Mr. Chairman, members of the Subcommittee, thank you for giving me this opportunity to appear at this very important hearing.

American consumers, and indeed consumers around the world, are entering a golden age of access to audiovisual content. Never before have consumers had so much choice in terms of the movies available to them, and the means by which they are delivered - theaters, VHS, DVD, cable, satellite, broadcast TV, Internet, advertiser supported, subscription, pay-per-view, video-on-demand - the list is long and growing. The same is true with regard to television programming.

The engine that is driving us into this golden age of consumer choice is technology. The motion picture industry has embraced technology, as witnessed by the DVD, to create new markets and bring new choices to consumers. However, technology brings challenges as well as opportunities. The greatest challenge is to maintain control over the distribution of movies and TV shows in order to recoup the cost of production and spur investment in new projects.

Fortunately, technology itself is a big part of the solution to illegal distribution. Digital rights management technology is being developed that will enable secure delivery of movies and TV shows to consumers and exponentially expand consumer choice. The high-tech industry is our partner in this endeavor. Contrary to the perception of some, the high-tech and movie industries are not enemies. To the contrary, we share a common interest in providing consumers new viewing opportunities, which will create vast new markets for both consumer technology and content.

That is not to say that the movie and high-tech industries are always in total agreement. We have different perspectives, which often result in conflicting ideas on how to achieve common goals. We are working together on a number of fronts to develop consensus solutions to content protection problems, some of which may require legislative implementation.

The greatest challenge facing the motion picture industry today is the widespread trafficking of movies and television shows on the Internet, mostly through so-called peer-to-peer "file sharing." The term "file sharing" is a popular euphemism for copying, which in the case of copyrighted motion pictures and TV programming, is stealing. The sound recording industry is being decimated by this insidious practice.

DRM technology is now being employed by movie distributors to prevent unauthorized reproduction and redistribution of digital works. However no DRM technology is available 100% of the time, or 100% effective when it is available. Some leakage is inevitable. And therein lies the problem. When movies leak out of a protected environment, whether through hacking of DRM measures, theft of unprotected copies, camcording off theater screens, or other means, they can be instantly made available to literally tens of millions of people over the Internet, instantaneously and with little or no degradation of quality.

Movie studios are actively engaged in finding ways to stem this leakage, such as by providing greater security for prints and promotional screeners, and use of more sophisticated DRM measures. They are also heavily involved in enforcement of their rights under the copyright law, not only through infringement actions, but through consumer education and working with colleges and universities to develop codes of conduct for students using digital networks.

One source of leakage that will continue to grow if not addressed is digital broadcast television. Because it is transmitted in the clear, digital broadcast television programming is subject to an extraordinarily high risk of unauthorized redistribution over digital networks such as the Internet. The threat of such wide-scale piracy, will lead content creators to cease making their high-value programming available for distribution over digital broadcast television. Because the DTV transition would be seriously threatened by such a development, with consequent harm to consumers, the Federal Communications Commission has initiated a proceeding aimed at adopting narrowly-targeted regulations mandating protection of digital broadcast television. These proposed regulations are based upon a cross-industry consensus developed by the Broadcast Protection Discussion Group, an informal, open forum created for the purpose of finding a solution to the broadcast redistribution problem.

The BPDG proposed implementation of a Broadcast Flag as the most appropriate and efficient solution for the protection of digital broadcast television. Use of the Flag would allow broadcasters to offer content creators the same protection against Internet redistribution that conditional access systems like cable and satellite can provide. The Broadcast Flag would not be required to be embedded in content, in the event that a content provider wishes to make its broadcast content available for wide redistribution.

The Broadcast Flag solution regulates a minimum number of products. Only consumer products containing modulators or demodulators would be directly subject to FCC requirements necessary for the protection of unencrypted digital terrestrial broadcast content against unauthorized redistribution. These devices include DTV receivers and demodulator cards for PCs. Other "downstream" devices would have to substantially comply with the terms of license agreements with authorized digital output technology. Demodulators are the most appropriate gateway to commence protection, because prior to demodulation the content is not in usable form; after demodulation, the content may be in usable form. Regulation of modulators is necessary in order to prevent other content protection systems from being undermined by the very rules necessary to protect digital broadcast television content. The FCC would also regulate a limited number of products that are capable of receiving protected but unprocessed content, or digital broadcast content passed in a certain way within a computer. Equipment used by satellite, cable, and other professional retransmitters of digital broadcast content would be exempt from the requirements. However, such retransmitters would be required to ensure that retransmitted digital broadcast content is protected once received by the consumer's set-top box.

