The FCC’s latest set-top box proposal has recognized what we have been saying all along – apps are the future and, in fact, the here and now. Apps are how consumers watch television today and how Hulu, Amazon and Netflix have created their businesses. Apps allow innovation to flourish, while protecting privacy, security and copyright. Yet, while outwardly embracing apps, the Chairman’s latest proposal undermines those fundamental protections that an app environment provides by requiring disclosure of entitlement data, by creating a new licensing body that the FCC will oversee, and by extending their rules beyond set-top box replacements to mobile apps. Because the new and improved proposal raises many of the same copyright and privacy concerns as the original Google Fiber-backed proposal pitched last January, it should be discarded.
First, let’s unpack the privacy implications. While the new proposal states that existing privacy protections will be preserved, it also requires pay-TV providers to disclose “entitlement” or subscription data to third-party box (or app) providers. In other words, the FCC would require video companies like ours to tell third parties like Google Fiber exactly what channels each customer is “entitled” to receive – despite the fact that video companies are statutorily prohibited from making those disclosures without customer consent.
To get around the statutory privacy protections, the proposal says that a customer can “opt in” to such disclosure. This, however, raises more questions than it answers. To whom do they opt in? What disclosures must we provide to get consent? Can Google Fiber share that data with its affiliates? What happens to a consumer’s private right of action that is statutorily guaranteed? Who enforces this regime? What if the consumer buys the box or app and then opts out?
Presumably, like the old proposal, the data stream itself (which doesn’t exist today) will have to utilize a technology that must be created using a standard yet to be determined and issued by a standards body yet to be identified. The only thing certain is that consumers have to have it in two years. Sound complicated? You honestly need a flow chart to follow this. The lack of answers to these same fundamental questions at this stage of the proceeding is disturbing, to say the least.
Second, rather than allowing the MVPDs to enter into license agreements with third parties’ competitive navigation device providers, as they do today, the FCC is concocting a separate licensing body that would create (dictate) a single, one size fits all license to cover all apps and all MVPDs. This licensing body would create the terms of the license (and be the sole enforcer of the license), but the FCC would state up front what terms need to be included and would review the licensing terms, striking out what terms they do not like. While the new proposal states that the FCC will only serve as a backstop, the reality is that the FCC reserves the right to dictate and approve the terms of the license. Exactly the flaw that led the Copyright Office to declare the original Google Fiber proposal a non-starter, stating that it did not “respect the authority of creators to manage the exploitation of their copyrighted works through private licensing arrangements.” By usurping the free marketplace and the rights of the content creators in this regard, the FCC has in effect (as the programmers, NAB and NCTA have also stated) created a “compulsory copyright license,” clearly outside of the FCC’s jurisdiction.
The licensing body is not even necessary. Under the proposal submitted by pay-TV distributors and leading independent programmers, an equipment manufacturer would need to go to only eight different MVPDs to enter into essentially a form agreement for an HTML-5 app (or choose to do a B2B deal with those MVPDs). Contrast that to the 3,400 apps that Roku has on its system and the at least hundreds, if not thousands, of apps other devices have. Accepting licenses from eight additional parties can hardly be a burden. This single license would also have to account for technology and business differences among competitive MVPDs and varying app models, differences in the hundreds of underlying agreements between the programmers and the MVPDs, and be able to evolve quickly to account for security and technology developments in a rapid manner. It simply cannot be done.
Finally, despite statutory language which says that the mandate here is a market for competitive navigation devices, i.e. set-top box replacements, the new proposal reaches beyond devices located within the home (and beyond the FCC’s statutory authority) by requiring licenses and data sharing with makers of mobile apps without any finding that the market for mobile apps is somehow failing. All this despite evidence in this record that there are more than 460 million retail devices supporting MVPD apps today.
The industry offered the FCC an approach that would have provided an open platform, protected privacy and copyright, and still allowed business-to-business deals for those platforms that did not want to use HTML-5 technology. To its credit, the FCC accepted an app framework, which seems like a no-brainer since consumers are easily accessing and enjoying apps to view their news and entertainment. However, in its desire to go well beyond the mandate of the statute, it has created a revised proposal that still violates consumer privacy rights and copyright laws. The FCC should focus on the proposal put forth in June without undermining it with these overbroad, highly complicated and unnecessary add-ons.