These consolidated cases present various challenges to a rulemaking proceeding of the Copyright Royalty Tribunal ("Tribunal"), in which the Tribunal increased the royalty payable under the compulsory license for making and distributing phonorecords of copyrighted musical works. Our consideration of these petitions was expedited because the new rates were scheduled to become effective on July 1, 1981. Oral argument was heard on June 18, 1981, and on June 23 a judgment was entered, upholding the Tribunal in part, and reversing and remanding in part.

We held that the Tribunal acted within its authority in adjusting the royalty rate and in assigning the increase an effective date of July 1, 1981, but that the Tribunal had exceeded its authority in adopting a procedure for interim rate adjustments that would require the Tribunal to convene annual proceedings for the exercise of discretion. The case was remanded to permit the Tribunal to adopt, if it so desired, an alternative scheme of interim rate adjustment. This opinion explains more fully the basis of that judgment.I. THE COMPULSORY LICENSE AND THE COPYRIGHT ROYALTY TRIBUNAL

The royalty determinations challenged in this proceeding concern the compulsory license for phonorecords1 under the Copyright Act, 17 U.S.C. §§ 101-810 (1976). Once the creator of a nondramatic musical work has allowed phonorecords of that work to be produced and distributed, the statute requires him to grant a license upon request to any other person who proposes to make and distribute phonorecords of the work, at a royalty rate set by law. Id. § 115.2 This compulsory licensing scheme is one of several established by the Copyright Act, and determination of the appropriate royalty rates is one of the principal functions Congress has assigned to the Copyright Royalty Tribunal.3

The phonorecord compulsory licensing system dates back to 1909, when Congress first extended a composer's copyright protection to include the right to control manufacture of "parts of instruments serving to reproduce mechanically the musical work."4 Industry representatives expressed a fear that this protection ran the risk of "establishing a great music monopoly" because the Aeolian Company, a manufacturer of player-piano rolls, was acquiring exclusive contract rights from composers and publishers. See H.R. Rep. No. 2222, 60th Cong., 2d Sess. 7 (1909).5 The music industry has undergone major transformations in the intervening years, but record producers have continued to argue that a danger of monopolization and discriminatory practices exists, and Congress has concluded that a compulsory licensing system is still warranted. See H.R. Rep. No. 1476, 94th Cong., 2d Sess. 107 (1976) U.S.Code Cong. & Admin.News, p. 5659 (hereinafter cited as 1976 House Report); H.R. Rep. No. 83, 90th Cong., 1st Sess. 66-67 (1967).

Although the availability of the compulsory license under the 1909 Act has been very important to the structure of the recording industry, the statutory procedures for invoking the license have rarely been used.6 The usual effect of the system is to make the statutory royalty rate a ceiling on the price copyright owners can charge for use of their songs under negotiated contracts: if the owner demands a higher price in voluntary negotiations, the manufacturer can turn to the statutory scheme, but if the owner is willing to accept less than the statutory rate, he is free to do so.7 Today, the vast majority of contracts for use of copyrighted musical works involve voluntary payment at precisely the statutory rate. See Adjustment of Royalty Payable Under Compulsory License for Making and Distributing Phonorecords, 46 Fed.Reg. 10,466, 10,479-80 (1981); S.Rep. No. 473, 94th Cong., 1st Sess. 93-94 (1975) (hereinafter cited as 1975 Senate Report). This was not the case earlier in the century, because the statutory rate was then high enough in terms of purchasing power to allow a greater range for individual bargaining.8 The 1909 Act had set the royalty rate at two cents for each "part" (e. g., disc) manufactured, and this rate remained unchanged until the passage of the 1976 Copyright Act, which increased the statutory rate to 23/4 cents per copy and provided for further adjustments by the Copyright Royalty Tribunal.

The inadequacy of the two-cent rate after half a century of economic change had long been recognized. See, e. g., H.R. Rep. No. 83, 90th Cong., 1st Sess. 67 (1967). Nonetheless, the rate increase was continually delayed by the battle over comprehensive copyright law revision and as the years passed, spokesmen for the opposing interests returned to argue over further incremental adjustments. Ultimately Congress found it "neither feasible nor desirable that these rates should be adjusted exclusively by the normal legislative process." 1975 Senate Report at 155.9 Congress chose instead to make a first, approximate modification of the royalty rate, and to delegate the authority to make future adjustments to an independent tribunal. 17 U.S.C. § 801(b) (1976).

