Prisoners of Digital Television

A misadventure in high-tech regulatory policy -- and a Harry Potter Fix


In Harry Potter and the Prisoner of Azkaban, the young student wizard Harry Potter is pursued by a horde of creatures called Dementors. To make a long, well-plotted story far too short, a future version of Harry suddenly appears and waves his magic wand, reciting the spell "Expecto Petronum!" Thus Future Harry manages to scare away the Dementors, protecting the Harry of the present.

The transition from analog broadcast television to digital broadcast television (DTV), now an enshrined part of American broadcasting policy, faces its own set of Dementors—a horde of technical, legal, economic, and social problems. Taken together, the problems look as unbeatable as any monster. Making things worse, many factions with a stake in the outcome are at war over such issues as technology mandates, copyright protection, and fair use.

But what if we could somehow look back from the future to today's troubled present debate, wave our wands, and magically defeat the problems that bedevil the DTV transition? Such magic is beyond us mere muggles (as Harry's fellow wizards disparage non-magical humans). But it is possible to look back from the future we have long been imagining—one in which various consumer electronics and information technologies have converged, and in which the broadband Internet reaches every home. From there, we can come up with our own version of a magical solution.

It's fair to ask why we even need a solution, other than letting our DTV industrial policy collapse under the weight of its own mistakes. The short answer is this: There's much more than digital television at stake. Bad government actions in this sphere—and you can be sure that Congress and the Federal Communications Commission will act rather than refrain from acting—could permanently shoehorn part or all of the computer revolution under government-driven design control. Not only would this likely kill the dynamism of the information-technology sector, but it is unlikely to do much to protect copyright interests.

Worse, by slowing technical innovation, the Hollywood studios may end up shooting themselves in the foot, since digital innovations have both lowered production costs and let new features and effects be included in modern TV and movies. Since our government is dead-set on taking action, the question becomes one of helping our regulatory Harry Potters invoke the most innovation-friendly spell rather than (as might otherwise be preferable) giving up the magic of regulation altogether.

The Problems

Before we can outline a solution, we have to take a look at the problems. A list follows of the issues each set of stakeholders sees at the center of the transition to DTV. One might reasonably dispute some of the groups' assertions, but for the sake of argument I'll treat all their primary points as essentially valid. Even with that understanding, as we'll see, there may be a win-win solution for all the major players—especially consumers.

Problems for content companies. Motion picture studios, TV networks, and other companies that produce, publish, or distribute content worry that DTV will allow viewers to record high-quality content, then recirculate it through the Internet or other media, à la Napster. Such copying could undermine the revenue potential of high-quality content, which otherwise could be resold to local broadcasters through syndication or repackaged as VHS tapes and DVDs for sale or rental.

One proposed fix, widely advocated within the content industries, is to "mark" all commercial content that needs to be controlled—perhaps with a broadcast flag (a string of bits contained in the digital broadcasting stream) or perhaps with watermark technology (a hidden mark designed to survive digital-to-analog conversions, as well as the conversions of content that occur routinely in computers and consumer electronics).

Such marking solutions, however, produce another set of problems. To look for the marks, an unprecedentedly broad range of technologies would be required. Plus, the government would have to standardize the marking technologies. And broad sectors of the information technology, consumer electronics, and communications fields would have to be radically rebuilt. Some industrial sectors—especially those that produce niche digital-manipulation devices (such as Formac, whose product line converts TV to digital video and back again) or personal video recorder systems (such as TiVo)—might be wiped out by the cost of the redesign and by limits on developing new products.

Without government regulation and oversight, the marking approach can't work. Unless it's required by law, electronics manufacturers would have little incentive to encumber digital devices with the necessary features. Import regulations would be needed to prevent entry of noncompliant devices. And we might need new regulatory controls over analog-to-digital and digital-to-analog recording technologies. Such devices are currently ubiquitous and cheap, but because they may ignore or even strip out the marks placed in digital content, they form part of what the content industry calls "the analog hole"—their unsightly term for analog devices' tendency to ignore or sidestep digitally based protections, thus creating a gap through which protected digital content can leak.

