[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
                        THE AUDIO AND VIDEO FLAGS: 
                CAN CONTENT PROTECTION AND TECHNOLOGICAL 
                           INNOVATION COEXIST?


                                 HEARING

                                BEFORE THE

               SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE 
                                 INTERNET

                                  OF THE 

                        COMMITTEE ON ENERGY AND 
                                COMMERCE

                        HOUSE OF REPRESENTATIVES


                       ONE HUNDRED NINTH CONGRESS

                              SECOND SESSION


                               JUNE 27, 2006

                            Serial No. 109-112

         Printed for the use of the Committee on Energy and Commerce




Available via the World Wide Web:  http://www.access.gpo.gov/congress/house




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                    COMMITTEE ON ENERGY AND COMMERCE
                       JOE BARTON, Texas, Chairman
RALPH M. HALL, Texas                      JOHN D. DINGELL, Michigan
MICHAEL BILIRAKIS, Florida                  Ranking Member
  Vice Chairman                           HENRY A. WAXMAN, California
FRED UPTON, Michigan                      EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                    RICK BOUCHER, Virginia
PAUL E. GILLMOR, Ohio                     EDOLPHUS TOWNS, New York
NATHAN DEAL, Georgia                      FRANK PALLONE, JR., New Jersey
ED WHITFIELD, Kentucky                    SHERROD BROWN, Ohio
CHARLIE NORWOOD, Georgia                  BART GORDON, Tennessee
BARBARA CUBIN, Wyoming                    BOBBY L. RUSH, Illinois
JOHN SHIMKUS, Illinois                    ANNA G. ESHOO, California
HEATHER WILSON, New Mexico                BART STUPAK, Michigan
JOHN B. SHADEGG, Arizona                  ELIOT L. ENGEL, New York
CHARLES W. "CHIP" PICKERING,  Mississippi ALBERT R. WYNN, Maryland
  Vice Chairman                           GENE GREEN, Texas
VITO FOSSELLA, New York                   TED STRICKLAND, Ohio
ROY BLUNT, Missouri                       DIANA DEGETTE, Colorado
STEVE BUYER, Indiana                      LOIS CAPPS, California
GEORGE RADANOVICH, California             MIKE DOYLE, Pennsylvania
CHARLES F. BASS, New Hampshire            TOM ALLEN, Maine
JOSEPH R. PITTS, Pennsylvania             JIM DAVIS, Florida
MARY BONO, California                     JAN SCHAKOWSKY, Illinois
GREG WALDEN, Oregon                       HILDA L. SOLIS, California
LEE TERRY, Nebraska                       CHARLES A. GONZALEZ, Texas
MIKE FERGUSON, New Jersey                 JAY INSLEE, Washington
MIKE ROGERS, Michigan                     TAMMY BALDWIN, Wisconsin
C.L. "BUTCH" OTTER, Idaho                 MIKE ROSS, Arkansas                       
SUE MYRICK, North Carolina
JOHN SULLIVAN, Oklahoma
TIM MURPHY, Pennsylvania
MICHAEL C. BURGESS, Texas
MARSHA BLACKBURN, Tennessee

                    BUD ALBRIGHT, Staff Director
                   DAVID CAVICKE, General Counsel
     REID P. F. STUNTZ, Minority Staff Director and Chief Counsel


         SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET
                     FRED UPTON, Michigan, Chairman
MICHAEL BILIRAKIS, Florida                 EDWARD J. MARKEY, Massachusetts
CLIFF STEARNS, Florida                       Ranking Member
PAUL E. GILLMOR, Ohio                      ELIOT L. ENGEL, New York
ED WHITFIELD, Kentucky                     ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming                     MIKE DOYLE, Pennsylvania
JOHN SHIMKUS, Illinois                     CHARLES A. GONZALEZ, Texas
HEATHER WILSON, New Mexico                 JAY INSLEE, Washington
CHARLES W. "CHIP"                          RICK BOUCHER, Virginia
PICKERING,  Mississippi                    EDOLPHUS TOWNS, New York
VITO FOSSELLA, New York                    FRANK PALLONE, JR., New Jersey
GEORGE RADANOVICH, California              SHERROD BROWN, Ohio
CHARLES F. BASS, New Hampshire             BART GORDON, Tennessee
GREG WALDEN, Oregon                        BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                        ANNA G. ESHOO, California
MIKE FERGUSON, New Jersey                  BART STUPAK, Michigan
JOHN SULLIVAN, Oklahoma                    JOHN D. DINGELL, Michigan
MARSHA BLACKBURN, Tennessee                  (EX OFFICIO)                 
JOE BARTON, Texas                          
  (EX OFFICIO)                                                                  


                                 CONTENTS


                                                                     Page
Testimony of:
        Bainwol, Mitch, Chairman and Chief Executive Officer, 
                Recording Industry Association of America	      17
        Levin, Andrew W., Executive Vice President and Chief 
                Legal Officer, Clear Channel Communications, on 
                behalf of National Association of Broadcasters	      22
        Harris, Stewart, Songwriter, on behalf of Songwriters 
                Guild of America	                              29
        Ziegler, Ruth A., Deputy General Counsel, Sirius 
                Satellite Radio, Inc.	                              32
        Attaway, Fritz, Executive Vice President and Special 
                Policy Advisor, Motion Picture Association of 
                America	                                              72
        Shapiro, Gary, President and Chief Executive Officer, 
                Consumer Electronics Association	              78
        Sohn, Gigi, President, Public Knowledge	                      88


                          THE AUDIO AND VIDEO FLAGS: 
                 CAN CONTENT PROTECTION AND TECHNOLOGICAL 
                              INNOVATION COEXIST?


                            TUESDAY, JUNE 27, 2006

                           HOUSE OF REPRESENTATIVES,
                      COMMITTEE ON ENERGY AND COMMERCE,
            SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET,
                                                            Washington, DC.


        The subcommittee met, pursuant to notice, at 2:05 p.m., in 
Room 2322 of the Rayburn House Office Building, Hon. Fred 
Upton (Chairman) presiding.
	Members present:  Representatives Stearns, Gillmor, Cubin, 
Shimkus, Bass, Walden, Terry, Ferguson, Blackburn, Barton (ex 
officio), Markey, Engel, Wynn, Gonzalez, Inslee, Boucher, Towns, 
and Gordon.
Also present:  Representative Bono.
	Staff present: Neil Fried, Counsel; Will Nordwind, Policy 
Coordinator; Anh Nguyen, Legislative Clerk; Jaylyn Jensen, 
Senior Legislative Analyst; Johanna Shelton, Minority Counsel; 
and Davis Vogel, Minority Research Assistant.
	MR. UPTON.  Good afternoon.  Today's hearing is entitled "The 
Audio and Video Flags: Can Content Protection and Technological 
Innovation Coexist?"  I would like to think that the answer to the 
question posed in the title of this hearing is: "yes, they can 
coexist."  In fact, the marketplace is replete with examples of that 
fact, which is a good thing since one of our Nation's most precious 
resources and exports is the creative genius and artistic ability of 
her citizens, otherwise known as intellectual property.
	This then begs the question of where, if at all, is it wise or 
appropriate for the Government to intervene in the marketplace 
and mandate specific content protection technologies, like the 
audio and video broadcast flags which are at issue in today's 
hearing.  In my view it is those who advocate intervention in the 
marketplace and federal technology mandates that bear the burden 
of the persuasion in this debate.
	Today's hearing is divided into two panels, one on the audio 
flag and the other on the video flag.  This subcommittee has a long 
record on the video broadcast flag since it was a major issue in the 
subcommittee's examination of the transition to digital TV.  We 
held a number of hearings in which the broadcast flag was 
addressed, and under former Chairman Billy Tauzin's leadership 
we held many, many, numerous multi-party roundtables which 
were, in part, responsible for industry consensus on a video 
broadcast flag.
	It was that consensus that helped pave the way for the FCC's 
video broadcast flag order, which was ultimately struck down by 
the D.C. Circuit on the grounds that the FCC lacked authority to 
issue such rules, not on substantive grounds.  So, today's hearing 
will help refresh our record on this important issue, which, at its 
heart, was always about preventing illicit mass distribution on the 
Internet of digital over-the-air broadcast content, a goal that I 
strongly support.
	However, this will be the first hearing that we have held on the 
audio broadcast flag.  I want to commend Mr. Ferguson for his 
motivation and for focusing our attention on it.  As I stated at the 
outset, I believe it is those who advocate intervention in the 
marketplace and Federal technology mandates who bear the burden 
of persuasion in this debate.  I believe that digital TV transition, 
which is government driven with a hard date now set into law, is 
very different than the digital radio transition which is purely 
market driven.  It does not require a separate spectrum and does 
not require the shut-off of analog service.  As such, I believe that 
the radio marketplace will be much more sensitive to government 
intervention and Federal technology mandates than the TV 
marketplace, and that is of great concern to me.  
        In any event, my understanding is that the NAB and the RIAA 
have been engaged in a productive dialogue over the audio flag 
issue, and I commend those organizations for their diligence.  I 
would hope that the parties to that dialogue could be expanded to 
include other interested parties to ensure that, if there is ever to be 
a consensus on audio flag, that it is a broad-based consensus.  I 
know from our experience with the video broadcast flags that these 
issues are highly technical.  There are important consumer issues at 
stake and ample time needs to be given to careful consensus 
building before the Government intervenes, if a case is to be made 
that it intervenes at all.
	With that, I look forward to hearing from our witnesses today, 
and with perfect timing I recognize the Ranking Member of the 
subcommittee from Massachusetts, my friend, Mr. Markey.
	[The prepared statement of Hon. Fred Upton follows:]

PREPARED STATEMENT OF HON. FRED UPTON, CHAIRMAN, 
SUBCOMMITTEE ON TELECOMMUNICATIONS AND THE INTERNET

        Good afternoon.  Today's hearing is entitled: The Audio and 
Video Flags:  Can Content Protection and Technological 
Innovation Coexist ?  
        I would like to think that the answer to the question posed in 
the title of this hearing is:  "YES, they can coexist."  In fact, the 
marketplace is replete with examples of this fact, which is a good 
thing since one of our nation's most precious resources - and 
exports -- is the creative genius and artistic ability of her citizens, 
otherwise know as intellectual property.  
        This then begs the question of where, if at all, is it wise or 
appropriate for the government to intervene in the marketplace and 
mandate specific content protection technologies, like the audio 
and video broadcast flags which are at issue in today's hearing ?   
In my view, it is those who advocate intervention in the 
marketplace and federal technology mandates that bear the burden 
of persuasion in this debate.
        Today's hearing is divided into two panels, one on the audio 
flag and one on the video flag.  
        This Subcommittee has a long record on the video broadcast 
flag, since it was a major issue in the Subcommittee's examination 
of the digital television transition.  We held a number of hearings 
in which the broadcast flag was addressed, and, under former 
Chairman Billy Tauzin's leadership, we held numerous multi-party 
roundtables which were, in part, responsible for industry consensus 
on the video broadcast flag.  It was that consensus that helped 
paved the way for the FCC's video broadcast flag order, which was 
ultimately struck down by the D.C. Circuit on the grounds that the 
FCC lacked authority to issue such rules, not on substantive 
grounds.  So, today's hearing will help us refresh our record on this 
important issue, which, at its heart, was always about preventing 
illicit mass distribution on the Internet of digital over-the-air 
broadcast content -- a goal I strongly support.  
        However, this will be the first hearing we have held on the 
audio broadcast flag.  I want to commend Mr. Ferguson for his 
motivation and for focusing our attention on it.  As I stated at the 
outset, I believe it is those who advocate intervention in the 
marketplace and federal technology mandates who bear the burden 
of persuasion in this debate.  I believe the digital television 
transition, which is government driven with a hard date now set 
into law, is very different than the digital radio transition which is 
purely market driven, does not require separate spectrum, and does 
not require the shut-off of analog service.  As such, I believe the 
radio marketplace will be much more sensitive to government 
intervention and federal technology mandates than the television 
marketplace - and this is of great concern to me.  
        In any event, my understanding is that the NAB and RIAA 
have been engaged in a productive dialogue over the audio flag 
issue, and I commend those organizations for their diligence.  I 
would hope that the parties to that dialogue could be expanded to 
include other interested parties to ensure that, if there ever is to be 
a consensus on audio flag, it is a broad-based consensus.  I know, 
from our experience with the video broadcast flag, that these issues 
are highly technical, there are important consumer issues at stake, 
and ample time needs to be given to careful consensus-building 
before the government intervenes, if a case is to be made that it 
intervenes at all.
        With that, I look forward to hearing from our witnesses today, 
and I thank them for their participation.

	MR. MARKEY.  Thank you, Mr. Chairman, and I want to 
commend you for calling this hearing today on content protection 
technologies for broadcast audio and video content.  Protecting 
copyright in the digital era is unquestionably important for content 
owners.  The inability of content owners to safeguard their 
financial and creative interests in digital versions of their 
copyrighted products could have an adverse impact on jobs 
innovation and the widespread availability of digital audio and 
video programming for consumers.
	Content owners have a reasonable and lawful expectation that 
privacy of their products will not be condoned in the marketplace 
or countenanced by entities charged with enforcing copyright laws.  
And I believe it is important that we stress as we move even 
further into the digital era our strong opposition to the theft and 
illegal distribution of copyrighted content.  The content community 
has several tools to combat piracy.  The content community has 
utilized lawsuits against individuals who engage in massive illegal 
infringement on-line.
	It has also prevailed the Supreme Court in the Grokster case 
which held that distributors of technologies used for infringement 
by others could be held liable for such activity.  The content 
community has also worked closely with universities around the 
country on educational programs about theft and piracy and the 
risk of lawsuits to students and faculty.  In addition, many 
companies have experimented with digital rights management and 
technologies to provide consumers with copyrighted content in a 
way that permits limited reasonable subsequent use by consumers.
	In recent years content providers have also promoted the use of 
other technological tools and protection measures, most notably 
the so-called broadcast and audio flags.  Such technology flags, 
particularly digital content with imbedded content protection 
instructions in order to thwart unauthorized use.  The broadcast 
video flag has been advanced by leading providers of video content 
as a technological tool to help impede widespread theft of digital 
content.  In contrast, many consumers view the broadcast flag as 
potentially frustrating or prohibiting their ability to fully utilize 
their home electronics equipment, including what they view as 
reasonable use of their computers and the Internet.
	The broadcast flag rule that the FCC promulgated was 
successfully challenged in the D.C. Circuit which ruled in May of 
2005 that the Commission lacks sufficient authority to adopt the 
regulations.  Presumably this legal interpretation of the 
Commission's authority would also hold for the broadcast audio 
flag for radio.  Broadcast radio, like its television counterpart, is 
also moving towards digital technology.  Yet unlike broadcast 
television, broadcast radio can migrate to digital without the need 
for additional spectrum.  
	As a result, hundreds of radio stations across the country are 
already broadcasting in digital form.  In addition, satellite radio 
providers, XM and Sirius, are providing a digital subscription radio 
service.  Each of these satellite radio providers offers a device in 
the marketplace which permits subscribers to store songs 
transmitted over their services.  With the rise of both terrestrial and 
satellite-delivered digital radio the music industry has sought 
implementation of audio flag technology to limit unauthorized 
copying or distribution of content.
	I want to thank you, Mr. Chairman, for calling this hearing 
today.  I believe this is a very useful inquiry.  As we considered 
developing a regulatory approach to these issues, particularly 
technology regulations that will impact a consumer's use of digital 
technology and the Internet,  I believe it is vitally important to 
assure the public that any new regulation appropriately balances 
the legitimate concerns of both consumers and content owners.
	I would also like to welcome Andy back to the committee 
today.  It has been a long time since he has paid us a visit.  I yield 
back the balance.
	MR. UPTON.  His year is up, I think.  Mr. Gillmor.
	MR. GILLMOR.  Thank you, Mr. Chairman, and I appreciate the 
opportunity for us today to discuss the matter of content protection 
in the digital age.  Digital age has presented us with some 
unexpected and exciting public policy challenges, many of which 
we continue to debate.  Protecting content has become one of, if 
not the paramount issue.  Many of our favorite music, TV, and 
movie selections are now being distributed in digital formats.  
These advanced digital distribution formats give consumers a 
better listening and viewing experience, certainly much better than 
the grainy images from the 1948 seven-inch TV that my family 
first bought when I was a small child, while at the same time 
offering consumers an increased ability to manage the use of both 
their audio and video content.
	The ability of a consumer to manage his or her experience has 
led many to question the appropriate nature by which this content 
is protected from illegal use and distribution.  Striking a balance 
between consumer fair use and the protection of creative and 
intellectual property is extremely important, and addressing this 
problem is going to require some insight into what technology may 
yield in the years to come.
	Dealing specifically with the broadcast video flag, I am glad to 
see that all stakeholders worked together to reach an agreement 
and, given the court's decision on the FCC's ability to implement 
such rules, it is now incumbent upon us to act in a responsible 
manner to ensure the protection of the video content.  A matter of 
greater contention surrounds the issue of audio flag.  Unlike the 
video flag, I believe it would be in the best interest of all 
consumers and the future of the industry to sit down with all 
affected parties and again try to work out a privately negotiated 
agreement rather than rely on a legislative solution.
	However, those talks cannot be allowed to be drawn out.  I 
think they have to be a priority because as we all know from the 
1996 Telecom Act, the tech sector changes rapidly.  Furthermore, 
from my discussions with industry representatives, a privately 
negotiated solution is preferred because recent Congressional 
efforts have fallen short of a consensus approach, and as that 
negotiation goes forward I would hope that the members of this 
committee could be kept informed as to how it progresses.  And I 
yield back, Mr. Chairman.
	[The prepared statement of Hon. Paul E. Gillmor follows:]

PREPARED STATEMENT OF THE HON. PAUL E. GILLMOR, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

        MR. CHAIRMAN:  Thank you for holding this important 
hearing.  I appreciate the opportunity to openly discuss the matter 
of content protection in a digital age.
	The digital age has presented us with many unexpected and 
exciting public policy challenges-many of which we continue to 
debate.  Protecting content has become one of, if not the 
paramount issue as many of our favorite music, TV, and movie 
selections are now being distributed in digital formats.  These 
advanced digital distribution formats give consumers a better 
listening and viewing experience-much better than the grainy 
images from the 1948 seven-inch TV that my family first received 
when I was nine years old-while at the same time offering 
consumers an increased ability to mange the use of both their audio 
and video content. 
	The ability of a consumer to manage his or her "experience" 
has led many to question the appropriate nature by which this 
content is protected from illegal use and distribution.  Striking a 
delicate balance between consumer "fair use" and the protection of 
creative and intellectual property is extremely important.  
Addressing this dispute will require not only knowledge of the 
present, but also insight into what technology may yield in the 
years to come.     
        Dealing specifically with the broadcast video flag, I was glad 
to see all stakeholders work together to reach an agreement.  Given 
the court's decision on the FCC's ability to implement such rules, 
it is now incumbent upon us to act in a responsible manner to 
ensure the protection of video content.  
        A matter of greater contention surrounds the issue of the 
proposed "audio flag."  Let me be clear on my current position, 
like the video flag, I believe it is in the best interest of all 
consumers and the future of the industry to sit down with all 
affected parties to, again, work out a privately negotiated 
agreement-rather than rely on a legislated solution.  However, 
these talks cannot be allowed to be drawn out-they must be a 
priority because, as we all know from the 1996 Telecom Act, the 
tech sector changes rapidly.  Furthermore, from my discussions 
with industry representatives, a privately negotiated solution is 
preferred because recent Congressional efforts have fallen short of 
a consensus approach.  
        Mr. Chairman, I look forward to the testimony from today's 
witnesses and to working closely with you on these lingering 
public policy issues.  Additionally, I would respectfully request 
that should any industry negotiations take place that this committee 
be kept informed of the ongoing status of those discussions.  
Again, thank you Mr. Chairman for yielding me this time.

	MR. UPTON.  Thank you.  Mr. Boucher.
	MR. BOUCHER.  Thank you very much, Mr. Chairman.  I have 
no hostility to a statutory authorization for a TV broadcast flag if 
certain key conditions are met and are clearly accommodated in the 
authorizing statute.  First, there should be clearly stated 
exemptions from the flag mandate for news and public affairs 
programs and for content subject to the TEACH Act.  These 
programs should never be flagged.  News and public affairs 
broadcasts erode in value over time and should be broadcast in the 
clear so that excerpts can be easily e-mailed from one interested 
party to another.
	The TEACH Act specifies content that under existing law is 
available for use in distance learning applications.  The TV 
broadcast flag should not be permitted to interfere with this well-
functioning law.  The Senate, in fact, has acknowledged these 
principles in the draft of the bill that is being considered in that 
body.  Secondly, it is essential that Congress reinforce fair use 
principles.  The DMCA broadly undermined fair use for digital 
media and actually empowers the creators of digital content to 
eliminate fair use altogether.
	I want to commend Chairman Barton for his determination to 
protect fair use rights for the consumers of digital media and for 
his announcement that the TV broadcast flag will only be 
considered in the broader context of assuring fair use protections 
for digital media consumers.  I also appreciate Chairman Barton's 
co-sponsorship of H.R. 1201, which is pending before this 
committee.  That bill is the right policy.  The proposed audio 
broadcast flag, however, is an entirely different matter.  Unlike the 
TV flag, there is no agreed-upon technical standard for an audio 
flag.
	After years of work the inter-industry forum known as the 
Copy Protection Technical Working Group produced a TV 
broadcast flag standard which the diverse interested parties have 
accepted as both being workable and effective.  That work has 
really not taken place for an audio flag.  In fact, even though the 
technical group has been meeting monthly, the industry 
representing the recording companies elects not to attend those 
sessions, and this is the forum that is comprised of the equipment 
manufacturers and in fact all interested parties.
	The work to create a technical standard for a broadcast flag has 
in essence not even started.  Moreover, if there were agreed-upon 
technical standards, those standards could be effectively 
implemented without Congress having to pass a statute.  The 
technology for high definition radio was developed by a company 
called iBiquity, which holds the intellectual property for the 
equipment the high definition radio stations are using.  Without 
Congress doing anything, if a technical standard for an audio flag 
is some day created, iBiquity could easily incorporate that standard 
into its license agreement with radio stations and could have the 
flag implemented simply through that private arrangement.
	This matter clearly lends itself to a complete private-sector 
resolution, with the private parties creating and implementing the 
technical standard.  And I would add my voice to others expressed 
here today encouraging that work to occur.  Congress really need 
give the matter no further consideration.  Thank you, Mr. 
Chairman, and I yield back.
	MR. UPTON.  Mr. Shimkus.
	MR. SHIMKUS.  Thank you, Mr. Chairman.  We ought to have 
our colleague, Rick Boucher, just testify.  He always puts us to 
shame and we appreciate how smart he is.
	MR. UPTON.  His handwritten notes.
	MR. SHIMKUS.  Here is mine.  I think you hear the message.  A 
lot of us would like to see private negotiated agreements involved 
in this process and let the system work out.  I always talk about in 
this debate you had Guttenberg with the printing press.  You had 
Xerox with the copy machine, 8 tracks, cassettes.  I am showing 
my age.  Now MP3.  My wife is a church organist, and we have an 
artist here and there is an issue of church choirs Xeroxing music 
that should be protected and compensated for when the church 
choirs use that, and my wife went through and threw all the 
Xeroxed copies out.
	Now it didn't make the church council very happy because that 
means they had to pay for the sheet music for the entire choir but it 
is an issue of compensating the artist for their work.  And so we 
have a tremendously difficult balance here to make sure that we 
continue to encourage the artist and those, and I am not for one, I 
just married one so I now know all this stuff whether I wanted to or 
not.  And as my friend, Mr. Boucher, would say the fair use issue 
and what you pay for is what you can use, but what you pay for is 
not what you can sell in essence.
	So we appreciate you coming here.  We are going to learn a lot, 
and, Mr. Chairman, I yield back.
	MR. UPTON.  Mr. Gonzalez.
	MR. GONZALEZ.  Thank you very much, Mr. Chairman.  I think 
regardless of the subject especially in this subcommittee on 
telecom it always strikes me that many times people will say 
because of the technology and it is fast moving and developing and 
so on, somehow it lends itself to different criteria than we have 
adopted and relied on for many, many years in this country, and 
those are just general principles.  One of those principles of course 
is the legislative one and that is not to act unless you really have to 
to let the market forces play out, let the innovation, let the 
stakeholders get together, and obviously we have already referred 
to that.
	Yet, because--now technology does add something that maybe 
legislators or members of our society and the legal system did not 
deal with, and that is that it moves quickly--here is a whole lot 
more creativity.  There is change every day and sometimes the law 
has to anticipate some of that but it surely has to react in a timely 
mode.  So technology has narrowed the window of what I refer to 
as timeliness.  We are not there yet.  I don't believe that.  And I 
would like to think that we are still going to have all stakeholders 
actively engaged knowing that they have a vested interest in this 
before Congress acts because there is one eternal truth and that is 
when we do act very few people walk away truly satisfied and 
many times the problem is not really improved measurably.
	And with that, I look forward to the discussion today and to the 
testimony.  And I really had never heard from the artists and the 
writers and the producers until I went to Austin last March to 
attend South by Southwest, and that was very encouraging and 
enlightening, and for anyone that may have been out there, I thank 
you for engaging in that particular discussion.  When it comes to 
industry and others, I have had ongoing discussions for a couple of 
years now and I appreciate your input.
	What I ask now is your active participation as a stakeholder in 
trying to arrive at some solution and giving us some direction.  I 
was talking to staff today, and, Mr. Chairman, the Wright 
amendment, the infamous Wright amendment regarding Southwest 
flights to Dallas finally was resolved among the stakeholders.  And 
I thought, gee, if you are a Texas and you can resolve that, you can 
resolve anything.
	However, he did remind me they took 20 years to come to that.  
We do not have 20 years.  And if you indulge me, Mr. Chairman, 
at this time I do want to introduce one of our witnesses who is a 
fairly new resident to my home town of San Antonio, and of 
course that is Andy Levin, who served on the staff of this 
committee from I think 1995 to 2002, invaluable service, was here 
for some monumental legislation, and I am sure that bears some of 
his handiwork and fingerprints of the outstanding job that he does 
for Clear Channel.  And I need to tell you that Clear Channel is 
one of our leading corporate citizens, not just of course in San 
Antonio but throughout the State and this Nation.  And the 
leadership that he has brought and the direction that he has 
provided the past years there is exemplary and has really assisted 
not just the community but I think all of what is going on out there 
with the broadcasters.
	And, Andy, I want to say welcome.  I wasn't here when you 
served on staff but I have heard great stories about you and they 
are all fine and good.  And with that, I yield back.
	MR. UPTON.  Mr. Ferguson.
	MR. FERGUSON.  Thank you, Mr. Chairman, and thank you for 
holding this hearing.  Our subcommittee can serve a constructive 
role in the area of digital content protection in the surest way to 
insure that competition in the marketplace and encourage creativity 
and innovation.  This hearing is particularly timely regarding the 
digital audio flag issue.  Protection and compensation for content 
and new technologies have been the subject of negotiations, 
settlements, and litigation.
	And as we hold this hearing today, the Senate is considering 
language in their cable franchise and legislation that includes both 
audio and video flags.  These are exciting times for consumers.  
There are more options available in the marketplace than ever 
before.  Apple's iPod has permeated the marketplace and is a 
stunning success story.  Digital audio can now be heard across 
multiple platforms from Web casts to wireless.  The advent of 
consumer consumption and ultimate success of these products was 
not born out of circumventing copy protection technology under 
the banner of fair use, and it was not achieved by ignoring the 
property rights of those who create content.
	The preference, of course, is to see the issue of digital content 
protection resolved between the respective parties in the private 
sector, and I hope it can happen and happen quickly.  But the fact 
remains that digital audio products are on the market today that 
allow unauthorized downloading and for the potential for illegal 
uploading to the World Wide Web.  This is an issue that deserves 
Congress' attention but if these issues are not resolved soon it may 
also require Congress' direction.
	Early this spring I introduced the Audio Broadcast Flag 
Licensing Act of 2006.   The goal of this legislation is to promote 
maximum consumer choice in the marketplace by ensuring that 
intellectual property rights are respected and that content creators 
are treated fairly.  Specifically it provides that technical licensing 
agreements currently taking place between satellite and HD radio 
and developers of digital audio broadcast systems include a 
broadcast flag or similar technology that limits the unauthorized 
dissemination, duplication, and redistribution of content.
	If the products in question allow downloading that was not 
legally authorized, the parties would need to come back to the table 
with content creators and work out fair royalties.  My bill makes 
sure that the marketplace and not Congress is where these 
negotiations happen.  Some have claimed that these new services 
fall under the Audio Home Recording Act.  The AHRA was passed 
in 1992 at a time when even the Internet was mostly unknown to 
legislators and consumers.  This argument has a shaky foundation 
at best.  Considering the rapid pace of technology, it is hard to 
believe that Congress could have foreseen over a decade ago that 
some would choose to turn their performance license into a 
distribution license without paying for it.
	While my bill is clear in its intent to protect content, it also 
insures that American consumers remain unaffected.  Legacy 
devices already in the stream of commerce would remain 
operational, and the bill specifically states that the HD radio roll 
out remain unimpeded.  The bottom line is that if private-sector 
negotiations are unsuccessful in ensuring a level playing field 
between content creators and distributors, it is our responsibility, 
Mr. Chairman, to help jumpstart those talks in the private 
marketplace.
	The goals of the Audio Broadcast Flag Licensing Act are not 
only for the good of content creators, more importantly they are for 
the good of our constituents, the consumer.  It simply requires that 
if you are going to use these products, make sure it is done fairly.  
That is my definition of fair use.  I would like to thank the 
witnesses for taking out their time to be with us today and in 
particular recognize and commend Sirius Satellite Radio in 
recently negotiating with the recording industry to ensure that 
content creators are compensated with regards to their S50 satellite 
radio and download service.  It is my hope that your industry peers 
will also follow suit.
	Mr. Chairman, thanks again for holding this hearing.  As we 
begin to debate this issue, we should not focus only on the 
products marketed today but rather the products that will be made 
available in the future.  Do we want to see a marketplace where 
there is a constant flow of new and exciting technology to our 
constituents?  Do we want to ensure the most options?  If we do, 
then there must be a balance among new radio services, property 
rights of creators, and fair competition among all parties.  It is our 
responsibility to ensure that this balance is achieved.  
Thank you, Mr. Chairman.  I yield back.
	MR. UPTON.  Mr. Gordon.
	MR. GORDON.  Thank you, Mr. Chairman.  Our remarks are 
beginning to sound a little repetitious so I will ask that my remarks 
be made part of the record, and just quickly say that I am a co-
sponsor, original co-sponsor, of the audio flag bill because I think 
we do need to have a balance between technology and content.  
Hopefully the parties can develop that but if they can't, we will let 
the FCC do it and it should be done.  Thank you.
	MR. UPTON.  I would just make a unanimous consent request 
for all members on the subcommittee that their statements be 
entered as part of the record.  And with that, I recognize Mr. 
Towns.
	MR. TOWNS.  Thank you very much, Mr. Chairman.  It is true 
that everything has been said but everybody didn't get a chance to 
say it.  The copyright industries, movies, television programs, and 
music and recording, books, video games, and software provide 
jobs for 8 percent of all United States workers.  As Members of 
Congress, I feel it is important that we never lose sight of this 
human element.  These jobs all depend on protection of 
copyrighted works from being devalued by piracy and 
unauthorized use.  I call upon all of my colleagues to keep this in 
mind as we proceed.
	As many of you know, I have been a long-time advocate of 
flagging technology because I feel it provides important protection 
to our artists and content providers.  In an age when digital radio 
broadcast can be copied and redistributed worldwide over the 
Internet, I worry that our current piracy prevention methods do not 
go far enough to stem the tide of audio and video theft.  I share in 
the concerns of the recording industry that the ability to record 
digital content will allow users to compile large song collections 
for free, and I hope we are able to put a stop to this through a 
solution that is favorable to all of these parties sitting before us 
today.
	All of you are well aware of how widespread piracy has 
become and I worry about the next wave of creative theft, and I 
pray that it is not born from the devices that we will be discussing 
today.  It is my belief that if we enact reasonable mutually agreed 
precautions now we will not leave the door open to rapid 
manipulation in later years.  H.R. 4861 is not an attack on 
traditional home taping services but rather ensures that fair 
licensing agreements are negotiated and piracy is thwarted.  Most 
importantly it does this without delaying the final guidelines for 
HD radio.
	I look forward to working with Congressman Ferguson, the 
satellite radio companies, and the recording industry as we 
consider H.R. 4861 and work towards a fair and equitable solution 
to this dilemma.  Also, before I yield back, Mr. Chairman, I would 
like to welcome Andrew Levin back to Capitol Hill and to know 
that you can survive even after this committee.  On that note, I 
yield back, Mr. Chairman.
	MR. UPTON.  Thank you.  This concludes--oh, Mrs. Cubin.  I 
am sorry.
	MRS. CUBIN.  I will submit mine for the record.
	[The prepared statement of Hon. Barbara Cubin follows:]

PREPARED STATEMENT OF THE HON. BARBARA CUBIN, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF WYOMING

        Thank you Mr. Chairman.
        I appreciate that this subcommittee remains engaged on the 
important issues surrounding digital media.  As an I-Pod owner 
myself, I am very aware of the I-Tunes music store as a successful 
means of digital content distribution.  Additionally, the video 
component of these devices serves as a great example of how 
content providers and consumer electronics companies can work 
together for the real benefit of both businesses and consumers.
        Technology continues to advance at breathtaking speeds, 
however, and with this new technology comes new challenges to 
strike the right balance between a consumer's right to enjoy their 
new gadgets, and the content provider's right to be paid for their 
innovation and performance.  It is safe to say that no one on this 
subcommittee is interested in stifling the innovation of either 
content providers or consumer electronics companies.  Both 
provide invaluable service to consumers and both should be 
promoted as examples of American innovation.
        Because both sides in this debate are so integral to each other's 
success, I am interested in hearing from the witnesses today about 
any common ground the parties have reached in negotiations that 
could lead to a non-legislative solution.  Congress will act if we 
must, and I appreciate your leadership on this Mr. Chairman, but I 
believe that both businesses and consumers are best served by 
limiting the regulatory involvement of Congress.  Innovation will 
not stop no matter what we do in Congress, that is the wonder of 
the economic system we have established in this country.  So if 
this hearing can serve as a springboard to a voluntary agreement 
that benefits all, it will have served its purpose.
        Thank you again Mr. Chairman.  I look forward to hearing 
from the witnesses about this important issue.  I yield back the 
remainder of my time.

        [Additional statements submitted for the record follows:]

PREPARED STATEMENT OF THE HON. JOE BARTON, CHAIRMAN, 
COMMITTEE ON ENERGY AND COMMERCE

        Mr. Chairman, thank you for holding this hearing today.  
Digital content, services, and devices allow more artists to create 
new and innovative content, and allow consumers to enjoy that 
content in increasingly exciting and convenient ways.  But the 
digital age also makes it easier to copy and redistribute content in 
unauthorized ways. 
        There is no question that content creators and owners are 
entitled to compensation for their content.  Without compensation, 
they have neither the resources nor the incentives to produce more 
of the music and video content that we enjoy.  At the same time, 
consumers are entitled to legitimate ways of enjoying that content.  
And device manufacturers are entitled to make devices that permit 
consumers to enjoy audio and video content.  It is critical that we 
strike the right balance between these interests.  I also believe that 
any broadcast flag legislation should include adequate protections 
for consumers' fair use rights.
        We have already heard much about the broadcast video flag, 
and, as I have previously indicated, I believe there is a compromise 
that can be struck between content protection and legitimate 
consumer use.  We have heard less about the audio flag, and I look 
forward to today's testimony so that we can flesh out that issue a 
bit more.
        I yield back.

