 Welcome to the Public Knowledge Policy Symposium for 2013. As I'm sure most of you know, we at Public Knowledge are a non-profit super advocacy group that focus on consumer technology issues. And so while there are many, many issues being discussed in this building and very proximate to this building, we wanted with the new Congress and with the renewed administration to take some time to identify some of the issues that we thought would be very important for this year and going forward. And the goal of this event is not necessarily to solve any of these problems, although, you know, you may figure it out in half an hour or 45 minutes, but more importantly to kind of flag the issues and begin to make sure that you understand why they are important and why they are worth focusing on. We've got a lot of content and not a lot of time, so I just want to give you a sense of the flow of the day. We have four panels and a lunchtime keynote address. The panels will begin with a panel discussing data caps and data caps are important because no matter how great of a network you have, if you can't use it, it will not be the engine of innovation and information and access that we all want it to be. And so we need to find a way to both create those networks and keep those created networks useful. We'll then move on more broadly to the future of video as many people in this room know. Online video is a part of the future of video but it's certainly not the end of the future of video and there are a great number of rules regarding video and as video begins to converge around a more limited number of distribution platforms, we really need to think about what that means and how we can make sure that it develops as freely and efficiently as possible. We'll then transition to a lunch keynote discussing probably the most important telecom issue that no one outside of Washington knows about, the PSTN transition, the transition from the phone network, the historical phone network to a more IP based one, and this is going to be an issue that is with us for some time but is important to get right early because you don't get it right early, you can't get it right medium and later. And then they have to know we're going to switch from telecom to the world of IP. And I think it's no secret that this town has become aware over the last year or so that there are two sides of the debate around copyright and copyright policy. And so what we want to do with the first panel after lunch is really talk about how copyright is impacting people who are operating in the real world and who are innovators and creators and users and think about ways that we can really optimize the balance of copyright to make sure that we encourage and reward innovation and creativity on all sides. And then finally, we're going to wrap up with a panel on what may be the copyright equivalent of the PSTN, the most important copyright issue that very few people outside of Washington or very few people inside of Washington for that matter are aware of, and that is the future of first sale. The Kurtzang case at the Supreme Court right now is touching on first sale in the world of physical things, specifically books that were made overseas, and that's an important element of what we're talking about. What we're really talking about is the almost imperceptible erosion of some of the balances that are key to the world of copyright. As we move from this physical first to a digital first world, a lot of the assumptions, the ability to sell or gift or give away or do whatever you want with the things that you buy gets harder and harder. And so we're trying to identify now what it means when those things change and what we can do to find a way to maintain the balance without being trapped in a world where we say, well, it used to be this way and therefore it has to be this way forever. So that's a very quick overview of the kind of things we're going to do. But since we do have limited time, I want to invite up the first panel. I've talked about data caps, so please come on up, folks. And as I said, we wanted to kick off today's symposium with data caps because data caps are one of these issues that have a real practical effect on the way people use the internet. And there's a lot of discussion about broadband penetration and broadband speeds, but a network that is available everywhere that is as fast as anyone can ever want isn't particularly useful if you can't use it for anything or if you can only use it for the things that have only been created today and the things that tomorrow won't work on it. So we're focusing specifically on this panel on online video, not because online video is the only place that data caps are relevant, but because online video is the place that it's easiest to see and understand the impact of data caps. It's sort of the canary in the data cap coal mine. And so I want to quickly introduce our panel and then get on to the questions. I will let them introduce themselves, but I will just go down the line. First, we have Jenny Powell, who is the producer of the, should I be embarrassed to say, addictive online show with even headed diaries that I spent my weekend binging on on the Amtrakish train and I'll explain what that is and why. So like me, maybe you may not should be embarrassed to watch a bunch of young women on YouTube dancing around. And there's also the director of content for VidCon. That sounded much worse than it is. And then Ryan Troy, who's the senior director of business development for Boxy, which is one of these services that are really trying to use the internet and the cloud to change the way that we watch probably largely more traditional video sources, although much more expensive than that. And then John Vazina, who's the co-director of the Writers Guild of America West and who represents people who want to be in, who are creating shows and want those shows to get out every way humanly possible, I imagine. And so look to see online video distribution as one of those ways. But quickly, I'll give you each a minute to introduce yourselves and explain why you came all the way down to the Capital Visitor Center this morning to talk about data caps. Hi, I'm Jenny Powell. The Lizzie Bennett Diaries is a modern-day adaptation of Pride and Prejudice, done video blog style. So the characters speak directly to the camera. They interact with the audience. And then VidCon is the world's largest online video conference. The reason I came down here today is because through VidCon and my work in the online video community, issues that affect creators are very, very important to me. And I'm passionate about fighting for their rights. And so data camping is something that personally affects them. I'm Ryan Troy. Boxy is a software company that has developed a cloud-based EBR that enables you to record free-to-air TSC signal television. And we have two boxes that we've launched with our partner, Nealink. And we blend in a seamless UI, both your recordings from free-to-air television and your over-the-top applications like Netflix and YouTube and the like. My name's John Vazina. As Michael said, I'm the political director at the Writers Guild of America West. Two and a half years ago, I left Senator Begich's office to move to LA to take this job. And just before I left, some friends, I had dinner to say goodbye with some friends. And I said, oh, we're going to invite a friend who just moved here from LA so that he can tell you a little bit there. You can tell him about here. And as we sat down to dinner, the guy said, oh, you're going to work for the communists. And little did I know at that time. But we are, you know, it's interesting as I take this, as I took the job and as we do more on this area that people sort of think of Hollywood as monolithic, that everyone in Hollywood thinks piracy is more important than net neutrality, that no one in Hollywood, especially content creators, can discern the difference of why it's an important example for writers to be able now that conglomerates own all the distribution and all the production to have independent ways to get directly to the public with what they do. So that's why I'm here and that's why writers are involved because probably more than anyone, you know, people may be in love with Brad Pitt but if you hear him talk when a writer hasn't written what he's saying, it's not quite so fascinating. And so getting what writers do directly out to the public is more and more important. So I'm going to get to data tasks specifically in a second but I want to first have you talk a little bit about online videos. I think for some people, we're at a weird moment right now where for some people online video is something they're engaging with every day and for some people it is something they are only peripherally aware of. So you all have three different interesting perspectives about this. I want to explain how you see online video as a relationship with other more traditional video distribution platforms and where it kind of fits in that equation. Do you mean like television and film? Yeah. I mean for me personally, I've always taken online video as just an extension of additional form of the entertainment can take. It's kind of, you know, it's changed a lot since, you know, it first started with people putting like their personal videos on YouTube into a storytelling and like a legitimate storytelling device. Online video tends to, just from an entertainment perspective is usually more person based although scripted does also exist. A lot of times they coincide such as my show which is done in vlog format but is scripted. It tends to be a little bit shorter but that again, that's changing. I mean as the technology gets better, it'll continually evolve. So yeah, I guess that's my short answer. Again at Voxie, we look at online videos of a means to watch kind of what you want, when you want, where you want. So outside of obviously the traditional theater you can now access through the web everything on multiple screens. So the three screen strategy of the ten foot UI on your television, the two foot UI on your tablet, or I guess the three foot UI on your laptop. And so, you know, when you are receiving all of that content over IP obviously the amount of bandwidth you consume will be increased. And so we are seeing more and more programming take advantage of that, of companion viewing where there is broadcast television with a companion application that also has parallel video content going on. And so people like ourselves who are focused on kind of unifying that user interface and enabling people to kind of pivot between the Netflix application and their vision, its key test that they have access to as much data as possible. You know, it won't surprise any of you because you're the viewing public as I am, that unless you're Quentin Tarantino or maybe Ben Affleck it's very difficult to get something new made, something different. And so online to our members is in a couple of ways both the future and vitally important to protect. For example, we have a member named Dennis Leone, he's Hispanic, really frustrated at the way he saw Hispanics portrayed on television. He would go and do pitches to the networks, and because he didn't want to tell a story in the way that the networks believe Hispanics live he couldn't sell anything. So he created a web series called Los Americans. So if you haven't seen it, there are eight episodes. And it's, you know, 17, 20 minutes an episode, really good. The good production value is well done. And quickly it built up a good audience and he was approached by Winivision and by PBS about perhaps serializing it and bringing it to television. That never would have happened. He would never have built that audience. Those people would never have known who he was from a different perspective without that online ability to go directly to viewers. So, you know, for writers being able to make sure that that's there and the future of that, especially, you know, the other thing that we cover obviously screenwriters and television writers, but the newest group that we've organized are video game writers and a lot of people don't think about how video games are written. Those are all storylines. And more and more, for those young people who are playing huge games that take huge amounts of data, they often story it in the cloud and bringing it down, making sure that those caps don't mean that on the 23rd of, you know, the 26th of February, you're in the middle of a game and suddenly you hit a data cap, super important. Yeah, I wanted to ask that audience question first, but Jenny, I mean, you had a story from just last night about, you know, the mass hysteria around data caps. We were finishing that side of it, but very quickly, what happened to you last night? So, I got in pretty late last night and I was trying to check in and there was a crowd of people just hovered around the check-in desk and I was like, what's going on? And they were all like, you said it was complimentary. You're like, why isn't it working? They had shut off our Wi-Fi in the hotel because as the company said too many people were streaming video. So, they just called the hotel and said, hey, you hit your data cap, you're done. And so, this poor guy was trying to tell these, this crowd of people, like, explain to them what was going on and they just didn't understand because to them, they're like, well, you said it was complimentary. Therefore, we should have access to it. And so, building off that, I want to, each of you, you all have interesting different perspectives on this, but when you talk about kind of finding video online, you know, if I want to, someone tells me that a new TV show, I sort of check it out and I do whatever I do. I mean, what is the kind of discovery and experimentation process for people finding, I mean, in some cases, not only a new show, but a new way to watch a show or a new way to interact with shows that have been watching for some time. What is that kind of acquisition process? How do people build up the habit of online video? You know, I actually think taking the incredibly scientific demographic of my Facebook friends, I think House of Cards on Netflix is going to be a total game changer. It is unbelievable to me how many of my friends are binge viewing and not eating for 13 hours in a row and not leaving the couch and bed sores on the medical problem. Now, we need Obamacare to take care of this. How many people are watching that? And how many of my friends, when they've seen me talk about or other friends talk about, they're like, oh, I can't work with this on DVD. And so it's this new way of doing things that people are going to experiment with. I think it's an introduction. And I think as people look at the subject we're talking about, data caps, when they and other, you know, when Amazon starts streaming, when other groups start doing independent production, that's really good. And, you know, I have to say, self-disclosure, House of Cards is covered, and it's one of, you know, they signed our basic, then my basic agreement, so it's a writer's guild member who's writing it. That is so good for writers, but I think also for the public and the way in which, you know, my 81-year-old mother loved the British version, I think because she's retired, she'd watched everything Netflix had on streaming, so she went back to DVD. Now she's going to go back to streaming because she really wants to see this in her password so that she can watch it at home. So, you know, I think that we're on the verge of a big explosion of people figuring it out. And the other thing I have to say is my friends who are half my age, they don't want to watch things, even on DVR when they're sort of told to, you know, if it's 2 a.m. and they want to stream it, that's when they want to watch it. And I think that that user-friendliness is going to have a huge impact. I think at Boxy we focused on bringing the DVR into the cloud to move away from those limits, both in storage capacity. We would offer an unlimited DVR, but also the ability to access that. Since it's in the cloud, you can stream kind of wherever you are. So any signal that's coming to your home, you can access that in and outside of the home, which, you know, before joining Boxy, I was at Netflix and we saw kind of consumption patterns around this binge where people would pivot from the living room to the bathroom to the bus. And I think that that's a trend that's going to continue to grow as content becomes available. It's just a question of kind of accessibility and clearly data caps is part of that. Yeah, I think with online video, a lot of it is about the way that people consume it in the fact that a lot of web series do have that regular release pattern where they have a schedule. Like, for instance, Lizzie Bennett Diaries, we have content that comes out Tuesdays or Mondays and Thursdays. So our hardcore fans who are watching it on a weekly basis, they do have that traditional experience of, oh my gosh, it's coming out at 9 a.m., let's all be there. But also, there are other groups that, you know, they wait till a certain amount of content is out and then they can go consume it in one full chunk as opposed to, you know, with some television shows, ones that aren't available on Netflix or Hulu. You're kind of beholden to when the show comes out. Like, you know, it's an event. You have to make sure you're there. Everyone needs to be there at the same time. Online videos kind of opening that up. So, you know, you could have a House of Cards watching party on a Saturday night at 3 a.m. if you wanted to. Like, there's no reason not to. So I think that's really, online videos open up the way we consume media. I mean, let's take Lizzie Bennett specifically. Who are these people? I mean, who is watching this show? How many of them are there? You're smiling. Who is your audience? And then when you project forward, when you're producing a lot of online shows right now, when you project forward, what does that audience look like? How big is that audience in two years or in five years? Sure. Lizzie Bennett Diaries, another great thing about online video and especially for us, we release solely on YouTube. We have access to YouTube analytics, which literally tell us exactly who is watching, when they're watching, when they stop watching. We are 90% female. And it's 90% 18 to, we say 18 to like 25, but it skews younger. It's like young women. Technically, we don't have analytics on that because you're not supposed to be on YouTube if you're under a certain age, but they are anyway. So, you know, we built this content for fans of crime prejudice and that predominantly is women and we knew that. So our advertising skews that way, all of that. I know other shows that have the exact opposite. Like I used to work for Philip DeFranco who's a very prolific online creator and his audience is the exact opposite and his is 90% male. So that's another great thing about online video and the things we're creating is if you're using the tools that the online platform gives you, you can know exactly who your audience is. You can start to create for them when you go to a video. There's a viewer count that tells you exactly how many people watched it. I mean, that's an entire other discussion because what is a view? What did those numbers look like? How many people watching average episodes? We're averaging 150 to 200,000 per episode and that's two episodes per week. I think last I saw we're up to about 12 million views. Episode 100 of our show came out yesterday and it was my birthday, so that was nice. And we are WGA, so... So this is not an insignificant number of people, right? It is niche. Maybe it's niche compared to cable television, but it is. Yeah, I mean, we pretty early on started having people knocking on our door saying, oh, hey, you're irrelevant. And we're like, well, we hope so, but I'm glad you agree. And John, I mean, you were talking about how you have members who kind of wanted to tell a story, couldn't find a way to do it, and then did it online, and then kind of got picked up in a traditional distribution channel. When your members are thinking about this, are they seeing it as an end or as a weigh-in or some hybrid of the two? Is that sort of evolving right now? I think it's evolving. For writers it's very much an ACN technology, and it's just very recently that it's been able to be monetized that either people will pay something to watch, some small amount to watch what you're doing, or that we know that the networks are starting to look at what people are watching and seeing something gets a lot of hits. They start paying attention and talking to the writer, and not maybe even about that show, but about maybe, oh, we like the way you do things there might be other opportunities for you here. I know this conversation is not about piracy, but there is, within the guild, a minority, but people who are worried about net neutrality and what that means for piracy, and more and more, I would say are more educated members, are pushing back and saying, this is really a way to fight piracy. If you use the internet to deliver things to people, say they don't want to go to a film at 6, 8, or 10 on the Friday night, they want to watch it at 2 a.m., and you figure out a way to wirelessly or wire line to deliver to them in their home and say, charge $5 for something that's not crap held on a handheld camera in a theater in Kazakhstan, you're probably going to get people that way, and that's going to bring down piracy because there's no reason to then pirate. We had this internal conversation about those issues because, of course, our members get money from residuals when things are shown legally, so that's really important to us, but I think more and more, I've had members say to me recently, we've lost financial syndication, we've lost a lot of independent production, DVDs are going the way of the dinosaur, we cannot be here in 20 years looking back and having members saying, why did you fight for the internet? Why did you let people close it down? I mean, that's one reason I flew out here for this, it's because we see data caps as the camel under the tent, the camel's nose under a tent to a certain extent, and we think there are better ways to control things. Why did you decide that when you wanted to structure your DVR, you could have gone the more special route, you did go the more special route at one point, why did you decide that the cloud infrastructure was the way you wanted to do this? So again, the beauty of DVR is you can watch what you want when you want and having to battle in a household amongst family members over a limit on the anxiety and the teeth grinding that takes place for some of us that maybe watch too much television about who's reporting when and how many tuners does the device have and how many shows can