The Senate and the House proposed entirely different structures for the independent body that would determine rates. The Senate version provided an ad hoc tribunal convened by the Register of Copyrights whenever a rate proceeding was necessary; the American Arbitration Association was to name three of its members to form the panel, and this choice would be binding unless parties made well-founded objections. S. 22, 94th Cong., 1st Sess. § 803 (1975) (hereinafter cited as Senate Bill), see 1975 Senate Report at 36, 157. Rate adjustments could be vetoed by resolution of either house of Congress, and judicial review was provided only when a party charged that a proceeding for distribution of collected royalty fees was tainted by partiality, corruption, fraud, or other misconduct.10 Senate Bill §§ 807, 809; see 1975 Senate Report at 37, 158.

The House, in contrast, proposed a permanent body, the Copyright Royalty Commission. The Commission would function like a traditional administrative agency. Its three members would be appointed by the President for five-year terms, and its proceedings would be subject to the Administrative Procedure Act, including the normal scope of judicial review. See 1976 House Report at 41-44, 174, 179. The legislative veto was eliminated. Id. at 179.

As the conference report stated, the structure finally chosen for the Tribunal "conforms in general to the House bill, but with several changes." H.R. Rep. No. 1733, 94th Cong., 2d Sess. 82 (1976) U.S.Code Cong. & Admin.News, p. 5823 (hereinafter cited as Conference Report ). The Act establishes "an independent Copyright Royalty Tribunal in the legislative branch." 17 U.S.C. § 801(a) (1976).11 The Tribunal is composed of five commissioners appointed by the President with the advice and consent of the Senate for seven-year terms. Id. § 802. The Tribunal is subject to the APA, and is directed to adopt regulations "governing its procedure and methods of operation" and to accompany its final decisions by a statement of "the criteria that (it) determined to be applicable to the particular proceeding, the various facts that it found relevant to its determination in that proceeding, and the specific reasons for its determination." Id. § 803.12 The APA also governs judicial review of the Tribunal's actions, and there is no legislative veto provision. Id. § 810.

Replacement of the legislative veto by the normal process of judicial review was intended to "permit more detailed, thoughtful, and careful review of possibly arbitrary or capricious determinations" of the Tribunal. 1976 House Report at 179, U.S.Code Cong. & Admin.News at p. 5795. Congress also enhanced the protection against arbitrary action by reconstituting the Tribunal as a permanent body. The Register of Copyrights, testifying before a House subcommittee, expressed her belief that the Senate proposal was constitutional, but urged the House to strengthen the Tribunal, emphasizing "that it should have continuity and not be as ad hoc as is laid out in the bill at the moment." 1975 Hearings at 1914-15 (testimony of Ms. Ringer).13 Assimilation of the Tribunal to the usual agency model provides greater practical and procedural assurances of a coherent royalty system.

The present case involves petitions for review of the Tribunal's first redetermination of the royalty rate for the phonorecord compulsory license. The statute requires the Tribunal to institute proceedings for a royalty adjustment on January 1, 1980, and, upon petition, "in 1987 and in each subsequent tenth calendar year." 17 U.S.C. § 804(a)(1), (2)(B) (1976). The rate applicable to the phonorecord license is to

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 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.

Id. § 801(b)(1). Until that redetermination has been made, the royalty rate is "either two and three-fourths cents, or one-half of one cent per minute of playing time or fraction thereof, whichever amount is larger." Id. § 115(c) (2).

The Copyright Royalty Tribunal published notice of its first proceeding to determine the royalty rate for the phonorecord compulsory license on January 2, 1980. 45 Fed.Reg. 63 (1980). In the spring of that year, the Tribunal accepted submissions of economic studies and legal motions, and then commenced evidentiary hearings that lasted forty-six days and involved thirty-five witnesses. See Adjustment of Royalty Payable Under Compulsory License for Making and Distributing Phonorecords, 46 Fed.Reg. 10,466, 10,466-67 (1981). Closing arguments followed in November, and the Tribunal published the new rate in the Federal Register on January 5, 1981. 46 Fed.Reg. 891 (1981). The royalty rate was increased to "four cents, or three-quarters of one cent per minute of playing time or fraction thereof, whichever amount is larger." Id. at 892 (to be codified at 37 C.F.R. § 307.2). The Tribunal also set out a complex system for future interim adjustments in the rate to reflect increases in the average list price of albums. Id. (to be codified at 37 C.F.R. § 307.3-.4). On February 3, the Tribunal published its findings in a detailed statement of the reasons for the adjustment it made in the rate. 46 Fed.Reg. 10,466-87 (1981).

