Wednesday, February 08, 2006

Copyright Office Satellite Report

In an extremely impressive show of its bench strength, the Copyright Office yesterday released a second report to Congress, this time on the Satellite Home Viewer Extension and Reauthorization Act. The report covers the unserved household limitation in Section 119 and the relatively recent Section 122 statutory license for the retransmission of local network stations into their local markets. Section 119 is not for the faint of heart, and requires very technical knowledge, both of the industry, copyright law, and FCC law. There are only a tiny number of copyright lawyers who can grasp the intracies of the SHVA, which also requires a great deal of history of past acts. Bill Roberts, now Judge Roberts of the Copyright Royalty Board, was the principal drafter of the report, and is one of the select few. My home boy Tom Olson, a partner at Wilmer Hale is another.

For those wondering how sunsets work in practice, Section 119 is an example. In 1994, when I was counsel to the House of Representatives, the SHVA, first passed in 1988, was up for renewal or death. I preferred death, but I had no say in the matter. I therefore spent the good part of a year working with Bill Roberts, the Senate, and opposing members in the House, principal of whom was the late Mike Synar a strong proponent of the satellite industry. Committee chair Jack Brooks was also a supporter, which eliminated much negotiating room for those of us in the House who sided with the broadcasters. The Senate was also hostile to the broadcasters over their having killed cable compulsory reform the prior year. Subcommittee staff were upset about that too, but we took issues on a case by case basis, and sided with the broadcasters and sports leagues.

The most contentious issue in 1994, as now, is the unserved household restriction. The restriction serves to ensure that households that receive over-the-air signals do not receive through their satellite service another such signal, from another station affiliated with the same network. In 1994, the Senate preferred an extremely, and we believed unworkable scheme, of testing compliance. We went along with it out of comity. That system failed miserably.

In 1999, the system was amended and adopted a predictive model to determine subscriber eligibility. Although the Office's report notes one dissenting view, it concludes that the 1999 revisions have operated both efficiently and effectively. That is a "signal" improvement indeed.

Another issue is the fee for the satellite license. The license is calculated differently from the cable compulsory. One of the most unusual experiences I think I had in Washington arose out of the 1994 renewal legislation, when we dictated that market rate be set as the benchmark for what was then the carps (copyright arbitration royalty panels). When the arbitrators faithfully followed the statute in the rate adjustment under the 1994 Act, there was a huge uproar among some, including members of Congress who weren't involved in the legislation. The result was a rollback in 1999, and a freezing of the rates for five years, so that now the rates are far below market rate. There is no reason in the world why the satellite industry should be subsidized by copyright owners, and I applaud the Office's report for concluding that copyright owners are being harmed by below market rates. Sunsets are, though, intensely political matters and the issue is fought out by muscle, not on the merits.

The Office's report is another outstanding effort, so bravo again.


Anonymous said...

From my layman's perspective, the report seems one-sided in favor of copyright owners.

If I were to watch "Lost" from a New York broadcast instead of watching my local station, how would that damage Lost's copyright owner?

Although statutory licenses can damage copyright owners, what about the public benefit -- presumably the reason why the legislation was enacted? If I write a hit song, should I complain because I can't charge jukebox operators a premium to play it?

I thought that copyrights existed to balance creators' rights against the public good. I don't see much public good in this report.

William Patry said...

The idea of the sunset was to give copyright owners the ability to develop their own distribution ystem, but due, in part, to the subsidized rates paid by satellite carriers and to their signing up massive number of unserved households, an authorized, legitimate market could not develop, in my opinion.

The public is really not affected by that debate because they will get the signal from someone. The harm is to local broadcasters, who cannot sell advertising based on viewers who are no seeing local ads, but are instead seeing ads from remote markets.

Mark Seecof said...

Local OTA broadcasters no longer serve any important function. Their continued existence is a tribute to their rent-seeking prowess (just look at satellite must-carry!) and regulatory inertia. Virtually everyone can get cable or DBS now.

Who cares if local broadcasters can't sell ads based on local viewers? The sooner they go under, the better--that would free up their wonderfully penetrative VHF and UHF-lo frequencies for very-much-higher-valued uses like wireless digital networking and telecommunications.

The public is deeply concerned in this debate because it pays a lot in direct and opportunity costs to subsidize the now-obsolete (but sweet to Congressmen) local broadcasters.

The public pays more $$ for fewer distinct channels on DBS (because the idiotic SVHS rules force DBS providers to waste satellite channels delivering nearly-identical feeds from multiple network affiliates and feeds of marginal local stations which nobody actually watches). The public gets much less wireless telecom service than it would like (and pays more for what it does get) because vast swathes of the most useful part of the radio spectrum are allocated to obsolete local TV broadcasting.

If you were starting today you would not build the "local broadcaster based" system of 1960. It's bad public policy to preserve the actual 1960 system in order to guarantee the now-unearned profits of incumbent local broadcasters. In fact, the policy is so obviously bad that it can only be explained by public-choice theory.

(Oh, for those of you just starting to think about this stuff--don't worry that local news or local-interest shows would disappear along with local OTA broadcasters. People would still want such programming, advertisers would pay for it, local studios and ENG teams would create it, and cable and DBS operators would deliver it--they just wouldn't broadcast it from a local hilltop on channel 2 VHF. Cable especially would supply "network" feeds with local programs and ads inserted (they already do that with, e.g., HBO). Everybody would still get all of their favorite shows, and ads for their local county fairs each fall, too.)