82 FR 59652 - Scope of Preexisting Subscription Services
LIBRARY OF CONGRESS
U.S. Copyright Office Federal Register Volume 82, Issue 240 (December 15, 2017)
U.S. Copyright Office
Federal Register Volume 82, Issue 240 (December 15, 2017)
| Page Range | 59652-59660 | |
| FR Document | 2017-27088 |
[Federal Register Volume 82, Number 240 (Friday, December 15, 2017)] [Notices] [Pages 59652-59660] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-27088] ======================================================================= ----------------------------------------------------------------------- LIBRARY OF CONGRESS U.S. Copyright Office [Docket No. 2017-20] Scope of Preexisting Subscription Services AGENCY: U.S. Copyright Office, Library of Congress. ACTION: Final order. ----------------------------------------------------------------------- SUMMARY: The Copyright Royalty Judges referred novel material questions of [[Page 59653]] substantive law to the Register of Copyrights for resolution in connection with the SDARS III proceeding. The Register responded with a written opinion that is reproduced below. DATES: Opinion dated November 20, 2017. FOR FURTHER INFORMATION CONTACT: Sarang V. Damle, General Counsel and Associate Register of Copyrights, by email at sdam@loc.gov, or Jason E. Sloan, Attorney-Advisor, by email at jslo@loc.gov. Each can be contacted by telephone by calling (202) 707-8350. SUPPLEMENTARY INFORMATION: The Copyright Royalty Judges (``CRJs'') are tasked with determining and adjusting rates and terms of royalty payments for statutory licenses under the Copyright Act. See 17 U.S.C. 801. If, in the course of proceedings before the CRJs, novel material questions of substantive law concerning the interpretation of provisions of title 17 arise, the CRJs are required by statute to refer those questions to the Register of Copyrights for resolution. 17 U.S.C. 802(f)(1)(B). On October 23, 2017, the CRJs, acting pursuant to 17 U.S.C. 802(f)(1)(B), referred to the Register novel material questions of substantive law in connection with the SDARS III proceeding, Docket No. 16-CRB-0001 SR/PSSR (2018-2022). The referred questions asked whether a preexisting subscription service's transmissions of multiple, unique channels of music that are accessible through that entity's website and through a mobile application are ``subscription transmissions by preexisting subscription services'' for which the CRJs are required to determine rates and terms of royalty payments under 17 U.S.C. 114(f)(1)(A), and, if so, whether there are any conditions a service must satisfy to qualify for a license under section 114(f)(1)(A). On November 20, 2017, the Register resolved these questions in a Memorandum Opinion that she transmitted to the CRJs. To provide the public with notice of the decision rendered by the Register, the Memorandum Opinion is reproduced in its entirety below. Dated: December 6, 2017. Karyn Temple Claggett, Acting Register of Copyrights and Director of the U.S. Copyright Office. Before the U.S. Copyright Office, Library of Congress, Washington, DC 20559 In the Matter of: DETERMINATION OF ROYALTY RATES AND TERMS FOR TRANSMISSION OF SOUND RECORDINGS BY SATELLITE RADIO AND ``PREEXISTING'' SUBSCRIPTION SERVICES (SDARS III) Docket No. 16-CRB-0001 SR/PSSR (2018-2022) MEMORANDUM OPINION ON NOVEL MATERIAL QUESTIONS OF LAW The Copyright Royalty Judges (``CRJs'' or ``Judges'') concluded the hearing in the above-captioned proceeding with closing arguments of counsel on July 18, 2017. In the course of their deliberations, the CRJs determined that novel material questions of substantive law arose regarding the interpretation of provisions of the Copyright Act and, as required under 17 U.S.C. 802(f)(1)(B), referred them to the Register of Copyrights for resolution. The questions were referred to the Register by the CRJs on October 23, 2017. The Register's determination follows. I. Background A. Statutory Background In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act of 1995 (``DPRSRA''),\1\ recognizing the exclusive right of copyright owners to perform sound recordings ``publicly by means of a digital audio transmission.'' \2\ The DPRSRA also established a statutory license to allow certain noninteractive digital audio services to make such performances of sound recordings, provided the services pay a royalty fee and comply with the terms of the license. Under the DPRSRA, nonexempt subscription transmissions were subject to statutory licensing if they satisfied certain requirements, and the royalty rates and terms for the statutory license were to be set in accordance with the objectives set forth in 17 U.S.C. 801(b)(1).\3\ --------------------------------------------------------------------------- \1\ Public Law 104-39, 109 Stat. 336 (1995). \2\ 17 U.S.C. 106(6). \3\ Section 801(b)(1) provides that the rates ``shall be calculated to achieve the following objectives: (A) To maximize the availability of creative works to the public. (B) To afford the copyright owner a fair return for his or her creative work and the copyright user a fair income under existing economic conditions. (C) To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication. (D) To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.'' 17 U.S.C. 801(b)(1). --------------------------------------------------------------------------- In 1998, the statutory license was amended by the Digital Millennium Copyright Act (``DMCA''),\4\ a major goal of which was to establish a market-based standard for setting royalty rates paid to copyright owners for use of their works under the statutory license.\5\ In doing so, Congress drew a distinction between preexisting subscription services (``PSSs'') on the one hand and nonsubscription services and new subscription services on the other. A ``preexisting subscription service'' is defined in 17 U.S.C. 114(j)(11) as: --------------------------------------------------------------------------- \4\ Public Law 105-304, 112 Stat. 2860 (1998). \5\ 71 FR 64639, 64641 (Nov. 3, 2006). [A] service that performs sound recordings by means of noninteractive audio-only subscription digital audio transmissions, which was in existence and was making such transmissions to the public for a fee on or before July 31, 1998, and may include a limited number of sample channels representative of the subscription service that are made available on a nonsubscription basis in order to promote the subscription service.\6\ --------------------------------------------------------------------------- \6\ 17 U.S.C. 114(j)(11). Section 114 contains two grandfathering provisions that apply to PSSs and provide benefits to those services not available to new subscription services or nonsubscription services. The first, section 114(d)(2)(B), preserves the DPRSRA's limited qualifications for entitlement to the statutory license, but only for transmissions made in the same transmission medium used by the PSS on July 31, 1998. The second, to which the referred questions most directly pertain, is the grandfathered method of setting royalty rates under section 114(f)(1), which applies to a PSS regardless of the transmission medium. Under this scheme, PSS transmissions in the same transmission medium used on July 31, 1998, are still subject to the DPRSRA's requirements under section 114(d)(2)(B) and are to still have royalty rates and terms set in accordance with the objectives of section 801(b)(1).\7\ Nonsubscription services and new subscription services, however, are subject to a more expansive set of qualifications under section 114(d)(2)(C), and are to have their royalty rates and terms set to reflect those that ``would have been negotiated in the marketplace between a willing buyer and a willing seller.'' \8\ PSS transmissions made in a new transmission medium are subject to the more expansive set of qualifications under section 114(d)(2)(C) imposed on nonsubscription and new subscription services.\9\ --------------------------------------------------------------------------- \7\ See id. at 114(d)(2)(B), (f)(1). \8\ See id. at 114(d)(2)(C), (f)(2). \9\ Id. at 114(d)(2)(C). --------------------------------------------------------------------------- The Register has explained that ``the rationale for [section 114's] grandfathering provisions is to `prevent disruption of the existing operations by [[Page 59654]] [preexisting subscription] services.' '' \10\ In discussing the legislative history explaining the objectives of the grandfathering provisions, the Register elaborated: --------------------------------------------------------------------------- \10\ 71 FR at 64641 (quoting H.R. Rep. No. 105-796, at 81 (1998) (Conf. Rep.)); accord SoundExchange, Inc. v. Muzak LLC, 854 F.3d 713, 719 (D.C. Cir. 2017) (``The grandfather provisions were intended to protect prior investments the three [PSS] business entities had made during a more favorable pre-1998 rate-setting regulatory climate.''). While it would appear . . . that Congress's purpose in grandfathering these services was to preserve a particular program offering, it was not its only purpose or even necessarily its major goal. The Conference Report also makes clear that Congress distinguished between preexisting subscription services and new subscription services as a way to prevent disruption of the existing operations of the services that were in existence and operating before July 31, 1998. It understood that the entities so designated as preexisting had invested a great deal of resources into developing their services under the terms established in 1995 as part of the Digital Performance Right in Sound Recording Act of 1995, and that those services deserved to develop their businesses accordingly.\11\ --------------------------------------------------------------------------- \11\ 71 FR at 64645 (internal citation omitted). B. Procedural History The instant proceeding will establish royalty rates and terms for PSSs' (as well as preexisting satellite digital audio radio services') digital performance of sound recordings and the making of ephemeral recordings under the statutory licenses set forth in sections 112(e) and 114(f)(1) of the Copyright Act. Music Choice is the only PSS that participated in the current rate-setting proceedings. The CRJs explain that the referred questions arose in this proceeding because SoundExchange, Inc.,\12\ for the first time, is seeking two separate royalty payments from PSSs: (1) For all licensed transmissions and related ephemeral recordings through a television-based service qualifying as a PSS, SoundExchange requests a per-subscriber, per-month royalty; and (2) for all licensed transmissions and related ephemeral recordings through an internet streaming service qualifying as a PSS (or any similar service capable of tracking the individual sound recordings received by any particular consumer and qualifying as a PSS), SoundExchange seeks a per-performance royalty fee that is the same as commercial webcasters are currently required to pay under 37 CFR 380.10 (or, in the alternative, a royalty based on aggregate tuning hours for a PSS that does not have the technological capability to track individual performances).\13\ The parties dispute whether it is necessary for the CRJs to decide whether Music Choice's internet and mobile transmissions qualify as part of its PSS.\14\ --------------------------------------------------------------------------- \12\ SoundExchange appears in this proceeding on behalf of the American Association of Independent Music; the American Federation of Musicians of the United States and Canada; the Recording Industry Association of America; the Screen Actors Guild and American Federation of Television and Radio Artists; Sony Music Entertainment; Universal Music Group; and Warner Music Group. Referral Order at 2 n.4. \13\ Id. at 2-3. \14\ Id. at 3. --------------------------------------------------------------------------- In response to this dispute, the CRJs found that ``consideration of the appropriate royalty rates and terms for a PSS's digital audio transmissions through a website or mobile application in which the PSS streams a variable number of unique channels of music presents a novel material question of substantive law,'' and referred the following questions to the Register pursuant to 17 U.S.C. 802(f)(1)(B): 1. Are a preexisting subscription service's transmissions of multiple, unique channels of music that are accessible through that entity's website and through a mobile application ``subscription transmissions by preexisting subscription services'' for which the Judges are required to determine rates and terms of royalty payments under Section 114(f)(1)(A) of the Copyright Act? 2. If yes, what conditions, if any, must the PSS meet with regard to streaming channels to qualify for a license under Section 114(f)(1)(A)? For example, must the streamed stations be identical to counterpart stations made available through cable television? Is there a limitation on the number of channels that the PSS may stream? Is there a limitation on the number or type of customers that may access the website or the mobile application? \15\ --------------------------------------------------------------------------- \15\ Id. at 3-4. Section 802(f)(1)(B) provides that ``[i]n any case in which a novel material question of substantive law concerning an interpretation of those provisions of [title 17] that are the subject of the proceeding is presented, the Copyright Royalty Judges shall request a decision of the Register of Copyrights, in writing, to resolve such novel question.'' 17 U.S.C. 802(f)(1)(B). --------------------------------------------------------------------------- II. Summary of the Parties' Arguments A. Music Choice's Position Music Choice argues that the statutory language, legislative history, and factual record all support its position that its internet transmissions are part of its PSS and subject to section 114(f)(1). Music Choice begins by disputing, as a factual matter, the claim that its internet transmissions are an ``expansion'' of its service into a new medium--which it perceives as the premise for the CRJs' referred questions--on the grounds that its ``internet transmissions are merely an ancillary part of its residential audio service,'' the value of its internet transmissions ``has always been included in the bundled per- subscriber fee,'' and ``the undisputed evidence establishes that Music Choice has been providing its subscribers with internet-based access to its audio channels since 1996, long before the PSS license was created in the DMCA, and has always included these internet transmissions as a part of its PSS since that time.'' \16\ Music Choice also disputes SoundExchange's claim that webcasting was becoming an ``increasingly important part'' of its business, claiming that record evidence shows that ``usage of Music Choice's internet transmissions has consistently remained at de minimis levels, and today comprises less than one hundredth of one percent of Music Choice's overall audio channel usage.'' \17\ Music Choice contends that, in any event, because it was making internet transmissions prior to the codification of the PSS definition in section 114(j)(11), ``[u]nder any reasonable interpretation of [the] statutory language, Music Choice's internet transmissions fall squarely within the definition of a PSS.'' \18\ --------------------------------------------------------------------------- \16\ Music Choice Brief at 1-2, 4-5. \17\ Id. at 6. \18\ Id. at 18-19, 30. --------------------------------------------------------------------------- Music Choice also argues that even if its internet transmissions did constitute an expansion of its services to a new medium, such expansion is permitted and ``would not require any new, additional license fee or rate.'' \19\ Music Choice contends that in grandfathering the existing three PSSs, Congress sought to protect their ``need for access to the works at a price that would not hamper their growth'' and did not ``intend[] to limit PSS status to the PSS offerings as they existed in 1998 or otherwise freeze the PSS in time.'' \20\ Music Choice claims that ``Congress's intent to provide the PSS with long-term protection is further evinced by the absence of any sunset provision anywhere in the statutory language or discussion of such a provision in the legislative history'' \21\ and argues that in enacting the DMCA, ``the overarching intent of Congress was decidedly not to move the entire market to marketplace rates,'' but rather ``to protect the PSS' unique business expectancies.'' \22\ --------------------------------------------------------------------------- \19\ Id. at 2, 30. \20\ Id. at 14, 19-23. \21\ Id. at 15. \22\ Id. at 16-17. --------------------------------------------------------------------------- Citing to Congress's discussion in the DMCA Conference Report, Music Choice asserts that Congress created a ``unique feature of the PSS license that allows a PSS to expand into new services in new transmission media while retaining PSS status for those new services, so long as the new service is similar in character to the original PSS [[Page 59655]] offering, i.e., does not take advantage of unique features of the new medium to provide a different listening experience or interactivity while listening to the audio channel.'' \23\ Music Choice further explains that ``[a]lthough Congress did not intend to allow the PSS to create fundamentally different types of services, with fundamentally different types of content or interactive audio functionality . . . , it did intend to allow the PSS to continue their development, evolution, and growth of their non-interactive, subscription audio services.'' \24\ Thus, Music Choice argues that ``there is no statutory requirement that a PSS offer the exact same channels to all of its subscribers or through each of its different transmission media,'' \25\ and ``there is no hint in the statute or the legislative history of any intent to impose restrictions on the number of channels that may be provided . . . or the number or type of subscribers that Music Choice may serve.'' \26\ Music Choice specifically argues that section 114 cannot be read to require the same exact channels in a new transmission medium as it offers in its original medium because the statute ``expressly acknowledges that the programming of a PSS's transmissions in a new medium may be different than those in the original medium, and in some instances requires that they be programmed differently.'' \27\ More generally, Music Choice asserts that its internet transmissions are permissible because they ``do not take advantage of the internet's technological capabilities,'' providing several fact-based arguments for why its internet service is comparable to its television service.