[Federal Register Volume 82, Number 102 (Tuesday, May 30, 2017)]
[Proposed Rules]
[Pages 24611-24614]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-10970]


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LIBRARY OF CONGRESS

Copyright Royalty Board

37 CFR Part 387

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


Adjustment of Cable Statutory License Royalty Rates

AGENCY: Copyright Royalty Board, Library of Congress.

ACTION: Notice of settlement and proposed rule.

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SUMMARY: The Copyright Royalty Judges (Judges) publish for comment 
proposed regulations to require covered cable systems to pay a separate 
per-telecast royalty (a Sports Surcharge) in addition to the other 
royalties that that cable system must pay under Section 111 of the 
Copyright Act.

DATES: Comments are due no later than June 20, 2017.

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: Anita Brown-Blaine, Program 
Specialist, by telephone at (202) 707-7658, or by email at [email protected].

SUPPLEMENTARY INFORMATION:

Background

    On January 11, 2017, the Copyright Royalty Judges (Judges) received 
a motion from the Joint Sports Claimants (JSC),\1\ the NCTA-The 
Internet and Television Association, and the American Cable 
Association, which represent that they are the only parties to this 
proceeding, notifying the Judges

[[Page 24612]]

that they reached a complete settlement of the proceeding. Joint Motion 
of the Participating Parties to Suspend Procedural Schedule and to 
Adopt Settlement at 1. The moving parties requested that the Judges 
terminate the proceeding by adopting the proposed rule set forth in 
Exhibit A of the joint motion. The moving parties further requested 
that the Judges suspend, pending resolution of the joint motion, the 
procedural schedule set forth in the Order of Bifurcation, Second Order 
of Further Proceedings, Notice of Participants, and Scheduling Order, 
Docket No. 15-CRB-0010-CA-S (June 22, 2016).
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    \1\ The Joint Sports Claimants are the Office of the 
Commissioner of Baseball, the National Football League, the National 
Basketball Association, the Women's National Basketball Association, 
the National Hockey League, and the National Collegiate Athletic 
Association.
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    On February 7, 2017, the Judges issued an order in which they 
suspended the procedural schedule they established by order dated June 
22, 2016, pending the Judges' review of the moving parties' settlement 
agreement and publication of the agreement for public comment. The 
Judges stated that they would defer decision on adoption of the 
settlement agreement and termination of the proceeding until after they 
consider comments, if any, filed in response to publication of the 
settlement notice. This notice is further to the Judges' February 7, 
2017 Order.

A. Background

    Section 111(d)(1)(B) of the Copyright Act, 17 U.S.C. 111(d)(1)(B), 
sets forth the royalty rates that ``Form 3'' cable systems must pay to 
retransmit broadcast signals pursuant to the Section 111(c) statutory 
license. Form 3 systems are those with semi-annual ``gross receipts'' 
greater than $527,600. See id. Sec. Sec.  111(d)(1)(B), (E) & (F); 37 
CFR 201.17(d). Section 801(b)(2)(C) of the Act provides:

    In the event of any change in the rules and regulations of the 
Federal Communications Commission [``FCC''] with respect to 
syndicated and sports program exclusivity after April 15, 1976, the 
rates established by section 111(d)(1)(B) may be adjusted to assure 
that such rates are reasonable in light of the changes to such rules 
and regulations, but any such adjustment shall apply only to the 
affected television broadcast signals carried on those systems 
affected by the change.

17 U.S.C. 801(b)(2)(C).
    Section 804(b)(1)(B) of the Copyright Act states that, in ``order 
to initiate proceedings under section [801(b)(2)(C)],'' an interested 
party must file a petition with the Judges requesting a rate change 
within twelve months of the FCC's action. 17 U.S.C. 804(b)(1)(B); see 
H.R. Rep. No. 94-1476 at 178 (1976) (right to seek review ``exercisable 
for a 12 month period following the date such changes are finally 
effective''). The FCC adopted sports exclusivity rules for cable 
systems in 1975. See Report and Order in Doc. No. 19417, 54 F.C.C.2d 
265 (1975) (``Sports Rules''). The FCC repealed the Sports Rules 
effective November 24, 2014. See Sports Blackout Rules, 79 FR 63547 
(Oct. 24, 2014). At the time of the Sports Rules' repeal, they were 
codified at 47 CFR 76.111 (2014).
    On November 23, 2015, JSC filed a rate adjustment petition pursuant 
to Section 801(b)(2)(C) of the Copyright Act. In their June 22 Order, 
the Judges established a procedural schedule for ruling on the JSC 
petition. While the moving parties were unable to settle this matter 
during the voluntary negotiation period established by the June 22 
Order, they continued those negotiations and now agree that this 
proceeding should be terminated with the adoption of the proposed rule 
set forth in Exhibit A to the joint motion.

