 
control. Historically, compulsory licenses has been one 
mechanism that has been used in moments of technological stress 
when that balance has been lessened by the response of content 
proprietors to new technologies, and I think, therefore, that 
is an option that has to remain in the mix that the 
subcommittee and the Congress consider as they take account of 
the converging phenomenon on television service delivery by 
means of the Internet and equivalent technologies.
    I guess the last point I would add is that it seems to me 
that when all is said and done, what we are likely to have for 
cable, for satellite, and for Internet is a mixed model for the 
authorization of retransmission, a model that has some 
compulsory licensing features with many free market features.
    Mr. Tauzin. Mr. Beck.
    Mr. Beck. Mr. Chairman, it has been gratifying to hear so 
many of your colleagues and you, yourself, say that you have 
often wanted affiliate television right here in Washington from 
your Districts. We did that. We brought our resources together. 
We pay the photographers. We pay the camera men. We even pay 
for the streaming to companies like his companies down there.
    So we are thrilled to be operating in this new environment, 
re-purposing our content to make your lives hopefully a little 
bit better when you want to learn about your Districts. I think 
things are working fine. Just prevent the pirates from stealing 
our products and punish where it is appropriate, and we will do 
just fine.
    We are not an old business. We are as new as anybody else. 
We think we are doing a fine job of competing in this new 
space. Please let us do that.
    Mr. Tauzin. Mr. Roback.
    Mr. Roback. Thank you. I guess I would just like to say 
that for every bad mark like something that has happened in 
this iCraveTV incident, I would like you all to know that there 
will be a lot of Internet companies like ours and the other 
members of if Digital Media Association that Alex mentioned 
that are going and licensing content appropriately, providing 
value to both sides of an equation by expanding the marketing 
and distribution for a lot of this value content and still 
compensating rights holders for use of that content.
    The second thing I would like to say is that I think we all 
have to be mindful, as I mentioned earlier, of the fact that 
the consumer will be the final arbiter of what works on the 
net, what works generally when it comes to how they receive 
content and what content, frankly, is successful. If local 
content continues to be something that people demand, it will 
be out there, and it will be the best because there will be so 
much competition.
    I think we should just be mindful of the fact that at the 
end of the day, the consumer has the final say.
    Mr. Tauzin. And that will be the final say.
    Gentlemen, again, thank you very much for your testimony. 
The record will remain open for 30 days, and I have invited you 
to supplement it. I wish you would, and we will look forward to 
hearing your comments also on the privacy issue when we do 
arrive at one.
    Thank you very much. The hearing stands adjourned.
    [Whereupon, at 1:23 p.m., the subcommittee was adjourned.]
    [Additional material submitted for the record follows:]
Prepared Statement of Hon. Eliot L. Engel, a Representative in Congress 
                       from the State of New York
    Mr. Chairman, please accept my gratitude for scheduling this 
hearing today. It is timely and foreshadows the future of what 
television programming Americans will receive and how they will receive 
it.
    With increasing deployment of broadband internet access, more and 
more Americans will be able to enjoy close to video-quality reception 
on their computer. The boundaries and rules for who can distribute 
programming and the arrangements for distribution are at the heart of 
this hearing. On the one hand, a representative of ``iCraveTV'', which 
exceeded the boundaries of copyright protection, is testifying. 
``iCraveTV'' rebroadcast signals of a U.S. TV station without a 
licensing arrangement to fairly compensate the owners of copyrighted 
content. This was wrong and seriously infringed on the intellectual 
property rights of the content owners.
    ``iCraveTV's'' infringements have only emphasized the bright line 
beyond which e-business should not stray. In addition, though, by 
showing what a webcasting company shouldn't do, ``iCraveTV'' has helped 
to spotlight the actions of the many webcasters who play by the rules 
and distribute content only under license.
    I am, indeed, optimistic as I look forward to today's hearing 
because I believe that the content industry and the streaming media 
community may actually move closer together as the internet becomes an 
increasingly important tool for distribution of music, television, 
sports, and other creative works.
    As I preview the statements of my friend, Jack Valenti, of the 
Motion Picture Association of America, and Alex Alben, of RealNetworks, 
with whom I met yesterday, I am struck by the convergence of elements 
of their testimony. Jack Valenti is proud to ``embrace new Internet 
opportunities for consumers . . . licensing our creative material to 
Internet companies.'' Likewise Alex Alben says, ``By offering the 
online audience the widest possible array of live on-demand 
programming, we will work with content producers to create a huge new 
market for new and old copyrighted works.''
    Thus, Mr. Chairman, I am grateful you have scheduled this hearing 
today and look forward to exploring whether internet companies should 
be given a so-called compulsory license and how copyrighted music, TV, 
sports, and other media will be distributed on the internet in the 
future.
                                 ______
                                 
 Prepared Statement of the American Society of Composers, Authors and 
                               Publishers
    The American Society of Composers, Authors and Publishers (ASCAP) 
submits this statement concerning the question of compulsory licensing 
of copyrighted works used by webcasters.
    ASCAP is an unincorporated membership association of over 90,000 
American composers, lyricists and music publishers. These writer and 
publisher members, who are the creators and the copyright owners of 
millions of copyrighted musical compositions, give ASCAP the 
nonexclusive right to license the nondramatic public performance of 
their music. ASCAP thus licenses many different types of music users, 
including radio and television broadcast stations and networks, cable 
program services and systems, concert promoters, hotels and motels, 
bars, grills, restaurants and nightclubs, and, increasingly over the 
last five years, Internet websites, including webcasters. ASCAP's 
license are blanket licenses, in that they give access to, and the user 
may perform, any and all works in the ASCAP repertory. Further, music 
users are guaranteed that ASCAP will license them at reasonable fees, 
and have recourse to have a federal court set license fees if they 
believe ASCAP's offers are unreasonable.
    ASCAP strongly opposes the enactment of any new compulsory licenses 
for webcasters, for many reasons:
    First, insofar as music is concerned, any webcaster can obtain all 
necessary performance rights in copyrighted musical compositions it is 
transmitting, by obtaining a license from ASCAP (and the two other 
American performing rights organizations). As ASCAP cannot deny that 
license, as it must be at a reasonable license fee, and as it covers 
all the music in the ASCAP repertory, webcasters are assured that they 
can get all the rights that they need. Further, pursuant to the 
amendments to the Performance Rights in Sound Recordings Act of 1995 
made by the Digital Millennium Copyright Act of 1998, webcasters have a 
statutory license for the performing rights in the sound recordings 
that they perform as well, and hence have all the rights they need.
    As for any other compulsion to allow the use of the property of 
others, the basic principles of our free enterprise system make the 
thought abhorrent. We believe, as we trust and believe Congress does as 
well, in the sanctity of private property. The fact is that 
intellectual property is no different from tangible property in this 
regard. The product of a person's mind is as much property as the 
product of a person's hands. The law should protect both equally. 
Webcasters do not obtain any other property they use on a compulsory 
basis. And the fact that they need intellectual property to provide 
service does not change that basic principle, for they need tangible 
property to provide their services as well. Thus, for example, a 
webcaster cannot operate without a computer. The law does not, and 
should not, require IBM or Apple to provide computers to webcasters 
(let alone at a price that is not determined in the free marketplace). 
The same holds true for copyrighted property.
    We appreciate the opportunity to share our views with the 
Committee, and stand ready to help further in any way we can.

                                  


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