[Federal Register Volume 73, Number 106 (Monday, June 2, 2008)]
[Proposed Rules]
[Pages 31399-31415]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-11855]


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LIBRARY OF CONGRESS

Copyright Office

37 CFR Part 201

[Docket No. 2005-5]


Retransmission of Digital Broadcast Signals Pursuant to the Cable 
Statutory License

AGENCY: Copyright Office, Library of Congress.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Copyright Office is seeking comment on proposed regulatory 
changes to accommodate the retransmission of digital television 
broadcast signals by cable operators under Section 111 of the Copyright 
Act.

DATES: Written comments are due July 17, 2008. Reply comments are due 
September 2, 2008. June 2, 2008.

ADDRESSES: If hand delivered by a private party, an original and five 
copies of a comment or reply comment should be brought to the Library 
of Congress, U.S. Copyright Office, Room LM-401, James Madison 
Building, 101 Independence Ave., SE, Washington, DC 20559, 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, DC 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-403, James Madison Building, 101 Independence Avenue, SE, 
Washington, DC 20559. 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

[[Page 31400]]

Office, Copyright GC/I&R, P.O. Box 70400, Washington, DC 20024.

FOR FURTHER INFORMATION CONTACT: Ben Golant, Assistant General Counsel, 
and Tanya M. Sandros, General Counsel, Copyright GC/I&R, P.O. Box 
70400, 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 
operators 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.
    In 2005, 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 Joint Sports Claimants 
(``JSC'')\1\ (collectively, ``Copyright Owners'') filed a Petition for 
Rulemaking (``Petition'') seeking to clarify the applicability of 
existing Copyright Office regulations to the retransmission of digital 
broadcast signals under the statutory license set forth in Section 111 
of the Copyright Act.
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    \1\JSC is composed of 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.
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    The Copyright Office released a Notice of Inquiry (``NOI'') to 
address the matters raised in the Copyright Owners' Petition and to 
solicit comment on possible clarifications to the Copyright Office's 
existing rules and cable Statement of Account (``SOA'') forms. See 
Retransmission of Digital Broadcast Signals Pursuant to the Cable 
Statutory License, 71 FR 54948 (Sept. 20, 2006). In the NOI, the 
Copyright Office stated that there is nothing in the Act, its 
legislative history, or the implementing rules, which limits the cable 
statutory license to analog broadcast signals. Instead, the Office 
found that the language of Section 111 broadly states that the 
statutory license applies to any broadcast stations licensed by the FCC 
or any of the signals transmitted by such stations. As such, the 
Copyright Office held that the use of the statutory license for the 
retransmission of digital signals would not be precluded merely because 
the technological characteristics of a digital signal differ from the 
traditional analog signal format. Even so, the Copyright Office noted 
that questions remain regarding the application and operation of the 
cable statutory license structure in the digital television context. 
For that reason, the Office sought comment on the issues raised by the 
Copyright Owners' Petition and on additional issues.
    The following parties filed comments in response to the NOI: (1) 
Copyright Owners (including the Motion Picture Association of America; 
Joint Sports Claimants; Public Television Claimants; National 
Association of Broadcasters; Canadian Claimants; Music Claimants 
(ASCAP-BMI-SESAC); and Devotional Claimants); (2) National Cable 
Television Association (``NCTA''); (3) National Public Radio (``NPR''); 
and (4) Capitol Broadcasting Company (``CBC''). The following parties 
filed reply comments: (1) Copyright Owners; (2) NCTA; (3) NPR; (4) 
American Cable Association (``ACA''); and (5) Philip Marano-Villanova 
University School of Law.
    This Notice of Proposed Rulemaking (``NPRM'') addresses the 
arguments raised by commenters and seeks public comment on proposals 
and policy recommendations on issues related to the retransmission of 
digital television signals by cable operators under Section 111. 
Proposed rule amendments are found at the end of the NPRM.

I. Digital Broadcast Signal Retransmission Issues

A. Digital Television

    Digital television technology enables an FCC licensed television 
broadcast station to provide, over-the-air, a mix of 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 and authorized each individual 
television station licensee to broadcast in a digital format. Since 
that time, hundreds of television stations have been transmitting both 
analog and digital signals from their broadcast facilities and 
television stations may choose to broadcast in a ``digital-only'' mode 
of operations, pursuant to FCC authorization. A significant number of 
cable operators have agreed to voluntarily carry both analog and 
digital broadcast signals in local and distant television markets. 
After February 17, 2009, full power television stations will no longer 
be permitted to broadcast in an analog format and must thereafter 
transmit in a digital format.\2\
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    \2\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). We note that Canada is planning a digital television 
transition in 2011 and Mexico is planning for a transition in 2021. 
See, e.g., Associated Press, Digital Switch Raises Alarm Near 
Border, http://www.siliconvalley.com (Last accessed on January 14, 
2008). These developments are important because Section 111 covers 
the secondary retransmissions of distant broadcast signals from 
Mexico as well as Canada. See 17 U.S.C. 111(c)(1).
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    At present, cable operators are retransmitting the analog and 
digital signals of the same television station under the FCC's local 
broadcast signal carriage rules\3\ and under Section 111 of the 
Copyright Act. In most cases, the program content transmitted on the 
primary digital signal is the same as that found on the analog signal, 
except that the picture quality of a digital television signal is 
vastly improved. When a digital broadcast signal replicates the analog 
signal, it is called simulcasting. The signal, or digital stream as it 
is now called, could be in a high definition digital format or a lower 
quality standard definition digital format.
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    \3\See Carriage of Digital Television Broadcast Signals, 16 FCC 
Rcd 2598, 2618 (2001). We note that the FCC recently adopted new 
rules for the retransmission of local digital signals by satellite 
carriers under Section 338 of the Communications Act. Recognizing 
satellite capacity limitations, the FCC promulgated carriage 
requirements phased in over a course of four years. Satellite 
carriers must provide carriage of local stations' HD signals if any 
local station in the same market is carried in HD, pursuant to the 
following schedule: (1) In at least 15% of the markets in which they 
carry any station pursuant to the statutory copyright license in HD 
by February 17, 2010; (2) In at least 30% of the markets in which 
they carry any station pursuant to the statutory copyright license 
in HD no later than February 17, 2011; (3) In at least 60% of the 
markets in which they carry any station pursuant to the statutory 
copyright license in HD no later than February 17, 2012; and (4) In 
100% of the markets in which they carry any station pursuant to the 
statutory copyright license in HD by February 17, 2013. 
Implementation of the Satellite Home Viewer Improvement Act of 1999: 
Local Broadcast Signal Carriage Issues and Retransmission Consent 
Issues, Second Report and Order, CS Docket No. 00-96 (rel. March 27, 
2008).
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    Multicasting, on the other hand, is the process by which multiple 
streams of digital television programming are transmitted at the same 
time over a single broadcast channel by a single

[[Page 31401]]

broadcast licensee. Currently, broadcast stations offer multicast 
streams carrying news, weather, sports, religious material, as well as 
foreign language programming (especially, but not limited to, Spanish 
programming).\4\ For example, Station WRAL in Raleigh, North Carolina, 
(owned by Capitol Broadcasting Corporation or ``CBC'') transmits its 
analog signal (WRAL-TV) on channel 5 and its primary digital signal 
(WRAL-DT) on channel 5.1, which simulcasts (in both standard definition 
and high definition) the analog programming schedule. It is also 
engaged in multicasting by transmitting a 24-hour news channel (WRAL-
NC) on channel 5.2 and locally-produced programming on channels 5.3 
(WRAL-DT3) and 5.4 (WRAL-DT4). See http://www.wral.com/ These digital 
programming streams are broadcast from a single transmitter.
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    \4\See Allison Romano, Local Stations Multiply, Broadcasting & 
Cable, March 10, 2008 (noting that local television stations plan to 
launch several new multicast programming streams in the months 
ahead. Some possible streams include: LATV (bilingual Spanish-
English entertainment), Retro Television Network (classic television 
shows); .2 Network (movies from the last decade); Weather Plus 
(weather stream co-owned by NBC and its affiliates); Blue Highway TV 
(gospel and country music programming); CoLours TV (programming for 
minority and ethnic communities); Fan Vision (local sports); 
Funimation (Anime and Japanese cartoons); Mexicanal (Spanish-
language entertainment); Motor Trend TV (automotive-related 
programming); and World Championship Sports Network (sports 
programming).
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B. Royalties for the retransmission of non-network programming

    Copyright Owners' Petition. In their Petition, Copyright Owners 
acknowledge that some cable systems are separately reporting carriage 
of digital and analog broadcast signals and, in their view, doing so 
appropriately. However, they stated that it was 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.
    Copyright Owners therefore have asked the Copyright Office to 
clarify that, if a cable operator chooses to carry a television 
broadcast station's analog and digital signals, it should identify 
those signals separately in Space G on its Statement of Account form 
(e.g., as WRC-TV on channel 4 and WRC-DT on channel 48). Copyright 
Owners asserted 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. Moreover, in the context of distant signal carriage, 
Copyright Owners argued that separate reporting of both the digital and 
the analog signal is necessary because such carriage may trigger an 
additional royalty obligation.
    Copyright Owners have also asked 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 asserted 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 stream.
    For purposes of ascertaining the royalties owed, Copyright Owners 
suggested that where the programming is identical, the DSE values for 
carriage of a distant analog and a digital signal would be the same. 
However, Copyright Owners have urged the Copyright Office to require 
separate calculation of DSE values and royalty payments for carriage of 
multiple streams of a distant digital station. If, for example, a cable 
operator chose to retransmit two streams from a particular station that 
is engaging in multicasting, one of which contained network programming 
and the other of which did not, they believe that the operator should 
be considered as retransmitting 1.25 DSEs (1.00 DSE for the independent 
programming stream plus .25 DSE for the network programming stream).
    NOI. In the NOI, the Office asked whether a cable operator must pay 
separately for the retransmission of a digital signal and an analog 
signal where the signals carry identical programming to the subscriber. 
Alternatively, the Office asked whether the statutory license allowed 
for a single payment for the delivery of the same programming albeit in 
two different formats. The Office also asked whether the determination 
would be 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. It also sought comment on 
Copyright Owners' regulatory treatment of digital multicast signals 
under Section 111. 71 FR at 54950-51.
    Comments. NCTA argues that no additional liability attaches on 
account of carriage of a digital signal where the cable operator is 
already paying for carriage of its analog counterpart. In support of 
its argument, NCTA relies upon the definition of a ``primary 
transmission'' in 17 U.S.C. 111(f). It further argues that since this 
provision used the term ``signals'' as opposed to just ``signal,'' 
Congress had already contemplated the retransmission of multiple 
signals, each with different distant digital programming, at a single 
DSE value. It states that a cable operator's royalty payment should not 
be increased based on carriage of multiple signals from the same 
primary transmitter. NCTA Comments at 4-5.
    NCTA asserts that the amount a cable operator pays for distant 
signal carriage under Section 111 is based on the number and type of 
`stations' carried, not the number of signals transmitted by each 
station. NCTA notes that a DSE is defined as the ``secondary 
transmission of any nonnetwork television programming carried by a 
cable system in whole or in part beyond the local service area of the 
primary transmitter of such programming.'' It remarks that the DSE 
value depends on whether the station engaged in the primary 
transmission is considered to be an ``independent,'' ``network,''or 
``noncommercial educational'' station. NCTA comments that a ``network 
station'' is only assigned a single DSE (.25) even if a station is 
affiliated with ``one or more television networks in the United States 
providing nationwide transmissions.'' Based on the foregoing, NCTA 
concludes that nothing in the Act indicates that a single ``station,'' 
for Section 111 purposes, must transmit only one signal. Id. at 5.
    With regard to multicasting, NCTA states that in a small number of 
cases, a cable operator may be importing a digital multicast stream 
from a distant station that differs from the programming on the analog 
version of the station already carried on a distant basis. NCTA argues 
that the Act does not provide a mechanism for assigning additional DSE 
values in such a case, and the Copyright Office should refrain from 
doing so without explicit statutory authority. NCTA Comments at 6. NCTA 
believes that Section 111 does not require cable operators to pay 
additional royalties for the retransmission of additional signals being 
transmitted by a single station.
    Specifically, NCTA asserts that the carriage of a separate digital 
multicast signal would be no different, from the standpoint of royalty 
calculations, than carriage of a separate copyrighted work