actually record. By moving to the cloud, you have unlimited storage capabilities. We work with Amazon with the same services that Netflix uses. It's completely scalable and not only do you get unlimited recording but you now also have the ability to again watch kind of where you want as well. And so the cloud has that flexibility, the infrastructure has caught up and the streaming services, both subscription and VOD have kind of laid the groundwork and it's just the natural extension we think of the television viewing experience or the video viewing experience is to kind of give you that celestial jukebox, if you will, of what you want when you want and the cloud is a natural step in that direction. So we talked a little bit now about online video and kind of where it is, a little bit where it's going but I want to bring it back now to the subject of the essential subject to panel, which is data caps. And where, how can data caps impact the way people find online video and how they see it as a part of their viewing diet? What's the relationship there? I think there's two sides to look at it. There's the viewing public, like how it affects them and then the creators themselves because it does affect the creators themselves. I'll start with that. I mean, in order to do what these online creators do, who are often uploading large amounts of data every day because their audiences want that content, if they hit a data cap, it's not just affecting their livelihood in the fact that they're not getting their content out there which they can then monetize and, you know, it's their livelihood, but it affects their entire audience who wants to see this content. So it's a huge issue on the creator side because it's essentially keeping them from being able to do their job. Some of these people, this is their full-time job, this is what they do. And then from the viewing side, hitting data caps means, again, you assume that materially you would like to when you want to. And in terms of discovery, like once you can't be online at all, no discovery is happening whatsoever. So it's a complete block of that ability. Right. I think, I mean, from our perspective, data caps limit innovation in the ecosystem that is changing very quickly. And from our perspective, all participants, content creators and writers, the production companies, those that own those rights and sell that content and those that deliver that content as well as the advertisers that help fund that can all benefit from an increase in data consumption and video consumption. And I think, you know, it's, frankly, un-American to find a good that has to be limited and put limitations on a particular good. If you look at data as being a particular good, you know, in a capitalist society, we should be able to offer that and make that available for consumers. And the rate in which they pay, the free market will dictate, but to kind of put these caps in place will limit the innovation that will grow the entire ecosystem. What they said. You know, for us, it's, and I like the way you said that, it just seems like we get a mindset about managing for scarcity rather than abundance. And so, you know, we already know for wireless that, you know, we're, we have to pay more where we're looking. I have friends who look at all their limits and they're like, oh, I can't stream that movie in HD. I can't do whatever because they, they worry about that. And for us, you know, for writers to have that ability to, to get their content out to the public and not having people second guess, especially if there are discriminatory caps where, you know, you know, say for example, people aren't doing Netflix because they, if they watch something over their Xbox, it's not getting kind of against their cap. That, that hurts innovation. It hurts, it certainly hurts creators who want to get as much out to the public as they can in as many ways. I really think, you know, a lot of these companies have monopolies already. They were given this, these areas, and so people don't have choice. And so you have a cable company that you basically have to have, and then they say, well, it's great that you want to stream 20 hours of, of HD content a month, but that's going to hit a cap. Or you're on a college campus and you have five or six people who are roommates in a house. And how quickly, if they're all looking at things on their own devices, do they run against these caps? It's definitely going to, creation is going to suffer, and for writers, having already bumped up against studios who tell them exactly what to make and how they're going to make it to have that creativity taken away and even further limited by how much people can watch. It's, you know, as you said, I think it's anti-American. It's anti-capitalist. You know, we should be managing for, for a lot. I want to touch on a little bit what you said about that, sort of that relationship. And I wonder if this is something that we talked earlier about kind of the relationship between online video and other distribution methods. When you're thinking about, this is probably Jenny Ryan a little bit more in your area, but when you're thinking about people's other options and the fact that in some ways you are competing against Cable or someone like Cable or other out, traditional outlets and those are also the companies that you in some ways rely on because your viewers need to use that high speed internet connection. Is there, is there thinking about the kind of the weird relationship you can have with a Cable company who's also an ISP that may also have data caps or is that something that people are still kind of working their way through or, you know, Ryan, in some ways you are competing with video on demand and other traditional DVRs that people who you're competing with are also the people that your customers are relying on to access your service. Is that a discussion that's happening yet or is that a, sort of, a little bit too abstract? No, no, so it's definitely a discussion that's happening that it's not, within we're embracing all participants. Sure. Actually, in NSO that has ISP services that's the perfect partner for us. You know, we think data, margins on data are far better than licensing content. But we don't view ourselves as competing really with anyone we're trying to facilitate and innovate and kind of listen to what consumers want and keep up with the demand and just make it easier for them. From our perspective someone that can sell data subscription services and broadband can make a very, very, very rich profit on someone who's consuming data through all my data and advertisers as well. So, yeah, we don't view it as there being any sort of real conflict there. No, no, no, no. The one other thing that I wanted to ask specifically with your service, I think that a lot of times when we talk about the way networks operate one of the things that when the arguments are sometimes thought it out is that you, if you're a company, you should pay to access you're using the network infrastructure and so you should have to pay to do that. Jenny, for you, you're sort of, you're using, it was a distribution platform so those costs, they exist. They exist on the, the royalties in the ad cut that you get. But Ryan, I mean, is your cloud service free to you to run? No, it's not. It's worth mentioning. Yeah, there's, the streaming is expensive. Storage is less expensive but expensive. Innovating software is expensive as well. But there, I think through that innovation there are ways, it's different maybe than the way traditional media and broadcasters and advertisers have made money but there is a great deal more money available, even for old parts. It's just as a matter of kind of the infrastructure catching up and certainly the back end is there. You know, I don't want to, you know, based on the number of hours and data that Netflix is consuming, we're not seeing, you know, network fall over. I think there's plenty of dark fiber out there so the infrastructure argument, I think is moot. I think we're really where there's room for a lot of innovation is around both the windowing and availability of content to keep up with consumer demand and that's what we're trying to do with our DVR so, you know, free-to-air television, 89 of the top 100 shows are available free-to-air and many folks just aren't taking advantage of it and we're trying to show them that, hey, there's all this great content in HD that you can access and you know, you kind of have to pay for broadband obviously and if someone wants to pay a great deal for that, it'll be at the market. We'll dictate what the price will be but we look to legislators to help preserve that innovation and I just ensure that you know, the ecosystem can be fostered across the board and keep up with consumer demand. And then we're going to get some questions from the audience in a second but I wanted to sort of end this part. I'm just asking you when you project out when you think about what this world looks like in an idealized sense in a year or two years or even five years, what does the online video world look like? Assuming there are no restrictions and you can sort of do what you want and consumers react positively. What does the world look like? I mean, how different is it than it is right now? I think the concept of windowing will go away where you will not run into kind of availability issues. I think discovery, stuff like meta search, cross provider search where you're able to search for a particular rider across different providers whether that be available through free air television or on your DVR or through a VOD service or through a subscription service that will become much easier and much more fluid and again, I think viewership will just continue to rise. The concept of the long tail I think will exist and that will continue to grow as people go back and discover old full episodic stuff and binge consume. I just discovered the wire on my train ride. Yeah, right. So we'll show you an air cargo. Yeah. And jeopardize the relationship through it. But there's, yes, I think that international boundaries I think we'll start to, as demand for more content increases, content providers and the license holders will I think be more motivated to transcend those borders. And again, I think the concept of windowing will start to erode as consumers have the ability to pivot and jump between availability. The DSLR completely changed what creators can do. They can shoot high quality HD video without having to spend a lot of money for it. And I think, as the technology continues to get better we're going to see more and more of that. Creators will be able to create more content, more high quality content. I think I agree with you House of Cards is going to be a huge game changer. More long form high premium content is kind of the buzz word right now. I think it's going to continue to grow as these online video, the more traditional media companies are investing more in the space, more advertising money is coming in and it's just making it so these creators can create more, just more content, better content to match the high viewership that is going to continue to happen. I should also add, I think that tune in events will also become actually more popular. Because there is a type of viewing where you want to do as a group, sporting events, presidential debates. Those events will I think obviously continue and actually they focus on them because they will become community experiences that the entire family does as opposed to this child is watching this series and dad is watching this and mom has these shows that she tunes into but the actual live events that's not going away and I think that the focus and values of those will only increase because they will truly become differentiated from the episodic content that will be less tuned in. Mainly because I don't have a life on the presents today I watched 8 of the 10 episodes of Game of Thrones 2nd season and that came after watching probably half of House of Cards at home also. And not having to worry about caps is what I pay being able to do that and I think it's actually good business I am now because I'm caught up with Game of Thrones I'm going to pay for HBO starting next month when the third season starts because I was able to catch up in a way that I can no longer wait another year to see the third season. The other thing for content creators we have a member named Tom Shulman who won the Academy Award for a Dead Poet Society later stage in his career he is looking at the internet in ways that he can take what he does directly to the public and I think as you have established writers and other content creators who look for new ways to get what they do and again he is an Academy Award winning screenwriter to have that ability to go directly to the public with something maybe edgy or maybe not edgy but something that he can't get made any other way because someone is making battleship the movie I would hope in a couple of years that we protected net neutrality to a level that all of this product can go directly to the public not at a level where a network would have to have but at a level where a million Americans are watching or two million Americans if you there is an LA sort of industry called the rap and you can every morning if you subscribe they will send you the viewership for the night before and which network came in first and you will see some of the shows perhaps that you really like and they have got 6 million viewers and they are probably going to get canceled the lowest rated and you know 6 million Americans if you can do that because you protect the internet and something like the new normal or a show like that can maybe find an audience that way or arrested development that is going to be on Netflix I think that is good for the country absolutely so we are handing out cards if you have a question please put down a card and let us know and we will pick them up and I guess while people are writing you mentioned kind of this idea I apologize this feels like out of left field but this idea between kind of appointment, collective viewing and this sort of shattering of a collective viewing because you know a show goes on tomorrow but I am not going to watch it for 2 years when I discover it somewhere we are thinking about creating shows and about the world the culture that revolves around video today do you worry about that fracturing reaching a point where you lose kind of cultural coherence at all or do you see it as being each to their own but then it is all that much more important when we come together for whatever that big event viewing is how do you think about that at all I think that the books people read tend to be personal based on where they are at that stage of the day or their lives whereas watching a sporting event is something you do not kind of your private you do that as a group because cheering on for that is common and non-veterous key I think as ad models start to evolve and catch up with consumer major content creation is already on it's way and we are just kind of at the beginning where they will start to melt but I do not think we are going to lose our cultural identity I mean we are not on much in that society so to think that we all want to watch the same thing at 8 o'clock on Sunday is not I think very accurate I think it will just evolve something along with you know offbeat groups of people who come together around maybe it is not your friends my friends would be very pleased to say they do not share my sense of humor but maybe I find an online community I do not think it has to be shared across millions of people it could be shared across a few and still have value and sure we are going to address some of those issues but you know we are on the hill I did not point out that there is a really technical part of all of this too the house energy and commerce hearing that was held the other day which was called satellite video 101 illustrates this it touched on mechanisms for measuring markets calculating royalties distance versus local signals the economics of spot-beaming satellite signals and so on if you multiply these technical issues by 10 for cable, for retransmission consent and so on you get an idea of what it is like to dive deep into how the government has shaped the video marketplace the fact is that the television and video marketplace is highly regulated not always in ways that benefits consumers and the future video could depend on exactly how those regulations are shaped a lot of the rules that are in place today are designed to protect one part of the industry against another different parts of the industry often fight with each other but they often seem to coexist in the sense system which gives control over NBGD use of broadcast signals it puts it in the hands of local broadcasters instead of the actual content creators and as a result, even though most people watch broadcast signals over cable we still have broadcasters transmitting over the air and on top of that you have the plethora of internet and copyright related issues that come up when you start looking at video and a lot of those are being dealt with other panels today so let me get to my panelist real quick so today we have two industry representatives Alison Minia from Dish Networks and Rachel Welch from Time Warner Cable and we have Adam Pierre from the Mercatus Center so here's a funny thing about Adam he wrote a blog post recently titled my next seven law review articles on the tech liberation front blog so that should give you an idea about how prolific he is in writing about these tech policy issues so let's start with some questions for everyone first of all with Stella up for reauthorization now that is what the other hearing the other day was about which is the law which expires soon which allows the satellite video to essentially continue operating so Alison I was wondering if you could just give me a little bit of background on that and then I'm going to go down the panel and ask the panelist if they think that since video issues are going to have to be addressed by Congress one way or the other and Dish and Direct TV are going to continue operating what are the odds that it's just going to be a really simple reauthorization of that law or whether there's a chance for more substantial reform so Alison sure well thanks very much John and thank you to Public Knowledge for hosting this event this is a really exciting time in the video business and I definitely appreciate the chance to have a conversation about it so Stella expires at the end of next year and the satellite reauthorization is the only must pass legislation telecom legislation for this session so it's a tremendous opportunity to take a fresh look at some of these issues that affect satellite carriers cable providers broadcasters and most important consumers Stella is important what you know one thing I will say is that as a result of the last round of legislation the copyright license that allows Dish and Direct TV to offer local broadcast stations back into their local markets does not sunset and that's an important point but one of the things that does need to be reauthorized is the distance signal licensing it should be the front center in this discussion Ian let's step back a second why is it that there needs to be a special law to allow satellite or there's a similar provision for cable to carry broadcast signals I mean if your Dish wants to carry ESPN for MTV you just sort of go to the rights holder and you sign a contract and you carry it and then it's taken care of so what is the deal with this cumbersome having to have a law periodically passed in order to allow you to continue to carry broadcast stations why are broadcast stations treated so differently than other kinds of content well I think you know there's a lot of again Tep John thank you very much for having the panel I'm happy to be here this morning to talk about what are really issues and have a long history so if you go back into the 50's 60's 70's even that's really where at least the cable regulatory regime grew up and the copyright issues have always long been intertwined with the communications act issues so you know going back to the Fort Knightley case the teleconter case and you know I think it was 68 and 74 you have these situations where the rights owners were always having concerns about whether or not the cable companies needed a license or not whether what they did was a performance under the copyright law the Supreme Court decided twice that it wasn't a performance and that the cable companies did not need to get a specific license or provide payment to the rights owners for rebroadcasting the broadcast stations what they really saw it as from a technology point of view was extended rabbit years so essentially cable took from over the air in local markets and sometimes from distant markets broadcast stations and they put wires not very pretty across hills and landscapes to people and provided them clear broadcast signals where otherwise they couldn't receive them or got really crummy you know white noise signals and so that was where this all started and then after those two decisions and during the same period all these decisions were being decided the FCC was also getting involved in this so again you had the introduction of both copyright law and communications law even back 30 and 40 years ago once those decisions were finished then the congress intervened and said you know what we're going to take a look at the 1909 Copyright Act and we're going to update it I think a lot of us complained about 20 year old laws if you look back some 60 or 70 year old laws so in 1976 they put in place a copyright act that was a very delicate balance between the rights owners and the cable companies and other players in the market that said you know look broadcast stations put a lot of things into their signal they could make it very difficult for cable systems to carry those signals by not clearing the rights and that they would be subject to liability for songs or jingles or different things that were carried into the signal so the mechanism that they came up with back in 1976 was a compulsory copyright license so for cable we have both the local signal license and the distant signal license in a single place in section 111 on title 17 and RSA permanent and you know over the years that Stella's been reauthorized the copyright office has been asked numerous times how should we phase this out how should we change it and if you look at the section 302 comments from the last round the stellar reauthorization it's a very difficult question you know yes we have seen that cable channels have grown up and cable companies and satellite companies and over builders and telecommunications providers now negotiate in a market environment where the local programmer clears all of