Various parties petitioned for review of the Tribunal's action. Parties on the receiving end argued that the royalty was too low, and that the effective date of the increase had been improperly postponed;14 parties who would be paying the royalty argued that the rate was too high and that the procedures for making interim adjustments were unlawful.15 We turn first to the contentions concerning the Tribunal's determination of the four-cent royalty rate itself.

A. The Adequacy of the Tribunal's Explanation

The Copyright Act, as we have noted, requires the Tribunal to "state in detail the criteria that the Tribunal determined to be applicable to the particular proceeding, the various facts that it found relevant to its determination in that proceeding, and the specific reasons for its determination." 17 U.S.C. § 803(b) (1976). On the basis of this detailed statement and the record before the Tribunal, judicial review is available in accordance with the provisions of the Administrative Procedure Act. Id. § 810; see Amusement and Music Operators Ass'n v. Copyright Royalty Tribunal, 636 F.2d 531 (D.C.Cir.1980).

The copyright users insist that the incorporation of the usual APA review provisions in the statutory scheme demonstrates a congressional desire for "searching judicial scrutiny." Responsive Brief for Petitioners RIAA and CBS Inc. at 13 n.32. They stress the reference in the House report to "the full scope of judicial review provided by Chapter 7 of the Administrative Procedure Act." 1976 House Report at 179, U.S.Code Cong. & Admin.News at p. 5795. The context of this reference makes clear, however, that the House committee did not contemplate intrusive judicial review beyond that ordinarily available under the APA, but rather contrasted the normal APA process of reviewing both the substantive and procedural aspects of all final decisions with the Senate's proposal to limit judicial review to gross procedural irregularities in the royalty distribution proceedings.16

The Copyright Act permits the Tribunal to conduct its royalty determination as an informal rulemaking.17 In such proceedings, the APA requires a court to "hold unlawful and set aside agency action, findings and conclusions" if they are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A) (1976). Our responsibilities under this "arbitrary and capricious" standard include ascertaining the facts on which the Tribunal relied in making its decision, determining whether those facts have some basis in the record,18 and judging whether a reasonable decisionmaker could respond to those facts as the Tribunal did. See, e. g., Weyerhaeuser Co. v. Costle, 590 F.2d 1011, 1027 (D.C.Cir.1978).

When applying the "arbitrary and capricious" standard to the Tribunal's determinations, we must bear in mind that the thoroughness of the factual support an agency can supply for its decision will vary with the nature of the decision being made. See, e. g., FCC v. National Citizens Comm. for Broadcasting, 436 U.S. 775, 813, 98 S. Ct. 2096, 2121, 56 L. Ed. 2d 697 (1978); Industrial Union Dep't v. Hodgson, 499 F.2d 467, 474-75 (D.C.Cir.1974). The setting of the royalty rate is not a routine exercise in historical cost of service ratemaking for a public utility. At least three distinct aspects of the royalty rate scheme increase the deference that this court owes to the Tribunal's conclusions.

First, some of the statutory factors require the Tribunal to estimate the effect of the royalty rate on the future of the music industry. The rate should be calculated19 to "maximize the availability of creative works to the public," but 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)(A), (D) (1976). These criteria require determinations "of a judgmental or predictive nature," and the court must be aware that " 'a forecast of the direction in which the future public interest lies necessarily involves deductions based on the expert knowledge of the agency,' " FCC v. National Citizens Comm. for Broadcasting, 436 U.S. at 813-14, 98 S.Ct. at 2121 (quoting FPC v. Transcontinental Gas Pipe Line Corp., 365 U.S. 1, 29, 81 S. Ct. 435, 450, 5 L. Ed. 2d 377 (1961)). In establishing a permanent Tribunal, Congress expressed its expectation that members would be appointed "from among persons who have demonstrated professional competence in the field of copyright policy," 1976 House Report at 174-75, U.S.Code Cong. & Admin.News at p. 5791, and a court must recognize the contributions of this expertise.

