[Federal Register Volume 82, Number 230 (Friday, December 1, 2017)]
[Proposed Rules]
[Pages 56926-56939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25487]


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LIBRARY OF CONGRESS

U.S. Copyright Office

37 CFR Part 201

[Docket No. 2005-6]


Statutory Cable, Satellite, and DART License Reporting Practices

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

ACTION: Notice of proposed rulemaking.

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SUMMARY: The U.S. Copyright Office (``Office'') is seeking comment on 
proposed rules governing the royalty reporting practices of cable 
operators under section 111 and proposed revisions to the Statement of 
Account forms, and on proposed amendments to the Statement of Account 
filing requirements. With this Notice of Proposed Rulemaking, the 
Office intends to resolve issues raised in an earlier Notice of Inquiry 
directed towards cable reporting practices,\1\ as well as address 
additional issues that have subsequently arisen. Further, to the extent 
this rulemaking proposes changes to the Office's section 111 
regulations governing the processing of refunds, supplemental or 
amended payments, or calculation of interest, as well as case 
management procedures, the Office proposes similar changes with regard 
to the regulations governing the statutory licenses for satellite 
carriers and digital audio recording devices or media.
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    \1\ 71 FR 45749 (Aug. 10, 2006).

DATES: Written comments must be received no later than 11:59 p.m. 
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Eastern Time on January 16, 2018.

ADDRESSES: For reasons of government efficiency, the Copyright Office 
is using the regulations.gov system for the submission and posting of 
public comments in this proceeding. All comments are therefore to be 
submitted electronically through regulations.gov. Specific instructions 
for submitting comments are available on the Copyright Office Web site 
at https://copyright.gov/rulemaking/section111. If electronic 
submission of comments is not feasible due to lack of access to a 
computer and/or the internet, please contact the Office using the 
contact information below for special instructions.

FOR FURTHER INFORMATION CONTACT: Sarang V. Damle, General Counsel and 
Associate Register of Copyrights, by email at [email protected], Regan A. 
Smith, Deputy General Counsel, by email at [email protected], or Anna 
Chauvet, Assistant General Counsel, by email at [email protected], or any 
of them by telephone at 202-707-8350.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 111 of the Copyright Act (``Act''), title 17 of the United 
States Code, 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 operators that retransmit 
broadcast signals in accordance with this provision are required to pay 
royalty fees to the Copyright Office (``Office''), among other 
requirements. Payments made under section 111 are remitted semi-
annually to the Office, which invests the royalties in United States 
Treasury securities pending distribution of these funds to copyright 
owners eligible to receive a share of the royalties.\2\ In conjunction 
with royalty payments, cable operators must also complete and file 
statements of account (``SOAs''), which provide a record regarding the 
cable operators' retransmissions and royalty payments to ``promote 
uniform and accurate reporting, assist cable operators in meeting their 
obligations under the Act and regulations, and aid copyright owners, 
the Copyright Office, and the Copyright [Royalty Judges] in reviewing 
and using the information provided.'' \3\ Information provided on SOAs 
includes, among other things, the number of channels on which the cable 
system made secondary transmissions, the number of subscribers to the 
cable system, and the gross amount paid to the cable system by 
subscribers for the basic service of providing secondary 
transmissions.\4\ Cable operators file the SOAs with the Office using 
an appropriate form provided by the Office.\5\
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    \2\ The Office distributes those royalties in accordance with 
periodic distribution orders entered by the Copyright Royalty Board.
    \3\ 42 FR 61051, 61054 (Dec. 1, 1977) (explaining benefits of 
using a standard SOA form, referencing the Copyright Royalty 
Tribunal, a precursor to the current Copyright Royalty Judges 
system).
    \4\ 37 CFR 201.17(e)(5)-(7).
    \5\ Id. 201.17(d). The SOA forms are available in PDF and Excel 
format on the Office's Web site at https://www.copyright.gov/licensing/sec_111.html.

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[[Page 56927]]

    In 2005, the Motion Picture Association of America, Inc. 
(``MPAA''), on behalf of its member companies and other producers and/
or distributors of movies and television series (hereinafter, ``Program 
Suppliers''), filed a petition for rulemaking with the Copyright Office 
requesting the commencement of a proceeding to address several issues 
related to the SOA reporting practices of cable operators under section 
111 (the ``Petition''). The Petition asked the Office to adopt a number 
of changes to its section 111 regulations and SOAs to ``improve the 
nature of the information reported on the SOAs by cable operators,'' 
believing them to be ``critical to efficient and effective compliance 
review'' of SOAs by copyright owners.\6\ The Office published a notice 
of inquiry (``NOI'') seeking comment on Program Suppliers' proposals 
and recommendations,\7\ and multiple parties filed comments in response 
to the NOI, as well as reply comments.\8\
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    \6\ Program Suppliers, Petition for Rulemaking 2 (June 7, 2005) 
(``Petition'').
    \7\ 71 FR 45749.
    \8\ The initial and reply comments have been posted on the 
Office's Web site at https://copyright.gov/rulemaking/section111.
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    Since the Office issued that NOI, the Satellite Television 
Extension and Localism Act of 2010 (``STELA'') and STELA 
Reauthorization Act of 2014 (``STELARA'') updated section 111 in 
several respects.\9\ Among other things, STELA modified the calculation 
of royalty rates paid by cable operators, and updated certain 
provisions to accommodate the transition to digital television 
broadcasts.\10\ In addition, pursuant to STELA, the Copyright Office 
issued a regulation implementing a confidential procedure under which a 
qualified independent auditor working on behalf of all copyright owners 
can ``confirm the correctness of the calculations and royalty payments 
reported'' on a cable SOA filed for accounting periods commencing on or 
after January 1, 2010.\11\ STELARA, in turn, amended section 111 to 
expand the local service area of low power television stations.\12\
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    \9\ See Satellite Television Extension and Localism Act of 2010, 
Public Law 111-175, 124 Stat. 1218 (2010) (``STELA''); STELA 
Reauthorization Act of 2014, Public Law 113-200, 128 Stat. 2059 
(2014) (``STELARA'').
    \10\ 17 U.S.C. 111(d)(1)(B)-(F), (f)(4); see generally 75 FR 
56868 (Sept. 17, 2010) (interim rule implementing STELA).
    \11\ 17 U.S.C. 111(d)(6); 37 CFR 201.16(h), (l), (o).
    \12\ 17 U.S.C. 111(f)(5).
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    This notice of proposed rulemaking (``NPRM'') addresses issues 
raised in response to the NOI that are still relevant, and notes where 
intervening statutory and/or regulatory changes may have mooted some 
issues. This NPRM also proposes revisions to SOA forms and/or the 
Office's regulations that are intended to streamline administration of 
SOAs by the Office's Licensing Division, some of which would also apply 
to remitters making use of the section 119 (satellite) or chapter 10 
(``DART'') licenses.
    The Office welcomes public input on the following proposed changes, 
as well as other suggestions on streamlining or otherwise improving 
reporting practices for the section 111 license.

II. Proposed Section 111--Specific Changes

A. Relationship Between Gross Receipts (Space K) and Subscriber and 
Rate Information (Space E)

    Section 111 requires cable operators to report, in public filings 
to the Copyright Office, a variety of information regarding the 
secondary transmissions licensed under the statute, including the 
number of channels by which the system made secondary transmissions, 
the names and locations of all primary transmitters used, and, as 
particularly relevant here, the ``total number of [cable system] 
subscribers'' and the ``gross amounts'' paid to the cable system by 
these subscribers ``for the basic service of providing secondary 
transmissions of primary broadcast transmitters.'' \13\ Cable operators 
pay a percentage from these reported gross receipts ``for the 
privilege'' of providing such secondary transmissions (that is, a base 
rate), and additional amounts for any distant signal equivalent 
(``DSEs'') carried by the cable system. These amounts in turn are 
distributed as royalty fees to copyright owners whose works have been 
broadcast pursuant to the statutory license.\14\ The statute further 
provides that copyright owners may conduct confidential audits to 
verify the information provided on the SOAs, including the number of 
subscribers and relevant subscription rates, as well as the total 
amount of gross receipts collected from these subscribers at the 
reported rates, to ensure that they have received accurate compensation 
under the statutory license.\15\
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    \13\ 17 U.S.C. 111(d)(1)(A).
    \14\ Id. 111(d)(1)(B)(i)-(iv).
    \15\ Id. 111(d)(6).
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    In accordance with this statutory design, the Copyright Office has 
implemented these requirements through its regulations \16\ and SOA 
forms. The Office addressed the statutory requirements to report the 
``number of subscribers'' and ``gross amounts'' paid to cable operators 
as part of its initial regulations implementing section 111. In a 
notice of proposed rulemaking, the Office noted that reporting ``[t]he 
`number of subscribers' alone will serve no real purpose.'' \17\ 
Instead, the Office concluded that the statutory requirement was 
``intended to provide copyright owners with a basis for a comparison 
with the reported gross receipts.'' \18\ Accordingly, the Office 
``proposed . . . that the number of subscribers be accompanied by 
certain related information concerning subscriber categories and 
charges in order reasonably to accomplish this purpose.'' \19\ In a 
subsequent final rule adopting regulatory language almost identical to 
the present section 201.17(e)(6), the Office noted that ``although this 
information `will not provide a definitive or detailed comparison with 
the reported gross receipts,' it will be useful for at least a rough 
comparison with the reported gross receipts, and gives meaning to the 
statutory requirement that the `number of subscribers' be given.'' \20\
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    \16\ 37 CFR 201.17(e)(6)-(7).
    \17\ 42 FR at 61054.
    \18\ Id.
    \19\ Id.
    \20\ 43 FR 958, 959 (Jan. 5, 1978).
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    To facilitate this ``rough comparison with the reported gross 
receipts,'' under section 201.17(e)(6) cable operators must provide 
``[a] brief description of each subscriber category for which a charge 
is made by the cable system for the basic service of providing 
secondary transmissions of primary broadcast transmitters''; ``[t]he 
number of subscribers to the cable system in each such subscriber 
category''; and ``[t]he charge or charges made per subscriber to each 
such subscriber category for the basic service of providing such 
secondary transmissions.'' \21\ These regulatory requirements are 
reflected in Space E of the SOA forms (titled ``Secondary Transmission 
Service: Subscribers and Rates''), which requests information that 
``should cover all categories of secondary transmission service of the 
cable system,'' including ``the number of subscribers to the cable 
system, broken down by categories of secondary transmission service,'' 
and the ``rate charged for each category of service.'' \22\ Section 
201.17(e)(7) of the Office's regulation addresses the statutory 
reference to ``gross amounts'' and is reflected in Space K (titled 
``Gross Receipts''), which requires cable

