Copyright Office Fees: Cable and Satellite Statement of Account Fees, 71498-71501 [2013-28716]
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Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Rules and Regulations
LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. 2012–1]
Copyright Office Fees: Cable and
Satellite Statement of Account Fees
U.S. Copyright Office, Library
of Congress.
ACTION: Final rule.
AGENCY:
The U.S. Copyright Office
(‘‘Office’’) is publishing a final rule
establishing a fee schedule for filing
cable and satellite statements of account
pursuant to Sections 112, 119, and 122
of Title 17 of the United States Code
(‘‘SOAs’’) in accordance with the
Satellite Television Extension and
Localism Act of 2010 (‘‘STELA’’). The
Office is establishing these SOA fees
after taking into account public
comments received in response to the
Office’s March 28, 2012 Notice of
Proposed Rulemaking and December 6,
2012 Notice of Proposed Rulemaking.
DATES: This rule is effective January 1,
2014.
FOR FURTHER INFORMATION CONTACT:
Jacqueline C. Charlesworth, General
Counsel and Associate Register of
Copyrights, or Catherine R. Rowland,
Senior Counsel for Policy and
International Affairs, at the U.S.
Copyright Office, Copyright GC/I&R,
P.O. Box 70400, Washington, DC 20024.
Telephone: (202) 707–8380. Telefax:
(202) 707–8366.
SUPPLEMENTARY INFORMATION:
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SUMMARY:
I. Background
The Office is charged with
administering certain statutory licenses
established under the Copyright Act, 17
U.S.C. 101 et seq. (‘‘Act’’), including
fees for filing and processing cable and
satellite SOAs pursuant to Sections 111
and 119. Previously, as permitted under
the Act, the Office covered its
administrative costs for processing these
SOAs by charging the costs against the
collected royalties. In 2010, however,
Congress enacted STELA, amending the
law to allow the Office to apportion the
fees between copyright owners and
statutory licensees. The Act requires
that the fees assessed for filing SOAs
‘‘shall be reasonable and may not
exceed one-half of the cost necessary to
cover reasonable expenses incurred by
the Copyright Office for the collection
and administration of the statements of
account and any royalty fees deposited
with such statements.’’ 1
1 17
U.S.C. 708(a).
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In light of the statutory change, the
Office undertook a cost study of its
Licensing Division, which processes
SOAs, and issued a Notice of Proposed
Rulemaking on March 28, 2012 (‘‘First
NPR’’).2 The First NPR suggested a
three-tiered fee schedule for cable
filings, with fees corresponding to the
different types of cable SOAs (the three
SOA forms are known as SA1, SA2, and
SA3). Thus, the First NPR proposed the
following SOA fees: $15 for licensees
who file an SA1 form; $20 for licensees
who file an SA2 form (slightly higher
due to the somewhat greater review
involved); and $500 for licensees who
file the SA3 form (substantially higher
due to the complex nature of the
Office’s review and administration of
SA3 filings). Additionally, the First NPR
proposed a $75 fee for satellite SOAs,
reflecting the fact that these forms
require attention beyond that needed for
SA1 and SA2 forms.
The Office received three comments
addressing the First NPR’s proposed
cable and satellite SOA fees. These
comments were submitted by the
American Cable Association (‘‘ACA’’);
the National Cable &
Telecommunications Association
(‘‘NCTA’’); and jointly by Program
Suppliers, Joint Sports Claimants,
Commercial Television Claimants,
Music Claimants, Canadian Claimants
Group, National Public Radio,
Broadcaster Claimants Group, and
Devotional Claimants (collectively, the
‘‘Copyright Owners’’). NCTA expressed
the concern that the proposed fees
sought to recover costs for services ‘‘that
go beyond what is reasonably necessary
to administer the license.’’ ACA
requested that the Office provide a
waiver of fees for cable operators
experiencing financial hardship.
Copyright Owners argued that the
proposed fees failed to recover enough
of the operating costs of the cable and
satellite program.
In light of the comments received, and
because the fees for the filing of cable
and satellite SOAs were being set for the
first time, the Office conducted a further
analysis of the costs of administering
the SOAs and published an updated fee
schedule in a second Notice of Public
Rulemaking on December 6, 2012
(‘‘Second NPR’’).3 The Second NPR
explained that the Office had conducted
an additional cost study to address
2 Copyright Office Fees Notice of Proposed
Rulemaking, 77 FR 18742 (Mar. 28, 2012). This
Notice also included fee proposals for other fees,
including for registration, recordation, and nonSOA licensing services, which will be the subject
of a subsequent Final Rule.
3 Copyright Office Fees Notice of Proposed
Rulemaking, 77 FR 72788 (Dec. 6, 2012).
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commenter concerns regarding cable
and satellite SOA fees. As discussed
below, the Office determined that its
original review of costs in relation to the
Licensing Division—using a
methodology that differed to some
degree from its approach to other fee
services in the Office unrelated to SOA
fees—did not sufficiently reflect all of
the costs incurred in the complex task
of processing cable and satellite SOAs.4
To more completely assess the costs, the
Office thus decided to conduct a second
study using the more typical
methodology, which captures
administrative overhead, among other
things.5
In the second Licensing Division cost
study, the Office found that many costs
are common to both cable and satellite
filings—in particular the fiscal
management and information
technology costs—and thus should be
shared by both types of filers.6 The
Office proposed a modified fee schedule
for cable and satellite SOA fees that
better reflected the overall costs of the
licensing program. Specifically, while
the Office proposed to keep the
recommended fees for SA1 and SA2
forms set forth in the First NPR ($15 and
$20, respectively), it determined that
fees for SA3 forms should be increased
from $500 to $725.7 The Office further
proposed to increase the fee for
processing SOAs for satellite
retransmissions from $75 to $725. While
these fees included significant increases
to certain fees initially proposed in the
First NPR, the Office believed that they
better captured the full costs associated
with the management of these SOAs.
