Analysis of the FCC's "Broadcast Flag" Technology Approval Order
On Aug. 12, 2004, the Federal Communications Commission released a novel order: for the first time, the FCC approved specific, proprietary digital content protection technologies, and addressed thorny issues concerning the terms and conditions on which these technologies may be licensed for use in consumer electronics devices. The FCC did so in the context of its ongoing “broadcast flag” proceeding, which is supposed to implement measures to “mark” over-the-air digital broadcast television content to restrict indiscriminate redistribution of such content over the Internet. The FCC is the (at least) interim authority for approving device connectors and content protection technologies as adequate for carriage and reception of unscreened digital broadcasts or broadcasts marked against Internet redistribution. The broadcast flag, its purpose and general implementation are described in detail in the Update of Nov. 7, 2003.
The FCC’s new order approved thirteen technologies for use with the flag: DTCP (1394); HDCP (DVI and HDMI); 4C (CPRM); Microsoft DRM; Real Helix DRM; Sony (four versions of MagicGate Type-R for Secure Video Recording, for Hi-MD and Memory Stick); Thomson SmartRight; JVC D-VHS; Philips/HP Vidi; and TiVoGuard. The following are the nine significant points from the FCC’s order approving these technologies.
- Approval of these technologies is limited in scope. There is a similar technology approval process under the FCC’s “plug and play” rules for copy protection of digital content on digital cable systems, in which new content protection and recording technologies may be approved as adequate for “digital cable ready” equipment connecting to the cable network (Update of Sept. 10, 2003). Many technology proponents asked the FCC to supplant the approval role currently assigned to CableLabs in “plug and play,” and to make broadcast flag approval tantamount to “plug and play” approval. The FCC declined. “Plug and play” technologies need to meet requirements for copy protection while maintaining the integrity of a conditional access distribution network. Broadcast flag technologies serve far more limited purposes and are held to lower robustness rules.
- These content protection technologies are approved for specific connectors, not necessarily for others. The FCC rejected the request that DTCP (1394) should be approved for all transports and media, noting that significant issues can arise when a content protection technology is mapped to another connector. It likewise required later FCC review and approval of any material changes to these technologies, such as mapping to a new transport or media; changes in encoding or substantial changes in cryptographic method; or changes in the scope of redistribution.
- TiVo-to-Go is approved. The headlines in the consumer and trade press focused on the FCC’s controversial decision not to require TiVo to include “proximity” controls on its new service allowing IP distribution of recorded TiVo content. Proximity controls would confine the redistribution of flagged recorded broadcast content to other devices within a 7 millisecond round-trip time from the recorder. Motion picture studios had negotiated that technique with Microsoft for use in Widows Media DRM, and MPAA asked that it also apply to TiVo. The FCC declined, holding that the broadcast flag was not intended as a technological prohibition on all Internet redistribution. The FCC found it adequate that TiVo contractually required subscribers to agree to limit copies to personal non-commercial use and limited redistribution to no more than 10 authorized devices billed to one account. The FCC preserved content owners’ rights to pursue copyright infringement litigation. In some fundamental ways, the FCC’s TiVo grant undermines MPAA studio hopes for the flag, leaving it to the business judgment of others how to redistribute content over the Internet.
- Private output approval processes may continue. Many content protection technologies themselves restrict downstream uses to “authorized” outputs. Some technologies only permit selected outputs (e.g., no analog). The FCC rejected requests to displace these private license reviews of technologies, permitting the current license and market structure to continue operating. It suggested that any perceived abuses by the licensors of DTCP and 4C be brought to the FCC on complaint (similar to the structure now provided in “plug and play.”)
- The FCC encourages interoperability but allows proprietary technologies. Most of the approved technologies are intended to be widely licensed and many will “translate” to other technologies. Others (Sony’s and TiVo’s) will not be licensed to any third party and are completely proprietary. The FCC did not insist that only interoperable technologies could be approved.
- Copy restrictions are permitted. The FCC was troubled that certain technologies enforced the flag by restricting copying of programming, which was not the flag’s advertised purpose. The FCC nonetheless approved those technologies while suggesting it would be more gratified if new technologies did not restrict the copying of digital broadcast programming.
- The FCC will not set terms for patent licensing (for now). It is becoming the standard in the U.S. and Europe that content protection technologies are licensed on condition that the licensee is willing to license any necessary part of their own patent portfolio on “reasonable and non-discriminatory” (RAND) terms. However, some content protection technologies (DTCP) require that licensees agree not to assert their own patent portfolios against other licensees (“non-assert”) as a condition of licensing the technology. For companies that make a business out of patent portfolios, rather than merely out of device manufacture, it may be a significant surrender to agree to non-assert. The FCC rejected requests to mandate RAND in all flag technologies and left complainants to pursue their patent issues in antitrust forums. The issue may return to the FCC if complaints are held to be of concern.
- Upstream royalties are limited. Along the way to the Order, the review process flushed out some helpful concessions: proponents of content protection technologies disclaimed any patent obligations upstream of the device manufacturer, unless the upstream party affirmatively elects to use the technology itself. In other words, the use of content protection technologies on downstream outputs does not impose royalty obligations on the unwitting upstream content owner or cable operator.
- Change management and revocation should offer an informal role to interested parties. Content providers urged the FCC to provide them with a formal approval role in the change management process used for approved technologies, warning that content protection could evaporate with unrestricted changes. The FCC rejected that request, encouraging license administrators to engage in voluntary consultation with interested parties, but not permitting such parties to enjoy a new veto right on any changes. The FCC reached a comparable decision on the approval revocation process, relying on voluntary “collaboration” among interested parties, rather than a formalized revocation arbitration or board for each technology. In both cases, the FCC recognized the powerful incentives that market forces should be permitted to play in changes or revocation: if technologies are perceived as insecure, content will not be allowed to flow over them. As the FCC put it, “commercial relationships between content owners and technology proponents will serve as strong incentive to address potential compliance issues.”
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