Governor Spitzer Gets it Right

by on October 8, 2007 · 0 comments

In a Cato TechKnowledge newsletter issued today, I’ve updated the world on the status of the REAL ID Act.

One of the more interesting recent developments is the decision by New York Governor Elliot Spitzer to break the link between driver licensing and immigration status. He and the Department of Motor Vehicles commissioner announced the policy September 21st.

Delinking driver licensing and immigration will reduce unlicensed driving, uninsured driving, hit-and-run driving, insurance costs for legal drivers, and roadway injuries. Linking driving and immigration status is a requirement of REAL ID, and Spitzer’s move is another nail in the coffin of this national ID law.

In my TechKnowledge piece, I laud the governor’s action as follows:

Spitzer is not willing to shed the blood of New Yorkers to “take a stand” on immigration, which is not a problem state governments are supposed to solve anyway.

It’s a welcome — and somewhat surprising — move, to see a Democrat and law-and-order-type former attorney general resist mission creep in a state bureau and hold fast to the federal system devised in the constitution. But he’s done the right thing. Thanks most recently to Governor Spitzer, and to state leaders from across the ideological spectrum, REAL ID is in collapse.

The move has subjected Spitzer to withering political attacks from Republicans. The attack most embarassing to witness, though, comes from “relatives of 9/11 victims.”

Update: New York Senator Charles Schumer (D) gets it wrong. His plan for REAL ID and a “non-forgeable” biometric immigrant card would mean mass surveillance of law-abiding citizens, and a system that’s easy for illegal aliens to defeat – simply by acquiring a REAL ID. Ya gotta think about this stuff!

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TPW 32: Jerry and Jerry on Net Neutrality

by on October 8, 2007 · 0 comments


TLF contributor Jerry Brito and his colleague Jerry Ellig, both of the Mercatus Center at George Mason University, recently released a comprehensive new paper on the law and economics of network neutrality regulation. In a wide-ranging discussion, we explore the economic arguments for network neutrality regulation, discuss how economic theory applies to the issue, and Jerry Brito fills us in on the legal status of the FCC and FTC’s various pronouncements.

I generally try to have podcasts up within 24 hours of recording them, but this one was recorded last Wednesday. My apologies for the delay.

There are several ways to listen to the TLF Podcast. You can press play on the player below to listen right now, or download the MP3 file. You can also subscribe to the podcast by clicking on the button for your preferred service. And do us a favor, Digg this podcast!

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It Only Took Eight Years

by on October 8, 2007 · 0 comments

Here’s a great talk by Yahoo’s Ian Rogers:

Eight years later, Amazon’s finally done what was clearly the right solution in 1999. Music in the format that people actually want it in, with a Web-based experience that’s simple and works with any device. I bought tracks from Amazon (Kevin Drew and No Age), downloaded them, sync’d them to my new iPod Nano, and had them playing in my home audio system (Control 4) in less than five minutes. PRAISE JESUS. It only took 8 years.

8 years. How much opportunity have we lost in those 8 years? How much naivety and hubris did we have when we said, “if we build it they will come”? What did we spend? And what did we gain? We certainly didn’t gain mass user adoption or trust, two prerequisites to success on the Internet.

Inconvenient experiences don’t have Web-scale potential, and platforms which monetize the gigantic scale of the Web is the only way to compete with the control you’ve lost, the only way to reclaim value in the music industry. If your consultants are telling you anything else, they are wrong.

Yahoo! Music demonstrates this scale discrepancy perfectly. Yahoo! is the world’s #1 Internet destination. Hundreds of millions of people visit Yahoo! each month. Yahoo! Music is the #1 Music site on the Web, with tens of millions of monthly visitors. Between 10 and 20 million people watch music videos on Yahoo! Music every month. Between 5 and 10 million people listen to radio on Yahoo! Music every month. But the ENTIRE subscription music market (including Rhapsody, Napster, and Yahoo!) is in the low millions (sorry, we don’t release subscriber numbers, but the aggregate number proves the point), even after years of marketing by all three companies. When you compare the experiences on Yahoo! Music, the order of magnitude difference in opportunity shouldn’t be a surprise: Want radio? No problem. Click play, get radio. Want video? Awesome. Click play, get video. Want a track on-demand? Oh have we got a deal for you! If you’re on Windows XP or Vista, and you’re in North America, just download this 20MB application, go through these seven install screens, reboot your computer, go through these five setup screens, these six credit card screens, give us $160 dollars and POW! Now you can hear that song you wanted to hear…if you’re still with us. Yahoo! didn’t want to go through all these steps. The licensing dictated it. It’s a slippery slope from “a little control” to consumer unfriendliness and non-Web-scale products and services.

I’m frankly not as optimistic as Rogers that the labels will be able to pull out of the tailspin they’ve gotten themselves into. The music labels have decades of inertia pushing them in the wrong direction, and large, bureaucratic institutions rarely show the kind of agility needed to negotiate new technologies in any event. So while it’s great that they’ve finally started to realize what was obvious to some of us years ago, my guess is that they’re going to continue to be five years behind the curve for the foreseeable future, always playing catch-up to other firms who are pioneering new ways of distributing and promoting music.

