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Flagged for Interference

Tedstevens The Senate Commerce Committee approved a bill yesterday by Chairman Ted Stevens (R-Alaska, pictured at left) to make it easier for AT&T, Verizon and other phone companies to offer television service through their high-speed Internet lines. But the favors offered by the bill don’t end with the telcos; the entertainment industry got its share of goodies, too.

Here’s just one example. The measure would require consumer-electronics and tech companies to alter their products to deter users from redistributing digital TV broadcasts over the Internet. This “broadcast flag” requirement is similar to an FCC mandate that an appeals court struck down last year on technical grounds. The requirement, which will have the most pronounced effects on entertainment-oriented home networks and computers, was pushed hard by Hollywood as a critical protection against a type of piracy that does not yet exist – and may not be seen for quite some time. The studios worry about high-definition programs being bootlegged online, but the obvious protection there is the enormous amount of data involved. As broadcast, 30 minutes of high-definition video consumes as much as 34 gigabytes of data. Even if you compress the broadcast aggressively, you still need upwards of 2 gigabytes of data. Think about trying to upload that through a broadband pipe with a 256 Kbps limit – you’d have to fill the pipe for more than 17 hours. (Even using a relatively fast, 1.5 Mbps DSL connection to download the thing would require 3 hours.) Now imagine doing that for a two-hour movie.

The studios’ concern about Internet piracy is understandable, given that just about everything they produce for TV these days gets bootlegged online (albeit not in high-def). Still, over-the-air television is an advertiser-supported medium. The business is all about encouraging people to watch a show, not trying to limit the audience. Granted, TV aims for national or regional audiences, and bootleggers share files globally. Still, you have to think that ABC's experiment with free, advertiser supported TV-on-demand online provide a better response to the threat of online piracy than the broadcast flag.

YouTube, Brutus?

Youtubelogo_1 It doesn’t take much business acumen to know that it’s easier to jump onto a bandwagon than to stop it. Maybe that’s why NBC, which infamously forced YouTube to take down a Saturday Night Live snippet that YouTube had helped make famous, announced a deal today with its erstwhile antagonist.

The press release indicates that NBC will make clips from several of its shows, including “The Office” and SNL, available at an official site within YouTube. As with conventional broadcasting, the idea here is to attract viewers and the advertising dollars that chase them.

YouTube is just the sort of place that major entertainment companies used to avoid (and many still do). It’s a hotbed of bootlegged material, as is virtually any site or network that relies on users to provide the content. But the (apocryphal) Willie Sutton rule remains in effect: the networks (and the studios and the labels) have to go where the audience is, rather than trying to lure viewers to more pristine grounds.

YouTube is the perfect online media partner to promote NBC’s marquee entertainment to their audience and explore new and creative ways to harness the power of viral video in a manner that respects copyrights,” John Miller, a marketing bigwig at NBC Universal, said in the press release. “We applaud YouTube for their continued willingness to work with us to remove any unauthorized NBC content and protect our copyrighted material.”

Logo_guba Warner Bros. made a somewhat similar move, agreeing to sell movies through YouTube competitor Guba.

The deals are exquisitely timed. One year ago today, the Supreme Court handed down its watershed Grokster ruling, deciding that file-sharing firms and other tech companies can be held liable for their users’ copyright infringements if they promote piracy. By making the legal rules a bit more clear, the Supremes prompted several leading file-sharing companies to fold or start negotiating with the entertainment industry to make their networks copyright friendly. Those negotiations, though, have yet to yield any fruit. The only converted network to launch is from iMesh, and it struck deals with the labels a year before the Grokster decision.

Hmm. You might think that if an advertising partnership with YouTube is cool for the entertainment industry, it might work with eDonkey, too. Right?

MySpace, Meet My Lawyers

Here's a sad story you hear too often: an underage girl is contacted online by an older teen, they get together, and he allegedly rapes her. In this particular instance, it was a 14-year-old Texas girl with a MySpace site and a cellphone. Now, the Austin American-Statesman reported today, the girl and her mother are suing MySpace and its corporate parent, News Corp., for $30 million. According to the story, the lawsuit accuses MySpace of essentially creating a platform for sexual predators with no effective protection for minors.

