First, I would like to point out that, although some content providers have been accused of being backward-thinking and anti-technology, I am proud to be aggressively pioneering this Committee’s brand-new video conference technology.  It is not the first time the entertainment industry has pushed technological innovation to new levels.  I hope that this will not go unnoticed by our detractors. 

You have asked me to cover several topics in my testimony:  first, to describe industry efforts to ensure that digital television content – particularly high-definition content – is protected once the transition from analog to digital television is complete; next, to identify the goal of the Copy Protection Technology Working Group (or "CPTWG") and its subcommittee, the Broadcast Protection Discussion Group (or "BPDG").  I will also discuss my company's involvement in the BPDG's efforts to address the broadcast flag technology solution; the process of evaluating alternative technologies capable of keeping free, over-the-air television programming from being redistributed on the Internet; the impact of content protection technology on consumers' ability to enjoy the full panoply of new and exciting digital equipment; and, finally, inter-industry efforts to close the "analog hole" and to resolve the broader, peer-to-peer file sharing problems, as well as the proper role of government in determining those solutions.   I welcome the opportunity to provide you with my company's perspective on these important matters. 

1.         Pre-BPDG Efforts to Protect Digital Television

            A.  The CPTWG and the Identification of the "DTV Hole"

            I will begin by giving you a few words of background on the CPTWG.

The CPTWG was founded in the aftermath of unsuccessful discussions in the mid-1990's among representatives of the content, consumer electronics and information technology industries regarding a legislative approach to protecting content in the dawning digital era.  The CPTWG was created to be a non-exclusive, non-legislative, non-binding forum that would meet regularly to investigate and seek consensus on technological solutions for various content protection challenges.  I think it’s important to recognize that the CPTWG is not a standard-setting organization and has no authority to promulgate or even recommend particular technologies.   Even where consensus on a particular technological approach has been reached within the CPTWG, implementation is always left to entities outside the forum.

From the outset of discussions within the CPTWG, there was widespread recognition that content delivered to consumers in encrypted form was easier to protect, from both a technological and a legal perspective, than content that was unencrypted, or "in-the-clear."  As a result, CPTWG focused its initial efforts almost exclusively on the protection of content that could be delivered to the home in encrypted form – in other words, physical media like DVDs and cable and satellite programming distributed via conditional access.  The idea was that once encrypted, such content would be continually protected through secure links to the recording and transmission technologies of consumer electronic and computing devices in people’s “home networks.” Solid achievements grew out of these CPTWG efforts.  These include the DVD protection technology CSS, the so-called "5C" output protection technology (known as DTCP) and the so-called "4C" technology to protect recordings on removable media (known as CPRM). 

The problem is that free, over-the-air, digital television could not directly benefit from those advances. Under current FCC regulations, digital terrestrial television broadcasts and certain basic tier cable video programming are delivered "in-the-clear,” or in unencrypted form. In other words, unlike encrypted digital media such as DVDs, or premium digital cable and satellite video transmissions delivered via conditional access, there is no technical or legal authorization needed to receive DTV signals. Thus, unprotected DTV content can be redistributed, over the Internet or elsewhere, without any authorization from copyright holders. The resulting "gap" in the digital content protection scheme is referred to as the "DTV hole".

B.  The Role of DTV Protection in the 5C Negotiations

When the question of how to plug this DTV hole arose in 1999, Fox and other broadcast-oriented studios realized that the quickest way to resolve the problem would be to augment already-developed home networking protection technologies like DTCP.  The initial idea was to require network entry, or "source," devices to detect and respond to a "broadcast" watermark by directing such content to a protected output of the device.  However, 5C cited a number of legal and commercial reasons for its belief that it could not agree to impose such an obligation upon its licensees and as a result the 5C/studio negotiations, which involved a number of issues besides DTV, were delayed for most of the year 2000.

Progress from there was gradual.  In November 2000, two studios elected to sign a Memorandum of Understanding with the 5C (later replaced by definitive agreements) that did not include protection for DTV.  A month later all seven MPAA studios signed a letter to 5C supporting the amendment of the 5C license to impose broadcast watermark detection and response obligations upon 5C-licensed source devices.  The DTLA and the other five studios then entered into discussions regarding such an amendment, which again proceeded slowly. 

