Freedom Line Blog

In Forbes today, intellectual property (IP) attorney Howard Hogan highlights the importance of IP to the American economy (38% of GDP and 30% of jobs) and considers the opportunity for positive change under a Trump Administration after eight years of poor leadership under Barack Obama.

Hogan highlights the pernicious influence of Google during the past eight years, given its self-interest in weakening America’s historic protection of IP rights and free-riding off of others’ creations:

Arguably, no company has been more influential than Google in setting policy in America in recent years…  White House officials met with employees of Google or related companies 427 times – an average of more than once a week, while approximately 30 Google personnel have taken positions in the Obama Administration, and about 20 former members of the White House staff have landed at Google…

One of the consistent goals of this political machine has been to promote policies that have the effect of weakening legal protections for IP rights.  The reason for these policy preferences lies in Google’s role as content distributor and advertiser.  Google does not create the overwhelming majority of the content that its users seek;  it generates much of its revenue by displaying ads while connecting users to content created by others, or by selling platforms to access such content.  For Google, the ability to distribute popular third-party content or sell rights to use other companies’ trademarks with few strings attached is tantalizingly profitable.”

Among the destructive agenda items pushed by Google?  The “set-top box” proposal within Obama’s Federal Communications Commission (FCC), which we at CFIF continue to emphatically oppose:

A recent example was the so-called ‘set-top box rule’ proposed by the Chairman of the Federal Communications Commission.  The proposal would have used a statute designed to promote competition among cable television set-top boxes as a vehicle to force cable companies to give tech companies like Google free access to raw video and data feeds that cable companies provide to their customers.

While much about the proposed rule remains controversial, there is no doubt that it would have benefited the Googles of the world, who could sell devices and advertising based on content that they had not licensed from copyright owners, without paying royalties, and with little fear that the owners would be able to enforce the licensing restrictions that led them to offer the video content to cable companies in the first place.  Google and its allied advocacy groups all filed comments in support of the proposal.  Even President Obama threw his support behind the rule, prompting some to question whether he was exerting undue pressure on a supposedly independent agency.”

As Howard concludes, companies like Google contribute a great deal to the American economy and our lives, but we must also do a far better job of protecting American IP rights, which may be our greatest comparative advantage over other nations in an increasingly competitive global information economy.

In today’s political atmosphere of Wikileaks and FBI investigation of potential collusion, the charge of government cronyism is perhaps more damning than any other.

For that reason, a blockbuster editorial in yesterday’s Wall Street Journal was particularly devastating:

Most Americans think of Google as a search engine doing unalloyed social good, but the company also wants to make money and wield political influence along the way.  So you don’t have to be a conspiracy theorist to notice that an abrupt change of leadership at the U.S. Copyright Office is good news for Google, which aims to pay less for profiting from the property of others.”

So what’s the backstory here?  In a nutshell, this tawdry ordeal centers on the suspicious demotion within the Library of Congress of Maria Pallante, who until two weeks ago served as U.S. Register of Copyrights.  In that capacity, Ms. Pallante advocated reorganizing the Copyright Office as an independent agency, but perhaps more significantly was too protective of people’s property rights, including copyright, for Google’s taste.

Chief among Ms. Pallante’s inconvenient heresies?  Her opposition to the malignant set-top cable box proposal from Obama’s Federal Communications Commission (FCC), which we at CFIF have steadfastly criticized:

Earlier this year the Federal Communications Commission proposed something known as the set-top box rule.  The thrust was to force cable companies to build a universal adapter so Google and others could broadcast content without paying licensing fees or abiding by carriage agreements.   Google supported the new rule.  Less pleased were creators, who wouldn’t be paid for their work.

A bipartisan group of House Members in July sent a letter asking the copyright office to weigh in.  Ms. Pallante replied that the rule ‘would seem to take a valuable good’ and ‘deliver it to third parties who are not in privity with the copyright owners, but who may nevertheless exploit the content for profit.’  Ms. Pallante suggested revising the rule, which the FCC did.

This prompted outrage from groups funded by Google.  Take Public Knowledge, whose website notes that Google is a ‘platinum’ supporter – chipping in $25,000 a year and probably more.  Public Knowledge’s senior counsel assailed the House letter, and in September it released a report claiming ‘systematic bias at the U.S. copyright office.’  Ms. Pallante was singled out as ‘captured’ by industry for the sin of focusing on ‘enforcement’ of copyright rather than rewriting it.  Something else happened in September:  Ms. Pallante got a new boss when Ms. Hayden was sworn in as Librarian of Congress, a presidential appointment.  Ms. Hayden formerly ran the American Library Association, which takes a permissive view of copyright law and accepts money from, you guessed it, Google.  A month later Ms. Pallante was pushed out.”

It all reeks of crony capitalism on behalf of Google, whose business model depends in part on exploiting others’ copyrighted artistic creations without compensation.

As The Wall Street Journal’s editorial concluded, “The guarantee to own what you create is the reason entrepreneurs take the risks that power the economy.”  Indeed, the U.S. maintains the world’s most protective copyright and intellectual property (IP) laws, which remains the driving force in our status as the most creative, inventive and prosperous nation in human history.  Americans shouldn’t tolerate cronyism in pursuit of such bad ideas as the FCC’s set-top box proposal that threaten that status.

