PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Comments to FCC on its Set-Top Box Regulation

By at 22 April, 2016, 10:29 am

Ms. Marlene Dortch

Secretary

Federal Communications Commission

445 12th Street SW

Washington, D.C. 20554

Via ECFS

 

RE: MB Docket No. 16-42, Expanding Consumers Video Navigation Choices

CS Docket No. 97-80, Commercial Availability of Navigation Devices

 

Dear Ms. Dortch:

On behalf of the Small Business & Entrepreneurship Council (SBE Council), I am submitting the following comments to voice our strong opposition to the Federal Communications Commission (FCC) proposal to “unlock” pay-TV set-top boxes. Quite frankly, SBE Council does not understand what problem the FCC is trying to fix, because there is none. However, the FCC’s proposal, if enacted, will create significant problems and barriers for entrepreneurs and innovative programmers. Big tech companies will be enriched and feed off of their work, while consumers will be deprived of the niche programming that has emerged in the current dynamic environment.

SBE Council is a nonpartisan, nonprofit advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. With nearly 100,000 members nationwide, SBE Council works to advance initiatives and policy proposals to enhance competitiveness and improve the environment for business start-up and growth. SBE Council has closely followed telecommunications and technology policy since our founding in 1994 and has weighed in on relevant issues since the passage of the 1996 Telecommunications Act. We have consistently supported policies to keep intrusive government actions at bay to allow for innovation and technology in the marketplace. A humble approach by government regulators, up until recent times, has fostered an extraordinary level of investment, innovation and entrepreneurship benefitting consumers and businesses alike. Technological innovation in the telecommunications sector has especially helped small businesses navigate a very difficult economy over the past ten years.

SBE Council and our members are baffled by the FCC’s proposal given the wide and growing choices that consumers have in the video marketplace. This dynamic and exciting marketplace allows consumers to access the programs they want, on the devices they prefer, and at their convenience. Content creators and startup disrupters are driving the future of video programming. But we have to wonder whether the regulators responsible for creating the set-top box proposal have actually talked to consumers or the entrepreneurs who are driving this dynamic marketplace. Based on the FCC proposal, we believe not.

The proposal clearly provides large tech companies with massive benefits and leverage at the expense of small, entrepreneurial and minority programmers. The independent programming community depends upon the protection of licensing agreements for channel placement, advertising and piracy, which creates certainty for accessing capital, new content development and growth. The FCC’s set-top box scheme will undermine these agreements and allow companies, like a Google for example, to profit off of the hard work of the programming community. These agreements would not have to be honored, and the programming can simply be lifted.

Another troubling aspect of this set-top box dictate by the FCC is that it potentially further undermines the protection, and therefore creation, of intellectual property (IP). In a USA Today op-ed, Gale Anne Hurd, producer of “The Walking Dead” television show, as well as assorted films and other shows, explained:

If the Federal Communications Commission approves Chairman Tom Wheeler’s regulatory proposal to “open” set-top boxes, it will make piracy as easy and dangerous in the living room as it is on laptop and mobile devices…

The Season 5 premiere of my show The Walking Dead was illegally downloaded by roughly 1.27 million unique IP addresses worldwide within 24 hours of its debut.

If we can agree that piracy on that scale is a serious problem, then let me explain why the FCC’s proposal would spell disaster for those of us who are trying to figure out how to keep making the movies and TV shows audiences love…

This proposal would end up reducing the security options available to prevent theft. TV distributors use complex security systems to ensure that the creative content on their networks, set-top boxes and apps all comply with the appropriate creative licenses and restrictions. In contrast, search engines such as Google and digital video platforms such as YouTube routinely show — and prioritize — stolen content in search results.

It 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 could in many cases help steer consumers to piracy.

This is a real threat. Google’s search engine does this today.

As Hurd noted, many are being and will be hurt by IP theft: “…the FCC’s proposal would spell disaster for those of us who are trying to figure out how to keep making the movies and TV shows audiences love. And I’m not talking about just the actors and the producers. Hundreds of thousands of crewmembers across the country will be out of jobs, too. Studios and networks can’t keep making content if they stop receiving revenue from legitimate sources.”

It’s critical to understand that the movie and TV business is overwhelmingly about small business. For example, according to the latest Census Bureau data, 98.4 percent of employer firms in the motion picture and video industries have less than 100 workers, and 92.9 percent less than 20 employees.

The set-top box proposal is an unwarranted regulatory intrusion that offers no real benefit to consumers. The only beneficiaries are big tech companies that will profit from the entire ecosystem’s investment, creativity and hard work.

Policies need to encourage independent programmers and foster their creativity. The FCC’s proposal fully undermines their innovative activity. These entrepreneurs would lose control over how their content is presented, resulting in diminished placement, exposure and revenues. The FCC proposal seems to ignore this reality. Perhaps these consequences would have been fully understood if the FCC performed an economic analysis and if it reached out to affected entrepreneurs and stakeholders to get a better understanding of the marketplace and how it works.

Again, SBE Council opposes the FCC proposal.

Sincerely,

Karen Kerrigan, President & CEO

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