[Federal Register Volume 89, Number 239 (Thursday, December 12, 2024)]
[Rules and Regulations]
[Pages 100348-100361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-28984]
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LIBRARY OF CONGRESS
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: Final rule.
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SUMMARY: The U.S. Copyright Office (``Office'') is issuing a final rule
governing royalty reporting practices of cable operators, and the
Statement of Account form and filing requirements. This final rule
makes regulatory changes regarding procedures for cable system
operators. In some areas, similar changes are being made to the
regulations governing statutory licenses for satellite carriers and
digital audio recording devices or media.
DATES: Effective January 27, 2025.
FOR FURTHER INFORMATION CONTACT: Rhea Efthimiadis, Assistant to the
General Counsel, by email at [email protected], or by telephone at
202-707-8350.
SUPPLEMENTARY INFORMATION:
I. Background
A. Statutory 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. The royalty amounts are determined based on a specified
percentage of cable operators' reported gross receipts collected for
secondary transmissions, as well as additional amounts for any distant
signal equivalent (``DSEs'') carried by the cable system.\1\ These
royalty fees are remitted semi-annually to the Office, which invests
the royalties in United States Treasury securities pending distribution
to copyright owners eligible to receive a share of the royalties.\2\
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\1\ 17 U.S.C. 111(d)(1)(B).
\2\ Id. at 111(d)(2). The Office distributes those royalties in
accordance with periodic distribution orders issued by the Copyright
Royalty Board (``CRB''). Id.
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In conjunction with their royalty payments, cable operators must
complete and file statements of account (``SOAs''), which provide a
record regarding their retransmissions and associated 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\ Section
111 identifies a variety of information that must be reported to the
Copyright Office on the SOA, 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.'' \4\
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\3\ Compulsory License for Cable Systems, 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). See 17 U.S.C.
111(d)(1)(A).
\4\ 17 U.S.C. 111(d)(1)(A).
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Section 111 tasks the Register of Copyrights (``Register'') with
prescribing the specific requirements for the SOA by regulation.\5\
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\5\ 17 U.S.C. 111(d)(1).
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B. Regulatory Background
As directed by section 111, the Office has adopted regulations to
implement the statute's reporting requirements \6\ as well as the
design of the SOA form.\7\ In 1977, to address the law's requirement
that the ``number of subscribers'' and ``gross amounts'' paid to cable
operators be reported,\8\ 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
[[Page 100349]]
purpose.'' \9\ In the subsequent 1978 final rule, which adopted
regulatory language almost identical to the present Sec. 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.'' \10\ The Office has consistently
followed this approach in its subsequent rulemakings in this area.
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\6\ 37 CFR 201.17(e)(6) and (7).
\7\ Id. Sec. 201.17(d). The SOA forms are available in PDF and
Excel format on the Office's website at https://www.copyright.gov/licensing/sec_111.html.
\8\ 17 U.S.C. 111(d)(2) (1977).
\9\ 42 FR at 61054.
\10\ 43 FR 958, 959 (Jan. 5, 1978).
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The Office's current regulations require the following information,
among other data, to be reported on SOAs by cable operators: ``[t]he
designation `Area Served', followed by the name of the community or
communities served by the system''; ``[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.'' \11\ The SOA
form organizes this information into specific areas, several of which
are relevant to this rulemaking. Space D of the SOA (titled ``Area
Served'') requests information identifying ``each separate community
served by the cable system.'' Space E (titled ``Secondary Transmission
Service: Subscribers and Rates'') 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.'' \12\ Space K (titled
``Gross Receipts'') requires cable 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.'' \13\ Finally, Space F (titled
``Services Other Than Secondary Transmissions: Rates'') requires cable
operators to list rate information ``with respect to all . . . services
that were not covered in space E, that is, those services that are not
offered in combination with any secondary transmission service for a
single fee.'' \14\
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\11\ 37 CFR 201.17(e)(4), (6)(i) through (iii).
\12\ Paper Form SA1-2 at 2, Space E (``Short Form SOA''); Paper
Form SA3 at 2, Space E (``Long Form SOA'').
\13\ Short Form SOA at 6, Space K; Long Form SOA at 7, Space K;
see also 37 CFR 201.17(e)(6) and (7) (describing corresponding SOA
requirements).
\14\ Short Form SOA at 2, Space F; Long Form SOA at 2, Space F.
See 37 CFR 201.17(e)(8).
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C. Procedural Background
This rulemaking began after the Motion Picture Association of
America, Inc. (``MPA'') \15\ filed a petition on behalf of its member
companies and other producers and/or distributors of movies and
television series (hereinafter ``Program Suppliers'') asking the Office
to address a number of issues relating to the SOA reporting practices
of cable operators under section 111.\16\ The Program Suppliers
expressed concerns that the subscriber and rate information reported by
cable operators under the Office's regulations failed to provide
sufficient data to support the intended ``rough comparison'' copyright
owners should be able to conduct between subscriber information and
gross receipts. Their concerns focused on the relationship between the
information provided in Space E and Space K.\17\ They asked 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.' '' \18\
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\15\ The Motion Picture Association of America is now known as
the Motion Picture Association, or MPA.
\16\ The petition can be found at https://www.copyright.gov/rulemaking/section111/petition20050607.pdf (the ``Petition'').
\17\ Program Suppliers Initial NOI Comment 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
Initial NOI Comment at 2.
\18\ Petition at 3; see also Program Suppliers Initial NOI
Comment at 5-7.
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After reviewing the Petition, the Office published a notice of
inquiry (``NOI'') seeking comment on the regulatory proposals and
recommendations raised by the Program Suppliers.\19\ Multiple parties
submitted responsive comments and reply comments.\20\ After the NOI's
publication, Congress took action that addressed some of the issue
raised by the Office. The Satellite Television Extension and Localism
Act of 2010 (``STELA''), followed by the STELA Reauthorization Act of
2014 (``STELARA''),\21\ made amendments to section 111, including the
royalty rate calculations for cable operators and addressing the
transition to digital television broadcasts.\22\ STELA also added a
right for copyright owners to conduct confidential audits to verify the
information provided on the SOAs.\23\ The Register of Copyrights was
directed to issue regulations establishing the procedure by which
copyright owners could pursue a confidential audit to ``confirm the
correctness of the calculations and royalty payments reported'' on SOAs
commencing on or after January 1, 2010.\24\ These regulations were
enacted in 2014.\25\
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\19\ 71 FR 45179 (Aug. 10, 2006).
\20\ The Office received six comments and three reply comments
to the NOI. The initial and reply comments to the NOI have been
posted on the Office's website at https://copyright.gov/rulemaking/section111.
\21\ See Satellite Television Extension and Localism Act of
2010, Public Law 111-175, 124 Stat. 1218 (2010); STELA
Reauthorization Act of 2014, Public Law 113-200, 128 Stat. 2059
(2014).
\22\ 17 U.S.C. 111(d)(1)(B) through (F), (f)(4).
\23\ Id. at 111(d)(6). See 37 CFR 201.16.
\24\ 17 U.S.C. 111(d)(6); 37 CFR 201.16(h), (1), (o).
\25\ Verification of Statements of Account Submitted by Cable
Operators and Satellite Carriers, 79 FR 68628 (Nov. 18, 2014).
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In 2017, the Office published a notice of proposed rulemaking
(``NPRM'') on the NOI issues that remained open after the intervening
statutory and regulatory changes.\26\ In addition, the rulemaking
proposed revisions to SOA forms and/or the Office's related regulations
to streamline administration of SOAs. The responses to the NPRM \27\
reflected agreement on some proposals, but also raised a number of
issues for the Office to consider and address before finalizing this
rule. The Office convened multiple ex parte meetings with groups of
stakeholders to discuss these issues and to attempt to narrow areas of
disagreement.\28\ Having reviewed and considered the feedback received
in response to the NOI and NPRM, the Office is issuing a final rule
that adopts certain of its proposals, withdraws others, and makes some
modifications.\29\
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\26\ Statutory Cable, Satellite, and DART License Reporting
Practices, 82 FR 56926 (Dec. 1, 2017).
\27\ The comments are posted on the Office's website at https://copyright.gov/rulemaking/section111.
\28\ The majority of the ex parte meetings occurred in 2019 and
2020. The Office requested additional input in late 2022. The
letters reflecting the ex parte discussions can be found at https://copyright.gov/rulemaking/section111/ex-parte-communications.
\29\ The Office has adopted the organization and section
headings in the NPRM for consistency.
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II. Summary of Final Rule
After careful consideration of the comments and the record as a
whole, the Office is adopting several changes to
[[Page 100350]]
the regulations governing SOAs. First, the Office is revising the
regulatory definition of ``gross receipts'' to clarify that equipment
fees (formerly called ``converter'' fees) and broadcast fees must be
included and reported in Space E. Second, the final rule removes the
regulatory provision requiring remitters to provide information
regarding ``Services Other Than Secondary Transmissions: Rates'' in
Space F, and eliminates all references to Grade B contour in Sec.
201.17 and on the cable SOAs. Third, the final rule revises reporting
requirements related to the name of the community or communities served
by requiring cable system operators to provide ``county'' information
in Space D. Fourth, while the Office is withdrawing proposals to amend
the regulatory definition of the phrase ``cable system'' and to require
more detailed reporting of subscriber and rate information in Space E,
it is amending Space E to require that operators fill in the spaces
requesting information regarding categories of service.