Control of analog-to-digital or digital-to-analog technologies may make them more expensive and less functional. Worse, it may add hidden, unanticipated costs to devices not traditionally considered within the FCC's jurisdiction, such as astronomical observation tools and certain types of medical monitors. And don't forget your cell phone, whose cheap microphone takes the analog waveforms of your voice and digitizes them for transmission.

Needless to say, the marking-plus-regulation solution puts the content sector at odds with other industries and with consumers. This has led to trench warfare in the legislature, in the courts, and in public opinion, with each side throwing all its resources into gaining a few feet here (as with the battles over the broadcast flag) or blocking an enemy's advance there (as with the effective killing of Sen. Fritz Holling's (D-S.C.) omnibus copyright-protection legislation, which first brought the struggle between the Hollywood studios and the tech companies into the public eye).

Problems for hardware, software, and Internet companies. Many segments of these industries are also facing flattening sales. The sector as a whole is acutely aware that customers will reject new products that may be more limited than older ones in how they deal with both commercial and user-generated content. The computer and software industries in particular take it as a given that consumers expect more and better functionality and faster processing speeds. They don't want to hear these sorts of complaints: "Every second my computer spends checking whether I'm making an unauthorized copy is a cycle it isn't using on my work!…Why can't I move digital video I made myself back and forth between my computer and my digital video camera?…This computer takes longer to load media files than my old one did!"

Worse yet, the content industry's proposal has to make many classes of hardware and software "untamperable"—that is, difficult to modify, or "closed." Yet open platforms such as the PC and the Internet have by their very openness encouraged innovation. The results include the Internet as we now know it, the World Wide Web, Linux and other open source software, and graphical browsers. Interestingly, rapid development in this sector has also produced technologies that make filmmaking, music recording, and other forms of content generation much cheaper and more accessible than they used to be.

The Linux problem is particularly acute, as Linux-based operating systems are among the few serious competitors to Microsoft remaining in the operating system market. Linux programs are distributed with their "source code" or simply distributed as source code, which means that they're inherently open and tamperable. A regulatory requirement that Linux-based media players be untamperable would in effect outlaw Linux versions of such products.

Fine, you say: Then the law should recognize the competitive value of open source software and carve out an exception from the untamperability requirement. But that wouldn't just be a big hole in the content-protecting regulatory scheme. It would actually put proprietary software companies at a disadvantage in competing with Linux in the media player market, since Linux-based players could be modified by any programmer to add functionality or remove content protections. In effect, the "untamperability" requirement creates a dilemma—either permanently hobble open source software (and perhaps lock in Microsoft's current market dominance), or permanently disadvantage proprietary software, including Microsoft's (and thus promote Linux as a matter of industrial policy).

For Internet companies, any regulatory obligation to monitor for copyrighted content signifies a substantial redesign of the Net as it has existed and grown since its beginnings more than three decades ago. Peer-to-peer file trading did not begin with Napster. It is, in a deep sense, a part of the Internet's fundamental design. The Net was created so computers could share data and other resources on a distributed, decentralized network. Digital music files are just another kind of data.

Furthermore, making copies is a fundamental part of what each computer does. It copies information from one part of memory to another, from memory to hard drive and back again, from memory to video, and so on. The Internet, too, works by copying—transmitted data are typically divided into "packets," which are then copied and recopied from computer to computer until reproductions of all the packets reach the destination computer and are reunited into a perfect copy of the transmitted information.

Problems for Congress. For a number of policy reasons—the perceived benefit to the public, a purportedly more efficient use of the spectrum, higher-quality broadcasts—Congress has required television broadcasters to move from analog to digital transmissions. It established the year 2006 as a nominal deadline for the shift, assuming that the general public would see the value of DTV and buy new television sets, with digital tuners, to take advantage of these features. In effect, Congress "loaned" broadcasters extra spectrum to develop DTV (and the DTV audience), but the loan has not produced the expected consumer buy-in.

Making things still more problematic, Congress based its tax and budgeting decisions for the next few years on the assumption that the original "analog spectrum" would be returned. It could then be used for public service purposes (public safety, a larger unlicensed band) or auctioned off, with the latter plan generating perhaps tens of billions of dollars for the government.

