Wednesday, January 31, 2018

A Nationwide "One-Touch Make-Ready" Policy Would Spur Broadband Investment

On January 25, 2018, Corning Incorporated filed a report with the FCC titled “Assessing the Impact of Removing Regulatory Barriers on Next Generation Wireless and Wireline Broadband Infrastructure Investment: Annex 1, Model Sensitivities.” This report, prepared by CMA Strategy Consulting and supported by Corning, finds that adoption of a nationwide “one-touch make-ready” (OTMR) policy would create an additional $12.6 billion in capital expenditures invested by fiber providers and an additional $8.8 billion in capital expenditures invested by 5G wireless providers.

In the FCC’s Notice of Proposed Rulemaking for “accelerating wireline broadband deployment by removing barriers to infrastructure investment,” the Commission proposed an OTMR policy, which ensures that attachment poles are prepared for the installation of new broadband infrastructure. In many municipalities, when a provider wishes to attach equipment to a pole, providers currently attached to that pole must approve the plans and hire contractors to carry out the work of moving existing attachments to make room for the new ones. The current process creates unnecessary costs among multiple providers and multiple contractors. With an OTMR policy, a single, pre-approved contractor is able to perform all of the necessary attachments, significantly reducing the costs of broadband deployment.

The CMA Strategy Consulting report analyzes the potential impacts of a nationwide OTMR policy on the deployments of fiber-to-the-premise (FTTP) and 5G wireless broadband. A nationwide OTMR policy would result in an additional 8.3 million premises passed by fiber providers, which corresponds to $12.6 billion in capital expenditures invested by fiber providers. It also would result in an additional 5.9 million premises passed by 5G wireless providers, which corresponds to $8.8 billion in capital expenditures invested by 5G wireless providers.

Importantly, twenty states and the District of Columbia are certified for “reverse preemption,” which means these states are not required to adopt FCC regulations regarding pole attachments, potentially limiting the positive impacts of an OTMR policy. However, if an OTMR policy is adopted and these states choose not to implement it, there still would be an additional 5.1 million premises passed by fiber, which corresponds to $7.7 billion in capital expenditures invested by fiber providers. And for 5G technology, there would be an additional 3.7 million premises passed, which corresponds to $5.4 billion in capital expenditures invested by 5G wireless providers.

The report also estimates the impact of higher-than-average municipality-imposed fees on nationwide 5G deployment if those above-average fees were to become the national average.

In many cases, the annual pole attachment fee for small cells, which are the infrastructure supporting deployment of 5G technology, is about $20 per pole. But some municipalities charge annual fees of $500 to $37,000 per pole. Applying a nationwide fee of $12,000 annually per pole would result in 28.2 million fewer premises passed by 5G technology, which corresponds to $37.9 billion in foregone network investment.

Some municipalities require application fees for pole attachments that are separate from the annual fees. These application fees range from $500 to $15,000 per pole. A nationwide application fee of $500 per pole would result in 7.9 million fewer premises passed by 5G technology, which corresponds to $11.6 billion in foregone network investment.

Lastly, while gross revenue fees are more common in the cable market, some municipalities have attempted to charge broadband providers fees of up to 5% of gross revenues for access to municipally owned rights-of-ways. If this were the national standard, there would be 9.4 million fewer premises passed by 5G technology, which corresponds to $13.6 billion in foregone network investment.

This report by CMA Strategy Consulting provides two very important takeaways. First, a nationwide OTMR policy would lead to an additional $7.7 to $12.6 billion in capital expenditures invested by fiber providers and an additional $5.4 to $8.8 billion in capital expenditures invested by 5G wireless providers, depending on how many states choose to adopt the policy. Secondly, the report highlights an unfortunate trend by some municipalities to charge excessive fees that surely will hinder deployment of advanced broadband networks and services.

The CMA report demonstrates that a nationwide OTMR policy would further the rapid deployment of next-generation broadband services. By significantly lowering the costs of deployment, a nationwide OTMR policy would create more competition, investment, and innovation, all benefitting America’s broadband consumers.

