The most efficient. The companies would prefer a market if it was more efficient. Host lets bring lydia beyoud in she is with bloomberg. Up, kevinfollow wheeler come in introducing this idea said he wants to open up this market and make it more where consumers can buy their own devices like with mobile phones, tvs, and other electronics. Do either of you think there is something similar or different to that analogy that would make it such this proposal would or would not work . We think it is the perfect analogy. You have the interface between the device and network. It would be possible for people to sell across the interface. It is just Like Computers or modems. Microsoft case was about the interface, the court said, open the interface, and you get competition. We have seen that time and time again. Remember the old telephone market . , no one can say plug a phone and, they will blow it up. They were wrong. We got tremendous cover edition. Competition. That is our point. Open the interface and you can get competition. Box,u look at the settop rather than making a judgment about whether it is or is not like the other things, look at it and say, it is not the behaving like the other things, and why . The answer is, it is not like the other things. It is not like a cable modem that you can buy from best buy. It is not like a telephone either in the fact that these devices are a secure link from the cable head end through the household, which secures the property delivered over that, which is copyrighted content. It also prohibits theft of the signal because it is scribbled. Scrambled. It is not the same. Part also a very important of managing the quality of the network for the cable operator. If you call the operator and tell them your services down, they want to see the box. It is worth asking yourself that, why is it this is different . Why is this different from a cable modem, where you are perfectly able to buy one of the store and use it, even though 50 of people 15 of people to. Do. Mark cooper that is what they always say. The answer is, the way the law is written, you will protect privacy and quality antiadvertising and the advertising. Letting people connect is exactly the reasoning behind the home recording and destroy they wanted to stop bcrs vcrs. The case is under copyright laws. On court has never won technology. Cases and theourt marketplaces. This is exactly the same thing. It has worked so many times that the question is, should we experiment . The answer is, yes. If it goes wrong, we can close the door. We honestly do not believe it will go wrong because of the expense. Experience. George the reason the telephone was because the whole system is regulated. They created an incentive to want to keep the phone. There are significant differences. You also had to look at who is really proposing the chairmans proposal. That is the copyright industry. They are concerned this program will threaten their livelihood. What is interesting about this when a that normally, new Company Comes along that wants to use video content, or example, when a phone Company Began operating in the cable business or netflix. The copyright industry had a new customer. I sat with these guys, we created new things. They had an expanded customer base. Now the fcc wants to say no, comcast can buy it, whoever wants access can have it. You dont have to Pay Attention to the contracts written. The programmers the Program Content people say, wait a minute, this is not right or fair. It is confiscation of our property. I think what happens is this runs square into the copyright law. Fcc has no authority to implement copyright law. Wrong. Is absolutely when somebody puts an box there, youle dont get it for free, you still have to pay your cable bill. You are paying your bill to the Cable Company. You just dont have to pay the Cable Company for the box. It is exactly the same competition. Boxr an independent settop is put up, it has the same opposition as before. They want to make profit with it. You can make profit with copyrighted content to me have to compensate the owner. No one goes into the business to deliver service for free. They want to be in the business so they can monetize the information they gather from what the viewer is doing. When is the copyright when does the copyright owner get to pick play in this game of monetizing . It is not the same. There is Something Else going on. Otherwise, no one would be interested. Concerns, the copyright the content is there a way the content providers could negotiate or do they have to go through the paytv industry . They may that they may do that as well. But that stream coming through the box today will continue. It will be almost impossible for anybody to monkey with that. That would require rebuilding an entire network to replicate what exists. With a put a piece of advertising in front of the show . Maybe. That, they dont own that, they get the advertising in the show. They give people the ability to move more quickly . Absolutely. They dont own that ability. They have their stream of revenue, they put their advertisements in. They will stay. Thinks of aone else new way to spread that around, they hated. Hate it. Anyone who tries to think of another way to deliver the content exactly the way they provided it, they get offended. That is my money. It is not. They made their deal, and other people are innovating and maybe gaining rewards for how they move the content. Also, this is a marketplace for there is money to be made in manufacturing that has been monopolized by the cable market power. Lydia we are already seeing paytv providers skip over advertisements. Is that a concern that they would have with this as well as it relates to copyright . To defendve a right their interests under the copyright act, though they cannot do and with the courts have not let them do is use the copyright medications act or copyright act to dictate technology. The debate about, should consumers be allowed to skip ads . Consumers do. Now we have technology that automates it. Is that a radical