February 25, 2018

Cablevision and Anti-Efficiency Policy

I wrote recently about the Cablevision decision, in which a judge appeared to draw a line between two kinds of Digital Video Recorder (DVR) technologies. (DVRs let home viewers record TV shows and play them later.) The judge found unlawful a Remote Storage DVR (RS-DVR) in which recorded shows are captured and stored in the cable TV company’s data center, but he apparently would have allowed a Set-Top Storage DVR (STS-DVR) in which shows are recorded on a device kept in the customer’s home.

Why should the law prefer that recorded shows be stored in the customer’s home? The judge’s reasoning was that the cable company is more involved in an activity if that activity happens in its data center. This appears to follow from the judge’s reasoning even if the alternative in-home STS-DVR is owned and controlled by the cable TV company. But I’m not asking what the law says; I’m asking instead what it should say. Why should the law prefer STS-DVRs over RS-DVRs?

If the goal of the law is to protect copyrighted material – and remember that this was a copyright case – then you might expect it to favor solutions that are more controllable or more resistant to content ripping. But the court got the opposite result: Cablevision was liable because it had more control. The result will be more customer control, which is a benefit for many law-abiding customers.

The court’s ruling also has implications for technical efficiency. Central storage is arguably more efficient than set-top storage in the customer’s home, because of economies of scale in managing a central facility. The court’s decision pushes companies toward set-top storage, even though it is probably less efficient and offers virtually the same functionality as central storage.

It might seem at first glance that public policy should never try to increase the cost of a lawful activity, but in fact there are exceptions. It can sometimes make sense for policy to raise the cost of an activity, if that activity has benefits but can harm nonparticipants. Raising costs rather than banning the activity outright can prevent marginal uses while allowing those uses that provide greater benefit. Of course, if you want to argue that raising the cost of DVRs is good policy, you’ll have to make several assumptions about the costs and benefits of DVRs – assumptions that are very likely untrue.

Even before the suit was brought, Cablevision was already reducing the efficiency of its system in the hope of improving its legal position. For example, their storage facility had a separate storage area for each customer, even though it would have been much more efficient to use a single shared pool of storage. If 5000 customers asked to record last week’s episode of Lost, Cablevision would store 5000 identical copies of that episode, one in each customer’s areas. It would have been easy, and much more efficient, to store a single copy. The only sensible reason to keep redundant copies is that a system with individual storage areas might look to a judge more like a set-top DVR system, thereby bolstering the argument that the system is just like a (presumably lawful) STS-DVR. In other words, even before the recent ruling, legal factors were pushing Cablevision toward a less efficient implementation.

For the companies who filed the suit, the goal was not to serve the public but to maximize their own economic advantage. What they cared about, most likely, was simply establishing that one had better come to them for approval before doing anything new. By that standard, they must see the suit as a big success.

Comments

  1. There’s a number of viable reasons to store multiple copies of the same program in different places: e.g. bandwidth and random accessibility. The bandwidth from multiple drives is higher than from one. This is especially handy when different users start the replay of the program and different but nearby times. More users can semi-simultaneously watch the program if its storage is replicated many times than if it only resides in one place.

  2. (billb’s argument works for some small number of copies, but doesn’t point you to anywhere near one copy per customer.)

    I’m taken by the notion that public policy can be served by raising the cost of a lawful activity. It’s possible that beneficial uses would be preserved while marginal ones fall by the wayside, but also possible (given the usual market imperfections) that you would simply stratify access by income or market power (low for most consumers with respect to their cable company) or some other efficiency-orthogonal characteristic.

    What seems much more apposite to me is the situation where courts or legislatures (perhaps as proxies for the interest groups that elect or appoint them) disapprove strongly of a particular activity, but bright-line law prevents them from proscribing it outright. By mandating that the activity be carried out in an inefficient, roundabout, inconvenient and needlessly expensive manner, the courts or legislature can reduce the level of that activity without engaging in outright prohibition.

  3. Maimon Mons says:

    While it may be more cost-effective for datacenters to hold all video content, that is only assuming that the cost of transmission is relatively fixed. At some point it will cost more to “lay more pipe” to the homeowners because the lines are saturated.