PREPARED STATEMENT OF THE HON. ELIOT L. ENGEL, A 
REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

        Thank you Mr. Chairman -
        I am struggling with this push for an audio flag.  I see the 
broadcasters and satellite radio industry battling the record industry 
- once again.
        And I see the artists, songwriters and performers stuck in the 
middle along with consumers.  
        I am a strong supporter of the video flag.  The federal 
government is mandating the switch to digital television.  
Moreover, the federal government ordered the switch in 1996.  
And it took 7 years of intense negotiation to find a solution that 
most found acceptable.  That solution was adopted by the FCC but 
thrown out by the courts - not on grounds that the agreement was 
flawed but simply that the FCC did not have the authority to 
implement the agreement.  I think the FCC needs that authority.
        When it comes to the audio flag, I find myself concerned that 
negotiations on an audio flag began in April - about 3 months.  I 
must wonder why there is a push for Congress to intervene so 
early.  
        I would admonish those who seek quick legislative action that 
what you hope for rarely is what you get.  Instead, it is better for 
all parties to meet and come to an agreement and, if necessary, ask 
Congress to pass implementing laws.
        I would think that the old Napster problem would be a case 
study for the recording industry.  Don't fight new technologies. 
Embrace them and find a simple, legal and profitable business plan 
to meet the needs and wants of consumers.  The IPod proves this 
clearly.  
        I am told that one of the major concerns is that satellite radio 
companies have devices that allow people to record a song and 
create playlists.  I am having real trouble seeing how this is an 
infringement of fair use.  
        In my day, I could go to the store and by a TDK audio tape, put 
it into my expensive Kenwood Stereo, tape songs from albums of 
many record companies, take that tape and play in my cheap car 
stereo.  I make this point because many companies were involved 
in making music portable for me.
        As I understand the satellite radio recording device does not 
make the music portable.  In fact, it can only be played on that 
device - it cannot be transferred to a computer or a CD or even an 
old audio tape. 
        But, I am always mindful of the talent, such as the Nashville 
songwriters.  They are the working men and women of the music 
industry.  And they deserve to be compensated for their work. 
        So I fall back on what I have said many times before.  I will 
continue to strive to find balance.  We must ensure the talent is 
fairly compensated while the fair use rights of the American people 
are maintained.  
        I believe we should move forward on the video flag but give 
the record companies, broadcast and satellite radio, talent and 
consumers time to work out a solution.  I know one can and will be 
found.
        I yield back.

	MR. UPTON.  Okay.  Thank you.  This concludes the opening 
statements.  We are delighted to have really two outstanding 
panels.  It will be led by--maybe we should have Mr. Levin go first 
with all these accolades, a friend on this side of the aisle too.  But 
we welcome Mr. Mitch Bainwol, Chairman and CEO of the 
Recording Industry Association of America, certainly an old friend 
of mine for sure; Mr. Andrew Levin, Executive VP and Chief 
Legal Officer for Clear Channel on behalf of the National 
Association of Broadcasters; Mr. Stewart Harris, Songwriter, on 
behalf of the Songwriters Guild of America; and Ms. Ruth Ziegler, 
Deputy General Counsel of Sirius Satellite Radio from New York.
	We welcome all four of you.  We appreciate your willingness 
to submit your testimony in advance.  It is made part of the record 
in its entirety.  If you would try to limit your remarks to 5 minutes, 
that would be terrific.  Mr. Bainwol, we will start with you.  
Welcome.

STATEMENTS OF MITCH BAINWOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, RECORDING 
INDUSTRY ASSOCIATION OF AMERICA; ANDREW W. LEVIN, EXECUTIVE VICE PRESIDENT AND 
CHIEF LEGAL OFFICER, CLEAR CHANNEL COMMUNICATIONS, ON BEHALF OF NATIONAL 
ASSOCATION OF BROADCASTERS; STEWART HARRIS, SONGWRITER, ON BEHALF OF 
SONGWRITERS GUILD OF AMERICA; AND RUTH A. ZIEGLER, DEPUTY GENERAL COUNSEL, 
SIRIUS SATELLITE RADIO, INC.

	MR. BAINWOL.  Thank you very much, Chairman Upton, 
members of the subcommittee.  Thank you for focusing on the 
timely issues arising from radio's transition to distribution platform 
for music.  Today has special meaning.  It is the one year 
anniversary of the Supreme Court's nine to zero Grokster decision.  
That unanimous decision reminds us that finding a balance 
between technical and creative innovation is in fact possible.  Not 
long ago, I read about Clear Channel's new program at their 
concert venues where the live performance is immediately burned 
to CDs to sell as people leave, so the venue has two chances to 
make money, one for the ticket, the performance, and one for the 
sale of a CD, the distribution.
	The consumer though does not get a free copy ownership after 
paying for the listening experience.  They have to buy it.  The 
same should hold true as radio morphs from a place to listen to 
music to a place for acquiring it.  I will back up for a second.  
Today's marketplace is a dynamic competition between a variety 
of platforms seeking to become a place where the fans listen to 
music, discover music, store music, and acquire music.  Listen, 
discover, store, and acquire whether by iPod, by Nano, by cell 
phone, by Trio, Zen Creative for a subscription service or by a 
radio device.  The competition between platforms increasingly is 
all about the portable device.  That competition is a good thing.  
Fans will benefit and if the competition is fair music creators will 
benefit too.
	Competition isn't fair.  iTunes and Wal-Mart download 
services pay to distribute our music.  Rhapsody and Napster 
subscription services pay.  Cingular and Verizon pay.  Even new 
legitimate P to P sites pay to distribute our music but radio does 
not.  We don't quarrel with the choice by radio to transition their 
business model.  We have done it.  But concocting a legal shell 
game so some radio services can get out of paying for content just 
isn't right.  XM in particular seems to think they should enjoy the 
unique right to be exempt from paying for the music they give to 
consumers as a mechanism to attract and retain subscribers.
	This is an ad running at Sky Mall magazine.  The slogan for 
XM is hear it, click it, save it.  Left unsaid, of course, is don't 
bother paying for it.  There is a word for this, hutzbah.  We also 
think it is illegal.  Regardless, it is unfair and certainly bad policy.  
Because of anomalies in comp rate law, satellite radio and over the 
air radio are different when it comes to paying a fee for the right to 
broadcast.  The important point is this, neither is licensed to 
compete as a distributor.
	The situation is also more complicated because different 
players are pursuing varying approaches.  The NAB has joined 
with us to suggest two goals should be paramount.  One, 
addressing the problem of cherry picking songs from a program in 
a broadcast, and, two, ensuring that the rollout of HD happens 
quickly, worthy goals.  We applaud the broadcasters for adopting 
this responsible approach.  Sirius, here today, sought a license for 
its first device, the S50.  We hope they view it as a precedent, 
though I was troubled when Mr. Karmazin was quoted as stating 
that Sirius might adopt the XM tactic, that the device adheres to 
the law.
	Let me be clear about what unlicensed feature we find 
concerning.  If radio wants to provide traditional TiVo-like time 
shifting of programs, that is not a problem.  If radio wants to 
provide traditional manual recording features, that is fine too.  But 
it is not okay for radio to allow cherry picking of individual songs 
from a broadcast program without first obtaining a license so that 
the songwriter, the publisher, the artist, and the label investor get 
their due compensation.
	Our members want to license radio.  Broadcasters are our 
partners.  Fans are enriched when broadcasters innovate, when 
device manufacturers innovate, and, yes, when creators innovate.  
You might say it takes three to tango.  As broadcasters, 
manufacturers, and creators do their thing, the concept of a level 
playing field makes a ton of sense.  Platforms should be subject to 
comparable content protection requirements when providing 
comparable services, and that of course is the objective underlying 
the Ferguson bill co-sponsored by Representative Towns, Bono, 
Gordon, Blackburn, Waxman, Terry, and Davis.
	The bill requires the use of a broadcast flag or similar 
technology to provide content protection that is quickly achievable 
and not disruptive, allowing digital radio devices to roll out 
expeditiously, without making older models obsolete.  You may 
hear the time isn't right for legislation or that the issue hasn't been 
through the rigorous voluntary process that generated the broadcast 
flag consensus.  Well, there is a reason for that.  There is a reason 
that it hasn't worked out.  Unlike our video colleagues, we have no 
performance rights over the air and the license for satellite is 
compulsory, so we can't withhold our content if we are not 
satisfied with its protection. Our video colleagues could.
	If record companies were able to license in the marketplace 
like other copyright owners, content protection would be resolved 
in these marketplace discussions.  There is a marketplace failure 
and that is what we are trying to address.  Moreover, because of 
the limitation on our performance rights, Congress has set up a 
system that makes record companies almost totally reliant on 
distribution revenue, yet the limitations on performance rights are 
now threatening even that revenue stream.  That is more than 
ironic to us.  It is our life blood.
	We suffered significant losses in recent years.  Our glimmer of 
hope for the future and our ability to invest in new music and new 
creativity is predicated on the integrity of the emerging digital 
marketplace.  We are now seeing digital revenues replace physical 
lawsuits.  That is very exciting.  It is very important, but it 
highlights why we are so interested in seeing that the problems we 
have outlined are addressed.  Thank you very much.
	[The prepared statement of Mitch Bainwol follows:]

PREPARED STATEMENT OF MITCH BAINWOL, CHAIRMAN AND CHIEF 
EXECUTIVE OFFICER, RECORDING INDUSTRY ASSOCIATION OF 
AMERICA

 As the music industry struggles to emerge from several 
difficult years due to online piracy, we are looking to the 
success of legitimate digital offerings from services such as 
iTunes, Napster, and Yahoo!.  The sales from these services 
are what songwriters and artists rely on to make a living, 
and what record labels rely on to be able to invest in new 
music.
 New devices and services from satellite and HD Radio 
threaten to replace those sales by allowing listeners to 
automatically record, sort, label, and store the music they 
hear on their radios, just like they can do through online 
stores and subscription services, but without having to buy 
it.
 We truly understand and appreciate the appeal of these 
devices and services.  In fact, we have no problem with 
them in themselves.  We simply believe that by using such 
offerings to effectively become a distributor of digital 
downloads, services should be required to pay the 
appropriate distribution license fee.  That doesn't mean 
getting rid of the devices; it just means paying 
appropriately when they are used to transform radio into 
download services.
 We also do not intend to prohibit any of the activities 
listeners have come to expect from radio.  Listeners can 
still record as they have for generations and can, in fact, 
engage in automatic recording (and time-shifting) by time, 
program, or channel.  We only ask that the line be drawn at 
automatic searching, copying, and disaggregation features 
that exceed the experience listeners, the FCC, and Congress 
expect from over-the-air terrestrial and satellite radio.
 Content protection can not only coexist with technological 
innovation, it is in many ways necessary to drive it.  Today, 
we bring music to consumers in a multitude of platforms 
and services, all made possible because of the content 
protection that defines their parameters and safeguards 
investment.
 Broadcast flag provisions, including those present in H.R. 
4861, The Audio Broadcast Flag Licensing Act, are a 
perfect way to balance the interests of technology and 
content protection.
        Chairman Upton, Ranking Member Markey, and Members of 
the Subcommittee, thank you for allowing me to participate today 
in this discussion on audio flag.  To answer the titular question 
posed in this hearing, yes, we believe that content protection and 
technological innovation can coexist.  And we believe that 
implementation of an audio flag is a fair and effective way to 
balance content protection and the wide range of new digital 
features.  But to understand why measures such as an audio flag 
are needed, it is necessary to consider how we arrived at this point.
        As you are aware, the music industry has faced an immense 
challenge in online piracy over the past several years.  In addition 
to sharply declining sales figures, composers, artists, musicians, 
technicians, and a multitude of others engaged in the music 
industry have seen their jobs disappear.  There are fewer people, 
and much less money, to invest in new artists and new music.  
Fewer resources to invest in the future, with an impact ultimately 
felt by consumers.
        In response, we have not sought to stifle new technology, we 
have embraced it.  Today, consumers have more choices in how 
they obtain their music than ever before: online downloads such as 
iTunes; subscription services such as Napster and Rhapsody, 
including portability features such as Napster to Go, and special 
discounted rates for subscription services at colleges; ringtones; 
ringbacks; mobile downloads; mobile videos; online videos on 
demand; kiosks in retail stores; legitimate peer-to-peer services; 
interactive web radio; and instant post-concert recorded CDs are 
just some of the new formats in which we are making music 
available.  These are in addition to new physical formats such as 
DVD-Audio, Super Audio CD, and DualDiscs.
        Not only does the content protection present on these systems 
coexist perfectly with the technology that makes them work, these 
new technologies and services are, in fact, dependent upon that 
content protection to succeed.  Technological innovation requires 
financial risk, which relies upon an expected return.  Satellite 
broadcast services, for example, protect their signal to prevent 
others from free riding off their investment.  In addition, the 
content carried on those signals is just as - if not more - valuable.  
If satellite services knew that anyone would be able to offer the 
exact same content - including music, sports, and multi-million 
dollar radio personalities - at a fraction of the cost (or free), they 
would never have invested in it.  This is true for any new platform 
or service.
        As with satellite and other services, content protection has 
allowed us in the music industry to innovate in the digital world, 
which has presented us with an opportunity to once again grow 
after several years of decline.  The legal online download market, 
in particular, has been growing at a spectacular rate.  Authorized 
download services such as emusic, Napster, and iTunes have truly 
taken root and are, for the first time, promising to offset the loss in 
CD sales.  This year, we are on track to see close to $1 billion in 
legal online downloads - that is, unless we are derailed.
        Unfortunately, just as we are emerging from under the cloud of 
online piracy, we are facing a new challenge on the digital front.  
HD Radio and satellite services have begun, or plan to begin, 
offering features and companion devices that enable listeners to 
transform the passive listening experience into a download one.  
These services allow broadcast programs to be automatically 
captured and then disaggregated, song-by-song, into a massive 
library of music, neatly filed in a portable device's digital jukebox 
and organized by artist, title, and genre.  Simply, users can 
download music and create a digital music library on their portable 
devices, in much the same way that iTunes offers permanent 
downloads.  Of course, the big difference is that in the case of 
iTunes, Apple compensates artists, creators and copyright owners 
through a distribution fee.
        To be clear: we are in no way against these new devices 
themselves.  They are undeniably cool and, like everyone else, we 
understand their appeal.  We are truly excited about the new 
opportunities digital radio and these devices will provide to expose 
new artists and offer consumers new choices in the way they get 
our music.  Rather, our concern is when these devices and their 
corresponding services change radio into a download store without 
paying the fair market price for licensing music that other services 
offering the same content must pay.  We have no issue with the 
convergence of radio and downloads, as long as they are licensed 
for that purpose.
        We believe listeners should continue to be able to engage in the 
kinds of activities they've come to expect from radio, including 
recording.  In fact, we look forward to users' ability to enhance this 
customary recording, by enabling automatic recording by time, 
program, or channel, digital read-outs, music purchase options, 
time-shifting capabilities, in addition to storage and great new 
sound.  Given all of these new amenities, our requests are actually 
strikingly modest - that the line be drawn at automatic searching, 
copying, and disaggregation features that exceed the experience 
listeners, the FCC, and Congress expect from over-the-air 
terrestrial and satellite radio.
        The market for digital music operates on the basis of a 
continuum of content ownership.  Distributors pay rights holders 
based on how much control over the content they give away.  At 
one end we have radio, where users typically have little or no 
control over the content - they listen to whatever comes on.  For 
offering this service, satellite pays content owners an amount based 
upon a statutorily set fee; in the case of terrestrial radio, due to a 
statutory anomaly, the broadcaster actually pays nothing.  As we 
move up the continuum, through customized radio, tethered 
downloads, and portable tethered downloads, distributors pay 
content owners an increasing amount to be able to give their 
consumers greater control.  At the other end of the continuum, we 
have permanent downloads and other forms of complete 
ownership, which give consumers the greatest flexibility in use of 
their content.  For this, distributors pay a market rate, deservedly 
higher than the free or statutory license amount at the other 
extreme.
        What we are seeing with these certain satellite and HD Radio 
services is a gaming of the system as they leapfrog from the 
limited control offerings of radio to the greater control of content 
offered by download services, but without paying the equivalent 
license fee.  This not only fails to properly compensate creators, it 
threatens the licensed services that are playing by the rules - the 
very services we and so many others in the music community are 
relying on to deliver us from years of loss due to online theft.  (It is 
interesting that, as noted above, satellite services guard their 
investment by protecting their signal but, in the case of XM Radio, 
fail to understand the need to protect the valuable content they 
carry.  After all, without content protection, there will be less 
investment in music; and music is the primary reason why 
customers purchase XM subscriptions.)
        XM claims that it is already paying content creators.  That is 
true, but what they are paying for is the performance of music - 
the statutorily-based license fee at the lower end of the ownership 
continuum.  That is very different from (and much less than) the 
free-market distribution license required for download services.  
One is not a substitute for the other.  XM's claim is tantamount to 
saying that if someone buys a ticket to watch a movie in a theater, 
he's entitled to take a DVD of the movie home with him 
afterwards.  These are two distinct purchases, worth distinctly 
different amounts, and this principle is no less true when found in 
the digital world.
        The transformation from a passive to an interactive listening 
experience without obtaining the proper license to pay the creator 
is especially troubling because, again, record labels and artists 
receive absolutely no payment from the performance of their works 
on terrestrial over-the-air radio.  This unfair situation means that 
revenue, if any, comes only from the ultimate sale of that music to 
listeners.  We are told that terrestrial radio's exemption from 
paying artists and record labels for the performance of their work 
is appropriate because radio serves a promotional purpose.  We 
fundamentally disagree with this argument (the U.S. is in fact one 
of only a few countries not to grant artists and labels a performance 
right) but, even if true, it means nothing if there are no resulting 
sales.  If the broadcast and its accompanying recording and 
archiving features replicates the sale it is intended to generate, no 
amount of "promotion" will benefit content creators.  Simply, we 
rely on sales.  Without them, we cannot realize the return 
necessary to invest in new works and new artists, and songwriters 
cannot earn a living to continue writing the songs we all want to 
hear.
        Fortunately, there are solutions.  These are best worked out in 
the marketplace, and we have seen progress in that respect on a 
couple fronts.  For satellite, we have entered into an agreement 
with Sirius that will ensure that content creators are properly 
compensated for their work.  For HD Radio, we have been 
engaged in extremely productive talks with the broadcast industry.  
These talks certainly are based on our long and positive 
relationship with broadcasters, but were facilitated by the request 
of Chairman Stevens and Senator Inouye in the Senate Committee 
on Commerce, Science and Transportation during a January 
hearing on Broadcast and Audio Flag.  We have come a long way 
since then and remain optimistic that a market-based solution that 
will protect content and compensate creators can be found.
        Nevertheless, we are mindful that a true marketplace solution is 
not necessarily available to us.  Unlike our friends in the movie 
industry, given our lack of a performance right for over-the-air 
radio and the compulsory license granted to satellite services, we 
are unable to withhold our content to ensure its proper use and 
compensation.  Therefore, while we are encouraged that the 
broadcasters will continue to negotiate in good faith, we appreciate 
the introduction of legislation such as H.R. 4861, The Audio 
Broadcast Flag Licensing Act.  This bill, introduced by 
Representatives Ferguson, Towns, Bono, Gordon and Blackburn, 
addresses this marketplace failure by granting the FCC jurisdiction 
to promulgate rules regarding content protection for digital radio.  
H.R. 4861 requires digital radio services that use the government 
spectrum and the government-granted compulsory license to 
implement certain content protection technology.  The bill also 
prevents unfair competition between radio services and download 
services by appropriately providing for private market negotiations 
of an "audio broadcast flag" that will differentiate between radio 
broadcasts and download services, and require a market license 
only for download services.
        The bill assures that no one device or technology manufacturer 
has an advantage over another and will maximize the range of 
broadcast receiving devices made available to the public.  Further, 
it makes clear that the adoption and implementation of an audio 
broadcast flag will in no way delay the final operational rules for 
digital radio and assures that legacy devices are not affected.  By 
using broadcast flag technology, devices already on the market 
prior to the enactment of legislation will not be made obsolete, but 
will remain fully functional.
        H.R. 4861 strikes the right balance between creating new radio 
services that bring more choices to consumers, and protecting the 
property rights of creators.  In the meantime, we look forward to 
continued discussions with broadcasters and remain optimistic that 
we can arrive at an acceptable solution for everyone.
        As we celebrate the one-year anniversary of the U.S. Supreme 
Court's decision in Grokster, we are reminded that content 
protection and technological innovation can, in fact, coexist.  But 
the success of technological innovation and content creation is 
each dependent upon mutual respect for the value of the other.  Mr. 
Chairman, I am here today in the hope that we can all continue on 
in the spirit of that Grokster decision - to recognize the value of 
creation and the importance of protecting it.  Once again, our 
message is simple: radio services should not be allowed to act like 
a download service without paying the appropriate license for 
distributions.  An audio flag, and legislation such as the Audio 
Broadcast Flag Licensing Act which implements it, is an effective 
way to attain the proper balance of interests.  We look forward to 
working with you and all of our partners in the broadcast and 
electronics industries to ensure a healthy and strong digital radio 
future.
        Thank you.
	MR. UPTON.  Mr. Levin.
        MR. LEVIN.  Good afternoon, Chairman Upton, Chairman 
Barton, and distinguished members of the committee.  My name is 
Andrew Levin.  I am Executive Vice President of Clear Channel 
Communications.  I am here today on behalf of the National 
Association of Broadcasters, and I thank you for the opportunity to 
speak on this issue.  Just 5 years ago free radio faced a major shift 
in consumer behavior.  Our listeners began to migrate to new 
digital music platforms, creating some very daunting business 
challenges for us, but we stepped up to the plate because history is 
littered with once thriving industries that have failed, some with 
their heads in the sand, others trying to deny and even to rail the 
changes in technology and consumer behavior around them.
	Consumer shifts are never easy for the businesses that have to 
adapt to them, but we realize that is the price of admission to 
compete, so today Clear Channel finds itself a leading programmer 
for the Internet, for cell phones, the iPod, and even satellite radios.  
And after nearly 15 years of research and development, countless 
hours of technology negotiations, millions of dollars in human 
capital and effort, we are successfully rolling out HD radios, the 
next generation of free radio broadcasts.
	Today, 800 radio stations air their primary broadcasts in HD, 
1,200 more will convert in the next year that will cost nearly 
$100,000 per station.  Industry players will spend $400 million 
over the next 2 years just to promote these new services.  HD 
radios are now shipping from factories, are being sold by retailers 
like Radio Shack and Tweeter. BMW is now shipping factory-
installed HD radios in their 5, 6, and 7 series cars.  But getting to 
this point has been far from easy.  Not only has it required a 
tremendous amount of investment, but also an enormous amount of 
collaboration across a variety of different industries.
	We have had some great successes so far, but this massive 
rollout of HD digital radio is now entering its most important and 
delicate phase.  Like all new technologies the success of the digital 
radio revolution will depend on whether a critical mass will follow 
these so-called early adopters and that will only come if there is 
reasonable certainty regarding technological requirements and 
consumer expectations.
	Any uncertainty about the ability to meet the reasonable 
expectations of consumers and the technological requirements that 
are at the core of this massive effort could deal a fatal blow to the 
most significant innovation we have seen for free radio in nearly 
100 years.  We believe the biggest threat to the future of free 
digital freedom would be pre-emptive legislation mandating a 
particular copyright copy protection technology and strict usage 
controls for consumers.  These actions would create enormous 
uncertainty for every major stakeholder involved, including 
consumers who will be the ultimate drivers whether this succeeds.
	A technological mandate by Congress, at best, would cause a 
delay to market of at least 2 years, or more likely the disruption 
and business uncertainty would simply kill the plans of 
broadcasters, manufacturers, automakers, and retailers, and leave a 
wake of stranded investment in its path.  There is no reason to 
enact a technological mandate at this point and there are several 
reasons not to.  
First, the affected industries can and will find a solution.  
Remember that the final inter-industry consensus on the digital 
television broadcast flag was found without government 
intervention and without disabling the existing base of digital 
televisions, nor interfering with consumer uses inside the home.
	Second, talks are currently underway between the NAB and the 
recording industry to forge a consensus on digital radio copy 
protection.  It is still early, but we are confident that if all the 
affected players are represented at the table, we will find a solution 
that is acceptable to everyone.  And, third, litigation is now 
pending between the recording industry and XM over the very 
issue that is essential to the development of a content protection 
scheme, that is, what constitutes fair use by consumers with regard 
to today's devices.
	Admittedly, it is not easy to adapt to new technologies but that 
is precisely what we are doing and the jury is still out on how the 
market will develop.  It is simply premature to enact a mandate 
when we have no idea how the marketplace is going to respond.  It 
would have to be based on little more than pure speculation.  Be 
assured broadcasters completely oppose copyright infringement, 
but there are a myriad of complex and technical issues at stake, 
with enormous consequences for the future of a fledging new 
service.
	We believe these issues deserve the requisite scrutiny that is 
best accomplished through arm's-length negotiations between 
private parties.  We urge the committee to give us that time to 
develop a well-vetted, industry-wide solution that will move the 
HD rollout forward while balancing all of the competing interests 
involved.  Thank you.
	[The prepared statement of Andrew W. Levin follows:]

PREPARED STATEMENT OF ANDREW W. LEVIN, EXECUTIVE VICE 
PRESIDENT AND CHIEF LEGAL OFFICER, CLEAR CHANNEL 
COMMUNICATIONS, ON BEHALF OF NATIONAL ASSOCIATION OF 
BROADCASTERS

                     Summary of Written Statement

        Good afternoon, my name is Andrew W. Levin. I am the 
Executive Vice President and Chief Legal Officer for Clear 
Channel Communications, which operates 1150 local radio 
stations, 35 television stations, and 140,000 outdoor advertising 
displays worldwide. I am testifying today on behalf of the National 
Association of Broadcasters (NAB).  NAB is a trade association 
that advocates on behalf of more than 8,300 free, local radio and 
television stations and broadcast networks before Congress, the 
Federal Communications Commission and the Courts.   
        Free radio is currently investing huge human and financial 
capital to complete its own transition to digital broadcasting.  
Given the importance of the digital transition to consumers and 
broadcasters alike, the design and implementation of an audio 
broadcast flag must not compromise reasonable and lawful 
consumer expectations, or in any manner impede the successful 
rollout of digital radio.   
	Currently, 824 digital radio stations are on the air and 
broadcasters have individually committed to upgrade more than 
2,000 stations to high definition (HD) radio technology this year, at 
a cost of  $100,000 per station in engineering alone. The 
possibilities are endless, and drive home the point that we need to 
make sure these technological innovations are not stopped dead in 
their tracks.  
        NAB has been diligently working with RIAA to develop and 
forge a consensus on a digital radio copy protection system that 
will not interrupt the digital roll out or create uncertainty that 
would lead to a slow down of adoption rates by manufacturers, 
consumers or even broadcasters.  Thus, NAB does not believe that 
legislation mandating any particular system of digital radio copy 
protection is necessary or appropriate at this time.  Rather, we 
encourage the committee to permit the parties' adequate time to 
work through these complicated issues.
        There is one type of protection system that has been discussed 
that NAB strongly opposes: encryption at the source.  No U.S. 
free, over-the-air broadcast service, analog or digital, has ever been 
required to encrypt its transmissions.  Any encryption requirement 
would also likely risk stalling the digital radio transition by 
requiring a change in the technical digital radio broadcasting 
standard of such magnitude that a year's delay and likely more 
would be inevitable.
        Further, the issue of an appropriate digital audio copyright 
scheme has been further complicated by the ongoing lawsuit by the 
recording industry against XM Satellite Radio, Inc.  The federal 
court in that case will be addressing the very issue that is essential 
to the development of an audio flag, i.e., what constitutes "fair 
use" of a copyrighted work, especially by consumers. Any 
discussion about digital audio copy protection must take into 
account Congress' long-standing policy of protecting and 
preserving the public's right to make home recordings of sound 
recordings for personal use.
        Nothing in the audio flag discussion is related to nor provides a 
basis to support a new performance right tax on broadcasters.  
Congress has consistently recognized that recording companies 
reap very significant promotional benefits from the exposure given 
their recordings by radio stations and that placing burdensome 
restrictions on performances could alter that relationship, to the 
detriment of both industries.  
	Finally, NAB believes Congress should legislate specific 
authority for the FCC to re-instate its regulations implementing a 
broadcast flag for digital television adopted in 2003.  Although the 
D.C. Circuit Court of Appeals ultimately decided that the FCC 
lacked authority to impose regulations, the policy judgments 
explained in the agency decision remain valid and should be 
implemented.  However, NAB opposes any attempt to exempt 
broadcasters' news or public affairs programs from the protection 
of the flag.    
	In sum, the deployment of digital radio is essential for 
terrestrial broadcasters to better serve their listeners and to remain 
competitive in today's digital media marketplace.  Because of the 
importance of a timely and successful roll out of digital radio, any 
system to protect digital content must not impede the transition.  In 
addition, the issues presented by the audio flag are complicated, 
involve numerous stakeholders, including consumers and their 
right to "fair use."  NAB will continue to work with RIAA to 
develop a consensus on digital radio copy protection.  Congress 
should allow this industry process to continue without the adoption 
of premature legislative mandates.
        Good afternoon, my name is Andrew W. Levin. I am the 
Executive Vice President and Chief Legal Officer for Clear 
Channel Communications, which operates 1150 local radio 
stations, 35 television stations, and 140,000 outdoor advertising 
displays worldwide. I am testifying today on behalf of the National 
Association of Broadcasters (NAB).  NAB is a trade association 
that advocates on behalf of more than 8,300 free, loca4l radio and 
television stations and broadcast networks before Congress, the 
Federal Communications Commission and the Courts.   
        Like the television broadcast industry, free radio is currently 
investing huge human and financial capital to complete its own 
transition to digital broadcasting.  Given the importance of the 
digital transition to consumers and broadcasters alike, our first and 
foremost concern is that any content protection scheme must do no 
harm.  By that I mean that the design and implementation of an 
audio broadcast flag must not compromise reasonable and lawful 
consumer expectations, or in any manner impede the successful 
rollout of digital radio. 
        One thing I'd like to make perfectly clear at the outset: 
broadcasters oppose piracy in all shapes and forms.  But in order to 
protect against unlawful uses, we believe that a well-vetted, 
industry-wide solution is the key to developing a system that 
balances the competing interests of everyone involved.  And by 
everyone I mean, most especially, consumers who will either enjoy 
the great new benefits this technology can bring, or be left behind 
with fewer choices and less functionality.  Too often it is 
consumers who are forgotten in the fractious bickering that takes 
place when new technologies are introduced in the marketplace.  
We urge this committee to allow the broadcast industry, the 
recording industry and other vital stakeholders, including 
consumer groups, to continue working toward a consensus on a 
digital radio copy protection scheme.

Any System to Protect Digital Content Must Not Impede the 
Digital Radio Roll-Out 
	Digital audio broadcasting will enable broadcasters to better 
serve our local communities and to remain competitive in today's 
ever-expanding digital media marketplace.  But we face many 
challenges as we work toward a successful and timely transition to 
digital radio.  If radio is not allowed to continue this roll out on a 
timely basis, and remain competitive with other providers of digital 
audio content, the issue of digital radio copyright protection will 
quickly become moot.  And, as we learned from the broadcast 
video flag process, there is no "quick fix" technical system to 
provide copy protection for digital media.  
	The radio industry in America has begun its massive roll out of 
digital broadcast transmissions and all-new digital radio receivers.  
Currently, 824 digital radio stations are on the air.  Broadcasters 
have individually committed to upgrade more than 2,000 stations 
to high definition (HD) radio technology this year, at a cost of  
$100,000 per station for engineering alone.  In fact, Clear Channel 
Radio itself already has more than 238 stations offering broadcasts 
in HD digital quality today, and more are added every day.  HD 
radio not only offers listeners crystal-clear audio, it also permits 
the broadcasting of an additional free, over-the-air program stream 
that will bring additional content (including much more local 
content) to the public on the radio stations' current allocation of 
spectrum.
        In fact, the best part is that these additional streams are 
currently free of advertising.  Clear Channel believes creating new, 
compelling formats is essential to the future of free radio.  Hence, 
our company's Research and Development Group created the 
Format Lab in 2004 to create more than 75 brand new niche 
formats.  These exciting new program formats are fully customized 
by our local programmers to meet the specific needs of their 
communities and thus create a new radio channel in HD markets 
all across the country.  
        This transition to digital radio will enable other great new 
services, including wireless data providing information such as 
song titles and artists or weather and traffic alerts.  Even more 
innovative features are under development, such as program menus 
giving listeners instant access to a favorite drive time show, special 
music information, news, weather and traffic alerts that are not 
only local, but will be interoperable with a listener's in-car 
navigation system.  The possibilities are endless, and drive home 
the point that we need to make sure these technological 
innovations are not stopped dead in their tracks.  Digital radio will 
allow broadcasters to provide tremendous new services to 
consumers, and is the only way to remain a vital and vibrant part of 
the media landscape of the future.
	But beyond thousands of radio stations converting to digital, 
the HD radio revolution also involves the consumer electronics 
industry and, most importantly, consumers.  New digital radio 
receivers have been launched in the marketplace across a range of 
product categories.  Major radio groups are engaged in a massive 
marketing campaign to promote digital radio to consumers through 
the creation of the HD Digital Radio Alliance.  And automakers 
and after-market manufacturers are beginning to produce digital 
radio products for car sound systems.  2006 and 2007 promise to 
be pivotal years for the roll-out of digital radio, with auto makers 
signing up for factory-installed radios, retail outlets prominently 
featuring many new digital radio products, and hundreds more 
broadcasters commencing digital transmissions.  Given this 
investment by broadcasters and equipment manufacturers and the 
benefits that consumers will receive from a successful deployment 
of digital radio, it is of paramount importance that any copy 
protection mechanism not impede the digital radio rollout.  
        NAB has been diligently working with RIAA to develop and 
forge a consensus on a digital radio copy protection system that 
will not interrupt the digital roll out or create uncertainty that 
would lead to a slow down of adoption rates by manufacturers, 
consumers or even broadcasters.  Thus, NAB does not believe that 
legislation mandating any particular system of digital radio copy 
protection is necessary at this time.  Rather, we encourage the 
committee to permit the party's adequate time to work through 
these complicated issues. 

Encryption at the Source Should be Rejected
        There is one type of protection system that has been discussed 
that NAB strongly opposes: encryption at the source.  Such a 
mandate would be antithetical to the concept of free, over-the-air 
broadcasting.  No U.S. free, over-the-air broadcast service, analog 
or digital, has ever been required to encrypt its transmissions.  Any 
encryption requirement would also risk stalling the digital radio 
transition by requiring a change in the technical digital radio 
broadcasting standard that could delay the digital radio roll-out by 
more than one year.  Unlike the video flag, encryption of DAB 
signals would obsolete receivers now in the field, as well as 
receivers and component parts currently in the production pipeline.  
Resulting uncertainty in the marketplace and potential loss of 
confidence and interest in digital audio broadcasting by 
manufacturers now ready to roll out DAB receivers would harm 
broadcasters and threaten the public's receipt of digital radio.

