Digital TV’s Hollywood Showdown

This week, the public got a glimpse of the future of television.

On February 22, the District of Columbia Circuit for the U.S. Court of Appeals heard arguments in a lawsuit that seeks to stop the FCC-mandated broadcast flag technology from entering the marketplace on July 1, 2005.

The suit – brought by Public Knowledge, a digital rights advocacy group, the American Library Association, the Association of Research Libraries, the Electronic Frontier Foundation and the Medical Library Association – is part of a battle that is a year and a half in the making.

In November 2003, the FCC, under pressure from content owners such as the television networks and cable channels, declared that all consumer electronics devices sold after July 1, 2005 that could receive television signals would have to be able to read broadcast flags – a piece of code embedded in a digital television stream that would restrict how consumers could move their media

The mandate came after content owners voiced their concerns about the potential piracy that would come when television networks switched to digital streams, which they argued would be much easier to copy and swap across the Internet.

The digital rights consortium is arguing that the FCC is overstepping its bounds, in essence dictating consumer electronic product design without first receiving Congressional approval to do so, which is normally required in an effort this sweeping.

After the long, protracted battle leading up to the court case, the plaintiffs appears to catch a break when two of the three judges spoke out against adding a broadcast flag.  “Are washing machines next,” asks Judge Harry Edwards, according to multiple reports from inside the courtroom.

Edwards’s concern is shared by the plaintiffs and many other technology observers. If the FCC can mandate the use and implementation of this technology by fiat, the concern is thatHollywood or other entities could apply enough pressure to consumer electronics manufactures and begin to dictate product designs to a host of categories such as cell phones, video game consoles, and others.

“We’re very encouraged,” says Wendy Seltzer, an EFF attorney, speaking about the judges reaction in the court.

The broadcast flag issue has made strange bedfellows of the technology industry and the government. Typically, consumer electronics manufactures balk at any government effort to dictate design.

In this instance, the companies are in a bind – or at least they were when the initial plans were drafted in 2003.

Consumer electronics companies need the television content in order to sell the digital televisions and ancillary products and many content owners have threatened to not offer digital streams if the flag is not passed.

As such, the Consumer Electronics Association, a lobbying group for the industry, has come down in favor of the flag, alongside representatives of the content industry such as the Motion Picture Association of America

One source, who requested anonymity because of business relationships with the content owners, says their threats to not offer digital content is spurious now that digital sets have entered the marketplace and some digital programming is already available to the public.

“Are you kidding me,” says the executive. “They have no recourse. The cat’s out of the bag. Analog TVs are going away, regardless of what content owners want. No one’s launching analog TV factories in Mexico these days.”

With the sales of digital televisions already growing, a sudden removal of digital television in the wake of a broadcast flag defeat would result in a major backlash against the networks.

“Can you imagine the anger if the people who bought digital sets were told that no more digital programming would be available,” says the excutive.

The markets show that consumers enjoy and expect certain freedoms when interacting with television.

Tivo this week announced that it had surpassed three million customers, well over its previously stated goal. Some of that boost may have come from the product’s price decrease, but it’s difficult to discount the new TivoToGo program, which allows subscribers to move recorded programs over to laptops or even burn DVDs to bring with them.

If the broadcast flag passed, it would be Hollywood – and not Tivo engineers – that would decide if this was allowable. 

Another variable that could complicate the broadcast flag debate is the growing number of mobile phones that stream video from television feeds and allow subscribers to watch highlights of television shows. Mobile carriers desperately need consumers to glom to these data-intensive services to keep their revenue numbers growing. If Hollywood appended onerous usage restrictions on such content, it might stifle user interest and adversely affect the industry’s outlook.

For consumers, the passage of the broadcast flag would mean the content owners would dictate the ability to record shows, share them with friends, or back them up onto a computer. Most of these activities are allowed under today’s “fair use” provisions.

“Once again, that the entertainment industry is trying to tell you what you can do with your own machines,” the EFF posted on its website.

And if previous DRM schemes offered by content owners are any indication, this group errs on the side of Draconian. In the world of digital music, for example, it wasn’t until – ironically – a computer company (Apple) stepped in with a less-oppressive DRM scheme that label-backed downloads took off.

Mark Cuban, chairman and CEO of HDNet is an anomaly – he’s a content owner, but against the broadcast flag.

“The broadcast flag is a joke,” Cuban says. “It’s completely irrelevant. It’s a power play on the part of content owners.”

Other government-mandated technology impositions haven’t fared very well. One recent example is the V-chip, enacted as a reaction to the growing concern over violence on television. But the difference is that the V-chip is controlled by the consumer, whereas the broadcast flag is controlled wholly by the content owners.

No timeline exists for when the judges must make their decision, but if they rule against the FCC, the committee can appeal or decide to drop the effort altogether.