[Federal Register Volume 81, Number 80 (Tuesday, April 26, 2016)]
[Proposed Rules]
[Pages 24523-24525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09626]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Chapter III

[Docket No. 15-CRB-0010-CA]


Adjustment of Cable Statutory License Royalty Rates

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Proposed rule.

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SUMMARY: The Copyright Royalty Judges (Judges) publish for comment 
proposed regulations governing royalty rates and terms for the distant 
retransmission of over-the-air television and radio broadcast stations 
by cable television systems to their subscribers.

DATES: Comments are due no later than May 17, 2016.

ADDRESSES: Submit electronic comments via email to [email protected] or 
online at http://www.regulations.gov. Those who choose not to submit 
comments electronically should see How to Submit Comments in the 
SUPPLEMENTARY INFORMATION section below for physical addresses and 
further instructions. The proposed rule is also posted on the agency's 
Web site (www.loc.gov/crb).

FOR FURTHER INFORMATION CONTACT: Kimberly Whittle, Attorney Advisor, by 
telephone at (202) 707-7658, or by email at [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On January 15, 2016, the Copyright Royalty Judges (Judges) received 
a motion from the National Cable & Telecommunications Association, the 
American Cable Association, and a group referring to itself as the 
``Phase I Parties'' requesting that the Judges adopt a partial 
settlement of the movants' interests regarding royalty rates and terms 
for the statutory copyright license for eligible cable retransmissions 
for the period 2015-2019. The settlement proposes that the rates, 
terms, and gross receipts limitations remain the same as those 
currently in effect. See 17 U.S.C. 111(d)(1)(B) and 37 CFR 256.2(c)-
(d). Motion of the Participating Parties to Adopt Partial Settlement, 
Docket No. 15-CRB-0010-CA (2015-2019) (Motion). The Judges hereby 
publish proposed regulations reflecting the proposed settlement and 
request comments from interested parties as required by 17 U.S.C. 
801(b)(7)(A).
    Section 111 of the Copyright Act grants a statutory copyright 
license to cable television systems for the distant retransmission of 
over-the-air television and radio broadcast stations to their 
subscribers. 17 U.S.C. 111(c). In exchange for the license, cable 
operators submit to the Copyright Office semiannually royalty payments 
and statements of account detailing their retransmissions. 17 U.S.C. 
111(d)(1). The Copyright Office deposits the royalties into the United 
States Treasury for later distribution to copyright owners of the 
broadcast programming that the cable systems retransmit. 17 U.S.C. 
111(d)(2).
    A cable system calculates its royalty payments in accordance with 
the statutory formula described in 17 U.S.C. 111(d)(1). Royalty rates 
are based upon a cable system's gross receipts from subscribers who 
receive retransmitted broadcast signals. For rate calculation purposes, 
cable systems are divided into three tiers based on their gross 
receipts (small, medium, and large). 17 U.S.C. 111(d)(1)(B) through 
(F). Both the applicable rates and the tiers are subject to adjustment. 
17 U.S.C. 801(b)(2).
    Every five years persons with a significant interest in the royalty 
rates may file petitions to initiate a proceeding to adjust the rates. 
17 U.S.C. 804(a) and (b). No person with a significant interest filed a 
petition to initiate a proceeding in 2015.\1\ Therefore, the Judges 
initiated this rate adjustment proceeding by notice published in the 
Federal Register in June 2015. See 17 U.S.C. 801(b)(2), 803(b)(1), 
804(a) and (b); 80 FR 35403 (Jun. 19, 2015).
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    \1\ The cable rates were last adjusted in 2005, at a time when 
the Copyright Office was transferring responsibility for royalty 
rate proceedings from Copyright Arbitration Royalty Panels (CARP) to 
the newly authorized Copyright Royalty Judges. Although the Judges 
commenced a rate proceeding relating to the 2010 rate adjustment, 
the Judges terminated it when passage of the Satellite Television 
Extension and Localism Act of 2010, Public Law 111-151, 124 Stat. 
1027 (``2010 STELA''), rendered the proceeding unnecessary. See 
Order Granting Request to Terminate Proceeding, Docket No. 2010-1 
CRB Cable Rate (July 13, 2010). At that time, although the act 
changed the relevant rates, neither the Register of Copyrights nor 
the Judges updated the statement of the prior rates in subsections 
(a) and (b) of section 256 of 37 CFR, the chapter of the Regulations 
applying to CARP. The STELA Reauthorization Act of 2014 did not 
change the cable royalty rates in Sec.  111. See Public Law 113-200, 
28 Stat. 2059 (Dec. 4, 2014).
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    The Judges received two joint Petitions to Participate, one from 
the National Cable & Telecommunications Association and the American 
Cable Association and another from a group referring to itself as the 
``Phase I Parties''.\2\ The Judges accepted these petitions and 
commenced a Voluntary Negotiation Period (VNP).
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    \2\ The Phase I Parties consist of Program Suppliers, Joint 
Sports Claimants, Public Television Claimants, Commercial Television 
Claimants, Music Claimants, Canadian Claimants Group, National 
Public Radio, and Devotional Claimants.
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    On December 15, 2015, at the conclusion of the VNP, all 
participants notified the Judges that they had settled and asked that 
cable retransmission rates remain unchanged for the rate period 2015 to 
2019, inclusive. On November 23, 2015, however, one of the 
participants, the Joint Sports Claimants (JSC),\3\ had filed a 
``Petition . . . to Initiate Cable Royalty Rate Adjustment 
Proceedings'' with a self-styled caption indicating a proceeding for 
cable rate adjustments ``for Retransmission of Certain Sports 
Telecasts.'' Given the seemingly conflicting positions of the JSC, the 
Judges rejected the settlement, without prejudice.
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    \3\ Joint Sports Claimants are: The National Basketball 
Association, the National Collegiate Athletic Association, the 
National Football League, the National Hockey League, the Office of 
the Commissioner of Baseball, and the Women's National Basketball 
Association.
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    The settling participants have now asked that the Judges adopt the 
settlement and permit continuing proceedings to determine whether and 
to what degree to make a rate adjustment under section 801(b)(2)(C). 
Motion at 1, 6-7. Section 801(b)(2)(C) provides for adjustment 
proceedings \4\ in the event the Federal Communications Commission 
(FCC) changes its rule ``with respect to . . . sports program 
exclusivity. . . .'' The JSC base their November 23, 2015 petition on 
an FCC rule change, viz., repeal of the sports exclusivity rules, 
effective November 24, 2014.\5\ The Judges announce

