us copyright office: national-assoc-broadcasters-reply

8/14/2019 US Copyright Office: national-assoc-broadcasters-reply

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REPLY COMMENT #8

Before theU.S. Copyright O fficeLibrary of CongressWashington, D.C. 20559-6000

In re Section 109 Report to Congre ss Docket No. 2007-1

REPLY COMMENTS OF THENATIONAL ASSOCIATION OF BROADCASTERS

October 1, 2007


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TABLE OF CONTENTSI. IntroductionII . Maintaining or Eliminating the Existing Statutory Licenses

A. The Section 111 Cable Compulsory License Should be MaintainedB. The Sect ion 119 Satell ite Compulsory License Should be Phased Out asCongress Intended, though Certain Provisions Should Be Kept1. Phase Out of Portions of Section 119 Au thorizing Retransmissionof Distant Network S tations2. Program E xclusivity Rules Must Be Applied to Satellite CarriersC.Marketplace M odel Does Not Offer A Viable Alternative.1. Reliance on Collectives Would Not W ork In The Distant SignalContext2. Sublicensing Is Not a Viable Alternative to the CompulsoryLicensing System

3 .etransmission Consent Does Not Replace Compulsory LicensingIII.odifying the Current Royalty StructuresA . R oya lty R ates S hou ld B e In cre ase dB . Th e M inim um Fe e S ho uld b e M ain taine d0C . The 3 .7 5% Fee Should Be M aintained1D. Carr ie rs Can Self -Correct for the "Phantom S igna l" Phenomenon1E.udits and Terms and Conditions3IV.nternet-Based Retransmission Systems Must Be Eva luated Carefully3V.IRECTV 's Proposed Expansions of the Distant Network Signal License AreUnnecessary at This Time5A. DIRECTV'S Missing Affiliate Proposal Is Premature5B. DIRE CTV H as Not Provided Adequate Justification For Its Spot BeamProposal7VI.choStar's Proposal Should Be Rejected9A. EchoStar's Proposal For A Single Unified License Is Unworkable9B. EchoSta r's Missing Aff ilia te P roposa l Should Not Be Adopted1

C. Echostar's Eligibility To Have "Significantly Viewed" Signals Treated AsLocal Signals Is Problematic And Beyon d the Scope of This Proceeding2D. Echostar's In-State, Out of M arket Proposal Is Beyond the Scope o f thisInquiry and Is Without Merit2VII. NPS's Proposed Amendments to the Distant Network Signal License, Some ofWh ich Are Based on Factual Misunderstandings, Should Be Rejected4VIII. Conclusion8ii


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Executive SummaryThe NO I in this proceeding posed a broad rang e of questions regarding the current and

future operation of the compulsory licenses for retransmission of broadcast stations. Variousparties responded w ith comm ents and prop osals designed to further their particular interests. Inevaluating these proposals, NAB urges the C opyright Office to be mindful that while the over-the-air broadcast stations that are at the center of this proceeding represent a relatively smallhandful of channels among the vast program offerings now available on cable and satellite,broadcast stations offer a unique and valuable service to their local markets, mandated byCongress, that could be upset by unwarranted changes suggested by some parties. Moreover,those channels remain b y far the most impo rtant to subscribers and service providers alike.

Two p rinciples must guide the Office in their recommendations to Con gress underSection 109: (1) no changes in the compulsory licenses should impair local broadcast stations'access to the entire local market they are licensed to serve, since doing so w ould threaten thepublic's access to free local broadcasting, which w ould not only thw art the legislative mandateestablished so long ago by Congress but w ould cripple the very service that makes broadc aststations such an attractive program ming source for cable and satellite service providers; and (2)no change s in the compu lsory licenses should impair the local market exclusivity that is key tothe broadcast programming m arket, since doing so would harm both broadca sters and otherprogram owners.

Maintaining the portions of the compulsory licenses (Sections 111 and 12 2) that providefor carriage of broadcast stations throughout their local markets is critical to both key principles.No commenting parties seriously oppose this point. NAB and the majority of the commenting

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parties also generally support maintaining the cab le and satellite licenses in their current formrather than replacing them w ith conformed licenses or a unified license, except that thescheduled elimination of the Section 119 license for distant network signals should be giveneffect and certain other modifications should be m ade as discussed below.