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Paying Customers are the Enemy

by on October 8, 2007 · 0 comments

Ars Technica reports on the latest DRM PR disaster:

bd_plus.jpg

BD+ is being rushed out to titles only shortly after the spec was finalized, partly in response to hackers cracking the protection on AACS earlier this year. This wouldn’t be the first time that extra layers of copy protection have harmed legitimate consumers: earlier this year Sony had to recall 20 DVD titles protected with ARccOS that caused problems on some DVD players.

When Paramount recently announced that they were switching to HD DVD releases, one of the reasons a spokesperson gave Ars was that the Blu-ray spec was not “market-ready.” Perhaps this is the sort of thing he meant.

Fox’s position is that the problem is entirely the fault of the player manufacturers. Steve Feldstein, Fox senior VP of marketing communications, told Video Business that “consumers should lobby their hardware manufacturers to release firmware upgrades post haste” and that “the title was well-reviewed and playing well on updated players.”

Isn’t that charming? It’s worth keeping in mind that only the legitimate customers have to jump through these kinds of hoops. If you’re stupid enough to follow the rules and pay hard-earned cash for your movies, Hollywood rewards you by making you spend a relaxing evening learning how to update your movie player’s firmware. People who break the law and get their movies via a P2P network don’t have to worry about these sorts of headaches, as those files tend to come pre-cracked and in an open format playable on any device.

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More Blades

by on October 8, 2007 · 0 comments

You thought the center of high tech was the computer industry. Think again:

I ask him about why five blades were better than one or four, and he clicks on a short animated film that shows that the key area in close and comfortable shaving was the elasticity of our skin. If one accepts that two blades in a razor are better than one – another film shows that after the first blade, the hair tries to retract back into the skin, but the second blade catches it before it does – then the critical factor is skin bulge between the blades. Five blades will give you a closer shave (ie cut deeper and deeper into the skin), but only if the cutting surfaces have precisely the correct spacing between them. And after spacing, there is the tricky issue of clogging. ‘Some of my friends and family do really think that I came to work one day and just added a blade,’ Powell says. ‘But walk around and I challenge you to find the Department of More Blades. It’s just not here.’

Of course, like every important development, The Onion was there first.

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Music Wants to Be Free

by on October 5, 2007 · 14 comments

Over at Techcrunch, Mike Arrington reaches the conclusion I advocated a couple of years ago: in the long run, the market price of most music is going to be zero. I think Arrington actually focuses too much on piracy. Yes, in the short run peer-to-peer networks are an important source of price pressure. But the far more important factor is the sheer number of people who want to be rock stars. Now that the bottleneck of CD production and distribution has been removed, any musician can reach an infinite number of fans at zero cost. As a result, more and more musicians will find it in their self-interest to voluntarily give music away for free as a means of building up their fan base. Over time, consumers will get used to music being free, and at some point music will be just like news and punditry are today: the vast majority will be free and ad-supported, with a small minority continuing to try to charge money.

However, I do think Arrington gets this backwards:

The price of music will likely not fall in the near term to absolutely zero. Charging any price at all requires the use of credit cards and their minimum fees of $0.20 or more per transaction, for example. And services like iTunes and Amazon can continue to charge something for quality of service. With P2P networks you don’t really know what you are getting until you download it. It could, for example, be a virus. Or a poor quality copy. Many users will be willing to pay to avoid those hassles. But as long as BitTorrent exists, or simple music search engines like Skreemrallow users to find and download virtually any song in seconds, they won’t be able to charge much.

On the contrary, the transaction costs of charging small amounts of money is the reason I think the price will drop from its current price of around a dollar to zero. In the absence of those transaction costs, it’s possible to imagine the price gradually falling over time, perhaps reaching 25 cents in 5 years and a nickel in 10 years. But the problem is that the costs of processing a 10 cent payment is on the order of 10 cents, (and as Clay Shirky has convincingly argued, this isn’t likely to change) so it makes more sense to just give the song away and find other ways to monetize those eardrums.

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Lessig and Corruption at the FCC

by on October 4, 2007 · 4 comments

Larry Lessig links to news that FCC insiders leaked details of forthcoming decisions to industry insiders in violation of the rules. He is justifiably outraged at the way the FCC has apparently abused the public trust for the benefit of the deep-pocketed interests that wield the most clout in telecom regulation. Administrators who break the law should be fired, and perhaps prosecuted in particularly egregious cases. I think it’s great that Lessig is highlighting these sorts of problems, and I’m looking forward to seeing his proposals for reducing this kind of corruption.

But I also think it’s worth keeping in mind that the odds are very long. This is not a new problem. Government regulators have been doing the bidding of industry incumbents for almost as long as they’ve been in existence. Reformers have been trying to clean up corrupt regulatory agencies for decades, and so far the only reliable way they’ve discovered to clean up a regulatory agency is to abolish it completely.

