[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
VIDEO ON THE INTERNET: iCraveTV.com AND OTHER RECENT DEVELOPMENTS IN
WEBCASTING
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HEARING
before the
SUBCOMMITTEE ON TELECOMMUNICATIONS,
TRADE, AND CONSUMER PROTECTION
of the
COMMITTEE ON COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
FEBRUARY 16, 2000
__________
Serial No. 106-94
__________
Printed for the use of the Committee on Commerce
U.S. GOVERNMENT PRINTING OFFICE
62-972CC WASHINGTON : 2000
COMMITTEE ON COMMERCE
TOM BLILEY, Virginia, Chairman
W.J. ``BILLY'' TAUZIN, Louisiana JOHN D. DINGELL, Michigan
MICHAEL G. OXLEY, Ohio HENRY A. WAXMAN, California
MICHAEL BILIRAKIS, Florida EDWARD J. MARKEY, Massachusetts
JOE BARTON, Texas RALPH M. HALL, Texas
FRED UPTON, Michigan RICK BOUCHER, Virginia
CLIFF STEARNS, Florida EDOLPHUS TOWNS, New York
PAUL E. GILLMOR, Ohio FRANK PALLONE, Jr., New Jersey
Vice Chairman SHERROD BROWN, Ohio
JAMES C. GREENWOOD, Pennsylvania BART GORDON, Tennessee
CHRISTOPHER COX, California PETER DEUTSCH, Florida
NATHAN DEAL, Georgia BOBBY L. RUSH, Illinois
STEVE LARGENT, Oklahoma ANNA G. ESHOO, California
RICHARD BURR, North Carolina RON KLINK, Pennsylvania
BRIAN P. BILBRAY, California BART STUPAK, Michigan
ED WHITFIELD, Kentucky ELIOT L. ENGEL, New York
GREG GANSKE, Iowa TOM SAWYER, Ohio
CHARLIE NORWOOD, Georgia ALBERT R. WYNN, Maryland
TOM A. COBURN, Oklahoma GENE GREEN, Texas
RICK LAZIO, New York KAREN McCARTHY, Missouri
BARBARA CUBIN, Wyoming TED STRICKLAND, Ohio
JAMES E. ROGAN, California DIANA DeGETTE, Colorado
JOHN SHIMKUS, Illinois THOMAS M. BARRETT, Wisconsin
HEATHER WILSON, New Mexico BILL LUTHER, Minnesota
JOHN B. SHADEGG, Arizona LOIS CAPPS, California
CHARLES W. ``CHIP'' PICKERING,
Mississippi
VITO FOSSELLA, New York
ROY BLUNT, Missouri
ED BRYANT, Tennessee
ROBERT L. EHRLICH, Jr., Maryland
James E. Derderian, Chief of Staff
James D. Barnette, General Counsel
Reid P.F. Stuntz, Minority Staff Director and Chief Counsel
______
Subcommittee on Telecommunications, Trade, and Consumer Protection
W.J. ``BILLY'' TAUZIN, Louisiana, Chairman
MICHAEL G. OXLEY, Ohio, EDWARD J. MARKEY, Massachusetts
Vice Chairman RICK BOUCHER, Virginia
CLIFF STEARNS, Florida BART GORDON, Tennessee
PAUL E. GILLMOR, Ohio BOBBY L. RUSH, Illinois
CHRISTOPHER COX, California ANNA G. ESHOO, California
NATHAN DEAL, Georgia ELIOT L. ENGEL, New York
STEVE LARGENT, Oklahoma ALBERT R. WYNN, Maryland
BARBARA CUBIN, Wyoming BILL LUTHER, Minnesota
JAMES E. ROGAN, California RON KLINK, Pennsylvania
JOHN SHIMKUS, Illinois TOM SAWYER, Ohio
HEATHER WILSON, New Mexico GENE GREEN, Texas
CHARLES W. ``CHIP'' PICKERING, KAREN McCARTHY, Missouri
Mississippi JOHN D. DINGELL, Michigan,
VITO FOSSELLA, New York (Ex Officio)
ROY BLUNT, Missouri
ROBERT L. EHRLICH, Jr., Maryland
TOM BLILEY, Virginia,
(Ex Officio)
(ii)
C O N T E N T S
__________
Page
Testimony of:
Alben, Alex, Vice President, Government Affairs, RealNetworks 42
Beck, Stuart J., President, Granite Broadcasting Corporation. 28
Boren, Hon. David L., former United States Senator from the
State of Oklahoma, and President, University of Oklahoma... 21
Jaszi, Peter, Professor, Washington College of Law, American
University................................................. 32
Karpowicz, Paul, Vice President, LIN Television.............. 37
McCallum, Ian, Vice President, Corporate Sales and
Development, TVRadioNow, Corporation....................... 14
Roback, Robert D., President, Launch Media................... 25
Valenti, Jack, President and CEO, Motion Picture Association
of America................................................. 11
Additional material submitted for the record:
American Society of Composers, Authors and Publishers,
prepared statement of...................................... 75
Engel, Hon. Eliot L., a Representative in Congress from the
State of New York, prepared statement of................... 75
(iii)
VIDEO ON THE INTERNET: iCraveTV.com AND OTHER RECENT DEVELOPMENTS IN
WEBCASTING
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WEDNESDAY, FEBRUARY 16, 2000
House of Representatives,
Committee of Commerce,
Subcommittee on Telecommunications,
Trade, and Consumer Protection,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:23 a.m., in
room 2123, Rayburn House Office Building, Hon. W.J. ``Billy''
Tauzin (chairman) presiding.
Members present: Representatives Tauzin, Oxley, Stearns,
Gillmor, Cox, Largent, Shimkus, Wilson, Pickering, Ehrlich,
Markey, Eshoo, Engel, Wynn, Luther, Sawyer, Green, and
McCarthy.
Staff present: Justin Lilley, majority counsel; Cliff
Riccio, legislative clerk; and Andy Levin, minority counsel.
Mr. Tauzin. The subcommittee will please come to order.
Today the subcommittee begins an inquiry into a number of
issues involving video on the Internet. I would ask all of our
friends and guests to take seats, and the Chair will recognize
himself for an opening statement.
In many respects, the inquiry today is an extension of a
long-standing interest to the chair, that being the state of
competition in the video programming markets. In one sense, the
Internet is much like cable and much like a satellite platform
in that it's capable of casting a wide array of video
programming to a large audience of American and international
consumers, but in another and more important sense, the
Internet is like no other medium. First, it is global. It is
geographically unconfined. It enables consumers to quickly and
efficiently copy and distribute any digitized product. That's
what makes it a marvel, and that's what literally makes it so
potentially important to our country and the world.
But as recent events involving widespread hacking indicate,
the Internet also invites those elements in society that refuse
to recognize fundamental rules of fairness and decent conduct.
It is for this reason that Congress must proceed cautiously and
deliberately as it considers whether to extend a compulsory
license to Internet service providers.
I would note for my colleagues that Congress just concluded
deliberations that were two separate satellite compulsory
licenses, and in both instances we reaffirmed our commitment to
protecting the broadcaster's Grade B contour. We reaffirmed our
commitment to ensuring that copyright holders have adequate
protections against piracy of their works.
Content is our Nation's richest expert product and should
not be unwittingly exposed to piracy, and localism is still one
of Congress's most important telecommunications objectives, one
that is enshrined in the Communications Act. So all of you in
favor of Internet-specific licenses have a very high threshold,
clearly, before Congress can proceed with that form of
legislation. The Internet by definition is ill-suited for the
types of rules and obligations that normally come with
compulsory licenses. How can you define a Grade B contour of 6
billion people? Nevertheless, we should ask and we will ask
here today what role can Congress play to facilitate enhanced
service and competition in the delivery of video over the
Internet.
Today we will here from some old friends and some new
friends, an expert on copyright law, about the challenges we
face in balancing of content owners and the interest of
consumers. New video streaming technology presents potential
threats to content owners, but it also offers vast new
opportunities to information consumers. We will no doubt hear
from both, and we no doubt have to be concerned with both of
those interests. Without a doubt, consumers will increasingly
seek to expand their viewing options, and in fact as we know in
the digital age, video will become just one part of a digital
stream of data that includes all forms of communications.
Our challenge, as it was in crafting the Digital Millennium
Copyright Act, is to ensure that both content owners and
consumers maximally benefit from these exciting advances in
technology. As a committee, we can encourage further electronic
commerce if we get the balance right. We welcome the
suggestions of our witnesses about how best to meet this
challenge, and we certainly expect to learn an awful lot today.
The panel we've assembled for our committee today is
extraordinary in its depth, knowledge, and impact upon the
issues I've outlined, and I expect that not only the written
statements we have already received, which I will ask now
unanimous consent be made a part of the record, and without
objection it is so ordered, but the verbal testimony we receive
I think will further enhance our capacity to understand and
hopefully one day make decent policy in this very difficult
area.
The Chair has extended his statement long enough to welcome
the incoming and very good friend from Massachusetts, the
ranking minority member of our committee, Mr. Markey.
Mr. Markey. Thank you very much, and I think everyone
enjoyed being exposed to streaming Tauzin, you know, which is a
special treat being here in this Telecommunications
Subcommittee.
I want to commend you for calling this hearing on Internet
video, issues related to video streaming and webcasting,
including debates over whether Internet service providers are
eligible to utilize the existing statutory licenses accorded to
cable operators and satellite providers to deliver Internet
video. I think that this hearing will provide a very
interesting morning of testimony and serve as a harbinger of
conversations to come as packet switch delivery of video
becomes more and more prevalent over different media.
There is no question that as deployment of Internet-based
technology continues at a heady pace, that existing results
that were drawn up based largely upon the geographically rooted
architecture of cable systems or geographically licensed
television broadcasting may come under strain. We already
witnessed last fall how new satellite technology with increased
capacity and new local-to-local service sheds new light and
increases scrutiny upon existing FCC rules such as those
addressing network non-duplication, syndicated exclusivity, and
sports blackout.
These rules were drawn up to promote important
communications values of localism and diversity, and Congress
sought to preserve these values while injecting another
important value, competition, into the mix; and while fairness
to various market participants and dictating parity, life as
the saying, goes is not always fair, in the new law rough
equivalency was sought on many issues between cable and
satellite providers, yet rather than giving the satellite
operators a statutory license like the terrestrial license that
cable operators use which lasts forever, Congress chose to
limit the satellite license to 5 years, and it comes with a
higher rate than cable pays for same programming.
The Internet, on the other hand, is not technology
specific, not territorially limited in its natural unfettered
state. It can be delivered over cable systems, phone networks,
satellite technology, and over wireless infrastructure. Once
something is on the net, it can be accessed in Boston, Bermuda,
or Beijing. This international aspect of Internet assess is
something that will bring many existing rules under a new
examination, and it should not change the values that drove
development of our policies.
One of those values is protected intellectual property.
Recently, a Canadian-based company began streaming Canadian-
and
Buffalo-based TV signals over the Internet. This company,
iCraveTV.com, argued that its service was permissible under a
Canadian statutory licensing law. In the U.S., the motion
picture industry and the sports leagues sued and won an
injunction against iCraveTV that ordered it to stop its
webcast. This case can be cited legally as iCraveTV v.
iCreateTV.
There is lingering questions, however, that this hearing
will explore which is whether the mere fact that something is
delivered through a packet switched Internet-based system means
that it is qualitatively different from other forms of delivery
or legally different, and if so, we need to explore what
adjustments should be made in our policies if any adjustments
should be made.
I have also found that many people in the emerging Internet
industry go through life with binoculars on. They are
visionary. They can see way out into the future and tell us
dreams of things to come. Everything up close, however, is
completely out of focus. I want to encourage our panel to not
only give us their vision of where this mark will be 10 years
from now or 15 years from now, but also where they think it
will be 1 or 2 or 3 years from now. That helps us as
policymakers. The vision may or may not ever come to pass. What
happens a year or 2 years or 3 years is very real in the lives
of consumers and competitors in our country.
We have an excellent panel before us today. I look to
forward to hearing from our distinguished witnesses.
I congratulate you, Mr. Chairman, on this excellent
hearing. I yield back the balance of my time.
Mr. Tauzin. I thank my friend. The Chair is now pleased to
recognize the gentleman, Mr. Shimkus, for an opening statement.
Mr. Shimkus. Thank you, Mr. Chairman, and I want to mention
that today is Lithuanian Independence Day. I know Chris would
know that, but it's important to state that publicly for the
record.
Thanks for calling this hearing. The late, great Harry Kari
said: ``It might be, it could be, it is a home run.'' As most
of us know, he was a Cub announcer. Before that, he was a St.
Louis Cardinal announcer. Jack Buck is quoted as saying, ``Go
crazy, everyone, go crazy,'' when the Cardinals won the pennant
in the World Series. Joe Buck said, ``to the track, well,
gone,'' in reference to Mark McGuire.
As much as those statements are indelibly sketched into any
mind by listening to St. Louis Cardinal broadcasts over 42
years, this is also indelibly sketched: ``This broadcast is
authorized by the St. Louis Baseball Cardinals and is solely
intended for our listening audience. Any rebroadcast,
retransmission of the account, or description of this game
without the express consent of the St. Louis Baseball Cardinals
is strictly prohibited.''
I think that is going to be part of the major debate today
as we talk about copyright issues, and my wife, who is a church
organist, to her credit went through the library and threw away
the Xerox copies of music because of the unintended use of
depriving the artist the compensation due to their works.
Having followed this issue and hearing from various parties
about webcasting, obviously I am intrigued, like all of us are,
by the possibilities the Internet holds. The question is not
what if webcasting, because it is a reality, but what are we
going to do to uphold the copyrights in a webcasting world.
I was extremely intrigued reading Mr. McCallum's written
testimony. Besides a complete lack of remorse for violating
U.S. copyright law, I was struck by the utter lack of respect
afforded current copyright holders. Mr. McCallum goes to great
length to explain how Canada is different from countries who do
not operate under similar copyright principals, yet he fails to
realize that the improper use of copyright materials, whether
in China or Canada is still illegal. In fact, it may be worse
when someone in a country with similar copyright principles is
the violator.
We all know that webcasting is here and it offers great
possibilities to consumers. How we can facilitate competition
and allow consumers the greatest choices with evolving
technologies will be the next question.
Again, Mr. Chairman, thank you for calling this hearing
today, and I look forward to hearing from the people of the
panel. I yield back my time.
Mr. Tauzin. I thank the gentleman. The gentlelady from
California, Ms. Eshoo, is recognized for an opening statement.
Ms. Eshoo. Thank you, Mr. Chairman, and I want to join all
of my colleagues on the committee in thanking you for holding
this very important hearing today. I look forward to hearing
testimony from our panel of expert witnesses on the
distribution of local broadcast signals over the Internet.
Much of what this subcommittee has been focusing on
recently is how the current paradigm of laws will apply to E-
commerce and the new technologies created for utilizing the
Internet to its fullest potential. We are currently dealing
with the changes of this paradigm in legislation which governs
the use of electronic signatures and records with the
protection of data bases and with the privacy of our personal
information in the online world.
Today, we have another example of this burgeoning public
policy question. This is a very important question we are
facing, namely to investigate whether our current laws protect
broadcast content providers from copyright infringement in the
online world. The courts are likely to decide this sooner than
this subcommittee or the Congress, especially in light of the
iCraveTV.com lawsuit that I'm sure we're going to hear more
about today.
I think it would have been a big mistake if the Congress
has granted Internet webcasters the same compulsory license
rights that cable companies currently operate under. As
committee members will I think recall, this was briefly
considered during the conference of the Shiva legislation. How
we regulate cable companies, in my view, should not
automatically--and I think the operative word here is
``automatically''--extend to webcasters and the Internet.
That's why these hearings are so important. Members will
learn, be able to ask very important questions, get some very
important answers back from these expert witnesses, and I think
that out of this some clarity will emerge. Just because we are
having a hearing, I do not believe that that automatically
should extend itself to legislation or the launching of
legislation in this area.
So, thank you, Mr. Chairman, for holding the hearing. Thank
you to the witnesses, some of whom we have welcomed back here
again and again; and to those that have not been here, a
welcome to you as well. Yield back.
Mr. Tauzin. I thank the gentlelady.
The Chair now recognizes the gentleman from Oklahoma, Mr.
Largent, for an opening statement.
Mr. Largent. Thank you, Mr. Chairman. Mr. Chairman, I want
to welcome my fellow Oklahoman and former Senator and former
Governor of the State of Oklahoma and current president of the
University of Oklahoma, the Honorable David Boren, who will be
testifying on behalf of the University of Oklahoma and the
NCAA.
Senator Boren, welcome. We're glad to have you back in
Washington, DC for a time.
I think this morning's hearing can be summed up with the
following question: Webcasting, a blessing or a curse? The
Internet service provider community views webcasting as a
consumer-friendly blessing. ISPs contend that as broad band
technologies continue to deploy, the Internet should be allowed
to compete on the same playing field with cable, satellite, and
traditional broadcast television as the legitimate alternative
of distributing video programming.
This raises public policy questions of whether Internet
ISPs should have the same statutory rights as cable and
satellite operators to retransmit broadcast programming without
the consent of copyright holders. The content community,
television networks, movie studios, broadcast stations, sports
leagues, and the NCAA take a more skeptical position of
webcasting. They see the unauthorized retransmission of their
intellectual property as a threat to their economic well being.
Copyright holders will argue that the Congress did not
intend cable and satellite licenses to apply Internet-based
services because the Internet has no geographic boundaries, as
is the case with cable and satellite delivery systems. For
instance, a broadcast originating in Tulsa, Oklahoma can be
easily retransmitted virtually anywhere in the world via the
Internet.
The content industry has also expressed concern that
unauthorized delivery of video programming over the Internet
will lead to more piracy because of the ease with which the
Internet enables computer users to copy and redistribute
computer files.
I'm looking forward to the hearing from our witnesses this
morning who I'm sure will offer compelling arguments on both
sides of this issue. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman.
The gentleman from Ohio, Mr. Sawyer, is recognized for an
opening statement.
Mr. Sawyer. Thank you very much, Mr. Chairman. I join my
colleagues in my thanks for having this hearing. My hope is
that it will touch a far broader arena than the instant case
that brings it before us.
I would like to associate myself with the comments of both
you, Mr. Chairman, and the ranking minority member, as well as
a number of my colleagues in their comments. I have an opening
statement which I will not read and would appreciate it if it
could be inserted into the record.
But let me just simply say that while we all seem to be
saying that we want to strive toward technologically neutral
but legally consistent interpretations of law that make
possible the growth of this extraordinary medium without
trampling on the rights of those who create content, and while
it may also be true that courts may resolve this more quickly
than the Congress, I suspect that that may be only because the
violation, if there was one, occurred within a convenient
terrestrial venue.
The real question is whether or not this problem can be
dealt with on a global basis. We face a problem of harmonizing
law and regulation around the world and addressing the question
of with whether or not existing jurisdictional oversight
through WTO and RIPO or other kinds of legal superstructures
need to be created in order to assure that technological
neutrality and legal consistency.
I hope that we can talk in terms of those mechanisms and
whether or not mechanisms will serve or whether we need to
investigate further global action to deal with this particular
undertaking. With that, I yield back my time and thank the
chairman for this opportunity.
Mr. Tauzin. I thank the gentleman.
The Chair is now pleased to welcome and recognize the vice
chairman of the committee, Mr. Oxley, for an opening statement.
Mr. Oxley. Thank you, Mr. Chairman, and welcome to all of
our distinguished witnesses.
The Internet is revolutionizing our lives in ways we never
would have thought possible just 5 or 10 years ago. People of
all ages routinely turn to the web as their primary source of
news and information, and in fact, many people are listening to
a live broadcast of this hearing through the Commerce
Committee's web site even as we speak.
Television broadcasters have started to offer their
newscasts and other types of programming to web servers as
well, and while the quality of these Internet broadcasts is
currently limited, several companies are working to perfect
their video streaming abilities. It's only a matter of time
before this technology will allow web-based broadcasts to
compete on equal footing with cable and satellite delivered
programming.
At the end of the last session, the House gave final
approval to the Satellite Home Viewer Improvement Act designed
to promote satellite television as a competitor to cable. I am
a proud supporter of that measure.
I look forward to this hearing on what role Congress should
play, if any, as Internet video broadcasts emerge as a serious
competitor to cable and satellite. I welcome the opportunity to
discuss whether Congress should establish a separate licensing
system for Internet service providers or if these ISPs should
be allowed to use existing statutory licenses to deliver
programming.
In light of the recent court ruling against the Canadian
company iCraveTV.com in which the motion picture studios and
sports organizations won an injunction against the company for
distributing their programming on the Internet, I look forward
to hearing from Mr. McCallum of iCraveTV, Mr. Valenti, of
course, from the motion picture association, and our former
Congressional colleague, Mr. Boren, President of the University
of Oklahoma, and other witnesses as well.
Thank you all for coming today, and I yield back. Thank
you, Mr. Chairman.
Mr. Tauzin. I thank the gentlemen.
The gentlelady from Missouri, Ms. McCarthy, is recognized
for an opening statement.
Ms. McCarthy. Thank you very much, Mr. Chairman. Like my
colleagues, I seek a balance between advancing technology such
as webcasting and protecting the content creators and their
copyright material. We must be about the business of fostering
new opportunities for providing content on the Internet as we
assure that intent provides an efficient, secure, and
profitable marketplace. Experimentation should be encouraged,
and freedom, including the freedom to exercise property rights
in content, should be the basic rule of the Internet.
Let's be careful, Mr. Chairman, not to rush to implement
policy that may hamper the development of the Internet freedom
of creativity or the technological advancements of the future
of the Internet, and that is why I look forward very much to
the testimony of this distinguished panel today and to working
with you, Mr. Chairman, on this issue. I yield back.
Mr. Tauzin. I thank the gentlelady.
The gentlelady from New Mexico, Ms. Heather Wilson is
recognized.
Ms. Wilson. Thank you, Mr. Chairman. I'm interested in
hearing from the panel. My district has a number of radio and
television stations who are moving to the web. In fact, in the
morning I listen to 770 KKOB from downtown Albuquerque, New
Mexico here in my office, and our three television stations
have web sites which are relatively new but I'm sure will begin
streaming their broadcasts shortly, and the reality is I like
it. I'm a consumer of that information, and I suspect that
what's really driving all of this is that a lot of people like
it.
The question is what if any regulation should apply to
those kinds of broadcasts. I'll be interested to here what the
panelists say, particularly with respect to the protection of
copyrights, in making sure that advertising revenues go where
they really should go; but with respect to trying to control
this, you know, there is reason for licenses. It's because we
were allocated limited resources like the broadcast spectrum or
we were trying to limit and control monopolies like the one,
cable, that's provided to your home, but the wonderful thing
about the Internet is that it is so unlimited.
I have a choice between KKOB out of Albuquerque or a whole
lot of other things online, and I think that is the wonderful
thing about this. Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentlelady.
The gentleman from Mississippi, Mr. Pickering, is
recognized.
Mr. Pickering. Mr. Chairman, I'll be very brief. I just
want to thank you for holding this hearing. This is an
extremely important issue as we go forward to new technologies,
that we want to make sure that we maintain the copyright and
property rights. It is extremely important, but I do believe
that we need to be cautious before we take any specific
mandated approaches, and so I look forward to hearing from the
panel today and look forward to working with you on this issue
as we go forward.
Mr. Tauzin. I thank my friend.
The gentleman from California, Mr. Cox, is recognized for
an opening statement.
Mr. Cox. Thank you, Mr. Chairman. Webcasting is good. Part
of what we may be debating here is that question, but I do not
think there is a question. I think webcasting is good. It's
good for consumers who are provided with an alternative to
cable or satellite or terrestrial broadcast. It's also good for
the creative content providers, and it's good for producers of
that material and distributors of that material, because the
lesson of the 20th century is that new technologies create new
markets.
The only people who should be threatened by the Internet
are those who want to preserve the status quo and insulate
themselves from new kinds of competition that they have not
already met. So the Internet is a threat. It's a threat to the
status quo, and it's a threat to the comfortable, privileged
position of industries beyond what we are talking about here
today that have not had to face this kind of dynamic
competition and anyone who wants to keep competitors out.
The Internet will permit consumers to get what they want
unless the Government passes laws to prevent it. So we need to
be attentive to our responsibilities here and make sure that we
protect intellectual property, but that at the same time we
resist the entreaties of competitors who may use arguments of
that type to prevent competition. It requires a good deal of
judgment on our part, but I think that this hearing will help
us make that judgment.
I thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman.
The gentleman from Florida, Mr. Stearns, is recognized.
Mr. Stearns. Mr. Chairman, thank you very much. Now, Mr.
Chairman, I think you have got a tiger by the tail here. You
know, I was thinking about what 40 years ago, maybe in the
1960's when cable started, probably these same type of
questions were proposed and thought about, you know, what we
source do television stations have in terms of copyright, what
about international treaty organizations where the copyrights
are violated.
So I think out of all the hearings both on the House and
Senate, Mr. Chairman, I think you have got the tiger by the
tail here.
Mr. Tauzin. Would the gentleman yield?
Mr. Stearns. Yes, I'd be glad to.
Mr. Tauzin. I direct your attention to a little book called
A Victorian Internet. It's a book that describes all these same
issues when the telegraph was first invented.
Mr. Stearns. Yes. I think that is where we are at, and Mr.
McCallum is going to have to make the argument that what
appears to be they have 1, 2, 3, 4, 5, 6, perhaps, and the two
of you are going to have the make your case against these six,
but just remember the cable TV operators made the same argument
40 years ago and they were successful. So you now have to do
the same thing, and I think of all the members have pointed out
we want to be very cautious about this. We want to make sure
that copyrights are protected and that the laws are obeyed, but
in the end we do not want to stymie competition, and as my
colleague from New Mexico said, how great it is just to go up
on the Internet and pull up your local television.
It is really very helpful, particularly if there are
negative comments about yourself. You can quickly respond to
them, whereas you would have to wait for some constituent to
call you up and say did you know yesterday they said so and so
about you.
So we have a real argument in favor of web TV, so I think
the arguments have to be made, and of course this committee,
Mr. Chairman, has to be very careful and cautious, and I thank
the gentleman.
Mr. Tauzin. I thank the gentleman.
[Additional statements submitted for the record follow:]
Prepared Statement of Hon. Tom Bliley, Chairman, Committee on Commerce
Thank you, Mr. Chairman.
I commend you for holding this hearing. The era of Internet video
has arrived. It offers unforeseen benefits. But Internet video also
raises a host of thorny issues.
Today's hearing will help the Subcommittee sort out some of those
tough issues. And the timing couldn't be better, because I think it is
inevitable that, over time, we will see a proliferation of Web sites
like iCraveTV.com.
Many will be offshore. But eventually many will likely emerge here,
in the United States. After all, as the record industry will tell you,
it was on America's college campuses that the MP3 revolution was born.
So let's begin to grapple with these issues, and find out what--if
any--role Congress should play in their consideration.
With today's hearing, we will explore how advances in technology
give consumers more access to video programming on the Internet . . .
while also recognizing that technology raises serious copyright issues.
As my colleagues will recall, this debate began--and ended!--
prematurely last Autumn. Without any notice to Members of this
Committee, provisions were added to the Conference Report to the
Satellite Home Viewer Improvements Act of 1999 that could have stifled
the development of electronic commerce.
