[Federal Register Volume 59, Number 155 (Friday, August 12, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-19668]


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[Federal Register: August 12, 1994]


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LIBRARY OF CONGRESS

Copyright Office
[Docket No. RM 93-5A]

 

Cable Compulsory License; Major Television Market List

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of policy decision.

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SUMMARY: In light of the 1992 Cable Act's direction to the Federal 
Communications Commission (FCC) to update the Sec. 76.51 major 
television market list, the Copyright Office is reaffirming its 1987 
Policy Decision accepting Commission market redesignation for purposes 
of the copyright cable compulsory license. Broadcast signals entitled 
to mandatory carriage status under the FCC's must-carry rules in effect 
on April 15, 1976, as a result of a Commission market redesignation 
order, are to be treated as local signals for purposes of the cable 
compulsory license. The Copyright Office declines to take a position at 
this time as to the possible copyright effect of a future FCC reranking 
of major television markets.

EFFECTIVE DATE: Effective date August 12, 1994.

FOR FURTHER INFORMATION CONTACT: Eric Schwartz, Acting General Counsel, 
U.S. Copyright Office, Library of Congress, Washington, D.C. 20559. 
Telephone: (202) 707-8380; Telefax (202) 707-8366.

SUPPLEMENTARY INFORMATION:

I. Background

    On June 28, 1993, the Copyright Office issued a Notice of Inquiry 
(NOI) informing the public that it was considering the impact of the 
Federal Communications Commission's recent update of its major 
television market list, 47 CFR 76.51, on copyright liability under the 
cable compulsory license, 17 U.S.C. 111. 58 FR 34594 (June 28, 1993). 
The Commission's action, Report and Order in MM Docket 92-259, 8 FCC 
Rcd 2965 (1993), was in response to the ``Cable Television Consumer 
Protection and Competition Act of 1992'' (1992 Cable Act) which adds a 
new section 614(f) to the Communications Act of 1934 requiring the FCC 
to ``update section 76.51 of title 47 of the Code of Federal 
Regulations.'' The Commission amended three markets on the list by 
adding Chillicothe to the Columbus, Ohio market; New London to the 
Hartford-New Haven-New Britain-Waterbury, Connecticut market; and Rome 
to the Atlanta, Georgia market. 8 FCC Rcd at 2978. The Commission also 
announced that a major revision of the major television market list was 
not necessary at that time, and that any future changes would be made 
on a case-by-case basis. Id.
    The NOI fully described the history and copyright significance of 
the major television market list. See 58 FR at 34594 (June 28, 1993). 
To summarize briefly, the major television market list contained in 
Sec. 76.51 of the Commission's rules is a ranking, based on audience 
size, of the top 100 television markets in the country derived from 
Arbitron's 1970 prime time household rankings. Adopted in 1972, the 
list named the communities comprising each individual market1 and 
related, inter alia, to the carriage obligations of cable systems under 
the former FCC distant signal and must-carry rules. With the 
elimination of the distant signal rules in 1981 and, especially, the 
invalidation of the must-carry rules in the Quincy Cable T.V., Inc. v. 
FCC, 768 F.2d 1434 (D.C. Cir. 1985), cert. denied, 476 U.S. 1169 (1986) 
and Century Communications v. FCC, 838 F.2d 292 (D.C. Cir. 1987), cert. 
denied, 486 U.S. 1032 (1988) cases, the FCC no longer made changes to 
Sec. 76.51. The 1992 Cable Act2 resuscitated the major-market list 
by requiring the Commission to update it.
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    \1\Markets containing the names of more than one community are 
known as ``hyphenated'' markets. E.g., Roanoke-Lynchburg, Virginia.
    \2\The 1992 Act restored must-carry requirements, but adopted a 
different standard (``area of dominant influence'' or ``ADI'') for 
applying them. The Supreme Court has reviewed the must-carry rules 
and, while they currently remain in force, remanded them to the 
trial court to make factual findings justifying their retention. 
Turner Broadcasting, Inc. v. F.C.C., 62 U.S.L.W. 4647 (June 27, 
1994).
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    Section 76.51 has relevance for the section 111 copyright cable 
compulsory license in two ways. The first is in determining whether a 
broadcast signal is local or distant. Compulsory license royalties are 
determined, for the most part, by the number of distant signals a cable 
system carries. When Congress created the cable license in 1976, it 
defined a broadcast station as being local to a cable system when the 
station ``is entitled to insist upon its signal being retransmitted by 
a cable system pursuant to the rules, regulations, and authorizations 
of the Federal Communications Commission in effect on April 15, 1976.'' 
17 U.S.C. 111(f). This passage is a direct reference to the FCC's 1976 