Finally, the final rule makes several technical amendments and
revises certain reporting practices that are also pertinent to the
filing of SOAs for other statutory licenses. For example, it clarifies
that cable system operators must use the SOA form prescribed by the
Office, and include any and all information requested in the
instructions for the SOA, as well as the information required by the
regulations. The final rule also includes the technical changes
proposed in the NPRM relating to the processing of refunds,
supplemental or amended payments, and calculation of interest, as well
as case management procedures. These latter changes will be reflected
in parallel amendments to regulations for satellite carrier and digital
audio recording equipment and media.
The amendments to the regulations reflected in this rule require
the development of new SOA forms, which the Office is preparing. Until
new forms are developed, cable service operators should use the most
current forms posted on the Office's website while complying with the
new regulatory requirements regarding the information to be reported.
III. Section 111--Specific Changes
A. Program Suppliers' Request for Greater Congruity Between Reported
Subscriber and Rate Information (Space E) and Gross Receipts (Space K)
In response to the Program Suppliers' original request that cable
operators provide more detailed information on the SOA, the NPRM
proposed a number of changes to the information sought in Space E
regarding subscribers. Having reviewed and considered all of the
comments received, the Office has been persuaded not to make the
majority of the proposed changes and only to make minor adjustments to
accommodate its conclusions about reporting equipment fees and
broadcast fees. Its specific findings and conclusions are explained
below.
1. Proposed Requirement To Provide More Detailed Reporting of
Subscriber and Rate Information (Space E)
37 CFR 201.17(e)(6) currently requires remitters to provide in
Space E ``[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.'' \30\ 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'' \31\ 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.'' \32\
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\30\ 37 CFR 201.17(e)(6)(i). As a result of other changes made
in this rule, Sec. 201.17(e)(6) will be renumbered as Sec.
201.17(e)(2).
\31\ Id. Sec. 201.17(e)(6)(iii)(B).
\32\ Id. Sec. 201.17(e)(6)(i).
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In response to the request for more granularity, the NPRM proposed
to update the subscriber and rate information required in Space E to
require remitters to break out subscription data into separate tiers of
service and list the per-tier rate or range of rates. The intent was to
provide copyright owners with more information when deciding whether to
make use of the audit right included in section 111.
In its initial comments to the NPRM, AT&T disagreed with the
Office's proposal.\33\ It stated that the availability of audits after
passage of STELA, through which companies make their books available
for inspection by copyright owners, rendered unnecessary the additional
information proposed in the NPRM. In addition, AT&T noted that
compliance with the proposed regulations would result in significant
extra work and expense for cable companies.\34\ NCTA--The Internet and
Television Association (``NCTA'') also opposed the proposal. It stated
that, due to the bundling of services and ``promotional discounts,''
providing the information proposed in the NPRM would be onerous and
could lead to the disclosure of the cable companies' proprietary
information.\35\
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\33\ AT&T Initial NPRM Comments at 2-5.
\34\ Id. at 3-6.
\35\ NCTA Initial NPRM Comments at 6-7.
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In their initial comments, the Copyright Owners observed that ``the
disparities [between Space K and Space E] seem to rest largely, though
not fully, on a disconnect between (1) the monthly rate that
subscribers must actually pay to receive broadcast signals and (2) the
monthly service fees that cable operators report in Space E.'' \36\
They questioned whether the NPRM's Space E proposal would provide
``rough comparability'' with Space K ``unless the rate information
reflects what subscribers actually pay to receive broadcast signals.''
\37\ They suggested instead that cable operators report ``each category
of service that includes retransmitted broadcast signals, with the
number of subscribers in each group, the published rate card fee for
each, and average monthly fee actually paid.'' \38\ In its reply
comments, NCTA opposed the Copyright Owners' proposed requirement for
reporting monthly subscriber information. Instead, it suggested
reducing the number of categories of service reported on Space E.\39\
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\36\ Copyright Owners I Initial NPRM Comments at 5. In their
initial NPRM comments, the Copyright Owners included the MPA, Joint
Sports Claimants, the National Association of Broadcasters
(``NAB''), Public Broadcasting Service, Settling Devotional
Claimants, and Canadian Claimants Group (``Copyright Owners I'').
\37\ Id. at 6.
\38\ Id. at 6-7.
\39\ NCTA Reply NPRM Comments at 11-12, 14-15.
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In subsequent ex parte meetings with the Office, NCTA and MPA
jointly proposed that the current Space E requirements be replaced with
requirements that cable operators report aggregated average number of
monthly subscribers for the six-month accounting period and average
monthly per subscriber fees collected during that period.\40\ In
response to the joint NCTA-MPA proposal, the Copyright Owners,\41\
[[Page 100351]]
in a separate ex parte meeting, stated that section 111 permits the
Office to require reporting of ``other data,'' and is not limited to an
aggregated six month report.\42\ They further stated that reporting
monthly averages, as opposed to a six-month aggregate, would not be
``unduly burdensome.'' \43\ Responding to these statements, NCTA and
MPA expressed concern that by providing monthly data, instead of a six-
month average, ``competitors could use that information to their
competitive advantage by closely tracking the operator's relative
success and failure under discrete promotional campaigns.'' \44\
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\40\ Letter from Mary Beth Murphy, Vice Pres. & Dep. Gen. Coun.
NCTA to Regan A. Smith, Gen. Coun. & Assoc. Register of Copyrights,
U.S. Copyright Office, May 20, 2020, attachment at 2 (``NCTA-MPA Ex
Parte Letter #1'').
\41\ As referenced here, the Copyright Owners no longer include
the MPA. However, they have stated that they collectively received
approximately 78% of the royalty fees distributed in the most recent
distribution by the CRB. Letter from Daniel A. Cantor, Esq., Arnold
& Porter, to Anna B. Chauvet, Esq., Assoc. Gen. Coun., U.S.
Copyright Office, Sept. 16, 2020, at 1 (``Copyright Owners II Ex
Parte Letter #5'').
\42\ Letter from John I. Stewart, Jr., Crowell & Moring, to
Regan A. Smith, Gen. Coun. & Assoc. Register of Copyrights, U.S.
Copyright Office, June 18, 2020, at 2-3 (``Copyright Owners II Ex
Parte Letter #4'').
\43\ Id. at 3.
\44\ Letter from Mary Beth Murphy, Esq., NCTA, and Dennis Lane,
Esq., Stinson, LLP, to Regan A. Smith, Gen. Coun. & Assoc. Register
of Copyrights, U.S. Copyright Office, July 30, 2020, at 7 (``NCTA-
MPA Ex Parte Letter #3'').
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The Office appreciates the inputs from stakeholders, including
their efforts to narrow their differences. It is apparent from the
comments of the parties, and their statements at ex parte meetings,
that they do not support the NPRM proposal to provide more detail in
Space E. The Office is therefore withdrawing its proposal. At the same
time, it declines to adopt the NCTA-MPA proposal to limit Space E
reporting to a six-month aggregation of subscribers and average rates.
It concludes that this proposal would not provide sufficient
information to allow the Copyright Owners to make the ``rough
comparison'' between the gross receipts reported in Space K and the
subscriber information reported in Space E. Therefore, except as
described below, the Office is not changing the requirements of Space E
at this time. It will continue to monitor the issue of comparability
between Space E and Space K going forward.
The final rule includes several changes to Space E that were either
raised by the NPRM or introduced during the comment process and fully
considered by stakeholders during the rulemaking proceeding. Specially,
the Office is revising the regulatory definition of ``gross receipts''
to make clear that equipment fees (formerly called ``converter'' fees)
and broadcast fees must be included in gross receipts and reported in
Space E. The Office will revise its Section E instructions for the SOA
accordingly. The rationale for these amendments is discussed in Section
3 below.
In addition, as discussed in the NPRM, the Office will require that
spaces on the SOA seeking information regarding categories of service
not be left blank.\45\ If a cable operator does not serve a specific
category, a ``zero'' or a ``N/A'' (not applicable) must be reported in
the appropriate space. These revisions are intended to facilitate the
review of cable SOAs by the Office's Licensing Division; they will be
implemented in the instructions to Space E in the SOA and do not
require amending the regulations.
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\45\ 82 FR at 56930.
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2. Reporting of Bundled Services in Gross Receipts (Space K)
The NPRM also addressed how gross receipts should be reported when
cable services are offered by cable operators as part of a ``bundle''
of services to subscribers. For example, many cable operators now offer
video services plus internet and/or voice services together at a price
that is less than what a subscriber would pay to subscribe to each
service separately (so-called ``double play'' and ``triple play''
bundles).\46\ Noting that the Office receives questions on how gross
receipts for cable services should be reported when sold as part of a
bundle, the NPRM stated that it was ``considering whether to amend its
regulations to provide specific guidance on how remitters should report
cable television services sold as a bundled service.'' It proposed the
addition of the following new language in its regulatory definition of
``gross receipts'' to address bundled services: when cable services are
bundled with non-cable services, ``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.'' ``[I]nstead, 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 services as an unbundled stand-alone product.'' \47\ The Office
sought public comment on the proposed definition and ``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.'' \48\
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\46\ Id. at 56931.
\47\ Id. at 56937.
\48\ Id. at 56931.
