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Congress Enacts Legislation Reauthorizing DBS Compulsory License and Making Certain Changes to Cable Compulsory License

May 12, 2010
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The Senate and House have passed, and the President is expected to sign, the oft-delayed legislation (the “Satellite Television Extension and Localism Act of 2010” or “STELA”) extending the DBS distant signal compulsory copyright license (Section 119) for another five years. In addition, STELA makes certain other amendments to the Copyright Act and Communications Act with respect to the carriage of broadcast signals by cable and DBS. The attached summary details the principal provisions of the legislation. For cable operators, the following changes are most noteworthy and may require immediate attention:

Requirement that Cable Operators Pay Royalties for Distant Multicast Streams: Cable operators will have to begin reporting and paying royalties for carriage of any distant multicast streams. If carriage of the multicast stream is the subject of an agreement that was in place on or before June 30, 2009 (including the NCTA-PBS agreement), royalty payments will not start until the agreement expires. For all other distant multicast streams, payment will be due for the first accounting period of 2010 if the stream was first carried on or after February 27, 2010; streams first carried before February 27, 2010 will not be subject to royalties until the second accounting period of 2010. Systems carrying “pre-February 27, 2010” distant multicast streams that want to avoid paying royalties need to drop the streams prior to July 1, 2010.

Increased Royalty Rate for Form 3 Systems: The “base” royalty rates applicable to Form 3 systems starting with the first accounting period of 2010 will increase by around five percent, as follows: the fee for the first “distant signal equivalent” (“DSE”) will increase from 1.013 percent to 1.064 percent; from .668 percent to .701 percent for each of the second through fourth DSEs; and from .314 percent to .330 percent for the fifth DSE and each additional DSE beyond the fifth DSE.

Relief from Royalty Payments for “Phantom Signals”: The legislation reverses the Copyright Office’s “phantom signals” policy, which sought to require cable operators to pay royalties based on revenues from subscribers in communities where a distant signal was not actually available. As amended, the compulsory license provision allows operators to calculate their royalties on a “subscriber group” rather than system-wide basis, thereby ensuring that DSE computations are applied against revenues from subscribers in communities where the affected distant broadcast signals are actually available.

Filing Fee. STELA gives the Copyright Office express authority to establish a “filing fee” to be paid by cable operators and DBS companies when they submit their statements of account. It is not clear when this fee, which will be set by the Copyright Office, will go into effect.

Audits. The Copyright Office is directed to establish procedures for copyright owners to “verify” the information in cable statements of account. While no deadline is set for the Office to implement the audit process, it will apply to statements of account filed for the first accounting period of 2010 (due August 29, 2010) and all subsequent accounting periods.

We would be pleased to respond to any questions regarding these matters.

("STELA") Summary of the Satellite Television Extension and Localism Act of 2010