These provisions would have permanently excluded any Internet
service from retransmitting broadcast programming pursuant to a
statutory license.
Today, the Commerce Committee will assess how current law applies
to the delivery of video signals over the Internet. As someone proud to
represent the State that is home to most of the major Internet service
providers in the world, I have little doubt about the importance of
online communications technologies for enhancing consumer choice.
Online technology has transformed the way consumers receive
information and entertainment. Because this transformation strengthens
our economy, it is essential that we give full attention to this issue
. . . and carefully assess whether Congress needs to amend current law.
In 1998, this Committee played a critical role in drafting the
version of the Digital Millennium Copyright Act that was ultimately
signed into law. We demonstrated that it was possible to strike a fair
balance between the concerns of content owners and the interests of
consumers. If necessary, Congress can do so again.
I look forward to receiving the testimony of our witnesses today
and working with them in the future to produce legislation, as may be
appropriate.
Thank you, Mr. Chairman, and I yield back the balance of my time.
______
Prepared Statement of Hon. Gene Green, a Representative in Congress
from the State of Texas
Thank you for holding this hearing on webcasting. For the past six
to seven years the telecommunications landscape has changed
drastically. Webcasting represents that change and the growing
convergence of telecommunications technologies. Since its inception,
webcasting has been dominated mainly by live events: concerts, sporting
events, press conferences. However, both local and network stations
have begun to experiment with streaming their local programs over the
internet.
In Houston we have a few stations that stream their local
programming over the internet. Both KHOU, Channel 11, and KPRC, Channel
2 stream their local news. Spending so much time in DC it is nice to be
able to keep up with news from Houston as it happens.
However, I do have some general concerns about webcasting. Such as,
are adequate protections available for broadcasters and companies that
produce these programs? The internet has helped fuel our economic boom
and our technological expansion. However, the one unfortunate facet
about the Internet is the ease in which something can be copied and
retransmitted almost instantly. Second, what will happen if programs
are made strictly for the Internet public. Then we, Congress, need to
ask the question, ``What about the Americans who don't have access to a
computer.'' Third, I am concerned that if we do not stop illegal
webcasting now it will grow and people will become accustomed to having
illegal programming. Then we would have a situation similar to last
year's satellite television situation.
As we continue to look at web casting, from a policy perspective.
we will have to decide one very important policy question. Do we treat
ISPs like we do satellite and cable companies and impose existing
regulations on them, or do we consider ISPs a separate entity with
completely new regulations.
Thank you Mr. Chairman for holding this hearing.
Mr. Tauzin. Does the gentleman from Massachusetts have a
unanimous consent request?
Mr. Markey. Yes, I would ask unanimous consent that the
gentleman from Washington, a distinguished visitor to our
committee today, Mr. Inslee, be allowed to introduce one of the
witnesses appearing before our committee today.
Mr. Tauzin. Is there any objection?
Without objection, it is so ordered, and we welcome you,
Mr. Inslee.
Mr. Inslee. Thank you, Mr. Chairman, and thanks for this
opportunity. I would like to introduce to the panel Alex Alben,
a constituent whose RealNetworks streaming genius has created
great opportunities for Americans and great interest of this
committee in a new issue, and thanks for joining us, Alex.
Mr. Tauzin. Thank you for that testimony, Mr. Inslee. I
appreciate it, and welcome, Mr. Alben.
If there are no other requests for opening statements, we
will now introduce our distinguished panel, and they are
distinguished, beginning with the most distinguished Jack
Valenti, President and CEO of the Motion Picture Association of
America; Mr. Paul Karpowicz, Vice President of LIN Television
in Providence, Rhode Island; Mr. Bob Roback of LAUNCH Media;
the Honorable David Boren, who has been previously introduced,
and, David, I want to especially welcome you back to the Hill.
Mr. Boren. Thank you, Mr. Chairman.
Mr. Tauzin. We miss you a great deal. I'm glad to see you
again, sir.
Mr. Alex Alben, who has also been recognized, and we want
to welcome you, Mr. Alben; Mr. Ian McCallum, Vice President of
Corporate Sales and Development of iCraveTV; Mr. Stuart Beck,
President of Granite Broadcasting Corporation; and Peter Jaszi,
a professor of Washington College of Law, who is going the
teach us a little bit about copyright, I suspect, before we're
done today.
We begin our panel with Mr. Valenti, the President of the
Motion Picture Association of America. Jack, as we do in our
all our hearings, your written statements, as you may have
noticed when I began, are part of our record, and we have read
them and we will read them over again, and extensively, and we
want to ask you, please, if you might summarize.
We have some new incredibly expensive digital equipment
that is going to signal you when your 5 minutes are up. We
would appreciate it if you would abide by the 5-minute rule.
The devices will light up green, yellow, and red to give you an
indication, and if you will all please try to abide by that
rule because we have a big panel. I would like to get as much Q
and A discussion with you as we can reach as soon as we can.
Mr. Valenti, you are welcome, sir.
STATEMENTS OF JACK VALENTI, PRESIDENT AND CEO, MOTION PICTURE
ASSOCIATION OF AMERICA; IAN McCALLUM, VICE PRESIDENT, CORPORATE
SALES AND DEVELOPMENT, TVRADIONOW, CORPORATION; HON. DAVID L.
BOREN, FORMER UNITED STATES SENATOR FROM THE STATE OF OKLAHOMA,
AND PRESIDENT, UNIVERSITY OF OKLAHOMA; ROBERT D. ROBACK,
PRESIDENT, LAUNCH MEDIA; STUART J. BECK, PRESIDENT, GRANITE
BROADCASTING CORPORATION; PETER JASZI, PROFESSOR, WASHINGTON
COLLEGE OF LAW, AMERICAN UNIVERSITY; PAUL KARPOWICZ, VICE
PRESIDENT, LIN TELEVISION; AND ALEX ALBEN, VICE PRESIDENT,
GOVERNMENT AFFAIRS, REALNETWORKS
Mr. Valenti. Thank you, Mr. Chairman, very much.
As I begin, I would like to first introduce, by way of
announcing, a freshly formed group called the Copyright
Assembly. These are all no surprises in this country to whom
copyright is absolutely indispensable to their future, and
probably these names I will read out are the great favorites of
the American consumer.
Let me tell you who belongs to this Copyright Assembly:
First, the ABC television network; the America Association of
Advertising Agencies; the Association of American Publishers;
the American Society of Composers, Authors, and Publishers;
Professional Baseball; Broadcast Music, BMI; Business Software
Alliance; CBS; Directors Guild of America; ESPN; FOX;
Interactive Digital Software Association; the LPGA Tour; the
PGA Tour; Magazine Publishers of America; NBA; the National
Association of Broadcasters; the National Cable Association;
NCAA that's going to be represented here today by a former
Governor and former Senator from Oklahoma, now the President of
the University of Oklahoma, David Boren; the National Football
League; the National Hockey League; the National Music
Publishers Association; NASCAR; NBC; Newspaper Association of
America; the Recording Industry Association of America; Screen
Actors Guild; Software and Information Industry Association;
the Writers Guild of America; MGM Studios; Paramount Pictures;
Sony Pictures; Time Warner; 20th Century Fox; Universal
Studios; and Walt Disney.
Mr. Tauzin. Name dropper.
Mr. Valenti. That's how I make may way through life, Mr.
Chairman.
First, I want to associate myself, I think as is the
Congress way, although Chris--I mean Congressman Cox is gone,
he said the Internet is good. I associate myself. He's
absolutely correct.
Everyone that I mention is spending hundreds of millions of
dollars to invent new business models for conveying to
consumers what they have to offer, presenting to consumers all
the things that they have created. The Internet is the future,
as he said, but as legitimate businesses emerge on the
Internet, illegitimate intruders find this a haven. It always
happens. There are many people who profess to have a great
honorable intention about the advancement of technology who
oftentimes treat with a brazen disregard the rules and the laws
which govern America's daily labor.
Now, why is this a matter of concern to this Congress?
Because, as the chairman pointed out a moment ago, people I
read comprise the greatest trade export that any country in the
world could ever have. We dominate the world as favorites for
people who watch on television or cable or satellite or the
Internet, whatever. We bring back to this country enormous
billions in surplus balance of trade when this Congress hears
nothing but the soiling words of trade deficits for which we
are hemorrhaging at this time. We bring back more--have more
international revenues than automobiles and auto parts, than
aircraft, than agriculture. It is an incredible jewel in
America's trade crown.
Now, why are we here? I'm not asking the Congress to do
anything specific. What I'm asking you to do is to consider
very carefully the Internet and how to deal with it. The
Internet is something that is almost uncomprehending to the
human mind. We have never seen anything like it. It has nothing
to do with telegraph or cable or satellite. Indeed, the
difference between satellite and cable and the Internet is the
difference between lightening and the lightening bug, totally
different. Therefore we need to see what is going to happen.
The second thing you ought to consider is the words of the
former speaker of this House, Sam Rayburn, who many years ago
said the three most important words in the Congressional
lexicon, Wait a minute. That's what I'm suggesting that you do.
Why? This Internet is growing like kudzu. In 1995, there were
100,000 sites. Today, there are 10 million. In 1995, 5 years
ago--4 years ago, there were a little less than 10 million host
computers. Today, there's 73 million. In 1995, there were 10
million pages on the Internet. Today, they are 1 billion.
Congressman Markey said, ``Where are we going to be 1 year
or 2 years from now.'' I'm going to tell you this. All of the
technology that we find so laudable today, 1 year from now, 2
years will be primitive, and we all know that. Neither Bill
Gates nor anyone else in this world can tell you with any
precision where we are going to be a year from now. This thing
is growing so fast, piling technological advance upon
technological advance.
All I am asking you to do is to be very cautious and wary
about granting compulsory licenses to anybody until you examine
the vast and massive difference between something that with one
click stroke can take you to 6 billion people instantaneously
with the speed of light. Cable cannot do it. Satellites cannot
do it. Video cassettes cannot do it, and even what I'm saying
today is so fascinating to me cannot do it either.
So I just urge you, Mr. Chairman--the red light. May I use
the words of the Congress here? I yield back my extra time.
[The prepared statement of Jack Valenti follows:]
Prepared Statement of Jack Valenti, President & CEO, Motion Picture
Association of America
To the honorable members of this Committee, let me introduce the
freshly formed Copyright Assembly. It enlists into its membership the
vast array of American enterprises involved in sports (professional
football, basketball, baseball, hockey, NASCAR, NCAA), music, song-
writing, advertising, software) broadcasters, both networks and
stations, cable, movies, publishing, television programs, home video.
These are the enterprises which are America's most wanted exports, in
addition to being the favorites of the viewing, reading and listening
public.
Why form a Copyright Assembly? Because we are deeply concerned
about the future of creative works. All these valued assets, protected
by Copyright whose roots are in the Constitution, are indispensable to
both the culture and the economy of the United States.
Why this concern? All the members of The Copyright Assembly are
actively embracing new Internet opportunities for consumers, are
developing new, inventive business models to deliver our creative works
to homes, businesses, schools, universities. Many of us are licensing
our creative material to Internet companies. Hundreds of millions of
dollars are now being invested by our members to develop this new
economy, which along with Gutenberg's movable type and the invention of
television, ranks as one of the great seminal entrants into the human
society. We are all eager to be part of the revolutionary technological
magic. But we worry lest the great potential, the immense future worth
of the Internet, becomes tangled by overt and covert piracy of
copyrighted material.
Why is there a problem? As legitimate businesses emerge on the
Internet, illegitimate intruders find the Internet a haven. These
invaders steal copyrighted works, assault legal business sites and
otherwise disrupt the normalities of Internet conduct. Piracy comes in
all sizes, ingenuity and motivation. Which is why at this moment we
confront attacks by those who profess to defend technological
advancement but in truth who treat Copyright with a brazen disdain for
laws and rules which guide and govern the daily labors of Americans.
Why should the Congress care? The Congress should hugely care
because these creative works do not spring from a void. The source bed
of this creativity lies within the imagination, artistry and ingenuity
of a community of artists and craftsmen who provision Americans with
most of what they read, hear and watch. It is the summation of massive
infusion of risk capital that must be, for the most part, recouped else
the risk becomes too large, the capital becomes too cautious, and the
works dry up. We should remind all who read this testimony that the
members of The Copyright Assembly comprise the greatest trade prize
available to any country on this planet. Intellectual property gathers
in over $65 Billion annually in international revenues--more than
automobiles and auto parts, more than aircraft, more than agriculture!
It produces new jobs at three times the annual rate of the economy as a
whole. Moreover America's intellectual property revenue curve is rising
all over the world. No wonder it is an engine of real growth for this
nation.
Why this overture to the Congress? It's really not an overture. We
are not asking the Congress to do anything specific at this time,
except to understand the economic and cultural worth of those enlisted
in The Copyright Assembly. It's a value that cannot be Xeroxed or
cloned. As the Congress considers public policy issues which connect to
the New Technologies and the delivery of creative works to American
consumers, we urge the Members to put our concerns and our optimism at
the top of congressional priorities. When there is an advocacy for
enlarging Compulsory Licenses or other congressionally mandated
marketplace interventions, we recommend that the Congress remember what
former Speaker Sam Rayburn once declared to be the three most important
words in the congressional lexicon: ``Wait a minute.''
The simple fact is this: The protection of copyright and copyrights
is not antagonistic to the New Technologies, such as the Internet. Not
at all. The Internet is widened and made more fruitful by our high
velocity involvement in it. But if we cannot protect what we invest in,
create and own, then we don't own anything.
Mr. Tauzin. Again, we'll ask you all to watch those lights
because we're going to have to get through this today as
expeditiously as we can.
We will rotate between content and Internet witnesses
today, and we will move second to Mr. Ian McCallum, Vice
President corporate sales and development of iCraveTV. Mr.
McCallum.
STATEMENT OF IAN MCCALLUM
Mr. McCallum. I thank you, Mr. Chairman, for the invitation
to speak to you about iCraveTV. My name is Ian McCallum. I am
the Vice President of Corporate Sales of TV Radio Now
Corporation which operates iCraveTV. I come from Toronto. I've
heard a great deal of comments about Toronto and how nice it
is. Peter Usenoff once described it as a New York run by the
Swiss.
Canadian Radio and Video Entertainment, the acronym is
CRAVE. The I is, of course, the Internet. iCraveTV, a companion
television service. One of the fundamental principles behind
the inception of iCraveTV and those of us who operate it is the
awareness that without copyright revenues flowing to the rights
holders, content will die. And as in all of the entertainment
and information mediums, consent is king and therefore it is
imperative that regimes be established that enable the flow
from the consumers back to the creators.
One of the imperatives we realized in starting up is we had
to move fast. We realized that we were operating in Internet
time, not regulatory time, and I second everything that Mr.
Valenti has said about the speed of development of the
Internet, and we're all caught up in that, Canadian, American
legislators, content creators, content distributors.
When we started out, we believed we had a good idea and
that it would prove a popular service. We did not anticipate
the level of interest that it would generate and in some
quarters, unfortunately, the hostility that it has arisen. We
launched with 17 broadcast signals coming from Buffalo, New
York and Toronto, converted those signals from analog to
digital, and distributed them out over the Internet using the
services of RealNetworks and their streaming system.
Users would come to the site. They would be ask to complete
a terms of use agreement. That would be asked to enter the area
code in Canada from where they were registering. They would
then be granted access to one of the streams by going to a TV
listings guide and clicking on that particular stream.
Our service simultaneously serves less than 4,000 viewers
which is a tiny fraction compared to the tens of millions of
viewers the same programs are receiving on Internet at the same
time, and also using a facility provided by RealNetworks, we
made sure that nobody could make copies of the programs that
were being distributed.
Our service provides broadcast programming with the
commercials fully intact to people who are not otherwise being
served, people in remote areas, people in offices, people in
universities. Furthermore, we are taking broadcast programming
to the very screen that has cost broadcasters market share over
the past 5 years. This should enable them to recapture some of
that market.
The guided principles, included paying rights to the
content holders, abide by all applicable laws and regulations,
be first to market, work through partnerships, and
operationally be lean.
We are not pirates, never have been, never will be, and we
take extreme exception to that characterization. In part, the
proof of that is that we enjoy the support of the relevant
parts of the Canadian Government, broadcast regulator, and the
copyright boards. Canadian law allows us to retransmit over the
air television signals like cable, like satellite, and we are
not required to obtain permission of the broadcasters before
doing so.
The Canadian compulsory license for the retransmission of
broadcast signals is, I understand, similar to U.S. law on
cable and satellite transmission. The difference is that
Canadian law is not technology specific, and so Canadians do
not need to have a policy debate every time a new
retransmission technology such as the Internet is introduced.
As I mentioned, we believe that an appropriate flow of
revenues to copyright holders is important, and we initiated
proceedings with the copyright board in Canada to establish a
flow, and as of Monday of this week, the collective
representing many rights holders including the MPAA have agreed
to work out an appropriate tariff.
Advertising to Canadians constitutes our only revenue base,
and due to the systems limitations, users coming from outside
of Canada cost us telecommunications charges which we can not
recover because we cannot advertise to them. Initially, we
tried to enforce this geographic restriction by relying on the
honesty of the users, and this was implemented at multiple
levels. When we were looking at the technology, the systems
that were available to us really resulted in us coming to this
particular approach. Surprisingly, we also found that by and
large it worked up to a point.
However, as the outside world that is outside of Canada
became aware of iCraveTV, ironically in part due to the
publicized criticisms of the security system by U.S. rights
holders, it could not work very satisfactorily for long. We
were subject to fraudulent and even criminal access to our
sites. Therefore, we are implementing an enhanced system that
we have designed that not only isolates our Canadian free
transmissions from the United States but gives us as the first
company on the Internet the ability to restrict programming to
any country in the world.
Mr. Tauzin. The Chair would note the bells, when they go
off, signify a vote on the House floor, and this is probably
going to happen during this hearing. So I want you all the know
we are occasionally going to have to get up and make votes, and
that is equally important that we abide by these time limits.
Mr. McCallum, your time has expired. Can you wrap it up for
us now?
Mr. McCallum. I will. Now we hope that this system we will
be putting into use with content under contract with many of
the people represented in this room and others. We are a
Canadian company. We operate in Canada for Canadians. We are
not trying to make any amendment to America law at this time.
We hope that in the process, however, you establish rules and
regulations that do not impact negatively on companies
operating legally within other countries. After all,
approximately 70 percent of our retransmission fees flow back
to American companies, and if there are unrealistic, rigorous
national regulations this might result in mirroring regulations
in other countries, and the losers would be us all, and
certainly the underserved and the consumers and the program
producing talent would lose as well.
As a final point, I would like to commend to you a piece of
existing legislation that comes from the Securities Exchange
Commission in an analogous content and that deals with the
attempt by companies to restrict access to securities offerings
outside of the United States, that is to restrict Americans
from accessing it, and the Securities Exchange Commission said,
in conclusion, that it did not require perfection, only serious
efforts that would discourage a great majority of potential
purchasers.
Thank you, Mr. Chairman and members of the subcommittee for
your interest in iCraveTV. I would be pleased to answer any
questions you may have.
[The prepared statement of Ian McCallum follows:]
Prepared Statement of Ian McCallum, Vice President of Corporate Sales
and Development, TVRadioNow, Corp.
I am Ian McCallum, Vice President of Corporate Sales and
Development of TVRadioNow, Corp., which operates the iCraveTV web site.
I thank you, Mr. Chairman, for the invitation to speak with you about
iCraveTV. When we started operation of the iCraveTV web site at the end
of November of last year, we believed we had a good idea that would
provide a service that many people would want to use, but we did not
anticipate the level of interest and, in some quarters, unfortunately,
hostility that our service would arouse. We have learned a great deal,
and we would certainly do things differently if we knew in November
what we know now and if we had the technology then that has since
become available. However, we continue to believe that the idea behind
iCraveTV is worth pursuing, and we think that we can provide a
desirable service that makes good use of the unique capabilities of the
Internet. We are a Canadian company run by Canadians, and we do not
seek to influence the development of American copyright law. However,
we hope that American law will not be applied in such a way as to make
it impossible for those outside the United States who want to operate
under the laws of their own country, and to pay a fair return to
American copyright holders, to make American works available over the
Internet.
Upon its launch, iCraveTV's operations were structured as follows:
It received broadcast televisions signals from stations in Toronto and
Buffalo, New York, converted those signals from analog to digital form,
and made them available to people using the iCraveTV web site,
www.icravetv.com. Someone who came to the site could click on the
``Watch TV'' icon, get a list of television stations, and select a
station to watch. By clicking on that station, the viewer could see on
his or her computer monitor the show then being broadcast, either in a
small corner of the monitor, or, with lower resolution, in a larger
portion of the screen. (Copies of ``screen captures'' from the iCraveTV
site are appended hereto at Tab A.)
From the outset our intention has been to provide this service only
to Canadians. Advertising to Canadians constitutes our revenue base
and, due to limitations on our systems' capacity, users coming from
outside our market cost us money we cannot recover. We initially tried
to enforce this geographic restriction by relying on the honesty of
users. First, we required someone wishing to use the video portion of
the web site to enter a 3-digit Canadian telephone area code in order
to confirm that he or she was located in Canada. If the user entered a
number that was not a Canadian area code, a screen appeared denying
that user any further access. If the user entered a Canadian area code,
a second screen appeared further warning that the site is intended only
for use in Canada, and requiring the user to make the affirmative
certification that he or she was located in Canada, by clicking ``In
Canada,'' in order to proceed further. A user then reached the ``Terms
of Use'' screen, which also stated that the site was solely for the use
of those located in Canada and required acceptance of terms that
included use only in Canada before proceeding further. Thus, in order
to access the programming portion of the iCraveTV Web site, a user had
to affirmatively state, repeatedly, that he or she understood that the
site was for use only in Canada and that he or she was in fact located
in Canada.
Unfortunately, concern has been expressed that these precautions
did not prove sufficient to keep users from outside Canada from
accessing the site. I will discuss this problem further in a moment,
but I want to address first the issue of the source of our television
broadcasts, because we think that it has been the subject of unfair
criticism. iCraveTV picked up signals broadcast from the United States
into Canada, and because we had not first entered into license
agreements with the United States copyright holders, we have been
accused of being ``pirates.'' This criticism is unfounded and ignores
two critical facts. First, it is perfectly legal for us to pick up
these broadcast signals, which are available free to everyone who has
an antenna. These programs were intentionally broadcast into Canada as
well as to the United States, and the broadcasters took advantage of
that fact, by, for example, obtaining advertising revenue based on
their Canadian as well as their American audience. Because American
copyright law does not extend beyond the borders of the United States,
we did not violate American law, or infringe American copyrights, by
picking up the signals in Canada or by digitizing and retransmitting
them over the Internet in Canada.
Since we operate in Canada we do, of course, have to comply with
Canadian law, and we have made every effort to do so. Under Canadian
law, it is not copyright infringement to retransmit over-the-air
broadcast signals, provided that, among other things, the retransmitter
pays royalties in accordance with tariffs set by the Canadian Copyright
Board. The majority of retransmission royalties paid by Canadian
retransmitters are now, in fact, paid to collectives representing
United States copyright owners, including the major Hollywood studios,
broadcasters and major league sports leagues. Under this statutory
procedure, the retransmitter has an automatic compulsory license to
communicate the retransmitted broadcast signals to the public and needs
no consent or permission from either the original broadcaster of the
retransmitted signals or from any of the owners of the copyrighted
works that were included in those signals. This arrangement is not
unlike the compulsory license for retransmission of network programming
via satellite that now exists under United States law. (A copy of
Section 31 of the Canadian Copyright Act is appended hereto at Tab B;
an op ed piece written by a Canadian law professor, Hudson Janisch,
discussing iCraveTV in the context of the evolution of Canadian
broadcasting and copyright law is appended hereto at Tab C.)
The retransmission regime established by the Canadian Copyright
Act is not limited to specific technologies for the delivery of
retransmitted broadcast signals. As a result, the Canadian
retransmission regime applies equally to retransmissions made over the
Internet as to retransmissions made via other media, including cable
and satellite. iCraveTV has requested the Canadian Copyright Board to
set tariffs for royalties for transmissions via the Internet of
television programs. It should be noted, moreover, that under Canadian
law Internet transmissions originating from servers located in Canada
are deemed to take place in Canada, even if received outside Canada,
and are subject to royalties payable in Canada. Thus, if a tariff for
Internet transmissions is established in Canada, as iCraveTV has
sought, the royalty that Canadian Internet retransmitters will pay can
be expected to take into account the possibility of receipt of the
retransmissions outside Canada. (An affidavit from another Canadian law
professor, Michael Geist, discussing the application of Section 31 of
the Canadian Copyright Act to iCraveTV's service is appended hereto at
Tab D.)
Because iCraveTV was a pioneer in this area, the Copyright Board
had not established a tariff for Internet transmission of television
programs when we began operation. In order to arrange fair voluntary
payments until that tariff was established, our Canadian solicitors
contacted the collectives that collected royalty payments for over-the-
air broadcasts and tried to discuss such an arrangement with them.
Those collectives were unwilling to work with us to establish such a
payment arrangement, so our solicitors proposed to the Copyright Board
that the Board establish an interim Internet retransmission tariff.
Counsel for certain of the collectives sought additional time to
respond, thereby delaying the Board's action on the tariff, and the
Board has not yet had the opportunity to act. During this process, we
have reiterated to the broadcasters our willingness to negotiate
royalty payments. It should be noted that the ``collectives'' include
all of the rights holders involved, including members of the MPAA, NFL
and the ``border broadcasters''. Indeed, a majority of the funds
dispersed by the Board go to United States rights holders for carriage
in Canada. (A copy of an editorial from the Toronto Globe and Mail
discussing iCraveTV's offer to pay royalties under the Canadian
copyright regime is appended hereto at Tab E.)
We are, you can see, acting in good faith to follow the laws of the
country in which we operate. Although Canadian copyright law differs in
some ways from American law, it is grounded in the same principles,
developed in English law, as is American copyright law, and I am sure
that the United States Congress respects the integrity and good faith
of Canadian law in this as in other respects. I recognize, of course,
that there are countries in the world that do not operate under similar
copyright principles and do not respect the work of content providers,
and the existence of such countries raises some concerns when we are
dealing with the ``World Wide Web.'' But it is important not to be
unduly influenced by the existence of such unsatisfactory copyright
regimes.
First, Canada is not such a country, and the conduct of a company
that operates within the laws of an enlightened country such as Canada,
which fully respects the creative activities of the authors of
copyrighted works, should not be judged or restricted because of the
existence of countries that make little effort to stop copyright
piracy. Second, one of the essential characteristics of the World Wide
Web is that it is worldwide, which means that it can be accessible from
countries whose laws we may disapprove of in many respects. If the
possibility of such access is allowed to govern the activities of
countries where the principles underlying our common Anglo-American
heritage are respected, the benefits of the Web will be greatly
reduced.
This brings me back to the issue I referred to before and which has
been the primary source of concern in the lawsuit brought in federal
court in Pittsburgh against iCraveTV by a number of major United States
content providers. This is the fact that, despite our making it
absolutely clear to users that only those located in Canada were
permitted to access the video capability of the iCraveTV web site, it
has been alleged that this restriction was not respected by all users,
and that some users located in the United States downloaded the video
stream and viewed programs with American copyrights. As a result, the
federal court has entered a preliminary injunction that could be read
as holding us responsible if any of our video programming is accessed
from the United States, even by hackers. Because we have not yet
completed enhancing our security system, this decision has resulted in
our decision to shut down the video portion of the site for now. We
will have an opportunity to present our case to the court and seek
modification of the terms of the order within 90 days.