\28\ --------------------------------------------------------------------------- \23\ Id. at 15, 17, 23-25. \24\ Id. at 24-25, 30. \25\ Id. at 19, 27. Music Choice specifically notes that, ``of the 75 channels available through the internet, 50 of those are identical to the channels broadcast over the television'' and the ``additional 25 are identical to the television channels in every way except the genre or sub-genre in which they are programmed.'' Id. at 19. \26\ Id. at 2. \27\ Id. at 27. \28\ Id. at 25-26. --------------------------------------------------------------------------- Music Choice rests its argument in part on the U.S. Court of Appeals for the District of Columbia Circuit's recent opinion in SoundExchange, Inc. v. Muzak LLC, which held that a music service acquired by Muzak was not entitled to the grandfathered rate that applied to its preexisting subscription service.\29\ Music Choice claims that this decision ``demonstrate[s] that the PSS definition was not intended to freeze the PSS in time, nor limit PSS status to channels (or customers) that are exactly the same as the channels that were transmitted in 1998 (or the customers who received them at that time)'' and that ``any rule limiting PSS status to internet-based channels that are exactly the same as those transmitted through cable or satellite, or limiting the number of channels that may be provided by a PSS, would be inconsistent with [the court's] interpretation of the PSS definition.'' \30\ Music Choice concludes that it would be contrary to the court's interpretation of the PSS definition to limit ``the expansion of a PSS's service under the same brand'' beyond the limitation ``that the service must remain within the general category of transmissions identified in the . . . definition: noninteractive audio-only subscription digital audio transmissions made by an entity that was in existence and making that category of transmissions on or before July 31, 1998.'' \31\ --------------------------------------------------------------------------- \29\ 854 F.3d at 719. \30\ Music Choice Brief at 21. \31\ Id. 29-30 (internal quotation marks omitted). --------------------------------------------------------------------------- B. SoundExchange's Position SoundExchange argues that the CRJs should set ``distinct statutory royalty rates for delivery of a PSS to television sets and for any webcasting that is provided as part of a PSS,'' with the rate for webcasting that is part of a PSS set ``at the same level as the statutory rate for other subscription webcasters, because Music Choice's webcasting is equivalent to that provided by other webcasting services, and competes with other webcasting services.'' \32\ SoundExchange argues that this position responds to the ``rapid growth in Music Choice's webcasting,'' which it asserts is demonstrated by record evidence it describes regarding Music Choice's mobile application and website and how Music Choice's internet transmissions differ from its television-based service.\33\ --------------------------------------------------------------------------- \32\ SoundExchange Brief at 5. \33\ Id. at 2-5. --------------------------------------------------------------------------- Pointing to the same discussion in the DMCA Conference Report referenced by Music Choice, SoundExchange argues that ``Congressional intent was to limit the grandfathering of the PSS to transmissions similar to the cable or satellite service offerings their providers offered on July 31, 1998,'' meaning that PSS status ``extends to a qualifying entity's cable and satellite offerings as they existed at July 31, 1998 . . . and also may extend to a qualifying entity's transmissions in a new medium such as the internet, if the transmissions are sufficiently similar to the 1998 offerings.'' \34\ SoundExchange contends that assessing similarity ``is a fact-intensive inquiry that requires comparison of a PSS provider's new offering with the provider's 1998 offerings,'' and that ``[i]t is not enough to consider only whether a qualifying entity's new offerings makes noninteractive audio-only subscription digital audio transmissions,'' but rather, ``it is necessary to consider the medium used, and the functionality and content provided, in the new offerings.'' \35\ SoundExchange claims that ``Congress gave no indication that . . . a PSS provider should enjoy PSS rates if it provided an offering different from its 1998 offering in a new medium.'' \36\ SoundExchange interprets the legislative history to suggest that Congress ``grandfathered the PSS to protect investments that qualifying entities had already made at the time the DMCA was under consideration in 1998.'' \37\ SoundExchange understands the D.C. Circuit's decision in SoundExchange to be consistent with its interpretation of the legislative history.\38\ --------------------------------------------------------------------------- \34\ Id. at 9-10. \35\ Id. at 10. \36\ Id. at 11. \37\ Id. \38\ Id. 11-12. --------------------------------------------------------------------------- SoundExchange argues that the PSS definition must be construed narrowly, particularly in the case of webcasting given that ``[i]nternet-based streaming services are a rapidly-growing means of music consumption,'' and ``webcasting by a PSS provider competes with webcasting by services that are currently paying for their use of sound recordings at much higher royalty rates.'' \39\ Such an interpretation, SoundExchange claims, would ``ensure that webcasters compete on level terms, eliminating distortions in the market and effectuating the Congressional intent to shift rates towards those that reflect arms- length market transactions.'' \40\ --------------------------------------------------------------------------- \39\ Id. at 12. \40\ Id. at 12-13. --------------------------------------------------------------------------- SoundExchange further argues that, ``[a]s a matter of law,'' ``webcast transmissions made through a mobile app, or through a version of a provider's website that has been optimized for display using the browser on a mobile device, are not transmissions by a PSS for which the Judges are to set rates and terms under Section 114(f)(1).'' \41\ SoundExchange contends that the PSSs' ``1998 offerings were residential offerings delivered by means of cable or satellite to fixed points in subscribers' homes,'' while ``[t]he Internet and the wireless networks that are used to deliver service to mobile devices are a different medium than the PSS used in [[Page 59656]] 1998.'' \42\ Furthermore, SoundExchange contends that mobile services ``take[ ] advantage of the capability of wireless networks to provide portability, allowing listeners to access music anytime and virtually anywhere'' as well as offering ``different opportunities for user interaction and navigation'' that ``provide a very different user experience than the stereo receivers and television sets that could receive the PSS' 1998 offerings.'' \43\ --------------------------------------------------------------------------- \41\ Id. at 13. \42\ Id. \43\ Id. at 13-14. --------------------------------------------------------------------------- While SoundExchange claims that internet streaming channels could qualify as part of a PSS, so long as it is ``sufficiently similar to the provider's 1998 offerings,'' SoundExchange asserts that this standard requires that the ``PSS provider's webcast channels [to] be identical to counterpart stations made available through cable television'' in order to qualify for a rate set under section 114(f)(1), as a service offering internet-only channels would lack sufficient similarity to the PSS' 1998 offerings which did not include any internet-only offerings.\44\ SoundExchange argues that a PSS's internet transmissions are similarly disqualified if the ``number of webcasting channels is [not] sufficiently similar to the provider's pre-1998 offerings.'' \45\ SoundExchange further contends that the number and type of subscribers to the transmission must also be substantially similar, and that a PSS cannot include video programming ``other than video related to the service or recording being performed'' in order for its webcasting service to qualify as a PSS.\46\ SoundExchange also asserts that ``[a] trier of fact may also consider other factors that bear on similarity of the service offerings, including any differences between Internet-based platforms and cable- and satellite-based platforms.'' \47\ --------------------------------------------------------------------------- \44\ Id. at 15-16. \45\ Id. 16-17. \46\ Id. 17-18. \47\ Id. at 17. --------------------------------------------------------------------------- III. Register's Determination Although the parties' briefs discuss at length the factual nature of Music Choice's particular internet transmissions, questions of fact are beyond the scope of the Register's inquiry under section 802(f)(1)(B). Thus, without judging the facts as they may pertain to Music Choice (or any other PSS), and having considered the relevant statutory language, legislative history, and the input from the parties, the Register determines that transmissions by a PSS entity that are accessible to a cable or satellite television subscriber through that entity's website and through a mobile application can be ``subscription transmissions by preexisting subscription services'' for which the CRJs must determine rates and terms of royalty payments under section 114(f)(1)(A), but only if such transmissions are sufficiently similar to the transmissions made to those subscribers via the entity's preexisting residential cable or satellite music service. A. Legal Standard Before addressing the appropriate legal standard for determining whether a particular subscription transmission by a preexisting subscription service is subject to the grandfathered method of setting royalty rates for such service offerings under section 114(f)(1), the Register makes a few threshold points about the statute. First, in analyzing the grandfathering provisions, the Register interprets them narrowly.\48\ --------------------------------------------------------------------------- \48\ See 71 FR at 64646; accord SoundExchange, 854 F.3d at 719. --------------------------------------------------------------------------- Second, as the Register has previously held, the definition of ``preexisting subscription service'' in section 114(j)(11) can pertain to both the business entity operating a service offering and the service offering itself.\49\ The D.C. Circuit recently agreed with the Register that ``the word `service,' as used both in the statute as well as the legislative history, sometimes referred to the business entity and sometimes the program offerings.'' \50\ For clarity's sake, the Register generally refers below to a ``PSS entity'' or a ``PSS offering'' to distinguish between a preexisting business itself and a specific preexisting program offering by such business. --------------------------------------------------------------------------- \49\ 71 FR at 64646, 64647 (``In construing the statutory language together with the legislative history, the logical conclusion is that Congress did use the term `service' to mean both the program offerings made on a subscription basis to the public and the business entity that secures the license to make the subscription transmissions.''). \50\ SoundExchange, 854 F.3d at 718. --------------------------------------------------------------------------- Third, as a corollary to the second point, the Register concurs with the D.C. Circuit's holding that, under the grandfathering provisions, ``the term `service' contemplates a double limitation; both the business and the program offering must qualify before the transmissions are eligible for the favorable rate.'' \51\ Indeed, Congress was clear that not every subscription transmission made by a PSS entity is subject to section 114(f)(1).\52\ Thus, as used in section 114(f)(1)(A), ``subscription transmissions by preexisting subscription services'' must refer only to the PSS offerings made by a PSS entity, rather than referring to all subscription transmissions made by a PSS entity. --------------------------------------------------------------------------- \51\ See id. at 719. \52\ See H.R. Rep. No. 105-796, at 84-85 (explaining that section 114(f)(2) applies to ``subscription transmissions made by a preexisting subscription service other than those that qualify under subsection (f)(1)'' in addition to new subscription services and eligible nonsubscription transmissions). Similarly, previous statements made by the Register that preexisting subscription ``services deserved to develop their businesses accordingly'' pertained to the businesses of the pre-July 31, 1998 PSS offerings-- not all businesses engaged in by the PSS entities. See 71 FR at 64645. For example, later in the same opinion, the Register elaborated that while ``Muzak was the pioneer music service that incurred both the benefits and risks that came with its investment, and one such benefit was its status as a preexisting subscription service,'' that benefit only exists ``so long as [Muzak] provided its music offerings over [DiSHCD],'' as it did as of July 31, 1998. Id. at 64646. --------------------------------------------------------------------------- Fourth, the Register has previously determined ``that the preexisting services must be limited to the three named entities in the [DMCA] Conference Report, i.e., DMX (operated by TCI Music), Music Choice (operated by Digital Cable Radio Associates), and [DiSHCD] \53\ (operated by Muzak).'' \54\ Thus, it is long-settled that these three entities are the only PSS entities. What offerings by these entities may constitute PSS offerings, however, has continued to be unsettled, but is now resolved by this memorandum opinion.\55\ --------------------------------------------------------------------------- \53\ The Register believes that the DMCA Conference Report's reference to ``DiSH Network'' was a typo, and that Congress intended to refer to Muzak's ``DiSHCD'' service, which was transmitted over Echostar's DiSH Network. See Report of the Copyright Arbitration Royalty Panel, In re: Determination of Statutory License Terms and Rates for Certain Digital Subscription Transmissions of Sound Recordings, No. 96-5 CARP DSTRA ] 27 (Nov. 28, 1997) (``CARP Report'') (``Muzak . . . began providing . . . digital music under the name DiSH CD, as part of Echostar's satellite-based DiSH Network.''); 63 FR 25394, 25395 (May 8, 1998) (same); see also Muzak Limited Partnership, Initial Notice of Digital Transmission of Sound Recordings under Statutory License (July 2, 1998) (listing the service name as ``dishCD''). \54\ 71 FR at 64646; see H.R. Rep. No. 105-796, at 81, 85, 89. \55\ The D.C. Circuit correctly recognized that the Register's previous ``opinion did not address whether those three business entities' grandfather status was further limited to the programs they were offering at the time the statute was passed.'' See SoundExchange, 854 F.3d at 718. --------------------------------------------------------------------------- Fifth, the Register observes that PSS offerings are not limited solely to the offerings made by PSS entities prior to July 31, 1998. Rather, the statute and legislative history both confirm that Congress intended for PSS entities to be able to expand their service offerings to some limited extent and still have those service offerings be considered PSS offerings. Two provisions of the statute [[Page 59657]] in particular reflect this congressional intent. Section 114(d)(2)(C) sets out more expansive qualifications for the statutory license for transmissions made by a PSS ``other than in the same transmission medium used by such service on July 31, 1998.'' In other words, Congress suggested that a PSS could deliver its offering in a new transmission medium without affecting its status as a PSS offering. Section 114(f)(1)(C), in turn, provides for an out-of-cycle rate proceeding to be held where ``a new type of subscription digital audio transmission service on which sound recordings are performed is or is about to become operational.'' The statute further makes clear that this rate proceeding is to be conducted with reference to the grandfathered rate standard. Such a provision would be unnecessary if PSS offerings were limited to the exact offerings made in 1998; there would never be a ``new type of . . . service.'' Thus, the ultimate question is whether a particular program offering by a PSS entity qualifies as a PSS offering within the meaning of section 114(j)(11), and is therefore subject to the grandfathered rate standard under section 114(f)(1). The DMCA Conference Report provides particularly helpful guidance in answering this question concerning section 114(f)(1): In grandfathering these services, the conferee's objective was to limit the grandfather to their existing services in the same transmission medium and to any new services in a new transmission medium where only transmissions similar to their existing service are provided. Thus, if a cable subscription music service making transmissions on July 31, 1998, were to offer the same music service through the Internet, then such Internet service would be considered part of a preexisting subscription service. If, however, a subscription service making transmissions on July 31, 1998, were to offer a new service either in the same or new transmission medium by taking advantages of the capabilities of that medium, such new service would not qualify as a preexisting subscription service.