    So while it may seem backwards to say that datacenters are not legal while home recorders are legal, I am glad that it was ruled this way for many reasons (My MythTV remains somewhat legal).

  4. Same happens in germany, online DVRs getting banned because of copyright violation. see

    http://www.heise.de/newsticker/meldung/83822
    and
    http://www.golem.de/showhigh2.php?file=/0704/51702.html

  5. jaxparrothead says:

    We have a set top DVR provided by Comcast. One big advantage for this type of DVR is that I can watch what I have recorded whenever I want, even if our cable is out. If our service is disconnected by the cable company, (if we dont pay), they send a signal to disable the DVR (along with everything else in the box). But, if the event of a cable outage, we can still use the DVR function on the box. In other words, as long as we pay for the use of the DVR, we control access to that content.

    I am not a lawyer, but it does seem that this could have played into the judges decision somewhat.

    Also, if the content is stored on the server of the cable company, they could change, or add to, what was recorded. It would be very easy for a cable provider to insert a commercial into the program, thereby generating more revenue. Even it ifs just a short announcement at the beginning of playback, such as “This recording brought to you by your local Ford Dealers”, they could make quite a bit of money. Cable providers dont really care about our entertainment, only their bottom line.

  6. @jax:

    Just as easy for the provider to download/insert commercials into the recorded content on your DVR. As long as the software on the DVR is controlled by the provider, the illusion of user control is just that: an illusion.

  7. An interesting spin-off thought … what if the RS-DVR was *so* much more efficient than the STS-DVR, that it was clear, perhaps even inevitable, that it would drive all other options from the market. In this sense, banning the RS-DVR might be seen as “competition preserving”.

    The cable company would be in a position to create a monopoly, derived from the pre-existing relationship between the cable company and the customer.

    It’s worth noting that many anti-monopoly measures are also anti-efficiency, if not be design then certainly in effect. Natural monopolies are often self-enforcing by virtue of the efficiencies provided. The nature of software – hard to write once, easy to sell 100 million times, resulting in a highly efficient production process and a near monopoly position – is one example of this.

  8. One solution to the bandwidth issue is by using Multicast distribution
    http://groups.google.com/group/nz.comp/msg/b8694481cc02cb0f

    I began investigating Multicast back in 1996 to as a potential solution to New Zealand’s then lack of overseas bandwidth. The business model failed because the major DSL provider , NZ Telecom, kept promising to deliver the bandwidth and volume to customers via ASDL. Even today NZ Telecom have still failed to deliver a working flat rate ( no charge on data volume overage and even local traffic is counted ) broadband account that would be necessary to deliver higher definition video on demand.

    Cable and wireless providers have potential for multicast delivery already built into their network. A lot of Telecom DSL network equipment also has the capability to provide multicast, but it has to be enabled.

    Since 2000 the price of hard drives have dropped to the point where a 320G HD is little more expensive than a 80GB model. Modern Desktops and Laptops have many time more the processing ability run the multicast receiver client. Even Most high end ADSL/CABLE/Wireless Linux based routers have processing power to run the required multicast receiver client ( The hard drive could be attached via USB or embedded in the router or installed on a local computer and mounted via CIFS/NFS etc ).

    A demand driven model, such as I described back in 1999 …
    http://groups.google.com/group/nz.comp/msg/b8694481cc02cb0f
    … would preserve the “common carrier model”, where the end user is the one selecting and executing the distribution of content, that protect the ISP and Backbone providers from copyright violation claims.

    In the same way that an ISP’s transparent http proxies and deliver a 20%+ reduction in external bandwidth usage, with the resulting drop in the ISP’s external bandwidth expenditure, multicast proxy servers could deliver much larger volume of data.

    The technology to provide this is here today, the software required can be quickly cobbled together, the real problem is the business model. While ISPs and Cable companies can set data volume limits and charge overage or restrict bandwidth there is no impetus for those same providers to provide any form of multicast workaround to provide extra data volume to their customers.