As we approach the deadline, the increasingly evident lack of significant consumer purchases of (relatively expensive) DTV receivers means Congress faces the prospect of telling voters that their analog TVs—including the big new ones they buy just this year, or next year, or in 2005—will either be wholly obsolete or require a converter box to keep working. There is no serious doubt that voters will be unhappy about having to buy new, more expensive TVs, or somewhat less expensive adapter boxes, just because Congress has said they must. (An unfortunate side effect of the converter interim solution is that, by adapting legacy devices to receive digital broadcasts, the government may in effect be equipping home-entertainment equipment to facilitate the very "analog hole" infringement that troubles content companies.)

Congress could, of course, push back the spectrum give-back deadline. Broadcasters may also be able to use a loophole in the original deal to push it back themselves. But this would throw off budget and tax calculations and force a revenue shortfall, which in turn would force Congress to make other hard decisions that also may irritate or disappoint voters.

Problems for consumer electronics companies. Quite rationally, the consumer electronics sector likes selling high-margin, high-quality, high-resolution TV display devices. It also knows that just about all of its current customer base for such devices gets its content from cable, satellite, or DVD, and scarcely ever from over-the-air digital broad-casting.

Tuner mandates, such as the FCC's recent requirement that all high-definition televisions (HDTVs) carry both analog and digital TV-signal receivers, mean an added expense per unit at a time when the industry is hoping economies of scale will reduce their costs and get more buyers into stores for crisper, even "cinema-quality," TV displays. Consumer electronics companies now have an incentive to move entirely into the computer-monitor business and abandon selling "TV sets" (monitors plus tuners) altogether. This would allow them to escape the tuner mandates and continue to sell high-quality visual displays that would function equally well on computers or as part of home entertainment systems—attached, for example, to cable set-top boxes.

Meanwhile, one looming problem has not even begun to be addressed: In-the-field tests of television sets equipped with digital tuners suggest that DTV reception—at least under the technical standard digital broadcasters are currently required to use, dubbed 8VSB—is not as reliable as analog broadcast reception. In other words, the FCC is requiring manufacturers to add digital tuners that, while spiffy on the rare occasions that they do work, are nowhere near as reliable as plain old analog TV receivers. This is not the kind of policy that inspires people to buy consumer electronics.

Problems for broadcasters. Broadcasters aren't pleased that digital transmissions are less reliably received than analog broadcasts. Nor are they happy that the bill for "loaned" spectrum will soon come due, especially given most Americans' unwillingness to buy DTV products. If the transition is imposed on the scheduled date, there will be an abrupt decline in the advertising audience base for their broadcasts—especially when compared to those of cable and satellite.

Furthermore, the generally high costs of refitting broadcasting plants to enable DTV transmissions are, for many stations, an unfunded mandate—expenses that they are required by law to make as licensees (and may already have begun to make) but that do not translate (or haven't yet translated) into additional revenue.

Historically, one argument for the transition to DTV has been to enable broadcasters to compete against the heretofore more reliable signal quality of cable- and satellite-delivered TV content. It would be ironic if a policy designed to preserve free broadcast TV were in fact to hasten its end.

Problems for consumers. By voting with their wallets, most consumers have demonstrated that they do not yet value DTV's benefits enough to invest seriously in new equipment for it. Consumers who rely primarily on over-the-air broadcast signals may find that their new digital TV sets receive broadcast content less reliably than their old analog sets did. This federally compelled downgrade in reception reliability will likely make a significant number of broadcast-reliant voters unhappy.

In addition, efforts to control analog input-output interfaces, recorders, and display devices, in order to ensure the effectiveness of some marking schemes, may spell the end of plug-and-play interoperability among consumer electronics devices—a convenience that every Radio Shack or Sears customer has come to expect.

The Harry Potter Fix

Is it possible to create a compromise that addresses the concerns of all these groups? Politically speaking, it might not be. As a matter of public policy, though, it might. I lay out that compromise here, but first, a warning and a request: Please don't hate me for suggesting that the FCC impose a new set of regulations when, in fact, we'd probably be better off if it sat this one out. I'm no fan of the commission, and remain appropriately skeptical of its expansive role in regulating broadcasting. But the fact is that the FCC is under immense pressure from Congress to further the DTV transition. It will almost certainly choose to act, and whatever it chooses to do will probably be big. If we can't stop the commission from acting at all, we should help it find a plan that, at worst, does no harm. At best—if the stars line up and we hold our mouths just right—it might actually solve the DTV problem with minimal costs to the rest of the us.

