Cable Losing Money on Outdated Royalty Fee Deal, Lawyers Say
The cable industry, pushing for royalty fee changes, is losing money because of outdated rules that favor some TV stations over cable systems, lawyers say. As a result of changes in the broadcast and cable industries since 1976, cable operators may be losing millions of dollars annually, they said. Cable attorneys said the problem needs fixing immediately.
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NCTA asked the Library of Congress’s Copyright Office to address the 2 issues (CD Aug 18 p10). The group petitioned the office to expand its definition of affiliated TV stations from the “Big 3” to include Fox, Pax, WB and UPN. In a separate filing, the NCTA sought an end to a rule that forces cable systems to pay extra royalty fees in certain cases when headends are combined. Operators must pay a phantom-signal fee for all subscribers served by a headend even when only some of them get a distant broadcast signal.
“Phantom signal has been a big problem… for over 20 years,” a cable lawyer said. The industry paid $132 million last year in license fees, NCTA research found. “It has been recognized as unjust by the Copyright Office, but nothing has been done about it. This is not some immaterial nagging issue,” the attorney said. Phantom signal rules have complicated some cable acquisitions and made others nearly impossible, the lawyer said. Another attorney said: “The rule itself is not correct. You should pay for what you use.”
Cable operators pay 4 times more for imported signals from stations deemed independent by the Copyright Office, including stations not affiliated with ABC, CBS or NBC, the NCTA said in the Aug. 17 petition. The FCC said transmission of an interconnected program service for more than 15 hours weekly to at least 25 stations in 10 states constitutes a network, the petition stated. Fox, Pax and WB run at least that much programming during prime time, while UPN provides 13 hours of shows, NCTA said. “It is unfair and outdated policy for the Copyright Office to continue to differentiate the network stations,” the petition said. Updating the rules “will ensure that cable operators are not overcharged,” it said.
If the past is any guide, NCTA has an uphill fight ahead at the Copyright Office. It has filed petitions on phantom signals since 1983. The office took no action on that petition, NCTA said. Copyright Office lawyers weren’t available to comment. “The Copyright Office, in other areas, has managed to address issues a little bit more quickly,” said George Washington U. Law School Prof. Robert Brauneis, who teaches copyright law.