Second, other statutory criteria invite the Tribunal to exercise a legislative discretion in determining copyright policy in order to achieve an equitable division of music industry profits between the copyright owners and users. Section 801(b)(1)(C) provides that the royalty rate should "reflect the relative roles of the copyright owner and the copyright user in the product ..." (emphasis added). Similarly, section 801(b)(1)(B) states a congressional purpose to "afford the copyright owner a fair return for his creative work and the copyright user a fair income under existing economic conditions." It is evident that the "fairness" of the return to a songwriter for his creative effort cannot be defined by the traditional methods of cost of service ratemaking; a broader inquiry is called for.20 Under these circumstances, a court owes considerable deference to the Tribunal's ultimate policy choices. See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S. Ct. 814, 823, 28 L. Ed. 2d 136 (1971); Action for Children's Television v. FCC, 564 F.2d 458, 479 (D.C.Cir.1977); Federation of Homemakers v. Schmidt, 539 F.2d 740, 743 (D.C.Cir.1976).

Finally, the statutory factors pull in opposing directions, and reconciliation of these objectives is committed to the Tribunal as part of its mandate to determine "reasonable" royalty rates. Both the House and the Senate had originally passed bills whose only instruction to the Tribunal was to assure that the royalty rate was reasonable,21 although the House report had stated objectives that it "anticipated that the Commission will consider."22 As part of the compromise that produced the final structure of the Tribunal, most of those objectives were written into the statute, see Conference Report at 82, but the Tribunal was not told which factors should receive higher priorities. To the extent that the statutory objectives determine a range of reasonable royalty rates that would serve all these objectives adequately but to differing degrees, the Tribunal is free to choose among those rates, and courts are without authority to set aside the particular rate chosen by the Tribunal if it lies within a "zone of reasonableness." Permian Basin Area Rate Cases, 390 U.S. 747, 767, 88 S. Ct. 1344, 1360, 20 L. Ed. 2d 312 (1968); FPC v. Natural Gas Pipeline Co., 315 U.S. 575, 586, 62 S. Ct. 736, 743, 86 L. Ed. 1037 (1942); Hercules, Inc. v. EPA, 598 F.2d 91, 107 (D.C.Cir.1978).

The copyright users attack the Tribunal's explanation of its reasons for choosing the four-cent royalty rate. They insist that the Tribunal has failed to give a sufficient derivation of the four-cent figure, that the Tribunal did not give adequate consideration to certain relevant factors, and that the Tribunal improperly gave weight to other, irrelevant factors. None of these objections require extended discussion,23 but there may be some value for future Tribunal decisions in a brief treatment of a few of them.

The copyright users make a fundamental argument that the Tribunal's decision provides no explanation for the selection of the four-cent figure. We recognize that the character of the Tribunal's explanation leaves room for improvement, but the industry's objection is greatly overstated. Stylistically, the Tribunal's opinion is structured more as a demonstration that the four-cent royalty rate is calculated to achieve the statutory objectives than as a derivation of a 4.00cents numerical figure. But this difference in focus does not obscure the basis of the Tribunal's decision.

The Tribunal's explanation of the rate increase is published in the Federal Register, and there is no need to recount it at length here. The Tribunal analyzed the empirical evidence in relation to the statutory criteria. One major target of the copyright owners' submissions, the effect of inflation on their return from the royalty rate, was pertinent to several factors.24 The Tribunal found that the current rate was too low to provide a financial incentive that would maximize the production of creative works, and rejected copyright users' claim that the effect of a rate increase on price (and thereby on demand) would be substantial enough to diminish the variety of new works that the industry could make available to the public. 46 Fed.Reg. at 10,479. Analyzing the relative contributions of the owners and users and their respective shares of recording industry revenues (as well as the shares taken by a third group, the performing artists), the Tribunal concluded that the return to the copyright owners had unfairly dwindled because of the price ceiling while the return to others had been greatly enhanced.25 Id. at 10,480, 10,483.

In light of the economic evidence, the "relative roles" of the copyright owners and others, and the higher level of remuneration to composers under compulsory licenses abroad, the Tribunal concluded that a fair return to the owners required an immediate increase in the royalty rate "to at least four cents per song." Id. at 10,485. The Tribunal also found that a four-cent royalty would be consistent with the opposing constraints among the statutory criteria, that the rate did not disrupt industry structure and practices or unfairly diminish the income of the copyright users. Id.; id. at 10,481, 10482.26 The Tribunal's discussion more than satisfies the statutory directive to state in detail the criteria, factual findings, and "specific reasons for its determination," 17 U.S.C. § 803(b) (1976).