The Public's Right to Make Private Copies of Sound 
Recordings for Personal Use Must Be Taken Into Account 
        The issue of an appropriate digital audio copyright scheme has 
been further complicated by the ongoing lawsuit by the recording 
industry against XM Satellite Radio, Inc.   The federal court in that 
case will be addressing the very issue that is essential to the 
development of an audio flag, i.e., what constitutes "fair use" of a 
copyrighted work, especially by consumers.  Indeed, any 
discussion about digital audio copy protection must take into 
account Congress' long-standing policy of protecting and 
preserving the public's right to make home recordings of sound 
recordings for personal use.  The House Report accompanying the 
Sound Recording Act of 1971 stated:
HOME RECORDING

        In approving the creation of a limited copyright in sound 
recordings it is the intention of the Committee that this limited 
copyright not grant any broader rights than are accorded to 
other copyright proprietors under the existing title 17.  
Specifically, it is not the intention of the Committee to restrain 
the home recording, from broadcasts or from tapes or records, 
of recorded performances, where the home recording is for 
private use and with no purpose of reproducing or otherwise 
capitalizing commercially on it.  This practice is common and 
unrestrained today, and the record producers and performers 
would be in no different position from that of the owners of 
copyright in recorded musical compositions over the past 20 
years. 

        In the Audio Home Recording Act of 1992 ("AHRA"), 
Congress definitively addressed the issue of home recording of 
sound recordings and musical works, and in section 1008 provided 
an exemption for home copying.  This Act was intended to be 
comprehensive, forward-looking legislation designed to end, once 
and for all, the "longstanding controversy" surrounding the home 
recording of prerecorded music.   Indeed, then-President of RIAA, 
Jay Berman, described the bill that became the AHRA as  "a 
generic solution that applies across the board to all forms of 
digital audio recording technology."   
        The lawsuit against XM raises the question of whether the 
recording, downloading and creating of a personal library of 
copyrighted music is a permitted "fair use" under copyright law.  
The lawsuit centers on a recently released device called the Inno, 
which, among other uses, allows consumers to record up to 50 
hours of XM's programming.  The Inno gives users the option of 
disaggregating songs from XM's airing, and storing them on the 
device for later playback.  Although the songs cannot be removed 
from the Inno, the recording industry's suit asserts that the 
recording and disaggregating function equates with illegal 
downloading, and is therefore a copyright violation.  XM has 
stated that the device was designed to comply with fair use 
principles and the AHRA.  The resolution of this lawsuit could 
well impact the interpretation of what constitutes fair use and, thus, 
how any digital audio copy protection system should be designed 
and implemented under copyright law.     	 

Congress Should Reject Efforts to Impose a Sound Recording 
Performance Right in Digital Broadcasts  
        As NAB has stated numerous times, nothing in the audio flag 
discussion is related to nor provides a basis to support a new 
performance right tax on broadcasters.  Throughout the history of 
the debate over sound recording copyrights, Congress has 
consistently recognized that recording companies reap very 
significant promotional benefits from the exposure given their 
recordings by radio stations and that placing burdensome 
restrictions on performances could alter that relationship, to the 
detriment of both industries.  For that reason, in the 1920s and for 
five decades following, Congress regularly considered proposals to 
grant copyright rights in sound recordings, but repeatedly rejected 
such proposals.
        When Congress did first afford limited copyright protection to 
sound recordings in 1971, it prohibited only unauthorized 
reproduction and distribution of records, but did not create a sound 
recording performance right.  During the comprehensive revision 
of the Copyright Act in 1976, Congress again considered, and 
rejected, granting a sound recording performance right.  Congress 
continued to refuse to provide any sound recording performance 
right for another twenty years.  During that time, the recording 
industry thrived, due in large measure to the promotional value of 
radio performances of their records. 
	It was not until the Digital Performance Rights in Sound 
Recordings Act of 1995 (the "DPRA") that even a limited 
performance right in sound recordings was granted.  In granting 
this limited right, Congress stated it "should do nothing to change 
or jeopardize the mutually beneficial economic relationship 
between the recording and traditional broadcasting industries."   
Consistent with this intent, the DPRA expressly exempted from 
sound recording performance right liability non-subscription, non-
interactive transmissions, including "non-subscription broadcast 
transmission[s]" - transmissions made by FCC licensed radio 
broadcasters.     
	  In sum, the transition of traditional local radio stations from 
analog to digital presents no basis to alter fundamentally the long-
standing mutually beneficial relationship between the recording 
and broadcasting industries by imposing a new performance right 
in digital broadcasts, when one does not exist in analog.  

The DTV Broadcast Flag
 	NAB believes Congress should legislate specific authority for 
the FCC to re-instate its regulations implementing a broadcast flag 
for digital television adopted in 2003.  The DTV broadcast flag 
mechanism was developed over many years of intense negotiations 
by scores of participants from a wide array of industry sectors.  
The purpose, concept and methodology of the DTV flag were then 
debated at the FCC in voluminous comments and reply comments 
from affected industry and consumer groups, companies and 
organizations.  Although the D.C. Circuit Court of Appeals 
ultimately decided that the FCC lacked authority to impose 
regulations, the policy judgments explained in the agency decision 
remain valid and should be implemented.  
        Further, NAB opposes any attempt to exempt local 
broadcasters' news or public affairs programs from the protection 
of the flag.  While broadcasters freely and widely distribute their 
news and public affairs programming, NAB believes it vitally 
important that broadcasters retain the right to protect their 
copyrighted news and public affairs programs, which typically are 
the main or only product of local broadcasters.  Unauthorized 
internet redistribution could well eviscerate the program 
exclusivity of news or public affairs programs of stations in local 
markets, as well as undermine the original broadcast and its 
accompanying revenue by re-distributing programs across time 
zones, thus allowing Internet viewing before the original show is 
seen on local stations in western U.S. markets.  Such results would 
wreak havoc on stations' audience ratings and threaten its 
continued viability.

Conclusion
	The deployment of digital radio is essential for terrestrial 
broadcasters to better serve their listeners and to remain 
competitive in today's digital media marketplace.  Because of the 
importance of a timely and successful roll out of digital radio, any 
system to protect digital content must not impede the transition.  In 
addition, the issues presented by the audio flag are complicated, 
involve numerous stakeholders, including consumers and their 
right to "fair use."  NAB will continue to work with RIAA to 
develop a consensus on digital radio copy protection.  Congress 
should allow this industry process to continue without the adoption 
of premature legislative mandates.

	MR. UPTON.  Mr. Harris, welcome.
        MR. HARRIS.  Chairman Upton, Representative Markey, 
Representative Ferguson, and members of the subcommittee, thank 
you very much for having me here today to speak on the issue of 
protecting the value of the songs I write when they are broadcast 
over a digital radio service that enables consumer to keep it 
without buying it.  First of all, let me say that I love the fact that 
new technologies exist that will allow consumers to listen to my 
music in different ways on different platforms, but please excuse 
me if I insist on being paid for it, even if it is consumed by you in a 
new and different way.
	I have been fortunate enough to write nine number one songs 
by some of today's biggest artists.  However, the number of 
talented young songwriters who choose to dedicate their lives to 
music will decrease even more than it already has with the problem 
of massive piracy on the Internet and now XM format.  Choosing 
to be a professional songwriter has become a risky business.
	As a professional songwriter, you are your own business.  
There is no health insurance or 401K.  You live on royalties from 
the intellectual property you create.  When I write a song, I get a 
royalty when it is performed or when it is played on radio.  I also 
get a royalty when a consumer buys a copy of it.  When you go to 
see a concert you pay to listen to the music.  When you buy a 
download you pay to keep that song.
	We are here today because certain digital radio services do not 
want to pay for music.  By allowing listeners to record broadcasts 
and build up entire juke boxes of music on portable devices, radio 
services are becoming download services without paying for the 
download license.  I am not talking about recording off the radio.  
Certainly, we have all done that and I have no interest in seeing 
that disappear, but imagine my reaction when XM offers a service 
that allows someone to get an entire collection of my works 
automatically recorded, labeled, sorted, and transferred to them in 
pristine, permanent, and portable digital copies without seeing a 
cent from the sale in return.
	This is not radio.  This is Napster, Rhapsody, Yahoo or any 
number of other digital music subscription services that pay the 
appropriate license for this type of distribution.  Those are the 
services necessary to make the sales we need to survive.  Those 
services cannot compete with others that offer the exact same 
service without paying the same license.  This is a matter of 
survival for the creators of music and those who provide legal 
downloads.  Everyone can win in the digital world if we cooperate 
in creating a fair and equitable licensing system.  This has been the 
tradition since the days of Cole Porter.  A song is a commodity like 
any other.  Attorneys are not working pro bono today.  If digital 
radio can pay market rates for their technology, equipment, and 
legal services, they certainly could pay for the songs because 
without the songs there is no artist.  Without the song there is no 
XM radio.
	I applaud Representative Ferguson for introducing the Audio 
Broadcast Flag Licensing Act.  This allows the songwriters to 
receive fair compensation for their work.  We are all grateful for 
your insight.  On behalf of everyone in the music community, I 
hope you will support this bill and create for all songwriters a 
secure digital future.  Thank you.
	[The prepared statement of Stewart Harris follows:]

PREPARED STATEMENT OF STEWART HARRIS, SONGWRITER, ON 
BEHALF OF SONGWRITERS GUILD OF AMERICA

        Chairman Upton, Representative Markey, Representative 
Ferguson, and Members of the Subcommittee, thank you very 
much for having me here today to speak on the issue of protecting 
the value of the songs I write -- my property -- when it is broadcast 
over a digital radio service that enables a consumer to keep it 
without buying it.
        First of all, let me say that I love the fact that new technologies 
exist that will allow consumers to listen to my music in different 
ways on different platforms.  But please excuse me if I insist on 
being paid for it even if it is consumed in a new and different way.
        I have been fortunate enough to write several #1 songs 
recorded by some of the biggest artists.  But getting there was not 
easy.  And the number of talented young songwriters who choose 
to dedicate their lives to bringing their gifts to American 
consumers will decrease even more than it already has with the 
problem of massive piracy on the Internet if they do not get paid as 
the delivery of music evolves.
        Choosing to be a professional songwriter is a risky business.  
As a professional songwriter you are your own small business - in 
fact the smallest.  You pay your own health insurance and your 
own retirement.  There is no "flex plan."  What you get to live on 
are royalties from the use of what you create.  From your property.  
When I write a song, I get a royalty when it is performed, or 
broadcast over radio.  I also get royalties when a consumer keeps a 
copy of it.  Different uses of my songs deserve separate payments.  
When you go see a concert you pay to listen to that performance.  
And when you buy a download you pay to keep that song.  But you 
don't go to iTunes and demand a song for free because you 
listened to it on the radio or at a concert.  Consumers get the 
difference.  Digital radio services should get the difference too.
        We are here today because certain digital radio services do not 
want to pay me when they offer a service that allows a consumer to 
keep my song instead of having to buy it.  
By allowing listeners to record broadcasts and build up entire 
jukeboxes of music on portable devices, radio services are 
becoming download services - but without paying the download 
license.
        I'm not talking about casual recording off the radio.  Certainly, 
we've all done that and I have no interest in seeing that disappear.  
I love it when someone runs to the radio to record one of my songs 
that has come on.  But imagine my frustration when XM offers a 
service that allows someone to get an entire collection of my 
works, automatically recorded, labeled, sorted, and transferred to 
them in pristine permanent and portable digital copies without 
seeing a cent from a sale in return.  This is not radio; this is 
Napster, Rhapsody, Yahoo!, or any one of the number of other 
digital music subscription services that pay the appropriate license 
for this type of distribution.  Those are the services we need to 
make the sales we need to survive.  But those services can not 
compete with others that offer the exact same functionality without 
paying the same license.
        This is a matter of fairness - to other broadcasters, to download 
services, and to all of us making the music for those services.  This 
is a matter of treating platforms that offer the same services 
equally.
        I applaud Representative Ferguson for introducing the Audio 
Broadcast Flag Licensing Act, that will allow consumers to 
continue taping of the radio, but prevent the automatic "collecting" 
of my songs with no payment to me.  You are directly affecting my 
livelihood with this bill and for that I am extremely grateful.
        Seems to me that if digital radio services can pay market rates 
for their technology and equipment, they can do the same for my 
music.  After all, without songwriters to write the songs, what is 
there to deliver over all that technology?
        I always explain it this way:  suppose I was a general 
contractor and you provided me with all of the bricks I needed to 
build my project, and then when it came time to pay  I said thanks 
and handed you back your invoice.  You would probably punch me 
in the nose.  While I promise there will be no punching here today, 
I hope you understand how I feel.  I am not a lawyer like these 
other guys at the table.  I'm just a songwriter.  And all I ask is that 
when the lawyers for the radio services sitting here get their 
paychecks, they urge their companies to reward me for my work, 
too.
        On behalf of everyone in the music community, I hope you will 
support this bill and secure for all songwriters a bright digital 
future.
        Thank you.



	MR. UPTON.  Ms. Ziegler.
        MS. ZIEGLER.  Chairman Upton, Congressman Markey, and 
members of the subcommittee, my name is Ruth Ziegler, and I am 
the Deputy General Counsel of Sirius Satellite Radio.  I very much 
appreciate the opportunity to appear today on behalf of Sirius and 
its over four million subscribers.  Sirius is bringing exciting 
technical innovation to American consumers, and at the same time 
we are opening enormous new opportunities for the music 
industries, paying the millions of dollars in royalties, and applying 
strong technological measures to protect their content.
	Sirius takes great pride in presenting a breadth and depth of 
programming that is unparalleled on radio and gives our millions 
of listeners a way to discover and rediscover music and artists.  In 
less than a decade, Sirius has developed infrastructure necessary to 
deliver a national satellite service and we now broadcast over 125 
digital quality channels including 67 channels of commercial free 
music, plus over 60 channels of sports, news, talk, and 
entertainment.  Unfortunately, from our perspective, it appears the 
music industries have declared a multi-front legal assault on 
innovation on well-settled and congressionally recognized 
consumer home reporting rights and on legislative agreements they 
made and Congress enacted.
	I would first emphasize and mention that the so-called audio 
flag proposal in substance bears no resemblance to the video flag 
that will be discussed by the panel later today.  The video flag 
seeks to prevent mass and discriminate redistribution of content 
over the Internet.  Our products already prohibit such 
redistribution.  Our transmissions are encrypted at the source.  In 
contrast, the audio flag proposals take as their primary target 
consumer home recording, conduct long considered to be fair use.  
Moreover, the video flag proposal is the result of years of open 
multi-industry negotiations.  Nothing similar has occurred in 
connection with the audio flag proposal to date, although the NAB 
and the RIAA as we have heard have begun discussions.
	To be clear, the issue here today certainly with respect to 
satellite radio is not piracy or mass redistribution.  It is about the 
very first copy a consumer makes in his or her own home of 
lawfully received broadcasts.  Let me tell you a little bit about one 
of our innovative products, our portable hand-held device called 
the S50.  The S50 is a traditional satellite receiver that allows users 
to listen live to our programming.  It also allows them to save our 
programming for listening later while commuting, exercising, or 
simply exercising at a time when you can't receive our satellite 
signal.  The S50 also allows the user to save individual songs from 
Sirius broadcasts manually with a push of a button.
	Contrary to some reports, the S50 does not provide for any 
kind of automated searches, cannot program the device to seek an 
individual song or artist.  It is our firm view that this ability to 
record individual songs and to play them back in any order is 
nothing more than a convenient form of the kind of home 
recording from radio that the public has been doing lawfully for 
decades.  In the past, Congress has consistently affirmed and 
reaffirmed the rights of Americans to make copies of music they 
receive over the air.  This right was expressly codified in the Audio 
Home Recording Act of 1992, at the urging of the recording and 
the music industries.  The S50 was designed to comply with that 
Act.  Songs recorded from the broadcast are encrypted and can't be 
taken off the device.
	Royalty payments required by the Audio Home Recording Act 
are paid for each device and these royalties are shared by the 
recording industry and its artists and by the music industry and its 
songwriters.  Those payments are in addition to the enormous 
royalties Sirius pays to those parties for the right to make its 
satellite transmissions.  Moreover, as you may be aware, despite 
our rights under the Audio Home Recording Act, Sirius has sought 
good relations with these industries and we negotiate in good faith 
and resolve issues related to the S50 with recording companies.
	Mr. Chairman and subcommittee members, Congress should 
not enact legislation unless and until the recording and music 
industries clearly identify what they seek to prevent with this 
legislation, carry the burden of demonstrating that they face a 
concrete and significant threat, and make the necessary showing 
that the technology exists to implement the solution and it will 
reduce the threat without unreasonably harming consumers' 
values, rights, and innovation, and we are far from that point as we 
sit here today.  The law as it now exists has been beneficial to 
consumers, innovators, and copyright owners.  Consumers have 
rights to record lawfully acquired content for non-commercial 
purposes in their homes.
	We have a legislative framework in the Audio Home 
Recording Act that protects content and consumers, compensates 
copyright owners, artists, and writers, and provides some certainty 
to technology companies.  There is no justification at this time in 
our view to change the successful formula.  Thank you for the 
opportunity to speak with you today.
	[The prepared statement of Ruth A. Ziegler follows:]

PREPARED STATEMENT OF RUTH A. ZIEGLER, DEPUTY GENERAL 
COUNSEL, SIRIUS SATELLITE RADIO, INC.

        Chairman Upton, Representative Markey and Members of the 
Subcommittee,   my name is Ruth Ziegler, and I am Deputy 
General Counsel of Sirius Satellite Radio.  I very much appreciate 
the opportunity to appear today on behalf of Sirius, its employees, 
stockholders and more than four million subscribers.
	Technological innovation and furthering consumer enjoyment 
are the core of our business.  In less than a decade, we have 
developed and launched the infrastructure necessary to deliver a 
national satellite service and we now broadcast over 125 digital-
quality channels, including 67 channels of 100% commercial-free 
music, plus over 60 channels of sports, news, talk, entertainment, 
traffic, weather and data to consumers across the country.  We 
already pay the music and recording industries millions of dollars 
to make these performances.
	The audio flag proposal that we discuss today is part of a multi-
front legal assault by the recording and music industries on 
innovation, on well-settled and Congressionally recognized 
consumer fair-use home recording rights, on legislative agreements 
that they made (and Congress enacted), and, specifically, on 
satellite radio.	 
	Further, the so-called audio flag proposal, in its substance, 
bears no resemblance to the video broadcast flag that also is being 
discussed during today's hearing.  The video flag seeks only to 
prevent mass, indiscriminate redistribution of digital broadcast 
television over the Internet.  Home recording is not affected. Our 
products already prevent Internet redistribution. The audio flag 
proposal targets private consumer home recording, long considered 
to be fair use. 
	Congress has consistently affirmed and reaffirmed the rights of 
Americans to make copies of music that they receive over the air.  
This right was expressly codified in the Audio Home Recording 
Act, legislation negotiated by the recording and music publishing 
industries with the consumer electronics industry and strongly 
advocated by all three of those industries as a complete, forward-
looking "generic solution that applies across the board to all forms 
of digital audio recording technology."
	Nor has a clear audio flag proposal been offered.  Rather, the 
proponents have offered vague buzz words, like "disaggregation," 
or have tried to redefine previously well understood terms, like 
"distribution."  However, it is reasonable to predict that any audio 
flag regime will result in the imposition of new encryption 
obligations on all in-home consumer devices designed to receive or 
playback radio-not only receivers, but complete stereo systems to 
which those receivers are attached, recording devices, playback 
devices, and even speakers.  
	It is not appropriate to leave the hard public policy decisions to 
the FCC, which is not an agency that traditionally has concerned 
itself with copyright law or with consumer fair use rights.  
Congress should not enact audio flag legislation unless and until 
the recording and music industries (i) clearly identify what they 
seek to prevent, (ii) carry the burden of demonstrating that they are 
facing a concrete and significant threat that outweighs the threat to 
consumer fair use rights and innovation, (iii) propose a clear, 
definite solution and (iv) make the necessary showing that 
technology exists to implement the solution and can be applied in a 
way that is likely to reduce the threat without unreasonably 
harming consumers and innovation.  We are far from that point 
today.
        The law as it now exists has been beneficial to consumers, 
innovation, and copyright owners.  There is no justification for 
changing this successful recipe.


        Chairman Upton, Representative Markey and Members of the 
Subcommittee,  my name is Ruth Ziegler, and I am Deputy 
General Counsel of Sirius Satellite Radio.  I very much appreciate 
the opportunity to appear today on behalf of Sirius, its employees, 
stockholders and more than four million subscribers.  I am 
testifying on behalf of Sirius as a company that is bringing exciting 
technical innovation to American consumers.  We are doing that 
while at the same time opening enormous new opportunities for the 
music and recording industries, paying them millions of dollars in 
royalties and, in addition, applying strong technological measures 
to protect their content.  Sirius takes great pride in presenting our 
millions of listeners with a breadth and depth of musical 
programming that is unparalleled on radio and in providing a 
means for our listeners to discover-and rediscover-music and 
artists.  Such a rich and diverse offering of musical choice benefits 
all segments of the music industry - today and in the future.   
	Technological innovation and furthering consumer enjoyment 
are the core of our business.  In less than a decade, we have 
developed and launched the infrastructure necessary to deliver a 
national satellite service and we now broadcast over 125 digital-
quality channels, including 67 channels of 100% commercial-free 
music, plus over 60 channels of sports, news, talk, entertainment, 
traffic, weather and data to consumers across the country.
	Unfortunately, the recording and music industries have 
declared a multi-front legal assault on innovation, on well-settled 
and Congressionally recognized consumer fair-use home recording 
rights, on legislative agreements that they made (and Congress 
enacted) in the past, and, quite frankly, specifically, on satellite 
radio.  In addition to lawsuits and threats of lawsuits, this anti-
consumer, anti-competitive front includes advocacy of three 
different proposed bills.  
	In addition to the misnamed audio flag proposal that is the 
subject of this hearing, the equally misnamed "PERFORM" Act 
and important sections of the Section 115 Reform Act, each seeks 
to outlaw long-accepted and permitted consumer recording, for 
which the music and recording industries are already paid a 
royalty.  Each seeks to give the recording and music industries veto 
power over technological innovation.  Each would renege on the 
Audio Home Recording Act deal, made by the recording and 
music industries and sold to Congress in 1992 as "a generic 
solution that applies across the board to all forms of digital audio 
recording technology." And on the promise that "Congress will not 
be in the position after enactment of this bill of having to enact 
subsequent bills to provide protection for new forms of digital 
audio recording technologies." 
	It is equally important to emphasize that the so-called audio 
broadcast flag proposal, in its substance, bears no resemblance to 
the video broadcast flag that also is being discussed during today's 
hearing.  As I will discuss in greater detail, the video flag seeks 
only to prevent mass, indiscriminate redistribution of digital 
television broadcasts over the Internet.  Our products already 
prevent all Internet redistribution of SIRIUS broadcasts.  In 
contrast, the audio flag proposals take several ill-defined forms, 
each of which uses recording and music industry buzz words like 
"disaggregation" or "distribution," and all of which have as their 
primary target consumer home recording; conduct long considered 
to be fair use.  The battlefield here today is not piracy or mass 
redistribution, it is the very first copy a consumer makes in their 
own home of lawfully received broadcasts.

Sirius and Innovation
	Sirius has built its business on innovation.  The company began 
with the invention of a new, miniature antenna technology that, for 
the first time, permitted the receipt of low power satellite radio 
transmissions in vehicles.  In the late 1990s, the company paid 
almost $90 million to the U.S. Treasury for spectrum rights 
auctioned by the Federal Communications Commission.  Since 
then, our company has invested nearly $3 billion in the complex 
infrastructure necessary to run a state-of-the-art satellite radio 
company - from satellites to transmitters to innovative new 
receivers to the programming of our channels by our skilled and 
creative employees.  
	There is no question that Sirius is changing the way people 
listen to music, and for that matter -- sports, news, and 
entertainment.  Operating from our corporate headquarters in New 
York City's Rockefeller Center, Sirius broadcasts over 125 digital-
quality channels, including 67 channels of 100% commercial-free 
music, plus over 60 channels of sports, news, talk, entertainment, 
traffic, weather and data.  
	SIRIUS' music channels cover nearly every genre - from heavy 
metal and hip-hop to country, dance, jazz, Latin, classical and 
beyond.  The music on each channel is selected, arranged, prepared 
and hosted by SIRIUS staff, all of whom are recognized experts in 
their music fields, along with contributing musicians and 
performers who lend their talent and expertise. This ensures that 
SIRIUS subscribers can regularly listen to unparalleled music 
selections, insights and perspectives.
        This unique listening experience is available to subscribers 
from coast-to-coast in the United States.  Our service can be used 
in cars, trucks, RVs, homes, offices, stores, and even outdoors. 
Boaters around the country, and up to 200 miles offshore, can also 
hear Sirius. For a monthly subscription fee, Sirius provides 
premium quality programming delivered by three dedicated 
satellites orbiting in special orbits to maximize their time directly 
over the United States.  
        The nerve center for SIRIUS operations is at Avenue of the 
Americas and 49th Street in New York City, where the company's 
state-of-the art studios are located.  Artists including Burt 
Bacharach, The Beach Boys, Emmylou Harris, Dolly Parton, Yo-
Yo Ma, Phoebe Snow, The White Stripes, Mary J. Blige, Sting and 
Randy Travis have visited the studios for performances and 
interviews.

Sirius and Innovative Consumer Recording
        In addition, responding to the demands of our subscribers, 
Sirius has developed a portable, hand-held device called the S50.  
        The S50 is an intelligent leap forward in Satellite Radio technology 
providing integration of both live content and up to 50 hours of 
time shifted content storage.  The device provides our subscribers 
with the ability to enjoy their favorite music-on a time-shifted 
basis-while traveling, exercising, commuting or simply relaxing.
The S50 includes several different capabilities.  While attached 
to its docking station and connected antenna, the S50 receives live 
SIRIUS broadcasts and includes a short-term buffer that allows the 
listener to pause and replay those broadcasts.  
	Apart from the replay buffer, most of the recording performed 
by the S50 consists of recording the subscriber's three most-
listened to channels, while the device is tuned to one of the 
channels, so that the subscriber can have the full SIRIUS 
experience while traveling or otherwise away from his or her 
docking station.  These channels are refreshed on a first-in/first-out 
basis.  
        In addition, the subscriber can program timed blocks of 
programming to record and save.  These blocks cannot be broken 
into individual songs or programs.  The device also allows the 
subscriber to upload his or her own collection of digital music 
files, including MP3 files, from a home computer.
        Finally, the device allows the user to save individual songs 
from SIRIUS broadcasts, while they are playing.  The device 
includes a one-touch record function, to make convenient the kind 
of home recording that the public has been doing for decades-the 
kind of recording recognized by the Audio Home Recording Act to 
be wholly lawful.  It is this function that has drawn the attention 
and ire of the recording and music industries. 
The S50 was designed to comply with the Audio Home Recording 
Act.  Songs recorded from SIRIUS broadcasts are encrypted and 
cannot be removed from the device.  In other words, there is no 
threat of Internet redistribution, let alone "mass, indiscriminate 
Internet redistribution."
        And, of course, the royalty payments required by the AHRA 
are made for each device.  These royalties are shared, under a 
statutory formula, by the recording industry and its artists and by 
the music industry and its songwriters.  Those payments are in 
addition to the enormous royalties SIRIUS already pays to the 
recording industry for the right to make public performances of the 
record companies' sound recordings and to ASCAP, BMI and 
SESAC for the right to make public performances of musical 
works. Moreover, as I am sure you have seen in the press, despite its 
rights under the AHRA, SIRIUS has sought good relations with the 
recording and music industries. Thus, we have negotiated in good 
faith over the S50, and reached an agreement with the record 
companies.

The Audio Flag Proposals Advocated by the Recording and 
Music Industries Seek To Renege on the AHRA and Ban 
Conduct Long Permitted to the Public.
	Congress has consistently affirmed and reaffirmed the rights of 
Americans to make copies of music that they receive over the air.  
This right was expressly codified in the Audio Home Recording 
Act, legislation negotiated by the recording and music publishing 
industries with the consumer electronics industry and strongly 
advocated by all three of those industries as a complete, forward-
looking resolution of home recording issues. 
	When Congress first granted copyright protection to sound 
recordings in the 1970's, it confirmed consumers' historical right 
to record radio transmissions:  
        In approving the creation of a limited copyright in sound 
recordings it is the intention of the Committee that this limited 
copyright not grant any broader rights than are accorded to 
other copyright proprietors under the existing title 17.  
Specifically, it is not the intention of the Committee to restrain 
the home recording, from broadcasts or from tapes or records, 
of recorded performances, where the home recording is for 
private use and with no purpose of reproducing or otherwise 
capitalizing commercially on it.  This practice is common and 
unrestrained today, and the record producers and performers 
would be in no different position from that of the owners of 
copyright in recorded musical compositions over the past 20 
years.   

	Since that Act, Congress has expanded the sound recording 
right only sparingly, in careful response to specific and well-
documented threats, all the while reiterating the importance of 
preserving the public's right to make home copies for personal use.  
When Congress enacted the record rental amendments,  for 
example, it declined to make any statements or take any actions 
regarding home taping, instead referring to its previous statements 
in the Sound Recording Act house report, quoted above, and 
stating that "no precedential value" with regard to home taping 
should be given to the fact of the record rental amendment's 
passage.   
	Congress squarely addressed the issue of home recording of 
sound recordings and musical works in the Audio Home Recording 
Act of 1992.  The bill was negotiated by the recording industry, 
music publishing industry and consumer electronics industry, and 
was strongly advocated by all three industries as the definitive 
solution to the home recording issue.   
	The Senate Report, which discusses the bill in the form 
negotiated by the recording, music and consumer electronics 
industries, notes that "the copyright law implications of private 
audio recording for noncommercial use have been the subject of 
longstanding debate" and states "[a] central purpose of the 
[AHRA] is conclusively to resolve this debate, both in the analog 
and digital areas, thereby creating an atmosphere of certainty to 
pave the way for the development and availability to consumers of 
new digital recording technologies and new musical recordings."     
	The legislative history is not ambiguous.  The Senate Report 
opens its discussion of the bill with the assertion that "[t]he 
purpose of S.1623 is to ensure the right of consumers to make 
analog or digital audio recordings of copyrighted music for their 
private noncommercial use."   This specifically includes "the 
making of [a copy] by a consumer for use in his or her home car, 
or portable tape player, or for a family member."  All are 
"protected by the prohibition against copyright infringement 
actions contained in" the AHRA.   
	The same sentiments were expressed in the House of 
Representatives.  As one co-sponsor in the House explained, the 
Audio Home Recording Act was enacted to 

        make it clear that noncommercial taping of music by 
consumers is not a violation of copyright law.  The debate over 
home taping of records goes back to 1970 when Congress first 
extended copyright protection for records but this legislation 
will end the 22-year-old debate and make it clear that home 
taping does not constitute copyright infringement.   

The provision of the AHRA providing the exemption for home 
copying, section 1008, was considered "one of the cornerstones of 
the bill" because it 

        removes the legal cloud over home copying of prerecorded 
music in the most proconsumer way possible: It gives 
consumers a complete exemption for noncommercial home 
copying of both digital and analog music, even though the 
royalty obligations under the bill apply only to digitally 
formatted music. No longer will consumers be branded 
copyright pirates for making a tape for their car or for their 
children.   

	The Ninth Circuit confirmed this conclusion in Recording 
Industry Association of America v. Diamond Multimedia Systems, 
Inc., 180 F.3d 1072 (9th Cir. 1999).  There, the court found that the 
purpose of the AHRA "is to ensure the right of consumers to make 
analog or digital audio recordings of copyrighted music for their 
private, noncommercial use."   Even in holding that the Rio 
device itself did not meet the statutory requirements of the AHRA, 
the Diamond court noted that "the Rio's operation is entirely 
consistent with the Act's main purpose - the facilitation of 
personal use." 
	Further, the AHRA includes an explicit technology mandate 
applicable to home recording-the obligation to use the Serial 
Copy Management System on digital audio recording devices.  17 
U.S.C.  1002.  In imposing this mandate, Congress evaluated the 
competing interests and concluded that first generation copies 
made by digital audio recording devices should be permissible, and 
that technology should only act to stop second-generation copies.  
17 U.S.C.  1001(11) (definition of "serial copying").  As the 
Senate Report described SCMS, "[o]ne can make an unlimited 
number of copies from the original, but one cannot copy the 
copy." 
	The AHRA explicitly addressed home recordings made from 
digital transmissions, such as terrestrial and satellite radio.  The 
key definition of "digital audio recording device" includes devices 
with a recording function that has, as its primary purpose, the 
making of digital copies "from a transmission."   Moreover, the 
Act contains rules governing the encoding of SCMS in digital 
transmissions intended to protect broadcasters.  17 U.S.C.  
1002(e).  The Senate Report eliminates any doubt about 
Congress's (and the recording and music industries') intent, 
explaining that SCMS sets forth rules governing the receipt of 
digital broadcasts, and, that "as a result, digital broadcast and cable 
transmissions generally will be recordable by consumers, but 
second generation digital copies will not be able to be made from 
those first generation copies." 

Any Resemblance Between the Audio Flag and Video Flag 
Proposals Are Superficial and Misleading
	The audio flag advocated by the recording and music industries 
bears no resemblance to the video flag proposal being considered 
at this hearing, either in substance or in the process by which it was 
developed.  
	The video flag proposal is the result of years of multi-industry 
negotiations, held under the auspices of the Copy Protection 
Technical Working Group, which resulted in a detailed report. 
While there was not consensus on all issues, there was broad 
consensus on many, including the issue of the scope of appropriate 
technological protections.  That scope is carefully limited to 
preventing mass, indiscriminate redistribution of digital broadcast 
television over the Internet.  Nothing similar, to date, has occurred 
in connection with the recording industry's audio flag proposal.  
	To the contrary, the audio flag proposal and the restrictions it 
seeks to impose, have never been clearly defined by the recording 
industry.  The proposal has been circulated in various 
formulations, which have consistently been wrapped in vague buzz 
words, as the recording industry attempts to make it look like the 
video flag.  Audio flag language advocated by the recording and 
music industries has included either undefined, novel terms such as 
"disaggregation" (apparently intended to prohibit consumers from 
recording programs and listening in an order of their choosing to 
the recorded songs) or terms that the recording industry and music 
industry are seeking to redefine, such as "distribution," which they 
now argue includes home recording.  Nor have any candidate 
technologies been identified to effectuate the flag regime.
	Indeed, there is no evidence whatsoever that either satellite or 
terrestrial radio broadcasts are meaningful sources of content used 
for mass, indiscriminate Internet redistribution.  To the contrary, 
broadcasts are a poor source of content for redistribution. They 
include music segues and DJ chatter.  By comparison, the 
recording industry itself provides millions of unprotected copies of 
better sources. They are called CDs and authorized digital 
downloads that may be copied to CD.  If there is any redistribution 
problem, the cause is the content sold by the record companies 
themselves. Perhaps most perplexing is the inclusion of satellite radio 
industry in a proposed audio flag regime at all.  The whole purpose of a 
broadcast audio flag regime is to provide for encryption of content 
transmitted in the clear.  Satellite radio content is fully encrypted at 
the source, providing the same level of protection against 
redistribution as the protection provided by the video flag adopted 
by the FCC.  Particularly as applied to the satellite radioindustry, 
the audio flag makes no sense.

