5C, MPAA AND IT INDUSTRY REACH AGREEMENT ON DTV FLAG, HILL TOLD

House Internet Caucus Co-Chmn. Boucher (D-Va.) called agreement “truly substantial progress.” Parsons agreed, adding that only real challenge now was to design final standard that could be brought to Congress in order to be codified for all DTV equipment. He predicted resolution in “a couple of months,” but Chernin said “I'm even more optimistic,” calling resolution likely in “at most a matter of weeks.” Several members of subcommittee expressed hope that resolution of broadcast flag issue, which would allow DTV content to be protected from illegal duplication while avoiding encryption used in digital signals by DBS and cable operators, would help spur DTV deployment through release of more content.

Subcommittee Chmn. Upton (R-Mich.) said broadcast flag was one of 3 critical digital rights management (DRM) issues, along with analog hole (analog content converted to digital, then distributed illegally) and Internet peer-to-peer networks similar to Napster. He asked both Parsons and Chernin whether resolution of broadcast flag would mean release of more digital content, even if analog hole and peer-to-peer problems remained unsolved. Chernin said “I think that clearly the broadcast flag is the single biggest impediment to making all of our digital content available on digital television.” Parsons agreed, calling broadcast flag 80% of problem of DTV content protection, with analog hole another 19% that was close to resolution with talks on watermarking.

Congress will do everything it can to ensure that DTV rollout deadline of 2006 is met, Commerce Committee Chmn. Tauzin (R-La.) said: “We are determined to stick with our schedule. We are going to do everything in our power to reach that schedule.” On more pessimistic note, Subcommittee’s ranking Democrat Markey (Mass.) said “it’s readily apparent to even a casual observer that the DTV transition remains stalled. Even where progress is being made, it’s modest at best.” He predicted that “if we keep up the current pace, we're years and years away from a digital denouement.” Undeterred, Tauzin said it was time to go “on the record” on roundtable talks DTV industry representatives had been having with Tauzin, Upton, full committee ranking Democrat Dingell (Mich.), Markey and Boucher. Roundtables have been “extraordinarily successful” in spurring private sector solutions, Tauzin said. Alluding to S-2048, bill introduced by Senate Commerce Committee Chmn. Hollings (D- S.C.) that would have FCC mandate DRM solution after year if private sector couldn’t reach solution, Tauzin said “the worst world would be if progress on these roundtables stopped and interindustry agreements ended and we are asked to legislate on standards and technology and protection agreements.” He said committee would “make sure [consumers] don’t have to keep constantly buying new equipment because we've made last year’s model obsolete through some decision we made here.”

Issue of backward-compatibility of DTV equipment was one of many concerns raised by Blanford. “Philips comes before you today with a call for action,” he told subcommittee, asking Congress’s help to open what he called “closed” negotiation process of 5C consortium. He contended agreement being reached would contain too many mandates for manufacturers. “The process we are now using to reach a technological solution is flawed and we need your help to fix it,” Blanford said, calling for Congress to “establish a forum under govt. auspices” to ensure that broadcast flag discussions were open. Noting concerns of Blanford, Parsons said “there may be some jots and tittles” required to tweak flag issue, but cautioned that “the perfect can be the enemy of the good.”

Nearly all members at hearing cautioned that any agreement codified by Congress on broadcast flag would have to protect consumers’ fair use rights. “We must recognize,” Markey said, “that not all consumers are potential pirates and not all uses are potentially criminal.” Blanford said that under current broadcast flag standard being proposed, any videotape made by consumer of DTV program would have “expiration” built in, limiting amount of time program could be stored by consumer for later use.

Not one member of House Telecom Subcommittee speaking Thurs. backed S-2048 Hollings that which would have FCC mandate DRM solution for every digital receiving device if industry couldn’t reach agreement in one year. “The wrong way to proceed is for Congress to act prematurely,” Boucher said: “In the Senate, legislation has been introduced that would have government develop digital content protection standards. This is clearly the wrong approach.” Closest hint of support for Hollings’ bill came from Rep. Luther (D- Minn.). “If market forces are insufficient,” he said, “the next question becomes exactly how forceful a nudge is required from Congress.” Rep. Eshoo (D-Cal.) said “if there was ever a market that would force companies to come together and find a solution I think this is it,” referring to content, CE, IT and ISP industries. Given billions that can be made in these industries as well as billions lost each year to piracy, she said “there’s one hell of an economic incentive in this for people to come together.”