1 March 2002
Source:
http://commerce.senate.gov/hearings/hearings.htm
U.S. Senate Committee on Commerce, Science and Transportation
Chairman, Fritz Hollings (Democrat-South Carolina)
Digital Content Copyright – Full Committee Hearing
Date: Thursday, February 28, 2002
Time: 9:30 AM
Location: 253 Russell Senate Office Building
Hearing Notes: Senator Hollings will preside.
Hearing Statements
Opening statement from Senator Hollings
Panel I
Mr. Michael D. Eisner, Chairman and CEO, The Walt Disney Company, 500 S. Buena Vista Street, Burbank, CA 91521
Mr. Peter Chernin, President and Chief Operating Officer, News Corporation, 1211 Avenue of the Americas, New York, NY 10036
Mr. Leslie L. Vadasz, Executive Vice President, Intel Corporation, 2200 Mission College Boulevard, Santa Clara, CA 95052
Panel II
Mr. Andreas Bechtolsheim, General Manager/Vice President of the Gigabit Systems Business Unit, Cisco Systems Inc., 250 West Tasman Drive, San Jose, CA 95134
Mr. James E. Meyer, Special Advisor to the Chairman and formerly Senior Vice President and Chief Operating Officer, Thomson Multimedia, 10330 North Meridian Street, Indianapolis, IN 46290
Mr. Robert Perry, Vice President, Marketing, Mitsubishi Digital Electronics America, Inc., 9351 Jeronimo Road, Irvine, CA 92618
Mr. Jack Valenti, President and CEO, The Motion Picture Association of America, 15503 Ventura Boulevard, Encino, CA 91436
http://commerce.senate.gov/hearings/022802hollings.pdf
U.S. SENATE COMMITTEE ON
Commerce, Science, and Transportation
ERNEST F. HOLLINGS, Chairman commerce.senate.gov
Contact: Andy Davis, (202) 224- 6654
Statement of Chairman Ernest F. Hollings
Senate Commerce Committee Hearing on Digital Content Protection
Thursday, February 28, 2002
TODAY WE EXAMINE THE ROLE GOVERNMENT SHOULD PLAY TO ASSIST THE PRIVATE SECTOR IN SOLVING COPYRIGHT PROTECTION PROBLEMS THAT ARE STALLING BOTH BROADBAND ADOPTION AND THE DIGITAL TELEVISION TRANSITION.
WITH THE EXCEPTION OF RURAL AMERICA AND SOME UNDERSERVED AREAS, THERE IS NO BROADBAND AVAILABILITY PROBLEM; WE HAVE A DEMAND PROBLEM. 80% CAN GET IT, ONLY 10-12% TAKE IT. MOST AMERICANS DON’T WANT TO PAY $50 A MONTH FOR FASTER ACCESS TO EMAIL. IF MORE CONTENT WERE AVAILABLE ONLINE, CONSUMERS WOULD COME.
BUT THERE IS ALMOST NO LEGAL, HIGH QUALITY CONTENT AVAILABLE ON THE INTERNET. WHY? BECAUSE THERE IS NO SINGLE, OPEN STANDARD PROVIDING TECHNOLOGICAL PROTECTION TO COPYRIGHTED PRODUCTS TO GIVE CONTENT OWNERS THE CONFIDENCE TO PLACE THEIR PREMIUM CONTENT ONLINE. THE SAME IS TRUE FOR DIGITAL TELEVISION, WHERE PIRACY DETERS PROGRAMMERS FROM PUTTING DIGITAL CONTENT OVER THE AIRWAVES. IN THAT REGARD, WE ALSO NEED TO DO SOMETHING TO SOLVE THE CURRENT CABLE COMBATIBILITY PROBLEM, BUT THAT IS PROBABLY A TOPIC FOR ANOTHER HEARING. TODAY WE EXAMINE COPYRIGHT PROTECTION ISSUES IN A DIGITAL AGE.
AMERICA’S CREATIVE ARTISTS DESERVE PROTECTION. OUR COPYRIGHT INDUSTRIES ARE AMONG OUR GREATEST ECONOMIC AND CREATIVE ASSETS. THE FRAMERS RECOGNIZED THAT INNOVATION AND CREATIVITY WAS INSTRUMENTAL TO OUR COUNTRY’S ECONOMIC HEALTH WHEN THEY EMPOWERED CONGRESS IN THE CONSTITUTION TO PROTECT COPYRIGHTED PRODUCTS.
AMERICA HAS HAD COPYRIGHT LAWS ON THE BOOKS SINCE THE CONSTITUTION. BUT IN AN ERA WHEN PRODUCTS ARE DELIVERED DIGITALLY, THE COPYRIGHT LAWS MEAN LESS AND LESS. ABSENT STRONG TECHNOLOGICAL PROTECTIONS LAYERED ON TOP OF THE COPYRIGHT LAWS, IT IS VIRTUALLY IMPOSSIBLE TO ENFORCE THE LAW AS IT EXISTS. YOU CAN SEE TODAY.
THOSE AMERICANS WHO DO ACCESS TOP NOTCH CONTENT ONLINE ARE OFTEN STEALING IT. EVERY WEEK A MAJOR MAGAZINE OR NEWSPAPER REPORTS ON THE THOUSANDS OF ILLEGAL PIRATED WORKS THAT ARE AVAILABLE FOR COPYING AND REDISTRIBUTION ONLINE. ACADEMY AWARD WINNING MOTION PICTURES, PLATINUM RECORDS, AND EMMY AWARD WINNING TELEVISION SHOWS – ALL FOR FREE, ALL ILLEGAL.
WHEN CONGRESS SITS IDLY BY IN THE FACE OF THESE ACTIVITIES, WE ESSENTIALLY SANCTION THE INTERNET AS A HAVEN FOR THIEVERY. THIS PROBLEM CANNOT BE MINIMIZED. PIRACY IS GROWING EXPONENTIALLY ON COLLEGE CAMPUSES AND AMONG TECH SAVVY CONSUMERS. OVER TEN MILLION PEOPLE USE FILE SHARING SITES ON THE INTERNET TO DOWNLOAD MOVIES, SONGS, AND TV SHOWS, WITH NO PENALTY. SUCH AN ATMOSPHERE CONTRIBUTES TO THE STUDIOS AND RECORD LABELS’ RELUCTANCE TO PLACE THEIR DIGITAL CONTENT ON THE INTERNET OR OVER THE AIRWAVES.
THERE IS SOME LEGALLY AVAILABLE CONTENT ONLINE. BUT IT IS LIMITED AND PROVIDED VIA PROPRIETARY CLOSED SYSTEMS THAT PROVIDE CONTROL TO THE COMPANIES PROVIDING THE PROTECTION – MICROSOFT, INTEL, AND REAL NETWORKS – RATHER THAN THE CONSUMER. TO GAIN ACCESS EVEN TO ALL THE LIMITED CONTENT THAT IS AVAILABLE, CONSUMERS MUST COBBLE TOGETHER ACCESS VIA THE VARIETY OF PROPRIETARY SCHEMES, AND MAY END UP HAVING TO PAY MORE TO DO SO. THIS IS WHY I AM PLEASED CISCO IS TESTIFYING TODAY AS TO THE NEED FOR AN OPEN STANDARD AS A SOLUTION TO THESE PROBLEMS.
A SOLUTION IS UNDER OUR NOSES. LEADERS IN THE CONSUMER ELECTRONICS, INFORMATION TECHNOLOGY, AND CONTENT INDUSTRIES ARE AMERICA’S BEST AND BRIGHTEST. THEY CAN SOLVE THIS PROBLEM.
THE CONSUMER ELECTRONICS AND HIGH TECH INDUSTRIES CLAIM THEY ARE READY TO SOLVE THESE PROBLEMS. I WANT TO BELIEVE THEM. BUT I AM NOT SURE. INDUSTRY NEGOTIATIONS HAVE BEEN GOING ON FOR YEARS WITH LITTLE TO SHOW FOR IT. BOTH SIDES SHARE SOME BLAME IN THIS AREA. BUT AS I SEE IT, THE TECH INDUSTRY HAS MIXED INCENTIVES. EXISTING DIGITAL RIGHTS MANAGEMENT (‘DRM’) TECHNOLOGIES LICENSED TO SELECT CONTENT COMPANIES WOULD BE ELIMINATED BY THE ADOPTION OF A SINGLE STANDARD. OTHER TECH COMPANIES PROFIT FROM THE SALE OF CONSUMER ELECTRONICS EQUIPMENT THAT ENABLES PIRACY IN THE 1ST PLACE. SO WHEN I LISTEN TO HIGH TECH’S CLARION CALL TO THE GOVERNMENT – “PLEASE STAY AWAY FROM OUR BUSINESS” – I AM REMINDED A BIT OF THE POLICE CHIEF IN CASABLANCA WHO FEIGNED SURPRISE AND SAID – “I AM SHOCKED THERE IS GAMBLING GOING ON HERE.”
SENATOR STEVENS AND I ARE PLANNING LEGISLATION THAT WOULD PLACE A DEADLINE ON AFFECTED INDUSTRIES TO COME TOGETHER TO SOLVE THESE PROBLEMS IN PRIVATE SECTOR TALKS. IF THEY DO, WE WILL EMPOWER GOVERNMENT ENFORCEMENT SO THAT ALL CONSUMER DEVICES COMPLY WITH THE PRIVATE SECTOR’S SOLUTION. IF THEY DON’T, THE GOVERNMENT’S TECHNOLOGISTS AND ENGINEERS, IN CONSULTATION WITH THE PRIVATE SECTOR WILL STEP IN. THIS WOULD NOT BE THE FIRST TIME CONGRESS IMPOSED TECHNOLOGICAL REQUIREMENTS TO BENEFIT CONSUMERS. AND IT WON’T BE THE LAST.
IN 1962, CONGRESS ENACTED THE ALL CHANNEL RECEIVER ACT, TO REQUIRE THAT ALL TELEVISION RECEIVERS INCLUDE THE CAPABILITY TO TUNE ALL CHANNELS (UHF AND VHF) ALLOCATED TO THE TELEVISION BROADCAST SERVICE. THIS WAS A GOVERNMENT MANDATE OF TECHNOLOGY THAT BENEFITTED CONSUMERS, AND INDUSTRY.