\56\ --------------------------------------------------------------------------- \56\ H.R. Rep. No. 105-796, at 89. This passage, consistent with the statutory language in sections 114(d)(2) and 114(f), demonstrates Congress's intent to distinguish among three different possibilities: 1. A service offering identified by Congress as being a PSS offering as of July 31, 1998, that is still offered today in the same transmission medium identified by Congress in 1998 (referred to here as an ``existing service offering'').\57\ Such a service offering would be entitled to both a rate established under the grandfathered rate standard under section 114(f)(1) and the grandfathered license requirements in section 114(d)(2)(B). --------------------------------------------------------------------------- \57\ See id. (grandfathered services can be ``existing services in the same transmission medium''). --------------------------------------------------------------------------- 2. A service offering identified by Congress as being a PSS offering as of July 31, 1998, that is still offered today, but in a different transmission medium than the one identified by Congress in 1998, where only transmissions similar to the existing service offering are provided (referred to here as an ``expanded service offering'').\58\ Such a service offering would be entitled to a rate established under the grandfathered rate standard under section 114(f)(1), but would not be able to take advantage of the grandfathered license requirements in section 114(d)(2)(B). Instead, it would be required to comply with more detailed license requirements in section 114(d)(2)(C). --------------------------------------------------------------------------- \58\ See id. (grandfathered services can be ``new services in a new transmission medium where only transmissions similar to their existing service are provided''). While the Conference Report refers to ``new services,'' in the next sentence, it provides an example of a ``cable . . . service'' expanding into an ``Internet service'' by ``offer[ing] the same music service through the Internet.'' See id. Thus, in context, such services are what the Register has here called ``expanded services,'' and are not meant to encompass wholly new services that are unrelated to an existing service offering. By the same logic, other references in the statute and legislative history to ``new'' service offerings should be similarly interpreted as being what is referred to here as expanded service offerings. See, e.g., 17 U.S.C. 114(f)(1)(C) (permitting out-of-cycle rate- setting proceedings for a ``new type of . . . service''). --------------------------------------------------------------------------- 3. A service offering that is not an existing service offering or an expanded service offering (referred to here as a ``different service offering'').\59\ This would include any offering that is insufficiently similar to an existing service offering to be considered an expanded service offering. A different service offering would not be entitled to either a rate established under the grandfathered rate standard under section 114(f)(1) or the grandfathered license requirements in section 114(d)(2)(B). Instead, the rate would be set under the willing buyer/ willing seller standard in section 114(f)(2), and would be required to comply with the license requirements in section 114(d)(2)(C). --------------------------------------------------------------------------- \59\ See H.R. Rep. No. 105-796, at 89 (grandfathering ``limit[ed]'' to ``existing services in the same transmission medium and to any new services in a new transmission medium where only transmissions similar to their existing service are provided'') (emphasis added). --------------------------------------------------------------------------- These categorizations presume that a service is eligible for the section 114 license. The purpose of separating them into these groups is to determine whether the rate for a service is determined pursuant to section 114(f)(1) or section 114(f)(2). Thus, if a PSS entity began offering, for example, an interactive service, it would not fall into one of these categories, as it is ineligible for the statutory license. The following sections describe the types of service offerings that fall within these three categories. 1. Existing Service Offerings Implicit in the Register's previous determination that the only PSS entities are the three entities Congress named in the DMCA Conference Report,\60\ is that, as a matter of law, the service offerings that Congress sought to identify as PSS offerings as of July 31, 1998, were the ones offered by those entities prior to that date. The legislative history makes clear that Congress further intended to limit what it identified as a PSS offering at that time to the PSS entities' offerings in the specific transmission media affirmatively identified in the DMCA Conference Report: ``cable'' or ``satellite'' for DMX and Music Choice, and ``satellite'' for DiSHCD.\61\ Thus, to qualify as an ``existing service offering,'' the service must not only have existed as of July 31, 1998, but it must have also been providing its offering in the specific transmission media identified by Congress. --------------------------------------------------------------------------- \60\ See 71 FR at 64646. \61\ See H.R. Rep. No. 105-796, at 89 (``As of July 31, 1998, DMX and Music Choice made transmissions via both cable and satellite media; the [DiSHCD service] was available only via satellite.''). --------------------------------------------------------------------------- Music Choice urges that it was already making internet transmissions of its subscription music service as of July 31, 1998.\62\ In so doing, it is effectively asking for its current internet transmissions to be treated as an ``existing service offering'' under the rubric set forth above. But even assuming Music Choice, or another service, were making such pre-1998 internet transmissions,\63\ it was clearly to an inconsequential degree: Any such transmissions were entirely unacknowledged by the Copyright Arbitration Royalty Panel (``CARP''), in setting royalty rates for the statutory license under the DPRSRA; the Librarian of Congress and the Register of Copyrights, in reviewing that CARP decision; and Congress, in enacting the DMCA in 1998. The CARP report describes the three PSSs at length and, notably, makes an explicit finding of fact that the services are the ``only three digital audio music subscription [[Page 59658]] services available to residential subscribers in the United States'' and that they ``offer their digital music via satellite, or cable, or both,'' making no mention of any internet retransmissions.\64\ In comprehensively reviewing the CARP report and adopting rates and terms for PSSs, the Register of Copyrights and the Librarian of Congress made no mention of any internet transmissions by those PSS entities.\65\ To the contrary, that decision concluded that the PSSs ``face new competition from the internet.'' \66\ These factual findings are further reflected in the DMCA Conference Report, where Congress clearly identified the three qualifying services and only described them as making transmissions via cable and/or satellite media.\67\ Given this background, it is highly improbable that Congress would have intended, sub silentio, to treat internet transmissions as subject to the grandfathering provision under section 114(d)(2)(B). --------------------------------------------------------------------------- \62\ Music Choice Brief at 1-2, 4-6, 18-19, 30. \63\ The Register notes that the only apparent evidence offered by Music Choice of such pre-1998 internet transmissions is the testimony of Music Choice CEO David Del Beccaro. See id. at 5. \64\ CARP Report ] 43. \65\ See 63 FR 25394. \66\ Id. at 25407 (emphasis added). \67\ See H.R. Rep. No. 105-796, at 81, 89. --------------------------------------------------------------------------- This understanding is strongly reinforced by the new requirements Congress added in section 114(d)(2)(C) that webcasting services and new subscription services, as well as preexisting subscription services other than in the same transmission medium used by such service on July 31, 1998, had to comply with to qualify for the statutory license. The rationale behind the DMCA's amendments to the DPRSRA, including the new requirements in section 114(d)(2)(C), was to ``address[] unique programming and other issues raised by Internet transmissions.'' \68\ If a PSS were permitted to make internet transmissions under the less stringent requirements of section 114(d)(2)(B), it would undermine the design of this statutory scheme and blur the distinction that Congress intended to draw when dividing PSS transmissions between paragraphs (B) and (C) based on the transmission medium used on July 31, 1998.\69\ --------------------------------------------------------------------------- \68\ See Staff of H. Comm. on the Judiciary, 105th Cong., Section-By-Section Analysis of H.R. 2281 as Passed by the United States House of Representatives on August 4th, 1998, at 50 (Comm. Print 1998) (emphasis added); id. at 51 (``At the time the DPRSRA was crafted, Internet transmissions were not the focus of Congress' efforts.''); see also H.R. Rep. No. 105-796, at 83 (explaining explicitly that the reason for one of the new requirements was because of ``a disturbing trend on the Internet'' pertaining to the ``unauthorized performance of sound recordings not yet released for broadcast or sale to the public''). \69\ See 17 U.S.C. 114(d)(2)(B)-(C); see also H.R. Rep. No. 105- 796, at 89 (indicating that a ``cable subscription music service'' that offers ``the same music service through the Internet'' is engaged in the delivery of its service ``in a new transmission medium''). --------------------------------------------------------------------------- Thus, in accordance with the principles of narrow construction afforded to grandfathering provisions, the Register finds that, as a matter of law, it is irrelevant whether or not Music Choice or another PSS entity, to some limited degree, was making transmissions via a different medium than those specified in the legislative history on July 31, 1998, such as the internet. If such a service was in fact doing so, it would not be as part of an existing service offering--any such transmissions today would be considered either an expanded service offering or a different service offering, depending on the analysis described below. At the same time, the Register emphasizes that an existing service offering can grow and expand significantly within the same transmission medium while remaining a PSS offering. The Register has found no indication that Congress meant to freeze existing service offerings exactly as they were on July 31, 1998, in order for them to continue to qualify for the grandfathering provisions. The user interface can be updated, certain functionality can be changed, the number of subscribers can grow, and channels can be added, subtracted, or otherwise changed.\70\ The only restriction is that the existing service offering as it is today must be fundamentally the same type of offering that it was on July 31, 1998--i.e., it must be a noninteractive, residential, cable or satellite digital audio transmission subscription service.\71\ --------------------------------------------------------------------------- \70\ See, e.g., 78 FR 23054, 23085 (Apr. 17, 2013) (increasing the royalty rate due to Music Choice's announced intention to increase its number of channels from 46 to 300). \71\ See 17 U.S.C. 114(j)(11); H.R. Rep. No. 105-796, at 81, 89; 63 FR at 25414; CARP Report ]] 43-44, 51-78, 109. --------------------------------------------------------------------------- 2. Expanded Service Offerings In addition to expanding within its congressionally-recognized transmission medium, an existing service offering can also expand to a different transmission medium, provided that the subscription transmissions are similar.\72\ --------------------------------------------------------------------------- \72\ See H.R. Rep. No. 105-796, at 89 (the grandfathering covers ``a new transmission medium [but] where only transmissions similar to their existing service are provided''); 71 FR at 64641 (``[A] preexisting service does not lose its designation as such in the event the service decides to utilize a new transmission medium, provided that the subscription transmissions are similar.'') (emphasis added). --------------------------------------------------------------------------- This expansion, however, is subject to an important threshold limitation. For a service offering to qualify as an expanded service offering, the PSS entity must continue to operate its existing service offering. The basis for the grandfathering provisions is to protect existing service offerings and limited direct outgrowths of them. If such a limited outgrowth--i.e., an expanded service offering--were to exist alone, divorced from the existing service offering, the rationale for including them within the existing service offering's grandfather protection becomes less tenable. Furthermore, the legislative history is explicit that a service offering that is not an existing service offering can only be subject to the grandfathering provision if it provides ``transmissions similar to their existing service.'' \73\ Ascertaining similarity requires comparison, and if a PSS entity discontinues its existing service offering, there would be nothing to compare against.\74\ --------------------------------------------------------------------------- \73\ See H.R. Rep. No. 105-796, at 89. \74\ In the event that technology evolves such that a PSS decides to completely discontinue its cable or satellite service and limit its offerings solely to another transmission medium, such as the internet, this limitation would act as a type of ``sunset provision,'' which, contrary to Music Choice's argument with respect to such provisions, demonstrates that Congress did not in fact intend for the grandfather status to apply to a service indefinitely regardless of the offerings it provides and the way it is transmitted. --------------------------------------------------------------------------- As Music Choice and SoundExchange agree, in assessing whether a service offering is an expanded service offering, and thus qualifies as a PSS offering, a comparison must be made between the service offering in question and the existing service offering to see if it is sufficiently similar. Because, as discussed above, an existing service offering can expand over time while remaining a PSS offering, the comparison should be made to the existing service offering as it exists at the time of the comparison, not, as SoundExchange argues, as it existed on July 31, 1998. To determine whether or not such a service offering is sufficiently similar to the existing service offering, the fact-finder should compare the offerings by analyzing certain factors, including but not limited to: (1) Whether the service offering has a similar effect on displacing or promoting sales of phonorecords.\75\ --------------------------------------------------------------------------- \75\ See 17 U.S.C. 114(f)(2)(B) (providing this as one of the examples of criteria to be used in distinguishing among different types of non-PSSs). --------------------------------------------------------------------------- (2) Whether the quantity and nature of the use of sound recordings by the service offering is similar.