Lastly, in the Second NPR the Office
declined to adopt a hardship waiver for
SOA fees as advocated by the ACA. The
Office noted that the statutory language
in Section 708(a) does not include a
reference to waivers, although another
part of the Copyright Act, Section
708(c), does provide for discretionary
waivers for government actors in limited
circumstances. From this, the Office
concluded that Congress did not intend
for the Office to establish waivers for
STELA-based fees. Notably, the Office
does not provide hardship waivers for
other fees.8
The Office received three initial
comments and three reply comments in
response to the Second NPR. The initial
comments came from the ACA,
Copyright Owners, and NCTA. In these
comments, the licensing stakeholders
4 Id.
at 72789.
5 Id.
6 Id.
at 72790.
7 Id.
8 Id.
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Federal Register / Vol. 78, No. 230 / Friday, November 29, 2013 / Rules and Regulations
made a variety of arguments regarding
the Office’s methodology and the SOA
fees proposed in the Second NPR.
The Copyright Owners expressed
concern over the Office’s proposed cable
and satellite SOA fees. They stated that
the new study excluded too many costs
and thus did not reflect the full costs
necessary to cover the Office’s
reasonable expenses. They also stated
that the Office’s new fees did not
adequately balance the costs between
copyright owners and licensees. The
Copyright Owners further contended
that the fees did not account for the
continuing decline in the number of
SA3 forms due to consolidation in the
cable marketplace.
The ACA also filed comments, which
focused on the hardship question
initially set forth in the ACA’s 2012
comments. ACA abandoned its original
request for a hardship waiver in favor of
a new request for a reduced rate for
smaller entities filing SA3 forms. ACA
requested that the Office provide an
additional, lower-cost SA3 form for
cable systems with 400,000 or fewer
subscribers that would face a financial
hardship if forced to pay a higher fee.
The fee for this form, ACA urged,
should be $50, which it argued would
be more manageable for smaller entities.
ACA claimed that its proposed new fee
would be reasonable under STELA and
would not undercut the Office’s
administrative costs because these forms
would constitute a minority of filings.
For its part, NCTA believed that it did
not have adequate information to assess
whether the new fee was reasonable. It
thus filed a Freedom of Information Act
(‘‘FOIA’’) request seeking information
about the Office’s cost studies and
submitted initial comments expressing
concern over the reasonableness of the
proposed fees.
In response to NCTA’s FOIA request,
the Office provided data that it believed
properly could be supplied under
FOIA 9 and on February 7, 2013 held a
meeting, open to all interested parties,
to discuss the cost study.10 At the
meeting, the Office explained its general
approach and methodology in the
second cost study regarding the
establishment of cable and satellite SOA
fees, and noted the following:
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9 The
Office withheld documents that fell within
FOIA Exemption 5, which permits an agency to
withhold records reflecting an agency’s deliberative
process. See Letter from George Thuronyi, Chief
FOIA Officer, to Seth A. Davidson (Jan. 25, 2013).
10 The Office invited all parties who filed
comments on cable and satellite SOA fees to attend
the meeting. The Office also posted a notice of the
meeting on its Web site in case others were
interested in attending.
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1. The Office used a three-year average of
non-personnel costs in determining the
baseline for new cable and satellite SOA fees.
The Office used this three-year average
(which spanned fiscal years 2009–2011) to
avoid an aberrant result in light of the
Office’s recent reengineering process. If the
Office had not used a three-year average for
these costs, the results could have been
skewed upward because of the relatively high
costs incurred for reengineering efforts in
2011.
2. The Office did not use a three-year
average when calculating personnel costs,
but instead used payroll numbers from the
pay period in effect at the time the Office
commenced the second cost study. This is
because a number of Licensing Division staff
participated in an Office-wide voluntary
separation package prior to the beginning of
the study, which resulted in a decrease in
staffing. The Office thus looked to the pay
period immediately preceding the
commencement of the second cost study
because earlier time frames would have
artificially inflated the personnel costs.
3. Once the Office determined the
appropriate time frame(s) for assessing costs,
pursuant to its mandate to set reasonable
fees, it excluded certain items from the cost
study. For example, the cost study excluded
75% of the cost of the Licensing Division’s
Fiscal Division staff because they largely
support maintenance and distribution of
royalty fees collected on behalf of copyright
owners. Because these funds can remain
undistributed for decades (through no fault of
the licensees), these efforts inure largely to
the benefit of copyright owners rather than
SOA filers. The Office also excluded costs
associated with Audio Home Recording Act
filings as well as public outreach, among
other exclusions for activities unrelated to
cable and satellite SOAs. The Office
explained that these exclusions resulted in
lowering the overall amount of costs to be
apportioned between copyright owners and
licensees.
4. In response to stakeholders questioning
the likelihood that the number of SA3 form
filings would remain stable in the future, the
Office explained that it had reviewed data for
three years and used this to project the
number of filings in the future. The statute
requires the Office to recover 50% or less of
costs, and thus the Office took a somewhat
conservative approach so as not to
underestimate potential filings, a
circumstance that could result in total fee
collections above the statutory limit.
5. Finally, it was noted that once the
exclusions were applied, under the proposed
fees, the Office projected that licensees
would pay approximately 47% of the
applicable costs, consistent with the statutory
mandate.
