Feds Wary of Content Industry Proposals Without Infringement Data

Education seems to be the preferred route: Phil Weiser, deputy assistant attorney general in the antitrust division, asked how government and industry could strengthen the “powerful shaming norm” associated with illicit downloading. The Patent and Trademark Office doesn’t want to be left out of the action, either. Michael Shapiro, attorney-adviser in the PTO Office of Legislative and International Affairs, said his boss, just-confirmed Director David Kappos, wanted to “underscore his keen interest” in the promise of expanded broadband and “great peril” of rising digital piracy that comes from that expansion. “We want to be active participants in this interagency process,” Shapiro said.

The FCC should advise Congress to support the creation of “best practices for online content security,” said Motion Picture Association of America Chairman Dan Glickman. Broadband expansion and “compelling content” can’t be separated, and “the U.S. should lead by example” in protecting intellectual property, as governments in the U.K., France, Taiwan and New Zealand have done regarding ISP obligations, he said. If the U.S. adopts “unrestricted broadband” without copyright protection measures in place first, it could follow the experience of South Korea, which is now implementing a “graduated response” regime following an explosion in infringement, he said.

Copyright Alliance Executive Director Patrick Ross noted that FCC Chairman Julius Genachowski has said ISPs can take “reasonable steps” to block infringing content without harming net neutrality. Small-time artists, including musicians, writers and photographers, don’t have confidence that Washington understands the importance of their rights, Ross said. Without a clear distinction between legitimate and illicit content from regulators, infringed works will “supplant” licensed works, he said. A spokesman for the RIAA, which didn’t have a representative on the panel, told us Ross’s testimony “reflected our thinking.”

“There are no easy answers” in how to reduce Internet infringement, said Future of Music Coalition Policy Director Michael Bracy. Making broadband more affordable through infrastructure buildout, competition and spectrum allocation will give consumers more money to spend on music, he said. “Ongoing collaboration is the key” to helping musicians and filtering won’t help, Bracy said. Music composer Alex Shapiro said the Internet has enabled her to “do business every week in several countries at once” from her remote home in the San Juan Islands of Washington. “America’s global competitiveness is tied to the quality of our broadband service,” which is currently overpriced and “subpar,” she said. “We can’t turn our backs” on broadband expansion to protect “yesterday’s business models,” she said.

“Artists are risk takers, just like financiers,” and piracy threatens an “American cultural art form,” said Kathy Garmezy, Directors Guild of America assistant executive director of government and international affairs. Infringement disproportionately hits “downstream revenue” -- DVD and new-media sales after theatrical runs -- that is critical for directors’ livelihoods and pensions, she said. Directors have “great excitement and great concern about the digital future.” Charles Slocum, assistant executive director of the Writers Guild of America-West, warned against making “medicine that is worse than the illness.” The Internet has enabled creators to get around corporate “gatekeepers,” as with director Joss Whedon’s hit Internet miniseries Dr. Horrible’s Sing-Along Blog, which “faced a manageable amount of piracy.” If Internet policy gives mainstream programming a “fast lane” online, independent content may lose viewers who won’t tolerate jittery streams, Slocum said. The FCC should study the extent of infringement online because MPAA estimates in the 50-80 percent range are “urban legends.”

“The elephant in the room here is that there are policy choices on the table” to solve what’s basically an enforcement problem, said American University Law Prof. Michael Carroll, a Creative Commons board member. If technical measures are involved in FCC standards for content protection online, the agency will become the “federal culture commission,” protecting “one set of cultural producers” -- big studios. The FCC should take a “modest view” of its role online, because cloud computing will transform the Internet in a few years -- infringement may be tougher to track, but always-on mobile connections may simplify the revenue model for creators, Carroll said: “Streaming may well be the answer here.”

Paramount Pictures Chief Operating Officer Frederick Huntsberry explained a wall-length banner the studio created, showing the download activity around several illicitly camcorded copies of Star Trek during its theatrical run this spring. The highest-quality version, coming from the Ukraine and rated “good/fair,” quickly drew traffic away from the other five versions rated “fair” quality when it debuted, Huntsberry said. The film was illicitly downloaded 1.7 million times in its first three weeks, not including streaming. Infringement has gone from “geek to sleek,” with almost a third of the top 100 Web sites as ranked by Alexa.com specializing in pirated content, Huntsberry said -- some carrying banner ads for “premium advertisers and financial institutions.” Huntsberry streamed a grainy video of the opening sequence from 9, released last week, directly from file host Zshare.net. The variety of hardware and applications for viewing pirated content on TV, including Boxee and Sony Bravia TVs, blurs the line of legitimacy in consumers’ minds, he said.