The Audio Flag Proposals Threaten Innovation and Would 
Establish the Music and Recording Industries as Gatekeepers 
Over Technology
	Without a clear proposal from the recording and music 
industries it is difficult to assess the full potential impact of the flag 
regime they seek.  However, some of the likely effects of audio 
flag proposals include:  
	 the imposition of new encryption obligations on all in-
home consumer devices designed to receive or playback 
radio.  The rules would likely affect not only receivers, but 
complete stereo systems to which those receivers are 
attached, recording devices, playback devices, and even 
speakers.  Depending on the scope of the prohibitions, 
existing systems on which consumers have invested 
thousands of dollars could be cut off from radio and 
satellite radio - including systems that do not facilitate any 
home recording.
	 The FCC, or even the copyright owners themselves, would 
have authority to determine the scope of consumer fair use 
rights and to determine which technologies should be 
permitted to be made available in the marketplace.  Such a 
shift of power is not warranted and is certain to only 
heighten the lack of certainty for consumer electronics 
companies and deprive consumers of innovative new 
products and product features.
	 Innovative devices will need to license technologies 
mandated by the FCC.  If the radio flag regime ultimately 
resembles the video regime, those licenses will include 
further restrictions on products that will be subject to 
approval from the recording and music industries.  Any 
device that does not conform to the regime would need 
specific approval from the recording and music industries 
before it is sold.  And if the major copyright owners don't 
like a feature, don't like the manufacturer, or otherwise 
seek leverage against satellite radio, consumers will be 
deprived of the device and potentially desirable features.  
That is too much power for the copyright holders and too 
high a price for consumers.

        Mr. Chairman and Subcommittee members, it is not enough to 
leave the hard decisions to the FCC, which is not an agency that 
traditionally has concerned itself with copyright law or with 
consumer fair use rights.  Congress should not enact audio flag 
legislation unless and until the recording and music industries (i) 
clearly identify what they seek to prevent, (ii) carry the burden of 
demonstrating that they are facing a concrete and significant threat 
that outweighs the threat to consumer fair use rights and 
innovation, (iii) propose a clear, definite solution and (iv) make the 
necessary showing that technology exists to implement the solution 
and can be applied in a way that is likely to reduce the threat 
without unreasonably harming consumers and innovation.  We are 
far from that point as we sit here today.  
        The law as it now exists has been beneficial to consumers, 
innovation, and copyright owners.  Consumers have clear rights 
with respect to what they can do with lawfully acquired content for 
non-commercial purposes within the privacy of their own homes 
and we have a legislative framework-in the AHRA-that protects 
content, permits consumers to make first generation copies, 
compensates copyright owners, artists and writers, and provides 
some certainty to technology companies.  There is no justification 
to change this successful recipe.

Conclusion
	Thank you again for the opportunity to present our views on 
this important issue.  We look forward to working with the 
Subcommittee members and staff to help ensure that traditional 
consumer home recording rights are protected, technological 
innovation is encouraged and, just as importantly, the creative 
works of musicians of every genre are exposed to the millions of 
people who have discovered and rediscovered their artistic 
contributions on satellite radio.