After the February 7 meeting,
Copyright Owners, NCTA, and DirectTV
filed reply comments. Copyright
Owners continued to argue that the
Office should not have excluded certain
costs. In addition, Copyright Owners
reiterated their view that there is a
downward trend in the number of
operators, and objected to ACA’s new
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proposed hardship filing fee. NCTA
continued to urge that it had inadequate
information on the Office’s cost study
and also contended that the Copyright
Owners’ desired increases in fees were
inappropriate. NCTA also continued to
dispute the Office’s decision regarding
the costs to be included in its
calculations. DirectTV stated that the
Office should not further increase
satellite filing fees.
II. Fee Setting Methodology
In conducting its cost study analysis,
the Office reviewed established
accounting procedures used by other
governmental entities, including the
Federal Accounting Standards Advisory
Board’s (‘‘FASAB’s’’) guidelines for
determining the full cost of federal
agency program activities 11 and the
Office of Management and Budget’s
Circular No. A–25 Revised: User
Charges 12 document regarding costing
guidelines and establishing user fees.
When the Office began studying
potential cable and satellite SOA fees, it
used the additive model to assess costs,
which it also uses for peripheral fee
services such as responding to FOIA
requests, and some seldom-invoked
services such as full-term retention of
registration deposits. The additive
method focuses on the desk time of
dedicated employees, meaning the
amount of time they spend performing
activities involved in processing a
typical service request. The Office
initially decided to use this model
because, at the time, it was thought it
might be well suited to evaluate cable
and satellite SOA processing costs.
As discussed above, several
commenters contested the initially
proposed SOA fees and, after careful
review, the Office determined that the
additive model did not capture all costs
of performing these services, including
indirect costs and time spent on
upgrades to improve the processing of
SOAs to the benefit of both copyright
owners and filers. The Office ultimately
recognized that, while effective in
analyzing services that can be measured
by short intervals of time, the additive
method is sometimes not as successful
in determining the cost of a more
complex task, such as processing an
entire cable or satellite SOA. The
management of cable and satellite SOAs
is one of the Office’s major programs
and constitutes the greatest percentage
of staff time and related resources
within the Licensing Division. Thus, the
11 This includes FASAB’s Managerial Cost
Accounting Concepts and Standards for the Federal
Government.
12 See https://www.whitehouse.gov/omb/circulars_
a025.
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Office concluded that the study
described in the First NPR did not fully
reflect the cost of the program to the
Licensing Division and was not an
appropriate measure by which to
establish SOA fees.
In light of these determinations, the
Office conducted another cost study
using an alternative activity-based
methodology that is consistent with that
employed to evaluate other types of
services—including its registration and
recordation functions—but with certain
exclusions specific to the operation of
the Licensing Division. These
adjustments were reviewed at the FOIA
meeting, as set forth above.
The second study yielded a more
complete picture of the costs of
administering the SOA program. It
reflects all relevant staff time, whether
directly or indirectly associated with
program functions, and all relevant nonpersonnel costs. Because it is allinclusive, the revised methodology
accounts for costs incurred in
connection with difficult or exceptional
circumstances that involve timeintensive research or problem
resolution. For example, it includes
cases where electronic funds transfer
payments need to be matched with an
SOA received much earlier or later than
the payment or without a remittance
advice. It also covers non-routine staff
effort. During the period under review,
for example, the Office revised work
procedures and forms and updated its
internal information systems to facilitate
its implementation of other aspects of
STELA. The Office expects similar types
of administrative and technical
upgrades to continue to occur during
the life of the SOA program as legal and
practical requirements evolve.
STELA directs that the fees collected
from licensees filing SOAs shall be
reasonable and may not exceed one-half
of the Office’s reasonable expenses to
administer the cable and satellite SOA
program, including the collection and
administration of SOAs and any royalty
fees deposited with such statements. 17
U.S.C. 708(a). The fees established by
this Final Rule are designed to recover
just under one half of the Office’s total
cost of administering the SOA program.
Of the Licensing Division’s $5.27
million budget, the Office estimated in
the Second NPR that the costs of
administering filings under the cable
and satellite SOA program would be
$3.74 million, a number that the Office
has since revised slightly upward, to
$3.76 million, after a final review of its
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cost data.13 At the fee levels hereby
adopted, based upon projected filings,
the expected annual fee recovery under
the SOA program should be
approximately $1.77 million, or 47% of
the estimated $3.76 million total annual
cost of the program.14
III. Final Cable and Satellite SOA Fees
The Office is instituting the following
SOA fees:
1. Fee for processing of a statement of
account based on secondary transmissions of
primary transmissions pursuant to Section
111: $15 for SA1 forms, $20 for SA2 forms,
and $725 for SA3 forms
2. Fee for processing of a statement of
account based on secondary transmissions of
primary transmissions pursuant to Sections
119 or 122: $725
As explained above, with the
enactment of STELA, the Office is
authorized for the first time to impose
a fee that apportions costs between SOA
filers and copyright owners, who until
now have shouldered all of these costs
through deductions from their royalty
funds. Thus, this fee study presents the
Office with its first opportunity to
establish SOA fees based on a review of
the Office’s costs for processing these
SOAs.
