Freedom Line Blog

We are fortunate to live in what many have called the “Golden Age of Television,” a time when an explosion of creativity and innovation have collided to create more audience choice than ever before.

In light of that, the Federal Communications Commission’s (FCC’s) recent decision to “Unlock the Box” with their “AllVid” proposal seems especially puzzling.  Upon further reflection and considering the bigger picture, however, the misguided AllVid proposal regarding technology that is already antiquated and will soon  be entirely irrelevant is merely the most recent in a string of illogical and counterproductive proposals from the current FCC.

From the so called AllVid proposal to the FCC’s Privacy proposal, it is evident that we live not only in the “Golden Age of Television,” but also in the “Age of Asymmetrical Regulation.” Current regulations impose one set of rules upon incumbents in the telecommunications industry and another set of rules entirely for so-called  “edge” providers like Google. In fact, regulation under this FCC seems to deliberately create a crony capitalist environment where incumbents can’t compete and the edge providers alone can thrive.

Equally troubling is the abnormally notoriously close relationship between Google and the White House, a partnership that was extensively detailed in a recent piece in The Intercept. Not only did Google’s top lobbyist visit the White House 128 times, but during the company’s annual State of the Union YouTube interviews with the President, Google is reported to have planted questions on policy issues important to Google on at least 3 occasions. That conspicuous degree of access and flagrant favoritism suggests that it has contributed to the severely asymmetrical regulation that we continue to witness from this FCC.

Again and again we have seen examples of this type of successful rent-seeking behavior from Google, and their ilk, and the remedy is clear: the FCC must stop its transparent favoritism and heavy-handed regulation of the telecommunication incumbents.  Instead, it should focus on maintaining a level playing field. Regulating based on crony capitalist bias and personal friendship is not only wildly inappropriate, but also a recipe for interventionist disaster. Continuing to disproportionately impose destructive regulations on the telecommunications for the benefit of other favored sectors not only violates the rights of disfavored enterprises, it ultimately serves to stifle competition and innovation for years to come in same the way that all government interventions into the free market tend to do.

Alongside other free market organizations, CFIF adamantly opposes a new proposal by the Obama Administration’s Federal Communications Commission (FCC) to regulate cable television set-top boxes.

More specifically, Obama’s FCC seeks to impose a 1990s-vintage, one-size-fits-all mandate to make cable TV set-top boxes artificially compatible with third-party devices.  As we have detailed, the proposed regulation constitutes crony capitalism in its worst form, it poses a threat to consumer privacy, it undermines the creative community and jeopardizes intellectual property protections by potentially facilitating piracy.  In addition to those problems, it also constitutes an anachronism in the sense that it freezes in place an outdated set-top box  model that is already being left behind by technological advance and private sector innovation.  Cable companies and other entertainment industry players are already abandoning traditional cable boxes in favor of devices owned and maintained by individual consumers as they choose.

Today’s announcement of the new joint Xfinity TV Partner Program between Comcast, Samsung and Roku provides just the latest example illustrating that dynamic.  Stated simply, consumers can access their cable subscription via the Xfinity TV Partner app that will be compatible with RokuTV and Roku devices.  Thus, without the need for a set-top box at all, customers can now access live, on-demand, cloud, DVR and other televised content on smart TVs and other IP-enabled technology.

What this shows is that the video entertainment and app markets continue to evolve alongside consumer demand, rendering the FCC’s set-top box proposal obsolete before it can even be imposed.  The new regulation would disrupt market innovation of this sort while threatening the privacy and piracy perils noted above.  Simply put, the marketplace is working, and this latest FCC “solution” to a non-existent problem will only create more problems.

As we have emphasized, and as any American who watches television well knows, there is no realm of contemporary life that manifests innovation, consumer choice, quality, affordability and sheer enjoyment than the video entertainment sector.  The variety and excellence of today’s video choices continues to expand at breakneck speed and literally on a daily basis.

Today’s news serves to confirm that reality, and demonstrates why leaders in Congress, the innovation community, consumer groups and everyday American consumers should stand together and oppose this latest FCC overreach.

This is an amazing time for the film and TV industry, as audiences have never possessed more entertainment choices on more platforms.

To illustrate, FX Networks recently conducted a study demonstrating that the total number of scripted series (think dramas and comedies, not reality-TV) across cable, satellite and online increased to 409 in 2015. That represents a 94% increase from 2009, with a 174% growth in scripted series on basic cable (181 vs. 66). What’s more, all this great content is widely available online. SNL Kagan recently released a report finding that “98% of premium films and 94% of premium TV series were digitally available on at least one of the online services that were reviewed.”

Given this explosion of creativity and innovation, a sense of growing and justifiable bewilderment in the creative community exists over a recent FCC proposal, commonly referred to as “AllVid,” that would force creators, networks, and pay-TV providers to give away their products and services for tech giants like Google to exploit for their own commercial purposes. The beneficiaries of this government handout would be free to repackage video content as they see fit, drop programming or bury it on the channel guide, add their own advertising and strip out existing ads, and mine viewer data – all without negotiating with cable programmers or distributors or adhering to privacy laws and regulations that apply to traditional providers.

Further, there is nothing in the proposed rule to stop tech companies from combining legitimate content with video from piracy sources. “Walking Dead” producer Gale Ann Hurd articulated these concerns well in a recent USA Today op-ed stating:

[The proposal] would also allow Google — and for that matter set-top box manufacturers from all over the world, including China (where rogue boxes are being built by the millions) — to create and market applications or boxes with software that will treat legitimate and stolen material exactly the same, and may in many cases help to steer consumers to piracy.”