The Section 111 cab le compulsory license should be maintained, but the continuing needfor the distant network signal portion of that license may need to be studied. The Section 11 9satellite compu lsory license should be phased out as C ongress intended, though certainprovisions should be m aintained, including the license for distant retransmission of supe rstations.The portions of Section 119 authorizing retransmission of distant network stations should beterminated at the end of 20 0 9, as they have fulfilled their purpose. Consistent with the coreprinciples spelled out abov e, however, the program exclusivity rules must finally be applied tosatellite carriers as they are to cable operators.

Reliance on the marketplace as a com plete substitute for the compulsory licenses wouldnot be viable. Collectives would not work in the distant signal context to eliminate cost orregulatory oversight. Nor is the so-called "sublicensing" approach, under which broadcasterswould be exp ected to acquire new rights and then nego tiate copyright retransmission licenses forall program material on their schedules, a viable alternative to the compulsory licensing system.

If the current royalty structures are to be modified at all, royalty rates should be increasedto levels more closely resembling marketplace compensation. In any event, the minimum feeprescribed by Congress in Section 111, which the cable parties have mischaracterized aspayment for local signals, should be maintained. The 3.75% fee should be maintained, androyalty variations resulting from rate differentials should be resolved in favor of increasing rates

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to the 3.75% level. Cable operators can self-correct for the so-called "phantom signal"phenom enon about wh ich they complain, and the rule that leads to the phenomen on is anappropriate application of the statutory license conditions, which h elps prevent the self-help"artificial fragmentation" approach some ca ble operators have followed to avo id their statutorilymandated royalty payments.

Under the core principles that should guide the Office's recomme ndations to Congress,Internet-based retransmission systems m ust be evaluated carefully to determine w hether they canboth protect local market exclusivity and comply with the requirements the FCC imposes oncable systems to assure stations full access to their local markets.

With respect to the satellite carriers' specific proposals, DIRECTV's proposedexpansions of the distant network signal license are unnecessary at this time. DIRECTV'smissing affiliate proposal is premature, and DIRE CTV has not provided ad equate justificationfor its spot beam proposal.

EchoStar's proposals should also be rejected. EchoStar's proposal for a single unifiedlicense is unworkable, and its missing affiliate proposal should not be adopted. EchoStar'seligibility to have "significantly viewed " signals treated as local signals is problematic andbeyond the scope of this proceeding. EchoStar's "in-state, out of market" proposal is alsobeyond the scope of this inquiry and is without m erit.

Finally, NPS's proposed amendments to the distant network signal license, some ofwhich are based on factual misunderstandings, should also be rejected.


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models, except generally to advocate for marketplace licensing. While it is obvious, from theplethora of cable and satellite programming already on offer, that marketplace licensing wo uldoperate perfectly well to fill a seemingly limitless number of M VPD channels, the statutorylicense regime only ad dresses the unique issues that arise from retransmission of over-the-airbroadcast stations. This 30-year-old system, with its layering of copyright law, royaltyproceedings, and FCC regulations, has reflected and accomm odated those issues in a way thathas become integral to the workings of the broadcast programm ing market.

Simply put, there is no compelling basis for wholesale revision. The Copyright Office

should limit its recommend ed changes to those that wo uld strengthen local broadcast marketccess and exclusivity. Because of the critical importance to broadcast stations of maintainingnfettered access to their entire local market and program exclusivity within that market, NA Brecomm ends that the current cable licensing system and Section 12 2 for satellite be maintained,and, consistent with Congress's intent, that the Section 119 license for network stations bephased out. With respect to the distant signal portion of the cable license and the superstationlicense for satellite, the Office should carefully evaluate the po tential impact of any furtherreduction of those licenses before recomm ending their modification or elimination.

A.he Section 111 Cable Compulsory License Should be M aintainedThe Section 111 license should be maintained principally because it permitsretransmission o f stations within their local m arkets. 1 Moreover, the cable distant signal licensedoes not, as long as program exclusivity rules are in place to protect local stations, produce themost critically deleterious effects on local m arket exclusivity, because it does not result inwidespread importation of duplicating programs. To the extent new distribution methods

NAB Com ments at 7.