change . Should that be banned . The federal Communications Commission has no business doing in the middle of the copyright act. Decade, they tried to battle against technology. The irony is that when the court the courtthey win case, but lose the economic war. The courts will not let them dictate to protect themselves. Now music they make more money than before, they have more cost. That is the process under the copyright act. That is a balance between the consumer interest in Creative Arts and the Copyright Holder interested in getting enough revenue to continue to create. That is a different balance. The fcc is about communication, not copyright. I think you made my point. When you make money using copyrighted content, you own the owner money. If it is adding advertisements, you must pay for the right. That is what a broadcaster is. A broadcaster gets copyrighted content, sells advertising around it, make money, and then the copyright owner takes his fair share. That is exactly the point. You cannot do anything, reorganize the channels, put a nicer front end on it, anything you do to make money is a violation of someone elses right if you do not pay. That is what the copyright law is. Host wooden opening the market benefit the consumer by having competition where you can buy different boxes opening the market benefit the consumer by having competition where you can buy different boxes . You cannot take a product like video, like everybody wants, and add settop boxes no one wants, and become edible more profitable. They are trying desperately to get out from under it which goes back to your question, moving to an outpaced model app based model. The industry had choices. They could do what the video providers did which would eliminate the box, or do the other approach which is probably a violation of copyright law. Saying is always because the cable car didnt work because of the response. The cable industry and the copyright people will do it. What if the copyright industry says you cannot give this information to a third party. You cannot. Program do . E fcc mandate you give it to a thirdparty . Is that legal . I dont think so . Chairmanher hand, the could go the other route and do it. At a time when we are trying to eliminate the settop box, you says,bout it and it you cannot eliminate the settop box, because the statute says you are forced to keep it so you have competition. It is a crazy idea. Host he referenced a cable card , what is that . The first time it was a total failure. They had a Security Card basically. The cable system comes in, it is scrambled, it hits the box and the metv can see it and the tv can see it. Out a security piece and you can move it to different boxes. Then you have a tv with a slot for this card. Scramble the signal. You could get this from the store, it was a mess. No one bought it. People quit making it. Consumers are not that interested in it. They could buy a cable modem, they just dont. You can buy one for 60, they choose to rent it for four dollars a month. It is obvious they are not that keen on that. That cost billions to implement the program. Admits it is a disaster. This is too. Fcc is coming right back into this. No wonder the soviet union failed. Look at all of this complexity. The copyright industry comes in. Whenopyright holders i buy a book, they dont charge me every time you read it. They dont want me to read it to kids. They want to get a quarter for every kid that listens. That is the model they like. Instead of recovering their cost of the cell of the book sale of the book. If they want a copyright fight, lets do it in the court. Player, the home recorder, file sharing, we have had those fights and the world has moved on. They said, lets get rid of the settop boxes this way it was a way to preserve their bilateral monopoly. The Cable Companies can control the signal, broadcasters can control it no competition. They define the way that you search for the programs. That is exactly what at t said about a telephone. That is exactly the same argument. If you plug it in, it will blow the system up. The answer is, it is the wall ate put up to defend wall they put up to defend their market power. Later, it0 years evolved. Some people succeeded with cable cards. We no longer have that. We have this new flexibility. We can control the interface. That is much more efficient. , protectionsecurity of copyright, and cop edition and competition. That is what we as consumers care most about competition. I think that was a grossness gross misstatement on the copyright of books. They have never charged me reading to my children. The question is there such thing as a market for settop boxes . Really . Or is it just part of the network . We can draw regulatory distinctions of the house, but then it is artificial. Is that separate from the network . It is not. Now we have a realistic possibility to do to move to a softwarebased solution. That is not good enough for some reason for the fcc. The reason is obvious, that is a valuable piece of information that traverses the cable buyer. Particularly when you know what theyre watching and not watching. There is a huge opportunity to monetize. Go. Fcc will not let that they will let somebody else in their. That is the problem the copyright industry has. They should be able to charge when somebody uses their product. There is a Software Solution that can be unlamented. Why is implemented. Why is that not good enough . Cable boxes two because charter provides an app. Host lets get the next question from lydia. I would be fine with it. That is not with the sec is doing scc is saying to do. You did not offer it. I dont offer anything. They did not offer an open interface. If they said, here is my app, the comcastku, hit app, you can do what you want. You cannot. That is what you cannot do. Manipulate theo signal. Most one of the criticized aspects of the proposed rule is it is not clear how Copyright Holders with a would enforce the copyright if a third party were to either change the program neighborhood, where it says in relation