FCC Grants Studios SOC Waiver On First-Run Films Beamed On Pay TV

The public interest benefits of allowing the major studios to use selectable output controls (SOC) to beam first-run movies to pay-TV homes before their release on DVD or Blu-ray, “outweigh the limited impact on consumers who rely on unprotected outputs on the set-top box,” the FCC’s Media Bureau said Friday. It granted the MPAA’s request for waiver of SOC rules with conditions, as had been expected (CED Dec 1 p5). “We believe that providing consumers with the option to view films in their homes shortly after those films are released in theaters will serve the public interest,” the bureau said.

Bowing to pressure from CEA and fair-use rights groups, the bureau opted against granting MPAA an “open-ended” SOC waiver. It will “terminate the waiver for a particular film 90 days after the first activation of SOC,” or immediately when the film reaches retail release on Blu-ray or DVD, it said. The bureau also heeded the requests of MPAA critics that it should revisit the SOC issue to see how the waiver is working, though it refused to grant critics the “specified expiration date” they had sought. “Rather, we reserve the right to review the impact of the waiver and modify or terminate it if we find that it no longer serves the public interest,” the bureau said.

Companies that use the waiver must file a report at the FCC within two years summarizing such things as consumer complaints they received and “whether SOC has been an effective tool in combating illegal copying of these films during the early release window,” the bureau said. “This will enable the Commission to review whether the waiver has had any unanticipated adverse consequences, and if so, or if for any other reason the Commission finds the waiver no longer serves the public interest, the Commission may modify or terminate the waiver."

"On balance,” the bureau said, the SOC waiver “is necessary to provide adequate protection against illegal copying of the proposed service. It disagreed with Public Knowledge that MPAA “has failed to provide specific evidence of illegal copying through unprotected outputs. While it would be impossible to demonstrate specific evidence of illegal copying for a service that does not yet exist, MPAA has provided specific evidence that illegal copying exists, and that unprotected outputs on the set-top box have led to unauthorized rebroadcast of content.” Public Knowledge had argued that SOC won’t “prevent all early-window illegal copying by consumers nor will it address other sources of illegal copies, such as illicit conduct by studio employees."

But the bureau said that “while we agree with PK that SOC will not eliminate illegal copying, SOC will impede such copying by disabling outputs on the set-top box that provide no protections to prevent copying. Therefore, we conclude that SOC is necessary to provide protection against illegal copying of the proposed service.” This logic explains why MPAA member companies are reluctant to offer this service without SOC protection. MPAA convincingly argues that films are “too valuable in this early release window to risk their exposure to unauthorized copying, redistribution or other unauthorized activities” and that, absent the requested waiver, this business model will not be implemented, it said.

Public Knowledge is “disappointed” the bureau “has succumbed to the special-interest pleadings of the big media companies and ignored the thousands of letters from consumers,” President Gigi Sohn said in a written statement Friday. The SOC waiver “will allow the big firms for the first time to take control of a consumer’s TV set or set-top box, blocking viewing of a TV program or motion picture,” she said.

Public Knowledge will closely monitor “for the first time the industry decides to exercise its control over electronics in a consumer’s home,” Sohn said. “At that point, neither the Commission, nor, we suspect, Capitol Hill, will be able to ignore the outrage that will surely come from consumers. In the long run, customers will be much happier and willing to pay for content if the media companies loosen up their control of content. The practices allowed by this order are in stark contrast to digital-age business plans in which companies need to ‘let go to grow.'"

Like Public Knowledge, CEA is disappointed in the bureau’s decision “effectively allowing any video copyright owner to unilaterally shut off video outputs on consumers’ televisions,” a spokesman said. “We appreciate, however, that the waiver is limited to analog-only outputs, has a 90-day duration, and that the Commission will review all waivers that are implemented. Nonetheless, we are unsure when the FCC has ever before given private entities the right to disable consumers’ products in their homes. The fact that the motion picture studios want to create a new business model does not mean that functioning products should be disabled by them. The decision is not in the public interest, and harms the very consumers that the Commission is in place to protect."

But MPAA President Bob Pisano hailed the bureau’s action as “an important victory for consumers who will now have far greater access to see recent high-definition movies in their homes. And it is a major step forward in the development of new business models by the motion picture industry to respond to growing consumer demand.” Pisano said “the first, and best way to view movies will always be in movie theaters -- and nothing can replace the pleasure this brings to millions and millions of people all across our country and the globe. But for those people unable to make it to the theater and interested in viewing a recently released movie, thanks to the FCC, they will now have a new option.”