\76\ --------------------------------------------------------------------------- \76\ See id. (providing this as one of the examples of criteria to be used in distinguishing among different types of non-PSSs). --------------------------------------------------------------------------- [[Page 59659]] (3) Whether the service offering provides similar content to similar groups of users. (4) Whether the service offering is consumed in a similar manner, provides a similar user experience, and has similar form, feel, and functionality. (5) Whether and to what degree the service offering relates to the same pre-July 31, 1998 investments Congress sought to protect.\77\ --------------------------------------------------------------------------- \77\ See 71 FR at 64641 (``[T]he rationale for [the] grandfathering provisions is to `prevent disruption of the existing operations by such services.''') (quoting H.R. Rep. No. 105-796, at 81); SoundExchange, 854 F.3d at 719 (``The grandfather provisions were intended to protect prior investments the three [PSS] business entities had made during a more favorable pre-1998 rate-setting regulatory climate.''). --------------------------------------------------------------------------- (6) Whether and to what degree the service offering takes advantage of the capabilities of the medium through which it is transmitted (i.e., whether and the extent to which differences between the service offerings are due to limitations in the existing service offering's transmission medium that are not present in the other service offering's transmission medium).\78\ --------------------------------------------------------------------------- \78\ See H.R. Rep. No. 105-796, at 89 (``If . . . a subscription service making transmissions on July 31, 1998, were to offer a new service either in the same or new transmission medium by taking advantages of the capabilities of that medium, such new service would not qualify as a preexisting subscription service.''). --------------------------------------------------------------------------- Note that even if a service offering is found to be an expanded service offering qualifying for the section 114(f)(1) grandfathering provision, it would still not be eligible for the section 114(d)(2)(B) grandfathering provision by virtue of its being transmitted via a different transmission medium. Such an offering would be subject to the requirements in section 114(d)(2)(C). 3. Different Service Offerings As a matter of law, a wholly different service offering can never qualify as a PSS offering because it would not be one of the specifically identified pre-July 31, 1998, business operations (i.e., the three PSS offerings) Congress sought to protect when it enacted the DMCA.\79\ This is true regardless of whether the service offering is developed internally or acquired. As the D.C. Circuit recently held, the DMCA's amendments to section 114 were ``designed to move the industry to market rates,'' and if a PSS entity ``were permitted to pay the grandfather rate for transmissions made to customers who subscribed to a `service' that was previously provided by [a different, non-PSS entity], what would prevent * * * the complete elimination of the market-rate regime by [such PSS entity's] acquisitions strategy.'' \80\ The Register agrees that ``when [such entity] expands its operations and provides additional transmissions to subscribers to a different `service,' * * * this is an entirely new investment'' and is not a PSS offering.\81\ --------------------------------------------------------------------------- \79\ See id. at 81, 89; 71 FR at 64641, 64645-46; SoundExchange, 854 F.3d at 719. \80\ SoundExchange, 854 F.3d at 719. \81\ See id. (emphasis added). The Register thus agrees with the D.C. Circuit's holding that a service offering that is acquired by a PSS entity does not qualify as a PSS offering. --------------------------------------------------------------------------- B. Transmission Medium As noted above, the statute and legislative history focus extensively on whether a PSS offering is being provided through the same or a different ``transmission medium'' than the one identified by Congress in 1998, and the analysis above follows Congress's lead in that regard. At first blush, one might conclude that Congress intended to draw a distinction among the kinds of physical wires or radiofrequency channels used to deliver signals from a service to a listener--e.g., coaxial cable, optical fiber, radio spectrum. But this would not be a proper understanding of the statutory scheme. The legislative history makes repeated references to ``cable,'' ``satellite,'' and the ``internet'' as different ``transmission[] * * * media.'' \82\ Congress surely understood that the internet is a layer of services that can be reached through a variety of delivery mechanisms, for example, through phone lines, satellite signals, and optical fiber. Similarly, a ``cable'' service can be transmitted over different media, such as coaxial cable, optical fiber, or microwaves--a fact Congress explicitly understands.\83\ --------------------------------------------------------------------------- \82\ See H.R. Rep. No. 105-796, at 81, 89 (referring to ``transmissions via both cable and satellite media'' and explaining that under appropriate circumstances, a ``cable . . . service'' may be transmitted ``through the Internet''). \83\ Cf. 17 U.S.C. 111(f)(3) (defining a ``cable system'' as, among other things, making transmission by ``wires, cables, microwave, or other communications channels''). --------------------------------------------------------------------------- Thus, for section 114 purposes, the better understanding is that, in referring to the ``transmission medium'' in the context of a PSS offering, Congress was referring to the basic telecommunications service through which that offering is being delivered to the user. For example, an existing service offering that on July 31, 1998, was delivered to residential cable television subscribers through coaxial cable, may today be delivered to such cable television subscribers through optical fiber without constituting an expansion to a new ``transmission medium'' within the meaning of section 114. In other words, this service offering would still be an existing service offering, rather than an expanded service offering or different service offering, because it would still be part of what is traditionally considered to be a residential cable television service; this is true even though optical fiber may provide certain advantages over coaxial cable. By the same token, however, when an existing cable music service is made available to cable television subscribers over the internet, it is being transmitted through a different transmission medium regardless of how the internet is being reached; for section 114 purposes, internet service is a different telecommunications service from a residential cable service, even if delivered by the same operator through the same infrastructure.\84\ --------------------------------------------------------------------------- \84\ To be clear, this discussion relates to the meaning of section 114and should not be construed as having broader application to other areas of copyright law, such as the section 111 cable retransmission license. --------------------------------------------------------------------------- C. Application to the Referred Questions The CRJs' referral to the Register of Copyrights specifically asked how the legal analysis would apply specifically to ``transmissions of multiple, unique channels of music that are accessible through that entity's website and through a mobile application,'' and the degree to which differences between a PSS entity's internet service and its existing service in terms of the numbers or types of channels or subscribers would result in the exclusion of the internet service from a grandfathered rate.\85\ Although ultimately it is not for the Register to apply the above-described inquiry to Music Choice's current program offerings, the Register offers the following observations about transmissions made via the internet and made available on portable devices, and general guidance about application of the analysis to the scenarios identified in the referral order. --------------------------------------------------------------------------- \85\ Referral Order at 3-4. --------------------------------------------------------------------------- Under the standard articulated above, the mere fact that a service offering is transmitted to cable or satellite television subscribers over the internet does not automatically disqualify the service offering from being an expanded service offering subject to the grandfathered rate standard, so long as the service offering, as a factual matter, after considering the factors described above, is sufficiently similar to the PSS entity's existing cable or satellite service offering. In evaluating whether a service offering is ``sufficiently similar'' to the PSS entity's existing cable or satellite service offering so as to qualify as an [[Page 59660]] ``expanded service offering,'' the CRJs should consider the degree to which making the existing service offering accessible outside the home of the subscriber constitutes a fundamental change to the offering. One notable fact about PSS offerings in 1998 is that they were all limited to listening to music within the subscriber's home. Indeed, in the first ratesetting proceeding under the DPRSRA, portable listening does not appear to have been considered and the final rate was based on a percentage of gross revenues ``resulting from residential services in the United States'' \86\--which is how the rate is currently calculated.\87\ To be sure, technological developments since that time have made it easier to deliver digital audio transmissions outside the home (including over mobile networks). But, at least in the cable television market, there appears to be a distinction drawn between accessing content within the home and accessing that same content outside of it.\88\ To be clear, this distinction is one based on the location where the PSS offering is consumed, not the type of device on which the service is accessed. If the service offering is available through an internet-connected smartphone or tablet, but is designed so that the service offering will only work when accessed within the confines of the subscriber's residence, then it would be within the home and more similar to the PSS entity's existing cable or satellite service offering. --------------------------------------------------------------------------- \86\ See 63 FR at 25414 (to be codified at 37 CFR 260.2(a)) (emphasis added); see also CARP Report ] 109 (``The Panel finds that the Services are primarily responsible for creating a new media and market for digital music subscription services for residential consumers.'') (emphasis added). It also bears noting that in the last rate proceeding, the CRJs deleted the word ``Residential'' and its definition from the rate provision for preexisting satellite digital audio radio services because it was argued that ``the concept is a confusing artifact of a comparable term used in the PSS regulations'' because ``the SDARS service is not primarily residential in terms of being delivered to homes and the term residential subscriber simply means a subscriber,'' yet the term remained for purposes of the PSS rate. 78 FR at 23074-75, 23096, 23098 (internal quotation marks omitted). \87\ 37 CFR 382.3(a). \88\ See, e.g., Out of Home--XFINITY Stream App Error Message, XFINITY, https://www.xfinity.com/support/xfinity-apps/xfinity-tv-app-unable-to-connect/ (last visited Nov. 17, 2017) (``In order to watch live TV or XFINITY On Demand content using the XFINITY Stream app, you'll need to be connected to your in-home XFINITY WiFi network.''). --------------------------------------------------------------------------- As the second referred question specifically asks about differences in channel offerings and customers, the Register offers the following guidance. In comparing the number and type of channels offered by a service offering to an existing service offering, examples of factors to consider could include how many additional or fewer channels there are, how many channels offer different programming, and how different that programming is. One should also consider the reasons why any such differences exist. For example, if the service offering in question has more channels because of some benefit the internet affords, such as greater bandwidth or different contractual arrangements with cable operators, then it would be taking advantage of the capabilities of the internet as a transmission medium. Depending on the evaluation of the other factors discussed above and how much weight is ultimately given to the difference in channels in an overall comparison between the service offerings, it may or may not be enough to disqualify the offering from the grandfathered royalty calculation method. The number and type of customers should be similarly compared. At the same time, the Register agrees with Music Choice that differences in a service offering that directly and solely result from the imposition of the section 114(d)(2)(C) requirements that do not apply to the existing service offering (which is subject to section 114(d)(2)(B)), should not alone disqualify it from the grandfathered rate. Similarly, minor differences in the user interface necessitated by the change in medium also should not alone disqualify the service offering, even if they are perceived as an advantage offered by the medium. For example, a service offering should not be disqualified from being an expanded service offering merely because instead of needing to press a button on a remote control, the user can click a mouse or navigate using a touch screen. Additionally, minor differences in visual presentation, such as having a different aspect ratio or displaying less content due to differences in screen size, would not be so significant as to disqualify a service offering from being an expanded service offering. D. CRJs' Ability to Set Different Rates In closing, the Register briefly notes that, even if a service offering qualifies for the grandfathered method of setting rates, the CRJs still have the authority under section 114(f)(1)(A) to ``distinguish among the different types of digital audio transmission services . . . in operation.'' Thus, if there are material differences between an existing service offering and an expanded service offering, the CRJs can set separate rates and terms based on those differences, albeit using the section 801(b)(1) standard, and not under the willing buyer/willing seller standard under section 114(f)(2). November 20, 2017. Karyn Temple Claggett, Acting Register of Copyrights and Director of the U.S. Copyright Office. [FR Doc. 2017-27088 Filed 12-14-17; 8:45 am] BILLING CODE 1410-30-P
![59652 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices
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VerDate Sep<11>2014 23:42 Dec 14, 2017 Jkt 244001 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 E:\FR\FM\15DEN1.SGM 15DEN1](https://thefederalregister.org/doc/82_FR_59892/page/1.svg)
![Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices 59653
substantive law to the Register of ‘‘PREEXISTING’’ SUBSCRIPTION SERVICES works under the statutory license.5 In
Copyrights for resolution in connection (SDARS III) doing so, Congress drew a distinction
with the SDARS III proceeding. The Docket No. 16–CRB–0001 SR/PSSR (2018– between preexisting subscription
Register responded with a written 2022) services (‘‘PSSs’’) on the one hand and
opinion that is reproduced below. MEMORANDUM OPINION ON NOVEL nonsubscription services and new
DATES: Opinion dated November 20, MATERIAL QUESTIONS OF LAW subscription services on the other. A
2017. ‘‘preexisting subscription service’’ is
The Copyright Royalty Judges (‘‘CRJs’’
defined in 17 U.S.C. 114(j)(11) as:
FOR FURTHER INFORMATION CONTACT: or ‘‘Judges’’) concluded the hearing in
the above-captioned proceeding with [A] service that performs sound recordings
Sarang V. Damle, General Counsel and by means of noninteractive audio-only
Associate Register of Copyrights, by closing arguments of counsel on July 18,
subscription digital audio transmissions,
email at sdam@loc.gov, or Jason E. 2017. In the course of their
which was in existence and was making such
Sloan, Attorney-Advisor, by email at deliberations, the CRJs determined that transmissions to the public for a fee on or
jslo@loc.gov. Each can be contacted by novel material questions of substantive before July 31, 1998, and may include a
telephone by calling (202) 707–8350. law arose regarding the interpretation of limited number of sample channels
provisions of the Copyright Act and, as representative of the subscription service that
SUPPLEMENTARY INFORMATION: The
required under 17 U.S.C. 802(f)(1)(B), are made available on a nonsubscription
Copyright Royalty Judges (‘‘CRJs’’) are referred them to the Register of basis in order to promote the subscription
tasked with determining and adjusting Copyrights for resolution. The questions service.6
rates and terms of royalty payments for were referred to the Register by the CRJs
statutory licenses under the Copyright Section 114 contains two
on October 23, 2017. The Register’s grandfathering provisions that apply to
Act. See 17 U.S.C. 801. If, in the course determination follows.
