Opening Statement of Chairman Stevens
Hearing on Broadcast and Audio Flag
January 24, 2006
Some time ago a group of us joined together and asked the FCC to deal with the issues before us now. And, this broadcast flag was developed to protect the over-the-air digital television programming from piracy. The FCC adopted that broadcast flag rule, which the consumer electronics industry had begun to implement by developing devices that complied with its requirements. But, the Court has struck down that regulation and held that Congress had not given the Commission authority to promulgate the rule and that’s what brings us here today.
We’re trying to address the question of whether Congress should provide the FCC the authority to put the rule back in place. Groups like the American Library Association are concerned that if Congress give the FCC the authority to enforce the broadcast flag, the rights of consumers and educators to copy, watch, and share programs the way VCR recordings are shared will be threatened. Likewise some consumers want to make sure that they can continue to exercise their fair-use rights to record video programming for personal use.
It’s our task in this Committee to consider industry and various concerns and to try to find the proper balance between them. Determining how to protect audio content in the age of digital radio and satellite has only recently gained greater attention. The FCC has not yet acted on that front. The creative content side and the distribution side of the music industry should seek mutual ground that supports business models for both. Whether it is an audio flag or an alternative, we seek a balance between them and encourage innovative digital services to spur jobs, economic growth, and consumer options like the iPod against ensuring that the creative genius that brings us all the great pleasure to earn a return on their creative investment.
I should state the coming from a State like Alaska, I do come from Alaska, one-fifth the size of the United States, we have tried to implement our education system utilizing distance learning to the maximum extent possible. So, that’s one of our greatest concerns in this hearing today.
Chairman Stevens Questions and Answers with Witnesses
Hearing on Broadcast and Audio Flag
January 24, 2006
Chairman Stevens: Mr. Setos, Mr. Band sitting beside you there talked about the content concept, looking at the content of these transmissions. What’s your response to what he was saying about this process?
Mr. Setos: Well, I think you’re referring to his concerns that distance learning would be in some way affected by the broadcast flag and I think that, if read the TEACH Act correctly, the TEACH Act requires that the content going to students at distant locations via the Internet be protected in some way. And, I think that comes right under the regime of the broadcast flag. So, in principle I don’t see the broadcast flag affecting distance learning in any way and I would support any mechanism by which that would be made.
Chairman Stevens: And, Mr. Band you spoke of libraries being involved in the distance learning process. My understanding is basically that educational institutions like our university broadcast programs all over the state to schools. Now, where do libraries come in?
Mr. Band: Well, if a university is engaged in a distance education program, the university library is a critical part of that process, same thing at the high school level, same thing at the primary school level. It’s often that an instructor will ask, will work with the library, with the school library, the university library in putting together the distance education programming.
Chairman Stevens: Mr. Patton, is there any concern that determining fair license fees for flag technology could complicate this protection?
Mr. Patton: That try to compete?
Chairman Stevens: Yes.
Mr. Patton: No, in licensing regimes, in reasonable nondiscriminatory terms, there are fees associated with licenses. The primary issue which I have raised is whether or not, is not about the fee required to license a technology, but is about a provision that might require or prohibit us from asserting our own intellectual property that might read on that technology, for which we would be able to ask no fair price. The non-assert provision would prevent us from asking for that fair remuneration for the contribution that we would make to that technology.
Chairman Stevens: Ms. Harris, you mentioned the concern about the FCC becoming a gatekeeper for technology. How would you address that concern? Obviously, someone’s got to be a gatekeeper if we’re going to put this rule back into effect. Now, what process would you find acceptable for the FCC to use?
Ms. Harris: You know, I think in the first instance it’s important for this body to state what permissible use is, (what) they have to allow, in other words you’re talking about distance learning, we’re talking about news. You can make a lot of decisions. These are policy decisions, so a decision about whether or not we should permit excerpts to go across the Internet, whether or not we allow content to go to secure devices across the Internet. I think that a lot of those decisions need to be made here. I don’t think we want the FCC in the business of becoming an arbiter between incumbents with powerful entrants and new entrants who are trying to bring something to market. I mean, this is the fundamental problem with the flag regime, is that these things could get worked out in a private marketplace. I think once they become sort of a matter in front of the FCC, the FCC does not have enormous expertise in this area.
