FCC set-top pilot should not be greenlighted

May 23, 2016

The MPAA appreciates Chairman Wheeler’s commitment to honor copyright law, distribution agreements, and content security in his effort to promote set-top box competition. Unfortunately, the proposal itself falls short of that commitment, abrogating the rights of copyright holders and jeopardizing the creation of high-value programming, as we explain in reply comments we are filing today jointly with SAG-AFTRA. The FCC’s goal of increasing consumer choice in the video marketplace should not undermine the production and distribution of the very television content audiences enjoy.

The MPAA and SAG-AFTRA are committed to encouraging the availability of content to audiences through a wide variety of platforms and distributors. And our ask with respect to this rulemaking proceeding is straightforward: that in seeking to ensure set-top box competition, the FCC not give third parties our creative content without permission and without compensation, not put our creative content at risk of theft, and not jeopardize the very economic underpinnings that have led to an explosion of consumer choices and fostered a Second Golden Age of Television.

In addition to being our ask, it’s the law.

The Copyright Act grants copyright holders the exclusive rights to reproduce, distribute, publicly perform, or publicly display copyrighted works, as well as to prepare derivative works based on copyrighted works. Yet the proposal would compel MVPDs to transmit disaggregated streams of copyright holders’ works to all third-party set-top box, internet application, and web service providers, for those providers to use and manipulate without the copyright holders’ permission.

Section 629 of the Communications Act prohibits the FCC, when promoting set-top box competition, from jeopardizing content security or impeding programmers’ rights to prevent content theft. Yet the proposal would force copyright holders to allow third-party set-top box, internet application, and web service providers to use content outside of the licensing agreements necessary to effectively administer and enforce content protection; would limit the content protection systems copyright holders may use; would eliminate safeguards that prevent an influx of internet piracy into the MVPD world; and would increase the risk that devices and applications used to traffic pirated content could gain illicit access to MVPD programming and proliferate.

The First Amendment guarantees the right of speakers to determine what to say and how to say it. Yet the proposal would force programmers to allow third-party set-top box, internet application, and web service providers not only to convey their programming, but also to alter the content and the way it is presented.

The Fifth Amendment prohibits the government from taking property without just compensation. Yet the proposal would force programmers to allow third-party set-top box, internet application, and web service providers to use and manipulate their content for no compensation.

These are among the reasons the overwhelming majority of the creative community has expressed reservations about the proposal, and among the reasons more than 150 Republicans and Democrats from the House and Senate have sent letters of concern to the FCC. The National Telecommunications and Information Administration flagged similar issues in FCC comments it filed, stating that the final rule should “ensure the security of multichannel video programming,” and observing that licensing agreements “typically include a variety of provisions beyond price—issues such as brand protection, advertising, program availability windows, and duration—that are important to enabling parties to defray the costs of producing, acquiring, and distributing that programming.”

In attempting to refute the argument that the proposal abrogates copyright holders’ rights, proponents focus on potential violations by the third-party set-top box, internet application, and web service providers. They argue either that the providers’ conduct would not violate copyright holders’ exclusive rights or, if it does, that copyright holders are not harmed because the proposal does not disrupt their rights and remedies, allowing them to still bring suit.

This overlooks that—before we even analyze whether third-party conduct violates copyright holders’ exclusive rights—the FCC would already have abrogated copyright holders’ exclusive rights by adopting the proposed rules. The proposal would compel MVPDs to transmit licensed programming to third parties for manipulation in ways not permitted by the license agreements, creating a zero-rate compulsory license, something the FCC does not have authority to grant. It would interfere with the ability of copyright holders to enter into exclusive arrangements or windowing agreements. And it would jeopardize the ability of copyright holders to adopt protection measures.

Their argument also misses the point that a main purpose of copyright law and licensing agreements is to promote the creation and dissemination of content by preventing misappropriation of another’s work; litigation is an after-the-fact remedy. The proponents’ position is tantamount to arguing that forcing people to leave open their doors and let strangers in would not infringe their rights or cause them harm because if someone damaged or walked off with their things they could still sue for theft.

Perhaps the easiest way to understand that the proposal abrogates copyright holders’ exclusive rights is to recognize that, today, an internet application or web service provider would not be able to obtain movie or television content for distribution without entering into a licensing agreement with the copyright holder. But if the FCC adopts these rules, an internet application or web service provider would be able to obtain without a licensing agreement any content that an MVPD happens to carry, when serving subscribers who also happen to subscribe to that MVPD. This is a large universe of content, and the intent of some internet application and web service providers to avoid entering into licensing agreements may well underlie their support for the proposal.

Even if the proposal did not abrogate copyright holders’ exclusive rights under copyright law, Section 629 of the Communications Act does not give the FCC the authority to adopt it. Section 629(a) grants the FCC limited power to ensure the availability from third parties of the equipment that subscribers to MVPD services may choose to access the MVPD service in a secure manner. It does not authorize the FCC to require MVPDs to transmit content to third parties in a form that the third parties can manipulate as inputs into a different service, or to facilitate the use of internet applications and web services, as opposed to devices.

High-quality and innovative programming is expensive to produce, and it is license and advertising revenue that funds its production and acquisition. Allowing third parties to use that programming at zero cost—as well as to monetize and manipulate it in ways contrary to the license agreements that protect advertising and other programmer revenues—would jeopardize the creation of the programming in the first place. Thus, the proposal would make it harder to raise the capital needed to produce quality content, and reduce profits that might otherwise be invested into the next production. Exacerbating matters, the decrease in production and drop in revenues would reduce the compensation available to production workers and jeopardize their livelihoods. In short, the FCC’s proposal undermines a creative economy that employs millions of U.S. workers, generates billions of dollars in exports, and currently offers consumers an ever-expanding number of viewing choices. That’s not good for creators or audiences.