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ACA Commends House, Senate Panels For Approving Elimination of the Phantom Signal Rule

Commenting on satellite legislation that needs to be updated by Congress by the end of the year, the American Cable Association applauded the House and Senate Judiciary committees for recently passing bills that would overhaul an outdated copyright rule that has proven a financial burden on small and mid-sized cable operators, especially operators that have been consolidating headends to be more operationally efficient.

In separate votes in September, the two committees agreed to renew and update the Satellite Home Viewer Act (SHVA), which first became law in 1988 and allowed satellite providers to offer broadcast signals from New York and Los Angeles to consumers in rural and remote areas who could not pick up their local TV stations with an antenna. The distant signal license expires on Dec. 31, 2009.

Responding to concerns raised by ACA and others, the committees agreed to eliminate the "phantom signal" rule enforced by the U.S. Copyright Office. Under the rule, ACA members that have elected to consolidate their headends are required to pay copyright royalties on distant broadcast signals under a compensation formula that must include all system subscribers, including those who do not receive the programming (which is where the term phantom signal gets its name).

"These bills are a good start," ACA President and CEO Matthew M. Polka said. "We appreciate that the House and Senate Judiciary committees have recognized that smaller, independent and rural-based cable operators should not be punished financially by a nonsensical phantom signal rule adopted many years ago when the communications market place then was vastly different from today."

The pending expiration of the satellite distant signal license makes renewal of the SHVA "must pass" legislation in 2009. In the weeks ahead, ACA is urging Congress to consider making two changes to the House bill and one to the Senate version.

The House Judiciary's bill includes language that would direct the Copyright Office to establish rules to permit copyright holders to periodically verify and audit the books and records of cable systems to ensure that they are being appropriately compensated under the law. Another House Judiciary provision would impose copyright royalties on cable systems for each carried multicast broadcast signal originating from a distant market, which could result in higher costs for systems in smaller markets who must also contend with the Copyright Office's market quota rules.

ACA is also concerned about a Senate Judiciary provision that deals with cable's compulsory license. The license allows cable operators to retransmit both local and distant broadcast signals without having to negotiate copyright clearances with each copyright owner. The Senate Judiciary bill would call on the Copyright Office, a division of the Library of Congress, to study whether compulsory licensing should be phased out and be entirely replaced by a market-based approach.

"Compulsory licensing has been working for decades as an alternative to lengthy and costly negotiations with literally thousands of copyright owners." Polka said. "The compulsory license is a vital tool that not only helps ACA members and copyright owners avoid huge transaction costs but also prevents cable consumers from losing access to their favorite programming and becoming pawns amid disputes created by media conglomerates bent on taking financial advantage of ACA members," Polka said.

"Smaller cable operators could not support a phase out of the cable statutory license if it meant that copyright fees would be negotiated in the same way that retransmission consent fees are negotiated. Such a copyright payment regime would impose unfair costs on independent operators and their customers because the owners of these smaller providers would certainly face the same sort of price-discrimination that they face from broadcasters during broadcast carriage fee talks."


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