the rights and then demnifies the distributor for the carriage of those signals for broadcasters whether it's history whether it's for some small broadcasters in smaller markets they're less sophisticated and need more help I think there's lots of questions for why there should be this difference but a lot of it comes out of the history of how the copyright license was created for broadcast and the cable programmers they basically had to come up and had to be creative entrepreneurs to come up with a way to clear the copyright licenses for everything in their signal whereas the broadcasters from 76 on and before that because there was no copyright license didn't have to do it and then 76 on hadn't had to do it so if you think about the mom and pop broadcaster in the number 210 market what sort of costs would that impose on them if you put onto the broadcaster what sort of mechanism would you use would you use an ASCAP type of system would the responsibility be on the broadcaster, would it be on the distributor like a cable operator or a DVF provider those are all the complex questions so I think time and time again what we do is we come to the salary authorization and people say let's take a really hard look at these copyright issues and then they realize they start peeling back the onion about just how complex and difficult these are and there's so many players on the different sides of the issue that it's very hard to come to a solution but essentially that's the history of how we got to where we are today it's certainly not perfect, I think if any of us were to start with a blank sheet of paper today we would come up with a very different system both on the copyright side and on the communication side but this is where you end up when there's a history behind it I think from Cable's perspective what we'd like to see with this salary authorization is for a continued dialogue we've had these each of the times that we've had the reauthorization but we think there is a need for a careful look at what this regime should look like both on the copyright side and on the communication side with now at least three players in every market for video distribution plus overbuilders and now with over the top online video providers coming in what should the regulatory regime look like if over the top providers want access to content and need a compulsory copyright license what else should happen on the communications side of it are there communications act rules regulatory underbrush that are no longer working if you did a fan diagram of what's going on in terms of what applies to dish, what applies to Cable what applies to over the top online video providers it's a very different regulatory regime is there a need to regulate up a little bit some places regulate down other places and so I think what we'd like to see is a fulsome dialogue where people really dig into the details about this because is this the right regime for the 21st century I'm not sure that there's anybody today that would say that we've come up with the perfect solution here and maybe it's time for some tweets yeah so basically in the 1970s the DC consensus started to be ok we decided that cable systems need to have a copyright license in order to broadcast content but look it turns out that broadcasters actually are just broadcasting network content, syndicated content stuff that they don't even really have the right to license further on to cable systems while as the cable world HBO always evolved in a world where they had to acquire all of those rights from the beginning so we came up with this scheme where you have to get the permission of the broadcaster not the copyright permission but just permission to retransmit their signal while at the same time you pay a fee to cover you on the copyright side and presumably content owners can get some of their money back from the stations it's 40 years later though and maybe if we picked differently in the 70s by now broadcasters would be able to sub-license that content but we sort of put it off for 40 years because we came up with this system so I want to ask Adam is this did we make the right policy choice in the 70s to set up this system as it exists today and what would you have done where you were in charge to solve this cable congregation I think I've agreed with everything you said so far so first of all thank you and public knowledge for inviting me here today and first what this panel proves to me is what I've known since my high school days which women are scarier than me I don't want to be too close so I can live with that anyway I think you asked the right questions to frame this as start time you asked why do we need special laws to govern these issues and then secondly is broad based reform possible and now you've asked a question like going back to the ancient history of this and you know it's crazy I mean the way this is unfolded is that one misguided intervention is big out another and another and another and now we're stuck with the regime that nobody quite understands that we're all terrified it's going to apply to new technologies and services and you know this debate you know in a sense you have to ask yourself do you really believe in free market contracts do you really believe in traditional copyright do you believe also in antitrust because to the extent this debate is about people cutting deals this happens every day in a marketplace we have contracts for all sorts of other services including in the video marketplace to the extent this is about copyright traditional copyright should be able to handle all of these issues in other contexts sure there are going to be enforcement issues but why do we need a special regime for certain types of content the answer is we don't and then thirdly they said this is about market power local market power whatever we have antitrust laws to cover these things so there are other remedies we didn't need to create a convoluted regulatory regime and all of these things whether it's must carry and retrans and compulsory licensing and syndicated exclusivity and all of these things we have an online ecosystem and apply to all the new technologies in town and really potentially hurt them so what I'm optimistic about however is the fact that we have what economists and political scientists would call a perfect natural experiment going on in this marketplace natural experiment basically says well the hell with what labs study say or what abstract theory says what's going on in the real world for example we have a wonderful natural experiment between capitalism, socialism and North Korea and South Korea what's the natural experiment that's happening in this marketplace well it's the fact that we don't have this regime covering a lot of these new services and the fact of the matter is that deals get cut every minute of the day that doesn't mean it's perfect there are some blackouts there are some problems with contractual negotiations Dishon AMC had a little spat that lasted about three months last summer and it got quite heated but you know what that's cutthroat capitalism they eventually sealed the deal and got it in the content kept flowing the reality is is that we can work these fields out that a huge market for rights aggregations developed subsequent to the 76 act we didn't think things like HBO and discovery and history and things like this would exist back then but they now do and they aggregate these rights and they sell them and these markets work fairly well so my hope is why I'm a little bit optimistic here even though reform in the hill is going to be tough is that more and more stuff is getting pushed into that box that's the way the world is working today we just have to hope that it doesn't get encumbered with the old rules applied to the old analog way well it's time to act though how do you transition from the world we have now and also the world we have in the 70's where there was no requirement for cable systems to have copyright permission so there was no one to go to really the way there might be for a cable channel so how do you transition from the current system or what we had in the 70's to the system that you would see as being ideal and the further question is is it really worth it I don't have anyone from content up here unfortunately but they often complain about the compulsory license saying that they don't get the full value of their content and they think that they would do better in the free market but they still cut deals with the stations which then grant retransmission consent so why can't they just get the full value of their content from someone else I mean I'm saying it's a dumb system it's convoluted it's not what anyone would design it's not changing and is it even changeable without having years of disruption which would really not be beneficial well of course it's going to be years of disruption but really quick answer this you're making a great point John which is that right now in the content community cuts a lot of deals with a lot of other players we just have this special set of rules mostly for broadcast related content but the reality is that we know that those deals can be cut and they are every day in the marketplace I'm astonished by the fact that a lot of those in the content community essentially abandon this opportunity to get rid of something they've always regarded as sort of one of the original sins of this regulatory regime which was compulsory licensing but to answer your question the way you deal with this is you say we remedy the problem that was in Fort Nightly we basically say you do have to negotiate a right transaction with the content holders if you're a distributor and then we let that go from there we let them strike contracts but you don't need to have all of these other layers of rules to cover that process so if you just get the copyright part of right and you have contracts to do that I don't see what the problem is I think then you just have something like the Minsk lease you reform the rules, you get rid of them over a five-year transition and you're done I was going to say to be realistic it is pretty complicated to figure out exactly how you do it given all the interests but I think it is worth having the discussion about how you would address the changes and I think from our perspective the most important piece of this is that you don't do it in a vacuum so if you look just at the elimination of the copyright license but you retain the retransmission consent regime on the other side of the equation so if you eliminate section 111 119, 122 and you say look broadcasters figure it out clear these rights that fall onto the distributor side we have to make sure the rights are clear broadcasters have to make sure it is clear it can be some third party so there are some mechanism questions about how you actually would execute it but if you do all that in the vacuum of title 17 without looking at the communications act issues you haven't solved the problem so if you're really looking to enable to take out the middle man a little bit and allow the parties to have the rights to negotiate you have to also look at syndicated exclusivity sports blackout retransmission consent and it gets complicated quite frankly so if you look at the Stella re-authorization in the past you have both the Judiciary Committee and the Commerce Committee trying to work this out so what we are hopeful for is to have this dialogue I think we're getting to a point where some of these systems are breaking down on the programming side, the cable programming side we do see generally that the market transactions are working on the retransmission consent side where it is with the broadcasters what we are seeing is increasing disruptions so there are lots of people who are saying wow the compulsory copyright license is terrific it works really well I think there's a question mark there is it working in conjunction with retransmission consent because what we're seeing is more disruption for consumers less kind of continuous provision of the broadcast signal which was deemed so important by Congress so asking these questions and then trying to figure out how do you navigate through the juggernaut of a Judiciary Committee jurisdiction and a Commerce Committee jurisdiction and all of the parties that would be interested in doing this can you do it in a two year period unclear but certainly I think we're at a point in time where these hard questions need to be asked we need to be looking towards how we reframe the regulatory regime going forward I agree with everything that Rachel said and what I would add to that is if you take away the compulsory copyright license what's left is not a free market that's not the result when you delete that one aspect of it because the retransmission, the must carry slash retransmission consent that has been established ultimately doesn't work for the marketplace today if 20 years ago there was one broadcaster and one pay TV distributor in the market the situation was more like mutually assured destruction the broadcaster only had one option for a pay TV distributor to carry them and a pay TV distributor only had one option for NBC content in that market today it's different today there are in general three pay TV distributors in each market there's District TV there's a cable operator like Fios or Uverse so the broadcaster asked for a several hundred percent increase in the rates and Dish doesn't want to pay those rates because we want to try to keep our service affordable that broadcaster has three, four, maybe more alternatives to get their signal out and then ultimately consumers are left in a bind because if they lose the station on Dish they can switch to somebody else but they encurl the station costs and they lose some of the things that Dish offers like the offer that they really like so I definitely think that if we're going to re-examine the copyright license we definitely have to look at all the things that come with it to make sure that what we end up with is what we hope for yeah so I think you've raised, both of you have raised the interesting point that it's very hard to change just one aspect of the current regime without looking at the other for example yes I would totally agree it would be very difficult to get a temporary license without also looking at re-transmission consent because now all of a sudden you have an MVPD that has to get permission from two sets of people that are to broadcast content and that seems to be not ideal but we keep running into this problem where you have these temporary authorizations that allow satellite to exist and you kind of need to address that because I don't think anyone really wants Dish or Direct TV to have to stop operating but at the same time everyone seems to recognize that you need to have a temporary license and that it's really hard so how do you square that? How do you take care of the short-term problem just to prevent temporary pointless disruption while also setting the stage to where the entire system can be looked at again so look this was the unique genius of the UNICEF approach which I'm assuming those people are familiar with the fact that there was a bill induced by then Senator Biment and Representative Scalise last year that basically tried to deal with this problem look it's a game theory problem, you've got a lot of different players a lot of different interests, what you have to do is ask everybody to get a little to get a little and that means there's going to be some sacrifices but there's also going to be some games so yes, compulsory licensing would go and that would help content owners in the long run but on the other side they would have to give up things like retrainance and muscarity and syndicated exclusivity and some other issues that's the kind of reform that ultimately breaks this log jam and it doesn't mean it's easy I mean the reality is I'm not naive I mean piecemeal reform is always going to usually trump things like this but if you wanted to get it done in theory we have the model that's it, Biment Scalise whether it has prospects of successful passage it's another map without an executive order without Biment that might be a bit of a jam I'm going to step back a little bit because I think that some of the rules that we see to my mind at least are designed to protect one part of the industry against another and you could just like go through the entire thing this is designed to protect content creators against cable this is designed to protect broadcasters against content this is designed to prevent MVPs against each other and so forth but you know I want to mention the broadcaster bit a little bit because I think it's really not a coincidence that the broadcasters maintain such a key role in the 1970s and today in the roles and they seem to benefit a lot from things like syndicated exclusivity and sports blackout rules or just go down the list and so who benefits most from the current system like if you want to have the theory that the FCC and Congress is captured who is it captured by and for what purpose or is it just like this elaborate machine that sets different parts of the industry against each other where they're almost at a stalemate or is there someone who gains more than everyone else that comes on both sides of the scale everybody's interested in the result I mean the reality is that what's happened is that we've had Congress and the FCC trying to rejigger the balance of the scale after one intervention after an accident this has been happening not just going back to retransition not just back to compulsory licensing it goes all the way back to the primal intervention of spectrum nationalization and there you started a public interest regime that said we the FCC will make a lot of decisions about marketplace transactions in fact I'll disagree with some of my friends of public knowledge about whether or not we should be eliminating the nationalization of the spectrum and moving to property rights so let's understand that once we've got the ball rolling that's the better we're not laying but again, how do we get out of it how do we get out of this problem I think it requires a comprehensive type of reform that basically says that the FCC will not have this on the other side of the scales that will move all of this into a free market contractual regime but one that essentially both honors copyright trust is there as a backstop and we treat communications in media markets the same as we do any other markets in a free market capitalist economy but that's not an answer anybody wants to get to well and maybe I could just take a slightly different approach on this too I mean, you know, I believe in government and so I think that government generally starts from a premise of trying to do what's right and to do something that would be good for consumers and so in 1992 what they saw was vertical integration between a cable distributor and a programmer and they said look, this looks like it could be a real problem in the interest that they wanted to protect is local broadcasting and they said local broadcasters use Spectrum they get it for free we're going to treat them in a special manner because of that we're going to impose certain obligations on them for public interest obligations localism, competition, diversity because we think that this is really important to the democracy of the United States of America so now what you've seen over the last 20 years is a huge shift, there are big questions I think that need to be asked about whether the broadcasters are fulfilling those public interest obligations, are they different, are they special, if you ask someone who's under 25 years old, do they recognize that a broadcast channel is any different than a cable channel you know, that's a question that needs to be asked and answered and what has the shift occurred because as Adam said, when you intervene in a market you put your thumb on the scale so what are we seeing today, what we're seeing are very large media conglomerates with stables of channels 30, 40, and 50 deep and then they require the carriage of all of their signals on any distributor so if you want to get their most favored program, their most popular programming, you have to carry the rest of it so if there was a question about a concern about cable vertical integration in 1992, which was pretty significant in terms of its number there has to be a question about what has it caused, what has been the outcome as a result of what the government did in putting its finger on the scale and should there be another intervention and what is the intervention, is the intervention more regulation or is it less regulation and I think those are the questions that are in front of us in terms of how do we address and move forward into the 21st century, the future of video which is the question for the panel so those are the types of things that they should embrace those special requirements as well and not look to be essentially on the market side, the commercial side just like a cable programmer but then have special benefits on the regulatory side. If they are going to be special then maybe they, you know and if they serve a special purpose in terms of bringing news and information and serving the local community then maybe there's a different outcome but I don't think that we have the answer anymore about whether or not the evident truth back in 92 or earlier in the advent of broadcasting remains so today. Well you know I think localism is great I mean I suppose my question would be whether the current system actually promotes its purported goal of localism if you have a broadcaster who makes almost all this money by reselling national content that comes from a network that's syndicated and then because of the compulsory license retransystem is the exclusive local agent which is not local, which they did not produce I mean it seems like they don't really have an incentive to produce compelling local content while as if you suddenly change that system you know and you have broadcasters have to produce content that people want to watch locally and that is what they get their money from almost exclusively I think that might actually promote localism a little more. Moderator slash participant. Well I think I mean that is the question right so if you know where it really what's the money flow right? So if the networks are providing the most compelling programming to the broadcasters that's what the retransmission consent B is essentially going to. That wasn't the goal when Congress enacted it in 1992. The goal was for the signal not for the content and it was supposed to go back to the local station. What we're seeing now is 50% or more of the revenue flowing back up to the network so there's been you know and you know or some sort of what was the purpose of creating the fee and retransmission consent was to prop up