  9. jaxparrothead wrote “If our service is disconnected by the cable company, (if we dont pay), they send a signal to disable the DVR (along with everything else in the box). But, if the event of a cable outage, we can still use the DVR function on the box.”

    This seems needlessly evil on the part of the cable provider. If you don’t pay to receive current programming, not only don’t they send you current programming, but they also reach into your box and disable access to your recorded stuff?? Unless you are renting or leasing the box and fail to keep up on its payments (in which case they can repo the box) I don’t see justification for this. But there’s an obvious workaround: disconnect the cable. If, as you say, the box continues to work if your cable is out, then it will continue to work (and not get their “stop working” signal) if you disconnect it before discontinuing your cable service for whatever reason.

    Properly, your DVR should be like a VCR and collection of taped shows — you can rewatch them at your pleasure, without needing anyone else’s blessing. Maybe not make copies for friends, or give the tapes away, but use them yourself in your own home. If that isn’t how your cable service is actually working, then it isn’t working for you, and it is being gratuitously nasty. (Watching a show you’ve previously recorded doesn’t consume any of their resources or cost them anything; so why should they get to charge you for the privilege?)

    More generally, the discussion here serves as a woeful reminder of how terrible cable monopoly is in many parts of the world, and how more broadband competition is needed just about everywhere, stat.

    As for making something artificially more expensive via legislation, the one circumstance that I see as justifying that is where it has significant negative externalities that should be transferred back to the user somehow. Activities that pollute come most readily to mind, and cap-and-trade schemes with CO2, sulfurous gases, and other smokestack effluents serve as examples. Basically it makes the more polluting industries have to pay for emissions permits, which makes them feel the cost (a negative externality) their activities impose on the environment. The money can even be used for mitigation activities. Hefty taxes on cigarettes (which produce secondhand smoke) are another case in point, particularly if the extra tax revenue is rolled into health care and addiction research.

    I don’t see a case for raising the cost of home taping of TV shows. If there were one, it should be debated in open session in the legislature, and then implemented honestly and directly as, say, a blank media tax. Sneaky and circuitous ways to make it wastefully inefficient without even trying to capture the extra money and use it to mitigate … whatever bad things they think might result from excessive home taping? Nope. Not justifiable.

    (Nor is the hypocrisy of some nations that have BOTH a blank media tax AND civil and criminal penalties for non-profit home copyright infringement. Where I come from, that’s called double-dipping. Or maybe even double jeopardy.)

  10. Tomer Chachamu says:

    Sky (from BSkyB from News Corporation) is a UK satellite service. Their Sky+ box (and Sky HD box) costs £100 and £300 respectively. You also need to pay for the DVR functionality (£0 and £10 for SD and HD respectively). You also need to pay for a normal subscription (at least £15 a month), and you also need to pay for a UK TV license fee (£11.29 a month).

    Sky has reserved the right to disable component outputs on the HD box selectively at any time. If you remove the £10 a month package from your subscription, your DVR functionality is gone (including use of previously recorded programs). If their is no signal, your DVR functionality is gone. In fact, if you are watching something prerecorded, it will actually pause playback until signal is restored. (This is *extremely* frustrating.)

    A “copy” functionality is provided where the box plays back an entire recording, or several, without stopping. (Presumably unless the signal is lost.) I don’t know whether Macrovision is added. There is no optical drive and none of the data ports (ethernet, USB etc) are used. Firewire capture is not available.

    You are not allowed to disconnect your box from the telephone line. (It is used for VOD ordering and to receive firmware updates.) If you do, you face a fine on your next bill.

    If you record something from VOD, you can only keep it for 7 days. Other recordings have no expiry date.

    The box (£100 or £300) is yours to keep, but without a valid viewing card, it is useless. You cannot sell it used, because anybody who wants DVR functionality has to (AFAIK) buy a box from Sky when they add their £10 a month package.

    They call this service.

