[Ecommerce] American Antitrust Institute on proposed "broadcast flag"

[James Love]

0/23/03

FTC:WATCH No. 618
October 20, 2003

The aai column


        A red flag for the broadcast flag

by Jonathan L. Rubin

The digital revolution is upon us. As of May, 2003, according to the
FCC, more than 1,000 television stations were on the air with digital TV
(DTV) signals, with every major market now served by at least one DTV
station. The government's aim is to complete the transition to DTV by
December 31, 2006, and quickly phase-out current analog broadcasting.

The benefits are enormous. DTV is interference free, uses the airwaves
more efficiently (freeing them up for more advanced wireless and public
safety services), and allows broadcasters to provide super sharp "high
definition" (HDTV) programming with movie quality pictures, Dolby
digital surround sound, and other enhancements.

But DTV is a two edged sword. For content producers, each stream of
digital programming data is a potential "printing press" for making
copies of copyrighted programs which are indistinguishable in quality
from the original, and which may be freely exchanged and re-distributed
on home-burned DVDs and over the internet. They watch with alarm as the
music recording industry, in a frantic attempt to stem the tide of
copyright infringement and declining industry revenues, sues
file-sharing websites and consumers who choose to download music for
free rather than purchase it on CDs. With the transition to DTV, the
Hollywood studios imagine a world in which their ability to earn money
on any given network show or feature film would come to an abrupt end as
soon the program is broadcast digitally.

For consumers, the transition to DTV may have many benefits, but it also
allows movie studios, networks, cable-TV systems, and broadcasters to
control and track the use of programming to an extent not possible in an
analog world. This alarms privacy advocates, do-it-yourself tinkerers,
and those who support a broad interpretation of the "fair use" doctrine
in copyright law. The fair use doctrine (as interpreted by the Supreme
Court) allows consumers to record TV content and play it back at a later
time or to watch it at a different location with family and friends
without violating copyright laws. In the analog world, consumers have
grown used to recording whatever over-the-air programming they pleased.
But the quality of second-generation analog recordings has always been
inferior, and widespread distribution of analog copies is cumbersome.

All of that will change in the digital world, and the content producers
are unwilling to permit consumers to copy digital programming anytime
and to do with it what they please. So adamant are the Hollywood
studios, that they have told the FCC that unless they mandate "copy
protection" technology as part of the transition to DTV, they intend to
withhold digital content from the airwaves. The proposed FCC regulations
governing copy protection they are demanding require all digital video
products (receivers, recorders, networking equipment, etc.) to obey a
signal embedded in digital broadcast programming--the "broadcast
flag"--which would require consumer devices to encrypt copies made from
digital broadcasts.

The scope of the regulations the program producers are asking for is
enormous. Their proposal requires detailed rules on the manufacture and
design of DTV receivers and other devices. It requires that the outputs
on such devices be strictly controlled and tamper-proof. And it would
make illegal the importation into the U.S. or the possession of devices
that do not comply with the regulations and provide penalties for
consumers who attempt to circumvent them.

While the interested parties--Hollywood, the broadcasters, the consumer
electronics industry, the IT industry, and consumers--all agree in
principle that widespread unauthorized distribution of copyrighted
programming is undesirable, there is little consensus on what to do
about it.

But Hollywood's idea has gotten the FCC's full attention. Under the
current Hollywood-led plan, all DTV devices sold in the U.S. would be
required to use a certain set of copy protection technologies owned by
six private companies (Sony, Matsushita, Intel, Toshiba, Hitachi, and
IBM). In principle, the plan is intended to reduce the risk of copyright
infringement. However, it is unlikely to do so, for at least three reasons.

First, nothing in the broadcast flag proposal prevents consumers from
using a broadcast signal from a high-quality analog output and
re-converting it back into digital form. While some quality loss will
undoubtedly occur, it is unlikely to be noticeable or bothersome enough
to discourage private users intent on unauthorized re-distribution from
using this "analog hole" to any appreciable extent.

Second, unless Canada and Mexico also adopt regulations to prevent the
sale or use of "non-compliant" digital video devices in their
territories, DTV signals reaching those countries from broadcasters near
the border will be capable of being copied and re-distributed
in-the-clear without the protections intended to be imposed by the
broadcast flag rules.

Finally, computers running "software demodulation" programs will be
outside the scope of the rules. Such programs convert over-the-air
digital signals into streams of digital video and audio data capable of
display and further re-distribution. Consumers intent on circumventing
copy protection need only use a computer running such a program, which
will soon be widely available.

Even if these weaknesses did not plague the plan, however, the broadcast
flag proposal would still be seriously flawed. The problem is that the
broadcast flag proposal aims at delegating to the private companies that
own the copy protection technologies the power to make and re-make the
rules for how DTV signals should be handled by consumer devices. Through
their rules, these companies have already decided how consumers should
be permitted to handle even non-broadcast video. And companies outside
of the group-of-six will forever be behind the curve as new rules and
design criteria are announced without their input or prior knowledge.

The FCC may be justified in promoting copy protection for high-value
digital programming to ensure that the planned transition to DTV has the
full support of the content producers. But it should not do so by
placing the rules that will determine our digital rights for years to
come in the hands of private, interested parties. At the very least, the
FCC should retain the power to determine the license terms for any
technology that it requires manufacturers to use. It should approve more
than set of private copy protection technologies to give the consumer
electronics industry a choice, and it should closely monitor the effect
of copy protection regulations on the freedom of consumers to enjoy the
degree of fair use they have come to expect.

Delegating the future of DTV to a few private parties may be a simple
solution for the government. But to do so is offensive to the American
sense of fair play and free competition. It tips the balance of power
dangerously toward the interests of Hollywood and a small group of
private companies. And, perhaps worst of all, it amounts to nothing less
than a failure of the government to govern.


--
James Love, Director, Consumer Project on Technology
http://www.cptech.org, mailto:james.love@cptech.org
tel. +1.202.387.8030, mobile +1.202.361.3040