I'll skip the usual screed about personal responsibility being the handmaiden of liberty, given how many others are holding forth on that topic. Instead, I'll simply observe that these stories breed legislation as well as lawsuits. And as lawyers like to say, bad facts make bad law. Attacks like the one described above happen not just because parents don't know what their kids are doing online, but also because 14-year-olds can easily pass themselves off as 16, and 19-year-olds can pretend to be 17 or 18. The challenge for everyone trying to build communities around content online is figuring out whether and how to preserve this freedom, and then finding a way to explain their choices to Congress.

How to Kill the iPod

Zune_logo Reports circulated widely today that Microsoft was readying a slate of products designed to compete with Apple's market-stomping iPod/iTunes combo. Specifically, there's a new version of MSFT's online music store (anybody remember the original?), a new subscription music service and a pocket-sized device that plays music and video.

Personally, I don't think MSFT understands consumer products. But prospects for this venture are better than, say, UltimateTV or MSFT's last online music store (anybody remember... oh, never mind), simply because the effort is being led by Robbie Bach - the guy who led development of MSFT's only previous consumer-product winner, the Xbox. Well, OK, the Xbox still runs a distant second behind the PlayStation, but at least it wasn't laughably bad.

Continue reading How to Kill the iPod »

You and MeTube

Let's be clear about one thing right away: I don't own any music by Jason Mraz, and I'm not about to acquire any. Nevertheless, I have glimpsed the future of music promotion, and it is on Jason's Web site. Warner Bros., Jason's record company, has talked a good game about embracing the digital future. And like its competitors, Warner has put scads of its catalog onto iTunes (save Led Zeppelin, alas) and offered pricey song downloads to mobile phones. No breakthrough insights there. Where Warner seems to be distinguishing itself is in encouraging fans to make videos to go with an artist's tunes, such as Jason's single, "Geek in the Pink." (Raise your hand if you'd actually describe someone as a "geek." That's so ... retro.) Isn't that better than suing people for copyright infringement? Warner artists have also dabbled with letting fans use pieces of songs to create their own music. Now there's a great reason to buy a Mac.

The next step would be to cut deals with the likes of YouTube and that would authorize them to stream fan videos in exchange for a cut of the ad revenue. That's so obviously the right way to go, it's easy to overlook the inconvenient complications. For starters, artists might not want to have their songs used in videos promoting, say, the Aryan Nations (or even the Dodger Nation.) Then there are sites that help people online videos, rather than streaming them from advertiser-supported sites. Those are the kinds of things that keep record companies stuck in neutral, when they really need to be moving forward.

The background photo of a Sony camcorder is courtesy of Sony's SonyStyle website.

Compatibility Police

Indexfrontside20060607_3Evidently, French lawmakers weren't the only ones worried about DRM incompatibility in the nascent online-music world. Several Web news and comment sites, including Engadget and EE Times, are reporting that government officials in Norway are pressuring Apple and other online music retailers to enable customers to play the songs they buy on any portable music player. Sweden and Denmark are also following suit, or are expected to.

As much as I hate the compatibility problem posed by the Apple-Microsoft-Sony-RealNetworks standoff, I still think the best approach is to make sure consumers know the limits on what they buy and then let the market drive the solution. Why shouldn’t Apple use its music store to help drive sales of its hardware? If you don’t like their DRM, try Napster (which uses Microsoft’s) with one of the many Napster-compatible players. And if you don’t like DRM, period, buy the CD (assuming it’s not copy protected) or switch to artists, labels, stores or services that sell music in MP3 format.

Besides, there’s a simple compatibility solution: people can burn the tracks they buy onto CD, then re-rip into high-bit-rate MP3s. Sure, it’s a hassle, but music fans should be backing up their purchases anyway – I mean really, which is likely to die first, your computer’s hard drive or your love of Calexico?

Whose Hands Off the Net?

The rallying cry du jour of the anti-Net neutrality forces is, "Don’t regulate the Internet." Nice thought, but it’s a bit like saying "Don’t regulate the Pacific Coast Highway." The Net is already regulated in a host of ways by a variety of bodies. At one extreme are states like China, which try to dictate where users go in cyberspace, and which use the Net as a convenient place to gather evidence against disfavored people. At the other extreme is Sealand, a former oil rig in the North Sea that claims (with some success) to be a sovereign state. HavenCo, a hosting operation based at Sealand, holds itself out as a free zone to violate copyrights, patents, libel laws and other restrictions on speech (snuff films, perhaps?). But even HavenCo says it does not welcome spammers, hackers or child pornographers.