 In 2001, two new technology proposals from the studio side intensified these negotiations.  First, in the Spring, Fox's engineers proposed a mechanism for implementing broadcast protection in a less complex--and therefore less expensive--way than the original watermark proposal.  The idea was to include in the technical standards for DTV a simple and voluntary “Redistribution Control” descriptor (colloquially, a "broadcast flag") indicating that the copyright holder desired to control redistribution of the broadcast signal.  (This is the same proposal that was formally incorporated into the standards of the Advanced Television Standards Committee, or ATSC, earlier this month.)   Fox also developed and presented to the 5C companies a technical proposal whereby this "broadcast flag," when detected in ATSC transport streams, would automatically direct the streams to the established 5C protection system—while acknowledging that the earlier "broadcast watermark" might continue to be useful as an alternative or replacement approach.  The “broadcast flag” application was incorporated in a proposed MOU between the 5S studios and the 5C companies that was sent to 5C in July 2001 and discussed for the next several months.

Finally, at a meeting in October 2001, the 5C companies again declined to impose the Fox solution through the DTCP license. However, the 5C companies suggested that Fox's proposal form the basis for constituting a multi-industry group dedicated to protecting DTV against unauthorized redistribution.   At that time – and later at an FCC staff "hoedown" meeting that November – the 5S studios expressed concern that such a multi-industry process might unnecessarily delay the actual implementation of DTV protection, but nevertheless agreed to participate.  At the November 2001 CPTWG meeting, the individual 5C companies presented a slightly refined version of the Fox technical proposal, and recommended that a group open to all interested parties be formed for the purpose of evaluating the revised technical proposal.  Later that day, 70 representatives of the consumer electronics, information technology, motion picture, cable and broadcast industries agreed to form the Broadcast Protection Discussion Group (BPDG).   They have since been joined by representatives of various government bodies, public interest groups, academics and other private individuals.

2.         The Work of the BPDG

            A.  BPDG Problem Statement and Schedule

            A Work Plan for the BPDG was drafted and circulated in mid-December 2001 that described the problem BPDG was formed to address as follows:

"A solution is needed to prevent unauthorized redistribution of unencrypted digital over-the-air broadcast content on a worldwide basis (including unauthorized redistribution over the Internet)."  

The Work Plan also recommended a simultaneous effort to consider the policy and legal aspects of implementing the solution as follows: 

"A parallel discussion also should take place among representatives from the affected companies and industries to consider the policy and legal aspects of the solution, including with respect to what legally enforceable means might be available to mandate the use of the technologies or adherence to implementation requirements recommended by the technical working group….This effort should be organized promptly, so that work can begin once consensus begins to coalesce around a technical proposal." 

The Work Plan proposed that the so-called "Parallel Group" (since renamed the "Policy Group") be organized in January 2002, and that March 31, 2002, be the proposed deadline for completing the BPDG's evaluation of the “broadcast flag” proposal.  

For Fox and the other 5S studios, at least, the March 31 deadline was a key factor in muting concern about the delay inherent in multi-industry open processes like the BPDG.  As such, Fox is greatly disappointed that the March 31 deadline was not adhered to, even though we acknowledge the substantial efforts that were made to do so.  We are equally disappointed that the Policy Group has barely begun its work on how to mandate adherence to the requirements developed by the BPDG.  Every single day, new and perfectly lawful DTV receiver products are manufactured in the U.S. and around the globe without any built-in protection against unauthorized redistribution.  As a result, every single day DTV’s exposure to piracy increases.  Fox calls on all BPDG participants to do their utmost to ensure that the requirements document is finalized as soon as possible, and that the Policy Group begin work immediately on ideas for implementing it through legislation, regulation and/or private licenses. 

3.         The MPAA/5C/CIG Agreement on BPDG Conclusions

A.  The BPDG Conclusions

Like any other multi-industry process featuring participants with diverse interests and agendas, the discussions of the BPDG have not been without controversy.  But that does not mean that key participants have been unable to reach agreement.  To the contrary, I am pleased to report that, thanks to marathon negotiations during the past week, representatives of the MPAA studios, the 5C companies and the Computer Industry Group (CIG) have reached agreement in principle on a comprehensive set of conclusions recommended for adoption by the BPDG.  (A copy of these conclusions is attached.) The most important of them can be summarized as follows:

1. An approach based on a “broadcast flag” is technically sufficient for the purpose of signaling protection of all DTV audio-visual content.  