localism and make sure the local channels did well and the question is if we're seeing the money flow upstream to the networks and none of the money being reinvested in local programming there's a real question about whether it's still a workable viable system that's getting to the outcome that they were hopeful for. Just a brief point on the localism point that you know to the extent the policy makers be they in Congress or the SEC continue to produce localism or overarching value in this debate that continues to put a thumb on its scales in its own right. I mean why do we have things like network non-duplication rules? Why do we have syndicated exclusivity of these things? They're rooted in the belief that somehow that promotes localism. And localism has been you know the Rosendetra broadcasting for a long time but the reality is I'm just going to say this whether it routes from broadcast egos and policy makers goes a lot of public doesn't demand localism and we see that with markets that are natural and free that develop to the tastes and demands of consumers things that aren't exactly local in character. Now the reality is is maybe we still want some local programming I think we'll still get it but the reality is we should make everything subservient to it or else you get rules exactly like the ones we're trying to break. Yeah that's maybe a broader point I think this my observation would be to question whether we're actually even promoting localism like the rules may have been intended to but they have the consequence of simply enabling you know local businessmen to get rich national content. I'm going to go a little broader now and ask Alice in this question first because Dish you know with the automatic commercial skipping hopper has been something of a disruptive force in the traditional MVPD space. So my question is why is video taking so long to be disrupted in a way that we've seen with other areas of media. You know we have conferences and panels all the time about the future of books and music and journalism but you know we see that those industries are just transforming before our eyes and it's happening well as with cable and with satellite you have analysts who question whether cord cutting is even happening or if it's happening whether it's real or whether it will really make a difference so it seems that the MVPD model which is cable and satellite and Verizon FiOS TV is very sort of robust it seems to be a little bit more susceptible it seems to be a little more permanent almost than other media industries and why is that and why hasn't it been disrupted yet in the way that we've seen elsewhere. Yeah that's a really good question I guess our observation has been that there are very powerful constituencies who have a vested interest in keeping the structure of the way that it is. You know content providers who can negotiate to have their channels put in the lowest tier or the most widely distributed tier on dish, get paid on a per subscriber basis. That's a really steady, wonderful revenue stream so the large media companies have an interest in controlling how their content is distributed and I think as long as these constituencies have the market power that they do that's going to affect the ability for the video market to reinvent itself I mean just one example is dish created this consumer electronics device, the Hopper and tried to give consumers more choice in terms of which commercials they wanted to watch and it has of course the auto hop feature and we've been sued by all four networks and they're fighting very very hard to force dish to take this product away and when you look at that, to us that just seems sort of counterfeit up. Our chairman Charlie Organ has said we appreciate that advertising is important what we think advertising is changing and dish is more interested in thinking creatively about what we can do to help take advertising into the 21st century and think of new ways to distribute content in a way that's good for consumers and good for the industry so we try to innovate at least on the consumer electronics side but we've been thwarted so I guess what I would say is I think dish would hope that other participants in the industry would sort of join us in thinking about ways to disrupt the industry for the benefit of consumers but I think it's going to be very hard Yeah, now Rachel public knowledge, it's no secret we're not really big fans of data caps and we're very much in favor of then neutrality and it's part of our thesis that Time Warner Cable, you make your money off of data you also make your money off of video and we would question whether if disruption has to happen over the top over broadband connections yet those broadband connections are primarily controlled by people who also control video whether the incentives are there for the broadband providers to really invest and to adopt policies and billing plans and so on that really enable online video to thrive so can you just sort of address the tension that quite a few people see where maybe data caps are partly designed to prop up Cable revenue Sure, and maybe I'll just touch briefly too on the question to Allison Time Warner Cable has an intervene and say the area case or into the dish versus fox case but what we are seeing on the copyright side of everything is that there's a lot of confusion about how copyright really works which makes a lot of companies sit on their hands in terms of innovation so a lot of it goes to whether who's doing the performing or the copying and it results in kind of these crazy outcomes where you've got area including 9,000 antennas out or 10,000 antennas out in order to comply with what they thought was the law in the Cable Vision DVR remote DVR case so for I think from Time Warner Cable's perspective we don't really have a dog in any of these fights we're certainly watching them carefully but what we are seeing is certainty would be a real benefit for us in terms of being able to innovate because there's such a huge draconian harm if you cross the line the wrong way in terms of the types of enforcement mechanisms and trouble damages that you might face that I think that's part of the reason that you may not see innovation because you've got a lot of folks who are cautious you know, our publicly traded companies you have to be very careful when it comes to music or uncertainty about copyright laws so I mean in some ways we'd like to see the courts decide some of these cases and create certainty one way or the other and then there may be a role for Congress to step in if they think they went the courts went the wrong direction like they did with Fort Knightley and Teleprompter and maybe they got it wrong there but it certainly is congressional prerogative to step in and to make some changes with regard to the thesis of the court ban versus cable video you know, we just don't buy it I mean, we obviously as companies you know, the goal is to make money it's to serve your customers you know, if you look at Time Warner Cable for instance, we're the second largest cable company the fourth largest video provider we have 14 million subscribers compare that to, you know, your normal wireless company that has 80 million or 90 million subscribers really small we're very dedicated to our local markets we spend billions of dollars upgrading our facilities we want our customers to buy as much as possible so we want to have them buy our video product we want them to buy our broadband product we want to have the best broadband product in the market possible depending on consumer demand because we're real companies with real, you know, profits and real boards of directors we have to be responsive to them so if our consumers say we need a gigabyte in every home today and there's the application and in fact, the back side of the internet the Google servers actually enable that to go that fast we're going to respond to that we're going to respond to that consumer pressure because we're the ones in the same way with the video side part of the problem I think that happens with the video product is that it's only the distributor that has the relationship with the customer we're the ones that send the bill we're the ones that the customer calls when the signal goes dark or when the bills go up they never call the broadcaster they never call the cable programmer so there's no discipline in the market for the cable programmer to ask for less money or the broadcaster to ask for less money it's the same on the broadband side we send the bill to the customer we've got some customers who only ever smoke and watch CNN or read CNN articles or pictures of their grandchildren we've got other customers who are online all night gaming and they want faster and higher speeds so time where cable's approach to these types of things is really about consumer choice so I mean, I take your point but I think it is a little more nuance than that where you're saying as well because there's a glide path to change the cord cutters that are happening today are people who either they're really budget conscious or they're very tech savvy and young but there are lots of people who really like to have a beautiful high definition picture on their big screen and their living room and like the fact that cable aggregates it in a way that's very easy to page through and find your channel choice and I think in some ways cable's been denigrated in a way I think we're incredibly innovative systems that were like 400 megahertz to 950 megahertz systems that are fully digital and with no consumer disruption so there's been lots of good things that have happened and the transition from today's video marketplace whether you take a package of cable and we certainly think you should be able to take whatever you want whether you want to take it over the broadband pipe or whether you want to take it over the video Adam, do you want to touch on any of this? I have some questions here to all of them and then I have a final one of my questions I'm going to ask this I probably already have the answer to it but I will ask it as written if Time Warner Cable and Dish cannot buy ANC or Bravo from two or more suppliers why should they be allowed to buy network programming from multiple suppliers by eliminating network non-duplication so if you want to carry MTV you've got to go to Viacom so would this world where we get rid of a lot of the problems that local broadcasters have where we want to carry ABC content we can't get a good deal from the local station no, so let's go to Baltimore and it's like well it's the same content you normally have that, you normally have one content producer who controls the content you've got to deal with them so are you proposing this regime where you can bid multiple suppliers of the same exact content against each other or look, I mean this is something that there's many different layers to the contractional version of content, this is something that networks and stations and distributors all have to work out amongst themselves we've again seen this work out in another context what I was going to do, John, is challenge your assertion that there hasn't been a lot of disruption in this field I think there's been an incredible amount of disruption and you see, I mean I was reading Gigi's testimony, Gigi Stone's testimony on the way over when she talks about there's widespread agreement that we're currently living in the golden age of television and she cites Mad Men Breaking Bad, Game of Thrones, Modern Family, Daily Show, Cold Evercore think about that one of those six or seven things she mentions only one of them was on broadcast television that's a pretty big form of disruption itself number two, I watched four of those, every season of four of those on my Xbox 360 I mean 25 years ago when I told somebody I'm going to watch an entire season of television on a video game console they would have said what the hell is a video game console and they would have said how are you going to do that that's what we do today, huge disruption how do those contracts work people competing off of each other all the time for whether it's going to be on a video game console or on Hulu or on Netflix or on television we just announced we're going to make a time mark table available on Roku so you can, you know, get everything through Roku so I think that you're, take your point there's so much going on and it's really interesting stuff and that's why, you know, there needs to be a debate that you also be very careful about unintended consequences well, you know, and specifically to respond to this question I mean, there doesn't need to be a rule that you're talking exclusively you can just have private parties you can have ADC, the network, tell its local stations that they're not on the other it's beyond me why there needs to be an actual FCC rule just sort of strengthening what would probably already be privately contracted for in terms of disruption, I think I'm talking more about business models than the devices on which you watch content or cable which has been around for some time and actually I think this will be my final question for everyone because we're running out of time and we're going to get kicked out of here at 3 o'clock sharp so I've got it, I've got, I want to get to it so, you know, people have been talking about this or that tech company flavored the months potentially entering the video market you know, it was Apple for a while and now all of a sudden it's Intel now from the perspective of, you know, the economics of an established NDPD you know, not specifically about Intel but what challenges would such a tech company face if they wanted to you know, essentially duplicate NDPD service online well, it's definitely a big challenge and, you know, I think Dish tends to welcome disruption and welcome more competition when Comcast and NBC were going through their FCC merger process one of the questions we raised was, you know, at that time online video was sort of kind of an emerging service, more of a a maverick if you will and one of the concerns that we raised was you know, if you let Comcast and NBC consolidate all of this content under, you know, the largest paid TV distributor you know what does that mean for the next video entrance? Will they be able to get the content rights necessary to offer a really compelling substitute for cable or satellite TV service so, you know, I think that this is one of the times where I think the government can play an important role in trying to encourage and foster competition innovation to say, you know, if there's a big you know, media transaction what does that mean for the future of video? So, I think there are challenges you know, as the industry consolidates that could make it harder for an Apple or an Intel to enter the market and I do think that you know, we should be mindful the government should be mindful, the industry should be mindful about, you know, whether there are states of arts such as merger conditions that can help foster those markets Right, I mean, if you're an online video company, you have problems with access to content and problems with access to consumers, we disagree on the access to consumers part, that's name neutrality, that's data caps, but even putting that to the side you still have the access to content issues and those in some ways are probably more of a challenge for, you know, a tech company, so Rachel what are your thoughts on, you know, content issues for an online distributor? Well, I mean, I think it, you know, I think it is something called, it really comes down to money and what the cost is going to be and that's really not the distributor's world, right, so I mean, if you look at a dish or a time-runner cable or most of the market, I mean, the only really strongly vertically integrated company left, because everybody else has got the opposite direction as Comcast NBCU, there's some limited vertical integration, but not much, and it really goes to the content companies how do they want their content sold, they sit in the cappard seat with all of us, no matter to some degree how big we are so if the content companies don't think they're going to get enough from Intel or Apple or whoever, then they're not going to sell their content to them and it has little to do with whether or not dish has anything to say about it or time-runner cable has anything to say about it, so the question is you know, how do the programmers and the content holders want this market to evolve, where are they making the bulk of their money, you know, what is a Google or an Apple or a Netflix or what did you say, Intel, what are they willing to pay in order to kind of sustain the programmers business model? Let's try to finish this off in one minute, I would just say on that, you know, if you're a programmer, it's very hard for you to start selling online if Comcast tells you not to, whenever you're a biggest buyer and one of the distortions of the marketplace today is that Comcast can't tell an independent programmer, don't sell to time-runner cable, don't sell the dish, you know, we have actual SEC policies in place, some of them have sunset, that prevent that, there is no such protection for online video, and that is whether or not you think those policies are good, it is certainly unequal and that is a challenge that online video is. John, what you're making is a antitrust case. If you want to make that case, go make it. We don't need affirmative regulation to deal with this stuff. Like I said, contracts, copyright antitrust can handle 99% of the problems we're discussing here today that are currently encumbered by these crazy rules that do nothing more to protect certain interests. What's that 1% that's not covered that's a real problem? It's sports programming. We didn't even talk about that, that's a whole other juggernaut, right? I mean, we could have a whole panel on that, that's next year. But, you know, I would say you would support all these other discussions because it's such a unique type of content program. Everything else can be handled by those three things I mentioned, contracts, copyright antitrust. Yeah, and I think, by the way, to finish off, I think that NFL could probably destroy cable if they just decided to go out and sell directly so that that's probably not going to happen. All right. We have a meeting buzz, but that is not related to us. But, if everyone wants to grab... Those of us who remember Representative Pickering's career will know that he worked initially as a staffer for Senator Trent Laugh, heavily involved in shaping the 1996 Telecommunications Act. He represented a district that had for a very long time one of the most important competitors in telecommunications. His expertise in the area of telecommunications was not only what made him a leader on these issues in the house, but also his genuine commitment to trying to reach bipartisan solutions to what was a very difficult transition for the telecommunication system. It is fashionable now to talk about how the Telecommunications Act of 1996 is outdated, and all of these things that we could have done differently now that we are more than 15 years later, but we need to remember that there were a lot of very important experiments and a lot of successes in the 1996 Act and Representative Pickering was critical in shaping those in working with not nearly with the Republican majority, but reaching out to Democrats as well. And as we face what is now the critical transition of not merely the traditional voice network, but of all of our communications networks as the long-discussed convergence of IP networks and other modes of communication network is finally here. It is I think enormously helpful for all of us to hear from somebody who is expert in this from experience, expert in this from a technical perspective, and expert in this from the pragmatic political perspective in the best possible use of pragmatic and political of actually getting necessary things done. So with that, let me introduce the Honorable Chip Pickering. Thank you very much. Harold, thank you and public knowledge. I want to express my appreciation for the invitation to join you today and to talk about something that is very important to our future economy and I want to talk a little bit of what is at stake, why it matters, and put it in as much context as I can. I have titled my talk today Too Big Will Fail not T-O-O but T-W-O Too Big Will Fail. And I want to speak as a free market Adam Smith conservative Republican who believes in competition and believes that functioning free competitive markets expands individual and consumer freedom political freedom and creates the most prosperous country and I want to go into why I believe that and to a certain degree the history of what shaped and formed the beliefs but what I hope is more important is really the facts of history. So what I briefly want to do is give short personal history and then I go into what I believe are the relevant things in telecommunications history and the lessons you can draw from those. As I graduated from Ole Miss I ended up going to Budapest, Hungary which at that time, 1986 1987 was part of the old Soviet bond and then I returned home and went to Baylor University in Texas so Mississippi to Texas and Eastern Europe there's a lot of similarities out there but I ended up doing an MBA program with an emphasis in international management and while I was there I got to be a graduate sister of a professor who especially was compared to economics specifically looking at the Soviet centrally planned non-market economy and contrasting that to free market economic policies and principles. Then I came to Washington in the first Bush administration and I worked in the Department of Agriculture and as the Soviet Union collapsed and the Soviet block began to reform politically and economically, Congress passed an act called the support for East European democracy. Our objective as an administration and as a country during that transition from Soviet non-market, non-democratic systems where the objective was to help in that transition to move them to free market economics and free political-democratic systems. And so as I worked there for two years and then I joined CERNLOT staff in 1991 and my first responsibility, my first assignment in 1991 as a young Senate staffer excuse me was to help bring about a free market a more free market policy and energy. We were working on the 1992 Energy Act and as you all know, monopoly model, non-market economic policy in the United States much of our large sectors of our economy were not free market even in the land where we think free market economics rules. So we had a non-market poor economic sector and we were trying to bring wholesale competition and wholesale free market policy to the energy sector. As I finished that work I began to work on behalf of CERNLOT and on this staff