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Rural Pay-TV Providers Seek Retention Of Compulsory License

Rural groups providing pay-television services in hometown America say retention of the cable compulsory license is essential to providing millions of consumers with routine and predictable access to local and distant broadcast TV services at affordable rates.

"The compulsory license has advanced the interests of the television viewing public since 1976. Dismantling this tried-and-true system now would only lead to unjust enrichment for sports leagues and Hollywood studios already fairly compensated under current law," American Cable Association President and CEO Matthew M. Polka said.

On May 26, ACA joined three other groups in filing a fresh set of comments on the relevance of the cable compulsory license with the U.S. Copyright Office. The other rural groups involved were the National Telecommunications Cooperative Association (NTCA), the Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), and the Western Telecommunications Alliance (WTA).

Congress instructed the U.S. Copyright Office in law to prepare a report on the need, if any, to modify or sunset the compulsory license regime. After the U.S. Copyright Office issued a Notice of Inquiry (NOI) on March 3, 2011, the rural pay-TV groups that share many common interests related to the compulsory license regime responded by filing joint comments on April 25.

The record now before the U.S. Copyright Office overwhelmingly corroborates that the compulsory license continues to serve as Congress intended, benefitting consumers, broadcasters, distributors, and the vast majority of rights holders. Eliminating the compulsory license threatens serious harms, especially for rural consumers, smaller pay-TV providers, and even smaller broadcast stations.

In their new comments, the rural groups argued that keeping the compulsory license system in place will allow cable operators to retransmit broadcast TV signals in a cost-efficient manner. The current system, they added, treats copyright holders equitably while protecting small pay-TV providers from absorbing large costs associated with the negotiation of thousands of copyright transactions on an individual basis -- costs that would very likely be passed on to consumers.

"Retaining the cable compulsory license is vitally important because the changes sought by copyright holders will result in higher costs for consumers, who are already absorbing the cost of stunning increases in retransmission consent fees over the past six years," Shirley Bloomfield, CEO of the National Telecommunications Cooperative Association, said.

The rural groups also stressed that modifications to the compulsory license regime cannot be done in isolation. As the U.S. Copyright Office and the Federal Communications Commission have recognized for many years, the compulsory license is intertwined with a host of broadcast regulations, such as retransmission consent, network non-duplication, and syndicated exclusivity.

Possible elimination of the network non-duplication and syndicated exclusivity rules is under review in the FCC's retransmission consent reform docket launched on March 3.

"If Congress acts to eliminate the compulsory license, it obviously must also address closely related broadcast signal carriage rules and laws. The compulsory license is inextricably tied to a complex web of broadcast signal carriage laws. Review and reform of retransmission consent are at the top of the list," said Kelly Worthington, Executive Vice President of the Western Telecommunications Alliance.

The rural groups also asked the U.S. Copyright Office to preserve special considerations for smaller cable systems -- such as the right to carry distant TV signals -- in considering any modifications to the compulsory license.

"Congress has maintained special considerations for smaller systems since first adopting the compulsory license. Distant signal carriage by many rural pay-TV operators remains essential to providing customers with relevant information regarding news, government, politics, and weather," OPASTCO President John Rose said.

In the face of overwhelming support for continuing the compulsory license, the rural groups noted that a few powerful rights holders argue that Congress should eliminate it because they are not paid enough. This assertion fails the slightest scrutiny; in fact, these rights holders are probably overcompensated.

"Due to outdated retransmission consent rules that distort the market, broadcasters extract soaring fees for retransmission consent, which increasingly flow back to the broadcast networks and sports leagues - the same rights holders that claim to be undercompensated for the rights to their works," ACA's Polka noted, adding that a new report by SNL Kagan projects total retransmission consent fees to hit $3.6 billion in 2017.

The rural groups also explained that the copyright holders have overlooked the interests of TV stations that rely on federal law to demand cable carriage, also known as must carry. Without a compulsory license, cable operators that do not reach agreements with the appropriate copyright holders would likely need to black out programming on must carry stations, threatening the viability of must carry stations already regarded as economically marginal.

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