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continue to develop in a way that rend ers cable compulsory licenses for distant signalsunnecessary or unduly costly, NAB would urge careful study of the potential impact ofeliminating the license on established carriage patterns and service to subscribers before such achange is made.

At the end of 20 0 5 (the most recent period for which NA B has ready access to cablecarriage data), Form 3 systems carried a total of about 3 50 different "network stations" asdefined by Section 111 (ABC, CBS, and NBC affiliates) and 375 other commercial stations(including about 10 0 Fox stations as well as affiliates of WB and UPN and unaffiliated stations)

as distant signals. Other than the nationally distributed superstations, 2 these commercialelevision stations were picked up as distant signals by only 2 .4 cable systems, on av erage. Ands. NAB has previously explained, the vast majority of this non-superstation distant carriage is tocable subscribers located relatively nearby the retransmitted station's home m arket. 3Of the total incidents of distant cable carriage of network stations at the end of 2 0 0 5, onlyabout 1.2 percent w ere cases where the distant signal was the first affiliate of that network b eing

retransmitted and none of the system's subscribers had a local affiliate of the same network. Inthe vast majority of cable systems, the FCC 's network nondu plication and syndicated exclusivityrules can be invoked to prevent retransmissions of distant signals from impinging upo n themarket exclusivity local stations have in their netw ork and syndicated p rograms.

Given the long-established and relatively stable pattern of cab le distant signal carriagethat has developed o ver the years, the Office should thoroughly study the potential effects of

2he traditional superstations include KTLA, KWGN, WGN, WPIX, WSBK, andWWOR.3 NAB Com ments at 13-14.3


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eliminating the Section 111 distant signal license for network stations before proposing such achange.

B.he Section 119 Satellite Compulsory License Should be Phased Ou tas Congress Intended, though Certain Provisions Should Be Kept1. Phase Out of Portions of Section 119 AuthorizingRetransmission of Distant Network Stations

As discussed in Se ctions V through VII below, the p roposals of the satellite carriers forrenewal or even expansion of the satellite license should be rejected. The S ection 119 licenseshould be allowed to sunset for distant network stations on its own terms on Decem ber 31, 2 0 0 9,because it has accom plished its goals. How ever, Section 119 as it relates to superstations shouldbe ma intained. The subsection of Section 119 that perm its the retransmission of stations inomm unities outside their local markets in wh ich they have b een determined to be significantlyviewed should be mov ed to Section 122 , since such retransmissions are more akin to localcarriage. These and the other changes proposed in NAB's Comments 4 will streamline thelicenses and continue to serve the best interest of the satellite subscribers and their access tovaluable local programming.

2. Program Exclusivity Rules Must Be Applied to SatelliteCarriersProgram exclusivity rules should be applied fully to satellite carriers. 5 The satellite

industry is no longer a nascent industry that cannot techn ologically or economicallyaccomm odate the program exclusivity rules. Satellite subscription has grown and carriers arenow u sing the technology nece ssary to provide specialized access to their subscribers. Given the

4 S ee NAB Com ments at 38 -42, 54-55.5 S ee NAB Comments at 27-30. C f . NCTA C omments at 15 n.30.

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current technological feasibility of applying program exclusivity rules, satellite carriers are w ellpositioned to implement the syn dicated exclusivity, network non-duplication and sports blackoutprotections for their retransmitted distant signals.

C.Marketplace Model D oes Not Offer A Viable Alternative.The Mo tion Picture Association of America ("MPAA ") and the Performing RightsOrganizations ("PROs") m ost directly attacked the statutory scheme, advocating the com pleteelimination of statutory licenses and a shift to w hat they inaccurately describe as a "m arketplace"model. 6 Their proposals wou ld not result in practical or effective substitutes for the currentlicense system.