on what became the Telecommunications Act of 1996 and it took us four long years to get there and again natural monopoly policy, non-free market non-market policy how do we transition to free functioning competitive telecommunication markets. And so that early experience those early experiences have shaped my views my values and the perspective of what work, what doesn't and why free market competition is so critical to the success as a nation and what happens when a nation adopts those policies. Sustains them, promotes them and protects them. And so as we talked today I said that early formative experiences that I call on. At the same time as I was working on the Telecommunications Act in 1995 as we got into the senate the congressman that represented my district retired and I entered the race in the fall of 1995 before the final passage in 1969 but to run for congress and I like to say affectionately and jokingly that I went from being a senate staffer to running for congress becoming a member of congress and losing all my power and influence from what I did on the start. But what I as I became a member of congress one of the great privileges is to give tours through the capitol and I would often take school groups or I would talk to them about different things that define us as a people, as a country and our history. And I would use 5 flags that either by congressional action or by presidential action fly 24 hours a day 7 days a week they never come down and they're in places that are the defining moments in American history and they define something specific and special about the American character and as you're thinking ok what are the 5 flags where are the 5 flags I would always ask the class and the students and my sons can you name the 5 flags that fly 24 hours a day 7 days a week now the first flag is at Fort McHenry so 1812 a new entrance on the world stage is challenged by the powerful incumbent and the question was would we survive would our flag come down would this commitment to freedom and democracy continue well we defined ourselves at that very early stage in our history is that nobody's going to make us back down no one can make us quit and we're not going to give in and then if you look at the other moments and those flags once not even on this earth is on the moon defining our spirit of exploration discovery experimentation the quest for learning not for knowledge that always comes upon the exploration discovery character of our nation the next flag is is a little bit different and that is at Pearl Harbor so not only would we defend in 1812 our own freedom but at Pearl Harbor it's the flag that defines that as a nation we would defend the rights and freedoms of the rest of the world and that we would help maintain free people anywhere that struggle occurs not always not consistently but it is a defining proud moment of American history now the fourth flag near and dear to all of our hearts is here in the capital it flies over the capital the flag of democracy and political freedom and it never comes down the fifth flag is at the tomb of the unknown soldier so the flag of sacrifice to maintain the beliefs of freedoms and what we hold dear so those are the five flags if you were to look at telecom history and I've given this talk and made this point I really believe that there are three defining you could take issue with the three defining moments but I believe that there are three great acts in our lifetime that have had more economic impact expanded more freedom created more wealth more investment more innovation more jobs more political freedom than any other three actions in domestic policy of any other three in our lifetime now that goes back for me 15 years most people would not name these three most classes would not name these three most people in this room might not have thought of these three but I would propose that the breakup of AT&T in 1984 and what happened after that we would have copper networks and we had the old system but we wouldn't have had the great expansion economically and technologically of what we've known the last 30 years second great act 1993 to World War II generation members of the Senate some of the oldest members of the Senate did something unexpected that changed I believe is economic history as well they stopped a duopoly policy in wireless and they adopted a competitive auction where they said no longer are we going to have just two in a market again too big to fail we're going to have a fully competitive wireless industry where you have seven per market we will competitively bid and have free market auctions to determine the values and then the deployments that will come from intense competition that was 1993 first auction 1994 we're 19 years later and look at what the world is in the wireless networks and all of the applications and the devices and what has happened in the mobile world it changed our economy changed the way we live and work it had a dramatic effect the investment came and was driven by competition just as the fiber infrastructure the wireless infrastructure and the fiber infrastructure and backbones of our nation came when we did what we adopted competitive policy the third great act is when we adopted in 1996 a fully competitive free market approach instead of a monopoly based policy in all sectors of telecommunications the most significant thing that we did is to remove all barriers to competition anyone could enter in any sector and anyone could compete but the second lynch pin of the 96 act and very very significant part of the 1996 act was the establishment of a competitive interconnection policy so that if you are a wireless network you could connect to a wire line network at a fair cost dramatically drug down crisis to the access of the network and equally as important as the competitive auction the access to the network the interconnection policy there then the interconnection policy on the wire line side that allowed competition and investment and innovation to occur in all sectors those two things combined in the 1996 act made a tremendous difference so those three great acts created more wealth more innovation, more investment more jobs than any other three economic policy issues in our lifetime y'all can debate that we can discuss it but tax policy kind of ebbs into us budgets and deficits and surpluses rise and fall health care we struggle with energy is half kind of a half solution of competition and free markets and monopoly policy but telecom policy that drove our economy because of competition and the introduction of competition and competitive free market forces made more difference economically in my view than anything else that we've done in the last 30 to 40 years and could you imagine if we had stayed with the monopoly and duopoly policy that we would have enjoyed the economic growth, expansion innovation and the quality of life and the way of life that we have today and it's not possible in my view to imagine a monopoly or duopoly policy all that we have through what we have seen through competitive policy now that brings us to our question today posed by AT&T we're going to a new technology IP we're going from TDM to a packet mode switched electronics overlaying the network that we affectionately call the PSTM and should we as AT&T proposes in competitive policy and in interconnection as we go to a new technology now to the first question let me I kind of feel like Marco Rubio that should we transition to an IP-based network and the clear obvious answer is yes the second question should we in competitive policy and in interconnection as we move to a new technology in my view the clear answer to that is no and I want to get into that and why I believe maintaining competitive policy is so important for the future growth and the future benefits of what we have in the nation but before I get into that there's some things that I would like to try to establish as common facts or common findings or a common framework one competition works two monopoly or duopoly does not work I believe that economic history if AT&T wants to have an experiment or a field trial with in interconnection and in some markets ending competition I think that the field trial has occurred over the last three decades and the evidence is so overwhelmingly clear that competitive policy and interconnection are creating greater markets and interconnected networks that the evidence is clear that competition works and is preferable to having a disconnected policy and in some markets they fall back to a monopoly or duopoly so one competition works two, interconnection is the cornerstone of competition and why is that and what are the examples that we have of interconnection and interconnection policy we have interconnection policy and transportation and our highways and interstates and local roads we have interconnection policy our ports and our airports and other nations we increase the market when we increase the networks of trade we have interconnection and electricity and in grids and independent production so that anybody can connect into a grid and compete for the best price of the power we have interconnection in our pipelines we have interconnection and telecommunications and what we have learned through the information age and through the internet age is that interconnected networks create the largest possible market the largest creation of wealth the most innovation and the most jobs so to end it I think would be shrinking the market reducing investment blocking the new entrant limiting the entrepreneur and having a negative effect on the growth of our nation why would we want to do that we've had three decades of success of this policy why would we want to go back to the past policies promoting favoring and in many cases subsidizing and incumbent against the new entrant or the entrepreneur third what is a functioning free market many people can debate this and we have non-functioning non-market policy that protects incumbents and subsidizes and that is not a free functioning market so as a republican we need to say that we are going to be the party of competition whether it is in the public sector or in the private sector and reject views of concentration is preferable to competition the big part of this debate is really about who controls the future what is past what is future now technology is coming go we have copper we have fiber we have analog we have digital we have market mode technology is coming go but what is the future will always be driven whether the free market forces of competition and functioning markets drive innovation drive investment so our objective should not be to achieve some technology the objective should be to maintain free functioning competitive markets so that is the framework now as we as we look at the transition that is before us and talk communications policy and the telephone market what are the principles that we are going to favor free market functioning competitive policy that we are going to have a policy that promotes at least forward to a market and why does that work and do we have recent evidence to support that when AT&T proposed to acquire T-Mobile and taking four national carriers down to three and continuing with a period of concentration I believe that the SEC and the Justice Department rightly stopped that merger and look at what is happening and look at the result today one soft bank has invested more to the US economy and has partnered with their friends they entered, invested and they are building a 4G network T-Mobile is strengthening their partnering their SEC adopted and the courts have sustained data roaming and that allows whether it is a new entrant or regional company or all the other competitors in the market to exchange traffic to interconnect they can do it all commercially negotiated but there is a backstop there is going to be interconnection on the wireless side and that achieves a functioning seamless competitive market all of those things are creating a market that is stronger and healthier today on the wireless side why would we want to reject that on the wireless side and interconnection policy I think the clear answer both historically and recently is that competitive policy competitive interconnection policy is the most meaningful meaningful way the most minimal way with the lightest touch possible to maintain functioning markets and as a Republican I hope that we reject concentration embrace competition that we reject and ran and reaffirmed Adam Smith that we reject the incumbent based policies that protect and subsidize and return to encouraging, promoting and incentivizing the new entrants, the entrepreneur the small business the midsize business and the competitive markets that help those who are in that space if we do that the outcome will be the same that we've had for the last three decades we know what outcome has been the evidence is clear the experiment has been enduring and it has always increased our economic growth, productivity efficiency our jobs and this is as all Americans it's increased individual freedom it's increased the consumers freedom it's increased the economic well-being it's increased all the things that we care about and almost every case a positive way so if we're going to plan a flag that defines a part of the American character very uniquely and distinctly very important part of the American character competition because it drives the best whether you're an incumbent or a new entrant it makes us better as a people it always delivers a better future and so we should plant this flag of competition and protect it and promote it as we go forward any questions? so thanks very much for once again going to be passing out our index cards and collecting them from those who have built them out while we're doing that let me ask you one quick question so competition is obviously very important but there were many things as was recognized in the 1996 act that competition won't provide so we had for example the universal service statute which was part of the 1996 act because we wanted to make sure that everybody in the United States would have access to phone service we have consumer protection in the telecommunications act we had the public knowledge that put out our five fundamentals framework which talks about competition as one of the important fundamental principles of the transition but also lists four other important principles as well I wonder if you might perhaps speak to as competition enough that if we had competition that would take care of the rest of these concerns or do we have in addition to even if competition is the major support of the tentpole or the other issues that we need to be concerned about as well my view is as we look at the principle and this was a very important part of the 1996 act was to have universal access to telecommunications services which was maintaining preserving a principle that goes back to the adoption of the 1934 monopoly policy I believe competition much more efficiently achieves the universal objective and free market forces and new technologies much more efficiently achieves the objective of universal access and coverage on telecommunications we have had USF reform in the past for the most part that is going into the right direction new technologies are a state like mine Mississippi which is very rule the interesting thing is Mississippi and Arkansas with those two states you probably think they're in the bottom half in just about every category but there are there's one category where Mississippi and Arkansas are number one and two in the country y'all know what that would be it is the penetration of wireless broadband in Mississippi and Arkansas and the reason is that you had Altel and you had Segulate and South and I see Spire and they built out their markets from the rule to the urban and there are two examples of where competition and where you don't have that competition you don't have the same level of deployment and investment by all providers those regional carriers made the incumbents invest in their networks there's much more competition where you do have multiple players that covers everyone competition I think is the centerpiece and much more effectively achieves the universal goal all right well let me let me now take some of the questions here from the audience I have one here that comes up a lot both the AT&T breakup and the AT&T mobile deal rejection were antitrust and not regulatory why do we need regulation when antitrust is there to take care of the competition issues could you repeat the first part of that so if both the AT&T breakup was done as an antitrust case and the AT&T mobile rejection which was pivotal in bringing back investment to the market you told us was also an antitrust case so is the antitrust going to be enough here can we say get rid of all of the FCC regulations and just rely on antitrust to provide the necessary competition yeah I would I would say one that they were those are two cases that were both decided on antitrust basis and that they were correct cases but like a position who would prefer to have preventive medicine versus after the fact much more costly much more disruptive treatment minimal competitive rule that opens markets and allows for functioning competitive options and opportunities as interconnection and if you maintain that and a smart strategic restrained word some markets is applicable that there's an obligation some markets it's not some markets are competitive and there's willing buyers and sellers and we need to look at it market by market but wherever we can either by the 96 act and sustaining and promoting that and carrying it through all of the different generations of technology we should because it would prevent us from taking an antitrust action which will always be more disruptive to the economy and to the businesses and it is a minimal way to maximize the objectives that we have as a country and that is around investment innovation jobs consumer benefits and the individual benefits so just to I guess play on that for a second so when we look at say the break of AT&T in 1984 and then the passage of the telecommunications act in 1996 how would you compare the disruption as opposed to say the benefit you think that for example the 1996 act was a smoother transition was it more disruptive than the AT&T breakup or was the AT&T breakup really kind of the thing that did it and then the 1996 act was just sort of an add-on without the 1984 antitrust action we would not have had the 1996 act but this is where I believe the 1996 act is preferable and superior to antitrust and that we created a framework that is flexible over time it has forbearance it has ways to look at markets whether they're functioning or not functioning and to adapt and adjust over time antitrust it does not have that flexibility you come in and the remedies are usually and the cases are long and costly and the remedies are disruptive where if you have a predictable and certain framework that says one we're going to promote universal access we're going to promote competition and free markets and functioning markets and we have these objectives and everyone knows what they are everyone knows the rules of the road and that it can adjust with new technologies and adapt then I think that's a good example of public policy and I didn't get to say this in my talks in my talk and I meant to we need to re-establish the bipartisan consensus around competitive telecommunications that existed for three decades we had a bipartisan commitment that we're going to reject monopoly policy and we're going to promote competitive free market policy now it's not perfect but that's been the objective and it was supported by Republicans, Democrats Republican presidents Democratic presidents it was Reagan's Justice Department that wrote the AT&T Congress of the United States Act signed by Democratic President Bill Clinton and it was across the board you had a bipartisan vast majority committed to competitive policy and we need to re-establish and restore the bipartisan compact and consensus around competitive policy how does the elimination of the PSTN transition of the PSTN deal with 9-1-1 services? That's one of the things that the LCC made in the comments that have been filed in response to the AT&T petition is how do you do that and we've done that successfully and I had the good fortune when I was in Congress to work if you have a void provider a happy based service how do you maintain 9-1-1 so I think that that can be dealt with in the transition appropriately the other thing that we need to realize and as someone from Mississippi who lived through Katrina the great thing about competitive policy versus monopoly or duopoly policy is that you have multiple networks what do multiple networks give you when they're interconnected and when they're interoperable it gives you redundancy so whether Sandy or Katrina a competition creates greater networks which create more reliable networks more redundant networks but you have to have a linchpin of competition and public safety what is that linchpin interconnection and interoperability I don't know if we have any other questions from the floor but let me ask one more question we're seeing now a lot of action in the states where you have a lot of state legislators that are saying we should just eliminate regulation of all IP services and IP based services we're seeing some people say that the FCC should not act until Congress acts how do you see the relationship between the Congress the Federal Communications Commission and then the states and their role in this transition process it is both in the pre-96, post-96 there's always been a partnership of implementing the chair of her policy that the federal government has adopted in my view the natural monopoly policy was a great mistake and it created a great regulatory regime around the monopoly policy prior to the 1996 after 1996 there was a great partnership I think in the right direction which was to promote competition and so as we go through the transition we need to find the minimal way to maintain the functioning free competitive markets and it needs to be done in some form of partnership between the states and the federal government and how those agreements and how those terms and conditions are realized and so that the state federal partnership will always continue and it's hard to see how that could end on telecommunication services yes this is the last question and unfortunately I'm trying to whoever gave this to us I'm trying to find a way to frame this here but we talk about this as about the telephone network and the voice network but this is really a multi-sector lens that we're looking at here is moving to IP and these physical networks whether they're wireless or wireless networks are now supporting a large number of different services looking at the