[[Page 31402]]

transmitted by a station along with its main broadcast programming 
transmission. NCTA states, for example, that if a cable system were to 
retransmit closed captioning or other material, program-related or not, 
that might be in the vertical blanking interval of an analog television 
signal, no additional copyright payment would be owed. NCTA notes that 
so long as the additional material constitutes a ``primary 
transmission'' service, it would be covered by Section 111 and no 
additional DSE value would be assigned. It further notes that, for 
Section 111 purposes, the DSE value would not change, regardless of its 
status as ``program-related'' material for FCC purposes. NCTA argues 
that the same principle would apply where a cable operator retransmits 
multiple streams of digital programming transmitted by the same 
station. Id. at 6.
    NCTA also argues that a separate payment mechanism for digital 
transmissions was not intended by Congress, pointing to Section 119 of 
the Act for comparison. NCTA asserts that in 2004, Congress expressly 
amended Section 119 to require separate payments for a satellite 
carrier's secondary transmission of the primary digital transmissions 
of network stations and superstations See NCTA Comments at 6-7 citing 
17 U.S.C. 119(c)(2). Absent a similar amendment to Section 111, NCTA 
argues that no separate DSE should be calculated for ``distant digital 
signal carriage when the operator already pays for carriage of that 
primary transmitter's analog signal.'' NCTA Comments at 7.
    NCTA concludes that a cable operator should not have to pay more 
than once to import any number of signals (even if the programming 
differs) transmitted by a single broadcaster. NCTA argues that the plan 
devised by Copyright Owners ``would lead to inflated and unfair 
copyright fees.'' NCTA asserts that the Copyright Office should not 
impugn additional royalties under Section 111 when the language of the 
Act does not require it. NCTA Reply Comments at 2-4.
    Copyright Owners are principally concerned with the retransmission 
of multicast streams by cable operators under Section 111. They state 
that Section 111(f) assigns a DSE ``value of one to each independent 
station and the value of one-quarter to each network station and 
noncommercial educational station for the nonnetwork programming so 
carried pursuant to the rules, regulations, and authorizations of the 
Federal Communications Commission.'' Copyright Owners Reply Comments at 
19-20 (emphasis in original). According to Copyright Owners, the 
meaning of the term``signals'' is not the linchpin in this debate, 
rather the focus should be on the meaning of the term ``station'' as it 
is used in Section 111(f). That is, whether all multicast channels from 
a single broadcaster should be treated as one ``station'' for purposes 
of assigning a DSE value (NCTA's position), or whether each channel 
transmitting separate programming should be treated as a separate 
``station'' (Copyright Owners position). Id.
    Copyright Owners note that although Congress defined ``independent 
station,'' ``network station'' and ``noncommercial station'' in Section 
111(f), it did not define the general term ``station'' in Section 111. 
They comment that in 1976, a television station had broadcast 
programming on a single analog channel only. Id. at 21, citing Carriage 
of Digital Television Broadcast Signals, 16 FCC Rcd 2598, 2618 (2001). 
They state that it was not until the early 1990s that a ``common 
understanding'' began to develop that a digital televison station might 
engage in multicasting. Copyright Owners argue that there is no 
evidence that when Congress adopted the DSE definition in 1976, it 
contemplated that a television station would broadcast programming on 
more than a single channel, or that if a station did so, a single DSE 
value would encompass those multiple channels. They remark that this 
result is not surprising given that no station engaged in any type of 
multicasting until twenty years after Section 111 was enacted. 
Copyright Owners assert that these facts undercut NCTA's effort to 
encompass as many as six multicast streams within a single DSE value 
for purposes of calculating the Section 111 royalty payment. Id.
    Copyright Owners state that there are several reasons why the 
Copyright Office should decide that each multicast stream should be 
considered a separate ``station'' for purposes of the Section 111(f) 
definition of DSE. First, they argue that copyright owners should be 
compensated for all programming being retransmitted by Form 3 cable 
operators under Section 111, regardless of format. They state that a 
central principle underlying Section 111 was that royalties should 
increase, at least for larger systems, as the amount of distant 
programming increased.
    Next, Copyright Owners assert that a cardinal rule of statutory 
construction is that a statutory provision must be interpreted as a 
whole. In this case, they state that NCTA's proposed interpretations of 
Section 111(f) should be considered in light of Section 801(b)(2)(B), 
which arguably reflects a Congressional policy that Form 3 cable 
operators should pay a separate royalty for the carriage of non-network 
programming that they were not authorized to carry under the FCC's 1976 
rules. They state that NCTA's proposal would subvert that policy by 
allowing cable operators to retransmit substantial amounts of non-
permitted programming without paying a separate royalty, as long as 
that programming was contained on a multicast stream broadcast by a 
``permitted'' station.
    Third, Copyright Owners assert that an examination of some of the 
practical consequences of NCTA's suggested interpretation underscores 
its incompatibility with Congressional intent. They state that the DSE 
definition specifies certain circumstances where a cable operator may 
reduce or prorate a DSE value, such as when an operator retransmits a 
distant signal on a ``part-time'' basis because of the ``lack of 
activated channel capacity.'' According to Copyright Owners, in such 
cases, the cable operator is able to pay a fraction of the DSE value, 
using ``the values for independent, network, and noncommercial 
educational stations, as the case may be, to be multiplied by a 
fraction which is equal to the ratio of the broadcast hours of such 
station carried by the cable system to the total broadcast hours of the 
station.'' Id. at 24, citing 17 U.S.C. 111(f). Copyright Owners argue 
that if NCTA's interpretation were to be adopted, a cable system that 
otherwise qualified for part time carriage could cut in half the DSE 
value it had been assigning to a distant network affiliate simply by 
not carrying the affiliate's 24 hour weather multicast channel. They 
assert that a cable system could pay as little as one-sixth of its 
prior royalty for carriage of the same affiliate simply because the 
affiliate added five multicast channels that the system did not 
retransmit. Id. at 25.
    Copyright Owners state a similar problem would arise under the 
``network station'' definition that requires a ``station'' to transmit 
network programming ``for a substantial part of that station's typical 
broadcast day.'' Copyright Owners argue that if NCTA's position were 
accepted, such affiliates' classification as network stations might be 
questioned if they multicast any significant amount of nonnetwork 
programming on additional channels, so that the network programming 
would no longer occupy a substantial part of the station's typical 
broadcast day; in short, acceptance of NCTA's theory could lead to the 
conclusion that network affiliates

[[Page 31403]]

choosing to multicast no longer qualified as ``network stations.'' 
Copyright Owners conclude that this would not be the result that 
Congress intended. Id. at 22-25.
    Discussion. As seen in the commenters' discussion, a critical step 
in the analysis is choosing the proper statutory construct for 
assessing copyright liability for the retransmission of distant digital 
television signals under the Act. Section 111 uses various terms, such 
as ``stations,'' ``signals,'' ``distant signal equivalents,'' and 
``nonnetwork television programming,'' to delineate the ``product'' 
being carried by cable operators and for which royalty fees must be 
paid. While the statute contains specific definitions of ``network 
station,'' ``independent station,'' and ``noncommercial station,'' the 
general term ``station'' is not defined in Section 111.
    There are certain terms that Congress did elaborate upon in Section 
111's legislative history. Congress stated that in any particular case, 
the ``primary'' transmitter is the one whose signals are being picked 
up and further transmitted by a ``secondary'' transmitter which, in 
turn, is someone engaged in ``the further transmitting of a primary 
transmission simultaneously with the primary transmission.'' H. Rep. 
No. 94-1476, 94th Cong., 2d Sess., at 91. In this instance, it 
mentioned the term ``signal'' in the plural form, but this is far from 
supporting NCTA's interpretation.
    Congress also explained that a ``distant signal equivalent`` is 
assigned to all ``distant`` signals. It stated that distant signals are 
defined as signals retransmitted by a cable system, in whole or in 
part, outside the local service area of the primary transmitter. It 
noted that different values are assigned to independent, network, and 
educational stations because of the different amounts of viewing of 
``non-network programming'' carried by such stations. Id. at 90. While 
Congress discussed the meaning of the term, ``distant signals,'' it did 
not explain the meaning and significance of the term ``signal,'' or how 
it is different from the term ``station,'' for cable copyright 
purposes.
    It is axiomatic that Section 111 is not a model of statutory 
clarity.\5\ The terms ``station'' and ``signal'' are used, 
interchangeably, dozens of times throughout the provision. It may have 
been that Congress did not find it necessary to clarify such terms in 
1976 because there was no confusion as to the subject being transmitted 
by cable operators at that time. However, for our purposes here, we 
must parse out what the terms mean, so that we can effectuate the 
intent of Congress when it enacted Section 111. In the absence of 
clarifying language in the Copyright Act, reference to the 
Communications Act of 1934 may help.
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    \5\See Daniel L. Brenner, Monroe E. Price, Michael Myerson, 
Present Rate Structure. Cable Television and Other Nonbroadcast 
Video, Sec.  9.9 (Database updated April 2007) (``The rate structure 
governing cable copyright payments is complex. It reflects the 
tremendous pressures exerted on Congress by the industries affected 
by the legislation. As all parties sought to fashion regulations 
that favored their own financial interests, they preferred ambiguity 
or possible inconsistency to potentially unfavorable clarity.'')
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    Under the Communications Act, the term ``broadcast station``, 
``broadcasting station'', or ``radio broadcast station'' means a radio 
station equipped to engage in broadcasting. 47 U.S.C. 153(5).\6\ This 
is the physical facility used to transmit radio signals. The term 
``broadcasting,'' in turn, means the dissemination of radio 
communications intended to be received by the public, directly or by 
the intermediary of relay stations. 47 U.S.C. 153(6). Broadcasting, 
then, is the act of transmitting radio signals. The term ``station 
license,'' ``radio station license,'' or ``license'' means that 
instrument of authorization required by the Communications Act or the 
FCC for the use or operation of apparatus for transmission of energy, 
or communications, or signals by radio, by whatever name the instrument 
may be designated by the Commission. 47 U.S.C. 153(42). A broadcast 
licensee is a holder of a broadcast license and has the authority under 
law to engage in broadcasting.\7\ Each of these terms were part of the 
Communications Act when Congress amended Title 17 in 1976 to include 
Section 111. And, each of these terms relates to the act of 
broadcasting and the dissemination of radio signals. None of the terms 
define the content of the transmission for either communications law or 
copyright law purposes. As such, when Congress used the term 
``station,'' in either the singular or the plural, in Section 111, it 
is reasonable to conclude that it did not intend for the term to define 
the scope of the cable operator's statutory royalty obligations.
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    \6\The Communications Act was amended in 1996 to include new 
definitions applicable to television broadcast licensees. Under the 
Act, the term ``analog television service '' means television 
service provided pursuant to the transmission standards prescribed 
by the Commission in Section 73.682(a) of its regulations (47 CFR 
73.682(a)). 47 U.S.C. 153(49)(A). The term ``digital television 
service '' means television service provided pursuant to the 
transmission standards prescribed by the Commission in Section 
73.682(d) of its regulations (47 CFR 73.682(d)). 47 U.S.C. 
153(49)(B).
    \7\In 1997, the FCC determined that the analog and digital 
facilities of a station are to be licensed under a single paired 
license. See Advanced Television Systems and Their Impact Upon the 
Existing Television Broadcast Service, Fifth Report and Order, 12 
FCC Rcd 12809 (1997).
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    Congress did not define the singular term ``signal'' in the 
Communications Act. However, it did define the term ``radio 
communication'' as the transmission by radio of writing, signs, 
signals, pictures, and sounds of all kinds, including all 
instrumentalities, facilities, apparatus, and services (among other 
things, the receipt, forwarding, and delivery of communications) 
incidental to such transmission. 47 U.S.C. 153(33). Signals, as seen 
above, are a particular kind of radio communication transmitted by a 
broadcast station. Again, however, the Communications Act does not 
delineate the specific type of programming carried by the signal 
transmission.
    To further elucidate the meaning of the term ``signal,'' it is 
useful to examine the history of the retransmission consent provisions 
of the Communications Act. Prior to 1992, cable operators were not 
required to seek the permission of a local broadcast station before 
carrying its signal nor were they required to compensate the 
broadcaster for the value of its signal. Congress found that a 
broadcaster's lack of control over its signal created a ``distortion in 
the video marketplace which threatens the future of over-the-air 
broadcasting.'' See S. Rep. No. 102-92, 102d Cong., 1st Sess. (1991) at 
35. In 1992, Congress acted to remedy the situation by giving a 
commercial broadcast station control over the use of its signal through 
statutorily-granted retransmission consent rights. Retransmission 
consent effectively permits a commercial broadcast station to seek 
compensation from a cable operator for carriage of its signal. Congress 
noted that some broadcasters might find that carriage itself was 
sufficient compensation for the use of their signal by a multichannel 
video programming distributor (``MVPD'') while other broadcasters might 
seek monetary compensation, and still others might negotiate for in-
kind consideration such as joint marketing efforts, the opportunity to 
provide news inserts on cable channels, or the right to program an 
additional channel on a cable system. Congress emphasized that it 
intended ``to establish a marketplace for the disposition of the rights 
to retransmit broadcast signals'' but did not intend ``to dictate the 
outcome of the ensuing marketplace negotiations.'' Id. at 36.
    With regard to copyright issues, the legislative history 
accompanying Section 325 indicates that Congress was