Chairman Stevens: The fear is about the development of new technology in this regard, is that right?
Ms. Harris: Pardon.
Chairman Stevens: Your fear is about the development of new technology?
Ms. Harris: I’m worried about the development and the deployment of those new technologies. You saw, the truth is the FCC process, I am not going to say they got it 100 percent right, but they did a fairly good job. And, even in that process you saw companies who had developed technologies for secure transmission across the Internet to secure devices, withdraw those features because they saw that they were going to get into a big fight, that it was going to slow down the process and that’s what our concern is. If you went to the consumer electronics show, it was mind boggling about what is potentially coming to market that we don’t even understand yet. And, what we don’t want to do is wind up with a regime that locks things in place in a way that makes it difficult for those new technologies.
Chairman Stevens: Thank you.
Chairman Stevens: I’m informed the FCC took the position that copyright laws specifically provide the exceptions for fair use in the case of non-profit libraries, archives, educational institutions, and nothing in their order would interfere with those exceptions. Why wasn’t that sufficient?
Mr. Band: Because again the problem is the technology. The flag would require that all receiving devices prohibit the retransmission. So, even though technically you’re not changing the copyright law, as a practical matter there is no device that a library could buy that would allow that retransmission. So that’s why a critical part of this is making sure that there would be devices on the market, again only, what we’re asking for is very narrow, that there would just be basically professional devices that would available only to entities that can take advantage of the TEACH Act and that they would be able to have the devices that would be able to retransmit this content.
Chairman Stevens: Thank you very much.
Chairman Stevens: The first part of what we’re talking about in terms of the ability of the individual to download from the radio or from CDs. I’ve got to tell you, I’ve for years had my CDs in a little package that I carried with me on the airplane listening to CDS that I’ve liked for eight decades, alright. My daughters gave me an iPod and they downloaded all of those. It took a long time to do that. Mr. Bainwol, you’re not talking about that are you?
Mr. Bainwol: No, we think that’s great. The iPod is a phenomenal device and if you move your own CDs onto the iPod that’s great. If you buys songs individually and put them on the iPod that’s great too. We’re talking about something entirely different. We’re talking about being able to replicate a purchase, but not make a payment.
Chairman Stevens: Ok, now, then we come to Mr. Shapiro. You have some problems with that statement, as I understand it. You contradict him sort of.
Mr. Shaprio: Absolultey, of course. You know, we’re talking about three services here to conceptualize them. There are two national radio services, XM and Sirius, and they are paying royalties to Mr. Bainwol’s people. And, plus the manufacturers of devices which do what Mr. Bainwol is talking about are paying royalties to Mr. Bainwol’s people and plus those devices are already restricted by Acts of Congress as to what they can do. So, there are two royalties and a restriction already that copyright owners got. They’re asking for a fourth total restriction now. There’s also a local radio service, which is what NAB is talking about. It’s called HD Radio and it allows local radio broadcasters to send out a digital signal. It’s just started. It’s taken probably a dozen years in the making, seven years at the FCC. The RA was not present in any of those proceedings until very recently. We’ve got along. We’ve created a standard. The radios are being sold now the RA is talking about stopping them from recording from those devices. At the same time, Congress has considered over and over again whether you should have the right to record off of radio and every time Congress has said you should be able to record off of radio. And, that’s what these devices do. They allow you to record off of radio for product that you legitimately got. They don’t allow you to send it over the Internet. What’s Mr. Bainwol is talking about is stopping private, home recording, a fair use of radio. That’s what he’s talking about.
Chairman Stevens: Is that right Mr. Bainwol?