In the meantime, we are working on security procedures that will
make it extremely difficult for anyone who is not located in Canada to
access the video stream from the site. There are two aspects of such
procedures. First, we have to strengthen the methods used to deny to
those outside Canada access to the video via the ``front door,'' i.e.,
the iCraveTV home page. In addition to the procedures we previously
used that rely on the honesty of users, we are implementing software
that determines the location of the user's Internet Service Provider
and will permit access only to those using ISPs that are located in
Canada and serve only Canadian residents. Second, we are developing
software and procedures that will prohibit access via the ``back
door,'' i.e., by those who use computer commands to avoid the iCraveTV
home page and go directly to the computer that provides the video
stream. In an MPAA letter to us in late December, some suggestions, in
a different form, were made that we will incorporate into our final
design.
As far as we have been able to learn, such Internet security,
restricting access to a site to users within a particular geographic
area, has not yet been implemented anywhere, in part because it has not
previously been required. Its development and implementation has been
more difficult, expensive, and time-consuming than we had expected, but
we are making good progress. Whatever the difficulties, before we
return to court to seek a change in the court's current order, we
intend to implement security procedures that will make it extremely
difficult for anyone not located in Canada to access video from the
iCraveTV web site. However, we do not pretend that we can guarantee
that no determined hacker will ever be able to access that video. As we
already knew, but the recent attacks on such Internet leaders as Yahoo
and Amazon have highlighted, determined hackers, thrill seekers or
hired guns can wreak havoc on even the strongest and most secure of Web
sites. Any regime of laws that governs the Web must take account of
that fact and should not place impossible demands on sites that make
serious good faith efforts to provide the appropriate security.
In our case, for example, the plaintiffs, a powerful array of
studios, networks, and sports leagues, have alleged that by providing a
site that could be accessed improperly by persons located in the United
States to receive streamed copyrighted audiovisual works, we have
infringed the exclusive right of the copyright owners to perform their
works ``publicly'' in the United States. However, once a web site
operator located outside the United States has made determined efforts
to keep persons in the United States from accessing the video portion
of a site, thereby preventing substantially all persons located in the
United States from accessing it, excepting only persons having a high
degree of computer security expertise and deliberately using such
expertise to avoid the site's safeguards against such access, I do not
think that such a web site operator can fairly be said to be ``publicly
performing'' the work in the United States. To the contrary, any
performance in the United States in the face of such safeguards will be
a very private one, brought about only by the expertise and effort of a
hacker who is determined to get around serious barriers so as to access
something he or she has been expressly prohibited from accessing.
Imposing a standard that would find a Canadian web site operator,
operating in accordance with Canadian law and having committed no other
violation of American law, to have infringed an American copyright--and
so be subject to being, in effect, shut down by an American court--
simply because a hacker may be able to get around carefully implemented
security procedures, would, we respectfully submit, unfairly interfere
with the legitimate operation of Canadian companies and unduly inhibit
the development and usefulness of the Internet. The United States
Supreme Court, in its decision in Reno v. ACLU that invalidated
portions of the Communications Decency Act of 1996, compared the
Internet to ``a vast library including millions of readily available
and indexed publications and a sprawling mall offering goods and
services,'' and held that it was entitled to the full scope of First
Amendment protection. Indeed, the Court contrasted the freedom of
cyberspace with the governmental supervision and regulation that has
traditionally been imposed on the broadcast industry. The Internet, it
observed, is not as invasive as radio and television, and content does
not appear on one's computer screen unbidden or ``by accident.'' This
point is all the clearer when a web site operator has employed
substantial security technology to disable certain users--users outside
Canada, in our case--from accessing certain content. Even though your
First Amendment may not be directly applicable to the activities of a
Canadian company operating in Canada, it would surely be contrary to
the vision of the freedom and promise of the Internet embraced by the
Supreme Court in Reno v. ACLU to impose unrealistic requirements that
would expose legitimate Internet operations outside the United States
to crippling penalties in American courts because of the malicious
activities of some hackers.
Indeed, American law already recognizes that the universal
accessibility of web sites cannot be permitted to make it impossible to
conduct business otherwise in compliance with applicable law, so long
as reasonable security measures are taken. The Securities and Exchange
Commission, addressing the question of whether offshore Internet offers
are being made in the United States (and thus trigger registration
obligations), reasoned that implementation of adequate measures to
prevent persons in the United States from participating in the offshore
Internet offer would lead to the conclusion that the offer was not
occurring in the United States. The SEC recognized that the types of
procedures its suggested could not guarantee that someone from the
United States who was determined to get around the procedures could not
purchase securities from the site. It did not require perfection, only
serious efforts that would discourage the great majority of potential
purchasers located in the United States. See Statement of the
Commission Regarding Use Of Internet Web Sites To Offer Securities,
Solicit Securities Transactions Or Advertise Investment Services
Offshore, March 23, 1998, available at http://www.sec.gov/rules/
concept/33-7516.htm.
With the security that we will be prepared to implement, we believe
that any ``leakage'' into the United States will be minimal and could
not reasonably be considered to be a ``public performance'' in this
country under United States copyright law. The level will be well below
the decades of ``leakage'' that have been tolerated between the United
States and Canada for decades when radio and television broadcasters
signals cross the border. We will be operating only in Canada under a
copyright regime that we hope will soon establish a fair tariff under
which we can pay royalties to American copyright holders for carriage
in Canada. iCraveTV will then be able to provide the service to
Canadians that it was intended to provide. That service was not, I want
to emphasize, to compete with over-the-air broadcasting. Anyone who has
seen video on a 14-17 inch computer monitor will know that it is not a
substitute for television. Typically the video picture takes up only a
small portion of a computer monitor that is itself small compared to
current television screens, and if the video is enlarged it loses
resolution. We expect the technology, and so the quality of the
picture, to improve, but it will not in the foreseeable future improve
to the point where someone who owns a television set--which includes,
of course, far more people than own computers--will want to watch a TV
show on a computer rather than on TV.
Instead, iCraveTV serves a different audience. It serves those who
cannot receive broadcast television, such as those in the shadow of the
huge CN broadcast tower in Toronto, and those in universities and
offices who cannot receive broadcast television and do not have cable
access. And it serves those who are working on a computer and would
like to be able to view a television program in a corner of their
screen. In these ways we provide a real service to some people, but it
is not a service that provides any competition to over-the-air
broadcasters or cable or satellite retransmitters. This is confirmed by
the limited capacity of the video server used by iCraveTV: we can serve
no more than about 4,000 viewers at a time. This is hardly a threat to
television broadcasters with their tens of millions of viewers, and the
technology will not permit it to become such a threat, even if we
wanted it to, which we do not.
What we do want to do is provide audiovisual content over the
Internet, of the type we started to provide last year, as well as new
forms of content, such as video that has not been broadcast, and, we
hope, interactive video. We want to do this in accordance with Canadian
law and with reasonable safeguards that will keep our broadcast
retransmission service from being accessed from outside Canada. We do
not want to take anyone's property, and we are pleased to, and have
been trying to, work with content providers to ensure that they are
properly compensated under the copyright regime of our country. We very
much hope that, as the United States develops its laws to enable its
citizens to take advantage of the immense opportunities offered by the
World Wide Web, they will not be developed or construed in a way that
will keep your neighbors from fairly benefiting from those
opportunities as well.
Thank you, Mr. Chairman and members of the Subcommittee, for your
interest in iCraveTV. I would be pleased to answer any questions you
may have. [Additional submissions are retained in subcommittee files.]
Mr. Tauzin. Thank you, Mr. McCallum. Let me announce to the
committee that Mr. Shimkus has gone to vote early. He will come
back and take the Chair so that I can make the vote. We will
continue the hearing.
I am pleased now to welcome former Senator David Boren, our
friend from Oklahoma and now President of Oklahoma University
and also on behalf of the National Collegiate Athletic
Association. Senator Boren.
STATEMENT OF HON. DAVID L. BOREN
Mr. Boren. Thank you very much, Mr. Chairman and Mr. Markey
and members of the committee. It Is a pleasure to be back among
you, and I want to thank my friend from Oklahoma, especially
for his warm welcome, Congressman Largent. We are privileged to
have his son at the University of Oklahoma, and now we have his
daughter at the University of Oklahoma. So we feel especially a
close relationship.
I am here as president of the University of Oklahoma today
to testify on behalf of that institution and also on behalf of
the NCAA. University of Oklahoma is one of nearly 1,000
universities and colleges which comprise the NCAA and is
devoted to the well being of over 330,000 male and female
student athletes across the country.
And, of course, at universities, we recognize all of the
benefits of the Internet. We are excited by all the
possibilities. We are already benefiting by the educational
opportunities, but we also understand the vital importance of
intellectual property to the collegiate athletic community and
the need to preserve copyright owners' interests as we embrace
these opportunities of the Internet about which we have such
enthusiasm.
In the world of intercollegiate athletics, the revenue
derived from copyrighted sports programming is absolutely
essential to our programs. The University of Oklahoma, our
athletic department budget for this coming academic year is
$23.6 million, and we are not atypical. This budget funds the
operation of 20 men's and women's varsity teams. OU student
athletes who are members of these teams receive over $4 million
in athletically based scholarships and financial aid.
It is important to know that of the nearly 1,000 NCAA
member institutions, fewer than 80 athletic departments are
financially self-sufficient. Fewer than 80 out of 1,000. The
University of Oklahoma, I am happy to say today, given the fact
the that we have had a good basketball and football season this
year, is among this small group; however, all collegiate
athletic departments, including ours, confront significant
budget pressures while simultaneously striving to expand
opportunities for the student athletes. We have to determine
what sports can we afford, when are there tradeoffs between our
academic mission and our academic budget, and what we can
afford to invest in athletics.
Television rights for the broadcast of men's football and
basketball are a significant source of revenue for our program
and for others. The revenue is essential to our institutions to
help us support the funding of athletic scholarships and
operations in our 18 nonrevenue producing sports. The revenue
received by the athletic department from television rights
comes from, of course, big television agreements for men's
football and basketball, conference participation and football
games, and 87 percent or $62 million will come from basketball
and football this year.
It is then distributed, along with the CBC funds, through
our basketball agreements back to the university. For us, just
to give you an example, that is $4 million from our conference,
and we have an additional almost $2 million that is generated
with agreement through what we call Sooner Sports Properties
through radio rights and the rest.
Now to put that into perspective, that's over a fourth of
our athletic department budget. If that revenue is there, you
face the kind of choice; for example, it costs a million
dollars for every percentage increase in faculty salaries. That
tells you that that amount of revenue generated when you have
to talk about tradeoffs is 6 percent of faculty salaries. I can
make the same kind of comments about libraries, and then you
get into doing away with opportunities in those sports which do
not generate so much revenue for both women and for men. These
are very significant tradeoffs.
So as you can see, sports, like movies and music, this is
intellectual property, and the copyright attached to sports
programming is a vital source of revenue to the athletic
community. We have created our own SoonerSports.com. We are
utilizing the Internet where fans can access a number of video
and audio offerings, and we are already exploring new ways to
enhance and deliver programming. When we had the advent of
satellite and cable television, of course sports were among the
first to embrace it to find ways to expand our offerings.
Now, of course, the focus of this hearing, it really is
brought about by the iCraveTV case which is already will be
discussed. This case reveals how some could use the Internet to
ignore the intellectual property rights, deprive the copyright
owners of the benefit and value and control of their works.
This case not only posed a threat to copyright owners here in
the United States, but threatened international sales and
distribution rights, and once sports programming was
retransmitted over the Internet, the entire world had unlimited
access.
I am not one quick to say that I can profess to be an
expert on copyright law. I do, however, want to urge this body
to resist the kind of knee-jerk reaction of granting a
compulsory license for the Internet. Compulsory licenses
violate a fundamental principle of the free market, and it is
not a wise oversight to take intellectual property out of the
patrol of those who create it. Under a compulsory license
regime, I worry, for example, that a gambling web site legally
transmitting NCAA football and basketball games to ensure their
clients could wager without missing a play could be
established. Without the control of the property copyright
holders, they cannot ensure that their works will be used in an
acceptable or an appropriate way.
My message is really simple. When it comes to the Internet,
I urge you to let the marketplace work. It is already beginning
to work. For example, the NCAA has recently negotiated and
awarded CBS with Internet rights to men's basketball
tournaments for the next 11 years, and this agreement benefits
viewers and providers, NCAA, and member institutions and more
importantly our students a valuable source of revenue. Just
this month it has been reported in the Wall Street Journal that
baseball is moving in an similar direction.
The one thing that I have learned about it, it has been
especially a clear lesson since I left this great institution,
is that we must always legislate, keeping in mind that there
can be unintended consequences of our actions and particularly
dealing with the situation that is so fluid, changing so
quickly where already those of us who are creating this
property have a very strong incentive to get it to the widest
possible audience as soon as possible.
I would say let's look at this for a while. Let's see how
it evolves, and my guess is the marketplace is going to take
care of itself, provide the competition, and with the legal
rights already in place, protect those who are creating the
property. So I urge you the let the marketplace work, make sure
that while we have open competition and the widest possible
distribution of this property including our sports programming,
that we do so in a way that protects the interests of those who
own that property and have a right to it.
Thank you very much for letting me be with you today.
[The prepared statement of Hon. David L. Boren follows:]
Prepared Statement of David L. Boren, President, University of Oklahoma
Mr. Chairman, Congressman Markey, thank you for the opportunity to
testify before you today on the issue of video on the Internet. As
President of the University of Oklahoma, I am appearing on behalf of
that great institution and on behalf of the National Collegiate
Athletic Association (NCAA). The University of Oklahoma is one of
nearly 1,000 universities and colleges that comprise the NCAA. This
member organization is devoted to the regulation and promotion of
intercollegiate athletics for over 330,000 male and female student-
athletes.
I am here today to discuss the vital importance of intellectual
property to the collegiate athletics community and the need to preserve
copyright owners' interests as we embrace the new opportunities of the
Internet.
value of copyright to the intercollegiate athletics community:
In the world of intercollegiate athletics, the revenue derived from
copyrighted sports programming is essential to our programs. At the
University of Oklahoma, our athletic department budget for the 1999-
2000 academic year is $23.6 million. This budget funds the operation of
20 men's and women's varsity teams. O.U. student-athletes who are
members of these teams, receive over $4 million in athletically-based
scholarships and financial aid.
It is important to note that of the nearly 1,000 NCAA member
institutions, fewer than 80 athletics departments are financially,
self-sufficient (i.e., revenues exceed expenses). The University of
Oklahoma is fortunate to be among this small group. However, today all
college athletic departments, including ours, confront significant
budget pressures while simultaneously striving to expand opportunities
for their student-athletes.
Television rights fees from the broadcast of men's football and
basketball are a significant source of revenue for the University of
Oklahoma athletics program. This revenue is essential to our
institution as it helps support the funding of athletics scholarships
and the operation of our 18 non-revenue sports for both men and women.
The revenue received by our university athletic department from
television rights fees comes from three sources. The largest portion of
revenue is generated by our athletic conference's (the Big 12)
television agreements for men's football and basketball and from
conference member participation in football bowl games. This year, the
Big 12 conference will receive 87% of its revenues, or $62.4 million,
from television rights fees for men's football and basketball. This
revenue is divided among the conference's 12 member institutions.
Another important source of revenue is obtained from the television
rights fees paid by CBS for the NCAA Division I Men's Basketball
Tournament. In total, the University of Oklahoma receives more than $4
million from the Big 12 Conference and the NCAA; all of this coming
from rights fees paid for copyrighted collegiate sports programming.
In addition, the University of Oklahoma athletic department
negotiated a $1.8 million agreement with Sooner Sports Properties for
radio rights, a select number of televised basketball games and the
rights to operate our Sooners.com Internet site.
As you can see, sports, like movies and music, is intellectual
property. The copyright attached to sports programming is a vital
source of revenue to the athletics community and the preservation of
these rights is essential in the dawning of the digital age.
sports copyright holders embrace new technology:
The University of Oklahoma recognizes the unique opportunities the
Internet presents and is already exploring ways to supply college
sports content over this new communications medium. We have created
www.soonersports.com where fans can access a number of video and audio
offerings.
In fact, both the college and professional sports leagues have
always been quick to take advantage of new technologies in the delivery
of sports programming. For example, with the advent of cable and
satellite television, today sports fans can watch thousands of hours of
college and professional games on ESPN and other cable networks. In
addition, through agreements with DirectTV, special packages ensure
that viewers can have access to every NFL game as well as each contest
during the NCAA basketball tournament.
Now, with the emergence of the Internet, sports entities are
already exploring new ways to enhance and deliver their programming.
Furthermore, in November 1999, the NCAA became the first sports
organization to sign a major television pact that included the awarding
of Internet rights to CBS. Video streaming of college sports contests
will undoubtedly expand if copyright holders can be assured that they
will maintain control of their works. After all, as long as copyright
holders maintain control over their intellectual property on the
Internet, it will be in their best interests to pursue new
technological innovation.
the internet must not pose a threat to the preservation of intellectual
property:
At the focus of this hearing is the iCraveTV case. This case
reveals how some people can use the Internet to ignore intellectual
property rights and deprive copyright owners of the value, benefits and
control of their works. As we are all aware, commencing on November 30,
1999, iCraveTV.com streamed 17 over-the-air television stations from
Toronto, Canada and Buffalo, New York on the Internet, 24 hours a day
around the world. During this time, those that paid substantial rights
fees for NFL, NBA, NHL, and NCAA basketball and football games were
faced with having the value of their programming diluted. iCraveTV not
only posed a threat to copyright holders here in the U.S., but it also
threatened international sales and distributions rights. Once sports
programming was retransmitted by iCraveTV over the Internet, the entire
world had unlimited access.
While I certainly do not profess to be an expert on copyright law,
I do, however, want to urge this body to resist granting a compulsory
license for the Internet. This simply is not a good idea. Compulsory
licenses violate fundamental principles of capitalism and the free-
market. Furthermore, it is not wise oversight to take intellectual
property out of the control of those who create it. Under a compulsory
license regime, I can easily envision a gambling Web site legally
retransmitting NCAA football and basketball games to ensure their
clients can wager without missing a play. Without control of their
property, copyright holders cannot ensure that their works will be used
in an acceptable or appropriate manner.
message--allow the free-market to operate:
My message to you today is simple--When it comes to the Internet, I
urge you to let the marketplace work. It is already working. For
example, the NCAA has recently negotiated and awarded CBS with the
Internet rights to the men's basketball tournament for next 11 years
(beginning in 2003). This agreement benefits viewers and provides the
NCAA and its member institutions (and most importantly, our students)
with a valuable source of revenue.
As a college president, I am acutely aware of the importance to the
university community of preserving our intellectual property rights. By
allowing the market to work while respecting intellectual property
rights, Congress can ensure that universities will provide greater and
better services to our students, faculty, staff and our communities.
Mr. Shimkus [presiding]. Thank you, Senator.
We will now move to Mr. Bob Roback, President of LAUNCH
Media. He will talk on the aspect of the streaming issue as far
as music videos to which is all part of the this debate.
So welcome. Your written statement is submitted for the
record. If you could summarize, and you have 5 minutes.
STATEMENT OF ROBERT D. ROBACK
Mr. Roback. Thank you on behalf of the over 200 employees
of LAUNCH Media. Thank you all for inviting me to testify today
at this important hearing. I'm Bob Roback, president and
cofounder of LAUNCH Media, a publicly traded, California-based
company that for over 6 years has developed innovative and
compelling ways to help consumers discover new music through
interactive media and in particular the Internet where we
operate our music destination at LAUNCH.com.
We founded LAUNCH Media in 1994 in response to a growing
demand from the music consumer; specifically, music consumers
have long relied on traditional media such as radio and MTV as
ways to discover new music. Record companies and artists also
profited from the market's current opportunities created by
these traditional outlets, and certainly the outlets themselves
have benefited handsomely.
The nature of traditional broadcast media, however, is such
that it must be programmed at the consumer. In the music space,
MTV is a perfect example of how broadcast media has negatively
impacted both the music consumer and the record industry. In
response to its advertisers who were frustrated that MTV's
valuable viewers were switching in and out of the channel based
on whether the currently played music video was appealing, MTV
embraced a new programming strategy around half-hour lifestyle
shows that kept viewers tuned it through the commercials.
While this strategy has fueled impressive growth at MTV, it
has significantly curtailed the number of music videos played,
reducing the opportunities for consumers to discover music and
for music companies to market their repertoire. By creating an
intent destination for consumers to discover new music through
music video, LAUNCH Media helps artists and copyright owners
reach consumers that otherwise might not known of their works.
We have worked very closely with the major record companies
to ensure that all our video content is appropriately licensed
and that copyright holders are appropriately compensated. I can
assure you that in spite of bandwidth limitations, there is a
large audience of music consumers that thirsts for such video
content. We currently stream over 2 million music videos per
month to more than 2.8 million registered members.
In our experience, LAUNCH provides value consumer exposure
to music that would otherwise not be effectively marketed, and
we are able to turn new consumer interests directly into a
purchase that may not otherwise have happened. We firmly
believe that LAUNCH should not be limited in its pro-consumer
competitive offering by technology-based laws that favor cable
or satellite in contrast to the Internet. If the content is
compelling, the service reliable, and the price fair, then
consumers do not care whether it was delivered through a cable,
a satellite dish, a terrestrial broadcast, or over the
Internet.
The law should be equally technology neutral. As a general
premise we believe that distributors of content should be
permitted to compete against one another regardless of
technology. LAUNCH's long-term goal is to be the consumer's
content provider of choice. We are eager for the day when
webcasting is on a level playing field with terrestrial cable
and satellite television including with respect to compulsory
retransmission licenses.
Having stated the long-term goal of open competition and
broad consumer choice, let me also clearly state that LAUNCH
has no immediate plans to seek a compulsory television
retransmission license or to seek legislation that guarantees
our ability to obtain such a license, particularly as the law
exists today.
Most importantly, however, while we at LAUNCH may consider
new forms of music-related programming, we are not certain that
we can develop a compelling business model around webcasting
preprogrammed broadcasts whether retransmitted or created
specifically for the web.
Let me reiterate the ultimate desire of LAUNCH, that
consumers be empowered to listen, watch, and purchase
entertainment and educational content how, when, and where they
choose and by whatever technology their enjoy most. Competition
is the foundation of the American economy, and entrenched
industries should never be exempt from competition merely
because the laws on the books were developed when they were the
only ones in the room.
Thank you very much for having me.
[The prepared statement of Robert D. Roback follows:]
Prepared Statement of Robert D. Roback, President, Launch Media, Inc.
Mr. Chairman and members of the subcommittee, on behalf the over
200 employees of LAUNCH Media, thank you for inviting me to testify
today at this important hearing regarding the Internet's future as a
competitively-priced, consumer-friendly distributor of audiovisual
programming. I am Bob Roback, President and Co-Founder of LAUNCH Media,
a publicly traded (NASDAQ NMS: LAUN) California-based company that for
six years has developed innovative and compelling ways to help
consumers discover new music through interactive media. Our
distribution methods over the years has included a monthly CD-ROM and,
of course, the Internet where we operate our music destination at
www.launch.com.
Mr. Chairman, I am pleased to be joined before you today by
RealNetworks' Alex Alben. RealNetworks is a key strategic partner of
LAUNCH and a fellow member of the Digital Media Association. DiMA has
more than 40 members that develop and deploy digital technologies to
market and distribute music and entertainment media to consumers
worldwide over the Internet.
Earlier this month the President of BMG Entertainment, a company
that owns one of the world's largest repertoires of copyrighted music
and media, said, ``it has been proven time and again that new media in
entertainment don't kill pre-existing media.'' I am here to tell this
Committee that we are in full agreement with this statement. LAUNCH and
our DiMA company colleagues market, disseminate, popularize, and sell
pre-existing media. Internet media companies add new value for the
music industry, and expand the opportunity pie so dramatically that
copyright owners and creators get a larger slice than ever before. In
our experience, LAUNCH provides valuable consumer exposure to music
that would otherwise not be effectively marketed and we are able turn
new consumer interest directly into a purchase that may not otherwise
have happened.
We founded LAUNCH Media in 1994 in response to a growing dilemma
for the music consumer. Specifically, music consumers have long relied
on traditional media such as radio and MTV as ways to discover new
music. Record companies and artists also profited from the marketing
opportunities created by these traditional outlets and certainly the
outlets themselves have benefited handsomely.
The nature of traditional broadcast media, however, is such that it
must be programmed at the consumer. In the music space, MTV is a
perfect example of how traditional broadcast media has negatively
impacted both the music consumer and the record industry. In response
to its advertisers who were frustrated that MTV's valuable viewers were
switching in and out of the channel based on whether the currently
played music video was appealing, and therefore were not sitting
through commercials, MTV embraced a new programming strategy around
half-hour lifestyle shows that kept viewers tuned in. While this
strategy has fueled impressive growth at MTV, it has significantly
curtailed the number of music videos played, reducing the opportunities
for consumers to discover music and for music companies to market their
repertoire. Similarly, consolidation in the radio industry has led to
shorter playlists and more homogenized formats that, in turn, limit
consumer access to new artists and diverse music styles.
By creating an Internet destination for consumers to discover new
music, LAUNCH Media helps artists and copyright owners reach consumers
that otherwise might not know of their works. LAUNCH Media has been
built on the premise that an intermediary can develop a relationship
with both the creative community and the consumer, and deliver value to
both sides of an opportunity. The power of the Internet is that the
consumer is in control. We believe that if consumers can access content
where they want, when they want, and in a format or medium they want,
artists and copyright owners will benefit so long as the
Constitutionally-mandated economic and legal balance between owners and
consumers of copyrighted content is not undermined.
One of the most popular content areas on launch.com is our music
video section. This area is already populated with over 2000 music
videos created by both the record companies and exclusively by LAUNCH
in our studios. We continue to add hundreds of new videos each week.
Our focus on video content may surprise you in light of the fact
that most consumers still access the Internet at relatively low
connection speeds and, therefore, receive lower quality video.
Notwithstanding these limitations, I can assure you that there is a
large audience of music consumers that thirst for such video content.
We currently stream over 2 million music videos per month to more than
2.8 million registered members. We expect that the addition of more
video content, and the advent of broadband technology, will only serve
to push these numbers higher. Looking closely at our audience and at
the most popular videos it is clear that much of this consumer demand
for music video content on the Web is driven by the scarcity of music
videos on broadcast, cable and satellite.
We have worked very closely with major record companies to ensure
that all of our video content is appropriately licensed and that
copyright holders are appropriately compensated. We count Warner Music
Group, Sony Music and EMI among our close record company partners.
Mr. Chairman, we firmly believe that LAUNCH should not be limited
in its pro-consumer competitive offerings by technology-based laws that
favor cable or satellite in contrast to the Internet. This Committee
and all the witnesses before you know that consumers purchase
entertainment programming based on quality, price and the reliability
of the distribution service. If the content is compelling, the service
reliable and the price fair, then consumers do not care whether it is
delivered through a cable, a satellite dish, a terrestrial broadcast or
over the Internet. The law should be equally technology-neutral.
