Copyright Office: No Compulsory Licenses for Internet Companies

By William G. Korver, Reporter, BroadbandCensus.com

WASHINGTON, July 1 – “Broadband penetration will have substantially increased” by 2015, the U.S. Copyright Office said in a Monday report in which the agency recommended that Internet companies streaming local television signals over the Internet be denied a compulsory copyright license.

The agency, an arm of the Library of Congress, also recommended that Congress streamline the statutory copyright licensing terms for cable and direct broadcast satellite providers of broadcast TV signals.

If the advice of the U.S. Copyright Office is implemented, companies desiring to stream local TV signals over the Internet would be denied the copyright license that cable and satellite operators utilize to distribute identical signals.

The report urged, however, that the compulsory license extend to Internet protocol-based video services such as those offered by telecommunication companies like AT&T and Verizon Communications. Such services, the report held, fit the definition of a cable service under existing copyright law.

A compulsory license allows users of copyright audio and video material – such as cable and satellite copies – to use video programming without obtaining permission from the copyright holders. But the user must still pay the copyright owner a fee, and that fee is determined by the government.

The extension of compulsory licenses to the Internet could facilitate piracy, damaging the financial interests of copyright owners, said the Copyright Office. “There are serious questions” about signal security that need to be addressed, said the report.

Moreover, the marketplace seems to be working with regard to video programming distribution over the Internet, said the report. Hence, expanding the compulsory license could prove counterproductive.

After discovering that the prices of existing government royalty rates related to the multichannel retransmission of distant broadcast signals are currently beneath market value, the U.S. Copyright Office stated that copyright licensing should be “phased out” and replaced by commercial rates as “the need for these statutory licenses has dissipated over time.”

The Copyright Office report said that its “principle recommendation” was that Congress should “abandon” both Sections 111 and 119 of the Copyright Act, which it called “a stop-gap solution.” The “distant signal programming marketplace could be equally successful” without the continuation of Sections 111 and 119, the report said. Continued maintenance of the two sections has resulted in “fissures.”

Although Sections 111 and 119 may have been justifiable during the beginning stages of the cable and satellite industries, the flourishing pay TV marketplace has made them obsolete, the report said. The Internet has reduced the need for them.

Collective licensing and sublicensing could be possible substitutes for distant signal licenses, said the report.

While seeking to phase out Sections 111 and 119, the Copyright Office favored continuing Section 122 of the Copyright Act, or a license allowing satellite operators to retransmit local programming without charge, “because it promotes the general welfare of users, broadcasters, and the public.”

Since Section 111 was implemented in 1978, cable operators have paid $125 million in average annual royalties, while satellite TV providers have paid an average of about $50 million in annual royalties since Section 119 was implemented in 1989 .

The transition to digital television was also discussed in the report.

The Copyright Office report said that digital transition “will be settled” and many different providers shall offer broadcast-type video programming for homes by 2015.

That’s why Congress should grant only a temporary license, from January 1, 2010, until December 31, 2014, a move to provide royalties for the carriage of distant and “superstation” signals while continuing to permit retransmission of local TV signals royalty-free.

Thus, the Copyright Office would continued a digital signal service “lifeline” for “millions of American households” that could be adversely affected by “unanticipated signal reception problems” because of the switchover to digital TV, from analog, and help settle all issue in the DTV transition.

The office also recommended that cable operators no longer pay royalties based on gross receipts, but based upon a flat-fee, per-subscriber system.