[Federal Register Volume 78, Number 230 (Friday, November 29, 2013)]
[Rules and Regulations]
[Pages 71498-71501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-28716]



[[Page 71498]]

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LIBRARY OF CONGRESS

 Copyright Office

37 CFR Part 201

[Docket No. 2012-1]


Copyright Office Fees: Cable and Satellite Statement of Account 
Fees

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Final rule.

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SUMMARY: The U.S. Copyright Office (``Office'') is publishing a final 
rule establishing a fee schedule for filing cable and satellite 
statements of account pursuant to Sections 112, 119, and 122 of Title 
17 of the United States Code (``SOAs'') in accordance with the 
Satellite Television Extension and Localism Act of 2010 (``STELA''). 
The Office is establishing these SOA fees after taking into account 
public comments received in response to the Office's March 28, 2012 
Notice of Proposed Rulemaking and December 6, 2012 Notice of Proposed 
Rulemaking.

DATES: This rule is effective January 1, 2014.

FOR FURTHER INFORMATION CONTACT: Jacqueline C. Charlesworth, General 
Counsel and Associate Register of Copyrights, or Catherine R. Rowland, 
Senior Counsel for Policy and International Affairs, at the U.S. 
Copyright Office, Copyright GC/I&R, P.O. Box 70400, Washington, DC 
20024. Telephone: (202) 707-8380. Telefax: (202) 707-8366.

SUPPLEMENTARY INFORMATION:

I. Background

    The Office is charged with administering certain statutory licenses 
established under the Copyright Act, 17 U.S.C. 101 et seq. (``Act''), 
including fees for filing and processing cable and satellite SOAs 
pursuant to Sections 111 and 119. Previously, as permitted under the 
Act, the Office covered its administrative costs for processing these 
SOAs by charging the costs against the collected royalties. In 2010, 
however, Congress enacted STELA, amending the law to allow the Office 
to apportion the fees between copyright owners and statutory licensees. 
The Act requires that the fees assessed for filing SOAs ``shall be 
reasonable and may not exceed one-half of the cost necessary to cover 
reasonable expenses incurred by the Copyright Office for the collection 
and administration of the statements of account and any royalty fees 
deposited with such statements.'' \1\
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    \1\ 17 U.S.C. 708(a).
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    In light of the statutory change, the Office undertook a cost study 
of its Licensing Division, which processes SOAs, and issued a Notice of 
Proposed Rulemaking on March 28, 2012 (``First NPR'').\2\ The First NPR 
suggested a three-tiered fee schedule for cable filings, with fees 
corresponding to the different types of cable SOAs (the three SOA forms 
are known as SA1, SA2, and SA3). Thus, the First NPR proposed the 
following SOA fees: $15 for licensees who file an SA1 form; $20 for 
licensees who file an SA2 form (slightly higher due to the somewhat 
greater review involved); and $500 for licensees who file the SA3 form 
(substantially higher due to the complex nature of the Office's review 
and administration of SA3 filings). Additionally, the First NPR 
proposed a $75 fee for satellite SOAs, reflecting the fact that these 
forms require attention beyond that needed for SA1 and SA2 forms.
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    \2\ Copyright Office Fees Notice of Proposed Rulemaking, 77 FR 
18742 (Mar. 28, 2012). This Notice also included fee proposals for 
other fees, including for registration, recordation, and non-SOA 
licensing services, which will be the subject of a subsequent Final 
Rule.
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    The Office received three comments addressing the First NPR's 
proposed cable and satellite SOA fees. These comments were submitted by 
the American Cable Association (``ACA''); the National Cable & 
Telecommunications Association (``NCTA''); and jointly by Program 
Suppliers, Joint Sports Claimants, Commercial Television Claimants, 
Music Claimants, Canadian Claimants Group, National Public Radio, 
Broadcaster Claimants Group, and Devotional Claimants (collectively, 
the ``Copyright Owners''). NCTA expressed the concern that the proposed 
fees sought to recover costs for services ``that go beyond what is 
reasonably necessary to administer the license.'' ACA requested that 
the Office provide a waiver of fees for cable operators experiencing 
financial hardship. Copyright Owners argued that the proposed fees 
failed to recover enough of the operating costs of the cable and 
satellite program.
    In light of the comments received, and because the fees for the 
filing of cable and satellite SOAs were being set for the first time, 
the Office conducted a further analysis of the costs of administering 
the SOAs and published an updated fee schedule in a second Notice of 
Public Rulemaking on December 6, 2012 (``Second NPR'').\3\ The Second 
NPR explained that the Office had conducted an additional cost study to 
address commenter concerns regarding cable and satellite SOA fees. As 
discussed below, the Office determined that its original review of 
costs in relation to the Licensing Division--using a methodology that 
differed to some degree from its approach to other fee services in the 
Office unrelated to SOA fees--did not sufficiently reflect all of the 
costs incurred in the complex task of processing cable and satellite 
SOAs.\4\ To more completely assess the costs, the Office thus decided 
to conduct a second study using the more typical methodology, which 
captures administrative overhead, among other things.\5\
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    \3\ Copyright Office Fees Notice of Proposed Rulemaking, 77 FR 
72788 (Dec. 6, 2012).
    \4\ Id. at 72789.
    \5\ Id.
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    In the second Licensing Division cost study, the Office found that 
many costs are common to both cable and satellite filings--in 
particular the fiscal management and information technology costs--and 
thus should be shared by both types of filers.\6\ The Office proposed a 
modified fee schedule for cable and satellite SOA fees that better 
reflected the overall costs of the licensing program. Specifically, 
while the Office proposed to keep the recommended fees for SA1 and SA2 
forms set forth in the First NPR ($15 and $20, respectively), it 
determined that fees for SA3 forms should be increased from $500 to 
$725.\7\ The Office further proposed to increase the fee for processing 
SOAs for satellite retransmissions from $75 to $725. While these fees 
included significant increases to certain fees initially proposed in 
the First NPR, the Office believed that they better captured the full 
costs associated with the management of these SOAs.
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    \6\ Id. at 72790.
    \7\ Id.
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    Lastly, in the Second NPR the Office declined to adopt a hardship 
waiver for SOA fees as advocated by the ACA. The Office noted that the 
statutory language in Section 708(a) does not include a reference to 
waivers, although another part of the Copyright Act, Section 708(c), 
does provide for discretionary waivers for government actors in limited 
circumstances. From this, the Office concluded that Congress did not 
intend for the Office to establish waivers for STELA-based fees. 
Notably, the Office does not provide hardship waivers for other 
fees.\8\
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    \8\ Id. at 72790-91.
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    The Office received three initial comments and three reply comments 
in response to the Second NPR. The initial comments came from the ACA, 
Copyright Owners, and NCTA. In these comments, the licensing 
stakeholders