The Harry Potter fix begins with three basic steps.

First, Congress would keep its 2006 deadline for the return of extra spectrum but allow broadcasters to choose which spectrum they return. They could keep their old analog spectrum or their new digital spectrum, but they'd have to give back one or the other. (This step assumes for the sake of simplicity that spectrum is fungible. The actual implementation of the giveback will be somewhat more complicated due to technical allocation issues, but compared to the regulatory problems of the current state of affairs it would be relatively straightforward.)

Second, TV stations could continue analog broadcasting if they wished. Those that wanted to continue analog broadcasting but continue to build out to, or experiment with, digital broadcasting could choose to buy or license additional spectrum, more of which should be available once the "loaned" spectrum has been reclaimed by the Commission, acting as a proxy for the general public. Furthermore, broadcasters who continue to transmit digital signals would be allowed to choose between the 8VSB standard and any other standard that might work more effectively (e.g., the COFDM standard now prevalent in Europe).

Third, the FCC would require all national networks, as a condition of continuing to hold their licenses, to transmit their prime time and late-night programming via the Internet. Local broadcast licensees likewise would be required to Netcast their locally generated programming.

"Wait a minute," you may shout at this suggestion. Internet distribution of licensed creative content? Won't that worry copyright holders? Aren't such worries the very motivation for the technology mandates they keep proposing?

Sure they are. That's why the FCC must also allow content companies to insist that delivery of licensed content be done through one or more secure digital multimedia systems, such as RealPlayer, QuickTime Streaming Video, Windows Media Player, or various Palladium-based schemes soon to be deployed. All of these systems, plus a number of others, offer reasonably secure delivery that prevents all but the most determined viewers from making unauthorized copies of content. They are not entirely hack-proof, but that is also true (indeed, much more true) of the proposed marking schemes. In purely practical terms, they already offer more protection than such schemes, not least because they are less costly to implement. Of course, broadcasters may choose to deliver some of their own content in the clear, and there may be occasions when copyright holders want to authorize or even encourage broadcasters to deliver some of their content in that manner.

What are the advantages to this three-part plan?

First and foremost, it takes advantage of market forces that are already in play. Consider the advantage to content companies in the secure-delivery-system requirement. Market competition already exists in this sector, and there are several major players, including Real Networks, Microsoft, and Apple. Market-driven solutions can evolve more rapidly and respond more quickly to new copyright security problems than any government-imposed standard can. For antitrust reasons, the FCC would not want a regulation that let content licensors dictate which one of the competing systems must be used—that would permit them to leverage their copyright interests into control over commerce in areas outside of their copyrights. It would nevertheless be possible for the FCC to allow content creators to insist that licensees select a system that meets specified technology-neutral minimum security standards.

Another advantage: Secure Internet delivery of high-quality content would expose more Americans to the quality of high-definition TV and other digital offerings. Recent statistics suggest that about 70 percent of American households have personal computers—about the same share that has cable. Current PC monitors, including analog ones, are excellent DTV display devices. DTV-Internet offerings may spur demand for even better technologies.

It's true that even the fastest home broadband connections require many hours of download time to deliver digital television. Content companies typically acknowledge that their marking proposals are anticipatory measures. That is, they are addressing not a current problem but a prospective problem they believe will appear when Internet bandwidth is expanded.

But we also know that, for infringers at least, waiting hours for downloads to complete has not been considered a serious problem, even on the current Internet. In addition, it is widely believed (although hotly disputed by many telecom observers) that Internet bandwidth to the home will continue to increase over the coming years. Many early Napster users waited a long time for MP3 files to complete their downloading over 56-kilobyte modem connections. The same is now true for those who download movie and television files via broadband.

This points to a larger development: Live delivery of television is increasingly unimportant to Americans, a fact that helps explain the widespread use of VCRs, TiVo, and other devices for time shifting. Current Internet bandwidth rarely if ever supports live high-definition TV. But we may reasonably assume that a jumpstarted demand for broadband-delivered digital television will fund the kind of infrastructure build-out required to enable quick or even real-time high-definition TV delivery. And since the FCC is concerned with promoting high-definition TV broadcasting we may note here that consumers who've found that their appetites have been whetted for high-definition TV, and who want it faster than the Internet can deliver it, have an obvious solution that also fulfills the Commission's mandate. To wit, they can buy an high-definition TV set and (assuming broadcasters iron out those pesky 8VSB transmission problems) get their must-see TV live, 24 hours a day, from over-the-air broadcasting sources.