	MR. UPTON.  Thank you, all of you.  At this point we will take 
questions of the panel, each with 5 minutes up here.
	MR. SHIMKUS.  Mr. Chairman, would you make sure you ask 
the panelists to make sure their microphones are moved a little 
closer.
	MR. UPTON.  Yeah, if you would put the mics a little closer.  
That happens when you get older, right?  I guess the first question I 
have, Mr. Harris, is I would like to know your nine number one 
songs.  That was the first thing that I thought.
	MR. HARRIS.  Well, it has been over a 25-year period.  You can 
tell that I have earned the gray hair along the way.  I started out, 
my first number one song was by a one-hit wonder in 1979, a guy 
named Leon Evert from South Carolina.  He had a number one on 
CBS Records.  And it was great for his career and it was very good 
for mine.  It was my first number one.  He had the Hurricane tour 
and the Hurricane bus and the Hurricane van.  And then it all kind 
of disappeared after that.  But my next one was Mickey Gilley's 
"Lonely Nights."  That was in 1982.  1988 was Waylon Jennings' 
last number one.  It was "Rose in Paradise."  Then I had three on a 
young guy from Georgia that I went down and wrote with.  His 
name is Travis Tritt.  I had "I'm Going to Be Somebody," "Dream 
Off to Dream," "Can I Trust You With My Heart," those three.  
And seven other, actually nine other, cuts on his album during that 
period of time.  Wynonna Judd on her first solo album, I have had 
what has now become her signature record called "No One Else on 
Earth."  And, let's see, Little Texas, "You and Forever and Me."
	MR. UPTON.  Mr. Barton would like that one, I know.
	MR. HARRIS.  The band did very well, and John Berry's 
"Standing on the Edge of Goodbye."  My latest one was a top ten 
record in 2000 and topped out in 2002, "Angels in Waiting," 
Tammy Cochran.  I also co-wrote the lyrics to America's Funniest 
Home Videos.  So that was--
	MR. UPTON.  Actually I knew that one.  That is one I did know.
	MR. HARRIS.  It has been primarily in the country field but 
other artists, I have worked out of London, and I worked with Neil 
Diamond when he was there on his last album.
	MR. UPTON.  Ms. Ziegler, in your testimony you indicated you 
didn't see a need for legislation, and I guess one of the--as I 
wrestle with this issue and as I hear all parties, one of the things 
that has been pointed out is that these devices in fact could do 
these automatic searches so you could get all of Bruce 
Springstein's albums, et cetera, come up with all these different 
things.  In fact, you indicated that your devices don't allow you to 
do that, is that right?
	MS. ZIEGLER.  That is right.  There is no--
	MR. UPTON.  Is there some intent down the road that they will 
be able to have that technology?
	MS. ZIEGLER.  We have no present intent to.
	MR. UPTON.  That is another question for Mr. Shapiro, who is 
in the audience, one that is on panel two.  Mr. Levin, you talked 
about one of the things that I felt proud to participate in with Mr. 
Tauzin, Mr. Barton, and others, Mr. Stearns, Mr. Dingell, and Mr. 
Markey.  We had a number of these different roundtable 
discussions, you might have even been in those rooms for a couple 
of those discussions as we tried to see a private solution to this 
versus a government-mandated one.
	In your remarks, you in essence suggested that those be given 
another chance to give you the time to try and negotiate those.  Tell 
us what is the progress of these discussions.  We have heard about-
-our subcommittee has not been involved like we were once before 
but where are things?
	MR. LEVIN.  Well, I think we have made very productive 
progress so far.  I think, obviously the issues are extremely 
complex.  And I was there during the time that you are recalling 
where all of these different stakeholders in the video flag got 
together and they spent hours and hours and in fact years actually 
negotiating out those very complicated issues.  And that is 
precisely, I think, that this kind of thing--
	MR. UPTON.  One of the reasons, as I recall, was we didn't 
want to go back with the DCR, the data versus--
	MR. LEVIN.  Exactly.  Exactly.  I think we were very interested 
in making sure that everybody's rights were balanced properly and 
that the ultimate technology could provide as many benefits as 
possible to consumers while at the same time protecting the 
copyright owners.  And I think that worked very well, but I think a 
key distinction between the video flag and what is happening now 
with the audio flag proposals is that the video flag, as some people 
mentioned, only dealt with indiscriminate redistribution over the 
Internet.  That was the primary thing that everybody was 
concerned about over those main years, and it took an awfully long 
time to figure out just what technology ought to be used in order to 
be able to prevent that.
	With the audio flag it is much, much broader.  It is more vague.  
It is overly broad.  And we are frankly concerned that it impinges 
on consumer's reasonable expectations and lawful uses to a point 
that not only hurts consumers, but then in turn obviously affects 
our business model.
	MR. UPTON.  Mr. Bainwol, do you want to comment on the 
negotiations?
	MR. BAINWOL.  Sure.  Sure.  We began the negotiations in 
March.  They have been fruitful.  We have fundamentally--
	MR. UPTON.  They haven't or have?
	MR. BAINWOL.  They have been fruitful.  We have 
fundamentally agreed on the proposition that cherry picking is 
wrong, ought to be dealt with, and that is aggregation of content 
and without ever listening to the radio choose the songs you want 
to keep.  You scroll down the data and say I will keep this one, that 
one is Julie Roberts, and that Toby Keith, and this 50 Cent, never 
listening.  You got them stored in your digital jukebox.  The 
conversations have been very good.  But the point I think that is 
crucial here is that we really don't have market leverage.  Getting 
to yes--we can get to a conversation, it took 3 years to get to the 
point where we had folks willing to sit down and that was because 
Members of the Congress said you need to.
	But getting over the hump to the point where we say solve the 
problem, that is an entirely different challenge and we are not 
going to get there unless we got something that forces action.  Now 
there is one other critical point here.  Because we don't have the 
performance right, we don't have the leverage to move them, but 
the other difference with the video guys is this.  By the time they 
show up on TV, they have already been in theater.  They have got 
multiple windows of revenue.  We sell music.  That is what we do.  
We derive the bulk of our ability to reinvest in new art from the 
sale of music.  It is that very window that has been compromised 
here.  We've got to protect that window or else the venture capital 
that goes into creativity will dry up.
	MR. UPTON.  Mr. Boucher.
	MR. BOUCHER.  Thank you, Mr. Chairman, and I want to say 
thank you to our witnesses for their informative testimony this 
afternoon.  Mr. Levin, a quick question for you.  In my opening 
statement I mentioned the rather unique position that iBiquity has 
with regard to high definition radio, having developed the 
technology and holding today the intellectual property it licenses to 
the HD stations.  Would you agree that if someday a technical 
standard for an audio flag for HD radio was created that iBiquity 
through that unique position could implement it without 
Congressional action?
	MR. LEVIN.  I think you are absolutely right on the money.
	MR. BOUCHER.  And so we should defer to the private sector 
entirely with regard to this matter, first to create the flag and the 
technical standard to assure that it is effective, and then secondly 
through iBiquity for its implementation.  
	MR. LEVIN.  I think that works, and at the end of the day if 
there is a need to come to Congress for implementing legislation, I 
think the parties can do that without any problem whatsoever.  I 
think we need to come to a solution though before we come to 
Congress.
	MR. BOUCHER.  Thank you, Mr. Levin.  You are just a great 
witness.  I applaud that answer.  
	MR. LEVIN.  You are a good questioner.  
	MR. BOUCHER.  And we got along this well when he was on 
the staff.
	MR. LEVIN.  It is called good staff work, right?
	MR. BOUCHER.  Always good staff work.  Mr. Bainwol, I noted 
with interest your discussion about the progress of the negotiations, 
but those negotiations really only include your industry and the 
broadcasters.  It is my understanding that the device manufacturers 
who are in my mind a critical part of this are not at the table.  Why 
do you not take this conversation over to the well-established 
industry forum, which is the Copyright Protection Technical 
Working Group, a long-standing organization that has been in 
existence 10 years.  It meets every month.  Per my information, 
you haven't been there in 7 years.  Why not get the device 
manufacturers involved in this conversation, because even if you 
and the broadcasters come to an agreement, if the device 
manufacturers say, well, this doesn't work for the following 15 
technical reasons you really haven't accomplished very much.  So 
why not take this conversation over to the Copyright Technical--
well anyway.
	MR. BAINWOL.  The short answer to the last question is 
because CPTWG has evidenced no interest in solving this problem.  
That is a place for this problem to die, not to be solved.
	MR. BOUCHER.  Well, they are the ones who created the 
broadcast flag.
	MR. BAINWOL.  Well, that is because there was marketplace 
pressure to make that happen.  They had no choice.
	MR. BOUCHER.  They also created the content protection DRM 
for DVDs.  I mean these are the people who have a great track 
record in making this happen.  You haven't even been there to ask 
them to take it up.
	MR. BAINWOL.  I have been at the RIAA for almost 3 years, 
and about 3 years ago, I went to the FCC to say we have got a 
problem here with the emerging roll out of HD radio.  And I was 
hit on one side by the broadcasters and hit on the other side by the 
manufacturers.  One said premature, no demonstration of harm, the 
other one said too late.  And that is the quicksand that we find 
ourselves in because we don't have market pressure, we don't have 
a market right to force people to the table, not just to the table but 
to get the settlement.  We have got a real challenge.
	Because of Congressional interest we now have a very fruitful 
conversation going on with the broadcasters.  It is with the 
broadcasters because that was the request from the Senate. 
	MR. BOUCHER.  Let me ask you a simple question.  I 
understand maybe Senator Inouye had asked you to sit down with 
the broadcasters.  Let me ask you to sit down with the device 
manufacturers.  I think to make this conversation really effective 
you are going to need the people involved in it who at the end of 
the day are going to have to pass on whether or not the technical 
standard really works and you need their input as that is developed.
	So a simple question.  If the Copyright Protection Technical 
Working Group, I got it right that time, expressed a willingness 
and interest in addressing the subject, would you be interested in 
taking this conversation to them?
	MR. BAINWOL.  If they provide you an assurance and us an 
assurance that they mean business, that they are prepared to get 
ES, that the scope of the problem is not simply with distribution 
but also this aggregation, then we will talk to anybody.  But let me 
make one additional point.  iBiquity has said to us this is not 
terribly complicated stuff.  This is radio science, not rocket 
science.  What we need help with here is somebody to tell us to do 
it because we are not here to do it on our own.  We need an 
instruction either from Congress or from the FCC.
	MR. BOUCHER.  Well, my time is up so let me briefly say I 
appreciate your expression of willingness to involve the device 
manufacturers in this discussion, your expression of willingness 
under rather carefully stated conditions to have that conversation 
with the group that can make the technical difference.  And for my 
part, I would certainly encourage all of the interested parties to 
work toward an agreement on this.  I had some rather critical 
comments of the proposals put forward so far, but I think it is in 
the public interest for us to develop the DRM technology and then 
have that implemented.  That provides the kinds of protections that 
you are looking for.
	And so I share with you the overall goal.  I just think 
legislation is not needed to get us there, perhaps encouraging all 
the parties to work together is, and your expression of willingness 
to expand this conversation, I think is a helpful step in that 
direction.  Thank you, Mr. Chairman.
	MR. UPTON.  Mr. Barton.
	CHAIRMAN BARTON.  Thank you, Mr. Chairman.  I am really 
stunned that Mr. Boucher made a mistake in one of his questions.  
You know, I think I know the reason.  He got married about a 
month ago.  He used to be a very boring guy who had nothing else 
to do but study for these hearings.  Now he has got other outside 
interests and he is a much more fun guy, but he slips up every now 
and then.  He has lost focus which is a good thing.
	You know, between Mr. Harris and myself, we have nine 
number one records.
	MR. UPTON.  You had the big Texas hit, right, not the little one.
	CHAIRMAN BARTON.  If we get this panel right and we get this 
hearing right between Mr. Harris and I, we may have one law 
passed that solves this problem.  So my only real question, I am a 
co-sponsor with Mr. Boucher of the fair use bill, and it would seem 
to me that technology is converging with political ability and that 
we might be able to solve two or three issues at one time.  We 
could do a broadcast flag, a video flag, and get some fair use 
language that help our consumers, so my real question would--I 
guess start with Mr. Bainwol.  Do you think that is possible?  I 
have seen some technology that was presented to me by the Disney 
folks that would seem to think we could solve all these problems in 
one boot, in one swoop.  Do you agree or disagree?
	MR. BAINWOL.  The movie folks have now moved in a 
direction in the recording industry where we have for many years 
allowed people to make multiple copies of our product.  So your 
fundamental fair use concern is something that we have 
accommodated for a long time.  We have concerns about Mr. 
Boucher's bill, H.R. 1201, that we fear will have some serious 
consequences.  If the objective is really fair use for the recording 
side, that is being satisfied.
	And let me make one other point about fair use.  We often hear 
about it from the standpoint of just purely what the consumer is 
entitled to.  The fourth standard in the fair use sequence of four 
standards is this:  You have to consider the effect of the use upon 
the potential market for or value of the copyrighted work.  And the 
absence of that consideration blows a hole in the digital 
marketplace, and whatever we do we need to protect that and that 
is precisely why we are here at the table, because the fundamental 
value of our copyrighted work, the genius of Mr. Harris, is going 
to be compromised because there won't be any basis for 
reinvestment.
	What you have going on in society is the iPodization of 
America.  It is all about this device.  If you get music from iTunes 
you pay for it.  If you get music from Creative Zone you pay for it.  
If you get it from satellite radio you don't pay for it.  You store it.  
It says, if you made a purchase of my tunes, Mr. Harris is not being 
compensated and neither are we.  That is fundamentally wrong.  
That violates our standard and fair use.  That needs to be dealt 
with.
	CHAIRMAN BARTON.  Well, if we can--for the first time in 
about 4 years, I really see that there is a possible convergence.  I 
want to protect Mr. Harris, and I want to protect the content 
providers.  They are the geniuses that create the product that you 
said we consume, but I also want to protect the consumer so that 
you can make a few copies for personal use, and the technology 
appears to be there.  Now if we can just get the political parties to 
agree, I think we have got a deal here that we can work on pretty 
quickly, and I think Mr. Ferguson's bill, with some tweaking to 
make sure that Mr. Boucher and I are happy, may be the way to do 
it.  So with that, Mr. Chairman, I yield back.
	MR. UPTON.  Mr. Gonzalez.
	MR. GONZALEZ.  Thank you very much, Mr. Chairman.  I 
alluded in my opening statement regarding technology, and I am 
trying to get this all straight and have some working knowledge, 
and you all can help me with this.  Ms. Ziegler, if I want to 
subscribe to Sirius, what does it cost me?
	MS. ZIEGLER.  $12.95 a month.
	MR. GONZALEZ.  Now I want--is it the S50?  I am not sure.  
What is the feature that allows me to basically store, save?
	MS. ZIEGLER.  The S50 permits you to--you can listen live but 
you can also record blocks of recording and you can also, if you 
are listening live and listening to the recording, save an individual 
song.
	MR. GONZALEZ.  And how much does that cost me in addition 
to my $13 a month, whatever?
	MS. ZIEGLER.  It costs you $12.95 a month, the same 
subscription price.
	MR. GONZALEZ.  It is a feature that is included in my standard 
fee.  In other words, it is not something that is added.  It is not a 
premium that you charge extra for?
	MS. ZIEGLER.  The device itself, the recording device itself, 
will cost you more.  The service--
	MR. GONZALEZ.  So let us say the recording device is $100 or 
whatever it is but to have the S50 feature it is now much more?
	MS. ZIEGLER.  The S50 feature to the consumer is still $12.95.
	MR. GONZALEZ.  Okay.  I guess what I am trying to figure out 
is if I am going to have to pay extra in order to have the capability 
to save and store music, right?  I am trying to figure out how much 
extra would I be paying.
	MS. ZIEGLER.  It is the cost of the device itself.
	MR. GONZALEZ.  The device itself.
	MS. ZIEGLER.  So you could buy a very low end receiver and 
not have--
	MR. GONZALEZ.  Now let me ask you, in the marketplace 
where do I acquire this device?
	MS. ZIEGLER.  You can buy it at various retailers, I mean most 
large retailers.
	MR. GONZALEZ.  Because the question really comes I think in 
the old days of fair use Charlie Gonzalez goes out there and gets 
his cassette, double cassette or whatever it is, and, you transfer it 
yourself.  What has happened out there in the marketplace 
especially with Sirius and such the feature that you are providing 
now which is pretty unique, and I guess we get prepared for 
expanding that capability for the reasons that digital or HD radio 
allows that enhancement and the ability to do these things, quality 
and such, you are making the distinction though that what you 
really are guarding against really is just the big boogey man of 
redistribution.
	You hang your whole argument that you should be able to do 
this because it is fair use.  I am recording it for my own use.  And 
there is no danger or anything, nothing is happening by way of 
redistribution because it is not allowed.  The technology that you 
utilize is not available for that use.
	MS. ZIEGLER.  Right.  We have brought out the S50 in 
compliance on the Audio Home Recording Act of 1992, and that 
framework we believe provided a framework that codifies fair use 
and is in compliance with that statute.
	MR. GONZALEZ.  And, Mr. Bainwol, what is your argument on 
that particular, I guess, understanding of the present law and where 
we are going?
	MR. BAINWOL.  Let me do two cuts of that.  One is, if you take 
500 songs and you get them on your iPod or you get them from 
Zen, then Mr. Harris is compensated.  If you get those same 500 
songs, you put them into your radio receiver, which is where you 
store your music, you import your other stuff, this is now your hub.  
XM calls it the mother ship.  It is not a pod.  It is the mother ship.  
So you've got the same 500 songs and not a dime is going to the 
creator for that distribution for the right to have ownership of that 
product.
	MR. GONZALEZ.  This technology is just allowing me an 
enhanced way of having better quality, greater quantity, but it is 
still fair use.
	MR. BAINWOL.  It is not fair use because fair use also requires 
that the creator be compensated.  We have no problem with time 
shifting.  We have no problem with manual recording.  But when 
you can replicate the iTunes experience and not pay for it, that will 
devastate an industry and that will destroy creativity.
	MS. ZIEGLER.  Can I comment?
	MR. GONZALEZ.  Yes, please.
	MS. ZIEGLER.  Thank you.  One part of the Audio Home 
Recording Act is that we need to pay a royalty on each device and 
that--
	MR. BAINWOL.  And may I comment on that?
	MR. GONZALEZ.  I am going to give you a chance.  I got about 
42 seconds.  You take 20 of those seconds.
	MS. ZIEGLER.  Okay.  I just want to say the artists, the 
recording labels, as well as the songwriters, are compensated 
through that royalty so to say that there is no compensation, there 
is.
	MR. BAINWOL.  The Audio Home Recording Act pays the 
industry about $2 million a year.  Today in America there will be 2 
million downloads or more that will pay the industry about that 
today, so the Audio Home Recording Act will starve, literally 
starve, creativity.  It is not the right answer.  It is for serial copying.  
It is not for replicating the iTunes or the Rhapsody experience.
	MR. GONZALEZ.  My time is up.  Thank you all very much.
	MR. HARRIS.  Mr. Chairman, could I comment on that?
	MR. UPTON.  Go ahead.  Why don't you comment, Mr. Harris, 
and then we will go to Mr. Shimkus.
	MR. HARRIS.  I would just like to comment on the fact that by 
someone being able to download in this iTunes mode, and we all 
have them in the music industry, for instance.   But the traditional 
way has been performance royalties and mechanical royalties.  
This completely takes any kind of mechanical--mechanical is 
based on the sale of a record.  Every time my song was played on 
the radio, I got a royalty.  Every time that someone bought a CD, I 
got a royalty.  Songwriters make pennies on the dollar.  We always 
have, even since 1928 when they created--1923, excuse me, when 
they created the intellectual copyright protection laws.
	There is no protection in this way when someone can cherry 
pick, download a particular one.  There is no need for them to go 
out and either buy it on iTunes or to buy the CD itself.  There is no 
reason for them to do that because they get it free.  I have been up 
here before not testifying in a committee, this is all new to me, but 
lobbying with the National Songwriters Association and the Guild, 
but since 1997, I and a lot of others, but I, in particular, because 
my accountant gave me the information, I lost about 28 percent of 
my income.  At my age that is disturbing.
	If this goes unchecked without the flag, I could lose another 50 
percent on top of that, so that would make it nearly impossible for 
me to stay in the industry.  And I have done well.  There are others 
that will just have to go get jobs.  
	MR. UPTON.  Mr. Shimkus.
	MR. SHIMKUS.  Thank you.  And I want to encourage Mr. 
Gonzalez and anybody else, this line of questioning and this 
discussion that Mr. Gonzalez was addressing was just what we 
need to hear and address and talk about.  One thing I learned in one 
of the private industry junkets to the CEA convention was how 
artists really drive technology advancements, and I think it was the 
year they rolled out the MP3, and it was people wanted music and 
it drove the technology.
	You all have a symbiotic relationship that if a part of the chain 
breaks everyone is going to get penalized and that is why I think 
we are really working hard to try to come to some agreement and 
understanding.  But this S50 issue is at the heart of I think Mr. 
Gonzalez's questions and a lot of our questions.  Mr. Harris in his 
opening statement talked about how people can get his songs 
without compensation--he is not--through your product all his 
songs are stored on this device without compensation to him other 
than that we just found out through the device.  There is what you 
would say minimal compensation provided by the device itself but 
per song there is not, is that--Mr. Harris, is that what you said, and, 
Ms. Ziegler, is that what I interpreted right, and then, Mr. Bainwol, 
am I following this debate correctly?
	MR. HARRIS.  That is correct.
	MR. SHIMKUS.  Do you agree?
	MR. HARRIS.  Basically, I would not receive any compensation 
with the exception of the performance, which I think has already 
been negotiated.  But it is when a user--and I understand 
consumers.  We have had radio for years.  We all thought it was 
free.  I thought it was free when I got in the music business.  I 
wanted to be in the business when I was a young man because I 
wanted to be a star.  Now that I understand the industry, that music 
was always paid for.
	The threat to us now is that it could go out on the airways en 
masse.  If we had pennies on the dollar as we have always had, it 
would be the greatest thing.  This is what all songwriters have said.  
It would be the greatest thing in the world because then we would 
be able to reach some Third World countries.  We would be able to 
reach countries that necessarily we were not able to reach before.  
However, it is such in the psyche of the young generation to be 
able to download for free.  It took us years to get Napster to pay.
	And every day, it is going on right now.  It is going on.  I am 
losing money as we are sitting here because somewhere, somebody 
is loving something that I did, hearing it, downloading it on a 
device, and I receive no compensation.
	MR. SHIMKUS.  Okay.  I don't want to cut you off but I want to 
make sure we got a chance.  Ms. Ziegler.
	MS. ZIEGLER.  We want Mr. Harris to be paid, and we do pay.  
We pay two times with Sirius satellite radio.  We pay performance 
royalties that were negotiated and millions of dollars for all of our 
transmissions.  In addition, we pay with respect to the S50 Audio 
Home Recording Act royalty.  That goes directly to artists as well 
as to songwriters.  In fact--
	MR. SHIMKUS.  Mr. Harris, how do you see that money?
	MS. ZIEGLER.  We haven't gone through the year yet so it is 
working its way through the copyright.
	MR. SHIMKUS.  Okay, so he hasn't received any money yet, the 
device portion.
	MR. HARRIS.  I was given some numbers today just for me to 
look at and they got $150 million for baseball, $50 million for 
Oprah, $600 million for Howard Stern, $3 billion for technology.  
These were just numbers that I had, but am I correct, Mr. Bainwol, 
in that ours is somewhere around $2 million?
	MR. BAINWOL.  On the audio side, that is about right.
	MR. HARRIS.  Yes.
	MR. SHIMKUS.  And we don't want to beat up on Ms. Ziegler 
because you are here and you are making a good faith effort to 
work on this.  Other folks aren't here.
	MS. ZIEGLER.  Just to be clear.  Performance royalties are in the 
millions.  It is a part of a confidential deal, an arm's length 
transaction 5 years ago with the label, so that is not a $2 million 
deal.  The Audio Home Recording Act fees, frankly, the S50 just 
came out and that is just entering the market and those fees are just 
beginning to be paid.  But we do pay.  We pay twice.  In addition 
to that, obviously we did sit down and then do a deal with the 
recording industry.
	MR. SHIMKUS.  Mr. Bainwol, and then I will--
	MR. BAINWOL.  You have an anomaly in law.  We get paid for 
distributions on phones like the one that went off, on iPods and on 
subscription.  We don't get paid for the distribution.  We get paid 
for the performance, for the broadcast.  We don't get paid for 
distribution when it comes to satellite.  S50 has negotiated a 
private deal, but as a matter of policy, there is a competitive 
breakdown in the legal structure here, and what radio is doing is 
exploiting the loophole in the law and that is what needs to be 
fixed.
	MR. SHIMKUS.  That is why you guys need to fix it because if 
you ask us to, it is going to be a disaster.
	MR. BAINWOL.  But we can't get them to the table to get to yes.  
That is the challenge.
	MR. SHIMKUS.  I yield back.
	MR. UPTON.  Mr. Gordon.
	MR. GORDON.  Thank you, Mr. Chairman.  Earlier, Mr. 
Gonzalez mentioned that it took 25 years to find a consensus and a 
compromise for the Wright amendment.  What he didn't mention 
is it was phased in during over an additional 9 years.  So Mr. 
Harris, despite his pleas, probably can survive that but the next 
generation of writers can't.  And when the music stops that is the 
foundation of the entire industry and the whole ball of wax 
collapses, and that is why I think we really have to keep that in 
mind.
	Following up on this most recent sort of trial log, I guess, that 
was going on, Mr. Bainwol, what is different about the satellite 
services, new devices, and consumers taping off the radio as they 
have done in the past and why is it different than say a TiVo 
device?
	MR. BAINWOL.  What they used to do in terms of manual 
recording we are fine with and moving that into the digital age is 
fine.  It is different than TiVo.  We are fine with TiVo time 
shifting.  What we are not fine with is this aggregation of a 
program.  When you take out individual songs on an automatic 
basis, without ever listening to the radio you have fundamentally 
transformed what radio is.  That is not old-fashioned recording off 
the record.  That is replicating either the iTunes experience or the 
subscription model and just avoiding payment to the creator.
	MR. GORDON.  And do you believe that the Audio Home 
Recording Act of 1992 was intended for digital audio tape players 
only?
	MR. BAINWOL.  It was certainly not intended to cover what we 
are seeing today.  1992 was before the iBiquity of the Internet, it 
was before broadband surge.  Napster had never been conceived.  
Peer to Peer was a notion that meant something entirely different.  
Satellite radio was nowhere near rollout, if it had been conceived.  
It was a totally different world.
	You can have lawyers debate whether or not the AHRA covers 
it, and one lawyer will say yes, another lawyer will say no because 
we don't think you threaded the needle just right.  But as a matter 
of just basic common sense, as a matter of policy, should you be 
able to get away with this modest fee to allow you to replicate an 
iTunes model and a subscription model that is the foundation for 
reinvestment and creativity, the answer is obviously no.
	MR. GORDON.  Anyone want to have a comment to that?
	MS. ZIEGLER.  I have a few comments.  As to the Audio Home 
Recording Act, yes, you can debate it both ways but I think that 
there were many statements made at the time it was entered into.  
First of all, it was a private negotiation that was then brought to 
Congress.  It was a deal that was cut.  The recording industry was 
at the table, quotes at the time it is a generic solution that applies 
across the board to all forms of digital audio recording technology.  
In fact, what has happened is we have finally exploited that.  A 
technology company has come up and exploited a particular 
legislative framework, and we get to market and suddenly we hear, 
oh, that wasn't enough money.  That is not enough money.  That is 
not the right framework.  We need something new.  It is in fact the 
framework that is there today and it is the framework that we relied 
upon and we do pay under it.
	The other thing that I would just like to discuss for a moment is 
what we do in fact--
	MR. GORDON.  Keep it back to this subject.  Okay.  Mr. 
Bainwol, would you want to have any rebuttal to that?
	MR. BAINWOL.  Yeah, just a simple point.  If you get 1,000 
songs, 5,000 songs--1,000 songs, let us say, you put 1,000 songs 
on radio, you have not paid a dime for the distribution for the right 
for ownership.  You do it from iTunes.  You do.  There is a basic 
question of equity here and no amount of fancy kind of legal 
footwork gets you through that fundamental point of equity.  We 
have got to deal with the reality here that you got a wave of new 
devices coming that we are perfectly happy to license, but we are 
not happy to have our shirt taken off our back.
	Sirius went nuts when people were able to go and tape Howard 
Stern, so you could access Howard Stern without being a Sirius 
subscriber.  That is how we feel.  It is the same thing.  We are 
having our content taken from us without there being a 
compensation for it.  That is absurd.  And legal niceties, legal 
loopholes are interesting legal arguments, but they miss the 
fundamental point of equity here.  Creators are being victimized 
here, and we need to deal with it.
	MR. GORDON.  I yield back the balance of my time.
	MR. UPTON.  Mr. Ferguson.
	MR. FERGUSON.  Thanks, Mr. Chairman.  Mr. Levin, welcome 
back.
	MR. LEVIN.  Thank you.
	MR. FERGUSON.  I wasn't here when you were here, but you 
obviously have a lot of fans up here so welcome back.
	MR. LEVIN.  I hope I can keep them.
	MR. FERGUSON.  My bill, the Audio Broadcast Flag Licensing 
Act, requires that the implementation of a broadcast flag, not 
encryption at the source, would be privately done through licensing 
agreements.  It cannot make obsolete legacy devices or slow down 
the roll out of HD radio.  In addition, we have taken great pains to 
make sure that fair use is protected.  These elements seem to 
comport with the requirements that you lay out in your testimony.  
Why do you still oppose my bill?
	MR. LEVIN.  Well, I think that there are a number of things in 
your bill that obviously will stimulate discussion in a positive, 
constructive way.
	MR. FERGUSON.  They seem to have.
	MR. LEVIN.  Yes.  There are a few things though that we are 
concerned about.  Some of the terms are undefined.  You give the 
FCC authority to implement rules, technology prescriptions 
without really setting out the parameters of what consumers and 
broadcasters should be entitled to do.  You talk about the fair use, 
laying out the fair use principles that mandate that they must be 
complied with, but it is very unclear what they are right now.
	So I think my main position is that it is simply premature.  We 
are waiting on a court case, the XM court case, to determine what 
the court believes fair use principles ought to be in this context.  
And I think, you know, I did want to just mention that Mr. 
Bainwol's point about the last prong of the fair use requirements 
that are in law that the content owners be considered in the 
equation is extremely important but that just reinforces how 
difficult the debate is.
	If it was all one-sided, it would be easy.  When we bring in 
both sides that is when it gets harder so to legislate that would be a 
very difficult thing.
	MR. FERGUSON.  And you have talked about how we need 
more time, the private sector should handle this.
	MR. LEVIN.  Right.
	MR. FERGUSON.  It seems that the negotiations didn't really get 
started from what it sounds like.  It didn't really get started until 
there was a threat of legislation.  iBiquity, my understanding is that 
iBiquity itself which holds the patent on this technology to begin 
with, they have asserted all along that they need legislation or 
regulation requiring them to include content protection so it just 
seems to me this might be exactly how these negotiations can 
move forward.  Mr. Bainwol, you said before, when were the 
negotiations first begun?
	MR. BAINWOL.  The actual face to face contact didn't begin 
until March of this year, but it took us 40 months to get there.
	MR. FERGUSON.  You said '03, did you say '03?
	MR. BAINWOL.  We started certainly since I began in '03 and 
then effort began at that point and it was fruitless.
	MR. FERGUSON.  Mr. Boucher and others have said we've got 
to let the marketplace or we've got to let these negotiations 
happen.  Delay helps your side, Mr. Levin, it advantages your side 
and disadvantages the other side.
	MR. LEVIN.  I am not sure I would agree with that.
	MR. FERGUSON.  Talking about bringing new people to the 
negotiating table, all that is real nice, but the fact remains that 
today there are devices on the market that allow the abuses that we 
are all talking about that we think are a bad thing.
	MR. LEVIN.  Well, Mr. Ferguson, I do want to make the point 
that there are no HD radio devices today that can record a single 
song.  The HD radios that are being sold at Radio Shack and 
Tweeter and that are in the production pipeline do not record, and 
they don't go further to permit people to search for particular songs 
or do all the things that Mr. Bainwol is concerned about.  So I 
don't really think there is a problem today with free radio. 
	MR. FERGUSON.  I am very short on time.  Do you want to 
comment on that?
	MR. BAINWOL.  I am just curious whether Andy would be 
willing to commit to a date certain for closure on this--
	MR. FERGUSON.  Mr. Levin, how long do you need?
	MR. LEVIN.  It would be nice to be able to predict how long we 
need to do it.  One of the problems is that we--
	MR. FERGUSON.  I am willing to give you more time.  Do you 
need a year?
	MR. LEVIN.  I can't say precisely how long, but I do know that 
there are all the affected parties at the table.  We can't agree to put 
mandates on device manufacturers without them sitting at the 
table.  I mean it is just not--
	MR. FERGUSON.  What if they won't come to the table?  We are 
hearing that they won't even come to the table.  I think it is a lame 
argument to say we really need to negotiate this out.  We really just 
need everybody at the table, and as soon as everybody is at the 
table we can figure this out.  If some people are not going to come 
to the table, that doesn't cut it to me.
	MR. LEVIN.  Well, I think the recording industry would prefer 
that the consumer electronics manufacturers--
	MR. FERGUSON.  Chairman Barton wanted me to ask you if we 
schedule a markup on my bill next week will everybody be at the 
table tomorrow?
	MR. LEVIN.  I would hope so.
	MR. UPTON.  I am in Michigan, I just want you to know.  Are 
you coming to Michigan?
	MR. LEVIN.  Mr. Ferguson, we have asked for CEA to be 
represented at the table ever since day one--
	MR. FERGUSON.  My time is up, Mr. Levin.  I suspect that until 
we start marking up this legislation or have some other direction as 
Senator Inouye has kind of directed this, that frankly it is to your 
advantage to not talk.  It is to your advantage to delay.  It is to your 
advantage to say, yeah, we should really figure this out and we are 
going to do it in due time.  But until there is a threat of you being 
forced to do it, my guess is, and this is just a hunch, is not going to 
happen.
	MR. LEVIN.  Well, I would like the opportunity to talk to you 
more about it because--
	MR. FERGUSON.  I would be delighted to.
	MR. LEVIN.  --I disagree with that.
	MR. FERGUSON.  It sounds like you want to talk a lot but it 
sounds like we don't want to solve the problem.
	MR. LEVIN.  We do.  We are content owners ourselves.  It is 
our interest to have content protection.
	MR. FERGUSON.  I am all for talking but I am also for action, 
and it seems like the action isn't going to happen.
	MR. LEVIN.  Well, if Mr. Bainwol's laundry list wasn't this big, 
we might get something done.
	MR. BAINWOL.  Our laundry list is not that big.  I mean the 
default position right now is for artists and creators to be 
disadvantaged and that is not fair, and it is the default position that 
we have no market leverage.  We need to force action.  It isn't that 
complicated.  iBiquity has said to us this is simple.  Just give us an 
instruction to do it.  So we made it sound like it is building a ship 
to go to the moon, but it is not.  All you have to decide is what 
those user rules are going to be and then the implementation of it is 
very simple.  And we are not that far apart on usage rules, and I am 
happy for Gary to be involved in that discussion.  He had to be 
involved, but we need to know that Gary and CEA will say to the 
question will you support getting to yes, will you deal with the 
cherry picking problem.  Broadcasters have said yes.  The satellite 
folks, it is not clear.  And I haven't heard anything near that from 
CEA.
	MR. FERGUSON.  Mr. Chairman, my time is up.  I think this is a 
very constructive conversation going on.  I thank you and I thank 
Chairman Barton.
	MR. UPTON.  I am just glad Mr. Shapiro came early to the 
hearing so that he will be prepared to answer that question when 
his time comes up shortly.  Mr. Inslee.
	MR. INSLEE.  Thank you.  A small technical question.  Mr. 
Levin, you said there is nothing in the market that can record these 
songs.  Mr. Bainwol made reference to the mother ship.  Are you 
guys talking about the same thing?
	MR. LEVIN.  No.  I think he is talking about XM satellite radio.
	MR. BAINWOL.  Yeah, that is correct.  You have the satellite 
devices in the market.  Sirius has a device which has been licensed.  
XM has a device which has not been licensed.  They refer to that 
as the mother ship.  It is not a pod, it is the mother ship.  The HD 
rollout is behind that.  They are comparable issues.  It is radio 
morphing into a distribution service to compete with iTunes and 
compete with Rhapsody.  It is part of this competition.
	MR. INSLEE.  So, Mr. Bainwol, in regard to that let us assume a 
consumer gets the mother ship, would want to use it as a 
replacement iPod essentially is what you are talking about and how 
they use that infinite number of replays for personal use.  What is 
your position on compensation in that situation?
	MR. BAINWOL.  What you call personal use here is replicating 
purchases.  When you can automatically cherry pick--this is not a 
manual record.  This is taking a block of programming, scrolling, 
not live, scrolling through the meta data and saying I want this 
Toby Keith, I want this Travis Tritt, and that is going to get Mr. 
Harris, I want this 50 Cent and I want this whatever.  That is 
replicating a sale that is draining our one window of revenue and it 
is a challenge for us.
	MR. INSLEE.  Any other comments?
	MR. LEVIN.  That can be done today.  That can be done today 
by recording off the radio.  That can be done today by buying a CD 
in a record store and making a copy of that and copying that onto 
your iPod.  You can develop a library of music on your iPod 
through other means.  And it appears that they don't want to be 
able to--
	MR. BAINWOL.  So let us just let it get worse.  Let us go ahead 
and--
	MR. LEVIN.  Well, but you don't have any copy protection in 
the audio CDs that you sell.  You know that this is a tough nut to 
crack because we saw with the Sony experience that as soon as 
they started to put copy protections in the Sony audio CDs there 
was a huge consumer backlash and they backed up.  But there is 
nothing to stop record labels from protecting their own content 
and, instead, we feel that they are trying to shift the burden to us 
along with the expense, and in effect dampen the appetite for 
consumers for our products.
	MR. BAINWOL.  So the consumer is left with a choice.  I want 
to get these ten songs.  Do I go to iTunes and make a purchase or 
do I go to the mother ship and just simply tag them, keep them, and 
not pay a dime to the creator.  A rational consumer will do exactly 
that, but it is certainly not fair.
	MR. INSLEE.  Yes.
	MR. HARRIS.  If I may, they really have referred to this.  I 
didn't realize it wasn't licensed yet, but if this is the mother ship if 
you would, please, when it comes time to look at this bill, just 
imagine the songwriter as the wind beneath the wings because that 
is basically what this is.  We will lose tremendously if some kind 
of agreement, and we are all for it as creators because, frankly, we 
would like to get on with the business of creating for the future, 
and this could be to our advantage too.  But we do need a license 
that will guarantee us that when this is downloaded on satellite we 
have the equivalent of a sale.
	MR. INSLEE.  Did you write Wind Beneath My Wings, Mr. 
Harris?
	MR. HARRIS.  No, sir.  I have two good friends that wrote that 
song and I have told them never to do that without me again.
	MR. INSLEE.  I think the rule is if they are your friends it is not 
a copyright violation so we will let that one go.
	MR. HARRIS.  It is not in this context.
	MR. INSLEE.  Let me ask generally to each of you to describe 
philosophical, however you want to describe this, who should have 
the economic burden of protecting intellectual property here 
between the three points of the stool.  How should that be looked 
at?  Should we look at ease, should we look at it as fairness so that 
everybody has got the same share?  Give me your best arguments 
that somebody else should do it, I guess is what I am asking.
	MR. BAINWOL.  Do you want to start?
	MS. ZIEGLER.  I think that it is a shared burden but certainly we 
as content distributors take very seriously protection of the content 
that we put out over our broadcast as well as what is into our 
product.  Our content is all encrypted at the source.  It is decrypted 
when it comes into the receiver.  So we take that very seriously and 
we don't believe that we have any significant issues with respect to 
piracy with our content.
	MR. HARRIS.  I am going to respectfully bow out on that and 
just say that we trust that something can be done for this and that 
the songwriter would appreciate it very much.
	MR. LEVIN.  I think it is--I agree with Ms. Ziegler that it is a 
shared burden.  The radio industry has content that it produces that 
is proprietary, and we also have an interest in protecting that.  But 
at the same time, Congress and the courts have for decades and 
decades and decades recognized the rights of consumers to record 
free over the air broadcasts, and so we want to make sure that we 
do nothing to tramp on those rights.
	MR. BAINWOL.  We think it is a shared burden, but we think 
that Mr. Ferguson's bill hits the nail just perfectly.  What it does is 
it says release these devices, don't impede rollout, go ahead and let 
consumers do what they do in a customary way in terms of home 
recording.  Just don't put the burden on the creator to allow this 
automatic cherry picking until there is a deal.
	MR. INSLEE.  Thank you.
	MR. UPTON.  Mrs. Cubin.
	MRS. CUBIN.  Thank you, Mr. Chairman.  I think I have kind of 
made up my mind as to which way it ought to go as far as whether 
or not the artist should be compensated in this situation more than 
they are, but when Andy was talking and you were talking, Mr. 
Bainwol, Andy said you have a laundry list about this long and you 
said you didn't.  So besides the issue of the payment, what are the 
other items that are on your laundry list?
	MR. BAINWOL.  It isn't even really the payment.  The question 
that I think Andy was referring to is the question of what are the 
usage rules.  And that is something I think our folks have met on a 
number of times and my sense of those discussions is that they are 
very productive and these usage rules are very close, that we do 
need to bring in CEA and others, but I think the usage piece of this 
is not that complicated.  I think it is a false premise to suggest that 
this is just an enormous challenge.  It isn't.  You agree on what 
they ought to be and the fundamental point is don't allow 
automatic cherry picking which is something that the broadcasters 
have already said I think is a foundation of the argument, and then 
you implement it with play.
	MR. LEVIN.  I think the conversations have also been very 
productive, and while we agree in concept to the notion of no 
cherry picking there are nuances to that that still need to be worked 
out.  I think that the recording industry's view at this point is fairly 
broad with regard to what that means and it would in effect turn 
back the clock on what is already lawfully used by consumers.  So 
to the extent we were to agree to all of the recording industry's 
demands, the consumer is the one that gets left out in the cold.
	So I think that we really need to take a hard look at just what 
consumers are entitled to and what their expectations are before we 
agree on usage rules that get memorialized in any kind of statute or 
regulation.
	MRS. CUBIN.  Well, it is certainly those users that elect me to 
my seat but I don't think that their expectations are that hard-
working people shouldn't be paid for what they do.  And it just 
seems--
	MR. LEVIN.  Absolutely.  I am sorry.  I didn't mean to interrupt 
you.  But we are talking about things like making a recording off 
the radio and being able to retransmit that recording through a 
home network and be interoperable with stereo equipment, existing 
home audio equipment that is in the house.
	MRS. CUBIN.  But that isn't what is costing the artists the 
money.
	MR. BAINWOL.  And those are issues we can solve.
	MRS. CUBIN.  Pardon me?
	MR. BAINWOL.  Those are issues we can solve.  That is not the 
problem.  And the Ferguson bill says this, that the implementation 
shall not be consistent with customer use of broadcast content by 
consumers, period.
	MR. LEVIN.  But that is customary as of the date it is written.
	MR. BAINWOL.  But what we are trying to do is preserve 
customary practice.  This isn't about winding back the clock.  This 
is about devastating the property right of the creator.
	MR. LEVIN.  But it is also about making sure the consumers can 
take advantage of the new capabilities and technology that comes 
down the road.
	MR. BAINWOL.  But if technology in effect--
	MRS. CUBIN.  Well, my time is just--
	MR. BAINWOL.  I am sorry.
	MRS. CUBIN.  Well, we are just going in a circle.  And so I 
think that if it comes to this committee, this committee, I think that 
they will probably take some kind of action and it is kind of the 
motto of Congress, if it is worth doing, it is worth over-doing, so 
that is not good.  So I hope that it can be worked out, but if it can't 
be, I think, we are ready to get to work and fix it.  So I thank you, 
Mr. Chairman.
	MR. UPTON.  Mr. Engel.
	MR. ENGEL.  Thank you, Mr. Chairman.  I have been listening 
to the back and forth, and this has been very helpful to me because 
rarely do we have hearings where you actually have the back and 
forth, people answering other people, and it really presents both 
side of the issue, and, frankly, both sides make good points.  I 
mean for me, and I think for all of us really, it is the issue of 
fairness because we want people to be compensated.  We don't 
want them to feel they are having this stolen from them.
	On the other hand, we want to do what is best for the consumer 
as well, and so I think it is kind of a delicate balance.  Mr. Levin, 
let me ask you, first of all, how does it feel to be on that side of the 
table?
	MR. LEVIN.  It was a lot comfortable up there, more 
comfortable.
	MR. ENGEL.  I testified at another committee about 2 weeks 
ago, and I didn't realize how daunting it was to face all of us.  I 
want to ask you how long did it take for consensus of the video 
industry to develop before a workable video flag standard was set, 
how many years was that?
	MR. LEVIN.  About six.
	MR. ENGEL.  About six.  To develop an audio flag, do you 
think it will take 6 years?
	MR. LEVIN.  No, I don't.  I don't think that the issues are as 
complicated as they were, and I think that based on the work of the 
video flag, if we narrow down the issues to be akin to what was 
addressed in the video flag rules, I think we could do it tomorrow.  
The video flag, don't forget that is just about indiscriminate 
redistribution over the Internet, that is what the film industry was 
concerned about, broadcasters, all the content owners at the time.  
Now it seems that the concerns have expanded beyond that.
	If we were back on that, we would say as broadcasters 
absolutely, we will put a flag in and we will protect indiscriminate 
redistribution tomorrow.  It is agreeing on all these other usage 
rules.  
	MR. ENGEL.  So you have been saying that we need more time 
to work this out, and the other side has been saying, yeah, but you 
can't work it out forever because you keep talking and talking.  
What do you think is a reasonable goal?  What are we talking 
about here in terms of working on it, another year, another 6 
months, another 2 years?  What do you think is a reasonable or 
would be a reasonable time?
	MR. LEVIN.  I would say that we have got two groups. We have 
got the Audio Flag Task Force that looks at the policy, what the 
policies are to be, and then we have another group, the Technical 
Implementation Working Group, that looks at whether or not it is 
technologically feasible to do what the policy agreements have 
been.  I think if we get the right folks on both of those task forces 
that we should be able to do it in 6 to 12 months.  We should be 
able to have some kind of an agreement nailed down.  I am hopeful 
that it could be sooner than that but I hate to be late.
	MR. ENGEL.  So in your view Congress shouldn't rush into 
anything because you think that in a reasonable amount of time--
	MR. LEVIN.  Well, that is right.  And there is another thing, Mr. 
Engel, we don't know how the marketplace is going to react to HD 
radio.  We don't believe that recording off the radio or certainly 
what the recording industry is calling downloads is the killer 
application in HD radio.  That is not why we are developing it.  We 
think the killer application of HD radio is the improved quality and 
the improved programming that we are going to be doing.  You 
have to remember radio is different.  It is not a pristine copy or 
recording that is made of a CD or a download from Sirius or 
iTunes or anyone else.  You know, you still have the DJ banter.  
You still have the looping over of one song into another.  You have 
a lot of things that are endemic just to the radio industry.  That is 
the kind of entertainment promotion that we do on radio.  So I 
don't think that it is going to displace sales, but we don't know yet, 
and I think that is really the key.
	MR. ENGEL.  Mr. Bainwol, you seem to be jumping out of your 
skin.
	MR. BAINWOL.  Yeah, I am, through my suit.  If it is not the 
killer ap, then why not go with the Ferguson bill which gives us 
plenty of time to work out this aggregation place, this so-called 
non-killer ap.  Why is it so vital that they have to have that for the 
rollout?
	MR. LEVIN.  Well, for one thing what you all want to do is to--
really you say you are not against the TiVo-like device but in 
actuality it does become a prohibition on a TiVo-like device 
because it is not just about prohibiting--it is not just allowing time 
shifting.  What it would do when you say disaggregating with 
TiVo you are effectually disaggregating.
	MR. BAINWOL.  You are not watching the monologue when 
you tape Leno.
	MR. LEVIN.  You are not watching the monologue.  You are 
specifying which programs you want to watch, and those are the 
ones that come up on your TiVo.  And, frankly, history has shown 
that when people can do that it hasn't displaced sales, it has 
increased sales.  You go into any video store or Best Buy and all 
you see are lines.  They can't keep enough Family Guy on the shelf 
or Simpsons or other serial programs that are on television.  These 
sales have skyrocketed despite TiVo.
	MR. ENGEL.  Mr. Bainwol, let me ask you.  Isn't a lot of this 
compensation too?   The Audio Home Recording Act, that would 
not be at the jurisdiction of this committee from what I understand.  
Isn't a lot of things you are talking about a need to from your point 
of view renegotiate fees under that Act?  Would that not be better 
than you to do it in legislation here?
	MR. BAINWOL.  Some of our satellite friends said this is about 
leverage in the discussion about the performance rate, and that is a 
totally separate question and that is a flawed diversionary 
argument.  This is simply about our one window, our primary 
window, of deriving the revenue which would reinvest new 
creativity which is sales.  The XM device slogan, it is the mother 
ship, it is not a pod.  What that means is you get content for free.  
They are giving away our stuff in order to make their service more 
viable.  And I understand why, but it is not fair.
	MR. ENGEL.  But is it not true, and I would just like to give Ms. 
Ziegler a chance to respond to that, but is it not true if I purchase 
Sirius and I record stuff on the S50 and then I cancel, I lose that 
stuff, don't I?
	MS. ZIEGLER.  Currently, no, only because we couldn't 
technically implement it.  It is true, all the XM devices and any 
future device, it should be tied to the subscription, you are correct.  
I would like to make that distinction.  Mr. Bainwol talks about it as 
a download, it is the same thing.  We are much more.  We are 
recording of a transmission that comes from radio.  When you get 
a download, what you want, when you want it.  It is available to 
you.  When you record off the radio it is whatever the DJs happen 
to play, whatever you are there to listen to.  The quality is just 
simply not the same.
	There is DJ talk over their segways.  There are things in there.  
It is a much, much lower rate.  But most fundamentally what you 
are talking about, you can only listen to it on one device.  If you 
owned a download you could listen to it on your computer, you 
could burn it on to CD, you could listen to it on another device.  
The ownership right is very, very limited.  It is just the ability to 
listen to it on one particular device, and as you are saying it is tied 
to the subscription.  So to talk about it as a complete replacement 
for a download those are two different experiences, two different 
products.
	MR. UPTON.  The gentleman's time has expired.  Mr. Bass.
	MR. BASS.  Thank you, Mr. Chairman.  I just have one 
question.  I have been following this discussion, and as others have 
said I think this is very informative.  Can somebody clarify for the 
record the difference if there is a work out on the video flag but not 
the audio.  If the video flag is okay, what is wrong with the audio 
flag as well, and why is it different?
	MR. LEVIN.  The video flag, and it is a great question, the video 
flag prohibits indiscriminate redistribution over the Internet.  That 
was what all the content owners were very concerned about several 
years ago and that is the extent to which the video flag regulates 
the content, the distribution.  The audio flag, depending on what 
proposals you look at, could very likely affect how the content is 
distributed within the home, what people can do with it, whether 
they can take it from their home to the car to the beach to the gym.  
There are an awful lot of open-ended questions with regard to 
these proposals that were not a part of the flag.
	MR. BASS.  Ms. Ziegler makes a point that on the what are 
being called the S50 the content is lost when you stop subscribing.  
Is the same true of the iPod?
	MR. BAINWOL.  In the case of the iPod you don't have to 
subscribe.  You are actually moving--it is total ownership.  There 
is a continuum here.  In the old days, you had a radio which you 
listened to and you had ownership where you bought either an 
album or a cassette or--
	MR. BASS.  Mr. Bainwol, are you willing to concede that the 
quality or the ownership of the material in the S50 is not as good or 
not the same as the iPod?
	MR. BAINWOL.  There are two different issues.  There is 
ownership and quality.  The quality relative to the iPod for most 
applications is virtually indistinguishable.
	MR. BASS.  The voice-over question is when it is vastly 
overblown?
	MR. BAINWOL.  This is nitch channeling where it is 
commercial free.  I listen to XM all the time and you get lots of 
pristine quality.  It is not a problem.  The ownership question I 
think is a more complicated one.  There was a continuum of 
ownership in the radio.  Now you have all these different elements 
along the continuum including subscription and this is--
	MR. BASS.  When that subscription expires there is nothing 
whereas on iPod when there is no subscription essentially, if the 
iPod breaks you still have the music on your main storage in your 
computer.  Now you can't use the iPod--is there a difference in 
quality of ownership between--
	MR. BAINWOL.  There is a difference in control, correct.  We 
would say that in terms of the user, while they have the 
subscription, it is very much like the iPod, but in terms of enduring 
it is closer to the subscription model.  It is like Rhapsody.  It is like 
a tethered download that when your subscription expires you have 
lost.  We are not suggesting that this has to be a one for one like an 
iPod.  We are suggesting that you are deriving some control and 
there should be an additional--
	MR. BASS.  So there should be some compensation.  It doesn't 
necessarily have to be equivalent.  Fair enough.  I will yield back, 
Mr. Chairman.
	MR. FERGUSON.  [Presiding]  I think Mrs. Blackburn is next.
	MRS. BLACKBURN.  I was trying to be certain that Ms. Bono 
was not overlooked.  She and I kind of like this issue a little bit.  
We kind of like this legislation so I wanted to be sure that all of 
you heard from both of us on this.  Mr. Harris, I want to say a 
special welcome to you.  I am sorry that I was not here at the 
beginning--
	MR. HARRIS.  Thank you.
	MRS. BLACKBURN.  --of the hearing, but we appreciate your 
being here.  And I understand what while I have run to the MPAA 
meeting on behalf of some of my constituents that we had a 
discussion of what you are paid when you have a paid for 
performance and comparing that with a download.
	MR. HARRIS.  Congresswoman, basically under the present 
format if something can't be worked out I basically will not be 
compensated at all, which would if you compared it to mechanical 
royalties as I have received for quite a few years now and 
performance royalties, those mechanical royalties are basically 
gone.  They are history.  And in my case, this varies from writer to 
writer, but in my case my mechanicals, which are sales, and my 
performances are approximately equal, I found this out, in sales.  
So I would be losing at least half of my income.
	MRS. BLACKBURN.  At least half.  Well, you know, Ms. Ziegler 
said in her testimony that she didn't consider the current situation 
to be a serious threat so you would disagree with that comment, I 
guess?
	MR. HARRIS.  It is very hard for me to understand how people 
cannot see that as many years as we have been through this in 
other forms that this is a continuum but now it is threatening the 
livelihoods of not only the songwriters, but at one point I had my 
own publishing company in the late '90s and I had secretaries, I 
had people that pitched songs, I had people working in the tape 
room making copies so those people could go out and pitch the 
songs.  All these people had to be paid.  There are so many--over 
half of those--
	MRS. BLACKBURN.  To a songwriter or a publisher it is a 
serious threat.
	MR. HARRIS.  It is a serious, serious threat.  These are things 
that are around the songwriter now who independently employ 
somebody because things have gotten tighter and tighter and 
tighter.
	MRS. BLACKBURN.  Okay.  Mr. Levin, I think I want to come to 
you.  I found your choice of words, you made a reference to 
protecting content and paying for performance, paying those 
royalties as a content protection scheme.  I found that an 
interesting choice of words.  You know, I think that the 
Constitution is a pretty good protection scheme if that is going to 
be your choice of words for being certain that our creative 
community in this country are fairly compensated for the works 
that they do create.
	So I think that they deserve to have that compensation.  I have 
got another question for you.  You know, is Clear Channel or the 
NAB working with the device manufacturers to look at the next 
generation devices that are going to operate similarly to the XM 
and Sirius device, and how do you plan to address the download 
licensing issue for that next generation of devices?
	MR. LEVIN.  I talked to our chief engineer yesterday and asked 
that very question, and the answer was that there are no discussions 
right now on the next generation devices.  Right now all of the 
impetus and all the energy is being put into getting first generation 
devices produced.  It is a market-driven phenomenon unlike the 
DTV transition.  Consumers don't have to adopt digital radio, and 
so we are in a very precarious position in trying to persuade 
consumer electronics manufacturers to produce the devices, trying 
to persuade retailers to sell them, and trying to persuade auto 
makers to stick them in the cars.
	It is really a Catch 22 because you need to have consumers out 
there who will demand them in order for all of those different 
constituencies to agree to produce them.  Much different than DTV 
where everybody needs to buy a digital television set or a DTV 
converter box or they won't get television.  Totally different.  This 
is completely market driven.
	MRS. BLACKBURN.  Well, my time is up.  I have some other 
questions.  I think we could keep you here asking questions all day 
long but thank you for your interest in the issue.
	MR. FERGUSON.  Ms. Bono, do you have a unanimous consent 
request?
	MS. BONO.  Thank you, Mr. Chairman.  Just a UC that I might 
be allowed to ask a question since I am not a member of the 
subcommittee.
	MR. FERGUSON.  Without objection.  Hush, Shimkus.
	MS. BONO.  Boy, he is crotchety today.  Thank you, Mr. 
Chairman, and Mr. Shimkus for allowing me to ask a question.  
And I am going to jump ahead, I guess, before Greg if that is all 
right.  Thank you. Again, being so close to last so many great 
questions have been answered and there have been moments I 
think between Mr. Levin and Bainwol, you two look like you are 
negotiating a prenuptial agreement.  It is postnuptial and you are 
beginning to say--one of you said we need this, and the other one 
argued you don't need it, but if you don't need it as Mr. Bainwol 
said then why not go ahead and do it.
	And I think the question that was just asked, Mr. Levin also 
said no discussions on next generation devices.  Then why not do it 
anyway?  You know, last night I saw a commercial for I think it 
was a Nissan Quest, and I talked about this in the last hearing we 
had, this Quest, and again it might be another minivan, whatever it 
was, it was showing you probably the plug in for the iPod, it was 
showing you probably the rear boom box speakers that now lower 
down out of the lift gate.  It not once talked about the engine that 
was beneath the hood, the tires that were on the vehicle, the brakes 
that were on the vehicle or the air bags.  But it really talked about 
iPods and boom boxes.
	So clearly there is a value on music in our society that goes 
well beyond this discussion today.  So when we talk about Mr. 
Levin said it is not a problem today, I am one of the first people 
who can criticize the music industry for failing to react to the 
Internet.  I have always said the Enter key is the artist's greatest 
tool whether it is your songwriter, performer, whoever it might be.  
And now we are simply saying we don't know what the future 
holds but we know that the songwriter deserves protection.  I think 
that is a laudable goal.
	MR. LEVIN.  I agree with you, Congresswoman Bono, and in 
fact we are involved in those discussions, and those discussions do 
extend to the capabilities of future devices even though we are not 
currently negotiating those kinds of specs with the device 
manufacturers.
	MS. BONO.  But, you know, years ago I sat with the Magineers 
from Disney and they talked about the future actually not even 
coming into place for the written word.  There is no question, we 
don't know where we are going to go, and for you to say currently 
we are not talking about this, that does not mean innovation nor 
high school--I mean college students are going to entirely break 
your system and start downloading your HD radio.  Even though 
you don't think it will happen, we don't know that it won't.  So I 
am just encouraged to hear my Chairman say let us mark it up.  I 
was very encouraged to hear him say that.
	I would like to go a little bit to a point that he made.  And again 
I will--and I know with Mrs. Blackburn, Mr. Ferguson, Mrs. 
Cubin, a number of us will encourage the Chairman to go ahead 
and move for a markup.  But I am curious, I would like to actually-
-Mr. Bainwol, he talked about something that is problematic for 
me too and that is including H.R. 1201 in that because I still--we 
have come a long way and the Chairman believes now that we are 
at this perfect point, with DRM, the iPod, that is fair use.  How 
many devices can you marry now your iPod to--how many--one 
computer can support how many iPods, six, five?
	MR. BAINWOL.  With Apple you have lots of flexibility both 
with the number of downloads you make of a single song and the 
number of applications that you use it for.
	MS. BONO.  But again the H.R. 1201 to me, the basis of it is so 
we can make it legal to circumvent encryption technologies that 
are the very thing that we are touting today as being so good, so 
why would we want to marry H.R. 1201 into the broadcast flag?
	MR. BAINWOL.  I think Mr. Barton, Chairman Barton, was 
referring to a desire to make sure that there can be backup copies, 
and the music community is long past the point where we have 
made that available.  The challenge we spoke about at some point 
before in terms of copy protection was about copy protection.  It 
was about allowing multiple copies.  We are fine with that.  If a 
consumer buys Stairway to Heaven and they want to play it in a 
cabin and play it in the car and play it at home, that is perfectly 
fine.
	And I think that is what Mr. Barton wants to see happen across 
the content community.  I don't know that he necessarily was 
making reference to the anti-circumvention piece of this.
	MS. BONO.  Thank you.  Mr. Harris, I just wanted to also let 
you know that Mrs. Blackburn and I hosted a town hall meeting in 
Nashville about 2 weeks ago during Fan Fare Music Fest.  We had 
a very constructive dialogue with a number of songwriters, and I 
just wanted to actually take this opportunity to point out what a 
champion Marsha Blackburn has been.  And as we were in 
Nashville, we had a songwriter talk about the INO, which we 
haven't talked about the INO devices much today as we should 
have.  But this songwriter was actually in tears when she said that 
her livelihood, that her mother--she saw this device, the 
advertisement for it and she told her mother, Mom, my future has 
just been written out, that I no longer have the opportunity to make 
a living to take care of my children.  So, Mr. Harris, if you want to 
make any last comments--oh, I have got 9 seconds.  It is all yours.
	MR. HARRIS.  I would only thank you for that story, that it is 
just one in literally thousands over the last little bit, and as I was 
saying to Congressman Blackburn, they come in all forms, 
songwriters and all of the support people that go along with the 
fact that these songwriters can no longer make the kind of living to 
even have publishing deals and publishers are cut way back, so all 
of this has transpired since about 1995.  That is when it really 
started to go down the hill.  We had been on a roll prior to that.
	But it is quite sad and what pains me when I was growing up, I 
listened to Cole Porter, I listened to the songs that Sammy Kahn 
wrote, and then of course Elvis came along and changed all of that 
for me, and moved on into a new genre.  But I am desperately 
afraid that the talented people that want to make music now if we 
don't do something now, if we don't do something at this point, we 
will be up here as we have for the last 20 years over and over and 
over and over with every new technology.
	MR. FERGUSON.  Mr. Walden is next.
	MR. HARRIS.  Thank you.
	MR. WALDEN.  Thank you, Mr. Chairman.  Mr. Levin, there 
was some discussion about I think the term was indiscriminate 
redistribution on the Internet that either you or Mr. Bainwol have 
opposition to some sort of flag to preclude that, is that accurate?
	MR. BAINWOL.  That is correct.  It is not sufficient but it is 
necessary.
	MR. WALDEN.  And obviously I think I am the only person 
here that is actually in the radio business so I always just claim that 
up front for 20 years.  And I thought back to something my father 
told me.  He started in radio in 1934.  When television came along 
everybody in radio said, well, that is the end of radio.  And there 
are those who say with satellite coming along it is the end of radio 
or it is the end of something else.  And I go back far enough to 
remember when we would track albums at night.  The recording 
industry wasn't exactly excited about that because you would have 
the whole album tracked at night.
	And that was something that was objected to.  I am just trying 
to figure out how we roll out a new technology here in HD radio 
that still allows for the artists and all to be compensated but also 
allows the consumer to take advantage of a new device.  I know I 
have an iPod.  I have one of those gadgets you plug in.  I shouldn't 
admit this but sometimes I am out of the range of the over the air 
broadcast and I refuse to sign up for satellite for different reasons.
	But none of those have done away--it seems like we have 
enhanced the marketplace and enhances to gather music.  Now I 
am trying to sort out here.  I know when I download or my son 
does onto the computer or iPod a song, that remains resident on my 
computer.  It can be put onto his iPod.  We can still use our 
computer and connect it into our home audio system, and you 
don't have any problem with those uses, correct?
	MR. BAINWOL.  Correct.  That is fine.
	MR. WALDEN.  So if I have it on my digital player device, you 
don't have a problem if I collected that song.
	MR. BAINWOL.  We want you to.  We simply want to license it.
	MR. WALDEN.  Okay.  But today I could collect that audio off 
of a broadcast over the air, correct, and put it on some device.  
Now the question is quality of that audio.
	MR. BAINWOL.  Correct.  Quality and ease.
	MR. WALDEN.  Well, now talking about ease.
	MR. BAINWOL.  What you can do in today's world and the 
analog world is press record button as you are listening to the radio 
so you are listening, you do have talk over issues, you do have 
timing issues.  It got to be part of it.  This is an entirely different 
animal.  This is scrolling through and saying by meta data I am 
going to keep this one, that one and that one.
	MR. WALDEN.  All right.  But, Mr. Levin, you are saying you 
don't have a problem with trying to restrict that, right?
	MR. LEVIN.  That is correct.  The devil obviously is in the 
details but, yeah, we don't want people to be able to go out and 
cherry pick.
	MR. WALDEN.  Without listening in order.
	MR. LEVIN.  Without listening to the radio at all.  Obviously, 
that would be worse for our business more than anything else.  But 
there are certain proposals that you have to record, you know, 
hours, a big block of time.
	MR. WALDEN.  Is that what you are saying, Mr. Bainwol, you 
got the big blocks?
	MR. BAINWOL.  We have already, I think, agreed on in terms of 
this piece that--am I allowed to say, where are we?
	MR. LEVIN.  Well, these are private discussions.
	MR. BAINWOL.  Put it this way.
	MR. WALDEN.  In the theoretical.  Do you have any problem 
with recording in blocks of time and then--okay, let me put it this--
I get Led Zeppelin and I have the whole CD, and there is one song 
I really like and I want to get rid of the rest.
	MR. LEVIN.  You can't do that under their proposal.
	MR. BAINWOL.  That is automatic cherry picking and that we 
have a problem with, but a block of programming, time shifting, 
not a problem.  Manual recording, not a problem.  Ability to scroll 
through data and say I am going to keep these top 20 hits instead of 
going to the store to buy them, that we have a problem with.
	MR. LEVIN.  So it is like recording three hours of prime time in 
the evening just to get one sitcom at 9:00, and you have to listen to 
it in order to get it.
	MR. WALDEN.  But, you know, Mr. Bainwol, you said you 
didn't have any problem with TiVo.
	MR. BAINWOL.  Correct.
	MR. WALDEN.  With TiVO I can, and I don't have that either, 
not that I am technologically challenged, I am actually a HAM 
radio operator, but in the broadcast industry the only way we get 
paid is through advertising.  So what you are saying is it is okay to 
have TiVo and zap the commercials and only run the programming 
that you want to see.  You don't have a problem with TiVo, you 
said.
	MR. BAINWOL.  We are trying to accommodate, and we don't 
have a problem with time shifting, but this is different than TiVo 
because what you are doing is you are taking the monologue from 
Carson or Leno's opening gamut.  When you TiVo something you 
are getting the whole block of the program.  A song is not a 
program.  The program is a block--
	MR. WALDEN.  That I can zap and get just what I want and then 
only save what I want, can't I?
	MR. LEVIN.  Yes.
	MR. WALDEN.  So I can archive only the parts I want, correct?
	MR. LEVIN.  Yes, but--
	MR. WALDEN.  So I end up at the same place that you are 
objecting to.
	MR. BAINWOL.  But there is a big difference, and that is they 
get paid when they broadcast over the air, we don't, and that is true 
over the air and it is not true on satellite.
	MR. WALDEN.  Well, they are not supposed to localize but 
anyway that is another subject for another day because they agreed 
never to do that.  But anyway, Mr. Levin, do you have any final 
comment?
	MR. LEVIN.  Well, Mr. Bainwol keeps bringing up the 
performance rights fee and the fact that radio doesn't pay for it and 
says that that is an issue that is completely separate and a red 
herring but keeps bringing it up, so I feel like I need to respond to 
it.  Historically, as you know, radio has been exempt from the 
performance rights fees--
	MR. WALDEN.  Although we pay ASCAP.
	MR. LEVIN.  We pay ASCAP.  We pay the publishers.  We pay 
all of that.  But we don't pay the recording industry for the 
performance right.  And the reason we don't do that is it is a very--
there are mutuality--
	MR. WALDEN.  It is a symbiotic relationship.
	MR. LEVIN.  It is a symbiotic relationship.  We provide a 
tremendous amount of promotion for those songs which later get 
sold and so when we talk about artists being compensated, radio air 
play is the number one way that artists make a living because their 
music is purchased as a direct result of radio air play and the 
record labels agree with that.
	MR. BAINWOL.  I know this has run long and we cut into 
Gary's time and for that I think I should probably filibuster some 
more, but let me make two very quick points.  One is that it is true 
in the U.S., and I think only true in China and Singapore, that we 
don't have a performance right.  This is not about the performance 
right.  This is a different fight.  But the point is sales is our window 
of revenue.  Okay.
	MR. WALDEN.  But nobody has a broadcast structure like the 
U.S. has, do they?  It is mostly state run and controlled.
	MR. BAINWOL.  The reality though is that creators have 
multiple streams of compensation and, here, the investor and the 
artist do not enjoy a right, that is factual.  So what they are doing is 
they are creating a device that creates promotional value--I am 
sorry, broadcast does create interest but they are satisfying that 
interest with the very device mitigating the probability of a sale so 
they are promoting and satisfying the promotion.  That doesn't do 
us a whole lot of good.  We have one window that generates the 
reinvestment and new art, and that window is being compromised 
by this device.
	MR. WALDEN.  But that is not a broadcast device.
	MR. BAINWOL.  This particular one is not but in a couple of 
years we will be right back at the table.
	MR. FERGUSON.  That is going to have to be the last word.  We 
have a vote on.  Ms. Ziegler, Mr. Harris, Mr. Levin, Mr. Bainwol, 
thank you all very much.  We are going to end this panel.  We very 
much appreciate it.  This has been very enlightening, I think, for all 
of us.  We are going to take about a 30-minute break for our vote.  
We have a series of votes.  We are going to come back.  We will 
do the second panel in about 30 minutes.
	[Recess.]
	MR. FERGUSON.  We will reconvene.  I am sorry.  It took a 
little longer than any of us thought.  If I could ask our second panel 
to be seated at the table.  We have Mr. Fritz Attaway who is 
Executive Vice President and Special Policy Advisor to the 
MPAA; Ms. Gigi Sohn, who is President of Public Knowledge; 
and Mr. Gary Shapiro, President and CEO of the Consumer 
Electronics Association.  Welcome to two of the three of you--all 
three.  Here we are.  Mr. Attaway, why don't you go ahead, 5 
minutes for your opening statement, please.