[[Page 31404]]

concerned with the effect retransmission consent may have on the 
Section 111 license stating that ``the Committee recognizes that the 
environment in which the compulsory copyright [sic] operates may change 
because of the authority granted broadcasters by section 325(b)(1).'' 
Id. The legislative history later stated that cable operators would 
continue to have the authority to retransmit programs carried by 
broadcast stations under Section 111. Id.
    In 2001, the FCC established a new policy permitting a broadcast 
station to treat its analog and digital signals differently for 
retransmission consent purposes. Under this paradigm, a television 
station would be allowed to choose must carry or retransmission consent 
for its analog signal and retransmission consent for its digital signal 
during the DTV transition period. The FCC also concluded that a 
broadcaster and a cable operator may negotiate for partial carriage of 
a local digital television signal. The FCC believed that this policy, 
which would apply to digital-only television stations and television 
stations with both analog and digital signals, would benefit both 
parties and help to accomplish the Congressional goal of smooth DTV 
transition. To the point, the FCC noted that the broadcaster gained 
access to cable subscribers for some fraction of its signal, and the 
cable operator could conserve channel capacity and carry that 
programming stream which it believes subscribers would want. The FCC 
stated that cable operators were likely to negotiate retransmission 
consent agreements with more stations if carriage of something less 
than the full complement of a broadcaster's digital signal is 
permitted. Carriage of Digital Television Broadcast Signals, 16 FCC Rcd 
at 2610-11.
    This discussion shows that Congress specifically intended to 
provide a broadcast ``station'' with a mechanism to extract the value 
of its ``signal'' when being retransmitted by a cable operator or other 
multichannel video programming distributor.\8\ This was a ``right'' 
that was clearly lacking in the copyright law. The legislative history 
of Section 325 of the Communications Act supports the notion that 
Congress was concerned about compensating a broadcast station for the 
retransmission of its signal by a cable operator, not the content 
carried on the signal.\9\ The FCC later allowed a broadcast station to 
segregate its digital signal to further realize the value of specific 
programming streams in the marketplace.
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    \8\For retransmission consent purposes, the term ``television 
broadcast station '' means an over-the-air commercial or 
noncommercial television broadcast station licensed by the 
Commission under subpart E of part 73 of title 47, Code of Federal 
Regulations, except that such term does not include a low-power or 
translator television station. 47 U.S.C. 325(b)((7).
    \9\Prior FCC statements on this matter support our view. When 
implementing the Communications Act's new must carry and 
retransmission consent provisions in 1993, the FCC stated that ``the 
legislative history of the 1992 Act suggests that Congress created a 
new communications right in the broadcaster's signal, completely 
separate from the programming contained in the signal. Congress made 
clear that copyright applies to the programming and is thus distinct 
from signal retransmission rights.'' The FCC interpreted Section 325 
as meaning that the new right may be bargained away by broadcasters 
in future contracts and conceivably could have been bargained away 
in some existing contracts. In so holding, the FCC stressed that 
``retransmission consent is a right created by the Communications 
Act that vests in a broadcaster 's signal; hence, the parties to any 
contract must have bargained over this specific right, not a 
copyright interest.'' The FCC then stated that ``Just as Congress 
made a clear distinction between television stations' rights in 
their signals and copyright holders' rights in programming carried 
on that signal, we intend to maintain that distinction as we 
implement the retransmission consent rules.'' See Broadcast Signal 
Carriage Issues, 8 FCC Rcd 2965, 3004 (1993).
---------------------------------------------------------------------------

    So, it appears that the terms ``station'' and ``signal,'' are not 
necessarily controlling in our analysis here. In contrast, Section 111 
explicitly discusses the value of the nonnetwork programming carried by 
a broadcast station. Congress has used the term ``nonnetwork 
programming'' throughout the legislative history accompanying the Act. 
For example, Congress found that the retransmission of distant ``non-
network programming'' by cable systems causes damage to the copyright 
owner by distributing the program in an area beyond which it has been 
authorized. Congress also stated that such retransmission adversely 
affects the ability of the copyright owner to exploit the work in the 
distant market. For these reasons, Congress concluded that the 
copyright liability of cable television systems under the statutory 
license should be limited to the retransmission of distant ``nonnetwork 
programming.'' H. Rep. No. 94-1476, 94th Cong., 2d Sess., at 90.
    Further, when discussing copyright royalty distributions, Congress 
noted that copyright royalty fees should be made only for the 
retransmission of distant ``nonnetwork programming,'' and that the 
claimants were limited to (1) copyright owners whose works were 
included in a secondary transmission made by a cable system of a 
distant ``nonnetwork television program''; (2) any copyright owner 
whose work is included in a secondary transmission identified in a 
statement of account deposited under Section 111(d)(2)(A); and (3) any 
copyright owner whose work was included in distant ``nonnetwork 
programming'' consisting exclusively of aural signals. Id. at 97.
    The statutory definition of distant signal equivalents, and 
accompanying legislative history, also emphasize the term ``nonnetwork 
programming.'' For cable copyright royalty purposes, a ``distant signal 
equivalent'' is the value assigned to the secondary transmission of any 
nonnetwork television programming carried by a cable system in whole or 
in part beyond the local service area of the primary transmitter of 
such programming. It is computed by assigning a value of one to each 
independent station and a value of one-quarter to each network station 
and noncommercial educational station for the nonnetwork programming so 
carried pursuant to the rules, regulations, and authorizations of the 
Federal Communications Commission in effect in 1976. 17 U.S.C. 111(f) 
(emphasis added). The emphasis on DSEs is reinforced by Section 
801(b)(2)(B), which, as noted by Copyright Owners, reflects the 
legislative policy that cable operators should pay a separate royalty 
for the carriage of non-network programming that they were not 
authorized to carry under the FCC's 1976 rules.\10\
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    \10\This provision states, in relevant part: ``In the event that 
the rules and regulations of the Federal Communications Commission 
are amended at any time after April 15, 1976, to permit the carriage 
by cable systems of additional television broadcast signals beyond 
the local service area of the primary transmitters of such signals, 
the royalty rates established by section 111(d)(1)(B) may be 
adjusted to ensure that the rates for additional distant signal 
equivalents resulting from such carriage are reasonable in light of 
the changes effected by the amendment to such rules and 
regulations.'' 17 U.S.C. 801(b)(2)(B).
---------------------------------------------------------------------------

    Congress noted that the definition of a ``distant signal 
equivalent''' is central to the computation of the royalty fees payable 
under the statutory license. According to the legislative history, it 
is the value assigned to the secondary transmission of any nonnetwork 
television programming carried by a cable system, in whole or in part, 
beyond the local service area of the primary transmitter of such 
programming. It is computed by assigning a value of one (1) to each 
distant independent station and a value of one-quarter (1/4) to each 
distant network station and distant noncommercial educational station 
carried by a cable system, pursuant to the rules and regulations of the 
FCC. The legislative history states, for example, that a cable system 
carrying two distant independent stations, two

[[Page 31405]]

distant network stations and one distant noncommercial educational 
station would have a total of 2.75 distant signal equivalents. H. Rep. 
No. 94-1476, 94th Cong. 2d Sess., at 100.
    We are confronted with an archaic and arcane statute and a 
burgeoning new technology that was never contemplated by Congress in 
1976. Both NCTA and Copyright Owners have submitted reasonable 
interpretations of the existing statutory language and its application 
to the retransmission of digital television streams. Our task here is 
to read Section 111 in a manner that keeps the statute functioning and 
in a way to avoid regulatory chaos. As such, the most reasonable 
interpretation, and one that is fully supportable by language and 
history of the Copyright Act (as well as the Communications Act), is 
one that best compensates copyright holders for the public performance 
of their works. We therefore propose that the statutory linchpins in 
this discussion are not ``signals,'' as proffered by NCTA, nor 
``stations,'' as noted by Copyright Owners, but ``DSEs'' and 
``nonnetwork television programming.'' While the Copyright Act is 
silent on the treatment of duplicative distant signals in Section 111, 
the DSE definition does not require cable operators to pay additional 
royalties for the digital simulcast of a distant television station's 
analog signal. In this case, there is no unique nonnetwork television 
programming retransmitted by the cable system. The copyright owner, in 
this instance, is already being compensated for the value of the work 
through the payment of royalties for the analog signal. Therefore, if 
the programming carried on the primary digital signal is duplicative of 
the programming carried on the analog signal, double payment of 
royalties for the retransmission of both by cable operators is not 
required. In practical terms, if a cable operator lists an analog 
signal and a digital simulcast signal on its statement of account, it 
only has to pay a single DSE.
    However, we propose that a cable operator must pay royalties on 
each retransmitted distant digital multicast stream carrying different 
programming from the channel line-up on other streams. Each multicast 
stream should be treated as a separate DSE for Section 111 purposes. It 
is important to note here that in 1976, an analog television station 
was limited by technology to being able to transmit a single channel of 
programming during a typical broadcast day. Currently, because of 
digital technology, a digital television station is able to transmit 
multiple channels of programming during a broadcast day. To the 
licensee, that is like having the ability to program multiple stations. 
To the cable subscriber, each multicast stream is received as, and 
appears to be, a separate ``station'' with different programming 
schedules. This is a critical distinction from program-related material 
embedded in the analog station's vertical blanking interval that cannot 
be seen nor has any instrinsic value to cable subscribers.
    In this instance, we propose that copyright owners must be 
compensated because there is new nonnetwork programming being carried 
by the cable operator regardless of whether multiple digital signals 
are broadcast from a single transmitter. Thus, if there is any 
original, non-duplicative programming on a multicast stream, then 
royalties must be paid according to the DSE value that would be 
assigned to that signal based upon its classification as either a 
network, independent, or noncommercial station. A cable operator must 
report the retransmission of each multicast programming stream it 
carries on its SOA. So, if an operator retransmits a distant network 
station analog signal, a digital simulcast of the network, and two 
separate digital multicast network station streams, the DSE would equal 
.75 (.25 for the analog, 0 for the digital simulcast, .25 for the first 
stream and .25 for the second stream).\11\ In accordance with the rules 
proposed below, a cable operator shall identify the types of digital 
streams retransmitted on its Statement of Account so that examiners are 
able to process the forms submitted to the Copyright Office. While 
Congress certainly did not contemplate the advent of multicasting when 
it enacted Section 111 thirty years ago, our proposal comports with the 
language, intent, and goals of the Act.\12\ We believe that the 
Copyright Office has the statutory authority to effectuate this policy 
outcome without legislative action.\13\
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    \11\This does not include the possibility of the 3.75% fee, or 
syndicated exclusivity surcharge, which may or may not apply.
    \12\The FCC has recognized the value of multicasting and its 
ability to reach audiences with different programming on different 
streams. For example, in 2004, the FCC amended its children's 
television rules and policies to ensure that they continue to serve 
the interests of children during and after the DTV transition. Among 
other things, the FCC revised its three-hour core programming 
processing guideline (where a television broadcast licensee is 
required to air three hours per week of programming ``specifically 
designed'' to serve the educational and informational needs of 
children ages 16 and under) as it applies to DTV signals. For those 
broadcasters that engage in multicasting, the rule generally 
provides that a broadcaster's core programming obligation increases 
in proportion to the amount of free programming being offered. That 
is, a digital television station must provide additional children's 
programming on each multicast it offers. See Children's Television 
Obligations of Digital Television Broadcasters, 19 FCC Rcd 22943 
(2004).
    \13\In the 2004 SHVERA, Congress was principally concerned with 
the reauthorization of Section 119 that was to expire without 
legislative action. Section 111, which is permanent, was not the 
subject of discussion at that time and any attempt to have amended 
the cable statutory license would have unduly delayed the Section 
119 renewal process.
---------------------------------------------------------------------------