[[Page 24524]]

commencement of further proceedings on the issue raised by that 
petition in a separate notice in the Federal Register.
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    \4\ Apart from the quinquennial proceedings required by Sec.  
804 of the Act.
    \5\ Petition of the Joint Sports Claimants to Initiate Cable 
Royalty Rate Adjustment Proceedings (Nov. 23, 2015). In its 
petition, JSC requests that the Judges ``initiate proceedings to 
adjust the cable statutory license royalty rates `to assure that 
such rates are reasonable in light of' the repeal of the Sports 
Blackout Rules.'' Petition at 1. In its Motion to Adopt Partial 
Settlement, the self-styled ``Participating Parties,'' which 
includes JSC, states that ``[t]he Joint Sports Rule Petition 
requests a new Section 111 royalty rate pursuant to 17 U.S.C. 
801(b)(2)(C) to account for the November 2014 elimination of the 
[FCC's] Sports Rule (a ``Sports Rule Surcharge''). Motion at 1-2. 
According to the Motion, ``[n]either the Judges nor their 
predecessors have previously conducted any proceeding under Section 
801(b)(2)(C) to consider the adoption of a cable rate to account for 
changes in the FCC Sports Rule,'' although Section 801(b)(2)(C) has 
been invoked twice since its enactment with respect to the 
syndicated exclusivity provision of the section. Motion at 2, n.2.