[[Page 56928]]

operators to ``[e]nter the total of all amounts (gross receipts) paid 
to [the] cable system by subscribers for the system's secondary 
transmission service (as identified in Space E) during the accounting 
period.'' \23\
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    \21\ 37 CFR 201.17(e)(6)(i)-(iii).
    \22\ Paper Form SA1-2 at 2, Space E (``Short Form SOA''); Paper 
Form SA3 at 2, Space E (``Long Form SOA'').
    \23\ Short Form SOA at 6, Space K; Long Form SOA at 7, Space K; 
see also 37 CFR 201.17(e)(6)-(7) (describing corresponding SOA 
requirements).
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    Many of the issues raised by Program Suppliers' Petition address 
whether the subscriber and rate information provided by cable operators 
under the Office's current regulations is sufficient to provide the 
copyright owner with the intended ``rough comparison'' with the 
required gross receipts information, a concern the Office understands 
remains germane as the cable marketplace continues to evolve since the 
regulation was first promulgated. Program Suppliers stated that SOAs do 
not ``require adequate information for a meaningful comparison between 
Space E and Space K,'' \24\ and requested the Office to ``require 
greater congruity between the `gross receipts' information and the 
subscriber and rate information provided on the SOAs,'' and ``greater 
detail concerning the nature of revenues that a cable operator includes 
and excludes in its `gross receipts.' '' \25\ As explained below, while 
the Office tentatively concludes that it is not advisable to adopt all 
of the Program Suppliers' recommendations, the Office proposes some 
changes to the information sought in Space E to better facilitate the 
ability of copyright owners to verify gross receipts and other 
information provided on SOAs through the auditing mechanism set forth 
in 37 CFR 201.16.
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    \24\ Program Suppliers Comments at 6. Broadcast Music, Inc., The 
American Society of Composers, Authors and Publishers, Broadcast 
Music Inc., and SESAC, Inc. (collectively, ``Music Claimants'') 
submitted their own comments in response to the NOI, stating that 
``as a general matter, [they] support MPAA's comments and proposed 
revisions to the SOAs.'' Music Claimants Comments at 2.
    \25\ Petition at 3; see also Program Suppliers Comments at 5-7.
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1. Proposed Requirement to Explain Variation in Data Between Spaces E 
and K

    In proposing that the Office require ``greater congruity'' between 
these spaces, Program Suppliers specifically requested that the Office 
instruct remitters that the gross receipts reported in Space K should 
approximate calculated gross receipts (i.e., the number of subscribers 
in each category identified in Space E, multiplied by the applicable 
rate) and require cable operators to explain briefly in Space K any 
variation of more than 10% between calculated and reported gross 
receipts.\26\ National Association of Broadcasters (``NAB'') supported 
this proposal, stating that ``requiring greater congruity between the 
`gross receipts' information in Space K . . . and the subscriber and 
rate information in Space E would allow the Office to conduct its 
compliance reviews with the benefit of more readily comparable base 
data.'' \27\
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    \26\ Program Suppliers Comments at 5-6, 8.
    \27\ NAB Comments at 1.
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    Cable associations National Cable & Telecommunications Association 
(``NCTA'') and American Cable Association (``ACA'') opposed this 
suggestion. Specifically, ACA maintained that title 17 does not require 
such detailed reporting and suggested that instead, copyright owners 
should request additional information about individual SOAs if the 
filing appeared questionable.\28\ NCTA stated that even if the Office 
adopted all of the Program Suppliers' proposed changes to the SOA 
(discussed further below), the ``calculated gross receipts'' derived 
from Space E and actual gross receipts would still not be identical. 
For example, NCTA asserted that simply multiplying tier charges by the 
number of subscribers per tier would not equal gross receipts since 
both tier charges and subscribership fluctuate over six months due to, 
among other things, periodic rate adjustments to ``reflect inflation, 
changes in the channels offered, [and] increased programming costs for 
the basic tier.'' \29\ NCTA also stated that variations between gross 
receipts derived from using the data in Space E and the actual gross 
receipts reported under Space K result because the number of 
subscribers in Space E are reported as of the last day of the 
accounting period, whereas gross receipts are accumulated over the 
entire six-month period.\30\
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    \28\ ACA Comments at 5-6.
    \29\ NCTA Comments at 5.
    \30\ Id.
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    The Office understands Program Suppliers' position that a variance 
explanation requirement would aid copyright owners in making a rough 
comparison between the amount of ``gross receipts'' given in Space K 
and the result of multiplying the number of subscribers by the rates 
given in Space E. This requirement, however, would go beyond what has 
traditionally been required of remitters and may be inappropriate in 
light of differences in how data is reported in the two spaces. For 
example, the amount in Space K may vary depending on whether the cable 
system's accounting is done on an accrual or cash basis and, as noted 
by NCTA, a comparison between Spaces E and K is difficult since the 
information in the two spaces reflects different time periods (i.e., 
Space E calls for figures as of the last day of the accounting period 
whereas Space K calls for gross receipts for the entire accounting 
period).
    The Office is also concerned that a variance explanation 
requirement could increase burdens on the Office, by requiring its 
Licensing Division examiners to assume a far greater role in 
examination of SOAs than has traditionally been the case. Under the 
current examination scheme, the Office simply checks whether SOAs 
contain ``obvious errors or omissions''--not to identify all possible 
deficiencies.\31\ It has never been the Office's practice to compute 
totals in Space E and compare the result with Space K, or otherwise 
attempt to validate the information provided in those spaces. The 
variance explanation requirement, however, apparently envisions a role 
of the Office in calculating the proposed 10% variance that would go 
beyond checking for obvious errors and omissions.
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    \31\ See 37 CFR 201.17(c)(2).
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    For the same reasons, while the Office is considering adding an 
instruction to its SOAs generally explaining that Space E is intended 
to allow for a rough comparison with reported gross receipts, the 
Office tentatively concludes that it is not appropriate to adopt 
Program Suppliers' related proposal to explicitly instruct remitters 
that the gross receipts reported in Space K should approximate the 
number of subscribers in each category identified in Space E, 
multiplied by the applicable rate.

2. Proposed Requirement To Provide More Detailed Reporting of 
Subscriber and Rate Information (Space E)

    As noted above, Program Suppliers' Petition proposed ``greater 
congruity'' between gross receipts and subscriber and rate information 
on SOAs. In response, the Office agrees that it may be advisable to 
update the subscriber and rate information required by Space E to 
provide private parties with more granular information to make a rough 
comparison with the gross receipts information provided in Space K, 
including by making use of the audit mechanism provided by the 
regulations.\32\ With the exception of one amendment to the regulatory 
usage of the word ``converter,'' which, as discussed below, is intended 
to be technical, these proposed changes are to

[[Page 56929]]

the Office's forms and not its regulations.
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    \32\ Id. Sec.  201.16.
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    While the audit right established by STELA provides a mechanism for 
copyright owners to verify information provided by cable operators and 
ensure they are being accurately compensated for use of their 
intellectual property under the compulsory license, these audits are 
limited in various ways, including by accounting period, frequency, and 
scope of initial and expanded audits as proscribed in the Offices 
regulations.\33\ These audits are not intended to substitute for 
accurate and complete information provided by cable operators on the 
SOAs; nor is there an expectation that every single SOA would be 
audited. Indeed, it is important for SOAs to provide meaningful 
information to facilitate copyright owners' determination of whether or 
not to initiate an audit. Accordingly, this section outlines proposed 
changes or clarifications to reporting requirements in Space E 
concerning categories of service and other rate information.
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    \33\ 17 U.S.C. 111(d)(6); 37 CFR 201.16.
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    Space E implements 37 CFR 201.17(e)(6), which requires remitters to 
provide ``[a] brief description of each subscriber category for which a 
charge is made by the cable system for the basic service of providing 
secondary transmissions of primary broadcast transmitters.'' \34\ The 
regulation further states that ``[e]ach entity (for example, the owner 
of a private home, the resident of an apartment, the owner of a motel, 
or the owner of an apartment house) . . . shall be considered one 
subscriber'' \35\ subject to charges by the cable system for the basic 
service of providing secondary transmissions. These requirements are 
intended to complement the regulatory definition of ``gross receipts,'' 
which includes ``the full amount of monthly (or other periodic) service 
fees for any and all services or tiers of services which include one or 
more secondary transmissions of television or radio broadcast signals, 
for additional set fees, and for converter fees.'' \36\
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    \34\ 37 CFR 201.17(e)(6)(i).
    \35\ Id. 201.17(e)(6)(iii)(B).
    \36\ Id. 201.17(e)(b)(i).
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    As depicted below, Space E currently requires cable operators to 
report their number of subscribers and corresponding rate, ``broken 
down by categories of secondary transmission service'' offered to 
subscribers.\37\ As the form instructs, ``[t]he information in Space E 
should cover all categories of secondary transmission service of the 
cable system, that is, the retransmission of television and radio 
broadcasts by your system to subscribers.'' This information is 
reported through ``Block 1,'' which ``lists the categories of secondary 
transmission service that cable systems most commonly provide to their 
subscribers,'' and ``Block 2,'' which allows cable systems to add brief 
descriptions of additional categories for secondary transmission 
service that they offer to customers:
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    \37\ Short Form SOA at 2, Space E; Long Form SOA at 2, Space E.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                      Block 1                                                                      Block 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
        Category of service          Number of subscribers           Rate             Category of service   Number of subscribers           Rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Residential:
    [thinsp]Service to      ......................  ......................  ......................  .....................  .....................
     first set
    [thinsp]Service to      ......................  ......................  ......................  .....................  .....................
     additional set(s)
    [thinsp]FM radio (if    ......................  ......................  ......................  .....................  .....................
     separate rate)
Motel, hotel                        ......................  ......................  ......................  .....................  .....................
Commercial                          ......................  ......................  ......................  .....................  .....................
Converter:                          ......................  ......................  ......................  .....................  .....................
    [thinsp]Residential     ......................  ......................  ......................  .....................  .....................
    [thinsp]Non-            ......................  ......................  ......................  .....................  .....................
     residential
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    As the Petition suggested, and as the Licensing Division's 
examination of recently filed SOAs illustrates, there appear to be 
opportunities to improve the consistency and quality of information 
reported in Space E. Specifically, Program Suppliers noted that there 
currently is ``scant information'' about the tiers of service (e.g., 
basic, expanded, digital) offered by cable operators that contain 
broadcast signals.\38\ Program Suppliers requested that the Office 
revise its SOAs to require a variety of information, including:
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    \38\ Petition at 8 (citing 37 CFR 201.17(e)(7)).

