On June 30, 2008, after a year of intensive study, the Copyright Offi ce issued its Final Report on whether to maintain, modify or eliminate certain key provisions of the Copyright Act relating to cable television and satellite carriers. In its Report, the Offi ce recommended abolishing compulsory licenses for cable television systems and satellite carriers, possibly paving the way for legislative changes that could transform the television and radio broadcasting marketplace starting in 2010. See Satellite Home Viewer Extension Act Section 109 Report, available at <http://www.loc.gov/today/pr/2008/08-123. html>.

The Report was prepared in response to a statutory requirement in Section 109 of the Satellite Home Viewer Extension and Reauthorization Act of 2004. The Report examined the statutory licensing system for the cable and satellite industries established under Sections 111, 119 and 122 of the Copyright Act in light of technological developments, and in an effort to create a basis for legislation to be drafted to update or eliminate the licenses.

Collectively, three licenses regulate retransmissions of distant and local over-the-air broadcast signals. The Section 111 license allows cable operators to retransmit local and distant radio and television signals to subscribers, and the Section 119 license does the same for satellite carriers of television signals. The purpose of these licenses is to provide an effi cient method of compensating copyright owners without incurring the transaction costs of marketplace negotiations, thereby promoting the growth of the cable and satellite industries.

The Section 122 license allows satellite carriers to retransmit local television broadcasts into the station’s local markets without paying royalties. Its purposes are to provide local television to satellite subscribers and stimulate competition between cable and satellite carriers by promoting an alternative programming array.

Congress created this licensing system when the cable and satellite industries were nascent. The licenses have been periodically reviewed over the last 20 years.

In preparing its Report, the Copyright Office sought comments from the affected industries, copyright owners and other interested parties and, in 2007, the Offi ce held three days of public hearings to supplement the record.

Key recommendations include:

  • Repeal Sections 111 and 119, Effective in 2010.

Characterizing Section 111 and 119 licenses as “arcane, antiquated, complicated, and dysfunctional,” the Offi ce’s principal recommendation was that Congress move towards abolishing them before January 1, 2010. The Offi ce found that, under the compulsory licenses, royalty rates are kept below marketplace rates. Furthermore, as broadcasting technology has evolved, the need for the licenses has waned. The Internet, for instance, has thrived without a parallel statutory scheme, and private mechanisms – such as collective licensing and sublicensing – could replace the compulsory licenses.

  • Replace the Section 111 and 119 Licenses With a Consolidated, Transitional Distant Signal License, Effective Through the End of 2014.

Because the digital television transition in 2009 will cause unanticipated signal-reception problems for millions of Americans, the Offi ce recommends a new fi ve-year “short-term statutory license built around digital television technology” during which new voluntary licensing arrangements are negotiated and become widely available in the broadcasting marketplace.

  • Abolish Distant Signal Compulsory Licensing, Effective January 1, 2015.

With the termination of the transition period on December 31, 2014, the cable and satellite compulsory licenses would be repealed.

  • Retain the Section 122 License, Expanding It If Section 111 is Eliminated.

This license continues to serve its original purposes of promoting inter-industry competition and ensuring the provision of local television broadcasts to satellite subscribers. Retention of a royalty-free, localto- local license is warranted because it promotes the general welfare of users, broadcasters and the public with no harm to copyright owners.

Although not presented as recommendations, the Report contains an entire chapter about “new distribution technologies” and whether they should be included in the current statutory licensing paradigm. Several wellknown businesses are using, or are planning to use, the Internet to retransmit broadcast programming. For example, AT&T currently uses Internet Protocol (IP) technology to deliver video content through a closed system available only to subscribers for a monthly fee. Verizon engages in similar transmission activities. The Offi ce concluded that new systems that are substantially similar in every respect to systems that already use the cable compulsory license should be eligible to use the license. If not substantially similar, new systems should not be eligible for the license. The Offi ce concluded that businesses using the Internet to deliver video programming should not be eligible for a statutory license at this time.

Furthermore, the Offi ce reaffi rmed a conclusion that it made almost a decade ago: “negotiation between collectives representing the owner and user industries, rather than by government administered statutory license, was the better solution for licensing the copyrighted works retransmitted by cable systems and satellite carriers.” Today, while existing collective licensing structures through the performing rights organizations (BMI, ASCAP and SESAC) are directed at musical works, the Offi ce found that they may nonetheless prove to be an uncongested avenue to clear video programming.

The Section 109 Report has been forwarded to Congress for review and will be central to discussions about implementing recommendations. Although the Offi ce recommended a gradual transition, with elimination of the distant signal licenses not scheduled until 2015, the proposed timeline for consolidating the cable and satellite compulsory licenses is short, potentially (if Congress approves) taking effect January 1, 2010. Clients who have a stake in these proposed changes are advised to make their views known if they wish to have meaningful policy input.