January 2006

Here’s yet another group of customers being needlessly antagonized by DRM technology–wealthy audiophiles:

Steve Vasquez, the founder of ReQuest, which makes ultra-high end streaming audio networks for homes, says his company struggles with the limitations of DRM-protected audio files.

“We have an open system that can stream off a server to another house, but the DRM mechanism doesn’t recognize that possibility,” Vasquez said. “We have clients who have multiple units in one house and multiple units in multiple houses who want to be able to use music in those devices as well as portable ones. DRM is a limitation that limits innovation.”

A similar system made by Sonos creates a mesh-wireless network that connects up to 32 remote amplifiers with music stored on a home computer, but the company hides music bought through Apple’s iTunes store, according to co-founder Thomas Cullen.

“We don’t want to taunt them,” Cullen said. “The best thing we can do is hide iTunes songs so they don’t get an expectation they can play them.”

Ninety percent of his customers own iPods, according to Cullen, and many call in after first buying the system, wondering where their iTunes songs are. But after the company explains it is Apple’s DRM that prevents the file from playing, users universally respond that they will go back to buying CDs that they can then rip into non-DRMed audio files, Cullen said.

Without the DMCA, these companies could reverse-engineer the DRM in order to support music downloaded from the iTunes Music Store. But as long as the DMCA is on the books, any attempt to support those songs without Apple’s permission is a violation of federal law.

So far, most consumers are blissfully ignorant that when they buy DRMed music or videos, they’re locking themselves into playing the content only on devices approved by the company that developed the DRM scheme. I hope and expect that there will be a fierce consumer backlash when this becomes more widely recognized.

Jim Harper of Cato has an interesting exchange with Adam Thierer of PFF on U.S. companies doing business in China. Would a “code of conduct” for U.S. firms doing business there help the cause of human rights?

Suppose a firm refused to do business in China, or got booted out for “pushing back” in response to queries from Chinese officials for information on dissidents? It seems to me that there would be other firms ready to step into that market–China being a truly massive market–either Asian firms or U.S.-based firms, or those of some other nation. There might be some gains from the publicity this stance would generate, but like Tianamen Square, the gains might be short-lived.

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What do the labels think they’re accomplishing with CD-based copy protection? Here’s a story about the first copy-protected CD to reach #1 on US charts:

Like other recent copy-protected albums, the Velvet Revolver disc includes technology that blocks direct copying or ripping of the CD tracks to MP3 format. It also comes preloaded with songs in Microsoft’s Windows Media Audio (WMA) format, which can be transferred to a computer or to many portable digital music players.

As in earlier tests by BMG and SunnComm, the copy protection on the Velvet Revolver disc can be simply disabled by pushing the “Shift” key on a computer while the CD is loading, which blocks the SunnComm software from being installed. The companies say they have long been aware of the work-around but that they were not trying to create an unhackable protection…

The inability to move songs to Apple’s popular digital music player, as well as to other devices that don’t support Microsoft’s Windows Media digital rights management services, is a serious shortcoming. Jacobs says SunnComm recognizes that–and that the company’s next version will go beyond the Microsoft files and be able to create multiple kinds of digital files that will be compatible with the iPod.

But for now, iPod-owning Velvet Revolver fans don’t have a direct alternative.

“We are actively working with Apple to provide a long-term solution to this issue,” a posting on SunnComm’s Web site reads. “We encourage you to provide feedback to Apple, requesting they implement a solution that will enable the iPod to support other secure music formats.”

What is this supposed to accomplish? Obviously, it’s not going to deter anyone with a reasonable amount of technical savvy, given that pressing the shift key isn’t rocket science. So it’s hard to see this having a significant effect on piracy. On the other hand, preventing people from transferring their music to their iPods is a significant inconvenience that mostly affects legitimate users. Even if we set aside the privacy and security problems with SunComm’s technology, does it even make any sense from a business perspective to use this software? It’s not likely to slow any determined pirates down, but it’s guaranteed to piss off those of us who just want to listen to our music on the portable device of our choice.

Incidentally, it’s worth mentioning that SunComm could enable iPod compatibility tomorrow if it were willing to allow users to put songs on their iPods in MP3 format. Why don’t they? I’m not sure. Extracting an unprotected MP3 from an iPod is at least as technically difficult as pressing the shift key. So it’s not clear to me how enabling iPod compatibility would make any real difference in the “security” of their DRM scheme, even if they had to put the music on the iPod in an unencrypted format.