must-carry rules, in which the major television market list played a 
significant role. Under those earlier rules, any cable system community 
within 35 miles of a market identified in the Sec. 76.51 list was 
subject to mandatory carriage of any broadcast station licensed to a 
community within the market. Hence, as provided by section 111 of the 
Copyright Code, cable systems in those circumstances may carry stations 
located within the major market as a ``local'' signal, thereby avoiding 
the distant signal cable compulsory license royalty fee.
    Aside from the local/distant status of broadcast signals, 
Sec. 76.51 also serves a purpose in determining the applicable royalty 
rate for distant signals to be paid by cable systems. The earlier FCC 
must-carry rules determined when a broadcast signal was distant, and in 
turn the Commission's distant signal carriage rules in effect in 1976 
determined how many distant signals a cable operator in a top 100 
television market could carry. 47 C.F.R. Secs. 76.61 and 76.63 (1976). 
Cable systems operating in the top 50 markets listed in Sec. 76.51 were 
generally allowed to carry three distant signals, while systems in the 
second 50 markets could generally carry only two. When the distant 
signal carriage rules were eliminated in 1981, see Malrite T.V. of New 
York, Inc. v. FCC, 652 F.2d 1140 (2d Cir. 1981), cert. denied sub. 
nom., National Football League, Inc. v. FCC, 454 U.S. 1143 (1982), the 
Copyright Royalty Tribunal adjusted the royalty rates under the 
Copyright Code provision permitting adjustment ``[i]n the event that 
the rules and regulations of the [FCC] are amended . . . to permit the 
carriage of additional television broadcast signals beyond the local 
service area of such signals. . . .'' 17 U.S.C. 801(b)(2)(B). The 
result was that cable carriage of formerly non-permitted distant 
signals triggered a substantially higher copyright royalty rate (3.75% 
of gross receipts per signal) than that applicable to carriage of 
formerly permitted signals (less than 1% of gross receipts per signal). 
See Adjustment of the Royalty Rates for Cable Systems, 47 FR 52146 
(Nov. 19, 1982). Cable systems in the top fifty Sec. 76.51 markets, 
therefore, can generally carry one more non-3.75% distant signal than 
cable systems located in the second 50 markets.
    Except for redesignation of the scope of a particular market, the 
markets listed in Sec. 76.51 and their ranking have remained unchanged 
since the section's inception in 1972. In 1985, the FCC amended the 
list to include Melbourne and Cocoa, Florida in the Orlando-Daytona 
Beach, Florida hyphenated market, and added Visalia, Hanford, and 
Clovis, California to the Fresno, California market. See Report and 
Order in MM Docket No. 84-11 RM 4557, 102 FCC2d 1062 (1985)(Florida); 
Report and Order in MM Docket No. 84-439, FCC-85-59 (1985)(California). 
That action raised some of the same issues presented in this 
proceeding, and we asked for public comment concerning the implications 
of the FCC action on the copyright cable compulsory license. Notice of 
Inquiry in Docket No. RM 85-2, 50 FR 14725 (Apr. 15, 1985). We asked 
the public to respond to a series of questions, including:
    (1) What is the impact on the copyright law of a change by the FCC 
in the major television market list;
    (2) Whether the amendment of Sec. 76.51 was a rule change requiring 
an adjustment in the royalty rates;
    (3) How should the 3.75% royalty for distant formerly nonpermitted 
signals be applied to the changed market; and
    (4) What action, if any, should the Copyright Office take to 
clarify the issues raised by the FCC changes in the major television 
market list.
    We received 12 comments from interested parties, including comments 
from the FCC. The commentators were in unanimous agreement that the 
redesignations of the Orlando-Daytona Beach, Florida and Hanford-
Clovis, California hyphenated markets were not changes in the FCC rules 
in effect on April 15, 1976, and that the Copyright Office should treat 
signals in the newly defined markets that were local for communications 
purposes as local for purposes of computing copyright royalties as 
well.
    We issued a policy decision in 1987 accepting the Florida and 
California market changes for compulsory license purposes. 52 FR 28362 
(July 29, 1987). We stated that we were--* * * formally adopt[ing] the 
view that signals entitled to mandatory carriage status under the FCC's 
former must-carry rules as a result of an FCC market redesignation 
order are to be treated as local signals for purposes of the cable 
compulsory license. This position is necessarily based upon the 
interpretations that (1) Congress did not intend Sec. 76.51 to be 
frozen to its April 15, 1976 status for purposes of determining cable 
systems' local service area and copyright royalty fees; and (2) when 
the FCC amends its major television market list in 47 CFR 76.51, there 
has been no substantive rule change effected so as to impact 
calculation of cable copyright royalties.