Opposing the FCC's Use of Economics and Analytics Raises a Red Flag

Yesterday, the FCC voted to establish the Office of Economics and Analytics, which will help ensure that economic analysis is deeply and consistently incorporated as part of the agency’s regular operations. The decision was a party-line vote with Commissioners Clyburn and Rosenworcel dissenting, but why would any Commissioner vote against the FCC using more economics and analytics?
In a September 2017 blog, I said that opposing a cost-benefit analysis for proposed regulations is a red flag:
It is important that the FCC perform this cost-benefit analysis, because agencies, independent or not, should analyze how new rules will impact innovation, investment, job creation, and economic activity. It is reasonable to question the methodology that an agency uses when assessing the costs and benefits of a regulation. However, if an interested party offers only criticism of an agency proposal to conduct a regulatory CBA, this is likely a signal that the interested party fears that the costs will outweigh the benefits, invalidating its policy position.
I think the same rationale applies for anyone who opposes the FCC’s action to create the Office of Economics and Analytics. It will be important for consumers, businesses, and policymakers to question the methodology and results that this office will produce in the future, and I fully expect all Commissioners, at some point, to disagree with a methodology used by the office. However, opposing the implementation of additional uses of economics, analytics, and data science at the FCC raises a red flag. 

Monday, January 29, 2018

FCC Chairman Ajit Pai Opposes a Nationalized 5G Network

On Sunday, Axios reported that members of President Donald Trump’s National Security Council are considering nationalizing America’s 5G wireless networks. The documents released by Axios outline a plan in which the federal government would build and pay for a single 5G network in response to China's "dominant position in the manufacture and operation of network infrastructure.” The documents make it clear that this proposal is designed to protect the United States from China and other bad actors.
FCC Chairman Ajit Pai quickly announced his opposition to the proposal:
I oppose any proposal for the federal government to build and operate a nationwide 5G network. The main lesson to draw from the wireless sector’s development over the past three decades—including American leadership in 4G—is that the market, not government, is best positioned to drive innovation and investment. What government can and should do is to push spectrum into the commercial marketplace and set rules that encourage the private sector to develop and deploy next-generation infrastructure. Any federal effort to construct a nationalized 5G network would be a costly and counterproductive distraction from the policies we need to help the United States win the 5G future. 

Friday, January 26, 2018

Copyright Bill to Modernize Music Royalties and Streaming Filed in Senate

On January 24, S. 2334the Music Modernization Act of 2018 – was introduced in the U.S. Senate and referred to the Judiciary Committee. Sponsored by Sen. Orrin Hatch, and with bi-partisan co-sponsorship, S. 2334 is the Senate counterpart to HR 4706. The Music Modernization Act would reform Sections 114 and 115 of the Copyright Act by facilitating more timely and accurate payment of songwriter royalties and by streamlining blanket licenses for digital streaming services. If adopted, the Music Modernization Act would also move mechanical licensing royalties for music compositions to the “willing buyer/willing seller” standard, which seeks to “most clearly represent the rates and terms that would have been negotiated in the marketplace” among willing parties. The legislation has the support of songwriters, music publishers, and digital streaming services.
The House version of the Music Modernization Act was one of three bills that were briefly profiled in my January 16 blog post: “Congress Should Advance Consensus Music Copyright Reforms in 2018.” As explained in that post, several provisions of the Copyright Act regarding sound recordings and music compositions need to be updated to better secure copyright owners’ rights to the proceeds of their creative labors. The Music Modernization Act (S.2334/HR 4706), the CLASSICS Act (HR 3301), and the AMP Act (HR 881), would all help achieve those ends. Congress should seize the opportunity to make those reform proposals into reality in 2018.