MORE RECENTLY, IN 1998, CONGRESS REQUIRED ALL ANALOG VCRS, BY APRIL 2000, TO CONFORM TO COPY CONTROL TECHNOLOGY (KNOWN AS ‘MACROVISION’). THIS WAS PART OF THE LANDMARK DIGITAL MILLENIUM COPYRIGHT ACT (‘DMCA’) THAT TOOK THE FIRST STEP TO PROTECT CONTENT IN A DIGITAL AGE. UNLIKE THE ALL CHANNEL RECEIVER ACT, THIS MANDATE REFLECTED A CONSENSUS AMONG INDUSTRY THAT MACROVISION WAS AN APPROPRIATE TECHNOLOGICAL SOLUTION. IN BOTH CASES, ONE THE RESULT OF INDUSTRY CONSENSUS, THE OTHER THE RESULT OF A GOVERNMENT MANDATE, CONSUMERS AND INDUSTRY BENEFITTED AS MORE AMERICANS RECEIVED GREATER ACCESS TO MORE PROGRAMMING AND CONTENT.
FINALLY, I WANT TO EMPHASIZE THAT WE WILL WORK TO PRESERVE LEGITIMATE EXPECTATIONS OF CONSUMERS AND RESEARCHERS. IF THEY ARE ENGAGING IN APPROPRIATE BEHAVIOR NOW IN THE HOME OR AT A UNIVERSITY, WE WILL SEEK TO ENABLE THEM TO DO THE SAME IN THE FUTURE.
http://commerce.senate.gov/hearings/022802eisner.pdf
Testimony of
Michael D. Eisner
Chairman & CEO
The Walt Disney Company
Before the
Committee on Commerce, Science & Transportation
United States Senate
February 28, 2002
Thank you Mr. Chairman. I want to thank you, Ranking Member McCain and all of your colleagues for inviting us here to discuss the distribution of creative content over digital Broadband and digital Broadcast distribution systems. For all the reasons that I will share with you today, The Walt Disney Company urges the United States Congress to act to facilitate the establishment of open and common standards for technological protection of creative content in digital distribution.
U.S. produced movies, TV shows and other audiovisual works are part of the creative content industries that lead the V.S. economy in contributions to job growth, Gross Domestic Product and foreign sales and exports. Creative content represents nearly 5% of GDP, generates more than $450 Billion annually and provides jobs for more than 4 million Americans. In fact, creative works account for a larger percentage of U.S. foreign sales and exports than almost all other sectors of our economy, including automobiles, aircraft and agriculture. By facilitating the establishment of open and common standards for protection of creative content, Congress will be acting to ensure the domestic viability of one of the most important positive contributions to our nation's balance of international trade.
Technological content protection standards also will play an important role in stimulating the deployment of Broadband communications networks, accelerating the digital television transition and re-energizing the sale of many different digital devices, including personal computers. Our nation's build-out of Broadband networks is going too slowly. The sale of computers and other digital media devices has slowed. And, the pace of the digital television transition is a frustration to many including the local broadcasters who have invested Billions of Dollars in new digital transmission facilities.
The availability of high quality motion pictures and television programs on DTV and on Broadband networks will help drive consumer demand. That consumer demand will hasten the deployment of DTV, stimulate the sales of digital media devices and speed the build out of the vital telecommunications infrastructure that will drive our digital economy.
Digital technology and Broadband communications hold the promise of tremendous economic growth for our Nation. At Disney, we have embraced advanced digital technology. We were one of the first major studios to deliver our product digitally to consumers via direct broadcast satellite. We have one of the largest and most successful digital videodisc businesses. We broadcast digital television every day. We have state-of-the-art digital feature film production studios and were the first to produce and deliver our films completely in the digital realm with major titles such as Dinosaur, Toy Story and Monsters, Inc. Currently we are pioneering the development of digital cinema screens throughout the world. And, we have entered into a joint venture with News Corporation entitled Movies.Com. This new company will establish a direct broadband connection between U.S.- produced motion pictures and U.S. consumers sitting in their own homes. Using advanced digital technology, Movies.Com will enable exciting new choices and options for consumers wishing to access our movies and other creative content.
These Disney investments demonstrate two things. First, our Company has been enthusiastic in its embrace of new technology. Second, the digital revolution holds the promise of great economic growth for our nation and wondrous new services for our citizens. Unfortunately, these same digital technologies can enable a level of piracy - theft - that would undermine our capacity to produce films and entertainment, undermine the deployment of Broadband networks, undermine the digital television transition and ultimately result in fewer choices and options for American consumers.
To be sure, piracy has always been with us. But, digital piracy is different. In the analog world, each successive copy degrades in quality and sharing a copy requires one consumer to physically transfer that copy to another. In digital, each copy is perfect a perfectly coded series of ones and zeros. The 1,000th copy is just as perfect as the original. And, because of the ubiquitous nature of the Internet, perfect, but unauthorized, copies can be transmitted virtually instantaneously allover the world with no regard whatsoever for the rights of the content owners. For a chillingly real depiction of where we are headed, please take a look at this short clip from a recent "Night Line" program in which 15-year-old Benjamin illustrates his ability to take-for-free-any motion picture or television program of his choice. [Play Nightline clip]
We know that we can never achieve -- and do not expect -- 100% content security. But, there must be a reasonably secure environment to prevent widespread and crippling theft of the creative content that drives our economy. As Benjamin clearly demonstrated, today, we are not even close. One research firm, Viant of Boston, estimates that more than 350,000 illegal pirate movies are downloaded from the Internet every day. In fact today, you can go to the Internet and find illegal copies of brand new films like "Harry Potter," "Lord Of the Rings," "Monsters, Inc" and "Ocean's Eleven." Just in case you have any doubts about picture quality, just take a look at this excerpt from a downloaded pirate copy of the recent film "[Insert Title]". [Play clip]
There are several key considerations that should be a part of the solution to this pressing problem. First, the interests of consumers, content owners and device manufacturers ALL require that there be common technological standards. Common standards will prevent consumers from confronting a bewildering array of confusing and incompatible standards. Common standards will help create a technologically predictable market to which content owners can bring their movies and other works. And common standards will make it reasonable to mandate that device manufacturers build the necessary hardware and/or software into their devices.
This does not mean that there will be a single "silver bullet" solution or that all content owners must use the same digital rights management system in the distribution of legitimate content. Rather, what the market needs is some means to ensure interoperability and a common set of "baseline" technologies to help digital media devices identify and reject the illegal, pirated copies.
Second, the technological standards should be open -- not limited to the proprietary developments of a single firm. Widely available open standards, licensed at reasonable costs, will prevent the emergence of new "gatekeepers" who could retard the development of new digital services and limit consumer choice in content. A top public policy goal for Broadband should be open standards so that consumers have convenient access to all content from all producers.
Third, the private sector should be given every reasonable opportunity to develop appropriate means of protection and to adopt common open standards for use in a wide variety of delivery devices. Only in the event of private sector failure should government set the standards. But, the pressure of a timeline for eventual government action is critical to yield the desired standards in a reasonable time frame.
Fourth, the standards that we seek must be renewable, upgradeable and extensible without the necessity of time consuming bureaucratic processes in either private sector, or government, standards setting organizations.
Fifth, once standards are set, they must be mandated for inclusion in all digital media devices that handle creative content. This is necessary to ensure a reasonably secure environment and to prevent unfair competition by non-compliant device manufacturers.
Finally, it is critical that the government act now to help achieve appropriate solutions. Disney is very grateful for the efforts of many in the Congress who have tried over the years to "jawbone" the affected industries to negotiate the required technological standards. For example, we thank Chairman Hollings and Ranking Member McCain for scheduling this hearing, which has acted as a healthy spur to discussions in the private sector. Other leading legislators have been helpful as well. Members of both the House and the Senate, Democrats and Republicans have written to the Motion Picture Association, to the Electronics Industries Association, to prominent high tech companies and to the FCC urging swift private sector agreement on technological standards to protect creative content in the digital world. And, we are grateful to Chairman Hollings and Senator Stevens for the Discussion Draft Legislation that they circulated last year. That Discussion Draft contained many innovative suggestions to break the Gordian knot that has frustrated all prior attempts to solve the digital piracy problem.
Of course, any legislative solutions must be vetted by all the appropriate Committees of the Congress. And, legislation will enjoy smoother sailing if it proceeds from agreement among the affected industries, consumer groups and others with a stake in the digital future. Also, given the complexity of the problem, we need to proceed carefully so as to avoid unintended consequences of any legislative intervention. But, the time to solve this problem is running short and prior attempts at jawboning have not produced a solution.
Some high tech companies, like Cisco Systems, have been helpful in the search for solutions and to them we express our gratitude. Unfortunately, other high tech companies have simply lectured us that they have no obligation to help solve what they describe as "our problem." In fact, at least one high tech executive has described illegal pirate content as a "killer application" that will drive consumer demand for Broadband. Obviously, the development of Broadband networks is an appropriate National goal only if those networks are conduits for legitimate -- not pirate -- content.
I would like to respond briefly to some of the arguments that have been raised against efforts to deal with this problem. First, some argue that it is unprecedented to have government involvement in the mandating of technological standards. That argument is incorrect. There are numerous precedents for a government role here. For example, the Audio Home Recording Act of 1992 required that all digital audio recording devices conform to a specific content protection technology, namely, the Serial Copy Management System (SCMS). And, the Digital Millennium Copyright Act of 1998 requires all analog VCRs to include the Macrovision copy control technology. The All Channel Receiver Act required all television sets sold in this Country to contain both VHF and UHF tuners. Clearly, there is ample precedent for legislation to mandate technical standards.
There is another issue I'd like to clarify. Disney and other content owners are not seeking to stop home taping or eliminate "fair use." We are not here because we want to hinder libraries and college professors in using portions of creative works for scholarly research. Nor are we here because we want to interfere with consumers who wish to make a home copy of Broadcast and basic cable TV programs for their own personal time-shifted viewing. Weare confident that the government can act to facilitate the needed technology standards without endangering home taping or fair use.
Finally, I want to emphasize that Disney has no desire to stifle innovation, development, experimentation and research by our nation's vibrant high-technology companies. We embrace technology -- it is an everyday part of our business. Continued innovation in high tech is necessary for Disney to evolve how we create and distribute our content and to reach consumers in new ways. We are eager to work with the consumer electronics and information technology industries to ensure that the technological standards we seek are NOT an impediment to continued innovation and experimentation.
I thank you again for the opportunity to testify here today and I would be happy to answer any questions that you might have.
http://commerce.senate.gov/hearings/022802chernin.pdf
Before the Senate Commerce, Science and Transportation
Committee
Testimony of Peter Chernin
President and Chief Operating Officer
News Corporation
February 28, 2002
Good morning Mr. Chairman and Members of the Committee. My name is Peter Chernin and I am the President and Chief Operating Officer of the News Corporation. Thank you, Mr. Chairman, for inviting me to participate in today's hearing. I would like to take this opportunity to applaud you for your leadership on seeking to ensure copyright protection for content producers in the digital broadband age.
