Regulation over Innovation…Again?

Posted by: Bob Quinn on May 6, 2016 at 1:43 pm

Yesterday, 60 members of Congress joined an already significant chorus of bipartisan Congressional voices questioning the impact that Google’s set-top box proposal will have on consumers and the broader video marketplace.  This time the focus was on the negative impact the Google proposal would have on the ability of smaller/rural video providers to continue innovating and investing in the intensely competitive video marketplace. For those keeping score at home, 154 members of Congress have now written to FCC Chairman Wheeler to express their concerns about the Commission’s proposed rulemaking, which recommended adopting the Google set-top box proposal in a 3-2 party-line vote back in February.

The concerns raised in these letters are not, however, party-line concerns; they run the gamut from infrastructure investment and innovation, to the disparate impact the proposal would have on minority programmers, to privacy, to copyright and piracy.  When Chairman Wheeler first discussed recommending the Google set-top box proposal back in January, he assured lawmakers that  minority programming would be enhanced and not harmed, copyright would be protected, existing privacy regulations would continue to apply and the proposal would not impact the capability of broadband and video companies to continue to invest in infrastructure.  Given the chance to review the actual FCC proposed rulemaking, however, it is now apparent to everyone that none of those concerns were seriously addressed in the item.

One of the main issues raised by minority programmers and broadcasters was whether the contractual provisions between the programmers and video distributers (the cable or satellite company), which governed terms like channel placement and advertising, could be enforced on third-party set-top box and application providers.  That specific issue was not addressed by the FCC, which rather summarily concluded that because rules had not been necessary in a CableCard regime, none should be necessary here.  Similarly, while copyright was listed as a priority, no real solutions were proposed and there was no answer whatsoever to the content owners’ concerns that they were being forced essentially to provide content to entities that were not required to enter into contracts with the content owner – thereby denying them one of the main protections in U.S. Copyright law.

On privacy, when the Washington Post first interviewed Chairman Wheeler, it ran a story that asserted the existing privacy rules that apply to cable and satellite companies would also apply to the Googles of the world.  If that were actually true, Google and others would not be able use viewing data in targeted advertising.  The Post later issued a clarification of that story making clear that there would be some privacy protection but not the existing protections. If there were any doubt about whether the existing rules would apply to set-top box providers under Google’s proposal, Google eliminated it in in its filing last week stating, “…limitations on the FCC’s jurisdiction under Section 629 of the Communications Act prevent it from applying the rules that apply to ‘cable operators’ and ‘satellite carriers’ to suppliers of devices…” After all, as Gene Kimmelman of Public Knowledge, a long-time supporter of the Google proposal, was reported to have acknowledged at NAB last month, the “dirty little secret” of the Google proposal is that it’s all about access to viewer data.

Finally, Moody’s slammed the door on Chairman Wheeler’s assertions that his proposals would result in more investment not less, declaring that the combination of the FCC’s proposals on set-top and privacy would be “credit negative” and “have a negative impact on both fixed and mobile broadband providers,” as well as posing a “long-term risk to the current TV advertising business model.”

So, if you are wondering why so many members of Congress from both sides of the aisle are weighing in on this issue, the answer lies in the basic problem with Google’s approach since it first surfaced under the Allvid name six years ago: it eliminates the copyright, license and privacy protections contained in existing laws.  And because the FCC seemed to be doing nothing more than paying lip service to those concerns, the letters from Congress have continued to arrive in the Commission’s mailbox day after day after day.

Of course, there are potential solutions in the market today which promise to bring even more choice to consumers without raising any of the concerns highlighted in the Congressional letters. Technology and innovation will only add to that number over time.  But the FCC gave those other potential solutions short shrift in its proposal.  And by announcing that the agency will take only one week of meetings on this important issue after comments are filed, the FCC is suggesting that speed to adopt the Google proposal is more important than addressing the concerns raised by a large, bipartisan cross-section of Congress.

But when your technological solution is a “complicated” regulatory environment that requires standards to be developed, new interfaces to be built, and implementation that couldn’t even happen in the two years proposed by the FCC, I guess speed trumps innovation. All of which makes one wonder if this is really a notice and comment rulemaking under the APA, or merely a rushed effort where the decision has already been made to give Google exactly what it wants regardless of facts or objections.

 

 

 

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