Id. at 28366 (July 29, 1987).
    While we noted that our ``interpretation [was] based on the 
legislative history of the Copyright Act,'' we underscored the moot 
nature of our policy decision by what then appeared to be the end of 
changes to Sec. 76.51: [T]he changes in the FCC's must-carry-rules 
following the Quincy decision have essentially mooted the subject of 
this Notice. When this inquiry began the Copyright Office had concerns 
about enlargement of the class of local signals under the Copyright Act 
due to the approximately 400 petitions for market redesignation at that 
time pending at the FCC. However, it would appear that this policy 
concern is now eliminated because under the FCC's amended must-carry 
rules, the major market list is not determinative of must-carry status, 
and it is unlikely that a large number of market redesignations will be 
effected by the FCC in the future.

Id. The above statement proved to be accurate, especially with the 
elimination of all must-carry obligations later that year. See Century 
Communications v. FCC, 835 F.2d 292 (D.C. Cir. 1987), cert. denied, 486 
U.S. 1032 (1988).

II. 1992 Cable Act

    The composition of the major television market list remained intact 
until the passage of the 1992 Cable Act. The 1992 Cable Act amends the 
Communications Act of 1934 by, among other things, adding a new section 
614 governing the cable carriage obligations for local commercial 
television stations, i.e., new must-carry rules. As noted above, the 
1992 must-carry requirements no longer involve the major-market list. 
Nevertheless, section 614(f) of the 1992 Act requires that the FCC's 
regulations adopted to implement the new must-carry rules ``shall 
include necessary revisions to update section 76.51 of title 47 of the 
Code of Federal Regulations.'' As we noted in our NOI, the instruction 
of Sec. 614(f) may seem somewhat anomalous since the Sec. 76.51 major 
television market list has nothing to do with the new must-carry 
obligations of cable systems.3 See 58 FR at 34594 n.1 (June 28, 
1993). In compliance with the statutory directive, however, the Federal 
Communications Commission on November 19, 1992, published a Notice of 
Proposed Rulemaking in MM Docket No. 92-259, 7 FCC Rcd 8055 (1992) to 
consider changes to the Sec. 76.51 list. The Commission stated that, 
while the Cable Act was silent as to the reason for changes to 
Sec. 76.51, ``it appears that this [congressional] action would 
primarily affect copyright liability under the compulsory license.'' 7 
FCC Rcd at 8059 (1992).
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    \3\Section 76.51 does have relevance for the Commission's non-
network territorial exclusivity, network non-duplication and 
syndicated exclusivity rules. 47 C.F.R. Secs. 73.658(m), 76.92 and 
76.151.
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    In its final regulation issued in 1993, the Commission confirmed 
its copyright observation and redesignated three Sec. 76.51 markets: 1) 
it added Chillocothe to the Columbus, Ohio market; 2) it added New 
London to the Hartford-New Haven-New Britain-Waterbury, Connecticut 
market; and 3) it added Rome to the Atlanta, Georgia market. Report and 
Order in MM Docket 92-259, 8 FCC Rcd 2965 (1993). Nonetheless, the 
Commission took a conservative approach in updating Sec. 76.51: We do 
not believe that a major update of the Sec. 76.51 market list is 
necessary on the basis of the record before us. Wholesale changes in or 
reranking the markets on the list would have significant implications 
for copyright liability and for the Commission's broadcast and cable 
program exclusivity rules. We are not prepared to make such changes on 
the present record.

8 FCC Rcd at 2979 (1993). Future revisions of the major television 
market list are to be done on a ``case-by-case'' basis by petition for 
rulemaking. Id.
    Although the Commission confined its discussion to the 
redesignation of markets, it neither embraced nor ruled out the 
possibility of reordering markets. (``We are not prepared to make such 
changes on the present record.'') It is therefore possible that future 
changes to the Sec. 76.51 list may include not only redesignations but 
also reranking and deletions and additions to the market list, although 
probably in limited circumstances.

III. Notice of Inquiry

    In order to determine the copyright implications, if any, of the 
1992 Cable Act's instruction to the FCC to update the major television 
market list, we published a NOI initiating this proceeding. 58 FR 34594 
(June 28, 1993). We requested direct response to a series of questions:
    (1) The section 111(f) definition of a ``local service area of a 
primary transmitter'' is ``the area in which such station is entitled 
to insist upon its signal being retransmitted by a cable system 
pursuant to the rules, regulations, and authorizations of the Federal 
Communications Commission in effect on April 15, 1976''--i.e., the 1976 
must-carry rules. Is the amendment to the Sec. 76.51 major television 
market list required by the 1992 Cable Act an amendment of the 1976 
rules, or is it a separate and independent action of Congress? If it is 
an independent act with no bearing on the 1976 rules, under what 
statutory justification should the Copyright Office follow the present 
and future changes to the Sec. 76.51 list?
    (2) The FCC has stated its belief that ``Congress intended for our 
updated Sec. 76.51 list to be applied to assess copyright liability.'' 
What evidence is there in the 1992 Cable Act to support this 
contention?
    (3) If the Copyright Office accepts the redesignations of Ohio, 
Connecticut, and Georgia for copyright purposes, should the Office 
accept any future redesignations? Should such acceptance be as a matter 
of course, or should it be on a case-by-case basis?
    (4) If the Commission at some future date reranks markets on the 
list, and/or adds or subtracts markets, should the Copyright Office 
recognize these changes as applicable to the cable compulsory license? 
If so, in the situation where a reranking results in a cable system 
reducing its number of permitted distant signals, should the cable 
system be allowed to continue to carry a former permitted distant 
signal on a grandfathered basis as a non-3.75% distant signal?
    We received comments from the following parties: Federal 
Communications Commission (FCC); National Association of Broadcasters 
(NAB); Motion Picture Association of America, Inc. (MPAA); National 
Cable Television Association (NCTA); Association of Independent 
Television Station, Inc. (INTV); Commissioner of Baseball, National 
Basketball Association and National Hockey League (Professional 
Sports); Press Broadcasting, Company, Inc.; R&R Media Corporation; 
United Video, Inc.; Force Amusement Enterprises, Inc.; Providence 
Journal Company and Multivision Cable TV Corporation; WLIG-TV, Inc.; TV 
14, Inc.; and Cablevision Industries Corporation, Comcast Cable 
Communications, Inc., Cox Cable Communications, Jones Intercable, Inc. 
and Newhouse Broadcasting Corporation (Joint Cable Operators).

IV. Summary of the Comments

    The comments reveal a general unanimity as to the effect of the 
1992 Cable Act and the Commission's recent action regarding Sec. 76.51; 
the parties generally agree Congress did intend to affect copyright 
through the 1992 Cable Act, and that the Copyright Office should 
observe the Ohio, Connecticut, and Georgia redesignations for cable 
compulsory license purposes. While there is a slight difference of 
opinion as to how the Office should treat future FCC redesignations, 
most parties stated that the issue of FCC rerankings of the top 100 
television markets was not ripe for decision.

a. Response to Question 1.