News Corporation began fifty years ago as the owner and operator of a single newspaper. Today we are one of the world's largest media companies. News Corporation operates newspapers, a publishing house, a film company, a television network, television stations, cable program networks, and the largest TV production studios in the world. Yet in all that time, and in all those businesses, the company's basic function has not changed. Whether we're delivering the New York Post in Harlem, New York, broadcasting our FOX television programs to viewers across South Carolina, or preparing our novels from Harper Collins to be downloaded onto e-books for students in Alaska, News Corporation is essentially a producer and distributor of content. Our job is to create and select the most valuable information and entertainment, to package it as attractively as possible, and to distribute it as widely and as efficiently as technology will allow
As an industry, we are in a very exciting but challenging time. The rise of broadband Internet and other digital technologies is providing us with tools of unprecedented flexibility that we are only beginning to fathom. We are already harnessing these new technologies and distribution methods in a big way: over fifty percent of the United States television households are able to receive FOX broadcast in DTV (through 27 of our owned and operated and affiliate stations), including the firstever all-digital, widescreen Super Bowl earlier this month; our BSkyB business is the leading digital satellite broadcaster in Europe; and we have released hundreds of FOX movies in digital form on hundreds of millions of DVDs sold allover the globe. And there is much more to come. We hope soon to be rolling out Movies.com and other interactive products, and be releasing FOX movies in the high-definition digital D-VHS pre-recorded format. However, we strongly believe that the great potential and promise of broadband Internet and other digital technologies can be fully achieved only if protections are in place to safeguard our investment in the development and distribution of that content. Thus, the single most important issue for all entertainment companies, and certainly for every content producer, is that of copyright protection, a constitutional right that has increasingly come under attack in this digital age.
The right to hold a copyright can be traced back to Article One of the United States Constitution. However, the constitutional protections of copyrighted works are being threatened by the ease with which people can copy and distribute materials in cyberspace. There is no better example of the content community's potential, as well as its vulnerability, than the rollout of broadband Internet access. Without the adequate technological and legal protections for intellectual property, content producers and legitimate content distributors will find themselves vulnerable to theft by anyone who owns or has access to a computer with a broadband connection to the Internet.
The Internet is more than an economic medium; it is a supremely democratic one in providing equality of access to information, and this deserves to be celebrated. But its ability to empower the general public must not be taken as a license for consumers to essentially shoplift online. What the general public has to realize is that many businesses that rely on the creation, distribution and sale of content will be put in jeopardy by massive copyright infringement. This, in turn, will impact the quality of content that makes the broadband Internet so exciting for so many people.
Recently, we have seen more and more programs like DivX, Gnutella, Morpheus, Bear Share and Lime Wire that streamline the downloading of motion pictures and television programming without compensation to the copyright holder. With the advent of broadband, it is only a matter of time before these file-sharing technologies and other emerging mechanisms have a serious impact on the economic viability of the motion picture and television broadcast industry. Films and television shows are like any other products in search of investors. However, if investors believe that the products they are investing in cannot be protected, thus losing their economic value, those investors will look for other products to fund, or at least other distribution means for those products. That alone will have a dramatic impact on the millions of jobs that are created by the entertainment industry. Why would one invest millions of dollars in a motion picture or a TV show only to have it stolen and placed on the Internet where anyone can access it for [line missing].
Lack of protection of intellectual property is not just a threat to the entertainment industry; it is a threat to American business as a whole. Protection of intellectual property has been crucial to this country's prosperity over the past several decades, and is as critical to the success of the Information Revolution as it was to the Industrial Revolution. U.S. media industries dependent on copyright employ nearly four million workers and produce more than $65 billion in exports. American books, movies, television and music are among our most successful products overseas; but if they cannot be protected from unlawful copying, their export value would shrink to nothing. The potential of the wholesale disregard of copyrights would be devastating to employment and job creation in the U.S., and to any chance of making the Internet a boon to us all.
The threat is real not just for the creators of content, but also for those businesses that make their livelihood on the redistribution and licensing of content. For example, the market for network television shows after the first network run (including the value of rerun and re-purposing rights, and syndication to local broadcast stations) in this country alone is hundreds of millions of dollars. Around the world, American-produced television programming generates additional billions of dollars in revenues. Imagine a world where those revenues vanish because any television episode can be posted to the Internet at the time of its first network run for redistribution around the world. What would happen to the hundreds of TV production companies and distributors that employ thousands if buyers vanish because there were no incentives to purchase the rights of episodes because that are freely accessible on the Web? These are the questions we are asking ourselves.
One solution to this dilemma may be that we only distribute our content through media that are reasonably secur.e. For example, pay cable, direct broadcast satellite, and D-VHS are digital distribution channels to the home that provide a basic level of security for digital content. Indeed, even the Internet affords us the basis to securely transmit our content. In each of these areas we are able to protect our content, through either a negotiation process regarding protection technology (for example, "D-Theater" encryption for D-VHS), or a licensing process using a commercially available Digital Rights Management (DRM) technology for the Internet, or through contractual arrangements with cable and satellite providers. However, there is one major digital distribution method that does not currently offer adequate protection right now -- digital over-the-air broadcast TV ("DTV").
One might ask why broadcast television is worthy of protection in this time of multichannel offerings such as cable and direct broadcast satellite, each offering a vast array and variety of programming. The answer lies in the unique local nature of the service provided by broadcast television. For it is broadcasters who provide viewers with:
high quality local news that keeps viewers abreast of the happenings in their community;community affairs programs that help them keep up with local politics, issues, and events in their area;
[one page illegible.]
in DTV signals that can be detected upon receipt by DTV processing equipment. Once detected, the receiving device would protect the content from being redistributed on the Internet. Weare hopeful that through negotiations with the consumer electronics (CE) and information technology (IT) industries this solution will be voluntarily agreed upon and incorporated in relevant copy protection technology licenses; in fact, FOX is leading this charge. However, even if we do reach agreement, targeted legislation will be necessary in order to ensure a level playing field for all entities involved.
Unfortunately, we have not yet reached the agreement with the CE and IT industries. Mr. Chairman, as you are undoubtedly aware, there has been an on-going effort for the last several years to negotiate the protection of all digital audio-visual content delivered to the "home network", including but not limited to DTV. These negotiations are often referred to as the "5C" negotiations. Those negotiations have made substantial progress with regard to the protection of pre-recorded and conditional-access delivered content (e.g., pay-per-view, video-on-demand, pay and basic cable), and FOX applauds that progress. But as a representative of one of the largest broadcasters in the country, I regret to report to you today that, although some hopeful developments have occurred with regard to protection of over-the-air broadcast content, those negotiations are presently at an impasse over 5C's refusal to include the obligation of protecting DTV via the "broadcast flag" in its license. They say there are antitrust problems with extending their license to cover broadcast; they also say that potential licensees will be so turned off by a broadcast protection obligation that they won't sign up for a 5C license at all. We think these objections are unfounded. We don't believe that a serious antitrust objection can be raised to such a narrowly targeted and pro-competitive technology as the broadcast flag; nor do we think it right, or even logical, that non-complying competitors would use the fact that their devices do not contain protection of DTV as a selling point. Regardless, we are currently at an impasse with 5C.
Needless to say, this impasse is much to the broadcast industry's collective frustration. I have always believed that an agreement should first be brokered through voluntary, industry-led negotiations, and then blessed by Congress to ensure a level playing field against "rogue". companies who will not sign up for the voluntary obligations. But time is growing short for digital TV copyright protection. Lengthy negotiations have resulted in some progress in airing the issues but have not produced tangible results. The parties to the negotiations M.L know that the broadcast flag provides a workable, low-cost technological solution to this problem. Yet, the 5C companies have been unwilling to embrace this "license-first, then legislation" approach. Other voices in the CE and IT industries have likewise refused to support this two-step approach. I would hope that the 5C companies and their CE and IT brethren would rethink the position they are presently taking. If we cannot arrive at a voluntary industry consensus very soon, broadcasters will be forced to come to Congress to ask that a DTV solution be imposed on the CE and IT industries.
Just as we are striving to protect our content when distributed by DTV, we are addressing two other mechanisms that threaten content. Into the foreseeable future we will still need to deliver content to consumers in an analog form; after all, hundreds of millions of TV sets can only accept content in that form. Unfortunately, analog content (including protected digital content converted to analog for viewing purposes) can easily be converted into an unprotected digital form that can in turn be copied or redistributed without authorization. This is called the "analog hole" in digital content protection schemes. We are developing a plan to plug the "analog hole" that includes harnessing watermark technology that would prevent such conversions from being used to avoid content protection obligations. We hope to secure inter-industry consensus on such a proposal, and we welcome your assistance in encouraging all relevant parties to make this happen. Once it does, we would have that solution ratified by Congress.
Finally, we are working furiously on a plan to frustrate the unauthorized viewing of content delivered via the Internet. It is a difficult problem to address because there are We are also so many ways unauthorized content can be distributed on the Internet. mindful of not over-correcting the problem by burdening Internet appliances any more than necessary. But we are confident that the problem can be solved; we know it must be. It is reported that every day, hundreds of thousands of copies of movies are being
[one page illegible.]
http://commerce.senate.gov/hearings/022802vasdasz.pdf
Testimony of Leslie L. Vadasz
Executive Vice President, Intel Corporation
President, Intel Capital
Hearing on “Protecting Content in the Digital Age – Promoting
Broadband and the
Digital Television Transition”
I appreciate the opportunity to appear before the Committee to discuss the information technology (IT) industry’s work on creating a more secure environment for the dissemination of digital content. Intel – and the rest of our industry – has as great, if not a greater, interest as the studios in the growth of a robust market for new digital content offerings to the consumer. And, we have an equally strong interest in the protection of intellectual property.
But we come at these challenges from very different perspectives. The IT industry is all about innovation; we embrace and champion technological progress. The content community, by contrast, has historically feared technology – from the advent of sound recording, to the development of the VCR, the DVD, the PC and other digital devices. Yet every advancement in technology has proven to be a major growth catalyst for the studios. Videocassette rental and sales totaled about 11 billion dollars last year, exceeding box office receipts by some 2+ billion dollars. This is the device once referred to by Jack Valenti as the “Boston Strangler” of the film industry. Other “attackers” of the film industry include the DVD, which added another 5.9 billion to studio receipts in the last year.1 It is important to keep these facts in perspective when reviewing claims of imminent threats to the health of the film industry.
