FTC Suggests Privacy Safeguards on Set-Tops, Aiding FCC Plans

The director of the FTC Consumer Protection Bureau weighed in Friday in FCC docket 16-42 on FCC-proposed changes to rules for set-top boxes, alongside comments from pay-TV carriers, programmers, and advertisers. Set-top proposal opponent the Future of TV Coalition and proponent Consumer Video Choice Coalition filed thousands of citizen comments on the matter. Consumer Protection Bureau Director Jessica Rich didn't weigh in either way on the merits of the FCC plan but commented on the possibilities for enforcing privacy rules on third-party set-top makers, in a letter some industry officials said strengthened the case for the FCC proposal and others characterized as staking out a jurisdictional claim.

Rich's letter suggested a method for the FCC to increase the privacy protections for consumers under the proposal. Numerous commenters in docket 16-42 attacked the FCC plan as giving third-party set-top makers too much access to consumer data without the protections against abuse that pay-TV carriers must abide by. “Consumers want more competition and innovation in cable boxes, but not if it means sacrificing their families' privacy and security," said the Digital Citizens Alliance. The FCC can't enforce privacy protections on set-top box makers, said the Free State Foundation.

Rich suggested the FCC help the FTC enforce violations of consumer privacy by third-party box makers by requiring the companies to promise privacy protections to consumers. Though the FCC NPRM had contemplated requiring the third-party box makers to certify to pay-TV companies that they would abide by the same consumer data rules, Rich said consumer-facing promises would “clearly implicate” FTC authority over deceptive claims. Rich suggested third-party box makers be required on both their packaging and on a website to pledge to abide by the multichannel video programming distributor privacy rules. “Liability would be triggered if any of the set-top box manufacturers’ practices were inconsistent with any material obligations of the pledge,” the letter said.

The CVCC made a very similar proposal in its comments Friday, and several supporters of the FCC plan told us the FTC suggestion provides an answer to pay-TV concerns that privacy-related covenants envisioned by the set-top NPRM don't have teeth or enforcement mechanisms. The FTC letter illustrates that rules already exist against the abuses the pay-TV opponents are describing, said communications attorney Henry Goldberg of Goldberg Godles, who represents CVCC member TiVo in the proceeding. Making the FTC responsible for privacy protection doesn't provide the same protections to consumers that are required of MVPDs, said Davis Wright attorney Paul Glist in an email. Glist represented NCTA and pay-TV carriers in opposing the FCC plan. "The self-certification approach being pushed by the FCC and FTC doesn’t give TV providers any technical or contractual means to verify whether devices are breaking their promises and doesn’t begin to restore the specific rights and remedies that consumers would lose when they do,” Glist said.

Though the White House, NTIA and DOJ earlier weighed in on FCC set-top plans, numerous industry commenters told us they saw the FTC filing as separate from the larger executive branch effort supporting the FCC proposal. FTC comments on FCC proposals aren't uncommon, several industry officials told us. Rich's letter is likely seeking to assert FTC jurisdiction over the privacy aspects of the proposal, since the FCC recently moved in on privacy jurisdiction over the Internet, and the proposal doesn't specify an enforcement method, a technology industry official told us. The FTC didn't comment.

The video market is functioning correctly without FCC intervention, numerous commenters said in filings Friday. MVPDs are "rapidly moving to make their content available on as many devices as possible through the use of applications," said AT&T. "Yet, for some reason, this consumer driven move away from special purpose devices to smartphones, tablets, smart TVs, gaming consoles and streaming devices is insufficient for the FCC." AT&T said. The FCC is operating with a faulty premise, said the Telecommunications Industry Association, saying the standard-setting process advanced by the commission wouldn't be able to keep up with the pace of innovation. The FCC risks ”pre-determining which technologies will prevail over time, contrary to widely followed standards making protocol,” said TIA. The commission “wants to shatter a vibrant and well-functioning marketplace into a million pieces and then try to glue it together in an entirely different shape,” said Comcast.

Creating a competitive navigation device market will "unleash numerous benefits," said the Consumer Video Choice Coalition. Congress gave the FCC explicit authority to open up the set-top box market, and doing so will give consumers more choices, the CVCC said. The CVCC dismissed pay-TV arguments that a standards based system would lead to a uselessly slow process. "Deployment could happen expeditiously," the CVCC said. "With good faith cooperation from industry stakeholders, standards could be quickly created to ensure implementation that results in interoperability, but not in undue burdens."

Smaller cable operators have already integrated set-tops provided by TiVo and Roku into their cable offerings, and would be especially disrupted by the FCC plan, the American Cable Association said. The set-top plan would "impose significant costs on smaller MVPDs," ACA said. The NPRM barely addresses the issues satellite carriers would have in complying with the proposal, Dish Network and EchoStar said. Satellite MVPDs deliver their television service "in a fundamentally different way than do two-way terrestrial competitors," the satellite companies said. Though the NPRM notes this, it doesn't include proposed rules for satellite providers, they said. "The Notice provides the text of proposed rules for implementation of a regime that the Commission recognizes would not be appropriate for satellite systems, and makes only a very brief and generalized request for comment on satellite-related issues," they said. "The FCC has failed to provide the notice and opportunity for meaningful comment by satellite providers required under the Administrative Procedure Act, and thus cannot adopt rules for satellite systems without issuing a further notice."

The new rules “would change incentives facing both programmers and MVPDs with uncertain consequences,” said the Technology Policy Institute. Some commenters attacked FCC motivations in proposing the rule changes. Steve Effros of downloadable security provider BBT called the commission's process a smokescreen, and Comcast Senior Executive Vice President David Cohen said FCC Chairman Tom Wheeler's “real objective” is to “hand control of the video ecosystem to a few favored Big Tech giants.” The commission doesn't have the authority to implement its proposal, commenters said. "This is part of a consistent pattern -- from net neutrality to prison payphone rates, the FCC simply does not care what its statutes say," said TechFreedom President Berin Szoka. “Without a record, and preempting the thoughtful administrative processes required by the ... [APA], the Notice goes well beyond the statutory authority of the Telecommunications Act,” said Cohen in a news release on Comcast's filing.

The NPRM would “undermine the value and income of advertising,” which would raise consumers' costs, said the Association of National Advertisers. The NPRM “does not include necessary protections of either programming or advertising content, and could seriously and adversely impact the content-development market,” ANA said.

Numerous commenters focused on the FCC proposal's effect on programming and copyright. The proposal would allow “Silicon Valley firms to scrape our programming and use it for their own purposes -- without negotiating or paying for rights,” said a group of minority writers, actors and producers. The set-top rule changes would violate the first amendment and MVPD editorial discretion, said Tech Knowledge. The Writer's Guild of America, West disagreed. MVPDs are “today’s gatekeepers,” it said. “The rules would allow independent programming not sanctioned by these gatekeepers to reach more viewers more easily.” Programmers don't have a stake in set-top leasing revenue but would be harmed by the proposal, said a joint filing from A&E, CBS, Disney, Scripps, Time Warner, 21st Century Fox and Viacom. "The Content Companies write not in defense of set-top boxes or leased equipment, but instead to highlight that the Commission’s proposal is fundamentally flawed and therefore threatens to harm the video programming marketplace and consumers."