Art Brodsky complains about the broadband duopoly:
We’ve argued that broadband is a duopoly, with Federal Communications Commission (FCC) statistics showing that just about everyone who has broadband gets it from either the telephone company or the cable company. The FCC has affirmatively pursued the policy of creating this situation, and it’s one of the main reasons we need a Net Neutrality policy. There is no real choice.
The new Kagan study shows just how un-competitive the broadband market is. Here’s the title of the study: “Cable Modem Vs. DSL: Rivals Side-Step Big Price Wars So Far.”
Not only are there only two “choices,” in supplier, there’s little evidence of competition on one factor that really counts–price. In their July 6 Insights email newsletter, Kagan puts it fairly simply: “Though the battle for broadband access subscribers is intense, there’s no screaming price war between cable TV and telcos, and Kagan Research doesn’t expect one in the foreseeable future.” You can read the report here.
There are several things to say about this. First, this doesn’t match my experience. I signed up for a cable modem a year ago at an introductory rate of $26.99/month for six months. After that rate expired, I called my cable provider and threatened to switch to AT&T (who was offering a $14.99/month introductory rate), and they offered me a rate of $29.99/month with a 1-year contract. So not only am I paying significantly less than the Kagan article shows, but I’ve also experienced direct price competition for my business.
Maybe St. Louis is just a more competitive market than most. But it’s also possible that the competitors have kept their official prices steady while offering more discounts, rebates, and special deals. The Kagan article doesn’t have a lot of detail about its methodoloy, so it’s hard to be sure.
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Slashdot is reporting that Mozilla Firefox is now used by 13 percent of web users, up from 9 percent in April 2005, and 2 percent in May 2004. That’s impressive, if overdue, progress. Microsoft’s market share has dropped from 94 percent in 2004 to 83 percent today. Opera and Safari have been below 2 percent since 2004.
It’s interesting to note that FireFox has succeeded where commercial browser efforts like Opera largely failed to make a dent in Microsoft’s market share. This, it seems to me, is one of the many reasons to prefer a legal environment hospitable to open source development efforts. Microsoft may have killed Netscape using “monopolistic” tactics (personally, I think incompetence on Netscape’s part was mostly to blame) but such tactics can’t hurt a volunteer-driven effort like Mozilla, which isn’t focused on the bottom line. Having open source projects in the mix ensures there will always be some competition for the market-leading firm no matter what happens in the marketplace.
The LA Times has an editorial attacking the entertainment lobby’s pet causes this year: tech mandates for copy protection in digital TV and radio:
The bills would pressure device makers and service providers to limit or eliminate features from some products, such as the ability to record individual songs off satellite radio. In essence, tech companies would have to alter what they are selling to safeguard the entertainment industry’s wares.
Protecting intellectual property is a legitimate goal for Congress–after all, the Constitution called on Congress to give authors and inventors exclusive rights “to promote the progress of science and useful arts.” The task has grown more urgent with the emergence of an Internet-fueled global information economy. But what the entertainment industry is seeking in this year’s proposals isn’t merely protection from piracy; it’s after increased leverage to protect its business models.
That’s why lawmakers must bear in mind the balance needed between copyright holders’ interests and the public’s, something Congress has not done well lately. In 1998, it gave copyright holders broad power to block legitimate uses of works, even those in the public domain, through the use of electronic locks that impede copying of digital products. And that same year, it prolonged the public domain’s starvation diet by extending copyrights an additional 20 years, to 70 years beyond the death of the creator.
Whatever your views on the DMCA and copy protection in general, mandating particular copy-protection standards is clearly bad policy.
Today brings a strange WaPo article on the supposed weakness of Wikipedia because several of the original contributions on Ken Lay after his death were inaccurate, even intentionally so. The article was corrected within a few days of his death, and that, WaPo would have us believe, is a bad thing – better to not have the article at all, than to have it within a matter of days, I suppose.
Everything new is old again, it seems, and the breathtaking power of Wikipedia is already leading some to clamour for whatever is next. (How about a book, updated by experts every year or so, and sold door to door out of the trunks of chevys?)
That’s Rob Hyndman. I have to say I don’t really understand why Wikipedia gets taken in for so much criticism. Wikipedia is accurate 95 percent of the time, and it probably covers a wider range of subjects than any other publication on Earth. And it’s made available to the world for free.