2. The specific “broadcast flag” used for this purpose should be the ATSC Redistribution Control descriptor now set forth in the ATSC Standard. 

3. Protection requirements should begin at the point of demodulation of the incoming ATSC signal. 

4. Products covered by the compliance and robustness requirements must handle demodulated content in a "protected manner" unless – and until – the products screen for the “broadcast flag” and determine that it is not present.  The parties have agreed on exactly how "protected manner" should be defined for various ways in which DTV is and might be transmitted and stored within and between covered products.

5. Where the demodulated DTV content has been screened and the “broadcast flag” has been determined not to be present, no further requirements or limitations should be imposed upon the handling or recording of such unmarked content. 

6. Unscreened and marked content should be recorded by, or output from, covered products exclusively through the following permitted methods:

a.  Through certain legacy outputs and recording methods, including analog outputs and recording methods;

b.  Through certain non-legacy digital outputs that do not pose undue risk of unauthorized redistribution; and

c.  Through non-legacy digital outputs and recording methods that provide adequate protection against unauthorized redistribution.  The parties have agreed on three alternative "market acceptance"-based criteria and one alternative "just-as-good-as" criterion for determining which outputs and recording methods meet the "adequate protection" test (as discussed in further detail below).  The parties have also agreed on certain recommendations to the Policy Group as to how to handle disputes and the "hacking" of authorized output and recording protection technologies. 

B. The Impact of the Agreed BPDG Conclusions on Alternative Technologies for Protecting DTV from Unauthorized Redistribution 

These are the pillars of the MPAA/5C/CIG proposal, a proposal that carefully balances the rights of content owners, of device manufacturers, of the proprietors of technologies currently available to protect DTV from unauthorized redistribution, and of the proprietors of such technologies that will become available in the future.  As I’ve noted, the agreement provides for four alternative methods by which a particular protection technology can be proposed for inclusion on the list of approved technologies (the so-called "Table A") or added later.  The first method requires agreements with just three content providers (of whom only two need be studios) by which such providers use or approve the particular technology.  The second requires agreements with just two studios--as well as 10 device manufacturers.  The third method is the "just-as-good-as" method, by which a proprietor of a new technology can get on the list without having had to get anyone to adopt the technology, merely by showing a neutral arbiter that the technology is "at least as effective" as an uncompromised technology already on the list.  This fourth method enables protection technologies linked to technologies already on the list to also be added. 

Some participants in the BPDG have argued that technologies should be candidates for inclusion on the list just by virtue of the sheer volume of content protected, regardless of whether content owners have had any say whatsoever in this protection.  Such an approach strikes us as far too manipulable by device manufacturers and unlikely to ensure that only effective technologies be added to the list.   Other participants have suggested that an array of technical criteria be adduced to determine whether a technology is "good enough" to be added to the list.  While such a proposal sounds even-handed, no list of technical factors could realistically represent the complex ways those factors interact to make an overall system architecture effective (or not).  Furthermore, no list of factors developed in 2002 could possibly anticipate all of the revolutionary ways in which future protection technologies might evolve.  As such, the "technical criteria" approach would stifle creative technology development without necessarily keeping ineffective technologies off the list.

By contrast, the "market acceptance" criteria outlined in the MPAA/5C/CIG proposal serve to screen for ineffective technologies while protecting the proprietors of effective technologies against slow marketplace acceptance by content providers.  Nor do these criteria discriminate against innovative and unorthodox approaches.  Just to take one example, Philips has presented BPDG with a proposal whereby unencrypted recordings of broadcast content could be protected by an alternative “flag preserving” mechanism. Protection in this scheme would be derived from “compliance” rather than “self-protection.”  Because Philips has not yet specified exactly how this compliance would be achieved, its proposal is currently incomplete.  However, nothing in the agreed criteria will preclude Philips from petitioning to add its proposed technology to the list of approved recording protection technologies in the future, once it has a complete proposal to submit.  We look forward to evaluating this proposal, as well as other examples of the benefits of  innovative thinking we expect to receive in the future. 

