FCC FLAG DECISION PRAISED, FAULTED, CHALLENGED

The FCC’s 5-0 decision late Tues. to enact broadcast flag copyright protection rules wasn’t unexpected, and neither was celebration by the content industry and lamentation by some in high-tech and fair use advocacy groups. Hill reaction was somewhat divided, too, with at least one prominent House member questioning the authority of the FCC to act.

Consumer electronics devices and PCs will be required by 2005 to comply with a broadcast flag, essentially code that rides along a broadcasted digital TV signal that prevents redistribution on the Internet. For several years, MPAA has championed 3 technology and policy solutions to combat digital piracy -- a broadcast flag, an analog hole solution, and peer-to-peer restrictions. The latter effort hasn’t been addressed significantly by the FCC or Congress but an inter- industry group has been meeting for some time on the analog hole -- essentially protecting copy that’s converted to digital from analog and then redistributed -- and the FCC decision signals a victory on their first item. However, one fair use advocate told us the FCC decision would face a court challenge.

One Hill member strongly praising the flag decision was House Commerce Committee Chmn. Tauzin (R-La.), who has held roundtables with leaders from the content, high-tech and CE industries to work toward digital rights management (DRM) solutions. Tauzin, widely rumored to be the successor to Jack Valenti as head of MPAA, called the FCC decision an “important step” in protecting digital content.

But the fact that the FCC decision might have an impact on copyright law, not a typical area of jurisdiction for the FCC, was not lost on House Judiciary Courts, Internet & Intellectual Property Subcommittee Chmn. Smith (R-Tex.). “My Subcommittee has great interest in the FCC’s announcement because the agency may issue rules that impact the Copyright Act and involve my subcommittee’s jurisdiction,” he said Wed.: “The subcommittee will reserve judgment until we undertake a complete review of the published rule and determine if the Copyright Act is affected.” Smith is one of Capitol Hill’s most vocal opponents of digital piracy. He has held numerous hearings on the subject and is attempting to mark up a bill that would bolster law enforcement efforts. But earlier this year he held a hearing on the broadcast flag and made it clear to FCC Media Bureau Chief Kenneth Ferree that Smith was skeptical that the FCC had the authority to act with the flag. Originally, the FCC began the flag proceeding with a Notice of Inquiry asking if it had the authority; after reviewing comments it decided it did.

Valenti called the decision “a big victory for consumers” because without such protection, broadcasters would have been reluctant to broadcast high-quality digital programming over the air: “All the way around, the consumer wins, and free TV stays alive.” But Public Knowledge Pres. Gigi Sohn said “consumers will need to be vigilant to make sure the flag doesn’t tread on their reasonable uses of content.” Electronic Frontier Foundation Senior Intellectual Property Attorney Fred von Lohmann was more blunt, calling the decision “a step in the wrong direction, a step that will undermine innovation, fair use and competition.” Business Software Alliance Pres. Robert Holleyman said his group needed to review the order fully before commenting in detail but said the high-tech industry has worked hard to negotiate private-sector DRM solutions with content providers: “We continue to have reservations about the need for regulatory intervention in this area at this time.” Center for Democracy & Technology analyst Ari Schwartz said “it still remains unclear what technologies and consumer uses will ultimately be permitted under the ruling.”

Looking at the 72-page order, which came out Wed., some consumer groups said they feared that the broadcast flag would diminish consumers’ rights to record content in the way they're used to today. A Consumers Union (CU) spokesman said the decision by the FCC opens the door to a pay-for-play world where, potentially, down the line, every piece of content could involve a payment. The order, he said, doesn’t distinguish between an individual’s rights to move content around from his home, car and other places in a “personal digital network environment” and the illegal mass redistribution of that content over the Internet.

“The FCC approved most of the worst elements of the flag and punted on all of the hard questions that needed to be answered to remedy some of the problems of the flag,” the CU official said, referring to what’s included in the Further Notice of Proposed Rulemaking (FNPRM). The flag, he said, is not even half of the solution unless the “analog hole” can be plugged. He also questioned whether the FCC has the power to transform the market for technology products in the way this order could do. “Technology normally becomes obsolete because the marketplace woos buyers with new features. This is the first time that technology will become obsolete by government fiat,” he said.

NAB Pres. Edward Fritts said the FCC decision was an important advance in the digital TV transition and that he was equally pleased that the Commission recognized that news and public affairs programming deserved the same copyright protection as other programming. “With approval of DTV ‘plug and play’ rules, a DTV tuner mandate and now the broadcast flag, the FCC is poised to enact cable DTV carriage rules that guarantee consumer access to the highest quality broadcast programming available anywhere in the world,” Fritts said. NCTA Pres. Robert Sachs said he was glad the FCC in its order gave cable a certain amount of flexibility in implementing the flag. Disney Exec. Vp Preston Padden said consumers have a “big stake in helping to keep high value content on broadcast TV. Today’s FCC decision will do just that.”

Rep. Terry (R-Neb.), who introduced with Rep. Boucher (D-Va.) DTV legislation (HR-2825) earlier this year, also praised the FCC for its adoption of the flag. The bill -- which mainly focused on cable-TV “plug and play” issues -- helped spur the FCC to take action on the plug and play agreement, Terry said. That action by the FCC acted as a “catalyst” for the Commission to move on the stalled broadcast flag requirements. Terry’s spokesman said that despite the fact that the plug and play portion of the bill has been enacted by the FCC, there’s still need for the legislation because it would require the FCC to establish minimum power levels for DTV broadcasts by July 1, 2004. Terry also credited the DTV roundtables led by Tauzin as instrumental in getting a broadcast flag standard adopted.