Spurring Broadband Deployment and Reforming Communications Law

The House Subcommittee on Communications and Technology will hold a hearing, “Closing the Digital Divide: Broadband Infrastructure Solutions,” on January 30 to discuss a raft of recently introduced bills and resolutions aimed at encouraging broadband deployment. As reported in TR Daily on January 23, these include H.Res. 687 (addressing federal, state, and local taxes, fees, regulations, and permitting policies); H.Res. 689 (urging preference for prioritizing wireless infrastructure funding to states that have enacted streamlined siting for small cells); H.Res. 690 (opposing funding broadband overbuilds); H.Res. 691 (recommending that broadband deployment be competitively and technologically neutral); and H.Res. 701 (recommending that environmental and historic studies required for broadband deployment be limited to the area impacted).
As for the remainder, here is TR Daily’s bare-bones listing with the bill numbers:

Leading Infrastructure for Tomorrow’s America Act (HR 2479); the ACCESS BROADBAND Act (HR 3994); the Broadband Infrastructure Finance and Innovation Act (HR 4287); the Communications Facilities Deployment on Federal Property Act (HR 4795); the Inventory of Assets for Communications Facilities Act (HR 4798); the Streamlining and Expediting Approval for Communications Technologies Act (HR 4802); the Making Available Plans to Promote Investment in Next Generation Networks without Overbuilding and Waste (MAPPING NOW) Act (HR 4810); the Wireless Internet Focus on Innovation  in Spectrum Technology for Unlicensed Deployment (WIFI STUDy) Act (HR 4813); the Community Broadband Act (HR 4814); the Promoting Exchanges for Enhanced Routing of Information so Networks are Great (PEERING) Act (HR 4817); the Restoring Economic Strength and Telecommunications Operations by Releasing Expected Dollars (RESTORED) Act (HR 4832); Connecting Communities Post Disasters Act (HR 4845); the Streamlining Permitting to Enable Efficient Deployment of Broadband Infrastructure (HR 4842); the Broadband Deployment Streamlining Act (HR 4847); the CLIMB ONCE Act (HR 4858).

Aside from the use of the clever – even if sometimes awkward – acronym-dictating bill naming protocols, it appears that most of these bills will, in fact, speed broadband deployment by removing or reducing regulatory barriers and facilitating planning processes. Several of them are targeted more specifically at streamlining regulations or processes that otherwise would unnecessarily inhibit deployment of 5G network infrastructure.

Subcommittee Chairman Marsha Blackburn and her committee colleagues should be commended for getting off to a fast start this year in their work to spur broadband infrastructure deployment, including measures targeted to 5G. I haven’t studied all of the details of the bills that will be discussed at the hearing. Nevertheless, it appears that many of them propose common-sense measures that ought to warrant bipartisan support.

Of course, “net neutrality” is the proverbial elephant in the room as congressional Democrats now prepare to attempt to use the Congressional Review Act (CRA) to overturn the FCC’s December 2017 Restoring Internet Freedom order (notwithstanding the fact that several of the leading proponents of this action, only recently, have advocated repeal of the Congressional Review Act.)

Rather than using the CRA process in what almost certainly will be an unsuccessful effort to overturn the Restoring Internet Freedom order, opponents at least should attempt to work across party lines to enact legislation that would resolve the decade-old net neutrality controversy, if not for “all time,” then at least for the foreseeable future.

For many years now, I have stated frequently that I am not fond of a legislative resolution of the net neutrality controversy that writes into law – in other words, that locks in – absolute bans on certain practices, even, say, “throttling,” foreclosing any consideration of the existence or not of market failure or consumer harm. This is especially true, for example, with regard to so-called paid prioritization, where an absolute prohibition, in the absence of consideration of evidence of market failure or consumer harm, seems particularly short-sighted. In other words, in the fast-changing, dynamic Internet environment, legislation that is framed in terms of targeting practices that cause consumer harm or that constitute anticompetitive abuses, examined by the expert agency in the context of current and projected market conditions, is preferable over a law containing outright bans.

Be that as it may, consumers are not well-served for net neutrality regulations to be akin to the proverbial ping-pong, with a change in the rules accompanying each change in administration. Even as the Internet services marketplace and the technology continue to evolve at a quick pace, there certainly is value in stability of the rules of the road. Aside from the need for the market participants to have a predictable, stable legal regime, which facilitates investment and innovation, far too many resources are consumed non-productively by opposing parties contesting regulations subject to administrative ping-pong. To my mind, Chairman Blackburn’s “Open Internet Preservation Act” represents a good starting part for discussing a compromise net neutrality bill.

In the meantime, and in the near term, the cause of advancing broadband infrastructure deployment, including deployment of game-changing 5G networks, ought to be one on which bipartisan consensus can be reached. Tuesday’s hearing is a welcome step in the right direction.