Based on its cost study findings, the
Office is creating a three-tiered fee
schedule for cable operators that
corresponds to the filing of the different
types of cable SOAs and accounts for
the increased time spent processing the
more complex forms. The fee for
licensees who file the SA1 form (and
may pay as little as $52 each accounting
period) is set at $15, at the low end of
the scale, while the fee for cable systems
filing the SA2 form is set slightly higher,
at $20, due to somewhat higher
processing costs. These fees reflect the
fact that the resources required to
review SA1 and SA2 forms are
relatively small in comparison to those
needed to process SA3 forms, as
discussed below. The SA1 and SA2
form fees are reasonable in light of the
lesser amount of processing required
and the typical royalty payments
associated with such statements.
The Office is also establishing both
the cable SA3 filing fee and satellite
filing fee at $725. The $725 fee is
reasonable in light of the findings of the
second, more complete cost study and
the more substantial royalty payments
associated with these SOAs. Licensees
13 The slight increase does not materially impact
the projected recovery rate for the cable and
satellite program, which is still estimated at 47%.
14 The data and calculations comprising the
Office’s cost study with respect to cable and
satellite fees are available on the Office’s Web site
at www.copyright.gov/docs/newfees/.
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who file the considerably more
complicated SA3 form should pay a
correspondingly higher fee because of
the time associated with reviewing the
information in such filings, including
the detailed classifications of
community groups, television stations,
and channel lineups. The $725 fee also
takes into account that the SA3 forms
reflect substantial royalty payments that
far exceed those collected with SA1 and
SA2 forms. The SA3 form fee is thus
consistent with the higher amount of
royalties involved and the larger amount
of time that Licensing Division staff
must take to accurately process the
forms and royalty payments. The
processing of satellite SOAs similarly
involves significant royalty payments
and a substantial commitment of Office
resources.
Finally, the Office declines to create
a lesser ‘‘hardship’’ fee for smaller cable
operators that file SA3 forms. The Office
has set the SOA fees to reflect its costs
and has established significantly lower
fees for cable systems that file the far
less complex SA1 or SA2 forms.
Notwithstanding the lower number of
subscribers, the Office does not spend
less time processing SA3 forms filed by
smaller operators and thus there is no
cost-based reason for a reduced fee.
In establishing fees for cable and
satellite SOAs, the Office carefully
reviewed public comments and held a
meeting with interested parties, as
described above. As might be expected,
copyright owners have advocated for
higher fees and filers have sought lower
ones. Based on its cost study, the Office
believes that it has found the
appropriate middle ground. The Office
concludes that the SOA fees it is now
adopting are fairly apportioned,
reasonable, and otherwise consistent
with the guidance set forth in Section
708(a). Nonetheless, because the fees are
new, the Office will continue closely to
monitor its costs relating to the filing of
cable and satellite SOAs, as well as the
fees it collects, so it can adjust the fees
as appropriate in the future.
List of Subjects in 37 CFR Part 201
Copyright, General provisions.
Final Rule
In consideration of the foregoing,
under the authority of 17 U.S.C. 702, the
U.S. Copyright Office amends 37 CFR
chapter II as follows:
PART 201—GENERAL PROVISIONS
1. The authority citation for part 201
continues to read as follows:
■
Authority: 17 U.S.C. 702.
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§ 201.3 Fees for registration, recordation,
and related services, special services, and
services performed by the Licensing
Division.
2. Amend § 201.3 to add paragraphs
(e)(9) and (10) to read as follows:
■
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71501
(e) * * *
*
Licensing Division services
*
*
*
*
Fees
*
*
*
(9) Processing of a statement account based on secondary transmissions of primary transmissions pursuant to 17 U.S.C. 111:
(i) Form SA1 .............................................................................................................................................................................................
(ii) Form SA2 ............................................................................................................................................................................................
(iii) Form SA3 ...........................................................................................................................................................................................
(10) Processing of a statement of account based on secondary transmissions of primary transmissions pursuant to 17 U.S.C. 119 or
122 ...............................................................................................................................................................................................................
*
*
*
*
*
Dated: November 25, 2013.
Maria A. Pallante,
Register of Copyrights.
[FR Doc. 2013–28716 Filed 11–27–13; 8:45 am]
BILLING CODE 1410–30–P
LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 381
[Docket No. 2013–9 CRB NCEB COLA]
Cost of Living Adjustment for
Performance of Musical Compositions
by Colleges and Universities
Copyright Royalty Board,
Library of Congress.
ACTION: Final rule.
AGENCY:
The Copyright Royalty Judges
announce a cost of living adjustment
(COLA) of 2% in the royalty rates that
colleges, universities, and other
educational institutions not affiliated
with National Public Radio pay for the
use of published nondramatic musical
compositions in the SESAC repertory
for the statutory license under the
Copyright Act for noncommercial
broadcasting.
DATES: Effective Date: December 30,
2013.
FOR FURTHER INFORMATION CONTACT:
LaKeshia Keys, Program Specialist.
Telephone: (202) 707–7658. Email: crb@
loc.gov.
SUPPLEMENTARY INFORMATION: Section
118 of the Copyright Act, title 17 of the
United States Code, creates a
compulsory license for the use of
published nondramatic musical works
and published pictorial, graphic, and
sculptural works in connection with
noncommercial broadcasting.
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SUMMARY:
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On November 29, 2012, the Copyright
Royalty Judges (Judges) adopted final
regulations governing the rates and
terms of copyright royalty payments
under section 118 of the Copyright Act
for the license period 2013–2017. See 77
FR 71104. Pursuant to these regulations,
on or before December 1 of each year,
the Judges shall publish in the Federal
Register a notice of the change in the
cost of living for the rate codified at
§ 381.5(c)(3) relating to compositions in
the repertory of SESAC. See 37 CFR
381.10. The adjustment, fixed to the
nearest dollar, shall be the greater of (1)
‘‘the change in the cost of living as
determined by the Consumer Price
Index (all consumers, all items) [CPI–U]
. . . during the period from the most
recent index published prior to the
previous notice to the most recent index
published prior to December 1, of that
year,’’ 37 CFR 381.10(a), or (2) 2%. 37
CFR 381.10(b), (c).