[[Page 71499]]

made a variety of arguments regarding the Office's methodology and the 
SOA fees proposed in the Second NPR.
    The Copyright Owners expressed concern over the Office's proposed 
cable and satellite SOA fees. They stated that the new study excluded 
too many costs and thus did not reflect the full costs necessary to 
cover the Office's reasonable expenses. They also stated that the 
Office's new fees did not adequately balance the costs between 
copyright owners and licensees. The Copyright Owners further contended 
that the fees did not account for the continuing decline in the number 
of SA3 forms due to consolidation in the cable marketplace.
    The ACA also filed comments, which focused on the hardship question 
initially set forth in the ACA's 2012 comments. ACA abandoned its 
original request for a hardship waiver in favor of a new request for a 
reduced rate for smaller entities filing SA3 forms. ACA requested that 
the Office provide an additional, lower-cost SA3 form for cable systems 
with 400,000 or fewer subscribers that would face a financial hardship 
if forced to pay a higher fee. The fee for this form, ACA urged, should 
be $50, which it argued would be more manageable for smaller entities. 
ACA claimed that its proposed new fee would be reasonable under STELA 
and would not undercut the Office's administrative costs because these 
forms would constitute a minority of filings.
    For its part, NCTA believed that it did not have adequate 
information to assess whether the new fee was reasonable. It thus filed 
a Freedom of Information Act (``FOIA'') request seeking information 
about the Office's cost studies and submitted initial comments 
expressing concern over the reasonableness of the proposed fees.
    In response to NCTA's FOIA request, the Office provided data that 
it believed properly could be supplied under FOIA \9\ and on February 
7, 2013 held a meeting, open to all interested parties, to discuss the 
cost study.\10\ At the meeting, the Office explained its general 
approach and methodology in the second cost study regarding the 
establishment of cable and satellite SOA fees, and noted the following:
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    \9\ The Office withheld documents that fell within FOIA 
Exemption 5, which permits an agency to withhold records reflecting 
an agency's deliberative process. See Letter from George Thuronyi, 
Chief FOIA Officer, to Seth A. Davidson (Jan. 25, 2013).
    \10\ The Office invited all parties who filed comments on cable 
and satellite SOA fees to attend the meeting. The Office also posted 
a notice of the meeting on its Web site in case others were 
interested in attending.