STATEMENTS OF FRITZ ATTAWAY, EXECUTIVE VICE 
PRESIDENT AND SPECIAL POLICY ADVISOR, 
MOTION PICTURE ASSOCIATION OF AMERICA; 
GARY SHAPIRO, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, CONSUMER ELECTRONICS 
ASSOCIATION; AND GIGI SOHN, PRESIDENT, 
PUBLIC KNOWLEDGE

	MR. ATTAWAY.  Thank you very much.  Thank you for giving 
me this opportunity to talk about the video broadcast flag, and I 
want to emphasize that the video flag is very different from the 
audio flag, so take everything that you learned in the last panel and 
file it away for a few minutes and focus on the video flag.  I also 
should mention that the National Association of Broadcasters is 
very supportive of the video flag so it is a little different position 
that you heard on the audio flag.
	You have my written statement in which I have attempted to 
set forth a comprehensive view of why the video broadcast flag is 
in the public interest.  In the few minutes I have here, I would like 
to just focus on a couple of key points.  First of all, the flag is 
narrowly focused to prevent mass redistribution of digital content, 
nothing more.  The FCC news release when the rule was adopted 
makes clear that the flag will not require consumers to purchase 
new equipment.  It will not in any way effect the ability of 
consumers to make digital copies.  It will not limit functionality of 
existing devices and yet will not affect digital VCRs, DVD players, 
computers, or any other device that does not contain a digital tuner.
	When the broadcast slide was in effect, only 13 technology 
applications were filed with the FCC for certification.  These 13 
technologies were sufficient to implement the video flag in every 
covered consume, device that was scheduled to enter the 
marketplace when the flag was to become effective in July of 
2005.  The claim that the FCC would have to pre-approve every 
TV set, computer, and digital video recorder is simply false.  The 
primary point I want to make today is that the sole purpose of the 
flag is to provide a level playing field for off-air broadcasters and 
to protect consumers who rely on free off-air TV for entertainment 
and information.
	I put up a poster there.  I know it is hard to read but that is a 
listing of all the channels available on one of the major multi-
channel video program distributors.  The vast majority of these 
program channels are not off-air broadcasts and the content on 
these channels can be protected against indiscriminate 
redistribution.  Many provide protection against redistribution 
today, and I point out that at least I am not aware of any consumer 
complaints.
	Only off-air broadcasters, those few that are highlighted in 
yellow, don't have the ability to prevent redistribution over the 
Internet and other digital networks.  The broadcast flag will give 
broadcasters the stability so they can continue to attract high value 
content that must be protected against mass redistribution in order 
to preserve its value.  Eighty-five percent of households subscribe 
to a multi-channel service that can require content protection.  The 
TV devices in those households will have to provide the same kind 
of protection that the flag would require.
	That is why device manufacturers do not oppose the flag.  They 
are going to have to build devices that have that functionality in 
any case.  Whether or not the flag is reinstituted, the vast majority 
of digital TV channels received by the American public will be 
capable of protecting content against mass redistribution.  The 
question presented by this hearing is whether free off-air 
broadcasters will be able to provide the same protection and 
continue to have access to high-value content.  I hope that you will 
give them that ability to compete on a level playing field by 
adopting or reinstituting the broadcast flag.  And I also hope that 
you will not do that while repealing the DMCA, which is 
unfortunately what H.R. 1201 would do.  Thank you very much.
	[The prepared statement of Fritz Attaway follows:]

PREPARED STATEMENT OF FRITZ ATTAWAY, EXECUTIVE VICE 
PRESIDENT AND SPECIAL POLICY ADVISOR, MOTION PICTURE 
ASSOCIATION OF AMERICA

SUMMARY
        Thank you for giving me this opportunity to speak to you today 
about the Broadcast Flag and whether content protection and 
technological innovation can coexist.
        The short answer is that content protection and technological 
innovation CAN coexist, and ARE coexisting.  American 
consumers, and indeed consumers around the world, have entered 
a golden age of access to audiovisual content.  Never before have 
consumers had so much choice in terms of the movies and TV 
shows available to them and the means by which they are 
delivered.
        Digital rights management (DRM) technology enables secure 
delivery of movies and TV shows to consumers, exponentially 
expanding consumer choice. The high-tech and movie industries 
share a common interest in providing consumers new viewing 
opportunities, which will create vast new markets for both 
consumer technology and content.
        The greatest challenge facing the motion picture industry today 
is the widespread trafficking of movies and television shows on the 
Internet. Because it is transmitted without encryption or other 
technological protections (i.e., "in the clear"), there is no 
technological protection against anyone redistributing digital 
broadcast television content over the Internet and other digital 
networks.  By contrast, cable and satellite, and even authorized 
Internet, distribution can include protections against such 
redistribution.  The likelihood of wide-scale redistribution of 
content distributed over digital broadcast television creates a 
disincentive for program owners to license high value content 
through that distribution channel.  Without this high-value 
programming, local stations would lose viewership and, 
correspondingly, revenue. Loss of this revenue would threaten 
their continued existence, jeopardizing the source of local news 
and public affairs programming for millions of Americans.
        In order to provide a level playing field for off-air broadcasters, 
and protect the millions of consumers who rely on free TV, the 
Federal Communications Commission (FCC) adopted narrowly 
targeted regulations allowing digital TV stations to prevent the 
indiscriminate redistribution of their programming. The basic 
outline of the Broadcast Flag was developed and approved in 
principle by a large and diverse group of consumer electronics, 
computer technology and video content companies.  Use of the 
Flag allows broadcasters to offer content creators the same 
protection against Internet redistribution that conditional access 
systems like cable and satellite can provide.  Nothing in the 
Broadcast Flag regulation requires broadcasters to embed the Flag 
in content; the Broadcast Flag regime merely allows a content 
provider to choose whether to include protection against Internet 
redistribution.
        The FCC certified thirteen separate technologies for 
implementing the Flag, including one that provides for remote 
access of recorded TV programs. It is important to note that the 
Broadcast Flag would have no effect on the copying of TV 
programs or distributing protected digital broadcast content within 
the personal digital network environment.  The Broadcast Flag 
solution will have no impact on existing consumer equipment.  The 
cost impact on affected equipment going forward will be 
insignificant.
        The D.C. Circuit Court of Appeals, invalidated the FCC's 
regulations on purely jurisdictional grounds.  Significantly, no 
consumer electronics or computer technology company required to 
implement the Broadcast Flag challenged the FCC regulation.
        It is imperative that Congress act quickly to enact narrowly 
crafted legislation to reinstate the FCC's Broadcast Flag ruling. 
The marketplace has already anticipated that the Broadcast Flag 
will be required and many manufacturers of digital television 
devices are now producing equipment in compliance with the FCC 
Broadcast Flag regulations.  It is worthy of note that there has been 
no discernable consumer resistance to these broadcast flag 
compliant devices and no surge of consumer complaints.
        Let me add one cautionary note. While we strongly support 
legislation that will reinstate the Broadcast Flag, we cannot support 
legislation that will do that at the expense of the anti-
circumvention provisions of the DMCA.  It has been suggested 
that HR 1201 be attached to Broadcast Flag legislation. However, 
that type of legislation would as a practical matter repeal Section 
1201 of the DMCA, would compromise efforts to fight piracy and 
inflict devastating harm on an important American industry.
        I appreciate this opportunity to discuss these matters of concern 
to our industry.


        Chairman Upton, Ranking Member Markey, members of the 
Subcommittee, thank you for giving me this opportunity to speak 
to you today about the Broadcast Flag and whether content 
protection and technological innovation can coexist.
	The short answer is that content protection and technological 
innovation CAN coexist, and ARE coexisting.  American 
consumers, and indeed consumers around the world, have entered 
a golden age of access to audiovisual content.  Never before have 
consumers had so much choice in terms of the movies available to 
them and the means by which they are delivered - theaters, VHS, 
DVD, cable, satellite, broadcast TV, Internet, advertiser supported, 
subscription, pay-per-view, video-on-demand - the list is long and 
growing.  And television programming is being made available to 
consumers in even more ways (e.g., via mobile phones).
	The engine that is driving us into this golden age of consumer 
choice is technology.  The motion picture industry has 
enthusiastically embraced innovative technology to create new 
markets and bring new choices to consumers.  Here are a few of 
the recent announcements:
	 Warner Bros. partners with Free Record Shop using 
P2P distribution
	 Universal partners with LoveFilm in UK, offering 
downloads
	 CBS and Verizon FiOS TV partner to carry select 
programs
	 Disney offers feature length film on ITunes
	 CBS delivers college basketball "March Madness" 
online
	 ABC offers free streaming of shows at ABC.com 
	 Disney re-launches MovieBeam as a new digital 
VOD distribution channel
	 NBC Universal launches Aeon Digital set top box
	 MTV Networks partners with Microsoft to 
offer digital music and video downloads via URGE.
	 MTV Networks offers thousands of free on-demand 
videos via its broadband channels, including MTV 
Overdrive, Nick Turbo, V-Spot and Motherload
	 CBS offers select programs on demand
	 Warner Bros. launches P2P service In2Movies in 
Germany
	 Fox announces VOD and DVD windows collapsed
	 NBC Universal announces Peer Impact deal
	 Disney announces download-to-own deal for full-
length feature films with CinemaNow
	 Google Video beta launched - essentially going 
with a wholesale reseller model - creating an 
iTunes-like store. 

	However, technology brings challenges as well as 
opportunities.  The greatest challenge is to maintain control over 
the distribution of movies and TV shows in order to recoup the 
cost of production and spur investment in new projects.
	Fortunately, technology itself is a big part of the solution to 
illegal distribution.  Digital rights management (DRM) technology 
enables secure delivery of movies and TV shows to consumers, 
exponentially expanding consumer choice.  The high-tech industry 
is our partner in this endeavor.  Contrary to the perception of some, 
the high-tech and movie industries are not enemies.  To the 
contrary, we share a common interest in providing consumers new 
viewing opportunities, which will create vast new markets for both 
consumer technology and content.
	The greatest challenge facing the motion picture industry today 
is the widespread trafficking of movies and television shows on the 
Internet, mostly through so-called peer-to-peer "file sharing."  The 
term "file sharing" is a popular euphemism for copying, which in 
the case of copyrighted motion pictures and TV programming is 
stealing.  
	DRM technology is being employed by movie distributors to 
prevent unauthorized reproduction and redistribution of digital 
works.  However when movies and TV shows leak out of a 
protected environment, whether through hacking of DRM 
measures, copying through the "analog hole," illegally camcording 
off theater screens, or other means, they can be made available to 
literally tens of millions of people over the Internet, 
instantaneously and with little or no degradation of quality.  
	Movie studios are actively engaged in finding ways to stem this 
leakage, such as through use of more sophisticated DRM 
measures.  They are also heavily involved in encouraging 
awareness of and respect for their rights under copyright laws 
around the world, not only through infringement actions, but 
through consumer education and working with colleges and 
universities to develop codes of conduct for students using digital 
networks.
	One source of leakage that only can be addressed by the 
Congress is digital broadcast television.  Because it is transmitted 
without encryption or other technological protections (i.e., "in the 
clear"), there is no technological protection against anyone 
redistributing digital broadcast television content over the Internet 
and other digital networks.  By contrast, cable and satellite, and 
even authorized Internet, distribution can include protections 
against such redistribution.  The likelihood of wide-scale 
redistribution of content distributed over digital broadcast 
television creates a disincentive for program owners to license high 
value content through that distribution channel.  
	The effects of this disparity will become yet more pronounced 
as more and more consumers access their content from digital 
broadcasts, in preparation for the mandated switch-over from 
analog to digital broadcasting in 2009.  Program owners may 
determine that the value of their programming is diminished so 
significantly by redistribution over the Internet that they choose to 
distribute their programming only through distribution channels 
that can offer some protection.  Without this high-value 
programming, local stations would lose viewership and, 
correspondingly, revenue.  Loss of this revenue would threaten 
their continued existence, jeopardizing the source of local news 
and public affairs programming for millions of Americans.
	In order to provide a level playing field for off-air broadcasters, 
and protect the millions of consumers who rely on free TV, the 
Federal Communications Commission initiated a proceeding aimed 
at adopting narrowly targeted regulations prohibiting the 
indiscriminate redistribution of digital broadcast television 
programming.  In November 2003, with the purpose of speeding 
consumer transition to digital television, the FCC issued a 
regulation requiring implementation of the "Broadcast Flag" as of 
July 1, 2005. 
	The basic outline of the Broadcast Flag was developed and 
approved in principle by a large and diverse group of consumer 
electronics, computer technology and video content companies 
participating in the Broadcast Protection Discussion Group, an 
informal, open forum created for the purpose of finding a solution 
to the broadcast redistribution problem.  The BPDG proposed 
implementation of a Broadcast Flag as the most appropriate and 
efficient solution for the protection of digital broadcast television.  
Use of the Flag allows broadcasters to offer content creators the 
same protection against Internet redistribution that conditional 
access systems like cable and satellite can provide.  Nothing in the 
Broadcast Flag regulation requires broadcasters to embed the Flag 
in content; the Broadcast Flag regime merely allows a content 
provider to choose whether to include protection against Internet 
redistribution.
	Subsequent to its adoption of its Broadcast Flag regulation, the 
FCC certified 13 separate technologies for implementing the Flag, 
including one that provides for remote access of recorded TV 
programs.  It is important to note that the Broadcast Flag would 
have no effect on the copying of TV programs.  The Broadcast 
Flag solution will not prevent consumers from making an 
unlimited number of physical recordings of DTV programs, or 
from distributing protected digital broadcast content within the 
personal digital network environment.  Furthermore, 
implementation of the Broadcast Flag solution will have no impact 
on existing consumer equipment.  The cost impact on affected 
equipment going forward will be insignificant.   
	Despite the broad consensus in favor of the Broadcast Flag, the 
FCC's authority to adopt Broadcast Flag regulations was 
challenged before the D.C. Circuit Court of Appeals, which 
invalidated the FCC's regulations on purely jurisdictional grounds.  
Significantly, no consumer electronics or computer technology 
company required to implement the Broadcast Flag challenged the 
FCC regulation.
	It is imperative that Congress act quickly to enact narrowly 
crafted legislation to reinstate the FCC's Broadcast Flag ruling.  
The marketplace has already anticipated that the Broadcast Flag 
will be required and many manufacturers of digital television 
devices are now producing equipment in compliance with the FCC 
Broadcast Flag regulations.  Moreover, consumer equipment that 
includes one or more of the same 13 content protection 
technologies approved for use under the Flag regime is already 
being deployed, so most manufacturers will be building equipment 
that will work seamlessly under the Broadcast Flag regime in any 
event.  It is worthy of note that there has been no discernable 
consumer resistance to these broadcast flag compliant devices and 
no surge of consumer complaints. 
	Let me add one cautionary note.  While we strongly support 
legislation that will reinstate the Broadcast Flag, we cannot support 
legislation that will do that at the expense of the anti-
circumvention provisions of the DMCA.  It has been suggested 
that HR 1201 be attached to Broadcast Flag legislation.  However, 
that type of legislation would as a practical matter repeal Section 
1201 of the DMCA, would compromise efforts to fight piracy and 
inflict devastating harm on an important American industry.
        Chairman Upton, Ranking Member Markey, members of the 
Committee, I appreciate this opportunity to discuss these matters of 
concern to our industry and I look forward to answering any 
questions you may have regarding what I have just discussed.

	MR. FERGUSON.  Thank you very much.  Mr. Shapiro, 5 
minutes, please.
        MR. SHAPIRO.  Thank you for this invitation to testify on behalf 
of the technology industry.  We represent 2,100 companies and 
$180 billion, and we believe that we are igniting the greatest 
explosion of human creativity since the Renaissance and it is 
driving America's rise to global leadership and innovation and 
ingenuity.  We believe that the rationale actually for the video flag 
is debatable and for the audio flag it is actually non-existent.  The 
fact is that both of these bills would involve taking rights away 
from lawful consumers and giving it to the content industry.
	That is why if the committee chooses to move forward on 
either of the flag bills we would hope that it should also protect 
consumers by putting H.R. 1201 as part of the package.  Let us 
review the facts.  We have a symbiotic relationship between the 
content and technology industries.  We need each other and in the 
long term we do great things for each other.  The problem is in the 
short term the content industry reacts to every new technology with 
fear, apprehension and cries for government intervention.  The 
track record is unbroken.  They opposed the player piano, FM 
radio, television, the cassette recorders, the VCR, the MP3 player, 
the TiVo, and I could go on and on and on.  But again and again 
the content industries come here to Congress asking you to stop or 
limit technologies.  And most of the time you have chosen the free 
market over regulation, and what has happened?  Well, somehow 
the sky doesn't fall.  New revenue streams are created and the 
economy and consumers have benefited.
	The new villains today at this hearing are digital television, 
digital radio or HD radio, and satellite radio.  Right now we are 
barraged by bills and lawsuits that would impose government 
mandates on our products and limit private non-commercial 
activities of consumers.  The television broadcast flag and audio 
flag are two such proposals.  They are radically different in terms 
of technology, implementation and impact on innovation and 
consumers, and that is why we have two separate panels and that is 
why I urge you to consider them separately.
	The television broadcast flag emerged from a very rigorous 
multi-year, multi-industry technical process.  It was implemented 
by the FCC and was only addressing redistribution over the 
Internet.  By contrast the audio flag bill, H.R. 4861, is aimed to 
stop the copying, in other words, non-commercial recording inside 
your own home.  The bill targets unauthorized copying, not illegal 
copying, but just unauthorized.  And, secondly, no audio flag 
actually exists.  Unlike the video flag, the audio flag was not the 
result of an industry process.  The RIAA does not even have a 
technical proposal.  Instead, they come with a theoretical mandate 
and so they come with a theoretical mandate and ask you to 
legislate on it.
	The audio flag bill also contradicts the Audio Home Recording 
Act.  Congress challenged us to come make a deal with the 
recording industry.  We did.  It said digital audio recording 
products shall not be restricted except by the law that was already 
in there so you cannot make copies of copies and royalties shall be 
paid and then they shall be produced.  But yet here they are with 
legislation and lawsuits.  Also significant, a flag would bring 
digital radio transition to a halt.  The only way to accomplish the 
bill's ban on copying is through an encryption scheme which 
would obsolete all existing digital radios notwithstanding the 
prohibition in the legislation.
	Basically the RIAA is showing up very late to the party.  They 
ignored the CPTWG, they ignored the FCC.  They have no 
evidence of real harm and they are demanding that everyone bring 
their lawful businesses to a full stop.  The bill's proposal to lock 
down satellite radio is even more outrageous.  Exciting new 
products are being sold by XM and Sirius that allow consumers to 
record lawfully acquired material recording off of radio.  They 
comply with the Audio Home Recording Act.  They cannot be 
used for piracy and all digital recordings are locked into the device.  
There is no demonstrated problem and there is no evidence of 
harm to music sales.
	These proposals are merely the latest step in a long-standing 
attempt to tip the balance of copyright.  We always hear about 
balance, but we never hear about consumer rights and consumer 
balance.  The lawsuit provides an example that you should focus 
on how much copyright has spun out of control.  The record labels 
have sued XM radio for these devices.  They are suing for statutory 
damages of $150,000 per song.  That translates into $115 million 
per XM device already sold.  That liability against five devices 
would exceed XM's 2005 revenues.  Against 100 devices it would 
exceed the entire revenue of the recording industry and if the INO 
just becomes one-quarter as successful as the iPod, claim damages 
would exceed the gross domestic product of the United States of 
America.
	This is all for a product that merely allows private recording.  I 
can't imagine a stronger disincentive to new innovation, but for the 
RIAA, that is exactly the point.  In the past two decades Congress 
has passed some 20 bills expanding copyright owners' rights and 
restricting consumer rights.  That is why if Congress chooses to 
give even more powers to the copyright owners, it must protect the 
rights of consumers by passing H.R. 1201.  It balances the 
copyright laws and it allows the real pirates to be put in jail.  It 
codifies the Supreme Court Betamax decision and allows 
consumers to bypass technical protection measures to exercise 
their fair use rights.  It is tough on pirates.
	In conclusion, I ask you to be suspicious of claims that 
government limits on consumers and innovation are necessary to 
protect the content industry.  Perhaps they are finally right.  Maybe 
this time the sky is really falling.  But I believe you have earned 
the right to be skeptical.
	[The prepared statement of Gary Shapiro follows:]

PREPARED STATEMENT OF GARY SHAPIRO, PRESIDENT AND CHIEF 
EXECUTIVE OFFICER, CONSUMER ELECTRONICS ASSOCIATION

        Chairman Upton and members of the subcommittee, thank you 
for inviting me to appear today on behalf of  the Home Recording 
Rights Coalition and the Consumer Electronics Association.  At 
CEA, we have more than 2,000 corporate members who contribute 
more than $120 billion to our economy and serve almost every 
household in the country.  We thus believe it is vital  to preserve 
the innovation, integrity, and usefulness of the products that our 
members deliver to consumers.  The Home Recording Rights 
Coalition was founded almost 25 years ago, in response to a court 
decision that said copyright proprietors could, via a lawsuit, stop 
the distribution of a new and useful product - the VCR.  Even the 
motion picture industry has admitted that it is glad that the VCR 
was allowed to come to market.  Congress should be very careful 
not to impose any mandates that would be regretted later.
        Before discussing the advisability of any sort of "flag" 
legislation, I want to emphasize that both CEA and the HRRC 
share and applaud Chairman Barton's and Mr. Boucher's 
determination that if the Congress should find it appropriate to 
proceed, it should do so only while enacting H.R. 1201 at the same 
time.  We believe this legislation, as formulated and introduced in 
this Congress, would protect consumers without threatening any 
legitimate service.  It would not remove any tools against pirates.  
It has been unfairly caricatured by some, and deserves 
consideration on its own merits.
        On the subject at hand, we have grave concerns.  While the 
rationale for a video flag is questionable, we have not seen any 
rationale whatsoever for an "audio flag," nor have we seen any 
actual technical proposal on the subject.  Moreover, based on 
experience this year, we are deeply concerned about how the 
entertainment industry will interpret, tomorrow, the legislative 
language that it accepts today.  These industries are turning now  to 
both the Congress and the courts to seek new, damaging, and 
unreasonable interpretations of legislation which, in retrospect, we 
were perhaps naï¿½ve enough to join them in supporting. 
	We worked closely with the music industry and this Committee 
to help draft and enact the Audio Home Recording Act of 1992.  
The music industry, then, agreed with us, and told the Congress, 
that the AHRA was forward-looking legislation that would cover 
all digital audio recorders, even devices that recorded music from 
digital cable, satellite and terrestrial radio services.  What they told 
the Congress then is not what they tell you now; nor is it what they 
tell the courts.  The music industry no longer agrees that a 
consumer's right to make a first generation copy of a song includes 
the right to play it back when and how the consumer wishes.  Nor 
do they any longer agree that the words "No action may be brought 
under this title alleging infringement of copyright ." have the 
meaning they told the Congress they had in 1992.  (They do seem 
still to appreciate the word "royalties" - though apparently they are 
becoming ever more fond of the word "damages.")
        We worked with this Committee and the motion picture 
industry on the Digital Millennium Copyright Act of 1998 (the 
"DMCA") as well.  Yet, we have also been surprised at some of 
the later interpretations of this law, and at the reluctance of some to 
consider the clarifications proposed by Chairman Barton and 
Congressman Boucher. We therefore are very cautious  in 
discussing any legislation that may impose a mandate on new 
technology and consumer devices.  Both of today's subjects have 
that potential.  

Any "Flag" Provision Should Be Proven Necessary And 
Accompanied By H.R. 1201
        The most vital requirement is that the legislation be necessary 
in the first place.  There has been much discussion and review on 
this subject by the FCC with respect to the Video Broadcast Flag, 
which addresses only the mass, indiscriminate redistribution of 
content over the Internet.  There has been no such focused 
discussion  about an "audio flag" because we have not yet seen any 
actual proposal for such a "flag."  It seems evident that addressing 
"mass, indiscriminate redistribution" is very far from what the 
recording industry actually has in mind when it asks for a "flag."  
The Video Broadcast Flag, as promulgated by the FCC, assured 
consumers' rights to record from broadcast television.  The 
recording industry seems intent on targeting, and preventing or 
taxing, consumers' rights to record from terrestrial and satellite 
radio.

Concerns About Technical Mandates In General
        Hard experience counsels that you establish some touchstones 
before even considering any such legislation.  First, given the 
inherent difficulty of anticipating the timetable and course of 
specific technological developments, it should be shown 
unequivocally that the drastic step of a technology mandate is 
necessary.  In addition:	
	 Any technical terms, and their consequences, must be 
absolutely clear and well understood before legislation is 
passed.
	 The mandated technologies, their effects in the marketplace 
and on consumers, and the entire terms under which 
technology would be available to makers of the covered 
products must similarly be subject to a clear, common, and 
immutable understanding.
	 Mandating the use of the technology should not harm 
technological progress or unduly burden legitimate products.
	 It is no longer enough that, as we have previously insisted, 
a mandate must be accompanied by affirmative language that 
protect a consumer's right to make private, noncommercial 
recordings at home.  It is now clear to us, as I discuss below, 
that any mandate legislation also needs to protect, 
specifically, the consumer's right to search for, index, store, 
and play back any home recorded content, in the desired 
order, and to shift content in terms of time and place --  just 
as consumers lawfully do with their personal video and 
audio recorders today.

This Hearing Is About Very Different Subjects
        The first thing our experience teaches us is that the issues 
noticed for this hearing are very different subjects.  If I can 
emphasize one fundamental point, it is that these subjects should 
not be conflated or confused.  Each is a separate and distinct issue, 
whether perceived from the content side as a "problem," from the 
"technology" side as a potential "burden," or from the consumer 
side as an obstacle to convenient and quiet enjoyment of products 
and services at home.

The "Broadcast Flag Authorization Act"
	The proposals for a "broadcast flag" emerged from two forums 
in which CEA, the HRRC, and various members have been very 
active - the Advanced Television Systems Committee (ATSC) and 
the Copy Protection Technical Work Group.  In ATSC  
committees, members of the content community for years pushed 
for a "descriptor" for the purportedly limited purpose of marking 
content, for possible control over mass Internet transmission.  
Members of the consumer electronics industry were greatly 
concerned that such a "flag" might be abused or used for other 
purposes, resulting in unwarranted control over consumer devices 
inside the home - something that had never been imposed on free, 
over-the-air commercial broadcasting.  In response to these 
concerns, the content and broadcasting representatives agreed to 
clarify that the flag was meant to govern not transmission, but 
retransmission, outside the home.
	Our members led in forming a Broadcast Flag work group at 
the CPTWG, and in  drafting a final report.  While the concept of a 
passive "flag" proved simple enough, the digital means of securing 
content, in response to such a flag, and the potential effect on 
consumers and their devices, proved highly controversial and 
contentious.  The pros and cons finally were sorted out in the FCC 
Report & Order, which specified that the Flag was meant solely to 
address "mass, indiscriminate redistribution" of content over the 
Internet.  This is the Order that the Court of Appeals nullified on 
jurisdictional grounds, and which, we assume, any "flag" 
legislation would reinstate.
	While our members have a variety of views on the FCC action, 
CEA and HRRC have a couple of very clear concerns:
	 First, we have been disappointed to see the "ATSC 
Descriptor" show up in a number of standards proceedings, 
proposed by the content industry for uses that go well 
beyond those originally described to the ATSC.
	 Second, some of the legislative language that at times has 
been circulated and attributed to the Motion Picture 
Association of America and its members would go well 
beyond the FCC's "mass, indiscriminate redistribution" 
standard, and could be interpreted as constraining 
distribution on networks inside the home.
	 Third, the flag regulations were invalidated before they ever 
took effect.  It should be clearly understood that, if 
legislation is enacted that would put the FCC regulations 
into force for the first time, manufacturers must be given a 
commercially reasonable period of time to manufacture and 
include the necessary circuitry in their devices.
	 Fourth, exceptions for consumer fair use, news and public 
affairs programming, and distance education, as we 
proposed to the FCC, should be part of any legislation 
addressing this subject.

The "Audio Flag"
	It is hard to think of a phrase that has been more abused in 
Washington this year than the words "Audio Flag."  From the 
context of the "Video Broadcast Flag" discussed above, one would 
naturally think that "audio flag" represents some proposal that:
        (a) refers to some known technology
        (b) is aimed only at "mass, indiscriminate redistribution of 
content over the Internet, and
        (c) is not aimed at restricting consumers' in-home use of 
content that they have lawfully obtained.
Unfortunately, this is not the case.   

Most Proposals Are Not For "Flags" At All
        Flying generally under "flag" colors in both bodies this year, 
either legislatively or in the PR wars, have been proposals that 
would govern the playback of lawfully received satellite radio 
content,  require a license for and then deny it to music services 
that are deemed to encourage lawful home recording,  define a 
"flag" as pertaining to music "distribution" rather than to the 
public performance in question,  or require a radio service to stop 
consumers from "disaggregating" music by playing back the songs 
they lawfully record at home in the order they choose.  
	While we would have very strong concerns over legislation - if 
there ever really is any - that would propose an "audio flag" that is 
remotely similar to the Video Broadcast Flag, I wish to emphasize 
that the sorts of proposals I have described have nothing to do with 
a "flag" and are inherently unfounded, unreasonable, and 
objectionable for a number of reasons. 
	First, there is no established basis whatsoever for congressional 
or FCC meddling with home recording from the ongoing satellite 
radio services, or with the terrestrial digital audio broadcast 
services that are just being launched.  Whatever consumers will be 
able to do with these services in the future - including the 
recording, indexing, storing, and compilation of playlists -- it has 
been equally feasible for decades to do the same things with  
existing FM radio service, with comparable quality.  Yet, every 
time the Congress has reformed the Copyright Act, it has declined 
to grant phonorecord producers any right or control of whether 
their albums are broadcast in the first place.  
        There is no demonstrated problem, and there is no reason to 
take control of these services away from broadcasters and satellite 
radio providers, or to interfere with the customary enjoyment of 
these services by consumers, and put those controls solely in the 
hands of the record companies or music publishers.  The Congress 
has consistently declined to do so.  As a result, the United States 
remains a world leader in developing new broadcast and consumer 
technologies and services.
	Second, the Congress did address the advent of digital 
recording, by passing a  law in 1992 that went in a different and 
opposite direction.  As you know, the Audio Home Recording Act 
provides for a royalty payment to the music industry on Digital 
Audio Recording devices and media.  While the AHRA addressed 
devices' ability to make digital copies from digital copies, it never 
imposed any constraints on the "first generation" copies that 
consumers were explicitly allowed to make in return for that 
royalty payment.  Yet, several legislative drafts now interpret the 
AHRA as saying:  "Sure you can make the recording, you just 
can't always play it back!"
	Apparently the Recording Industry Association of America, 
which took the lead in working with us on the Audio Home 
Recording Act, has forgotten that the AHRA exists.  In 1991, Jay 
Berman, then head of the RIAA and later head of the industry's 
umbrella organization, IFPI, told the Senate that the AHRA -

". will eliminate the legal uncertainty about home audio 
taping that has clouded the marketplace.  The bill will bar 
copyright infringement lawsuits for both analog and digital 
audio home recording by consumers, and for the sale of audio 
recording equipment by manufacturers and importers.  It thus 
will allow consumer electronics manufacturers to introduce 
new audio technology into the market without fear of 
infringement lawsuits .." 

        Yet, on May 16, the major record labels filed suit against the 
XM satellite radio service, explicitly based on its support of a 
royalty-paid device, covered by the AHRA, that in addition to 
allowing consumers to make home recordings (that cannot be 
output from the device), allows consumers to choose the order in 
which the recordings are played back.  According to the labels, 
apparently such consumer choice violates the law.  Moreover, they 
apparently see no relevance to the legislative language they agreed 
to in our joint support of the AHRA in 1992:

         1008.  Prohibition on certain infringement actions 
No action may be brought under this title alleging 
infringement of copyright based on the manufacture, 
importation, or distribution of a digital audio recording device, 
a digital audio recording medium, an analog recording device, 
or an analog recording medium, or based on making digital 
musical recordings or analog musical recordings.

	In addition to establishing a royalty fund, the AHRA gave 
technical oversight authority to the Department of Commerce.  
Proposing an overhaul of the laws regarding recorders from 
satellite and terrestrial radio services without addressing or 
amending the AHRA is like moving city hall without telling the 
mayor.

HRRC And CEA Oppose H.R. 4861	
        H.R. 4861, though styled as the "Audio Broadcast Flag 
Licensing Act of 2006," actually addresses both "redistribution" 
and the "unauthorized copying" of content.  Although the language 
"unauthorized copying and redistribution" might be deemed 
simply ambiguous, if this legislation were aimed solely at 
"redistribution," it would be irrelevant whether the prior in-home 
copying had been authorized or not.  In other words, a true "flag" 
bill would be aimed at mass, indiscriminate redistribution -- it 
would not matter whether the copy that was "redistributed" had 
been lawfully made or not.  
        This legislation, therefore, although styled as a narrow bill 
giving the FCC 'limited authority' to impose licensing conditions 
on new HD radios and satellite radios, actually is a fundamental 
attack on traditional home taping practices that consumers have 
engaged in since the first analog cassette recorder reached the U.S. 
market in 1964, and the reel-to-reel recorder decades before.  The 
bill would give the FCC remote control over consumers' rights to 
engage in reasonable and customary "unauthorized" recording, 
even in the privacy of their homes for noncommercial purposes.  
Virtually all home recording is "unauthorized" by copyright 
owners. But as the Supreme Court held in the Betamax case, that 
does not make it unlawful.  Exercising their "fair use" rights under 
the law, consumers have lawfully been making unauthorized tapes 
of music off the radio for more than 50 years. 
        In Congressional testimony earlier this year, the head of the 
RIAA said that  "the one-way method of communication [enabled 
by HD radio] allows individuals to boldly engage in piracy with 
little fear of detection." In other words, the RIAA believes that 
when Members of Congress, their staff, and their constituents tape 
a song off the radio they have engaged in piracy and ought to be 
criminally prosecuted.  This subcommittee ought not consider any 
legislation that proceeds from the premise that Americans listening 
to broadcasts at home are actually "pirates evading detection."