PSTN transition what other sectors do you think are really sort of caught up in all of this how do we make sure that these different sectors of the economy that we've traditionally thought of as being very different are sustained and hopefully expanded by the transition of what we think of as the telephone network to being the IP the all-IP network we want to see AT&T modernize their network from a copper to an IP most of the competitors are already IP and most of their networks the long call, the long distance the middle mile, the rings much of the direct access dedicated facilities those are IP fiber-based if you look at what the competitors have done they always do many things well, they don't innovate very well the competitors brought voice over internet DSL, they're bringing ethernet cloud-based services and so we want everyone to be able to transition and compete on that and to facilitate that I think that there are limited things you can do that currently exist if you just extend them into the IP world that again, it's not we should be technologically neutral one of the principles of the app core principles of the app we should be competitively neutral those types of things have helped us in most cases, not all cases I get the answer right as we make these different transitions but I do think that we're seeing emerging areas of our economy without regulation function very well and have competitive choice we need to be wise and discreet of choosing where we have non-functioning or the possibility of a bottleneck that would prevent competition and be targeted strategic and smart of only addressing those areas where you could possibly have a failed or non-functioning or non-competitive market and I think that the incentives are in place for us to get to a transition without sacrificing competition or the targeted interconnection that works well thank you very much only the very beginning of the discussions around this I'm sure which will cause some groans for people who have been having these discussions for the last several years but now they're hopefully kicking into high speed so thank you for sharing your thoughts with us and I'd like to ask the next panel to come forward and is one of the most provocative speakers particularly from the Libertarian perspective on copyright reform next to Tom is the person I call the mother of copyright reform advocacy and that's Pam Samuelson who really doesn't really need introduction but we're not for Pam I'm not sure public knowledge would be here I know the clinics that are training young folks to be copyright advocates would not be around she really kind of started all and she's continuing continuing her advocacy in big and little ways both through her law reviews her writings she is a professor at Bolt Hall which is a Brooklyn law school for those of you who don't know but also she was really critical in bringing academic authors together to fight the Google book settlement which many of us included public knowledge so it was anti-competitive and I believe the judge mentioned the authors prominently in his decision to strike down that settlement and then lastly Mike McGeary from Engine Advocacy is one of the newest and most powerful entrants into the Washington Advocacy game representing small entrepreneurs and start-ups and they have a if you didn't know they have an event tomorrow so it's all about that tonight that's right that's about at Ping Pong Dim Sum at the very late hour people like me at 8 o'clock at Ping Pong Dim Sum in 10 quarters so I will be there despite my age and the fact that I have children I will be there so let me start first with Pam and this is a question that's going to go to everybody a very broad question and I like to answer this question in three to five minutes why don't we need copyright reform in the US isn't everything just peachy so we'll start with Pam and then we'll go to Tom so one reason I think we need copyright reform is because the statute that we have today is largely the product of a 1950s mindset so there were a series of studies done in the 1950s about what kinds of reform the 1909 app needed and in the early 1960s most of those ideas got manifested in a statute which only got enacted in 1976 but actually was pretty close to the statute at the time and of course at the time nobody thought it really was going to regulate the daily behavior of everybody it was only this sort of like real small sector of people who were like broadcasters or cable companies or publishers and so they're the people who showed up and they crafted the rules that were meant for them but nobody imagined the internet no one imagined the set of questions that we've been facing which is a little rigid in certain ways and something like the reproduction right was not thought of in terms of in digital form everything's a reproduction and therefore this thing that's supposed to be an important exclusive right now kind of gets broken because it applies too broadly so those are just a few ideas about why we need copyright reform I could go on Tom do you want your slides up? Yes please I put together some graphics to help you understand in a visual way why I think copyright reform is necessary I should start out with a trademark issue though by the way because I see my friend Jerry Jerry Brito is here and I'm actually listed here as the author of copyright and balance he edited that collection I just wrote one paper in there so I just want to set that straight I'm going to have a book on copyright it's called intellectual privilege I'll show you quickly this is a news clip how do we know we need copyright reform people talk about copyright being in a delicate balance I think that is wrong we cannot put copyright in a delicate balance because we don't have the numbers all we can look for is salient injustices this young lady it's just one story of many this young lady got thrown in jail for three days because she whipped out her camera at a movie and happened to sort of accidentally she got like three or four seconds of film one of these werewolf movie stars taking off his shirt so she could share it with a friend sent to jail for three days she faced jail time of many years and considerable fines she got off the hook but I think that's evidence that things are crazy out of whack I don't know that we can say copyright is delicately balanced but I think we can say it's indelicately in balance can we see the next slide this is the copyright term in the United States there's different ways to calculate the copyright term this is kind of your basic term since the 1790 act Pam mentioned some of these other acts that come along you can see every time they increase the copyright term every time and you'll notice some of the shapes of those colors are kind of funny they're L shaped why because there are retroactive extensions of the copyright term can we go one more slide how do we explain this now steamboat willy now some happens I think steamboat willy is in the public domain check out my book I talk about this at length I'm not the first person to discover this although I don't think enough publicity has been given to the to meet fact that steamboat willy is not copyright protected they didn't satisfy the formalities the stringent formalities in 1909 act but Disney trees it like it's copyrighted look here what happened steamboat willy came out in 1928 so okay initially it got this maximum 16 year term and then it started running down so when that dotted line hits the x axis times up steamboat willy but it never gets there it gets close and lawmakers up the term and it gets close again and they up the term again now I don't know that Disney's lobbyists are prowling these halls maybe you do I'm sure you could tell me stories it's just a coincidence but I think we know the dynamic of work here we have diffuse costs and concentrated benefits and that my friends is a recipe for a public choice disaster it's setting out a time out at 2023 your guess is better than mine as to whether or not it'll get extended again but the public choice dynamic suggests that it'll happen again unless a reformed copyright is just going to get more and more and delicately thank you great why don't we go to Eric why do we need copyright sure so I mean there's a lot of things that we as Reddit think about doing ourselves or things that we just see in the sort of online ecosystem especially around communities where there's real opportunity for innovation and you know we it's a pretty amazing place that we're in I mean Reddit is a company of I think now 22 people and we have a site that's in the top 150 in the world and whether you like Reddit or not it's pretty amazing that a site run by that amount of people and run by that little amount of money can reach such a broad amount of people but there's all kinds of other places where something like Reddit or Reddit itself could get into and where innovation could happen but we're sort of hamstrung by this analog copyright mindset and by using legacy and by constant harassment and constant sort of abuse of some of the existing copyright laws Mike in a lot of the same way that Eric's framing this what we look at with NJ is not even so much the companies that are out there right now we can talk about just generating content some of these other sites that are growing on the internet and products that are being built in companies and all of the copyright laws that exist doesn't work for those companies but what about the ones we haven't even thought of yet it's the next step in this process what is going to be the next Google or Facebook or Reddit or pick an app on your iPhone what's going to be the next iPhone I mean all of these things what's coming down the pike is what's most concerning about where the regime is right now because it already doesn't work if we're going to get serious about it we have to start really taking a look at what we can do now to avoid the problems we see in the marketplace today from coming back and getting even worse down the road so that's in our view that's exactly where we need to be copyrighted to move the debate forward did you before we move on tonight just mention I actually brought with me some copies of copyright principles project report in 2007 I put together a kind of private copyright reform effort myself and I had representatives from Warner Brothers Entertainment from Disney from IBM from Microsoft some practicing lawyers as well as some law professors and we got together and we said is copyright reform needed and I was astonished at how many problems people were full-time copyright professionals thought that there was with the law and so we have in this report a set of principles that we think would govern a good copyright law we then measure the existing copyright law by whether or not it matches up and in what respects it falls short and then we have a set of recommendations 25 recommendations for reform that should be considered so I'll leave copies of that out on the table in case people would like there's actually a consensus because you took one of my follow-up questions where there's actually a consensus around some of the things that were wrong it wasn't just the copyright reform or thought it was too strong and the copyright industry thought it was too weak that's interesting okay well let me ask my next question which is a two-part question and I have a problem so the first part of the question is if you were and you can wear this if you want it belongs to my daughter so it's kind of snugly if you're the absolute monarch of the United States what kind of copyright law would you mandate so in other words what would your ideal copyright universe look like or the copyright country look like so if you were the monarch that's the first part of the question and the second part of the question is unfortunately you're not the absolute monarch so what would be the three to five or less improvement so surgical cuts the copyright law that would make it better that would that would diminish some of the problems that you talked about in the first go round so why don't we start again why don't we start with Tom this time you want to? are we only doing the monarch question? either one, well it's both we answer both or either one if you don't feel comfortable because the second question really kind of gets up what are the specific changes to copyright law that you'd want to make but the first part of the question is you know if you're a god or you're the monarch and you got to start a copyright regime from square one if you believe there should be a copyright regime the protection of the intellectual property what would it look like? I would go back to the 1790 act if I were vested with that awesome power the GG is clean and it's a much similar act and you can just see right there shows how elegant and lean the founders thought copyright could be and if we go to the next slide we'll just see there they are, it's a bit of a geography I admit, but I admire the founders and they wrote into the constitution that clause that is the premise for the authority Congress has to pass copyright law they knew what they were doing the 1790 Congress had many of the same people who wrote the Constitution what are some of the virtues of the 1790 copyright act, a very short term maximum of only 28 years here's a big shocker covers only maps books and charts basically all they cared about were documents that show you where to go and books and that shows what a parsimmonious view of copyright the founders who again put that clause in the constitution what a parsimmonious view of copyright they had they knew about it, they didn't think those things were worthy of protection now they lived in a time of great cultural poverty back then they did not have what we have in our pockets basically everything they had in the Library of Congress and more, at our fingertips so they thought we live in cultural poverty we have to stimulate the creation of expressive works and they only went as far as maps, books and charts for 28 years that's amazing to me, I think it's a real eye-opener one more thing, they only protected those works against exact duplication you wouldn't have to worry about derivative works if you did a translation in the German of an English word, you had a new work so that's what I would take us back to if I could I don't know if that's possible can we go to the next couple slides so since you want details, there you go I won't go through these in a great deal of detail because I've borne to death, but I know many of you write laws for a living I suggest two things, 107B the effects I'm looking for here are very subtle it's restructuring the market for copyright works and both these reforms are designed to make people gently nudge people towards the door out of the copyright regime into a common law regime where they rely on their common law rights contract and tort rights to protect their expressive works this 107B would do that we can see the next slide, you'll see also 301G I'll explain these more fully in my book intellectual privilege, Jerry's helped me publish this the Mercados Institute is coming out this summer and it's being released under the 1790 Copyright Act we basically are revivified the 1790 Copyright Act to protect this book so 28 years, I'll be lucky if anybody reads it in year 2 but in 28 years I'll be in the public domain and you all can copy it I'll actually talk to you beforehand I'm sure we can work something out so I think I'm willing to protect more than maps, charts and books I like this notion that original works of authorship are eligible for copyright protection I think a big change that I would return to because I think there was some wisdom as Tom has, of the way the law used to be and that is to reinvigorate formalities in copyright law to have more registration, more inducement to formalities like notices on copies and the like I'll just mention and I'll leave this out on the table too we're having a conference in Berkeley this year about reinvigorating formalities for the internet age Maria Palante the Register of Copyrights is actually a keynote speaker the Copyright Society of the United States is one of the co-sponsoring entities for it so we're really trying to reach across the board we have a number of people from Europe about it to come and talk about it and interestingly enough the Europeans right now are more interested in formalities than they have ever been before so I think that the idea that you opt in to copyright by registering your claim is something that's a good part of copyright law that we had in US copyright law until 1989 so for almost 200 years we had an opt-in system and that seems to me to be a really good feature of a good copyright law which isn't to say that today I would say that if you don't register or you don't put notices on that it should necessarily fall into the public domain part of what we're trying to do is think creatively about what kinds of what kinds of baseline should there be and then what benefits do you get to engage in formalization I'd also do some tailoring of the exclusive rights I'd be more comprehensive and more thoughtful about the limitations and exceptions to copyright so for example why did 4-H clubs get the right to perform music for free and not the campfire girls or whatever if you look at sections 107 to 122 you'll see the most mockly crew of exceptions where did these come from and so I actually try to do something much more much more systematic about it and finally I would do a very very substantial reform of statutory damages I think that's the single worst part of US copyright law today and I'll probably talk a little bit more about that can I do that now yes but also if you don't mind you know do people understand what formalities is that is registering it registering the copyright and renewing that registration and other notices but the response to that when you talk about that as well we're parties to the burn convention so therefore we cannot re-institute formalities so finish what you were going to say and then if you can answer my question how do we get around the burn problem if indeed it is a problem okay so statutory damages I'm sure most of you in this room are aware of the $1.92 million award that was made against a teenager who downloaded 24 songs this is made possible by the US statutory damage regime which creates a baseline of $750 per infringed work as a bare minimum and up to $150,000 per infringed work and while I think it's just grossly excessive as applied to this particular file share what worries me more is that any company any tech company that's trying to actually make some platform for looking at large number of works are basically facing an enormous risk of statutory damages even for secondary infringement that is to say they may not be infringing themselves but if they're charged with secondary infringement by facilitating the infringing acts of others they face gazillion dollars of statutory damages even Google bet the company on the with its google book search project and they're facing as much as $3.6 trillion in statutory damages for something which from my standpoint has caused no actual injury to any author and has brought no profits to Google and so the idea that $3.6 trillion is hanging over their head is really something very very deeply disturbing I've been doing a study recently about statutory damages on the international scale and one thing I've found is that only 14% of the countries in the world have statutory regimes and they all have much more and more sensible limits on their statutory damage regime than we do and that's a place where I think reform is really really needed for tech companies, for innovation for internet companies that's where I think there's a kind of stranglehold on innovation and we'll hold the brown question till later but I'm sure Mike and Eric would have a lot to add about how statutory damages affect speech, how they affect innovations, so why don't we start with Mike and then we'll go to Eric. On this Dexter damages question I think that's something we absolutely have to be cognizant of changing when you can get $150,000 fine for downloading a song or whatever it is it's completely insane, especially moving into a situation where the younger generation of music consumers don't understand and will never understand probably what it means to own music, they think it comes over YouTube or in a best case scenario Spotify you know, or RDO or one of those services but it's freely available, you don't build a record collection anymore, things like that so there's that aspect of it. I will say that ours will be a benevolent dictatorship but you know I think that it would we'd build a copyright regime that you know looked a lot like Derek Connors artist's paper Could you be a little more specific? I mean it basically rethinking with market influences and aspects what we could do for copyright, looking at things like the copyright act of 1790 which I think is actually a pretty good baseline to start as rebuilding a regime that's been taken over by the deep seeded interest in this town and throughout the country that I've seen to it that Tom's very colorful chart keeps you know sliding ever further and higher than the right so you know I think that we have to just totally look at how to rethink and rebuild that system and you know tear it down build it again, do all that because I mean as I said in the beginning and as I often say at these things as the much more learned people to my right have already been saying like we're in a system that doesn't work we need we absolutely can't go forward as Pam read the point out with a stranglehold on innovation because of a system that was built for people that bought records you know or conceived of owning you know a VHS tape not just a DVD you know not just having access to a library it's time to rethink what it means to have your protections in place for sure in some way but understanding that we've got this great thing called the internet that makes it better faster and stronger for all of us to experience all of this culture so much with so much more breadth and depth than we ever could before and the last point that I'll make on this is you know I have a day job as well I'm a strategist for the Metro Capital Fund and we work with real early stage real leading edge kinds of companies and you know when they come to us and say what do we need in terms of whether it's patent protection or whether it's just general IP or copyrighted trade markets tell them to out innovate the market in a lot of ways just stay ahead of what you can do that's not saying you know don't protect yourself but if you continue to build products that work from an entrepreneurial standpoint and that lead markets rather than become part of a market and change markets all the protections in the world won't amount to much