As a general premise, LAUNCH Media and the Digital Media
Association believe that distributors of content should be permitted to
compete against one another regardless of technology: more entrants
into the programming distribution marketplace will bring more
competition, lower prices and higher quality. If satellite television
spurred cable television to improve, then the Internet will, in time,
lead to even more improvements and better service for consumers. I
believe that launch.com's early success in the music video space
suggests that this has already started. In that context, let me be very
clear: LAUNCH's long-term goal is to be consumers' content provider of
choice, and we are eager for the day when we have an equal opportunity
to compete for consumers' allegiance, when webcasting is on a level-
playing field with terrestrial, cable, and satellite television--
including with respect to compulsory retransmission licenses.
Similarly, DiMA members believe that consumers deserve full choice--
full competition--and a level-playing field that lets the marketplace
rather than the law determine winners.
I expect, Mr. Chairman, that you and members of this Committee may
be concerned about the effect of the Internet on local broadcasters and
local news service, which is a core component of every thriving
American community. I propose to you, Mr. Chairman, that local
television would not suffer at the hands of the World Wide Web, but
rather would thrive. When Chairman Tauzin can watch your local
Louisiana television news, no matter how late the House debates proceed
or where in the world you might be that night, the Louisiana television
station will know it has more viewers, will charge more for
advertisements, and the local economy and broadcast service will
benefit. Mark Cuban started broadcast.com because his local network
stations in Dallas did not broadcast Indiana University basketball
games. With the Internet, Chairman Tauzin could always watch LSU games,
and perhaps even the local high school games.
We need only to look to the experience of other media, Mr.
Chairman, to see that national distribution does not harm localism.
Major metropolitan newspapers are available in major cities in other
states, for decades in hard copy and in the last few years over the
Internet. Yet, our nation's local newspapers thrive and retain their
local character both in print and on-line. Thousands of local radio
stations are available today over the Internet, broadcasting their
signals to an expanded local and national audience. People tune to
these out-of-market stations to hear first-hand local news, musical
tastes and cultural and sporting events. For the stations, Internet
broadcasting expands their market--after all, many more people have
computers at their desks than radios. For the consumer, Internet
broadcasting brings new information and understanding, and provides a
cure for homesick sports fans, college students and Congressional
legislative aides.
Making television network programming available over the Internet
similarly will not harm localism or local stations. Indeed, hundreds of
local television stations already are broadcasting their own local
programming over the Internet, to tens of thousands of viewers. But
when the local news is over, and the stations resume transmitting
network shows, the computer screen goes blank. If the Internet is ever
to provide effective competition to cable and satellite services, with
the resulting benefits to consumers, Internet media companies must find
a way to license the entire local station's broadcast signal to the
viewing audience.
Having stated the long-term goal of open competition and broad
consumer choice, let me also clearly state that LAUNCH has no immediate
plans to seek a compulsory television retransmission license or to seek
legislation that guarantees our ability to attain a compulsory
television retransmission license, particularly as the law exists
today. Candidly, Internet technology to ensure limited geographic
distribution is just beginning to approach the levels of security
generally associated with cable television, and we are not yet
confident that all other technological hurdles have been overcome. Most
importantly, however, while we at LAUNCH may consider new forms of
music related programming, we are not certain that we could develop a
compelling business model around webcasting pre-programmed broadcasts,
whether retransmitted or created specifically for the Web.
Mr. Chairman, let me reiterate the ultimate desire of LAUNCH and
the Digital Media Association: that consumers be empowered to listen,
watch and purchase entertainment and educational content how, when and
where they choose, and by whatever technology they enjoy most.
Competition is the foundation of the American economy, and entrenched
industries should never be exempt from competition merely because the
laws on the books were developed when they were the only ones in the
room. The law must be open to evolution and adaptation, to assure fair
treatment and equivalent rights for new businesses using new
technologies.
Thank you.
Mr. Shimkus. Thank you for your testimony.
We will next go to Mr. Stuart Beck, President of Granite
Broadcasting Corporation. Again, your full testimony was
submitted for the record, and if you would summarize for 5
minutes.
STATEMENT OF STUART J. BECK
Mr. Beck. Thank you, sir, and thank you all. Thank you for
the opportunity to appear before you today to discuss video and
broadcasting on the Internet. As you have said, my name is
Stuart Beck, and I am the president and I am the cofounder of
Granite Broadcasting Corporation.
Granite, which was founded 12 years ago, owns and operates
nine television stations around the country. Our markets
include Detroit, Fort Wayne, Fresno, Peoria, Bloomington, San
Francisco, San Jose, Syracuse, and Buffalo. Each of our
television stations is distinctly community oriented. The
backbone of our service is the strength of your local daily
news, weather, and sports operations.
For many, local television is the primary source of
accurate information about the people and events in their
communities, and although the Internet has indeed begun to
supplement television programming in this regard, as I will
explain, as such, the community building function of the
programming provided by local operations cannot be over
emphasized.
My dad was a local broadcaster, and I am proud to follow in
his foot steps, but times have changed broadcasting, and I
actually think they have changed for the better. Technology is
providing us with expanded reach to our customers by addressing
a wider audience and by supplying more comprehensive news and
information.
Granite is recognized as an innovator in the development of
new media services that combine TV and Internet platforms. We
have established complimentary web sites for our local stations
on which we stream live news coverage from our stations and
post items of local interest such as traffic, weather, school
closings, and high school sports. We have put managing editors
into each of our news rooms to re-purpose our news content and
put it out on the web.
We have spent a lot of money on administrative systems that
allow the people in our news room to type in plain English on a
computer screen that which will appear on the web once
extracted from our television programming. Our services,
therefore, include webcasts which we love, as well as
supplementary news content local advertising and other unique
features.
The Granite Group includes WKBW in Buffalo, New York.
That's the No. 1 station is Northern New York, with due respect
to my colleague, Mr. Karpowicz. WKBW TV is an ABC affiliate
that has been an integral part of the Buffalo community for
many years. The station launched its related web site
WWW.WKBW.com in 1996. It receives about 300,000 page views, a
month and members of the Buffalo community rely on the site for
timely news and information about community events.
Last year, Granite learned that another web site,
iCraveTV.com was also carrying WKBW's local programming and
other copyrighted works including all ABC network programming.
iCraveTV was converting our TV signal into computerized data
and streaming it over the Internet from its web site.
What Mr. McCallum failed to tell this committee is that not
only was iCrave carrying our programming without authorization,
but the Internet site was displaying our programming on web
page surrounded by iCrave advertisements which presumably were
sold by McCallum. Thus it would be possible for a local Ford
dealer to sign a contract for exclusive rights for WKBW's local
11 p.m. newscast, only to find its advertisement on iCraveTV
surrounded by competing advertisements for Chevrolet.
Similarly, an advertiser may purchase a banner ad for the KBW
web site during the airing of a particular program, only to
find it replaced by a competitor's banner advertisement on
iCrave's site.
On January 20, a coalition of TV networks, studios, and
sports leagues got a temporary restraining order against
iCrave, a fairly rare legal remedy but employed in this case.
Under the court order, iCrave is prohibited from infringing on
rights set forth in copyright and trademark law, and we are
satisfied with how effectively our courts enforced the rule of
law in this situation. It is clear that under the U.S.
copyright law it is illegal to take copyrighted programming
such as the stuff we spend so much money producing and stream
it on the Internet without permission of the owner. iCrave
plainly and openly did that and the court ruled promptly to
stop.
Copyright owners such as Granite Broadcasting are already
transferring content through the use of streaming and other
innovative applications. There is no need whatsoever to change
the law, in our opinion, to allow third parties to use our
copyrighted material in ways which are now illegal. Copyright
owners are already taking full advantage of new media to
distribute content in unconventional and creative ways. If our
greater public policy goal is to increase a flow of
information, then entertainment copyright owners are already
doing this, and I assure you that we are aggressive and
innovative in this approach.
In the course of our business, ladies and gentlemen,
Granite needs assurances that all copyright law and related
protections can be provide to us. For example, we need to
assure advertisers with whom we contract that they will not
find our programming surrounded by somebody else's
advertisements and potentially a diminution of the quality of
our product by people who did not make that product. So there
is no fair use about it in changing it.
Mr. Shimkus. Mr. Beck, if you would quickly----
Mr. Beck. I think I am completed. I think all the points
that I have not yet made have been made.
Mr. Shimkus. I am sure this will be followed up in the
question and answer, and my colleagues will be back and I think
that we will go into it in greater detail.
[The prepared statement of Stuart J. Beck follows:]
Prepared Statement of Stuart J. Beck, Granite Broadcasting Corporation
Chairman Tauzin, Ranking Member Markey, and Members of the
Subcommittee, thank you for the opportunity to appear before you today
to discuss video and broadcasting on the Internet. My name is Stuart
Beck, and I am President of Granite Broadcasting Corporation.
Granite, which was founded just twelve years ago, owns and operates
nine television stations in geographically diverse markets reaching a
substantial number of the nation's television households. Granite is
also the largest minority-controlled owner of major market television
stations in the country. In every market where we produce news, Granite
strives to be the leading provider of local news and community
programming. The markets served by Granite include: Detroit, Michigan;
Duluth, Minnesota/Superior, Wisconsin; Fort Wayne, Indiana; Fresno,
California; Peoria-Bloomington, Illinois; San Francisco, California;
San Jose California; Syracuse, New York; and Buffalo, New York.
Each of the broadcast television stations operated by Granite is
distinctly community-oriented. The backbone of our service is the
strength of our local daily news operations. For many, local television
news is the primary source of accurate and up-to-date information about
the people, trends, and events in their communities, although the
Internet has begun to supplement television programming in this regard,
as I will explain. As such, the community-building function of the
programming provided by local news operations cannot be overemphasized.
Granite Broadcasting Corporation: Using the Internet to Reach our
Audience
My father was a local broadcaster, and I am proud to follow in his
footsteps. But times have changed since the day my dad was at the peak
of his career, and I might add that they have changed for the better.
Technological breakthroughs provide today's broadcasters with expanded
opportunities to reach our customers--both in terms of addressing a
wider audience and in supplying more comprehensive news and
information.
Granite is recognized as an innovator in the development of new
media services that combine television broadcasting and Internet
platforms. We have established complementary websites for our local
stations on which we stream live news coverage from our stations and
post items of local interest such as traffic, weather, school closings
and high school sports. Local Granite stations consider themselves
responsible members of the communities in which they serve, and make it
a point to serve those communities comprehensively. The services
Granite provides to local audiences include:
Webcasts: Granite stations stream live news and other original
programming over the Internet. Web users also have access to previously
aired news programs and other station-generated programs. San Jose-
based KNTV streams its original ``TechNow!'' program live on its site,
and it is possible to access archives of the program up to a year old.
Written News Content: Our stations hire reporters to supplement
over-the-air and streamed news programming with additional written
news, sports, and other stories such as reviews of local entertainment
and restaurants for their sites. Our web sites also provide links to
related sites with more extensive local entertainment information.
Advertising: Granite news sites typically carry banner ads at the
top of the screen and contain many links to the sites of other
businesses, bolstering the local economy.
Unique Features: Granite has created an election news site called
``Political 2000,'' to which all of its stations are linked. This link
contains national, state and local political news and campaign
information tailored to the local Granite station from which the
Internet user accessed the ``Political 2000'' site.
Some Granite stations have online sites especially for children and
teens. These include ``Kids Club'' areas with information of interest
to young Internet users, and ``Homework Help'' areas, which contain
links to Internet sites that can assist students in completing research
or other projects. KBJR-TV, based in Duluth, Minnesota and Superior,
Wisconsin, has created a site featuring local high school hockey
information (www.highschoolhockey.com).
Resolving the iCraveTV.com Threat and Letting the Markets Work
The Granite television broadcasting group includes WKBW-TV in
Buffalo, New York. WKBW-TV is an ABC affiliate that has been an
integrated part of the Buffalo community for many years. The station
launched its related web site--www.wkbw.com--in 1996. It receives
approximately 300,000 page views every month, and members of the
Buffalo community rely on the site for timely news and information
about community events.
Last year, Granite learned that another web site--iCraveTV.com--was
also carrying WKBW-TV's local programming and other copyrighted works,
including all ABC network programming. ICraveTV was converting our
television signal into computerized data and streaming it over the
Internet from its website. Not only was iCrave carrying WKBW-TV
programming without authorization, but the Internet site was displaying
our programming on its web page surrounded by iCrave advertisements.
Thus, it would be possible for a local Ford car dealer to sign a
contract for exclusive rights to WKBW-TV's local I 1:00 p.m. newscast
only to find its advertisements on iCrave surrounded by competing
advertisements by Chevrolet. Similarly, an advertiser may purchase a
banner add for the WKBW web site during the airing of a particular
program, only to find it replaced by a competitor's banner
advertisement on iCrave's site.
On January 20, 2000, a coalition of television networks, studios
and sports leagues filed a Motion in the U.S. District Court for the
Western District of Pennsylvania for a Temporary Restraining Order
against iCrave. That Motion was granted on January 28, 2000. On
February 8, 2000, the court granted a Preliminary Injunction. Under
this court order, iCrave is prohibited from infringing on rights set
forth in copyright and trademark law or otherwise making any false
representation with regard to sponsorship of iCraveTV. ICrave is
specifically barred from streaming copyrighted programming into the
United States.
It is clear that under U.S. copyright law, it is illegal to take
copyrighted programming--such as local news, movies or sports--and
stream it on the Internet without permission of the owner. ICrave
plainly and openly violated copyright law, and the court was sound in
ruling as such. Copyright owners, such as Granite Broadcasting, are
already transferring content through the use of streaming and other
innovative applications. There is no need to change the law to allow
third parties to use copyrighted materials in ways that are now
illegal. Copyright owners are already taking advantage of new media to
distribute content in unconventional and creative ways. If our greater
public policy goal is to increase the flow of information and
entertainment, copyright owners are already doing this, and I assure
you that we are aggressive and innovative in our approach.
In the course of our business, Granite needs certain assurances
that only copyright law and related protections can provide. For
example, we need to assure advertisers with whom we contract that they
will not find our programming surrounded by advertisements of a
competitor. Granite also needs to know that other web sites will not
take our recognized trademark or otherwise imply our endorsement of
their site. Finally, Granite needs to know that the programming we
create and license for our stations, such as WYBW-TV in Buffalo, will
not be misappropriated, jeopardizing the copyright protections and
rights of parties with interests at stake. The recent iCrave
preliminary injunction provides these types of assurances for Granite
and allows us to pursue the business of entertaining, educating and
informing our audience.
Previous Congresses have established a solid legal framework to
provide copyright and trademark owners control of their works and
symbols. Chairman Tauzin, Ranking Member Markey, and Members of the
Subcommittee, I urge you to refrain from passing any laws that could
jeopardize the intellectual property protections provided under the
present legal framework. There is no need to expand the purview of
government regulation of the Internet or otherwise change a legal
approach that, so far, has proven to work.
Conclusion
Granite is proud to be a leader in the extension of local
television service to new media. We are reaching our customers with
valuable and comprehensive information and creating a better informed
population. Our web sites demonstrate that it is possible to enjoy the
free flow of information on the Internet without breaking any laws--
laws that have held the United States in good stead for centuries and
continue to serve a valuable purpose. I urge the Members of the
Subcommittee to continue to encourage the potential of the Internet,
but also to step back and let the markets work within the framework of
the existing, effective legal system.
Mr. Shimkus. I would like to now recognize Mr. Peter Jaszi,
professor, Washington College of Law, American University.
Again, welcome, and you have 5 minutes.
STATEMENT OF PETER JASZI
Mr. Jaszi. Mr. Chairman, members of the subcommittee, I am
honored to appear in my individual capacity to offer an
overview of how copyright has evolved with technology.
Mr. Shimkus. Professor Jaszi, can you pull your microphone
just a little bit closer?
Mr. Jaszi. With pleasure.
Mr. Shimkus. It is a high-tech conference room here.
Mr. Jaszi. During the debate over the Digital Millennium
Copyright Act of 1968, this subcommittee demonstrated that it
understood the need to balance the interests of information
consumers and content owners affected by new technology. Then
content owners were concerned that advances in digital
technology threatened the economic viability of their
businesses and legislation proposed by the administration would
have substantially curtailed the fair use doctrine.
You recognized that while new technology may present
potential threats, it also offers vast new opportunities to the
public, and you produced balanced legislation that advanced
electronic commerce, and you have heard the radio and
television signals now can be distributed via the Internet.
Internet radio already enables consumers to listen to
stations from around the world in part because you incorporated
the DMCA and a compulsory license for retransmission of
copyrighted sound recordings performed by Internet
broadcasters. Improvements in quality can soon establish
Internet television delivery as the market competitor for other
consumer video services.
In my view, the appropriate question to ask now is this:
How can Congress facilitate enhanced service and competition?
And to begin to answer that question, I would like to take you
back do 1455 when Europe got its first glimpse of the
Guttenberg Bible and discovered that multiple copies of a
document could be produced by mechanical means. Fortunately,
early printers' hopes of maintaining a monopoly on this new
technology proved unavailing. By 1500, roughly 30,000 titles
had made it into print and the world has never been the same.
Copyright began as the law's response to movable type. In
the United States, it has served to promote a single
Constitutional objective, the progress of science and use for
arts. It accomplishes this by balanced regulation of
information use and not of the means by which information is
delivered to consumers. Copyright has contributed to the
dissemination of knowledge and successive waves of new
technology from photography to satellite retransmission have
swept over our information environment.
In situations where copyright owners have been most
concerned that new distributions mechanisms might destabilize
an established business model, Congress has prevented
technological stalemate by legislating compulsory licenses. In
1909, music copyright owners were locked in a standoff with the
fledgling phonograph record industry whose new products
threatened sales of sheet music. The Congressional compromise
made it clear that unauthorized recordings did infringe
copyright while providing a compulsory license to assure that
authorizations to record would not be unreasonably withheld.
Section 111 of the 1976 Copyright Act cut the knot our
courts had tied around cable television and unleashed a
transformative force in the entertainment industry. Section 119
was introduced and extended in 1999 to provide a space for
direct broadcast satellite technology. Compulsory licensing
often has helped to open other promising channels for
delivering content by breaking a decade's old standoff around
performance rights and sound recordings.
In short, compulsory licensing is alive and well and the
American copyright system is a common and appropriate
legislative response to the tensions that new information
technologies can generate. When the technological potential of
Internet TV is fulfilled, the real question will not be whether
it qualifies under the Section 111 and 119 compulsory licenses
as now written, but on what terms it should be made available
to consumers through existing or new legislation and how
content owners can be fairly compensated for delivery of their
works.
Given the wildfire growth of Internet radio, Mr. Chairman,
there can be no doubt that Internet TV transmissions that
include popular network programming would be equally
successful. This could be facilitated by statutory provisions
like those now available to cable and satellite distributors
or, alternatively, local stations could be empowered by law or
agreement to grant permission to retransmit network programming
with compensation flowing back to the networks.
To the extent that it was appropriate to impose
geographical restrictions on Internet retransmission of TV
signals, technologies now in existence or in development,
password systems and encryption, could be employed. Thus the
concerns expressed by the copyright office back in 1997 about
extending compulsory licensing to the Internet may no longer be
relevant.
More fundamentally, however, Congress should reconsider the
role of geographic restrictions as conditions on compulsory
licensing for the Internet. If each TV station could make its
signals available over the Internet, then all stations could
compete freely and attract new viewers and additional
advertising. Such a change would advance electronic commerce
and information availability if it could be accomplished in way
that adequately protects the interests of content owners,
broadcasters, and other stakes in this system.
Consumers will increasingly seek to expand the ways they
can access video content. The challenge, of course, is to
assure that all effective parties benefit from these
advancements in technology. Thank you.
[The prepared statement of Peter Jaszi follows:]
Prepared Statement of Peter Jaszi, Professor of Law, Washington College
of Law, American University
Mr. Chairman and Members of the Subcommittee, I am honored to
appear before you today in my individual capacity as a professor of law
who specializes in copyright and new media law. To help put in
perspective the testimony of the other distinguished witnesses on the
panel, I have been asked to provide an overview of how copyright and
related laws have evolved as technology has changed over time.
Introduction. During the debate over the Digital Millennium
Copyright Act of 1998, this Subcommittee certainly demonstrated that it
understood the need to balance the interests of information consumers
and content owners affected by new technology. As you will recall,
content owners were deeply concerned that advances in digital
technology threatened the economic viability of their businesses. Under
legislation proposed by the Administration, the fair use rights of
ordinary consumers would have been substantially curtailed in the
effort to provide additional protections to content owners.
Fortunately, as you recognized, new digital technology may present
potential threats to content owners, but it also offers vast new
opportunities to information consumers. In the end, you produced
balanced legislation that advanced electronic commerce and promoted the
interests of both content owners and information consumers.
As you will hear in greater detail today, radio and television
signals now can be distributed via the Internet to consumers. Internet
radio retransmissions already enable consumers to listen to radio
stations from around the world, in part because you incorporated into
the DMCA a compulsory license for retransmission of copyrighted sound
recordings performed by Internet broadcasters.
Incremental improvements in quality could soon establish Internet
television delivery as a market competitor for other consumer video
services. In my view, the appropriate question to be asking now is
this: What role can and should Congress play to facilitate enhanced
service and competition? To answer that question, I think it useful to
go back over five centuries and consider how the law has adapted to
changes in technology.
The Evolution of Technology and the Law. In 1455, visitors to the
Frankfurt Trade Fair got their first glimpse of what we know today as
the Gutenberg Bible. The appearance of just a few pages of text was
quite a revelation to Western eyes, for it was apparent that multiple
copies of a document could be produced by mechanical means. Whatever
hopes early printers may have had of maintaining a monopoly on this new
method of producing the written word for the masses proved, they were
unavailing--fortunately for all of us. By 1500, roughly 30,000 titles
had made it into print. The world has never been the same.
As Representative Sawyer so eloquently put it during the hearing
this Subcommittee held during its consideration of the DMCA,
``Gutenberg's action had a powerful effect on western culture. It was
the bridge from the Renaissance to the Reformation and was a direct
pathway in this country to the First Amendment.''
Copyright had its beginnings as the law's response to the spread of
the new technology of movable type. Reflecting the broad societal
interest in the wide dissemination of information, Article 1, section
8, clause 8 of the Constitution authorizes Congress to promulgate laws
governing the scope of proprietary rights in, and use privileges with
respect to, intangible ``works of authorship.'' As set forth in the
Constitution, the fundamental goal is ``[t]o promote the Progress of
Science and useful Arts . . .'' In the more than 200 years since
enactment of the first federal copyright law in 1790, the maintenance
of this balance in our copyright laws has contributed significantly to
the growth of markets for works of the imagination and of the
industries that enable the public to have access to and enjoy such
works.
Congress has historically advanced this constitutional objective
and promoted technological development by regulating the use of
information--not the devices or means by which the information is
delivered or used by information consumers. Section 106 of the
Copyright Act of 1976, for example, establishes certain rights
copyright owners have in their works, including limitations on the use
of these works without their authorization. As a countervailing
balance, Sections 107 through 121 of the Copyright Act set forth the
circumstances in which such uses will be deemed permissible or
otherwise lawful even though unauthorized. In general, these provisions
are technology neutral. They do not regulate information commerce or
information technology. Instead, they prohibit certain actions and
create exceptions to permit certain conduct deemed to be in the greater
public interest, all in a way that appropriately balances the interests
of copyright owners and users of copyrighted works.
Evolution of Compulsory Licenses. In general, the copyright system
of the United States has an excellent--if by no means perfect--record
of accommodating technological change and adapting itself to the
conditions created by new modes of information commerce. This is so, at
least in part, because the fundamental values underlying that system,
with their emphasis on the importance of achieving an appropriate
balance between proprietary control and public access, have stood so
robustly through all the waves of ``new technology'' which have swept
over our information environment in the last century: photography,
motion pictures, broadcasting, photocopying, cable and satellite
retransmission--and more. In this connection, it is worth remembering
that some of those waves appeared--in their own times--as threatening
to the copyright status quo as networked digital technology seems
today.
From time to time, of course, the process of accommodation and
adaptation has been less than perfectly smooth--especially in
situations where copyright owners have been intensely concerned about
the potential of new distribution technologies to destabilize
established business models. In these situations, to avoid stalemates
that might retard the growth of information commerce, the Congress
repeatedly has responded by legislating ``compulsory'' or ``statutory''
licenses. These mechanisms allow (either in the first instance or as a
``back-up'' where attempts at voluntary negotiation have failed) the
dissemination of copyrighted works by means of specific technologies,
when--and only when--prescribed conditions (including the payment of
licensing fees) have been satisfied. Far from being out of the
ordinary, compulsory licensing is embedded in the grain of the American
copyright system.
In 1909, for example, the Congress was faced with a stand-off
between owners of copyright in musical compositions, on the one hand,
and the fledgling phonograph record industry--whose new business model
threatened continued sales of sheet music--on the other. The compromise
Congress struck involved making it clear that the unauthorized
``mechanical reproduction'' of songs did indeed infringe copyright,
while providing a compulsory license (now found in Section 115 of the
Copyright Act) to assure that authorization for recordings would not be
unreasonably withheld.
The 1976 Copyright Act incorporated other compulsory licenses:
Section 116 (repealed in 1993) was designed to strike a fair compromise
between the interests of music copyright owners and jukebox operators,
while Section 118 aimed specifically to promote the performance of
copyrighted music by means of the then-novel technology of public
broadcasting. Of greatest significance, however, were the Section 111
compulsory licensing provisions that cut the Gordian Knot of law and
technology that courts had tied over the previous decade, enabling the
rise of cable television and thus unleashing a transformative force in
the entertainment and information industries.
Since 1976, the Congress frequently has resorted to compulsory
licensing to avoid other potential impasses between content owners and
distributors. Section 119 of the Copyright Act was introduced in the
Satellite Home Viewer Act of 1988 to provide a space in which direct
broadcast satellite technology could flourish as cable TV had done
before it. In 1999, the provision was revised and extended by (among
other things) the addition of a new compulsory license for ``local-
into-local'' transmissions. Recently, compulsory licensing also was
employed to open up yet other promising channels for delivering
copyrighted content to consumers by breaking the decades-old standoff
between recording companies and broadcasters around performance rights
in sound recordings. Central to the design of the Digital Performance
Right in Sound Recordings Act (DSPRA) of 1995 were a back-up compulsory
license for certain subscription music services and another for the so-
called ``digital delivery'' of sound recordings. In 1998, as part of
the Digital Millennium Copyright Act, the DSPRA was expanded to add a
the new compulsory license for the retransmission of copyrighted sound
recordings by Internet broadcasters to which I referred earlier.
In short, compulsory licensing is alive and well in the American
copyright system. It is a common and appropriate legislative response
to the tensions that new technological modes of information commerce
inevitably will generate.
Last year, we saw a further evolution of the debate over the future
of compulsory licensing. In 1997, in anticipation of the renewal of the
Satellite Home Viewer Act, the Copyright Office conducted a study to
determine whether and how that Act should be extended. The Copyright
Office concluded that compulsory licenses should not be extended to the
Internet, largely because of the perceived inability of Internet
technology to geographically restrict signals to areas unserved by
terrestrial broadcast signals.
