BEFORE THE FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 In the Matter of ) ) Expanding Consumers’ Video Navigation ) MB Docket No. 16-42 Choices ) ) Commercial Availability of Navigation Devices ) CS Docket No. 97-80 COMMENTS OF THE NATIONAL CABLE & TELECOMMUNICATIONS ASSOCIATION Rick Chessen Neal M. Goldberg National Cable & Telecommunications Association 25 Massachusetts Avenue, N.W. – Suite 100 Washington, D.C. 20001-1431 Paul Glist Paul Hudson Davis Wright Tremaine LLP 1919 Pennsylvania Avenue N.W. – Suite 800 Washington, D.C. 20006-3401 April 22, 2016 TABLE OF CONTENTS Page EXECUTIVE SUMMARY .............................................................................................................2 I. THE MARKET HAS BEEN TRANSFORMED BY NEW AND EXPANDING MEANS FOR ENJOYING MULTICHANNEL SERVICE ON RETAIL DEVICES ...........................................................................................9 A. Video Choices for Consumers Have Expanded Dramatically Beyond the Cable Set-Top Boxes Available in 1996 ..................................9 B. MVPD Apps Support More Retail Devices than Set-Top Boxes, and Keep Expanding ..................................................................................11 C. Programmers are Embracing New Distributors and Apps .........................14 D. Apps Provide a Path for Eliminating Set-Top Boxes ................................16 II. THE PROPOSED SET-TOP BOX MANDATE WOULD POSE GRAVE RISKS TO PROGRAMMING AND INNOVATION FOR LITTLE CONSUMER BENEFIT ........................................................................................18 A. The NPRM Would Disassemble MVPD Service ......................................18 B. A Preview of Consequences: Higher Costs, More Boxes, More Ads; and Less Service, Programming, Security and Innovation ...............18 III. THE NPRM IS DIVORCED FROM MARKET REALITIES ..............................22 A. The FCC Has Artificially Defined Its Own Market Failure ......................23 B. Consumers Have Spoken: Apps, Not Replacement Guides, Are Driving Retail Device Success ...................................................................24 C. Apps Do Not Commoditize Retail Devices – They Enrich Them .............26 D. Consumers, Standards Bodies, Device Manufacturers and Technologists Worldwide Refute the FCC’s Approach ............................29 IV. THE PROPOSED MANDATE WOULD UNDERMINE THE COPYRIGHT AND LICENSING PROTECTIONS THAT ARE NECESSARY TO SUSTAIN HIGH-QUALITY PROGRAMMING ..................31 A. The Proposed Mandate Would Undermine the Intellectual Property Foundation and License Agreements that Sustain Today’s Golden Age of Television .......................................................................................33 B. The Proposed Mandate Would Undo the Channel and Neighborhood Placements That Define How Programmers Connect to Their Audiences .......................................................................41 C. The Proposed Mandate Would Erode the Advertising Revenues that Support and Sustain Programming .....................................................43 D. The Proposed Mandate Would Undermine the Economics for the Creation of Guides .....................................................................................53 i E. The Subversion of Licensing Agreements Would Be Particularly Destructive to Minority and Independent Programmers ............................54 F. The Proposed Mandate Would Eviscerate the Copyrights of MVPDs ......................................................................................................58 G. A Government-Mandated Takeover of Licensed Content is Entirely Unnecessary When Content is Already Available Through Direct Licensing .........................................................................................59 H. The FCC’s Proposed Robustness Rules Cannot Secure Copyright Protections in Today’s Market ...................................................................60 I. Netflix and other OVDs Use the Same App Model to Enable Compliance with their Program License Agreements ...............................63 J. The FCC’s Discriminatory Mandate Cannot Deliver on Its Key Promise of Search Across All Program Sources........................................66 V. THE PROPOSED MANDATE WOULD NOT DELIVER CONSUMERS’ THEIR SUBSCRIPTION MVPD SERVICE .............................67 A. The Proposed Mandate Would Move Cable Service Backwards to One-Way ....................................................................................................68 B. The NPRM Would Strip Out the Modern and Interactive Features of Today’s Cable Service ...........................................................................72 VI. THE PROPOSED RULES WOULD DEPRIVE