Digital Television and Copy Protection: Government Mandated Technology is a Bad Idea

Earlier this year, Silicon Valley was outraged at a proposal to prohibit the sale of almost any technology unless it contains copy protection standards endorsed by the federal government. While that proposal is unlikely to become law, there's a similar initiative afoot at the Federal Communications Commission (FCC) under the guise of encouraging the rollout of Digital Television (DTV).

Silicon Valley and Hollywood have long been squabbling over how best to protect intellectual property, like movies and music, against theft. Hollywood, impatient for a solution, has been lobbying government to force tech companies to accept its preferences. The latest Hollywood idea involves a technology called "broadcast flags."

Broadcast flags are a series of digital bits that are embedded in a television program or movie to indicate that the content should not be redistributed. The problem with the flags is that they depend on the device running the program (a TV or computer, for instance) to follow the instructions. If the program is broadcast to a TV that does not recognize the broadcast flags, then this method of copy protection won't work. From Hollywood's point of view, that's why the FCC is important.

For years, the FCC has been trying to free up a bunch of unused spectrum for wireless services by coaxing the nation's TV broadcasters to move from analog to digital broadcasts. There have been a number of excuses as to why the broadcasters won't make the transition, but the latest plays right into Hollywood's hand.

The argument goes like this: Hollywood says it will not allow its movies to be broadcast on DTV unless they are assured of copy protection. Broadcasters cannot convince consumers to invest in DTV receivers and equipment unless they offer Hollywood movies. Therefore, broadcasters cannot roll out DTV (and give back that valuable spectrum) until the perceived piracy problem is fixed.

This argument led the FCC in August to solicit comments on potential new regulations forcing tech companies to engineer their products to work with the broadcast flag technology that Hollywood wants. The FCC is accepting comments from the public until December 6, 2002 (proceeding 02-231).

There are many reasons new FCC regulations governing technology standards are a mistake, but perhaps the most important is that government meddling would stifle innovation in the market for anti-copying technologies. One of the reasons that Silicon Valley opposes many of Hollywood's schemes for copy protection is that they are still looking for the best way to deal with the problem.

Fighting piracy is not just a matter of putting an end to all digital copying - if that were the case, the problem would already be solved. The issue instead is how illegal copying can be prevented while still allowing legitimate copying for personal use. This is a more difficult question that should be worked out by many different entrepreneurs looking for the best solution.

Central planning of market functions has never been a good idea, and enshrining one set of technology standards in law would serve as a disincentive for new technologies to be created. It could even make piracy a larger problem than expected because competition to produce the best anti-theft technology would be trapped in a regulations-based time capsule while digital thieves continue up-to-date work at breaking the system.

Currently, competition among rival anti-piracy solutions is fierce, but it is also a political weakness in the tech community that Hollywood is trying to exploit. Some tech firms, recognizing that government could be an effective way to force consumers to use their technology, have embraced the idea of using law to mandate standards.

This led Philips Consumer Electronics North America CEO Lawrence J. Blanford to complain to Congress that the Broadcast Protection Discussion Group (BPDG), an inter-industry group whose recommendations the FCC is considering, "has been taken over by a small group of companies."

Blanford went on to say in a press release that he doubts that the group "will allow for serious consideration or adoption of technology solutions of equal merit presented by other interested parties." If a big company like Philips can be locked out of the group, small entrepreneurs that drive our economy don't have a chance when government gets involved.

Another reason that government should not mandate technology specifications is that it socializes costs that should be borne directly by those requesting them. If government forces tech firms to add special engineering requirements to their products, the extra labor and parts required in the design change unfairly transfers the business costs from content producers to hardware producers. At a time when the nation's technology industry is fighting to stay alive, this is one new tax that the industry and consumers can do without.

Protecting intellectual property and recovering unused spectrum are two important goals, but government technology mandates are not the way to achieve them. When it comes to copy-protection, the market is the best bet for an effective non-politicized solution. As for spectrum, that's an entire area of policy that needs a lot bigger fix than anti-piracy technologies.

Sonia Arrison is director of the Center for Technology Studies at the Pacific Research Institute, and writes for TechCentralStation.com.