In 1999, potentially harmful language was included in the
Conference Report of the Satellite Home Viewer Improvements Act that
explicitly would have precluded Internet carriage of retransmitted
video signals. As I understand it, proponents of the change contended
that this merely reflected existing law, since Internet companies did
not currently qualify for such a license. Internet and
telecommunications companies objected, arguing that, if they could meet
the geographic restrictions in the current Act, they should be entitled
to a compulsory license. In the end, principally as a result of the
efforts of many Members of this Committee, the language was removed
from the legislation that ultimately was signed into law.
Next Steps. In the near future, Internet companies believe they
will be able to provide effective competition to cable and satellite
companies delivering television to consumers. Natural markets include
the workplace, where interference prevents clear reception, and rural
and remote areas unserved or undeserved by broadcast, cable, and
satellite services. When this technological potential is fulfilled, the
real question will not be whether Internet TV service qualifies under
the Section 111 and 119 compulsory license, as now written, but on what
terms it should be made available to consumers under existing or new
legislation--and how content owners can be fairly and adequately
compensated for delivery of their works.
As other witnesses have stated, the tens of thousands of hours of
audiovisual content available over the Internet demonstrates a growing
consumer interest in Internet video. There are sites dedicated to
independent films, independently produced news, talk and public service
programming, and original animation. Live concerts, news events,
conferences, and business meetings from around the world are broadcast
five daily. Television programming from past decades have been licensed
for rebroadcast on various Internet sites.
But despite the wealth of video content available over the
Internet--far more than any one cable or satellite system could
possibly offer--what is missing is current television network content.
Several hundred local television stations are retransmitted over the
Internet today, but these retransmissions are limited to content
created by the stations themselves. When such material is on the air,
it is made available to all Internet users in all geographic regions,
without subscription. At other times of the day, such as when network
programming is broadcast, the station signals are not available over
the Internet.
Given the wildfire growth of Internet radio, Mr. Chairman, there
can be no doubt that television transmissions over the Internet that
include today's popular network programming would be equally
successful. To enable transmission of the complete broadcast day would
require a license from the owner of the network content. This could be
facilitated by statutory provisions of the type now available to cable
and satellite distributors. Alternatively, the Copyright Office study
suggested that local stations could be empowered, by law or agreement,
to grant permission to retransmit network programming, with
compensation flowing back to the networks.
As I noted earlier, in its study the Copyright Office concluded
that compulsory licenses should not be extended to the Internet,
largely because of the perceived inability of Internet technology to
geographically restrict signals to areas unserved by terrestrial
broadcast signals. That may have been true in 1997, but it will
increasingly be of limited relevance in the future. While the Internet
has generally been utilized as a global medium, various means have been
developed in recent years to restrict access to material over the
Internet. Private web sites are available on a member-only basis.
Videoconferences restricted to certain participants have been conducted
over the Internet. Methods such as password protection or cryptographic
authentication can be used to limit access to authorized persons. Other
technologies, such as hardware cards or smart cards, theoretically
could be implemented for this purpose.
As I also have noted, even under current law Internet services
argue that they could be included within the compulsory video licenses
for cable or satellite services to retransmit station signals if they
limit distribution of signals to particular geographic regions. In my
view, however, Congress should reconsider the requirement to implement
geographic restrictions as a condition to compulsory licensing for the
Internet. If every television station can make its signals available
over the Internet, without spectrum or bandwidth limitations faced by
cable and satellite systems, then all local stations can compete freely
and attract new viewers (and, therefore, more advertising revenue).
Such a change would advance electronic commerce and the availability of
information to consumers, and can undoubtedly be accomplished by means
that will adequately and fairly protect the interest of content owners,
broadcasters, and others with a vested interest in the status quo.
Conclusion. Consumers will increasingly seek to expand the ways
they can access video content. Whether viewing broadcast programming on
a computer monitor, a handheld personal device, or a television screen
using relatively new market entrants such as Web TV, AOL TV,
RealNetworks G2, or a host of products still being developed in garages
and labs around the world, consumers will seek access to new content
and to share their experiences with others. As the technology further
evolves, the breadth of their experiences and enjoyment can increase as
well. The challenge, of course, is to ensure that both content owners
and consumers benefit from these advances in technology.
As it did in rewriting the DMCA, this Subcommittee can advance
technological development and electronic commerce by balancing the
interests of these important stakeholder groups.
Thank you.
Mr. Tauzin. Thank you, gentleman.
The Chair now recognizes Mr. Paul Karpowicz, the Vice
President of LIN Television of Providence, Rhode Island.
STATEMENT OF PAUL KARPOWICZ
Mr. Karpowicz. Thank you, Mr. Chairman. I am vice
president of LIN Television which owns and operates 15 TV
stations nationwide. I am also vice chairman of the NAB
Television Board and chairman of the CBS Affiliates Board.
Lintel vision employs 1,500 people including nearly 140 at
our station in Buffalo, New York, WIVB, Channel 4. Of those 140
employees, 60 are part of our local news department. WIVB is
our station in Buffalo that was one of those stations hijacked
by iCraveTV and put on the Internet illegally.
I am here today to tell this committee that we must oppose
and remain vigilant against this sort of thievery. The activity
iCraveTV engaged in was a direct attack or American copyright
law. More importantly, it was a frontal assault upon the
locally based network affiliate system of broadcasting that is
the hallmark of American television. Both Congress and the FCC
have consistently recognized the benefits of having American
broadcasting licensed and entrusted to serve the local public
interest.
As a result, we have created a nationwide network of local
stations that provides both national and local programming.
iCraveTV's actions do violence to that system and ultimately
threaten the ability of all Americans to have access to local
programming. Let me explain how. My station in Buffalo, WIVB,
is a ABC affiliate and carries their network fare. In addition
to that network programming, we offer local produced
programming, syndicated shows that we purchase as the exclusive
station in our market. Providing all of these programs allows
us to generate local advertising that runs under all of the
local service we provide.
For example, we spend almost $5 million a year on local
news, a commitment that would not be possible without some of
the revenue that we generate from our advertising within local
network and syndicated programs. As you know, Congress has
created compulsory license for both cable and satellite
services that gives those industries the ability to retransmit
local stations in a discrete geographic area, in this case, our
DMA with some very limited exceptions.
These licenses also carry certain obligations such as must-
carry, Syntax, and sports blackout rules, but no such license
or obligations exist for the Internet which can literally serve
the entire world.
Why is this a concern? If you look at my station, it
provides all kinds of local programming throughout the day
including local advertising, promotional material that drives
viewers to our local news, weather warnings and alerts, public
service announcements, and numerous other offerings. If a
viewer in Buffalo can access their network programming from the
Internet, they will lose access to all of that local
information, and it will only diminish our ability to provide
it.
The same holds true for syndicated programs. We pay hefty
fees to obtain the rights to show Oprah in the Buffalo market,
but if some Internet site streams Oprah from elsewhere or vice
versa, that destroys the syndicated exclusivity we have paid
for and our station and its viewers will suffer as a result.
The bottom line is that this lawless activity will create
economic harm which necessarily translates into reduced local
services for our audience. Further, the way in which the
programs are presented on iCraveTV degrades the entire viewing
experience by squeezing my station's picture inside a frame
that includes extraneous banner advertising. Not only does the
picture quality suffer, but by doing this, iCraveTV also
removes the data stream that gives viewer closed captioning and
lets them activate the V-chip technology in their TV set.
In addition, iCraveTV or some other network provider could
insert advertising for competing advertisers that would
severely dilute the ads my station carries. There is no reason
for General Motors to advertise on my station if iCraveTV is
running a banner ad for Ford around the edge of my picture.
Local advertisers pay for local viewers. Viewers in Buffalo
watching programming from some other market will not see the
local car ads, the local PSAs, or those ever important local
political ads, and that same situation would hold true for
viewers in other markets watching WIVB from Buffalo.
The Federal Court in Pittsburgh fortunately stepped in and
did the right thing. It forced iCraveTV to cease and desist in
this illegal activity. We believe that the laws currently on
the books are sufficient to make sure that this does not happen
again, so long as the courts remain vigilant in enforcement.
The situation can only change if Congress were to become
convinced to pass legislation by granting the compulsory
license for the Internet. The Internet is and can be a
wonderful thing. Our stations are already using it to provide
news, Doppler radar, traffic cameras, and other local
information to our viewers.
Make no mistake, we are not against the Internet, but what
we are against is allowing the Internet to take advantage of
our copyright material and use it illegally to hurt us and our
local viewers. We all want the Internet to enhance our local
markets through innovative technology, but we cannot allow
those without the copyright to control those uses.
We will continue to fight for our rights against iCraveTV
or any other web site that attempts to steal our product, and I
would urge of you to join us in that effort. Thank you very
much.
[The prepared statement of Paul Karpowicz follows:]
Prepared Statement of Paul Karpowicz, Vice President, LIN Television
Corporation on Behalf of the National Association of Broadcasters
My name is Paul Karpowicz. I am the Vice President for Television
of LIN Television Corporation, the owner of television station WIVB, a
CBS-affiliated station in Buffalo, New York as well as network stations
in many other markets. I am the Vice Chairman of the Television Board
of the National Association of Broadcasters and the Chairman of the CBS
Television Affiliates Association. Thank you very much for giving me
the opportunity to testify today.
The Network/Affiliate System
Our station in Buffalo, like the hundreds of other network stations
across the United States, exists as a result of the uniquely American
partnership between national networks and local TV stations. Under this
system, local TV stations in markets large and small across the United
States provide a unique combination of national TV programming (such as
NFL football and ``60 Minutes''), syndicated programming (such as
``Oprah Winfrey''), and local news, weather, and public affairs
programming.
The network/affiliate system provides the solution to a problem
that Congress has long tried to solve: how to ensure that as many
communities as possible have their own local TV ``voices,'' rather than
accepting a world in which viewers in Buffalo, Baton Rouge, or Boise
must rely solely on programming originating in New York or Los Angeles.
The network/affiliate system has also ensured that virtually all
Americans have access to free, over-the-air television, rather than
forcing viewers to pay intermediaries (such as cable systems or
satellite companies) to provide them with TV programming.
In short, the network/affiliate system has been a tremendous
American success story. But the continued vitality of this system
depends on local stations enjoying a substantial degree of exclusivity
in providing network programming to local viewers. Local stations make
much of their revenues by selling advertising time during popular
network programs, particularly primetime programs. During these same
programs, local stations run promotional spots designed to attract
viewers to local news programs; these spots are a key way that stations
build audiences for their news programs. If local viewers are able to
watch network programs on distant stations imported by third parties--
whether cable systems, satellite carriers, or Internet companies--the
basic economics of network affiliates are put in grave jeopardy.
Exclusivity in providing local audiences with syndicated
programming is also important to the continued viability of local
stations, both network and independent. Our stations simply cannot
continue to pay large fees to program syndicators to keep high quality
syndicated shows on free over-the-air television, if the same programs
are being imported day and night into our local markets by cable,
satellite, or the Internet.
Protection of stations from importation of duplicative programming
into their markets is thoroughly woven into the fabric of our legal
system. Since the 1960s, for example, the Federal Communications
Commission has adopted and enforced network nonduplication, syndicated
exclusivity, and sports blackout rules that bar cable systems from
importing duplicative programming from distant stations. Congress
acknowledged and supported these rules when in created the cable
compulsory license in 1976, and reaffirmed its strong support of those
rules in the Telecommunications Act of 1996.
When satellite television appeared on the scene, Congress created a
similar set of rules in 1988 to protect the network/affiliate
relationship. Congress reaffirmed those rules last year in the
Satellite Home Viewer Improvement Act, and directed the Commission to
apply syndicated exclusivity and sports blackout rules to satellite
carriers as well. In doing so, Congress ``reassert[ed] the importance
of protecting and fostering the system of television networks as they
relate to the concept of localism,'' and pointed out that ``television
broadcast stations provide valuable programming tailored to local
needs, such as news, weather, special announcements and information
related to local activities.'' SHVIA Conference Report, 145 Cong. Rec.
at 11792 (daily ed. Nov. 9, 1999).
Internet Transmissions of TV Broadcasts and the iCraveTV Case
Although this Subcommittee is very familiar with the harm (and
resulting consumer complaints) caused by satellite industry importation
of distant network stations, the threat posed by unauthorized Internet
delivery of broadcast television programming is vastly worse.
Let me start by telling you what iCraveTV is and what it has done.
iCraveTV is a company based in Toronto, Ontario that late last year
began picking up over-the-air TV signals from 17 stations in Buffalo,
New York and Toronto and retransmitting them throughout the world via
the Internet. ICraveTV's business plan was simple: use broadcasters'
copyrighted product, in which broadcasters have invested billions of
dollars, and then ``frame'' it with iCraveTV's own advertisements. In
the process, iCraveTV also degraded the quality of our signal, omitted
the part of the signal required for closed captioning and parental
advisories, and made it appear that iCraveTV was itself the author of
the programming. iCraveTV did not obtain permission from any TV
station--including our Buffalo station--or any other copyright owner
before pirating their programming.
iCraveTV pretended that its service was limited to Canada, where it
claims it is permitted to retransmit TV programming through the
Internet. (We strongly disagree with that claim about Canadian law, and
iCraveTV has been sued in Canada as well.) The reality is that iCraveTV
was available throughout the United States and throughout the world.
As soon as they learned of iCraveTV's unlawful activities, American
broadcasters and copyright owners immediately demanded that iCraveTV
stop infringing their copyrights. When iCraveTV refused, a coalition of
TV networks, motion picture studios, and sports leagues filed suit in
federal court in Pittsburgh on January 20, 2000 against iCraveTV and
its principals.
Judge Ziegler of the United States District Court for the Western
District of Pennsylvania instantly saw through the ``only in Canada''
sham. As Judge Ziegler explained, the evidence showed that the iCraveTV
web site ``was established, used, promoted, advertised and sold to
attract users in the United States to circumvent the trade[mark] and
copyright laws of the United States and to circumvent the trade[mark]
and copyright rights of the plaintiffs.''
The Court also found that by transmitting TV programming through
the Internet into the United States, iCraveTV is ``publicly
performing'' those programs in violation of the plaintiffs' exclusive
rights under the Copyright Act. Notably, iCraveTV did not argue--and
could not argue--that it is allowed to transmit TV programming through
the Internet to U.S. viewers without obtaining permission from the
copyright owners. As the Register of Copyrights made clear in letters
to Congress last fall, U.S. law simply does not permit such
transmissions, and Internet companies are not entitled to transmit TV
programming under any existing compulsory license.
Judge Ziegler has issued a preliminary injunction barring iCraveTV
from transmitting the plaintiffs' copyrighted programming into the
United States. To comply with that court order, iCraveTV has terminated
its online transmissions of TV programming.
Why Internet Retransmissions of TV Station Programming is So Dangerous
The very substantial harm that stations have experienced as a
result of unlawful retransmissions by satellite companies would be
incalculably worse if Internet infringers such as iCraveTV were allowed
to continue to stay in business, or if Congress were (mistakenly) to
create a new Internet compulsory license that would override the rights
of stations and other copyright owners. The reason is simple:
unauthorized Internet transmissions of TV broadcast programming can
reach everyone in the United States--in fact, everyone in the world--
who has a computer and a modem. In the United States alone, there are
110 million Americans with Internet access, and there are hundreds of
millions of Internet users worldwide. These figures are, of course,
growing every day, as is access to broadband that makes delivery of
video over the Internet even more appealing to consumers. As local
stations have lost millions of local viewers to unlawful retransmission
of distant TV stations by satellite companies, they would now face
unauthorized Internet companies delivering the station's own product to
more than 100 million local viewers in the United States, including
those in many of the most affluent households that are the most
appealing to advertisers.
And it is not just the national programming that is at issue here.
Our Buffalo station invests millions of dollars every year in producing
top quality local news programming, of which we are the sole copyright
owner. Having invested the money and hired the talent to produce this
programming, our station--and not some third party who has invested not
a penny in our programming--is entitled to decide how to deliver that
programming to viewers.
Our Buffalo station, like many stations, also buys syndicated
programming, and often pays top dollar to ensure that only our station
will offer a particular program in its local market. FCC rules ensure
that those contracts must be respected by cable systems when they
import out-of-town stations. Unauthorized Internet transmissions would,
of course, make those contractual protections meaningless, since TV
stations carrying the same programming in distant cities would be
available to every viewer in Buffalo with an Internet connection.
Nor is this just a domestic issue. By delivering U.S. television
programming throughout the world on the Internet, unauthorized Web
transmissions of TV stations would sabotage the ability of U.S.
broadcasters and other copyright owners to sell their programming in
foreign markets. That is, owners of valuable U.S. television
programming would find themselves ``scooped'' in selling their own
programming by third parties who could simply appropriate the entire
output of the U.S. television programming and deliver it
instantaneously throughout the world.
It is not an exaggeration to say that unauthorized Internet
transmissions of TV stations would cripple, if not destroy, our
spectacularly successful system of free, local, over-the-air
television. Exclusivity would become a meaningless concept, since
dozens, if not hundreds, of stations would offer the same programming
that local stations once used as their calling card. Local weather
emergency information--such as blizzard warnings in Buffalo--would go
unheard by many local viewers, since there would be no reason to watch
network or syndicated programming on a viewer's local station rather
than on a station imported from some distant market. And with those
viewers lost to local stations, the revenues needed for stations for
local stations to provide this programming would be diminished. And
local political advertisements, along with local news coverage, would
go unseen by many local viewers for the same reasons.
Let me be clear: broadcasters are not opposed to technological
change, and we are eager to harness the extraordinary power of the
Internet in ways that are consistent with our roles as providers of
free, over-the-air local television. To exploit the magic of the
Internet properly, however, requires that free market forces be left to
work, rather than having the government seize our copyrighted works and
hand them over to third parties who have done nothing to create them.
Broadcasters are already taking advantage of the power of the
Internet--and benefiting consumers--through purely voluntary,
marketplace transactions. For example, many TV stations today offer
their own local newscasts throughout the United States on their Web
sites, thereby enabling interested viewers--including former
residents--to keep on top of local news developments. Of course, these
Webcasts feature (and are financed in part by) advertisements sold by
the station that created the programming, not ads placed by third party
parasites. Other broadcast TV programs may soon be offered through the
Internet, through normal, marketplace transactions, if copyright owners
determine that it can be done consistent with the fundamental
principles of their businesses.
Although authorized Webcasts of TV broadcast programming are an
exciting new development, unauthorized Webcasts pose one of the most
devastating threats that over-the-air television has ever faced. We
should take to heart the lesson that the satellite experience has
taught us: as Chairman Tauzin has pointed out, it is crucial to stop
unauthorized transmissions of TV programming before they become
widespread and viewers become accustomed to receiving illegal
programming. Just as Congress does not want to hear complaints from
viewers about another round of turnoffs--this time from an illegal
Internet service--stations do not want to field the complaints that
will inevitably result if this type of piracy becomes widespread and is
then halted by the courts.
For now, the laws appear to be working well to permit TV
broadcasters and other copyright owners to protect themselves against
this new, ultra-high-tech form of piracy: the iCraveTV court correctly
found that Internet transmissions of TV programming in the United
States, without the permission of the broadcaster and copyright owners,
are against the law. We will keep you closely advised of developments,
and will let you and other concerned members of Congress know
immediately if it turns out that there needs to be some adjustment to
U.S. law to prevent iCraveTV or anyone else from engaging in this
outrageous form of misappropriation.
Mr. Tauzin. Thank you very much, sir.
And our final witness is Mr. Alex Alben, Vice President of
Government Affairs of RealNetworks, referred to you earlier I
think by Mr. McCallum as a distributor of iCrave. Mr. Alben.
STATEMENT OF ALEX ALBEN
Mr. Alben. We are not a distributor. We are the technology
platform that is utilized for streaming.
Mr. Tauzin. I stand corrected.
Mr. Alben. Mr. Chairman, members of the subcommittee, on
behalf of RealNetworks, thank you for inviting me to testify
today.
I'm Alex Alben, and since 1997, I've had the pleasure of
developing and implementing RealNetworks' Internet media
strategy. It has also been my pleasure to represent
RealNetworks as one of the founding members of the Digital
Media Association which today represents over 40 Internet media
companies.
Mr. Valenti, we do not have as distinguished a list of
members in terms of name recognition, but our members are also
technology exporters and are building the infrastructure for
the worldwide interpret economy which hopefully will also be a
great export for the United States as we continue to develop.
RealNetworks was founded by Rob Glazer in 1994 with the
bold premise that the Internet would be a mass audio-visual
medium. To accomplish this, Mr. Grazer and his development team
developed the Real Player, a software application that receives
plays packets of audio and video, and then delivers or streams
them over the Internet. Because we have always made a free
version of the Real Player available to end users, our platform
has rapidly proliferated, as you are aware.
From 5 million unique registered users in 1995, our
audience has grown to over 95 million today with 33 percent
watching video and 75 percent tuning into audio programming
every week. This growth would not have been possible without
the creation of attractive content from over 300 content
partners from individuals to schools and community groups to
large media companies.
The barriers to entry in the field of mass communications
have never been so low as on the Internet. Streaming media, as
you've heard today, is being widely embraced by local radio and
television stations. As a result of these forces, over 300,000
hours of programming are created and webcast each week,
creating a medium that enriches video content with interactive
features.
Mr. Chairman, we appreciate the opportunity to come here
today, and I would like to alert you to three critical trends
in our business. First, we firmly believe that the a level
playing field fosters competition and is essential for growth
of the Internet. The Telecommunications Act of 1996 called for
breaking down the barriers of distribution in the United States
communications marketplace. The Internet is accelerating this
process in ways that we could not have predicted even 4 years
ago. A horde of businesses across all industry sectors are
pushing the barriers for wider distribution of content over the
Internet.
Our sole concern is that we have a level playing field to
compete with these established forms of mass media. We are not
asking for Government regulation. We are not asking for
Government intervention. We believe none is required at this
time when the marketplace is finding new ways to meet consumer
appetite for interactive online news and entertainment
products.
Second, the web must be allowed to bring local programming
to a global audience. Much like cable access and low-powered
TV, streaming media promotes localism and presents a platform
for more speakers to reach the general public, creating new
media outlets to serve the public. Any solution to an Internet
compulsory license must take the global nature of the Internet
into account and not artificially limit the audience for
webcast content by imposing artificial geographic restrictions
that make little sense for a global medium.
Our challenge, therefore, is to present new business models
for media companies to stream their programming to this new
audience so that they can immediately appreciate the upside of
full-fledged distribution of their programming over the
Internet.
Third, streaming media will establish new online revenue
streams for traditional media. As you have heard today, it
already is, but we must also respect intellectual property
rights. The web has already created these new revenue streams
for Internet broadcasters and other broadcasters who can sell
Internet ads and do E-commerce on a global basis. It is a
wonderful thing to hear of stations from Buffalo, New York
distributing their programming over the world and selling ads
now on an international basis. It's remarkable.
Traditional sports entertainment, and news programs made
available to the 250 million member Internet audience will only
grow the revenues for the talented artists, athletes including
colleagiates, producers, and others who create this popular
programming. We want to offer content to consumers at
attractive prices with the greatest convenience in terms of
what they can watch and where they want to watch it. By
offering the online audience the widest possible array of live
and on-demand programming, we will work with content providers
to create this huge new market for new and old copyrighted
works.
In the long run, every program will be globally distributed
over the Internet. The technology allows for it and consumers
demand it. Our critical task to do so in a way that fairly
compensates copyright owners and demonstrates the promise of
this rich and interactive global medium.
Mr. Chairman, thank you for inviting us here today. I'd
like to also add to Mr. Valenti's comments. We are interested
in the copyright assembly, and if we can afford the membership
fees, we may be interested in signing up. So please give us
some information.
Mr. Valenti. We will give you a compulsory license.
Mr. Tauzin. Compulsory dues.
Thank you very much, Mr. Alben.
[The prepared statement of Alex Alben follows:]
Prepared Statement of Alex Alben, Vice President, Government Affairs,
RealNetworks, Inc.
Mr. Chairman and members of the subcommittee, on behalf of
RealNetworks, Inc., thank you for inviting me to testify today at this
very important hearing regarding the future of video distribution on
the Internet. I am Alex Alben, and since 1997, I have had the
remarkable pleasure of participating in the development and
implementation of RealNetworks' groundbreaking Internet media strategy.
It has also been my pleasure to represent RealNetworks as one of the
founding members of the Digital Media Association, which today
represents forty digital music, e-commerce and digital video companies.
Today I would like to briefly review the history of RealNetworks and
streaming media, and discuss the future of our company, the digital
media industry, and the exciting future that consumers will enjoy as we
implement our vision to distribute music and video to the global
Internet audience.
RealNetworks Revolutionary Technology Creates The Streaming Media
Market
RealNetworks was founded by Rob Glaser in 1994 with the bold
premise that the Internet would one day be a mass audiovisual medium.
For those of us who built early web businesses on a foundation of text
and simple graphics, the notion that one day high quality video would
stream to 250 million connected consumers around the world was as
farfetched as predicting that two sluggers would break Babe Ruth's
single season home run record two years in a row. Yet just as Mark
McGwire and Sammy Sosa have accomplished this feat, RealNetworks
technology has delivered on the promise of inter-active video. You
might remember the first Seattle Mariner's baseball game, broadcast
over the Internet in April of 1995 using the RealAudio 1.0 format. This
AM-quality broadcast was not only streamed to fans at their desktops in
Seattle, but, complete with commercials, was enjoyed by displaced fans
as far away as Stockholm and Tokyo.
To accomplish this, Mr. Glaser and his team had developed the Real
Player--a software application that receives and plays ``packets'' of
audio or video data that are delivered from remote computers, or
``servers,'' across the Internet. By breaking rich media files such as
video into a series of small packets, Real technology gives the
computer user a continuous listening or viewing experience, even over
low bit rate connections. The RealPlayer and server system facilitates
both live and on-demand delivery of streaming programming. Unlike
digital downloads, which require storage space on the user's pc and
relatively fast Internet connections, streaming represents an
incredibly efficient and inexpensive way for broadcasters--or
``webcasters''--to deliver audiovisual content to their online
audience. As a consequence, the technology fulfills Mr. Glaser's
original vision that millions of Internet users can create new content
for a new medium, without reliance on traditional media outlets.
Fast forward to February of 1997, when Spike Lee helped us launch
RealVideo with a short film featuring tap dancer Savion Glover that was
widely distributed over the Internet. It's unfortunate that Al Jolson
wasn't available, because he might have said, ``You ain't seen nothing
yet.''
In November of 1999, the RealPlayer 7.0 brought consumers a package
of audio and video programming that delivers on the promise of
streaming media, incorporating better video and audio quality with a
revolutionary format that allows for simultaneous presentations of
multimedia, text, pictures and graphics.
Because we have always made a free version of the RealPlayer
available to end users, the platform has rapidly proliferated. From
500,000 unique registered users in 1995, our audience grew to 14.4
million in 1997, 48 million in 1998 and stands at 95 million at the
beginning of this month, with five downloads of the RealPlayer 7
occurring every second.
To underscore the popularity of streaming media on the web,
Arbitron New Media and Northstar Interactive report that of the 95
million RealPlayer base, 33% watch video programming and 75% tune into
audio programming on a weekly basis!
Connecting 95 Million RealPlayer Users To a Wide Array of Content
Created Both By Traditional Media Companies and New Voices.
