The main justification for the broadcast flag is that without some form of protection broadcasters won't provide high value content on HDTV. See, In the Matter of: Digital Broadcast Content Protection [PDF]:

Content owners and broadcasters uniformly assert that DTV broadcast content must be protected and that, in the absence of some protection mechanism, high value content will be withheld from broadcast television and migrate to pay services.

Okay, let's skip for the moment the fact that this assertion doesn't make a lot of business sense for the broadcasters, that the broadcast flag won't stop HDTV distribution on the internet anyway, that the content producers haven't withheld content from other distribution channels (DVDs) that allow for massive internet redistribution, there is no definition of what is "high value content" (Average Joe Millionaire's Apprentice Big Brother Marries an Extreme Makeover Survivor on Temptation Island?), that the broadcasters make no promises to provide such content even if there is a broadcast flag, and simply note that the FCC has rather gullibly accepted this assertion. If the broadcasters said it, it must be true.

Now, some CBS News stations are claiming that they will stop covering live news outside the so-called safe harbor for indecency Some CBS Affils Could Drop Live News:

CBS affiliates are telling the Federal Communications Commission that unless it changes its ruling about profanities on-air, many will have to stop doing news outside of the 10 p.m.-6 a.m. safe harbor for indecent speech.