    (1) Each tier of service they provide for a separate fee, noting 
which tiers contain broadcast signals, (2) the rates associated with 
each service tier, and whether the fees collected for each package 
are included or excluded from their gross receipts calculation, (3) 
the number of subscribers receiving each service tier, (4) the 
lowest tier of service including secondary broadcast transmissions 
that is available for independent subscription, and (5) any tier of 
service or equipment for which purchase is required as a 
prerequisite to obtaining another tier of service.\39\
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    \39\ Id. at 9-10.

    In addition, the Office of the Commissioner of Baseball, National 
Basketball Association, National Football League, National Hockey 
League, Women's National Basketball Association, and the National 
Collegiate Athletic Association (a group collectively referred to as 
``Joint Sports Claimants'' or ``JSC'') expressed concerns that cable 
operators could limit the reporting of gross receipts to revenues 
derived solely from the lowest priced tier of service carrying 
broadcast signals and exclude revenues derived from higher priced tiers 
that also carry such signals.\40\
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    \40\ JSC Comments at 2-3.
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    While the Office does not endorse every proposal of the Petition, 
in light of the increased variation in rates offered by cable 
operators, the Office agrees with revising Space E to require a 
somewhat more granular breakdown of the number of subscribers and rates 
charged for the various pertinent categories of service provided to 
subscribers. Remitters would be instructed to list the total number of 
subscribers for each category of service as well as the corresponding 
rate (or range of rates), and to mark ``N/A'' if they did not offer 
service in a given category. The Office hopes that these changes will 
make it easier for cable operators to more accurately report the number 
of subscribers for the various services they offer.
    Specifically, the Office proposes to update the various bolded 
categories of service--currently listed in Block 1 of Space E as 
``Residential,'' ``Motel, hotel,'' ``Commercial,'' and ``Converter.'' 
The Office proposes to replace these categories with the following: 
``Single-unit residential,'' ``Multi-unit

[[Page 56930]]

residential,'' ``Motel, hotel,'' ``Commercial,'' ``Other MDU,'' and 
``Equipment.'' In addition, the Office proposes to add additional space 
below each category for providers to provide a further breakdown that 
captures each relevant category of retransmission of television and 
radio broadcasts offered to subscribers. In doing so, the proposed rule 
would replace the existing categories of service listed under what is 
currently labeled ``Residential''-- ``Service to first set,'' ``Service 
to additional set(s),'' and ``FM radio (if separate rate)''--with the 
more generic categories ``basic service 1,'' ``service 2,'' and 
``service 3.'' In addition, the proposed rule would list these same 
categories underneath most of the additional types of subscribers 
(e.g., ``motel, hotel,'' or ``commercial''). The category ``equipment'' 
would retain the current subcategories ``residential'' and ``non-
residential.'' Remitters could add additional categories of service as 
relevant to their business in empty lines, currently labeled ``Block 
2'' of Space E. The Office is also considering whether space should be 
provided for cable operators to briefly describe these additional 
services to reflect the specific offering (e.g., ``expanded'' or 
``sports and news bundle''). Finally, the Office proposes clarifying in 
its instructions that cable operators should separately list the number 
of subscribers and rate information for each cable service offered that 
contains any broadcast signals.
    The proposal to break up the existing ``Residential'' category into 
single- and multi-unit sub-categories is intended to alleviate some 
discrepancy in reporting practices for residential multiple-dwelling 
units (``MDUs''), as noted in earlier stakeholder comments, as well as 
better organize the type of rate information provided. For example, in 
their Petition, Program Suppliers stated that while some cable 
operators report the ``total subscriber counts'' for each of the MDUs 
they serve (albeit in a manner that leaves it unclear how these numbers 
are derived), others report each MDU simply as one subscriber, while 
still others leave the lines relating to ``motel, hotel'' or 
``commercial'' categories of service blank.\41\ Under the proposal 
here, the Office intends for remitters to report single-family homes 
and individual unit apartment or condominium subscribers on the 
``single-unit residential'' space, and subscribers on behalf of an 
overall apartment or condominium building on the ``multi-unit 
residential'' space. If an operator has a single contract for cable 
service on behalf of the residents or occupants of a multi-unit 
residential building, the operator should report that building served 
as one multi-unit residential subscriber, and the rate (or range of 
rates) the operator receives for cable service from those 
subscribers.\42\ In addition, the replacement of the term ``converter'' 
with ``equipment'' on the SOA forms and in the regulation is simply 
intended to modernize regulatory terminology. The Office seeks comment 
on these proposed changes, including whether it would be advisable to 
specifically add the category of ``other MDU,'' which could encompass 
subscriptions for non-commercial multi-dwelling units such as 
penitentiaries, churches, or schools, or whether it is sufficient to 
allow cable operators to add categories of service as needed in the 
blank section of Space E.
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    \41\ Petition at 6-7 (citing Short Form SOA at 2, Space E; Long 
Form SOA at 2, Space E); see also 71 FR at 45750 (noting Program 
Suppliers' concerns over Space E).
    \42\ See 37 CFR 201.17(e)(6)(iii)(B) (listing a private home 
owner, apartment owner, apartment resident, motel owner as 
subscriber examples).
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    These proposed changes are also intended to recognize the increased 
variety in cable subscription rates by providing a flexible table to 
allow cable operators to report each category of service ``for which a 
charge is made by the cable system for the basic service of providing 
secondary transmissions of primary broadcast transmitters.'' \43\ For 
example, since the Petition was received, the cable marketplace has 
experimented with a variety of service offerings, ranging from tiers of 
packages offering over 400 channels to skinny bundles emphasizing 
family friendly or sports-related programming. Meanwhile, the Office 
recognizes that it is no longer commonplace for cable operators to 
charge additional fees for ``service to additional sets'' or ``FM 
radio,'' but any remitter who does offer these services for a separate 
fee could list them as a separate service.
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    \43\ Id. 201.17(e)(6)(i).
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    In addition, for each service offered to a category of subscribers, 
the Office proposes to allow cable operators to report a range of rates 
that the cable operator actually charged on the last day of the 
accounting period.\44\ This instruction is intended to address pricing 
variations, as well as concerns from NCTA that reporting each rate 
charged to MDU subscribers based on individual negotiations would be 
``enormously difficult, and would unfairly require operators to divulge 
competitively sensitive information.'' \45\ As noted above, cable 
operators could also add additional categories of services to report 
rates that correspond to different types of service. The Office invites 
comment on whether there should be a limit on the variance that may be 
reported for a single service, such as a requirement that the highest 
amount may be no more than 100% of the lowest amount in a range (e.g., 
a range of $14.99-$26.99 would be permissible, but not a range of 
$24.00-$78.00), and whether any variance limit should be higher for 
MDUs to reflect the more individualized nature of services offered.
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    \44\ See Petition at 7; Program Suppliers Reply Comments at 12-
14.
    \45\ NCTA Comments at 6.
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    Finally, the Office proposes that information regarding categories 
of service shall not be left blank.\46\ If a cable operator does not 
serve a specific category, a ``zero'' or a ``N/A'' (not applicable) 
should be reported in the appropriate space. These revisions are 
intended to facilitate the review of cable SOAs.
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    \46\ See Program Suppliers Reply Comments at 12-14.
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    Further, the Office intends to revise Space E's instructions and 
its regulatory definition of ``gross receipts'' to specifically note 
that cable operators' gross receipts must include revenue from 
subscription to non-broadcast tier(s) and/or from equipment sales or 
leases if they are required to obtain tiers with broadcast signals. If 
a tier or other service has no broadcast signals, and is not required 
to be purchased to obtain access to broadcast signals, it need not be 
reported in Space E. This addition does not represent a substantive 
change in policy, but is intended to provide more detailed guidance in 
furtherance of the Office's current regulatory definition of ``gross 
receipts.'' \47\ This change is also in accordance with Cablevision v. 
MPAA, which found this definition and the Office's longstanding 
requirement that ``revenues from all tiers other than pay cable and 
from all channels within each included tier must be included in gross 
receipts'' to be reasonable.\48\
---------------------------------------------------------------------------

    \47\ See 37 CFR 201.17(b)(1).
    \48\ Cablevision Sys. Dev. Co. v. Motion Picture Ass'n of Am., 
Inc., 836 F.2d 599, 602, 611 (D.C. Cir. 1988).
---------------------------------------------------------------------------

    In sum, by updating the pre-populated categories listed in Space E 
and requiring more detail regarding the categories of service offered 
(i.e., by breaking out currently-reported subscriptions into separate 
tiers of service and listing the per-tier rate or range of rates), the 
Office hopes to address concerns about the adequacy of reported 
information. At the same time, the Office does not propose to adopt 
every information category proposed by

[[Page 56931]]

Program Suppliers, tentatively agreeing with NCTA and ACA that 
requiring filers to provide information on offerings that do not 
contain broadcast signals (or are not prerequisites to obtaining 
service containing any broadcast signals) would be inappropriate, as 
those tiers do not contribute to gross receipts.\49\
---------------------------------------------------------------------------

    \49\ See NCTA Comments at 7; ACA Comments at 7-8.
---------------------------------------------------------------------------

3. Reporting of Bundled Services in Gross Receipts and Subscriber Rates 
(Spaces E and K)

    For years, cable operators and other multichannel video programming 
distributors have marketed video, internet data, and voice services as 
a single bundle of communication products to subscribers for a set 
price. Bundling offers certain subscriber benefits, such as price 
discounts and a single monthly bill. While pricing models vary, 
subscribers generally pay less for a bundled package than if purchasing 
each service individually.
    From time to time, the Office receives questions on how to report 
the price of cable television service in gross receipts on their SOAs 
when it is sold as part of a bundle of services. The Office is 
considering whether to amend its regulations to provide specific 
guidance on how remitters should report cable television services sold 
as a bundled service. The Office welcomes comments on how cable 
operators currently report the price of cable television service in 
gross receipts on their SOAs when it is sold as part of a bundle of 
services, and whether the Office's regulations should be amended to 
provide more guidance.

