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FCC Goes from Bad to Worse on its Latest Rulemaking

09/09/2016

by Raymond J. Keating-

Government has an unrelenting knack for making bad situations worse. This happens when elected officials or regulators impose assorted policies with significant costs and consequences, and then go on to expand the scope, reach and control of those measures, thereby further ramping up costs and other negative consequences.

This phenomenon has largely been the rule when it comes to taxes, regulations and spending programs. Just consider, for example, how the federal income tax, the EPA, and government health care programs started out, and where they stand today.

FCC is All About Control

The Federal Communications Commission (FCC) recently decided to step in to the competitive video marketplace with a set-top-box plan to mandate that pay TV providers and content providers offer their products and services to any box maker.

The problems with such an aggressive, unwarranted intrusion into the marketplace are numerous. As noted in comments to the FCC, Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council, pointed out:

“The proposal clearly provides large tech companies with massive benefits and leverage at the expense of small, entrepreneurial and minority programmers. The independent programming community depends upon the protection of licensing agreements for channel placement, advertising and piracy, which creates certainty for accessing capital, new content development and growth. The FCC’s set-top box scheme will undermine these agreements and allow companies, like a Google for example, to profit off of the hard work of the programming community. These agreements would not have to be honored, and the programming can simply be lifted. Another troubling aspect of this set-top box dictate by the FCC is that it potentially further undermines the protection, and therefore creation, of intellectual property (IP).”

Kerrigan added in a recent analysis: “A diverse array of voices are also alarmed by the plan.  Like SBE Council, they are concerned about the impact on small, entrepreneurial and minority programmers, as well as small service providers. In addition, they’ve noted that the plan undermines the creation and protection of intellectual property (IP), and licensing agreements. These agreements create certainty for accessing capital, new content development, and individual business and industry growth.”

The proposal obviously ran into serious questions and opposition, including from the U.S. Copyright Office, the SBA Office of Advocacy, and Members of Congress from across the political spectrum.

So, in reaction, as USA Today reported on September 9, Wheeler has shifted strategy with the FCC voting later this month “on rules requiring pay-TV providers to make free apps available that would work on other devices and video game consoles… The new rules would protect current copyrights and licensing agreements. Pay-TV providers must make the free apps available on all popular platforms including Android and iOS devices, Roku, Amazon Fire and video game consoles. Third-party developers could work with pay-TV providers for apps, too.”

Of course, businesses and innovators in the marketplace already have been doing this, with the so-called set-top-box increasingly becoming a thing of the past.

Therefore, we come to a key question: Why is the FCC intruding into an already innovative, dynamic, consumer-responsive market? The answer seems to be that no reason exists other than to maintain and expand its own power.

As noted in the USA Today report: “However, not all on the commission are convinced that the rules are needed. Commissioner Michael O’Rielly, who along with fellow Commissioner Ajit Pai, voted against the initial rule-making process, has said the market is moving to apps on its own. ‘I will review this proposal carefully over the coming days and weeks, but at the outset it appears to exist within a fantasy world of unlimited Commission authority,’ he said in a statement Thursday. ‘The Commission is and must remain in the business of licensing spectrum and infrastructure, not content.’”

Well said.

FCC Continues to Undermine IP

In addition, Motion Picture Association of America (MPAA) Chairman & CEO Senator Chris Dodd said in a statement that the FCC’s revised proposal still appears to encroach upon copyright protections. MPAA has made clear that any FCC action “must fully respect copyright law.”

Intellectual property is the lifeblood of entrepreneurs and small businesses in the motion picture and entertainment industry, as well as many other industries where IP is critical to various business models, competitive advantage, raising capital and vibrant growth. Government should be doing all it can to protect IP, rather than undermining innovation, investment and much needed entrepreneurship and business growth.

Indeed, we have another costly example of the FCC making a bad proposal even worse, with the FCC moving to expand its reach into how content is distributed. Anyone concerned with entrepreneurial dynamism, content creation, incentives to innovate and create, and the protection of intellectual property should be concerned about the FCC’s latest reiteration of its power grab.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.