Raising a 'broadcast flag'

Spurred by Congress, studios and techies work on Internet digital piracy problems

Facing Congressional pressure, movie studios and technology companies are coming closer to agreeing on technology that would prevent digital broadcast content from being copied and distributed for free over the Internet.

Lawmakers hope that development will encourage the studios to produce more digital programming and spur the transition to digital television. The method in question, known as a "broadcast flag," has been the subject of debate between the industries for years now, but, with Walt Disney Co., News Corp., Viacom and other content companies pushing hard on Capitol Hill for some resolution, the sides seem to be moving toward each other.

To complete the process, both sides say, targeted legislation will be required. "It appears that our partners in the consumer electronics and information-technology industries agree that this targeted government action is both necessary and desirable," said Richard Parsons, CEO-designate for AOL Time Warner.

Just getting that far is a huge step forward for the industry. "We are greatly encouraged by the high level of interest from three different Senate committees regarding film piracy," said Preston Padden, Disney's top lobbyist. Senate Foreign Relations, Commerce and Judiciary Committees have each looked at the issue in the past month.

Both sides also have progressed on "plugging the analog hole": blocking users from copying analog content, converting it to digital format and distributing it online.

A still-thorny issue is stopping online services that allow users to download any content they want from another user's computer, a technology known as peer-to-peer file swapping, made famous by Napster.

"There is no known technical solution to the peer-to-peer piracy of unprotected content," said Intel Corp. CEO Craig Barrett, "and thus direct costs of any future solutions cannot be estimated."

Disney and News Corp. disagree, as they told Senate Commerce Committee Chairman Fritz Hollings. "We do not accept that in-the-clear pirate content can never be protected against copying on the Internet and that there is no watermark, chip device or screening system that will ever effectively put an end to this problem," wrote Disney Chairman Michael Eisner and News Corp. President Peter Chernin. "We have more faith in our high-tech brethren than that."

Movie studios should not expect legislation to pass this year requiring tech companies to add copyright protection to computers and all other copying devices, Sen. Patrick Leahy (D-Vt.), chairman of the Senate Judiciary Committee, said last week. "Frankly, I think it would be a disaster to try and legislate this today." He takes the side of technologists who do not want government interfering with how they build computers.

But Hollings plans to introduce legislation as soon as next week, sources say, that would require the industries to negotiate a solution within 18 months or face government interference.

Last week, both Barrett and Parsons said they don't want the government to get involved. While not wanting to move legislation, Leahy and Sen. Orrin Hatch (R-Utah), the panel's ranking member, asked the industries to report their progress to them every two months.