“Specialty station” list updated; MPAA objections rejected

As we reported last November, the U.S. Copyright Office (CO) was then in the process of updating its list of “specialty stations”. Those are stations that, when carried on cable systems as “distant signals”, trigger lower royalty burdens for the cable operator than other “distant” stations do. (Check out our earlier post for a more detailed explanation of how that works.) 

The CO has now completed its updating process. In a Federal Register notice, it has announced that all stations that had claimed to be “specialty stations” will be included in its official listing. This should not come as much of a surprise, since the CO has long accepted self-certifications from stations looking to get on the list.  Think of it as a kind of honor system.

That didn’t stop the Motion Picture Association of America (MPAA) from objecting to several of the proposed additions to the list. MPAA’s members receive distributions from the copyright royalty pool generated by (among other things) distant signal royalty payments. So MPAA’s members benefit more from distant signal carriage charged at full copyright rate, rather than carriage at the discounted “specialty station” rate. In its objections, MPAA urged that the CO both can and should wade into – and independently resolve – disputes concerning “specialty station” status. Needless to say, MPAA also argued that some of the claims of “specialty” status were just self-serving noise.

Sorry, the CO has now ruled – we stand by the position we’ve always taken, which is that we don’t have any legal authority to resolve disputes of that kind. We will maintain our self-certification honor system. Here’s our new specialty station list, which includes the stations whose status was contested.

What happens now?

That will be up to each cable system when the time comes for it to fill out its routine Statement of Account and tender its royalty payments. If a cable system thinks that a distant signal doesn’t qualify as a specialty station, the system should pay the higher rate. If it thinks that the station does qualify, it should pay the lower “specialty station” rate. If MPAA or anyone else disagrees with the position any cable system takes, they have to challenge the Statement of Account filed by each such system, and a CO License Examiner will have to resolve the dispute.

What are the chances that the challenge might be successful? Hard to say, but get this: according to the CO, the examiners 

will look at these stations [i.e., ones whose “specialty station” status has been challenged] in the same way they have done in the past. That is, if a cable operator claims specialty station status for a contested station on the list, the examiner will inform the operator by letter that a particular party objects to the ‘‘specialty station characterization.’’ See 54 FR 38461, 38464 (September 18, 1989). The cable operator may then file an amended Statement of Account and recalculate royalties, if the operator so chooses.

Call us crazy, but that deck doesn’t look like it’s stacked in favor of the challenger. And while, sure, any operator might voluntarily “choose” to recalculate its royalties upward, we’re guessing that most, if not all, probably won’t.

Of course, the FCC could get the CO and its License Examiners off the hook by jumping back into the business of officially identifying “specialty stations”. But the Commission took itself out of that particular line of work more than 30 years ago, and it probably isn’t inclined to get back into it in 2012. After all, “specialty stations” don’t involve “broadband”, do they?