CABLE SUBSCRIBERS OF THE CONSUMER PROTECTIONS GUARANTEED BY LAW .................75 A. The Proposed Mandate Would Gut Statutory Protections for Privacy and Children..................................................................................75 1. The Proposed Certification Regime Would be Ineffectual ............78 2. The NPRM Would Rely on Trust of Retail Device Manufacturers and App Developers Despite their Dismal Privacy Record ...............................................................................82 B. The Proposed Mandate Would Fail to Ensure Delivery of Emergency Alert Messages........................................................................85 C. The Proposed Mandate Would Impair Accessibility .................................87 VII. THE PROPOSED MANDATE WOULD UNDERCUT THE SECURITY THAT PROTECTS PROGRAMMING, NETWORKS, AND CONSUMERS .......................................................................................................90 A. Loss of Security for the Channel Lineup ...................................................91 B. Loss of Data Security .................................................................................93 C. Increased Supply Chain Risks ...................................................................96 D. Lack of User Authentication Opens Service to Rampant Fraud ................97 E. The Proposed Mandate Would Radically Constrain MVPD Choice (and Use) of Essential Security ..................................................................98 ii F. Programming Keys Would be Exposed to Concentrated Attack .............100 G. The Proposed Mandate Would Open Door to More Piracy and Malware ...................................................................................................100 VIII. THE PROPOSED MANDATE WOULD REDUCE CHOICE, INNOVATION AND COMPETITION ..............................................................106 A. Tech Mandates Chill Innovation in Rapidly-Evolving Technologies ............................................................................................106 B. The Proposed Mandate Would Remove the Innovative Features of Today’s Cable Service .............................................................................108 C. The Proposed Mandate Would Limit Future MVPD Service Offerings ..................................................................................................109 D. The Proposed Mandate Would Limit Future Technology Innovations ...............................................................................................111 E. The Proposed Mandate Would Isolate U.S. MVPDs from Global Development ............................................................................................111 F. The Proposed Mandate Would Limit Future Programming ....................113 G. The Proposed Mandate Would Undercut Network Management and Squander Bandwidth .........................................................................113 H. CableCARD and Other FCC Mandates Have Been Expensive Failures that Restrained Innovation .........................................................114 IX. IT WOULD BE ARBITRARY TO STANDARDIZE ACROSS ALL MVPDS IN TWO YEARS OR DEFAULT TO A DEFICIENT GOOGLE SPECIFICATION ................................................................................................118 A. Delegation to Standards Bodies Does Not Relieve the Destructive Consequences of a Government-Imposed Technology Mandate ............118 B. The NPRM Trivializes Important Technological Differences Between MVPD Networks ......................................................................119 C. Two Years is An Impossibly Short Time for Creating a New Standard and Implementing It Across All MVPDs .................................123 D. Standardization Would Expose MVPDs to Increased Patent Litigation ..................................................................................................126 E. It Would be Arbitrary to Default to the Google Proposal ........................127 X. THE PROPOSED MANDATE WOULD INCREASE CONSUMER COSTS .................................................................................................................129 A. The NPRM Would Mandate More In-Home Set-Top Boxes ..................130 B. The Proposed Mandate Would Undermine Energy Efficiency ...............132 1. Energy Efficiency Under the Voluntary Agreement ...................132 2. The Proposed Set-Top Box Mandate Would Erase Energy Savings Achieved by the Voluntary Agreement ..........................133 iii 3. The Proposed Parity Rules Would Erect Barriers to Boxless Solutions ......................................................................................134 C. The Proposed Mandate Would Increase Network Costs