Good news within the federal regulatory leviathan has been depressingly rare, perhaps most of all at the Federal Communications Commission (FCC).  This week, however, brought a remarkably welcome development worthy of celebration.

Specifically, the FCC delayed its vote on a toxic and entirely unwarranted new proposal to regulate cable television set-top boxes before the Obama presidency’s clock expires, in what The Wall Street Journal labeled “a major blow to the proposal” and “a setback to Federal Communications Commission Chairman Tom Wheeler on one of his top priorities for the year.”

Even Democrats have attacked the scheme as a “massive new federal regulation,” and CFIF stands alongside a broad coalition of conservative and libertarian organizations in opposition.  The initiative from the overactive FCC seeks to impose a one-size-fits all mandate to make cable TV set-top boxes artificially compatible with third-party entertainment devices.  So even while cable companies themselves progressively and voluntarily move toward abandoning traditional cable boxes in favor of devices owned and maintained by individual customers as they prefer, Chairman Wheeler hopes to impose a 1990s-style regulation upon the industry.  That would essentially freeze in place the increasingly outdated model of set-top cable boxes that is already becoming an anachronism due to market forces.  Exacerbating matters, the proposal reeks of crony capitalism, as CFIF has highlighted.  The proposal is a confluence of regulatory overreach, technological sclerosis and crony capitalism.

Fortunately, this week’s decision within the FCC to delay a vote due to Wheeler’s apparent inability to persuade fellow Democratic Commissioner Jessica Rosenworcel to his side provides a rare victory against years of FCC regulatory onslaught.  Although the bipartisan consensus among consumer groups, Congress, the innovation community and market participants must remain vigilant because the battle isn’t over, it’s welcome news worthy of note and celebration.

CFIF and other conservative and libertarian groups strongly oppose a new proposal from Obama’s overactive Federal Communications Commission (FCC) to regulate cable television set-top boxes, and that opposition is widely shared among a bipartisan Congressional coalition and even the political left.

Now, even the U.S. Copyright Office has joined the voices criticizing the FCC’s misguided proposal:

The U.S. Copyright Office criticized a federal agency’s plan to open up the market for pay-TV set-top boxes in a letter to lawmakers on Wednesday.  The letter adds political pressure on Federal Communications Commission Chairman Tom Wheeler, who has been pushing since the beginning of the year for new FCC rules to open up the market for the costly set-top boxes…  ‘As currently proposed, the [FCC] rule could interfere with copyright owners’ rights to license their works as provided by copyright law.’  That is because those who create programming, and hold the copyright on it, have negotiated specific deals with cable companies, and those deals could be upended if other companies also obtain access to the programming through their own set-top boxes.  The letter adds that the Copyright Office is ‘hopeful that the FCC will refine its approach as necessary to avoid conflicts with copyright law and authors’ interests under that law.'”

It’s pretty damning and humiliating that even a counterpart executive branch agency raps the highly-politicized FCC across the knuckles in such an open manner.

Nevertheless, it’s a welcome rebuke against the FCC’s proposal, which constitutes a 1990s-vintage, one-size-fits all mandate to make cable TV set-top boxes artificially compatible with third-party devices.  It additionally constitutes transparent crony capitalism, threatens consumer privacy, undermines the creative community and damages property rights by facilitating piracy of creative content.  And technologically speaking, the set-top box proposal freezes in place an outdated set-top box business model that private innovation and technological advance are already leaving in the dust, with cable companies and other entertainment industry entrepreneurs already abandoning traditional cable boxes in favor of apps and other devices owned and guided by individual consumers.

Hopefully, the Copyright Office’s welcome input helps drive a well-deserved nail into the proposal’s metaphorical coffin.

Alongside nearly every other conservative and libertarian organization of which we’re aware, CFIF opposes a toxic and wholly unnecessary new proposal from the Obama Administration’s Federal Communications Commission (FCC) to regulate cable television set-top boxes before the clock runs out on the Obama presidency.

But opposition extends across the political spectrum.  In today’s Wall Street Journal, former Clinton Administration Undersecretary of Commerce Ev Ehrlich excoriates the FCC’s proposed set-top box regulation for what it is — a crony capitalist, purloining, invasive, already-obsolete, anti-competitive, “massive new federal regulation”:

The Federal Communications Commission wants you, the consumer, to allow a new set-top box into your home that rearranges the programs you buy and inserts new advertising while tracking what you watch.  Movie studios, labor unions and civil rights groups all oppose it.  Why?  Because this ‘All-Vid’ proposal isn’t about the box fees the senators-turned-lobbyists decry.  Instead, it’s all about appropriating content.  Google and Amazon want to capture, repackage and profit from TV programming in their own competing services without having to pay for it…

If Google, Amazon or anyone else wants to build a better set-top box, they can do so the way these services have – in a way that respects federal privacy laws and negotiated licensing agreements with program producers.  Or they can actually license the content from creators, the way everybody else does, as opposed to demanding a gift from a captive FCC.”

Mr. Ehrlich gets it exactly right.

As we have stated, there is simply no realm of American life today that manifests badly-needed 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 on (literally) a daily basis.  We therefore ask officials at all levels of government, as well as our 250,000 supporters and activists across the country, to oppose what Mr. Ehrlich rightly describes as a looming federal atrocity.

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.”