B. Definition of Cable System

    The Office proposes to amend the regulatory definition of ``cable 
system'' to reflect both the Copyright Office's longstanding position 
that such systems are limited to systems providing only localized 
retransmissions of limited availability, and the uniform case law 
holding that internet-based retransmission services are excluded from 
the section 111 compulsory license.\50\
---------------------------------------------------------------------------

    \50\ See, e.g., Fox Television Stations, Inc. v. Aereokiller, 
LLC, 851 F.3d 1002, 1007 n.1 (9th Cir. 2017) (noting that seven 
other federal courts held that ``Internet-based transmission 
services'' did not qualify as a ``cable systems'' under the 
Copyright Act).
---------------------------------------------------------------------------

    As the Ninth Circuit recently explained, Congress did not intend 
for section 111 ``to service the entire secondary transmission 
community . . . without regard to the technological makeup of its 
members,'' and instead limited the cable license to a narrower subset 
of providers that the statute defines in a ``detailed, if arguably 
ambiguous, way.'' \51\
---------------------------------------------------------------------------

    \51\ Id. at 1009.
---------------------------------------------------------------------------

    The Act requires a ``cable system'' to make secondary transmissions 
by ``wires, cables, microwave, or other communications channels.'' \52\ 
As the Ninth Circuit recognized, when read in conjunction with the 
whole of section 111 and the rest of the Copyright Act, it is clear 
that Congress did not intend section 111 ``to sweep in secondary 
transmission services with indifference to their technological 
profile.'' \53\ As the Office has previously noted, ``at the time 
Congress created the cable compulsory license, the FCC regulated the 
cable industry as a highly localized medium of limited availability, 
suggesting that Congress, cognizant of the FCC's regulations and the 
market realities, fashioned a compulsory license with a local rather 
than a national scope.'' \54\ Indeed, the localized nature of the cable 
statutory license is reflected throughout section 111. For example, in 
defining ``cable system,'' section 111 states that two or more systems 
operating from ``one headend'' \55\ are considered a single system; the 
same section also makes references to ``contiguous communities.'' \56\ 
Thus, as the Ninth Circuit properly concluded, the Office's established 
understanding of the section 111 license ``aligns with [section] 111's 
many instances of location-sensitive language.'' \57\
---------------------------------------------------------------------------

    \52\ 17 U.S.C. 111(f)(3).
    \53\ Aereokiller, 851 F.3d at 1009.
    \54\ 62 FR 18705, 18707 (Apr. 17, 1997); see also Aereokiller, 
851 F.3d at 1014 (quoting same).
    \55\ Under FCC regulations, a ``principal headend'' is defined 
as ``(1) the headend, in the case of a cable system with a single 
headend or, (2) in the case of a cable system with more than one 
headend, the principal headend designated by the cable operator, 
except that such designation shall not undermine or evade [the 
broadcast signal carriage requirements.]'' 47 CFR 76.5(pp).
    \56\ 17 U.S.C. 111(f)(3).
    \57\ Aereokiller, 851 F.3d at 1013.
---------------------------------------------------------------------------

    Indeed, the overall operation of the section 111 license assumes 
cable systems operate as localized retransmission services. The royalty 
structure for the license is predicated upon determining whether the 
retransmission of television programming is ``local'' to or ``distant'' 
from the local service area of the primary transmitter of such 
programming.\58\ Specifically, royalty rates for larger (i.e., Long 
Form SOA) cable systems are calculated based on a value known as the 
``distant signal equivalent,'' \59\ which is calculated based on the 
type and number of stations with ``non-network television programming 
carried by a cable system in whole or in part beyond the local service 
area of the primary transmitter of such programming.'' \60\ The 
statute, in turn, defines ``local service area'' in precise geographic 
terms. For example, for low power stations, the statute itself defines 
the local service area in terms of a specific radius in miles around a 
transmitter site.\61\ Accordingly, for a cable station to accurately 
calculate royalties under the statutory license, it must know with some 
precision the locations to which the cable system has retransmitted a 
broadcast station's signal--and whether that retransmission was within 
or outside the local service area of that station. This is something 
that is possible with traditional, hard-wired cable systems and their 
equivalent, because of the localized nature of their retransmission 
services.
---------------------------------------------------------------------------

    \58\ See 17 U.S.C. 111(d)(1), (f)(4), (5).
    \59\ See, e.g., id. 111(d)(1)(B).
    \60\ Id. 111(f)(5)(i) (emphasis added).
    \61\ See 17 111(f)(4). Specifically, the statute defines the 
local service area for ``low power stations'' as comprising ``the 
designated market area . . . that encompasses the community of 
license of such station,'' plus communities outside the designated 
market area that are either ``wholly or partially within 35 miles of 
the transmitter site'' or, in the case of stations located in larger 
metropolitan areas, ``wholly or partially within 20 miles of such 
transmitter site.'' Id.; see also id. 122(j)(2)(C) (defining 
``designated market area'').
---------------------------------------------------------------------------

    Other aspects of the statutory scheme similarly underscore the 
localized nature of the statutory license. As discussed in greater 
detail below, for purposes of categorizing cable systems for royalty 
purposes, the statute specifies that two or more cable systems 
constitute a single cable system for purposes of section 111 if they 
are under common ownership or control and ``are located in the same or 
contiguous communities.'' \62\ Similarly, the Office's section 111 
regulations require cable operators to report the communities served by 
each cable system (i.e., the cities or towns).\63\ Thus, determining 
what ``community'' a cable system serves requires knowing with some 
precision where retransmitted signals are being sent, which necessarily 
implies that a ``cable system'' is one that operates via a localized 
transmission system.\64\
---------------------------------------------------------------------------

    \62\ Id. 111(f)(3).
    \63\ 37 CFR 201.17(e)(4).
    \64\ Cf. Aereokiller, 851 F.3d at 1013-14 (deferring to 
Copyright Office interpretation based on section 111's use of 
``location-sensitive language'').
---------------------------------------------------------------------------

    Consistent with this understanding of the overall legislative 
scheme, the Office in prior rulemakings has held a consistent view that 
a ``cable system'' under the meaning of section 111 must operate in an 
inherently localized retransmission medium. For instance, in 1992 and 
1997, in the context of

[[Page 56932]]

rulemakings to determine whether satellite and wireless cable 
retransmission systems could qualify for the section 111 license, the 
Office concluded that the section 111 license ``applies only to 
localized retransmission services,'' \65\ and that ``a provider of 
broadcast signals [must] be an inherently localized transmission media 
of limited availability to qualify as a cable system.'' \66\ Applying 
this standard, the Office found that satellite carriers could not 
qualify as cable systems.\67\ The Eleventh Circuit upheld the 
reasonableness of that determination.\68\ Congress established the 
section 119 and 122 licenses to provide for a separate statutory 
licensing scheme for satellite carriers.\69\ Thus, as the Ninth Circuit 
recently noted, ``if Congress meant Sec.  111 to sweep in secondary 
transmission services with indifference to their technological profile, 
then it was strange for Congress to have provided separate compulsory 
license provisions--Sec. Sec.  119 and 122--for broadcast 
retransmissions by satellite carriers.'' \70\
---------------------------------------------------------------------------

    \65\ 57 FR 3284-01, 3292 (Jan. 29, 1992) (codified at 37 CFR pt. 
201).
    \66\ 62 FR 18705, 18707 (Apr. 17, 1997) (codified at 37 CFR pt. 
201).
    \67\ 57 FR at 3292, 3296. In this 1992 rulemaking, the Copyright 
Office also concluded that ``wireless'' cable systems could not 
qualify as ``cable systems'' under section 111. Id. at 3293-95. 
Congress amended section 111 in 1992 to reverse that decision. 
Satellite Home Viewer Act of 1994, Public Law 103-369, 108 Stat. 
3477 (1994); 59 FR 67635 (Dec. 30, 2004). In doing so, however, 
Congress did not question the Copyright Office's conclusion that the 
statute was limited to localized retransmission services. To the 
contrary, Congress recognized that such wireless cable systems would 
have to be treated the same as wired systems for purposes of 
calculating distant signal royalties under the statutory license. 
See S. Rep. No 103-407 at 14 (1994); H.R. Rep. No. 103-703 at 19 
(1994); see generally 62 FR at 18709 (discussing legislative 
history).
    \68\ Satellite Broad. & Commc'ns Ass'n of Am. v. Oman, 17 F.3d 
344, 346-48 (11th Cir. 1994); see also 37 CFR 201.17(k) (1992) 
(``Satellite carriers, [and] satellite resale carriers . . . are not 
eligible for the cable compulsory license based upon an 
interpretation of the whole of section 111 of title 17 of the United 
States Code.'').
    \69\ Satellite Home Viewer Act of 1994, Public Law 103-369, 108 
Stat. 3477 (1994); 59 FR 67635 (Dec. 30, 2004).
    \70\ Aereokiller, 851 F.3d at 1009.
---------------------------------------------------------------------------

    Similarly, in policy reports and testimony before Congress, the 
Office consistently communicated its position that internet-based 
retransmission services are not ``cable systems'' under section 
111.\71\ As explained in more detail in those reports, the Office's 
view was based on an understanding that, unlike other systems 
qualifying for the cable license, online streaming services are not 
closed, localized systems, and so are outside the statutory license. By 
contrast, in a 2008 policy report, the Office opined that video 
programming distribution systems using Internet Protocol technology, by 
virtue of the fact that they were inherently closed systems delivering 
content to a limited set of subscribers at their homes, could meet the 
definition of ``cable system'' \72\
---------------------------------------------------------------------------

    \71\ See, e.g., Register of Copyrights, A Review of the 
Copyright Licensing Regimes Covering Retransmission of Broadcast 
Signals 97-99 (1997), https://www.copyright.gov/reports/study.pdf; 
Copyrighted Webcast Programming on the Internet: Hearing Before the 
H. Subcomm. on Courts and Intell. Prop., 106th Cong. 5-6 (2000) 
(statement of Marybeth Peters, Register of Copyrights and Dir., U.S. 
Copyright Office); Register of Copyrights, Satellite Home Viewer 
Extension and Reauthorization Act Section 109 Report 193-94 (2008), 
http://www.copyright.gov/reports/section109-final-report.pdf 
(``Section 109 Report''); Register of Copyrights, Satellite Home 
Viewer Extension and Localism Act Section 302 Report 47-49 (2011), 
https://www.copyright.gov/reports/section302-report.pdf.
    \72\ Section 109 Report at 197-99; see also id. at 200 
(concluding that retransmission of broadcast signals to mobile 
devices should be outside statutory license).
---------------------------------------------------------------------------

    In sum, in light of the Office's understanding of section 111, its 
longstanding policy views, and the uniform direction of case law, the 
Office proposes adding the following sentence to its regulatory 
definition of ``cable system'': ``A provider of broadcast signals must 
be an inherently localized and closed transmission system of limited 
availability to qualify as a cable system.''

