Today, 99% of cable and satellite customers pay an annual average of $231 per household to rent a set-top box from their service provider in order to view the programming they already pay for. This rental fee results in an annual profit of almost $20 billion for the cable and satellite companies (aka “MVPDs” or multichannel video programming distributors), on top of the profits they already make from subscription fees. As Federal Communications Commission (“FCC”) Chairman Wheeler explained, this “lack of competition has meant few choices and high prices for consumers.”
Congress recognized this problem 20 years ago – passing the Telecommunications Act of 1996 and adding Section 629 to the Communications Act in order to increase the commercial availability of third-party set-top boxes. Back then, Congress compared the idea to the telephone industry: if you can use a landline purchased at Walmart to call someone through your AT&T service, why should you be forced to rent a set-top box from your MVPD to watch their cable or satellite service? And Congress continues to make that analogy updating it with more modern technology like cellphones and wifi routers. Unfortunately, Congress’s legislation did little to fix the problem.
In order to meet Congress’s goal, the FCC established the Downloadable Security Technical Advisory Committee (“DSTAC”) in accordance with the STELA Reauthorization Act of 2014. The Committee – consisting of MVPDs, device manufacturers, production companies, and public interest groups – compiled a report which outlined recommendations for creating a security system that would allow consumers to view their MVPD’s programming through a third-party set-top box while protecting that content from infringement.
MVPDs and the entertainment industry suggested a Proprietary Applications approach that allows MVPDs to retain control over the consumer experience. MVPDs would create apps that could be downloaded onto third-party set-top boxes and devices like phones, smart TVs, and tablets. These apps would allow MVPDs to uniformly control how the programming is presented and what additional features are offered. Additionally, MVPDs would utilize a security system of their choice supported by “royalty free and open source” HTML5. MVPDs explained that this option complied with copyright law and existing licensing agreements. (However, critics of this approach have noted that the market fails to be truly competitive if MVPD’s retain control over the consumer experience, since third-party manufacturers are not allowed to invent new features that entice consumers to purchase third-party set-top boxes instead.)
Consumer electronics advocates and the tech industry supported the Competitive Navigation approach which would use a virtual head end system and link protection (like DTCP-IP) in the cloud. Under this approach, MVPDs would transfer three Information Flows to third-party devices: service discovery data (information that provides viewers with details about the programming like channels, program titles, ratings, airtimes, etc.), entitlement data (information that protects copyright by ensuring viewers only access and copy programming which they are authorized to access or copy), and content delivery (the actual programming.) Additionally, third-party devices would be able to customize the viewing experience by adding additional features, by reordering how the programming appears, by adding additional content like YouTube videos, and more. Finally, in order to further prevent the theft and misuse of copyrighted programming, MVPDs would choose “at least one content protection system that is openly licensed on reasonable and non-discriminatory terms.” Third-party manufacturers would then develop boxes using at least one of those security systems and market those boxes to that MVPD’s consumers. This security regime was modeled after the smart TV industry and protects programming from piracy much as it is protected under the current CableCARD regime.
After reviewing these recommendations, the FCC choose the Competitive Navigation approach and issued the First Notice of Proposed Rulemaking which would allow MVPD subscribers to “watch what they pay for wherever they want, however they want, and whenever they want, and pay less money to do so, making it as easy to buy an innovative means of accessing multichannel video programming (such as an app, smart TV, or set-top box) as it is to buy a cell phone or TV.”
Senator Markey was a key player in the development of the above Acts and was thrilled to see the FCC finally formulating rules that could fix the problem:
“The FCC is using authority clearly provided by Congress to better allow consumers to choose which device to watch programming for which they have already paid. I applaud the FCC for its efforts and encourage the Commission to finalize these rules. It’s time we add set-top boxes to the list of all of the other consumer technologies that have benefited from strong rules that fostered choice, innovation, and competition.”
While Senator Markey was joined by consumer advocates, tech companies, and other interest groups in supporting the proposal, the US Copyright Office, MVPDs, and the entertainment industry strongly opposed the rules for their implication on copyright law and licensing agreements.
At the request of Congress, the Copyright Office addressed the potential copyright implications of the proposal, supporting the goals but laying out five areas where copyright law was implicated. These five areas included the exclusive right to license; the exclusive right to perform, display, reproduce or distribute; the copyright interests of MVPDs; the security issues; and the enforcement issues. Only the second, fourth, and fifth have the most obvious criminal implications so they will be the focus of this blog post.
The Copyright Office claims the proposal could result in copyright infringement, because the Entitlement Data does not do enough to prevent infringement of copyright owners’ exclusive right to perform, display, reproduce, or distribute their work. Taking it one step further, some in the entertainment industry voiced their concern that the proposal invites piracy of their copyrighted works.
