Case of Piracy Overkill?

02:00 AM Oct. 27, 2003 PT

Critics of proposed Federal Communications Commission rules designed to prevent consumers from redistributing copies of digital television shows on the Internet say the move won't stop piracy but will curtail technological innovation and the "fair use" of content.

The new rules, expected to win approval this week, mandate that devices capable of receiving digital signals -- including TVs, digital recording devices or computers containing a broadcast card -- be able to detect a broadcast flag encoded in the bit stream. The flag would allow users to copy and view digital content on any system in their home network, but would not allow them to upload the content to the Internet.

Fred von Lohmann, senior staff attorney at the Electronic Frontier Foundation, said the movie industry fought in court for eight years to try to make it illegal for users to copy TV shows with their VCR. He said the industry is simply trying to find new ways to encroach on fair use, an individual's right to use copyright material in a reasonable manner without the consent of the copyright owner.

"They know that trying to take that fair use away from millions of Americans is way too unpopular, even though they would if they could," von Lohmann said. "So what they want to do is freeze things so that consumers don't get any new fair-use capabilities in the future."

If such restrictions had been in place in the early 1970s, von Lohmann said, there would be no VCR today.

"As they made clear through eight years of litigation with Sony, the industry never would have given you the opportunity to make copies in your home if it had been up to them."

Fritz Attaway, the Motion Picture Association of America's executive vice president for government relations and Washington general counsel, said the new rules are needed because Internet piracy has the potential to cut into the syndication market for shows abroad. According to the MPAA, total foreign TV revenues for the industry were approximately $4 billion last year.

"Those ancillary market revenues in foreign syndication are critical to the ability to recover costs," he said. "Foreign syndication, cable casting (the re-selling of broadcast shows to the cable market) and home video are important to the economic foundation of television production."

However, Attaway admitted that there were currently no recorded losses from piracy of broadcast shows.

"Because so few people are capable of trafficking in these large audiovisual files today, the economic impact today is probably fairly low," he said. "But we are trying to provide for the future."

Von Lohmann sees a problem with the MPAA requesting protection for a problem that doesn't currently exist and probably won't for four more years, if ever.

"What they're saying is we might have a piracy problem in several years' time, so we would like you to bail us out in advance," he said. "There is absolutely no benefit to this."

He also said "the broadcast flag would still be completely and utterly useless at addressing the problem. The thing leaks like a sieve."

The mandate, for instance, would not affect numerous devices already on the market, such as digital tuners and broadcast cards for PCs. This means that anyone who currently owns these products will still be able to trade digital content over the Internet even after the mandate is implemented.

"We're talking about hundreds of thousands of devices already in the field that can receive digital TV and save it to a hard drive with no protection at all," said von Lohmann, who predicts there would be a run on such devices in stores before the mandate goes into effect. "There will be a great market for PC broadcasting cards on eBay," he said.

Attaway acknowledged that this "will be a legacy problem for us until those TVs migrate out of the marketplace."

Even then, Attaway said in a March address to Congress, the flag would not completely solve the problem of Internet trafficking, since users could always bypass the flag restrictions by making a digital copy of content, converting it to analog, and then reconverting it to digital.

In a press release following his address, Attaway said the solution in that case would be "to close the analog hole," implying further restrictions on consumers down the line.

He said the mandate would not prevent a consumer who owns a "flagged" digital TV from recording a home copy of a program. The problem lies with one person sharing their copy with 10 million others.

"There is a very big difference between you making a copy of Friends and mailing a copy to 10 million people in Europe. We don't think you're going to do that. We do think that if you have the ability, you might take that copy of Friends and make it available to 30 million people in Western Europe over the Internet. That has an adverse effect on the economic foundation of producing that program," he said.

Von Lohmann charged the FCC mandate would curtail technological innovation, since technology companies would have to ask permission before they could design a new product.

"The mandate comes with all kinds of obligations about what kinds of features you're allowed to offer with your product and how they must be implemented, and the people who control those requirements are the Hollywood movie studios and other technology and consumer electronic companies," he said. "It creates an environment where small innovators who are not willing to compromise for someone else's business model essentially get shut out."

He pointed to DVD technology as an example of what happens when technology is controlled by a particular group.

"In order to interoperate with DVD, you have to sign on with a bunch of agreements and private licensing arrangements under the auspices of the DVD forum," he said. "There's been no new feature added to DVD players since their introduction. And that's exactly the way Hollywood likes things to go."

As for Attaway's argument that the industry stands to lose income from foreign sales if shows are traded over the Internet, von Lohmann said the copyright act is not designed to guarantee profitability for all time in all markets.

"The same argument applies here that we gave to the railroad industry when the auto industry emerged. It's a market economy: Adapt."

Von Lohmann pointed out that the industry was hardly suffering economically.

"Last year was the most profitable year that the movie industry had, and broadcast TV is doing a very healthy business in DVDs," he said. "The bottom line is that there is lot of money being made by the industry today, and there is no evidence to show that this is going to change if high-definition broadcasts are not protected."