C. The Impact of the Agreed BPDG Conclusions on Consumers' Enjoyment of Digital Technology 

It’s equally important to point out that nothing in the proposed BPDG requirements will adversely affect consumers' enjoyment of digital equipment in all its exciting variety.  To the contrary, the emerging consensus on how DTV should be protected will accelerate the proliferation of such equipment by better informing manufacturers exactly what sort of protections to incorporate.  Nor will protection requirements hinder the operation of new digital equipment.  Consumers will continue to be enabled to make secure copies of DTV content marked with the Broadcast Flag, either on personal video recorders like TiVo or ReplayTV or on removable media such as D-VHS tapes or recordable DVDs. Similarly, the requirement that non-legacy digital outputs be protected will do nothing to hinder the ability of consumers to send DTV content across a home digital network with connections to digital set top boxes, digital recorders, digital servers and digital display devices.  Finally, the compliance and robustness requirements will not extend to professional broadcast products that are not used to insert and carry the Broadcast Flag, or to bona fide academic and commercial research and development activities, and so will not hinder such activities in any way. 

4.            Industry Efforts to Address the "Analog Hole" and P2P 

I have focused most of my testimony on protecting the “DTV hole” not just because of this Subcommittee's laudable interest in and concern for the DTV transition.  It is also because the "DTV Hole" is the gap in the digital content protection scheme for which we have a solution that is ready to implement today.  This solution is the “broadcast flag.”  For the other two dangerous gaps--the so-called "analog hole" and the problem of online theft -- solutions are every bit as necessary (if not more so), and promising technologies have been identified, but finalized solutions are regrettably more elusive.

 A.            Plugging the "Analog Hole" 

Long into the foreseeable future, content providers will need to deliver content to consumers in an analog form; after all, hundreds of millions of TV sets are not digitally equipped. Unfortunately, analog content (including protected digital content converted to analog for viewing purposes) can easily be converted into an unprotected digital form that can in turn be copied or redistributed without authorization.   This is called the "analog hole" in digital content protection schemes.  The BPDG identified the "analog hole" in its Work Plan as a subject for further study, but has more recently realized that because this issue applies to a range of content far broader than DTV, and because the BPDG is already late in finishing its work on the Broadcast Flag, the BPDG is not the appropriate forum in which to address it.

Fox strongly recommends that the multi-industry approach that has brought us so far towards achieving protection of DTV broadcasting, turn next to developing and implementing a solution for the "analog hole."  In the meantime, Fox and its industry colleagues are working on a plan that includes harnessing watermark technology to close the gap in content protection that’s created by the digital/analog conversion. . We hope to secure inter-industry consensus on such a proposal, and we welcome your assistance in encouraging all relevant parties to make this happen.  Once it does, we would hope to have that solution quickly ratified by Congress. 

B.  Online Theft of Content 

Finally, we are working intensely on a plan to prevent the unauthorized viewing of content delivered via the Internet.  It is a difficult problem to address because there are so many ways unauthorized content can be distributed on the Internet.  We are also mindful of not over-correcting the problem and burdening Internet appliances any more than necessary.  But we are confident that the problem can be solved; we know it must be. It is reported that every day, hundreds of thousands of copies of movies are being downloaded without compensation to their copyright holders, and this number is growing rapidly, in tandem with the increasing speed and proliferation of Internet-delivered broadband.  The competition from pirated copies of our movies and TV shows is the single biggest obstacle to our developing a viable business model for marketing movies and TV shows legally on the Web.  Again, we are optimistic that we can develop a technological solution to address this phenomenon in a cost-effective way, just as we have with DTV, and as we will soon be doing with the "analog hole."

However, it is critical that Congress play an active role in ensuring that the parties reach a consensus on how to solve this problem as quickly as technologically possible.  This is an Internet problem that needs to be solved at Internet speed.  As with the broadcast flag and analog hole solutions, we will need Congress to codify the solution to the illegal download problem.  We at News Corporation are working to build the necessary support in the private sector, including consumer electronics and computer manufacturers, Internet service providers and others in order to come up with solutions that would benefit industry and consumers.  With our combined technological expertise, we have a chance to stop the rampant theft of copyrighted works and to provide the business opportunities that will drive the development of new and innovative products and services long into the future.

At the end of the day, Mr. Chairman and Members of the Subcommittee, if we do not find creative solutions to this real and growing problem, consumers will be the ultimate losers.  While some consumers may see a short-term gain in obtaining free unauthorized material from the Internet, the long-term result will be less consumer choice, lower quality of content, and the stunted growth of American technology and entertainment. Thank you for providing me this opportunity to present the views of News Corporation.  I will be happy to answer questions.