1.eliance on Collectives W ould Not W ork In The Distant SignalContextThe PROs' approach would not be as simple or straightforward as they suggest. Rather,it would merely substitute one regulatory framework for another. In order for the PROs'misnamed "marketplace" proposal -- that license negotiations be handled by collectives -- towork as a substitute for individual license negotiations, some m echanism for ensuring globalreliance on the collective would have to be introduced. This might take the form, as is the caseunder certain other countries' retransmission schemes, of statutory mand ates that copyrightowners m ust license their works through a collective. 7 Such a system would presumably alsorequire statutory antitrust exemptions or antitrust consent decrees, and the establishment of

6rogram Suppliers' Comments at 7 -8, 20 ; PRO C omments at 3, 9-12.S ee Council Directive 93/83/EEC of 27 September 1993 on the coordination of certainrules concerning copy right and rights related to copyright ap plicable to satellite broadcasting andcable retransmission, Art. 9.5


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regulatory mechanisms such as the music Rate Court proceedings. 8 A new complex regime ofcopyright law, FCC rules, and antitrust regulation would likely have to be adopted. The processof establishing and operating such a system would un doubtedly lead to litigation in federalcourts, increasing transaction costs for the copyright ow ners ,and users as this so-called"marketplace" model developed. Congressional intervention could well be necessary to balancethe interests of various copyright holders and to define new areas of the law. In short, thetransition to any such m odel would be neither simple nor seamless.

The current operation of the P ROs' licensing collectives, besides being heavily regulated,hardly provides a mo del for the much broader system they p ropose for television stationretransmissions. Broadcast programming, unlike the PRO's repertoires does not comprise asingle uniform type of content, and clearing the retransmission of any particular station wouldnecessarily require the participation of a numb er of different collectives, which wou ld not be the8or more than 6 0 y ears, ASCAP and B MI have been subject to antitrust consent decreeswith the U.S. Department of Justice that heavily regulate their activities. S ee United States v.A S C A P , 1940-43 Trade Cas. 56,104 (S.D.N.Y. 1941); United States v . BM I, 1940-43 TradeCas. 56, 0 96 (E .D. Wisc. 1941). The federal judges with supervisory authority over the currentversions of those consent decrees, see Second Amended Final Judgment, United States v.A S C A P , No. 41-1395 (S.D.N.Y. 2001); United S tates v . BM I, 1966 -1 Trade Cas. 1171 (S.D.N.Y.1994), are emp owered to set license fees for the rights to perform ASCA P and BM I music in"Rate Cou rt proceedings" if the PRO and the music user are unable to reach agreem ent, andthere have been dozens of such proceedings. While the availability of the. Rate Court offersimportant protection to music users, Rate Court proceedings are time-consuming and exp ensive.ASCA P and BM I are required to grant performance rights licenses to users who reque st them, sothe license obligation, at least as to ASCA P and B MI, would effectively remain compu lsory, butthe rate-setting process would be much more cum bersome.

Because o f its historically mu ch smaller scale, SESAC is not currently subject to aconsent decree with the D epartment of Justice, but compelling negotiations with SESAC in placeof the current comp ulsory license would be particularly problematic because users are notentitled to the protections offered by the ASC AP and B MI consent decrees: there is noautomatic right to a SESA C license, there are no prohibitions on exclusive licensingarrangements between SESA C and its affiliates, and there is no Rate Co urt or other entitlementfor third-party determination of reasonable fees.

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same for every station. W ith such a substantial range of interests represented by all of theprogramm ing across all broadcast stations, the likelihood seem s small that the process oflicensing the retransmission of any single station wou ld be substantially simplified by acollective system.

The Satellite Home Viewer Extension and Reauthorization Act ("SHVERA") ratenegotiation, cited by the PRO s as an exam ple of successful collective negotiations by the carriersand copyright owners, 9 was also far from a marketplace model. The negotiation, which did notinvolve all of the program claimant group s, took place within the context of a compu lsory licenseframework that c alled for a single rate that would be applicable to all network stations andanother rate for all superstations, each to cover all programs that aired on any signal within theategory. The negotiation of this one legislative compromise did not at all resemble the level ofparticipation and co mplexity that wou ld be necessary if the statutory license were eliminated inits entirety and separate licenses had to be negotiated for each of the different program categoriesthat appear on different distant signals.