    The Participating Parties state that they do not believe that 
the JSC Sports Rule Petition precludes adoption of their agreement 
as set forth in the Dec. 15 Settlement Notice. That agreement 
concerns only the Quinquennial Cable Rate Adjustments. It resolves 
all issues concerning those quinquennial adjustments by agreeing to 
retain without change the existing cable royalty rates (the base 
rates, 3.75 percent rate and the Syndicated Exclusivity Surcharge) 
and existing gross receipts limitations during the years 2015-19. It 
simply does not address the issue of whether the Judges should make 
any changes in cable rates pursuant to 17 U.S.C. 801(b)(2)(B) & (C) 
to account for changes in FCC cable rules.
Motion at 5-6 (emphasis original).

Statutory Timing of Adoption of Rates and Terms

    Section 801(b)(7)(A) allows for the adoption of rates and terms 
negotiated by ``some or all of the participants in a proceeding at any 
time during the proceeding'' provided the parties submit the negotiated 
rates and terms to the Judges for approval. That provision directs the 
Judges to provide those who would be bound by the negotiated rates and 
terms an opportunity to comment on the agreement. Unless a participant 
in a proceeding objects and the Judges conclude that the agreement does 
not provide a reasonable basis for setting statutory rates or terms, 
the Judges adopt the negotiated rates and terms. 17 U.S.C. 
801(b)(7)(A).
    If the Judges adopt the proposed rates and terms pursuant to this 
provision for the 2015-2019 rate period, the adopted (and thus, 
existing) rates and terms and gross receipts limitations will continue 
to be binding on all cable systems that retransmit distantly over-the-
air television and radio broadcast stations to their subscribers and on 
all copyright owners of the broadcast programming that the cable 
systems retransmit during the license period 2015-2019, except to the 
extent those rates and terms may be adjusted for sports programming in 
the portion of the proceeding focused on the effect, if any, of the FCC 
Sports Exclusivity Rule change.

Proposed Adjustments to Rates and Terms

    If the Judges adopt the proposed rules that include the terms of 
the settlement, these rules shall take effect upon final adoption. The 
Judges have statutory authority to promulgate their own rules which, 
when adopted, shall render inapplicable the prior rules that pertained 
to the rates and terms as established by the now defunct CARP, in part 
256 of the existing regulation (37 CFR, part 256).
    The Judges will update the terms, eliminate surplus verbiage, make 
the rules easier to read, and codify them in Chapter 3 of Title 37 of 
the CFR. Chapter 3 is the chapter that governs Copyright Royalty Board 
proceedings. If adopted, the proposed rules shall be designated ``part 
387.''
    Interested parties may comment and object to any or all of the 
proposed regulations contained in this notice. Such comments and 
objections must be submitted no later than May 17, 2016.

How To Submit Comments

    Interested members of the public must submit comments to only one 
of the following addresses. If not commenting by email or online, 
commenters must submit an original of their comments, five paper 
copies, and an electronic version on a CD.
    Email: [email protected]; or
    Online: http://www.regulations.gov; or
    U.S. mail: Copyright Royalty Board, P.O. Box 70977, Washington, DC 
20024-0977; or
    Overnight service (only USPS Express Mail is acceptable): Copyright 
Royalty Board, P.O. Box 70977, Washington, DC 20024-0977; or
    Commercial courier: Address package to: Copyright Royalty Board, 
Library of Congress, James Madison Memorial Building, LM-403, 101 
Independence Avenue SE., Washington, DC 20559-6000. Deliver to: 
Congressional Courier Acceptance Site, 2nd Street NE., and D Street 
NE., Washington, DC; or
    Hand delivery: Library of Congress, James Madison Memorial 
Building, LM-401, 101 Independence Avenue SE., Washington, DC 20559-
6000.

List of Subjects in 37 CFR Part 387

    Copyright, Cable Television, Royalties.

Proposed Regulations

    For the reasons set forth in the preamble, and under the authority 
of chapter 8, title 17, United States Code, the Copyright Royalty 
Judges propose to amend 37 CFR Chapter III as follows:
    Add a new Part 387.

PART 387--ADJUSTMENT OF ROYALTY FEE FOR CABLE COMPULSORY LICENSE

Sec.
387.1 General
387.2 Royalty fee for compulsory license for secondary transmission 
by cable systems.