    When discussing DSEs here, it is also important to recognize that 
under Section 111(f) of the Copyright Act, the values for independent, 
network, and noncommercial educational stations are subject to some 
limitations. For example, where the FCC's rules require a cable system 
to omit the further transmission of a particular program, and the rules 
also permit program substitution, no value is assigned to the 
substituted or additional program. Further, where the FCC's rules 
permit a cable system, at its election, to omit the further 
transmission of a particular program and permit the substitution of 
another program, the value assigned for the substituted or additional 
program shall be, in the case of a live program, the value of one full 
distant signal equivalent multiplied by a fraction that has as its 
numerator the number of days in the year in which such substitution 
occurs and as its denominator the number of days in the year. Also, in 
the case of a station carried pursuant to the FCC's late-night or 
specialty programming rules, or a station carried on a part-time basis 
where full-time carriage is not possible because the cable system lacks 
the activated channel capacity to retransmit on a full-time basis all 
signals which it is authorized to carry, the values for independent, 
network, and noncommercial educational stations are multiplied by a 
fraction which is equal to the ratio of the broadcast hours of such 
station carried by the cable system to the total broadcast hours of the 
station. These exceptions are important to recognize because they 
demonstrate that Congress explicitly limited the value of certain 
nonnetwork programs, for royalty purposes, when the situation so 
warranted.\14\ There are no such exceptions for digital signals 
retransmitted under Section 111.
---------------------------------------------------------------------------

    \14\The legislative history accompanying this provision states 
that this ``discretionary exception is limited to those FCC rules in 
effect on the date of enactment of this legislation. If subsequent 
FCC rule amendments or individual authorizations enlarge the 
discretionary ability of cable systems to delete and substitute 
programs, such deletions and substitutions would be counted at the 
full value assigned the particular type of station provided above.'' 
H. Rep. No. 94-1476, 94th Cong., 2d sess., at 100.

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[[Page 31406]]

C. Ancillary and Supplementary Streams

    Background. DTV technology allows television stations to use part 
of their digital bandwidth for new ancillary programming and data 
services. These adjunct 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. 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 
cited to WGN v. United Video, 693 F.2d 622 (7th Cir. 1982) in support. 
We sought comment on Copyright Owners' recommendation in the NOI and 
also asked whether the 1982 WGN case, decided in an analog context, is 
applicable in this context. 71 FR at 54951.\15\ No party filed comments 
in response to this specific inquiry. However, as seen above, NCTA 
raises arguments about program-related material and multicasting that 
allude to this case. See, supra, at 11.
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    \15\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).
---------------------------------------------------------------------------

    We also must recognize that NAB, in its comments filed in response 
to the Copyright Office's Section 109 Notice of Inquiry, argues that 
separate rules for the retransmission of digital broadcast signals are 
unnecessary; instead, some relatively minor clarifications and 
amendments should clarify that the existing rules apply without regard 
to the broadcast format of a signal. According to NAB, each separate 
broadcast signal with a stream of programming retransmitted by a cable 
system to subscribers should be reported and considered separately for 
purposes of calculating Section 111 royalties. It comments that if the 
material on one channel consists entirely of material that is identical 
to or related to the copyrighted material on another channel, within 
the meaning of WGN v. United Video, Inc., 693 F.2d 622 (7 th Cir. 
1982), only one DSE value would be assigned to both channels. Based on 
the preceding comments, a discussion of WGN is important in both the 
royalty treatment of distant digital multicast signals and how the 
Office should examine ``program-related'' material for Section 111 
purposes.
    In WGN, an independent television station in Chicago sought an 
injunction against United Video, a telecommunications common carrier, 
to prohibit it from retransmitting its copyrighted television program 
to the carrier's cable television system customers after stripping the 
vertical blanking interval (``VBI'') of teletext information. The 7th 
Circuit held that the teletext was covered by the underlying copyright 
on the news program where it was intended to be seen by the same 
viewers that were watching the nine o'clock news on WGN, during same 
interval in which that news was broadcast, and it was an integral part 
of the news program. The teletext portion of the program itself, was 
encoded in vertical blanking interval of the television signal. The 
Court held that this was the case even though the teletext could not be 
viewed simultaneously with the news program and was intended to be seen 
as if it were on a different channel, even though it was part of the 
same signal. The Court concluded that the television station's 
copyright in its news program was infringed by the deletion of the 
teletext portion of the broadcast by United Video.
    Discussion. As an initial matter, we must note that digital 
multicasting is different than the teletext provided in the vertical 
blanking interval of WGN's analog broadcast signal for a variety of 
reasons. From a technical standpoint, there is no VBI in the digital 
television context. Rather, there are digital streams of data that can 
be dynamically tailored to transmit any type of programming within the 
bandwidth constraints of the digital television signal. There are also 
significant differences in the manner by which multicasting is 
presented. First, multicast streams are not intended by television 
stations to be seen by the same viewers. One of the benefits of 
multicasting is that a broadcaster can reach different audiences with 
different programs than the kind broadcast on the primary digital 
stream. Second, multicast streams exist independent of each other, at 
least from the viewers' perspective. While the streams are transmitted 
simultaneously by a digital television station, the programming streams 
are generally not entwined with each other. For example, a single 
digital television station may be multicasting separate digital 
programming streams of ABC, NBC, and Fox programming at the same time 
and be seen separately by viewers at home. Finally, each multicasting 
stream in the example given is not anchored to, or is an integral part 
of, the video programming of the main video stream (as designated by 
the broadcaster). Multicasts are more like separate ``stations'' rather 
than one station with programming streams orbiting around it. As such, 
most multicast streams would not be considered program-related for 
Section 111 purposes, and therefore, should not be bundled together for 
DSE determinations. Rather, each stream should have its own distinct 
DSE value in line with the points noted elsewhere in this NPRM.
    There are certain exceptions to this general rule. For example, a 
multiple camera angle sporting event may be considered a program-
related event under the WGN factors. In this instance, this programming 
is intended to be seen by the same viewers, they are related to each 
other since they are different perspectives of the same event, and they 
are an integral part of the same broadcast. As such, the retransmission 
of such nonnetwork programming would be assigned a value of a single 
DSE.
    It is important to note that FCC has determined that, to avoid 
inconsistency with copyright law, the factors enumerated by the 7th 
Circuit in WGN should be used in deciding whether material in the 
vertical blanking interval of local television stations is program-
related and therefore entitled to mandatory cable carriage.\16\ The FCC 
noted that there could also be instances in which material that does 
not fit squarely within the factors listed in WGN would be program-
related. See Broadcast Signal Carriage Issues, 8 FCC

[[Page 31407]]

Rcd 2985 n.235 (1993); Broadcast Signal Carriage Issues, 
Reconsideration Order, 9 FCC Rcd 6723, 6732 n.128. 614. See also In re 
Gemstar International Group., Ltd., 16 FCC Rcd 21531 (2001) (holding 
that an electronic program guide developed by Gemstar International, 
and carried in the VBI of local broadcast stations, was not covered by 
the signal carriage obligations of Section 614).
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    \16\Pursuant to Section 614 of the Communications Act, and 
implementing rules adopted by the FCC, a broadcast station is 
entitled to assert mandatory carriage rights on cable systems 
located within the station's market. Specifically, cable operators 
are required to carry the primary video, accompanying audio, and 
closed captioning information in line 21 of the VBI, in its 
entirety, of local commercial stations in fulfilling their must 
carry obligations. Cable operators also are required, to the extent 
technically feasible, to retransmit program-related material carried 
in the VBI. Carriage of other non-program-related material in the 
VBI (including teletext and other subscription and advertiser-
supported information services) is at the discretion of the cable 
operator.  See 47 U.S.C. 534(b)(3).
---------------------------------------------------------------------------

    Therefore, unique audio and visual material that is related to a 
program being transmitted by a digital broadcast television signal is 
considered covered under Section 111 of the Act. If such material is 
embedded in the digital programming stream, such as new interactive 
content like multiple camera angles, then a cable operator should not 
have to pay separate royalties for the additional material. However, if 
the distant digital broadcast station multicasts unique and separate 
streams of programming, and they are retransmitted pursuant to Section 
111, then a cable operator must pay royalties for each stream.
    WGN provides support for our interpretations here. In reviewing the 
facts and law presented in WGN, the 7th Circuit stated that ``Congress 
probably wanted the courts to interpret the definitional provisions of 
the new act flexibly, so that it would cover new technologies as they 
appeared, rather than to interpret those provisions narrowly and so 
force Congress periodically to update the act.'' 693 F.2d at 628. The 
Court comments that the House Report states: ``Authors are continually 
finding new ways of expressing themselves, but it is impossible to 
foresee the forms that these new expressive methods will take. The bill 
does not intend either to freeze the scope of copyrightable technology 
or to allow unlimited expansion to areas completely outside the present 
congressional intent. Section 102 [a lengthy enumeration of 
copyrightable works of authorship, including audiovisual works] implies 
neither that the subject matter is unlimited nor that new forms of 
expression within that general area of subject matter would necessarily 
be unprotected.'' Id. citing H.R. Rep. No.1476, 94th Cong., 2d Sess. at 
51 (1976) (emphasis added). The Court then states, ``We take this 
passage, despite its hedging language, as some warrant for the method 
of interpretation employed in this opinion, which allows new types of 
``audiovisual work'' to be recognized by analogy to the old.'' Id. at 
629.\17\ No party filed comments disagreeing with this general 
principle.
---------------------------------------------------------------------------

    \17\Digital television applications are developing at a rapid 
pace and it is impossible to prognosticate future developments. In 
any event, broadcasters are currently working on technologies that 
would allow digital television station licensees to offer near on-
demand news and weather, target ads at individual viewers, and 
transmit downloadable programming, games, and music. See TVNEWSDAY, 
Digital TV Opens Up Two-Way Opportunities, http://tvnewsday.com/articles/2008/02/28/daily.4/ (Last accessed on February 28, 2008). 
We are not in a position here to decide whether the retransmission 
of such material would be covered by Section 111.
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D. Application of Section 111 to Digital Signals