We Have Not Seen An Actual "Flag" Proposal Because No 
Such Thing Exists
        Perhaps one reason we have not seen any legislation addressed 
strictly and only to  mass, indiscriminate redistribution over the 
Internet is that we have also not seen any technical proposal, from 
the music industry, that would be so limited.  Unlike the video 
Flag, the "proposal" made by the RIAA to the FCC in 2004 was 
aimed, instead, at frustrating the long-accepted, reasonable private 
and noncommercial practices of consumers inside the home.  As to 
distribution outside the home, the RIAA never explained to the 
FCC how it could accomplish its objectives in a non-intrusive 
manner, and we are still not aware of any such technical proposal.   
        The FCC's Digital Audio Broadcast proceeding was begun by 
the Commission in 1999 and its initial emphasis was almost 
entirely technical.  Nevertheless, neither the RIAA nor any other 
music industry interest ever made a single filing in that proceeding 
until 2004 - and even then it did not disclose or propose what 
specific technology would be imposed on consumers.  But no 
matter what technology ultimately is chosen, there has simply 
never been any case made for the need of an "audio flag."  A 
mandate in aid of one would be an unwarranted, unnecessary, and 
probably unworkable intrusion into consumer use, and into the 
very viability of the new digital radio format on which so many 
have worked so long and hard for so many years. 
        The proposal to suddenly lock down satellite radio comes even 
more "out of the blue."  There is no indication that the new devices 
being rolled out by these services  depart from the requirements of 
the Audio Home Recording Act, most of which were drafted by the 
music industry itself.  Indeed, the products that form the basis of 
the record labels' suit against XM do not have any outputs, other 
than a headphone jack, via which music from the satellite 
broadcast content can be obtained.  It is true that, in theory, the 
output of a headphone jack can be digitized and potentially sent to 
the Internet.  Is it the music industry's "flag agenda" to impose 
some copy protection scheme on all headphone jacks and other 
analog interfaces of all music players and stereo system 
components?  If so, they should say so, and return to the multi-
industry Copy Protection Technical Working Group (which they 
left 6 or 7 years ago) for such an idea to be given appropriate 
consideration in the private sector. 
        In short, we see no justification to undo the provisions of the 
AHRA and the DMCA that specifically were enacted by Congress 
to address digital and satellite radio services.  There is no reason 
for the Congress to give further consideration to an "audio flag" or 
to any of the very restrictive legislation, aimed at "distribution" or 
"disaggregation," which are also thinly veiled attacks on lawful, 
private, noncommercial, in-home consumer recording practices.  
Instead, we respectfully urge that this subcommittee give renewed 
attention and impetus to protecting consumers, libraries, and 
educators by taking affirmative action on H.R. 1201. 
                               * * *
        Finally, we must not ignore the overarching issue of 
technological progress and U.S. competitiveness.  While other 
countries are busy developing their technology industries in order 
to compete more efficiently with the United States, we face 
proposals from the content community to suppress technological 
development on arbitrary or insufficient bases.  This is a trend that 
ought not to be encouraged.
        Again, thank you, Mr. Chairman, for the opportunity to appear 
before this Subcommittee to address these important issues.  We 
appreciate being asked to be here today and look forward to 
working with you and your staff as you examine the important 
issues that have been raised for discussion today.

	MR. FERGUSON.  Thank you.  For our third panelist on the 
video flag panel, Ms. Sohn.
MS. SOHN.  Thank you for inviting me to testify here today to 
give a consumer perspective on the broadcast flags.  We are living 
in a digital gold age and consumers, your constituents, are the 
beneficiaries.  Consumers have numerous choices for buying 
digital content and for buying devices on which to play that 
content.  They have never had so much flexibility and so much 
opportunity to be creators themselves.
	New opportunities in the content industry to profit from these 
digital technologies arise every day.  Sales of DVDs continue to 
generate enormous revenues.  In just months, iTunes sold 12 
million video downloads for use on its video iPod.  The broadcast 
networks, ESPN and Warner Brothers, are making for pay and 
advertiser-supported content available either through streaming or 
as downloads over a variety of on-line platforms.  As the content 
industry has ramped up on-line delivery of content, it has been 
testing a variety of protection measures that provide both security 
for the industry and flexibility for consumers.
	So to answer the question, can content protection technological 
innovation coexist?  It is a resounding yes.  Look at the robust 
market for on-line content distribution facilitated by the 
technologies and networks consumers love.  But apparently 
success is not enough for the content industry which is asking you 
to interfere with this market and impose two technology mandates 
that could bring this technological and artistic renaissance to a 
grinding halt.
	The first to reinstate the FCC's vacated broadcast flag rule, 
Public Knowledge opposes this rule first and foremost because it 
would give the FCC unprecedented and broad control over 
technological design.  On this point the D.C. Circuit emphatically 
agreed.  Moreover, the rule would allow the agency to set the 
limits of consumers' rights and the copyright law.  It would 
prohibit lawful uses of content, including use of broadcast TV 
excerpts on-line and for distant education.
	And let me clarify with all due respect to my colleagues on the 
first panel while the broadcast flag purports to be about 
indiscriminate redistribution, it also prohibits discriminate 
redistribution.  So if you, Mr. Chairman, would like to send a clip 
of you appearing on broadcast news to your home office in New 
Jersey, you wouldn't be able to do that under the broadcast flag 
scheme.  The flag scheme will also cause great consumer 
inconvenience, confusion, and cost, which will slow rather than 
expedite the transition to digital TV.
	Again, with all due respect to Mr. Attaway, flag-compliant 
devices may not work with non-compliant devices, making 
millions of obsolete legacy machines.  Digital media recorded on a 
flag-compliant device may not play on a non-compliant device 
meaning that the DVD that you burn in one room of the house may 
not play in a DVD player in a different room.  In addition, TV flag 
scheme will increase consumer cost because none of the 13 
technologies the FCC has certified work with each other.  
Therefore, if you have a Phillips flag-compliant TV set, a 
consumer must purchase devices from that same manufacturer.  
This is profoundly anti-competitive and anti-consumer.
	And with your permission, I would like to submit for the record 
some diagrams that demonstrate how devices become obsolete 
when you mix flag-compliant and non-compliant devices.
	MR. FERGUSON.  Without objection, we will include those.
	[The information follows:]

 

	MS. SOHN.  Nevertheless, if Congress decides to impose a TV 
flag scheme, it must also ensure that consumers' rights under the 
copyright act are preserved.  Thus, any broadcast flag legislation 
must be coupled with legislation that would permit circumvention 
of technological protection measures for lawful uses.  We are 
grateful that Chairman Barton has recommended that any flag 
legislation also include H.R. 1201.  In addition, any TV flag 
legislation should have meaningful exemptions for news and 
public affairs programming, distant education, and public domain 
programming.  The former is particularly important as news 
programming is the public's compensation for permitting 
broadcasters to use the public airways for free.
	We have similar concerns about the audio flag which are 
discussed in detail in my written statement.  Proponents of the 
audio flag do not even purport to be concerned with so-called 
indiscriminate redistribution of songs.  Instead, they want to 
extinguish the long-protected consumer right to make personal 
home recordings of radio transmissions.  There are far better 
alternatives to the heavy-handed technology mandates being 
discussed today.  As Mr. Markey said, they include a multi-prong 
approach of consumer education, enforcement of copyright laws, 
and use of technological tools developed in the marketplace which 
Public Knowledge supports.
	The Grokster decision and the Family Entertainment Copyright 
Act are just two of several new legal tools that the content industry 
has at its disposal to protect its content.  Members of the 
subcommittee, the TV and audio flags are controversial and do not 
reflect consensus.  That is another myth.  I am confident that you 
will conclude that the Federal Communications Commission 
should not become the Federal Computer Commission or the 
Federal Copyright Commission, and that the marketplace, not the 
Government is the best arbiter of what technologies succeed or 
fail.  The flag rules place unacceptable limits on innovation, 
competition and consumer rights.  I urge you to reject them.  
Thank you.
	[The prepared statement of Gigi Sohn follows:]

PREPARED STATEMENT OF GIGI SOHN, PRESIDENT, PUBLIC 
KNOWLEDGE

        Chairman Upton, Ranking Member Markey and other members 
of the subcommittee, my name is Gigi B. Sohn.  I am the President 
of Public Knowledge, a nonprofit public interest organization that 
addresses the public's stake in the convergence of communications 
policy and intellectual property law.  I want to thank the 
subcommittee for inviting me to testify on the audio and video 
broadcast flags.  I specifically want to focus on the impact of these 
technological mandates on consumers. 
        I served as counsel to the nine public interest and library 
groups that successfully challenged the Federal Communications 
Commission's (FCC) broadcast flag rules in the United States 
Court of Appeals for the District of Columbia Circuit.  My 
organization financed and coordinated the case, which is titled 
American Library Association v. FCC, 406 F.3d 689 (D.C. Cir. 
2005).  I have attached a copy of the court's decision in the case, 
and I respectfully request that it be placed into the record of this 
hearing.

                         Introduction
        This is the digital golden age for consumers.  They have 
numerous choices for buying digital content and for buying 
devices on which to play that content.  Far away from the 
copyright and technology battles in which we engage in 
Washington, newly forged partnerships between technology 
companies and content companies are revolutionizing the way we 
view and listen to digital media.  Here are just a few examples:  
	 New versions of Microsoft's Media Center software enable 
the playback of a consumer's favorite media, whether on 
the individual's home office monitor, living room 
television, or PDA.  The company has also developed a 
new music service in conjunction with MTV, VH1, and 
CMT music channels.
	 Innovators like DigitalDeck, NewSoft, SlingMedia, and 
Sony each have developed competing technologies that 
allow consumers to remotely watch the television playing 
in their living rooms on a laptop, mobile phone, or portable 
gaming console.
	 Yahoo! has developed software and services that enable 
consumers to view, create, and share content between their 
mobile phones, computers and living rooms, all using the 
Internet.
	 Google has developed a distribution system to allow 
anyone to provide videos for free or for sale, and allow 
others to download that content to a computer, Apple iPod, 
or Sony Play Station Portable (PSP).  Google has 
announced content distribution agreements with large 
content providers like CBS and the NBA.  This follows the 
recent success of NBC, ABC, and ESPN, which  distribute 
programming in partnership with Apple's iTunes.
	 TiVo's most recent software update makes it simple for 
consumers to watch their favorite television shows on 
popular players like the iPod and PSP.  And soon, the next 
generation TiVo recorder will help consumers record over-
the-air high-definition television.
	 Together, XM Radio and Pioneer developed an innovative 
portable satellite radio player that, like a TiVo, allows 
consumers to automatically record their favorite songs or 
shows while they are being broadcast.  A consumer's 
preferences are stored on the radio, and when connected to 
a computer, XM's software helps the consumer to find 
more information about the artists, purchase music through 
the new Napster, and discover other songs and shows by 
similar artists.

	These and many other examples demonstrate that the market 
for delivering content digitally over new technologies is working.  
Consumers can watch and listen to the content they purchase 
anytime and anywhere they want.  Some of that content will be 
protected, and consumers can decide whether that protection is 
flexible enough.  All of these great developments happened 
without government intervention. 
	The public appetite for buying individual TV shows and songs 
online is growing by leaps and bounds.  There are more ways than 
ever to watch TV and movies and listen to the radio.  Here are 
some of the newest legal services that offer consumers the 
opportunity to view, either for free or for a charge, content 
provided by the TV networks and Hollywood studios:
	 Last winter, CBS Sports and the NCAA announced that 
they would stream the NCAA tournament for free over the 
Internet. Over the course of the tournament, they served up 
a record 268,000 simultaneous streams, with a total of 14 
million streams served and 4 million unique visitors. 
	 The iTunes Video store, launched in October 2005, now 
carries television programs from ABC, NBC, Fox and CBS, 
along with many cable networks. In its first five months of 
operation, the movie store sold more than 12 million videos 
at $1.99 a piece.
	 In May, ABC began offering downloads of many of its 
most popular shows, including Lost, Alias, and Desperate 
Housewives for free on a trial basis. Last week ABC 
reported that more than 11 million viewers used the service 
in the first month of operation.
	 Services like CinemaNow and WorldCinemaOnline allow 
consumers to download Digital Rights Management (DRM) 
protected movies and TV shows to their computers. 
Consumers can opt for a limited time rental, or choose to 
keep the movie for a higher price.
	 Akimbo and MovieBeam use a special set-top box that 
enables the user to download and watch movies on demand, 
with variable pricing based on the length of viewing.
	 Warner Brothers has entered into a partnership with 
BitTorrent to provide DRM-protected media using 
BitTorrent technology.  This innovative model will use 
BitTorrent's distributed model to provide high speed 
downloads, and shared compensation for the content 
owners.

	Yet even as innovators in the motion picture and recording 
industries promote these alternative distribution models and the 
technologies that facilitate them, their colleagues in Washington 
are asking Congress to step in and give them protection from the 
vague threat of massive copyright infringement the industry says 
these new technologies could facilitate.  Let us be clear.  The 
content industry has not shown that any infringement has resulted 
from these technologies.  And it certainly has not shown that 
government technology mandates will work to stop actual 
copyright pirates rather than prevent ordinary consumers from 
engaging in lawful activities.  
        The content industry is asking Congress to impose three 
technology mandates: the TV broadcast flag, an audio broadcast 
flag, and an end to the analog hole.  Each mandate 1) injects 
government into technological design; 2) restricts lawful consumer 
activities; and 3) increases consumer costs by making obsolete 
millions of digital devices.  Once consumers start to purchase 
devices that are compliant with these technology mandates, the 
costs will be enormous.  For example: 
	 A consumer would not be able to record over-the-air local 
news on her broadcast-flag compliant digital video recorder 
in her living room and play it back on a non-compliant 
player in her bedroom (broadcast flag).
	 A member of Congress could not email a clip of his 
appearance on the national news to his home office 
(broadcast flag).
	 A student would be prohibited from recording excerpts 
from a DVD for a college Powerpoint presentation (analog 
hole). 
	 A consumer would be unable to record individual songs off 
digital broadcast and satellite radio (audio flag).
	 Current versions of TiVos (and other digital video 
recorders), and Slingboxes may not work with analog hole 
closing compliant devices, rendering them virtually 
obsolete (analog hole and broadcast flag).
	 A university could not use digital TV video clips for 
distance learning classes (broadcast flag).  
        I urge the Committee to think very long and hard about trying 
to fix what is not broken.  Ask yourselves, in light of recent 
marketplace developments, is it good policy to turn the Federal 
Communications Commission into the Federal Computer 
Commission or the Federal Copyright Commission?  Is it good 
policy to impose limits on a new technology like HD Radio (that 
unlike digital television, consumers need not adopt) that may well 
kill it?  Is it good policy to impose technological mandates (like the 
broadcast flag and closing the analog hole) that would result in 
consumers having to replace most of the new devices that they just 
purchased? 
        There are better alternatives for protecting digital content than 
heavy-handed technology mandates.  An effective multi-pronged 
approach would utilize consumer education, enforcement of 
copyright laws, new business models for content distribution and 
the use of technological tools developed in the marketplace, not 
mandated by government.  The recent Grokster decision and the 
passage of the Family Entertainment and Copyright Act are just 
two of several new tools that the content industry has at its disposal 
to protect its content.

Technology Mandates Harm Innovation and are Costly and 
Inconvenient for Consumers
        For Public Knowledge, its members and its public interest 
allies, the impact of the D.C. Circuit's decision vacating the 
broadcast flag rules goes far beyond citizens' ability  to make non-
infringing uses of copyrighted material they receive on free over-
the-air broadcast television.  Equally as important, the decision 
limited the power of a government agency that, in the court's own 
words, has never exercised such "sweeping" power over the design 
of a broad range of consumer electronics and computer devices.  
This hands-off approach has fostered a robust market place for 
electronic devices that has in turn made this country the leader in 
their development and manufacture. 
        For this reason, any attempt to portray legislative reinstatement 
of the broadcast flag rules as "narrow" should be viewed with great 
skepticism.  The rules put the FCC in the position of deciding the 
ultimate fate of every single device that can demodulate a digital 
television signal.  The broadcast flag rules require the FCC to pre-
approve television sets, computer software, digital video recorders, 
cellphones, game consoles, iPods and any other device that can 
receive a digital television signal.   Thus, the broadcast flag 
scheme places the FCC in the position of dictating the marketplace 
for all kinds of electronics.  
        The agency has neither the resources nor the expertise to 
engage in this kind of determination.  This type of government 
oversight of technology design will slow the rollout of new 
technologies and seriously compromise US companies' 
competitiveness in the electronics marketplace.
        Some argue that the initial FCC certification process worked 
because all thirteen technologies submitted to the agency were 
approved.  That is a very superficial view of that process.  First, it 
is widely known that several manufacturers removed legal and 
consumer-friendly features of their devices before submitting them 
to the FCC, largely at the behest of the movie studios.  Second, the 
changing nature of the FCC and its commissioners is likely to 
make for widely varying results.  Given the fervor of then- 
Commissioner Martin's dissent to the Commission's approval of 
TiVo-To-Go, it is unlikely that such technology would be certified 
today under Chairman Martin's FCC. 
        The certification process also exacerbates equipment 
incompatibility problems caused by the broadcast flag scheme.  
Not only will the scheme prevent consumers from making copies 
of a TV show on one system and play it on another, none of the 13 
different technologies approved by the FCC in its interim 
certification process work with each other.  This means that a 
consumer who buys one Philips brand flag-compliant device must 
buy all Philips brand flag compliant devices.  This raises consumer 
costs, and also raises serious questions about competition among 
and between digital device manufacturers.  
        Proposals to mandate content protection for digital broadcast 
and satellite radio would similarly place the FCC in the position of 
mandating the design of new technologies.  For example, H.R. 
4861, the Audio Broadcast Flag Licensing Act of 2006 ("Ferguson 
bill"), gives the FCC the authority to promulgate regulations 
governing "all technologies necessary to make transmission and 
reception devices" for digital broadcast and satellite radio.  In the 
case of so-called High Definition (or HD) Radio,  this could 
destroy this new technology at birth.  Digital broadcast radio 
benefits consumers through improved sound quality (particularly 
for AM radio) and gives radio broadcasters the capacity to provide 
additional program streams and metadata.  Unlike digital 
television, however, consumers need not purchase digital broadcast 
receivers to continue receiving free over the air broadcast radio.  
Certainly, if digital radio receivers have less functionality than 
current analog radio receivers, consumers will reject them and the 
market for HD radio will die. 
        In the case of digital satellite radio, mandated radio content 
protection has the potential to cripple this increasingly popular, but 
still nascent, technology.  XM Radio now has more than six and a 
half million subscribers, and Sirius Radio last year passed the four 
million subscriber mark.  Consumers are buying all types of 
receivers for those services, based in part on the new flexibility and 
features the equipment offers. The type of content protection the 
recording industry seeks would likely slow this incredible growth. 

The Content Industry Has Not Justified the Need for 
Technology Mandates
        Hollywood's core justification for imposition of the TV 
broadcast flag scheme can be paraphrased thusly:  if the threat of 
indiscriminate redistribution of "high value" high definition 
television content is not reduced, broadcasters will not make that 
content available, thus slowing this country's transition to digital 
TV.  
        One of the most vocal proponents of this argument was 
Viacom, which told the FCC in 2002 that "if the broadcast flag is 
not implemented and enforced by next summer, CBS will cease 
providing any programming in high definition for the 2003-2004 
television season.  And without the security afforded by a 
broadcast flag, Paramount will have less enthusiasm to make 
digital content available." 
        Viacom never did carry out its threat to withhold HD 
programming, and the argument that the broadcast flag is 
necessary to encourage the broadcast of high value content and the 
orderly transition to digital TV transmission has been repudiated in 
the marketplace.    First, broadcasters are making "high value" 
content available for HDTV or, "in HD": 50%  of TV shows, 
including 66 %  of prime time programming, is broadcast in high 
definition.  A number of "high value" sports programming 
broadcasts, including Monday Night Football, the Super Bowl, the 
NBA Finals, the NCAA Final Four college basketball 
championship, the FIFA World Cup, Major League Baseball's All-
Star Game and World Series games, all NBC NASCAR races, the 
U.S. Open golf tournament, and the Olympics, are broadcast in HD 
along with many other select sporting events throughout the year.   
Second, the country's transition to digital TV is accelerating, not 
slowing down, as sales of digital TV sets continue to increase.  
According to the Consumer Electronics Association, sales of 
digital TV sets grew 60% to $17 billion dollars.  According to 
Forrester Research, 16 million American homes have digital 
television sets.  In 2006, that number is expected to rise to 26 
million, or one in four households.  Indeed, the case could be 
made that rather than accelerate the DTV transition, the broadcast 
flag could slow the transition when consumers discover that 
expensive new television sets have less functionality than their 
current sets. 
        The recording industry has similarly not demonstrated that an 
audio flag is necessary.  The industry does not cite to even one 
instance of a digital broadcast or satellite radio transmission being 
copied illegally or retransmitted over the Internet.  Indeed, RIAA 
chief Mitch Bainwol's testimony and comments on the subject 
make clear that the real rationale for seeking radio content 
protection is not copyright infringement, but the recording 
industry's displeasure over the licensing fees it receives from 
broadcast and satellite radio broadcasters.   The recording 
industry does not even pretend that audio flag legislation is 
intended to do anything other than stop personal home recording. 

Video and Audio Flag Schemes Will Transform the Federal 
Communications Commission into the Federal Copyright 
Commission
        Despite the FCC's protestations to the contrary, any video or 
audio broadcast flag scheme will necessarily involve the agency in 
shaping the rights of content owners and consumers under 
copyright law.  Making copyright law and policy is not the FCC's 
job.  It is Congress' job. 
        While it is true that the TV broadcast flag scheme does not 
completely bar a consumer from recording her favorite TV show, it 
does prevent consumers from engaging in other lawful activities 
under copyright law.  For example, as the D.C. Circuit noted in 
ALA v. FCC, the broadcast flag would limit the ability of libraries 
and other educators to use broadcast clips for distance learning via 
the Internet that is permitted pursuant to the TEACH Act, Pub. L. 
No. 107-273, 116 Stat. 1758, Title III, Subtitle C, 1330, amending 
17 U.S.C.  110, 112 & 882 (2002).  See ALA v. FCC, 406 F.2d at 
697.
        This and other examples highlight that while proponents of the 
flag may justify it as prohibiting only "indiscriminate" 
redistribution of content over the Internet, flag-compliant 
technologies actually prohibit any and all distribution, no matter 
how limited or legal.  For example, if a member of this Committee 
wants to email a snippet of his appearance on the national TV news 
to his home office, the broadcast flag scheme would prohibit him 
from doing so.  Video bloggers and other TV watchdogs would 
similarly be unable to post broadcast TV clips on their blogs.  For 
example, the Parents Television Council, which rates television 
programs according to how child friendly they are, would be 
prevented from posting clips from those programs for parents to 
see. 
        The fact that the broadcast flag will limit lawful uses of 
copyrighted content was detailed in the Congressional Research 
Service Report entitled Copy Protection of Digital Television: The 
Broadcast Flag (May 11, 2005).  CRS concluded there that

        While the broadcast flag is intended to "prevent the 
indiscriminate redistribution of [digital broadcast] content over 
the Internet or through similar means," the goal of the flag was 
not to impede a consumer's ability to copy or use content 
lawfully in the home, nor was the policy intended to "foreclose 
use of the Internet to send digital broadcast content where it 
can be adequately protected from indiscriminate 
redistribution."  However, current technological limitations 
have the potential to hinder some activities that might 
normally be considered "fair use" under existing copyright 
law.  For example, a consumer who wished to record a 
program to watch at a later time, or at a different location 
(time-shifting, and space-shifting, respectively), might be 
prevented when otherwise approved technologies do not allow 
for such activities, or do not integrate well with one another, or 
with older, "legacy" devices. In addition, future fair or 
reasonable uses may be precluded by these limitations. For 
example, a student would be unable to email herself a copy of 
a project with digital video content because no current secure 
system exists for email transmission.  

        Proposals for an audio flag for broadcast and satellite radio 
similarly, and perhaps even more directly, place the FCC in the 
position of determining consumers' rights under copyright law.  
For example, the Ferguson bill gives the FCC authority to issue 
licenses for satellite and digital broadcast radio transmission and 
reception devices that must

        include prohibitions against unauthorized copying and 
        redistribution of transmitted content through the use of a 
        broadcast flag or other similar technology, in a manner 
        consistent with the purposes of other applicable law.

        Under this proposal, the FCC is placed in charge of 
determining both 1) the extent to which unauthorized copying 
(which is legal is some circumstances) of digital broadcast and 
satellite radio content is permitted; and 2) determining what kind 
of copying and redistribution of audio content is permissible.  In 
other words, the FCC is given the power to control the extent to 
which consumers can engage in personal copying.
        Not only does this language give the FCC power to set 
copyright law, it also directly conflicts with current copyright law, 
specifically the Audio Home Recording Act - which explicitly 
gives consumers the right to record digital radio transmissions for 
noncommercial use.   

Any Broadcast Flag Legislation Must Be Coupled With DMCA 
Reform and Include Public Interest Exceptions
        As discussed above, Public Knowledge believes that 
technology mandates like the video and audio broadcast flags are 
misguided industrial policies that would constitute a radical 
expansion of the FCC's powers while radically diminishing 
consumers' rights.  If the first rule for policymakers in technology 
and copyright debates is "first do no harm," then your course of 
action should be to let an already thriving market continue to grow.
        Nevertheless, if Congress decides to impose flag schemes for 
digital television and/or digital radio, it must attempt to ensure that 
consumer's rights under the Copyright Act and the public interest 
under the Communications Act are preserved.  The latter is 
particularly critical given that Hollywood seeks to limit access to 
free over-the-air broadcasting, which by law exists to serve the 
American people with, among other things, local news and public 
affairs programming.  Thus, any broadcast flag legislation must be 
coupled with legislation to permit circumvention of technological 
protection measures for lawful uses and must include meaningful 
exceptions for 1) news and public affairs programming; 2) distance 
education; and 3) programming in the public domain.

DMCA Reform
	We urge Chairman Barton to keep his promise to consumers 
that the full Energy and Commerce Committee will not approve 
any broadcast flag legislation unless it is coupled with legislation 
to permit circumvention of technological protection measures for 
lawful uses.  Because of broadcasting's special role in American 
society, it is imperative that consumers be able to circumvent 
technological protection measures like the broadcast flag in order 
to engage in lawful uses of that content. This is particularly 
important as more and more people use weblogs to comment or 
criticize our culture.  
        Public Knowledge is grateful that Chairman Barton has co-
sponsored H.R. 1201, the Digital Media Consumers Rights Act.  
H.R. 1201 would provide an exception to the anti-circumvention 
provisions of the Digital Millennium Copyright Act (DMCA), for 
lawful uses of copyrighted content. We believe that it is a narrowly 
tailored law that will preserve fair use rights for the digital age.  
Critics contend that H.R. 1201 is an invitation to piracy - but 
determined pirates do not need or use fair use to engage in illegal 
activity.  H.R. 1201 only permits lawful activity. Those who flout 
copyright law will continue to be subject to all the penalties that 
the law permits.

News and Public Affairs Programming
        Under the Communications Act of 1934, broadcasters are 
tasked with serving as public trustees in exchange for the free use 
of public spectrum.  As part of that duty, broadcasters are tasked 
with providing news and public affairs programming which serve 
the needs of the local communities that they serve.  This 
programming, in essence, is payback to local viewers for the right 
to use a valuable resource: the public airwaves.
        Broadcast news and public affairs programming is also a 
common source of comment, criticism and follow-up news on a 
variety of digital media.  Websites and weblogs abound with fair 
use clips of such broadcast programming.  Such comment and 
criticism would not be possible under a broadcast flag scheme. 
        For these reasons, any broadcast flag legislation should exempt 
news and public affairs programming.  To the extent that the 
studios claim the need for a broadcast flag to protect secondary 
markets for programming, there is no such market for news and 
public affairs programming, since it is outdated soon after it airs.   
        The exceptions language included in the broadcast flag 
provision which is part of the pending Senate telecommunications 
reform bill, S. 2686, is wholly inadequate.  That provision exempts 
news and public affairs programming "the primary commercial 
value of which depends on timeliness."  However, it is entirely up 
to the broadcaster to decide whether that test is met.  Undoubtedly, 
the studios will pressure the broadcaster to decide that the primary 
commercial value of such programming does not depend on 
timeliness - ensuring that most, if not all, news and public affairs 
programming is flagged.  This is an exception that swallows the 
exception.

Distance Education
        Any broadcast flag law must also exempt distance learning for 
non-profit and for-profit libraries and higher educational 
institutions.  As more and more Americans receive their educations 
online, those institutions must be able to redistribute broadcast 
programming that is part of a distance education curriculum.  For 
non-profit higher education institutions, the ability to do so is 
guaranteed by the TEACH Act, Pub. L. 107-273.  While for-profit 
educational institutions are not protected by the TEACH Act, there 
is no rationale for treating these institutions differently than non-
profits.  Both are dedicated to distance education and both use 
broadcast programming to engage in that activity.
        The broadcast flag provision in the Senate telecommunications 
reform bill also is inadequate to protect the rights of libraries and 
universities to engage in distance learning.  Under that provision, 
libraries and universities must seek FCC permission before they 
can engage in a task that is critical to their mission, and at least 
with respect to non-profit libraries, protected by law.  

Programming in the Public Domain
        The public domain is the reservoir of creative works that are no 
longer protected by copyright.  Thus, they are free for the public to 
use in whatever way they please.  As such they should not be 
subject to technological protection measures like the broadcast 
flag.  To the extent that content owners consider the public domain 
to be a dumping ground of works with little commercial value, it is 
unlikely that this exemption will be used very often.  Moreover, if 
content owners are concerned that a program under copyright that 
only uses a small bit of a public domain work would be required to 
be exempted, the legislative language or legislative history can be 
drafted to emphasize that only that programming which primarily 
consists of public domain materials should be exempted.

A Technology Mandate to Close the Analog Hole is 
Unnecessary and Would Cause Great Consumer Confusion, 
Cost and Inconvenience
        While this hearing does not specifically address the content 
industry's efforts to close the so-called analog hole through 
legislative means, those efforts are closely related to the broadcast 
flag and radio content protection initiatives, and are therefore 
worthy of mention.  
        As many of you know, a bill was introduced in the House of 
Representatives last year  that would mandate that all digital 
devices read and obey two specific technologies - an encryption 
technology called CGMS-A and a watermarking technology called 
VEIL. The content industry claims that both of these technologies 
are necessary to ensure that analog content cannot be captured and 
digitized for possible indiscriminate distribution over the Internet.
	I will not mince words - a government mandate to close the 
analog hole would be profoundly anti-consumer and a radical 
change in the historic copyright balance.  Closing the analog hole 
would immediately restrict lawful uses of technology and make 
millions of consumer devices obsolete.  It would not be far-fetched 
to predict that closing the analog hole will cause a consumer 
backlash with ramifications for device manufacturers, retail stores, 
content producers and Congress.
        Moreover, Hollywood has not clearly defined the problem it 
wants to fix.  They have provided no evidence that use of the 
analog hole has resulted in any significant copyright infringement.  
The mere fact that a consumer can buy an analog to digital 
converter device is not evidence that such a device is being used 
illegally any more than the sale of kitchen knives indicates that 
they are being used for stabbings.  If the concern is that certain 
individuals are taking analog content, digitizing it and placing it on 
peer-to-peer networks, then the answer is not to close the analog 
hole, but to use the many legal, technological and marketplace 
tools the industry has at its disposal to combat illegal use of those 
networks.  
	Specifically, the proposed legislation suffers from a number of 
important substantive flaws.  Here are just a few:
	 The analog hole technology mandate would be more 
intrusive than the broadcast flag:  The content industry's 
proposal mandates that each and every device with an 
analog connection obey not one, but two copy protection 
schemes.  Thus, while the broadcast flag would put the 
FCC in charge of design control just for technologies that 
demodulate a broadcast signal, the proposal would put the 
inexperienced and overworked Patent and Trademark 
Office in charge of mandating the design of every device 
with an analog connector, including printers, cellphones, 
camcorders, etc.  Like the broadcast flag, it sets in stone a 
copy protection technology for technologies that are always 
changing.  
	 The analog hole mandate would impose a detailed set of 
encoding rules that would restrict certain lawful uses of 
content. The House bill includes tiered levels of restriction 
based on the type of programming (e.g., pay-per-view, 
video on demand) that limit lawful uses in a manner that 
ignores the four fair use factors of 17 U.S.C. 107. This 
upsets the balance established in copyright law between the 
needs of copyright holders and the rights of the public by 
placing far too much control over lawful uses in the hands 
of the content producers. 
	 The mandate would eliminate the DMCA's safety valve.  
This Committee has been the leader in ensuring that the 
anti-circumvention provisions of the Digital Millennium 
Copyright Act do not unintentionally impinge on fair use.  
A common justifications for limitations on fair use imposed 
by the DMCA is that individuals who want to use excerpts 
of digitally protected content like DVDs can copy snippets 
using the analog outputs on a TV set or by recording the 
screen with a video camera.   An analog hole mandate 
would eliminate this safety valve.
	 The bill would mandate and unproven and disputed 
technology. While the CGMS-A + VEIL technology was 
discussed at the Analog Hole Reconversion Discussion 
Group, a standards group with both industry and public 
interest participation, it was quickly dismissed as not 
worthy of further consideration.  Thus, this technology has 
not been fully vetted by industry and public interest groups. 
If Congress feels it must do something about the analog 
hole, at a minimum it should refer the technology back to 
industry and public interest groups so CGMS-A + VEIL 
can be thoroughly analyzed for its impact on consumers and 
the cost to technology companies.  In the complete absence 
of any such review, the one-sided imposition of such a 
detailed technology mandated would be unprecedented.