Now, if you’re a journalist or an academic writing a peer-reviewed paper, you probably shouldn’t cite Wikipedia as your source. But so what? People older than 12 don’t generally cite traditional encyclopedias in their research either. Most of the time, 95 percent accuracy is more than sufficient. And if you need 100 percent efficiency, Wikipedia gives you a good starting point by giving you an idea of what to look for.
More to the point, when will the Encyclopedia Britannica entry on Ken Lay be updated to reflect his death? 18 months from now? For that matter, does EB even
have an entry on Ken Lay? It’s downright bizarre to fault Wikipedia for being slightly inaccurate for a few hours, when EB provides the reader with no useful information at all until months after an important event occurs.
Ars reports on the first of many security holes in next-generation DVD standards:
The folks at c’t magazine have discovered a simple tool for beating the content protection on Blu-ray and HD-DVD formats: the print screen button. By pressing the print screen button once per frame, you can capture an entire movie at full resolution. Of course, you’d want to automate this task, but c’t has shown that it can be done. They’re promising more details in the forthcoming print version of their magazine.
The few machines on which they’ve confirmed the hack have been running Intervideo’s WinDVD, though it’s likely that this hack isn’t specific to WinDVD. C’t also reports that Toshiba now has updates planned to disable the screen capture function while the software is running, and they may also update the AACS key in order to force users to either patch their software or be unable to decode the content.
The industry will stick its thumb in this hole, but if the record of past DRM efforts is any guide, that’s not likely to save the dike.
Ed Felten has a great new paper out on network neutrality regulations. Here’s his policy conclusion:
The network neutrality issue is more complex and subtle than most of the advocates on either side would have you believe. Net neutrality advocates are right to worry that ISPs can discriminate–and have the means and motive to do so–in ways that might be difficult to stop. Opponents are right to say that enforcing neutrality rules may be difficult and error-prone. Both sides are right to say that making the wrong decision can lead to unintended side-effects and hamper the Internet’s development.
There is a good policy argument in favor of doing nothing and letting the situation develop further. The present situation, with the network neutrality issue on the table in Washington but no rules yet adopted, is in many ways ideal. ISPs, knowing that discriminating now would make regulation seem more necessary, are on their best behavior; and with no rules yet adopted we don’t have to face the difficult issues of linedrawing and enforcement. Enacting strong regulation now would risk side-effects, and passing toothless regulation now would remove the threat of regulation. If it is possible to maintain the threat of regulation while leaving the issue unresolved, time will teach us more about what regulation, if any, is needed.
And here’s one other thought that struck me while reading the paper:
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The Economist discusses the economics of the iTunes-iPod tie in relation to the French interoperability law, which apparently was passed a couple of weeks ago. They make the familiar razors-and-blades analogy that has been discussed here on TLF before. The weird thing is, they never get around the actually making an economic argument about why the tie is economically beneficial:
The law’s opponents reach for different analogies. They compare the iPod not to the Walkman, but to printers, games consoles and razors. Buy an inkjet printer, for example, and you must buy the manufacturer’s cartridges to be sure that it will work properly. (Although French parliamentarians will not come to your rescue, European regulators might.) Indeed, manufacturers make much of their money from the cartridges, not the printer itself, which is often sold cheaply. Economists explain this business model as a clever way for companies to “meter” their customers, charging them according to use. If they could not tie their customers to their cartridges, they would charge more for the printer itself, and the kind of person who now uses his printer rarely would not buy one at all.
Apple’s business model, however, turns this on its head. Apple makes its money from sales of the iPod, not sales of music; the printer, not the cartridge; the razor, not the blade. As Bill Shope, an equity analyst at JPMorgan, puts it, the music store is a “loss leader” that serves only to boost sales of the iPod. It is as if record stores existed only to sell record players.
The article goes on to explain why this arrangement benefits Apple, but it never gets around to explaining why it’s good policy to allow Apple to tie the iPod to iTunes. I understand the argument when you’re selling cheap printers and expensive ink cartridges. That allows manufacturers to capture more of the value of the printer (by charging heavy users more) to cover development costs while simultaneously making the printer more affordable for light users, who otherwise might not be able to afford one at all.
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Yahoo reports on music sales for the first half of 2006:
Physical album sales continued to decline in the U.S. during the first six months of 2006, down 4.2 percent in comparison to the same period last year.