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The NPRM proposal is consistent with the Office's decades-long
interpretation of ``gross receipts'' in section 111 as requiring
reporting of all subscription fees collected by a cable operator when
its service includes broadcast stations. For example, when a video
service tier includes both broadcast and non-broadcast stations, the
Office requires the cable operator to report all of the revenues from
the broader tier to be included in gross receipts, not just the
revenues that would have been garnered from a broadcast-only tier. This
interpretation of gross receipts, barring proration of mixed cable
channel tiers, was issued in 1984.\49\ In other words, cable operators
are not permitted to prorate gross receipts within tiers of service
that contain broadcast channels according to the ratio of broadcast to
non-broadcast channels in a given tier.
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\49\ See 49 FR 13029, 13035 (1984).
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In their initial comments, NCTA agreed that the exclusion of
internet and voice services in the proposed rule was proper.\50\ At the
same time, however, it suggested that the Office substantively change
its approach to the reporting of revenue in this circumstance. It asked
the Office to recognize generally accepted accounting principles, or
GAAP, as the method for determining the amount of revenue to be
reported for bundled services.\51\ It suggested that employing GAAP
would be a more appropriate standard for reporting the video portion of
the bundled revenue than the proposed rule and pointed out that other
compulsory licenses use GAAP in their analyses.\52\ NCTA criticized the
proposed rule on the grounds that it purportedly assigns the discount
for the bundled services to the non-video services and therefore allows
royalty payments to be computed against revenue from services that do
not include broadcast video.\53\
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\50\ NCTA Initial NPRM Comments at 12.
\51\ Id. at 10-18.
\52\ Id. at 13-14 & n.37.
\53\ Id. at 14-15. NCTA stated that, under GAAP, the discount
for the bundle would be assigned in a manner proportionate to the
unbundled prices of the separate services. Id. at 14.
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In support of its comments, NCTA submitted the declaration of
Professor William Holder, which states that GAAP is the method
recognized as the most authoritative for businesses to prepare their
financial statements.\54\ As explained by Prof. Holder, the
[[Page 100352]]
application of GAAP by the Financial Accounting Standards Board
(``FASB'') is intended to provide financial information that is
relevant and a ``faithful representation'' of the financial status of
the business that is neutral and non-biased.\55\ His declaration states
that several regulatory bodies require businesses to present their
financial statements in accordance with GAAP.\56\ According to Prof.
Holder, applying the principles of GAAP, the FASB has created a method
of allocating the revenue received in a bundled discount
arrangement.\57\ In his view, this allocation is ``based on the
relative proportion of each element in the arrangement to the total
consideration that is expected to be received.'' \58\ He concludes that
using a GAAP approach would allocate the discount in the bundled price
to each element according to its relative percentage of the unbundled
price of the group of discounted goods or services.\59\
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\54\ Declaration of Prof. William Holder, October 3, 2018, at 5,
attached as Exhibit A to NCTA Initial NPRM Comments (``Holder
Declaration'').
\55\ Holder Declaration at 6.
\56\ Id. at 7.
\57\ Id. at 9. Prof. Holder's declaration further states that
this methodology is not limited to cable service bundling; it is
applicable generally to businesses offering a group of products or
services at a discounted price from the sum of their separate
prices. Id.
\58\ Id.
\59\ Thus, if the unbundled prices of cable, internet, and voice
services were $10, $10, and $5 per month respectively, and the
bundled price was $20 per month for all three, the cable portion
would be allocated at 40% of the bundled price ($10/$25), or $8. The
proposed rule, by contrast, would require reporting of $10 per month
in the gross receipts.
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In their initial comments, Copyright Owners I, whose members then
included the MPA, Joint Sports Claimants, the National Association of
Broadcasters (``NAB''), Public Broadcasting Service, Settling
Devotional Claimants, and Canadian Claimants Group,\60\ stated that
there was disagreement among the group as to the proper method of
reporting bundled services.\61\ They agreed with the Office that
internet and voice services should not be included in gross receipts
\62\ and noted that the language of the proposed rule appeared to track
``prior Office and judicial guidance concerning the meaning of the term
Gross Receipts.'' \63\ In their first reply comments responding to
NCTA's proposal, the they stated that they ``do not have a common
position on the issue'' and indicated that they would file separate
comments.\64\
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\60\ As noted below, in later comments the MPA sided with NCTA
on this issue.
\61\ Copyright Owners I Initial NPRM Comments, at 7-8.
\62\ Id. at 8.
\63\ Id.
\64\ Copyright Owners I NPRM Reply Comments, at 7.
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In their second reply comments, the Copyright Owners II--
representing the same groups as before except for the MPA--stressed
that the Office's proposed rule ``is consistent with (and indeed
mandated by) the Office's longstanding interpretation of the term Gross
Receipts.'' \65\ They stated that ``where CSOs [cable service
operators] offer bundled products or services that include broadcast
signals, they must include in Gross Receipts the full amount that they
charge subscribers to receive the Basic Service alone.'' \66\ They
suggested that NCTA's proposal would be contrary to the Cablevision
decision, in which the court upheld the Office's interpretation of
gross receipts as including the total revenues from any tier of video
services that includes broadcast services.\67\ They took the position
that, whatever the merits of GAAP in various other contexts, the
statutory mandate of section 111 was to the contrary.\68\ From their
perspective, employing GAAP would permit greater subjectivity in the
reporting of revenues than was implied by NCTA's comments,\69\ and
would be unfair to copyright owners.\70\ For example, different bundles
offered by a single cable operator might contain a variety of different
video services, not all of which would have a stand-alone price.\71\
---------------------------------------------------------------------------
\65\ Copyright Owners II NPRM Reply Comments at 2.
\66\ Id. at 3. Copyright Owners II also dispute the assertion in
the Holder Declaration that cable operators ``generally'' use GAAP
when reporting gross receipts for bundled services. Rather Copyright
Owners II assert that their audits have found that ``while some CSOs
improperly utilize what they interpret to be GAAP, other CSOs
properly follow the Office's existing rules and have included in
Gross Receipts the subscriber revenues as required by precedent and
not GAAP.'' Id. at 4.
\67\ Copyright Owners II NPRM Reply Comments at 3. See id. at 4-
8 (discussing the applicability of Cablevision).
\68\ Id. at 10-11.
\69\ Id. at 4, 11-14.
\70\ Id. at 14.
\71\ Id. at 12-13.
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Copyright Owners II submitted a declaration from Sam D. Wild, CPA,
in response to Prof. Holder's declaration submitted by NCTA.\72\ Mr.
Wild stated that although it is appropriate to use GAAP in financial
reporting, ``calculating royalties is different than and distinct from
preparing financial statements.'' \73\ He stated that royalties are
calculated according to contracts or statutory mandates, which may
differ from the requirements of GAAP.\74\ He also stated that GAAP
would not provide an easy answer if each service in the bundle does not
have a separate stand-alone price; he asserted that in such a
circumstance, using GAAP would increase the subjectivity of the
calculation.\75\
---------------------------------------------------------------------------
\72\ Declaration of Sam D. Wild, CPA, October 24, 2018, attached
as Exhibit 1 to Copyright Owners II Reply Comments (``Wild
Declaration'').
\73\ Wild Declaration at 2.
\74\ Id.
\75\ Id. at 3.
---------------------------------------------------------------------------
In its reply comments, NCTA repeated its suggestion that GAAP
provides the proper method for reporting revenues from bundled
services.\76\ It reiterated that the proposed rule would apply the
bundle discount to the non-video services only, which NCTA claimed
would result in royalties being paid on non-video revenues.\77\ It
suggested that using GAAP aided consumers by allowing cable operators
to offer bundles in a competitive market, giving consumers additional
choices at a variety of price levels.\78\ NCTA again stated that GAAP
is a well-recognized method of accounting for revenues, and that it is
used by the government, including the Office, in other contexts.\79\
---------------------------------------------------------------------------
\76\ NCTA Reply NPRM Comments at 2-6.
\77\ Id. at 3.
\78\ Id.
\79\ Id. at 5-6.
---------------------------------------------------------------------------
In their separate reply comments, Program Suppliers also supported
the use of GAAP for reporting bundled revenues. They stated that the
circumstances in the cable industry today are significantly different
from those in 1988, when Cablevision was decided and when the Office
issued regulations implementing that decision.\80\ They took the
position that the bundling of non-video with video services at a single
price is not the same as combining broadcast and non-broadcast channels
in a single tier at a single price.\81\ They stated that the changed
circumstances ``demonstrates that the Office could adopt a new gross
receipts interpretation to allow use of GAAP methodology, . . . but
still leaves open the question of whether adoption of the GAAP
methodology would be consistent with Section 111's purpose and
intent.'' \82\ Program Suppliers stated that the use of GAAP
``represents a change from how gross receipts were calculated under the
1988 Notice's policy,'' but argued that GAAP now represents the more
appropriate method of reporting bundled revenues.\83\
---------------------------------------------------------------------------
\80\ Reply Comments of Program Suppliers at 2-3 (Oct. 25, 2018).
\81\ Id. at 5.
\82\ Id. at 4 (emphasis in original).
\83\ Id. at 7-8. The 1988 Notice refers to the Office's Notice
of Policy Decision, issued on January 28, 1988. See Compulsory
License for Cable Systems, Reporting of Gross Receipts, 53 FR 2493
(Jan. 28, 1988). In subsequent ex parte meetings with the Office,
the parties reiterated their positions relating to the applicability
of GAAP. See Letter from Mary Beth Murphy, Esq., NCTA and Dennis
Lane, Esq., Stinson, LLP, to Regan A. Smith, Gen. Coun. & Assoc.