    In the NOI, we stated that the retransmission of digital signals 
was not expressly excluded under the cable statutory license, however, 
we sought comment on a number of practical problems associated with 
their retransmission under the existing Section 111 regulatory 
structure. At the outset, it is important to note that in their 
comments, Copyright Owners stress that separate rules for 
retransmission of digital broadcast signals are unnecessary. Instead, 
they ask the Copyright Office to clarify that the existing rules in 
Section 201.17 (Title 37 of the CFR) apply without regard to the 
broadcast format of a signal. Copyright Owners Comments at 3. As seen 
below, it is difficult to make such a broadbrush conclusion as 
Copyright Owners envision. Rather, a careful analysis of several cable 
copyright factors is necessary.
    1. Local service areas and television markets
    Background. Under Section 111(f) of the Act, the ``local service 
area of a primary transmitter,'' 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 the 
rules, regulations, and authorizations of the Federal Communications 
Commission in effect on April 15, 1976, or such station's television 
market as defined in Section 76.55(e) of title 47, Code of Federal 
Regulations (as in effect on September 18, 1993), or any modifications 
to such television market made, on or after September 18, 1993, 
pursuant to section 76.55(e) or 76.59 of title 47 of the Code of 
Federal Regulations. This is important because it determines whether a 
station is local or distant under Section 111.
    In the NOI, we asked whether a digital broadcast station's 
television market for Section 111 purposes would be the same as the 
broadcast station's television market for the analog signal. This 
question was directed at digital-only stations and those stations that 
broadcast in an analog and digital format during the transition period. 
We also sought comment on whether a digital signal could ever be 
considered local if the analog signal is considered distant, or vice 
versa. 71 FR at 54950. On this matter, Copyright Owners state that the 
television market for digital broadcast signals should again be 
determined by relying on the Section 111(f) definition of the `local 
service area of a primary transmitter,' which refers to FCC rules to 
determine the market of a broadcast station. Again, Copyright Owners 
argue that broadcast format is irrelevant for this purpose. As for 
significantly viewed signals, Copyright Owners state that if the analog 
signal has ``significantly viewed`` status in a specific community, its 
digital counterpart should have the same status for that community. See 
Copyright Owners Comments at 4. CBC states that if a station's analog 
signal is considered local to a market for Section 111 purposes, then 
the station's digital signals (including any multicast streams) should 
also be considered local to the market and therefore should be free 
from copyright liability under the statutory license. CBC Comments at 
3.
    Discussion. A key element in calculating the appropriate royalty 
fee involves identifying subscribers of the cable system located 
outside the local service area of a primary transmitter. As seen above, 
this determination is predicated upon two sets of FCC regulations: the 
broadcast signal carriage rules in effect on April 15, 1976, and a 
station's television market as currently defined by the FCC. In 
general, a broadcast station is considered distant vis-a-vis a 
particular cable system where subscribers served by that system are 
located outside that broadcast station's specified 35 mile zone (a 
market definition concept arising under the FCC's old rules), its Area 
of Dominant Influence (``ADI'') (under Arbitron's defunct television 
market system), or Designated Market Area (``DMA'') (under Nielsen's 
current television market system). However, there are other sets of 
rules and criteria, such as Grade B contour coverage and 
``significantly viewed'' status, that also apply in certain situations 
when assessing the local or distant status of a station-even when 
subscribers are located outside its zone, ADI and DMA for copyright 
purposes.
    We note that the FCC has adopted a Table of Allocations for digital 
television stations, defining the frequency allocations for channels in 
individual communities, that is intended to mirror its Table of 
Allocations for analog television stations. The FCC's policy goal was 
to ensure that a digital television station's

[[Page 31408]]

coverage area would replicate the analog television station's coverage 
area so that no one would lose over-the-air broadcasting service once 
the digital transition period ends. Plainly, the coverage areas of 
digital television signals are in a state of flux at the present time 
because of the FCC's various DTV service requirements and related 
exceptions and waivers. Some stations are operating on their pre-
transition digital channel assignment and some are operating on their 
post-transition digital channel assignment. Some digital television 
stations are operating at full power and are replicating their analog 
service area and some are operating at less than full power. And, some 
stations will be permitted, once the transition is over, to extend 
their coverage areas a small degree farther than their current analog 
signal. These various permutations may have a significant effect on the 
Office's SOA examination practices. See Third Periodic Review of the 
Commission's Rules and Policies Affecting the Conversion to Digital 
Television, MB Docket No. 07-91, FCC 07-228, et. seq. (rel. Dec. 31, 
2008).
    At the outset then, we must address the technical requirements the 
FCC has adopted for digital television stations. While these technical 
changes will not disrupt 35 mile zones, as defined by the Act, or local 
television markets for commercial television stations, as defined by 
Nielsen, they may have some bearing on the continuing validity of using 
analog Grade B contours in determining local service areas of digital 
signals. It is important to recognize that digital signal coverage is 
defined by ``noise limited service contours,'' not Grade B contours. 
This is especially critical for noncommercial television stations 
because their ``local'' status is currently determined by Grade B 
contours.\18\ The conundrum here is that the new DTV contour parameters 
did not exist in 1976 (like Grade B contours) nor are they used by the 
FCC in Sections 76.55(e) and 76.59 to define television markets. As 
such, there is no statutory basis for us to incorporate the new contour 
into our rules for purpose of defining markets. Thus, we propose that 
the Office must either use 35 mile zones or Nielsen's DMAs for purposes 
of examining SOAs where full power digital signals are reported. This 
approach is consistent with the operating definitions found in Section 
111 of the Act and the Copyright Office's rules and forms.
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    \18\The Grade B contour may be used to determine the local 
status of network and independent stations, but only if the cable 
communities are located ``outside all markets.'' See 47 CFR 76.59 
(1981). The Grade B contour may also be used to determine the 
``permitted'' status of a commercial UHF station to avoid the 3.75% 
fee in Part 6 of the DSE schedule. See 47 CFR 76.59, 76.61, and 
76.63 (1981).
---------------------------------------------------------------------------

    With regard to ``significantly viewed'' stations, we note that the 
FCC has stated that the significant viewing standard supplements other 
``local'' market definitions by permitting stations that would 
otherwise be considered ``distant,'' for program exclusivity purposes, 
to be considered local based on viewing surveys directly demonstrating 
that over-the-air viewers have access to the signals in question. After 
taking the complexities of the DTV transition into account, the FCC 
believed that the public interest was best served by according the 
digital signal of a television broadcast station the same significantly 
viewed status accorded the analog signal. The FCC noted, however, that 
new DTV-only television stations must petition the Commission for 
significantly viewed status under the same requirements for analog 
stations in Section 76.54 of the Commission's rules. 16 FCC Rcd at 
2642. The FCC did not explicitly discuss whether all new multicast 
programming streams broadcast from a single transmitter would inherit 
the significantly viewed status of the analog station.
    Based upon the preceding, we propose that a digital simulcast 
television signal should have the same ``significantly viewed'' status 
assigned by the FCC to its analog counterpart. These types of 
determinations, we believe, are unaffected by the switch to digital 
television. As for new multicast streams from a station that had 
originally been accorded ``significantly viewed'' status, we will 
decline to consider them permitted for Section 111 purposes until the 
time that the FCC makes a determination on this matter. This policy is 
in accord with our overall finding that new multicast streams should be 
treated as new stations for cable copyright purposes. We seek comment 
on these proposals, noting that no amendments to current rules are 
needed under this approach.
    2. Permitted or non-permitted signals and the 3.75% fee
    Background. Broadcast station signals retransmitted pursuant to the 
FCC's 1976-era market quota rules are considered permitted stations and 
are not subject to a higher royalty rate. Under these rules, a cable 
system in a smaller television market (as defined by the FCC) is 
permitted to retransmit only one independent television station signal. 
A cable system located in the top 50 television market or second 50 
market (as defined by the FCC), is permitted to carry two independent 
station signals. The former market quota rules did not apply to cable 
systems located ``outside of all markets,'' and these systems under 
Section 111 are currently permitted to retransmit an unlimited number 
of television station signals without incurring the 3.75% fee (although 
these systems still pay at least a minimum copyright fee or base rate 
fee for those signals).
    In the NOI, we asked how the Copyright Office could determine 
whether a distant digital broadcast signal is permitted or non-
permitted for DSE purposes. 71 FR at 54950. Copyright Owners assert 
that no distinction should be made in the application of the existing 
rules based on broadcast format; rather, each signal and each stream of 
a multicast signal should be evaluated separately to determine if it 
would have been permitted under Commission rules in effect on June 24, 
1981. They state, for example, that if a cable operator carries two 
different streams of a distant digital signal (neither of which 
contains any network programming) and only one distant independent 
station could have been carried by that system under the former FCC 
rules, one stream would be permitted and the other would not. Copyright 
Owner Comments at 4.
    NCTA criticizes this approach stating that most cable systems have 
reached their FCC market quota of permitted distant signals with 
distant analog signals. The result then, would be to deem non-permitted 
(and therefore subject to the 3.75% fee) all distant digital signals 
during the DTV transition in cases where analog signals already make up 
the quota of permitted signals. NCTA asserts that, under the Copyright 
Owners' plan, royalty fees of 3.75% of gross receipts would attach to 
carriage of each separate digital stream. NCTA argues that this would 
be an ``extreme and punitive'' approach, not warranted by the language 
of the Act of the Copyright Office's existing rules. NCTA Reply 
Comments at 3.
    Discussion. The retransmission of a duplicative distant digital 
television signal shall be considered ``permitted'' for Section 111 
purposes. As explained above, the carriage of such signals does not 
require additional compensation under the statute. However, we propose 
that each unique multicast stream retransmitted by a cable operator 
above the FCC market quota limitations as referenced in (or applied 
pursuant to) Section 111 shall be treated as a separate ``DSE'' and 
subject to the 3.75% fee, assuming no other legitimate

[[Page 31409]]

basis of permitted carriage applies. We seek comment on this approach.
    3. Basis of carriage
    Background. There are several bases of permitted carriage under the 
current copyright scheme that are tied to the FCC's former carriage 
requirements and the retransmission of which will not trigger the 3.75% 
fee. They include: (1) specialty stations; (2) grandfathered stations; 
(3) commercial UHF stations placing a Grade B contour over a cable 
system; (4) noncommercial educational stations; (5) part time or 
substitute carriage; and (6) a station carried pursuant to an 
individual waiver of FCC rules. If none of these permitted bases of 
carriage are applicable, then the cable system pays a relatively higher 
royalty fee for the retransmission of that station's signal.
    In the NOI, we asked how the Copyright Office could determine the 
basis of carriage for a distant digital signal. 71 FR at 54950. 
Copyright Owners state that the rules already in place should be 
applied without reference to broadcast format. They argue that each 
signal and each stream of a multicast signal should be evaluated 
separately to determine the basis of carriage. Copyright Owner Comments 
at 5.
    Discussion. We agree with Copyright Owners that the basis of 
carriage for retransmitted digital television signals should generally 
be the same as those for analog television signals, but the 
circumstances dictate the outcome in some instances. With regard to the 
market quota rules, the most commonly used permitted basis of carriage, 
we reiterate that the most significant change resulting from the 
retransmission of digital signals will be the amount of royalties that 
may have to be paid by the cable operator. For example, if an operator 
decides to retransmit each of the five or six (possible) multicast 
programming streams offered by a single distant digital broadcast 
signal, and each stream is a separately calculated DSE, then it may 
instantly reach its market quota and would have to pay a 3.75% fee for 
each stream over the quota. We seek comment on this result.
    Next, we believe that the specialty station status of an existing 
analog signal may be claimed by a companion digital signal if it 
transmits the same programming. However, a multicast signal emanating 
from the same station and carrying different programming cannot take 
advantage of the analog signal's specialty station status because it is 
``new'' for DSE purposes. Thus, the owner or the licensee of the 
station that transmits a multicast stream would need to submit a 
separate affidavit to be placed on the specialty station list. See 72 
FR 60029 (Oct. 23, 2007). We seek comment on this approach.
    Likewise, a new digital multicast stream transmitted by a 
television station whose analog signal has ``grandfathered'' status 
should not be able to claim the latter's status because it was not in 
existence prior to March 31, 1972. The FCC originally adopted its 
grandfathering policy so that cable operators could avoid the 
difficulty of withdrawing signals to which the public has been 
accustomed.\19\ This rationale is inapt in the case of new digital 
signals and streams because subscribers have not come to rely upon such 
signals. As such, an operator who carries such a distant digital signal 
or stream should have to pay the 3.75% fee if that signal is above the 
market quota (and no other permitted bases for carriage apply) for that 
particular system even though the licensee's analog signal may have 
qualified for ``grandfather status.`` Also, the multicast digital 
signal or stream, as well as new digital stations, should not be exempt 
from the syndicated exclusivity surcharge like true ``grandfathered`` 
stations. We seek comment on this approach.
---------------------------------------------------------------------------

    \19\See Cable Television Report and Order, 36 FCC 2d 143, para. 
107 (1972).
---------------------------------------------------------------------------