However, Nielsen SoundScan figures indicate that digital sales might boost the business as a whole. Sales of digital albums soared 126 percent during the first half of the year, while digital tracks rose 77 percent.
Looking at the entire sales picture–comprising physical albums, digital albums and digital tracks–overall sales to date this year have gained about one-tenth of a percentage point over the first six months of ’05.
A total of 270.6 million physical albums were sold domestically through the end of June, representing a drop of 12 million units from last year’s six-month total of 282.6 million.
Digital albums improved by 8.2 million units, with 14.7 million units sold since January versus just 6.4 million units in the first half of 2005. Digital tracks gained by 122 million units; 281 million tracks were sold in the first six months of the year versus 158 million in the same period last year.
If we assume, as Ars did in January, that an album is equivalent to 12 stand-alone tracks, we can calculate the rough market share of downloads as a proportion of all music sales in the US. For 2004, downloads comprised 2.3 percent of the market, while for 2005, it was 7.3 percent. This year, it appears there were 270.6 million physical albums sold, 8.2 million digital albums, and the equivalent of 23.4 million albums worth of individual tracks. Adding that up, there were 31.6 million online sales out of a total of 302.2 million sales, or 10.5 percent for the first half of 2006.
It looks like sales growth isn’t quite keeping pace with last year’s growth rate, but it’s still a safe bet that downloads will be the dominant revenue source for the music industry by the end of the decade. It’s also worth noting that download revenues are probably much higher margin than physical CD sales, so even if industry
revenues remain flat, industry profits are likely to rise significantly as more and more users shift to online downloading.
Here’s another interesting wrinkle in the CleanFlicks decision:
CleanFlicks first obtains an original copy of the movie from its customer or by its own purchase from an authorized retailer. It then makes a digital copy of the entire movie onto the hard drive of a computer, overcoming such technology as a digital content scrambling protection system in the acquired DVD, that is designed to prevent copying. After using software to make the edits, the company downloads from the computer an edited master copy which is then used to create a new recordable DVD-R to be sold to the public, directly or indirectly through a retailer. Thus, the content of the authorized DVD has been changed and the encryption removed. The DVD-R bears the CleanFlicks trademark. CleanFlicks makes direct sales and rentals to consumers online through its web-site requiring the purchaser to buy both the authorized and edited copies. CleanFlicks purchases an authorized copy of each edited copy it rents. CleanFlicks stops selling to any retailer that makes unauthorized copies of an edited movie.
This is an unambiguous violation of the DMCA’s anti-circumvention rules. Yet interestingly, the judge didn’t even mention the issue. I have to assume that means Hollywood didn’t make a DMCA argument in its lawsuit. I wonder why not? Perhaps they were confident they’d win on the other grounds, and didn’t want to inflame social conservatives against the DMCA?
Joe Gratz has tracked down a copy of the Clean Flicks decision. And he has some excellent analysis of the case here:
While the First Sale Doctrine protects resellers from copyright liability, CleanFlicks is doing more than reselling. They’re making unauthorized copies. Maybe otherwise-infringing copies should be legal if one authorized copy is warehoused or destroyed for each unauthorized copy made, but that’s not the current state of the law. (If it were, there would be pretty nasty proof problems involved in keeping copiers from playing with their numbers.)
Judge Matsch also marched through the fair use factors, properly recognizing that they represent only a part of the Fair Use Doctrine. His transformativity analysis was rather unsatisfying; it seems that, in Judge Matsch’s view, only additions of content, not deletions, can be transformative. I agree that these particular deletions were not transformative, but the opinion’s language is overly broad.
The EFF filed an amicus brief seeking to rebut the studios’ argument that “the intermediate hard drive copies allegedly [used] to create [CleanFlicks’] final products violate a copyright holder’s exclusive right of reproduction[.]” The brief was successful; the court focused on the DVD-R copies CleanFlicks made, ignoring the intermediate copying in its infringement analysis.
Finally, I meant to mention the Family Home Movie Act, which explicitly legalized devices like ClearPlay, which edit out objectionable content from DVDs on the fly. It seems to me that ClearPlay would have been on much firmer ground than Clean Flicks even without this explicit exemption (since ClearPlay never makes any unauthorized copies) but in any event, parents wanting to shield their children from naughty words and images still have ClearPlay as an option. The FHMA did not mention DVD editing services like CleanFlicks.
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