____________________
1 Scott Hettrick, “2001: Higher Ground, Tight at the Top,” Video Business, 21 January 21 2002, 32.
Nevertheless, we agree that content protection is important and we are working
together on that challenge. But at the outset, I want to emphasize the following
points:
IT Industries: the power behind our economy
The information technology sector is enormously important to the overall health of the US economy. The Department of Commerce just released a new report entitled Digital Economy 2002. According to this report, in 2000, the IT-producing industries employed some 5.6 million workers, with average wages per worker more than twice the national average. During the period from 1996-2000, IT “was responsible for 28 percent of overall real economic growth”. Most importantly, the study states that the evidence “suggests that massive IT investments by U.S. industries are producing positive and enduring changes in the nation’s economic potential.”2
____________________
2 United States, Department of Commerce, Economics and Statistics Administration, Digital Economy 2002 (Washington: February 2002, accessed 25 February 2002); available from http://www.esa.doc.gov/508/esa/DIGITALECONOMY2002.htm.
Information from the Bureau of Economic Analysis provides useful insight into the relative positions – and importance to the economy – of the IT industry and the studios. According to Digital Economy 2002, business, personal, and government spending on IT goods and services (not including communications services) totaled $600 billion in 2000. Meanwhile, the gross domestic product of the motion picture industry was approximately $35 billion in 2000.3
____________________
3 United States, Department of Commerce, Bureau of Economic Analysis, Gross Domestic Product by Industry in Current Dollars, 1994-2000, (Washington: undated, accessed 25 February 2002); available from http://www.bea.doc.gov/bea/dn2/gpoc.htm.
Innovations in our industry have come at a staggering pace. Consumers have come to expect from us a continuous flow of ever more powerful devices, at lower cost, each year. These innovations require large amounts of investment and tremendous amounts of research and development. Last year, Intel spent $3.8 billion on R&D alone, about half of all that Hollywood earned in box office receipts in the past year.4
____________________
4 Box Office receipts totaled $8.35 billion in 2001. See Sharon Waxman, “Hollywood’s Great Escapism: 2001 Box Office Receipts Set a Record” The Washington Post 4 January 2002, p A01.
This dynamic of innovation would be choked by any attempt to regulate the design of products sole ly for the benefit of one industry. Designing products through a regulatory process, as some studios have advocated, would inject political influences into technology development in very destructive ways. Investment and innovation will both suffer, as a fear of entanglement with government processes will have a chilling effect on investors and subject new ideas to “reg review”.
Overview of content protection: the work that has been done by the IT industry
The primary challenge in content protection, we have found, comes down not to technology but answering the question: how is the consumer best served?
The first time the issue of digital video content protection arose was in 1995, when Digital Versatile Discs – DVD’s – were preparing to come on the market. Concerned about mass copying of DVD’s, Hollywood attempted to persuade Congress to legislatively mandate technological “fixes” to address the prospect of widespread consumer copying of DVD discs. Not surprisingly, the studios opted for an overreaching approach that would have all but eliminated the value of the PC experience.
Responding to the threat of legislation freezing in place inadequate, clumsy solutions to copy protection issues, Intel and the PC industry mobilized the consumer electronics industry and the studios to form a working group known as the Copy Protection Technical Working Group (CPTWG). This body reviewed and enhanced cryptographic tools that could be applied to DVD content – which still today protect DVD’s from being hacked by all but a tiny percentage of users of these products. Through the work of CPTWG (subgroups 4C and 5C), we have also tackled the issues of content distribution between devices and the protection of information in recordable media.
While this consensual process yielded specifications that sped DVD to market, I have serious concerns that consumers were not fully served.
The over-the-air broadcast protection question
One immediate concern of the studios, today, is over-the-air broadcast of digital content. The CPTWG is nearing completion of technical specifications to address this issue. There is general agreement that it may be necessary for the FCC to assist in the implementation of the digital broadcast protection solution by enacting a very narrow regulation respecting requirements for digital television receiver products to ensure that they pass on the content in a protected form. However, I have great concerns that we are, again, rushing this technology to market without pausing to ensure that customers’ reasonable expectations for use of the products are weighed in the balance.
The “analog hole” issue
Another issue, much more complex and difficult to solve, is the so-called “analog hole”. This is the situation presented by millions of le gacy devices – such as the commonly owned VCR of today -- that have digital inputs and analog outputs. Such devices can be used to reconvert a digital signal to analog, from which it can then be reconverted to digital through available PC equipment or other devices.
Work toward solving this issue has started – “watermarking” solutions have been proposed and are being evaluated -- but there is no clear path to a solution at the present time. Again, we are working on this issue aggressively, but some studio demands – we believe – would infringe on consumer fair use rights.
It has been suggested by the studios that the placement on chips of electronic circuitry that would recognize and respond to watermarks be mandated by regulation. For the government to mandate how the IT industry designs and develops chips – or to try and force agreement for design features – would be ludicrous. As I said before, irreparable economic damage would result.
Our view of the studio perspective
For some studios, the objective is total control. In the early 70’s, when RCA was experimenting with the new technology of videotape, researchers were eager to find a means to control consumers’ use of the product in order to maximize studio revenues. The means eventually chosen was simple: a video would play once, and when finished, the cassette would lock into place. The customer would have to return the video to the store, and pay again, to have it unlocked. In spite of the restrictive nature of this technology, the Disney executives were horrified because they could not control how many people could watch the videotape.5
____________________
5 Lawrence Lessig, “May The Source Be With You,” Wired (December 2001, accessed 25 February 2002); available from http://www.wired.com/wired/archive/9.12/lessig.html.
In 1981, Mr. Valenti bemoaned the prospect that the industry would be overwhelmed by “millions of little tapeworms” eating at the very heart and essence of copyright(s).6 Today there are 88 million VCR’s in use in the US alone, yet the studios are making more money than ever before. Since the VCR has been introduced, the number of new films released per year has more than doubled, while annual sales of videotapes have grown from approximately 3 million units to over 700 million units.7 Four and a half million VHS tapes of Shrek were sold in just two days. As I noted before, consumers spent $11 billion on the rental and purchase of VHS tapes in 2001.8
____________________
6 Ellen Goodman, “The Right To Zap,” Washington Post, 24 January 1984, p A13.7 MPAA Research Department, 2000 US Economic Review (accessed 25 February 2002): available from http://www.mpaa.org/useconomicreview/2000Economic/index.htm.
8 Hettrick, 32.
Substitute “digital” for “tape” in Mr. Valenti’s comments in 1981 and the arguments are the same. Congress should not engage in futile attempts to design products by regulation. Instead, Congress should focus attention on the degree to which the consumer interest is being undermined by a slavish adherence to demands for “total” content protection.
Where is the voice of the consumer?
There is a fundamental difference between the perspectives of the high-tech industry and the content community. High-tech does not have one narrow market objective – that of maximizing revenue from content distribution. We have a broader marketplace composed of hundreds of millions of consumers who want ubiquitous, powerful digital tools that can manage a wide variety of information, content, and applications and who want to use them for all lawful purposes.
Consumers expect, when they buy a PC, that it will have the power, versatility, and robustness that they know our industry can provide. They also have expectations to be able to make full use of the PC’s ability to store, retrieve, create, and manage digital content. We intend to provide that utility, while providing technologies to protect against wholesale copyright infringement.
I have stated that I have concerns whether all of the compromises that have
been reached to date are in the best interests of the consumer. We have rejected
some of the more onerous controls that have been advanced by the content
community, such as:
Voluntary, consensual standards – the best means to the right balance In the end, the only way to effectively balance the interests of content owners, manufacturers of consumer electronics devices, and the information technology industry with the rights of consumers is through the voluntary, consensus-based process. It can be difficult, does not lend itself to “one size fits all” solutions, and may be viewed as cumbersome by some who would rather see the process driven by top-down control mechanisms. But it is the only path which will allow technology to advance efficiently while reconciling all of these competing interests.
There are new “intelligent” consumer products, exemplified by the PC, that are dramatically improving the consumer experience. The real question for the content community is not whether we will provide effective content protection tools, but rather whether they are prepared to enter the digital age. They must finally accept that consumers want affordable, usable digital products and they must develop new business models that give consumers what they want – without obsessing about controlling all of the consumers’ choices. The video rental market has contributed very substantially to studio profits – but that market developed over their early objections to the idea of allowing consumers to view a film as many times as desired without paying for each viewing. The same will be true of digital products, once the studios move forward and take advantage of the content protection tools that we are now offering.
I would like to leave this Committee with the following thoughts:
Thank you for your time. I would be happy to answer any questions.
_______________
See also Vadasz's post-hearing letter to Hollings:
http://www.politechbot.com/docs/intel.hollings.letter.022802.html
http://commerce.senate.gov/hearings/022802bechtolsheim.pdf
TESTIMONY OF ANDY BECHTOLSCHEIM
VICE PRESIDENT AND GENERAL MANAGER
GIGABIT SYSTEMS BUSINESS UNIT
CISCO SYSTEMS, INC.
BEFORE THE SENATE COMMITTEE ON
COMMERCE, SCIENCE AND TRANSPORTATION
FEBRUARY 28, 2002
Good morning and thank you, Mr. Chairman, for convening these hearings on protecting digital content and promoting broadband deployment. At Cisco, we believe that growing the Internet from the current narrowband generation of email and web browsing to one that is capable of delivering movies and multimedia applications is crucial to the economic future of our country. Although many forces will drive broadband deployment, one key factor will be the availability of audiovisual content on the Internet. The more and better content that is available on the Internet, the more consumers will choose broadband connections to access that content and also gain access to the benefits of broadband in other areas, such as education, medicine, and government services.
But why should government care about the deployment of broadband Internet networks? The answer is simple, yet compelling. Broadband enables new applications and services that will continue the radical transformation of our economy that the Internet has begun. It is not just about watching movies online or playing interactive games, however interesting those activities may be. It is about improving the productivity of our workforce and increasing long term economic growth. If we look at the recent past, we can see the enormous impact of first generation Internet services on the economy. In industries where information technology and Internet services were integrated into their operations, productivity increased four times faster than in industries that did not integrate information technology. Higher productivity growth creates more jobs, strengthens existing industries, and provides higher wages for workers.