    Question #1 addresses an extremely important legal issue: whether 
the 1992 Cable Act's direction to the FCC to update Sec. 76.51 
constituted an amendment of the FCC must-carry rules which were in 
effect in 1976. The Copyright Code requires application only of the 
1976 must-carry rules. See 17 U.S.C. 111(f) (definition of a ``local 
service area of a primary transmitter''). With the exception of the 
MPAA, all of the parties who addressed the issue agreed that the 1992 
Cable Act's direction to the FCC to amend Sec. 76.51 was not an 
amendment of the 1976 must-carry rules.
    Professional Sports argues that amendment of Sec. 76.51 by the FCC 
is not an amendment of the 1976 must-carry rules because Sec. 76.51 was 
not part of the must-carry rules. Rather, the applicability of the 1976 
must-carry rules was determined only by reference to the Sec. 76.51 
list. Sports, however, qualifies the separability of Sec. 76.51 from 
the 1976 must-carry rules by noting that a fundamental change in 
Sec. 76.51 could amount to a de facto amendment of the 1976 must-carry 
rules: [S]o long as the underlying structure of the [Sec. 76.51] list 
remains unchanged, a case-by-case modification of individual components 
of the list is an external event--comparable to modification in the 
reach of a station's Grade B contour--which may affect a station's 
local service area under the 1976 must-carry rules, but which does not 
alter the underlying principles by which calculation of a station's 
local service area is made under those rules. * * * However, if at any 
time in the future the Commission reverses itself and chooses to 
redefine the underlying structure of the 76.51 list, such a change 
could--depending on the nature of the change--constitute an amendment 
of the 1976 must-carry rules requiring a different response from the 
Copyright Office.

Professional Sports, comments at 7-8.
    NAB supports the position that the 1992 Cable Act is not an 
amendment of the 1976 must-carry rules. NAB notes that the House 
Judiciary Committee Report accompanying the 1976 Copyright Act 
specifically omits mention of Sec. 76.51 in its discussion of the must-
carry rules, thereby indicating that Congress did not intend to freeze 
Sec. 76.51 for compulsory license purposes: In explaining the 
definition of the ``local service area'' in Section 111(f) as being 
that area in which stations were entitled to must carry under the FCC's 
rules in effect on April 15, 1976, this report specifically referenced 
Sections 76.57, 76.59, 76.61 and 76.63. It did not reference Section 
76.51. . . . The logical explanation for the omission of Section 76.51 
is that Congress did not intend to freeze, in perpetuity, the list of 
top 100 markets as they existed on April 15, 1976.

NAB, comments at 3 n.4. Press Broadcasting also argues that Congress 
must have intended not to freeze Sec. 76.51; otherwise the 1992 Cable 
Act direction to update the list would not make sense. Press 
Broadcasting, comments at 4.
    The MPAA, unlike the other commentators, takes the position that 
the 1992 Cable Act is a separate and independent action of Congress and 
is an amendment of the 1976 must-carry rules. MPAA, comments at 4. 
According to MPAA, however, the Copyright Office still has authority to 
adopt the FCC changes to the Sec. 76.51 list, but it is not statutorily 
bound by such changes. MPAA compares the Cable Act amendment with the 
invalidation of the 1976 must-carry rules in the Quincy case. The 
invalidation of the must-carry rules ``was effectively an amendment of 
the 1976 regulations'' but the ``Copyright Office did not eliminate 
local station carriage for royalty purposes.'' Id. The statutory 
justification for the Copyright Office to either accept or reject 
amendments of Sec. 76.51 does not come from whether there has been a 
change of the 1976 rules, but is the ``responsibility assigned . . . 
[the office] to implement the provisions of the [compulsory license] 
plan. That responsibility requires the Office to determine the 
appropriate copyright policy related to the circumstances.'' Id. MPAA 
asserts that the Copyright Office is free to either follow or reject 
FCC changes to Sec. 76.51 depending upon how they affect copyright 
policy.

b. Response to Question 2.

    The FCC's Report and Order redesignating the Ohio, Connecticut, and 
Georgia markets concluded that Congress specifically intended to affect 
copyright liability through its direction to the Commission to update 
Sec. 76.51. In question #2 we sought specific evidence to back the 
FCC's conclusion.
    The FCC argues that the legislative history of the 1992 Cable Act 
clearly reflects Congress' intention to affect liability under the 
cable compulsory license through its direction to the 1992 Commission 
to update the Sec. 76.51 list. Although we noted in our NOI that the 
amendment to the Cable Act offered by Congressman McEwen did not 
explain the reasons for updating Sec. 76.51, see 58 FR at 34594 n. 1 
(June 28, 1993), the FCC reveals that Rep. John Dingell, Chairman of 
the House Committee on Energy and Commerce, did include a statement 
accompanying the McEwen amendment. ``The McEwen amendment requires the 
FCC to update the list of the Nation's television markets in order to 
clarify whether a signal of a television station is considered to be 
local or distant.'' Amendment No. 14, 138 Cong. Rec. H6529 (daily ed. 
July 23, 1992). Furthermore, the FCC notes that Congressman McEwen 
represented the Sixth District of Ohio, which is where Chillocothe, one 
of the Commission's redesignated markets, is located. FCC comments at 
5. The FCC urges that it is therefore clear that Congress attempted to 
affect copyright liability through the Cable Act: In short, the 
sequence of events, including the hyphenation of the Orlando market by 
the Commission and the acceptance of that amendment of Section 76.51 
for copyright purposes by the Copyright Office; the Copyright Office's 
[1992 cable] report specifically bringing this to the attention of 
Congress; the specific problem associated with the Columbus-Chillocothe 
television market and the response thereto; and the legislative 
history's indication that such changes were to define stations as 
``local'' or ``distant;'' all point to or are entirely consistent with 
a Congressional intention that changes resulting from the inclusion of 
Section 614(f) in the 1992 Cable Act were intended to have both 
communications and copyright consequences.

Id at 6. See generally comments of R&R Media Corp. and NAB.

c. Response to Question 3.

