S. HRG. 109–580 BROADCAST AND AUDIO FLAG HEARING BEFORE THE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION UNITED STATES SENATE ONE HUNDRED NINTH CONGRESS SECOND SESSION JANUARY 24, 2006 Printed for the use of the Committee on Commerce, Science, and Transportation ( U.S. GOVERNMENT PRINTING OFFICE 29–917 PDF WASHINGTON : 2006 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001 VerDate 0ct 09 2002 15:35 Sep 19, 2006 Jkt 029917 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 S:\WPSHR\GPO\DOCS\29917.TXT JACKF PsN: JACKF SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION ONE HUNDRED NINTH CONGRESS SECOND SESSION TED STEVENS, Alaska, Chairman JOHN MCCAIN, Arizona DANIEL K. INOUYE, Hawaii, Co-Chairman CONRAD BURNS, Montana JOHN D. ROCKEFELLER IV, West Virginia TRENT LOTT, Mississippi JOHN F. KERRY, Massachusetts KAY BAILEY HUTCHISON, Texas BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine BARBARA BOXER, California GORDON H. SMITH, Oregon BILL NELSON, Florida JOHN ENSIGN, Nevada MARIA CANTWELL, Washington GEORGE ALLEN, Virginia FRANK R. LAUTENBERG, New Jersey JOHN E. SUNUNU, New Hampshire E. BENJAMIN NELSON, Nebraska JIM DEMINT, South Carolina MARK PRYOR, Arkansas DAVID VITTER, Louisiana LISA J. SUTHERLAND, Republican Staff Director CHRISTINE DRAGER KURTH, Republican Deputy Staff Director KENNETH R. NAHIGIAN, Republican Chief Counsel MARGARET L. CUMMISKY, Democratic Staff Director and Chief Counsel SAMUEL E. WHITEHORN, Democratic Deputy Staff Director and General Counsel LILA HARPER HELMS, Democratic Policy Director (II) VerDate 0ct 09 2002 15:35 Sep 19, 2006 Jkt 029917 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\29917.TXT JACKF PsN: JACKF C O N T E N T S Page Hearing held on January 24, 2006 ......................................................................... 1 Statement of Senator Burns ................................................................................... 2 Statement of Senator Inouye .................................................................................. 31 Prepared statement .......................................................................................... 31 Letter and response, dated January 11–12, 2006, from David K. Rehr, President/CEO, National Association of Broadcasters to Mitch Bainwol 67 Statement of Senator E. Benjamin Nelson ............................................................ 39 Statement of Senator Smith ................................................................................... 36 Statement of Senator Stevens ................................................................................ 1 Statement of Senator Sununu ................................................................................ 41 WITNESSES Bainwol, Mitch, Chairman/CEO, Recording Industry Association of America ... 44 Prepared statement .......................................................................................... 46 Band, Jonathan, Counsel, American Library Association; on behalf of the Library Copyright Alliance .................................................................................. 7 Prepared statement .......................................................................................... 8 Harris, Leslie, Executive Director, Center for Democracy and Technology ........ 25 Prepared statement .......................................................................................... 26 Halyburton, Dan, Senior Vice President/General Manager, Group Operations, Susquehanna Radio Corporation; Chairman, Audio Flag Task Force, Na- tional Association of Broadcasters (NAB) .......................................................... 59 Prepared statement .......................................................................................... 60 Prepared statement of Preston R. Padden, Executive Vice President, Worldwide Government Relations, The Walt Disney Company; Member, National Association of Broadcasters (NAB) .............................................. 56 Patton, Thomas B., Corporate Vice President, Government Relations, Philips Electronics North America Corporation ............................................................. 17 Prepared statement .......................................................................................... 18 Setos, Andrew, President of Engineering, Fox Entertainment Group ................ 2 Prepared statement .......................................................................................... 4 Shapiro, Gary J., President/CEO, Consumer Electronics Association ................ 48 Prepared statement .......................................................................................... 