The change in the cost of living as
determined by the CPI–U during the
period from the most recent index
published before December 1, 2012, to
the most recent index published before
December 1, 2013, is 1%.1 In
accordance with 37 CFR 381.10(b), the
Judges announce that the cost of living
adjustment shall be 2%. Application of
the 2% COLA to the current rate for the
performance of published nondramatic
musical compositions in the repertory of
SESAC—$140 per station—results in an
adjusted rate of $143 per station.
List of Subjects in 37 CFR Part 381
Copyright, Music, Radio, Television,
Rates.
1 On November 20, 2013, the Bureau of Labor
Statistics announced that the CPI–U increased 1.0%
over the last 12 months.
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15
20
725
725
Final Regulations
In consideration of the foregoing, the
Judges amend part 381 of title 37 of the
Code of Federal Regulations as follows:
PART 381—USE OF CERTAIN
COPYRIGHTED WORKS IN
CONNECTION WITH
NONCOMMERCIAL EDUCATIONAL
BROADCASTING
1. The authority citation for part 381
continues to read as follows:
■
Authority: 17 U.S.C. 118, 801(b)(1), and
803.
2. Section 381.5 is amended by
revising paragraph (c)(3)(ii) to read as
follows:
■
§ 381.5 Performance of musical
compositions by public broadcasting
entities licensed to colleges and
universities.
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(c) * * *
(3) * * *
(ii) 2014: $143 per station.
*
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Dated: November 21, 2013.
Suzanne M. Barnett,
Chief Copyright Royalty Judge.
[FR Doc. 2013–28633 Filed 11–27–13; 8:45 am]
BILLING CODE 1410–72–P
LIBRARY OF CONGRESS
Copyright Royalty Board
37 CFR Part 386
[Docket No. 2013–8 CRB Satellite COLA]
Cost of Living Adjustment to Satellite
Carrier Compulsory License Royalty
Rates
Copyright Royalty Board,
Library of Congress.
AGENCY:
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[Federal Register Volume 78, Number 230 (Friday, November 29, 2013)]
[Rules and Regulations]
[Pages 71498-71501]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-28716]
[[Page 71498]]
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LIBRARY OF CONGRESS
Copyright Office
37 CFR Part 201
[Docket No. 2012-1]
Copyright Office Fees: Cable and Satellite Statement of Account
Fees
AGENCY: U.S. Copyright Office, Library of Congress.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Copyright Office (``Office'') is publishing a final
rule establishing a fee schedule for filing cable and satellite
statements of account pursuant to Sections 112, 119, and 122 of Title
17 of the United States Code (``SOAs'') in accordance with the
Satellite Television Extension and Localism Act of 2010 (``STELA'').
The Office is establishing these SOA fees after taking into account
public comments received in response to the Office's March 28, 2012
Notice of Proposed Rulemaking and December 6, 2012 Notice of Proposed
Rulemaking.
DATES: This rule is effective January 1, 2014.
FOR FURTHER INFORMATION CONTACT: Jacqueline C. Charlesworth, General
Counsel and Associate Register of Copyrights, or Catherine R. Rowland,
Senior Counsel for Policy and International Affairs, at the U.S.
Copyright Office, Copyright GC/I&R, P.O. Box 70400, Washington, DC
20024. Telephone: (202) 707-8380. Telefax: (202) 707-8366.
SUPPLEMENTARY INFORMATION:
I. Background
The Office is charged with administering certain statutory licenses
established under the Copyright Act, 17 U.S.C. 101 et seq. (``Act''),
including fees for filing and processing cable and satellite SOAs
pursuant to Sections 111 and 119. Previously, as permitted under the
Act, the Office covered its administrative costs for processing these
SOAs by charging the costs against the collected royalties. In 2010,
however, Congress enacted STELA, amending the law to allow the Office
to apportion the fees between copyright owners and statutory licensees.
The Act requires that the fees assessed for filing SOAs ``shall be
reasonable and may not exceed one-half of the cost necessary to cover
reasonable expenses incurred by the Copyright Office for the collection
and administration of the statements of account and any royalty fees
deposited with such statements.'' \1\
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\1\ 17 U.S.C. 708(a).
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In light of the statutory change, the Office undertook a cost study
of its Licensing Division, which processes SOAs, and issued a Notice of
Proposed Rulemaking on March 28, 2012 (``First NPR'').\2\ The First NPR
suggested a three-tiered fee schedule for cable filings, with fees
corresponding to the different types of cable SOAs (the three SOA forms
are known as SA1, SA2, and SA3). Thus, the First NPR proposed the
following SOA fees: $15 for licensees who file an SA1 form; $20 for
licensees who file an SA2 form (slightly higher due to the somewhat
greater review involved); and $500 for licensees who file the SA3 form
(substantially higher due to the complex nature of the Office's review
and administration of SA3 filings). Additionally, the First NPR
proposed a $75 fee for satellite SOAs, reflecting the fact that these
forms require attention beyond that needed for SA1 and SA2 forms.
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\2\ Copyright Office Fees Notice of Proposed Rulemaking, 77 FR
18742 (Mar. 28, 2012). This Notice also included fee proposals for
other fees, including for registration, recordation, and non-SOA
licensing services, which will be the subject of a subsequent Final
Rule.