C. Interpretation of Community and Reporting of Area Served (Space D)

1. Cable Headend Location

    Section 111(f) of the Copyright Act states in relevant part that: 
``For purposes of determining the royalty fee under subsection (d)(1), 
two or more cable systems in contiguous communities under common 
ownership or control or operating from one headend shall be considered 
as one system.'' \73\ Moreover, two cable systems operating from the 
same headend are considered to be one system for purposes of 
calculating the section 111 royalties ``even if they are owned by 
different entities.'' \74\ Currently, a cable operator is required to 
identify on its SOA only the community or communities in which it 
operates and not the location of the headend(s) serving those 
communities.\75\
---------------------------------------------------------------------------

    \73\ 17 U.S.C. 111(f)(3); see also 37 CFR 201.17(b)(2).
    \74\ Short Form SOA at ii; Long Form SOA at ii; see also 43 FR 
at 958.
    \75\ See 37 CFR 201.17(e)(4); Short Form SOA at 1b, Space D; 
Long Form SOA at 1b, Space D.
---------------------------------------------------------------------------

    In their Petition, Program Suppliers requested that the Office 
revise Space D of the SOA form to require cable operators to identify 
the location of each headend and the specific communities served from 
that headend.\76\ Program Suppliers stated that this information will 
help them determine whether cable operators are, in fact, complying 
with the section 111(f) requirement to treat all cable systems 
operating from a common headend as a single cable system and suggested 
that a headend identification requirement would not burden cable 
operators, as the FCC already requires them to maintain records of the 
location of principal headends.\77\ As to which headend a cable 
operator should report where there are multiple headends, Program 
Suppliers stated that an operator should be required to identify the 
location of each headend that serves communities listed by its 
systems.\78\ NAB concurred that including the specific location of 
headends would enhance the Office's review of SOAs.\79\
---------------------------------------------------------------------------

    \76\ Petition at 10-11.
    \77\ See Program Suppliers Comments at 12-13 (citing 47 CFR 
76.1708, 76.1716). The Office notes that the FCC recently eliminated 
the requirement that cable operators maintain for public inspection 
the designation and location of the cable system's principal 
headend. In re Revisions to Public Inspection File Requirements--
Broadcaster Correspondence File & Cable Principal Headend Location, 
32 FCC Rcd. 1565 (2017), https://apps.fcc.gov/edocs_public/attachmatch/FCC-17-3A1.pdf.
    \78\ Id. at 13.
    \79\ NAB Comments at 1-2.
---------------------------------------------------------------------------

    By contrast, NCTA remarked that if a single system uses more than 
one headend, it should make no difference to copyright owners which one 
is identified; in that instance, an operator has already determined 
that it operates a single system for copyright purposes.\80\ ACA 
commented that if a Program Supplier has a legitimate question 
regarding the location of a headend, it can request clarification from 
that particular operator, and that Program Suppliers have employees and 
outside counsel devoted to precisely that type of activity.\81\
---------------------------------------------------------------------------

    \80\ NCTA Comments at 8.
    \81\ ACA Comments at 11.
---------------------------------------------------------------------------

    The Office tentatively concludes that it is not clear that 
artificial fragmentation by cable systems seeking to avoid paying a 
higher royalty rate (i.e., a Long Form SOA cable system reporting as 
several Short Form cable systems) is currently a pressing concern, or 
that requiring the reporting of headend information would significantly 
help lessen this issue, compared to the additional burden imposed upon 
cable operators. Given the lack of a strong record demonstrating the 
need for this information, the Office declines to adopt

[[Page 56933]]

a headend-reporting requirement at this time.

2. County Information

    The Office's regulations currently require a cable operator to 
report the name of the community or communities served by its cable 
system.\82\ Space D of the SOAs require a cable operator to identify 
the communities it serves, including by listing the ``city or town'' 
and ``state'' served.\83\ The SOAs do not currently require 
identification of the county in which the given community is located, 
although some operators report counties on a voluntary basis.
---------------------------------------------------------------------------

    \82\ 37 CFR 201.17(e)(4).
    \83\ Short Form SOA at 1b, Space D; Long Form SOA at 1b, Space 
D.
---------------------------------------------------------------------------

    In their Petition, Program Suppliers requested that the Office 
require cable operators to identify the county where each cable 
community is located, in addition to the city and state.\84\ They 
commented that this information would help clarify whether a signal is 
local, distant, or partially distant (i.e., distant to some subscribers 
but local to others) for section 111 purposes.\85\ NCTA agreed that the 
absence of county designations has hampered legitimate efforts to 
review certain SOAs and did not object to modification of the SOA forms 
to require inclusion of county information in Space D.\86\ Similarly, 
ACA stated that this requirement will impose minimal additional burdens 
and will facilitate review of SOAs by the Licensing Division.\87\
---------------------------------------------------------------------------

    \84\ Petition at 11-13.
    \85\ Id. at 12.
    \86\ NCTA Comments at 9.
    \87\ ACA Comments at 4.
---------------------------------------------------------------------------

    Because the parties agreed that inclusion of the county on the SOA 
would be beneficial, the Office proposes that Space D should be revised 
to require ``county'' information, but seeks comment on whether this 
proposed change remains desirable to stakeholders. The Office concludes 
that regulatory change is not necessary to implement this update to the 
form.

3. Definition of ``Community''

    Under the Copyright Act and the Office's regulations, two or more 
cable systems constitute a single cable system for purposes of section 
111 if, as relevant here, they are under common ownership or control 
and are located in the same or ``contiguous communities.'' \88\ Where 
common ownership of cable systems is established, defining the 
``community'' served is important to determine whether two or more 
cable facilities operate in ``contiguous communities,'' and whether 
those facilities should file as a single cable system, preventing 
artificial fragmentation of large cable systems into multiple smaller 
systems to avoid the higher royalty payments Form 3 cable systems pay 
under section 111.\89\
---------------------------------------------------------------------------

    \88\ 17 U.S.C. 111(f)(3); 37 CFR 201.17(b)(2).
    \89\ See 43 FR 958 (Jan. 5, 1978) (``[T]he legislative history 
of the Act indicates that the purpose of this sentence [in section 
111(f)] is to avoid the artificial fragmentation of cable 
systems.'').
---------------------------------------------------------------------------

    The Office's regulations currently state that a cable system's 
``community,'' for purposes of section 111, is the same geographic area 
as that specified under the definition of ``community unit'' as defined 
in the FCC's rules and regulations.\90\ FCC regulations define 
``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).'' \91\
---------------------------------------------------------------------------

    \90\ 37 CFR 201.17(e)(4); see also Short Form SOA at 1b, Space 
D; Long Form SOA at 1b, Space D.
    \91\ 47 CFR 76.5(dd).
---------------------------------------------------------------------------

    Program Suppliers requested that the Office amend the regulatory 
definition of the term ``community'' so that a cable operator's 
``franchise area'' should be the de facto regulatory boundary for 
defining cable communities instead of the FCC's community unit 
definition. In support, Program Suppliers noted that the FCC itself, in 
written opinions, has interpreted ``community unit'' to mean cable 
franchise areas.\92\ But while it may be true that the FCC has itself 
at times equated its regulatory definition of ``community unit'' with a 
given cable system's franchise area, that is, the political 
jurisdiction for which a local government body has granted it the right 
to provide cable television to its residents, the regulatory definition 
refers more broadly to a ``distinct community'' and the Petition itself 
suggests the FCC has not been uniform in that interpretation. In its 
NOI, the Office asked if there is a general pattern of disaggregation 
by cable operators to support a rule change, and if so, whether it 
would be reasonable to equate the term ``community'' with a cable 
operator's ``franchise area.'' \93\
---------------------------------------------------------------------------

    \92\ Petition at 16 (citation omitted).
    \93\ 71 FR at 45752.
---------------------------------------------------------------------------

    In comments, NCTA suggested that the FCC community unit concept was 
part of a long-established cable copyright paradigm.\94\ It explained 
that the cable industry's signal carriage obligations under current FCC 
rules, notably the syndicated exclusivity rules, continue to depend on 
the community unit definition, and were necessary under the FCC's 
former distant signal rules for establishing whether a distant signal 
is permitted for copyright purposes. NCTA further stated that Program 
Suppliers offered no evidence that Congress intended franchise areas to 
play a decisive role in defining a single cable system for copyright 
purposes. NCTA noted that with the advent of statewide franchising in 
some states, the proposed rule change could result in the artificial 
joinder of systems that could be hundreds of miles apart and not 
interconnected in any way.\95\ In reply comments, NAB agreed that the 
Copyright Office should continue to rely upon the FCC's regulatory 
definition of community unit, and suggested that a literal application 
of those rules would prevent artificial fragmentation by requiring 
cable operators to list all contiguous units that shared a franchise 
authority.\96\
---------------------------------------------------------------------------

    \94\ NCTA Comments at 11.
    \95\ Id. at 11-13.
    \96\ NAB Reply Comments at 12-13.
---------------------------------------------------------------------------

    The Copyright Office tentatively concludes that the facts and the 
law do not support replacing the community unit definition with a 
franchise area definition. Moreover, since the receipt of the Petition, 
the Office has not noted a practice of fragmentation, and has learned 
that this issue may be of less interest to stakeholders. The Office 
invites public comments on whether this issue is still significant to 
stakeholders.

D. Grade B Contour (Parts 6 and 7)

    Under the Copyright Act, the definition of ``local service area of 
a primary transmitter'' establishes the difference between ``local'' 
and ``distant'' signals and ``therefore the line between signals which 
are subject to payment under the compulsory license [under section 111] 
and those that are not.'' \97\ The shifting technologies used for 
television transmission, as reflected in STELA, have led the Copyright 
Office to question whether certain parts of its regulations and SOA 
forms should be modified or eliminated.
---------------------------------------------------------------------------

    \97\ H.R. Rep. No. 94-1476, at 99 (1976), as reprinted in 1976 
U.S.C.C.A.N. 5659, 5714.
---------------------------------------------------------------------------

    Specifically, the parts of the Long Form SOA which reference the 
``Grade B contour,'' an FCC construct used for many years in the 
context of analog television stations, appear to be obsolete. Section 
111 imported this construct, as detailed in FCC rules and regulations, 
with respect to determining the local service area of certain 
signals.\98\ Subsequently, with the advent

[[Page 56934]]

of digital television signals, the FCC has recognized a new standard 
known as the ``noise-limited service contour.'' STELA amended section 
111 by adding to the definition of ``local service area'' any area 
``within the noise-limited contour as defined in 73.622(e)(1) of title 
47, Code of Federal Regulations.'' \99\
---------------------------------------------------------------------------

    \98\ 17 U.S.C. 111(f)(4).
    \99\ STELA at sec.104, 124 Stat. at 1235; 17 U.S.C. 111(f)(4).
---------------------------------------------------------------------------

    Two parts of the form appear to have been overtaken by these 
technological developments. First, the Long Form SOA asks for certain 
information related to certain UHF signals within a Grade B contour, 
for purposes of calculating royalties paid under a 3.75% fee in Part 6, 
Block B of the form. Under the FCC's old ``market quota'' rules, which 
were incorporated by reference into section 111, a cable operator could 
carry a certain number of distant signals based upon a complex scheme 
involving the type of the television market and the type of signal 
available. A cable operator, however, could carry more signals than its 
market quota of distant signals if the station was considered 
``permitted'' by the FCC's 1976-era rules. The concept of ``permitted'' 
stations has been imported into the section 111 license. Under section 
111, an operator that carries a non-permitted signal above its market 
quota is generally subject to a 3.75% fee for carriage of that signal, 
in lieu of the minimum royalty rate.\100\ There are several bases of 
``permitted'' carriage, however, for which retransmission will not 
trigger the 3.75% fee. One of these bases--basis ``G''--includes 
carriage of commercial UHF stations within a Grade B contour.\101\ On 
cable SOAs, permitted signals, including those under basis ``G,'' must 
be reported in Part 6, Block B, or be subject to the 3.75% fee 
calculation in Part 6/Block C.\102\
---------------------------------------------------------------------------

