• Is there an Audit in your Future?
  Free Webinar Offered On Changes to the Cable Copyright License

The much-delayed Satellite Television Extension and Localism Act of 2010 (“STELA”) became law last month. But the provisions are not limited to satellite. Congress made changes affecting the cable compulsory copyright license that take retroactive effect to January 1, 2010.

Higher cable rates. Consistent with prior legislation, the rates used to compute copyright royalties have increased purportedly to reflect inflation (even though the gross receipts base was not also increased). Also, all copyright royalties will be computed based on a percentage of gross receipts, thus eliminating the simplicity of the $52 flat fee. Copyright expense for most cable operators will increase, although for some not appreciably.

Elimination of “phantom signals.” A phantom signal is one that is carried in a portion of a system (or systems required to file together) where it is distant, but not carried in another portion of the system(s) where it would also be distant. For long-form (SA-3) filers, distant signals only will be calculated for communities where the signal is both actually carried and distant. Historically, some operators paid for “carriage” of the phantom portion of the signal, while others had not. Those that did not pay now have statutory immunity. Those that did pay, however, cannot seek refund of those fees.

Digital clarifications. The legislation clarifies that operators, absent certain exceptions, must pay for distant multicast (non-simulcast) streams where the primary signal is distant. Second, the legislation permits use of digital service contours for local/distant determinations in addition to use of analog Grade B contours.

Audit right. Congress gave copyright owners the right to send auditors in to verify cable copyright statements of account beginning with the 2010/1 filings due in August. Auditors will likely explore what revenues were included in statements of account – for example, how were digital set top boxes treated, how available are basic tier services. Depending on the facts, outcomes of audits could substantially increase copyright costs for certain operators.

Compulsory license elimination. Congress directed the Copyright Office to issue a report within 18 months outlining how to eliminate the compulsory license and for the Comptroller General’s office to issue a report on the impact elimination would have on cable carriage requirements.

Free ICN webinar. Many of these changes impact copyright filings due in August, some of which may be audited. Audit adjustments for 2010 may be easily applied to prior year filings and will likely result in additional demands for payment, under threat of infringement lawsuits. Operators are best positioned by ensuring their 2010 filings are as clean as possible. To assist our readers, ICN, in conjunction with the law firm of Womble Carlyle Sandridge & Rice, PLLC, will offer a free one-hour webinar on July 21, 2010 at 12 p.m. EDT to give practical advice to help independent cable operators prepare for these changes. To Learn more, and to register for this free Webinar, go to www.wcsr.com/independentcable.