Register of Copyrights, U.S. Copyright Office, May 22, 2020, at 4-5
(``NCTA-MPA Ex Parte Letter #2''); NCTA-MPA Ex Parte Letter #3, at
4-6; Letter from Daniel A. Cantor, Esq., Arnold & Porter, to Regan
A. Smith, Esq., Gen. Coun., U.S. Copyright Office, June 10, 2020, at
2-3 (``Copyright Owners II Ex Parte Letter #2''); Copyright Owners
II Ex Parte Letter #5 at 3-4.
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[[Page 100353]]
The Office appreciates the efforts of the commenters to assist its
decision-making through their comments and by supplying declarations of
accounting experts.\84\ After careful consideration of the comments and
declarations, as well as ex parte meetings held in 2020 and 2022 which
are publicly captured in ex parte letters provided to the Office, the
Office has decided that its proposal in the NPRM is most consistent
with its longstanding interpretation of gross receipts under section
111, which it has applied consistently. On the current record, the
Office believes that its proposed rule reflects the appropriate
interpretation of the statute and is not persuaded that GAAP
necessarily leads to a simpler and more appropriate calculation of the
value of the video services in a bundle in the context of section 111
and congressional intent. To the contrary, the Office concludes that
changing its interpretation of gross receipts at this time is not
supported by the record or by the statute.
---------------------------------------------------------------------------
\84\ See generally Holder Declaration; Wild Declaration.
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For example, Professor Holder's implementation of GAAP in his
declaration assumes that consumer preferences and valuation of the
constituent services in a bundle are accurately measured by the
proportionate ``rack rate'' of each service sold separately. But that
assumption is not necessarily correct.\85\ Bundling may be a reflection
of the cable operator's desire to maximize revenue, with the
understanding that consumers may not value the other services in the
bundle (e.g., internet and/or voice) enough to pay the full asking
price, and that a discounted bundle that includes those other services
at a price slightly higher than the video alone, maximizes cable system
revenue. The record does not provide information on this issue, nor is
it clear that the calculation would be the same for every bundle of
services. Moreover, there is no evidence in the record about the cost
of including the additional services in the bundle; if the marginal
cost of including internet and voice services is very small, then a
revenue maximizing cable system could increase revenue and profit by
including those services at just above their marginal cost.\86\
Finally, the record does not supply information about the extent to
which bundled services are available as stand-alone offerings. Thus, it
is difficult for the Office to determine whether the use of GAAP in
these circumstances would be an appropriate measure of the value of the
video services that must be included in gross receipts. Moreover, it is
not clear that GAAP must be interpreted as Professor Holder's example
indicates. If GAAP is more subjective than his example suggests--for
example, because the bundled services are not all available at a stand-
alone price--then one of the goals of section 111, namely, simplicity
of calculating gross receipts, would be undermined.\87\ As noted by the
Program Suppliers, the use of GAAP is not mandated by the statute, and
using GAAP would represent a change from the Office's existing
interpretation of the statute.
---------------------------------------------------------------------------
\85\ See also Determination of Rates and Terms for Preexisting
Subscription Services and Satellite Digital Audio Ratio Services, 82
FR 56725, 56734 (CRB, Nov. 30, 2017) (discussing the economic effect
of bundling certain types of audio services).
\86\ To be sure, if a consumer highly valued internet services
and placed little value on video services, the calculation would
work in reverse; the revenue maximizing cable operator would want to
sell the internet services to that consumer at close to full price
and add the other services at closer to their marginal cost.
However, the record also does not contain information about the
marginal cost of providing video services in addition to internet
and/or voice services.
\87\ See Cablevision Systems Development Co. v. Motion Picture
Association of America, Inc., 836 F.2d 599, 611 (D.C. Cir. 1988)
(``Congress never contemplated a precise congruence of the royalties
paid and the amount of distant non-network programming actually
carried. Instead, Congress picked a convenient revenue base and used
the DSEs to discount it in a reasonable manner.'') (emphasis in
original); id. at 612 (``Congress . . . chose an easily calculable
revenue base and used the DSEs to approximate the value received by
the cable companies.'').
---------------------------------------------------------------------------
The Office believes that including the full, non-bundled value of
the video services is consistent with Congress' intent that the ``gross
receipts'' reported serve as the baseline against which royalties are
calculated, and further concludes that its proposal is consistent with
Congress' intent for gross receipts to be calculated simply (and, by
implication, audited simply).
3. Reporting of Equipment Fees, Broadcast Fees, and Franchise Fees in
Gross Receipts (Space E)
a. Equipment Fees
The current regulations require cable operators to include
``converter'' fees in their gross receipts. In the NPRM, the Office
proposed to change the terminology in the definition of gross receipts
from ``converter'' fees to ``equipment'' fees, in recognition that the
latter is a more accurate description of what is currently sold or
leased to cable subscribers.\88\ The Office viewed this proposal as a
technical one ``intended to modernize regulatory terminology'' to align
with cable operator's current practices.\89\
---------------------------------------------------------------------------
\88\ 82 FR at 56930.
\89\ Id.
---------------------------------------------------------------------------
In initial comments to the NPRM, NCTA expressed no opposition to
the proposal.\90\ At the same time, Copyright Owners I, which includes
the MPA, supported the Office's technical change, while adding more
broadly that ``if the cable operator charges subscribers for its use,
and subscribers use the converter/equipment/app/device to obtain the
basic service of providing retransmitted broadcast signals, the
subscriber revenues should be included in gross receipts.'' \91\ In its
reply comments, NCTA opposed the inclusion of any equipment fees in
gross receipts, arguing that ``equipment fees are not service fees''
under section 111.\92\ It contended that such fees are becoming less
important as more cable operators offer free apps to allow subscribers
to view broadcast and video services on different devices.\93\
---------------------------------------------------------------------------
\90\ See generally NCTA Initial NPRM Comment.
\91\ Copyright Owners I Initial NPRM Comments at 7.
\92\ NCTA Reply NPRM Comment at 6-7, 8-11.
\93\ Id. at 10.
---------------------------------------------------------------------------
In subsequent ex parte meetings with the Office, NCTA and the MPA
announced that, as part of a compromise of their previous disagreements
related to the rulemaking's proposals, they now jointly opposed the
inclusion of equipment fees in gross receipts, while Copyright Owners
II continued to express support for including them.\94\ Specifically,
NCTA and MPA argued that, if a subscriber is given the option of
accessing video services (including broadcast signals) through a free
software application on the subscriber's television, and the subscriber
still chooses to receive video services through equipment provided by
the cable operator, then the equipment fees should not be included in
gross receipts.\95\
---------------------------------------------------------------------------
\94\ E.g., NCTA-MPA Ex Parte Letter #2, at 3-4 (opposing
inclusion of equipment fees); Copyright Owners II Ex Parte Letter
#2, at 1, 2 (supporting inclusion of equipment fees); Copyright
Owners II Ex Parte Letter #5, at 2-3 (supporting inclusion of
equipment fees).
\95\ NCTA-MPA Ex Parte Letter #4, at 4.
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Consistent with its long-held view, the Office believes that,
regardless of the descriptor used, equipment fees are properly included
in gross receipts. The Office's approach in this area is well-
established.\96\ It requires the fees
[[Page 100354]]
charged to subscribers for the equipment necessary to access broadcast
services be included in gross receipts.\97\ Due to a concern that some
cable operators may be uncertain as to whether the regulations' current
reference to ``converter fees'' includes modern equipment fees, the
NPRM proposed amended language to eliminate that confusion.
---------------------------------------------------------------------------
\96\ Since 1978, the Office's regulations have incorporated the
concept that equipment fees--or ``converter fees''--would be
included in gross receipts if they were necessary to access basic
secondary transmissions. 43 FR 27827, 27832 (June 27, 1978).
\97\ Letter from Dorothy Schrader, Gen. Coun., to James F.
Ireland, Cole, Raywid & Braverman, October 11, 1989, attached as
Exhibit A to NCTA Reply NPRM Comments.
---------------------------------------------------------------------------
NCTA and MPA's position would eliminate equipment fees from gross
receipts reported by a cable operator regardless of the amount of
equipment fees that cable operators continue to collect from
subscribers who choose the equipment option to access broadcast
channels. The record does not support this result.
Having fully considered all comments and ex parte submissions, the
Office concludes that, when a cable operator offers to provide video
services through a free software application, but a subscriber opts to
forego the software application in favor of a cable box, then that
equipment is no less necessary to the subscriber's ability to receive
broadcast signals than before.\98\ Thus, gross receipts shall include
all equipment charges collected for any equipment used to access
broadcast signals. If the cable operator charges a fee for the use of a
software application to be used in lieu of physical equipment used to
receive broadcast services, then that fee should be included in gross
receipts and the final rule so indicates.\99\
---------------------------------------------------------------------------
\98\ See Copyright Owners II Ex Parte Letter #5, at 3.
\99\ The Office notes that the record does not include
information regarding whether cable operators offering subscribers a
free software application for video services condition access to the
application on the purchase of internet service, or other services,
from the cable operator.
---------------------------------------------------------------------------
b. Broadcast Fees/Surcharges and Franchise Fees
As background, the Office is aware that many cable operators
separately itemize various fees in their bills to subscribers. In
particular, many include separate charges for what are often termed a
``Broadcast fee,'' or a ``Broadcast Surcharge,'' as well as a
``Franchise fee.'' Broadcast surcharges represent some portion of fees
paid by cable operators to broadcasters for permission to retransmit
their signals. Franchise fees represent fees paid to local governments
for permission to operate a cable television service in a particular
area.