But as I said before, movies will help draw consumers to broadband services. But first, the movies must be drawn to the Internet. The motion picture industry is certainly interested in using the Internet as a new distribution platform for its movies. But the movie industry is not interested in doing so without proper protection against unauthorized copying of copyrighted material. We would not expect anyone to put their money in a bank that does not have a safe and secure vault to store the money. Likewise, it is not reasonable to expect movie studios to release content on the Internet without strong copy protection systems in place. The technology industry, including Cisco, has worked hard to create copy protection technology and continues to work with the content industry to improve and implement such technologies.
Copy protection technology, however, must be about more than just preventing authorized copying of content. The technology must support multiple encoding technologies, multiple platforms, and multiple categories of devices. Most importantly, the technology must be consumer friendly. If consumers find the copy protection technology to be confusing, difficult and burdensome, they will not move to the new services. For consumers to embrace broadband distribution of movies, copy protection must be transparent to the user, available for multiple platforms and formats, and support multiple usage models such as purchase, rental, subscription and broadcast.
The best example of this type of security is already in widespread use on the Internet today. Millions of consumers make secure transactions on the Internet using the Secure Socket Layer encryption technology, commonly referred to as SSL. The open and interoperable SSL technology allows for the transmission of sensitive data, such as credit card numbers, securely across the Internet in a manner that is virtually transparent to the user. In fact, most Internet users do not even know that they are using SSL protection in making these transactions. The creation of SSL was critical to developing commerce on the Internet largely because it is an open and interoperable system that supports almost all technologies and is easy for consumers to use.
It became clear that a similar system for protecting content on the Internet would be the best and most consumer friendly way to bring high value content to the Internet. So Cisco took up this task and has created a system called Open Conditional Content Access Management, or OCCAM. OCCAM is an end-to-end protocol for protecting content from unauthorized copying, distribution and playback and can be used to protect content during transmission and storage in any public, private or home network.
OCCAM utilizes 128-bit AES or Advanced Encryption Standard for encrypting content. This is one of the best encryption technologies known today which was created by industry working with the National Institute of Standards at the Department of Commerce. In addition, OCCAM uses PKE or Public Key Encryption which allows for the secure transmission of a content key from a content provider to the consumer playback device. Both of these technologies have been extensively researched, are in wide use on the Internet today, and are considered open standards.
I would like to state for the record that government, in particular the Department of Commerce has already greatly contributed to enabling content protection technology, by defining thestandards for security technologies that are used as the basis for ecommerce,.
In order to maintain the open nature of this system, Cisco has created a non-profit licensing organization to administer the OCCAM technology. The licensing organization can also be used to enforce the robust implementation of the copy protection technology by manufacturers of compliant equipment. Cisco believes that the open licensing of open and interoperable technology will be the best means of creating strong and consumer friendly content protection to encourage the distribution of content on the Internet.
The availability of open systems of content protection like OCCAM, which can be enforced through licensing regimes leads to the conclusion that legislation prescribing specific content protection technology, is not necessary. In fact, it would be quite undesirable. If the decision on selecting and implementing technologies were left to government bureaucrats, we run the risk of selecting inferior, market-unfriendly, and limited technologies. We would also limit future innovation in security technology by freezing in place current technology and only making changes at the speed of government, not the speed of the Internet.
Looking at history only confirms this conclusion. For example, the Audio Home Recording Act attempted to legislatively protect digital audio content through a government-mandated copy control technology. Initially, the AHRA largely succeeded only in destroying the market for digital audio devices. Then, as technology developed, it became clear that the copy protection system of the AHRA was extremely ineffective. Despite provisions in the AHRA that would allow the mandated technology to be “updated,” no serious attempt has been made to do so. Instead, the recording industry is working through private sector technologies to solve its problems, rather than seeking another government mandate.
The best way to protect content is through technology, not government. Proven content protection technology exists today that does not require new legislation for efficacy. Alternative technologies that would require new legislation to be effective in our opinion are not technically sound because the protection offered by the law can never be as strong as protection offered by the strength of encryption and mathematics.
A standard for copy protection is required to assure a viable market for content creators and consumer electronics companies, while making the widest range of content available to the public. Such a standard should be technically sound, be open to all qualfied participants, and not be controlled by a for-profit entity. Cisco remains committed to work with the industry to implement an open and interoperable system of this nature.
Mr. Chairman, thank you for the opportunity to present Cisco’s views today.
http://commerce.senate.gov/hearings/022802meyers.pdf
"Protecting Content in a Digital Age –
Promoting Broadband and the Digital Television Transition"
Written Statement of
James E. Meyer
On Behalf of Thomson multimedia
Before the
U.S. Senate Committee on Commerce, Science, and Transportation
February 28, 2002
Thank you, Chairman Hollings, Senator McCain, and members of the Committee for the opportunity to bring the views of my company to this hearing.
My name is Jim Meyer, most recently Senior Executive Vice President and Chief Operating Officer and currently special adviser to the Chairman of Thomson multimedia. I have over 25 years of experience in the consumer electronics industry, and I'm here today to share the views of one of America's largest entertainment industry employers. I believe that I also can speak fairly for the millions of consumers who purchase RCA brand home entertainment products each year and call us if there is a problem.
I commend you, Mr. Chairman, for holding this hearing and for the continued leadership that you, Senator McCain and other Members of the Committee have demonstrated over the past decade in attempting to guide and accelerate our nation's transition to digital television. The subject of today’s hearing, the protection of copyrighted video programming formatted digitally and electronically transmitted by broadcast, satellite, cable or over the Internet, involves numerous difficult technical and business issues. I would suggest, however, that the public policy issues are relatively few and straightforward.
First, there needs to be agreement on digital copy protection standards if the conversion to digital television is to move forward more rapidly.
Second, any such agreement must embody one fundamental principle: it must protect both the interests of digital content owners and providers and consumers. Copy protection must be effective, particularly in addressing the core problem of unlawful internet retransmission, but it must permit consumers to continue to make recordings for their personal use within their homes just as they have come to expect in the analog world since the advent of the VCR. Consumers making investments in advanced digital products will not and should not accept reduced functionality in their digital viewing experience.
Third, ideally, agreement should be reached voluntarily among the affected parties through private negotiations using established standard setting processes. However, if that effort does not succeed within a reasonable period of time, the government must facilitate and, if necessary, mandate the adoption of standards.
1. Unresolved Issues Slow The Digital TV Transition
While digital technology is transforming our industry, the switch to digital transmission and reception of TV signals has been a bumpy ride so far. Fewer than one out of six broadcasters is now sending a digital TV signal. We are hopeful that by May 1, 2002, an additional 400 to 500 broadcasters will be transmitting digitally. While consumers have purchased more than two million HDTV monitors and sets, the reality is that this transition has only just begun.
Content owners have yet to release truly compelling digital high-definition movies, sports, and shows. Their reasoning is simple – they want more protection from illicit Internet redistribution of digital content.
Obviously, if we're going to have an orderly transition, there needs to be agreement about what we're trying to protect and how. Thomson prefers private agreements that insure full functionality in a Personal Home Network, and protection of digital content from widespread piracy.
To that end, Thomson is developing a new technology called SmartRight. Designed to work with a simple "smart card," the SmartRight system would permit a consumer to view, record, and store digital content for his own use within what is called a personal private network. The system would work for broadcasters, for cable and satellite operators, and could even be extended to computing platforms. SmartRight is a good example of a technology that is reliable, renewable, modular, and easily applied to a variety of situations.
Beginning this year, Thomson is also building copy protected interfaces for cable and satellite programming into its new line of RCA Scenium integrated digital television receivers and in RCA HDTV monitors that will be available to consumers in time for this year’s Christmas shopping season.
Another roadblock in the digital TV transition is incompatibility between various cable systems throughout the country. Current cable TV systems are proprietary and closed, making it impossible to develop new digital TV products that could easily be sold anywhere in the U.S. and plug directly into a cable outlet. This is an unfortunate fact that will certainly hinder a speedy digital TV transition.
2. Background on Thomson multimedia
Thomson multimedia is the company behind RCA home entertainment products and the owner of Technicolor, a service provider to the film industry. As the leading manufacturer and marketer of consumer entertainment products, and as a trusted supplier of DVD and tape replication services to Hollywood, Thomson is well positioned to comment on how best to expand broadband entertainment while preserving both home recording rights and the rights of copyright holders.
One out of five TV sets sold in America comes from Thomson's RCA brand, our professional broadcast division is one of the world's largest, and we are the worldwide leader in DVD and CD-ROM replication serving such diverse customers as RadioShack, Circuit City, Best Buy, Wal-Mart, Fox, Disney, Warner Bros., and hundreds of others. Of course, millions of consumers are also our customers, and we field more than 10,000 calls, e-mails, and letters each day with consumers who need help, need service, or just need some advice.
As one of the largest employers in the entertainment industry, our reach spans these United States, with more than 10,000 employees in 30 different communities. Our biggest concentration of employees live and work near Indianapolis, Indiana and in Senator Boxer's home state of California (near Hollywood) at Technicolor.
So, we have a unique position in both of the content and electronics industries – by helping the creative community reach the public through Technicolor's trusted film and video services, and by designing and selling new RCA home entertainment products that entertain and inform millions of people.
3. Consumers Expect Features Like Home Recording
With my 25 years of experience in the consumer electronics industry, I've lived through several revolutionary changes in our business. I was there when RCA sold the very first VCR that could record four hours on one tape. That business is now very mature, with VCRs themselves selling for under $75 and both content owners and consumers migrating to the popular DVD platform.
Home recording has become a popular past-time, as people use their VCRs to watch their favorite programs at different times and keep "bookshelf" copies in a collection. Thomson, alone, sold more than 55 million blank VHS tapes last year. While not formally enshrined as a U.S. law, home recording has become a feature that consumers expect to enjoy. They like the convenience. Some record to catch up on favorite programs, others to skip the commercials. But most people aren't using a home VCR to become pirates.
Prerecorded movies and TV shows on tape and disc are coded to prevent copies from being made. Both the VCR and the DVD player recognize standardized copy protection methods for prerecorded content, restricting the average person from making and selling pirated copies.
With today's products, a good balance has been struck between the consumer convenience and popularity of home recording and protecting copyrights. Tomorrow's products are another story. Digital recording makes perfect digital copies. The situation is compounded by the convergence of the computer with many popular consumer electronics products. Typically, computing devices are not subject to the same restrictions as consumer electronics products. This disparity is the cause of much debate and concern.
Today, Thomson is working on new technologies that will link together digital entertainment products in a Personal Home Network. This is the VCR of the future – the ability to easily record shows and watch them anywhere in your home, at any time. Our customers have been struggling to identify how the "rules of the game" should change as products go digital and perfect copies are possible. Thomson draws the line at the Personal Home Network, allowing consumers to time shift, keep archival copies, move content to various devices, and preserve favorite content as long the consumer wants to. But there are legitimate fears about sending that content outside the home network. These issues are now heating up because of America's transition to digital televisio n.