This growth would not have been possible without the creation of
attractive content from wide variety of sources, enabled by the
distribution of our low-cost encoding and production tools. We also
offer a free server that will connect a content publisher with up to
sixty simultaneous viewers or listeners. From individuals, to community
groups, to clubs, to broadcasters and large media companies, the
barriers to entry in the field of mass communications have never been
so low as on the Internet. Virtually anyone with a connected computer
can distribute information over the World Wide Web, realizing our
Founding Fathers' vision of a robust marketplace of ideas.
RealNetworks has over 300 content partners, ranging from Chuck D's
RapStation, to NPR, the BBC, Comedy Central, Atom Films and Leonard
Nimoy's ``Alien Voices.'' Independent and non-traditional programmers
have found an efficient channel in the Internet to cost-effectively
reach niche audiences. Similarly, CNN, ESPN, NBC, MTV, Fox, CBS and
other major media companies have embraced RealSystem G2 as a leveraged
way to expand their reach on the web and drive consumers to both their
web sites and to their off-line media outlets.
And this is an international phenomenon--from broadcasts of special
services from the Vatican to underground radio transmissions during the
war in Bosnia--streaming media has presented unique ways for speakers
and dissidents to reach their community of listeners on the World Wide
Web.
Streaming media has also been widely embraced by local radio and
television stations. Our best estimates are that on a global basis over
3000 radio stations have put their signal up on the web on a 24 hour
basis. This phenomenon has turned businesses aimed at local audiences
(and advertisers) into global media outlets. Following suit, over 200
TV affiliates offer some selection of their news programming on the
Internet in RealVideo, creating convenience for viewers who seek out
particular stories or who might have missed the 5 o'clock News.
As a result of these forces, over 300,000 hours of programming are
created and webcast each week in RealMedia formats.
Motion picture studios, TV networks, and local broadcasters have
all affirmatively decided to employ streaming media to expand beyond
their core consumers and reach the vital Internet audience. The
promotional value of distributing content over the web and the
potential for tapping into increased ad revenues perpetuates this
``virtuous circle.'' RealNetworks views these copyright owners and
programmers as our partners in this enterprise to create a new
programming medium--a medium that takes the best of TV and Radio
content and enriches it with interactive features that ``add value''
for the American and global consumer.
Looking to the Future--
Mr. Chairman, we appreciate the opportunity to come before this
Subcommittee and reflect not only on the rapid growth of our industry,
but to alert you to trends we have noticed, with a view toward helping
you craft the best approach to government policy in this area. We can
encapsulate these observations in a set of three fundamental
principles:
First--A Level Playing Field Fosters Competition And Is Essential For
the Growth Of This Important New Medium
The Telcommunications Act of 1996 called for breaking down the
barriers to distribution in the U.S. communications marketplace. The
Internet has accelerated this process in ways we could not have
predicted even four years ago. A horde of businesses--software vendors,
media companies, telcos and others--are pushing the barriers for wider
distribution of content to more consumers. RealNetworks and other
Internet media delivery companies have not asked for special
legislation to address the particular aspects of our distribution
channel. In fact, as the statistics I have cited clearly demonstrate,
the web audience is growing without any regulatory favoritism.
Our sole concern is to have a level playing field to compete with
established forms of mass media. We are not asking for government
regulation or intervention and believe none is required at this time
when the marketplace is finding new ways to meet consumer appetite for
interactive online news and entertainment products. It would also be
unfair--and probably unwise--for government to devise new sets of rules
to regulate this nascent medium as it evolves and grows in sometimes
unpredictable ways. We are simply asking that all laws passed be
technologically neutral and that Congress refrain from erecting special
barriers to digital distribution simply because it is digital, without
thinking through the implications for the important policy goals served
by online media.
Second--The Web Must Be Allowed To Bring Local Programming To A Global
Audience
The impressive growth of streaming on the Internet demonstrates
consumer demand for online audio and visual content. People today
expect to find radio shows and film clips on web sites. They want to
experience both traditional and non-traditional content and they want
to do so on their own schedule and in places that are not well-served
by analog audio and video signals. By its nature, the Internet is an
unscheduled interactive medium that offers consumers more choice and
more voices. Clearly, this medium dovetails with our longheld public
policy principles of free speech and breaking content distribution
bottlenecks.
Much like Cable Access, Low Power TV and the old-fashioned soapbox,
streaming media promotes localism and presents a platform for more
speakers to reach the general public. I'm sure the members of this
Committee are keenly aware that much of the unprecedented media
consolidation and relaxation of cross-ownership rules over the past
decade are premised on this development--that new media outlets are
serving the public through new means of distribution such as the
Internet.
The challenge in creating a compulsory license for the Internet is
not to shoehorn the Internet into local topographies, but to fairly
compensate program owners for the distribution of their content beyond
the boundaries of their terrestrial signals. The technology allows a
soccer fan in the U.S. to watch a World Cup match in France in real
time over a modem. Surely, along with the sports leagues, we should be
smart enough to figure out how to expand the audience for such
programming in a way that doesn't undermine traditional revenue streams
and licensing arrangements.
Any solution to an Internet compulsory license must take the global
nature of the Internet into account and not artificially limit the
audience for webcast content by imposing artificial geographic
restrictions that make little sense for a global medium. Our challenge,
therefore, is to present new business models for media companies and
producers to stream their programming to this new audience, so that
they can immediately appreciate the upside of full-fledged distribution
of their programming over the Internet.
Third--Streaming Media Will Establish New Online Revenue Streams for
Traditional Media, While Respecting Intellectual Property
Rights
As a person who participated on the studio side of the Sony Betamax
case, I can only smile now at the outcome where the VCR created both
the $7 billion Video Rental market and the $8 billion Video Sale
market, while the Theatrical Box Office continues to grow and in fact
set new records. Quite simply, new technologies created new markets for
old content in a way that did not cannibalize long-established revenue
streams. The web is already creating new revenue streams for local
broadcasters who can now sell Internet ads and do e-commerce on a
global basis, while their terrestrial signal market continues to
thrive.Traditional sports, entertainment and news programs made
available to the 250 million member Internet audience will only grow
revenues for the talented artists, athletes, producers and others who
create this popular programming.
We are mindful that we need to balance the incentives to create
great programming with the benefits of achieving the widest possible
distribution. RealNetworks upholds this principle, both as an inventor
of intellectual property and as the first company to successfully bring
a legal action under the Digital Millenium Copyright Act to ensure that
content owners can distribute their streaming media programming in ways
that they intend.
We want to offer content to consumers at attractive prices with the
greatest convenience in terms of when they want to watch and where they
want to watch. By offering the online audience the widest possible
array of live and on-demand programming, we will work with content
producers to create a huge new market for new and old copyrighted
works.
Many traditional models--pay-per-view, syndication, subscription
and even ``rental'' can be replicated online. In the long run, every
program will be globally distributed over the Internet. The technology
allows for it and consumers demand it. Our critical task is to do so in
a way that fairly compensates copyright owners and demonstrates the
promise of this richly interactive global medium
Conclusion
In conclusion, let me reiterate the ultimate desire of RealNetworks
and our fellow companies with the Digital Media Association: that
consumers be empowered to listen, watch and purchase entertainment and
educational content how, when and where they choose, and by whatever
technology they enjoy most. We pledge to continue to work with our
content partners, as RealNetworks has since its inception, to fully
realize Rob Glaser's vision of the Internet as a robust, interactive
medium for audio and video communication by all people around the
globe.
Thank you for the opportunity to testify this morning. I would be
pleased to answer any questions you may have.
Mr. Tauzin. The Chair will recognize himself and then other
members for 5 minutes.
Let me point out that I think we are going to follow this
hearing with what I think is the behind-the-mirror issues that
are going to envelope a consideration of the issues you have
presented us today, and that is the issues of privacy on the
Internet and how information may or may not be restricted by
consumers, and we are talking about how you may or may not
restrict the movement of content or isolate its delivery,
isolate access to it.
Consumers, I think as we further develop privacy technology
and privacy policy, are going to also have some ability to
control growing information over the Internet, and much of what
you discussed today that do with advertiser-based support for
content and obviously privacy controls exercised by consumers
can have very increasingly important effects upon the ability
of advertisers to work the new markets, and we are probably
going to follow up with a hearing on that. I just want you to
know this so you can be thinking about how you may be able the
contribute to that hearing.
Let me confess to you that I think I share with many of my
colleagues I've talked to about the issues you have presented
today some of the tension I think Americans feel about these
issues. Let me try to express them for you and get some
feedback.
One, I think Americans like the idea that they can see all
the television they could possibly want to see from as many
different places as possible on the Internet. I kind of like
the notion that I can watch my local news here in Washington on
the stations back in new Orleans and Baton Rouge. I kind of
like the idea that I can watch what the candidates are saying
in New Hampshire before they come to campaign in Louisiana to
see if they are saying the same things. It is kind of nice. I
kind of like the idea that I can watch that incredibly
interesting campaign in New York. That is going to be
interesting for all Americans, and yet, you know, the question
is how can we accommodate to that and yet are we going to lose
localism.
Are we going to lose some of the features of network
distribution that has characterized network programming
distribution, network non-dupe rules, and the systems that have
supported the local station's ability to finance local news
programs and local important events, and how do we settle those
tensions, and I'll ask you to respond.
I also want to tell you that from what I am hearing from
you, I sense that there are two real concerns expressed out
here in addition to consumer concern for more and more video
programming and the one on the side of broadcasters, and video
content providers has to do with, indeed, localism and
protecting the base of advertiser support and network
distribution of products. And on the other side, on the content
side, is the concern for copying and distribution of digital
products that still have value, that still have value in terms
of its ability to make profit for the content creator in
various ports, either at Blockbuster and other area
distributions.
At the same time, you know, Mr. Alben, you said it as
boldly as I ever heard it. You predicted that every television,
every video content program is one day going to be available to
the world whether we want it to or not. It is sort of like
MP3.com reached on university campuses. The question is when
will university students be able to pick up digital video
signals and put them on their web site and broadcast from
around the world.
You know, iCrave is just the first puff of wind in this
brewing storm, and how do we settle it? So give me some
feedback.
Mr. McCallum, first of all, technologically, you tell me
you have software, you have equipment that can protect this
product, and you have equipment that can isolate the delivery
to a certain designated class of subscribers. How certain can
you or any of us be that that technology is going to be
sustained in the face of kids in any college in America who
have been able to break the best codes our best scientists have
been able to put together?
Mr. McCallum. Mr. Chairman, in the next 2 weeks, we hope to
have an efficiency level set for the software that we're
implementing. The invasion by young people and by people intent
on hacking into systems knows no bounds. They are driven
largely by curiosity. Increasingly, unfortunately, there's a
large number driven by commercial intent, but the industry,
RealNetworks and other companies, are working to be ahead of
those to try to put in place ever increasing protective systems
with encryption and so on, and we are part of that process
because it is important to us from a business model that we be
able to guarantee protection to a certain degree.
Mr. Tauzin. Mr. Valenti, the copyright assembly is being
organized. Will it invest in technology that perhaps can help
us resolve some of these conflicts?
Mr. Valenti. Mr. Chairman, I think that Mr. McCallum will
do very well in the motion picture business. He can sure write
good fiction.
The fact is that in the trial before Chief Judge Ziegler,
the Chief Judge of the Western District of Pennsylvania, as my
memory serves me correct, on that trial document on pages 48,
98, 102 and 113, McCallum plainly admits they cannot do it, and
Judge Ziegler in his decision said you cannot. There are no
technological fixes to restrict it to Canada.
For example, I'm a 16 year old, and I'm in my base in
Toronto. I can mirror iCrave to the world instantaneously, and
that can happen and we all know that, and he has admitted that
in the trial that went on. You have to understand what iCrave
is doing. They take these television stations from the twenty-
ninth parallel and above, bring them into their web site, alter
the picture, and then sell advertising around it, do not ask
anybody's permission to do it, do not pay anybody, and they
expect you to believe that they are doing something nobel,
advancing human society.
Fifty-seven percent of all the users of iCrave were in what
country? The United States.
Mr. Tauzin. Why don't you respond, Mr. McCallum and Mr.
Alben if you'd like to join in. How do you answer that
argument?
Mr. McCallum. Thank you for anticipating, Mr. Chairman,
that I might have a response. I might start off my response by
reading a short E-mail. It says:
``Hello. I live in northwestern Ontario, and I am not able
to get access to cable, and I do not have the money for a
satellite dish and service. I live 35 miles away from the
nearest city of Thunder Bay. Your web page gave me access, but
now they have taken that away. I wish they would let you bring
back your rebroadcasting service so that I could have access to
shows and programs that I presently do not have access to.
Signed, Missing my TV access.'' This is from Linda, somewhere
35 miles outside of North Bay in very deep snow, I assume. The
plaintiffs would have you believe that this woman 35 miles
outside of Thunder Bay, Canada is living in Richmond, Virginia
because she sent this E-mail through her AOL account. All
Canadian AOL subscribers are registered through the system as
being in the United States.
The system that we put in place at the time we launched was
using what we asked was the best available technology. Since
that time, a number of developments have taken place by other
companies, and we are taking advantage of those as we build the
new system. We have also augmented those by some proprietary
software development that is taking place within our own
company and our suppliers, and so we believe that this system
which will be available in the next month will be in a quantum
leap toward not only the security of our system but for
security for other program suppliers on the Internet.
Mr. Tauzin. Mr. Alben, is that technology reliable in your
view?
Mr. Alben. We have not tested that specific technology that
Mr. McCallum referred to, and I think that any means of trying
to deny access based on the URL of the user is probably not
going to be sufficient if that is what is being used. So you
need to get information from the consumer in order to verify
where they are from, and that is a hurdle to entering into the
access.
Mr. Tauzin. My time is up, but, Mr. Karpowicz, you wanted
to respond to my earlier comments. I'll let you do that, and
then I'll move to Mr. Markey.
Mr. Karpowicz. Yes, sir. Thank you, Mr. Chairman. Really, I
just wanted to start off by saying broadcasters are not against
the Internet. We think the Internet is a wonderful, innovative
technology, and it has provided us with many opportunities to
provide new services to our viewers that currently did not
exist.
As I indicated in my testimony, we do stream news and
weather and traffic cameras. A lot of information is being
streamed currently. It is my understanding that over 200
stations across the United States currently stream all or part
of their newscasts. So to your question about being able to
receive New Orleans stations in New York, I think that time is
coming.
I think the issue there is those stations have chosen to do
that. Those stations who are the copyright holders of that news
product have chosen to make that decision. The product was not
just plucked out of the air waves and taken away, and it is
presented in a format that the stations are very comfortable
with.
Mr. Tauzin. The Chair is pleased to recognize Mr. Markey
for a round of questions.
Mr. Markey. Thank you, Mr. Chairman, very much.
Opening day last year, Red Sox, WEEI radio up in Boston, I
am able to put it up and listen to it in my office down here in
Washington, DC. That is great. I want to be able to watch it
to. That would be great, fabulous. You know?
Back in the 1920's, we actually passed laws which cleared
signals all the way for 10,000 miles, and I listen to WBC radio
every night when I go home here in Washington, DC. I listen to
the 6 or 7 o'clock news in WBZ radio in Boston. We know that
there is 25 or so channels across the country that we can do
that.
Over the years, of course, this subcommittee panel, we have
ensured that we create a balance that makes it possible for new
technologies, for new competitors to get into the marketplace.
There are always controversial decisions which we make. Back in
1962, this subcommittee had to pass a law so that all TVs in
America could carry UHF channels. ABC, CBS, and NBC bitterly
opposed that law. They, of course, did not want new UHF
channels. They said that would undermine their ability to be
able to create just the right kind of a marketplace for the
existing three big net works.
In 1978, this subcommittee had to pass a law that insured
that the cable industry would have access to telephone and
utility poles across the country so that they would also get
preferential treatment. Those existing industries, they did not
like those laws.
Similarly, back in the 1960's and 1970's, we passed a
compulsory license for the cable industry whereby the rates
were set by Congress so that we could again give a nurturing
hand to the cable industry, and in 1987 and 1988, we forced,
this subcommittee forced the Federal Communications Commission
to not, in fact, levy access charges on Prodigy and CompuServe,
and then AOL as they were in their early stage, and in fact
that is what today makes flat rate pricing of the Internet
possible and drives its growth, that decision by this
subcommittee in 1987 and 1988, otherwise AOL would not be able
to purchase Time Warner and the Atlanta Braves.
It was this subcommittee that actually made it possible. It
would have died in its infancy or grown very slowly, and,
believe me, a lot of people opposed that as well at the time,
and even last year Congress acted to allow DVS providers to
start local-to-local services and let them wait until 2002
before they had to start full must-carry service. That helps
the new service, the satellite service get off the ground, so
to speak.
The point of this story line is that this subcommittee has
always tried to break down barriers. So the questions before us
are multiple, balancing the rights of existing copyright
holders against the new technology and the competition which we
like to see in the marketplace.
Mr. Valenti, do the copyright owners need protection or
tools for enforcement beyond that contained in the RIPO
implementing legislation and otherwise contained in existing
laws? Do you need new laws?
Mr. Valenti. I do not think any law is needed, Mr.
Chairman. That is what, in my awkward way, I was trying to say.
I used Sam Rayburn's words, ``Wait a minute to see how this
develops'', and I think you have been in the forefront of that,
you and the chairman. That is all that is needed, is watchful
waiting to see who is being denied what.
I think today, except for this loan fellow that Mr.
McCallum referred to, that just about 99 percent people in this
country can get just about anything that they want to get, and
this has been expressed by Mr. Beck and Senator Boren and
others here, but we are going to have television stations all
over this Internet.
Mr. Markey. Let me ask Mr. Alben then. Let me ask, Mr.
Alben, do ISPs have the ability to use existing licenses if
they adhere to existing rules?
Mr. Alben. I don't think any Internet company to date has
applied for a compulsory license to transmit television
programming, and frankly I think the laws are ambiguous as to
whether an Internet company could avail itself, but under
certain circumstances, potentially it could.
I think if I can talk about localism for a second, because
I think it is a very important principle, that is the bedrock
principle of our communications laws. You want to watch the
Boston Red Sox games. We broadcast the first Seattle Mariners
game in 1995 to a worldwide audience over the Internet in a
radio broadcast, and people in Japan called us and said, Hey, I
love Ken Griffey, and now I can finally at least hear about Ken
Griffey on the Internet.
Consumers want this, and the Internet----
Mr. Markey. Well, when can I see the Red Sox and how much
will it cost me?
Mr. Alben. We would love to see a marketplace where the Red
Sox are putting their signal up on the Internet, and in fact I
think that many of them are going to start doing that because
they realize they are serving the so-called displaced fan. You
are a displaced fan, Mr. Markey, and you want to watch the
broadcasting of the Red Sox and perhaps even the Patriots.
Mr. Markey. If blackout rules are ambiguous, will you be
denied the ability to do that? Do we have to clarify the
blackout rules in order for you to be able to do that?
Mr. Alben. I think you need to look at what the blackout
rules were designed to serve. Clearly, if the goal of the
blackout rule is to increase the physical gate attendance at
the stadium, then the fact that you are being blacked out from
watching the game when you're in Washington DC does not meet
that stated goal.
Mr. Markey. Does the law have to be clarified?
Mr. Alben. I don't know if the law needs to be clarified,
frankly. I think that blackout rules should be revised in
certain circumstances where there is a consumer demand for the
program and where the station can get additional revenue.
Mr. Markey. Mr. McCallum, does the law have to be
clarified, the black out rule?
Mr. McCallum. I cannot answer for the United States. Sorry.
Mr. Markey. Okay. Thank you. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, Mr. Markey. The Chair is now pleased
to welcome and now recognize Mr. Shimkus for a round of
questions.
Mr. Shimkus. Thank you. Clarification: He is not a
displaced fan. He is a misplaced fan.
I am a Cardinal fan, for the record.
Mr. Tauzin. He is a Cardinal fan. That is the nicest thing
that has been said about him in a long time.
Mr. Shimkus. A long time. I have two questions. Hopefully,
I will get to both of them.
Mr. Alben, I was fortunate to hear Rob Glazer at a
conference in January, and what he did was he pulled in a data
stream of music on an MP3 player, played it for the whole
convention hall. Then it took it from the MP3 player to a desk
in which he burned the CD. You know, it is all digital. My
question is how does the artist get compensated for that?
Mr. Alben. Well, in that specific example I am familiar
with, the artist was compensated when we purchased the CD. So
let's say it was a Beck CD. Beck received whatever payments he
gets from his record label when the physical CD is purchased,
and I think it is very clear that people have personal use
rights to take their CDs and play them on their computers and
also to put them on to a portable device, and in fact that is
going to increase the sales of CDs because then people realize,
hey, there is a great new way of enjoying music, I'm going to
go out and buy more CDs.
I think the case that you are worried about, legitimately,
is when a user would then take that CD, multiply it a hundred
times and send it out over the Internet, and clearly there is a
point where personal use rights have limits and where they
start to deteriorate from the market.
Mr. Shimkus. I agree, and I think that is our challenge.
And, Senator Boren, I did not hear all the testimony
because I was coming back from the vote, but SoonerSports.com
is an attempt to make sure that you capture the web TV or the
stream market; is that correct?
Mr. Boren. That's correct. In other words, of course we
have our negotiations for live broadcast, but typically after
the time of the live broadcast, we will then put some of this
up for our fans all over to enjoy, and this allows us to have
control over the way it is done and to keep control of our
intellectual property; but we all have the strong incentive to
get it out as quickly as we can to those misplaced fans around.
Mr. Shimkus. If they are Sooner fans, most of them are
going to search, and they are going to use Sooners, and it is
going to pull up. They are not going to pull up iCrave to try
to find a Sooner football game.
Mr. Boren. No.
Mr. Shimkus. So my question to the local broadcasters, I am
a big defender of local broadcasting. I have seen how it has
helped save communities. I guess the question for me is I do
believe this is a debate of a rising tide, expanded markets.
Are you or why are not you taking advantage of the competitive
atmosphere and developing a similar Sooner sports.com to be
prepared to more broadly disseminate your signal so that you
are in direct competition to industries like iCrave.
Mr. Beck. We are doing that. We own the URL High
SchoolHockey.com, and what is so wonderful about the Internet
is that came out of Duluth, Minnesota, our little station
there. They created that site. We own a big chunk of something
called MyTVSshop.com which is about television and its
electronic commerce sites.
So we are perfectly willing and able to compete on a
national or international basis with anybody.
Mr. Shimkus. My point is for the specific station. Again
talking baseball today, KMOX is a carrier of the St. Louis
Cardinals.
Mr. Karpowicz. Right.
Mr. Shimkus. It would be easy for me in a remote location
to be a displaced fan to call up KMOX, and if they are
streaming the audio, then they are capturing that market, and
they may be competing with someone else, but it is more likely
for me knowing the locality to go to a KMOX versus an iCrave.
Mr. Karpowicz. I think in those cases where we own the
copyright, specifically with our local news, we are very
prepared to stream that video. The issue comes in which we are
running syndicated product like Friends or Oprah or CBS product
or NBC product. We have no rights to let that go out. So to the
extent that over 200 local television stations currently stream
all or part of their local news product, clearly that is the
direction this is going.
Mr. Shimkus. Okay. You brought up a good point about your
rights to stream outside of your geographical barrier based on
your agreement with the network, and I think that is something
I did not think about.
So I yield back my time. Thank you, Mr. Chair.
Mr. Tauzin. I thank the gentleman.
The Chair recognizes the gentleman from Ohio, Mr. Sawyer,
for a round of questions.
Mr. Sawyer. Thank you very much, Mr. Chairman. I am not
sure that we have really gotten a full answer to the question
about how you actually limit geographically what can be done
with the signal. Maybe I am just not understanding what you are
saying, but even if encryption technology is implemented to
create these geographical barriers, how do you prevent a
subscriber from turning around and distributing the product
received in that way?
Mr. Jaszi. To me?
Mr. Sawyer. Yes, or anybody. I mean I am just at a loss to
understand the argument that you can create these barriers, and
I have not heard the answer to that question. I was addressing
it to Mr. McCallum, but more broadly I am particularly
interested in how the absence of geography on the Internet
creates circumstances where law or regulation can be enforced
in a compatible way across a variety of national legal
jurisdictions. But answer the first question first, and then
others can respond as well.
Mr. McCallum. We had a problem drawn to our attention in
January that there were pirate sites out there were just
drawing our stream to the sites and then redirecting them to
anybody who came on. They came in through what is known as the
back door. Part of the work that we are currently doing is
locking that back down solidly tight.
Mr. Sawyer. Okay. They were not subscribers; is that
correct?
Mr. McCallum. No.
Mr. Sawyer. Okay. What do you do about subscribers?
Mr. Sawyer. The nature of the security system is that the
stream is sent to an individual computer, to an individual IP
address. We have locked down the ability from the beginning
putting the streams up, preventing copying so that nobody could
copy it to their computer, and we believe that the current
system that we are implementing is a system that will prevent
the retransmission from that computer to others.
Mr. Sawyer. Does everyone else subscribe to that?
Mr. Valenti. Mr. Congressman?
Mr. Sawyer. Yes, sir.
Mr. Valenti. That ain't so, and you go to see any expert in
Internet or computer, you cannot do it because anyone can pick
up that signal and do what is called mirror, and that is
transmitted then to a waiting global world of 6 billion people
instantaneously. There is no way you can do it.
Mr. Sawyer. Yes, sir?
Mr. McCallum. Congressman, there would be, I would think,
little difficulty in the individual who currently takes his cam
corder into a movie theater, captures a new release, exhibits
it on the Internet, and takes the same cam corder and pointing
it at a computer screen and doing the same thing. I would
suggest that part of the solution----
Mr. Sawyer. But the medium of distribution is substantially
different, of course.
Mr. McCallum. No, they are both on the Internet. I'm
suggesting that they are both being distributed to be Internet,
and they are obtained in that exactly the same fashion. What I
would suggest that part of the solution may be to make these
products so readily available under arrangements to allow the
flow of copyright payments back to the original creators that
you effectively reduce the temptation to go to these means in
order to get a substandard product.
Mr. Sawyer. Mr. Beck, you have been trying to----
Mr. Beck. Sorry. Mr. Valenti actually responded as I would
have, Congressman.
Mr. Valenti. Let me just say that I do not want to dominate
here, but I have got to respond to this. When a man goes with a
cam corder into a theater and picks that up that, records that
program and then distributes it, he goes to jail for that.
Mr. Sawyer. Yes, he is in violation of law.
Mr. Valenti. It is a felony offense.
Mr. Sawyer. Yes.
Mr. Valenti. And as a matter of fact, we have put a number
of such people in the slammer over the last year or 2. That is
exactly what happened. So you cannot take digital which is
ephemeral. It comes into your computer, then goes to world, and
then equate it was a physical video cassette in analog format
or digital format or whatever you want to call it. It's totally
different.
That is what I said in my opening remarks. This is a
miraculous, fantastic new entrant into the human society,
ranking with Guttenberg movable type and the invention of
television, and it cannot be equated with satellites or cable
or video cassettes in the analog format; totally different,
sir.
Mr. Sawyer. And it should not be possible with a license to
go through that medium what would be illegal through any other
medium; is that what you're saying?
Mr. Valenti. You want to be on a level playing field. Then
you take your chances by going to jail by doing what iCrave is
doing.
Mr. Sawyer. Thank you.