    1. The Office used a three-year average of non-personnel costs 
in determining the baseline for new cable and satellite SOA fees. 
The Office used this three-year average (which spanned fiscal years 
2009-2011) to avoid an aberrant result in light of the Office's 
recent reengineering process. If the Office had not used a three-
year average for these costs, the results could have been skewed 
upward because of the relatively high costs incurred for 
reengineering efforts in 2011.
    2. The Office did not use a three-year average when calculating 
personnel costs, but instead used payroll numbers from the pay 
period in effect at the time the Office commenced the second cost 
study. This is because a number of Licensing Division staff 
participated in an Office-wide voluntary separation package prior to 
the beginning of the study, which resulted in a decrease in 
staffing. The Office thus looked to the pay period immediately 
preceding the commencement of the second cost study because earlier 
time frames would have artificially inflated the personnel costs.
    3. Once the Office determined the appropriate time frame(s) for 
assessing costs, pursuant to its mandate to set reasonable fees, it 
excluded certain items from the cost study. For example, the cost 
study excluded 75% of the cost of the Licensing Division's Fiscal 
Division staff because they largely support maintenance and 
distribution of royalty fees collected on behalf of copyright 
owners. Because these funds can remain undistributed for decades 
(through no fault of the licensees), these efforts inure largely to 
the benefit of copyright owners rather than SOA filers. The Office 
also excluded costs associated with Audio Home Recording Act filings 
as well as public outreach, among other exclusions for activities 
unrelated to cable and satellite SOAs. The Office explained that 
these exclusions resulted in lowering the overall amount of costs to 
be apportioned between copyright owners and licensees.
    4. In response to stakeholders questioning the likelihood that 
the number of SA3 form filings would remain stable in the future, 
the Office explained that it had reviewed data for three years and 
used this to project the number of filings in the future. The 
statute requires the Office to recover 50% or less of costs, and 
thus the Office took a somewhat conservative approach so as not to 
underestimate potential filings, a circumstance that could result in 
total fee collections above the statutory limit.
    5. Finally, it was noted that once the exclusions were applied, 
under the proposed fees, the Office projected that licensees would 
pay approximately 47% of the applicable costs, consistent with the 
statutory mandate.

    After the February 7 meeting, Copyright Owners, NCTA, and DirectTV 
filed reply comments. Copyright Owners continued to argue that the 
Office should not have excluded certain costs. In addition, Copyright 
Owners reiterated their view that there is a downward trend in the 
number of operators, and objected to ACA's new proposed hardship filing 
fee. NCTA continued to urge that it had inadequate information on the 
Office's cost study and also contended that the Copyright Owners' 
desired increases in fees were inappropriate. NCTA also continued to 
dispute the Office's decision regarding the costs to be included in its 
calculations. DirectTV stated that the Office should not further 
increase satellite filing fees.

