[Federal Register Volume 71, Number 182 (Wednesday, September 20, 2006)]
[Proposed Rules]
[Pages 54948-54953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-7927]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. RM 2005-5]


Retransmission of Digital Broadcast Signals Pursuant to the Cable 
Statutory License

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of Inquiry.

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

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

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

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

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

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[[Page 54949]]

Background

    Digital television technology enables a television broadcast 
station to provide, over-the-air, an array of quality high-definition 
digital television signals (``HDTV''), standard-definition digital 
television signals (``SDTV''), and many different types of ancillary 
programming and data services. In 1997, the FCC adopted its initial 
rules governing the transition of the broadcast television industry 
from analog to digital technology,\2\ and authorized each individual 
television station licensee to broadcast in a digital format. Advanced 
Television Systems and Their Impact on Existing Television Broadcast 
Service, 12 FCC Rcd. 12809 (1997). Since that time, hundreds of 
television stations have been transmitting both analog and digital 
signals from their broadcast facilities,\3\ and television stations may 
choose to broadcast in a ``digital-only'' mode of operations, pursuant 
to FCC authorization. See, e.g., Second Periodic Review of the 
Commission's Rules and Policies Affecting the Conversion to Digital 
Television, 19 FCC Rcd 18279, 18321-22 (2004). Moreover, a significant 
number of cable operators have agreed to voluntarily carry both analog 
and digital broadcast signals from the same broadcast licensee. See 
http://www.ncta.com/IssueBrief.aspx?contentId=2716&view=3 (Cable 
operators voluntarily carrying at least 500 digital television station 
signals).
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    \2\ Recently, Congress established February 17, 2009, as the 
date for the completion of the transition from analog to digital 
broadcast television. See Pub. L. No. 109-171, Section 3002(a), 120 
Stat. 4 (2006).
    \3\ As of October 2005, more than 1,537 television stations 
nationwide were broadcasting in a digital format. See Annual 
Assessment of the Status of Competition in the Market for the 
Delivery of Video Programming, 21 FCC Rcd 2503 (2006) (``12th Annual 
Video Competition Report'') at ]95.
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    It is this trend toward carriage of digital signals, often 
simultaneously with the transmission of an analog counterpart, that has 
prompted Copyright Owners to seek clarification of the rules governing 
a cable system's carriage of broadcast signals under Section 111. 
However, before proposing new rules, the Copyright Office seeks comment 
on the proposed changes and a number of associated issues related to 
the carriage of digital signals.

Applicability of Section 111 to Digital Broadcast Signals

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

[[Page 54950]]