Public Knowledge President Gigi Sohn asked the content industry to admit its continuing desire for network-level filtering, as evidenced by its advocacy in the FCC broadband inquiry: “People want to run away from it now -- great. But it’s on the record.” The industry’s numbers on piracy levels are “suspect at best,” she said, noting the MPAA last year had to drastically lower its estimate for college students’ share of infringement, from 44 percent to 15 percent. The industry also can’t show that every illicit download or stream is a lost sale, Sohn said. Filtering is a “blunt instrument” that could block “time-sensitive civic speech,” such as a video by then-presidential candidate John McCain removed from YouTube over an infringement claim. The FCC’s authority to impose filtering or Internet cutoffs is doubtful, given that Public Knowledge beat the commission in court over its broadcast flag proposal, she said. Sohn is a fan of ISPs sending infringement warning letters to subscribers, which she said has led to four in five targeted users halting their illicit activity.

Both sides said they didn’t want the FCC to impose its will, either prohibiting or requiring the use of technology to reduce infringement. “We ought to be open enough to see if we can develop sensible technologies” that can accurately flag infringement without blocking legitimate content, Glickman said. “It would be crazy not to look at technological solutions.” Yet “those technologies have largely failed,” Carroll said, pointing to the relatively easy circumvention of DVDs’ Content Scramble System DRM. That earned a challenge from the Justice Department’s Weiser, who said many consumers don’t know how to rip DVDs and that illicit movies online historically come from camcorded versions, released months before DVDs. But in the absence of camcorded versions, no one doubts that ripped DVDs would replace them online, Carroll said.

Weiser took hold of Sohn’s statistic about the effectiveness of ISP warnings to subscribers, asking how regulators can strengthen the “shame” associated with infringement, especially on college campuses. “It has to be a balanced education,” Sohn said, blaming the copyright industries for a mantra of “you cannot” with regard to consumers’ rights with media. The Copyright Alliance’s education foundation takes a positive approach, Ross said: “We want to encourage the Alex’s [Shapiro] of the world to feel empowered.” John Horrigan, the FCC’s director of consumer research for the broadband plan, asked why studios weren’t simply pressuring big-name advertisers to drop their connection to illicit sites. “We're just in the beginning phases” of identifying the ad agencies that supply such sites, and judging whether there’s “malicious intent” by advertisers themselves, Huntsberry said.

Speakers disputed whether licensed works were affordable and flexible enough to draw consumers away from illicit versions. Sohn described as “crap” the quality of the 9 clip that Huntsberry streamed: “That’s not what movie buffs want to see.” Yet the first download-to-own movies cost $25 and had no portability, she said. Huntsberry said DVDs, including licensed downloads, were now often $10 or less. Composer Shapiro also said making available DVDs and downloads of movies concurrent with their theatrical release could “put a major dent” into “silly looking camcorder releases.” Though studios “look at our windowing all the time,” said Huntsberry, “a consumer will always go for something that is free.” The bigger problem is “generational,” as evidenced by Congress’ approval of filtering and enforcement provisions for colleges in the higher education reauthorization bill last year, Glickman said. Studios are working on providing affordable entertainment services on campus, but the threat of disconnection is crucial, he said.

Having data on consumer expectations with their purchased media would be helpful before regulators or industry impose new restrictions, said Susan DeSanti, director of the Office of Policy Planning at the Federal Trade Commission Bureau of Competition. Glickman said the studios do regular focus groups with consumers, especially on what formats they want. “Hassle-free, reasonably priced” is the studios’ mantra. Ross said it wasn’t necessary for a “broad” requirement that content companies disclose the use of protection technology, as the trade commission has been effective on “isolated” cases where hidden technologies harmed consumers. DeSanti clarified she wasn’t suggesting a “standardized approach.” Disclosure, however, could inform consumers of what copyright law entails, Sohn said.

There’s still a lot of privately-held data that could be useful in gauging the scope of online infringement, some speakers agreed. Glickman said ISPs could share some of their internal data without affecting their subscribers’ privacy. It’s still not clear how much illicit use happens within the U.S., Slocum said. Asked about technological protections interfering with fair use of media, Disney Executive Vice President of Government Relations Preston Padden pointed to the user-generated content principles that the major studios signed onto in 2007. But there’s a big difference between filtering by a site like YouTube and network-level filtering, Sohn said -- the latter uses deep- packet inspection and can’t be challenged under the Digital Millennium Copyright Act.