    \100\ See 37 CFR 387.2. All cable systems filing Long Form SOAs 
must pay at least the minimum fee which is 1.064% of gross receipts. 
The cable system pays either the minimum fee or the sum of the base 
rate fee and the 3.75% fee, whichever is larger, and a Syndicated 
Exclusivity Surcharge, as applicable. Long Form SOA at 10.
    \101\ See Long Form SOA at 13.
    \102\ See Long Form SOA at 13.
---------------------------------------------------------------------------

    The Office, in a 2008 Notice of Proposed Rulemaking concerning 
digital broadcast signals (``Digital Signals NPRM'') that pre-dated 
STELA,\103\ made initial conclusions concerning the continued relevance 
of the ``basis G'' for the cable retransmission of digital television 
signals. With regard to commercial UHF stations placing a Grade B 
contour over a cable system, the Office noted that the Grade B contour 
could not 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 contour 
parameters were not in use at the time Section 111 was enacted.\104\
---------------------------------------------------------------------------

    \103\ See 73 FR 31399 (June 2, 2008). Because STELA confirmed 
the application of section 111 to digital broadcast signals, the 
Office considers the Digital Signals NPRM to be closed.
    \104\ Id. at 31408-409.
---------------------------------------------------------------------------

    As noted, after the Digital Signals NPRM, STELA amended the 
definition of ``local service area of a primary transmitter'' in 
section 111 so that such area would include the area within the noise 
limited service contour.\105\ This amendment confirms to the Office 
that the noise limited service contour is the proper standard by which 
to measure the reach of digital television signals with respect to the 
section 111 license, including digital UHF signals. And, as most 
relevant here, the amendment appears to render ``basis G'' obsolete as 
it currently exists. That is because, as stated above, royalty rates 
under the section 111 license are calculated based on the ``secondary 
transmission of any non-network television programming carried by a 
cable system in whole or in part beyond the local service area of the 
primary transmitter of such programming.'' \106\ Any digital signals 
within the noise-limited service contour are ``local'' and thus are not 
subject to the section 111 royalty rate. Thus, it appears that there is 
no need to treat any station within the noise limited contour as 
``permitted,'' because locally retransmitted stations do not count 
against the market quota in the first place.
---------------------------------------------------------------------------

    \105\ See STELA at sec.104, 124 Stat. at 1235; 17 U.S.C. 
111(f)(4).
    \106\ 17 U.S.C. 111(f)(5) (emphasis added).
---------------------------------------------------------------------------

    To the extent that the ``Grade B contour'' construct theoretically 
may continue to apply to analog signals, the Office questions whether 
it has become obsolete as a practical matter. From running database 
queries on submitted SOAs, the Office has learned that permitted basis 
``G'' in Part 6/Block B is rarely, if ever, used. Moreover, in the few 
cases where cable operators have reported the permitted basis of 
carriage category ``G,'' the Office believes the cable operators may 
have used the noise-limited contour (for digital signals) 
interchangeably with the Grade B contour (for analog signals) because 
they historically reported ``G'' in the all-analog world (prior to the 
mandated FCC digital conversion in 2009), and continue to report the 
``G'' permitted basis out of habit. Accordingly, the Office proposes 
eliminating permitted basis ``G'' in Part 6/Block B on the cable SOAs 
(i.e., commercial UHF stations within a Grade B contour). The Office 
invites public comment on this proposal. The Office is particularly 
interested in learning whether cable operators still retransmit 
broadcast signals using analog signals, and if so, to what extent the 
permitted basis ``G'' is relevant to this carriage.
    Second, the Grade B contour has, in the past, had relevance to 
other aspects of the statutory license under section 111, including the 
calculation of a ``syndicated exclusivity surcharge.'' Cable systems 
located in whole or in part within a major television market, as 
defined by FCC rules and regulations, must calculate a syndicated 
exclusivity surcharge for the carriage of any commercial VHF station 
that places a Grade B contour, in whole or in part, over the cable 
system that would have been subject to the FCC's syndicated exclusivity 
rules in effect on June 24, 1981.\107\ Cable operators report any 
syndicated exclusivity surcharge in Part 7, Block B of cable Long Form 
SOAs.
---------------------------------------------------------------------------

    \107\ See 37 CFR 201.17(i)(1)(ii), (i)(2)(ii).
---------------------------------------------------------------------------

    From running database queries on submitted SOAs, however, the 
Office has learned that the last time Part 7 of the cable SOA was used 
(i.e., Computation of the Syndicated Exclusivity Charge) was in 2013, 
on a single SOA. Accordingly, the Office invites public comment on 
whether Part 7 of the cable SOA should be amended, and whether, more 
generally, the Office's related regulations should be amended to remove 
references to a Grade B contour.

E. Changes to SOA Due to Copyright Royalty Board's Proposed Rule 
Relating to the Retransmission of Sports Programming

    In May 2017, the Copyright Royalty Board (``CRB'') issued a notice 
of proposed settlement and proposed rule to require covered cable 
systems to pay a separate per-telecast royalty (a ``Sports Surcharge'') 
in addition to the other royalties that cable systems must pay under 
section 111.\108\ In September, the CRB issued an additional notice 
concerning whether non-participants to the settlement could be eligible 
to receive royalties stemming from the Sports Charge, but did not 
otherwise alter its proposed rule.\109\ Under the CRB's proposed rule, 
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

[[Page 56935]]

broadcast of a sports event, provided that all of the conditions of the 
proposed rule are satisfied.'' \110\ ``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').'' \111\
---------------------------------------------------------------------------

    \108\ 82 FR 24611 (May 30, 2017).
    \109\ 82 FR 44368 (Sept. 22, 2017).
    \110\ 82 FR at 24612.
    \111\ Id.
---------------------------------------------------------------------------

    Assuming the CRB's rule is adopted, the Office intends to amend its 
cable SOA forms to account for the new Sports Surcharge for semi-annual 
accounting periods by adding a new Space R that would allow for 
calculations of this surcharge. No amendments to the Office's 
regulations are needed to accommodate this change.

F. Interest Payments and Copyright Infringement Liability

    The Office's current regulations require cable operators to pay 
interest on late or underpaid royalty payments.\112\ In their Petition, 
Program Suppliers asserted that such payments do not preclude copyright 
owners from bringing an action against cable operators for copyright 
infringement during the time period in which the cable operators' 
royalty payments were not properly remitted, and requested that the 
Office amend its regulations and revise its SOA forms to include 
language clarifying that the assessment of interest does not absolve 
cable operators from copyright infringement liability for failure to 
make timely royalty payments.\113\ Cable associations disagreed, with 
ACA stating that ``[s]ound policy supports maintaining the ability of a 
cable operator to correct an[y] SOA and pay additional royalties with 
interest, without the imminent threat of copyright infringement,'' and 
that the ability to file amended or late SOAs with interest ``provides 
an efficient means to correct good faith errors in filings[,] while at 
the same time providing copyright claimants with their full 
compensation plus interest.'' \114\
---------------------------------------------------------------------------

    \112\ See 37 CFR 201.17(k)(4); see also Short Form SOA at 8, 
Space Q; Long Form SOA at 9, Space Q.
    \113\ Petition at 13.
    \114\ ACA Comments at 12; see also NCTA Comments at 9.
---------------------------------------------------------------------------

    The Office declines Program Suppliers' suggestion to modify the SOA 
to state that a payment made after the due date does not bar an 
infringement action against the cable operator. While section 
111(d)(1)(A) directs the Register to issue regulations governing the 
filing of SOAs, including identification of all secondary 
retransmissions of broadcast stations, number of subscribers, and gross 
revenues paid to the cable system, it does not require the Office to 
determine the scope of liability for copyright infringement; in the 
Office's view, this question is more properly reserved for the courts 
in appropriate cases.\115\
---------------------------------------------------------------------------

    \115\ There are two other provisions, aside from 17 U.S.C. 
111(d)(1)(A), which require action by the Register in the cable 
statutory licensing context. These are the authority to set filing 
fees for SOAs under 17 U.S.C. 111(d)(1)(G) and the authority to 
issue audit regulations under 17 U.S.C. 111(d)(6).
---------------------------------------------------------------------------

G. Removing Outdated References to the Satellite Television Extension 
and Localism Act

    After Congress enacted STELA in 2010, the Office issued 
implementing regulations that, among other things, established the 
accounting period for which the new cable operator royalty fee rates 
would take effect.\116\ In the seven years since STELA was enacted, 
however, some references to STELA in the Office's regulations appear to 
have become outdated and unnecessary. The Office understands that cable 
operators rarely file SOAs for periods dating back further than the 
last five years (i.e., for periods prior to the enactment of STELA). 
Accordingly, the Office proposes amending section 201.17 by deleting 
outdated references to STELA, and adding language for remitters to 
contact the Licensing Division for instructions should they need to 
file SOAs for accounting periods further back than the last five years. 
The Office invites public comment on this proposal.
---------------------------------------------------------------------------

    \116\ 37 CFR 201.17(g)(4).
---------------------------------------------------------------------------

H. Technical Amendments

    The Office's current regulations provide a number of instructions 
to cable operators on how to complete SOAs, many of which duplicate the 
instructions on the SOA forms themselves.\117\ The Office proposes 
removing regulatory provisions that are duplicative of information 
provided on cable operator SOA forms and/or on the Office's Web site.
---------------------------------------------------------------------------

    \117\ See id. 201.17(e)(1)-(4), (8), (10)-(13).
---------------------------------------------------------------------------

    In addition, the Office's current regulations instruct which 
information must be provided as part of the electronic funds transfer 
(``EFT'') to pay royalty fees.\118\ The Office proposes removing this 
language from the regulations and incorporating it into the 
instructions for the SOA forms themselves.
---------------------------------------------------------------------------

    \118\ Id. 201.17(k)(1).
---------------------------------------------------------------------------

    These changes are intended to improve the readability of existing 
regulations and do not represent substantive changes in policy.