The NPRM did not address broadcast fees or franchise fees. However,
questions about whether these fees should be included in gross receipts
were raised by commenters during the rulemaking proceeding and all
parties had an opportunity to be heard on the question. The Office
accordingly addresses the treatment of these fees in this final rule.
The question of whether broadcast fees should be included within
the definition of gross receipts was raised by Copyright Owners I in
their initial comments to the NPRM.\100\ In written comments, NCTA
initially expressed no opinion on broadcast surcharges.\101\ However,
in subsequent ex parte meetings with the Office, NCTA and the MPA
stated that they agreed to the inclusion of franchise fees and
broadcast fees in gross receipts as part of their agreement referenced
above.\102\ The Copyright Owners, for their part, stated that they
believe broadcast fees (as well as equipment fees and franchise fees)
should be included in gross receipts.\103\
---------------------------------------------------------------------------
\100\ See Copyright Owners I Initial NPRM Comments at 10 (urging
the Office to include broadcast surcharges in gross receipts
``[b]ecause cable subscribers cannot receive broadcast signals
without paying the broadcast surcharge (where imposed)'').
\101\ NCTA Reply NPRM Comments at 7-8.
\102\ NCTA-MPA Ex Parte Letter #2, at 3. See NCTA-MPA Ex Parte
Letter #3, at 1-2 (noting that their agreement to include franchise
fees and broadcast fees in gross receipts was predicated on an
overall settlement of the other issues in the rulemaking).
\103\ Copyright Owners II Ex Parte Letter #2, at 2.
---------------------------------------------------------------------------
After careful consideration, the Office has determined that
broadcast fees (whether denominated ``broadcast fees,'' broadcast
surcharges,'' or other similar descriptions) should be included in
gross receipts. By their very nature, broadcast fees are charges for
the service of providing broadcast transmissions. Subscribers cannot
receive broadcast transmissions without paying those charges. Thus,
they fit comfortably within the scope of charges that traditionally
have been included in gross receipts.
The treatment of franchise fees was also raised by Copyright Owners
I in their initial comments.\104\ As noted above, franchise fees are
fees paid to local governments for the privilege of operating a cable
service franchise within the territory of that government. As stated by
NCTA, franchise fees could be described as a kind of tax levied on
cable operators.\105\ While a tax or assessment imposed on cable
operators that is passed on to all subscribers, and that subscribers
must pay regardless of their tier of service, could fit within the
traditional bounds of the definition of gross receipts, franchise fees
do not appear to be directly linked to the service of broadcast
transmissions in the same way that broadcast fees are linked. Thus, the
Office concludes that, on the current record, franchise fees should not
be included in gross receipts.
---------------------------------------------------------------------------
\104\ See Copyright Owners I Initial NPRM Comments at 10 (urging
the Office to include franchise in gross receipts ``[b]ecause
franchise fees are part of the total amount cable subscribers pay to
receive broadcast signals'').
\105\ See NCTA Reply NPRM Comments at 7 (describing the
franchise fee as ``an indirect tax for rights-of-way'').
---------------------------------------------------------------------------
4. Elimination of Space F in the SOA
In the NPRM, the Office invited ``suggestions on streamlining or
otherwise improving reporting practices for the section 111 license.''
\106\ In response, NCTA suggests eliminating Space F, stating that the
information collected ``does not relate to the provision of secondary
transmissions of broadcast service and thus its collection is neither
mandated by Section 111(d)(1)(A) of the Act nor relevant to cable
operators' payments of royalties pursuant to the compulsory license.''
\107\ Space F of the SOA, titled ``Services Other Than Secondary
Transmissions: Rates,'' requires cable operators to list rate
information ``with respect to all . . . services that were not covered
in space E, that is, those services that are not offered in combination
with any secondary transmission service for a single fee.'' \108\ The
Office of the Commissioner of Baseball, Public Broadcasting Service,
and attorneys Dennis Lane, Philip Hochberg, John Stewart, Ann Mace,
Dustin Cho, John Beiter, Brian Coleman, Matthew Maclean, and Benjamin
Sternberg (collectively, ``Owner Representatives'') agreed that Space F
can be eliminated \109\ and Copyright Owners I commented they ``do not
object'' to NCTA's proposal.\110\ In light of these comments, the
Office has determined that eliminating Space F would help streamline
reporting practices for cable
[[Page 100355]]
operators. The final rule thus eliminates the regulatory provision
requiring remitters to provide information regarding ``Services Other
Than Secondary Transmissions: Rates,'' \111\ and Space F will be
removed from the cable SOA forms.\112\
---------------------------------------------------------------------------
\106\ 82 FR at 56927.
\107\ NCTA Initial NPRM Comment at 10; NCTA Ex Parte Letter Jan.
24, 2019 at 2; NCTA & MPA Ex Parte Letter May 22, 2020 at 8 (``[T]he
Office should not only delete Space F (and all references thereto)
from the SOA forms, but also remove Section 201.17(e)(8) from its
rules.'').
\108\ Short Form SOA at 2, Space F; Long Form SOA at 2, Space F.
See 37 CFR 201.17(e)(8).
\109\ Owner Representatives Ex Parte Letter Aug. 15, 2019 at 2.
\110\ Copyright Owners I Reply NPRM Comment at 6. See NCTA & MPA
Ex Parte Letter May 22, 2020 at 10 (stating that commenting parties
agree Space F can be eliminated); see NCTA & MPA Ex Parte Letter May
20, 2020 Ex. at 3 (same).
\111\ See 37 CFR 201.17(e)(8).
\112\ As noted above, cable operators may continue to use the
Office's existing SOA forms until the Office's new forms without
Space F have been made publicly available. Until the new SOA forms
are provided, cable operators need not complete Space F.
---------------------------------------------------------------------------
B. Definition of Phrase ``Cable System''
The Office has maintained a consistent interpretation of the
statutory definition of a cable system for many years, i.e., that cable
systems are limited to systems providing only localized retransmissions
of limited availability and that internet-based retransmission services
are excluded from the section 111 compulsory license. This
interpretation has been included in testimony before Congress, as well
as policy reports issued by the Office.\113\ It also has been accorded
deference by courts examining whether satellite carriers and internet-
based services are eligible for the section 111 license.\114\
---------------------------------------------------------------------------
\113\ 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.
\114\ E.g., Fox Television Stations, Inc. v. Aereokiller, LLC,
851 F.3d 1002, 1013-15 (9th Cir. 2017) (finding the Office's view
concerning the ineligibility of internet services under section 111
to be longstanding, consistent, and ``persuasive'' and deferring to
the Office's interpretation); WPIX, Inc. v. ivi, Inc., 691 F.3d 275,
283-84 (2d Cir. 2012) (deferring to the Office's interpretation
regarding internet-based services and eligibility for section 111
license); Satellite Broad. & Commc'ns Ass'n of Am. v. Oman, 17 F.3d
344, 346-48 (11th Cir. 1994) (upholding the Office's determination
that satellite carriers are ineligible for section 111 license).
---------------------------------------------------------------------------
In the NPRM, the Office proposed amending its regulatory definition
of the phrase ``cable system'' to specifically reflect this
position.\115\ In their comments, stakeholders expressed reservations
about the proposed change. Copyright Owners I, while agreeing that the
proposed language comported with the Office's longstanding
interpretation of the statute, stated that they ``do not believe that
an amendment is needed to give full effect to that consistent
interpretation.'' \116\ NCTA also opposed implementation of the
proposed change. It stated that the proposed change ``may inadvertently
create a new target for [people] to try to invent around in ways not
intended by the Copyright Office.'' \117\
---------------------------------------------------------------------------
\115\ 82 FR at 56931-32; 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); WPIX, Inc. v. ivi, Inc., 691 F.3d 275, 276 (2d
Cir. 2012); Fox Television Stations, Inc. v. FilmOn X, LLC, 150 F.
Supp. 3d 1, 7 (D.D.C. 2015).
\116\ Copyright Owners I Initial NPRM Comments at 11.
\117\ NCTA Initial NPRM Comments at 19.
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After reviewing the comments to the NPRM, the Office concludes
that, while its interpretation of section 111 has not changed,
amendment of the phrase ``cable system'' in its regulations at this
time may create unintended confusion regarding the Office's position.
To avoid any unintended consequences, it therefore has decided not to
memorialize its longstanding interpretation in the regulations as part
of this rulemaking.
C. Interpretation of Community and Reporting of Area Served (Space D)
1. Cable Headend Location
Remitters are currently required to identify only the community or
communities in which they operate and not the location of the
headend(s) serving those communities.\118\ While the Program Suppliers'
original petition requested that Space D be revised to require cable
operators to identify the location of each headend and the specific
communities served from that headend,\119\ the Office declined to
include this change in the NPRM, concluding that it was not clear that
artificial fragmentation by cable systems seeking to avoid paying a
higher royalty rate was a pressing concern.\120\ In response to the
NPRM, Copyright Owners I and NCTA agreed that headend location
information is not necessary to be reported on cable SOAs.\121\
Accordingly, the final rule does not require remitters to include
headend location information in Space D.
---------------------------------------------------------------------------
\118\ See 37 CFR 201.17(e)(4); Short Form SOA at 1b, Space D;
Long Form SOA at 1b, Space D.
\119\ Petition at 10-11.
\120\ 82 FR at 56932.