II. Fee Setting Methodology

    In conducting its cost study analysis, the Office reviewed 
established accounting procedures used by other governmental entities, 
including the Federal Accounting Standards Advisory Board's 
(``FASAB's'') guidelines for determining the full cost of federal 
agency program activities \11\ and the Office of Management and 
Budget's Circular No. A-25 Revised: User Charges \12\ document 
regarding costing guidelines and establishing user fees.
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    \11\ This includes FASAB's Managerial Cost Accounting Concepts 
and Standards for the Federal Government.
    \12\ See http://www.whitehouse.gov/omb/circulars_a025.
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    When the Office began studying potential cable and satellite SOA 
fees, it used the additive model to assess costs, which it also uses 
for peripheral fee services such as responding to FOIA requests, and 
some seldom-invoked services such as full-term retention of 
registration deposits. The additive method focuses on the desk time of 
dedicated employees, meaning the amount of time they spend performing 
activities involved in processing a typical service request. The Office 
initially decided to use this model because, at the time, it was 
thought it might be well suited to evaluate cable and satellite SOA 
processing costs.
    As discussed above, several commenters contested the initially 
proposed SOA fees and, after careful review, the Office determined that 
the additive model did not capture all costs of performing these 
services, including indirect costs and time spent on upgrades to 
improve the processing of SOAs to the benefit of both copyright owners 
and filers. The Office ultimately recognized that, while effective in 
analyzing services that can be measured by short intervals of time, the 
additive method is sometimes not as successful in determining the cost 
of a more complex task, such as processing an entire cable or satellite 
SOA. The management of cable and satellite SOAs is one of the Office's 
major programs and constitutes the greatest percentage of staff time 
and related resources within the Licensing Division. Thus, the

[[Page 71500]]

Office concluded that the study described in the First NPR did not 
fully reflect the cost of the program to the Licensing Division and was 
not an appropriate measure by which to establish SOA fees.
    In light of these determinations, the Office conducted another cost 
study using an alternative activity-based methodology that is 
consistent with that employed to evaluate other types of services--
including its registration and recordation functions--but with certain 
exclusions specific to the operation of the Licensing Division. These 
adjustments were reviewed at the FOIA meeting, as set forth above.
    The second study yielded a more complete picture of the costs of 
administering the SOA program. It reflects all relevant staff time, 
whether directly or indirectly associated with program functions, and 
all relevant non-personnel costs. Because it is all-inclusive, the 
revised methodology accounts for costs incurred in connection with 
difficult or exceptional circumstances that involve time-intensive 
research or problem resolution. For example, it includes cases where 
electronic funds transfer payments need to be matched with an SOA 
received much earlier or later than the payment or without a remittance 
advice. It also covers non-routine staff effort. During the period 
under review, for example, the Office revised work procedures and forms 
and updated its internal information systems to facilitate its 
implementation of other aspects of STELA. The Office expects similar 
types of administrative and technical upgrades to continue to occur 
during the life of the SOA program as legal and practical requirements 
evolve.
    STELA directs that the fees collected from licensees filing SOAs 
shall be reasonable and may not exceed one-half of the Office's 
reasonable expenses to administer the cable and satellite SOA program, 
including the collection and administration of SOAs and any royalty 
fees deposited with such statements. 17 U.S.C. 708(a). The fees 
established by this Final Rule are designed to recover just under one 
half of the Office's total cost of administering the SOA program. Of 
the Licensing Division's $5.27 million budget, the Office estimated in 
the Second NPR that the costs of administering filings under the cable 
and satellite SOA program would be $3.74 million, a number that the 
Office has since revised slightly upward, to $3.76 million, after a 
final review of its cost data.\13\ At the fee levels hereby adopted, 
based upon projected filings, the expected annual fee recovery under 
the SOA program should be approximately $1.77 million, or 47% of the 
estimated $3.76 million total annual cost of the program.\14\
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    \13\ The slight increase does not materially impact the 
projected recovery rate for the cable and satellite program, which 
is still estimated at 47%.
    \14\ The data and calculations comprising the Office's cost 
study with respect to cable and satellite fees are available on the 
Office's Web site at www.copyright.gov/docs/newfees/.
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III. Final Cable and Satellite SOA Fees

    The Office is instituting the following SOA fees:

    1. Fee for processing of a statement of account based on 
secondary transmissions of primary transmissions pursuant to Section 
111: $15 for SA1 forms, $20 for SA2 forms, and $725 for SA3 forms
    2. Fee for processing of a statement of account based on 
secondary transmissions of primary transmissions pursuant to 
Sections 119 or 122: $725