of proceedings before the CRJs, novel PSSs and provide benefits to those
material questions of substantive law I. Background services not available to new
concerning the interpretation of subscription services or nonsubscription
A. Statutory Background
provisions of title 17 arise, the CRJs are services. The first, section 114(d)(2)(B),
required by statute to refer those In 1995, Congress enacted the Digital preserves the DPRSRA’s limited
questions to the Register of Copyrights Performance Right in Sound Recordings qualifications for entitlement to the
for resolution. 17 U.S.C. 802(f)(1)(B). Act of 1995 (‘‘DPRSRA’’),1 recognizing statutory license, but only for
On October 23, 2017, the CRJs, acting the exclusive right of copyright owners transmissions made in the same
pursuant to 17 U.S.C. 802(f)(1)(B), to perform sound recordings ‘‘publicly transmission medium used by the PSS
referred to the Register novel material by means of a digital audio on July 31, 1998. The second, to which
questions of substantive law in transmission.’’ 2 The DPRSRA also the referred questions most directly
connection with the SDARS III established a statutory license to allow pertain, is the grandfathered method of
proceeding, Docket No. 16–CRB–0001 certain noninteractive digital audio setting royalty rates under section
SR/PSSR (2018–2022). The referred services to make such performances of 114(f)(1), which applies to a PSS
questions asked whether a preexisting sound recordings, provided the services regardless of the transmission medium.
subscription service’s transmissions of pay a royalty fee and comply with the Under this scheme, PSS transmissions
multiple, unique channels of music that terms of the license. Under the in the same transmission medium used
are accessible through that entity’s DPRSRA, nonexempt subscription on July 31, 1998, are still subject to the
website and through a mobile transmissions were subject to statutory DPRSRA’s requirements under section
application are ‘‘subscription licensing if they satisfied certain 114(d)(2)(B) and are to still have royalty
transmissions by preexisting requirements, and the royalty rates and rates and terms set in accordance with
subscription services’’ for which the terms for the statutory license were to be the objectives of section 801(b)(1).7
CRJs are required to determine rates and set in accordance with the objectives set Nonsubscription services and new
terms of royalty payments under 17 forth in 17 U.S.C. 801(b)(1).3 subscription services, however, are
U.S.C. 114(f)(1)(A), and, if so, whether In 1998, the statutory license was
subject to a more expansive set of
there are any conditions a service must amended by the Digital Millennium
qualifications under section
satisfy to qualify for a license under Copyright Act (‘‘DMCA’’),4 a major goal
114(d)(2)(C), and are to have their
section 114(f)(1)(A). On November 20, of which was to establish a market-
royalty rates and terms set to reflect
2017, the Register resolved these based standard for setting royalty rates
those that ‘‘would have been negotiated
questions in a Memorandum Opinion paid to copyright owners for use of their
in the marketplace between a willing
that she transmitted to the CRJs. To 1 Public
buyer and a willing seller.’’ 8 PSS
Law 104–39, 109 Stat. 336 (1995).
provide the public with notice of the 2 17 U.S.C. 106(6).
transmissions made in a new
decision rendered by the Register, the 3 Section 801(b)(1) provides that the rates ‘‘shall transmission medium are subject to the
Memorandum Opinion is reproduced in be calculated to achieve the following objectives: more expansive set of qualifications
its entirety below. (A) To maximize the availability of creative works under section 114(d)(2)(C) imposed on
to the public. (B) To afford the copyright owner a nonsubscription and new subscription
Dated: December 6, 2017. fair return for his or her creative work and the
Karyn Temple Claggett, copyright user a fair income under existing services.9
economic conditions. (C) To reflect the relative The Register has explained that ‘‘the
Acting Register of Copyrights and Director roles of the copyright owner and the copyright user
of the U.S. Copyright Office. in the product made available to the public with
rationale for [section 114’s]
sradovich on DSK3GMQ082PROD with NOTICES
respect to relative creative contribution, grandfathering provisions is to ‘prevent
Before the U.S. Copyright Office, technological contribution, capital investment, cost, disruption of the existing operations by
Library of Congress, Washington, DC risk, and contribution to the opening of new
20559 markets for creative expression and media for their 5 71
communication. (D) To minimize any disruptive FR 64639, 64641 (Nov. 3, 2006).
In the Matter of: DETERMINATION OF impact on the structure of the industries involved
6 17 U.S.C. 114(j)(11).
ROYALTY RATES AND TERMS FOR and on generally prevailing industry practices.’’ 17 7 See id. at 114(d)(2)(B), (f)(1).
TRANSMISSION OF SOUND RECORDINGS U.S.C. 801(b)(1). 8 See id. at 114(d)(2)(C), (f)(2).
BY SATELLITE RADIO AND 4 Public Law 105–304, 112 Stat. 2860 (1998). 9 Id. at 114(d)(2)(C).
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[preexisting subscription] services.’ ’’ 10 required to pay under 37 CFR 380.10 establishes that Music Choice has been
In discussing the legislative history (or, in the alternative, a royalty based on providing its subscribers with internet-
explaining the objectives of the aggregate tuning hours for a PSS that based access to its audio channels since
grandfathering provisions, the Register does not have the technological 1996, long before the PSS license was
elaborated: capability to track individual created in the DMCA, and has always
While it would appear . . . that Congress’s performances).13 The parties dispute included these internet transmissions as
purpose in grandfathering these services was whether it is necessary for the CRJs to a part of its PSS since that time.’’ 16
to preserve a particular program offering, it decide whether Music Choice’s internet Music Choice also disputes
was not its only purpose or even necessarily and mobile transmissions qualify as part SoundExchange’s claim that webcasting
its major goal. The Conference Report also of its PSS.14 was becoming an ‘‘increasingly
makes clear that Congress distinguished In response to this dispute, the CRJs important part’’ of its business, claiming
between preexisting subscription services found that ‘‘consideration of the
and new subscription services as a way to
that record evidence shows that ‘‘usage
appropriate royalty rates and terms for of Music Choice’s internet transmissions
prevent disruption of the existing operations
of the services that were in existence and a PSS’s digital audio transmissions has consistently remained at de minimis
operating before July 31, 1998. It understood through a website or mobile application levels, and today comprises less than
that the entities so designated as preexisting in which the PSS streams a variable one hundredth of one percent of Music
had invested a great deal of resources into number of unique channels of music Choice’s overall audio channel
developing their services under the terms presents a novel material question of usage.’’ 17 Music Choice contends that,
established in 1995 as part of the Digital substantive law,’’ and referred the
Performance Right in Sound Recording Act of
in any event, because it was making
following questions to the Register internet transmissions prior to the
1995, and that those services deserved to
pursuant to 17 U.S.C. 802(f)(1)(B): codification of the PSS definition in
develop their businesses accordingly.11
1. Are a preexisting subscription service’s section 114(j)(11), ‘‘[u]nder any
B. Procedural History transmissions of multiple, unique channels reasonable interpretation of [the]
of music that are accessible through that statutory language, Music Choice’s
The instant proceeding will establish entity’s website and through a mobile
royalty rates and terms for PSSs’ (as internet transmissions fall squarely
application ‘‘subscription transmissions by
well as preexisting satellite digital audio preexisting subscription services’’ for which
within the definition of a PSS.’’ 18
the Judges are required to determine rates Music Choice also argues that even if
radio services’) digital performance of
sound recordings and the making of and terms of royalty payments under Section its internet transmissions did constitute
ephemeral recordings under the 114(f)(1)(A) of the Copyright Act? an expansion of its services to a new
statutory licenses set forth in sections 2. If yes, what conditions, if any, must the medium, such expansion is permitted
PSS meet with regard to streaming channels and ‘‘would not require any new,
112(e) and 114(f)(1) of the Copyright to qualify for a license under Section
Act. Music Choice is the only PSS that additional license fee or rate.’’ 19 Music
114(f)(1)(A)? For example, must the streamed Choice contends that in grandfathering
participated in the current rate-setting stations be identical to counterpart stations
proceedings. The CRJs explain that the made available through cable television? Is
the existing three PSSs, Congress sought
referred questions arose in this there a limitation on the number of channels to protect their ‘‘need for access to the
proceeding because SoundExchange, that the PSS may stream? Is there a limitation works at a price that would not hamper
Inc.,12 for the first time, is seeking two on the number or type of customers that may their growth’’ and did not ‘‘intend[] to
separate royalty payments from PSSs: access the website or the mobile limit PSS status to the PSS offerings as
application? 15 they existed in 1998 or otherwise freeze
(1) For all licensed transmissions and
related ephemeral recordings through a II. Summary of the Parties’ Arguments the PSS in time.’’ 20 Music Choice
television-based service qualifying as a claims that ‘‘Congress’s intent to
A. Music Choice’s Position provide the PSS with long-term
PSS, SoundExchange requests a per-
subscriber, per-month royalty; and (2) Music Choice argues that the statutory protection is further evinced by the
for all licensed transmissions and language, legislative history, and factual absence of any sunset provision
related ephemeral recordings through an record all support its position that its anywhere in the statutory language or
internet streaming service qualifying as internet transmissions are part of its PSS discussion of such a provision in the
a PSS (or any similar service capable of and subject to section 114(f)(1). Music legislative history’’ 21 and argues that in
tracking the individual sound Choice begins by disputing, as a factual enacting the DMCA, ‘‘the overarching
recordings received by any particular matter, the claim that its internet intent of Congress was decidedly not to
consumer and qualifying as a PSS), transmissions are an ‘‘expansion’’ of its move the entire market to marketplace
SoundExchange seeks a per- service into a new medium—which it rates,’’ but rather ‘‘to protect the PSS’
performance royalty fee that is the same perceives as the premise for the CRJs’ unique business expectancies.’’ 22
as commercial webcasters are currently referred questions—on the grounds that Citing to Congress’s discussion in the
its ‘‘internet transmissions are merely an DMCA Conference Report, Music
10 71 FR at 64641 (quoting H.R. Rep. No. 105–796, ancillary part of its residential audio Choice asserts that Congress created a
at 81 (1998) (Conf. Rep.)); accord SoundExchange, service,’’ the value of its internet ‘‘unique feature of the PSS license that
Inc. v. Muzak LLC, 854 F.3d 713, 719 (D.C. Cir. transmissions ‘‘has always been allows a PSS to expand into new
2017) (‘‘The grandfather provisions were intended included in the bundled per-subscriber services in new transmission media
to protect prior investments the three [PSS]
business entities had made during a more favorable fee,’’ and ‘‘the undisputed evidence while retaining PSS status for those new
pre-1998 rate-setting regulatory climate.’’). services, so long as the new service is
11 71 FR at 64645 (internal citation omitted). 13 Id. at 2–3. similar in character to the original PSS
sradovich on DSK3GMQ082PROD with NOTICES
12 SoundExchange appears in this proceeding on 14 Id. at 3.
behalf of the American Association of Independent 15 Id. at 3–4. Section 802(f)(1)(B) provides that 16 Music Choice Brief at 1–2, 4–5.
Music; the American Federation of Musicians of the ‘‘[i]n any case in which a novel material question 17 Id. at 6.
United States and Canada; the Recording Industry of substantive law concerning an interpretation of 18 Id. at 18–19, 30.
Association of America; the Screen Actors Guild those provisions of [title 17] that are the subject of 19 Id. at 2, 30.
and American Federation of Television and Radio the proceeding is presented, the Copyright Royalty
20 Id. at 14, 19–23.
Artists; Sony Music Entertainment; Universal Music Judges shall request a decision of the Register of
21 Id. at 15.
Group; and Warner Music Group. Referral Order at Copyrights, in writing, to resolve such novel
2 n.4. question.’’ 17 U.S.C. 802(f)(1)(B). 22 Id. at 16–17.