The Proper Balance Between Content Protection and 
Consumer Rights Should Be Set by Copyright Law and 
Marketplace Initiatives

        I am often asked the following question:  if Public Knowledge 
opposes the broadcast flag, radio content protection and closing the 
analog hole, what are better alternatives to protect digital television 
and radio content from infringing uses?  The best approach to 
protecting rights holders' interests is a multi-pronged approach: by 
better educating the public, using the legal tools that the content 
industry already has at its disposal, and the technological tools that 
are being developed and tested in the marketplace every day. In the 
past eighteen months alone, content industry has used and won 
several important new tools to protect content, including:
	 The Supreme Court's decision in MGM v. Grokster and its 
aftermath.  The Supreme Court gave content owners a 
powerful tool against infringement when it held that 
manufacturers and distributors of technologies that are used 
to infringe could be held liable for that infringement if they 
actively encourage illegal activity.  As a result, a number of 
commercial P2P distributors have gone out of business, 
moved out of the U.S., or sold their assets to copyright 
holders.
	 Lawsuits against mass infringers using P2P networks. Both 
the RIAA and the MPAA continue to sue individuals who 
are engaged in massive infringement over peer-to-peer 
(P2P) networks.  By their own admission, these lawsuits 
have had both a deterrent and educative effect. The RIAA 
now characterizes the P2P problem as "contained." 
	 Passage of the Family Entertainment and Copyright Act.  
The FECA gave copyright holders a new cause of action to 
help limit leaks of pre-release works and made explicit the 
illegality of bringing a camcorder into a movie theatre.  It 
also provided for the appointment of an intellectual 
property "czar" to better enforce copyright laws.
	 Agreements by ISPs to pass on warning notices.  The war 
between Internet Service Providers and content companies 
has begun to cool.  Last year, Verizon and Disney entered 
into an agreement by which Verizon will warn alleged 
copyright infringers using its networks, but will not give up 
their personal information to Disney.  Verizon officials 
have told me that they intend to enter into similar 
agreements with other content providers.
	 Increased use of copy protection and other digital rights 
management tools in the marketplace.  As discussed above, 
there are numerous instances of the use of digital rights 
management tools in the marketplace.  iTunes Fairplay 
DRM is perhaps the most well known, but other services 
that use DRM include MSN music and video, Napster, 
Yahoo Music, Wal-mart, Movielink, CinemaNow and 
MovieBeam.  The success of some of these business 
models are a testament to the fact that if content companies 
make their catalogues available in an easily accessible, 
flexible and reasonably priced manner, those models will 
succeed in the marketplace without government 
intervention.  

        These tools are in addition to the strict penalties of current 
copyright law.  To the extent that the content industries are looking 
for a "speed bump" to keep "honest people honest," I would 
contend that many such speed bumps already exist, while more are 
being developed every day without government technology 
mandates.  
        Finally, by far the most effective means of preventing massive 
copyright infringement involves the content industry doing what it 
took the music industry far too long to do  - satisfy market 
demand by allowing consumers to enjoy fair and flexible access to 
content at reasonable prices (inevitably produced in a free market).  
DVDs are the best example of the market working.  There, a 
government mandate -the Digital Video Recording Act--was 
rejected and an industry-agreed upon fairly weak "keep honest 
people honest" protection system was adopted.  Despite the fact 
that the protection system was defeated long ago, the DVD market 
has grown at an astounding rate - from zero in 1997 to 
$25,000,000,000 in sales and rentals last year.  Moreover as I 
noted above, many other new digital music and video distribution 
models, developed with content industry support and industry-
agreed upon content protection, are emerging in the market.  We 
believe that these efforts make government intervention in the free 
market unnecessary.

Conclusion
        The content and technology industries are moving forward, 
together, to provide the digital content and the digital machinery 
that consumers are buying and enjoying.  Technology mandates 
like the broadcast flag and radio content protection are a step 
backward from this progress, limiting both innovation and 
consumer choice while increasing costs to innovators and 
consumers.  I urge the subcommittee to look at recent marketplace 
developments and consider whether government action here would 
do far more harm than good.  Thank you.

        MR. FERGUSON.  Thanks very much to all three of you.  I will 
begin the questioning.  Mr. Attaway, will video content providers 
be less willing to invest in digital content absent a broadcast video 
flag and why or why not?
	MR. ATTAWAY.  Absolutely.  Ms. Sohn just said that she 
supports the use of technology to prevent content.  Well, we are 
using technology on the vast majority of the services you see on 
that chart to protect our content against redistribution.  Only over 
the air broadcasters lack the ability to do that because they 
broadcast free in the clear. They are not encrypted.  What we are 
trying to do is get broadcasters on a level playing field by using the 
same technology that all these other services are using to protect 
against redistribution.  If broadcasters can't do that, it is axiomatic 
that the owners of valuable content, if given a choice between 
licensing the services that protect against redistribution and those 
that don't, are going to license to the ones that protect the content.  
They have to.  They have to protect their content against--they 
have to protect their markets.
	So absolutely, yes, without reinstituting the broadcast flag, 
high-value content is going to migrate away from over the air 
broadcasters to cable and satellite services, where it could be 
protected.
	MR. FERGUSON.  Ms. Sohn, the FCC, and I want to make sure I 
get through my questions here, the FCC adopted broadcast flag 
rules that by many accounts were fair.  They are workable for 
content owners.  They are workable for manufacturers, for 
consumers.  Those rules were struck down but not on substantive 
grounds.  They were struck down on jurisdictional grounds.  Why 
shouldn't Congress just grant the FCC authority to implement the 
rules that have already been sort of vetted through this whole 
process?
	MS. SOHN.  Well, because they are profoundly anti-consumer 
and they put an agency--
	MR. FERGUSON.  We sort of went through this long process that 
everyone says was a great process, it was an important process, 
sort of common ground was found, it was vetted through all sorts 
of players, everybody at the table, how many years it took to do it, 
and then it was struck down again.  Not because of the content of 
the agreement but just because they didn't have the jurisdiction to 
do it.
	MS. SOHN.  Well, except that the court said that the FCC had 
never exercised such sweeping powers.  I mean, yeah, it was a 
jurisdictional--
	MR. FERGUSON.  But again that has nothing to do with the 
content.
	MS. SOHN.  What is that?
	MR. FERGUSON.  That has nothing to do with the substance.  It 
just says it is a jurisdictional issue.
	MS. SOHN.  Well, unless you believe that the FCC, a 
government agency, should have power to dictate technology 
design for every single device that demodulates a television.
	MR. FERGUSON.  But this is something that has gone through 
this incredible vetting process.  All the court said was Congress 
hasn't given FCC the power to do that.  Why wouldn't we just do 
it if it has gone through this process?
	MS. SOHN.  Because it is anti-consumer and it does obsolete 
devices.  And the notion that there was a consensus is way 
overblown.  So the FCC certified 13 technologies but--
	MR. FERGUSON.  We had folks who were on your side of this 
argument on a previous panel saying this was the model, this is 
Utopia, this was the Nirvana of coming up with a solution.
	MS. SOHN.  But if there is consensus--
	MR. FERGUSON.  You are telling me that they were just wrong?
	MS. SOHN.  Well, if there is consensus then why do we need 
Government to act?  Then let them just do it.  
	MR. FERGUSON.  Because the court said jurisdictionally they 
kind of found this technical jurisdictional issue.  We've got a 
solution for that.  The Congress has a solution for jurisdictional 
issues.  We just grant them the authority to implement something 
which all the players have already worked out.
	MS. SOHN.  Well, again, the reason even if you construe this as 
a narrow jurisdictional decision the broadcast flag scheme would 
place the FCC as an arbiter of what technologies come to market 
and what don't.  It would be bad for the lawful uses that consumers 
make of technology, and it would also be bad for cost and the 
digital television transition purposes.
	MR. FERGUSON.  Mr. Gonzalez.
	MR. GONZALEZ.  Thank you very much, Mr. Chairman.  I will 
just go back to some basics so I can try to get an understanding of 
what this whole thing is all about.  And that is you have the content 
people.  They actually have the product.  Then we have 
broadcasters that deliver the product.  Then we have manufacturers 
that obviously manufacture all the equipment to accommodate all 
that, that whole scheme.  But in that mix we have certain legal 
principles, certain rights that are recognized since time and 
memorial, the royalty scheme, copyright scheme and such, and I 
don't ever want to toss that away.  Something that is always 
predominant of course is the consumer, the customer, the citizen, 
and what we are getting out there, when we get it, is it fair, it is a 
level playing field and so on.
	And I said this earlier, the big boogey man has always been 
redistribution because one of the principles that I think we are 
always going to adhere to is fair use.  When I got to this committee 
it was I love all these concepts but fair use.  What is fair in any 
particular context depending where technology is and so on kind of 
changes.  It is not what it used to be with the Xerox machine and 
so on which we have gone over.  But it is still there and we have to 
either expand it, narrow it, or whatever we are going to do.  Part of 
the solution appears to be this flagging system.
	But it seems to me that as technology moves forward, the 
business concerns that used to come under the heading of 
redistribution are now coming under the heading of distribution.  
And what I mean is Sirius is a good example of that.  That is you 
don't have an individual that is just going to go and record one or 
two songs and eventually one or two films or whatever it is for 
personal use or to go to the lake house or back home and one up 
here in the district when we come up.  It is totally different.
	And if you listen to Ms. Ziegler and what they are providing it 
is fairly extraordinary, and that is for a fee and the right equipment 
you have a whole library that if you think in terms of numbers and 
you think in terms of royalties and copyrights and all of that, these 
are conceivably, and I am not saying that the sky is falling with 
every technological advance, but I think we do have to recognize 
that at some point you could reach where the distribution system 
itself equates to or is equal to what we are trying to avoid in the 
redistribution system.
	And I don't know if I am making myself anywhere near clear 
on this thing but I think if you are a business person out there--and 
I am not sure, Gary, that I am making myself too clear on this 
thing, but are we reaching a point where technology in a business 
model when it comes to the product itself, the content people, what 
they are putting out there, is going to be so distributed without 
recognizing, let us say, the royalty payments, the artist, the writer, 
Sony or whoever it is.  Are we reaching that point?  Is that 
possible?
	MR. SHAPIRO.  It is a good point and I do applaud you for 
recognizing the difference between redistribution and what is in 
the home.  The broadcast flag for the most part is about 
redistribution on the Internet and it is a potential problem.  There 
was a lot--it took 10 years of discussion.  It is a technical solution 
which definitely works.  There needs to be exceptions.  There 
needs to be other things.  And it is very different than when we are 
talking about the audio broadcast flag.
	When you are talking about the audio broadcast flag, first of 
all, we cut a deal.  Congress sent us away 10 years ago or so and 
said come back and solve this problem.  We came back.  We 
agreed to pay royalties for every digital audio recording product.  
We are paying those.  The products are just being introduced.  It is 
a hefty royalty.  I think it is about $10 or $12 a pop.  We are also 
paying--we have also agreed to design the devices in a way we can 
never make copies of copies.  That is the Audio Home Recording 
Act.  And in turn we got the right to produce audio home recording 
products.
	Now what you are saying, as I hear you, is that because 
technology is advancing, consumers are being able to exercise their 
fair use rights established by Congress repeatedly.  The right to 
record off radio has been recognized over and over again by 
Congress.  But what you are saying is technology is advancing in 
such a way that maybe that is not a good idea anymore.  I think 
what the prior panel totally missed was the concept if Congress 
wants to take away the right that consumers have to record off the 
radio, they should say they are doing that because that is what 
Mitch Bainwol is arguing for.
	It wasn't about redistribution over the Internet.  It was the fact 
that consumers are exercising their rights and technology is 
allowing them to do it easier and easier.  They paid for the right to 
their fee.  They paid for the royalty manufacturer.  The devices are 
restricted.  But the test really should be a cynical one, as I said 
earlier, by Congress.  It should be really an effect on innovation 
and creation.  And I think if you look at what has changed in 
society dramatically in the last 20 years with the digital revolution 
is we made every American a creator, and we have to stop 
measuring our creativity by the financial results of 10 companies 
that compose the MPPA and the RIAA.
	I think we have to measure by the fact that there is all sorts of 
new creativity out there, and if you listen to the content community 
we would have shut down the iPod, we would have shut down all 
these new services, we would have shut down the VCR, and that is 
why you have to be skeptical.  And what I heard in the prior panel 
to be so dangerous you have the broadcasting industry, radio 
broadcasters only, not the satellite people, negotiating with the 
RIAA over how satellite radio will be regulated and how devices 
will be regulated.  And that is considered negotiation.
	Hillary Rosen, the President of the RIAA, Jack Valenti, the 
President of Motion Pictures Association, and I created the 
CPTWG, the Copyright Protection Trade Working Group, and the 
RIAA was part of that.  We created a DVD standard together.  We 
created the broadcast flag.  The RIAA walked away.  They said we 
have nothing to do--digital radio went through the FCC.  The 
RIAA had nothing to do with it until 3 years ago, Mitch comes in 
and said, my God, we have this huge problem with digital radio, 
and now they are killing the product that radio broadcasters need 
and are threatening satellite radio.
	And what is the result?  It will be a doubling or tripling of price 
for satellite radio subscribers.  Ten million subscribers are going to 
have to pay a lot more.
	MR. GONZALEZ.  And I know I am over my time but would you 
indulge me, Mr. Chairman, to allow the other two witnesses to 
respond on this particular point or anything else that they feel they 
need to address?
	MR. FERGUSON.  I would just ask that they do it very briefly.  
Mrs. Blackburn is here and it is her turn.
	MR. ATTAWAY.  Thank you.  I just want to respond to the point 
that Mr. Shapiro was making.  He accused us of being Chicken 
Little but yet he is the one that is saying that if you protect content 
it is going to stifle innovation and bar technology.  Well, the facts 
show that that simply isn't true.  Movies are available today in 
more venues, on more different types of devices than ever before 
in history, and it is the movies, it is the content that is driving this 
new technology.  The studios are at the forefront of using new 
technology to offer consumers greater choice.  We are not Chicken 
Little.
	MR. FERGUSON.  Ms. Sohn, very briefly.
	MS. SOHN.  Yeah.  Mr. Attaway just undercut the answer to 
your question, Mr. Ferguson, to the extent he said movies are 
everywhere.  Okay.  So they are making high quality content 
available.  Sixty-six percent of prime time programming is in HD, 
high definition, so the notion that they are not going to make their 
content available if they don't have this flag is belied by the facts.  
In 2002, Viacom threatened to not do any HD programming unless 
they got a broadcast flag.  Well, guess what?  CBS is doing tons of 
high definition broadcasting.
	MR. FERGUSON.  Mrs. Blackburn is recognized for questions.
	MRS. BLACKBURN.  Thank you all.  Thanks for staying here for 
the afternoon.  Not any of you probably thought that you were 
going to be spending the afternoon with us but this is always a 
good debate and being certain that we protect all of our content 
creators is a discussion that I am enjoying having on an ongoing 
basis with Mr. Shapiro.
	He has great innovators that are members of his organization.  
So, Mr. Shapiro, let us continue our dialogue, how about that?  
And go back to Mr. Ferguson's bill, and you are critical of the bill 
and there are some--and I appreciate being invited to speak to your 
groups and sometimes there are some that will say we are trying to 
confuse the issue or that you guys are trying to confuse the issue 
by saying that new devices from XM will comply with the Audio 
Home Recording Act, and we have great discussions about it.
	Some people think this is a red herring because the fee paid is 
minimal and it is not sufficient for the download service that they 
are providing, and we have our entertainers that, basically as we 
heard Mr. Harris say that some of these devices, his revenue is 
going to be gone, and he is not going to be making revenue.  So, 
don't you think there ought to be some kind of new services 
compensation for the songwriters so that they are being 
compensated?  Don't you think there should be a way with these 
new devices that they are going to be compensated?
	MR. SHAPIRO.  Well, thank you, and thank you for coming 
back and I was looking forward to the moment you had your voice 
back.  The last time I was up here, I was terrified when you didn't 
have a voice.
	MRS. BLACKBURN.  Oh, I made sure that I was ready for today.
	MR. SHAPIRO.  What you are asking as I hear it, is because 
technology is changing there must be new ways to compensate 
creators, and what I would ask you to recognize is we did cut a 
deal with the music industry as Congress asked us to.  We came 
back, and that deal is kicking in now because every one of these 
devices that they are so concerned about, as a result there would be 
an enormous royalty paid.  That is why when they say it is only $2 
million, yeah, because they haven't been sold yet.
	Now if they will be sold, well, depending on what happens 
with the lawsuit obviously, there will be significant amounts of 
money.
	MRS. BLACKBURN.  Let us qualify that because it is fractions of 
a penny.
	MR. SHAPIRO.  No, let me--can I just explain?
	MRS. BLACKBURN.  Okay.  Go ahead.
	MR. SHAPIRO.  I need some help here.  I think it is $8 to $10 
per device sold goes directly to the music industry, and the reason 
it is very--this is just per device.
	MRS. BLACKBURN.  Yes.  Yes.
	MR. SHAPIRO.  In addition, there is the monthly fee which they 
get a very large cut of.  I understand Sirius and XM are the largest 
payers of royalties to the music industry.  And then there is also the 
fact that we are by law, the deal we cut with the music industry at 
the request of Congress, we have agreed to restrict every device so 
that it may not make copies of copies.  So essentially the sky is not 
falling.
	MRS. BLACKBURN.  We are here for the flag.
	MR. SHAPIRO.  Yes, we all are.
	MRS. BLACKBURN.  And we all support a flag.
	MR. SHAPIRO.  And I think it is good to talk about--we want 
this great creativity, but I think the fact is that we believe the 
devices encourage great creativity by everyone.  I think what I 
would like to do is define the difference that we have because I 
think we do have a difference.  And I think what I have heard you 
say earlier today is that you do not think that consumers in all 
cases should have the right to record from radio and aggregate it, 
and that is what Mr. Bainwol is asking to change and that is why 
there is this proposal out there.
	And that is where the difference is right now, and the question 
is do consumers have the right to record off of radio or at least off 
of satellite and HD radio, and that is the question.  And if it is a 
TiVo in the broadcast world they do with TiVo because the video 
broadcast flag is just about sending stuff over the Internet, and if 
we want to talk about sending stuff over the Internet, we want to 
negotiate about a flag, let us do that.  We have been asking the 
RIAA to talk about that for years.  But talking about what 
consumers do in their home is what we are focused on here.
	If Congress wants to take away the right that consumers have 
to record off the radio that is what Congress has the right and 
privilege to do, but that is what this is about.
	MRS. BLACKBURN.  Well, I think that what we have to look at 
there too is--and all of that sounds good but, Mr. Shapiro, if you 
can sort a file and you can store that file and then you can 
redistribute that file you are playing with something that is a horse 
of a different color, and that is where we have such a difference of 
opinion.  And it works out, when you look at what is paid by radio 
there is very little that ends up going to that songwriter on that 
royalty, very little on per song but, we have--
	MR. SHAPIRO.  Excuse me, could I just correct one thing?  The 
redistribution is not permitted with these devices so what you are 
talking about is recording in the home.  Every device--
	MRS. BLACKBURN.  In a perfect world.
	MR. SHAPIRO.  No, that is what we are talking about today.
	MRS. BLACKBURN.  Mr. Chairman, my time is over, and I will 
yield back.
	MR. FERGUSON.  Thank you, Mrs. Blackburn.  I have one 
follow-up question with Ms. Sohn.  When we are talking about this 
video flag provision, I believe your organization and perhaps 
others have argued for a news exception, and I just want to explore 
that a little bit.  Now obviously broadcasters and others have talked 
about without this content protection they have less of an incentive 
or less of an ability to protect their intellectual property, their 
investment and their product, et cetera.
	Obviously news organizations do the same thing when they 
produce a product, when they produce a newscast.  They have 
invested resources to produce that news content.  If the FCC's flag 
rules still allow personal copying and limited Internet sharing, why 
is there a need for a news exception, and how do we define what is 
news?
	MS. SOHN.  Well it doesn't allow limited Internet sharing.  That 
was the point I made in the testimony is that broadcast flag not 
only prohibits indiscriminate redistribution over the Internet, it 
prohibits all distribution over the Internet so that is number one.  
Number two, news and public affairs programming, the thing 
about news and public affairs is that the day after it plays it doesn't 
have any value, all right, and I have heard some people say, well, 
we might want to sell DVD sets of Meet the Press.  Well, if that 
was the case why don't we see it on the shelves already?
	So one of the rationales for the broadcast flag is that, well, if 
our movies are pirated then we are not going to be able to put them 
on DVD.  We won't be able to have secondary markets for them.  
Well, that is clearly not the case.  Nobody really wants to buy the 
7:00 news on DVD.  That is number one.  The second point is to 
the extent that broadcasters get free use of the public air waves, 
they do so because they are supposed to provide news and public 
affairs programming, and that is the type of programming that 
people blog on, they comment on, they criticize on-line.
	So to take that away from the American public is basically 
saying, okay, you can spend your taxpayer dollars and give them 
all to the broadcasters for nothing and get absolutely nothing in 
return.  
	MR. SHAPIRO.  Can I just add to that?
	MR. FERGUSON.  Forgive me.  How do we define news 
content?
	MS. SOHN.  It is actually defined in the Communications Act.  
The exceptions to Section 315, the equal time rules, is defined 
there and there is a whole--
	MR. FERGUSON.  Not all of us have read 315.
	MS. SOHN.  Those are the exceptions to the equal time rule.  
There are certain occurrences for news and documentary 
programming where you basically don't have to follow the equal 
time rules.  The FCC has a huge body of law defining what is, and 
I will say as somebody who lost many of these cases when I was at 
Media Access Project, the definition actually is not too broad but 
somewhat broad.  It would cover enough to make us comfortable.
	MR. FERGUSON.  It just seems that that is a sticky area 
particularly with the way coverage today and broadcasts today are 
changing.  I mean you could flip through the channels at any point 
during the day and find news coverage when it just sort of seems to 
me that those lines are blurring a little bit and that might be a 
difficult exception to both define and enforce.
	MS. SOHN.  Well, again, like I said, the FCC has a very large 
body of law in that area so it not like they are going blind.  And I 
also think that the broadcasters are pretty smart.  They know what 
news and public affairs programming is.  Now I do have a problem 
with the Senate provision and the telecom bill because it basically 
allows the broadcasters to have the exception swallow the 
exception.  They obviously have to have some discretion but the 
FCC has to be able to also enforce any concerns that the public has 
with them defining news and public affairs programming too 
broadly.
But under the FCC's case law, I don't think it is a problem 
actually.
	MR. FERGUSON.  Does 60 Minutes fit under that?
	MS. SOHN.  I would think so, yeah.
	MR. FERGUSON.  So that would be considered a news--
	MS. SOHN.  News and public affairs programming, probably.  I 
would have to see what the FCC has decided as far as equal time 
rules are concerned but is anybody selling 60 Minutes reruns on 
DVD?
	MR. FERGUSON.  Yeah.
	MR. SHAPIRO.  Mr. Ferguson, can I give you a real life 
example?
	MR. FERGUSON.  Sure.
	MR. SHAPIRO.  I assume you are running for re-election in New 
Jersey and you have an opponent, I don't know.  But the opponent 
runs an attack ad on your local television station against you which 
is totally unfair and your staff is incensed about it.  And they call 
you up in Washington--
	MR. FERGUSON.  Any attack ads somebody would run against 
me would be terribly unfair.
	MR. SHAPIRO.  Then you want to see it.  Here you are in 
Washington.  Under today they could basically copy it and send it 
to you over the Internet.  No broadcast flag.  In fact, as was said 
earlier, there is no exceptions.  If this all passed as proposed, I 
don't know what would happen.  They would probably have to 
Federal Express it, a hard copy, so you lose 12 or 24 or 36 hours 
waiting for that Fed Ex to actually see how bad it really was.
	There are a lot of exceptions like that which come in, and 
which is why the exceptions are important.  And I don't know if 
that would qualify as news and public affairs.  I don't know if 
attack ads are actually news.  But it would affect--and there are a 
lot of real life situations like that.
	MR. FERGUSON.  Can you comment on that?
	MR. ATTAWAY.  That is simply not true.  The FCC rule does 
provide--
	MR. FERGUSON.  You have a disagreement?
	MR. ATTAWAY.  --for discriminate redistribution and in fact 
one of the 13 technologies that was certified by the FCC would 
permit you to get your attack ad sent from your district to your 
office here in Washington.  I just don't understand why I keep 
hearing this that the rule would prevent all redistribution when it is 
just simply not true, and the technologies certified by the FCC 
would permit it.
	MS. SOHN.  But what the rule says and what the technology 
allows you to do, Fritz, are two separate things, okay, so the FCC 
kept saying, well, we are not changing copyright law and this is 
only about indiscriminate redistribution.  They can say that all they 
want but the technology does not permit what Gary just talked 
about.
	MR. FERGUSON.  When we are talking about Dateline or, what 
do you call it, 60 Minutes or Newsmakers or some of these other 
programs which seem to kind of blur the lines a little bit that is 
where I was going.  I appreciate your varied viewpoints on this.  
One thing we have heard today is a lot of varied viewpoints.  I 
know there was some comment from some of you on my bill 
which we discussed at the first panel.  I know, Mr. Shapiro, you 
were cautioning against sweeping generalizations and Chicken 
Little and the sky is falling, and I would just respectfully ask that 
you not practice that either.
	MR. SHAPIRO.  I would never do that.
	MR. FERGUSON.  In your description of my bill or whatever Mr. 
Bainwol or someone else was saying, my sense is that there is 
certainly a reasonable common ground solution that folks if they 
just get to the negotiating table can come up with.  It has happened 
before.  It can happen again.  I don't happen to believe that 
government and the Congress getting involved in every problem is 
necessarily the solution, but when it seems like folks aren't 
necessarily perhaps negotiating effectively and one party is 
severely disadvantaged by the lack of a negotiation that seems to 
me to be a market failure as someone said earlier today, and that is 
frankly the goal of my bill.
	Thank you all, all three of you, very much for being here today.  
We appreciate it very much.
	MR. SHAPIRO.  Thank you for listening.
	MR. FERGUSON.  You are welcome.  And we will adjourn this 
hearing.
	[Whereupon, at 5:53 p.m., the subcommittee was adjourned.]


  Atlantic Recording Corp., et al. v. XM Satellite Radio Inc., Docket No. 06 CV 3733 (S.D.N.Y.). 
  H. Rep. No. 92-487, 92d Congress, 1st Sess. at 7 (Sept. 22, 1971) (emphasis added).
  See S. Rep. No. 102-294, 102d Cong., 2d Sess. 30, 51 (June 9, 1992).
  Hearing Before the Senate Subcommittee on Communications, S. Hrg. 102-908, Serial No. J-102-
43, at 111 (Oct. 29, 1991) (statement of Jason Berman, President of RIAA) (emphasis added).  
  See, e.g., S. Rep. No. 93-983, at 225-26 (1974) ("The financial success of recording companies and 
artists who contract with these companies is directly related to the volume of record sales, which, in 
turn, depends in great measure on the promotion efforts of broadcasters."). 
  S. Rep. No. 104-129, at 15 ("1995 Senate Report"); accord, id. at 13 (Congress sought to ensure 
that extensions of copyright protection in favor of the recording industry did not "upset[] the long-
standing business relationships among record producers and performers, music composers and 
publishers and broadcasters that have served all of these industries well for decades.").
  17 U.S.C.  114(d)(1)(A).
  Audio Home Recording Act of 1991: Hearing Before the Subcomm. on Patents, Copyrights, and 
Trademarks of the S. Comm. on the Judiciary, S. Hrg. 102-908, 102nd Cong., 2d Sess. 111 (Oct. 29, 
1991) (statement of Jason S. Berman, President, Recording Industry Association of America).  Mr. 
Berman also argued "[m]oreover, enactment of this legislation will ratify the whole process of 
negotiation and compromise that Congress encouraged us to undertake."  Id. at 120.  There could be 
nothing more deleterious to that process than allowing the recording industry to renege on the 
legislative deal that it made.
  Contrary to what some may have heard, the S50 contains no automated search function.  You 
cannot program the device to seek individual songs or artists, period.
  House Judiciary Committee Report No. 92-487, 92nd Cong., 1st Sess. at 7 (1971).
  Record Rental Amendment of 1984, Pub. L. No. 98-450, 98 Stat. 1727 (1984).  
  See H.R. Rep. 98-987 (Aug. 31, 1984).
  See, e.g., S. Rep. 102-294, 102nd Cong., 2nd Sess. 33 (June 9, 1992).
  S. Rep. No. 102-294, 102nd Cong., 2nd Sess. 51 (June 9, 1992) (emphasis added).
  S. Rep. 102-294, 102nd Cong., 2nd Sess. 30 (June 9, 1992); id. at 51 ("key purpose of [AHRA] is to 
insure the right of consumers to make analog or digital recordings of copyrighted music for private, 
noncommercial use").
  Id. at 51.
  138 Cong. Rec. H9033 (daily ed., Sept. 22, 1992)(Statement of Rep. Moorhead).  
  138 Cong. Rec. H9029, H9033 (daily ed., Sept. 22, 1992)( Statement of Rep. Hughes, emphasis 
added).
  Diamond, 180 F.3d at 1079, quoting S. Rep. No. 102-294 at 86.
  Id. at 179.
  S. Rep. 102-294 at 36.  Congress chose SCMS as a pre-approved technology because "SCMS has 
been subjected to extensive review by the affected industries and relevant international scientific 
standards bodies,"  H.R. Rep. No. 102-873 Part 1 at 19.  Further, Congress explicitly granted 
regulatory authority to the Secretary of Commerce, not the FCC, to approve technological protection 
measures other than SCMS, subject to the requirement that they have the same functional 
characteristics of SCMS.  17 U.S.C.  1002(a)(3).
  Although the Act uses a set of nested definitions that are somewhat complex, it defines a "digital 
audio recording device" as a device "the digital recording function of which is designed or marketed 
for the primary purpose of making a digital audio copied recording for private use."  17 U.S.C. 
1001(3).  A "digital audio copied recording" is, in turn," a "reproduction in a digital recording 
format of a digital musical recording, whether that reproduction is made directly from another digital 
musical recording or indirectly from a transmission."  Id., 1001(1) (emphasis added).  A "digital 
musical recording," in turn, is material object in which are fixed, in a digital recording format, only 
sounds, and material, statements, or instructions incidental to those fixed sounds, if any."  
  S. Rep. No. 102-294 at 66.
  The "Perform Act," H.R. 2466, would require any device that can record from a satellite radio 
service to play back songs only in the order transmitted on a particular channel -- not in the order 
desired by the owner of the device.
  The "Section 115 Reform Act," H.R. 5553, would revoke the necessary license in the case of any 
service that "takes affirmative steps to authorize, enable, cause, or induce the making of 
reproductions of musical works by or for end users that are accessible by such end users for future 
listening" - "future listening" meaning even the type of time-shift recording that the Supreme Court 
protected as fair use in the Betamax case.
  The "Digital Audio Broadcast" provisions of S. 2686, telecommunications reform legislation under 
consideration by the Senate Commerce Committee at the time of submission of this written 
statement, would require the Federal Communications Commission to impose regulations governing 
such purported "distributions" - apparently, by implication, reclassifying broadcast performances as 
"distributions" and so by implication amending copyright law.
  This was contained in a minority discussion draft of the legislation referenced directly above.
  The Audio Home Recording Act of 1991:  Hearing before the Senate Committee on the Judiciary, 
S. Hrg. 102-98 at 115, October 29, 1991, written statement of Jason S. Berman.at 119.  Mr. Berman, 
in fact, emphasized that the comprehensive compromise nature of the AHRA was a reason for the 
Congress to pass it:  "Moreover, enactment of this legislation will ratify the whole process of 
negotiation and compromise that Congress encouraged us to undertake."  Id. at 120. 
 http://www2.ncaa.org/portal/media_and_events/press_room/2006/march/20060320_mmod_rls.html
 	D.C. Circuit Court Judge Harry Edwards noted this reach at oral argument when he said, 
"You're beyond transmission.I mean you're out there in the whole world regulating****I mean, I 
suppose it will be washing machines next."  ALA v. FCC, Oral Argument Transcript at 31.
 	For a detailed analysis of the flaws of the FCC's certifications process, see Center for 
Democracy and Technology, Lessons of the FCC Broadcast Flag Process (2005), found at 
http://cdt.org/copyright/20050919flaglessons.pdf
 	For a detailed discussion of these issues, see 
http://www.publicknowledge.org/content/presentations/bflagpff.ppt
 	I say "so called," because calling a digital radio broadcast signal "High Definition" is quite 
misleading.  Whereas in the television context, High Definition connotes a far clearer and sharper 
picture, an HD radio signal simply raises the quality of AM radio to FM standards, and permits the 
reception of broadcast radio in places where an analog signal would get cut off, such as in a tunnel or 
at a traffic light.  Indeed, an "HD" quality signal is not even a CD quality signal.  See, Ken Kessler, 
Digital Radio Sucks, it's Official, found at http://www.stereophile.com/newsletters/.
 	See In the Matter of Digital Broadcast Content Protection, FCC 03-273, 18 FCC Rcd 23550, 
23553 (November 4, 2003).
 	See Comments of Viacom In the Matter of Digital Broadcast Content Protection, MM Docket 
No. 02-230 at 12 (December 6, 2002).
 	D.C. Circuit Judge Edwards also rejected this argument. See ALA v. FCC Oral Argument 
Transcript at 32 (Judge Edwards:  "This in no way -- what you do here or not in no way impairs the 
ability to . . . stay on the digital deadline. . . . In no way.").
 	http://www.ati.com/products/hdtvwonder/
 	For the week of Jan. 19 to Jan. 25, ABC broadcast 13 of 32 prime-time shows in HD. During 
the same week, CBS broadcast 31 of 34 prime-time shows in HD; NBC broadcast 32 of 50 prime-
time shows in HD during the same period. For all 3 networks combined, 76 of 116 (66%) prime-time 
shows were broadcast in HD for one week in January 2006.
 	http://www.cnet.com/4520-7874_1-5119938-1.html
 	http://www.ce.org/Press/CurrentNews/press_relesae_detail.asp?id=10913
 	See, http://biz.yahoo.com/prnews/051220/nytu017.html?.v=36
 	See testimony of Mitch Bainwol before House Committee on the Judiciary, Subcommittee 
on Courts, the Internet, and Intellectual Property for the hearing on "Content Protection in the Digital 
Age: The Broadcast Flag, High-Definition Radio, and the Analog Hole," November 3, 2005 at 4, 
found at http://judiciary.house.gov/media/pdfs/bainwol110305.pdf; and Mitch Bainwol, Out, P2P 
Paranoia, In: Platform Parity, Billboard Magazine, January 7, 2006 at 4.  
 	See www.parentstv.org.
 	 CRS Report at 5.
 	17 U.S.C. 1000-1010.
 	One MPAA executive stated at a recent public forum that the studios opposed such an 
exemption because they wanted to reserve the right to sell boxed sets of shows like Meet the Press.  
This strains credulity, since if there was a secondary market for public affairs programming of this 
type, then the studios would already be selling it.
 	H.R. 4569: The Digital Transition Content Security Act of 2005, 109th Cong. 2005.  Found at: 

 	See Testimony of Dean Marks, Senior Counsel Intellectual Property, Time Warner, Inc., and 
Steve Metalitz, Representing Content Industry Joint Commenters, before the Copyright Office in 
Rulemaking Hearing: Exemptions From Prohibitions On Circumvention Of Technological Measures 
That Control Access To Copyrighted Works, May 13, 2003 at 60-61: "I think the best example I can 
give is the demonstration that Mr. Attaway [MPAA Executive Vice President for Government 
Relations and Washington General Counsel] gave for you [Marybeth Peters, Registrar of 
Copyrights] earlier this month in Washington in which he demonstrated that he used a digital 
camcorder viewing the screen on which a DVD was playing to make a excerpt from a DVD film and 
have a digital copy that could then be used for all the fair use purposes.." (Mr. Metaliz at 60.) "I 
agree with everything Steve has just said about fair use copying or taking clips . with digital 
camcorders and analog camcorders being widely available ." (Mr. Marks at 61).

 	Jefferson Graham, RIAA Chief Says Illegal Song-Sharing "Contained", USATODAY.COM, 
June 12, 2006, at: http://www.usatoday.com/tech/products/services/2006-06-12-riaa_x.htm.
 	See Keynote Address of Edgar Bronfman, Chairman and CEO of Warner Music at 
http://www.tvworldwide.com/events/pff/050821/agenda.htm. "The Music Industry, like almost 
every industry faced with massive and rapid transformation first reacted too slowly and moderately, 
inhibited by an instinctive and reflexive reaction to protect our current business and business 
models."
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