2.ublicensing Is Not a Viable Alternative to the Comp ulsoryLicensing SystemThe C opyright Office also expressed interest in exploring sublicensing as a ma rketplacealternative to compulsory licensing. I But such an approach would likely mean the end of distantsignals as we know them.A "sublicensing" approach, under which broadc asters would be expected to acqu ire

distant-market retransmission rights and then license them to cable operators and satellite

9 PROs Comm ents at 11.1 0 See NOI at 19055.

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carriers, would not wo rk as a d irect substitute for the com pulsory licenses. A significant reasonis that, by and large, broadcasters w hose stations are currently retransmitted as distant signals,typically by a handful of systems in adjacent television markets, have no core financial incentiveto engage in sublicensing. Since broadcasters rely principally on advertising revenues, andadvertisers would not assign value to potential audiences in a few scattered cable comm unitiesoutside the station's home market, there is no direct econom ic incentive for such broadcasters toundertake the cost and administrative burden of acting as a clearinghouse for such distantcarriage rights.

Neither the prevalence of cable netw orks nor even the rise of an after-market for theelivery of individual broadcast network program s pointed out in the Notice11 and repeated byome of the participating parties, 12 supports the proposition that sublicensing would be a v iablealternative to the statutory license. The factors relevant in those situations are not applicable tobroadcasters, who focus their economic activities on the local market. As mentioned ab ove,distant signal carriage does not translate into increased ad do llars for broadcasters. Nationalcable networks market a different product, supported by national advertising. The fundam entaleconom ic model that drives such cable networks simply does not translate to the broadcaststation context. 13

See Id. at 1904 5, 19054.12 See, e.g., Program Suppliers' Comments at 20 .13See alsoNCTA Com ments at 12-14.

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3.etransmission Consent Does Not Replace Com pulsoryLicensingOur current system of retransmission consent rights cannot be used as a ben chmark orsubstitute for the com pulsory licenses. 14 Retransmission consent relates to the distribution of abroadcast signal that is separate and distinct from copyright rights in programming. Not onlywould attempting to m erge copyright royalties with retransmission consent be mixing apples andoranges; such a m erger would also be impractical and inefficient because of the costs it wouldimpose. As C ongress has recognized, copyright licenses and retransmission consent are twoseparate concepts that should not be conflated.15III.odifying the Current Royalty StructuresA.oyalty Rates Should Be IncreasedThe cable and satellite providers complain about various aspects of their respective ratestructures, and suggest that rates should be kept low o r even reduced. 16 But the statutory royaltyrates were intentionally set below market levels, and despite limited rate adjustments over theyears since their enactment, remain so. 17 The initial rationale for setting artificially low rates promoting the growth of nascent industries has long since been overtaken by the huge growthof the cable and satellite businesses, and can no longer justify the statutory prescription of suc hrate levels. Any mo dification of the statutory rate should result in an increase, rather than adecrease, in compensation to copyright owners.

14 S ee NAB Com ments at 17-21.15Id16See, e.g., NCTA Com ments at 13, 17; ACA C omments at 13-16 ; DIRECTV Commentsat 13; EchoStar Comments at 14-15.17 S ee NAB Comments at 22 -23 ; Program Suppliers' Comments at 8-10.

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B.he M inimum Fee Should be MaintainedACA and NC TA argue that the cable license requires cable operators to pay royalties forthe retransmission of local television stations, while satellite carriers do not.1 8 But their premiseis incorrect. The minimum payment required by Section 111 is expressly a payment "for theprivilege of further transmitting any nonnetw ork programm ing of a primary transmitter in wholeor in part beyond the local service area of such primary transmitter," and thus quite clearly andexclusively a payment for the right to carry distant signals. 17 USC 1 11(d)(1)(B)(i) (emp hasisadded). Indeed, under Section 111(d)(3)(A), such royalties may be paid only to the owners ofworks that w ere the subject of retransmissions outside the local service area of the station. Noneare paid to the owners of programs on local stations retransmitted by the system. It is thussimply wrong to characterize the minimum fee as payment for the carriage of local stations.

