The Broadcast Flag Decision: The FCC Bends Over Backward to Protect Over‐​the‐​Air Television and the HDTV Transition

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Just how far will policymakers go to protect "free,over-the-air" television and our ongoing industrial policy experiment with high-definitiontelevision (HDTV)? To answer that question, one need look nofurther than last week's decision by the Federal CommunicationsCommission mandating that by July 1, 2005, every consumerelectronic device in America capable of receiving digital TVsignals must be able to recognize a "broadcast flag"-or string of digital code-thatwill be embedded in digital broadcast programming in the future. Intheory, this little bit (excuse the pun) of regulatory engineeringwill encourage content creators and broadcasters to air moredigital programming "in the clear" (i.e., through the broadcasttelevision spectrum), knowing that the broadcast flag will allowthem to prohibit mass redistribution through peer-to-peer (P2P)networks. In other words, the broadcast flag mandate will preventthe "Napster-ization" of video programming.

That's the theory, and to some extent it just might work. But isadding another layer of regulation to the existing mountain of HDTVmandates really a good idea? In one sense, it's tempting to say,why not? The history of broadcasttelevision in general, and the HDTV transition in particular, isjust an endless string of mini-industrial policies. Each industrialpolicy decision begets another and another. The theory has alwaysbeen that broadcasting is a complicated and important business and,therefore, policymakers need to take special steps to guarantee itssuccess. Somebody needs to figure out, for example, thetransmission standards for broadcast television. Are 480 lines ofresolution enough, or should we bump it to 1,080? Is interlacedvideo acceptable, or would progressively scanned video be better?Is a 4x3 TV set aspect (square) ratio good enough, or should allpictures be shown in 16x9 (letterbox) aspect? Should we phase outthe old analog broadcast transmission on a specific timetable?Should each new television set include a digital tuner?

Hey, somebody has to make these decisions, right? Sure they do,but it remains unclear why that someone should be the FCC.Nonetheless, in each of the examples just listed, the FCC hasalready adopted mandatory standards for companies and consumers tofollow. We have aspect ratio standards and rules governing whatcounts as a "high-def" signal; rules governing by what datestations are supposed to make the digital transition in theircommunities; mandates requiring set manufacturers to install government-approved digital tuners inevery set they sell; and now a broadcast flag edict mandating thatevery program and electronic device include or readgovernment-approved digital code to guard against contentredistribution. We are told to believe that the HDTV transitionwill not happen in this country without such mandates andmicromanagement from above.

One cannot help but snicker at such an assertion since the HDTV"transition" has already been going on for almost 20 years and yetonly a very small percentage of consumers receive HD signals today.Moreover, the FCC does not impose grand industrial policyexperiments on most other high-tech industries, but they seem tomake complex transitions all the time. The computer sector isequally, if not more complicated than broadcasting, and thereexists a variety of knotty computing issues for which the FCC couldpotentially establish complex regulatory solutions. But they don't.Somehow the computer sector just keeps chugging along without suchmeticulous micromanagement from Washington. But what's done isdone, and we long ago reached the point of no return on the road toa HDTV industrial policy. What should we make of the latestmini-industrial policy, the broadcast flag? Doesn't the contentcommunity have valid reasons to be concerned about widespreadredistribution of their digital programming? Some broadcasters haveeven said they'd consider pulling their existing digitalprogramming off the air if they couldn't ensure adequateprotections existing against Net redistribution.

As someone who's obsessed with HDTV and currently owns three HDsets, I certainly appreciate the value of high-definitiontelevision programming and want to make sure it doesn't disappear.But while the broadcast and content industry are correct inasserting that the widespread redistribution of high-definitionbroadcast content over the Internet might represent aserious problem, it's hard to believe anyone in America today hasenough bandwidth or processing power to be downloading andredistributing massive digital television files via the Net. In thefuture, however, when broadband speeds (hopefully) multiply,content providers might have more reason to be concerned about thefinancial viability of certain programs if those shows could beredistributed to the world at the click of a button. In such aworld, it might make sense for them to embed digital broadcastflags in their programming, or even encrypt their programming atthe source and require consumers to purchase new equipment todecrypt that programming before it can be viewed. But it is anentirely different matter to have the FCC set up a mandatoryregulatory regime that forces such solutions on the entirenation.

Technology mandates are misguided because, well, they aremandatory! Policymakers should not lock industry or consumers intoany static technological standard, even when it's done in the nameof protecting intellectual property. IP rights can still beenforced in other ways. For example, programmers could sueindividual users who redistribute content on a widespread basiswithout permission or compensation for the creators. Instead oftaking this more targeted approach to prosecuting the handful ofusers that cause the most serious problems, the broadcast flagproposal opens the door for the FCC to create an intrusive newregulatory apparatus for the Internet and computers in the future.The FCC would be hard-pressed to point to any language in theCommunications Act of 1934 or the Telecommunications Act of 1996that gives them the authority to regulate IP, the Internet, orcomputers in this manner, but statutory law long ago ceased to bemuch of constraint on this agency's actions.

Finally, there are some troubling enforcement issues here worthconsidering. In the wake of the broadcast flag plan as well as thedigital tuner mandate, the phrase "compliant devices" will becomemore common in this arena. If I build a personal computer thatpowers my home theater setup and it includes a noncompliant digitaltuner or video card, have I broken the law? What if I sold a few ofthose devices on eBay? If the broadcast flag makes my current DVDplayers obsolete, can I tinker with them to make sure they're stillusable after July 1, 2005? What about the so-called "analog hole"problem of consumers simply using analog outputs to transfer filesto computers, ignoring the broadcast flag altogether? And whathappens when the broadcast flag gets hacked a few weeks after itdebuts? Will the FCC invoke the Digital Millennium Copyright Act's"anti-circumvention" provisions to go after certain consumers whotake advantage of the hack? What's the FCC's enforcement plan ifand when each of these scenarios develop?

So many questions. I guess we'll have to wait for the next fewFCC industrial policies to be promulgated to get our answers. Onewonders if the Soviets ever spent this much time and attentionplanning a sector of their economy.