Her concern regarding piracy-laden devices is legitimate. As just one recent example, the UK’s Police Intellectual Property Crime Unit arrested six people for selling Android set-top boxes modified to deliver illegal movies and TV shows. And Hurd’s concerns about boxes manufactured in China are made plain in this Forbes article.

Proponents of AllVid claim they merely want to show consumers “all their video,” meaning they want to mix and match content from YouTube and other online sources with pay-TV. Setting aside the fact that existing technologies like Roku and Apple TV already provide that capability, the creative community is understandably nervous about stolen content appearing alongside legitimate video if Google gets its way with the set top box proposal. As Hurd points out, “Google’s search engine does this today. Here’s what happens when I search “www.google.com/?gws_rd=ssl#q=watch+Fear+the+Walking+Dead">watch www.google.com/?gws_rd=ssl#q=watch+Fear+the+Walking+Dead">Fear the Walking Dead.”

The role search plays in facilitating piracy is significant, so those concerns about the mixing of stolen online video with legal pay-TV content are well founded. According to one survey, 74% of consumers say they used a search engine when they first viewed pirated content. And researches at Carnegie Mellon University conducted an experiment conclusively demonstrating that search rankings drive consumer behavior. The more prominently pirated content appears in search results, the more likely consumers are to choose it.

Worse, TorrentFreak recently reported that Google Now is pushing links to piracy sites, even when consumers don’t engage in any search at all. As TorrentFreak explains:

Google can’t read people’s minds but it does harvest data from Google accounts in order to provide its Now services. That includes your search and location history, sites you’ve visited and the content of Gmail messages. It can also access your phone contacts, calendar entries and even certain apps.”

In this instance, after Google Now determined that user Ryan Raab had “shown an interest” in the movie “Deadpool,” it proactively delivered a link to one of the largest torrent sites in the world, 1337x (see the screenshot below).  The troubling nature of this behavior can’t be understated. Based on data collected across multiple services, Google’s algorithm unilaterally suggested Raab access stolen content – without any action on his part. The FCC’s proposal would only increase the likelihood that Google continues to engage in such irresponsible conduct.

Creators like Hurd have fought hard to keep the pay-TV environment piracy-free. But the FCC – in its eagerness to foment “innovation” – seems determined to compromise the integrity of the creative ecosystem that has produced an explosion of creativity and innovation. AllVid supporters see content merely as bait – a digital lure to attract their ultimate prize: data. If Google and the FCC succeed, creative content could be taken without negotiation or compensation and used by large tech companies to collect consumer viewing data – thereby undermining the economics of creation and consumer trust in one fell swoop.

Or as Hurd puts it, “I’m afraid that all of us who create, market and broadcast legitimate content will be like the zombies on my show: the walking dead.”

In this week’s Freedom Minute, CFIF’s Renee Giachino discusses the absurdity of the Federal Communications Commission’s cable set-top box proposal.

In recent weeks we’ve highlighted a destructive new initiative by the Obama Administration’s Federal Communications Commission (FCC) to impose a one-size-fits-all regulation forcing cable TV set-top boxes to become artificially compatible with third-party devices.  Translation:  in the ever-evolving home entertainment market, where cable companies themselves are already moving from traditional cable boxes toward devices owned by individual consumers, the FCC remains mired in a 1990s mindset and wants to regulate accordingly.  The FCC’s inexplicable proposal would freeze in place a technological state that is already outdated.

Check that.  Perhaps the FCC’s behavior isn’t so inexplicable at all.

This morning, The Wall Street Journal editorial board highlights many of the concerns that we and others address, but notes in “Government by Google” that crony capitalism constitutes the underlying foundation of the initiative:

The Federal Communications Commission has proposed rules that would force television providers to create a universal cable-box adapter.  This would hand over shows to companies – TiVo, Google – that would peddle programming as their own…

The new rule amounts to government-sponsored piracy in allowing TiVo and Google to broadcast programs that providers pay to distribute.  Google wouldn’t have to abide by carriage agreements or pay licensing fees, which is one reason content creators are pushing back.  The stealing would no doubt violate copyright.  Some 30 members of the Congressional Black Caucus sent a letter to FCC Chairman Tom Wheeler saying the rule would relegate minority programming to channels rarely visited by viewers.  Google prodded the supposedly independent FCC in 2014 to bust open cable boxes, and Chairman Wheeler followed orders.  The tech giant wants to sell ads against poached content, mowing over cable commercials and crushing advertising competitors.”

The federal government can’t be trusted to control our healthcare industry, our free speech rights, our children’s educational options, our Second Amendment rights and so on.  Why would control over our home entertainment choices or the constantly-advancing telecommunications industry somehow be any different?

The Journal concludes by noting another ominous element:  the Obama Administration’s mad rush to impose the remainder of its to-do list as the sun sets on its tenure:

The FCC rejected a similar proposal in 2010, but now the Democratic majority seems committed to ramming it through before President Obama leaves office.  Mr. Wheeler has already done great harm to his reputation by taking direction from the White House to regulate the Internet.  He’ll do even more damage if he does the cable-box bidding of Google.”

Well said.  Fortunately, a bipartisan Congressional consensus, the creative community, consumer groups and other elements stand ready to stop the FCC’s scheme at the legislative, judicial and regulatory levels.  Its up to the American electorate justifiably disgusted by crony capitalism and stifling federal overregulation to support them.