The minimu m fee requirement is applicable only to Form 3 systems, which, having paidthe fee as a cond ition of the compulsory license, may carry either a distant independent station orfour distant network or PB S stations without paying any additional royalties. If a system paysthe royalty and carries no distant signals, it is because the system has m ade a business decisionthat its own interests are better served by the carriage of another program ming chan nel instead ofany available distant signal. Congressional intervention would be inappropriate in thesecircumstances.

18 ACA Com ments at 13-14; NCTA Com ments at 15-16.

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C. The 3.75% Fee Should Be M aintainedACA and NC TA also argue that the operative significance of the FCC's old market quota

rules, and the 3 .75 % fee that is triggered by their application, should be eliminated. 1 9 Butchanges in these rules wo uld lead to distortions in the marketplace, and should not berecommended.

During the amendm ent of Section 111, Congress determined that market rates shouldapply with the elimination of the FCC's market quota rules, and the Copyright Ro yalty Tribunaladopted and the courts affirmed the 3 .75% rate as that market rate. Although ACA describeshow significantly the 3.75% rate might affect royalty payments in the case of two hypotheticalcable systems, it has not identified how realistic or widespread this situation m ight be. 20 Thedisparity identified in the hyp othetical should, if anything, be addressed by increasing ratesacross the board to marketplace levels, not by eliminating the market-based rate.

D. Carriers Can Self-Correct for the "Phantom Signal" Phenom enonThrough tables illustrating purely hypothetical payments, the ACA attem pts to argue that

the rates are distorted by the "phantom signal" phenomenon for neighboring cable systems. 2 1

19 ACA Comm ents at 5-10; se e NCTA Comments at 17.20 Indeed, KVT J, the station it used for its hypothetical, was, according to Cable D ataCorporation data from cable systems' Statements of Account for 20 0 5-2, carried as a distantsignal by only two Form 3 systems, who paid a total of only $1,518 in royalties for that carriage.The nine Form 1/2 system s that carried the station as a distant signal to their 6,8 51 subscriberspaid a grand total of only $939 in royalties for the station, or about 20 per subscriber per month.21 ACA Comm ents at 10-13.

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ACA's description of the phantom signal phenomenon is uncorroborated, and ignores thepurpose of the carriage rules. 22

The phantom signal phenomenon is simply a particular application, in unusualcircumstances, of a rule that was adopted because of some ca ble operators' manipulation of cableroyalty payments. Before the implementation of carriage rules, some cable operators hadengaged in an "artificial fragmen tation" practice to minimize their already m inimal royaltypayments. To discourage artificial fragmentation of systems and to ensure that consumersreceived a va riety of signals from their cable providers, the Office impleme nted rules requiringthat the royalty rate for a distant signal be applied to the total gross receipts received fromsubscribers for every tier of service that includes any broadcast station.

The creation of so-called "phantom signals" is entirely a result of a c able operator'sbusiness decision not to d eliver the same distant signal to all subscribers receiving the same tierof service. ACA's hypothetical system could simply choose to provide the distant signal to allsubscribers receiving the sam e tier of service without any royalty increase, or drop the signalaltogether and reduce its royalties proportionately. It is in the cable operator's power to makefull use of the copyright licenses it is granted. Despite providing hypotheticals, ACA providesno evidence that the pheno menon is realistic or widespread. 23 With so little evidence, and inlight of the industry's ability to remed y the p roblem itself, there is no basis for the Cop yright

2 2 NC TA ackno wledges the important purpose un derlying the rule, but only asserts thatthere is no concern about artificial fragmentation. NCTA Comments at 18-19. As ProgramSuppliers have reported, however, numerous cable systems con tinue to treat co-ownedgeographically contiguous systems as separate for SOA filing purposes. Com ments of ProgramSuppliers in Docket No. RM 20 05-6 at 26-2 7 (filed Sep. 25, 20 06 ).23 See n. 18, supra.

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Office or Congress to intervene. The royalty payment rules should be maintained to continue todiscourage artificial fragmentation.