Bridge to the 20th Century

by on January 24, 2006 · 4 comments

Occasional co-blogger Solveig Singleton has done good work on patent reform, but I think her latest analysis of the RIM-NTP patent dispute rather misses the mark:

The patent office is likely to declare all of NTP’s patents invalid in its final ruling. While NTP could appeal, this would take quite a while, plenty of time for RIM to finish working out a technical bypass. NTP’s position is getting weaker and weaker.

She’s right that NTP is getting weaker, but the reason is that no matter what the letter of the law says, no judge insane enough to order the shutdown of all BlackBerries. And she’s wrong to imagine that RIM can or will work out a “technical bypass.” The “invention” that NTP has patented is the concept of checking your email wirelessly. (there are a few qualifications to the scope of the patent, but none of them are of much use to RIM) As long as BlackBerries do what they’re designed to do–fetch peoples’ email from a mobile device–they’re infringing NTP’s patent.

I’ve been a disappointed with media coverage of this issue: I think the fact that NTP has patented the idea of wireless email is crucial to a proper understanding of the case. But reporters credulously repeat RIM’s claims tha they have a software workaround to “bridge the patent,” when in fact, a BlackBerry that doesn’t infringe NTP’s patent (i.e. that doesn’t fetch email wirelessly) is called a paper weight.

Liberation Technology

by on January 23, 2006

So I’ve been following this month’s argument over at Cato Unbound, a site run by my friend and former colleague Will Wilkinson that takes a Big Idea each months and brings in some Smart People to discuss it. I’ve been meaning to jump in when I saw a point where I’d have something to add to the discussion.

The problem is that I agree with Eric Raymond’s opening salvo, in which he tears the lead essay, written by Jaron Lanier, to shreds. Lanier’s essay is chock full of breathtakingly broad generalizations expounded in a world-weary tone. He flits from topic to topic, issuing sweeping but vague pronouncements about each, without ever arriving at any kind of clear point.

So honestly, I’m not sure what Lanier’s point is, or whether I agree with it. So instead of jumping into that specific argument, let me offer some quick thoughts on this month’s big idea: what’s become of the techno-utopianism of the 1990s? While I think that some of the utopians over-stated their case, and most of them got the details wrong, their basic thesis was right: the Internet is going to revolutionize American (and world) politics, society, and economics.

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(I recently engaged my former Cato Institute colleague and fellow TLF blogger Jim Harper in a dialog about the effectiveness of U.S. engagement with China in terms of broadening human rights and speech rights in particular. I’ve been doing some soul-searching about this recently and asked Jim to help me think through the issue (and the “engagement is good” theory) again. What follows is the transcript of our e-mail exchange. A condensed version of this exchange also appaers on CNET today. – – Adam Thierer)

THIERER: Jim, I must admit, in recent months I have really been struggling with the issue of U.S. corporate engagement / investment in China. In particular, I have been wondering if my long-held assumption is correct: that greater engagement by U.S. companies in China will really help achieve meaningful reforms for its repressed citizenry. I have always argued that investment by U.S. companies – – and technology companies in particular – – could help break down some of the legal barriers to greater economic and social / cultural freedom.

In recent years, however, the reports from the front have not been good. It does not seem the U.S. corporate engagement / investment has really done much to effectuate positive reforms in the post-Tiananmen era. It seems that the Chinese are just as repressive as ever, especially on the political / cultural front. Worse yet, we know that many large American corporate technology leaders have actually assisted the efforts of Chinese officials when they sought to repress speech and dissent. (Microsoft, for example, has made news recently by shutting down a journalist’s blog because of material that might be offensive to Chinese authorities. And Yahoo and Google are coming under fire for playing ball with Chinese officials too.)

Tell me my fellow libertarian friend, are you not also troubled by these developments? Are you still comfortable with our traditional position on the issue?

HARPER: I recall, a few years ago, being very concerned when I heard that Google had come to an agreement with the Chinese government so that their service would not be blocked there. I had a natural sense of revulsion at the thought that any company, much less one of the technology companies that are doing so much to improve life around the world, would get in bed with censors and despots. Google has never been as forthcoming about what exactly they do to appease the Chinese as I would like them to be, so I suppose I am still uncomfortable with it.