Which isn’t to say that we should stop trying. On the margins, it is possible to make government more transparent and accountable, and I expect Lessig will use his considerable intellect to come up with some innovative ways of doing that. But in the meantime, we should keep in mind that government agencies don’t work the way they’re described in high school civics classes. They are, in fact, dominated by industry incumbents who are experts at twisting the rules to their advantage, to the detriment of both competitors and consumers. And as long as that’s true, we should be wary of giving it more power over anything, especially over a disruptive technology like the Internet.

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$222,000

by on October 4, 2007 · 0 comments

As predicted, Ms. Thomas lost her file-sharing case and was ordered to pay more than $200 grand to the recording industry. As much as I dislike a lot of what the RIAA does, I can’t work up too much sympathy for the woman.

One thing that is worth mentioning is that $222,000 seems like an excessive amount of money to fine someone for sharing 24 songs. It’s a basic principle of law that damage awards should have some reasonable relationship to the harm caused by the defendant, and it seems highly implausible that making a single song available online could have caused the recording industry anywhere close to $9,250 in lost revenue. Of course, under copyright law, the jury could have fined her 15 times that amount, which would have been completely absurd.

Update: I can’t find details for Minnesota, but just for purposes of comparison, shoplifting less than $500 of merchandise in New Jersey will get you a $10,000 fine. In Massachusetts it’s $1000, and the same is true of Connecticut. Of course, you can also get jail time for shoplifting even small amounts, but I believe that would require a criminal trial and a higher burden of proof. Most of the seem to have a ceiling around $150,000 in fines for stealing merchandise in the tens of thousands of dollars.

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Karlgaard on “The Cheap Revolution”

by on October 4, 2007 · 8 comments

Rich Karlgaard, publisher of Forbes, had an excellent editorial in yesterday’s Wall Street Journal commenting on the silly lawsuit that a New York woman has filed against Apple for supposedly violating price discrimination laws when the price of the iPhone dropped by $200 bucks. Apparently, this woman believes she is the victim of some sort of grave cosmic injustice because she shelled out $600 clams to be an early adopter, only to see the lesser mortals among us get their iPhones for $400 just a few months later.

Karlgaard points out that this is just the way a world governed by Moore’s Law works:

What’s going on here? Did Mr. Jobs gouge early technology adopters just for a couple extra (billion) bucks? I don’t think so. After a long streak of successes, Mr. Jobs and Apple — whose stock is up more than 20-fold since 2002 — have collided with two forces stronger than they are: One is the cheap revolution; the other is the global economy. Together they forced Apple to drop the price of the iPhone and offend its geeky customer base.

To illustrate the power of “the cheap revolution” in action within our new digital economy, Karlgaard provides this wonderful example:

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She Did It

by on October 3, 2007 · 18 comments

Ars Technica’s Eric Bangeman has been doing some great on-the-spot reporting on the first file-sharing trial in my home state of Minnesota. Assuming his summary of the evidence is accurate, it’s awfully hard to believe her claims to innocence:

After establishing that she has accounts with Match.com, MySpace, plays games online, and has an Internet account at home, Gabriel then asked her if she posted to the “anti-RIAA blog” Recording Industry vs. The People under the username “tereastarr.” After answering in the affirmative, questioning then turned to whether there was another PC in her home the night Media Sentry discovered the tereastarr@KaZaA account. She said that there was not.

On a number of occasions during her testimony, Gabriel asked Thomas to refer to her depositions, reminding her that she was under oath when she gave the depositions and was under oath on the stand. Gabriel then proceeded to show the jury the ubiquity of the tereastarr username in Thomas’ online persona. The jurors saw screenshots of her pogo.com and match.com profiles and the Start menu from her Compaq Presario PC, all of which had the tereastarr username…

Gabriel then turned to her eclectic music collection, comparing some of the bands seen in the KaZaA share to found in her My Music folder upon forensic examination of her hard drive. He rattled off bands such as Lacuna Coil, Cold, Evanescence, Howard Shore, Green Day, Black Sabbath, Creed, Belinda Carlisle, A.F.I., Dream Theater, Sheryl Crow, and Enya, concluding by asking, “Does it surprise you to learn there are more than 60 artists you listen to in the shared folder?”

…Under cross-examination by her attorney, Thomas explained the date discrepancies. She originally had said that she bought the PC from Best Buy in 2003 and that the hard drive was replaced in January or February of 2004. After her forensic expert inspected the hard drive and found that it wasn’t manufactured until January 2005, she then said that she bought the PC in 2004 and that the hard drive was replaced in March 2005. “I was a year off on everything in my deposition,” she said. He also said that the “jury could do the math” on whether it was possible for her to rip 2,000 or so tracks over a two-day period given the demonstration earlier in the day.

Either that’s an incredible series of coincidences, or the woman is guilty as charged. Whether you agree with the law or not, it sure looks like she broke it. Which makes me wonder what she thinks she’s accomplishing. All she’s likely to accomplish is to give the RIAA its first scalp.

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