Specifically, the entertainment industry believes the proposal creates an opening and an incentive for third-party manufacturers to create set-top boxes that are designed with piracy in mind. They believe applications could be added to third-party set-top boxes in order to present pirated content alongside legally licensed programming. In reality, these “pirate boxes” already exist in the American marketplace. You can watch pirated content free of charge and free of commercials by buying a pirate box online or at your local shopping mall for about $350. (It is important to note, however, that these pirate boxes are very rarely used in America. In fact, the overwhelming majority of copyright piracy in America occurs via online file sharing.)
The Electronic Frontier Foundation (“EFF”), however, highlights that “nothing in the proposed rules permits any party to obtain unauthorized access to programming.” Piracy and pirate boxes are illegal and will continue to be illegal if the proposal is enacted.
In regards to security issues, the proposal makes clear that each MVPD must choose at least one licensable security system, and each third-party box must license and utilize one of those security systems. These security systems are technological measures that control access to the MVPD’s programming.
The Digital Millennium Copyright Act forbids “circumvent[ing] a technological measure that effectively controls access” to copyrighted works online. The DMCA protects copyright online, and those protections apply to third-party set-top boxes since they utilize internet protocol to deliver programming to the viewer’s television set. Thus, third-party manufacturers that make pirate boxes to circumvent or ignore Entitlement Data are breaking the law and are subject to criminal punishment. So to are consumers that use those boxes. Manufacturers and consumers can, should, and will be criminally punished if they seek to circumvent the security systems these set-top boxes use to protect copyrighted programming.
Finally, the Copyright Office suggests the FCC needs to more thoroughly analyze compliance enforcement mechanisms, because the proposal “underestimate[s] the barriers to invoking copyright remedies to redress potential violations by third-party actors purporting to operate under this rule.” For example, it is hard to enforce the DMCA against foreign pirate box manufacturer, and it is hard for a content creator to seek damages against a foreign pirate box manufacturer.
There are a number of reasons enforcement of copyright is difficult. First, MVPDs and content creators have no adequate way to monitor infringement. Second, copyright litigation is inherently expensive, time consuming, and uncertain. Third, foreign perpetrators are even harder to punish and successfully enforce a judgment against.
But that is not because of this proposal. Copyright is hard to enforce with or without these new regulations. The FCC points out that that the proposal does not change a copyright holder’s rights or remedies. Likewise, EFF echoes that “the Unlock the Box rules do not affect the status or enforcement of copyrights.” In essence, the rules do no legalize piracy or pirate boxes. The rules do not change the fact that it would be hard to punish or seek damages against a pirate box manufacturer. That is not the purpose of the proposal, and that is not the FCC’s job.
The FCC’s proposal does not alter the criminal protections or punishments for piracy. Piracy exists, but the FCC is not responsible for protecting copyright – the US Copyright Office is (or, where new legislation is necessary, Congress is.) The FCC cannot regulate copyright, so it should not attempt to do so in these rules. The FCC was asked to regulate the set-top box industry to ensure openness and competitiveness, and that is what these rules do. Thus, the first set of proposed rules should be enacted.
Unfortunately, the incessant lobbying of MVPDs and the entertainment industry has lead the FCC to abandon its first proposal in favor of a second which largely resembles the Proprietary Applications approach. Not-so-coincidentally, the second proposal (which mind you was their idea in the first place) is now strongly opposed by MVPDs and content creators (which mind you are often in the same corporate family tree like NBCUniversal and Comcast) – essentially forcing the FCC back to the drawing board.
It looks like we may go another twenty years without enacting regulations that finally address Congress’s goal of opening up a competitive market for set-top boxes as laid into law in 1996.
I leave you with a few questions:
- Do either, neither, or both approaches sufficiently protect copyrighted programming from piracy?
- Should more be done to stop the proliferation of piracy and the potential proliferation of pirate boxes in America or is the current state of copyright law sufficient? If so, what should be done?
- What can be done to ensure that the enforcement process is effective in punishing pirates and in providing copyright holders with an effective means for seeking damages against pirates?
- Considering the fact that MVPDs now oppose both proposals including their own Proprietary Applications approach, are they really upset about the copyright implications or are they actually afraid of missing out on $20 billion worth of rental fees?
 See Telecommunications Act of 1996, Pub. L. No. 104-104, § 304, 110 Stat. 56, 125-126 (1996)
 THE FCC AND ANCILLARY POWER: WHAT CAN IT TRULY REGULATE? 36 Hastings Comm. & Ent L.J. 311 (Summer 2014)
 17 U.S.C. § 1201