Lieberman added that proposed alternatives to the compulsory license would lead to increases in administrative burdens, costs, and service disruptions. For some smaller MVPDs and broadcasters, the harms would threaten their viability, leaving rural consumers with fewer choices and higher costs, he said.
"Maintaining the status quo would avoid these consequences," Lieberman said.
In addition to ACA, Lieberman testified on behalf of three other groups that represent rural multichannel video programming distributors. Also in the Rural MVPD group 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).
The future in the compulsory license is at issue as Congress instructed the U.S. Copyright Office in law to prepare a report addressing possible mechanisms, methods and recommendations for phasing it out. After the U.S. Copyright Office issued a Notice of Inquiry (NOI) on March 3, 2011, the Rural MVPD group responded by filing joint comments on April 25 and reply comments on May 26 ahead of the Copyright Office's June 10 public hearing in Washington, D.C.
In his testimony, Lieberman previewed the possibility that the Copyright Office might recommend that Congress abolish the compulsory license, a move supported by sports leagues and TV networks with large copyright interests. Should that happen, Lieberman underscored that changes to the compulsory license cannot be done in isolation because the Copyright Office and the Federal Communications Commission have long recognized that the license is intertwined with key broadcast regulations, such as retransmission consent, must carry, and the exclusivity rules. Elimination of the license must coincide with reform of these broadcast rules, and the Copyright Office should make this point in its report, Lieberman said.
Just as important, Lieberman said, was preservation of two policies that are essential to smaller and rural MVPDs: clear access to distribute "distant" signals and special considerations for smaller MVPD systems.
For over 35 years, cable's Section 111 license has cleared copyright for cable carriage of "distant" signals. In adopting this license, Congress recognized that many cable systems in rural areas, especially those on the outskirts of DMAs, offered "distant" signals because "local" signals were unavailable or limited. Rural consumers benefitted then, and still do today, Lieberman said.
For some consumers, "local" stations are actually located out-of-state, and the importation of "distant" stations provides them with in-state news, sports, and political coverage. For others, "distant" signals provide vital weather warnings that come prior to, rather than during or after, the event, Lieberman said.
For these reasons and others, any Copyright Office recommendation to phase out the compulsory license must also include a recommendation that smaller and rural MVPDs be permitted to continue to provide "distant signals," Lieberman said.
The Copyright Office must also suggest that smaller MVPDs' special considerations continue. Since 1976, Congress has allowed smaller MVPDs to pay lower copyright license fees. This policy recognized that smaller MVPDs provided needed services, and operate under economic constraints that are vastly different from those affecting larger operators. This remains true today. Congress has maintained this small system provisions throughout every amendment to the license, validating their importance, Lieberman said.
Elimination of the license would undoubtedly expose smaller MVPDs to rampant price discrimination, leading to these operators paying higher copyright license fees than larger MVPDs. Members of the Rural MVPD group have thoroughly documented to Congress and the FCC that many broadcasters and programmers routinely charge smaller operators substantially higher programming fees. This price discrimination has no basis in cost; rather, the basis is unmatchable market power, Lieberman said.
The current license protects smaller MVPDs from this sort of price discrimination by establishing uniform license fees based on gross revenues and other variables. With no compulsory license, powerful rights holders would "stick it to the small guy" - conduct that would threaten smaller MVPDs and their customers who rely on their service, he said.
Accordingly, any recommendation to phase out the compulsory license should also recommend that smaller MVPDs not pay more than larger operators, Lieberman said.
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