But I have come to believe that the best option for a company faced with this dilemma is to accept the ugly conditions some governments put on doing business in their countries. This is for a couple of reasons: There is strong evidence that refusing trade doesn’t help anybody. The U.S. trade embargo toward Cuba has been a dismal failure. We’ve had some level of trade restrictions with Cuba for more than 40 years and, if anything, it has helped Castro by pauperizing the Cubans, demoralizing them, and shielding them from knowledge about the benefits of freedom. Heck, if we had had trade with Cuba the last 40 years, a steady diet of fast food probably would have killed off Fidel by now…

Just as importantly, if you give them the communications tools that these companies provide, the Chinese people will evade government controls and get done what we want them to get done, censorship or no censorship. You don’t have to use words like “falun gong” or “Taiwan” or “free speech” to communicate about liberty and public issues. Before Vaclac Havel was the first President of a free Czechoslovakia, he was a playwright. His plays weren’t political polemics that tweaked the nose of the government and invited censorship (though he got in plenty of trouble). They were subtle critiques of life under the regime. Everybody knew what he was talking about. Freedom had been in the hearts of the Czechs for years when the Velvet Revolution officially delivered it. Technology and communications are enabling this on a broader scale in China. It’s working. You’ll see.

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I’m kind of baffled by the network neutrality debate. Take this quote for example:

At the end of the day, Google’s Davidson says that his biggest worry is not for Google but for the prospect of bringing fresh innovation to the Internet. After all, if worse comes to worst, Google can pay AT&T or BellSouth to maintain its role as the Internet’s dominant search engine. But the bright young start-up with the next big innovative idea won’t have that option.

That’s the last paragraph from a long article about the network neutrality debate. The article implies that the outcome of the network neutrality debate could determine whether the telcos end up in control of the Internet.

Except that it doesn’t make a lot of sense. Take the paragraph I just quoted. I’m having trouble even imagining a plausible scenario in which the above could happen. Think about it: let’s say that Verizon wanted to get every website on the Internet to pay it a fee for access to its customer base. How would they do it?

The first step presumably, would be to send an email to the webmaster of each site, informing them that they’d be disconnected if they didn’t cough up the required fee. But it’s likely that most web site owners–especially the smaller ones–would ignore the notices. A lot of sites, such as this one, are run by volunteers and don’t have a lot of money to spend on tolls to Baby Bells. Others would calculate that it’s in their strategic interest not to pony up the cash–especially since they still have plenty of customers from other parts of the country. So then what would the Baby Bells do? Simply blocking access to the sites would be financial suicide. The vast majority of Internet users access at least a handful of small websites on a regular basis. Hence, if you shut off all non-paying websites at once, you’d piss off virtually all of your customers. You’d spend years repairing the financial and PR damage from a stunt like that.

They’d have the same kind of problem if they chose to degrade the performance of non-paying web sites rather than cutting them off entirely. That’s more likely to just make it look like their own Internet service sucks than harm the targetted sites. I would be sad if my TLF readers had to wait longer to read my posts, but not sad enough to cough up money to the company responsible to get them to stop. And you can bet we’d add a banner at the top that says “Verizon customers: is this site loading slowly? Click here to find out why.”

A slightly less draconian plan would be to allow everyone to use the existing bandwidth, but to limit access to additional bandwidth to those that paid a special fee. But even here, it’s hard to imagine them getting very far. I mean, imagine if Verizon approached Apple’s Steve Jobs and told him that they wanted him to cough up some money if he wanted to be allowed to use their new fiber capacity for his iTunes video store. You know what he’d do? First, he’d laugh at them. Then he’d point out that if they don’t give him access to their bandwidth, he can cause every copy of iTunes to pop up a little notification during long downloads that explains that it’s Verizon’s fault the download is slow and explains how to switch to another ISP. I’ll give you three guesses who would run out of the room with their tails between their legs.

In addition to having content consumers want, content providers also have a direct connection with their customers–in many cases much stronger than the connection the customers have with their cable or phone company. If content providers and telcos began engaging in brinkmanship, the outcome would depend crucially on who consumers blamed for the mess. In that kind of PR battle, the telcos wouldn’t have a prayer, given that essentially the whole Internet would be lined up against them, and people increasingly get their news and information from sources on the Internet.

So I don’t see how a Baby Bell would go about extorting money from web site owners without shooting themselves in the foot. I’m having trouble even envisioning a plausible scenario, much less one that is likely to actually happen. The idea of a balkanized Internet sounds ominous in the abstract, but when you try to imagine how it would actually happen, it doesn’t make a lot of sense. Telcos need content providers at least as much as content providers need telcos. Content providers know it.

The telcos are wrong about their ability to charge content providers for the use of their “pipes,” they’re right about one thing: “network neutrality” regulation is a solution in search of a problem.

Update: Although he’s more ambivalent about network neutrality regulation than I am, Ed Felton highlights some of the same problems.