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offering, i.e., does not take advantage of transmitted in 1998 (or the customers intensive inquiry that requires
unique features of the new medium to who received them at that time)’’ and comparison of a PSS provider’s new
provide a different listening experience that ‘‘any rule limiting PSS status to offering with the provider’s 1998
or interactivity while listening to the internet-based channels that are exactly offerings,’’ and that ‘‘[i]t is not enough
audio channel.’’ 23 Music Choice further the same as those transmitted through to consider only whether a qualifying
explains that ‘‘[a]lthough Congress did cable or satellite, or limiting the number entity’s new offerings makes
not intend to allow the PSS to create of channels that may be provided by a noninteractive audio-only subscription
fundamentally different types of PSS, would be inconsistent with [the digital audio transmissions,’’ but rather,
services, with fundamentally different court’s] interpretation of the PSS ‘‘it is necessary to consider the medium
types of content or interactive audio definition.’’ 30 Music Choice concludes used, and the functionality and content
functionality . . . , it did intend to that it would be contrary to the court’s provided, in the new offerings.’’ 35
allow the PSS to continue their interpretation of the PSS definition to SoundExchange claims that ‘‘Congress
development, evolution, and growth of limit ‘‘the expansion of a PSS’s service gave no indication that . . . a PSS
their non-interactive, subscription audio under the same brand’’ beyond the provider should enjoy PSS rates if it
services.’’ 24 Thus, Music Choice argues limitation ‘‘that the service must remain provided an offering different from its
that ‘‘there is no statutory requirement within the general category of 1998 offering in a new medium.’’ 36
that a PSS offer the exact same channels transmissions identified in the . . . SoundExchange interprets the
to all of its subscribers or through each definition: noninteractive audio-only legislative history to suggest that
of its different transmission media,’’ 25 subscription digital audio transmissions Congress ‘‘grandfathered the PSS to
and ‘‘there is no hint in the statute or made by an entity that was in existence protect investments that qualifying
the legislative history of any intent to and making that category of entities had already made at the time
impose restrictions on the number of transmissions on or before July 31, the DMCA was under consideration in
channels that may be provided . . . or 1998.’’ 31 1998.’’ 37 SoundExchange understands
the number or type of subscribers that the D.C. Circuit’s decision in
Music Choice may serve.’’ 26 Music B. SoundExchange’s Position
SoundExchange to be consistent with its
Choice specifically argues that section SoundExchange argues that the CRJs interpretation of the legislative
114 cannot be read to require the same should set ‘‘distinct statutory royalty history.38
exact channels in a new transmission rates for delivery of a PSS to television SoundExchange argues that the PSS
medium as it offers in its original sets and for any webcasting that is definition must be construed narrowly,
medium because the statute ‘‘expressly provided as part of a PSS,’’ with the rate particularly in the case of webcasting
acknowledges that the programming of for webcasting that is part of a PSS set given that ‘‘[i]nternet-based streaming
a PSS’s transmissions in a new medium ‘‘at the same level as the statutory rate services are a rapidly-growing means of
may be different than those in the for other subscription webcasters, music consumption,’’ and ‘‘webcasting
original medium, and in some instances because Music Choice’s webcasting is by a PSS provider competes with
requires that they be programmed equivalent to that provided by other webcasting by services that are currently
differently.’’ 27 More generally, Music webcasting services, and competes with paying for their use of sound recordings
Choice asserts that its internet other webcasting services.’’ 32 at much higher royalty rates.’’ 39 Such
transmissions are permissible because SoundExchange argues that this an interpretation, SoundExchange
they ‘‘do not take advantage of the position responds to the ‘‘rapid growth claims, would ‘‘ensure that webcasters
internet’s technological capabilities,’’ in Music Choice’s webcasting,’’ which it compete on level terms, eliminating
providing several fact-based arguments asserts is demonstrated by record distortions in the market and
for why its internet service is evidence it describes regarding Music effectuating the Congressional intent to
comparable to its television service.28 Choice’s mobile application and website shift rates towards those that reflect
Music Choice rests its argument in and how Music Choice’s internet arms-length market transactions.’’ 40
part on the U.S. Court of Appeals for the transmissions differ from its television- SoundExchange further argues that,
District of Columbia Circuit’s recent based service.33 ‘‘[a]s a matter of law,’’ ‘‘webcast
opinion in SoundExchange, Inc. v. Pointing to the same discussion in the transmissions made through a mobile
Muzak LLC, which held that a music DMCA Conference Report referenced by app, or through a version of a provider’s
service acquired by Muzak was not Music Choice, SoundExchange argues website that has been optimized for
entitled to the grandfathered rate that that ‘‘Congressional intent was to limit display using the browser on a mobile
applied to its preexisting subscription the grandfathering of the PSS to device, are not transmissions by a PSS
service.29 Music Choice claims that this transmissions similar to the cable or for which the Judges are to set rates and
decision ‘‘demonstrate[s] that the PSS satellite service offerings their providers terms under Section 114(f)(1).’’ 41
definition was not intended to freeze the offered on July 31, 1998,’’ meaning that SoundExchange contends that the PSSs’
PSS in time, nor limit PSS status to PSS status ‘‘extends to a qualifying ‘‘1998 offerings were residential
channels (or customers) that are exactly entity’s cable and satellite offerings as offerings delivered by means of cable or
the same as the channels that were they existed at July 31, 1998 . . . and satellite to fixed points in subscribers’
23 Id.
also may extend to a qualifying entity’s homes,’’ while ‘‘[t]he Internet and the
at 15, 17, 23–25.
24 Id.
transmissions in a new medium such as wireless networks that are used to
at 24–25, 30.
25 Id. at 19, 27. Music Choice specifically notes the internet, if the transmissions are deliver service to mobile devices are a
that, ‘‘of the 75 channels available through the sufficiently similar to the 1998 different medium than the PSS used in
sradovich on DSK3GMQ082PROD with NOTICES
internet, 50 of those are identical to the channels offerings.’’ 34 SoundExchange contends
broadcast over the television’’ and the ‘‘additional that assessing similarity ‘‘is a fact- 35 Id.
25 are identical to the television channels in every at 10.
36 Id. at 11.
way except the genre or sub-genre in which they
30 Music Choice Brief at 21. 37 Id.
are programmed.’’ Id. at 19.
26 Id. at 2. 31 Id. 29–30 (internal quotation marks omitted). 38 Id. 11–12.
27 Id. at 27. 32 SoundExchange Brief at 5. 39 Id. at 12.
28 Id. at 25–26. 33 Id. at 2–5. 40 Id. at 12–13.
29 854 F.3d at 719. 34 Id. at 9–10. 41 Id. at 13.
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1998.’’ 42 Furthermore, SoundExchange accessible to a cable or satellite used in section 114(f)(1)(A),
contends that mobile services ‘‘take[ ] television subscriber through that ‘‘subscription transmissions by
advantage of the capability of wireless entity’s website and through a mobile preexisting subscription services’’ must
networks to provide portability, application can be ‘‘subscription refer only to the PSS offerings made by
allowing listeners to access music transmissions by preexisting a PSS entity, rather than referring to all
anytime and virtually anywhere’’ as subscription services’’ for which the subscription transmissions made by a
well as offering ‘‘different opportunities CRJs must determine rates and terms of PSS entity.
for user interaction and navigation’’ that royalty payments under section Fourth, the Register has previously
‘‘provide a very different user 114(f)(1)(A), but only if such determined ‘‘that the preexisting
experience than the stereo receivers and transmissions are sufficiently similar to services must be limited to the three
television sets that could receive the the transmissions made to those named entities in the [DMCA]
PSS’ 1998 offerings.’’ 43 subscribers via the entity’s preexisting Conference Report, i.e., DMX (operated
While SoundExchange claims that residential cable or satellite music by TCI Music), Music Choice (operated
internet streaming channels could service. by Digital Cable Radio Associates), and
qualify as part of a PSS, so long as it is [DiSHCD] 53 (operated by Muzak).’’ 54
A. Legal Standard Thus, it is long-settled that these three
‘‘sufficiently similar to the provider’s
1998 offerings,’’ SoundExchange asserts Before addressing the appropriate entities are the only PSS entities. What
that this standard requires that the ‘‘PSS legal standard for determining whether offerings by these entities may
provider’s webcast channels [to] be a particular subscription transmission constitute PSS offerings, however, has
identical to counterpart stations made by a preexisting subscription service is continued to be unsettled, but is now
available through cable television’’ in subject to the grandfathered method of resolved by this memorandum
order to qualify for a rate set under setting royalty rates for such service opinion.55
section 114(f)(1), as a service offering offerings under section 114(f)(1), the Fifth, the Register observes that PSS
internet-only channels would lack Register makes a few threshold points offerings are not limited solely to the
sufficient similarity to the PSS’ 1998 about the statute. offerings made by PSS entities prior to
offerings which did not include any First, in analyzing the grandfathering July 31, 1998. Rather, the statute and
internet-only offerings.44 provisions, the Register interprets them legislative history both confirm that
SoundExchange argues that a PSS’s narrowly.48 Congress intended for PSS entities to be
Second, as the Register has previously able to expand their service offerings to
internet transmissions are similarly
held, the definition of ‘‘preexisting some limited extent and still have those
disqualified if the ‘‘number of
subscription service’’ in section service offerings be considered PSS
webcasting channels is [not] sufficiently
114(j)(11) can pertain to both the offerings. Two provisions of the statute
similar to the provider’s pre-1998
business entity operating a service
offerings.’’ 45 SoundExchange further
offering and the service offering itself.49 ‘‘subscription transmissions made by a preexisting
contends that the number and type of
The D.C. Circuit recently agreed with subscription service other than those that qualify
subscribers to the transmission must under subsection (f)(1)’’ in addition to new
the Register that ‘‘the word ‘service,’ as
also be substantially similar, and that a subscription services and eligible nonsubscription
used both in the statute as well as the transmissions). Similarly, previous statements made
PSS cannot include video programming
legislative history, sometimes referred to by the Register that preexisting subscription
‘‘other than video related to the service
the business entity and sometimes the ‘‘services deserved to develop their businesses
or recording being performed’’ in order accordingly’’ pertained to the businesses of the pre-
program offerings.’’ 50 For clarity’s sake,
for its webcasting service to qualify as July 31, 1998 PSS offerings—not all businesses
the Register generally refers below to a engaged in by the PSS entities. See 71 FR at 64645.
a PSS.46 SoundExchange also asserts
‘‘PSS entity’’ or a ‘‘PSS offering’’ to For example, later in the same opinion, the Register
that ‘‘[a] trier of fact may also consider
distinguish between a preexisting elaborated that while ‘‘Muzak was the pioneer
other factors that bear on similarity of music service that incurred both the benefits and
business itself and a specific preexisting
the service offerings, including any risks that came with its investment, and one such
program offering by such business. benefit was its status as a preexisting subscription
differences between Internet-based Third, as a corollary to the second service,’’ that benefit only exists ‘‘so long as
platforms and cable- and satellite-based point, the Register concurs with the D.C. [Muzak] provided its music offerings over
platforms.’’ 47 Circuit’s holding that, under the [DiSHCD],’’ as it did as of July 31, 1998. Id. at
64646.
III. Register’s Determination grandfathering provisions, ‘‘the term 53 The Register believes that the DMCA
‘service’ contemplates a double Conference Report’s reference to ‘‘DiSH Network’’
Although the parties’ briefs discuss at
limitation; both the business and the was a typo, and that Congress intended to refer to
length the factual nature of Music
program offering must qualify before the Muzak’s ‘‘DiSHCD’’ service, which was transmitted
Choice’s particular internet over Echostar’s DiSH Network. See Report of the
transmissions are eligible for the
transmissions, questions of fact are Copyright Arbitration Royalty Panel, In re:
favorable rate.’’ 51 Indeed, Congress was Determination of Statutory License Terms and Rates
beyond the scope of the Register’s
clear that not every subscription for Certain Digital Subscription Transmissions of
inquiry under section 802(f)(1)(B). Thus,
transmission made by a PSS entity is Sound Recordings, No. 96–5 CARP DSTRA ¶ 27
without judging the facts as they may (Nov. 28, 1997) (‘‘CARP Report’’) (‘‘Muzak . . .
subject to section 114(f)(1).52 Thus, as
pertain to Music Choice (or any other began providing . . . digital music under the name
PSS), and having considered the DiSH CD, as part of Echostar’s satellite-based DiSH
48 See 71 FR at 64646; accord SoundExchange,
Network.’’); 63 FR 25394, 25395 (May 8, 1998)
relevant statutory language, legislative 854 F.3d at 719. (same); see also Muzak Limited Partnership, Initial
history, and the input from the parties, 49 71 FR at 64646, 64647 (‘‘In construing the
Notice of Digital Transmission of Sound Recordings
the Register determines that statutory language together with the legislative under Statutory License (July 2, 1998) (listing the
sradovich on DSK3GMQ082PROD with NOTICES
transmissions by a PSS entity that are history, the logical conclusion is that Congress did service name as ‘‘dishCD’’).
use the term ‘service’ to mean both the program 54 71 FR at 64646; see H.R. Rep. No. 105–796, at
offerings made on a subscription basis to the public 81, 85, 89.