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The Office received three comments addressing the First NPR's
proposed cable and satellite SOA fees. These comments were submitted by
the American Cable Association (``ACA''); the National Cable &
Telecommunications Association (``NCTA''); and jointly by Program
Suppliers, Joint Sports Claimants, Commercial Television Claimants,
Music Claimants, Canadian Claimants Group, National Public Radio,
Broadcaster Claimants Group, and Devotional Claimants (collectively,
the ``Copyright Owners''). NCTA expressed the concern that the proposed
fees sought to recover costs for services ``that go beyond what is
reasonably necessary to administer the license.'' ACA requested that
the Office provide a waiver of fees for cable operators experiencing
financial hardship. Copyright Owners argued that the proposed fees
failed to recover enough of the operating costs of the cable and
satellite program.
In light of the comments received, and because the fees for the
filing of cable and satellite SOAs were being set for the first time,
the Office conducted a further analysis of the costs of administering
the SOAs and published an updated fee schedule in a second Notice of
Public Rulemaking on December 6, 2012 (``Second NPR'').\3\ The Second
NPR explained that the Office had conducted an additional cost study to
address commenter concerns regarding cable and satellite SOA fees. As
discussed below, the Office determined that its original review of
costs in relation to the Licensing Division--using a methodology that
differed to some degree from its approach to other fee services in the
Office unrelated to SOA fees--did not sufficiently reflect all of the
costs incurred in the complex task of processing cable and satellite
SOAs.\4\ To more completely assess the costs, the Office thus decided
to conduct a second study using the more typical methodology, which
captures administrative overhead, among other things.\5\
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\3\ Copyright Office Fees Notice of Proposed Rulemaking, 77 FR
72788 (Dec. 6, 2012).
\4\ Id. at 72789.
\5\ Id.
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In the second Licensing Division cost study, the Office found that
many costs are common to both cable and satellite filings--in
particular the fiscal management and information technology costs--and
thus should be shared by both types of filers.\6\ The Office proposed a
modified fee schedule for cable and satellite SOA fees that better
reflected the overall costs of the licensing program. Specifically,
while the Office proposed to keep the recommended fees for SA1 and SA2
forms set forth in the First NPR ($15 and $20, respectively), it
determined that fees for SA3 forms should be increased from $500 to
$725.\7\ The Office further proposed to increase the fee for processing
SOAs for satellite retransmissions from $75 to $725. While these fees
included significant increases to certain fees initially proposed in
the First NPR, the Office believed that they better captured the full
costs associated with the management of these SOAs.
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\6\ Id. at 72790.
\7\ Id.
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Lastly, in the Second NPR the Office declined to adopt a hardship
waiver for SOA fees as advocated by the ACA. The Office noted that the
statutory language in Section 708(a) does not include a reference to
waivers, although another part of the Copyright Act, Section 708(c),
does provide for discretionary waivers for government actors in limited
circumstances. From this, the Office concluded that Congress did not
intend for the Office to establish waivers for STELA-based fees.
Notably, the Office does not provide hardship waivers for other
fees.\8\
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\8\ Id. at 72790-91.
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The Office received three initial comments and three reply comments
in response to the Second NPR. The initial comments came from the ACA,
Copyright Owners, and NCTA. In these comments, the licensing
stakeholders
[[Page 71499]]
made a variety of arguments regarding the Office's methodology and the
SOA fees proposed in the Second NPR.
The Copyright Owners expressed concern over the Office's proposed
cable and satellite SOA fees. They stated that the new study excluded
too many costs and thus did not reflect the full costs necessary to
cover the Office's reasonable expenses. They also stated that the
Office's new fees did not adequately balance the costs between
copyright owners and licensees. The Copyright Owners further contended
that the fees did not account for the continuing decline in the number
of SA3 forms due to consolidation in the cable marketplace.
The ACA also filed comments, which focused on the hardship question
initially set forth in the ACA's 2012 comments. ACA abandoned its
original request for a hardship waiver in favor of a new request for a
reduced rate for smaller entities filing SA3 forms. ACA requested that
the Office provide an additional, lower-cost SA3 form for cable systems
with 400,000 or fewer subscribers that would face a financial hardship
if forced to pay a higher fee. The fee for this form, ACA urged, should
be $50, which it argued would be more manageable for smaller entities.
ACA claimed that its proposed new fee would be reasonable under STELA
and would not undercut the Office's administrative costs because these
forms would constitute a minority of filings.
For its part, NCTA believed that it did not have adequate
information to assess whether the new fee was reasonable. It thus filed
a Freedom of Information Act (``FOIA'') request seeking information
about the Office's cost studies and submitted initial comments
expressing concern over the reasonableness of the proposed fees.
In response to NCTA's FOIA request, the Office provided data that
it believed properly could be supplied under FOIA \9\ and on February
7, 2013 held a meeting, open to all interested parties, to discuss the
cost study.\10\ At the meeting, the Office explained its general
approach and methodology in the second cost study regarding the
establishment of cable and satellite SOA fees, and noted the following:
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\9\ The Office withheld documents that fell within FOIA
Exemption 5, which permits an agency to withhold records reflecting
an agency's deliberative process. See Letter from George Thuronyi,
Chief FOIA Officer, to Seth A. Davidson (Jan. 25, 2013).
\10\ The Office invited all parties who filed comments on cable
and satellite SOA fees to attend the meeting. The Office also posted
a notice of the meeting on its Web site in case others were
interested in attending.
1. The Office used a three-year average of non-personnel costs
in determining the baseline for new cable and satellite SOA fees.