We conclude that, based on the statutory objectives and the character of the determination they require, the Tribunal has adequately explained its choice of a royalty rate. The copyright users have not shown that the rate chosen lies outside the zone of reasonableness suggested by the Tribunal's factual findings, or that the Tribunal's decision is arbitrary or capricious.

The copyright owners assert that the Tribunal misconstrued the purpose of the statutory royalty rate, and set the rate too low because of this misinterpretation. They argue that the two-cent royalty rate set by Congress in 1909 did not become a rigidly prevailing rate until much later in this century. The owners insist that the intent of Congress in 1976 was to revive the flexibility of the original compulsory license system, and that the Tribunal should have set a rate high enough to leave greater room for individual songwriters to negotiate a fair return on their works by bargaining within a range below the statutory ceiling.

The Tribunal rejected this argument, explaining that the bargaining room theory was inconsistent with the Tribunal's interpretation of the statutory criteria:The statute requires the Tribunal to establish a "reasonable" royalty rate calculated to achieve the statutory objectives. We adopt the view of RIAA that:

A rate that is deliberately fixed above the level that the market can bear so that a lower rate can be negotiated in the marketplace cannot be 'reasonable.' Such a rate would yield more than the 'fair return' to copyright owners mandated by the statute.

46 Fed.Reg. at 10,478 (emphasis and footnote omitted). The Tribunal did not agree with RIAA's economic argument that bargaining was impossible,27 but concluded that the statutory rate should itself be reasonable and should afford the possibility of what the Tribunal considered a fair return to individual songwriters, while leaving them free to accept less if bargaining did take place.

We have already observed that the statutory criteria, including the directive that the rate be calculated to "afford the copyright owner a fair return for his creative work," leave the Tribunal substantial discretion to determine policy within the framework of the statute, and that the Tribunal's choices in this area are entitled to deference.28 The copyright owners argue, however, that the legislative history clearly demonstrates that Congress intended to restore the free play of market forces within a generous price ceiling, and that the Tribunal's ruling must be set aside as inconsistent with that legislative intent.

The copyright owners correctly point out that a House committee report issued in 1967 appears to express a legislative intent to adopt the bargaining room approach. See H.R.Rep.No.83, 90th Cong., 1st Sess. 72-74 (1967).29 This 1967 bill, however, was not enacted into law, and its approach to the compulsory license was significantly changed by the subsequent creation of the Copyright Royalty Tribunal. The choice between a bargaining room theory and a prevailing rate theory of the royalty continued to spark controversy over the years, and the 1967 report's summary of the opposing contentions of the copyright owners and users was repeated with some statistical updating in the 1975 Senate report. See 1975 Senate Report at 93-94. But the conclusions of the 1967 House report were not repeated. Rather, the Senate committee drew no explicit conclusion on this issue, merely expressing its approval of a rate increase to 21/2 cents, and observing that "the publishers and composers will have the opportunity to present their case to the Copyright Royalty Tribunal, an expert body qualified to review the economic evidence in detail." Id. at 94.

Thus, the legislative history does not demonstrate that Congress intended to impose a bargaining room rationale on the Tribunal's determination of a reasonable rate.30 The legislative history indicates only that the bargaining room theory had been considered, and that Congress had chosen to express its will through the statutory criteria instead. These criteria do not explicitly address the bargaining room question, and that dispute can only be resolved through the Tribunal's articulation of principles that flesh out the statutory notions of "reasonable" rates and "fair" returns.

The Tribunal's decision that the royalty rate must be reasonable as set, and must not yield an unfairly large return, is based on a reasonable interpretation of the statutory language and is entitled to the deference of this court. Congress established a permanent tribunal, in part, to assure the development of a consistent royalty policy.31 The copyright owners have not shown that this policy determination should be reversed.32

Both groups of petitioners find fault with the schedule that the Tribunal designed for adjustment of the royalty rate. The copyright owners contend that delaying the effective date of the increase to four cents until July 1, 1981, was arbitrary and capricious and inconsistent with the legislative intent. The copyright users charge that the Tribunal exceeded its jurisdiction by establishing a structure for interim rate adjustments that requires the Tribunal to meet annually to reevaluate economic conditions in the recording industry.

Turning first to the effective date, we note that nothing in the Copyright Act expressly forbids the Tribunal to postpone the effective date of a rate increase, at least when an aggrieved party has sought judicial review.33 Petitioners appear to recognize this fact, see Brief for Intervenor NMPA at 52, but they argue that postponement frustrates the congressional intent underlying the statute.