III. Reporting Practices--Cable, Satellite and DART

    The Office has identified a number of additional issues relating to 
cable SOA reporting practices, and finds it is administratively 
efficient to address these new cable reporting practice matters here 
rather than initiate a new proceeding. Because some of these issues are 
also pertinent to the filing of SOAs for other statutory licenses, the 
Office proposes to amend certain reporting rules for cable operators 
(under section 201.17), satellite carriers (under section 201.11) and 
digital audio recording equipment manufacturers and importers (under 
sections 201.27 and 201.28), where applicable, so that there are 
parallel requirements for all three licenses in the Office's 
regulations. Each of the following proposed changes are reflected in 
the updated proposed regulatory language below.

A. Closing Out Statements of Account

    During an initial examination of SOAs, the Office's Licensing 
Division often makes inquiries of cable system operators regarding the 
information provided in the SOA.\119\ Generally, the Office does not 
make an entire SOA available to the public until the cable operator has 
responded to the Office's inquiry and the initial examination process 
has been completed. But oftentimes, the Office may not receive a 
response to its inquiry until long after the Office's letter or email. 
In some cases, replies are not received in the Office until years 
later. Currently, if this happens, the Office re-examines the original 
SOA in light of the request.
---------------------------------------------------------------------------

    \119\ These inquiries generally seek missing or clarifying 
information pertaining to an element(s) of the SOA and might raise 
the possibility that there has been an underpayment or overpayment 
of the royalty fee.
---------------------------------------------------------------------------

    To streamline the administrative process and encourage timely 
responses to Office inquiries, the Office proposes to close out SOA 
examination if a filer fails to reply to an Office correspondence 
request after 90 days from the date of the last correspondence from the 
Office. After an SOA is closed, it would be placed with other publicly 
available SOA records. At that point, a cable operator wishing to 
submit a reply or pay additional royalties or make necessary 
corrections would need to file an amended SOA along with a filing fee 
as prescribed in 37 CFR 201.3(e). But, to

[[Page 56936]]

be clear, operators failing to respond within the prescribed 90-day 
window would forfeit any potential refund of an overpayment associated 
with any issue with the SOA identified by the Office in its 
correspondence.
    The Office tentatively concludes that 90 days is a reasonable 
timeframe for operators to reply to any issues arising from examination 
of an SOA and that the proposed amendments will facilitate the timely 
disposition of SOAs. The Office proposes harmonizing this practice 
across regulations affecting SOAs for cable operators, satellite 
carriers, and digital audio recording equipment manufacturers and 
importers.

B. Royalty Refunds

    Because the administrative cost of issuing royalty refunds of less 
than $50.00 can exceed the amount actually refunded, under the Office's 
proposed rule, refunds for amounts of $50.00 or less will issue only 
where the refund is specifically requested before the SOA is closed and 
made available for public inspection. If a refund is not requested 
before the SOA is closed, the amount will be added to the relevant 
royalty pool. The proposed rule will harmonize this practice across 
regulations affecting royalty refunds for cable operators, satellite 
carriers, and digital audio recording equipment manufacturers and 
importers.

C. Payment of Supplemental Royalty Fees and Filing Fees by EFT

    The Office proposes to amend its regulations to require payment of 
supplemental royalty fees and filing fees by EFT for cable operators, 
satellite carriers, and digital audio recording equipment manufacturers 
and importers, and eliminate the ability to pay by paper check or money 
order. Use of EFT has enhanced the efficiency of the Office's royalty 
collection process by avoiding problems associated with a paper check 
or money order (e.g., lost checks or delays in processing mail) and by 
lessening the Office's administrative workload.

D. Interest Assessment

    Current regulations regarding the treatment of interest assessment 
for late payments or underpayments of royalties are similar, but not 
uniform, for cable operators, satellite carriers, and digital audio 
recording equipment manufacturers and importers. The Office proposes to 
harmonize these regulations so that interest begins accruing on the 
first day after the close of the period for filing SOAs for all 
underpayments or late payments of royalties; the accrual period shall 
end on the date the payment submitted by the remitter is received by 
the Office; and the applicable interest rate shall be the Current Value 
of Funds Rate, established by section 8025.4 of the Treasury Finance 
Manual. In addition, interest payments shall not be required if the 
interest charge is less than $5.00.

IV. Conclusion

    The Copyright Office hereby seeks comment from the public on the 
amendments proposed in this Notice of Proposed Rulemaking.

List of Subjects in 37 CFR Part 201

    Cable television, Copyright, Recordings, Satellites.

Proposed Regulations

    For the reasons stated in the preamble, the Copyright Office 
proposes to amend 37 CFR part 201 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.

0
2. Amend Sec.  201.11 by:
0
a. Revising paragraph (f)(1).
0
b. Revising paragraph (h)(3)(iv).
0
c. Adding paragraph (h)(3)(vii).
0
d. Adding paragraphs (h)(5) and (h)(6).
    The revisions and additions read as follows:


Sec.  201.11   Satellite carrier statements of account covering 
statutory licenses for secondary transmissions.

* * * * *
    (f) * * *
    (1) All royalty fees, including supplemental royalty payments, must 
be paid by a single electronic funds transfer (EFT), and must be 
received in the designated bank by the filing deadline for the relevant 
accounting period. Satellite carriers must provide specific information 
as part of the EFT and as part of the remittance advice, as listed in 
the instructions for the Statement of Account form.
* * * * *
    (h) * * *
    (3) * * *
    (iv) All requests for correction or refunds must be accompanied by 
a filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, paid by EFT. No request will be 
processed until the appropriate filing fees are received, and no 
supplemental royalty fee will be deposited until an acceptable 
remittance in the full amount of the supplemental royalty fee has been 
received.
* * * * *
    (vii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part of the royalty fee. A request for a refund payment 
in an amount of over fifty dollars ($50.00) is not necessary where the 
Licensing Division, during its examination of a Statement of Account or 
related document, discovers an error that has resulted in a royalty 
overpayment. In this case, the Licensing Division will affirmatively 
send the royalty refund to the satellite carrier owner named in the 
Statement of Account without regard to the time limitations provided 
for in paragraph (h)(3)(i) of this section.
* * * * *
    (5) Interest on late payments or underpayments. Royalty fee 
payments submitted as a result of late or amended filings shall include 
interest. Interest shall begin to accrue beginning on the first day 
after the close of the period for filing statements of account for all 
underpayments or late payments of royalties for the satellite carrier 
statutory license for secondary transmissions for private home viewing 
and viewing in commercial establishments occurring within that 
accounting period. The accrual period shall end on the date the full 
payment submitted by a remitter is received by the Copyright Office. 
The interest rate applicable to a specific accounting period beginning 
with the 1992/2 period shall be the Current Value of Funds Rate, as 
established by section 8025.40 of the Treasury Financial Manual and 
published in the Federal Register, in effect on the first business day 
after the close of the filing deadline for that accounting period. 
Satellite carriers wishing to obtain the interest rate for a specific 
accounting period may do so by consulting the Federal Register for the 
applicable Current Value of Funds Rate, or by consulting the Copyright 
Office Web site. Interest is not required to be paid on any royalty 
underpayment or late payment from a particular accounting period if the 
interest charge is less than or equal to five dollars ($5.00).
    (6) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary,

[[Page 56937]]

ninety days from the date of the last correspondence from the Office.
0
3. Amend Sec.  201.17 by:
0
a. Revising paragraphs (b)(1) and (2).
0
b. Revising paragraph (c) introductory text and paragraph (c)(3).
0
c. Adding paragraph (c)(5).
0
d. Revising paragraph (d).
0
e. Revising paragraph (e) introductory text.
0
f. Removing paragraphs (e)(1) through (4), (e)(8), and (e)(10) through 
(13).
0
g. Redesignating paragraph (e)(5) as (e)(1), paragraph (e)(6) as 
(e)(2), paragraph (e)(7) as (e)(3), paragraph (e)(9) as (e)(4), and 
paragraph (e)(14) as (e)(5).
0
h. Removing ````Secondary Transmission Service: Subscribers and 
Rates'','' and adding in its place ````Secondary Transmission Service: 
Subscribers and Rates,'''' in the newly redesignated paragraph (e)(2).
0
i. Adding ``or, in the case of a cable system ceasing operations during 
the accounting period, the facts existing on the last day of 
operations'' after ``Statement'' in the newly redesignated paragraph 
(e)(2)(iii)(A).
0
j. Revising newly redesignated paragraph (e)(2)(iii)(B).
0
k. Adding paragraph (e)(2)(iii)(C).
0
l. Removing ````Gross Receipts'','' and adding in its place ````Gross 
Receipts,'''' in the newly redesignated paragraph (e)(3).
0
m. Removing ``Television'','' and adding in its place ``Television,'''' 
and removing ``and required to be specially identified by paragraph 
(e)(11) of this section,'' in the newly redesignated paragraph (e)(4) 
in the introductory text.
0
n. Revising newly redesignated paragraph (e)(4)(iv).
0
o. Removing paragraphs (g)(2) and (g)(4).
0
p. Redesignating paragraph (g)(3) as paragraph (g)(2).
0
q. Revising paragraph (k) introductory text and paragraph (k)(1).
0
r. Removing ``satellite carrier'' and adding in its place ``cable 
operator'' in paragraph (k)(4).
0
s. Revising paragraph (l)(1).
0
t. Removing ``(m)(4)'' and adding in its place ``(l)(4)'' in paragraph 
(l)(2).
0
u. Removing ``, for any reason except that mentioned in paragraph 
(m)(2)(iii) of this section,'' in paragraph (l)(2)(ii).
0
v. Removing ``(m)(2)'' and adding in its place ``(l)(2)'' in paragraph 
(l)(4).
0
w. Removing ``(m)(2)(i)'' and adding in its place ``(l)(2)(i)'' in 
paragraph (l)(4)(iii)(A).
0
x. Removing ``(m)(2)(ii)'' and adding in its place ``(l)(2)(ii)'' in 
paragraph (l)(4)(iii)(B).
0
y. Revising paragraph (l)(4)(iv).
0
z. Removing ``(m)'' and adding in its place ``(l)'', and removing 
``(e)(14)'' and adding in its place ``(e)(5)'' in paragraph (l)(4)(v).
0
aa. Removing ``(m)(4)(i)'' and adding in its place ``(l)(4)(i)'' in 
paragraph (l)(4)(vi).
0
bb. Adding paragraph (l)(4)(vii).
0
cc. Redesignating paragraph (l)(5) as (l)(7).
0
dd. Revising newly redesignated paragraph (l)(5).
0
ee. Adding paragraph (l)(6).
0
ff. Removing ``(m)'' and adding in its place ``(l)'' in newly 
redesignated paragraph (l)(7).
    The revisions and additions 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 of services which include one or more secondary 
transmissions of television or radio broadcast signals. Gross receipts 
also include fees for non-broadcast tier(s) of services if such 
purchase is required to obtain tiers of services with broadcast 
signals, and fees for any other type of equipment or device necessary 
to receive broadcast signals that is supplied by the cable operator. In 
no case shall gross receipts be less than the cost of obtaining the 
signals of primary broadcast transmitters for subsequent 
retransmission. All such gross receipts shall be aggregated and the 
distant signal equivalent (DSE) calculations shall be made against the 
aggregated amount. Gross receipts for secondary transmission services 
do not include installation (including connection, relocation, 
disconnection, or reconnection) fees, separate charges for security, 
alarm or facsimile services, charges for late payments, or charges for 
pay cable or other program origination services: Provided that, the 
origination services are not offered in combination with secondary 
transmission service for a single fee. In addition, gross receipts 
shall not include any fees collected from subscribers for the sale of 
Internet services or telephony services when such services are bundled 
together with cable service; instead, when cable services are sold as 
part of a bundle of other services, gross receipts shall include fees 
in the amount that would have been collected if such subscribers 
received cable service as an unbundled stand-alone product.
    (2) A cable system is a facility, located in any State, Territory, 
Trust Territory, or Possession, that in whole or in part receives 
signals transmitted or programs broadcast by one or more television 
broadcast stations licensed by the Federal Communications Commission, 
and makes secondary transmissions of such signals or programs by wires, 
cables, microwave, or other communications channels to subscribing 
members of the public who pay for such service. A provider of broadcast 
signals must be an inherently localized and closed transmission system 
of limited availability to qualify as a cable system. A system that 
meets this definition is considered a ``cable system'' for copyright 
purposes, even if the FCC excludes it from being considered a ``cable 
system'' because of the number or nature of its subscribers or the 
nature of its secondary transmissions. The Statements of Account and 
royalty fees to be deposited under this section shall be recorded and 
deposited by each individual cable system desiring its secondary 
transmissions to be subject to compulsory licensing. The owner of each 
individual cable system on the last day of the accounting period 
covered by a Statement of Account is responsible for depositing the 
Statement of Account and remitting the copyright royalty fees. For 
these purposes, and the purpose of this section, an ``individual'' 
cable system is each cable system recognized as a distinct entity under 
the rules, regulations, and practices of the Federal Communications 
Commission in effect on the last day of the accounting period covered 
by a Statement of Account, in the case of the preparation and deposit 
of a Statement of Account and copyright royalty fee. For these 
purposes, two or more cable facilities are considered as one individual 
cable system if the facilities are either:
    (i) In contiguous communities under common ownership or control or
    (ii) Operating from one headend.
* * * * *
    (c) Submission of Statement of Account, accounting periods, and 
deposit.
* * * * *
    (3) Statements of Account and royalty fees received before the end 
of the particular accounting period they purport to cover will not be 
processed by the Copyright Office except for cases where the cable 
system has ceased operation before the account period closes. 
Statements of Account and royalty fees received after the filing 
deadlines of July 30 or January 30, respectively, will be accepted for