50 APPENDIX Boxer, Hon. Barbara, U.S. Senator from California, prepared statement .......... 77 Broadcast Music, Inc. (BMI), prepared statement ................................................ 78 Dorgan, Hon. Byron L., U.S. Senator from North Dakota, prepared statement 77 Sohn, Gigi B., President, Public Knowledge, prepared statement and attach- ment ...................................................................................................................... 81 (III) VerDate 0ct 09 2002 15:35 Sep 19, 2006 Jkt 029917 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\29917.TXT JACKF PsN: JACKF VerDate 0ct 09 2002 15:35 Sep 19, 2006 Jkt 029917 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 S:\WPSHR\GPO\DOCS\29917.TXT JACKF PsN: JACKF BROADCAST AND AUDIO FLAG TUESDAY, JANUARY 24, 2006 U.S. SENATE, COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, Washington, DC. The Committee met, pursuant to notice, at 10 a.m. in room SD– 562, Dirksen Senate Office Building, Hon. Ted Stevens, Chairman of the Committee, presiding. OPENING STATEMENT OF HON. TED STEVENS, U.S. SENATOR FROM ALASKA The CHAIRMAN. Good morning. Our Co-Chairman will be along in a few minutes, but he has asked that we start. So, let me thank you all for coming today. Some time ago, a group of us joined together and asked the FCC to deal with the issues before us now, and this broadcast flag was developed to protect over-air digital television programming from piracy. The FCC adopted that broadcast flag rule, which the con- sumer electronics industry had begun to implement by developing devices that complied with its requirements. But the court has struck down that regulation and held that Congress had not given the Commission authority to promulgate the rule. And that’s what brings us here today, and we are trying to address the question of whether Congress should provide the FCC the authority to put the rule back in place. Groups like the American Library Association are concerned that if Congress gives the FCC the authority to enforce the broadcast flag, the rights of consumers and educators to copy, watch, and share programs the way VCR recordings are shared will be threat- ened. Likewise, some consumers want to make sure that they can continue to exercise their fair-use rights to record video program- ming for personal use. It’s our task in this Committee to consider industry and fair-use concerns and to try to find the proper balance between them. De- termining how to protect audio content in the age of digital radio and satellite has only recently gained greater attention. The FCC has not yet acted on that front. The creative-content side and the distribution side of the music industry should seek mutual ground that supports business models for both. Whether it is an audio flag or an alternative, we seek to balance between them and encourage innovative digital services that spur jobs, economic growth, and consumer options like the iPod against ensuring that the creative genius that brings us all (1) VerDate 0ct 09 2002 15:35 Sep 19, 2006 Jkt 029917 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\WPSHR\GPO\DOCS\29917.TXT JACKF PsN: JACKF 2 the great pleasure to earn a return on creative investment is en- couraged. Now, Senator Burns, do you have an opening statement? STATEMENT OF HON. CONRAD BURNS, U.S. SENATOR FROM MONTANA Senator BURNS. I do not, Mr. Chairman, but I appreciate you having this hearing today, and your insight on this issue. With the advent of digital technology, what we thought would uncomplicate our world now is complicating it. Before, as you know, we always talked about a lot of things, but we tend to talk more about bandwidth than anything else when we went to digital, because we could do some things, but we couldn’t identify signals. And now we are finding that ones and zeros are hard to identify, whether it’s voice, data, or video, and now we’re getting in a new era of really branding whose signal it is now, that is moving, rather than the technology. So, this is a timely hearing. It is something that the industry itself should come to some sort of a conclusion that would be of benefit to everybody, and with the consumers always in mind. But it seems as though that hasn’t been done yet. And I would wonder, when government wanders into this area, there are always unin- tended consequences. And so, this hearing is timely, and I thank you for having it. The CHAIRMAN. Thank you very much. I should state that, coming from a State like Alaska, as I do come from Alaska, one-fifth the size of the United States, we have tried to implement our education system utilizing distance learning to the maximum extent possible. So, that’s one of our greatest con- cerns in this hearing