because you'll just be better than everybody else and they'll be 18 months behind you whatever you want to do so innovation is the real key here we build a system around that we need to find and and codify the way that the regulation and protection can work so that we don't have to make a little innovation that we allow people to continue to thrive and grow frankly, grow the economy so Eric I trust that your perfect copyright world would include some DNC reform yes definitely shortening shortening terms, shortening the damages the other big component is an actual penalty for abuse and because right now there's basically none and that all the data around that would be public so I don't know if that gets into formalities but you know we file a whole bunch of really bad DMCA takedown notices that at least you're gonna have to do that publicly where you can be scrutinized for in the court of public opinion if nothing else you know the other thing that I'd like to see if I were wearing the crown is and it gets more complicated depending on the medium but is you know that the original creators would have to have more they would have to basically sign their names before anyone is sued for these kind of damages so they would have a little more say whether it's the 15 person game publisher that made the hit app or game or a tablet magazine or movie or whatever that is and they would have to have some way to say like look we this is my creation this is my idea this is my story and I don't agree to it being used this way because when we actually talk to the actual content creators not the distributors not the trade lawyers but the actual content creators most of the time they they're on the side of their fans they're on the side of innovation so some sort of way for them to express that if they so choose to Pam let's get back to you about that question I asked before you talked about bringing back some formalities and I mentioned the argument that the convention is somehow because we are signatories to it somehow a barrier to that how do you get around that issue well so there are a number of things that the burn convention provision that says that you can't condition the existence or exercise of copyright on formalities that's the rule from the burn convention there are a number of things that it doesn't apply to so it doesn't apply for example to the corporate author works and second we already have formalities that apply only to US authors so that for example in order to bring a lawsuit for copyright infringement an American author has to file a registration with the US copyright office and also if you want to get statutory damages or attorney space you need to register your claim of copyright and you can only get them sort of if you file promptly and so those are existence of formalities already in US law and we can do to our own citizens whatever we think is actually a sensible thing to do and so the burn convention doesn't require us not to do that to ourselves it just means that formalities would not be applicable to foreign nationals works and so we already do that for the the filing of the lawsuit a foreign author can bring a lawsuit without having registered claim of copyright and so there are I think a lot of things that we could do that as long as we think it's a sensible thing to do and I think formalities make a huge amount of sense we can do a lot of things within the burn framework but also there is I think an international conversation starting about whether or not we should change the burn convention in this respect and here's a really important thought that has now been expressed in a book by a young Dutch scholar his name is Stefan Gumpel he's written a book about the history and philosophy of formalities and many of us think oh the Europeans they never like formalities it's a content issue buddy back there that they're against formalities and the burn convention is completely inconsistent with having formalities and that turns out not to be true it turns out to be the case that the history shows that the reason the burn convention adopted a no formalities rule was because at the time it was so difficult cumbersome expensive to comply with the formalities rules of each individual country because you wanted to start getting international trade and copyrighted works it was just too burdensome what we have now is the situation in which all those burdens can easily be overcome because we can all use the internet so the World Intellectual Property Organization is starting an investigation of formalities a number of European countries are beginning to develop registries and registry systems that will distinguish between things that are registered and things not registered so we're actually in the United States a little behind the curve but I'm going to try to change that through my conference so if you want to know about it we'll be on the internet without formalities at all and then if you do and even if you don't I would like you to walk us through your specific prescriptions for reforming the surgical cuts sure you asked me about formalities yes do you have anything to add to what I would still like to hear about your work Professor Samuelsen is doing the Lord's work there as far as I'm concerned keep it up I would say though I don't understand why we have to stay in burn I know that Saint was saying to almost every copyright scholar but here's a problem I have with burn what's burn designed to do it's designed to open up foreign markets to domestic authors and copyright holders right so they get more money from overseas sales when we accede to burn okay I have no problem with that but when that happens we should be ratcheting down domestic protections assuming we have achieved some sort of balance even if it's not delicate some sort of balance in copyright we're saying public we're taking from you the rights you would otherwise have to copy these works we're going to give to these authors and rights holders these special privileges because we want to stimulate their production of these expressive works well look if you're going to increase the awards given to creating expressive works you can lower the amount of protection you afford and that never happens with burn it's always as you've seen with the it's the same thing that we saw with the term protections always ratchet up ratchet up ratchet up so I think we should consider leaving burn but I'll stop with that that's radical enough you want to hear about this do you want to go back on so here the idea is very simply that if well let me back up here's what you can do under copyright now you can license your work to someone and say by clicking okay you're giving up all your fair use rights by clicking okay you are giving up the right for example to criticize this work in public now this is not very common although it does happen by clicking okay I've seen this in license you can't make any use of this material not even minimal quotes and the concern is although you could not get by with doing that simply under the statute right if I'm sure you'd never do this but if I decided to take a short quote from professional Samuelson's paper here I would just hide under the fair use defense but if she had a license imposed on this kind of shrink wrap license where I clicked okay where I can't quote anything she could come after me under contract law so that's too much that's combining the statutory rights with common law rights and what this does is says you have to cut bait or fish we're not going to give you two trips to the banquet either you go with just copyright or if you want more than copyright will give you you want to limit fair use rights that's fine we'll let you do that but you have to give up your copyright rights and rely solely on your common law rights why would anyone like this well for one thing it kind of decreases the power forward to copyright holders and I think all told that's about time for that and secondly more importantly as I said it's a subtle effect the idea is to encourage the development of business models that do not rely on statutory protections I want to see a whole class of entrepreneurs arise but they said you know I don't want to fool around with the statute they keep changing the rules it's terribly complicated I got a higher attorneys every time I do anything and even then I don't understand what my rights are I know I can throw people in jail and that's cool but I'm like so I'm just going to rely on my contract rights I'm going to encourage people to develop those business models so that's what this does and then the next one pretty much does the same thing it just reassures people who go to this business model we're relying solely on their contract and tort law and property rights it says to them that if you put your work in the public domain have at it we're not going to come after you under federal law saying why you've done is too much like copyright you can't do that under state law we're going to use the supremacy clause to shut you down this says please develop those business models so we can get you out of Washington and back in Silicon Valley we can get you back to innovating and away from lobbying that's the kind of market I want to see develop one where we use the tools that are already on the table in fact they're kind of super powered now maybe the founders had to have contract because they didn't have the internet they didn't have click-through licenses we do now you do wonderful things with common law rights that they could not do and it's led to me to believe maybe we don't need as much copyright in fact it's led me to believe we really don't need as much copyright as we have the panel wants to follow up on that so one other thing actually that this report of the copyright principles project does is address this question about efforts to use contract or mass market licenses to override fair use and other limitations and exceptions the rights that users would otherwise have and we came up with a formulation for how to think about when it should be copyright should override contract and so that's a little bit different approach but still the recognition that there is some often some conflict between what copyright law would do which gives users some rights and what licenses sometimes do which is to override those rights and how do you mediate those tensions I'll also put in another plug for it which is that we also came to consensus about about reinvigorating formalities so big companies and I think small companies as long as the formalities are not onerous and confiscatory I think people can support reinvigorating formalities is there anywhere online we can get those yes it's all online it's called the copyright principles project directions for reform it's available on SSIN so Eric so as I said before Reddit is the front page of the internet and obviously there's a web and there's a lot of conversation about copyright reform obviously it was a huge foment of organization and discussion around cell phone PIPA and that's the last time I'm going to mention cell phone PIPA in this panel I don't want it this is about reform not what happened a year ago although I didn't mind what happened a year ago but what do people when people are talking about copyright and copyright reform on Reddit what do they care about what are the things other than saying no what do they say yes to because to me that's the challenge right the challenge is it's a lot easier to feed a bill that is to you know to get one passed so our challenge as advocates for copyright reform is how do we get even half the number of people that came out against mm-mm-mm to come out in favor of something well so I mean I think the most exciting thing they say yes to is they say yes to good business models that give people good service and let them buy what they want to buy I mean that's we see that all the time for you to play and then people pay for other things I mean they say yes to you know all kinds of things kick starters they say yes to directly funding musicians they say yes to they give us us money to support the site in addition to advertising they don't have to so they say yes to a lot of things with their with their credit cards and pay pals and cash and that's that's what's really exciting and you know there's not a lot of things to say yes to in that innovative business model space from you know from the big content companies and I think that's that's what's really frustrating and you know we have a pretty international audience who gets really frustrated because it's super complicated to even know you know where to look for you know certain shows or books or games online if they want to pay for it so that's what's what's exciting for us to see and Mike how about your members I mean what will I know you're up here Morning Tech report today you're talking about immigration reform which is obviously really critical I assume you're talking about patent reform which is all the rage in not just in Silicon Valley but Silicon Alley, Austin any place where there's high tech but when it comes to copyright reform you know what are your members telling you that they would say yes to that they would come to the hill and and march the halls of this congress in favor of and spread out to their networks and tell them to do the same well so on on the copyright front we made sort of a decision when we got edged off the ground to do a lot of the other issues and talk about immigration and patent and the fact that patent is all the rage by the way is kind of fun because it is very important now people are starting to like get around that we actually need this kind of stuff we looked at copyright and especially coming out of the great internet you know thing of last year that apparently won't hey coming out I shall not come in we're coming out of that we learned that we've got to teach people on both sides of this about what the internet really is and so we made a decision to choose issues in consultation with our members that were telling us like I got real problems with immigration, I got real problems with patent I got real problems with you know financial regulation which was jobs act last year and things like that and said we will let people more learn than ourselves as I often would say especially you like the good fight on copyright and keep it in a manageable level but what we want is more people walking the halls in this building who get why it's different now and what that means is teaching them about the products we build, the companies we started where we are, how we do what we do the business models that are allowing people to not just survive but thrive in ways that we never conceived of before whether as a content creator or a web developer or a new and fledgling company whatever it is and then we want to have a conversation about copyright when we're all a little bit further down the line now at the same time we're going out to our members and saying and here's how you can most effectively work with our friends in Congress and the regulatory agencies in White House and in government at the federal and state and local level instead of the traditional Silicon Valley and entrepreneurial view of putting blinders on and just hoping that they don't notice that you're over here doing stuff and maybe just maybe your business will succeed despite the fact that around here sometimes it's seek first to regulate more than seek first to understand so we want to build that understanding we want to build that trust we want on both sides we want to be here to edge against why we're doing events like Start Up Day on the Hill and I invite you all to come to that after you're done here today we'll have stuff all over Capitol Hill for the next two days but in our view it really is about education and about trying to figure out the best way for regulation and legislation to be crafted going forward that helps not just the business models that we've already started to see pick up but the ones we haven't thought of yet the products we haven't thought of yet the companies we haven't thought of yet that will provide frameworks where they can survive that when we do talk about copyright that's what our membership will stand up for they will stand up for a regime that works that for changes that can help their bottom line they'll come here in droves to talk about that I'm perfectly happy to help the internet find its pitchforks and torches I'm sure Eric is too and the rest of us when necessary and we'll fight if there's another bill like that which shall not be named which would have had not just a chilling effect but real damage to innovation generally and especially to the start of the economy we'll fight that fight if we have to we would rather not we would much rather that we got a chance to get people understand what's going on and then work together and collaboratively to build a regime that works that's a great answer so let me just shift just a little bit let's talk about international what's going on overseas you see the UK sort of completely rethinking of your regime you see the Hedopie three strikes law falling apart in France you saw protests against ACTA all over the world except the United States here we had we signed ACTA we're now negotiating the Trans-Pacific Partnership Agreement the ISPs and the Institute of Voluntary graduated response regime so we're a little bit behind but is the ground shifting and will what's happening overseas will have non-expressive uses computational uses of works that we can learn new things from some of you probably of you the ngram viewer to see what kinds of word usages have happened over time that's essentially an application on top of the Google Books corpus so also Singapore and Israel have recently adopted a fair use provision Canada has expanded its fair dealing provisions so that it's much more like a US fair use defense and I know that a number of the countries who are part of the APEC group the Asia Pacific Economic Council those countries are also looking at fair use so some of the good ideas of American copyright law are actually spreading to some of those other places and I think those are developments that are really worth noting I think one of the most important things that's happened in the international arena was the European Parliament's vote against ACTA and that was not only important for Europe because the European Commission officials that had negotiated that participated in the negotiations had been willing to negotiate something that was going to bind all members of the European Union without consulting with the European Parliament at all they would violate supposedly national security if the negotiators even talked to their legislators about what they were in the process of negotiating that kind of lack of transparency I think and public knowledge is a great job trying to say we've got to have more transparency it is not fair to have international treaties negotiated where there isn't some ability to see what the proposals are and to say would we want to be bound by these rules and if we wouldn't want to be bound by these rules we shouldn't be trying to bind other people to some of these rules and you know it's a way of essentially subverting the legislative process domestically by allowing the trade representatives to go off and negotiate things that actually are not in the best interest of our own economy let alone the economy of the world yeah I mean you've really picked up on one of the most vexing issues for us is how to affect trade policy I mean we're not trade lawyers and copyright and we have found USTR to be a complete and total black hole you know they'll give us a little piece of candy every once in a while and then they'll kick us where it hurts so if anybody has any ideas on that how do we I mean I think it takes leadership right I mean you know Ambassador Kirk is a very nice guy but you know he wasn't the guy was going to come in and say look you know we're treating intellectual products like you treat soybean and corn there's something wrong with that I don't know how you fix that other than getting you know they had Peter Cowey who was a professor at University of California San Diego to come in and essentially change the culture there he lasted one year so anybody has any thoughts about how we fix that policy laundering problem and when I say policy laundering I mean taking laws we can't get here and going overseas either through WIPO or some other multilateral process or through trade agreements getting it there and then coming back here and saying ooh we signed this treaty we signed this trade agreement so now you must pass this owner's law please weigh in I don't have a solution to that problem I'm sorry and your commerce was so well put on that but I will say there are some interesting developments at the WTO in fact there's a panelist coming up and Andrew Shore who's worked with the Antiguin gambling folks and Antigua they've managed this through the WTO process to basically start giving away American copyrighted goods goods online and I'm not sure exactly what I think about that I had so radically than I got stopped but it's an interesting development and I'm watching that with a regular interest Eric or Mike do you have anything else to add subject of I mean I know I think the TPP was very with a big article discussion on Reddit and go ahead Mike after the Acton and TPP have both been a lot of discussion happening on Reddit and I think it's actually it's a testament to the front page of the internet that this is where the substantive discussions were really happening about these bills I mean a lot of the news that we were getting what little would come out of USTR which you know was smuggled out in the middle of the night or you know probably just left out the trash or whatever it was on but it would show up on Reddit and then you would have these conversations that would happen and be like well you know okay how are we going to activate how are we going to do this that's a very powerful tool for those of us in this community care about this to have is just a place and a way to convene it's the reason we started engine was to bring together the startup community to convene on this and meet with government Reddit's a great tool for that we'd love to see some mix of that that's you know springing up in other countries as the sort of consciousness on this continues to proliferate around and you know different countries and you know international organizations begin to to take you know stands on so I think it's it's just important to build you know sort of the copyright civil society as it were internationally so that there are folks that will get on a subreddit and say hey I heard about this this seems bad let's talk about it what can we do and I just it's so easy now to do that and get activated that the more light we bring on to this