And no matter where you are, you can’t put up a Web site whose name ends in .xxx. The Internet Corporation for Assigned Names and Numbers doesn’t recognize that domain, so ISPs won’t, either.

In the U.S. of A., there are all sorts of things you can’t do online, at least not legally. The Federal Communications Commission stopped a telco-owned ISP from blocking a competitor’s VOIP service. The Federal Trade Commission has gone after spammers and Web-based scammers. The Justice Department has prosecuted warez groups, online copyright infringers and hackers. RIAA and MPAA have sued thousands of people for sharing copyrighted songs and movies on P2P networks.

The operative question on Net Neutrality isn’t whether to regulate the Internet. That one’s been decided. The issue today is how much to regulate.

That’s a long preamble to a comment about the Washington Post’s editorial today on Net neutrality. The Post’s editorial board urged Congress not to burden the Net with "preemptive regulation." I agree, but it doesn’t mean all regulation is going to burden network operators or stifle their innovation. The middle ground here, IMHO, is to allow network operators to prioritize traffic for a fee without discriminating unfairly among competitors, or against users who don’t pay for prioritization. If they want to charge $X per kilobyte to prioritize streaming video, they should be able to do so as long as everyone who streams video can access the service for the same price, and those who don’t pay aren’t penalized. That way the market, not network operators, will pick winners and losers online. I’d also argue for eliminating these rules as soon as you had four or more broadband networks in a community competing for residential customers.

The photo of FCC Chairman Kevin Martin floating the background of this post is courtesy of the FCC.

What We Were Trying to Say...

Who knew the House would stay in late on Thursday to vote on Joe Barton's telecom bill, HR 5252?

I wrote an editorial Wednesday on Net neutrality, but we decided to hold it for Friday's paper because there were other pieces that seemed more urgent. Election Day aftermath stuff, that sort of thing. Ooops. Anyway, what I would have said is that trying to stop network operators from prioritizing traffic for a fee is going too far. It's OK to guard against sweetheart deals between network operators and their affiliates or partners, but requiring that all data of any given type be treated equally seems socialistic. You can pretend that the Net is a bastion of equality, but it's not, really. Anyone can put up a Web site, but unless they've got lots of money to spend on bandwidth or  Akamai-like content distribution services, their video streams won't look as good as AOL's or MSN's.

The real questions are whether the phone companies can use DSL or fiber lines to do what cable operators do, and whether they can offer an alternative to Akamai. The Bells want to set aside a portion of the broadband networks they build to carry TV programming. No one seems to have a problem with that. But at least some of the Bells have also talked about delivering selected Internet content to TV sets alongside ABC, NBC and 200+ other channels. Unlike other Web sites and services, this featured Web content would be delivered in pristine quality because it wouldn't have to compete for bandwidth -- it would have a dedicated channel.

This concept scares folks like Google and Yahoo, which don't want to have to pay twice to reach Web users. Others worry that the telcos and cable operators won't provide enough bandwidth for data coming in from the public Internet, effectively forcing Web sites to pay for special delivery just to be seen and heard. If that were a real possibility, the threat to free speech would warrant pre-emptive action by Congress. But there are a couple of things worth remembering here. First, it's in everyone's interests to have the telcos compete with the cable guys. If they want to build fatter pipes, then reserve a portion of their pipes for TV service, more power to them. Second, cable TV companies already do this. Their cables have room for a certain number of channels, and only a few of them are used for high-speed Internet service. Several cable operators have tried delivering selected Web sites and other data to TV sets, and the response has been underwhelming at best.

Not that we should trust the telcos to play fair here -- these are the same guys who essentially snuffed the CLECs in their infancy. The least intrusive approach, I think, would be to require broadband network operators to have non-discriminatory rates for prioritization, and bar them from degrading the delivery of Web sites or services that don't pay for special treatment. In other words, if AT&T cuts a deal with YouTube to prioritize its video traffic, the same terms would have to be available to YouTube's competitors. And if Google chose not to pay the price, Google Video shouldn't perform any worse than it did before prioritization became an option. Such an approach would let telcos and cable operators add bandwidth for the sake of priority delivery, but prevent them from doing so at the expense of the bandwidth vailable for best-effort delivery.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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