  11. The core problem with Cablevision’s remote-DVR solution is that is technologically pretty much the same as the video-on-demand solutions being offered by various cable companies. Whichever way you do it, somewhere, in a Cablevision machine room, there are racks of hard drives with stored copies of TV shows. If you call it a video-on-demand system, then there are (I presume) licensing fees paid for this new service. If you call it a remote DVR, then those licensing fees (I presume) aren’t paid. If Cablevision worked out a revenue-sharing arrangement with the source channels, I’ll bet everybody would be happy.

    Devil’s Advocate: When you argue that there’s a slim difference between a remote-DVR and a remote video-on-demand service, you’re now also effectively arguing that there’s a slim difference between a local-DVR and a remote video-on-demand service. Follow that to its logical conclusion, and you’ve got to pay for the right to record shows on your local DVR. The only thing saving you is the (presumably still) legal basis behind home video recording.

  12. Tomer Chachamu says “Sky is a UK satellite service”.

    Actually, Sky is some kind of fascist organization masquerading as a satellite service. Not that most satellite so-called services behave much better, e.g. thinking somehow they should be able to charge you for viewing the signal whose footprint you’re sitting in regardless — actually viewing the content doesn’t add to their incremental costs, so really you ought to only have to buy the receiver box and pay for the electricity to run it!

    Imagine the 1987 equivalent: an organization representing the cable companies got the government to legislate mandatory registration of all VHS and Betamax recorders, and they had inflated prices for consumers, triple what they actually were. Don’t pay your cable bill, and the cable company can send goons to take your VCR or tapes or both.

    Nah, that’s not 1987; that’s 1984. Orwell’s 1984.

    It’s time to put a stop to this nonsense before it’s too late and we’re all in the soup!

    http://www.dklevine.com/general/intellectual/againstnew.htm

  13. The way I see it, the “Tivo model” works.

    The tech-heads agree that local storage and local time-shift is a useful feature, hard drives are cheap and getting cheaper, and the media companies can stick with their standard single broadcast technology that have had time to get used to and they are happy with. Yes, Tivo makes it easier to skip through the ads, so does any decent VHS unit. The legal precedents are all in place, everything has been argued out already and we have decided that the Tivo model is legal (ignoring Linux GPL issues for the moment :-). What I’m getting at is we have a good system already that has evolved along with the VCR industry and all parties are reasonably settled.

    It kind of makes sense NOT to go rocking the boat and looking for yet another way to achieve the same result. Use technology to address a real need, rather than rebuilding the same wheel again and again with minor changes to the tread pattern.

    If you want to be disruptive, find a way to merge online web cartoons and podcasts with the existing Tivo model to make a unified media catalog that can borrow from both the broadcast and online world — then package it in a consumer product (the obvious “next step” for the Tivo model). There’s already been a few free software cracks at this unified media system but nothing packaged neatly enough for the consumer market.

  14. cisco kidd says:

    Down with the cable company, they want a cheaper way of doing bussiness will that translate down to the consumer ? NO WAY PRICES WILL GO UP AGAIN !!!!!

  15. “There’s already been a few free software cracks at this unified media system but nothing packaged neatly enough for the consumer market.”

    But they are getting more mature?

    And the studio executives and other copyright fatcats are wetting their pants with every attempt?

    Good. 🙂

  16. Valintino, this is at least the third largely identical comment you’ve posted. While praise is nice, this sort of repetition doesn’t accomplish anything useful and clutters up the blog. It is also not as interesting as actually joining the discussions with original thoughts of your own beyond a simple reaction to the site as a whole.

  17. Joe Pallas says:

    Nobody seems to pay much attention to what I think is Judge Chin’s most interesting pronouncement: “The fact that plaintiffs and other programming owners have not sued cable operators over the legality of STS-DVRs does not insulate the RS-DVR from such a challenge.”

    In other words, he’s implying that STS-DVRs are not necessarily covered by the Sony decision because “ownership of the RS-DVR set-top box remains with Cablevision and the RS-DVR requires a continuing relationship between Cablevision and its customers.” That’s true of any DVR that isn’t purely stand-alone. An STS-DVR is useless without the program guide from the service provider, whether cable, satellite, or TiVo.