    As for commercial UHF stations placing a Grade B contour over a 
cable system, we encounter the same issues that arise in determining 
the appropriate market area using that coverage dynamic. In this case, 
we again find that the Grade B contour cannot be replaced by the noise 
limited service contour as the appropriate measurement to determine 
whether a commercial UHF station is ``permitted`` for copyright 
purposes because the new predictive standard was not in existence at 
the time Section 111 was enacted. The practical effect of this 
determination is that a cable operator cannot rely upon any type of 
contour to determine whether a UHF signal is permitted for Section 111 
purposes. We seek comment on this result.
    The transition to digital television likely will not disturb the 
permitted basis for carriage of noncommercial educational stations or 
implicate part time or substitute carriage rationale for permitted 
signals. Further, the Office's current policy of treating stations with 
an FCC waiver as ``permitted`` may be unaffected as well. For example, 
in 1972, the FCC granted a waiver (under its former carriage rules) 
permitting all present and future New Jersey television stations to be 
carried on all New Jersey cable systems. For cable copyright purposes, 
then, a New Jersey cable operator may retransmit all New Jersey 
televisions stations without incurring the 3.75% fee for carriage of 
signals above the market quota. See letter from Dorothy Schrader, U.S. 
Copyright Office to David Wittenstein, Dow Lohnes & Albertson, dated 
February 6, 1986. The FCC waiver, which was explicitly prospective, 
would apply to all digital television stations with their community of 
license in New Jersey, and by extension, all multicasts streamed from 
each of those stations. We recognize that this result runs contrary to 
our newly stated policy that operators should pay additional royalties 
for the retransmission of new digital multicast streams, but this is 
how Section 111 operates. This example highlights the friction between 
an antiquated licensing system and the rights of copyright owners. We 
seek comment on these interpretations.
    4. DSE values
    Background. In the NOI, we asked what DSE values (for network, 
educational, independent) should be assigned to digital signals. 71 FR 
at 54950. Copyright owners state that DSE values should be based on the 
definition of station types found in Section 111(f) regardless of 
format. They add that where a digital signal includes multiple program 
streams, each stream's DSE value should be based on its individual 
station type. Copyright Owner Comments at 5.
    Discussion. As stated earlier, under Section 111 of the Copyright 
Act, distant independent television stations are assigned a DSE value 
of 1.00 and network and educational television stations are assigned a 
value of .25. The transition to digital television does not generally 
affect these DSE values. Thus, retransmitted digital television signals 
should carry the same value as those for analog signals. This is of no 
concern for duplicative digital signals, however, this is an issue for 
multicast digital signals. There may be instances where a single 
station transmits separate multicast streams of independent and network 
programming (e.g., an Ion Media television stream and an ABC stream). 
In such a case, we propose that a cable operator should separately 
report the DSE value of each individual stream on its SOA, identify 
each stream as a network, independent, or noncommercial station, and 
pay accordingly. The proposed rules have been amended to reflect this 
approach. We seek comment on this proposal.
    5. New digital stations
    Background. In the NOI, we asked how new digital television 
stations, without a pre-existing analog counterpart, should be treated 
for cable

[[Page 31410]]

royalty purposes. 71 FR at 54950. In response to our inquiry, NCTA 
comments that if the new digital television station is carried on a 
distant basis, additional payment would be required since this newly 
added station would be considered a new ``primary transmitter,`` just 
as if a new analog station were added to a cable system line-up on a 
distant basis. NCTA Comments at 4, n. 7. Copyright Owners state that 
all existing rules should be applied even if the digital signal never 
had an analog counterpart. Copyright Owner Comments at 6-7. On a 
separate, but related subject, Copyright Owners state that a new 
digital station could petition the FCC for significantly viewed status 
and therefore be considered a local station for cable copyright 
purposes. Copyright Owners Comments at 6.
    Discussion. We propose that the rules and regulations applicable to 
the retransmission of existing analog television stations under Section 
111 should apply in the same manner to the retransmission of new 
digital-only television stations. However, as discussed above with 
regard to new stations and multicast streams, there are certain 
practices and rules that would not necessarily apply because of their 
status as new television stations. For example, a new digital station 
(without a prior analog counterpart) or a new multicast stream, cannot 
have grandfathered status because they did not exist prior to March 31, 
1972, and the concerns about viewing expectations that motivated the 
FCC to grant grandfather status to certain stations under its former 
rules are inapplicable to new programming. Further, there can be no 
market determination based on Grade B contours because they have been 
rendered moot by the transition to DTV and a digital station's coverage 
area is now determined by noise limited service contours. One last 
question that must be addressed is whether new digital stations 
``create`` television markets, as that concept has been defined by the 
FCC, and incorporated into the cable royalty scheme.\20\ These 
``markets`` have been used to determine the local or distant status of 
analog commercial television station for cable copyright purposes. 
However, the FCC no longer assigns specified zones as it did when the 
old local and distant carriage rules were in effect. Thus, there is no 
regulatory basis upon which we can rely to state that new digital 
stations create their own markets. We seek comment on these proposals 
and other tentative conclusions outlined above.
---------------------------------------------------------------------------

    \20\In the analog context, when the FCC licensed a network or 
independent station in the 1970s, it assigned a circular 35 mile 
specified zone to each station and then determined the type of 
market it created.
---------------------------------------------------------------------------

    6. Digital signal downconverted to analog
    Background. In the NOI, we asked how a cable operator should report 
carriage of a digital signal that has been downconverted to an analog 
signal at the cable system's headend. 71 FR at 54950. This action is 
necessary so that those cable households without a digital television 
set are able to receive and view the programming carried by the 
station. NCTA states that a cable operator would be engaged in the 
secondary transmission of a primary transmission and that Section 111 
would still be applicable. NCTA asserts that the statute does not 
depend on the technical format of the transmission. NCTA Comments at 4, 
n. 7.
    Discussion. Our current view is that the downconversion of a 
digital signal into an analog format is inconsequential to the royalty 
structure under Section 111. The technical format of the retransmission 
in the subscriber's home has no bearing on the status of the signal for 
royalty purposes. As such, as long as the operator reports the digital 
station's call letters and type (independent, network, or educational) 
on its SOA, there is no rationale for requiring a separate statement 
indicating the downconversion status of a distant digital signal or an 
obligation to pay additional royalties (unless it is a new multicast 
signal). We seek comment on this approach.

E. Retransmission of Digital Audio Broadcast Signals

    Background. Section 111 permits cable systems to retransmit radio 
station signals in addition to television station signals. The Office 
had codified rules concerning the secondary retransmission of radio 
signals and determined how such signals should be identified on cable 
Statements of Account. See 37 CFR 201.17(e)(10). Terrestrial radio 
station licensees have been converting to a digital format over the 
last few years. Using in band on channel (``IBOC'') technology, radio 
stations have initiated a service known as digital audio broadcasting 
(``DAB''). DAB provides for enhanced sound fidelity and improved 
reception while giving radio stations the capability to multicast audio 
programming as well as offer new data services to the public. This 
technology allows broadcasters to use their current radio spectrum to 
transmit AM and FM analog signals simultaneously with new higher 
quality digital signals. There is no government mandated transition for 
radio station licensees as there is for television station licensees, 
but the FCC has encouraged radio stations to convert to a digital 
format. See Digital Audio Broadcasting Systems and Their Impact on the 
Terrestrial Radio Broadcast Service, 22 FCC Rcd 10344 (2007).\21\
---------------------------------------------------------------------------

    \21\Industry reports forecast that there will be 30 million DAB 
listeners by 2012. See Researcher Sees Growth for Satellite, but 
Even More for HD Radio, Radio World Newsbytes, http://www.rwonline.com (Last accessed January 14, 2008).
---------------------------------------------------------------------------

    In the NOI, we sought comment on what changes in our rules and the 
SOAs would be necessary to accommodate the retransmission of digital 
audio signals by cable systems. We asked how cable systems should 
report the retransmission of digital audio multicast streams. We also 
asked whether cable subscribers would need specialized equipment or set 
top boxes to receive these digital radio signals, and if so, how this 
may affect a cable operator's gross receipts calculations. 71 FR at 
54951.
    Comments. NPR argues that digital television and digital radio 
stations are so similar that they should both be covered by Section 
111. It asserts that both can and do transmit digital simulcasts and 
multicast digital signals and simulcast analog services and both can 
offer ancillary services, such as program-related textual material. NPR 
comments that the Copyright Office may generally follow the same 
approach as it does for television in revising its rules to accommodate 
the digital radio transition. NPR states that while the equipment to 
process individual digital radio signals is not yet available, the 
basic technology exists, and until such equipment is developed, 
retransmission on an all-band basis would permit the pass through of 
digital multicast signals. NPR Comments at 3-4.
    With regard to specific policy recommendations, NPR suggests that: 
(1) cable systems should continue to state whether radio station 
signals are carried on an all-band retransmission basis or as separate 
and discrete signals; (2) distinct digital radio signals should be 
treated as separate retransmissions under the Copyright Office's 
regulations; and (3) cable systems should include in their gross 
receipts any revenue associated with the retransmission of digital 
radio signals, including any equipment a subscriber must rent or 
purchase to receive such services. NPR concludes that for present 
purposes, ``it is sufficient to clarify that retransmission of digital 
radio signals is covered by the Section 111 license and to confirm the 
applicability of the rules

[[Page 31411]]

governing the reporting of such retransmissions.`` Id. at 4.
    CBC disagrees that DAB should be subject to the Section 111 
license. It urges the Copyright Office to forego creating a new 
regulatory framework for DAB ``until the service further evolves and is 
more widely available in the marketplace.`` CBC Comments at 4.
    NPR disagrees with CBC and states that DAB service is widely 
available across the United States with over 1500 stations broadcasting 
digital signals. It adds that since a given station's digital service 
area is comparable to its analog service coverage area, the advent of 
DAB does not require a fundamentally new regulatory framework. 
According to NPR, it is sufficient and appropriate for the Copyright 
Office to require the reporting of all such retransmissions of analog 
and digital radio broadcast signals. See NPR Reply Comments at 3-4.
    Discussion. We find that DAB is a burgeoning new type of over-the-
air radio service that warrants consideration here. DAB amounts to a 
change in format that appears to have no effect on its carriage under 
Section 111. Consequently, digital radio stations would be treated in 
the same manner as analog radio stations when retransmitted by cable 
operators in accordance with existing Office regulations. A cable 
operator should report the retransmission of digital audio signals in 
Space H of the SOA and the fees associated with these signals in Space 
K of the SOA. We seek comment on this approach.
    We are not instituting a new regulatory framework for the carriage 
of digital radio signals here. Thus, any concerns CBC may have had 
about DAB and Section 111 will likely not materialize. However, we 
stand ready to entertain any novel questions about the application of 
Section 111 to digital radio signals in a future proceeding.