4. Thomson Leads the Digital TV Transition
With the transition to digital TV just a few years old, Thomson has already developed a broad array of RCA-brand digital television equipment that spans a wide range of price points – including digital satellite receivers, DVD players, HDTV monitors and HDTV receivers.
Consumers can make the digital transition in a manner that serves their own needs and personal budgets. For most people, it means the addition of a digital satellite receiver or digital video disc player – and maybe an upgrade to an HDTV monitor. Slowly, as the amount of good HDTV programming is increasing, we're also seeing growth in the market for fully-integrated high-definition televisions.
As I mentioned earlier, Thomson supplies digital broadcast equipment to broadcasters, cable networks, satellite broadcasters, local stations, and production companies. And all of them worry about security.
5. More Digital Content and More Digital Products Will Drive the Transition
It is indisputable that high-value, high-quality content will drive deeper consumer acceptance of digital television. For example, the availability of thousands of movies on DVD has sparked strong sales of high definition TV monitors and sets – as well as discs and players.
Thomson views the digital TV transition holistically – that is, the pieces are interconnected: viewers want content; broadcasters want viewers; and content companies want to sell their content, with assurances that their digital material is secure. For more consumers to embrace digital TV, we believe that two things must happen.
First, high quality and innovative digital content must be created by the content community and distributed in its fullest quality and integrity. This happens with over-the-air terrestrial broadcasts, through the cable and satellite facilities, with pre-recorded media, and someday even over the Internet.
Secondly, for more consumer acceptance of digital TV, companies like Thomson must offer innovative products that let consumers exploit the full benefits of going digital. As your constituents buy new digital gear, they will still want to record favorite shows, pause to take a call during a broadcast, and save episodes or sports events for posterity.
Achieving these two mutually reinforcing – not mutually exclusive -- goals of more HDTV content and more digital products requires certainty for content providers, for consumers, and for manufacturers.
6. Copy Protection Standards Provide Assurances for Studios, Network Operators, Manufacturers, and Consumers
What's missing from the transition is certainty – for everyone. There are holes in the system that could be used to steal content. That worries the Studios. Broadcasters fear they'll be passed over for more secure networks like satellite and cable. Manufacturers move cautiously, because of the huge engineering investments required to make new products. And Consumers may not buy anything, fearing obsolescence.
In more detail:
Studios need assurance that their content (their intellectual property) is protected before they make investments in the production and distribution of high quality digital content. They will not have that certainty unless there is genuine and effective protection against commercial piracy and against unauthorized retransmission of digital content – especially over the Internet. Once the necessary copyright protections are in place, we believe that consumers will enjoy a dramatic increase, not decrease, in the availability of compelling, creative works online. This will be good for consumers, and very good for the companies that provide the content.
Network Operators like cable, satellite, and terrestrial broadcasters want to offer their services in a secure environment so that they get the best content and interested subscribers.
Manufacturers like Thomson need to know that consumers won't be stranded by obscure licensing agreements or heavy-handed control exercised by content owners under the terms of licensing agreements between Cable Labs and consumer electronics manufacturers. Some proposals would allow the owner of the content to prevent recording, or worse, automatically erase programs that consumers have recorded at home. Just because we move to digital delivery doesn't mean that we should run roughshod over law-abiding consumers.
Consumers expect full functionality in new products. They want home entertainment systems to work as advertised, and consumers want to know that common home recording practices enjoyed today will continue. Believe me, nothing will kill the transition to digital television faster than trying to sell digital products that are actually less functional than today's common VCR.
It's clear that some form of copy protection standard setting is necessary. (Some of this work has already been done for cable networks, although HOW that technology is used remains an open question.) Preferably, these standards should be adopted expeditiously by private negotiations among affected industries. If that effort fails, the government must facilitate and, if necessary, mandate their adoption. These standards must, however, focus on the real concerns – such as commercial piracy and illicit retransmission of content over the Internet, and not just new ways for the copyright holders or network operators to charge for consumer convenience.
During the last few months, progress has been made within the Copy Protection Technical Working Group and related groups, bringing together representatives of all industry stakeholders, toward agreement on a number of outstanding copy protection issues, most notably a broadcast flag which could be embedded in the digital bitstream and recognized by a digital television receiver, cable set top box or computer. The heightened Congressional interest in these activities reflected in discussion draft legislation circulated by Chairman Hollings’ Commerce Committee staff and the roundtable discussions led by Chairman Tauzin and Upton in the House have clearly accelerated the pace of these discussions. Hopefully, they will conclude swiftly and successfully.
Thomson multimedia remains squarely focused on the needs and desires of our customers. If we can work this out, then everyone will benefit. Studios will sell more content. Network Operators will have more viewers. Manufacturers will sell more products, and Consumers will enjoy a better entertainment experience.
Ultimately, our own government will be able to reclaim the valuable broadcast spectrum now used for analog TV – and reassign it for future communications needs.
Thank you for your interest in these complex but critical issues. I look forward to your questions.
http://commerce.senate.gov/hearings/022802perry.pdf
Committee on Commerce, Science, and Transportation
"Protecting Content In A Digital Age --
Promoting Broadband And The
Digital Television Transition"
Statement of Robert A. Perry
On Behalf Of The Home Recording Rights Coalition
February 28, 2002
Chairman Hollings, Ranking Member McCain, and Members of the Committee--
I am pleased to appear today on behalf of the Home Recording Rights Coalition (“HRRC”). I serve on the Board of the HRRC, and currently chair the Video Board of the Consumer Electronics Association ("CEA"). I also serve as Vice President of Marketing of Mitsubishi Digital Electronics America, Inc., a corporate leader in the transition to DTV and other digital products for the home network. In my role at Mitsubishi, I am the executive directly responsible for the product strategy of the company.
The HRRC was founded more than 20 years ago, after a U.S. Court of Appeals ruled that Sony could not legally sell the first “Betamax” home VCR to consumers. Fortunately for all involved – including the motion picture industry – that decision was reversed by the U.S. Supreme Court. Not many years after having failed to keep the Betamax and successive generations of VCRs off the market, the motion picture industry began receiving greater revenue from the home video market than it does from the theatrical box office, a trend that continues in the digital DVD era.
This morning it should be apparent why, after twenty years and a Supreme Court victory for consumers, the HRRC finds it necessary to remain active. Despite the tremendous benefits conferred on the entertainment industry by consumer electronics products, some in the content creation and distribution industries continue with their efforts to limit, curtail, restrict and confine the design of these products, and their use by consumers. Many or most of the areas in which restrictions are now sought are targeted at the home, and the home network, rather than at abuses related to the Internet, which is their purported justification.
Proposals to restrict the development of new technology, and consumers' use of it, represent an alarming trend which in our view should be a main subject, if not the subject, of the hearing today. We are at the forefront of a digital revolution that, if allowed to proceed, can offer consumers greater value at lower prices. But history teaches that if the Congress allows content industries to dictate the designs and uses of new products, the digital revolution will never reach its full potential.
All who seek regulation or legislation today cite to actual and potential redistribution of commercial programming over the Internet. But the legislative agenda of some is not confined to addressing this problem. It extends to dictation of the design of products by technology companies, and the dictation of their use by consumers. We hope this Committee, in its fact finding, will sort the wheat from the chaff.
The HRRC Has Worked With
Content Industries On Approaches
That Are Balanced And Fair To Consumers
In the analog domain, HRRC cooperated with the entertainment industry in drafting section 1201(k) of the Digital Millennium Copyright Act of 1998 (DMCA). Prior to that, we worked with the recording industry on the Audio Home Recording Act, and we took the initiative in negotiating with the motion picture industry, to address their concerns over emerging digital video formats, starting in 1992. It was, literally, we who invited them to the table. We were also among the founders, along with information technology and content participants, of the Copy Protection Technical Working Group ("CPTWG"), which has met approximately every month on the West Coast for the last six years. Its most recent meeting was yesterday.
For several years, both HRRC and consumer electronics companies have offered to work, via legislation if necessary, with those who legitimately want to address large scale, anonymous redistribution of content over the Internet. I am a co-chair of a CPTWG work group on this particular subject. Consumer electronics companies have already committed publicly to support measures, regulatory if necessary, addressing such redistribution.
Some Content Industry Agendas
Extend Into Deep Control Over
Consumer Practices In The Home,
Not On The Internet
The movie industry agendas from which consumers need protection go well beyond dealing with external connections to the Internet. Rather, they extend internally, inside the home, into heart of the consumer home network. We are concerned about efforts to control or eliminate reasonable, healthy, and constructive practices of consumers, and to chill the design of innovative products.
Congress Should Not Allow Control Over
Consumer Home Recording Of Free
Over The Air Broadcasts
At least one motion picture and television network company has sought, through regulation or legislation, the ability to control consumers’ enjoyment of free, over the air broadcast programming within the home -- not just on the Internet. The argument has been that private sector content distribution licenses provide for “generational” control of home recording in some instances. So, it is reasoned, free, over the air digital broadcasts should be similarly controlled, and consumers may be limited to making a single, personal copy.
They shouldn't be. Consumer expectations about free, over the air broadcasting are different from those as to cable and satellite delivery. Those who receive programming over cable or satellite have contractual relationships with their content distributors; the devices they use are specifically licensed to receive content Approximately 15% of the public, however, chooses to forego such contractual or license relationships, preferring to watch whatever they choose, plus the advertising, delivered via rooftop antennas or rabbit ears. Imposing a technical regime on free broadcasts would forever change this paradigm and experience. If those who want to equate free programming with paid programming had their way, these consumers would become involuntary licensees, subject to technological controls negotiated elsewhere.
Advocates of such a regime say they would still allow consumers to make a single copy of a program. Beware. As Herbert T. Gillis famously advised, "The first step down is a long way." Any imposition on consumer home recording of free, over the air broadcasts would have significant, harmful consequences for consumers.
For example, many consumers now have set-top boxes with built-in "personal video recorders," or PVRs, as well as plain-old VCRs. Some studios insist that consumers should only be able to make one copy of a broadcast, claiming that they never have a need for more than one. If a PVR copy counts as the consumer's one copy, however, he or she can never record it on a VCR, or play it back on another TV in the house. A program recorded for viewing by the children could only be viewed on the same TV on which a parent would otherwise watch Sunday sports. A program of local interest could not be shared with parents or grown children living in another community.