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PS – Note immediately above that I said “in the near term.” I remain convinced that, if not this year, then in the not-too-distant future a comprehensive overhaul of the Communications Act is needed. Back in 2014, the House Commerce Committee initiated what it called a #CommActUpdate process to begin examining what a modernized law – one fit for the Digital Age – should look like. Amidst the heat of the net neutrality controversy that overhaul effort has stalled. But for the full potential of the digital revolution to be realized in a way that enhances overall consumer welfare, and the nation’s social and economic well-being, there will need to be a #CommActUpdate that requires evidence of market failure and consumer harm before regulatory sanctions are imposed.

With that in mind, for those who are willing, or even anxious, to “think ahead,” I commend to you the book recently published by the Free State Foundation titled, #CommActUpdate – A Communications Act Fit for the Digital Age. In addition to a Preface and a lengthy, substantive Introduction containing much detailed background information, this new book reproduces all six Responses to the House Commerce Committee’s White Papers prepared by a distinguished group of Free State Foundation-affiliated scholars. I’m convinced, and I think you may be as well, that the book’s recommendations are instructive in pointing the way forward as the digital revolution continues to produce more competition and more convergence in the communications marketplace.

Wednesday, January 24, 2018

U.S. Trade Representative Report Spotlights Rogue Piracy Websites and Devices

Online piracy deprives copyright owners of their exclusive rights to the proceeds of their creative works and causes billion-dollar damages to the U.S. economy each year. Identifying large-scale intellectual property piracy operations is an important part of combatting such harmful and unlawful activities. The U.S. Trade Representative's annual report on Notorious Markets focuses on online copyright piracy involving stream-ripping websites and illicit streaming devices. The report’s publication exerts pressure on foreign governments and private entities to curtail IP piracy in their vicinities. 

Released on January 10, the U.S. Trade Representative’s report for the year 2017 includes a “Notorious Markets List” intended to highlight “prominent and illustrative examples of online and physical marketplaces that reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial [copyright] piracy and [trademark] counterfeiting.” According to the report’s press release: “Imports in counterfeit and pirated physical products is estimated at nearly half a trillion dollars.”Publication of the of Notorious Markets List is intended “to motivate appropriate action by owners, operators, and service providers in the private sector of these and similar markets, as well as governments, to reduce piracy and counterfeiting.” 

The Notorious Markets List identifies the stream-ripping websites that, without authorization, convert copyrighted music and video content from licensed streaming sites into files that are downloadable by Internet end users. The Notorious Markets List draws particular attention to online piracy sites funded by ad revenue. The report cites a whiteBULLET report of the top 5,000 IP-infringing website URLs in the U.S., European Union, and Australia, which found that “about 25-30% of advertising on websites posing an IP risk are from major brands.” The List specifically names piracy sites – or alleged piracy sites – operated by foreign entities and/or hosted in foreign nations, such as France, Russia, and Vietnam. 

Further, Internet end users seeking unauthorized access to copyrighted content can be harmed by online piracy. The report observed that online piracy sites “actively and surreptitiously install malware on users’ computers, commit advertisement fraud, and enable phishing scams that steal personal information, all to increase their unlawful profits.” And it cited a July 2016 Digital Citizens Alliance report that one-third of copyrighted content theft sites “expose consumers to malware and other risks.” 

The 2017 Notorious Markets Report also focused on the issue of illicit streaming devices (ISDs). Using piracy apps, ISDs stream or download pirated content from the Internet. According to the report, ISDs can be “fully loaded” at the time of sale with piracy-enabling capabilities or ISDs can be “combined with add-ons after purchase” to access pirated content. 

Under Section 106 of the Copyright Act, copyright owners of sound recordings, motion pictures, and other audiovisual works have exclusive rights over the distribution of their works. Copyright owners negotiate detailed licensing agreement for rights to stream or download copyrighted content to retail consumers. But ISD-enabled piracy violates the exclusive rights of copyright owners and also impairs their contract rights contained in licensing agreement terms of service. 