as community internationally it's going to be good and the same thing on the positive side I think that may end up being one of the biggest impacts is that there will be places that take a more you know sort of innovation centric approach to copyright and we'll start to see new businesses there and unfortunately that may not be here but we're going to start to see those and we're going to start to see data come out of other countries to take a digital approach to these things let me focus on something that might be possible it hasn't been mentioned by anybody here it's possible copyright reformer I think actually has a chance of moving forward in fact it almost passed in 2008 that's Orphan Works reform and this is a very sore spot for me because a very good Orphan Works bill passed the senate in 2008 and I remember walking the streets of Winchester Virginia campaigning door to door for then Senator Obama begging Howard Berman to put the senate bill on the suspension calendar so it would become law and he refused to do it and I'm still his friend but in any event it was a very bitter pill to swallow but there's talk about Orphan Works making a comeback is that possible and if it is possible I hear that you know one of the main components of Orphan Works back in 2008 and some of the other libraries aren't interested anymore they're concerned that a bill would be led down with a lot of requirements and they'd rather rely on fair use so what are the possibilities can you start so I think that part of what's happened in the last several years 2006 was when the copyright office came up with a report about Orphan Works these are works that you can't find the copyright owner once you try to look for them right now there are a lot of works that are still in copyright formally but in fact the rights holders can't be found you don't know who created the work or the company went out of business or the author died or went to the hinterlands of West Virginia or something so what to do libraries, educational institutions archives, historical societies many of them want to be able to make some of these materials available on the internet we actually had a wonderful conference last year at Berkeley about Orphan Works and somebody from one of the early civil rights groups had these boxes and documents including pictures about the early history of the civil rights movement they wanted to put them up on the internet but they were scared to because of copyright so as you say it was introduced it looked like it was going to get close to passing it didn't in the meantime people have basically been saying look we'll try to do some searches for some of these rights holders if we can't find it we're going to actually make fair uses of them and so fair use has in fact stepped up and filled in some of the gap and even the Library of Congress has been relying on fair use to make some Orphan Works available so I think fair use now is part of the solution space but I don't think fair use goes far enough I still think some legislation would be desirable for commercial users of Orphan Works and particularly commercial users that would create derivative works so one of the features of the last Orphan Works failed that I think was a really good one which is that if you really thought that this let's say movie made out of a short story that was published in 1933 you try to find rights holders couldn't you go ahead and make use of it under what was then the Orphan Works legislation you make this fabulous movie it turns out that the rights holders finally shows up they can't enjoin the movie they can get some compensation for the value that they added to the work and so that's actually a fair trade because then the public is not deprived of further access to the work and also the rights holder in the derivative work can basically say look I'll pay you this fair share of the value but I deserve some I deserve some compensation too because I made this investment I've got good stars and blah blah blah and so I added value here so we all win and not just one entity so I think that it's really more for the creative reuses especially commercial uses that would probably not fall within fair use that Orphan Works legislation would be desirable and I think the libraries might be willing to support something like that as long as there was some recognition that fair use does play an important role in the Orphan Works space also for those of you that are not familiar with Orphan Works legislation what it would do is it would take works that are under copyright but for which the copyright owner could not be found instead of subjecting them to the statutory damage the huge statutory damages that you heard about before you just have to compensate for reasonable compensation if the owner in the very unlikely case they come to the fore and say this is mine they would get compensated as opposed to having statutory damages available to them okay one last question and that's about the copyright office's recent decision to remove the exemption from unlocking cell phones so one might ask this is the DMCA exception one might ask well why did the copyright office and if they granted it you'd hit him for those of us who like interoperability and the ability to take your cell phone from one carrier to the next is why in God's name did they get rid of it should they have been there in the first place and we should even be a question whether unlocking cell phones is a violation of the DMCA why don't we just go down from Mike and just one day I'm going to see to a lawyer on this question first and then I'll go back but I mean we need to promote these ideas and be able for interoperability purposes we're moving into a situation where we're going to be jumping between carriers or switching devices or traveling internationally in ways that we've never worked before but I'll leave it to you The Digital Millennium Copyright Act developed a set of rules about making it illegal to bypass a technical protection measure that some copyright owner was using to protect their work The idea that gave rise to the legislation in the first place was that many content owners were unwilling to make digital content available unless they had the reassurance that a technical protection measure would control unlimited copying of them and so the content scramble system that is available for protecting DVD movies from being copied easily is an example of a TPM that you're not supposed to bypass to make unlawful uses of it so it was supposed to be trying to stop copyright infringement and that was all it was supposed to be doing it was supposed to be a kind of preventive measure and what's happened of course is that TPMs are now used technical protection measures in all kinds of things and so the idea that you should be able to control the bypassing of those technical measures is something that the law granted a very very broad right to control and so the last copyright office proceeding they said this isn't about piracy so I think that's why they granted an exemption and then probably the content owner said we don't like any exceptions to the law so it's the telephone companies right it's any competitive is what it is and so this is not copyrights business there is actually an interoperability exception to the DMCA but it has not been shall I say specifically to deal with this and so copyright office in some sense weighing in on something that really isn't part of their mandate but that's what happens when you get an overbroad law Tom and Eric I want to comment on the specifics of that but I'll just say it shows how dismaying the copyright has become it's basically become this huge regulatory regime administered by yet another federal agency and you folks here in the room may not keenly appreciate this but if you get very far from DC these edicts are not well received they come from out of the blue they seem uninformed at any rate they're extremely complicated we have an expert in the field and you say I'm pointing to the lawyers it doesn't have to be that way it shouldn't be that way it should be a lot simpler yeah I mean I'm not surprised to see them using that I mean we see the DMCA used for links we see the DMCA used for plot spoilers we see the DMCA used for you know all kinds of things that it wasn't much beyond it's original intent because it was so broad taking down NASCAR photos of big major crashes so I'm not surprised so anyway thank you everybody Public Knowledge has its own copyright reforms on the internet blueprint.org and thanks for everything thanks for coming thanks for having us there's one more panel about copyright law and copyright law reforms this is about the first sale doctrine and earlier today Michael an intelligent guy said that the first sale doctrine is one of the most important copyright issues that's facing us in the future today now what would possess him to say something like that when we think about copyright we think about protecting artists we think about their use we think about the digital millennium copyright act why is first sale sort of this important next step so we have a distinguished panel to discuss exactly that issue why it's so important we have Christina Mulligan who is a fellow at the Yale information society project Andrew Short who's the executive director of the owners rights initiative and Brandon Butler who's director of public policy initiatives at the association of research libraries so first sale a doctrine that allows us to have lending libraries have used bookstores to have DVD rentals enshrined in US law since at least 1908 but how does it work and why do we have it Christina can you start us off and Andrew and Brandon just feel free to jump in right after so I'm going to talk a little bit about what first sale is and then I'm going to give you four reasons why it's a good thing first sale doctrine is the idea that once you buy something the previous owner or the person who manufactured it can't dictate how you use it whether you can resell it once you have it it belongs to you and the origins of first sale come before we had intellectual property it's actually an idea from personal property law in order that exists to protect the rights and interests of downstream purchasers of objects reasons behind this reason number one that you should like for sale is that it promotes economic efficiency and lowers the transaction costs of buying and selling goods these are sort of big economic words but we can intuitively understand this just from our own personal experiences when you have a pen or you have a coffee mug you don't think to yourself now wait, is this coffee mug licensed to be used by my house guest I can't remember I don't want to go beyond uses of the coffee mug oh darn it, was this the pencil that I owned free and clear or was this the one I can't use on Saturdays or Sundays the weekday only pencil we don't think about things like that because it sounds crazy and because personal property law generally doesn't allow manufacturers or previous owners to put usage restrictions on what you can do with objects and the reason behind this is sort of obvious because you would go crazy trying to figure out what you can and can't do with everything it would be extremely costly and generally very economically inefficient so one reason for sale is great in a property or an intellectual property context if you have a book or a CD or a record is that it lets people do things fairly easily and understand what the scope of their rights are in an intellectual property context specifically there's three more reasons why you might really like for sale one is it promotes the availability of works at low or available prices not for sale you wouldn't necessarily have libraries you wouldn't necessarily necessarily have secondary sales of works excuse me on ebay or secondhand stores and as we know from our own experiences as children or maybe when we were in college a lot of works are available at lower prices than they might have originally been which lets knowledge become more accessible to more people second it preserves access to a work when the original copyright owner might not be present or no longer be making it available so you know we're all familiar sometimes there's a book often in fiction or nonfiction that was popular say in the 70s and there's nobody making it now the only way to get it is to buy it from a second hand someone who bought it previously and this is a very important value when it comes to historical things sometimes there aren't people making works available who have the right to and so first sale has an important role in preserving knowledge in this fashion and third it promotes innovation the ability of people to use things in ways that the original previous owner the original manufacturer might not have anticipated people could use them this is also a good thing because it promotes advances in science and technology and makes things more efficient so those are the reasons why we have first sale but can we talk a little bit about well how why do we need first sale in order to do those things what prevents people from doing those things just ordinarily so I mean what is it about copyright law that requires us to have this particular doctrine how does it stop people from innovating from having low prices from these efficiencies so in a traditional context people the copyright statute did not give copyright owners people that made works the right to control uses of the work they would control the ability to reproduce and distribute the work but once you had it you would not be able to control further distributions and that's because of section both the limited scope of the rights the copyright owners have and also section 109 of the copyright act which makes that explicit but even before then common law judges in 1908 acknowledged that due to regular property law first sale was a value that existed perhaps even without the copyright statute specifying it do you want to go into the digital how it's different in digital politics I think we might pick that up in a minute because you mentioned section 109 right and section 109 is what is sort of the embodiment of what the first sale doctrine is today right that's been on the books since 1976 or so since the 76 act and but why if it's been on the books since 1976 why are we talking about this right now there's a supreme court case interpreting this language that's been sitting there for a few decades how is it controversial now so we've got a supreme court case Wiley and Sons versus Kurt Seng and it has real effects for it seems libraries and retailers and all sorts of people and Brandon Andrew did you want to talk a little bit about that you do a good shtick on this one can you tell Andrew and I've been doing meetings we've probably met with some of you about this already and the rest of you are entertainment lobbyists who are here just to follow me at home so we've been talking about this for a while now because of this case so what's going on in the Kurt Seng case is that we have a very self-starting young man named Supab Kurt Seng who is Italian national and is here in the US going to school and he wrote home to his family and said you know gosh my textbooks here in the states sure are expensive what do they cost do you buy them back home and it turns out they cost a lot less and these are legit textbooks right the real deal licensed by Wiley these aren't counterfeit but they're printed a little bit more cheaply and priced lower to be acceptable on the time market right so the family buys a copy for Supab and he says now wait a minute there's a huge difference here and these prices are there more on the shelf can you buy a few more and I'll start selling them to my friends here in the states so Supab got a pretty nice good business going there buying these copies again legit copies retail right he's not stealing them from the printer before they get to the store he's buying them the way anybody would and then shipping them back home shipping them to the states and then selling them online and Wiley brought a lawsuit saying wait a minute we have a right to control importation of these books right we can exclude these books from the market and Kurtzane's defense is the first sale doctor he says look we bought these fair and square these are legit copies we're way downstream in the stream of commerce here I didn't play any tricks on you not under any contract with you I'm a normal buyer I should be able to turn around and sell this copy that I got and that's where we are now in the Kurtzane case is this dispute over whether the first sale doctrine protects works that were printed abroad and the origin of this controversy is that there are two unfortunate three unfortunate words in section one of them right so what kinds of works are subject to the first sale doctrine and it's works that are lawfully made under this title and those three words are sort of opaque right we don't know it's not clear whether they mean would they be lawful had this title applied no matter where they are right are they lawful or as the courts have so far unfortunately in the district level interpreted doesn't mean lawfully made where this title applies i.e. here in the United States if that latter interpretation is upheld by the Supreme Court though what that's going to mean is that not only people like Mr. Kurtzane who maybe are making money with this but sort of anyone who is buying things lawfully that are made abroad even if those things are sold for the first time here in the U.S. because all that matters is where it's made not where it's sold every good that is made abroad will suddenly no longer be subject to the first sale doctrine which creates chaos you know dogs and cats living together so we're really concerned about what's going to happen if the court gets this wrong right at that point you have to rely on fair use and that means every single good is subject to subject to a subjective sorry for the redundancy subjective test and it's just not as clean as the first sale doctrine and part of the problem with goods that are coming across the border is you know multiple parties could have rights to a particular good so it's never as clean as saying that there's a single copyright holder to a particular work that was then made overseas and shipped into the United States four or five different people like you do with movies and music different people are assigned different levels of rights in order to publicize the movie and sell the DVD and all those types of things so a world without first sale and a first sale doctrine that protects consumers immediately after that first sale that legitimate first sale has been made is completely chaotic it's not a world that policy makers want to wake up in well okay so but you're talking about consumers and you're concerned about them curtain isn't an end consumer right he's a reseller and for another matter he's importing works right I mean you know there's a section in the copyright act that says if you're importing something and distributing it you need the permission of a copyright holder to do that I mean how how is it that that this that that first sale should override that well the problem is that there ought to be right the counter argument to all of the concerns that we're raising is that there is a legitimate interest and I absolutely believe that this is true there are good public policy reasons for folks to sell things at different prices in different places right and the question is how do they preserve that right and to what extent should they be able to preserve that right and so there's a whole arsenal of legal tools at the disposal of the folks who want to sell things abroad and ensure that when they for example license someone to print a hundred thousand copies that guy who printed the hundred thousand doesn't turn around and mail them back to the US right so there are ways for them to really try to control their supply chain in pretty in pretty powerful ways the question is should that go so far that once there is this lawful sale the control continues in essence forever right we're not even just talking about Kurtzang the people who buy the books from Kurtzang would also be subject to this problem so if the other the other kinds of problems that we have and there were other cases about this before are where you lawfully buy things from someone like overstock.com right and that thing if it was made abroad even though you bought it on a US website that thing could be subject to copyright protection a better example that we often use is Goodwill who's a member of the coalition we're talking about products of Goodwill right it could be everything it could be a t-shirt with a logo on it it could be a pair of jeans that now has a copyright affixed to it and the problem with Goodwill is one they don't buy anything everything is donated so they don't know where anything comes from everything is potentially not resellable and because you can't tell what things were licensed how once it gets efficiently downstream then people are paralyzed and feel like they can't do anything because it's just too costly to figure out what you can and can't do with stuff right and it ties back finally to the last panel when we were talking about the problem with no formalities for copyright so sort of everyone has copyrights all the time and any crazy person can assert their copyrights right and so you're at the limb of the craziest possible copyright owner it's not just sophisticated you know sophisticated businesses you can get a CMD from any Waco and that sort of sets you off down this road of wondering how to change the way you do business Randy, Andrew mentioned some specific lawsuits did you want to yeah libraries get sued man so a lot more than you would have thought this is a relatively novel development but it coincides with the general rise in copyright angst around the world because of new technology right so libraries are fairly determined to make our collections useful in any way that we can and we rely on fair use for example to do things like digitize and to support teaching with digital versions of books in the library and things like that and there are two or three major lawsuits pending in federal appeals courts right now I'm beating the pavement every day putting together amicus briefs and working on this so it's not at all a fantasy that libraries could get sued over copyright and you know I love fair use like we live and die by it we are all of these briefs are about how important fair use is but it's hard to litigate you know it is a challenge and when we have a sort of fundamental clear bedrock principle like first sale that makes our lives a lot easier right we can focus on the interesting cutting edge stuff with fair use but we need that bedrock principle first sale to get our jobs done in a very basic way