Daily Rules, Proposed Rules, and Notices of the Federal Government
In 2010, Congress enacted the Satellite Television Extension and Localism Act (“STELA”), Public Law 111-175, 124 Stat. 1218, which, for the first time, granted authority to the Copyright Office to establish fees for the filing of statements of account (“SOAs”) pursuant to the section 111, 119, and 122 statutory licenses for cable and satellite users. Prior to 2010, the cost of processing such statements and associated royalty payments was funded solely by the royalty fees collected for the benefit of the copyright owners under the statutory licenses. STELA added a new provision to Title 17 that permits the Office to apportion up to 50 percent of the cost of processing the SOAs and royalty payments to licensees. More specifically, 17 U.S.C. 708(a) provides that the fees charged to licensees for the filing of 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.”
On March 28, 2012, the Copyright Office published a Notice of Proposed Rulemaking (“NPR”) as the initial step in adopting new fees for various services, including the registration of claims, recordation of documents, special services, processing of requests for records pursuant to the Freedom of Information Act, and Licensing Division services, including the new fees for filing of cable and satellite SOAs.
Generally speaking, the Office has conducted a study of costs every three years. In each case, and in the case here, the Office is acutely aware of its obligations as an agency of the federal government, including the mandate to establish sound fiscal policies and develop a responsible budget. At the same time, the Office is cognizant of its responsibilities to both copyright owners and users of copyrighted works. Ultimately, the Office must price its services in a manner that is fair to the parties and conducive to well-functioning programs and recordkeeping. Indeed, elsewhere the Copyright Act indicates that fees “shall be fair and equitable and give due consideration to the objectives of the copyright system.” 17 U.S.C. 708(b)(4).
In response to the NPR, the Office received 138 comments on the proposed fees, three of which specifically addressed the new fees for filing cable and satellite SOAs. The Office received individual comments from the American Cable Association (“ACA”) and the National Cable & Telecommunications Association (“NCTA”), and a joint comment from Program Suppliers, Joint Sports Claimants, Commercial Television Claimants, Music Claimants, Canadian Claimants Group, National Public Radio, Broadcaster Claimants Group, and Devotional Claimants (collectively, “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 and reflect expenses incurred in the past that are unlikely to recur in the future.” NCTA Comments at 2. ACA requested the Office to provide a waiver of fees for cable operators experiencing financial hardship.
Copyright Owners, on the other hand, argued that the proposed fees failed to recover half of the actual operating costs of the cable and satellite program, and also questioned the Office's methodology, specifically why actual costs were not the starting point for analysis.
In light of the comments received from affected stakeholders, and because the fees for filing cable and satellite SOAs are being set for the first time, the Office conducted further analysis of those fees. As explained below, it performed a second study, using a revised methodology to more precisely capture the cost of providing the services in question.
The original cost study for the Office's administration of the cable and satellite statutory licenses used the additive model employed in previous cost studies for peripheral fee services. This method focuses on the desk time of dedicated employees, in other words, how much time they spend performing activities involved in processing a typical service request. While effective in analyzing services that can be measured by short intervals of time, it is sometimes not as successful in determining the cost of a more complex task, such as the processing of an entire SOA. At the same time, managing the cable and satellite SOAs is a major program of the Office and comprises the greatest portion of staff time and related resources in comparison to administering the other statutory licenses.
In its reexamination of SOA program costs, the Office applied a traditional methodology that it has used to assess the costs of its services in other areas, such as copyright registration. This methodology calculates the full cost of the activity in question—in this case, the entire SOA program, including the receipt and administration of the SOAs and royalty fees deposited with such statements—based on actual expenditures and all costs directly or indirectly associated with these functions. The revised methodology identifies staffing costs for each particular program service and apportions non-personnel costs either directly to the services they support or, in the case of administrative and other indirect costs, in proportion to the staff costs previously identified. Staffing costs not associated directly or indirectly with any of the program services, along with a commensurate proportion of non-personnel costs, are excluded from the model.
The revised methodology is more complete because it accounts for all
In conducting the second cost study, the Office applied a three-year average of non-personnel costs to address concerns that an aberrant year may have an undue impact on the proposed fees. The Office considered reengineering efforts of the Licensing Division in the area of statutory licenses and the rise of associated costs in 2011. The administrative and technical enhancements are integral to the SOA program. However, in order to mitigate the impact of higher than usual costs in 2011, the 2011 costs have been averaged with costs from 2010 and 2009 to achieve a balanced representation of the overall, ongoing cost of the SOA program, including periodic and technical upgrades.
Finally, in both the initial and revised cost studies, the Office excluded approximately 75 percent of salaries for staff who work in the Fiscal Section of the Licensing Division. The Office did so because much of the work of these employees is dedicated to royalty management functions that serve copyright owners (e.g., production of financial statements, reconciliations, investments, and distributions); the 75 percent exclusion is meant to fairly account for this fact.
In the initial cost study, the Office analyzed the processing of cable SA1, SA2, and SA3 SOAs and satellite SOAs independently. In performing the revised study, it was evident that many of the program 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.
Based on its further evaluation of the program costs for the collection and administration of the cable and satellite SOAs and the royalty fees deposited with such statements, the Office continues to propose a tiered fee schedule corresponding to the filing of the different types of SOAs. The fees for licensees who file a cable SA1 or SA2 form remain unchanged from the initial proposal, $15 for the filing of a SA1 form and $20 for the filing of a SA2 form. Such fees are reasonable in light of the minimal amount of processing required and the typical royalty payments associated with such statements, which are substantially lower than royalties associated with SA3 filings.
Moreover, at the proposed levels, the fees collected from licensees filing SOAs should in the aggregate approach, but not exceed, 50 percent of the Office's reasonable expenses to administer the cable and satellite SOA program, as determined in the more recent study conducted by the Office. Based on projected filings, the expected annual fee recovery will be approximately $1.77 million, or approximately 47 percent of the estimated $3.74 million total annual SOA program cost.
The chart below sets forth the proposed fees for filing cable and satellite SOAs:
The Office believes that, as revised, the proposed fees are appropriate based on the reasonable expenses incurred in the processing of cable and satellite SOAs and managing the associated royalty payments. Moreover, the fees are set to approach one-half the costs, without exceeding one-half, in order that owners and users of copyrighted works share the burden of supporting the cable and satellite SOA program. An outcome where program costs are shared relatively equally by owners and users is consistent with the mandate of STELA, as well as the objectives of the copyright system.
ACA suggests that the Office “establish a streamlined waiver process for smaller cable operators where payment of the filing fee would result in a financial hardship.” ACA Comments at 2. While the Office understands ACA's rationale for this request, the law appears to preclude this option.
Section 708(a) requires that “fees shall be paid to the Register of Copyrights” for filing a cable SOA. The statute also instructs the Register to fix said fees based on relevant costs. To this end, the Office conducted a cost study, taking into account that cable companies that file SA1 and SA2 forms benefit from the statutory licensing scheme, yet generate revenues considerably lower than the cable systems that file the SA3 form. Accordingly, the Office is proposing significantly lower fees to ensure that they are reasonable under the circumstances.
To the extent the suggestion of ACA is that nothing in the law expressly prevents the Register from creating exceptions or waivers to the general fee, the Office notes that Congress has set forth express authority for the Register
The Office will adopt technical amendments as needed to conform existing regulations to the changes proposed in this notice.
As noted above, the Copyright Office is publishing the revised proposed fee schedule for these particular fees to provide the public with an opportunity to comment.