The Office used this three-year average (which spanned fiscal years
2009-2011) to avoid an aberrant result in light of the Office's
recent reengineering process. If the Office had not used a three-
year average for these costs, the results could have been skewed
upward because of the relatively high costs incurred for
reengineering efforts in 2011.
2. The Office did not use a three-year average when calculating
personnel costs, but instead used payroll numbers from the pay
period in effect at the time the Office commenced the second cost
study. This is because a number of Licensing Division staff
participated in an Office-wide voluntary separation package prior to
the beginning of the study, which resulted in a decrease in
staffing. The Office thus looked to the pay period immediately
preceding the commencement of the second cost study because earlier
time frames would have artificially inflated the personnel costs.
3. Once the Office determined the appropriate time frame(s) for
assessing costs, pursuant to its mandate to set reasonable fees, it
excluded certain items from the cost study. For example, the cost
study excluded 75% of the cost of the Licensing Division's Fiscal
Division staff because they largely support maintenance and
distribution of royalty fees collected on behalf of copyright
owners. Because these funds can remain undistributed for decades
(through no fault of the licensees), these efforts inure largely to
the benefit of copyright owners rather than SOA filers. The Office
also excluded costs associated with Audio Home Recording Act filings
as well as public outreach, among other exclusions for activities
unrelated to cable and satellite SOAs. The Office explained that
these exclusions resulted in lowering the overall amount of costs to
be apportioned between copyright owners and licensees.
4. In response to stakeholders questioning the likelihood that
the number of SA3 form filings would remain stable in the future,
the Office explained that it had reviewed data for three years and
used this to project the number of filings in the future. The
statute requires the Office to recover 50% or less of costs, and
thus the Office took a somewhat conservative approach so as not to
underestimate potential filings, a circumstance that could result in
total fee collections above the statutory limit.
5. Finally, it was noted that once the exclusions were applied,
under the proposed fees, the Office projected that licensees would
pay approximately 47% of the applicable costs, consistent with the
statutory mandate.
After the February 7 meeting, Copyright Owners, NCTA, and DirectTV
filed reply comments. Copyright Owners continued to argue that the
Office should not have excluded certain costs. In addition, Copyright
Owners reiterated their view that there is a downward trend in the
number of operators, and objected to ACA's new proposed hardship filing
fee. NCTA continued to urge that it had inadequate information on the
Office's cost study and also contended that the Copyright Owners'
desired increases in fees were inappropriate. NCTA also continued to
dispute the Office's decision regarding the costs to be included in its
calculations. DirectTV stated that the Office should not further
increase satellite filing fees.
II. Fee Setting Methodology
In conducting its cost study analysis, the Office reviewed
established accounting procedures used by other governmental entities,
including the Federal Accounting Standards Advisory Board's
(``FASAB's'') guidelines for determining the full cost of federal
agency program activities \11\ and the Office of Management and
Budget's Circular No. A-25 Revised: User Charges \12\ document
regarding costing guidelines and establishing user fees.
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\11\ This includes FASAB's Managerial Cost Accounting Concepts
and Standards for the Federal Government.
\12\ See https://www.whitehouse.gov/omb/circulars_a025.
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When the Office began studying potential cable and satellite SOA
fees, it used the additive model to assess costs, which it also uses
for peripheral fee services such as responding to FOIA requests, and
some seldom-invoked services such as full-term retention of
registration deposits. The additive method focuses on the desk time of
dedicated employees, meaning the amount of time they spend performing
activities involved in processing a typical service request. The Office
initially decided to use this model because, at the time, it was
thought it might be well suited to evaluate cable and satellite SOA
processing costs.
As discussed above, several commenters contested the initially
proposed SOA fees and, after careful review, the Office determined that
the additive model did not capture all costs of performing these
services, including indirect costs and time spent on upgrades to
improve the processing of SOAs to the benefit of both copyright owners
and filers. The Office ultimately recognized that, while effective in
analyzing services that can be measured by short intervals of time, the
additive method is sometimes not as successful in determining the cost
of a more complex task, such as processing an entire cable or satellite
SOA. The management of cable and satellite SOAs is one of the Office's
major programs and constitutes the greatest percentage of staff time
and related resources within the Licensing Division. Thus, the
[[Page 71500]]
Office concluded that the study described in the First NPR did not
fully reflect the cost of the program to the Licensing Division and was
not an appropriate measure by which to establish SOA fees.
In light of these determinations, the Office conducted another cost
study using an alternative activity-based methodology that is
consistent with that employed to evaluate other types of services--
including its registration and recordation functions--but with certain
exclusions specific to the operation of the Licensing Division. These
adjustments were reviewed at the FOIA meeting, as set forth above.
The second study yielded a more complete picture of the costs of
administering the SOA program. It reflects all relevant staff time,
whether directly or indirectly associated with program functions, and
all relevant non-personnel costs. Because it is all-inclusive, the
revised methodology accounts for costs incurred in connection with
difficult or exceptional circumstances that involve time-intensive
research or problem resolution. For example, it includes cases where
electronic funds transfer payments need to be matched with an SOA
received much earlier or later than the payment or without a remittance
advice. It also covers non-routine staff effort. During the period
under review, for example, the Office revised work procedures and forms
and updated its internal information systems to facilitate its
implementation of other aspects of STELA. The Office expects similar
types of administrative and technical upgrades to continue to occur
during the life of the SOA program as legal and practical requirements
evolve.