Mr. Bainwol: No. And, you know, Gary’s charming and compelling, but often very misleading. It’s a dangerous combination. When we were going through our issue with Grokster, Gary instructed us that we should just get over it, that P2P was part of life, that is was fair use. The Court disagreed with him 9-0. He’s got a fairly fringe perspective here when it comes to what he calls recording rights and he’s applying that fringe perspective to this debate. And, I want to clarify a number of things he said. First of all, fair use is not the right to take something and redistribute it. And, it’s not the right to replicate a purchase and steal a song. Free use is the right to enjoy the product that you buy. So, if you buy a CD you can put it on your iPod. We are the most permissive rights holders of any of the content players.
Chairman Stevens: Don’t stretch it out too long. I want to know what do you disagree with, with what he said.
Mr. Bainwol: Well, I key things in terms of recording, we don’t want to do anything that is different than current consumer expectations.
Chairman Stevens: But, if I take something off of one of these new radio stations, like Mr. Halyburton’s got and use it and just use it in my own home, on my own iPod, are you trying to restrict that?
Mr. Bainwol: What we’re trying to do is this: if you listen to the radio and manually record as you can right now and get it in that fashion, that’s fine. If you want to time shift a block of programming that too is fine. But, if you want to go in and program the device to automatically say, I want that Bruce Springsteen tune and I’m going to automatically do that without listening to the programming when it’s live, that’s different than the traditional taping off the radio. If that’s your objective, that’s exactly what you do when you go to iTunes and you make a purchase. You’re saying I want Bruce Springsteen, Born to Run, give it to me now. You put it in your library, you’ve cherry-picked it.
That’s not right (refers back to programming for automatic taping), that emasculates the download model. Let me give you a consumer quote…
Chairman Stevens: I’ve got just limited time and we’ve got to get through this.
Senator Sununu: Mr. Chairman can I ask a very specific question here that speaks directly to your point?
Chairman Stevens: Yes.
Senator Sununu: Mr. Bainwol, if I am listening to XM Radio and they play three songs in succession and I record all three songs, what you are saying is, I can listen to all three of those songs in the order that they were played by XM, but what you object to is me listening to those songs one at a time over a span of three hours. Is that correct?
Mr. Bainwol: Here’s what I’m saying, I’m saying that you can…
Senator Sununu: It’s a very clear question. If I record it, it’s a simple, very…
Mr. Bainwol: Are you listening to the radio as this occurs?
Senator Sununu: No, I recorded three songs in succession.
Mr. Bainwol: Right.
Senator Sununu: Do object, do you oppose my right to listen to one of those songs at a particular time the following day?
Mr. Bainwol: We have a concern about the disaggregation of a block of programming.
Senator Sununu: Mr. Chairman, the answer to that question, I think you understood the question, the answer to that question is yes. You could not listen to those songs one at a time.
Chairman Stevens: And, I follow Mr. Bainwol right down to the end, but if I set my television so I can record a particular program that I’m not going to be able to see, alright, a ball game.
Mr. Bainwol: Right.
Chairman Stevens: And, I come back and turn it on two days later and see it, there’s nothing wrong with that today?
Mr. Bainwol: There is nothing wrong with that.
Chairman Stevens: What’s wrong with what Senator Sununu said with regard to recording songs and listening to them later?
Mr. Bainwol: There are a series of problems. One is when that TV program is broadcast, the content owner is being paid. When the song it aired on the radio, not in the satellite context, but in the HD context, the content owner is not being paid. So, that’s the first thing that’s wrong. Secondly, when you listen to White Christmas or Stairway to Heaven, you listen to it 1,000 times. Desperate Housewives you watch twice. It is the pattern of consumption. Third, we have no leverage here.
Chairman Stevens: Ok, I’ve got to move on. We have a disagreement here I think. Mr. Halyburton, do you have any responsibility as radio operators to protect radio content, digital radio content.
Mr. Halyburton: At this time, no. Chairman Stevens: Are you willing to work for a solution as to content protection?
