FCC’s set-top box proposal
Apr 23, 2016
The Property Rights Alliance (PRA), an affiliate of Americans for Tax Reform, has taken a stand against the FCC’s set-top box proposal that compels pay-TV providers to give control of their products and services to third party providers without negotiation or compensation.
The FCC’s proposed rule violates copyright. The Founding Fathers understood the importance of IP and rooted it in the Constitution. The dynamic video marketplace is governed by complex contractual agreements between willing buyers (pay-TV distributors) and sellers (content creators and owners). These contracts stipulate the terms by which TV shows and movies are presented to consumers and include things like channel location, neighborhooding, advertising revenue splits, quality of presentation, security, and more. The FCC proposal needlessly upends this delicate ecosystem by removing buyers and sellers from the equation. Instead, a vibrant marketplace will be replaced by government mandates. The FCC has no right to force creators to give away their content and risks harming consumer welfare by slowing creation of content.
The proposal contradicts U.S. policy. The US government has a long history of opposing foreign government policies that force American entrepreneurs to hand over their valuable IP to competitors for commercial exploitation. But this is exactly what the FCC proposal is going to force companies to do. The FCC proposes to force 1) rights holders and MVPDs to transfer their IP, products, services and data to new competitors; and 2) adoption of a government technology and encryption standard to serve a government created market for set-top boxes. The idea that a domestic government agency would propose a rule that would be received warmly by China’s central economic planners is disturbing, at best.
The proposal could lead to an increase in piracy. One study concluded that “23.8% of the total bandwidth used by all internet users, residential and commercial” is infringing. In contrast, the Pay-TV market is piracy free thanks to strong contractual and technological measures put in place by content owners and distributors. However, supporters of the set-top box proposal have expressed their intent to mix content from the Internet with pay-TV service by virtue of “universal search,” potentially displaying illegal and legitimate content side-by-side – and there is no language in the proposed rule barring this behavior. Furthermore, search plays a large role in facilitating piracy. According to one survey, 74% of consumers say they used a search engine when they first viewed pirated content. And the more prominently pirated content appears in search results, the more likely consumers are to choose it.
Let the Free Market work. The marketplace for video devices and services is functioning well, and the goal of increasing consumers’ choices for video devices is already being realized in the marketplace. There is no need or justification for a mandate that tramples IP rights such as the one the FCC is considering.
The letter can be accessed here