\121\ NCTA Initial NPRM Comments at 20; Copyright Owners I
Initial NPRM Comments at 14.
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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 in Space D of the SOA.\122\ A cable operator must identify the
communities it serves, listing the ``city or town'' and ``state''
served, but not the county in which the given community is located
(although some operators report counties on a voluntary basis). In
response to a request by Program Suppliers, the Office proposed
revising Space D to require ``county'' information, noting that a
regulatory change would not be necessary to implement this update to
the SOA, but sought comment on whether this proposed change remained
desirable to stakeholders.\123\ Copyright Owners I supported this
proposed change,\124\ and AT&T and NCTA stated that they did not
object.\125\ Accordingly, the Office will adopt this change by updating
the instructions for filling out the SOA to require county information
be included.
---------------------------------------------------------------------------
\122\ 37 CFR 201.17(e)(4).
\123\ 82 FR at 56933.
\124\ Copyright Owners I Initial NPRM Comments at 14.
\125\ NCTA Initial NPRM Comments at 21; AT&T Initial NPRM
Comments at 8.
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3. Definition of the Term ``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.'' \126\ 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 smaller systems
and avoiding the higher royalty payments that Form 3 cable systems
\127\ pay under section 111.\128\ The Office's existing regulations
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.\129\
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
[[Page 100356]]
municipal entity (including unincorporated communities within
unincorporated areas and including single, discrete unincorporated
areas).'' \130\
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\126\ 17 U.S.C. 111(f)(3); 37 CFR 201.17(b)(2).
\127\ Form 3 cable systems are cable systems that use the Long
Form SOA.
\128\ 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.'').
\129\ 37 CFR 201.17(e)(4); see also Short Form SOA at 1b, Space
D; Long Form SOA at 1b, Space D.
\130\ 47 CFR 76.5(dd).
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In their original petition, Program Suppliers had requested that
the Office amend the regulatory definition of ``community'' so that a
cable operator's ``franchise area'' would be the de facto regulatory
boundary for defining communities, rather than the FCC's community unit
definition.\131\ However, based on comments received in response to the
NOI, the Office explained in the NPRM that it was not proposing to
replace the regulatory definition, because ``the facts and the law
[did] not support replacing the community unit definition with a
franchise area definition,'' \132\ noting that it was not aware of a
practice of fragmentation, but inviting public comments on whether this
issue was still significant to stakeholders.\133\ In its comments, NCTA
stated that the Office was correct in its decision not to amend the
regulations to reflect a franchise area,\134\ and Copyright Owners I
did not object.\135\ Accordingly, the Office declines to amend the
regulatory definition of the term ``community.
---------------------------------------------------------------------------
\131\ Petition at 19.
\132\ 82 FR at 56933.
\133\ Id.
\134\ NCTA Initial NPRM Comments at 20.
\135\ Copyright Owners I Initial NPRM Comments at 14. (In their
initial comments, the Copyright Owners included the MPA.)
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D. Grade B Contour Versus Noise-Limited Contour
In the NPRM, the Office noted that parts of the Long Form SOA
referencing the ``Grade B contour'' appeared to be obsolete given the
advent of digital television signals and the new ``noise-limited
service contour'' \136\ standard. It proposed two changes described
below to delete these references.
---------------------------------------------------------------------------
\136\ 82 FR at 56934.
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As background, section 111 defines the ``local service area of a
primary transmitter.'' The definition 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.'' \137\ It
originally relied on an FCC construct, referred to as the ``Grade B
contour'' construct, used to determine the local service area of
certain signals. Adopted in 1976, the Grade B contour applies to analog
television stations.\138\ In connection with the advent of digital
television signals, the FCC has established a new ``noise-limited
service contour'' \139\ standard. In 2010, as part of STELA, the
definition of local service area in section 111 was amended to
incorporate this new standard.\140\
---------------------------------------------------------------------------
\137\ H.R. Rep. No. 94-1476, at 99 (1976), as reprinted in 1976
U.S.C.C.A.N. 5659, 5714.
\138\ 17 U.S.C. 111(f)(4).
\139\ 82 FR at 56934.
\140\ STELA at sec.104, 124 Stat. at 1235; 17 U.S.C. 111(f)(4).
---------------------------------------------------------------------------
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 television market and 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 was 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.\141\ 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.\142\ 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.\143\
---------------------------------------------------------------------------
\141\ See 37 CFR 387.2.
\142\ See Long Form SOA at 13.
\143\ See id. 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.
---------------------------------------------------------------------------
In the NPRM, the Office explained that, post-STELA, this area would
include the area within the noise limited service contour; \144\ thus,
the noise limited service contour would be the proper standard by which
to measure the reach of digital television signals with respect to the
section 111 license, including digital UHF signals.\145\ It proposed
revising Part 6, Block B of the Long Form SOA which asks for
information related to ``permitted'' UHF signals carried by a cable
operator for purposes of calculating royalties paid under a 3.75% fee.
The NPRM's proposal would eliminate the option in Block B of Part 6 on
the cable SOAs for commercial UHF stations within a Grade B contour
(referred to as permitted basis ``G'').\146\ Because 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,'' \147\ and because any
digital signals within the noise-limited service contour are ``local''
and thus are not subject to the section 111 royalty rate, the Office
concluded 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.'' \148\
---------------------------------------------------------------------------
\144\ See STELA at sec.104, 124 Stat. at 1235; 17 U.S.C.
111(f)(4).
\145\ 82 FR at 56934.
\146\ Id.
\147\ 17 U.S.C. 111(f)(5) (emphasis added).
\148\ Id.
---------------------------------------------------------------------------
In addition, the Office noted that permitted basis ``G'' in Part 6/
Block B is rarely, if ever, used, and that in the few cases where cable
operators have reported the permitted basis of carriage category ``G,''
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.'' \149\
---------------------------------------------------------------------------
\149\ Id.
---------------------------------------------------------------------------
Second, the Office invited public comment on whether Part 7, Block
B of the cable SOA--which allows for calculation of 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--should be amended, and whether, more
generally, the Office's related regulations should be amended to remove
references to a Grade B contour.\150\ It explained that based on
database queries of submitted SOAs, ``the last time Part 7 of the cable
SOA [had been] used (i.e., Computation of the Syndicated Exclusivity
Charge) was in 2013, on a single SOA.'' \151\
---------------------------------------------------------------------------
\150\ Id.
\151\ Id.
---------------------------------------------------------------------------
The comments received in response to these proposed changes were
generally positive. While NCTA initially expressed concern that the
Office's proposal ``might have more significant substantive
ramifications,'' such as eliminating the ability to rely on a station's
Grade B contour in assessing local and distant signals, it later
acknowledged that the Office's
[[Page 100357]]
proposed changes ``would only eliminate from the rules and the Form SA3
a handful of specific Grade B references, to which NCTA is not
opposed.'' \152\ NCTA and MPA supported ``eliminat[ing] references to
the `Grade B contour' in Sections 201.17(i)(l)(ii) and 201.17(i)(2)(ii)
and, with respect to the DSE Schedule in Form SA3, references to the
`Grade B contour' in Parts 7 and 9 (and the instructions for those
Parts) and the `G' category in Part 6, Block B.'' \153\ Both commenters
asked, however, for the Office to clarify that ``in the unlikely event
a cable operator needs to continue relying on a station's Grade B
contour to establish its `permitted' status, the operator may report
that reliance under the existing `O--Other' designation in Part 6,
Block B.'' \154\ For their part, Copyright Owners I supported
eliminating basis ``G'' in Part 6 and ``amend[ing] Part 7 (and the
accompanying regulations) to remove references to a Grade B contour.''
\155\
---------------------------------------------------------------------------
\152\ NCTA & MPA Ex Parte Letter May 22, 2020 at 9; see NCTA
Initial NPRM Comment at 21-23; NCTA Reply NPRM Comment at 15. See
also Copyright Owners I Reply NPRM Comment at 6-7 (noting that
contrary to NCTA's initial interpretation, the Office did not
propose ``eliminating use of the Grade B contour in determining
whether a signal is distant or local for Section 111 purposes,'' but
rather proposed ``only two discrete, very limited places where the
Grade B contour reference would be eliminated'').
\153\ NCTA & MPA Ex Parte Letter May 22, 2020 at 9.
\154\ Id. at 9 n.41.
\155\ Copyright Owners I Reply NPRM Comment at 6. See NCTA & MPA
Ex Parte Letter May 20, 2020 Ex. at 3 (stating none of the
commenting parties opposed ``the Office's proposal to eliminate
references to the use of the Grade B contour in the SOA, subject to
the clarification that cable operators may continue to rely on the
Grade B contour to determine the status of a broadcast signal to the
same extent as is currently allowed''); NCTA & MPA Ex Parte Letter
May 22, 2020 at 9 (similar).
---------------------------------------------------------------------------
After carefully considering these comments, the Office will
eliminate the permitted basis ``G'' in Part 6/Block B on the cable SOAs
(i.e., commercial UHF stations within a Grade B contour), and if a
cable operator needs to continue relying on a station's Grade B contour
to establish its ``permitted'' status, it may report that reliance
under the existing ``O--Other'' designation. The Office will also
eliminate references to the ``Grade B contour'' in Sec. Sec.
201.17(i)(l)(ii) and 201.17(i)(2)(ii) and, with respect to the DSE
Schedule in Form SA3, references to the ``Grade B contour'' in Parts 7
and 9 (and the instructions for those Parts).