    Question #3 asks whether the Copyright Office, assuming it accepts 
the FCC's redesignations of the Ohio, Connecticut, and Georgia markets, 
should accept future Commission redesignations as a matter of course or 
on a case-by-case basis. With the exception of the MPAA, all parties 
addressing the issue believed that the Office should accept FCC 
redesignations as a matter of course. See, e.g., Force Amusement 
Enterprises, Inc., comments at 1-2; NCTA, comments at 4; NAB, comments 
at 1-2; INTV, comments at 4; WLIG-TV, Inc., comments at 1; Professional 
Sports, comments at 5-6; TV 14, Inc., comments at 1; Press 
Broadcasting, comments at 3-4. Since the FCC announced in its Report & 
Order that redesignations will be made on a case-by-case basis, the 
parties argue that this approach will provide the necessary 
governmental scrutiny and avoid widescale market changes affecting the 
copyright status of distant signals. One commentator declared: ``The 
addition or deletion of individual communities to or from designated 
markets listed in Sec. 76.51 of the Commission's Rules should have 
little overall effect on the cable copyright compulsory license royalty 
scheme.'' Professional Sports, comments at 5. According to this 
commentator, reconsideration of each Commission redesignation by the 
Copyright Office is therefore not only unnecessary, but unwise. 
Furthermore, several commentators noted that acceptance of future 
redesignations for copyright purposes is consistent with the position 
taken by the Office in its 1987 Policy Decision accepting the Florida 
and California redesignations, and with other Copyright Office 
declarations on the subject.
    The MPAA is the one commentator arguing that we should not accept 
FCC redesignations as a matter of course. MPAA supports acceptance of 
the Ohio, Connecticut, and Georgia redesignations by the Office for 
compulsory license purposes, but states that the ``acceptance should be 
specifically limited to the current circumstances and should have no 
controlling effect on future cases.'' MPAA, comments at 5. MPAA is 
concerned that the FCC may apply ADI (Area of Dominant Influence), 
adopted by the 1992 Cable Act for determining must-carry status, to 
future redesignations. Widescale use of ADI could, according to MPAA, 
transform the mere ``renaming'' of markets into a virtual 
``reordering'' of the top 100 markets, thereby dramatically affecting 
the compulsory license royalty scheme. MPAA, comments at 3 n.1. While 
this has not yet happened, MPAA urges the Copyright Office to ``set 
clear guidelines now to govern cable royalty reporting and payment 
practices in the event the FCC replaces the 1970 major market list with 
one based on current ADI designations.'' Id. at 3.
    Parties submitting reply comments in this proceeding were critical 
of the MPAA's rejection of acceptance of future redesignations and its 
admonition urging the Copyright Office to set guidelines. See Force 
Amusement Enterprises, Inc., reply comments at 2; NAB, reply comments 
at 4; INTV, reply comments at 6. Force underscores that the Commission 
specifically declined in its Report & Order to make wholesale changes 
in the major television market list, and that ``[u]nless and until such 
a major policy shift is actually considered by the FCC,'' reason 
dictates following the Commission's case-by-case redesignations. The 
reply commentators were also critical of the MPAA's recommendation that 
we adopt guidelines to evaluate the copyright consequences of future 
redesignations. They state that MPAA offers no argument or suggestions 
as to--1) why the criteria used by the FCC in making such 
redesignations are inadequate for copyright purposes; 2) what criteria, 
other than those employed by the FCC, the Copyright Office should use 
independently to evaluate market redesignations; or 3) the policy 
justification for, in essence, creating two separate major market 
lists.

NAB, reply comments at 4. Another commentator argued that adoption of 
guidelines would also be an unjustified rejection of our 1987 Policy 
Decision to accept Commission redesignations for cable license 
purposes. INTV, reply comments at 6-7.

d. Response to Question 4.