Mr. Halyburton: Yes, as written in our written and oral testimony, we are ready to sit down with the various players. There’s more, obviously, a lot more people than just at this table. But, you know, we have concerns about copyright. We are copyright owners, so we think that there is an opportunity to sit down and have some dialogue, providing that dialogue and the approach is narrow in its attempts to try to accomplish something.
Chairman Stevens: You mentioned your digital transition and I assume you have invested very substantially in that transition, right?
Mr. Halyburton: Yes, all of the broadcast companies are spending tens of millions of dollars to make the transition to digital.
Chairman Stevens: Has that added to your revenue base?
Mr. Halyburton: Not at this point. We’re just really as indicated, just really on the beginnings of this. There are hopes down that road that this will improve, you know, revenue and profitabilities. But, I think we’re several years away from seeing…
Chairman Stevens: I sort of take it you’re walking a tightrope between these other two witnesses beside you, right?
Mr. Halyburton: Yeah, it’s kind of interesting. Usually Mitch and I are more debating issues. I’m a little bit over on the side on this one, which is just fine.
Chairman Stevens: What would you have us do with this bill?
Mr. Halyburton: Well, I think as indicated, Senator Smith’s bill and suggestions are a good one and a step in the right direction. I think there’s a lot of work to be done. You know, the TV broadcast flag was a longtime in the making, but I think that if we can keep our approach contained and narrow so that we can kind of try to accomplish the things for all parties that…
Chairman Stevens: You don’t want us to mandate and industry, government solution, right?
Mr. Halyburton: We’d like to go back and work on it ourselves and see if we can’t figure that out. I think there may be an approach in Senator Smith’s (bill) that gives us a timetable we can work along these lines.
Chairman Stevens: That was going to be my last question to you, do you accept a timetable on that?
Mr. Halyburton: I think, again, providing, we keep this discussion straightforward and limited, we don’t get too broad and that we’re that aware of issues like home recording, etc, then I think we can get some things done.
Daniel K. InouyeSenator
Digital content producers are right to conclude that piracy is a legitimate threat to their long term success. The movie industry, one of the few American industries with a positive trade balance, loses an estimated $3.5 billion annually due to piracy.
This amount, while already large, seems certain to grow as broadband proliferates, particularly if producers of content are unable to stop the indiscriminate distribution of their creative works.
The Federal Communications Commission (FCC) jumped into this breach at the prodding of Congress. In adopting its Broadcast Flag Order, the FCC recognized that adopting a standard for the protection of digital, over-the-air, television content was necessary to give broadcasters the same ability to protect video content that currently exists on cable and satellite distribution platforms.
Though far from perfect, the broadcast flag is the closest we have come to date to a balanced solution. With some refinement, it could provide sensible copyright protection without stifling the production of new, innovative consumer electronics.
Despite the recent reversal of the FCC’s broadcast flag order by the D.C. Circuit Court of Appeals, the method appears to be gaining favor, and it may very well be appropriate for Congress to explicitly grant the FCC the authority that, the Court contends, it lacks. The testimony provided today will help us make that determination.
Today's hearing also affords us the opportunity to consider strategies designed to protect music and other audio content in a digital age -- an industry that knows all too well the impact of online piracy. As a result, today's second panel will allow us to explore whether similar content protection strategies are warranted for digital audio content.
I thank the witnesses for their participation in today's discussion.
Witness Panel 1
Mr. Andy SetosPresident of EngineeringFox Entertainment Group
Mr. Jonathan BandCounselAmerican Library Associatio
Mr. Thomas B. PattonCorporate Vice President of Government RelationsPhilips Electronics North America Corporation
Ms. Leslie HarrisPresident and Chief Executive OfficerCenter for Democracy and Technology
Witness Panel 2
Mr. Mitch BainwolChairman and Chief Executive OfficerRecording Industry Association of America
Mr. Gary ShapiroPresident and Chief Executive OfficerConsumers Electronics Association
Mr. Dan HalyburtonSenior Vice President and General manager of Group OperationsSusquehanna Radio