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

Digital Broadcast Signal Retransmission Issues

    Retransmission of a digital television broadcast signal. Today, 
television broadcasters may choose to transmit their signals in either 
a digital format or an analog format, or simultaneously in both 
formats. Some stations have also chosen to make the initial 
transmission of a new station signal solely in the digital format.\6\ 
Carriage of digital signals by a cable system under the Section 111 
license, however, requires a review of the current regulations and 
reporting practices as developed for analog signals to determine if 
these practices need to be readjusted in order to ensure accurate and 
complete reporting under the provisions of Section 111.
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    \6\ For example, WHDT-TV-DT, Stuart, Florida, operates as a 
digital facility but never had a paired analog station. See Petition 
for Declaratory Ruling that Digital Broadcast Stations Have 
Mandatory Carriage Rights, 16 FCC Rcd 2692 (2001).
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    First, in the case where the digital signal has or has had an 
analog counterpart, would the digital broadcast station's television 
market for Section 111 purposes be the same as the broadcast station's 
television market for the analog signal? And if the analog signal is 
considered distant, can the digital counterpart ever be considered 
local, or vice versa? Second, how should the Copyright Office determine 
whether a distant digital broadcast signal is permitted or non-
permitted for Distant Signal Equivalent (``DSE'') purposes? Third, how 
does the Copyright Office determine the basis of carriage for a distant 
digital signal (i.e. market quotas, grandfathered status, etc.)? 
Fourth, what DSE values (for network, educational, independent) should 
be assigned to digital signals? Fifth, how would the Copyright Office 
determine the coverage area of a broadcast licensee's digital 
television transmission for cable copyright purposes, especially in the 
context of significantly viewed signals?\7\
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    \7\ As a point of reference, the Copyright Office notes that 
digital television station's coverage areas are measured by noise 
limited service contours under current FCC rules, not Grade B 
contours as is the case for analog stations, see 47 CFR 76.54(c).
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    Would the resolution of these questions be the same in the case 
where the signal never had an analog counterpart? The Copyright Office 
seeks answers to these questions concerning the carriage of a digital 
signal and will consider any related issues identified by the 
commenters.
    Simultaneous Retransmission of Analog and Digital Broadcast 
Signals. Currently, hundreds of television stations are broadcasting in 
both an analog and digital format. For example, WRC in Washington, 
D.C., broadcasts both an analog signal (Channel 4, WRC-TV) and a 
digital signal (Channel 48, WRC-DT). See http://www.nbc4.com/tvlistings/index.html.
    Copyright owners acknowledge that some cable systems are separately 
reporting carriage of digital and analog broadcast signals and, in 
their view, doing so appropriately.\8\ However, they state that it is 
unclear whether all cable systems are identifying carriage of both 
types of signals or are doing so in a consistent and uniform manner. 
According to Copyright Owners, the lack of uniformity in reporting the 
carriage of both analog and digital broadcast signals necessitates 
clarification of the Copyright Office's existing regulations.
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    \8\ Cable operators are not required by the FCC to carry both 
the analog and digital signals of local broadcast stations. See 
Carriage of Digital Television Broadcast Signals, 20 FCC Rcd 4516 
(2005).
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    Specifically, they urge the Copyright Office to clarify that, if a 
cable operator chooses to carry a television broadcast station's analog 
and digital signals, that cable operator should identify those signals 
separately in Space G on its SOA (e.g., as WRC-TV on channel 4 and WRC-
DT on channel 48). Copyright Owners assert that separate designation 
provides notice that a cable operator is carrying digital signals and 
may be charging subscribers additional fees that should be included in 
the gross receipts calculation.\9\ Moreover, in the context of distant 
signal carriage, Copyright Owners argue that separate reporting of both 
the digital and the analog signal is necessary because such carriage 
would generate an additional royalty obligation.
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    \9\ Gross receipts for the basic service of providing secondary 
transmissions of primary broadcast transmitters include the full 
amount of monthly (or other periodic) service fees for any and all 
services or tiers of services which include one or more secondary 
transmissions of television or radio broadcast signals, for 
additional set fees, and for converter fees. See 37 CFR 
201.17(b)(1).
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    For purposes of ascertaining the royalties owed, Copyright Owners 
suggest that where the programming is identical, the DSE values for 
carriage of a distant analog and a digital signal would be the same. 
Alternatively, if the programming on the two signals is different 
(e.g., where the digital signal does not carry network programming), 
they assert that the DSE values may be different and should be computed 
separately in accordance with the provisions of Section 111(f). But in 
either case, Copyright Owners imply that the cable operator would still 
have to pay for each signal.
    Must a cable operator pay separately for carriage of a digital 
signal and an analog signal where the signals carry identical 
programming to the subscriber, or does the statutory license allow for 
a single payment for the delivery of the same programming albeit in two 
different formats?\10\ Would the programming be considered 
``different'' if the digital signal included only a subset of the 
programming from the analog signal or if the digital signal was 
broadcast in a high definition format? Are cable systems offering such 
combinations to subscribers and is the Copyright Owners' method of 
valuation appropriate?
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    \10\ We note, for example, that Metrocast Cablevision of New 
Hampshire has assigned a single value for a number of television 
stations transmitting both an analog and digital signal. Metrocast 
Cablevision SA3 Long Form, 2005/1 period, Cable ID  7438 
(as assigned by the Licensing Division of the Copyright Office).
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    We ask commenters to provide examples of where cable operators are 
retransmitting the analog and digital signals of the same licensee, but 
the programming on the primary (or main) digital signal is different 
than that of the analog signal. We also seek comment on how a cable 
operator should report the carriage of a digital signal that has been 
downconverted to an analog signal (at the cable operator's headend) so 
that subscribers without a digital set top box are able to view such 
signals.
    Retransmission of Digital Multicast Streams. Multicasting is the 
process by which multiple streams of digital television programming are 
transmitted at the same time over a single broadcast channel. The 
eleven largest broadcast groups and their affiliates broadcast more 
than 937,000 hours of multicast programming during the month of October 
2005. This multicast programming included news, weather, sports, 
religious material, music videos and coverage of local musicians and 
concerts, as well as foreign language programming (especially, but not 
limited to, Spanish programming). See 12th Annual Video Competition 
Report, 21 FCC Rcd. 2503 at ]101.\11\
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    \11\ The FCC has decided that if a digital broadcaster elects to 
divide its digital spectrum into several separate, independent and 
unrelated multicast programming streams, only one of these streams, 
the ``primary'' digital video stream, is entitled to mandatory 
carriage under the Communications Act. See Carriage of Digital 
Television Broadcast Signals, 16 FCC Rcd 2598 (2001). In any event, 
cable systems have voluntarily agreed to carry multicast digital 
programming streams from broadcast stations across the country. See 
Carriage of Digital Television Broadcast Signals, 20 FCC Rcd 4516 at 
] 38 (2005).

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[[Page 54951]]

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

Marketing of Digital Broadcast Signals and the Cable Statutory License

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

[[Page 54952]]

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

Digital Equipment and Reception Issues Under Section 111

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

[[Page 54953]]

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

Conclusion

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

    Dated: September 14, 2006.
Marybeth Peters,
Register, U.S. Copyright Office.
[FR Doc. 06-7927 Filed 9-19-06; 8:45 am]
BILLING CODE 1410-30-S