    Question #4 raises the issue of possible future reranking of 
markets on the Sec. 76.51 list and asks what effect reranking should 
have on the copyright status of distant signals. Since the FCC has not 
received a petition for reranking of markets, several commentators have 
suggested that the copyright implications of such an action are not 
ripe for decision. Parties aligned with cable interests support the 
view that current cable system carriage of permitted distant signals 
should be grandfathered, while copyright interests argue that the 
grandfathering of distant signals would be bad copyright policy 
resulting in considerable harm to the compulsory license royalty 
scheme.
    In announcing its practice for handling future revisions of the 
Sec. 76.51 list, the FCC did not address the possibility of 
reorganizing the order of the top 100 markets. See Report & Order, 8 
FCC Rcd at 2979 (1993) (FCC not ready to consider reranking on basis of 
present record). We noted in our NOI to this proceeding that since the 
Commission did not announce a definitive position on reranking of 
markets, ``[i]t is therefore possible that future changes to the 
Sec. 76.51 list may include both reranking and renaming, although 
probably in limited circumstances.'' NOI, 58 FR at 34595 (June 28, 
1993). Reranking would present the possibility of changes in the number 
of permitted/non-permitted distant signals that a cable system located 
in a top 100 market could carry, since the Sec. 76.51 list also had 
significance for the Commission's former distant signal carriage rules.
    For example, a cable system located in a second 50 market can 
generally carry two distant signals at the permitted base rate 
copyright royalty fee. Additional distant signals must be reported at 
the more expensive non-permitted 3.75% royalty fee. If a reranking of 
markets occurs and the cable system moves into the top 50 markets, 
then, according to the FCC's former distant signal carriage rules, the 
cable system could potentially carry three permitted base rate signals, 
instead of just two. If a reranking resulted in a cable system moving 
from the top 50 to the second 50, then the cable system would lose a 
base rate distant signal and possibly incur the 3.75% royalty for that 
signal. Concerned about the potential for a change in royalty status of 
current distant signals, we sought in Question #4 to elicit comment as 
to the possibility of grandfathering the royalty status of signals 
despite the effects of market reordering.
    Because the FCC has yet to receive a petition for reranking of the 
Sec. 76.51 list or to consider the issue, several commentators urge 
that the copyright implications of a reranking are not ripe for 
decision. Press Broadcasting, comments at 9; Professional Sports, 
comments at 1; NCTA, comments at 3. Noting that the questions involving 
market ranking versus market redesignation involve ``very different 
considerations,'' INTV urges that ``until the FCC is willing to revisit 
the ranking aspect of Sec. 76.51, the Copyright Office need not rush 
into the matter.'' INTV, comments at 22. Professional Sports also urges 
restraint, encouraging the Office to seek further comment at such time 
as the Commission does consider reranking. Professional Sports, 
comments at 9-10.
    Commentators aligned with cable argue that the Copyright Office 
must apply grandfathering principles to any reranking of television 
markets. See comments of United Video, Providence Journal, NCTA, INTV, 
and Joint Cable Operators. Citing the ``no rollback policy'' used by 
the Commission to apply its former distant signal carriage rules, these 
commentators state that the grandfathering of carriage of distant 
signals is critical to continued carriage of existing distant signals. 
The FCC specifically allowed for grandfathering of distant signals 
which had been carried prior to a rule change, so as to prevent 
carriage disruption. See, e.g., 36 FCC2d 143 (1972) (grandfathering 
signals carried prior to new distant signal and syndicated exclusivity 
rules); 54 FCC2d 265 (1975) (grandfathering distant signal sports 
imported prior to new restriction). The commentators note that the 
Copyright Office has also observed the practice of grandfathering. See 
Letter of Dorothy Schrader, Copyright Office General Counsel, to Peter 
H. Feinberg of January 31, 1990 (grandfathering of permitted signal 
after change in station's community of license from major market to 
nearby smaller market community); Letter of Dorothy Schrader, Copyright 
Office General Counsel, to Irving Gastfreund of December 11, 1986 
(grandfathering of permitted distant signals where area formerly 
located outside all markets becomes smaller market). Joint Cable 
Operators argue that there is no precedent for the Copyright Office to 
refuse to grandfather carriage of existing distant signals at the 
permitted base royalty rate. Thus, where a cable system moves from the 
top 50 to a second 50 market, or from a top 50 or second 50 market to a 
smaller market, we could not assess the 3.75% royalty rate against 
distant signals formerly carried on a permitted basis. Joint Cable 
Operators, comments at 3, Providence Journal, comments at 3, United 
Video, comments at 2-3.
    MPAA opposes application of the practice of grandfathering 
permitted signals. According to MPAA, if the Commission engages in a 
reranking of markets, ``the Office must either accept the reordering 
entirely or not at all for copyright royalty purposes.'' MPAA, comments 
at 5. If reranking results in a second 50 market moving to the first 
50, cable systems in that newly reranked market would gain an 
additional permitted signal. However, cable systems located in a market 
that loses one or more permitted signals as a result of reordering 
would have to pay the increased 3.75% royalty rate for those signals. 
This must be so because the practice of grandfathering would unfairly 
advantage cable systems: they would gain the benefit of additional 
permitted signals when their markets move up the Sec. 76.51 list, but 
would not lose any permitted signals when their markets move down the 
list. Id. at 6. Permitting grandfathering would, in MPAA's opinion, 
create as a practical result a Sec. 76.51 list which, for copyright 
purposes, would treat more than 50 markets as being top 50 markets 
since cable operators in markets dropping out of the top 50 as the 
result of an FCC reranking would still retain the copyright benefits of 
being a top 50 market. Id. at 7. Full acceptance or rejection of a 
Commission reranking will preserve balance in the royalty scheme. Id.
    United Video criticizes MPAA's position, submitting that ``the 
issue should not be maintaining precise balance or `imbalance' in the 
royalty plan or whether cable systems receive some minimal advantage or 
disadvantage. The primary issue and consideration in this proceeding 
should be the public interest in avoiding disruption of television 
signal carriage.'' United Video, reply comments at 2. Joint Cable 
Operators state that ``[w]hile the idea of cable systems gaining or 
losing permitted signals as they move up or down the major market list 
has a certain `symmetrical' appeal to it, the result will be needless 
disruption in service to viewers.'' Joint Cable Operators, comments at 
3.

e. Policy Considerations.

