SENATORS OPEN TO GOVT. INTERVENTION TO PROTECT BROADCAST CONTENT

On day before hearing, 9 high-tech CEOs wrote to CEOs of top 7 movie studios as well as MPAA Pres. Jack Valenti urging “interindustry cooperation to ensure that digital content can be distributed to consumers efficiently.” Hollings received copy of letter Wed. afternoon from Business Software Alliance, and told Intel Exec. Vp Leslie Vadasz at hearing that it supported his position, for if CE industry was so willing to work with studios and so close to resolution, it shouldn’t fear his bill. He also said his hearing had spurred letter, position backed by Disney CEO Michael Eisner and News Corp. Pres. Peter Chernin. However, Vadasz said to laughter that “frankly, I think [the letter’s timing] is a coincidence.”

While no committee member was as eager as Hollings or Stevens to introduce legislation, Vadasz found himself on defensive with several senators on issue of piracy, which he said he wasn’t trying to defend. There was much frustration among committee members at fact that copyright protection talks had been continuing for years, although Vadasz insisted that successful solutions already had been implemented for VCRs, DVDs and satellite TV. He said specifications for over-air digital signals would be released by end of March. After hearing, Chernin told reporters “we would be thrilled” if specifications were released and were acceptable, but News Corp. so far had unsuccessfully requested inclusion of “broadcast flag,” or watermarking for digital TV. “The broadcast piece is fairly easily solved,” he said: “It could be done in days.” As for end of March deadline, Chernin grinned and said “we'll give them until April 1st.”

Ranking Republican McCain (R-Ariz.) said “I believe the concerns of the content producers are justified,” and just wanted to ensure that any action taken by Congress didn’t interfere with fair use rights or technological innovation. Senate Internet Caucus Co-Chmn. Burns (R-Mont.) said “the industries are talking past each other” and said piracy was such a threat that action by Congress might be justified: “Congress may indeed step in… a procedure I don’t look forward to.” Burns called DTV rollout “inevitable” but said transition wasn’t moving fast enough and might need govt. help. Sen. Kerry (D-Mass.) echoed many in saying “our first preference is for the solution to come from industry” but said “if they can’t… we may be stuck with the need to legislate.”

Senate Republican High-Tech Task Force Chmn. Allen (R- Va.) shared his concerns with slow pace of negotiations but said he didn’t support govt. mandate: “I question whether a government mandate would be effective over time to deter hackers.” On that issue, Eisner said he wanted a flexible, open standard capable of upgrades: “We're asking for a renewable, changeable [standard]… If you make it one thing, it will be antiquated that day.”

As for fear that govt. solution would cause “irreparable damage,” as Vadasz said, Hollings dismissed that as “nonsense.” “We tampered and we saved you” in bailing out chip industry from pirates and market dumping, Hollings said, and Vadasz said he was grateful for intervention. Hollings also pointed to Digital Millennium Copyright Act, which required that VCRs contain Macrovision copyright protection, and other areas where govt. had successfully mandated technology: “We've been here before.” His primary argument was that there would be no govt. solution if industry solved problem in 18-month time frame, and he said letter from high- tech CEOs -- Compaq Chmn. Michael Capellas, Dell Chmn. Michael Dell, IBM Chmn. Louis Gerstner, Intel CEO Craig Barrett, Intuit CEO Steve Bennett, Microsoft CEO Steven Ballmer, Motorola Chmn. Christopher Galvin, Sybase Chmn. John Chen and Unisys Chmn. Lawrence Weinbach -- showed how quickly industry could act merely with threat of hearing. Eisner asked that 18-month clock start from Wed., day of letter to studios.

At least one CE witness acknowledged that Hollings’ interest had spurred talks among CE industry and studios. James Meyer, special adviser to chmn. at Thomson Multimedia, said on hearing’s 2nd panel that “the heightened congressional interest in these activities” both from Hollings and from roundtable discussions with House Commerce Committee Chmn. Tauzin (R-La.) and Telecom Subcommittee Chmn. Upton (R-Mich.) “have clearly accelerated the pace of these discussions.” Still, he defended progress of Copy Protection Technical Working Group (CPTWG) and said he hoped “they will conclude swiftly and successfully.” Mitsubishi Digital Electronics Vp-Mktg. Robert Perry, representing Home Recording Rights Coalition, expressed concerns that any solution that might arise out of Hollings’ legislation would impede on fair use rights, which would not only harm consumers but reduce sale of DTVs and similar technologies.

Valenti repeated his call for both Senate Commerce Committee and Senate Judiciary Committee (with jurisdiction over copyright law) to “be involved because these goals are umbilically connected to the oversight jurisdiction of both committees.” He advocated: (1) Broadcast flag, like that advocated by Chernin. (2) Watermark detector in TV set to “plug the analog hole,” referring to content converted from analog to digital and then transmitted illegally. (3) Crackdown on file-sharing in cooperation with CE industry. He said Congress would be needed most likely for all 3, particularly plugging analog hole. Hollings agreed Judiciary Committee also had role in debate, but said “while they know the law, they don’t know the business,” which he said was expertise of his committee.

After hearing Thurs., Computer Systems Policy Project (CSPP) released statement on high-tech CEO letter defending its timing: “[T]he idea of this letter was developed last fall, the CSPP CEOs formally agreed to it in January, and the drafting has taken place for the past month. The point of the letter is to communicate the commitment at the highest levels of the high-tech industry to developing a reasonable, effective, content protection solution.”