Meanwhile, nonsimultaneous delivery of premium content may constitute a new application for pure peer-to-peer distribution. (It would be a great irony if the Internet's peer-to-peer functionality, once regarded as an unmitigated problem, could be harnessed to enhance the delivery of commercial content in ways that financially benefit content producers even as they increase consumer choice.)

And if it doesn't work out that way—well, then the point is moot. If there is not enough bandwidth to allow a legal market in high-definition TV content, it follows that there isn't enough bandwidth to allow substantial piracy of it either.

Other Beneficiaries

The consumer electronics sector would also benefit: It would still get to sell high-quality computer monitors (essentially TVs without tuners) and might sell many more as audiences discovered alternative ways to access high-definition DTV content.

The information technology sector, remaining unencumbered by the government's technology mandates, would get to compete to develop secure content delivery systems. Provided the choice of secure delivery systems is left to the broadcaster, competition alone ought to be enough incentive for continuous innovation in these delivery components, driving down price while improving ease of use, quantity of features, and quality of playback. (It's instructive, in this connection, that consumer feedback about copy protection schemes revolutionized the software industry in the 1980s. The result was that most commercial software companies either abandoned copy protection or developed protection schemes, such as registration, that were less onerous for ordinary users.)

Broadcasters would be able to approach the shift to digital with a lot more flexibility. Local broadcasters in particular would gain. Not only would they be able to preserve their existing geographically based audiences (by not requiring them to abandon their old TVs and buy more expensive ones), but they would be able to reach new audiences around the world. Diversity of programming would be advanced, since an innovative local program would have the potential to reach a national or international audience. (This has already been the experience of radio stations that have echoed their programming to the Internet.) And reaching that larger audience would mean more advertising dollars for the station.

Consumers, too, would benefit, and not just because they wouldn't have to junk old TVs. They could still do fair-use time shifting (and other legal but unlicensed uses of commercial content) with their VCRs, TVs, TiVos, ReplayTVs, eyeTVs, WinTVs, and other digital and analog devices, including PC capture devices, as long as there was continued analog distribution. Perhaps more important, market competition among secure delivery systems might begin to offer similar fair-use features in the purely digital arena as well, especially once we've refueled the market for competition in the delivery-system sector.

Meanwhile, broadcasters could experiment with offering "must-see" TV at times convenient to audiences, or more than once. As far as the TV viewer is concerned, there would be an immediate improvement in convenience: Instead of waiting until Thursday night to see the new episode of Friends, you could click on the Friends Web link anytime you wanted during the week the current episode was showing.

That, of course, is just one possibility—lots of experiments would be possible. Another approach would be to give viewers a choice between "free" (that is, advertising-supported) prime time content and subscription-based, ad-free versions of the same programming. In other words, a viewer could choose to treat a network more like NBC or more like HBO. Perhaps you even could choose on Monday night to receive Friends on Wednesday. Since live broadcasting is increasingly unimportant to many TV viewers, your advance choice would allow the program to be buffered either in your system or in nearby servers, to be displayed on command. Such choices might matter more to viewers than any high-quality images.

And Congress? In a nutshell, it would be able to promote a transition to DTV without imposing any new expenses on TV consumers or imperiling "free" broadcasting. In fact, it would offer an expanded set of models for how free broadcasting can profitably work. It would get its "loaned" spectrum back and would be able to auction most of it off, consistent with budgetary plans, while reallocating portions of the spectrum for public use.

In short, every major stakeholder bloc would benefit, and consumers would be inconvenienced minimally, if at all.

Harry's wand-waving plan could work, and there may be other plans that do even better. But we'll only be able to weigh these alternatives if we set ourselves free to find alternatives to the current deadlocks, and resolve to avoid policy solutions that are worse than the problems. Both Congress and the FCC have been known to rival even J.K. Rowling in keeping us frustrated while we wait to find out how the story turns out. Let's hope we don't have to wait until 2006 for the next installment. And let's insist on a happy ending.