As James mentioned in his blog entry yesterday, the Senate Commerce Committee held yet another hearing yesterday about “cleaning up” content on broadcast TV, cable & satellite TV, and the Internet too. One Senator after another, as well as some of the typical media critics who get called to testify at these things, made the claim that parents are helpless in the face of all the media that bombards their kids these days. But what’s so troubling about such calls for increased media regulation / censorship in the name of “protecting children” is that it ignores the fact that parents have many constructive alternatives to censorship at their disposal.

Let’s start with some basics.

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Once again, the topic of the day for the Senate Commerce Committee today was indecency on TV. Following up on two forums late last year on the topic, today’s hearing featured a raft of witnesses–ranging from the cable and satellite TV execs to former superlobbyist for Hollywood Jack Valenti.

The quote of the day, however, must go to anti-indecency crusader Brent Bozell, who has long championed more and bigger FCC fines for broadcast indecency. But, how is indecency to be defined? As another witness asked, should Michaelangelo’s David be clothed? Bozell argued that its a simple matter of making distinctions, saying: “[w]e need to define the difference between “offensive” and “really offensive.”

Of course. Finally, a clear answer to what should be banned. A simple test–is it “offensive” or is it “really offensive.” Maybe the test could be expanded a little, to include a category for “really, really offensive” stuff, and maybe “really, really, super-offensive” stuff. Certainly, that finally provides certainty.

Bozell’s comment, of course, underscores the inherent difficultly in defining the scope of censorship. And to be fair, Bozell declined to endorse expanding the flawed system to cable TV. Instead, he argued that cable providers with a la carte choice. Of course, he didn’t call for regulation, he just “suggested” that providers do this. (See Adam Thierer’s excellent piece on the implicit threat in such jawboning.) There is, of course, an option besides suggestion and regulation–that’s competition. Let others into the video business. AT&T and BellSouth said they’d like to provide a la carte service–but regulations are slowing their entry into the market. But Bozell–nor any of the others at today’s hearing–mentioned that option. Perhaps that isn’t offensive, but it is certainly disappointing.

There’s a great conversation going on over at Marginal Revolution about net neutrality. As a card carrying free-marketeer I feel I’m expected to support Verizon, AT&T and the rest when they demand payment for use of their pipes. But I haven’t made up my mind yet. While net neutrality looks like forced access redux, I think it’s actually a much more complicated issue.

I am skeptical of regulation or legislation to enforce neutrality; preemptive regulation hardly ever works out they way it is intended. However, as Tyler Cowen points out, tiering the internet would change the nature of online content:

The beauty of the status quo is that web sites compete on the basis of consumer surplus alone. The bandwidth costs end up as a fixed charge on net access as a whole; I suspect this hits many inelastic demanders, a’la the Ramsey rules for optimal taxation. Admittedly it may be a bad deal for the poor who cannot afford to connect, but the overall arrangement enhances the long-run “competition of ideas” feature of the net.

It seems to me that the obvious solution to this problem is to get rid of flat-rate access charges and move to variable prices based on bandwidth usage. Sadly, consumers have historically resisted per-unit access charges, even when they would have come out ahead. They like the idea of not being rushed to disconnect or feeling pressure to monitor and cap their use.

What’s more, bandwidth consumption in itself is not the problem. Bandwidth consumption at peak times, causing congestion, is the real problem. But, as Arnold King points out, the internet is not suited to incorporate congestion-based pricing:

Think of Internet packets as envelopes with very exact formats for the address. The format does not provide for a way to designate the envelope as “high priority.” Even if it did, the cost of reading the “priority bit” on every packet header would almost surely exceed the benefits of congestion pricing.

Even if we did want to go the route of a two-tiered internet anyway, with one tier getting preferred delivery, it’s not clear how we can do this without breaking what makes the net unique. Ed Felten clarifies that “although the two-tier network is sometimes explained as if there were two tiers of network infrastructure, the obvious and efficient implementation in practice would be to have a single fast network, and to impose deliberate delay or bandwidth throttling on non-preferred traffic.”

So, I guess what I’m ultimately arriving at is that while I’m far from sold on net neutrality regulation, I like the neutral nature of the internet. And, given that it would be technically difficult and unpopular with consumers to tier the net, I’d like to think that a free market would preserve neutrality. What we need to ensure is robust competition so that a small number of ISPs can’t push this down consumers throats. Jeff Pulver is right that what Google, Apple, and Yahoo need to do is call the telcos’ bluff and make it clear they’re not going to consider paying the ISPs. What’s are the ISPs going to do? Tell their customers they can no longer access Google or iTunes?