Section 803(a) of the Copyright Act makes the Tribunal's proceedings subject to the provisions of the APA. The APA does not supply a mandatory effective date for agency rulemaking; rather, it requires an agency to publish most rules "not less than 30 days" before the effective date, 5 U.S.C. § 553(d) (1976), and permits an agency to postpone the effective date of an action pending judicial review, if it "finds that justice so requires," id. § 705. When the statute authorizing agency action fails to specify a timetable for effectiveness of decisions, the agency normally retains considerable discretion to choose an effective date.34 Petitioners have not demonstrated a congressional intent to withdraw this discretion.35 We also recognize a certain tension between the copyright owners' position that the rate must become effective immediately after thirty days and their insistence that the Tribunal has the authority to make interim adjustments to the rate before the next full rate proceeding.

Nor have petitioners shown that the Tribunal's decision to delay the effective date was arbitrary and capricious. The Tribunal's opinion demonstrates its concern "to minimize disruptive impacts" on the recording industry, and its view that the effective date of a royalty adjustment should be arranged so as to be "less disruptive to the industries." 46 Fed.Reg. at 10,486. Although the Tribunal concluded that a single increase to the full four-cent rate would not be unduly disruptive, id. at 10,481, it was within the Tribunal's discretion to give the industry adequate lead time to prepare for the increase. See, e. g., National Ass'n of Independent Television Producers & Distribs. v. FCC, 502 F.2d 249 (2d Cir. 1974). While we cannot deny that, on this point, the Tribunal's decision was "of less than ideal clarity," nonetheless we must uphold the determination "if the agency's path may reasonably be discerned." See Bowman Transp., Inc. v. Arkansas-Best Freight Sys., 419 U.S. 281, 286, 95 S. Ct. 438, 442, 42 L. Ed. 2d 447 (1974). That test is met here.

We find more troubling, however, the Tribunal's reservation of authority to calculate appropriate interim adjustment figures through annual proceedings. The procedure set out in the Tribunal's rules requires an annual change in the royalty rate "directly proportionate to the change, if any, in the average suggested retail list price of albums" over a designated twelve-month period. 46 Fed.Reg. 892 (1981) (to be codified at 37 C.F.R. § 307.3(a)). The rule goes on to define the "average suggested retail list price of albums" as the average determined from a "representative group" to be chosen by the CRT (i. e., the Tribunal) from "CRT-conducted surveys and/or studies which it may deem necessary, advisable and appropriate," with due consideration to studies submitted by interested parties. Id. (to be codified at 37 C.F.R. § 307.3(b), (c)). Even this procedure may be superseded, however, "(i)n the event that albums made and distributed in the United States without a suggested retail list price distort the average suggested retail list price, so that it does not reflect record price changes in the relevant period." Id. (to be codified at 37 C.F.R. § 307.4(a)). In that case, "CRT-conducted surveys and/or studies" will be used to determine an "average wholesale price" from a "representative group" of albums. Id. (to be codified at 37 C.F.R. § 307.4(b), (c)). It is evident from this description of the Tribunal's intended analysis that the Tribunal expects to wield its expert discretion in selecting representative groups of recordings and deciding whether the average price they yield is unduly distorted.

The copyright users argue that "(b)y its ambiguity and breadth, the rule gives the Tribunal standing authority to monitor and regulate the recorded music industry and discretion to reconsider the compulsory rate ab initio each year for the next seven years." Brief for Petitioners RIAA and CBS at 64 (footnote omitted). This contention is somewhat overstated: the Tribunal's rule does not authorize a reexamination of the recording industry's profits or the creative contributions of the owners and the users. All that the procedure requires is an analysis of recording industry pricing patterns. Nonetheless, we conclude that this annual analysis is a task that Congress did not intend for the Tribunal to undertake, and that the Tribunal has overstepped the bounds of its statutory authority by scheduling annual proceedings for the exercise of discretion.

The Copyright Act establishes the Tribunal as a permanent body, and authorizes it to settle controversies over the distribution of royalty fees deposited with the Register of Copyrights under sections 111 and 116 whenever the Tribunal determines that such a controversy exists. 17 U.S.C. §§ 801(b)(3), 804(d) (1976). In contrast, the Act does not grant the Tribunal continuous jurisdiction to monitor the fairness of royalty rates. Rather, the statute sets out a precise schedule for initiation and conclusion of proceedings. Id. § 804. Proceedings for the adjustment of the royalty under the compulsory license for phonorecords are to be commenced on January 1, 1980, and thereafter only in response to petitions which may be filed "in 1987 and in each subsequent tenth calendar year." Id. § 804(a)(1), (2)(B). All proceedings are to be "initiated without delay following publication of notice," and the Tribunal is to "render its final decision in any such proceeding within one year from the date of such publication." Id. § 804(e).