The 2017 Notorious Markets Report describes the economic consequences: “The growth of ISDs is a troubling threat to the pay TV and other content industries and undermines incentives for companies to improve services or offer a greater selection of content in more markets.” Citing findings published by Sandvine in November of 2017, the report states: “ISD piracy ecosystem, including unlawful device sellers and unlicensed video providers and video hosts, stands to bring in revenue of an estimated $840 million a year in North America alone, at a cost to the entertainment industry of roughly $4-5 billion a year.” Correctly, the report deems it “critical” for governments and private industries to fight threats from growing ISD piracy. 

On the good news side, the report explained why certain online piracy sites were removed from the prior year’s Notorious Markets List, thanks largely to civil and criminal enforcement efforts by cooperative foreign governments and industries. The U.S. Trade Representative rightly commended those overseas anti-piracy efforts. 

International engagement is essential to protecting the exclusive rights of U.S. copyright holders abroad. The U.S. Trade Representative performs a vital function in this regard. Hopefully, the 2017 Notorious Markets Report will prompt stronger enforcement efforts against copyright violations by stream-ripping sites, illicit streaming devices, and other piracy-enabling platforms in 2018.

Friday, January 19, 2018

Internet Giants Aim to Preserve Their Regulatory Advantage

Internet giants Google, Amazon, and Facebook, among others, announced, through their trade association, the Internet Association, that they plan to join legal challenges to the FCC’s recent Restoring Internet Freedom Order (RIF Order). Internet Association President & CEO Michael Beckerman issued the following statement in conjunction with the announcement:
The final version of Chairman Pai’s rule, as expected, dismantles popular net neutrality protections for consumers. This rule defies the will of a bipartisan majority of Americans and fails to preserve a free and open internet. IA intends to act as an intervenor in judicial action against this order and, along with our member companies, will continue our push to restore strong, enforceable net neutrality protections through a legislative solution.
The recently-repealed 2015 Open Internet Order approach is not so neutral at all, however, in its practical effect. The Order had the effect of supporting the imposition of stringent privacy restrictions on Internet service providers (ISPs), like Comcast and Verizon Wireless, which did not apply to Google, Amazon, and other major Internet companies that are among the largest collectors of personal consumer data. This approach, under which the largest Internet giants are subject to less stringent privacy regulation, attracted strong bipartisan criticism, as former Federal Trade Commission Chairman Jon Leibowitz, a Democrat appointee, explained in April 2017:
By creating a separate set of regulations that bind only internet service providers — but not other companies that collect as much or more consumer data — with heightened restrictions on the use and sharing of data that are out of sync with consumer expectations, the FCC rejected the bedrock principle of technology-neutral privacy rules recognized by the FTC, the Obama administration, and consumer advocates alike. Protecting privacy is about putting limits on what data is collected and how it is being used, not who is doing the collecting, and for that reason, a unanimous FTC — that is, both Democratic and Republican commissioners — actually criticized the FCC’s proposed rule in a bipartisan and unanimous comment letter as “not optimal,” among 27 other specific criticisms of the rule (emphasis added).
The 2015 Order also imposed several strict conduct regulations on ISPs like Comcast and Verizon Wireless. These public utility-like neutrality limitations were not applied to system administrators for business networks, to cloud backup services during uploads of data from customers, or to online gaming services that may throttle bandwidth at certain times to prevent their services from overloading and crashing. It also does not apply to traffic on private networks operated by “edge providers” like Google and Amazon.

And we’ve now learned that it did not apply to Apple’s sub rosa throttling of iPhones in what Apple now claims – when the throttling was discovered – was an attempt to preserve the battery life of phones. While Apple argues that this undisclosed throttling was needed as a measure to protect iPhone owners, it could also have the effect of encouraging more iPhone owners to pay to upgrade from their older devices instead of replacing their batteries. In any event, Apple did not disclose the practice to its consumers.

Tom Evslin, former chief technology officer for the state of Vermont and former chief executive of VoIP provider ITXC Corp, described in August 2017 how Google and Amazon engage in the same throttling and prioritization behavior that they seek to prohibit ISPs from doing:

In fact, however, web giants like Google and Amazon have private networks that connect to the internet in many locations. They have data caches (think of them as content warehouses) around the world. Their websites do pop up faster than yours because their bits travel mostly on their private networks and avoid internet backbone and interchange congestion. In other words, they have their own private fast lanes. You can’t achieve this speed for your website unless you build a private network of your own (unlikely) or host your website on Amazon or Google, in which case they may share some of their private access network. I have hosted services on Amazon, and they charge me more depending on how many locations from which I want my data served. In other words, faster is more expensive on their network.