F. Marketing of Digital Broadcast Signals and the Cable Statutory 
License

    Background. The Copyright Office's regulations require reporting of 
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.
    In their Petition for Rulemaking, Copyright Owners stated 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. Accordingly, Copyright Owners 
requested that the Copyright Office clarify that a cable operator must 
include in its gross receipts any revenues from the tiers of service 
consumers must purchase in order to receive digital broadcast signals - 
notwithstanding that the operator may market its offering of such 
signals as ``free.'' Copyright Owners also recommended 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 sought comment on these 
proposals in the NOI and also asked interested parties 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. 71 FR at 54951.
    Comments. NCTA states that cable operators offer digital broadcast 
signals on their (lowest priced) basic tier of service and so the issue 
of paying royalties on the sale of other upper tiers is irrelevant in 
this instance. NCTA Comments at 7. It states that this signal placement 
practice follows Section 623(b)(7) of the Communications Act, which 
requires cable operators to include on the basic service tier ``any 
signal of any television broadcast station that is provided by the 
cable operator to any subscriber [other than a superstation signal].`` 
NCTA Comments at 8, citing 47 U.S.C. 543(b)(7). NCTA further comments 
that in its 2001 Digital Must Carry Order, 16 FCC Rcd 2598 (2001), the 
FCC stated that, ``[i]n the context of the new digital carriage 
requirements, it is consistent with the statutory language to require 
that a broadcaster's digital signal must be available on a basic tier 
such that all broadcast signals are available to all cable subscribers 
at the lowest priced tier of service, as Congress envisioned.'' See id. 
NCTA asserts that cable subscribers with a digital television set 
capable of receiving digital broadcast signals, who purchase only the 
basic service tier, will receive both the analog and digital versions 
of broadcast signals, along with all other services on the basic tier. 
NCTA asserts that these customers do not need to purchase an 
intermediate ``expanded basic`` analog tier nor are they required to 
buy a digital tier to obtain those digital signals. NCTA also states 
that the Copyright Owners' assumptions about cable marketing practices 
for digital broadcast signals are not supported by their selected 
references to certain material, which in any instance, NCTA believes 
have been taken out of context. NCTA Reply Comments at 4.
    Copyright Owners argue that cable operators are not required to 
place digital signals in the basic tier of service, despite NCTA's 
protestations to the contrary. They specifically note that ``for any 
system that faces `effective competition' under the four statutory 
tests in the Communications Act, and is deregulated pursuant to a 
Commission order, the cable operator is free to place a broadcaster's 
digital signal on upper tiers of service or on a separate digital 
services tier.`` See Copyright Owners Reply Comments at 2-3. Copyright 
Owners further state that Section 623(b)(7) of the Communications Act 
does not restrict the carriage of superstations to the basic service 
tier. Id. at 4, citing 47 U.S.C. 543(b)(7)(A)(iii) (Section does not 
apply to any `signal which is secondarily transmitted by a satellite 
carrier beyond the local service area of such station'). Accordingly, 
they argue that nothing in the law prevents cable operators from 
placing such satellite-delivered digital signals on any tier they 
choose. See id., citing 47 U.S.C. 325(b)(2)(D) (exempting the carriage 
of certain superstations from the Communications Act's retransmission 
consent requirement).'' See id.
    According to NCTA, those operators who provide digital broadcast 
signals as an extension of the basic tier are ``wholly justified under 
long-standing Copyright Office precedent`` in reporting only revenues 
from that tier in determining gross receipts for copyright purposes. 
NCTA Comments at 8-9. NCTA states that the Copyright Office should 
clarify that cable operators need not incur an additional payment for 
carriage of distant digital signals where they already pay royalties on 
account of carriage of that station's analog signal. See id. at 13. 
NCTA adds that if the Copyright Office adopts rules that impose 
additional royalty fees based on how digital signals are marketed, it 
must avoid giving the rules a retroactive effect. NCTA Reply Comments 
at 6.
    Copyright Owners agree that a cable system need include only basic 
service revenues in its ``gross receipts`` calculation if it is true 
that analog and digital signals are offered on the lowest-priced tier 
without additional charges. Copyright Owners Reply Comments at 7. They 
note, however, that many cable operators make cable subscribers buy 
through other tiers of services before they can receive digital 
broadcast signals and that such charges must be

[[Page 31412]]

included in gross receipts calculation. See id. at 7-8. Further, 
Copyright Owners assert that NCTA has not provided any examples of 
cable operators that offer digital broadcast signals without imposing 
additional charges. Copyright Owners Reply Comments at 5. Copyright 
Owners urge the Copyright Office to amend the cable SOAs so that cable 
operators are required to: (1) identify clearly each of the fees that 
its subscribers must pay to receive analog and digital broadcast 
television signals; (2) certify that each of those fees was included in 
its calculation of gross receipts; and (3) state where the cable 
operator must inform subscribers that these are the only fees necessary 
to receive analog and digital broadcast signals. Copyright Owners 
Comments at 8.
    Discussion. 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. The Office's gross receipts definition 
is not contingent upon the type of station that is retransmitted. We 
have never wavered from this policy and it has been understood by both 
cable operators and copyright owners for years.
    We believe that our existing policies need not be changed as a 
result of the digital television transition. A tier is a tier 
regardless of the type of broadcast signals carried on it. As such, a 
cable operator must include in its gross receipts calculation all sales 
of services or tiers that must be purchased in order for subscribers to 
access any type of digital broadcast signals, whether they are 
duplicative digital broadcast signals or unique multicast signals. A 
cable operator should clearly identify on its SOA each of the fees that 
its subscribers must pay to receive digital television signals.
    To clarify our interpretation, we will use Comcast's West Palm 
Beach, Florida system as an example. Here, the operator charges $15.95 
for the Basic Service Tier, $50.95 for the expanded service tier, and 
an additional $6.95 for the digital tier of service that includes high 
definition television signals. A subscriber who wants to receive 
digital television programming would pay a fee of $57.90 (expanded 
basic tier + digital broadcast tier, excluding franchise fees and any 
equipment rentals). See http://www.comcast.com/shop/buyflow/default.ashx (Input zip code 33407 when prompted). In this example, it 
appears that the digital television signals are not available as part 
of the lowest priced tier of service. Thus, Comcast should be 
reporting, as part of its gross receipts, all monies collected for the 
sale of the expanded service tier, the digital broadcast tier, as well 
as rental fees for equipment needed to access such tiers of 
service.\22\
---------------------------------------------------------------------------

    \22\Comcast recently adopted a marketing policy for its Michigan 
customers who will now be able to receive high definition channels 
without having to pay through a digital service tier. In the past, 
high definition service only was available to customers who 
purchased the more extensive and expensive ``preferred'' cable 
service. See Sofia Kosmetatos, Comcast Puts HD on Basic Access, 
Detroit News, November 20, 2007. This example, and the one above, 
appear to support Copyright Owners' argument concerning the purchase 
of additional tiers to reach broadcast programming. But see Philip 
Swann, Time Warner: 100 HD Channels in 2008, http://www.TVPredictions.com (Last accessed Apr. 3, 2008) (TWC's digital 
cable customers in Brooklyn, Queens, and Staten Island, soon will be 
able to receive 100 HD channels, including high definition signals 
from New York television stations.) It appears from this 
announcement that a subscriber would need to purchase a digital 
tier, in addition to the basic service tier, to access broadcast 
signals in HD.
---------------------------------------------------------------------------

    Given the disparate descriptions of communications law precedent in 
the comments, we believe that it is useful to provide an overview of 
FCC precedent here. Specifically, Section 623(b)(7)(A) of the 
Communications Act requires that the basic tier on a rate regulated 
system include all signals carried to fulfill the must carry 
requirements of Sections 614 and 615 and ``any signal of any television 
broadcast station that is provided by the cable operator to any 
subscriber...`` In the context of the analog broadcast signal carriage 
requirements, it has been the FCC's view that the Communications Act 
contemplates there be one basic service tier. The FCC believed that in 
the context of its digital broadcast signal carriage requirements, it 
was consistent with the statutory language to require that a 
broadcaster's digital signal must be available on a basic tier such 
that all broadcast signals are available to all cable subscribers at 
the lowest priced tier of service, as Congress envisioned. The FCC 
stated that the basic service tier, including any broadcast signals 
carried, will continue to be under the jurisdiction of the local 
franchising authority, and as such, will be rate regulated if the local 
franchising authority has been certified under Section 623 of the Act. 
The FCC noted, however, that if a cable system faces effective 
competition under one of the four statutory tests, and is deregulated 
pursuant to a Commission order, the cable operator is free to place a 
broadcaster's digital signal on upper tiers of service or on a separate 
digital service tier. The FCC stated that its finding was based upon 
the belief that Section 623(b)(7) of the Communications Act is one of 
those rate regulation requirements that sunsets once competition is 
present in a given franchise area. 16 FCC Rcd at 2643.\23\
---------------------------------------------------------------------------

    \23\The FCC sought further comment on tiering issues in a 2001 
Further Notice of Proposed Rulemaking accompanying the Report and 
Order. In so doing, it stated its belief that it would facilitate 
the digital transition to permit cable operators that are carrying a 
broadcast station's analog signal on the basic tier to carry that 
broadcast station's digital signal on a separate digital tier 
pursuant to retransmission consent. The FCC believed that such an 
approach, which was necessarily limited to the duration of the 
transition in a given market, was consistent with the flexibility 
given the Commission by Section 614(b)(4)(B) to prescribe carriage 
rules for the DTV transition. The FCC has not finally decided this 
matter, even though it was proposed over seven years ago. Id. at 
2656.
---------------------------------------------------------------------------

    Copyright Owners recommend that the Office revise the SOAs and 
require cable operators to specifically certify that each of the 
subscriber fees associated with the purchase of tiers with digital 
signals is included in its calculation of gross receipts. They also 
suggest that a cable operator should be required to inform its 
subscribers that these are the fees necessary to receive analog and 
digital broadcast signals. In this instance, Copyright Owners have not 
demonstrated that their suggested revisions advance a relevant public 
policy goal associated with the proper administration of the cable 
statutory license. As such, we find that these proposed changes are 
unnecessary at this time and we will not further consider such 
recommendations.

G. Equipment Issues Under Section 111

    1. Reception Devices
    Background on Set Top Boxes. Under the Copyright Office's rules, 
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. (Emphasis added). 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: ``[A] 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, most cable subscribers are unable to receive digital 
(including broadcast) signals offered by their cable operator unless 
they obtain a special converter, i.e. digital set top box,

[[Page 31413]]

regardless of whether those signals are available as part of the 
lowest-priced basic service. In their Petition for Rulemaking, 
Copyright Owners have asserted that some cable operators may not be 
including digital set top box fees in their calculation of gross 
receipts. Copyright Owners have not suggested that all cable operators 
are failing to include digital converter fees in their gross receipts. 
They noted, however, that the fact that some cable systems are 
including such fees in their gross receipts, while others are 
apparently not doing so, underscores the need for the Copyright Office 
to address this matter to ensure consistency in the application of the 
relevant rules.
    Copyright Owners, therefore, requested that the Copyright Office 
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 digital broadcast signals, 
notwithstanding that the operator may market its offering of such 
signals as ``free.'' Copyright Owners have also recommended that the 
Copyright Office include in Space E of the cable SOA 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 sought comment on these proposed changes in the NOI. 71 FR 
at 54952.
    Comments on Set Top Boxes. NCTA states that when the converter box 
rule was first adopted by the Copyright Office in the late 1970s, many 
television sets were unable to receive UHF broadcast stations carried 
on cable without a set top box, a device that they could only obtain 
from their cable operator. NCTA Comments at 9. NCTA asserts that recent 
developments in communications law, specifically the requirement 
regarding the commercial availability of navigation devices under 
Section 629 of the Communications Act ``has ensured that cable 
operators are no longer the only source of equipment to permit the 
reception of broadcast signals.'' It argues that cable operator-
provided set-top boxes can no longer be considered ``necessary'' to 
receive digital broadcast signals and should not be included in gross 
receipt revenues. NCTA additionally argues that cable subscribers do 
not need cable operator-leased set top boxes to receive digital 
broadcast signals. To support its position, it asserts that cable 
operators are generally delivering digital broadcast signals ``in the 
clear'' (not scrambled) and any basic service tier subscriber (with a 
DTV receiver) is able to receive and view them without a box or a 
CableCard (see explanation below). NCTA Comments at 10. ACA agrees and 
states that to receive digital broadcast signals on cable, a customer 
need only purchase a digital ``cable-ready'' television. ACA Comments 
at 3.
    NCTA states that when a cable subscriber purchases either a digital 
``cable ready'' receiver or a Tivo Series 3 digital video recorder at 
retail, copyright owners receive no royalty payment. NCTA comments that 
in both these cases, the customer-supplied equipment enables the 
viewing of digital television signals in the same manner as a digital 
set top box rented from the cable operator. For these reasons, NCTA 
argues, it can no longer be said that it is necessary for any 
subscriber to lease a device from their local operator to access 
digital signals retransmitted by cable. NCTA concludes that no policy 
reason justifies charging cable subscribers in the form of increased 
royalty fees when those customers choose to lease a set top box from 
their cable operator instead of pursuing other marketplace options. 
NCTA Comments at 12.
    NCTA states that when cable systems first began retransmitting 
broadcast signals under the cable statutory license, broadcast signals 
were all that operators offered; under these circumstances, a policy 
that required operators to include set top box revenues may have been 
justified. NCTA asserts, however, that digital set top boxes serve 
entirely different functions that make this policy no longer valid; 
cable subscribers are obtaining set top boxes for a broad variety of 
reasons that have nothing to do with the system's ``secondary 
transmission service.'' NCTA states that digital set top boxes enable 
subscribers to buy services, like digital video recording or video-on-
demand and make possible viewing of scrambled non-broadcasting digital 
programming. NCTA asserts that these are services that a subscriber 
could not access without a set top box. NCTA concludes that copyright 
owners are simply trying to bootstrap box rental revenues into the 
copyright royalty pool. According to NCTA, these revenues have no 
relationship to the statutory license or to broadcast signal carriage, 
and operators should be able to exclude them from the gross receipt 
calculation. See id. at 12-13.
    In response, Copyright Owners assert that the Copyright Office has 
already ruled that analog converter fees must be included in the gross 
receipts calculation and that the applicability of this provision to 
such converters has not been challenged for 30 years. Copyright Owners 
assert that cable-ready television sets were widely available in the 
pre-digital era and subscribers nonetheless chose to rent converters in 
order to eliminate ghosting problems or be able to receive additional 
non-broadcast channels. They add that the Copyright Office's ruling 
required cable operators to report converter revenues as part of their 
gross receipts for royalty purposes whether or not subscriber rentals 
were driven by necessity. See Copyright Owners Reply Comments at 9-10.
    Copyright Owners also argue that NCTA's proposal would lead to 
absurd results. They state, for example, that NCTA's logic suggests 
that none of the subscriber fees charged to receive broadcast signals 
should be included in gross receipts because it is not necessary for a 
subscriber to buy service from a cable operator to receive broadcast 
signals. They argue that cable subscribers typically can obtain 
broadcast signals off-the-air, but nothing in the Copyright Act or 
Copyright Office rules would permit cable operators to omit fees they 
collect from subscribers from their gross receipts under a necessity 
rationale. Id. at 10.
    Copyright Owners admit that if a cable subscriber purchases a set 
top box from a third party, they receive no portion of that purchase 
price. They assert, however, that this situation is no different from 
the situation in 1976 (or now) where copyright owners receive no 
portion of the purchase price of outdoor antennas when consumers choose 
that option to receive broadcast signals. They argue that the 
availability of alternative means for obtaining broadcast signals does 
not free cable operators from the obligation to include the cost of 
converters in their gross receipts. Id. at 11.
    Background on CableCards. Under 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. 37 CFR 201.17(b).
    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