B. Scope of the Proposed Rule

    The proposed rule would require covered cable systems to pay a 
separate per-telecast royalty (a Sports Surcharge) in addition to the 
other royalties that that cable system must pay under Section 111 of 
the Copyright Act. Joint Motion at 3. The Sports Surcharge would amount 
to 0.025 percent of the cable system's ``gross receipts'' during the 
relevant semi-annual accounting period for the secondary transmission 
of each affected broadcast of a sports event, provided that all of the 
conditions of the proposed rule are satisfied. Thus, if a covered cable 
system made a secondary transmission of one affected broadcast, it 
would pay 0.025 percent of ``gross receipts'' during the relevant semi-
annual accounting period for that transmission; if it made secondary 
transmissions of two affected broadcasts, it would pay 0.025 percent of 
``gross receipts'' during the relevant semi-annual accounting period 
for each of those transmissions (or a total of 0.050 percent of its 
``gross receipts''). Id.
    Section 801(b)(2)(C) of the Act states that any rate adopted in 
this proceeding ``shall apply only to the affected television broadcast 
signals carried on those systems affected by the change.'' Furthermore, 
moving parties note that Section 801(b)(2)(C) authorizes the Judges to 
adjust only the royalty rates set forth in Section 111(d)(1)(B) of the 
Act. The moving parties also note that Section 111(d)(3)(A) of the Act 
permits the distribution of royalties only to copyright owners of 
distant signal ``non-network television programs.'' Joint Motion at 3-
4.
    The moving parties note that, consistent with the statutory 
mandates discussed above, the proposed rule, summarized below, limits 
the circumstances under which cable systems must pay the Sports 
Surcharge. Under the proposal:

    Covered Cable System. Only a ``covered cable system,'' as 
defined in the proposed rule, would be subject to the Sports 
Surcharge. That definition tracks the language of the former FCC 
Sports Rules, which applied only to a ``community unit'' located in 
whole or in part within a defined geographic area (``specified 
zone'') associated with a community in which a sports event occurs. 
See 47 CFR 76.111(a) (2014). The FCC has defined a ``community 
unit'' as: ``A cable television system, or portion of a cable 
television system, that operates or will operate within a separate 
and distinct community or municipal entity (including unincorporated 
communities within unincorporated areas and including single, 
discrete unincorporated areas).'' 47 CFR 76.5(dd) (2014). And it has 
defined ``specified zone'' as an area extending 35 miles from 
certain ``reference points'' in the FCC rules. 47 CFR 76.5(e) 
(2014). Consistent with Section 801(b)(2)(C) of the Act, only a 
covered cable system that, for purposes of the compulsory license is 
a ``Form 3'' system, i.e., one whose royalties are specified by 
Section 111(d)(1)(B), would be subject to the Sports Surcharge.
    Non-Network Programs. Only copyright owners of certain ``non-
network programs'' may receive Section 111 royalties. 17 U.S.C. 
111(d)(3)(A). Accordingly, a covered cable system must pay a Sports 
Surcharge only for the secondary transmission of distant signal 
``non-network programs'' within the meaning of 17 U.S.C. 
111(d)(3)(A).
    Sports Events. The Sports Surcharge would apply only to the 
carriage of eligible professional sports events and eligible 
collegiate sports events involving teams that are members of JSC 
and, in the case of eligible collegiate sports events, would be 
subject to a cap on the number of events involving a particular team 
that would be subject to the surcharge during any accounting period.
    Gross Receipts. The covered cable system would calculate the 
Sports Surcharge as a percentage of its ``gross receipts'' during 
the six-month accounting period in which the affected telecast or 
telecasts were carried. The term ``gross receipts'' has the same 
meaning as in 17 U.S.C. 111(d)(1)(B). Because Section 111 royalties 
are distributed only to copyright owners of certain distant signal 
programming (17 U.S.C. 111(d)(3)(A)), the covered cable system need 
not include in its gross receipts any revenues from subscribers who 
reside in the ``local service area'' of a broadcast station whose 
sports programming would otherwise have been subject to deletion 
under the former FCC Sports Rules. The term ``local service area'' 
is defined in 17 U.S.C. 111(f)(4). The Sports Rules also exempted 
from their scope community units (a) with fewer than 1,000 
subscribers (47 CFR 76.111(f) (2014)); (b) located outside the 
``specified zone'' of that community unit's local broadcast stations 
(id. Sec.  76.111(a)); and (c) in which the affected signal was 
carried prior to March 31, 1972 (id. Sec.  76.111(e)).