    As explained above, with the enactment of STELA, the Office is 
authorized for the first time to impose a fee that apportions costs 
between SOA filers and copyright owners, who until now have shouldered 
all of these costs through deductions from their royalty funds. Thus, 
this fee study presents the Office with its first opportunity to 
establish SOA fees based on a review of the Office's costs for 
processing these SOAs.
    Based on its cost study findings, the Office is creating a three-
tiered fee schedule for cable operators that corresponds to the filing 
of the different types of cable SOAs and accounts for the increased 
time spent processing the more complex forms. The fee for licensees who 
file the SA1 form (and may pay as little as $52 each accounting period) 
is set at $15, at the low end of the scale, while the fee for cable 
systems filing the SA2 form is set slightly higher, at $20, due to 
somewhat higher processing costs. These fees reflect the fact that the 
resources required to review SA1 and SA2 forms are relatively small in 
comparison to those needed to process SA3 forms, as discussed below. 
The SA1 and SA2 form fees are reasonable in light of the lesser amount 
of processing required and the typical royalty payments associated with 
such statements.
    The Office is also establishing both the cable SA3 filing fee and 
satellite filing fee at $725. The $725 fee is reasonable in light of 
the findings of the second, more complete cost study and the more 
substantial royalty payments associated with these SOAs. Licensees who 
file the considerably more complicated SA3 form should pay a 
correspondingly higher fee because of the time associated with 
reviewing the information in such filings, including the detailed 
classifications of community groups, television stations, and channel 
lineups. The $725 fee also takes into account that the SA3 forms 
reflect substantial royalty payments that far exceed those collected 
with SA1 and SA2 forms. The SA3 form fee is thus consistent with the 
higher amount of royalties involved and the larger amount of time that 
Licensing Division staff must take to accurately process the forms and 
royalty payments. The processing of satellite SOAs similarly involves 
significant royalty payments and a substantial commitment of Office 
resources.
    Finally, the Office declines to create a lesser ``hardship'' fee 
for smaller cable operators that file SA3 forms. The Office has set the 
SOA fees to reflect its costs and has established significantly lower 
fees for cable systems that file the far less complex SA1 or SA2 forms. 
Notwithstanding the lower number of subscribers, the Office does not 
spend less time processing SA3 forms filed by smaller operators and 
thus there is no cost-based reason for a reduced fee.
    In establishing fees for cable and satellite SOAs, the Office 
carefully reviewed public comments and held a meeting with interested 
parties, as described above. As might be expected, copyright owners 
have advocated for higher fees and filers have sought lower ones. Based 
on its cost study, the Office believes that it has found the 
appropriate middle ground. The Office concludes that the SOA fees it is 
now adopting are fairly apportioned, reasonable, and otherwise 
consistent with the guidance set forth in Section 708(a). Nonetheless, 
because the fees are new, the Office will continue closely to monitor 
its costs relating to the filing of cable and satellite SOAs, as well 
as the fees it collects, so it can adjust the fees as appropriate in 
the future.

List of Subjects in 37 CFR Part 201

    Copyright, General provisions.

Final Rule

    In consideration of the foregoing, under the authority of 17 U.S.C. 
702, the U.S. Copyright Office amends 37 CFR chapter II as follows:

PART 201--GENERAL PROVISIONS

0
1. The authority citation for part 201 continues to read as follows:

    Authority: 17 U.S.C. 702.

[[Page 71501]]


0
2. Amend Sec.  201.3 to add paragraphs (e)(9) and (10) to read as 
follows:


Sec.  201.3  Fees for registration, recordation, and related services, 
special services, and services performed by the Licensing Division.

* * * * *
    (e) * * *

 
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                  Licensing Division services                      Fees
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                              * * * * * * *
(9) Processing of a statement account based on secondary
 transmissions of primary transmissions pursuant to 17 U.S.C.
 111:
    (i) Form SA1...............................................       15
    (ii) Form SA2..............................................       20
    (iii) Form SA3.............................................      725
(10) Processing of a statement of account based on secondary         725
 transmissions of primary transmissions pursuant to 17 U.S.C.
 119 or 122....................................................
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* * * * *

    Dated: November 25, 2013.
Maria A. Pallante,
Register of Copyrights.
[FR Doc. 2013-28716 Filed 11-27-13; 8:45 am]
BILLING CODE 1410-30-P