Conveniently these private fast lanes are specifically exempt from the 2015 Federal Communications Commission’s Open Internet (aka “net neutrality”) regulations, which reclassified basic internet access service in a way that lets the FCC micromanage it and prohibit public “fast lanes.” The members of the Internet Association are “edge services,” so they are unregulated by this rule.

Regardless of how much Internet Association members like Google and Amazon may claim they want to bring back “net neutrality” to protect consumers, a significant impact of their actions is to try to re-impose regulation to protect themselves from ISP competition. If they succeed, the result will be to keep more stringent regulations on their ISP competitors. To the extent that regulation of providers of services in the Internet ecosystem is needed, it at least should be a somewhat uniform enforcement regime, not one so disparate that ISPs are regulated in a much more heavy-handed manner than Internet web giants like Google and Amazon.

Tuesday, January 16, 2018

Restoring Internet Freedom Order Bolsters VoIP Freedom

In a blog post from October 2017, I wrote about "The Case for Keeping VoIP Free from Legacy Regulation." The blog discussed Charter Advanced Services (MN) v. Lange, a case with important implications as to whether VoIP services will remain largely free from state legacy regulation. The U.S. District Court decision under review rightly concluded that the VoIP offering at issue "engages in net protocol conversion, and that this feature renders it an 'information service' under applicable legal and administrative precedent." 
On January 10, counsel for Charter Communications filed a letter with U.S. Court of Appeals for the Eighth Circuit, outlining ways in which the Restoring Internet Freedom Order supports the conclusion that Charter's Spectrum Voice VoIP service is, in fact, a Title I information service. Among other things, the letter points out that the Restoring Internet Freedom Order:
  • [E]mphasizes the "narrow scope" of the [telecommunications management] exception [to Title I] and reiterates that features "designed to be useful to end-users rather than providers" do not fall within it.
  • Reiterates that information services can "include[] a transmission component," and that this "does not render broadband Internet access services telecommunications services; if it did, the entire category of information services would be narrowed drastically."

  • Applies the FCC's standards for assessing when information and telecommunications components are functionally integrated and what the provider "offers"… [and] …finds that "relevant classification precedent focuses on the nature of the service offering the provider makes, rather than being limited to the functions within that offering that particular subscribers do, in fact, use."
  • Expressly preempts the states from public utility regulation of broadband Internet services, reiterating to the "longstanding federal policy of nonregulation for information services" and emphasizing "Congress's approval" of that "preemptive federal

Certainly, broadband Internet access services offer much more transforming, processing, and other functional capabilities to end user subscribers than VoIP services. Yet, the highlighted analytical aspects of the Restoring Internet Freedom Order surely strengthen the conclusion that Charter's Spectrum Voice services are information services under Title I. In sum, the Restoring Internet Freedom Order bolsters VoIP freedom from state legacy regulation. 

Congress Should Advance Consensus Music Copyright Reforms in 2018

As the New Year gets underway, opportunities have opened for Congress to make needed reforms regarding copyright protections in music. A broad consensus has emerged in support of a trio of music-related copyright bills that would improve the ability of recording artists, producers, and songwriters to exercise their rights in copyrighted music or at least to enjoy the financial rewards for their efforts. In 2018, Congress should promptly take up the CLASSICS Act, the AMP Act, and the Music Modernization Act.  

Music copyright is grounded in the U.S. Constitution. Article I, Section 8, Clause 8 – the  “Copyright Clause” – confers on Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” As Free State Foundation President Randolph J. May and I explain in our book, The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective (2015), copyright is a unique private property right, rooted in an author’s natural right to enjoy the fruits of his or her creative labor. Federal copyright protections in music help ensure that copyright holders, including creative artists, enjoy exclusive rights to the potential proceeds from their musical labors.