42 Id.
and the business entity that secures the license to 55 The D.C. Circuit correctly recognized that the
43 Id. at 13–14. make the subscription transmissions.’’). Register’s previous ‘‘opinion did not address
44 Id. at 15–16. 50 SoundExchange, 854 F.3d at 718.
whether those three business entities’ grandfather
45 Id. 16–17. 51 See id. at 719.
status was further limited to the programs they were
46 Id. 17–18. 52 See H.R. Rep. No. 105–796, at 84–85 offering at the time the statute was passed.’’ See
47 Id. at 17. (explaining that section 114(f)(2) applies to SoundExchange, 854 F.3d at 718.
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in particular reflect this congressional would be entitled to both a rate determined pursuant to section 114(f)(1)
intent. Section 114(d)(2)(C) sets out established under the grandfathered rate or section 114(f)(2). Thus, if a PSS entity
more expansive qualifications for the standard under section 114(f)(1) and the began offering, for example, an
statutory license for transmissions made grandfathered license requirements in interactive service, it would not fall into
by a PSS ‘‘other than in the same section 114(d)(2)(B). one of these categories, as it is ineligible
transmission medium used by such 2. A service offering identified by for the statutory license. The following
service on July 31, 1998.’’ In other Congress as being a PSS offering as of sections describe the types of service
words, Congress suggested that a PSS July 31, 1998, that is still offered today, offerings that fall within these three
could deliver its offering in a new but in a different transmission medium categories.
transmission medium without affecting than the one identified by Congress in
1. Existing Service Offerings
its status as a PSS offering. Section 1998, where only transmissions similar
114(f)(1)(C), in turn, provides for an out- to the existing service offering are Implicit in the Register’s previous
of-cycle rate proceeding to be held provided (referred to here as an determination that the only PSS entities
where ‘‘a new type of subscription ‘‘expanded service offering’’).58 Such a are the three entities Congress named in
digital audio transmission service on service offering would be entitled to a the DMCA Conference Report,60 is that,
which sound recordings are performed rate established under the grandfathered as a matter of law, the service offerings
is or is about to become operational.’’ rate standard under section 114(f)(1), that Congress sought to identify as PSS
The statute further makes clear that this but would not be able to take advantage offerings as of July 31, 1998, were the
rate proceeding is to be conducted with of the grandfathered license ones offered by those entities prior to
reference to the grandfathered rate requirements in section 114(d)(2)(B). that date. The legislative history makes
standard. Such a provision would be Instead, it would be required to comply clear that Congress further intended to
unnecessary if PSS offerings were with more detailed license requirements limit what it identified as a PSS offering
limited to the exact offerings made in in section 114(d)(2)(C). at that time to the PSS entities’ offerings
1998; there would never be a ‘‘new type 3. A service offering that is not an in the specific transmission media
of . . . service.’’ existing service offering or an expanded affirmatively identified in the DMCA
Thus, the ultimate question is service offering (referred to here as a Conference Report: ‘‘cable’’ or
whether a particular program offering by ‘‘different service offering’’).59 This ‘‘satellite’’ for DMX and Music Choice,
a PSS entity qualifies as a PSS offering would include any offering that is and ‘‘satellite’’ for DiSHCD.61 Thus, to
within the meaning of section 114(j)(11), insufficiently similar to an existing qualify as an ‘‘existing service offering,’’
and is therefore subject to the service offering to be considered an the service must not only have existed
grandfathered rate standard under expanded service offering. A different as of July 31, 1998, but it must have also
section 114(f)(1). The DMCA Conference service offering would not be entitled to been providing its offering in the
Report provides particularly helpful either a rate established under the specific transmission media identified
guidance in answering this question grandfathered rate standard under by Congress.
concerning section 114(f)(1): section 114(f)(1) or the grandfathered Music Choice urges that it was
license requirements in section already making internet transmissions
In grandfathering these services, the
conferee’s objective was to limit the 114(d)(2)(B). Instead, the rate would be of its subscription music service as of
grandfather to their existing services in the set under the willing buyer/willing July 31, 1998.62 In so doing, it is
same transmission medium and to any new seller standard in section 114(f)(2), and effectively asking for its current internet
services in a new transmission medium would be required to comply with the transmissions to be treated as an
where only transmissions similar to their license requirements in section ‘‘existing service offering’’ under the
existing service are provided. Thus, if a cable rubric set forth above. But even
subscription music service making
114(d)(2)(C).
These categorizations presume that a assuming Music Choice, or another
transmissions on July 31, 1998, were to offer
service is eligible for the section 114 service, were making such pre-1998
the same music service through the Internet,
then such Internet service would be license. The purpose of separating them internet transmissions,63 it was clearly
considered part of a preexisting subscription into these groups is to determine to an inconsequential degree: Any such
service. If, however, a subscription service whether the rate for a service is transmissions were entirely
making transmissions on July 31, 1998, were unacknowledged by the Copyright
to offer a new service either in the same or 58 See id. (grandfathered services can be ‘‘new Arbitration Royalty Panel (‘‘CARP’’), in
new transmission medium by taking services in a new transmission medium where only setting royalty rates for the statutory
advantages of the capabilities of that transmissions similar to their existing service are license under the DPRSRA; the
medium, such new service would not qualify provided’’). While the Conference Report refers to
‘‘new services,’’ in the next sentence, it provides an Librarian of Congress and the Register of
as a preexisting subscription service.56
example of a ‘‘cable . . . service’’ expanding into Copyrights, in reviewing that CARP
This passage, consistent with the an ‘‘Internet service’’ by ‘‘offer[ing] the same music decision; and Congress, in enacting the
statutory language in sections 114(d)(2) service through the Internet.’’ See id. Thus, in DMCA in 1998. The CARP report
and 114(f), demonstrates Congress’s context, such services are what the Register has
here called ‘‘expanded services,’’ and are not meant describes the three PSSs at length and,
intent to distinguish among three to encompass wholly new services that are notably, makes an explicit finding of
different possibilities: unrelated to an existing service offering. By the fact that the services are the ‘‘only three
1. A service offering identified by same logic, other references in the statute and digital audio music subscription
Congress as being a PSS offering as of legislative history to ‘‘new’’ service offerings should
be similarly interpreted as being what is referred to
July 31, 1998, that is still offered today here as expanded service offerings. See, e.g., 17
60 See 71 FR at 64646.
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in the same transmission medium U.S.C. 114(f)(1)(C) (permitting out-of-cycle rate- 61 See H.R. Rep. No. 105–796, at 89 (‘‘As of July
identified by Congress in 1998 (referred setting proceedings for a ‘‘new type of . . . 31, 1998, DMX and Music Choice made
service’’). transmissions via both cable and satellite media; the
to here as an ‘‘existing service [DiSHCD service] was available only via satellite.’’).
59 See H.R. Rep. No. 105–796, at 89
offering’’).57 Such a service offering (grandfathering ‘‘limit[ed]’’ to ‘‘existing services in 62 Music Choice Brief at 1–2, 4–6, 18–19, 30.
the same transmission medium and to any new 63 The Register notes that the only apparent
56 H.R. Rep. No. 105–796, at 89. services in a new transmission medium where only evidence offered by Music Choice of such pre-1998
57 See id. (grandfathered services can be ‘‘existing transmissions similar to their existing service are internet transmissions is the testimony of Music
services in the same transmission medium’’). provided’’) (emphasis added). Choice CEO David Del Beccaro. See id. at 5.
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services available to residential Thus, in accordance with the expanded service offering, the PSS
subscribers in the United States’’ and principles of narrow construction entity must continue to operate its
that they ‘‘offer their digital music via afforded to grandfathering provisions, existing service offering. The basis for
satellite, or cable, or both,’’ making no the Register finds that, as a matter of the grandfathering provisions is to
mention of any internet law, it is irrelevant whether or not protect existing service offerings and
retransmissions.64 In comprehensively Music Choice or another PSS entity, to limited direct outgrowths of them. If
reviewing the CARP report and adopting some limited degree, was making such a limited outgrowth—i.e., an
rates and terms for PSSs, the Register of transmissions via a different medium expanded service offering—were to exist
Copyrights and the Librarian of than those specified in the legislative alone, divorced from the existing service
Congress made no mention of any history on July 31, 1998, such as the offering, the rationale for including
internet transmissions by those PSS internet. If such a service was in fact them within the existing service
entities.65 To the contrary, that decision doing so, it would not be as part of an offering’s grandfather protection
concluded that the PSSs ‘‘face new existing service offering—any such becomes less tenable. Furthermore, the
competition from the internet.’’ 66 These transmissions today would be legislative history is explicit that a
factual findings are further reflected in considered either an expanded service service offering that is not an existing
the DMCA Conference Report, where offering or a different service offering, service offering can only be subject to
Congress clearly identified the three depending on the analysis described the grandfathering provision if it
qualifying services and only described below. provides ‘‘transmissions similar to their
them as making transmissions via cable At the same time, the Register existing service.’’ 73 Ascertaining
and/or satellite media.67 Given this emphasizes that an existing service similarity requires comparison, and if a
background, it is highly improbable that offering can grow and expand PSS entity discontinues its existing
Congress would have intended, sub significantly within the same service offering, there would be nothing
silentio, to treat internet transmissions transmission medium while remaining a to compare against.74
as subject to the grandfathering PSS offering. The Register has found no
As Music Choice and SoundExchange
provision under section 114(d)(2)(B). indication that Congress meant to freeze
This understanding is strongly agree, in assessing whether a service
existing service offerings exactly as they
reinforced by the new requirements offering is an expanded service offering,
were on July 31, 1998, in order for them
Congress added in section 114(d)(2)(C) and thus qualifies as a PSS offering, a
to continue to qualify for the
that webcasting services and new comparison must be made between the
grandfathering provisions. The user
subscription services, as well as service offering in question and the
interface can be updated, certain
preexisting subscription services other existing service offering to see if it is
functionality can be changed, the
than in the same transmission medium sufficiently similar. Because, as
number of subscribers can grow, and
used by such service on July 31, 1998, discussed above, an existing service
channels can be added, subtracted, or
had to comply with to qualify for the offering can expand over time while
otherwise changed.70 The only
statutory license. The rationale behind remaining a PSS offering, the
restriction is that the existing service
the DMCA’s amendments to the comparison should be made to the
offering as it is today must be
DPRSRA, including the new existing service offering as it exists at
fundamentally the same type of offering
requirements in section 114(d)(2)(C), the time of the comparison, not, as
that it was on July 31, 1998—i.e., it must
was to ‘‘address[] unique programming SoundExchange argues, as it existed on
be a noninteractive, residential, cable or
and other issues raised by Internet July 31, 1998.
satellite digital audio transmission
transmissions.’’ 68 If a PSS were subscription service.71 To determine whether or not such a
permitted to make internet service offering is sufficiently similar to
transmissions under the less stringent 2. Expanded Service Offerings the existing service offering, the fact-
requirements of section 114(d)(2)(B), it In addition to expanding within its finder should compare the offerings by
would undermine the design of this congressionally-recognized transmission analyzing certain factors, including but
statutory scheme and blur the medium, an existing service offering can not limited to:
distinction that Congress intended to also expand to a different transmission (1) Whether the service offering has a
draw when dividing PSS transmissions medium, provided that the subscription similar effect on displacing or
between paragraphs (B) and (C) based transmissions are similar.72 promoting sales of phonorecords.75
on the transmission medium used on This expansion, however, is subject to
July 31, 1998.69 an important threshold limitation. For a (2) Whether the quantity and nature of
service offering to qualify as an the use of sound recordings by the
64 CARP Report ¶ 43. service offering is similar.76
65 See 63 FR 25394. music service through the Internet’’ is engaged in
66 Id. at 25407 (emphasis added). the delivery of its service ‘‘in a new transmission 73 See H.R. Rep. No. 105–796, at 89.
67 See H.R. Rep. No. 105–796, at 81, 89. medium’’). 74 In the event that technology evolves such that
68 See Staff of H. Comm. on the Judiciary, 105th 70 See, e.g., 78 FR 23054, 23085 (Apr. 17, 2013) a PSS decides to completely discontinue its cable
Cong., Section-By-Section Analysis of H.R. 2281 as (increasing the royalty rate due to Music Choice’s or satellite service and limit its offerings solely to
Passed by the United States House of announced intention to increase its number of another transmission medium, such as the internet,
Representatives on August 4th, 1998, at 50 (Comm. channels from 46 to 300). this limitation would act as a type of ‘‘sunset
Print 1998) (emphasis added); id. at 51 (‘‘At the 71 See 17 U.S.C. 114(j)(11); H.R. Rep. No. 105– provision,’’ which, contrary to Music Choice’s
time the DPRSRA was crafted, Internet 796, at 81, 89; 63 FR at 25414; CARP Report ¶¶ 43– argument with respect to such provisions,
transmissions were not the focus of Congress’ 44, 51–78, 109. demonstrates that Congress did not in fact intend
sradovich on DSK3GMQ082PROD with NOTICES
efforts.’’); see also H.R. Rep. No. 105–796, at 83 72 See H.R. Rep. No. 105–796, at 89 (the for the grandfather status to apply to a service
(explaining explicitly that the reason for one of the grandfathering covers ‘‘a new transmission medium indefinitely regardless of the offerings it provides
new requirements was because of ‘‘a disturbing [but] where only transmissions similar to their and the way it is transmitted.
trend on the Internet’’ pertaining to the existing service are provided’’); 71 FR at 64641 75 See 17 U.S.C. 114(f)(2)(B) (providing this as one
‘‘unauthorized performance of sound recordings not (‘‘[A] preexisting service does not lose its of the examples of criteria to be used in
yet released for broadcast or sale to the public’’). designation as such in the event the service decides distinguishing among different types of non-PSSs).