[[Page 24613]]

Accordingly, revenues derived from subscribers in the communities 
served by these community units also would be excluded in 
determining the amount of any Sports Surcharge.
    Notification. The former FCC Sports Rules required the deletion 
of certain distant signal sports programming only when the cable 
system received timely advance notice from the holder of the local 
broadcast rights. See 47 CFR 76.111(b) & (c) (2014). Accordingly, a 
covered cable system will be required to pay the Sports Surcharge 
only if it receives timely notice as required by those rules. An 
example of a notice that the moving parties believe contained the 
requisite information is attached as Exhibit B to the Joint Motion. 
Finally, in the case of advance notices pertaining to eligible 
collegiate sports events, such notice must be accompanied by 
evidence confirming that the event is one to which the Sports 
Surcharge applies.
    Effective Date. The moving parties agree that to facilitate a 
smooth transition, the surcharge will take effect as of January 1, 
2018.

    According to the moving parties, the royalty rate reflected in the 
proposed rule represents a negotiated compromise based upon current 
market and regulatory conditions as well as various other factors and 
does not represent the fair market value of any secondary transmission 
of a sports event. None of the moving parties believes that the 
proposed rule should be considered precedential in any way for any 
purpose. The moving parties recognize that the proposed rule, if 
adopted, may be reconsidered in 2020 and every five years thereafter. 
See 17 U.S.C. 804(b)(1)(B). The moving parties continue that if, for 
any reason, the Judges do not adopt the proposed rule, each of the 
moving parties reserves the right to demonstrate that the Judges should 
adopt a different rate adjustment to account for the FCC's repeal of 
its Sports Rules.

C. The Judges' Authority To Adopt the Proposed Rule

    According to the moving parties, a key Congressional objective 
underlying the Judges' rate-setting authority is the promotion of 
voluntary settlements rather than litigation. Joint Motion at 5, citing 
H.R. Rep. No. 108-408 at 24 (2004) (referring to the legislative policy 
of ``facilitating and encouraging settlement agreements for determining 
royalty rates''); id. at 30 (same). Consistent with that objective, 
Section 801(b)(7)(A) of the Copyright Act authorizes the Judges to 
accept a settlement reached by ``some or all of the participants'' in a 
rate proceeding ``at any time during the proceeding.'' 17 U.S.C. 
801(b)(7)(A). The moving parties note that the Judges need not conduct 
a ``full-fledged ratesetting'' before adopting a negotiated rate. Joint 
Motion at 5-6, citing H.R. Rep. No. 108-408 at 24 (2004). As the Judges 
have concluded:

    Section 801(b)(7)(A) of the Act is clear that the Judges have 
the authority to adopt settlements between some or all of the 
participants to a proceeding at any time during a proceeding so long 
as those that would be bound by those rates and terms are given an 
opportunity to comment. Requiring that the adoption of all proposed 
settlements wait until the conclusion of the proceeding would 
undercut the policy in Section 801(b)(7)(A) to promote negotiated 
settlements.

Digital Performance Right in Sound Recordings and Ephemeral Recordings, 
Docket No. 2014-CRB-0001-WR (2016-2020), 80 FR 58201, 58203 (Sept. 28, 
2015) (emphasis in original); accord, Digital Performance Right in 
Sound Recordings and Ephemeral Recordings, Docket No. 2014-CRB-0001-WR 
(2016-2020), 80 FR 59588, 59589 (Oct. 2, 2015).
    The Act requires that the Judges afford those who ``would be bound 
by the terms, rates or other determination'' in a settlement agreement 
``an opportunity to comment on the agreement.'' 17 U.S.C. 
801(b)(7)(A)(i). The moving parties note that the Copyright Royalty 
Board rules also contemplate that the Judges will ``publish the 
settlement in the Federal Register for notice and comment from those 
bound by the terms, rates, or other determination set by the 
agreement.'' 37 CFR 351.2(b)(2). The moving parties aver that the 
Judges must assess the ``reasonable[ness]'' of a voluntarily-negotiated 
rate only if participants to a proceeding who would be bound by the 
rate objected to it. Joint Motion at 6. The moving parties represent 
that they are the only parties participating in this proceeding, and 
they are urging the Judges to adopt the proposed Sports Surcharge. Id.
    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 June 20, 2017.
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:

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

0
1. The authority citation for part 387 continues to read as follows:

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

0
2. Amend Sec.  387.2 by:
0
a. Redesignating paragraph (e) as paragraph (f) and
0
b. Adding a new paragraph (e), to read as follows:


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

* * * * *
    (e) Sports programming surcharge. Commencing with the first 
semiannual accounting period of 2018 and for each semiannual accounting 
period thereafter, in the case of a covered cable system filing Form 
SA3 as referenced in 37 CFR 201.17(d)(2)(ii) (2014), the royalty rate 
shall be, in addition to the amounts specified in paragraphs (a), (c) 
and (d) of this section, a surcharge of 0.025 percent of the covered 
cable system's gross receipts for the secondary transmission to 
subscribers of each live television broadcast of an eligible 
professional sports event or eligible collegiate sports event where the 
secondary transmission of such broadcast would have been subject to 
deletion under the FCC Sports Blackout Rule (47 CFR 76.111). For 
purposes of this paragraph:
    (1) The term ``cable system'' shall have the same meaning as in 17 
U.S.C. 111(f)(3);
    (2) A ``covered cable system'':

[[Page 24614]]

    (i) Is a ``community unit,'' as the comparable term is defined or 
interpreted in accordance with Sec.  76.5(dd) of the rules and 
regulations of the Federal Communications Commission in effect as of 
November 23, 2014, 47 CFR 76.5(dd) (2014);
    (ii) That is located in whole or in part within the 35-mile 
specified zone of a television broadcast station licensed to a 
community in which a sports event is taking place, provided that if 
there is no television broadcast station licensed to the community in 
which a sports event is taking place, the applicable specified zone 
shall be that of the television broadcast station licensed to the 
community with which the sports event or team is identified, or, if the 
event or local team is not identified with any particular community, 
the nearest community to which a television station is licensed; and
    (iii) Whose royalty fee is specified by 17 U.S.C. 111(d)(1)(B);
    (3) A ``television broadcast'' of a sports event must qualify as a 
``non-network television program'' within the meaning of 17 U.S.C. 
111(d)(3)(A);
    (4) An ``eligible professional sports event'' is a game involving 
teams that are members of the National Football League, Major League 
Baseball, the National Hockey League, the National Basketball 
Association, or the Women's National Basketball Association;
    (5) An ``eligible collegiate sports event'' is a game involving a 
football or men's basketball team that is a member of Division I of the 
National Collegiate Athletic Association on whose behalf the FCC Sports 
Blackout Rule (47 CFR 76.111) was invoked during the period from 
January 1, 2012 to November 23, 2014;
    (6) The term ``specified zone'' shall be defined as the comparable 
term is defined or interpreted in accordance with Section Sec.  76.5(e) 
of the rules and regulations of the Federal Communications Commission 
in effect as of November 23, 2014, 47 CFR 76.5(e) (2014);
    (7) The term ``gross receipts'' shall have the same meaning as in 
17 U.S.C. 111(d)(1)(B) and shall include all gross receipts of the 
covered cable system during the semiannual accounting period except 
those from the covered cable system's subscribers who reside in:
    (i) The local service area of the primary transmitter, as defined 
in 17 U.S.C. 111(f)(4);
    (ii) Any community where the cable system has fewer than 1000 
subscribers;
    (iii) Any community located wholly outside the specified zone 
referenced in paragraph (e)(1) above; and
    (iv) Any community where the primary transmitter was lawfully 
carried prior to March 31, 1972;
    (8) The term ``FCC Sports Blackout Rule'' refers to Sec.  76.111 of 
the rules and regulations of the Federal Communications Commission in 
effect as of November 23, 2014, 47 CFR76.111 (2014);
    (9) Subject to paragraph (e)(10) of this section, the surcharge 
will apply to the secondary transmission of the primary transmission of 
a live television broadcast of a sports event only where the holder of 
the broadcast rights to the sports event or its agent has given the 
covered cable system advance written notice regarding such secondary 
transmission as required by the former Sec.  76.111(b) of the rules and 
regulations of the Federal Communications Commission in effect as of 
November 23, 2014, 47 CFR 76.111(b) & (c) (2014); and
    (10) In the case of collegiate sports events:
    (i) The holder of the broadcast rights or its agent also must 
attest that the specific team on whose behalf the surcharge notice is 
given meets the eligibility condition specified in paragraph (e)(5) of 
this section and provide documentary evidence in support thereof; and
    (ii) The number of events involving a specific team as to which a 
covered cable system must pay the surcharge will be no greater than the 
largest number of events as to which the Sports Blackout Rule (47 CFR 
76.111) was invoked in a particular geographic area by such team during 
any one of the accounting periods occurring between January 1, 2012 and 
November 23, 2014.
* * * * *

    Dated: May 23, 2017.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2017-10970 Filed 5-26-17; 8:45 am]
 BILLING CODE 1410-72-P