Mr. Alben. Mr. Sawyer, if I may talk a little bit about
mirroring, there are technologies that allow for mirrors. The
fact is that once someone mirrors a stream, in order words
starts to retransmit what you would call a signal, they are
visible. Right? They have to be visible to the whole world, and
you can know where they are and where they are operating from,
and they should be taken down if they are mirroring a stream
without permission.
Most mirroring that occurs on the Internet is done with the
blessing of the content producer. In terms of the security of
the stream itself, the RealNetwork system as well as the
Microsoft system and Apple system for streaming all have copy
protection mechanisms built in, and in the rare circumstances
where hackers have been able to hack into a stream and record
the stream, we have invoked the Digital Millennium Copyright
Act to get injunctions because clearly someone should not be
able to make the technology that's primarily designed to copy
pirate streams.
Mr. Sawyer. Thank you, Mr. Chairman.
Mr. Tauzin. The gentlelady from New Mexico, Ms. Wilson is
recognized for 5 minutes.
Ms. Wilson. Thank you, Mr. Chairman. I had some questions
that arose from some of the previous answers and some of the
testimony which I have been reviewing here.
Mr. Karpowicz, you talked about the television stations now
cannot--you do not believe that a television station now could
broadcast its signal over the Internet, it could not broadcast
Friends because that would be outside of its broadcast area. Is
it your interpretation or do most television broadcasters have
the view that they are constrained by current law from doing
that?
Mr. Karpowicz. I believe so because we do not hold the
Internet copyright on Friends, for example. When we buy that
program, we buy that specifically for our DMA or our market
area, and that is really the issue with the Internet, is that
it is not bound by any geography, and there are no geographic
boundaries. So to the extent that when we buy that program, and
when we purchase that, we have bought it for a very specific
area.
Now, with our newscasts which is content that we produce
and we have the copyright on that, it can be widely
distributed. That can go out on the Internet because as far as
we are concerned, that is our product.
Ms. Wilson. Thank you. Mr. Alben, you were talking about
the Digital Millennium Copyright Act and injunctions that you
would get on mirror sites and things. Is it your view that--
does the law need to be changed in any way to protect or
further protect copyright holders or are the mechanisms there
in place now to do what needs to be done?
Mr. Alben. I think we believe that right now both at the
existing what you could call the old U.S. copyright law and the
Digital Millennium Copyright Act provide really specific
penalties. After all, the Motion Picture Association and the
other plaintiffs were successful in invoking copyright law to
get the TRO. So it's clear that if someone is violating
copyright by duplicating something without the permission of
the copyright owner, that that is against U.S. copyright law.
Now, when Congress passed the DMCA, they also recognized
exactly what Mr. Valenti said, is that analog and digital
present different problems. With digital, you can make near
perfect copies and redistribute those copies. So Congress took
the extra step of creating new laws that say if you are
specifically going to create a technology that breaks
encryption or that breaks a copy protection mechanism, that in
and of itself is a violation of the DMCA.
So I think that these two laws are working together, and
over the last few weeks we have seen, what, four or five
lawsuits filed regarding distribution of sound recordings,
distribution of motion pictures where you can see that the laws
are being put to the test.
Ms. Wilson. Mr. Valenti, do you think that there needs to
be changes at this point? I know you have put your copyright
coalition together. Is it working but cumbersome? Are people
ignoring it? What is your sense?
Mr. Valenti. You mean what is working right now?
Ms. Wilson. With respect to any changes needed to the
copyright law.
Mr. Valenti. No, I said earlier to the chairman, Madam
Congressman, that I did not think that any new laws were
required. As Mr. Alex pointed out and rightly so, the Digital
Millennium Copyright Act is working, and indeed the courts are
instantly recognizing that there is no ambiguity to this law.
What I am saying is that I think the Internet should be allowed
to continue its spiralling growth and you keep a watchful eye
to make sure that all goes well in the marketplace.
I do not think there is need to change anything at this
time or add anything at this time.
Ms. Wilson. Thank you. I yield my time, Mr. Chairman.
Mr. Tauzin. Thank the gentlelady. The gentlelady from
Missouri, Ms. McCarthy, is recognized.
Ms. McCarthy. Thank you, Mr. Chairman. I would like to
visit with Mr. Valenti. It is always a pleasure to have you
here, and I congratulate you on accomplishing the copyright
assembly that you announced to us today which I think creates
an important new voice in the private sector on copyright
matters.
However, I noted a very important voice is missing from
your assembly, and they are my constituents. I suspect,
actually, they are constituents of every member on this
committee and in fact perhaps are even family members of some
members on this committee.
So I would like for you to tell the committee why they've
been excluded from the assembly. They are the recording
artists, and their voices make movie theme songs hits for your
assembly members such as Disney and Universal and the other
studios that are members of the assembly. Their songs make hit
programs like MTV for your assembly members like the National
Cable and Television Association. Their music creates the sales
for your assembly members such as the Recording Industry
Association of America, Sony and other record labels. Their
performances at pregame and half-time encourage viewers to tune
in and stay tuned at sporting events such as the Super Bowl,
earning your assembly members such as ESPN and other TV
corporations lucrative revenue from advertising.
I myself am a Faith Hill fan, and I stayed tuned at half
time because I wanted to hear her. These recording artists are
represented by the National Academy of Recording Arts and
Sciences. Next week it's NARAS that is going to produce the
Grammys which 25 million people domestically watch on TV. That
is the second largest viewing audience after the Oscars, which
I believe you have some interest in.
So why is NARAS missing from this new assembly, and clearly
since copyright laws affect recording artists personally, why
are they not included in the room?
Mr. Valenti. Well, I am right now trading phone calls with
Mr. Michael Green who puts on the Grammys, and I am hopeful of
having his organization in there. Ms. McCarthy, I want you to
know that this assembly is open to every person or enterprise
to whom copyright is indispensable to their future, and we
welcome it. We have all of the creative guilds in here. We have
all the music organizations, and those that are not in here
will be before the next few days are out.
Mr. McCarthy. I anticipated that would be your answer. When
you made this announcement, I excused myself from the committee
and called Mr. Green to find out why he was not on the list. He
said they learned about it through the net, the Internet, and
that he initiated the call to you.
Mr. Valenti. He did, and as a matter of fact, may I just
say I blundered. The fact is putting together this list, I
frankly did not think about it. It was a terrible blunder on my
part, and I deeply apologize.
Ms. McCarthy. Well, I just want to tell you that I
represent Kansas City where there are a whole lot of artists.
You know, this is a jazz historical place, and I would love you
to come and visit, but it seems to me that this Congress even
overlooks including recording artists in the room at critical
times.
Last year, during the discussions of the omnibus
appropriation bill, a change was made in the copyright laws
that now deny them--artists who have signed recording contracts
after 1978, they will not be able to regain their rights after
the 35-year waiting period that is specified in current law.
Nobody told them to come in the room and talk about it. Nobody
told them to be there at the table. So special interest decided
to make this change, and frankly on behalf of the recording
artists, I think it is time we all woke up and made them part
of whatever the future holds on things like the Internet.
Without them, as I said in my remarks, do you think you could
sing like Faith Hill did at half--time and make me tune in?
Maybe once, but, honestly, they are what fuels the larger
entertainment industry, and I appreciate your honesty and I
hope you will think in the future of the recording artists in
all that you do with regard to property rights, and
intellectual property rights in particular are personal to
them.
Thank you Mr. Chairman.
Mr. Valenti. I cannot wait to embrace Mr. Green and his
organization if I can just get him on the phone.
Mr. Tauzin. We got a computer in the back room.
Mr. Valenti. Maybe he has got a web site so I can contact
him.
Mr. Tauzin. I thank the gentlelady.
The Chair now recognizes the gentleman from Florida, Mr.
Stearns, for a round of questions.
Mr. Stearns. Thank you, Mr. Chairman, and listening to this
debate has been very edifying. Let me take my colleagues and
also the panelists and the people in the audience to this
comparison: Direct TV, satellite TV when you broadcast that, it
is not going to just a region. It is going hemispheric. So when
people say satellite TV and cable TV are much different than
the Internet, that might be true for cable, but I do not see it
that different for Direct TV where it is going hemispheric.
Okay. Now this committee, and as Mr. Markey pointed out,
the incremental steps in the last 30 years we have done to
protect virgining new industries, and as he pointed out, AOL
would not be existing today if we had not in 1997 gave them
permanent access to the FCC. So I say to the broadcasters, I
understand Sam Rayburn's ``Wait a minute'', those three dynamic
words, ``wait a minute'', and I am a conservative and I believe
in wait a minute, but I cannot help but think when I am sitting
here looking at this, probably that it could correlate to
broadcasting of direct television.
Now, these people, Prime Star and all these people, they
pay compulsory license fees. They pay a local-to-local fee.
Then they pay for a distance signal, and it is digital. It is
not analog like Mr. Valenti was talking about. This is digital
that goes hemispheric. So tell me, somebody on the committee,
why we cannot bring an analogy for the satellite broadcast
television to the Internet television and say, okay, either the
FCC, the Library of Congress, or Congress or somebody could not
allow access for Internet companies in the same of analogy that
we have done for satellite TV?
Mr. Beck. Can I address myself to that?
Mr. Stearns. Okay.
Mr. Beck. The satellite companies do not alter our
programming, period. If these people had come to us then--you
know, we have got a lot of Canadians. We have got this poor
woman in Thunder Bay, and she really wants WKBW's programming,
and we are going to do you the service of redistributing it to
her. We would have said that is a pretty good idea. What he
does is take our programming and puts his ads on it and alters
it. So no satellite company does that, sir.
Mr. Stearns. Okay, but Mr. Beck, let's say we stipulated
that they could not do that, and we made it against the law for
the Internet companies to do that. We can do that and prevent
them from doing it. So that would allay your fear and concern.
Mr. Beck. Yes, it would. I mean he would not be on the
panel anymore. He would have to make his own content and
redistribute it, but if people are just interested in the
redistribution of the good stuff we do, hey, that's all right.
Mr. Stearns. Okay.
Mr. Karpowicz. The biggest issue, Congressman, is with the
satellite example that you are using. That is why local into
local was implemented, to prevent the importation of distant
signals coming in over the top of my copyrighted material. So
there is a very distinct and huge difference between the
satellite model and the Internet model.
Now, currently, as we know, there is no technological fix
to limit the Internet to my specific marketplace, whereas with
satellite in fact no distance signals can be brought into my
market, and that is why we created the provision or, in fact,
you all created the provision.
Mr. Stearns. How do you know that when a person broadcasts
a satellite that it is only going into one region?
Mr. Karpowicz. Well, there are cards that go into the
satellite receiver.
Mr. Stearns. No, but I mean we have had up here in the
hearings what we have gotten is going way out the region and
these people want to have access to it, and suddenly they get
cutoff and they get upset about it.
Mr. Karpowicz. But no distance signals should be coming in.
That is the whole concept behind local to local.
Mr. Stearns. Okay.
Mr. Karpowicz. That it protects my franchise in my unique
marketplace.
Mr. Stearns. Mr. Alben, am I wrong that there is some kind
of analogy between what I am trying to look for? And I think
every elected official, before they do anything, they want to
say is is there something that we have already done here,
without rediscovering the wheel? And is there some way to allow
RealNetworks in the very near future to start broadcasting
local-to-local, as well as, you know, other information without
being crimped here and have the copyright to do so?
Mr. Alben. Well, I think the geographic restriction of
local into local is a problem because of the nature of the
Internet being a global medium, as I said in my testimony.
There would be ways devised to limit people from accessing a
signal if they were not in a local market, but what we would
rather do is say when we rebroadcast the transmission--for
instance, let's take a baseball game. When we did the Seattle
Mariners baseball game, when we sent it to Japan, I'm sure the
local advertising for the local beauty parlor did not make much
sense the people in Tokyo or Yokohama who are listening to that
game even in English.
What we would like to do is say with the broadcaster, hey,
we are going to sell an ad that will have a national or
international audience, but we will share our ad revenue in
some way so that the broadcasters benefit from the expansion of
the terrestrial signal, and that's really the way that this is
going to go. That is why I say that this is going to happen,
because we are smart enough with broadcast stations and others
to figure out ways of creating new revenue and sharing that
revenue.
Mr. Stearns. But would not you like to go to one place to
get a copyright license so that you can do it?
Mr. Alben. It would be much more convenient if you could
have a mechanism to get a license rather than going to each
individual station. I do not know how many broadcast stations
there are in the United States, 30,000.
Mr. Stearns. 1,600, I'm told.
Mr. Alben. 1,600, so the physical challenge of just
negotiating license deals----
Mr. Stearns. It's impossible.
Mr. Alben. [continuing] would prevent it from happening,
and it would be very nice to have some sort of clearinghouse,
some sort of mechanism where someone who wanted to retransmit a
signal could go and with permission get that done and pay for
the content.
Mr. Stearns. And, in fact, the broadcasters would benefit.
Mr. Alben. They would if we----
Mr. Stearns. I mean we would make the copyright license and
the royalties expensive, and if they wanted to do it, they just
had to pay a high amount of money.
Mr. Karpowicz. That exists right now with companies like
Broadcast.com. Television stations can work out a deal with
Broadcast.com to stream their news broadcasts which they own
the copyright to. So it exist today.
Mr. Stearns. Just with one group and not the whole----
Mr. Karpowicz. Well, each individual station would have to
make their own deal.
Mr. Stearns. Which makes it impossible.
Mr. Alben. But the history of Broadcast.com was an
incredibly innovative company, and Mark Kuben, in all of his
energy, he went around for 3 years in the banging of the doors
of sports leagues local stations, the NCAA, and all the leagues
and saying, Hey, I want to put your signal up on the Internet.
It took him 3 years to assemble that kind of base, and now we
have a Broadcast.com and others that you can go to, but it
took--it was solving the licensing issue that took so long, and
I do not think that is going to work going forward.
Mr. McCallum. Mr. Stearns, might I add something?
Mr. Stearns. Sure.
Mr. McCallum. The simple system you are describing is the
one that exists in Canada today. That is why we are legal in
Canada.
Mr. Stearns. So the question is are you arguing for this
same kind of system in the United States?
Mr. McCallum. Well, I am not arguing for it or against it.
I am just offering it as an example of another jurisdiction.
Clearly, the broadcast conditions in Canada are distinct and
different from what they are in the U.S. The complexities here
may be different. The history is different.
Mr. Stearns. But you are saying it is a working model that
works in Canada.
Mr. McCallum. Correct.
Mr. Stearns. And you are saying this is a model, Mr.
Chairman, that works in Canada and does not restrict television
on the Internet and so the real question is when will it come
to the United States, and in what way, and how can we be sure
that the broadcasters are protected, and so I think it is a
challenge for this committee.
Mr. Tauzin. It certainly is. The gentleman's time has
expired, but I will allow any response.
Mr. Alben. There is another element to your challenge, Mr.
Sterns. I think it is an excellent question. Is the
international dimension of this medium. Let's say we had a
signal, but you were requiring under a compulsory license to
have a geographic restriction. Well, then you are going to have
the French perhaps saying, oh, well, if you are going to let
this retransmission go out over the Internet, it has to be the
French language or it has to be 38 percent French content.
The strength of our market is that our programming, the
programming of local stations and of the networks and of the
sports leagues, has an international audience. We don't want to
go down the road of geographic restrictions if we are not
willing to live with foreign countries saying, oh, I do not
want that content coming across my border.
First of all, it is almost impossible to police. Second of
all, it is not good for our industry. We want these revenue
streams to be driven all over the world.
Mr. Valenti. May I just say, Mr. Congressman, first I allay
myself with what Mr. Alben is saying. We oppose geographic
restrictions. That is anti-freedom, but in the interest of full
disclosure, Mr. McCallum did not tell you that the broadcast
stations in Canada are suing him right now in the courts saying
he does not have any mantle of compulsory license. That is in
the courts right now, and we will just have to wait and see
what the Canadian judicial system say says about this.
Mr. Tauzin. The Chair is now pleased to recognize the
gentleman for New York, Mr. Engel for a round of questions.
Mr. Engel. Thank you, Mr. Chairman, I would ask unanimous
consent to put my statement into the record.
Mr. Tauzin. Without objection.
Mr. Engel. Thank you very much.
Everybody, the issue to me is really balancing the rights
of current copyright holders. I think it is only fair that we
do that with the public desire to have access. The copyright
holders versus unlicensed distribution, Mr. Markey I thought
said it very well when he said that he liked to listen to
games. I would like to listen to Yankees and Mets games, and I
very often try to get the signal here as well.
I am wondering as I listen, and Mr. Sterns had really gone
down the line of what I was going to say. It seems to me that
in the future there has to be some common ground, because
obviously this is new technology and you cannot put a lid on it
forever. Sooner or later, people are going to demand that they
have access to it.
And so it seems very simple to me, in a way, that how do we
again balance the rights of the current copyright holders with
the public's desire to have this technology? I would like to
hear from the broadcaster side. Compulsory license, why cannot
there not be a compulsory license? I think Mr. Alben suggested
it as similar to what cable and satellite has today with the
exception that the Internet companies will not have to comply
with the geographical limitations.
You know, what does this all mean, the future of local
broadcasting license, with the Internet taking distribution in
a global direction? What happens to location? I would like to
hear from the broadcasting side. Why can there not be a common
ground? There seems to me, you know, we talked a little bit in
the answers about compensating people with advertising
revenues. I mean everyone on the panel is very bright and there
are lot of bright minds out there. Why can we not come to a
common ground for the future?
Mr. Karpowicz. To your point about the compulsory licenses,
I think you cannot ignore the geographic limitations. I think
the geography is the key here, and the inability of the
Internet to be limited to one market, one specific market is
really the fatal flaw that we see in that system. In addition
to that, with compulsory license comes must-carry,
retransmission consent, Syntax, sports blackouts. There are a
lot of other issues associated with that. So to the extent that
we cannot just put geography aside, geography is critical to
this whole discussion.
The other point I'd like to make, and Senator Boren
mentioned it in his comments, the ground-breaking deal that CBS
did with the NCAA this year for basketball tournaments included
not only the broadcast rights but the Internet rights as well.
Now, I think this is one of the first major sports deals that
has included the Internet provision, and I think this is the
direction we're going to see more and more major deals with
sports leagues and the NCAA take place as we go along, that
deals will include not just have the broadcast rights but the
Internet rights as well.
Mr. Boren. Just a week ago the baseball owners now have
also moved in that direction and are establishing a mechanism
for bargaining for baseball rebroadcast rights. So I think
really what is happening is there is such a strong push for
those who are creating the program that want to get it out to
widest possible audience as long as you have some control over
the appropriate way, for example, as we would want to see it
with intercollegiate athletics and the way it's broadcast and
that you have assurance of the revenue stream, that the revenue
stream will not be destroyed.
So I think this market is already beginning to work without
going into the scamp of what might have to be attached to
compulsory licensing that might have unintended consequences
and actually begin to limit what the Internet possibilities
might be in the long run.
So I would say I think the market over the next--things
have moved so quickly already. Over the next 12 to 24 months, I
think the market is going to play out in a way that is probably
going to make unnecessary additional regulatory schemes.
Mr. Engel. I would like to hear why not an exception for
geographical limitations, as Mr. Alben suggests, given the
Internet nature as global medium. Why would that not be
something that would be feasible? Would anybody like to
comment? Mr. Valenti?
Mr. Valenti. Well, I don't think--the truth is we can say
geographical limitations. It's like President Johnson used to
say. ``You can tell a man to go to hell, but getting him to go
there is another proposition.'' And you can say you've got the
technological image to do this, but it does not exist. That's
the key point. It does not exist.
Mr. Engel. Mr. Beck, do you have any comment on that?
Mr. Beck. We really have a wonderful system now. You flow.
You have got local broadcasters providing extraordinary
penetrating local news, weather, and sports in their markets
and in partnership with the studios and the networks who
provide us with extremely good content with which to pair our
good work. If his content needs to be exclusive in Buffalo, and
he does not want to sell the Internet rights, then that's up to
him. I want to be his partner. I want Friends on my air. So I
will negotiate with him and get it. If he does not want to sell
it to iCraveTV, that's up to him. He has the best idea of about
how to use his product.
So I think we have the most extraordinary system in the
world and nobody can compare the penetration of our local
broadcasters into their communities, and that's because of the
partnership that exists. So I'm not only proud to be here
sitting with Mr. Valenti, but our business is based upon the
partnership with these copyright holders, and it's necessary
for them to really--I'm following their lead. They are great
partners, and if he does not want to change the copyright laws,
I cannot see any reason why we should do it. It seems to be
working awfully well.
Mr. Jaszi. If I might say I'm less skeptical than Mr.
Valenti about the possibility of implementing appropriate
geographical restrictions if such restrictions would be deemed
appropriate through a combination of new technology and the
very stringent criminal penalties against the violation of
technical safeguards that have been discussed earlier today.
Those are a very potent combination taken together, and I see
no reason to assume that at the beginning of this discussion
that that combination would not be sufficient to implement
meaningful geographical restrictions were it the will of
Congress to impose such restrictions on an Internet TV
compulsory license.
Mr. Alben. If I could add a second to Mr. Engel's question,
I guess our question, and forgive us we have been accused of
wearing binoculars and only seeing far into the future, but why
would a broadcaster not want their local programming, sports,
news, weather, to be transmitted from Buffalo to Florida if
someone was on vacation if there is not that somebody that is
extending the signal reach and therefore extending your
advertiser base?
Mr. Karpowicz. Let me answer that question. As it relates
to iCraveTV, the first part of that equation is the signal is
distorted. Our picture, by the time it gets to that individual
in Florida, has been brought down to a little-bitty box. There
is advertising all around it that is inconsistent, potentially,
with the advertising that we have already sold. So that is--you
know, that is the first problem.
The second problem, if it's our entire broadcast day, we do
not own the copyright to Friends, or we do not own the
copyright to NFL football. We do not own the copyright to a lot
of the programming that we carry.
Mr. Alben. Just your local programming.
Mr. Karpowicz. Then it should be the decision of the local
broadcaster to do that.
Mr. Beck. We do that.
Mr. Karpowicz. And as I indicated, there are over 200
stations in America that currently do that, and that number is
growing every day. I think local broadcasters are starting to
understand what Congressman Markey mentioned earlier, is that
people who are displaced do have interest in what may be going
on in their old hometown or in a distant place.
So local broadcasters are taking the initiative and making
that happen, but we should not have that taken from us.
Mr. Beck. Mr. Engel?
Mr. Engel. Yes.
Mr. Beck. I'm sorry. Excuse me----
Mr. Tauzin. The gentleman's time has expired, but you can
respond.
Mr. Engel. Thank you, Mr. Chairman.
Mr. Beck. We do that, and we broadcast all of our local
news, weather, and sports. To demonstrate in an anecdote just
how effectively our system works now, we take our local news
and we, in the past, have put major league baseball clips into
our news. We believe it's fair use to do that. Well, our
friends and colleagues at major league baseball have decided to
tell us to no longer to carry the clips in streaming video.
They want it to be on our air, but they are not happy to have
it on our television station's streamed video because our
streamed video, being digital, can be archived and might
prevent them from profiting from that picture of Sosa hitting
the home run.
So when they called us and said would you please take that
out, I argued with them as best I could--I'm trained as a
litigator--and I gave in because they are right. It is theirs,
and we said that's fine, from now on we will put up a board
that says, I'm sorry, Major League Baseball does not want us to
stream this 30-second clip, and that's what we did.
So the system works great. iCrave never called us.
Mr. Alben. It does not work for the baseball fan, though,
that wants to watch that highlight, and if I'm a Seattle
Seahawks fan and I want to watch my game and NBC have decided
for that day that I'm supposed to watch the Pittsburgh game, it
does not work for me either, and the fact is if I'm an
additional member of the audience and want to tune it, I'm
going to paying somehow. Right? I mean they are going to be
paying by subscribing to the service, or I am going to be
paying by watching an advertisement that somebody sells so the
audience can be increased, and the sports leagues, while they
want to maintain the current system of geographic limitation,
have a revenue opportunity that they are not recognizing.
And it is very good to hear the CBS Internet deal because
those are the kind of deals that are going to move things
forward.
Mr. Valenti. Mr. Alben, let me just say to him if you want
to have a Real Player, I'm told he will sell it to you on your
web site for $35; is that correct?
Mr. Alben. The Real Player is distributed for free.
Mr. Valenti. What do you charge $35 for?
Mr. Tauzin. Mr. Alben, use the mike, sir. We have to record
this.
Mr. Alben. I'm sorry. The Real Player is distributed for
free, and we have distributed over 90 million of them for free.
We have distributed several million of our Plus Product which
we sell for $29.99.
Mr. Valenti. All right. Since I'm a consumer and I want to
have the best, I want the compulsory license to buy that $35
thing for $2. Would you agree to that? A compulsory license or
since you believe everybody ought to have the right to see and
do everything, I want the right to have your enhanced machine
or whatever you call it, and I want to do it for $2. How do you
deal with that?
Mr. Alben. I'm sure you want to go into a dealership and
buy a Mercedes for, you know, $100, but the consumer sees the
utility in buying the enhanced product, and the compulsory
license is not going to necessarily cannibalize the revenue
stream of stations. It's going to extend it in the long run.
Mr. Tauzin. I want to thank the gentleman from New York for
stirring this up.
Mr. Engel. Mr. Chairman, I did not realize my mischievous
question would have such an enlightened discourse.
Mr. Tauzin. You had one more thing you wanted to add, Jack?
Mr. Valenti. No, the only thing I wanted to add was, again,
as LBJ would say, ``It always depends on whose ox is getting
gored,'' and that's what this whole proposition is all about.
Mr. Tauzin. Then the chairperson will recognize the
gentleman from Oklahoma, Mr. Largent, for a round of questions.
Mr. Largent. Thank you, Mr. Chairman.
Mr. Alben, I wanted to go back to something that you said
about the CD scenario when my colleague, Mr. Shimkus, was
talking. Sometimes what we say and what we hear in this room is
not what really is happening on the street, and I had an on-
the-street discussion with my 15-year-old son who is a freshman
in high school, and he was mocking my daughter who is 18 years
old and a freshman at the University of Oklahoma because she
had signed up for one of these CD-a-month clubs. She had just
received a big stack of CDs in the mail, and he was mocking her
because of how foolish it was for her to pay so much more for
her CDs, $10, $11, whatever they are, a couple dollars less
than you get them in a store, and he said nobody is buying CDs
anymore. He said everybody is burning their own CDs. They just
pull it off the Internet. You can put whatever songs you want
on there, burn them in there, and he said I'll never buy a CD
again in my life, it's too expensive.
So that's a real world example in Tulsa, Oklahoma. I am
going to be really curious to see if in a year from now we do
not see a decline in the purchase of CDs, and I'm curious, if
it came to pass that the latest release, The Hurricane was
available in digital quality that was streamed on the Internet,
if in fact Blockbuster Video's stock would not decline over the
course of a year as well. I think it absolutely would because
people could pull it off the net and make a DVD quality
reproduction, and they would never have to rent another movie
on VHS.
Senator Boren, you said something in your testimony that's
been mentioned several times. I wanted to ask you about this.
You talked about a TV deal that CBS did with the NCAA, and it
included an Internet agreement. Does that agreement insulate
you from iCraveTV or is that still an issue?