    In addition to responding to our questions, several commentators 
offered other reasons for accepting any and all changes to the 
Sec. 76.51 list. In what can loosely be categorized as ``policy 
considerations,'' these parties ask us to continue our 1987 Policy 
Decision accepting FCC redesignations and give effect to Congressional 
efforts to harmonize the cable compulsory license with the 1992 Cable 
Act.
    Several commentators aligned with broadcast and cable interests 
argue that the current proceeding is unnecessary because we already 
resolved the handling of Sec. 76.51 redesignations in our 1987 
proceeding. See, e.g., Press Broadcasting, comments at 3-4; NCTA, 
comments at 4; INTV, comments. They underscore that the Office's 1987 
statement ``formally adopts the view that signals entitled to mandatory 
carriage status under the FCC's former must-carry rules as a result of 
an FCC market redesignation order are to be treated as local signals 
for purposes of the cable compulsory license,'' 52 FR 28362 (July 29, 
1987), and argue that nothing supports a change in this position. They 
argue that if the Office ignored its 1987 Policy Decision and did not 
follow Commission redesignations, then the Office would in effect be 
making its own determination of market status. R&R Media Corp., 
comments at 6. See also NAB, comments at 4-5 (Copyright Office has no 
authority to ignore FCC changes to Sec. 76.51).
    According to INTV, maintaining the 1987 practice is ``more likely 
to promote the basic policy goal of copyright.'' INTV, comments at 18. 
We ``must resist the superficial notion which suggests that enlarging 
stations' copyright local area would decrease the cable royalty pool,'' 
and recognize that the addition of communities to Sec. 76.51 markets 
will increase carriage of broadcast stations not previously carried by 
cable systems in those markets because of distant royalty fees. Id. at 
19. Increased carriage will make more broadcast stations stronger, and 
``stations then will be in a position to pay more for programming. This 
enhances the value of the program owners' copyrights and assures an 
enhanced reward for use of their works. Program production is 
stimulated, and the goal of copyright is furthered.'' Id. at 20.
    Several commentators also argue that the Copyright Office's refusal 
to follow Sec. 76.51 changes would frustrate policy goals of the 1992 
Cable Act. Press Broadcasting notes the language in the House version 
of the 1992 Cable Act, stating ``[n]othing in this section shall be 
construed to modify or otherwise affect title 17, United States Code,'' 
was deliberately omitted from the Senate version that ultimately became 
the law. Press Broadcasting, comments at 8. ``By deleting language 
which would have rendered the Copyright Act immutable in the face of 
the 1992 Cable Act, Congress has at least strongly suggested that the 
latter legislation, being Congress' most recent action in the area, 
should be deemed to take precedence over the 17 year-old Copyright Act 
to the limited extent that any conflict between the two may be 
perceived.'' Id. at 8.
    INTV argues that Congress' direction in the 1992 Cable Act to 
update Sec. 76.51 is an effort to harmonize what is a local signal for 
both the Cable Act and section 111 of the Copyright Code. INTV, reply 
comments at 1-2. Through the 1992 Cable Act, Congress abandoned the 
unnecessarily restrictive and difficult to administer 1976 must-carry 
definition of a local signal, employing the more rationally based ADI 
concept. Congress also gave the FCC authority to adjust ADI 
determinations in situations where application of ADI would result in 
broadcast stations in the same market being treated differently. INTV, 
comments at 8 (citing H.R. Rep. No. 268, 102 Cong., 2d Sess. 98 
(1992)). According to INTV, updating Sec. 76.51 promotes both goals of 
ADI-wide carriage and parity among stations. Failure to recognize 
market redesignations for compulsory copyright license purposes ``would 
hinder ADI-wide carriage and promote competitive disparity among 
broadcast stations in the same market.'' Id. at 9.

V. Policy Decision

    We have fully considered the record in this proceeding and are 
satisfied that the 1992 Cable Act's amendment of the Communications Act 
of 1934 requiring that the FCC make ``necessary revisions to update 
section 76.51 of title 47 of the Code of Federal Regulations'' is not a 
substantive change of the ``rules, regulations, and authorizations of 
the Federal Communications Commission in effect on April 15, 1976.'' As 
a matter of sound copyright policy, we will therefore observe the 
redesignations of the Ohio, Connecticut, and Georgia markets contained 
in the Commission's March 29, 1993, Report & Order for purposes of 
calculating royalty fees under the cable compulsory license, 17 U.S.C. 
111. We will also observe for cable compulsory license purposes other 
FCC redesignations--defined as the addition or deletion of communities 
to the markets contained on the Sec. 76.51 list--made after March 29, 
1993. We do not, at this time, take a position with respect to the 
reranking of markets by the FCC--defined as the reordering and/or 
addition or deletion of markets contained on the Sec. 76.51 list--and 
its effects on the calculation of the royalty fees under 17 U.S.C. 111.
    The Copyright Code defines the local service area of a broadcast 
station as the area in which the station would be entitled to insist 
upon its signal being retransmitted by a cable system in accordance 
with ``the rules, regulations, and authorizations of the Federal 
Communications Commission in effect on April 15, 1976''--i.e., the 1976 
must-carry rules. 17 U.S.C. 111(f). There is no question that in 
creating the cable compulsory license, Congress chose to freeze the 
1976 must-carry rules for purposes of calculating cable copyright 
royalties. H.R. Rep. No. 1476, 94th Cong., 2d Sess. 99 (1976). The 
purpose of freezing the must-carry rules was to insure that any 
subsequent rule amendments by the FCC that either increase or decrease 
the size of the local service area for its purposes do not change the 
definition for copyright purposes. The Committee believes that any such 
change for copyright purposes, which would materially affect the 
royalty fee payments provided in the legislation, should only be made 
by an amendment to the statute.

Id.
    Because Congress froze the 1976 must-carry rules for copyright 
purposes in determining local signals, we must resolve whether Congress 
also intended to freeze the major television market list as it was in 
1976. We are persuaded by the legislative history of the Copyright 
Code, and the supporting views of the majority of commentators to this 
proceeding, that Congress did not intend to freeze Sec. 76.51, and that 
FCC redesignations of markets on the list are not substantive changes 
to the 1976 must-carry rules. In describing the must-carry area for the 
definition of the local service area of a broadcast signal, the 1976 
House Committee Report specifically listed the FCC rules that contained 
must-carry provisions: ``Under FCC rules and regulations this so-called 
must-carry area is defined based on the market size and position of 
cable systems in 47 C.F.R. Secs. 76.57, 76.59, 76.61 and 76.63.'' Id. 
Omission of Sec. 76.51 is not surprising since Sec. 76.51 is not a 
must-carry rule; Sec. 76.51 is only incorporated by reference to must-
carry determinations. We therefore reaffirm the conclusions announced 
in our 1987 Policy Decision: (1) Congress did not intend Sec. 76.51 to 
be frozen to its April 15, 1976 status for purposes of determining 
cable systems' local service area and copyright royalty fees; and (2) 
when the FCC amends its major television market list in 47 CFR 76.51, 
there has been no substantive rule change effected so as to impact 
calculations of cable copyright royalties.