[[Page 56938]]

whatever legal effect they may have, if any.
* * * * *
    (5) A cable system that changes ownership during an accounting 
period is obligated to file only a single Statement of Account at the 
end of the accounting period. Statements of Account and royalty fees 
received after the filing deadlines of August 29 or March 1, 
respectively, will be accepted for whatever legal effect they may have, 
if any.
    (d) Statement of Account forms and submission. Cable systems should 
submit each Statement of Account using an appropriate form provided by 
the Copyright Office on its Web site and following the instructions for 
completion and submission provided on the Office's Web site or the form 
itself. To file a Statement of Account for an accounting period that 
includes dates prior to five years from submission of the form, please 
contact the Licensing Division for instructions.
    (e) Contents. In addition to the instructions for completion and 
submission provided on the Office's Web site or the form itself, each 
Statement of Account shall contain the following information:
* * * * *
    (2) * * *
    (iii) * * *
    (A) The description, the number of subscribers, and the charge or 
charges made shall reflect the facts existing on the last day of the 
period covered by the Statement or, in the case of a cable system 
ceasing operations during the accounting period, the facts existing on 
the last day of operations; and
    (B) Each entity (for example, the owner of a private home, the 
resident of an apartment, the owner of a motel, or the owner of an 
apartment house) which is charged by the cable system for the basic 
service of providing secondary transmissions shall be considered one 
subscriber. For short-stay multiple dwelling units (e.g., motel, 
hotels), the operator shall report each building served as one 
subscriber if the operator has a single agreement for cable service 
with the units' proprietor, landlord, or owner on behalf of the 
residents or occupants of the structure. If the operator does not serve 
any type of multiple dwelling unit, residential or commercial, or any 
hotel or motel, a ``zero'' or a ``N/A'' (for ``not applicable'') must 
be reported in the appropriate space on the statement of account form.
    (C) A cable operator shall on its Statement of Account separately 
report, line by line, for both single and multiple dwelling unit 
buildings, the number of subscribers served, gross receipts for the 
sale of each tier containing broadcast programming, any revenue derived 
from non-broadcast tier(s) of services if such purchase is required to 
obtain tiers of services with broadcast signals, and fees for any other 
type of equipment or device necessary to receive broadcast signals that 
is supplied by the cable operator. Information regarding multiple 
dwelling units shall not be left blank.
* * * * *
    (4) * * *
    (iv) A designation as to whether that primary transmitter is a 
``network station,'' an ``independent station,'' or a ``noncommercial 
educational station.''
* * * * *
    (k) Royalty fee payment. (1) All royalty fees, including 
supplemental royalty fees, must be paid by a single electronic funds 
transfer (EFT), and must be received in the designated bank by the 
filing deadline for the relevant accounting period. Cable systems must 
provide specific information as part of the EFT and as part of the 
remittance advice, as listed in the instructions for the Statement of 
Account form.
* * * * *
    (l) * * *
    (1) To amend or request a refund relating to a Statement of Account 
for an accounting period that includes dates prior to five years from 
submission of the form, please contact the Licensing Division for 
instructions.
* * * * *
    (4) * * *
    (iv) All requests for correction or refunds must be accompanied by 
a filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, paid by EFT. No request will be 
processed until the appropriate filing fees are received, and no 
supplemental royalty fee will be deposited until an acceptable 
remittance in the full amount of the supplemental royalty fee has been 
received.
* * * * *
    (vii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part of the royalty fee. A request for a refund payment 
in an amount of over fifty dollars ($50.00) is not necessary where the 
Licensing Division, during its examination of a Statement of Account or 
related document, discovers an error that has resulted in a royalty 
overpayment. In this case, the Licensing Division will affirmatively 
send the royalty refund to the cable system owner named in the 
Statement of Account.
* * * * *
    (5) Interest on late payments or underpayments. Royalty fee 
payments submitted as a result of late or amended filings shall include 
interest. Interest shall begin to accrue beginning on the first day 
after the close of the period for filing statements of account for all 
underpayments or late payments of royalties for the cable statutory 
license occurring within that accounting period. The accrual period 
shall end on the date the payment submitted by a remitter is received 
by the Copyright Office. The interest rate applicable to a specific 
accounting period beginning with the 1992/2 period shall be the Current 
Value of Funds Rate, as established by section 8025.40 of the Treasury 
Financial Manual and published in the Federal Register, in effect on 
the first business day after the close of the filing deadline for that 
accounting period. Cable operators wishing to obtain the interest rate 
for a specific accounting period may do so by consulting the Federal 
Register for the applicable Current Value of Funds Rate, or by 
consulting the Copyright Office Web site. Interest is not required to 
be paid on any royalty underpayment or late payment from a particular 
accounting period if the interest charge is less than or equal to five 
dollars ($5.00).
    (6) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary, ninety days from the 
date of the last correspondence from the Office.
* * * * *
0
4. Amend 201.28 by:
0
a. Revising paragraph (h)(1).
0
b. Revising paragraph (j)(3)(v).
0
c. Adding paragraph (j)(3)(viii)
0
d. Adding paragraphs (j)(4) and (j)(5).
    The revisions and additions read as follows:


Sec.  201.28  Statement of Account for digital audio recording devices 
or media.

* * * * *
    (h) * * *
    (1) All royalty fees, including supplemental royalty fee payments, 
must be paid by a single electronic funds transfer (EFT), and must be 
received in the designated bank by the filing deadline for the relevant 
accounting period. Remitters must provide specific information as part 
of the EFT and as part of the remittance

[[Page 56939]]

advice, as listed in the instructions for the Statement of Account 
form.
* * * * *
    (j) * * *
    (3) * * *
    (v) All requests for correction or refunds must be accompanied by a 
filing fee in the amount prescribed in Sec.  201.3(e) for each 
Statement of Account involved, paid by EFT. No request will be 
processed until the appropriate filing fees are received, and no 
supplemental royalty fee will be deposited until an acceptable 
remittance in the full amount of the supplemental royalty fee has been 
received.
* * * * *
    (viii) A refund payment in the amount of fifty dollars ($50.00) or 
less will not be refunded unless specifically requested before the 
statement of account is closed, at which point any excess payment will 
be treated as part of the royalty fee. A request for a refund payment 
in an amount of over fifty dollars ($50.00) is not necessary where the 
Licensing Division, during its examination of a Statement of Account or 
related document, discovers an error that has resulted in a royalty 
overpayment. In this case, the Licensing Division will affirmatively 
send the royalty refund to the manufacturing or importing party named 
in the Statement of Account.
    (4) Interest on late payments or underpayments. Royalty fee 
payments submitted as a result of late or amended filings shall include 
interest. Interest shall begin to accrue beginning on the first day 
after the close of the period for filing statements of account for all 
underpayments or late payments of royalties for the digital audio 
recording obligation occurring within that accounting period. The 
accrual period shall end on the date the payment submitted by a 
remitter is received by the Copyright Office. The interest rate 
applicable to a specific accounting period beginning with the 1992/2 
period shall be the Current Value of Funds Rate, as established by 
section 8025.40 of the Treasury Financial Manual and published in the 
Federal Register, in effect on the first business day after the close 
of the filing deadline for that accounting period. Manufacturers or 
importing parties wishing to obtain the interest rate for a specific 
accounting period may do so by consulting the Federal Register for the 
applicable Current Value of Funds Rate, or by consulting the Copyright 
Office Web site. Interest is not required to be paid on any royalty 
underpayment or late payment from a particular accounting period if the 
interest charge is less than or equal to five dollars ($5.00).
    (5) A statement of account shall be considered closed in cases 
where a licensee fails to reply within ninety days to the request for 
further information from the Copyright Office or, in the case of 
subsequent correspondence that may be necessary, ninety days from the 
date of the last correspondence from the Office.

Sarang V. Damle,
General Counsel and Associate Register of Copyrights.
[FR Doc. 2017-25487 Filed 11-30-17; 8:45 am]
BILLING CODE 1410-30-P