The FCC’s ‘Industrial Policy’ Approach to HDTV

Published January 1, 2004

Just how far will policymakers go to protect “free, over-the-air” television and our ongoing industrial policy experiment with high-definition television (HDTV)?

To answer that question, one need look no further than the November decision by the Federal Communications Commission mandating that by July 1, 2005, every consumer electronic device in America capable of receiving digital TV signals must be able to recognize a “broadcast flag”–or string of digital code–that will be embedded in digital broadcast programming in the future.

In theory, this little bit (excuse the pun) of regulatory engineering will encourage content creators and broadcasters to air more digital programming “in the clear” (i.e., through the broadcast television spectrum), knowing that the broadcast flag will allow them to prohibit mass redistribution through peer-to-peer (P2P) networks. In other words, the broadcast flag mandate will prevent the “Napster-ization” of video programming.

That’s the theory, and to some extent it just might work. But is adding another layer of regulation to the existing mountain of HDTV mandates really a good idea?

In one sense, it’s tempting to say, why not? The history of broadcast television in general, and the HDTV transition in particular, is just an endless string of mini-industrial policies. Each industrial policy decision begets another and another.

The theory always has been that broadcasting is a complicated and important business and, therefore, policymakers need to take special steps to guarantee its success. Somebody needs to figure out, for example, the transmission standards for broadcast television. Are 480 lines of resolution enough, or should we bump it to 1,080? Is interlaced video acceptable, or would progressively scanned video be better? Is a 4×3 TV set aspect (square) ratio good enough, or should all pictures be shown in 16×9 (letterbox) aspect? Should we phase out the old analog broadcast transmission on a specific timetable? Should each new television set include a digital tuner?

Hey, somebody has to make these decisions, right? Sure they do, but it remains unclear why that someone should be the FCC. Nonetheless, in each of the examples just listed, the FCC has already adopted mandatory standards for companies and consumers to follow. We are told to believe that the HDTV transition will not happen in this country without such mandates and micromanagement from above.

One cannot help but snicker at such an assertion since the HDTV “transition” has already been going on for almost 20 years and yet only a very small percentage of consumers receive HD signals today. Moreover, the FCC does not impose grand industrial policy experiments on most other high-tech industries, but they seem to make complex transitions all the time. The computer sector is equally, if not more complicated than broadcasting, and there exists a variety of knotty computing issues for which the FCC could potentially establish complex regulatory solutions. But they don’t. Somehow the computer sector just keeps chugging along without such meticulous micromanagement from Washington.

As someone who’s obsessed with HDTV and currently owns three HD sets, I certainly appreciate the value of high-definition television programming and want to make sure it doesn’t disappear. But while the broadcast and content industry are correct in asserting that the widespread redistribution of high-definition broadcast content over the Internet might represent a serious problem, it’s hard to believe anyone in America today has enough bandwidth or processing power to be downloading and redistributing massive digital television files via the Net.

In the future, however, when broadband speeds (we hope) multiply, content providers might have more reason to be concerned about the financial viability of certain programs if those shows could be redistributed to the world at the click of a button. In such a world, it might make sense for them to embed digital broadcast flags in their programming, or even encrypt their programming at the source and require consumers to purchase new equipment to decrypt that programming before it can be viewed. But it is an entirely different matter to have the FCC set up a mandatory regulatory regime that forces such solutions on the entire nation.

Policymakers should not lock industry or consumers into any static technological standard, even when it’s done in the name of protecting intellectual property. IP rights can be enforced in other ways. For example, programmers could sue individual users who redistribute content on a widespread basis without permission or compensation for the creators. Instead of taking this more targeted approach to prosecuting the handful of users that cause the most serious problems, the broadcast flag proposal opens the door for the FCC to create an intrusive new regulatory apparatus for the Internet and computers in the future.

The FCC would be hard-pressed to point to any language in the Communications Act of 1934 or the Telecommunications Act of 1996 that gives them the authority to regulate IP, the Internet, or computers in this manner, but statutory law long ago ceased to be much of a constraint on this agency’s actions.

Adam Thierer ([email protected]) is director of telecommunications studies at the Cato Institute in Washington, DC (