The Commission would authorize a list of specified protection technologies, known as "Table A," for use with digital broadcast content. Without such a list, manufacturers would lack guidance concerning implementation of the requirements and disputes over their implementation would inevitably arise. Given the ever-changing nature of technology, narrow criteria drafted today specifying certain features for protection technologies may quickly become obsolete. Thus, we have asked the Commission to adopt flexible, market-based criteria for Table A technologies, to be administered by the Commission.

Contrary to what has been argued by some Broadcast Flag opponents, the Broadcast Flag solution will not prevent consumers from making an unlimited number of physical recordings of DTV programs, or from distributing protected digital broadcast content within the personal digital network environment, defined as the home or similar local environment. And the Flag WILL NOT intrude in any way on consumer privacy. Furthermore, implementation of the Broadcast Flag solution will have no impact on existing consumer equipment. The cost impact on affected equipment going forward will be insignificant.

Given the fact that protection of digital broadcast content is necessary to implement a robust DTV transition, the Commission has ample authority to act under existing legislation. The Commission has express statutory authority under 47 U.S.C. § 336 to adopt rules to prevent unauthorized redistribution of digital terrestrial broadcast television programming. Furthermore, the Commission has ancillary jurisdiction to adopt such rules under Titles I and III of the Communications Act.

Although there is a high level of consensus within the content, consumer electronics and information technology (computer) industries on the need for a Broadcast Flag, there are disagreements on the details of its implementation and in a few cases opposition to the Flag in principle. Much of the opposition to the Flag in principle is based on misconceptions of what it would do, like restrict home copying. (As stated earlier, the Flag would not hinder physical copying and enjoyment in the home in any way.) Other concerns address such issues as timing and standards for implementation. MPAA and a host of other Broadcast Flag supporters, including broadcasters, labor and professional organizations, advertisers and sports interests, recently addressed these concerns in reply comments to the FCC, pointing out that:

1. The current availability of the highest quality programming for free over-the-air broadcast is not sustainable if adequate protections are not adopted in parallel with the rapid expansion in broadband connections and DTV equipment. 2. Without the Broadcast Flag, the market will respond to the increasing threat of unauthorized redistribution by migrating high-quality programming away from broadcast television to other, protected distribution channels. 3. Illegal file trafficking in audiovisual works is currently like illegal trafficking in music was six years ago; but as technology improves, television programming will be as susceptible to piracy as music is now, unless a solution is already in place. 4. The threat of unauthorized redistribution over wide area networks is qualitatively different from that of any other previous technology, such as the VCR; networks such as the Internet allow the instantaneous, effortless, and costless worldwide distribution of copies with none of the restrictions or effort that applied to VCRs or other, physical recording technologies. 5. Those who are interested in negotiating a solution on this particular topic have already done so, and further delay is unnecessary; indeed, delay will allow device manufacturers to create a huge legacy of non-compliant products that may stymie the Broadcast Flag. 6. The Broadcast Flag is the only solution that preserves high-quality programming on broadcast television. 7. Existing equipment in consumer's homes will not be affected by the implementation of the Broadcast Flag. 8. Adopting the Broadcast Flag would not inaugurate a new regime of content protection, but rather would afford digital broadcaster the same ability to protect content that other distribution channels enjoy. 9. The criteria for Table A in the Joint Proposal are more objective than those proposed by any other party. 10. The Broadcast Flag does not at all restrict the number of copies a consumer may make of broadcast television. 11. Claims that the Broadcast Flag would prevent such uses as the transfer of content within the home, or the incorporation of broadcast content into a school project, or would require content owner approval for any such actions, are simply mistaken. 12. The Broadcast Flag does not apply to every device, and does not apply to the equipment of Internet Service Providers; it applies only to DTV receivers, DTV modulators, and a very limited number of related DTV consumer products. 13. The Broadcast Flag achieves the minimum level of restrictions necessary to prevent worldwide unauthorized redistribution of broadcast content. 14. The Broadcast Flag regulation would not pose any challenge to open source developers not already posed by the very concept of secure applications generally.