Licenses governing programs distributed over cable and satellite systems have complex and expensive ways to deal with such issues -- for example, allowing transfer of a copy from a PVR to a VCR, if the PVR copy is erased at the same time. Nor have such licenses imposed restraints on programs originating as free, over the air broadcasts, even when delivered to the home over cable or satellite. Imposing such complexities as to free, over the air programming would bring the government into a complex, changing, and expensive technical area, with consumers suffering the consequences.
HRRC is strongly opposed to any legislative (or regulatory) interference with consumers' rights to engage in inhome, private, non-commercial recording of programming originating as free over the air broadcasts. We urge the proponents of legislation to publicly disclaim any such objective today, on the record, and without condition.
Congress And The FCC Should Not Allow
Content Owners And Distributors To
Exert Remote Control Over Consumers'
Selection Of Home Network Interfaces
And Viewing Products
Another agenda of some studios, that we already see in proposed licenses to be administered by the Federal Communications Commission, is the exertion of remote control over the daily operation of consumer devices. The technical phrase, "selectable output control," sounds inviting -- until one realizes that the "selection" would be done by the movie studio or cable company, not by the consumer. The technology as to which some studios seek mandated adherence would allow them, or cable or satellite operators, to exercise direct, remote control over all product-to-product connections in the home. Once given this power, a movie studio, or cable or satellite operator, could simply turn off any interface at will, effectively making the consumer home network a part of its own distribution system.
Please remember that digital technology, which causes content owners to feel threatened as to its distribution potential, offers a much more frightening potential for control -- if the FCC and the Congress allow such control to be exercised. And here is why it is being sought. Today, there are two standard all-digital interfaces being readied for widespread use in the home. One, known as IEEE 1394, iLink, or "firewire," provides a bi-directional means of connecting TVs, VCRs, and other standard consumer products within a home network. This connection allows home recording to be either supported or disabled. The other digital interface, called "DVI," is a one-way, broader digital connection originally designed to hook personal computers to digital monitors. The DVI signal used in this interface is simply not recordable by any known consumer technology.
Over several years of negotiations, license agreements governing the "1394" interface have spelled out when this technology may be used to block home recording of certain content, based on "encoding rules" that protect current consumer practices. (Congress in fact endorsed these rules in principle as part of section 1201(k) of the DMCA.) Such an approach is not possible utilizing DVI alone.
Each of these interfaces offers different advantages. Many people in my industry envision home networks in which each interface connection would be available to consumers -- some TV receivers might be designed to rely on the "1394" inputs, some on DVI, some on both. Connections to digital VCRs, for example, would be made through the 1394 interface, meaning that copying would be controlled, but subject to balanced "encoding rules."
However, if those studios seeking to impose "selectable output control" gain this power, they could remotely control, on a program by program basis, which one of these interfaces would be active in a home, and which would be switched off for all purposes. A studio, cable MSO, or satellite provider that did not want to permit any home recording on VCRs would simply turn off the "1394" interface, and the "encoding rule" protections for consumers, painfully negotiated over several years, would become irrelevant. But the damage would not stop there. A consumer who had bought a state of the art HDTV receiver, with a copy-protected digital 1394 interface, would lose the signal from this interface for all purposes, including viewing the program. So even consumer high resolution viewing, on the newest frontline, digital products of the DTV transition, could be cut off at the discretion of the studio, cable, or satellite company.
Unfortunately, the damage to consumer living rooms from "selectable output control" would not stop even at the choice of digital interfaces. Neither of these digital interfaces is yet in general use. Most HDTV displays in the market today, and sold over the last three years, rely on the same sort of broadband interface that is used to deliver signals from PCs to computer monitors. (In computer terminology it is called "RGB." Its consumer electronics cousin is component video, also known as "Y, Pb, Pr".) If Congress were to give this enormous "selectable output control" power to content owners, they could simply cut off broadband signals to the pioneering Americans who have purchased these 2.5 million displays.
To simplify this issue -- if studios and content distributors were given this power over consumer viewing, some consumers might conclude that they had overpaid for their brand new HDTV. Even more disastrously for our country's digital television transition, they might conclude, and tell their friends, that it was a mistake to buy any new digital television at all -- because all the high resolution inputs on the TVs manufactured to date could become useless as to content delivered over cable, satellite, or broadcast. We suggest that any studio proponents of such control be asked to explain to the Committee how such an outcome could possibly serve the public interest.
Spokesmen for the entertainment industry have never publicly disclaimed any intention of proceeding with such an agenda, through licenses as enforced by the FCC or through the Congress. We call upon them to do so today.
A Cable Industry Proposed License And
Specification Threatens Consumer
Enjoyment Of Innocent Home Products
Ironically, the Federal Communications Commission today is in a position to enforce anti-consumer license provisions because of a provision passed by the Congress, in the 1996 Telecommunications Act, that was meant to be explicitly proconsumer. Section 304 of the 1996 Telecommunications Act requires the FCC to assure in its regulations the competitive commercial availability of devices that attach directly to cable systems -- breaking the 50-year monopoly, based on their concerns over theft of service, that cable multi-system operators have enjoyed.
To achieve competitive entry with a range of new devices, as occurred in
telephone deregulation, the FCC oversaw a standards development process that
would also protect the security of cable signals from unauthorized use.
CableLabs, the research consortium of the cable industry, volunteered, and
was chosen by the FCC, to set such standards. But as presently drafted these
standards, and the license agreement that would extend from the cable industry
to device manufacturers, pose another threat to consumer enjoyment of home
devices, and represent yet another part of a motion picture industry agenda
represented before you today. We believe that in combination, their
specifications and their license would:
HRRC and others have repeatedly requested, in writing, that the FCC publish the pending drafts of this license, for public comment. We urge this Committee to exercise its jurisdiction to see that this occurs.
Several of these impositions are said to be at the behest of content owners. We call upon those who seek legislation that would grant them power over consumer devices to state clearly whether and how they intend to preserve consumer enjoyment of home devices attached to cable and satellite systems.
Congress Should Look Skeptically At
Vague Proposals For A "Single, Standard
Secure Domain" Controlling All Consumer Use
Of Consumer Electronics And Information
Technology Products
The Consumer Electronics Association ("CEA") has provided financial support for its members' attendance at CPTWG, and has also supported research and testing products of its work groups. I am thoroughly familiar with the technical proposals pending as to Internet redistribution. This project does not and should not require the sort of control over the home network that apparently has been sought as a part of a separate legislative agenda of the sort I have described today.
In addition to going well beyond the redistribution issue, these agendas also get well ahead of private sector processes.
We have heard speeches about "single, standard security domains," but have yet to see particular proposals, in the CPTWG or elsewhere, specifically related to such speeches, defining what is sought, and what it would mean for products that are in consumers' hands today. This imprecision will not be improved by tossing everything into the hands of a government agency to figure out. In my view, the output of industry-led groups such as the CPTWG should be an essential input for the consideration of any proposed legislative or regulatory agenda. We do not have an admirable history in doing the opposite -- legislating the "solution," and expecting the private sector to figure out what the Congress meant.
Any Further Regulation Or Legislation
Would Be Appropriate Only As A Narrow,
Necessary, And Targeted Supplement
To A Private Sector Consensus That
Protects Consumers
As I noted near the outset, the HRRC has worked cooperatively on legislative and regulatory proposals over the last two decades, so long as they gave fair consideration and protection to consumer interests and practices. In the analog domain, HRRC cooperated with the entertainment industry in drafting section 1201(k) of the Digital Millennium Copyright Act of 1998 (DMCA). This section -- the only part of the DMCA that provides for any mandate on product design -- takes a balanced approach. It recognizes the prevailing technology that may be used to limit analog home recording, but subjects any use of such technology by content owners to clear "encoding rules" that protect reasonable and customary consumer practices.
A similar approach could be identified to address widescale redistribution of content over the Internet, and, on an appropriate time scale, to provide necessary tools for the enforcement of reasonably balanced license agreements that address copy protection issues, as well. Such an approach has been suggested by Rep. Boucher in House hearings over the last several years. In fact, representatives of the content industry at times have appeared publicly committed to work towards enactment of a digital video version of section 1201(k), but little has been proposed as to such a project.
[p. 11 blank.]
HRRC has been engaged in the debates over actual and potential copyright legislation for the digital era since that era began, for consumer recording devices, in the mid-1980's. We have developed a set of principles, as to potential legislative or regulatory mandates, which we commend to the Congress in the interest of protecting consumers and not interfering with either technical progress or commerce:
HRRC will consider supporting a regulatory or legislative mandate only if --
(1) the issue cannot be addressed effectively by private sector standards or licensing activity alone,(2) the result promotes rather than hinders technical progress and legal certainty,
(3) the mandate is of a known technology and as narrow as possible, and
(4) the outcome protects consumers’ reasonable and customary expectations.
Narrow And Targeted Provisions
May Be Appropriate To Secure
Full Consumer Use And Reliance
On Component Analog Interfaces
I have already identified the pending consensus, private sector approach to redistribution of broadcast content over the Internet as one candidate for government support of an existing private sector consensus. There is one other issue that we see, a bit further on the horizon, which might be addressed according to the principles that I have suggested.
The preferred methods for dealing with reasonable content industry concerns are private sector development of technologies, and private sector licensing as the prevailing means to apply such technologies. These should be subject to fair “encoding rules,” protecting consumers from arbitrary impositions that interfere with their reasonable and customary expectations. Through licensing alone, however, it may not ultimately be possible to reach all the relevant devices in the market, or to protect consumers through adequate encoding rules.
For example, HRRC is committed to maintaining the full consumer enjoyment of DTV displays, owned by millions of consumers, that rely on the "component analog" video interface. We have asked the FCC, and we are asking the Congress, not to do or allow anything that would interfere with the right of consumers -- the pioneers in the DTV transition -- to use and enjoy these display devices. Those who seek the discretion to turn off or degrade the quality of this interface in set-top boxes (that would feed signals to these displays), however, cite their inability, using present technical and licensing tools, to provide any protection for high definition signals once they are allowed to pass over these interfaces. They argue that without such tools, there will be no means to prevent the future re-digitization of these signals for passage over the Internet. They would also need a means to enforce whatever copy control they may apply to licensed programs provided by cable or satellite conditional access -- e.g., pay per view, video on demand -- as allowed by reasonable "encoding rules."