Because the timetable for proceedings is so rigid, it is conceivable that economic changes unforeseen at the time of the most recent rate proceeding could create an unfairness in the royalty rate that could not be rectified until the next rate proceeding. The statute itself demonstrates that Congress recognized and accepted this possibility: the inflexibility of the timetable is highlighted by the narrow provision for additional proceedings to adjust the royalty rate for secondary transmission by cable systems in the event of certain changes in federal regulatory policy. Cable royalty adjustments to reflect national monetary inflation and changes in rates to cable subscribers are permitted only in 1980 and each subsequent fifth calendar year, see id. § 804(a)(1), (2)(A), but adjustments in response to amendments to certain Federal Communications Commission rules governing cable operation are permitted whenever the FCC implements such changes, id. § 804(b).

The statute thus indicates that Congress intended the Tribunal to exercise its discretion to determine royalty rates only at recurring intervals. This indication is fully borne out by the legislative history. The long intervals between Tribunal proceedings were not accidental, but were the product of a continuing process of compromise between opposing interests. See, e. g., 1975 Senate Report at 169 (additional views of Sen. Tunney); 122 Cong.Rec. 3823 (1976) (remarks of Sen. Thurmond). The House report explained its reasons for choosing different intervals for the different royalty rates, in terms demonstrating a belief that the Tribunal would not be reevaluating the economic situation between statutory proceedings:(T)he Committee recognizes that the cable television industry is a developing industry in transition, whereas the recording and jukebox industries are long-established. Therefore, the Committee has chosen periods of different lengths in which the (Copyright Royalty) Commission is to review the rates affecting those industries....

The Committee has chosen to stagger the times for review of the various rates established under the bill so as to balance the workload of the Commission.

1976 House Report at 173, U.S.Code Cong. & Admin.News at p. 5789.

The copyright owners and the Tribunal itself, in defending the Tribunal's proposed interim adjustment system, have not presented any evidence from the legislative history indicating that the conversion of the Tribunal from an ad hoc panel of arbitrators to a permanent agency was intended to change the nature of the Tribunal's functions during the periods between statutory rate proceedings. The reasons given in the House for reconstituting the Tribunal were avoiding possible constitutional infirmities and strengthening the Tribunal's ability to carry out the responsibilities it already possessed. See note 13 supra and accompanying text; 1976 House Report at 174; 122 Cong.Rec. 34,226 (1976) (remarks of Rep. Kastenmeier). Yet it is clear from the Senate debates36 and from the structure of the Senate's ad hoc Tribunal proposal that no adjustment proceedings were intended for interim years indeed, no proceedings were possible, since the "Tribunal" was to consist of separate panels of arbitrators, each selected for a single rate proceeding in the years designated by the bill, producing its final decision within a year. See Senate Bill §§ 802, 803(a), 804(e); 1975 Senate Report at 36, 157.37

The Senate debates also contain the fullest elucidation of the harms inherent in frequent rate review, which justified acceptance of the possibility that some inequity would develop during the interim periods. One disadvantage of frequent Tribunal proceedings was the expense to the parties resulting from active administrative and judicial litigation:

First of all, the procedure set out in chapter 8 for accomplishing a review of the fee schedules entrusted to the tribunal is a complex one. It will take almost 2 years to complete, even disregarding the possibility of subsequent judicial review. Because this process is time-consuming and complex, it will necessarily be costly for the industries involved, and these costs must obviously be passed on eventually to consumers.

122 Cong.Rec. 3148 (1976) (remarks of Sen. Beall). Another ill effect of decreasing the period between adjustments was its unsettling effect on industry planning. "(T)he industry needs rate certainty for a fixed, stable period." Id. (statement of Sen. Abourezk); see id. at 3149 (remarks of Sen. Beall).