    Authority:  17 U.S.C. 801(b)(2), 803(b)(6).


Sec.  387.1  General.

    This part establishes adjusted terms and rates for royalty payments 
in accordance with the provisions of 17 U.S.C. 111 and 801(b)(2)(A), 
(B), (C), and (D). Upon compliance with 17 U.S.C. 111 and the terms and 
rates of this part, a cable system entity may engage in the activities 
set forth in 17 U.S.C. 111.


Sec.  387.2  Royalty fee for compulsory license for secondary 
transmission by cable systems.

    (a) Royalty fee rates. Commencing with the first semiannual 
accounting period of 2015 and for each semiannual accounting period 
thereafter, the royalty fee rates for secondary transmission by cable 
systems are those established by 17 U.S.C. 111(d)(1)(B)(i)-(iv), as 
amended.
    (b) Alternate tiered rates. Commencing with the first semiannual 
accounting period of 2015 and for each semiannual accounting period 
thereafter, the alternate tiered royalty fee rates for cable systems 
with certain levels of gross receipts as described in 17 U.S.C. 
111(d)(1) (E) and (F), are those described therein.
    (c) 3.75 percent rate. Commencing with the first semiannual 
accounting period of 2015, and for each semiannual accounting period 
thereafter, and notwithstanding paragraphs (a) and (d) of this section, 
for each distant signal equivalent or fraction thereof not represented 
by the carriage of:
    (1) Any signal that was permitted (or, in the case of cable systems 
commencing operations after June 24, 1981, that would have been 
permitted) under the rules and regulations of the Federal 
Communications Commission in effect on June 24, 1981, or
    (2) A signal of the same type (that is, independent, network, or 
non-commercial educational) substituted for such permitted signal, or
    (3) A signal that was carried pursuant to an individual waiver of 
the rules and regulations of the Federal Communications Commissioning 
effect on June 24, 1981; in lieu of the royalty rates specified in 
paragraphs (a) and (d) of this section, the royalty rate shall be 3.75 
percent of the gross receipts of the cable system for each distant 
signal equivalent. Any fraction of a distant signal equivalent shall be 
computed at its fractional value.
    (d) Syndicated exclusivity surcharge. Commencing with the first 
semiannual accounting period of 2015 and for each semiannual accounting 
period thereafter, in the case of a cable system

[[Page 24525]]

located outside the 35-mile specified zone of a commercial VHF station 
that places a predicted Grade B contour, in whole or in part, over the 
cable system, and that is not significantly viewed or otherwise exempt 
from the FCC's syndicated exclusivity rules in effect on June 24, 1981, 
for each distant signal equivalent or fraction thereof represented by 
the carriage of such commercial VHF station, the royalty rate shall be, 
in addition to the amount specified in paragraph (a) of this section,
    (1) For cable systems located wholly or in part within a top 50 
television market,
    (i) 0.599 percent of such gross receipts for the first distant 
signal equivalent;
    (ii) 0.377 percent of such gross receipts for each of the second, 
third, and fourth distant signal equivalents; and
    (iii) 0.178 percent of such gross receipts for the fifth distant 
signal equivalent and each additional distant signal equivalent 
thereafter;
    (2) For cable systems located wholly or in part within a second 50 
television market,
    (i) 0.300 percent of such gross receipts for the first distant 
signal equivalent;
    (ii) 0.189 percent of such gross receipts for each of the second, 
third, and fourth distant signal equivalents; and
    (iii) 0.089 percent of such gross receipts for the fifth distant 
signal equivalent and each additional distant signal equivalent 
thereafter;
    (3) For purposes of this section ``top 50 television markets'' and 
``second 50 television markets'' shall be defined as the comparable 
terms are defined or interpreted in accordance with 47 CFR 76.51, as 
effective June 24, 1981.
    (e) Computation of rates. Computation of royalty fees shall be 
governed by 17 U.S.C. 111(d)(1)(C).

    Dated: April 20, 2016.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2016-09626 Filed 4-25-16; 8:45 am]
 BILLING CODE 1410-72-P