Thursday, July 30, 2015

Five Flaws with the FCC's Push for Video Device Controls

August 4 marks the next meeting of DSTAC - the Downloadable Security Technical Advisory Committee. Unfortunately, the FCC has saddled the advisory committee with some bad advice. The agency has urged DSTAC to go beyond its statutory mandate and recommend new standards for how video devices function and display content.
The FCC's approach is flawed for at least five different reasons. Namely: it exceeds Congress's instructions; it creates obstacles to DSTAC completing its real task; it undermines freedom to innovate in the video device space; it's unwarranted by the competitive conditions in today's video market; and it's contrary to First Amendment principles.
DSTAC was assembled pursuant to the STELA Reauthorization Act of 2014. The Act required the FCC Chairman establish a working group to recommend standards for software-based downloadable security to video navigation devices. The standards are supposed to be "not unduly burdensome, uniform, and technology- and platform-neutral." DSTAC's report to the FCC is due September 4, 2015. (Further background is supplied in my blog post, “FCC Shouldn’t Push Video Device and Content Controls on Advisory Committee.”) 
Software security involves serious complexities. Network and device interfacing pose added intricacies. These challenges make DSTAC's assignment formidable enough. Still, the subject matter of the report's mandate is clear enough: focus on downloadable security. Regrettably, the FCC staff has now added to those challenges by injecting its pet project ideas into DSTAC's mission and upcoming report.

The FCC has manipulated DSTAC into resurrecting a set of video device standards similar to the agency's ill-fated AllVid plan. As initially proposed in 2010, AllVid would have mandated all multichannel video programming distributors (MVPDs) make available to subscribers special "adapter" or "gateway" devices for accessing MVPD services. AllVid also would have required disaggregation of MVPD video programming and related content for unaffiliated providers to repackage and sell. Taking a page from the AllVid plan, FCC staff instructed DSTAC that a "black box" for third parties to repackage content and menu products for (re)sale should be included in its report to Congress.
In effect, the FCC is pushing DSTAC to recommend an AllVid-like regulatory regime as a successor to the $1 billion-costly and ultimately unlawfully-imposed CableCARD regime. There are five flaws in the FCC’s steering DSTAC toward broader video device design controls.
First, the FCC has exceeded its instructions from Congress. The agency is not being accountable. Its actions are at odds with the terms of STELAR. Whatever the practical effects the FCC’s actions may have on the report or video device policy, the agency’s disregard of the rule of law is wrong in itself.
Second, the FCC has created new obstacles to DSTAC obtaining consensus and completing the report as required. Tasking DSTAC with contentious, extraneous objectives can delay or derail agreement on its core objectives. By instructing DSTAC to include disaggregation of video programming and menu displays, the FCC has increased the incentives for certain stakeholders to reap financial gains at the expense of MVPDs and video content providers. Putting MVPDs and video content providers further on the defensive and with nothing to gain makes consensus on security standards less likely, not more likely.
Third, the FCC's push for greater controls undermines market freedom to design and products and services for consumers. Many consumers already take advantage of MVPDs' engagement with unregulated manufacturers of mobile devices, tablets, video game consoles, and other devices for viewing video programming. Those developments in video device and viewing took place outside the scope of FCC regulation. Had it been adopted in 2010, AllVid would have threatened those developments. And by pressing DSTAC to recommend a "black box" for repackaging unbundled content and menu displays, the FCC risks distorting future developments. 
Fourth, the FCC's push for greater controls for how video devices are designed and function is unwarranted by market conditions. Regulatory controls or heavy-handed influence by regulators can’t be justified in light of the prevalence of innovation and competition in the video market. There is no evidence of harm to consumers that requires new video device design restrictions.
In its Effective Competition Order (2015), the FCC adopted a presumption against regulation because of today's competitive video market conditions. (FSF President Randolph May analyzed the Order in his blog, "Dealing Effectively With Effective Competition.") Unlike the early 1990s, two nationwide DBS providers and so-called telco-MVPD entrants now offer consumers choices. Online delivery services (OVDs) such as Netflix and Hulu are also increasingly popular consumer choices. Those same facts and the Order's deregulatory presumptive outlook should inform video device policy. Growing consumer video content viewing via tablets and smartphone devices also belies the existence of any market failure or market power concerns requiring regulatory intervention.
Finally, the FCC's call for device design and function controls is at odds with First Amendment principles. MVPD editorial choices regarding video programming content, arrangement, and menu displays are protected forms of free speech. AllVid's proposed requirement for disaggregation of MVPD video programming and related content would have interfered with MVPDs' ability to select, control, and identify their own unique message and branded service. The FCC staff's instructions that DSTAC develop a method to disaggregate bundled content and menu products into outputs for third parties to reassemble and rebrand presents similar First Amendment problems.
Going forward, both the FCC and DSTAC should focus their efforts on what Congress actually required: recommending a standard for downloadable security. Pursuing FCC regulatory ambitions beyond what STELAR instructed puts accomplishment of DSTAC's real assignment at risk. And given the complexities of the task as well as time resource constraints, it is unrealistic to think DSTAC could ever settle on an AllVid-like "black box" standard – even if Congress had requested it, or even if such a standard made sense, which it doesn't.
Providers in different segments of the video market should be left free to pursue the design of broader video device functions and interfaces. Negotiations and arrangements on such matters should be voluntary. They should not be decided through a suspect process in which regulators place their thumbs on the scales.
Consumer enjoyment of MVPD and other video content viewing options – whether through Wi-Fi or wireless, mobile devices, tablets, video game consoles, or otherwise – is the result of market innovation, not FCC regulation. Subjecting dynamic market forces to regulation undermines the innovation-driven processes that benefit consumers, thus harming consumers. Whatever DSTAC's report ultimately calls for, Congress and the FCC should ensure that those same dynamic forces at work in the video market remain free to offer consumers a continuing supply of new video viewing choices. 

* Correction (07/30/15): DSTAT's report will be submitted to the FCC, not to Congress.