E. Changes to SOA Due to Copyright Royalty Board's Rule Relating to the
Retransmission of Sports Programming
The NPRM noted that in response to the repeal of the FCC's Sports
Blackout Rule, the CRB had 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 they must pay under section 111.\156\ The Office stated
that ``[a]ssuming 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,'' and that ``[n]o amendments to the
Office's regulations [would be] needed to accommodate this change.''
\157\
---------------------------------------------------------------------------
\156\ NPRM, 82 FR at 56934-35; Adjustment of Cable Statutory
License Royalty Rates, 82 FR 24611 (May 30, 2017).
\157\ NPRM, 82 FR at 56935.
---------------------------------------------------------------------------
Effective January 1, 2019, the CRB adopted a final rule under which
certain cable systems may be required to pay the Sports Surcharge.\158\
To facilitate Sports Surcharge payments, the Office created a Sports
Surcharge Addendum for remitters to complete, if necessary, in addition
to their SOAs.\159\ Because no regulatory amendments were necessary to
implement the Sports Surcharge Addendum, the Office considers this
issue closed for purposes of this rulemaking.
---------------------------------------------------------------------------
\158\ 83 FR 62714 (Dec. 6, 2018). See 37 CFR 387.2(e). The
Sports Surcharge is calculated separately for each community in
which a cable system carried one or more Sports Surcharge triggering
programs during an accounting period (i.e., live, non-network
broadcasts of sports events on a distant television station carried
by the cable system that would have been subject to blackout under
the FCC's sports exclusivity rule prior to its repeal in 2014 and
that meet certain other requirements established by the CRB). To
calculate the Sports Surcharge, the system multiplies the gross
receipts attributable to each such community by the number of Sports
Surcharge triggering programs carried in the community by the Sports
Surcharge rate of 0.025 percent (.00025). 37 CFR 387.2(e).
\159\ The Sports Surcharge Addendum is available through pay.gov
at www.copyright.gov/licensing/sec_111.html, or directly at pay.gov/public/form/start/584643809. Instructions for the Sports Surcharge
Addendum are available at www.copyright.gov/licensing/111/sports-addendum-instructions.
---------------------------------------------------------------------------
F. Removing Outdated References to STELA
In the NPRM, the Office proposed amending Sec. 201.17 by deleting
outdated references to STELA, and adding language directing remitters
to contact the Licensing Division for instructions should they need to
file SOAs for accounting periods further back than the last five
years.\160\ The Office received no comments on this proposal.
Accordingly, the proposed amendments are included in the final rule.
---------------------------------------------------------------------------
\160\ 82 FR at 56935.
---------------------------------------------------------------------------
G. Technical Amendments
The NPRM proposed several technical amendments. Because certain
regulatory provisions are duplicative of information provided on cable
operator SOA forms and/or on the Office's website, the proposed rule
would remove these duplicative provisions. 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. The
Office proposed removing this language and incorporating it into the
instruction for the SOA forms. There were no comments on either of
these proposed changes. The final rule will include these changes.
The final rule makes additional nonsubstantive changes to Sec.
201.17 of the CFR. It clarifies the introductory language in Sec.
201.17(e), which is not intended as a substantive change, and corrects
references in Sec. 2017.17(i)(3), and (k)(3). It reorders parts of
Sec. 201.17(c), and adopts the technical changes of the proposed rule,
by adding provisions to give guidance to remitters when a cable
operator ceases to operate or when a cable operator is sold during an
accounting period.
Finally, the Office is developing a new enterprise information
technology system (the ``Enterprise Copyright System'' or ``ECS'') that
will improve its administration of the section 111 license. To
accommodate the planned technological improvements and integration into
ECS, the final rule modifies language in Sec. 201.17(d) to make clear
that remitters must use the Statement of Account forms provided by the
Office on its website when the new forms have been adopted. The final
rule also updates the references to various provisions in Sec. 201.17
that are contained in Sec. 201.16, to conform to the changes being
made to Sec. 201.17, and makes technical changes to Sec. 201.17 to
correct issues within the regulation and update references to other
regulations.
These changes are intended to update the references and improve the
readability and understanding of existing regulations and do not
represent substantive changes in policy.
IV. Reporting Practices--Cable, Satellite, and DART
The NPRM proposed a number of regulatory changes, detailed below,
relating to cable SOA reporting practices that are also pertinent to
the filing of SOAs for other statutory licenses. After reviewing all
comments, the Office is issuing a final rule amending certain reporting
requirements for cable operators (under Sec. 201.17), satellite
[[Page 100358]]
carriers (under Sec. 201.11), and digital audio recording equipment
manufacturers and importers (under Sec. Sec. 201.27 and 201.28), where
applicable, so that there are parallel requirements for all three
licenses in the Office's regulations. The final rule also deletes
references in the proposed rules to payment by ``a single'' EFT to
reflect the elimination of that requirement in 2018.\161\ In addition,
each of the following changes are reflected in the regulatory language
below.
---------------------------------------------------------------------------
\161\ See 83 FR 51840 (Oct. 15, 2018).
---------------------------------------------------------------------------
A. Closing Out Statements of Account
To streamline the administrative process and encourage timely
responses to Office inquiries, the NPRM proposed closing out SOA
examination if a filer fails to reply to an Office correspondence
request after 90 days from the date of the last correspondence with the
Office. After the SOA is closed, it will 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 will need to file an amended SOA along with a filing fee as
prescribed in 37 CFR 201.3(e). To be clear, operators failing to
respond within the prescribed 90-day window will forfeit any potential
refund of an overpayment associated with any issue with the SOA
identified by the Office in its correspondence.
AT&T and Copyright Owners I supported this proposal.\162\ There
were no other comments on this issue.\163\ After reviewing all
comments, the Office adopts these changes in the final rule.
---------------------------------------------------------------------------
\162\ AT&T Initial NPRM Comments at 8; Copyright Owners I
Initial NPRM Comments at 14; Copyright Owners I Reply NPRM Comments
at 3.
\163\ In an ex parte letter, NCTA and MPA listed this as an
undisputed issue. NCTA-MPA Ex Parte Letter #1, attachment at 3.
---------------------------------------------------------------------------
B. Royalty Refunds
The NPRM proposed that royalty refunds for amounts of $50.00 or
less would issue only where the refund is specifically requested before
the SOA is closed and made available for public inspection. It further
proposed that, if a refund is not requested before the SOA is closed,
the amount will be added to the relevant royalty pool. The Office
proposed harmonizing this practice across the regulations affecting
royalty refunds for cable operators, satellite carriers, and digital
audio recording equipment manufacturers and importers.
AT&T and Copyright Owners I submitted comments agreeing with these
proposals.\164\ There were no other comments on this issue.\165\
Accordingly, these changes are adopted into the final rule.
---------------------------------------------------------------------------
\164\ AT&T Initial NPRM Comments at 8; Copyright Owners I
Initial NPRM Comments at 14; Copyright Owners I Reply NPRM Comments
at 3.
\165\ See NCTA-MPA Ex Parte Letter #1, attachment at 3 (all
parties support this proposal).
---------------------------------------------------------------------------
C. Payment of Supplemental Royalty Fees and Filing Fees by EFT
The NPRM proposed that all payments of supplemental royalty fees
and filing fees by cable operators, satellite carriers, and digital
audio recording equipment manufacturers and importers be made only by
EFT.\166\ In its comments, AT&T supported the Office's proposal.\167\
NCTA was generally supportive, but suggested that operators filing Form
1 and Form 2 be allowed to request a waiver of the EFT
requirement.\168\ The Office's records indicate that almost no Form 1
and Form 2 cable operators have insisted on remitting payment by other
than EFT. Moreover, the use of EFT has proven to be a more efficient
and effective means for the Office to receive and invest payments than
payment by check or other means. Therefore, in the final rule, the
Office has decided to retain the original proposal and require all
payments to be made by EFT.
---------------------------------------------------------------------------
\166\ 82 FR at 56936.
\167\ AT&T Initial NPRM Comments at 9.
\168\ NCTA Initial NPRM Comments at 24.
---------------------------------------------------------------------------
D. Interest Assessment
In the NPRM, the Office proposed harmonizing the regulations
relating to the assessment of interest for late payments or
underpayments of royalties among cable operators, satellite carriers,
and digital audio equipment manufacturers and importers, including the
specification of the relevant Current Value of Funds Rate. Interest
payments shall not be required if the interest charge is less than
$5.00.
Only NCTA and AT&T submitted comments in response to this proposal
and supported the Office's proposals.\169\ As there were no other
comments on this proposal, the final rule adopts the proposed changes.
---------------------------------------------------------------------------
\169\ Id. at 23; AT&T Initial NPRM Comments at 9. See NCTA-MPA
Ex Parte Letter #1, attachment at 3 (stating that all parties agree
to the Office's proposal).
---------------------------------------------------------------------------
List of Subjects in 37 CFR Part 201
Cable television, Copyright, Recordings, Satellites.
For the reasons set forth in the preamble, the Copyright Office
amends 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.
Section 201.10 also issued under 17 U.S.C. 304.
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 (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 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) Royalty fee payments submitted as a result of late or amended
filings shall
[[Page 100359]]
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
posted on the Treasury Department's website 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 website.
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.
