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October 28, 2009

Marlene H. Dortch
Secretary
Federal Communications Commission
445 12^th St. SW
Washington, DC 20554

RE: Notice of Ex Parte presentation in CS Docket No. 97-80, MB
Docket No. 08-82

Dear Ms. Dortch:

On October 27, 2009, I met with Bureau Chief William Lake, Assistant
Bureau Chief Robert Ratcliffe, Alison Neplokh, Jeffery Neumann, Brendan
Murray, Nancy Murphy, and Mary Beth Murphy, with regard to the above
captioned matters.

With regard to the pending waiver request by the MPAA, I noted the recent
deals between Comcast and Time Warner, as well as the other agreements
previously noted, to release movies in advance of the existing VOD
window. Staff asked what protection Comcast had offered to address piracy
as conditions of early release. I responded that a) I was unaware of any
special arrangements to address these piracy concerns; and, b) whatever
protections were provided, it is clear that they were provided without
the need for the pending waiver. The Commission should therefore permit
the marketplace to operate under existing rules rather than create
uncertainty by the grant of waivers.

I noted the lack of any evidence that indicated whether the ability to
turn off selectable output controls has any impact on illegal copying.
Staff asked if it didn’t “just make sense.” I observed
that, to the contrary, it did not “make sense” in light of
evidence already introduced that illegal copying occurs prior to the
availability on VOD. If such evidence existed, Petitioners could produce
it quite easily. For example, if the inability to deactivate selectable
output controls contributes to illegal copying, the number of illegal downloads should dramatically spike
whenever a movie is released on VOD. Further, given the
growing number of movies released earlier than the window, it is possible
to demonstrate the impact of the existing rule by noting whether illegal
copying rates for the earlier release version vary dramatically for
similar movies released under the existing window (controlling, of
course, for such factors as popularity and audience demographic and other
relevant factors that would assure a relevant comparison). The failure to
produce any such evidence is telling.
In the context of a data driven agency, the failure to produce such
evidence should be particularly inexcusable.

I further noted that accepting an argument without evidence because
“it just makes sense” shifts the burden for the extraordinary
relief requested from Applicants to the public. Such an outcome is not
merely contrary to Commission rules and precedent, it places an
impossible burden on those opposing the waiver.

Staff questioned Public Knowledge’s assertion in its recent written
ex parte that grant of the waiver would advance the availability
of the content by “only 30 days,” as MPAA has stated in its
waiver application that it will facilitate release of movies
before the existing DVD window. I noted that MPAA has failed to
commit to any timetable for release and could satisfy this language by
release of movies a single day before the existing DVD window. If the
Bureau believes that the length of time is a relevant detail, it should
at a minimum require Applicants to submit some evidence into the record
as to how much they will shorten the window.

Staff also questioned Public Knowledge’s insistence that MPAA
produce some evidence relating to the value of moving the release window
to VOD, or evidence that the existing rule is a barrier to resolving this
through standard marketplace negotiations. Staff asked if it did not
logically follow from the fact that people will pay to see first run
movies or will pay for VOD that moving the window has value. Staff
further asked why, if the rule does not present a barrier to
renegotiating release windows, have studios not already done so and could
staff not take this refusal to negotiate deals as evidence that a waiver
was needed, given the assumption that it is valuable because people will
pay to see first run movies?

Noting in passing that this argument rests on multiple untested
assumptions, that Applicants have not based the application on generic
value demonstrated by willingness to pay but on the purported value of
accelerating release to those who have difficulty reaching a theater or
ordering from a DVD delivery service, I observed that such suppositions
do not constitute evidence of a public interest need. If the Bureau
accepts the logic that the refusal of an industry participant to cut a
deal is evidence that a rule does not serve the public interest, the
Bureau would do well to abolish the rule entirely through a rulemaking
rather than invite an endless stream of special interests lamenting that
Commission rules frustrate profitable deals and that the public interest
would be served by allowing parties to engage in conduct previously found
harmful so as to facilitate this dealmaking.

Indeed, as to why parties do not conclude such deals, I noted that the
Bureau’s apparent willingness to entertain these arguments as the
basis for a grant of a waiver create a “moral hazard” that
creates uncertainty within the industry as a whole. Because the Bureau
holds out the possibility that it will rewrite the rules for specific
companies on request, with varying allegiance to the purportedly rigorous
standard imposed by the Commission’s rules and precedent, the
resultant uncertainty induces parties to behave strategically rather than
negotiate in their best financial interest. Worse, because these waivers
have industry-wide effect, the resultant uncertainty impedes the
willingness and ability of those not parties in any given proceeding to
engage in business negotiation or product development.

Staff asked me to address what harm would result from grant of the
waiver. I again observed that the applicable standard is that Applicants
must show a public interest benefit and that shifting the burden to
waiver opponents to demonstrate harm is contrary to Commission rule and
precedent. Worse, the creation of such “street law” on burden
shifting undermines respect for the Commission’s rules and the
ability of any industry stakeholders or the public to rely on the rules.

In addition to this broader institutional harm, grant of the waiver would
replace the previous bright line rule with an exception capable of abuse
and difficult to monitor. This was one of the reasons the Commission
imposed a clear prohibition in the first place. Further, the fact that 25
million MVPD subscribers would need new equipment to benefit from the
waiver makes it certain that consumers will suffer confusion, frustration
and that many will believe incorrectly that they must buy or lease new
equipment at additional expense. This will render devices such as Sling
Box and TiVo useless for the content provided. Finally, to the extent the
waiver includes content released earlier than the existing window after
the time it would be available under the present rule, it deprives users
of the existing use of their devices for which they have already paid and
for which, in some cases, they continue to pay subscription fees.

In accordance with the Commission’s rules, a copy of this notice is
being filed with your office today.

Sincerely,

/s/

Harold Feld
Legal Director
Public Knowledge

cc: William Lake
Robert Ratcliffe
Alison Neplokh
Jeffery Neumann
Brendan Murray
Nancy Murphy
Mary Beth Murphy