By Jeffrey Krauss, digital copycat and President of Telecommunications and Technology Policy

Now, a similar deal is in the works for digital video. It directly affects the cable TV industry. It should allow earlier performance windows for hot new movies on pay-per-view, but it could raise the cost of set-tops. On balance, if movies are made available to cable earlier, it seems to me that this is a reasonable tradeoff. But it all depends on the details.

Digital audio copying

The Audio Home Recording Act of 1992 required that digital audio recordings carry a few bits of copy control information, and digital audio recorders are able to make copies only if the proper control bits appear. Under the law, a consumer could make first generation copies of a digital audio recording, but could not make second generation copies. This constrains wholesale piracy but permits consumers to make digital copies of recordings. In addition, blank tapes and digital audio recorders carry a small royalty fee, which goes to the recording industry as a copyright payment.

This deal was negotiated between the Home Recording Rights Coalition (HRRC) and the Recording Industry Association of America (RIAA). The HRRC, a group of consumer electronics manufacturers, had been formed years earlier to fight the copyright infringement lawsuit that was brought by Disney Studios against Sony and other VCR manufacturers. If Disney had won, all home video recording of cable and broadcast programming would have been prohibited. But the HRRC won. You should check out the HRRC web page at

The audio taping legislation covered only recording of prerecorded media, not taping of broadcast or cablecast programming. But the video recording legislation will cover copying of pay, pay-per-view and video-on-demand programming, as well as prerecorded media.

The HRRC is now negotiating a video copy protection bill with the Motion Picture Association of America (MPAA). As I write this, the text and technical details haven't been released yet, but the broad principles have been shared with me.

There would be no restriction on making copies of digital broadcast or basic cable programming. Only first generation copies could be made of digital pay TV programming such as Home Box Office. No copies would be allowed for digital pay-per-view and video-on-demand movies and digital pre-recorded media. And these restrictions would apply to analog recordings of digital video transmissions, not just digital recordings.

So digital video transmissions would carry a few copy control bits, just like digital audio. Digital VCRs would be prohibited from copying PPV, VOD and copies of pay TV programming. Analog VCRs would be prevented from making these copies because digital cable boxes would be required to add Macrovision copy protection signals to their analog output. In addition, copy control codes would have to be added in the vertical blanking interval of the analog output signals. And it is these requirements that could create a cost impact on the cable industry, because they require additional circuitry in set-top boxes.

It is a little troubling to have a law that requires the use of a specific technology. But evidently Macrovision is the only analog copy protection technology available. I've been assured that the cost of Macrovision chips will be low. We'll see. Moreover, since the Macrovision technology is proprietary, Macrovision is entitled to patent royalties. I've been told that any patent royalties will be paid to Macrovision by the movie industry, not included in the cost of the set-top box.

I should point out that this law would affect DirecTV and Primestar boxes as well as cable boxes. They each will have several million digital-to-analog set-top boxes deployed by the time this law is enacted. One important question is whether they would have to make major modifications to their transmission formats in order to carry the copy control codes. And hopefully, the law will not require them to recall all the boxes now out in the market.

I do believe that some version of this bill will be enacted into law, although perhaps not until next year. The MPAA, always a powerful force in Washington, now has tremendous political clout, since MPAA president Jack Valenti convinced the broadcasters to accept the V-chip ratings approach.

Benefits as well as costs

The motion picture industry is the victim of worldwide counterfeiting and illegal copying and sales of recorded movies. The MPAA sees digital video transmission as a new threat, because it permits pirates to make "perfect" copies of movies. Partly as a result, first-run movies are not available on cable PPV as early as they are available at movie theaters. An effective copy protection regime could change this practice.

But the devil is in the details. The details of the proposed legislation have not been released. Nobody has done a cost analysis showing the impact on set-top boxes. The movie industry has not promised to make movies available earlier for cable distribution. The negotiations have been between the VCR manufacturers and the movie studios, not the cable industry. If they force higher costs on us, what do we get in return? For now, we should say, "Sounds OK, but tell me more."