* * * * *
Sec. 201.16 [Amended]
0
3. Amend Sec. 201.16 by:
0
a. Removing ``201.17(m)'' from paragraph (b)(8), and adding in its
place ``201.17(l)'';
0
b. Removing ``Sec. 201.17(e)(9)(iv)'' from paragraph (e)(2), and
adding in its place ``Sec. 201.17(e)(4)(iv)'';
0
c. Removing ``Sec. 201.17(e)(9)(iv)'' from paragraph (h)(1), and
adding in its place ``Sec. 201.17(e)(4)(iv)'';
0
d. Removing ``201.17(m)'' from paragraph (j)(1), and adding in its
place ``201.17(l)''; and
0
e. Removing ``201.17(m)(4)(i)'' and adding in its place
``201.17(l)(4)(i)'' and removing ``201.17(m)(4)'' and adding in its
place ``201.17(l)(4)'' in paragraph (j)(2).
0
4. Amend Sec. 201.17 by:
0
a. Revising paragraph (b)(1);
0
b. Revising the heading to paragraph (c) and paragraph (c)(3);
0
c. Redesignating paragraph (c)(4) as paragraph (c)(5) and adding a new
paragraph (c)(4);
0
d. Revising paragraph (d) and the introductory text of paragraph (e);
0
e. Removing paragraphs (e)(1), (2), (3), (4), (8), (10), (12), and
(13);.
0
f. Redesignating paragraphs (e)(5), (6), (7), (9), (11), and (14) as
paragraphs (e)(1) through (6), respectively;
0
g. 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
h. 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 the word ``Statement'' in the newly redesignated
paragraph (e)(2)(iii)(A);
0
i. Removing `` ``Gross Receipts'','' and adding in its place `` ``Gross
Receipts,'' '' in the newly redesignated paragraph (e)(3) introductory
text;
0
j. Removing ``Television'','' and adding in its place ``Television,''
'' and removing ``(e)(11)'' and adding in its place ``(e)(5)'' in the
newly redesignated paragraph (e)(4) introductory text;
0
k. Revising the newly redesignated paragraphs (e)(4)(iv) and (vi);
0
l. Removing ``(e)(9), paragraphs (v) through (viii) of this section''
and adding in its place ``paragraphs (e)(4)(v) through (viii) of this
section'' in newly redesignated paragraph (e)(4)(ix);
0
m. Revising newly redesignated paragraphs (e)(5) introductory text,
(e)(5)(i), and (e)(5)(ii) introductory text;
0
n. Removing paragraphs (g)(2) and (4);
0
o. Redesignating paragraph (g)(3) as paragraph (g)(2);
0
p. Revising paragraphs (i)(1)(ii) and (i)(2)(ii);
0
q. Removing ``37 CFR 308.2(c)'' from paragraph (i)(3) introductory text
and adding in its place ``37 CFR 387.2(c)'';
0
r. Revising paragraphs (k)(1) and (2);
0
s. Removing ``(i)(1)'' from paragraph (k)(3) and replacing it with
``(k)(1)'';
0
t. Removing ``satellite carrier'' and adding in its place ``cable
operator'' in paragraph (k)(4).
0
u. Revising paragraph (l)(1);
0
v. Removing ``(m)(4)'' and adding in its place ``(l)(4)'' in paragraph
(l)(2) introductory text;
0
w. Removing ``, for any reason except that mentioned in paragraph
(m)(2)(iii) of this section,'' from paragraph (l)(2)(ii);
0
x. Removing ``(m)(2)'' and adding in its place ``(l)(2)'' in paragraph
(l)(4) introductory text;
0
y. Removing ``(m)(2)(i)'' and adding in its place ``(l)(2)(i)'' in
paragraph (l)(4)(iii)(A);
0
z. Removing ``(m)(2)(ii)'' and adding in its place ``(l)(2)(ii)'' in
paragraph (l)(4)(iii)(B);
0
aa. Revising paragraph (l)(4)(iv);
0
bb. Removing ``(m)'' and adding in its place ``(l)'' and removing
``(e)(14)'' and adding in its place ``(e)(6)'' in paragraph (l)(4)(v);
0
cc. Removing ``(m)(4)(i)'' and adding in its place ``(l)(4)(i)'' in
paragraph (l)(4)(vi);
0
dd. Adding paragraph (l)(4)(vii);
0
ee. Redesignating paragraph (l)(5) as (l)(7);
0
ff. Adding new paragraph (l)(5) and paragraph (l)(6); and
0
gg. 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. For these
purposes, the full amount of such service fees includes separately
itemized fees, such as broadcast fees or broadcast surcharges, that are
directly related to the provision of basic service and that a
subscriber is required to pay to the cable operator in order to receive
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, device, or software
necessary to receive broadcast signals that is supplied by the cable
operator, even if the cable operator offers to provide services through
a free software application. 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, franchise fees, separate charges for security,
alarm or facsimile services, charges for late
[[Page 100360]]
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.
* * * * *
(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 August 29 or March 1, respectively, will be accepted for
whatever legal effect they may have, if any.
(4) 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 shall
submit each Statement of Account using an appropriate form provided by
the Copyright Office on its website and following the instructions for
completion and submission provided on the Office's website 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 information requested by the
instructions for completion and submission provided on the Office's
website or the form itself, each Statement of Account shall contain the
following information:
* * * * *
(4) * * *
(iv) A designation as to whether that primary transmitter is a
``network station,'' an ``independent station,'' or a ``noncommercial
educational station.''
* * * * *
(vi) If that primary transmitter is a ``distant'' station, a
specification of whether the signals of that primary transmitter are
carried:
(A) On a part-time basis where full-time carriage is not possible
because the cable system lacks the activated channel capacity to
retransmit on a full-time basis all signals which it is authorized to
carry; or
(B) On any other basis. If the signals of that primary transmitter
are carried on a part-time basis because of lack of activated channel
capacity, the Statement shall also include a log showing the dates on
which such carriage occurred, and the hours during which such carriage
occurred on those dates. Hours of carriage shall be accurate to the
nearest quarter-hour, except that, in any case where such part-time
carriage extends to the end of the broadcast day of the primary
transmitter, an approximate ending hour may be given if it is indicated
as an estimate.
* * * * *
(5) A special statement and program log, which shall consist of the
information indicated below for all nonnetwork television programming
that, during the period covered by the Statement, was carried in whole
or in part beyond the local service area of the primary transmitter of
such programming under:
(i) Rules or regulations of the FCC requiring a cable system to
omit the further transmission of a particular program and permitting
the substitution of another program in place of the omitted
transmission; or
(ii) Rules, regulations, or authorizations of the FCC in effect on
October 19, 1976, permitting a cable system, at its election, to omit
the further transmission of a particular program and permitting the
substitution of another program in place of the omitted transmission:
* * * * *
(i) * * *
(1) * * *
(ii) If the 3.75% rate does not apply to certain DSE's in the case
of a cable system located wholly or in part within a top 100 television
market, the current base rate together with the surcharge shall apply.
However, the surcharge shall not apply for carriage of a particular
signal first carried prior to March 31, 1972. The surcharge will not
apply if the signal is exempt from the syndicated exclusivity rules in
effect on June 24, 1981.
(2) * * *
(ii) If the 3.75% rate does not apply to certain DSE's in the case
of a cable system located wholly or in part within a top 100 television
market, the current base rate together with the surcharge shall apply.
However, the surcharge shall not apply for carriage of a particular
signal first carried prior to March 31, 1972. The surcharge will not
apply if the signal is exempt from the syndicated exclusivity rules in
effect on June 24, 1981.
* * * * *
(k) * * *
(1) All royalty fees, including supplemental royalty fees, must be
paid by 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 and on the Office's website.
(2) A copy of the remittance advice shall be attached to the
Statement(s) of Account. In addition, if payment is not made by
pay.gov, a copy of the remittance advice shall be emailed or sent by
facsimile to the Licensing Division.
* * * * *
(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, and all requests that a supplemental
royalty fee payment be received for deposit under this paragraph (l)
must be accompanied by a remittance in the full amount of such fee,
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
[[Page 100361]]
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) 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 posted
on the Treasury Department website, 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 website. 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
5. Amend 201.28 by:
0
a. Revising paragraph (e)(7);
0
b. Revising paragraph (h)(1);
0
c. Revising paragraph (j)(3)(v);
0
d. Adding paragraph (j)(3)(viii); and
0
e. Adding paragraphs (j)(4) and (5).
The revisions and additions read as follows:
Sec. 201.28 Statement of Account for digital audio recording devices
or media.
* * * * *
(e) * * *
(7) Oath and signature. (i) Each Statement of Account shall include
a legally binding signature, including an electronic signature as
defined in 15 U.S.C. 7006, of an authorized officer, principal, or
agent of the filing party. The signature shall be accompanied by:
(A) The printed or typewritten name of the person signing the
quarterly Statement of Account;
(B) The date the document is signed;
(C) The following certification:
I, the undersigned, hereby certify that I am an authorized officer,
principal, or agent of the ``manufacturing or importing party''
identified in Space B.
(ii) Penalties for fraud and false statements are provided under 18
U.S.C. 1001 et seq.
* * * * *
(h) * * *
(1) All royalty fees, including supplemental royalty fee payments,
must be paid by 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 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 posted on the
Treasury Department website, 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 website. 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.
Dated: December 3, 2024.
Shira Perlmutter,
Register of Copyrights and Director of the U.S. Copyright Office.
Approved by:
Carla D. Hayden,
Librarian of Congress.
[FR Doc. 2024-28984 Filed 12-11-24; 8:45 am]
BILLING CODE 1410-30-P