[[Page 31414]]

seeking to establish a cable ``plug and play'' standard. Cable 
subscribers are now 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.\24\
---------------------------------------------------------------------------

    \24\According to recent reports, the nation's ten largest cable 
operators had supplied their customers with at least 300,000 
CableCards by early December 2007. See Todd Spangler, Operators Top 
2.2M CableCard Set-Tops, Multichannel News, January 2, 2008.
---------------------------------------------------------------------------

    In the NOI, we sought comment on whether cable subscribers have 
been required to purchase CableCards in order to access digital 
broadcast television signals. If so, we asked whether the Copyright 
Office's definition of gross receipts should be amended to include 
subscriber revenue generated through the lease of CableCards. 71 FR at 
54952.
    Comments on CableCards. Copyright Owners state that many cable 
operators appear to make CableCards available to subscribers for a 
monthly rental fee, but they are not aware of how many customers are 
using them. Copyright Owners state that if cable subscribers choose to 
rent CableCards from cable systems in order to access digital broadcast 
signals, those fees should be reported in Section E and included in 
gross receipts calculations. Copyright Owner Comments at 8-9. NCTA 
states that because digital broadcast signals are ``in the clear,'' a 
subscriber does not need to obtain a CableCard from their cable 
operator in order to view them. NCTA further states that subscribers 
can simply ``plug and play'' a ``digital cable ready'' set and watch 
digital and analog broadcast signals without incurring any additional 
equipment charges. NCTA Comments at 11.
    Discussion. Under the Copyright Office's rules, 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. (Emphasis added). 37 CFR 201.17(b)(1). The Copyright 
Office has already ruled that analog converter fees must be included in 
the gross receipts calculation and that the applicability of this 
provision to such converters has remained in place for 30 years, even 
though they may not be deemed ``necessary'' in certain cases.\25\ 
Further, we agree with Copyright Owners that the availability of 
alternative means for obtaining broadcast signals does not free cable 
operators from including the cost of converters in their gross 
receipts. Therefore, a cable operator's digital set top box revenues, 
or monies generated by the sale or rent of CableCards used to access 
digital broadcast signals, must be included in gross receipts and 
royalties must be paid based upon the inclusion of these items.
---------------------------------------------------------------------------

    \25\We note that in 1988, for example, cable counsel asked 
whether revenues from the rental of converters need not be included 
in the gross receipts calculation where the cable system's 
configuration allows for the secondary transmissions of broadcast 
signals without the use of such equipment. See letter from Sol 
Schildhause, Farrow, Schildhause & Wilson, to Dorothy Schrader, 
General Counsel, Copyright Office, dated February 23, 1988. In 
response, Schrader wrote that ``Even though in your case the 
converters are optional and perhaps unnecessary, if the converters 
are in fact used for secondary transmissions, the revenue from the 
rental or sale must be reported as gross receipts for purposes of 
computing the cable compulsory license royalties.'' See letter from 
Dorothy Schrader, General Counsel, Copyright Office, to Sol 
Schildhause, Farrow, Schildhause & Wilson, dated April 8, 1988.
---------------------------------------------------------------------------

    2. Second television set fees and in-home digital networks
    Background on second set fees. Under the Copyright Office's rules, 
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 . . 
.'').
    In their Petition for Rulemaking, Copyright Owners stated that some 
cable systems charge additional fees for access to digital broadcast 
signals to a second television set in the household. Copyright Owners 
have questioned whether cable operators are including fees for service 
to additional sets that receive HDTV and other digital broadcast 
signals within their calculation of gross receipts. Copyright Owners 
have asked 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 have also recommended 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 a line item refers to fees charged for service to additional 
television sets receiving HDTV or other digital broadcast signals. We 
sought comment on the recommendations proposed by the Copyright Owners 
in the NOI. 71 FR 54952.
    Background on in-home digital networks. In the NOI, we noted that 
some cable operators offer subscribers in-home digital networks where 
one digital set top box provides digital signals to all sets in the 
household. We sought comment on whether the fees associated with such a 
service, if any, should be included in the operator's gross receipts 
calculation. Id. at 54953.
    Comments on in-home digital networks. Copyright Owners assert that 
the existing principle that requires cable operators to report 
subscriber fees for converters used to receive retransmitted broadcast 
signals in Section E of their SOAs, and to include the fees in gross 
receipts calculations, should apply to other rented equipment required 
to receive retransmissions of digital (or analog) broadcast 
transmissions. If cable operators lease digital set top boxes that 
provide digital broadcast signals to all sets in a household, the 
rental fees should be reported in Section E and included in gross 
receipts. Copyright Owners Comments at 9.
    Discussion. Under the Copyright Office's rules, 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). 
The transition to digital television does not disturb this policy. A 
television set is a television set regardless of the transmission 
technology. We note, however, the cable industry has now developed new 
ways of delivering cable service inside and throughout the home with 
new types of networks and connections. Nevertheless, the current rule 
is adequate to accommodate changes in the use of technology. A cable 
operator must report, in its gross receipts calculation, any revenue 
generated from the connection of cable service to additional digital 
television sets, through traditional means, or by new means, such as 
in-home digital networks in a household. This policy generally carries 
forward determinations made by the Copyright Office in the analog 
television context over thirty years ago. See, generally, Compulsory 
License for Cable Systems, 43 FR 958, 959 (Jan. 5, 1978).

III. Internet Retransmission of Distant Broadcast Signals

    Comments. CBC has urged the Copyright Office to adopt a policy 
stating that ``the retransmission of broadcasters' local signals over 
the Internet (whether for free or for payment) and other new 
technologies is exempt from copyright liability, so long

[[Page 31415]]

as the copyright protected material is only accessible to viewers 
within the station's local market (as defined by Nielsen's Designated 
Market Area).'' CBC believes that providers of Internet video and 
wireless technologies, similar to cable and satellite carriers under 
the statutory licenses, should not be subject to copyright royalties 
for retransmitting local broadcasts to parties who already have the 
option to receive the programming free over-the-air. See CBC Comments 
at 4.\26\
---------------------------------------------------------------------------

    \26\After filing its comments, CBC requested that its comments 
be withdrawn from the public record in this proceeding. We decline 
this request because other parties have already joined issue with 
the matters raised by CBC.
---------------------------------------------------------------------------

    Copyright Owners state that the retransmission of copyrighted 
broadcast programming over the Internet constitutes a public 
performance within the meaning of Section 106(4) of the Act and may 
also implicate copyright owners' exclusive reproduction rights under 
Section 106(1) of the Act. Copyright Owners argue that unless a 
statutory exemption or statutory license is available to the entity 
that seeks to retransmit broadcast programming over the Internet, that 
entity must obtain a privately negotiated license from the affected 
copyright owners. They further argue that nothing in the Copyright Act 
provides a general exemption for the public performance of third 
parties' copyrighted works on the Internet. They add that neither 
Section 111 nor any other statutory provision affords any statutory 
licensee the right to retransmit television programming over the 
Internet. As such, Copyright Owners urge the Copyright Office to reject 
CBC's requested ``clarification.'' Copyright Owners Reply Comments at 
26-27.
    Discussion. This is the wrong forum for discussing the Internet 
retransmission of digital broadcast signals. This matter was not raised 
by the Copyright Owners in their Petition nor was it a subject 
addressed in the NOI. In any event, many parties have discussed this 
matter at length in the Copyright Office's pending Section 109 
proceeding. See Section 109 Report to Congress, Notice of Inquiry, 72 
FR 19039 (Apr. 16, 2007) and comments filed thereunder. Internet 
retransmission of television broadcast signals will be a subject 
addressed in the Section 109 Report due to Congress in June 2008.

IV. Conclusion

    We hereby seek comment from the public on the proposals identified 
herein associated with the retransmission of digital broadcast signals 
by cable systems under Section 111 of the Copyright Act.

Regulatory Flexibility Act Statement

    Although the Copyright Office, as a department of the Library of 
Congress and part of the Legislative Branch, is not an ``agency'' 
subject to the Regulatory Flexibility Act, 5 U.S.C. 601-612, the 
Register of Copyrights has considered the effect of the proposed 
amendments on small businesses. The Register has determined that the 
proposed amendments would not have a significant economic impact on a 
substantial number of small businesses because the NPRM clarifies the 
application of existing law to changes in the cable industry. In any 
event, interested parties may file comments demonstrating that such 
changes could result in substantive burdens to smaller businesses.

List of Subjects in 37 CFR Part 201

    Copyright.

Proposed Regulation

    For the reasons set forth in the preamble, the Copyright Office 
proposes to amend part 201 of title 37 of the Code of Federal 
Regulations as follows:

PART 201-GENERAL PROVISIONS

    1. The authority citation for part 201 continues to read as 
follows:

    Authority: 17 U.S.C. 702.

    2. Section 201.17 is amended as follows:
    a. By revising the first sentence of paragraph (b)(1);
    b. By adding ``analog or digital'' after ``primary television 
transmitters whose'' in paragraph (e)(9) introductory text; and
    c. By revising paragraphs (e)(9)(i) and (vi).
    The revisions and additions to Sec.  201.17 read as follows:


Sec.  201.17  Statements of Account covering compulsory licenses for 
secondary transmissions by cable systems.

* * * * *
    (b) * * *(1) 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 which include one or more secondary transmissions of 
television or radio broadcast signals, for additional set fees, and for 
converter fees, including any service fees, converter fees, CableCard 
fees, additional set fees, whole home network fees, and any related 
fees that subscribers must pay to receive digital broadcast signals. * 
* *
* * * * *
    (e) * * *
    (9) * * *
    (i) The station call sign of the primary transmitter, including the 
designation ``TV'' for analog signals and ``DT'' (followed by the 
subchannel number) for digital signals.
* * * * *
    (iv) A designation as to whether that primary transmitter is a 
``network station,'' an ``independent station,'' or a ``noncommercial 
educational station.'' In the case of stations engaged in digital 
multicasting, that designation shall be made for each digital stream 
that the cable system carried.
* * * * *

    Dated: May 21, 2008.
Marybeth Peters,
Register of Copyrights,
U.S. Copyright Office.
[FR Doc. E8-11855 Filed 5-30-08; 8:45 am]
BILLING CODE 1410-33-S