STELA directs that the fees collected from licensees filing SOAs
shall be reasonable and may not exceed one-half of the Office's
reasonable expenses to administer the cable and satellite SOA program,
including the collection and administration of SOAs and any royalty
fees deposited with such statements. 17 U.S.C. 708(a). The fees
established by this Final Rule are designed to recover just under one
half of the Office's total cost of administering the SOA program. Of
the Licensing Division's $5.27 million budget, the Office estimated in
the Second NPR that the costs of administering filings under the cable
and satellite SOA program would be $3.74 million, a number that the
Office has since revised slightly upward, to $3.76 million, after a
final review of its cost data.\13\ At the fee levels hereby adopted,
based upon projected filings, the expected annual fee recovery under
the SOA program should be approximately $1.77 million, or 47% of the
estimated $3.76 million total annual cost of the program.\14\
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\13\ The slight increase does not materially impact the
projected recovery rate for the cable and satellite program, which
is still estimated at 47%.
\14\ The data and calculations comprising the Office's cost
study with respect to cable and satellite fees are available on the
Office's Web site at www.copyright.gov/docs/newfees/.
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III. Final Cable and Satellite SOA Fees
The Office is instituting the following SOA fees:
1. Fee for processing of a statement of account based on
secondary transmissions of primary transmissions pursuant to Section
111: $15 for SA1 forms, $20 for SA2 forms, and $725 for SA3 forms
2. Fee for processing of a statement of account based on
secondary transmissions of primary transmissions pursuant to
Sections 119 or 122: $725
As explained above, with the enactment of STELA, the Office is
authorized for the first time to impose a fee that apportions costs
between SOA filers and copyright owners, who until now have shouldered
all of these costs through deductions from their royalty funds. Thus,
this fee study presents the Office with its first opportunity to
establish SOA fees based on a review of the Office's costs for
processing these SOAs.
Based on its cost study findings, the Office is creating a three-
tiered fee schedule for cable operators that corresponds to the filing
of the different types of cable SOAs and accounts for the increased
time spent processing the more complex forms. The fee for licensees who
file the SA1 form (and may pay as little as $52 each accounting period)
is set at $15, at the low end of the scale, while the fee for cable
systems filing the SA2 form is set slightly higher, at $20, due to
somewhat higher processing costs. These fees reflect the fact that the
resources required to review SA1 and SA2 forms are relatively small in
comparison to those needed to process SA3 forms, as discussed below.
The SA1 and SA2 form fees are reasonable in light of the lesser amount
of processing required and the typical royalty payments associated with
such statements.
The Office is also establishing both the cable SA3 filing fee and
satellite filing fee at $725. The $725 fee is reasonable in light of
the findings of the second, more complete cost study and the more
substantial royalty payments associated with these SOAs. Licensees who
file the considerably more complicated SA3 form should pay a
correspondingly higher fee because of the time associated with
reviewing the information in such filings, including the detailed
classifications of community groups, television stations, and channel
lineups. The $725 fee also takes into account that the SA3 forms
reflect substantial royalty payments that far exceed those collected
with SA1 and SA2 forms. The SA3 form fee is thus consistent with the
higher amount of royalties involved and the larger amount of time that
Licensing Division staff must take to accurately process the forms and
royalty payments. The processing of satellite SOAs similarly involves
significant royalty payments and a substantial commitment of Office
resources.
Finally, the Office declines to create a lesser ``hardship'' fee
for smaller cable operators that file SA3 forms. The Office has set the
SOA fees to reflect its costs and has established significantly lower
fees for cable systems that file the far less complex SA1 or SA2 forms.
Notwithstanding the lower number of subscribers, the Office does not
spend less time processing SA3 forms filed by smaller operators and
thus there is no cost-based reason for a reduced fee.
In establishing fees for cable and satellite SOAs, the Office
carefully reviewed public comments and held a meeting with interested
parties, as described above. As might be expected, copyright owners
have advocated for higher fees and filers have sought lower ones. Based
on its cost study, the Office believes that it has found the
appropriate middle ground. The Office concludes that the SOA fees it is
now adopting are fairly apportioned, reasonable, and otherwise
consistent with the guidance set forth in Section 708(a). Nonetheless,
because the fees are new, the Office will continue closely to monitor
its costs relating to the filing of cable and satellite SOAs, as well
as the fees it collects, so it can adjust the fees as appropriate in
the future.
List of Subjects in 37 CFR Part 201
Copyright, General provisions.
Final Rule
In consideration of the foregoing, under the authority of 17 U.S.C.
702, the U.S. Copyright Office amends 37 CFR chapter II as follows:
PART 201--GENERAL PROVISIONS
0
1. The authority citation for part 201 continues to read as follows:
Authority: 17 U.S.C. 702.
[[Page 71501]]
0
2. Amend Sec. 201.3 to add paragraphs (e)(9) and (10) to read as
follows:
Sec. 201.3 Fees for registration, recordation, and related services,
special services, and services performed by the Licensing Division.
* * * * *
(e) * * *
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Licensing Division services Fees
------------------------------------------------------------------------
* * * * * * *
(9) Processing of a statement account based on secondary
transmissions of primary transmissions pursuant to 17 U.S.C.
111:
(i) Form SA1............................................... 15
(ii) Form SA2.............................................. 20
(iii) Form SA3............................................. 725
(10) Processing of a statement of account based on secondary 725
transmissions of primary transmissions pursuant to 17 U.S.C.
119 or 122....................................................
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* * * * *
Dated: November 25, 2013.
Maria A. Pallante,
Register of Copyrights.
[FR Doc. 2013-28716 Filed 11-27-13; 8:45 am]
BILLING CODE 1410-30-P