Copyright protections provide an important economic incentive for the work and expense of new creative works. The International Intellectual Property Alliance’s report, Copyright Industries in the U.S. Economy,” found that “core copyright industries” generated $1.2 trillion in economic activity and employed 5.5 million workers in the U.S. in 2015. Sound recordings and musical compositions are extraordinary sources of value. A report by Recording Industry Association of America’s Joshua P. Friedlander, cites $7.7 billion in 2016 U.S. retail revenues from recorded music.

*     *     *

However, the Copyright Act is in need of comprehensive updating to address changes brought about by digital technologies and the Internet. Many provisions of copyright law that touch on sound recordings and musical compositions need to be reformed to better enable copyright owners to exercise their rights and to direct proceeds to their rightful recipients. The three bills now pending in Congress would, if enacted, provide targeted reforms to further those purposes:

(1) The CLASSICS Act -- H.R. 3301. Copyright holders do not have the same right under federal law to receive royalties for public performances of sound recordings fixed prior to 1972 that copyright holders of later recordings have. As a result, major digital music service providers, such as Pandora and Sirius XM, have publicly performed pre-72 sound recordings by digital audio transmission to their subscribers – without obtaining consent or paying royalties to the copyright owners of those sound recordings.

The Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act – or CLASSICS Act – would finally provide public performances of pre-72 sound recordings via digital audio transmission with the same federal protections that post-72 sound recordings receive. Copyright owners of pre-72 sound recordings would receive royalties based on rates established by the Copyright Royalty Board pursuant to its “willing buyer/willing seller” standard that seeks to approximate market prices for public performances of sound recordings via digital audio transmissions. And the CLASSICS Act would provide a streamlined resolution process for existing lawsuits involving state law claims regarding digital audio transmissions of pre-72 sound recordings. (See my July 2017 blog for more on the CLASSICS Act.)

(2) The AMP Act -- H.R. 881. Producers, mixers, and sound engineers serve important roles in the creation of sound recordings. Many sound recording artists and sound recording copyright owners desire to reward financially producers and others when their sound recordings are publicly performed through digital audio transmissions. Yet, existing law does not provide a streamlined statutory mechanism for creative artists to voluntarily direct portions of their own royalties for outright payments to producers, mixers, or engineers.

The Allocation for Music Producers Act – or AMP Act – would establish in the Copyright Act a process for producers, mixers, and sound engineers to directly receive royalty payments. Under the AMP Act, sound recording artists and other copyright owners of sound recordings could submit “letters of direction” to a collective entity – SoundExchange – authorizing direct distribution of such payments. Importantly, the AMP Act respects the exclusive rights of creative artists and other copyright holders by permitting letters of direction – not requiring any new subdivision of royalties. It does not undermine the liberty of creative artists and studios to negotiate contracts with producers, mixers, and engineers. Nor does the AMP Act give producers any kind of misguided “moral rights” against copyright owners of sound recordings.

(3) The Music Modernization Act -- H.R. 4706. Currently, songwriters sometimes fail to receive royalties in a timely fashion for digital audio transmissions of their songs by services like Spotify. Such services encounter difficulties in accurately locating songwriters. Among other things, the Music Modernization Act would establish a Mechanical Licensing Collective (MLC) to facilitate accurate royalties for songwriters by ensuring digital music services have correct information. Digital service providers would receive blanket usage licenses for copyrighted compositions.

Also, mechanical license royalties – revenues for songwriters when sound recordings of their compositions are recorded and copied – are subject to a rate standard that results in exceedingly low returns for songwriters. Under the Music Modernization Act, the Copyright Royalty Board would set mechanical licensing royalties for music compositions according a “willing buyer/willing seller” standard. Although rate controls are always less-than-desirable, where such controls do exist they should at least seek, to the extent possible, to mirror market prices. Rates established under the willing buyer/willing seller standard are intended to “most clearly represent the rates and terms that would have been negotiated in the marketplace” between willing parties.

*     *     *

Each of these three bills has multiple co-sponsors in the House of Representatives. And each enjoys a broad base of support among music copyright industry associations and organizations. Consistent with the Constitution’s charge to promote the progress of the arts by securing the exclusive rights of authors, including creative artists, Congress should give these three music copyright bills timely consideration.