We hope that everyone in the Congress, the FCC, the movie industry, and the cable and satellite industries will agree with us that it is essential that consumers who buy DTV and HDTV receivers not lose most, or even any, of the benefits of their bargain. Therefore, in HRRC's view, a balanced regime as to "component analog outputs," that is fair to consumers, is far preferable to the imposition of broader measures such as “selectable output control” or “downresolution.” One such approach -- which at this stage would still need much private sector investigation and discussion -- would be an obligation only on narrowly and specifically defined, future analog-to-digital converters, to read and respond to so-called "watermark" technology that may emerge from a private sector consensus. Since private licenses cannot and should not reach every product, to enforce that obligation equitably some regulatory or legislative action may be necessary. We emphasize, however, that much needs to be done in the private sector first, before we can know whether the necessary preconditions as to fairness to consumers, and not hindering technology or commerce, can be met. We know there is particular concern on these points in the information technology industry, and we share it.
A Published Draft Of Legislation
Is Unfocused And Dangerously
Overbroad
I have attached the HRRC critique of the first published version of a draft bill entitled the "SSSCA." I understand that it is being reconsidered. The fundamental problem with its approach -- aside from its potential support for goals that we consider to be anti-consumer -- is the lack of any apparent nexus between content that would be protected, devices that would be subject to mandate, and the results that would be achieved.
One could go on and on about the sorts of devices that would be covered, intentionally or inadvertently -- from wristwatches to PDAs to ordinary TV receivers to supercomputers. This is not a drafting issue. This is a fundamental policy issue. The main question is whether the Congress is going to hand unfettered control of the future design of devices by consumer electronics and computer makers over to a few studios to who wish to exert absolute authority over what consumers can do with lawfully acquired programming in the privacy of their homes.
If Congress is not about to hand over such power, we respectfully suggest that it needs to back up and focus on particular issues and problems, find out exactly what the private sector is capable of doing, find out where the private sector would need help as to enforcement of reasonable measures, and, most importantly, assure that the outcome is fair to the consumers who are critical to the success of the digital television revolution.
On behalf of the HRRC and the other organizations with which I am affiliated, I greatly appreciate the opportunity to have appeared today.
_____________________
Home Recording Rights Coalition
Analysis And Concerns, Draft "SSSCA"
Technology Mandate Legislation
I. Objections In Principle
The approach taken in the published staff working draft of "SSSCA" technology
mandate legislation would deal far too harshly with consumers, and put an
end to their reasonable and customary home recording practices which, to
date, have contributed to entertainment industry prosperity. The draft--
II. Objections As To Overbreadth And Ambiguity
The draft legislation is so broad in its application that, technically and
legislatively, it entirely lacks focus. Selecting actual products to which
to apply its provisions, from the literally millions that would be covered,
would be pure guesswork. Hence, its application would arbitrary, its direction
uncertain, and its effect on the marketplace potentially catastrophic. The
draft--
III. Objections To Nature And Sweep Of Government Mandate
Consumers, consumer organizations, retailers, and others would be shut out
of the preliminary round of "negotiations" as to imposition of any "certified
security technology" -- only "device manufacturers" and "copyright owners"
would participate. Even the device manufacturers would lack negotiating leverage,
as the bill puts no constraint whatsoever on the objectives and means of
enforcement that can be demanded by the copyright owners. The draft--
# # #
http://commerce.senate.gov/hearings/022802valenti.pdf
A brief report concerning
the dark underside of Internet piracy
as well as the possibility of a
cleansing redemption to benefit
the American consumer
presented to the
Senate Committee on Commerce, Science and Transportation
On behalf of the member companies of
THE MOTION PICTURE ASSOCIATION OF
AMERICA
by
Jack Valenti
President and Chief Executive Officer
February 28, 2002
Washington D. C.
This document sets forth the goals that the American movie industry urges the Congress to seriously examine. The future of these unique creative story-telling works is in danger of being shrunk and squandered by an increasing thievery on the Internet. We cannot stand mute and observe the slow undoing of a formidable American economic and creative asset.
The Economic Worth
of the Copyright Industries
What kind of asset is at stake here and what does it mean to this country? The facts are these: The Copyright Industries (movies, TV programs, home video music, books and computer software) are America’s greatest trade export prize. They are responsible for some five percent of the GDP of the nation. They gather in more international revenues than automobiles and auto parts, more than aircraft, more than agriculture. They are creating NEW jobs at three times the rate of the rest of the national economy. The movie industry alone has a SURPLUS balance of trade with every single country in the world. No other American enterprise can make that statement. And all this at a time when the country is bleeding from a $400 Billion trade DEFICIT.
Which is why we come to you with a clear statement of what is needed to preserve this extraordinary economic/creative engine of growth in a broadband world.
Broadband (high speed, large pipe entry to the Internet) is an OPPORTUNITY to make available to consumers another delivery system for transporting visual entertainment to their homes. This means more freedom of choices for consumers.
As you may surmise, producers of visual entertainment are enthusiastic, ready and eager to offer their creative works on the Net. And to dispatch those works LEGALLY, at a fair and reasonable price to those American homes who choose to view them. It should be noted that ‘fair and reasonable’ will be defined by the consumer and no one else.
But there is an obstacle. Consider this: The cost of making and marketing movies, for example, has risen to nerve-shattering heights. In 2000, the total cost to the major studios for making and marketing their films was, on the average, an astounding $82 Million! Only two in ten films ever retrieve their total investment from U.S. theatrical exhibition. Those films must journey through various marketplace sequences: airlines, home video, satellite delivery, premium and basic cable, over the air TV stations and internationally. They must make that journey to try to break-even or ever make a profit.
Today as that movie travels its distribution compass course, it is exposed to great peril, especially in the digital environment. If that movie is ambushed early on in its travels, and then with a click of a mouse, and without authorization, sent hurtling at the speed of light to every nook and cranny of this planet, its value will be seriously demeaned. Who on earth would continue to invest huge sums of private risk capital when the chances of redeeming that investment become remote, if not impossible?
Broadband entices and allows piracy of films and TV programs on a massive, unprecedented scale. And at this precise moment, movies and other visual entertainment works are in ever-multiplying numbers swarming illegally throughout so-called file-sharing sites (a more accurate description would be “file-stealing” sites). And this is in an environment where most people's broadband connections are not fast enough to enable speedy downloads of these illegally copied files (funny how people will wait a long time for something when it is free!).
Thus, the problem will only get worse as the speed of broadband increases. University-based piracy provides especially troubling evidence of this phenomenon, because university ethernet systems are state-of-the-art, large pipe, highest speed broadband connections. These university systems are over-run and heavily burdened by student downloading of pirated movies and TV shows. It's easy. It's fast, and it's free. It is also illegal.
Gresham’s Law works its will in such a landscape. Just as cheap money drives out good money, so we are afraid that pirated movies will spoil the market for broadband delivery of high-quality films with superior fidelity to sight, sound and color once these high-speed connections proliferate. A consulting firm has estimated that more than 350,000 movies are being illegitimately brought down EVERY DAY. Who would choose to pay for movies when you can have them delivered to you FREE? It is this infection which corrodes the future of creative works.
But if through technological measures, producers of visual entertainment could defeat the spread of pirated movies populating ‘outlaw’ Net sites, the Net would be cleared of illegal debris and able to hospitably welcome legitimate, superior quality entertainment in a user-friendly format. The Consumer Electronics and Information Technology industries have been working cooperatively with us to find methods to deliver our legitimate content in a more secure digital environment. The largest beneficiary of such an environment would be American consumers.
The THREE GOALS I outline below are designed to protect valuable creative works in visual entertainment, and at the same time expand the reach and attraction of broadband in the consumer society.
How to achieve these GOALS? First and foremost both the Senate Commerce Committee and the Senate Judiciary Committee must be involved because these goals are umbillically connected to the oversight jurisdiction of both Committees.
---------------------------
Our Three Goals, whose Objective it is
to Protect movies, TV programs
and other visual entertainment on the Net.
Goal One: to create a “broadcast flag” which would prevent broadcast programs exhibited on over the air TV stations from being re-distributed on the Net, which is a form of thievery.
Because just about all such TV creative material is in “deficit,” (that is, its production costs are higher than the license fees it receives from the network) TV series and other high value broadcast material must go to ‘syndication’ when they leave the network. Syndication means those programs must be licensed to local and international TV stations in order to recoup their total investments, and hopefully make a profit. If such programs are re-distributed on the Net while they are still on the network, it shrinks and decays the earning power of that program in the syndication market. Discussions are now going on which could result in a mutually-agreed upon accord to construct a ‘broadcast flag.’ Praise is due all those Information Technology, Consumer Electronics, and Movie industry companies for these good faith discussions which I pray will end in a unanimous accord.
Action: To achieve this important goal will require congressional or agency action to implement the accord. In the absence of such an agreement, a narrow mandate may be necessary.
________________________________________
Goal Two: To “plug” the “analog hole.”
This is technical jargon. Let me sort this out in plain English. All digital protection designs can only work in a digital environment, which is the environment of the Internet. When a digital signal comes down to a TV set in the consumer home, that TV set in 95% or more of American homes is an “analog” set. This means the digital signal is immediately transformed into an analog signal in order for the consumer to watch it. If the analog signal is then converted back to digital, it cannot be protected by any known protection device. This is called “the analog hole.” One way to ‘plug the hole’ could be through a ‘watermark detector.’ The ‘watermark’ is an ingenious design, which commands the signal converter in the TV set to respond to the instructions on the movie. This can be accomplished through a concord agreed to by the Information Technology, Consumer Electronics and Movie industries.
Action: To reach this goal, Congressional assistance will be necessary.
__________________________________________
Goal Three: To stop the avalanche of movie theft on so-called ‘file-sharing” Web sites, such as Morpheus, Gnutella, etc. (the more accurate name would be ‘file-stealing’ sites).
Unhappily, neither the ‘broadcast flag’ nor ‘plugging the analog’ hole will stop this relentless thievery that is endemic.
We have not hesitated to spend considerable resources to fight these sites and services in the courts. But litigation alone cannot possibly provide an adequate solution, particularly as these services become increasingly decentralized, fragmented and anonymous. Constructive discussions need to take place with the Information Technology and Consumer Electronics industries to determine how best to develop effective technical solutions to crush online theft of our valuable creative works.
Action: Continuous negotiations must take place to develop technical solutions, which may require legislative enforcement.
____________________________________________
There is one truth that sums up the urgency of this request to the Congress to enlist in the battle to preserve and protect an American economic and artistic asset which attracts the enjoyment, the patronage and a most hospitable reception by every creed, culture and country throughout the world.
That truth is: If you cannot protect what you own, you don’t own anything.
Transcription and HTML by Cryptome.