Thus, the legislative history and the structure of the statute itself evidence a deliberate congressional intent to limit the Tribunal's exercise of discretion in evaluating economic and other factors relating to the fairness of the royalty rate to the review proceedings provided by the statute. This interpretation of the statute is in substantial agreement with the Tribunal's own interpretation, as set out in its regulations. For example, those regulations provide that, after 1980, "for rate adjustment proceedings to comme(n)ce, a petition must be filed by an interested party according to the (statutory) schedule." 37 C.F.R. § 301.61(b) (1980). Furthermore, "(f) ollowing the publication of a final determination in the Federal Register the Tribunal shall not reopen or conduct any further proceedings." Id. § 301.68. Nonetheless, without even alluding to the statutory limits on its authority to conduct proceedings, the Tribunal adopted its scheme for determining through its own expertise an average price of records. See 46 Fed.Reg. at 10,485-86.

The Tribunal itself has given no explanation of how these nonstatutory proceedings can be reconciled with the statute, but its counsel argues that the interim proceedings are permissible because they are not the same kind of proceeding as the statutory rate determinations. Rather than a plenary reconsideration of the fairness of the return the rate affords to the copyright owners and users, these proceedings are intended "to maintain the real fee level" in the face of raging inflation. Brief for Respondent Copyright Royalty Tribunal at 48 (emphasis omitted).38 But regardless of the narrower scope of the intended inquiry, the analysis of record industry pricing structure is sure to be complex and expensive, and possesses ample potential for spawning litigation. Not only would the Tribunal be free to choose among competing "representative samples" in determining average list prices, but it would also have the option of rejecting list prices as "distorted" and switching to a wholesale pricing model. Congress intended that the Tribunal undertake such analyses of the economics of the recording industry only at the widely-spaced recurring statutory proceedings.39

We do not suggest that the Tribunal must set a flat rate that will remain in effect until the next rate determination in 1987. If economic conditions make it implausible that any numerical rate will remain reasonable over the next seven years, then we see nothing in the statute precluding the Tribunal from adopting a reasonable mechanism for automatic rate changes in interim years. See Permian Basin Area Rate Cases, 390 U.S. 747, 776, 88 S. Ct. 1344, 1364, 20 L. Ed. 2d 312 (1968). But, whatever the scope of the Tribunal's adjustment powers may be, the mechanism chosen must be well-determined and beyond the Tribunal's discretion, and judicial review of the reasonableness of the chosen mechanism must be available as part of the review of the Tribunal's statutory rate proceeding. It is possible that an automatic adjustment mechanism will subject the copyright owners to some inequities during interim periods, but this is the "delicate balance" that Congress decreed in the Copyright Act. See 122 Cong.Rec. 3823 (1976) (remarks of Sen. Abourezk).

We conclude that the Tribunal impermissibly awarded itself discretion to reevaluate economic conditions in the recording industry as a part of its rate adjustment mechanism. The scope of the discretion reserved may be relatively narrow when compared to the plenary review proceedings, but the statute gives the Tribunal no authority to engage in discretionary interim proceedings on this subject at all. Accordingly, the adjustment regulations, 46 Fed.Reg. 892 (1981) (to be codified at 37 C.F.R. §§ 307.3, 307.4), cannot be upheld. This case must be remanded to the Tribunal for further proceedings to allow the Tribunal, if it so desires, to adopt an alternative scheme of interim rate adjustment that does not require annual exercise of discretion.40 Since this defect in the Tribunal's decision does not impair the reasonableness of the royalty rate as set for 1981, our remand is not intended to obstruct the effectiveness of the four-cent royalty rate as of July 1, 1981.

Congress created a permanent Copyright Royalty Tribunal to set fair royalty rates under the compulsory licenses in accordance with a consistent and articulated royalty policy. The statutory criteria determining the reasonableness of the phonorecord royalty rate provide significant guidance to the Tribunal, but they also leave it considerable discretion in charting royalty policy. We expect that in future years the staggering of the Tribunal's workload will permit a fuller explanation of the Tribunal's conclusions, more facilitative of judicial review, but we find on the whole that the Tribunal has adequately explained its reasons and adduced support for its adjustment of the royalty rate.

We conclude that the Tribunal's rate adjustment withstands the attacks launched by the various petitioners from their respective sides, and that the Tribunal did not act arbitrarily or unlawfully in deferring the effective date of the new rate. We find, however, that the Tribunal exceeded its authority in adopting its procedure for interim rate adjustments. Accordingly, the case is remanded for the limited purpose of allowing the Tribunal to consider whether it wishes to adopt an alternative scheme for interim adjustments that is within the limits ordained by Congress. In all other respects the Tribunal's decision is upheld.

It is so ordered.