to other channels, or certain types of content nonfamilyfriendly content on top of a disney program, disney might not like, and they enforced through the contract. Could you describe a little bit proposed. The fcc has self regime. E a they say if there is a violation, they can turn off the device. The pay industry says that harms the consumer. If the fcc rolled out a program where you have to have permission you know they would. There is a system. Wifi, if they had a civil procedure simple procedure where the devices intended for certain things, they would certify that. The cable guys and broadcasters know pretty quickly if somebody is violating. Violating that obligation. They have given the ability to the cable operator saying, if you see they are violating those obligations, you can turn them off. That is the enforcement. If you have to have permission of the cable operator before you can get to the customer, youre doomed. We have to cut through the. That. You cut through that by giving them protection of, if you see something that you think violates our rules, you can stop willd we will do and we litigate. Copywriters are clearly willing to litigate. That is the message. Lydia a consumer would be more likely to hold the paytv provider responsible, even if the choke point was that the thirdparty from the thirdparty. The consumer would be hard harmed. A lot of consumers would complain in disneys case. They are not shy about sending the fcc letters when they see something they do not like. If somebody put something on top of a kids show, the fcc would hear about that in the blink of an eye. The cable operator would be authorized to stop that in the brink of an eye blink of an i. Then we would stop that. I dont see the harm in allowing innovation and competition to take place first and then lets see if there are abuses. We have had the cable card, not as popular as hoped. They have been there for a while. You dont have a lot of complaints. The only people who complained for the Copyright Holders who lost the stream of income. That is what this is about. Capturing streams of income. Thatg up Horror Stories are supposed to scare someone into not allowing decision open competition. That is exactly what this is about. Tryingng income and not to compensate. Your question drives the point home why the box looks like it is today. These are complex contracts between distribution and copyright owners. The copyright is a right. It is property. These are complex contracts. If i dont know how that signal is being treated at all times throughout the entire chain, i dont have the confidence it is being treated properly. Ist is why it looks like it it does. You have to maintain tight control. Thein the world is copyright industry and cable industry going to know if somebody is this true beating boxes over ebay that allow you to do things that you should not do. Ine putting a thumb drive the thing and putting it online. Are they going to put every person in some in everyones house . You canhat imagine, this Wonderful World where this stuff gets sorted out. That is why it is closed. It is underlying and everything. Open is good, closed is bad. That is not true. Some things are better closed. Some things are better open. The market is good about sorting out which is which. I believe in markets, not monopolies. Control, control, control. Something fromt everything you touch. They want to say, no, you cannot use it that way. For us, every time we open one of these markets, we go back 50 years, with the phone, every time we open one, we get consumer finley choice. Friendly choice. Sometimes the industry has to restructure. The Music Industry has restructured. Americans listened to more music today at one third the price than they did 20 years ago. They hated singles. Buycould not by a single a single. That is what theyre doing with video. We believe in competition. We dont believe in control. Where is the monopoly . Settop boxes. No. Host lydia is the only one not jumping in. Lydia neither of you have directly addressed one of the other big issues the idea that Tech Companies would be able to capture the sort of Consumer Information and develop very tailored, detailed profiles of your behaviors and combine that, in the case of a google or apple or amazon with all of the other information that they have on you and sell that. Do you view that as a problem . Is that the nature of the marketplace . Has a proceeding on it . Fcc has an authority over communications providers. Overdont have authority others, the minute i say the fcc should regulate the internet he will grain like crazy. Scream like crazy. When i point here buy something from netflix, they know what im doing. They dont know when i go over here and buy something from you. They are not part of the transaction. The telephone, but to medications that work is. The Communications Network is. The Network Operator has the greatest potential to abuse the information. When netflix does it, they had to find it someplace else. It all comes to the hands of the telephone company. That is the great threat to privacy. That is what the fcc is working on. I think those privacy issues can and will be dealt with. There may be other privacy issues under title iii and title vi which govern video. The biggest threat is the guy who sees everything i do. George i disagree. I have talked about that. The that is the whole basis, getting to that information to monetize it. That is the only reason. You will not make money selling boxes. That is the only reason, the fcc will allow edge providers to monetize peoples viewing habits. That is it. Underneath it all, there it is. Chiefgeorge ford is the economist for the phoenix center. Formerly worked at the fcc in the cable bureau. Marc cooper is the Research Director for the Consumer Federation of america. He is also a fellow at Stanford Law School center for internet and society. Lydia beyoud is with bloomberg. This is the communicators. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] [captions Copyright National cable satellite corp. 2016