69 See 17 U.S.C. 114(d)(2)(B)–(C); see also H.R. to utilize a new transmission medium, provided 76 See id. (providing this as one of the examples
Rep. No. 105–796, at 89 (indicating that a ‘‘cable that the subscription transmissions are similar.’’) of criteria to be used in distinguishing among
subscription music service’’ that offers ‘‘the same (emphasis added). different types of non-PSSs).
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![Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices 59659
(3) Whether the service offering [such PSS entity’s] acquisitions would still be an existing service
provides similar content to similar strategy.’’ 80 The Register agrees that offering, rather than an expanded
groups of users. ‘‘when [such entity] expands its service offering or different service
(4) Whether the service offering is operations and provides additional offering, because it would still be part
consumed in a similar manner, provides transmissions to subscribers to a of what is traditionally considered to be
a similar user experience, and has different ‘service,’ * * * this is an a residential cable television service;
similar form, feel, and functionality. entirely new investment’’ and is not a this is true even though optical fiber
(5) Whether and to what degree the PSS offering.81 may provide certain advantages over
service offering relates to the same pre- coaxial cable. By the same token,
July 31, 1998 investments Congress B. Transmission Medium
however, when an existing cable music
sought to protect.77 As noted above, the statute and service is made available to cable
(6) Whether and to what degree the legislative history focus extensively on television subscribers over the internet,
service offering takes advantage of the whether a PSS offering is being it is being transmitted through a
capabilities of the medium through provided through the same or a different different transmission medium
which it is transmitted (i.e., whether ‘‘transmission medium’’ than the one regardless of how the internet is being
and the extent to which differences identified by Congress in 1998, and the reached; for section 114 purposes,
between the service offerings are due to analysis above follows Congress’s lead internet service is a different
limitations in the existing service in that regard. At first blush, one might telecommunications service from a
offering’s transmission medium that are conclude that Congress intended to residential cable service, even if
not present in the other service draw a distinction among the kinds of delivered by the same operator through
offering’s transmission medium).78 physical wires or radiofrequency the same infrastructure.84
Note that even if a service offering is channels used to deliver signals from a
found to be an expanded service service to a listener—e.g., coaxial cable, C. Application to the Referred Questions
offering qualifying for the section optical fiber, radio spectrum. But this The CRJs’ referral to the Register of
114(f)(1) grandfathering provision, it would not be a proper understanding of Copyrights specifically asked how the
would still not be eligible for the section the statutory scheme. The legislative legal analysis would apply specifically
114(d)(2)(B) grandfathering provision by history makes repeated references to to ‘‘transmissions of multiple, unique
virtue of its being transmitted via a ‘‘cable,’’ ‘‘satellite,’’ and the ‘‘internet’’ channels of music that are accessible
different transmission medium. Such an as different ‘‘transmission[] * * * through that entity’s website and
offering would be subject to the media.’’ 82 Congress surely understood through a mobile application,’’ and the
requirements in section 114(d)(2)(C). that the internet is a layer of services degree to which differences between a
that can be reached through a variety of PSS entity’s internet service and its
3. Different Service Offerings existing service in terms of the numbers
delivery mechanisms, for example,
As a matter of law, a wholly different through phone lines, satellite signals, or types of channels or subscribers
service offering can never qualify as a and optical fiber. Similarly, a ‘‘cable’’ would result in the exclusion of the
PSS offering because it would not be service can be transmitted over different internet service from a grandfathered
one of the specifically identified pre- media, such as coaxial cable, optical rate.85 Although ultimately it is not for
July 31, 1998, business operations (i.e., fiber, or microwaves—a fact Congress the Register to apply the above-
the three PSS offerings) Congress sought explicitly understands.83 described inquiry to Music Choice’s
to protect when it enacted the DMCA.79 Thus, for section 114 purposes, the current program offerings, the Register
This is true regardless of whether the better understanding is that, in referring offers the following observations about
service offering is developed internally to the ‘‘transmission medium’’ in the transmissions made via the internet and
or acquired. As the D.C. Circuit recently context of a PSS offering, Congress was made available on portable devices, and
held, the DMCA’s amendments to referring to the basic general guidance about application of
section 114 were ‘‘designed to move the telecommunications service through the analysis to the scenarios identified
industry to market rates,’’ and if a PSS which that offering is being delivered to in the referral order.
entity ‘‘were permitted to pay the the user. For example, an existing Under the standard articulated above,
grandfather rate for transmissions made service offering that on July 31, 1998, the mere fact that a service offering is
to customers who subscribed to a was delivered to residential cable transmitted to cable or satellite
‘service’ that was previously provided television subscribers through coaxial television subscribers over the internet
by [a different, non-PSS entity], what cable, may today be delivered to such does not automatically disqualify the
would prevent * * * the complete cable television subscribers through service offering from being an expanded
elimination of the market-rate regime by optical fiber without constituting an service offering subject to the
expansion to a new ‘‘transmission grandfathered rate standard, so long as
77 See 71 FR at 64641 (‘‘[T]he rationale for [the]
medium’’ within the meaning of section the service offering, as a factual matter,
grandfathering provisions is to ‘prevent disruption
114. In other words, this service offering after considering the factors described
of the existing operations by such services.’’’) above, is sufficiently similar to the PSS
(quoting H.R. Rep. No. 105–796, at 81);
SoundExchange, 854 F.3d at 719 (‘‘The grandfather 80 SoundExchange, 854 F.3d at 719. entity’s existing cable or satellite service
provisions were intended to protect prior 81 See id. (emphasis added). The Register thus offering.
investments the three [PSS] business entities had agrees with the D.C. Circuit’s holding that a service In evaluating whether a service
made during a more favorable pre-1998 rate-setting offering that is acquired by a PSS entity does not offering is ‘‘sufficiently similar’’ to the
regulatory climate.’’). qualify as a PSS offering.
PSS entity’s existing cable or satellite
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78 See H.R. Rep. No. 105–796, at 89 (‘‘If . . . a 82 See H.R. Rep. No. 105–796, at 81, 89 (referring
subscription service making transmissions on July to ‘‘transmissions via both cable and satellite service offering so as to qualify as an
31, 1998, were to offer a new service either in the media’’ and explaining that under appropriate
same or new transmission medium by taking circumstances, a ‘‘cable . . . service’’ may be 84 To be clear, this discussion relates to the
advantages of the capabilities of that medium, such transmitted ‘‘through the Internet’’). meaning of section 114and should not be construed
new service would not qualify as a preexisting 83 Cf. 17 U.S.C. 111(f)(3) (defining a ‘‘cable as having broader application to other areas of
subscription service.’’). system’’ as, among other things, making copyright law, such as the section 111 cable
79 See id. at 81, 89; 71 FR at 64641, 64645–46; transmission by ‘‘wires, cables, microwave, or other retransmission license.
SoundExchange, 854 F.3d at 719. communications channels’’). 85 Referral Order at 3–4.
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![59660 Federal Register / Vol. 82, No. 240 / Friday, December 15, 2017 / Notices
‘‘expanded service offering,’’ the CRJs factors to consider could include how willing buyer/willing seller standard
should consider the degree to which many additional or fewer channels there under section 114(f)(2).
making the existing service offering are, how many channels offer different
accessible outside the home of the programming, and how different that November 20, 2017.
subscriber constitutes a fundamental programming is. One should also Karyn Temple Claggett,
change to the offering. One notable fact consider the reasons why any such Acting Register of Copyrights and Director
about PSS offerings in 1998 is that they differences exist. For example, if the of the U.S. Copyright Office.
were all limited to listening to music service offering in question has more [FR Doc. 2017–27088 Filed 12–14–17; 8:45 am]
within the subscriber’s home. Indeed, in channels because of some benefit the BILLING CODE 1410–30–P
the first ratesetting proceeding under internet affords, such as greater
the DPRSRA, portable listening does not bandwidth or different contractual
appear to have been considered and the arrangements with cable operators, then NUCLEAR REGULATORY
final rate was based on a percentage of it would be taking advantage of the COMMISSION
gross revenues ‘‘resulting from capabilities of the internet as a
residential services in the United transmission medium. Depending on [Docket No. 70–7028; NRC–2017–0233]
States’’ 86—which is how the rate is the evaluation of the other factors
Johns Hopkins Applied Physics
currently calculated.87 To be sure, discussed above and how much weight
Laboratory
technological developments since that is ultimately given to the difference in
time have made it easier to deliver channels in an overall comparison AGENCY: U.S. Nuclear Regulatory
digital audio transmissions outside the between the service offerings, it may or Commission.
home (including over mobile networks). may not be enough to disqualify the ACTION: License application;
But, at least in the cable television offering from the grandfathered royalty opportunity to request a hearing and to
market, there appears to be a distinction calculation method. The number and petition for leave to intervene; order
drawn between accessing content type of customers should be similarly imposing procedures.
within the home and accessing that compared.
same content outside of it.88 To be clear, At the same time, the Register agrees SUMMARY: The U.S. Nuclear Regulatory
this distinction is one based on the with Music Choice that differences in a Commission (NRC) has received an
location where the PSS offering is service offering that directly and solely application from the Johns Hopkins
consumed, not the type of device on result from the imposition of the section Applied Physics Laboratory for a license
which the service is accessed. If the 114(d)(2)(C) requirements that do not which authorizes possession and use of
service offering is available through an apply to the existing service offering Special Nuclear Materials (SNM) for
internet-connected smartphone or (which is subject to section analytical or scientific research and
tablet, but is designed so that the service 114(d)(2)(B)), should not alone development. The license application
offering will only work when accessed disqualify it from the grandfathered rate. request contains sensitive unclassified
within the confines of the subscriber’s Similarly, minor differences in the user non-safeguards information (SUNSI).
residence, then it would be within the interface necessitated by the change in DATES: A request for a hearing or
home and more similar to the PSS medium also should not alone
petition for leave to intervene must be
entity’s existing cable or satellite service disqualify the service offering, even if
filed by February 13, 2018. Any
offering. they are perceived as an advantage
potential party, as defined in § 2.4 of
As the second referred question offered by the medium. For example, a
title 10 of the Code of Federal
specifically asks about differences in service offering should not be
Regulations (10 CFR), who believes
channel offerings and customers, the disqualified from being an expanded
access to SUNSI is necessary to respond
Register offers the following guidance. service offering merely because instead
to this notice must request document
In comparing the number and type of of needing to press a button on a remote
access by December 26, 2017.
channels offered by a service offering to control, the user can click a mouse or
an existing service offering, examples of navigate using a touch screen. ADDRESSES: Please refer to Docket ID
Additionally, minor differences in NRC–2017–0233 when contacting the
86 See 63 FR at 25414 (to be codified at 37 CFR visual presentation, such as having a NRC about the availability of
260.2(a)) (emphasis added); see also CARP Report different aspect ratio or displaying less information for this action. You may
¶ 109 (‘‘The Panel finds that the Services are obtain publicly-available information
primarily responsible for creating a new media and
content due to differences in screen
market for digital music subscription services for size, would not be so significant as to related to this action by any of the
residential consumers.’’) (emphasis added). It also disqualify a service offering from being following methods:
bears noting that in the last rate proceeding, the an expanded service offering. • Federal Rulemaking website: Go to
CRJs deleted the word ‘‘Residential’’ and its http://www.regulations.gov and search
definition from the rate provision for preexisting D. CRJs’ Ability to Set Different Rates for Docket ID: NRC–2017–0233. Address
satellite digital audio radio services because it was
argued that ‘‘the concept is a confusing artifact of In closing, the Register briefly notes questions about NRC dockets to Carol
a comparable term used in the PSS regulations’’ that, even if a service offering qualifies Gallagher; telephone: 301–415–3463;
because ‘‘the SDARS service is not primarily for the grandfathered method of setting email: Carol.Gallagher@nrc.gov. For
residential in terms of being delivered to homes and
the term residential subscriber simply means a rates, the CRJs still have the authority technical questions, contact the
subscriber,’’ yet the term remained for purposes of under section 114(f)(1)(A) to individual listed in the FOR FURTHER
the PSS rate. 78 FR at 23074–75, 23096, 23098 ‘‘distinguish among the different types INFORMATION CONTACT section of this
(internal quotation marks omitted). of digital audio transmission services document.
sradovich on DSK3GMQ082PROD with NOTICES
87 37 CFR 382.3(a).
88 See, e.g., Out of Home—XFINITY Stream App
. . . in operation.’’ Thus, if there are • NRC’s Agencywide Documents
Error Message, XFINITY, https://www.xfinity.com/ material differences between an existing Access and Management System
support/xfinity-apps/xfinity-tv-app-unable-to- service offering and an expanded (ADAMS): You may obtain publicly-
connect/ (last visited Nov. 17, 2017) (‘‘In order to service offering, the CRJs can set available documents online in the
watch live TV or XFINITY On Demand content
using the XFINITY Stream app, you’ll need to be
separate rates and terms based on those ADAMS Public Documents collection at
connected to your in-home XFINITY WiFi differences, albeit using the section http://www.nrc.gov/reading-rm/
network.’’). 801(b)(1) standard, and not under the adams.html. To begin the search, select
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Document Created: 2017-12-15 03:37:24
Document Modified: 2017-12-15 03:37:24
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| Action | Final order. | |
| Dates | Opinion dated November 20, 2017. | |
| Contact | Sarang V. Damle, General Counsel and Associate Register of Copyrights, by email at [email protected], or Jason E. Sloan, Attorney-Advisor, by email at [email protected] Each can be contacted by telephone by calling (202) 707-8350. | |
| FR Citation | 82 FR 59652 |
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