E.udits and Terms and ConditionsThe NA B does not ob ject to providing for audits of cable system SOAs, as suggested by

the Joint Sports Claimants ("JSC"), 24 to the extent audits are necessary to assure cable systemcompliance w ith the conditions of their compulsory license. If the Office adopts theimproveme nts to the cable SOA form that have been propo sed by the Copyright Own ers in theirseparate rulemaking comments in Docket No. 2 00 5-6, that need will be reduced somewhat bymaking it easier for cable operators to comply w ith their obligations and for the Office to enforcehoe obgaon

NAB has serious reservations about the broader JSC p roposal for authority to imposeunilateral terms and c onditions on the statutory license. The addition of such authority wouldlikely introduce a ne w set of nego tiations to the royalty claim and distribution process, andpossibly further litigation, which would only increase the transaction costs already imposed onthe parties to the royalty process. The addition of terms and con ditions could also lead toanomalous and inequitable results given the number of d ifferent copyright owner interests andindustry groups involved in the process. It would be p referable to impose terms and co nditions,if they are necessary, by statute and on a uniform basis.IV.nternet-Based Retransmission Systems M ust Be Evaluated Carefully

NAB supports the introduction of new comp etition among m ulti-channel video programdistributors, and several comm enting parties described proposed or actual systems that m ightfulfill that purpose by offering new ca ble-like television services via the Internet. But N AB24Joint Sports Claimants Comments at 9-11.

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remains concerned that the open global access and digital attributes of Internet technologies mustbe carefully accounted for in allowing any such services to retransmit broadcast stations. Inparticular, any new entrants should com ply with statutory terms and con ditions or regulatoryrequirements that are designed to en sure the protection of local market access and programexclusivity for broadcast stations. New technologies, whatever their ultimate promise in terms ofpromoting com petition in the MVP D marketplace, must be evaluated thoroughly against thesekey criteria.

In its comments, AT& T went to great lengths to show w hy its [PTV-based U-Verse videoservice satisfies the definition of "cable system" under Section 111(0 . 25 Yet AT&T is virtuallysilent on whether AT&T's service is also a cable system" under the Communications Act,noting only in a footnote that the tw o definitions are "very different." 26 However, as NABshowed extensively in its comments, in order for an entity to qualify as a "cable system" u nderthe Copyright Act, the entity must also comply w ith the statutory and regulatory requirementsapplicable to cable systems under the Com munications Act, such as must carry and programexclusivity. 27 AT&T should recognize that the two schemes are inextricably bound together, afact that Cap itol Broadcasting also recognizes. 28

In its comments and testimony, Capitol Broadcasting described a technical system thatwould pu rportedly permit the imposition of absolute geographical limitations on Internetretransmissions of broad cast stations. Based on that system, it says, the Office should m odify its

25 See AT&T Com ments at 14-19.26 AT&T Comments at 16 n.62.27 See NAB Comm ents at 61-68.28 See Capitol Broadcasting Comments at 14-17.


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prior position and support the extension of a statutory license to retransmissions of televisionbroadcast stations over the Internet.29

NAB has been skeptical, historically, of the ability of Internet com panies to restrictretransmissions over the Internet to local markets and , in the past, opposed application of thecompulsory license to the Internet. NAB understands that Capitol's proposal is designed toaddress this issue. Whether and under what conditions it should be entitled to a compulsorylicense would depend in part on wh ether it is completely effective in protecting local marketexclusivity. NAB is not currently in a position to assess any particular technology against thegeneral criterion.V.IRECT V's Proposed Expan sions off the Distant Networks Signal License AreUnnecessary at This TimeAlthough generally DIREC TV does not advocate any m ajor changes in the Section 119license, and, indeed, even suggests that "Congress should simply allow the license to continuediminishing in impo rtance naturally," 30 DIRECTV nevertheless proposes two new expansions ofthe distant network signal license. Neither proposal is currently necessary and, therefore, neithershould be recommended to Co ngress.

A.IRECTV'S Missing Affiliate Proposal Is PrematureDIREC TV proposes that the distant network signal license be expanded to autom aticallypermit the delivery of a distant network signal w here there is a "m issing" affiliate in a "shortmarket." NAB is concerned about this proposal for several reasons.29 Id. at 11.3 0 DIRECTV Com ments at 2.

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