Edition: U.S. / Global

THE MEDIA BUSINESS; House Proposal to Require Cable Units to Pay Royalty

Published: March 20, 1992

Hoping to smooth the way for legislation that would regulate cable television rates, House lawmakers proposed a measure today that would require cable companies to pay a new royalty to television stations in exchange for carrying their programming.

The proposal is intended to retain the support of broadcasters, who provided important support for cable regulation in the Senate, but it was quickly attacked by the movie industry's top Washington lobbyist.

The continued feuding between Hollywood producers and broadcasters over a side issue in the cable debate added to the doubts that the House of Representatives would be able to pass a veto-proof bill. The Senate passed a bill in late January that would give local governments the authority to regulate rates for a basic tier of cable service, and the House is preparing to act on its own bill in the next several weeks.

One main sticking point, however, is whether cable operators should be forced to pay royalties to broadcasters to carry their signals. Under existing law, cable operators receive an automatic license and pay nothing.

The Senate bill would allow television stations to demand royalties from cable operators. But that move inflamed movie and television studios, which argued that broadcasters would be capturing royalties that belonged to them because they owned the copyrights to the programming.

A measure introduced today by Representative William J. Hughes, Democrat of New Jersey, would require cable operators to pay broadcasters 3 cents a month for each subscriber to cover royalties on locally produced programming, like news and talk programs, on which the station holds copyrights. In a move that caught the studios by surprise, however, the money would go into a pool that would be distributed only to stations and not to outside producers.

That proposal brought an immediate objection from Jack Valenti, head of the Motion Picture Association of America. "This bill has a serious and, I think, apocalyptic flaw," Mr. Valenti said. "It ascribes zero value to the programs and all the value to the signal" of a television station.

He said he had not expected such a measure "in all my wildest dreams."

The National Association of Broadcasters praised the lawmakers for recognizing "the inequity" of the current rules, but said it would have to study the proposal.