Mr. Boren. Well, that's still an issue because, of course,
if people can stream over, overstream the people that are
paying us for the rights to rebroadcast, you know, they are no
longer going to go into those packages with us that are such an
important source of revenue. So, you know, we are talking about
something that provided a very large amount of funding over an
11-year period with CBS. It was a minimum of $6 billion, and if
others can simply not pay anything and be able to get that,
then they are not going to be able to negotiate with us in the
future with those kind of rights, so your revenue stream for
intercollegiate sports begins to dry up, and as I pointed out,
90 percent, over 90 percent of the 1,000-member colleges and
universities of the NCAA are not breaking even on their sports
now, especially as they're struggling to provide more
opportunities for women's sports, for example, and so these
universities are already having to make these kind of decisions
about putting central university funds into sports versus
faculty salaries, libraries, and other things.
The pressure if that stream dries up, the pressure to
reduce opportunities for student athletes is going to be
enormous. So all we're saying is the market is beginning to
work. This is working in a way that protects our intellectual
property. It's going to be get out on the Internet, more and
more of this sports programming including ours, but it's doing
it in a way in which we, the NCAA negotiates for us will be
able to continue that revenue stream to intercollegiate sports.
So it's working and we should not plunge in at this point
and try to change something that is working.
Mr. Largent. Well, let me rephrase my question if I can.
You are saying that since you have this licensing agreement
with CBS, now they are putting on the NCAA game of the week on
CBS.com so that people will flow to CBS.com which they can get
in Thunder Bay, Canada just as easily as they can get----
Mr. Boren. That is exactly right.
Mr. Largent. Okay. But what would prevent rebroadcasting
that? In other words, somebody pulls that signal off and wants
to put their own special ad around the border.
Mr. Boren. Well, the current copyright law protects us in
that regard, and that is exactly what happened in this case,
and when you have people collecting their own revenue, their
own advertising and altering then the original programming, at
least so far the courts have enforced that right. Now, if the
courts ever stopped enforcing that right what would happen is
our revenue stream would vanish because those that are now
paying us for exclusive rights would not have exclusive rights
and they would not be able to afford to pay you, certainly not
at the level they are now paying us.
So it is a real threat and it is the reason why I also say
that we also have a tremendous incentive. I want to see what we
are creating in terms of sports programming. I want to see the
contribution of that expanded because as that market grows and
it is expanded through the Internet, there is going to be, in
theory, a greater revenue stream back to us, back to LSU, and
other institutions around the country, but we have to be very
careful about how we do that.
Mr. Largent. Thank you, Mr. Chairman.
Mr. Tauzin. Thank you, sir. The Chair recognizes himself.
Let me see if I can make an observation and get your
reaction to it. It seems to me that we are still debating some
of these issues or thinking of some of these issues in a world
still defined by the differences in pipes and delivery systems
of information. It also seems to me that that's about to change
pretty radically, that as we move to broad band digital
services delivered over enhanced systems capable of
extraordinary capacity and data that includes video, that
anyone who thinks they can survive in that world by being a
telephone company or a cable video company or a satellite video
company is going to find out they get left behind quickly in
the dust bin of economic history, that as we move into the
broad band digital age, the television set will be the monitor
for the Internet, and data services flow to it that are going
to include massive amounts of video and audio and other data
services to us.
And if we begin to think of what that record looks like,
does not it make sense for us to have a common policy as it
applies to the protection of content and distribution of
content rights over that kind of a system? Because it does not
matter whether you are a satellite company or telephone company
or electric company, for that matter, or a cable company. If
you are all delivering broad band services, and that's where
the world is going, to a mix of digital data that includes all
those services combined into my television set on a worldwide
global network, does not it make sense for us to be thinking of
policy that will cut across that whole spectrum and apply the
delivery of these services and the protection of content rights
in all of these areas, policy that permits the contracting and
the technology developments that will enforce the contracts,
protect the consent or protect the delivery of the content, if
that is possible, to whomever is contracted to send it or
receive it rather than thinking of trying to define a policy
for cable and one for satellites and one for telephones and one
for who knows what, other wireless or other wide systems when
they eventually develop?
Please feedback to me on that, any one of you.
Mr. Boren. Mr. Chairman, as the novice in this in terms of
the technical details, I would just say in many ways what you
are talking about is happening. Just look at the NCAA-CBS-
internet package. In a way, that is happening right now in the
marketplace. In other words, we are now negotiating contracts
for the use of the Internet fully. It is in its fledgling
stages. Some of those details will even been worked out in
terms of appropriateness in programs and the way it is done,
but if I think we watch the market over the next year or 2,
given the current status and the ability to go into courts and
protect yourself through the existing copyright law, you may
find this will work itself out without a tremendous amount of
governmental intervention.
Mr. Tauzin. You see the problem, though, Senator Boren, is
that we have laid down a whole series of laws that are pipe
specific.
Mr. Boren. Right.
Mr. Tauzin. That we designed to try to create parity of
stream but in different ways for different pipes, and in our
best sense of fairness, we not only encourage new entrants into
the marketplace but give them a head start as we did with the
satellites, delaying the day for must-carry and what have you.
We have created all these different sets of laws designed
for different pipes. We defined them differently. Some are
telecommunications carries and some are not, and yet they will
all be doing the same thing pretty soon, using the same kind of
broad band digital systems to do it, and consumers, I assume
some day will not care too much how it gets there just so long
as they can get to everything they want and somehow have a
choice among providers so that they do not have to count on us
to regulate prices and terms and conditions of service, and if
that is true, if we are moving in that direction, if 10-minute
caps that cable put on video stream are not going to hold in
that world, how do we somehow let all that happen and at the
same time have all these old laws on the books that define
content and carriage and rights of carry.
I mean, in the telephone world we still have a massive
defining when a distance call becomes issue and is incredibly
relevant in Internet, and certainly in broad global Internet
traffic. What I'm saying is I hear you saying you do not have
to do anything, the laws are fine, the market is going to work,
but I'm looking at the laws we have on the books, and I am
saying wait a minute, they're pretty archaic. They're pretty
out of date, and they are becoming more outdated every day, and
while you struggle to find market solutions, maybe our policy
needs to keep abreast of those changes in the marketplace and
maybe we need to be thinking now how we settle those tensions
that exist among Americans such as the tension between wanting
to maintain localism and at the same time wanting to be able to
reach out and acquire any signal, any program from anywhere and
enjoy it.
Can we maintain some of those systems, those old laws? Do
they make any sense anymore? I would appreciate, frankly, if
you would just think that through a little bit and respond back
to us with perhaps some additional writings and some offerings.
Mr. Roback, I have not heard you in a while. Can you feed
back to me just a bit? Am I right about that? I mean music
videos is not where you're going to stop, I assume. Your
company is probably going to want the expand into all forms of
video, and as broad band services are allowing you to do it,
where are you taking it?
Mr. Roback. Yes. First of all, I completely agree with you
about needing to recognize a change and start to treat things
equally. I think the biggest thing that you also always have to
look at in the Internet space is that the consumer is more in
control than they have ever been before and preserving a lot of
the things that we have talked about today, I mean certainly we
are in complete agreement with the need to protect the
intellectual property and making sure that the intellectual
property holder is compensated, but for issues like localism
and diversity and competition, I think really the Internet
breeds exactly that.
You put yourself in a box where, I mean, we have talked a
little bit today, about some of the geographic guidelines, for
example, that have been drawn which really suggest that people
need to be protected and that they're anointed with the
opportunity to have advertising revenue in a local market, and
I would argue that the advertising benefits should really
accrue to the people that are delivering the best programming
and therefore attracting the best audience for whoever that
advertiser that's willing to pay, and so by opening up the
playing field and allowing there to be more providers of
whether it be local content or any content to the consumer who
cares, we are going to end up with higher quality contents, and
we're going to end up with whether it be web site or channels
that prevail around things that really are things that the
consumer wants.
And we have seen that in a number of different categories,
music in particular, where the consumer is gravitating toward
exactly those things they cannot find elsewhere, the things
that they really crave, and that is what has been our
opportunity in the music space, and I think we will translate,
you know, as we open up more of these opportunities as well.
Mr. Tauzin. I will stop just a second and acknowledge that
several of our witnesses had plane schedules, and I will try to
accommodate them, and we thank them privately for their
appearance today.
My time is up, but I will allow any of you to respond and
then I will move to Mr. Markey.
Mr. Karpowicz. Yes, Mr. Chairman, I would just say that to
your point about the other distribution systems, each of those
distribution systems that you have described does have a
component of geography, and, again, as a local broadcaster, I
have to continue to go back to my basic tenet that if we do not
protect the local market, we really cut away at the foundation
of our system, and if we are not able to control what happens
to our signal in our local marketplace fundamentally, the very
fragile network affiliate studio system dissolves completely.
So to the education at the present time, the technology
does not exist today to limit the Internet access to my
specific market. That is why we have a problem. Now, if, in
fact, that technology changes down the road, and certainly
there is very real possibility, at that point, I think we are
highly receptive to having those discussions.
Mr. Tauzin. Mr. Jaszi.
Mr. Jaszi. I just wanted to say that in my view, the
history genius of American copyright law is this it is not and
has not been technological specific, and to an extent Section
111 and Section 119, as they now exist in the act, derogate
from that general and I think very salutary basic copyright
principle.
The other thing that is true about the history of copyright
law, especially in the last 25 years, is that it has been
marked by a very strong degree of convergence, not only
nationally but increasingly internationally, and so it seems to
me nearly inevitable that the kind of legal and policy
convergence that you foresee as the consequence of
technological convergence will, must, should come about, but I
would say one thing about the form that that convergent mode of
regulation might take, and that is I think that we have
sometimes today been working with what I regard as a false
opposition, that is an opposition between a system based on
principles of compulsory licensing on the one hand and a system
based on freely negotiated market mechanisms on the other hand.
The fact of the matter is that historically, at least, what
we have seen in copyright law is mixed systems which
accommodate elements of statutory licensing and elements of
free market negotiated licenses. The system business which
music is authorized for--sound recordings is a good example,
although if Section 115 in the statutory license still
operates, many sound recordings are now prepared under
negotiated arrangements between copyright owners and recording
companies.
It's a mixed model. It has evolved as a mixed model. It is
stable and it works well. I see no reason to see that the mixed
model could not be the solution to this convergent regulation
of the delivery of video services that you describe.
Mr. Alben. Mr. Chairman, it is true the Internet is forcing
us to rethink old models. The model of cable compulsory license
is a problem which was that there were some local areas where
you would not get the local terrestrial signal, and then the
satellite license adds another layer of complexity on top of
that, and I think when you look at the Internet, it is very
appropriate to pause and think about how these policies all
work together, and I think the best thing might be to look at--
go back to the first principles.
What was the first principle of granting that broadcast
license under the, you know, by the FCC? It was you were going
do encourage local broadcasting and protect local markets for
public service. We are not just talking about, you know, city-
wide type broadcasting. My daughter's YMCA Indian Princess
group has their own web site, and they will be broadcasting 1
day, and the soccer club has their own web site. So all of a
sudden when you have been spending 30 or 40 years regulating to
promote localism, here comes a medium that is so local you
cannot get more granular.
Each one of us at this table could put this testimony up,
and we could add commentary and we could have the ideal local
broadcasting. So maybe it is time, and I say this very
hesitatingly, to rethink local protections because local
content is strong. There is market for local content. No one
can do what the Buffalo station does better than the Buffalo
station. They are there. They know the community. They have
made the investment, and I think that when you think through
these policies, we have to look at our first principles again.
Mr. Karpowicz. Could I add one of those other first
principles is free over-the-air availability of television
service for everyone, and we want to be able to continue to
provide that, and we want to be able to maintain our
marketplace so that we can continue to provide that. So I think
that is a principle that we do not want to get too for away
from.
Mr. Tauzin. Thank you very much.
The Chair would like to acknowledge that if any of the
other witnesses need to be temporarily excused to catch a quick
plane and return, you are also welcome to do so.
Mr. Markey is recognized.
Mr. Markey. Thank you, Mr. Chairman, very much.
To quote another speaker of the House, Tip O'Neal, his most
important aphorism was ``all politics are local''. Well, what
we tried to do last year and is already a success in the
marketplace is that we took the satellite industry and we
transformed it by saying all politics is local into local.
You can take this local TV station, beam it up to some
satellite and then beam it right back down again and create new
competition. Here with the Internet, what we have is this
mixture of global localism. Every local site is also a global
site simultaneously by definition, and so that creates a whole
series of issues that have to be resolved. None of them are
unsolvable, but there is no one simple template that you can
use anymore than when used in any other area of jurisdiction
that this committee has had to deal with.
We work it through. We try to be fair. We want to encourage
technology and competition. This committee is the not the
Judiciary Copyright Subcommittee. We have a slightly different
agenda, but we think that they can be harmonized. If we listen
to witnesses from the entertainment broadcast industry back in
the fifties and sixties and seventies, we would not have much
of a technological revolution which we have today. We just
would not have had it because they would have stopped it dead
in its tracks.
They would go back in a time capsule now, many of them if
they could to the good ole days of three TV stations and no
cable and no satellite because they had total control. So that
is a balance that we have, and we deal with the internal
contradictions, by the way, of broadcasters even, that maybe
they want to broadcast, webcast local programs today but want
to maintain exclusivity on programming.
Perhaps up in Seattle, perhaps, you know, you want to
broadcast this Seattle Mariners across the country, but on the
other hand, the Seattle Mariners say keep that antitrust law in
place, we do not want my new baseball teams. So that the very
same people that are investing in the Seattle Mariners saying,
no, we want antitrust protection, no competition for baseball,
but yet say would not it be great if everyone was free to have
their own little local webcast, broadcast station across the
station.
So you wide up with this set of contradictions. Everyone
has kind of a narrow perspective when it comes to their own
little internal monopoly, but when it comes to somebody else's
monopoly, they are more than willing to provide all the
competition in the world to that monopoly. And that is just a
duality of it all, and we have to deal with that here.
And as Tip used to say, Everyone likes to be asked. So we
appreciate you coming to us and asking because that helps us to
get into this discussion in a way that is going the ultimately,
I think, result in a proper balance being struck.
So I thank you, Mr. Chairman. I think that we have the
future sitting in front of us today. I think that 10 years from
now, to put on my binoculars, we are going to have a
transformed marketplace, and I will be able to see the Red Sox
here in Washington. I will probably have to pay some fee for
it, rather, to make it marketable.
I think that Mr. Karpowicz is right about his ability to
control his Buffalo station, but I personally believe that if
Doug Flute was quarterbacking in some game, even if it was a
shakey picture and it was only five inches in diameter and
someone was in Oklahoma, that they would take that as the
highest quality service that technology ever delivered to a
human being who comes to Buffalo.
So I think that there is going to be attention here. Each
of you desire to maintain the perfection of the original
product which you have been able to create, and on the other
hand the ability of technology to deliver that product in some
imperfect form across the country, and we want to make sure,
however, that the old is not destroyed by the new but rather it
coexists with the new, and we believe that that kind of
compatibility is possible, and if we work together, we will be
able to achieve that.
So I thank each of you. It has been highly illuminating.
You have given us a window onto the future, and I think that if
we work together, we can instruct a new regulatory and legal
frame work that allows all of you to come back here 10 years
from today great successes in this new universe.
Thank you, Mr. Chairman.
Mr. Tauzin. I thank the gentleman for his comments and his
insight.
Let me conclude by going back do where we started, and that
is an examination of the policy and technological challenges
that you presented to us today, I think would be incomplete if
we do not also look at the other side of the mirror at the
consumer, and the consumer's role in this evolving complex of
issues, and the consumer role is going to be in large measure
determined by what kind of privacy policy is made in the
marketplace and here in Washington.
My friend, Mr. Markey has been a strong advocate of
consumer privacy rights for a long time and privacy rights
causes being formed. I intend to establish a privacy task force
of this subcommittee to begin examining that particular element
of our role, our policymaking role in this area, and we will
ask your help and advice in terms of where we should take it.
We will do that in is another hearing where I will ask you
to be thinking on how you might be able to contribute to that
process. The concept will literally turn on the question of how
the consumer's control or lack of control of the flow of
information about the consumer, his location, his identity, his
likes, his dislikes, what he browses on the Internet or what he
browses in a store, albeit a virtual reality store, how that
information is or is not available to this system and how it
works with controls that some of you are talking about today in
terms of technologically defining the recipient of some of this
content.
There were several television shows just recently exploring
the concept of the cookie that is built into most software and
most of our personal computers. This allows the person to track
our movements over the web, and it demonstrated the consumers
how they might disable that cookie, and I would be very
surprised to learn that most Americans know that there is the
capacity in their computers for others to track all their
moves.
So what I would also be concerned about is that once all
Americans knew they could simply disable it and shut off the
flow of information, they probably will choose to do so and to
use the cookie cutter, in fact, and we are going to have to
think about what kind of policy we ought to make to give
consumers the rights to control the flow of information about
sensitive and personal investigation and yet at the same time
not put them in the spot where they have got to shut off
everything, and that is going to be critical to the movement of
video programs and to advertiser-based video programming in the
Internet world.
So I would urge you to be thinking of that and to think
about what contributions you might make in a future hearing on
that issue as well.
Mr. Markey suggests, and I think it is a good suggestion,
that I ask each of you to use a minute of time, if you do not
mind, in giving us a summary of what you would like us to
remember from this hearing today. What do you want to leave us
with? One minute apiece starting with you, Mr. Karpowicz.
Mr. Karpowicz. I think, Mr. Chairman, that what will I
leave you with today is simply that we have to protect local
television station's ability to maintain a discreet marketplace
and that any distribution system that threatens that and that
can take other product and distribute beyond our market area,
certainly without our knowledge or without our approval, is
very disruptive to the very fabric of the relationship that
exists today between networks, affiliates, studios and content
providers.
Mr. Tauzin. Mr. Alben.
Mr. Alben. I think that we want to thank the committee for
involving us in this debate because this is the first time we
have ever testified before a Congressional subcommittee.
Mr. Tauzin. Thanks for coming.
Mr. Alben. We think that the Internet is doing fine, the
market is evolving. I think people have prudently stated that
we need to wait a minute before we overreact on what we do not
understand, and I do not think there is a need to change the
compulsory license laws at this time, but I do think that we
should continue to resist efforts, as they were in the last
session, to erect some laws or language in laws that
specifically said that you could not have digital performance
rights, that you could not have a digital right to transmit
programming. That is equally not a good idea, and I think that
we are going to work as we have worked with the 300 content
partners that we have now to license programming.
Would we like a compulsory license down the road? Sure we
would, because I think that would facilitate the transmission
of programming to consumers.
Mr. Tauzin. Mr. Boren?
Mr. Boren. Well, I would just say that the colleges and
universities certainly welcome the opportunity for broader
distribution of our sports programming as we do with many other
educational funds, but we hope the committee will remember as
this goes forward to do it in a way that will not destroy our
ability to negotiate in the marketplace for a revenue stream
that is absolutely essential to intercollegiate athletics.
Otherwise, if that revenue stream dries up, many colleges and
universities are simply going to have to greatly reduce those
athletic opportunities for our student athletes, reduce the
financial support, be faced with the choice between men's and
women's athletics and also between academic programs and
athletic participation in a way that is really going to end up
hurting a lot of young people across the country. So we hope
you would keep that in mind.
Mr. Tauzin. Mr. McCallum.
Mr. McCallum. First and foremost, Mr. Chairman, I would
like to thank you very much for inviting us to come and speak
and be part of these discussions. I think if I would like to
leave a message, first and foremost, is that we are legal in
Canada. We operate, fortunately, within a regime that has
enabled us, under the circumstances, to operate in that
fashion. There are is still some housekeeping that is being
tidied up in the nature of the tariff and so on, but we have,
in fact, operated that way and intend to be that way.
We are developing a security system which does enable us
and will enable others to define territories. At this point, we
are looking on the national basis. Whether it could be done on
a local basis or not will require some additional examination.
You, as we were are, facing the reality that we are dealing
in Internet time, not regulatory time, and I think the
deliberations that you are going through have to be somewhat
accelerated, bearing in mind the interest of all the parties,
specifically the copyright holders, and as the--I think it was
Ms. McCarthy mentioned, not leaving out the creators, the
performers, the writers, the musicians as part of that process.
So we wish shall you God speed, and we will look forward
and look on your discussing things with great interest. Thank
you.
Mr. Tauzin. Mr. Jaszi.
Mr. Jaszi. Mr. Chairman, I hardly need to remind this
subcommittee that balancing the copyright system is one that
takes appropriate account of the interests of consumers and
access as well as the interest of owners and proprietary
control. Historically, compulsory licenses has been one
mechanism that has been used in moments of technological stress
when that balance has been lessened by the response of content
proprietors to new technologies, and I think, therefore, that
is an option that has to remain in the mix that the
subcommittee and the Congress consider as they take account of
the converging phenomenon on television service delivery by
means of the Internet and equivalent technologies.
I guess the last point I would add is that it seems to me
that when all is said and done, what we are likely to have for
cable, for satellite, and for Internet is a mixed model for the
authorization of retransmission, a model that has some
compulsory licensing features with many free market features.
Mr. Tauzin. Mr. Beck.
Mr. Beck. Mr. Chairman, it has been gratifying to hear so
many of your colleagues and you, yourself, say that you have
often wanted affiliate television right here in Washington from
your Districts. We did that. We brought our resources together.
We pay the photographers. We pay the camera men. We even pay
for the streaming to companies like his companies down there.
So we are thrilled to be operating in this new environment,
re-purposing our content to make your lives hopefully a little
bit better when you want to learn about your Districts. I think
things are working fine. Just prevent the pirates from stealing
our products and punish where it is appropriate, and we will do
just fine.
We are not an old business. We are as new as anybody else.
We think we are doing a fine job of competing in this new
space. Please let us do that.
Mr. Tauzin. Mr. Roback.
Mr. Roback. Thank you. I guess I would just like to say
that for every bad mark like something that has happened in
this iCraveTV incident, I would like you all to know that there
will be a lot of Internet companies like ours and the other
members of if Digital Media Association that Alex mentioned
that are going and licensing content appropriately, providing
value to both sides of an equation by expanding the marketing
and distribution for a lot of this value content and still
compensating rights holders for use of that content.
The second thing I would like to say is that I think we all
have to be mindful, as I mentioned earlier, of the fact that
the consumer will be the final arbiter of what works on the
net, what works generally when it comes to how they receive
content and what content, frankly, is successful. If local
content continues to be something that people demand, it will
be out there, and it will be the best because there will be so
much competition.
I think we should just be mindful of the fact that at the
end of the day, the consumer has the final say.
Mr. Tauzin. And that will be the final say.
Gentlemen, again, thank you very much for your testimony.
The record will remain open for 30 days, and I have invited you
to supplement it. I wish you would, and we will look forward to
hearing your comments also on the privacy issue when we do
arrive at one.
Thank you very much. The hearing stands adjourned.
[Whereupon, at 1:23 p.m., the subcommittee was adjourned.]
[Additional material submitted for the record follows:]
Prepared Statement of Hon. Eliot L. Engel, a Representative in Congress
from the State of New York
Mr. Chairman, please accept my gratitude for scheduling this
hearing today. It is timely and foreshadows the future of what
television programming Americans will receive and how they will receive
it.
With increasing deployment of broadband internet access, more and
more Americans will be able to enjoy close to video-quality reception
on their computer. The boundaries and rules for who can distribute
programming and the arrangements for distribution are at the heart of
this hearing. On the one hand, a representative of ``iCraveTV'', which
exceeded the boundaries of copyright protection, is testifying.
``iCraveTV'' rebroadcast signals of a U.S. TV station without a
licensing arrangement to fairly compensate the owners of copyrighted
content. This was wrong and seriously infringed on the intellectual
property rights of the content owners.
``iCraveTV's'' infringements have only emphasized the bright line
beyond which e-business should not stray. In addition, though, by
showing what a webcasting company shouldn't do, ``iCraveTV'' has helped
to spotlight the actions of the many webcasters who play by the rules
and distribute content only under license.
I am, indeed, optimistic as I look forward to today's hearing
because I believe that the content industry and the streaming media
community may actually move closer together as the internet becomes an
increasingly important tool for distribution of music, television,
sports, and other creative works.
As I preview the statements of my friend, Jack Valenti, of the
Motion Picture Association of America, and Alex Alben, of RealNetworks,
with whom I met yesterday, I am struck by the convergence of elements
of their testimony. Jack Valenti is proud to ``embrace new Internet
opportunities for consumers . . . licensing our creative material to
Internet companies.'' Likewise Alex Alben says, ``By offering the
online audience the widest possible array of live on-demand
programming, we will work with content producers to create a huge new
market for new and old copyrighted works.''
Thus, Mr. Chairman, I am grateful you have scheduled this hearing
today and look forward to exploring whether internet companies should
be given a so-called compulsory license and how copyrighted music, TV,
sports, and other media will be distributed on the internet in the
future.
______
Prepared Statement of the American Society of Composers, Authors and
Publishers
The American Society of Composers, Authors and Publishers (ASCAP)
submits this statement concerning the question of compulsory licensing
of copyrighted works used by webcasters.
ASCAP is an unincorporated membership association of over 90,000
American composers, lyricists and music publishers. These writer and
publisher members, who are the creators and the copyright owners of
millions of copyrighted musical compositions, give ASCAP the
nonexclusive right to license the nondramatic public performance of
their music. ASCAP thus licenses many different types of music users,
including radio and television broadcast stations and networks, cable
program services and systems, concert promoters, hotels and motels,
bars, grills, restaurants and nightclubs, and, increasingly over the
last five years, Internet websites, including webcasters. ASCAP's
license are blanket licenses, in that they give access to, and the user
may perform, any and all works in the ASCAP repertory. Further, music
users are guaranteed that ASCAP will license them at reasonable fees,
and have recourse to have a federal court set license fees if they
believe ASCAP's offers are unreasonable.
ASCAP strongly opposes the enactment of any new compulsory licenses
for webcasters, for many reasons:
First, insofar as music is concerned, any webcaster can obtain all
necessary performance rights in copyrighted musical compositions it is
transmitting, by obtaining a license from ASCAP (and the two other
American performing rights organizations). As ASCAP cannot deny that
license, as it must be at a reasonable license fee, and as it covers
all the music in the ASCAP repertory, webcasters are assured that they
can get all the rights that they need. Further, pursuant to the
amendments to the Performance Rights in Sound Recordings Act of 1995
made by the Digital Millennium Copyright Act of 1998, webcasters have a
statutory license for the performing rights in the sound recordings
that they perform as well, and hence have all the rights they need.
As for any other compulsion to allow the use of the property of
others, the basic principles of our free enterprise system make the
thought abhorrent. We believe, as we trust and believe Congress does as
well, in the sanctity of private property. The fact is that
intellectual property is no different from tangible property in this
regard. The product of a person's mind is as much property as the
product of a person's hands. The law should protect both equally.
Webcasters do not obtain any other property they use on a compulsory
basis. And the fact that they need intellectual property to provide
service does not change that basic principle, for they need tangible
property to provide their services as well. Thus, for example, a
webcaster cannot operate without a computer. The law does not, and
should not, require IBM or Apple to provide computers to webcasters
(let alone at a price that is not determined in the free marketplace).
The same holds true for copyrighted property.
We appreciate the opportunity to share our views with the
Committee, and stand ready to help further in any way we can.