Federal Communications Commission Chairman Tom Wheeler responded Thursday to criticism from the U.S. Copyright Office of the FCC’s proposal to open up the set-top box market to third parties, a move the office warned could “interfere” with programmers’ content licensing and advertising.
“As currently proposed, the rule could interfere with copyright owners’ rights to license their works as provided by copyright law, and restrict their ability to impose reasonable conditions on the use of those works through private negotiations,” the office said in a letter Wednesday to lawmakers, who raised concerns about the rule during a recent FCC oversight hearing.
Under Wheeler’s Notice of Proposed Rulemaking (NPRM), pay-TV providers would be forced to offer their content on TV navigation devices built by third parties like Google, but featuring the same content from their Xfinity, Fios or DirecTV subscription. The goal is to give consumers the choice of purchasing a box instead renting one monthly, a cost that averages $231 for the average U.S. household annually according to an FCC-cited study.
Pay-TV providers say the rule will undermine their contracts with programmers by giving companies like Google access to the same content for free, and make that content more susceptible to piracy with recording and DVR functionality.
Many programmers agree, and say the rule will give third parties power over channel placement and advertising. That power will let Google favor certain content, consistent with the growing on-demand video streaming market, and let them cut into programmers’ profits by offering advertising on the devices themselves, undercutting the need for advertisers to pay for channel time.
“[T]he Proposed Rule would appear to allow [third-party devices and applications] to add additional advertising as part of the programming stream, e.g., advertising spots before or after an on-demand video or banner advertising next to or overlaid on top of a program, without any requirement that resulting advertising revenue be shared with either the [pay-TV provider] or the content creator,” the letter reads.
The U.S. Copyright Office seems to share a number of those concerns, pointing out the rule “would not by its terms restrict repackaging, manipulation, or commercial exploitation of the programming made available to the third-party device and application producers, even where private contractual agreements between programmers and [pay-TV providers] might prohibit such activities.”
Wheeler on Thursday said the same letter also recognizes the FCC’s congressional mandate under Article 629 of the Communications Act that it “shall” provide competitive choice in the pay-TV navigation device market.
“The NPRM is designed to smoke out these kinds of issues so that you can be responsive to them,” Wheeler told reporters during a Q&A session after the FCC’s August open meeting. “So my read of the Copyright Office letter is that they’re worried that what we do would, ‘deliver [programming] to third parties who are not in privity with the copyright owners.'”
“We will not create a rule that forces that to happen,” Wheeler said. “Again, that’s what this process is all about — tell us these things, and let us fix them.”
The letter goes on to warn the current rule could threaten what many have dubbed the new “golden age of TV,” and suggested the alternative app-based approach pitched by Pay-TV providers including Comcast and the National Cable and Telecommunications Association had promise.
“The Copyright Office is therefore hopeful that the FCC will refine its approach as necessary to avoid conflicts with copyright law and authors’ interests under that law,” the letter reads.
Wheeler agreed, recounting how he spoke at a major cable industry event earlier this year and encouraged the industry to participate in rulemaking process.
“I believe that many of their suggestions will be adopted,” Wheeler said.
He added the report and order his office is currently drafting will address a number of concerns raised in response to the NPRM, including copyright protection, contract enforcement, consumer privacy and network security.
“And that, you can take to the bank,” he added.
FCC Commissioner Ajit Pai, one of the commission’s two Republicans opposed to the rule, said the letter “should be the final nail in the coffin” in his own Thursday statement, which pointed out how the office’s findings contradicted public statements Wheeler made about the rule’s approach to copyright, licensing and advertising.
“It is long past time for the FCC’s leadership to walk away from its deeply flawed set-top box scheme,” Pai said. “Instead, the commission should focus on ways to ditch the set-top box and embrace the video marketplace of the future.”
