In
January 2016 the FCC adopted a Notice of Proposed
Rulemaking
(NPRM) purporting to “unlock the box.” But in actuality, the FCC’s NPRM would unlock
copyright protections by mandating third-party video device maker access to
valuable content and subscriber information. This access mandate would result
in widespread violations of licensing agreements negotiated between copyright
owners and video service providers. The truth is that the NPRM’s strictures
would stifle the video market’s innovative
transition
from set-top boxes to applications.
Concerns
over the unintended consequences of the proposed rules have been raised by a
majority of the Commission. Two of the FCC Commissioners – Ajit Pai and Michael
O’Rielly – voted against the NPRM. They have cited increases in
the costs of video innovation and violations of intellectual property rights
that would result from the NPRM’s adoption. Commissioner Jessica Rosenworcel – who
voted for the adoption of the NPRM – has also publicly acknowledged her
concerns with the proposal. In June, Commissioner Rosenworcel, said: “Kudos to the Chairman
for kicking off this conversation but it has become clear the original proposal
has real flaws and, as I have suggested before, is too complicated. We need to
find another way forward.”
The current proposal is irretrievably flawed. As
FSF Senior Fellow Seth Cooper discussed in a February
2016 blog, the FCC’s proposal would undermine negotiated contractual
rights to transmit copyrighted video to subscribers. This is because video
service providers would be forced to make licensed video content available to
third-party device makers who never contracted with copyright owners. Copyright
owners would have no ability to enforce their negotiated licensing terms
against third-party devices makers they never contracted with. Nor would the
FCC have legal authority to police NPRM-enabled copyright violations by third-party
device makers. Significantly, on August 3, 2016, the Copyright Office sent
a letter to members of Congress describing in detail the
copyright law problems posed by the FCC’s NPRM.
Although this by-product of the FCC’s proposal
has not received as much attention as others, copyright violations that inevitably
would result from the NPRM almost certainly will harm minority and diverse
content creators. In a March
2016 letter to the FCC, a number of
organizations representing minority consumers and diverse ethnicities,
including the Multicultural Media, Telecom and Internet (MMTC), League of
United Latin American Citizens (LULAC), and the National Association for the
Advancement of Colored People (NAACP),
asked the Commission to study the effects the proposal would have on “diversity
and inclusion.” In April, MMTC submitted
comments to the FCC stating: “[T]he unintended
consequences of the FCC’s choice would harm diverse programmers and content
creators by violating their copyright and licensing agreements and existing
distribution arrangements with MVPDs, the lifeblood of their very existence.” Indeed, Commissioner Rosenworcel has publicly
recognized the threat of harm that NPRM-induced copyright violations would pose
to minority and diverse content creators.
To be sure, all content creators would be harmed
by this proposal because it will enable third-party device makers to repackage
content and rearrange channel lineups and tier placements. Copyright owners’ reduced
control over the use of their video content will correspond with reduced financial
returns. The NPRM will also cause harm by enabling third-party device makers to
sell targeted advertisements to consumers based on their viewing habits. Ad
revenues reaped by third-party device makers would be appropriated from the
owners of copyrighted video content. However, minority and diverse content
creators could be harmed disproportionately because they often sell their
content and corresponding ads to specific audiences that are smaller in size.
This loss in ad revenues will have the effect of discouraging innovation and
creativity among minorities and other smaller, diverse audiences.
It is encouraging to see a majority of the FCC
Commissioners raise concerns about the costs levied on minority programmers by
the agency’s set-top box proposal. But the proposal is hopelessly beyond
repair. FSF President Randolph May and Senior Fellow Seth Cooper rightly have
called for the termination of what they denominated the “Enable
Copyright Violations” proposal. (Also, see FSF’s comments and reply
comments regarding this proceeding.)
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