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FCC Grants Partial Waiver for Early VOD Release of Theatricals

In a move that could further boost the fortunes of VOD services, the FCC has granted a partial waiver of its selectable output controls (9SOC)  ban, giving studios and multichannel video programming distributors (MVPD's)  the ability to disable certain set-top outputs so they can copy-protect the release of theatrical films to VOD closer to their release date and potentially well before their DVD release.

The request had been pending for almost two years.

The FCC said it was loosening the ban on selectable output controls "to encourage Motion Picture Association of America ("MPAA") member companies, independent filmmakers, and their MVPD partners to offer their films for home viewing during early release windows," saying that when it adopted the ban it had "specifically contemplated" just such a move for new business models for valuable content.

The commission's Media Bureau, which released the order Friday (May 7),  said that without the waiver, the studios had provided "compelling arguments"  it would not be offered at all. "Therefore, we conclude that  SOC is necessary to provide protection against illegal copying of the proposed service."

The waiver is limited because while MPAA had asked it to extend until the DVD release, the FCC instead set a time limit of 90 days, or the DVD release, whichever comes first. The waiver is not exactly temporary, but the FCC reserves the right to review and change it, and requires the companies participating to report back in two years.

To prevent any MVPDs from favoring one type of input over another that could discriminate against retail devices, the FCC said the waiver was conditioned on making the service available over all protected, unidirectional digital outputs CableLabs has approved, and for any MVPD-approved output via IPTV or satellite.

The FCC is currently trying to create a more competitive market in set-tops.

 "This action is an important victory for consumers who will now have far greater access to see recent high definition movies in their homes," said interim MPAA President Bob Pisano. "And it is a major step forward in the development of new business models by the motion picture industry to respond to growing consumer demand. We deeply appreciate the recognition by the FCC that recently released movies need special protection against content theft when they are distributed to home televisions."

"We are disappointed that the Media Bureau has succumbed to the special-interest pleadings of the big media companies and ignored the thousands of letters from consumers," said Public Knowledge, which had opposed the waiver. "The order allowing the use of ‘selectable output control' will allow the big firms for the first time to take control of a consumer's TV set or set-top box, blocking viewing of a TV program or motion picture."

The output restrictions apply only to analog, but that still means that viewers with older HD sets won't be able to take advantage of an early VOD release service without buying new equipment. The FCC recognized that, but said that, ultimately, " the public interest benefits of the proposed service outweigh the limited impact on consumers who rely on unprotected outputs on the set-top box."

That benefit includes allowing shut-ins, parents who can't afford a babysitter, "and others who simply want to stay in for the night," the chance to go to a movie theater vicariously through their set-tops.

In June 2008, the Motion Pictures Association of America asked the FCC to waive its prohibition on selectable output controls to allow them to selectively block the copying of HD movies via cable set-top boxes. They say in order to move up the multichannel video HD window while still protecting the DVD window, they need to be able to prevent their being copied.

Faced with that prospect, groups including Public Knowledge, Media Access Project and Consumer Federation of America, sent a letter to the FCC warning it not to respond to the "whims of industry" by granting a waiver that would result in substantial harm to consumers by blocking outputs to TiVo's or Sling Boxes.

They argued that MPAA has not offered up "a shred of relevant data in the record to support its claim that the ability to turn off video outputs on common consumer electronics could be used to effectively combat piracy." The FCC said Friday that while it agreed with Public Knowledge that loosening the ban would not prevent piracy, the commission said it would impede it enough to allow the studios to provide what it argued was a valuable service.

Representatives of the MPAA met with FCC staffers in late summer of 2009 to urge them to grant the waiver, saying it would "enable millions of Americans to obtain access in their homes to high-value content that MPAA member studios intend to distribute."

One of MPAA's initial arguments was that the waiver could help speed the DTV transition by increasing the demand for HDTV, but the FCC has already missed that boat.

The National Cable & Telecommunications Association, which supported the FCC ban on selectable output controls, also supports the waiver.

"We are disappointed in the Bureau's Selectable Output Control decision effectively allowing any video copyright owner to unilaterally shut off video outputs on consumers' televisions," said the Consumer Electronics Association.  "We appreciate, however, that the waiver is limited to analog-only outputs, has a 90-day duration, and that the commission will review all waivers that are implemented.  Nonetheless, we are unsure when the FCC has ever before given private entities the right to disable consumers' products in their homes. The fact that the motion picture studios want to create a new business model does not mean that functioning products should be disabled by them. The decision is not in the public interest, and harms the very consumers that the commission is in place to protect."

Public Knowledge and others had argued that consumers had the right to expect to access any MVPD content through the equipment they had purchased, but the FCC agreed with MPAA that people currently could not and should not have any expectation to see a just-released theatrical on their TV's or via the Internet, at least not legally.

But just to make sure there was no confusion, the commission warned that it would revoke the waiver if the service were marketed deceptively or consumers not clearly  told what their options were.

Also opposed is the Independent Film & Television Alliance, which said not long after the waiver request was made that allowing the major studios to "remotely shut off a particular output on a program-by-program basis" would harm program diversity by diminishing access to independent films like those of their members. Theater owners were also concerned that the studios are shortening their distribution windows and migrating their movies to other distribution platforms -- like cable and satellite--that they can more easily control.

"We're pleased that the FCC has granted MPAA's request to permit cable customers to receive first-run theatrical movies before their release on DVD," said NCTA President Kyle McSlarrow. "The commission recognized that waiving its selectable output control rule would permit cable operators and other multichannel video programming distributors to provide their customers a new service which would not be available absent FCC action. This decision serves consumers well by allowing us to provide them more choices in how and when they can view new movies."