52 FR 28365 (July 29, 1987).
    Our NOI questioned whether the 1992 Cable Act's direction to the 
FCC to update Sec. 76.51 sought to bring a change in the copyright laws 
or the cable compulsory license. See 58 FR at 34594 n. 1 (June 28, 
1993) (``It cannot be definitively said that Congress sought to bring 
about a change in the copyright laws or the administration of the cable 
compulsory license through this provision.''). Some of the commentators 
to this proceeding have produced evidence in the legislative history 
that is strongly suggestive of a congressional effort to clarify the 
local/distant status of broadcast signals. This history includes 
correspondence between the licensee of WWAT (TV) Chillocothe, Ohio, one 
of the communities subject to the 1993 FCC redesignation; and Rep. 
McEwen requesting an amendment to the 1992 Cable Act to redesignate the 
Columbus, Ohio market to include Chillocothe, R & R Media Corp. 
comments, at appendix; and a statement of Rep. John Dingell, Chairman 
of the House Committee on Energy and Commerce, endorsing the adoption 
of the McEwen amendment into the 1992 Cable Act requiring the FCC to 
update Sec. 76.51 of its rules, 138 Cong. Rec. H6529 (daily ed. July 
23, 1992). Moreover, the Senate version, which ultimately became the 
law, omitted the language in the 1992 House cable bill, stating that 
nothing in the bill should be construed to affect the Copyright Act.
    We conclude that it is sound copyright policy to accept the FCC's 
redesignations4 of markets in the Sec. 76.51 list for cable 
compulsory license purposes beginning with the Commission's March 29, 
1993, Report & Order redesignating the Ohio, Connecticut, and Georgia 
markets. Acceptance of redesignations promotes greater uniformity 
between the operation of the copyright and communications laws, and is 
a better assessment of the reality of modern television marketplaces. 
Broadcast stations that for all intents and purposes compete and 
operate in a major television market can, through FCC redesignation, 
establish their location within that market. Their localition within 
that market should be recognized with respect to the cable compulsory 
license. All of the commentators agree that it is permissible for the 
Copyright Office to recognize FCC market redesignations of Sec. 76.51 
for purposes of 17 U.S.C. 111. We therefore reaffirm our 1987 Policy 
Decision by ``formally adopt[ing] the view that signals entitled to 
mandatory carriage status under the FCC's former must-carry rules as a 
result of an FCC market redesignation order are to be treated as local 
signals for purposes of the cable compulsory license.'' 52 FR 28366 
(July 29, 1987).
---------------------------------------------------------------------------

    \4\By ``redesignation,'' we mean the addition or deletion of 
communities to the top 100 television markets already appearing on 
the Sec. 76.51 list.
---------------------------------------------------------------------------

    While we will accept market redesignations now and in the future, 
we are aware of the possibility that, over time, a large number of 
market redesignations could dramatically affect the royalty structure 
of the cable compulsory license. There were approximately 400 petitions 
for redesignation pending at the FCC when the Copyright Office began 
its inquiry into Sec. 76.51 in 1985, see 52 FR at 28366, and while 
there is nowhere near that number before the FCC at this time, it is 
difficult to predict how many redesignation petitions the Commission 
will receive in the future. Extensive addition of new communities to 
existing markets could significantly raise the number of local signals 
carried by cable systems, thereby resulting in considerable decreases 
in royalties paid for distant signals. While we have said that we will 
accept future FCC redesignations as a matter of course, we are mindful 
that Congress expressly chose to freeze the 1976 must-carry rules for 
copyright purposes so as not to ``materially affect the royalty fee 
payments provided in the legislation.'' H.R. Rep. No. 1476, 94th Cong., 
2d Sess. 99 (1976). Should there come a day when the number of 
redesignations ``materially affect[s] the royalty fee payments'' under 
the cable compulsory license, the Copyright Office may find it 
necessary to make its concerns public, to call the issue to the 
attention of Congress, and petition for a legislative solution.
    In addition to market redesignations, we have also considered the 
issue of possible future reranking of markets on the Sec. 76.51 list. 
Reranking would be the reordering of markets as they appear in 
Sec. 76.51, including the addition or deletion of markets. Because the 
FCC has currently declined to consider the reranking of major 
television markets, see Report & Order, 8 FCC Rcd 2965, 2978 (1994), 
and there is no petition before the Commission seeking a reranking of 
Sec. 76.51, we agree with the majority of commentators that the results 
of reranking on Copyright Office policy are not ripe for decision at 
this time.
    We are, however, troubled by the implications of reranking. In its 
comments the Federal Communications Commission, in discussing its 1993 
Report & Order updating Sec. 76.51, noted that the commentators to that 
proceeding ``generally suggested that the FCC not rerank markets.'' 
FCC, comments at 3. In a footnote, the FCC added: Those opposing a 
reranking of the markets generally contend that such action was 
unnecessary, impractical or would result in confusion and instability. 
However, in recognition of the dual communications and copyright 
implications of Section 76.51, virtually all commentators agreed that 
any changes with respect to market rankings be done in conjunction with 
the Copyright Office.

Id. n. 11. We heartily agree that, should the FCC consider a reranking 
of Sec. 76.51 in the future, it is both necessary and proper for the 
Commission and the Copyright Office to consult with one another, and we 
welcome the opportunity to work with the Commission on such an 
important issue, should the need arise.
    In spite of our considerable doubts on the matter, we do not take a 
position as to what effect, if any, an FCC reranking of the Sec. 76.51 
major television market list would have on the section 111 cable 
compulsory license because a decision on this issue would be premature 
at this time.

    Dated: August 8, 1994.
Marybeth Peters,
Register of Copyrights.
    Approved:
James H. Billington,
Librarian of Congress.
[FR Doc. 94-19668 Filed 8-11-94; 8:45 am]
BILLING CODE 1410-08-P