Wolf Richter

The UK government today released the long-awaited Digital Britain Report. To start with the positive aspects: The ill-devised disconnection of repeat infringers is off the table, the report recognizes that there is a demand for legal media services, which the industry currently does not serve, and there will be a digital “test bed” to experiment with new legal and commercial models.

The report keeps alive the notification scheme, which obliges ISPs to deliver warning messages to users suspected of copyright infringement and reserves the right to impose sanctions like throttling of their internet connection. The telecom regulator Ofcom has been tasked  to oversee the development of filtering and blocking technology to throttle unlicensed file-sharing traffic. These filters could be potentially even more harmful than the previous disconnection scheme. If they are not extremely fine-tuned and targeted they could reduce the p2p experience also for legal users.

Remember, not all p2p is illegal: The BBC’s iPlayer is the most vivid example of the power of p2p distribution technology and the recent announcement of BT to throttle the bandwidth available for the iPlayer would not leave me surprised if the new p2p filters would also be used to “filter” iPlayer traffic as collateral damage. The alternative looks even more frightening: A smart filter that could differentiate between licensed and unlicensed traffic would have to investigate individual content pieces, a practice called “deep-packet inspection”, which would result in a system that allowed ISPs under the overview of the government to monitor and block virtually all Internet traffic.

The report also does not address the issue that the development of new business models does not suffer from a lack of creativity, but a lack of content. To point at the recent online media services “Spotify” or “Hulu” is not sufficient, and ignores the hundreds of entrepreneurs who tried for the past 10 years to build new models for legal content monetisation, but had to give up because of the reluctance of the music industry to license their content under reasonable terms.

Finally, the “exceptional statutory maxima” for online and offline copyright infringements have been “harmonised”, a term already widely understood as meaning “increased”. £50,000 is now the new recommended maximum statutory penalty for all Intellectual-Property related offences.

After all, the report could have been worse and contains many encouraging notes. It sends a clear signal that the government is determined to foster innovation and provide Internet users with legal access to the content they want. The government will invest more than £10m in the development of the test bed for new models and support further research. But while the report is very specific on the threats against copyright infringers, it remains very cloudy when it comes to the obligations of the industry, both ISPs and content producers, to finally deliver these services.

Ars Technica wrote yesterday that the Isle of Man’s investment minister Ron Berry had announced that the Isle of Man would introduce a Blanket License.

“At the end of the day, we’re not going to stop piracy,” said Berry. “Embrace it… Had the music industry embraced [the original Napster], we’d have a very different medium today.”

Under the terms of the license, every citizen of the island, which allegedly has a 100% broadband penetration, would be allowed to legally engage in file sharing. Interestingly, the model seems to be supported by the recording industry as the statements by BPI’s Geoff Taylor indicate. Given the less than enthusiastic reaction of the industry to the blanket license model in the recent year, who seemed to focus on again alienating customers with “Three Strikes” or “Graduate Response” models of deterrence, this could mark a paradigm shift. If the trial at the Isle of Man will be successful, this could be the beginning of a new era, in which consumer and industry interests are no longer adverse, but aligned by a smart business model.

While Ars Technica already sees “Grandma (…) browse BitTorrent trackers for songs of unknown quality (and with perhaps limited metadata and album art)” while still paying for the license, I have argued elsewhere that the introduction of a blanket license will inspire the creation of a new generation of new music services, which will compete on convenience and customer satisfaction rather than on access to the catalogues of the major record labels. The blanket license does not mean the end of iTunes&Co, but it means that having a contract with a major does no longer protect your turf from competition.

So, good news for customers, including Grandma – and by the way, who sold that broadband Internet connection to her anyway?

MediaScrums.com is a new blog originating at Harvard’s Berkman Centre to trace the evolution of production, distribution, and business models for digital media globally. Core writers are my friends and collaborators Eric Priest, Devon Copley, and Leah Belsky, who are all actively involved in shaping the future of digital media in one way or the other. Among others, the three are executives at Noank Media, a media start-up company committed to providing a legal alternative to unlicensed file sharing. I am very excited to join the three as a guest author and contribute a European perspective to the team, which already covers Asia, and the U.S. from both coasts.

The European Union has awarded a grant of 14 million Euro to a consortium of companies and research institutes gathered around the University of Delft (Netherlands) to develop a “next generation” P2P network. According to the press release the goal of the project is to create a new media delivery mechanism using the emerging P2P paradigm and explore its potential use for Internet Television. The new system builds on the decentralized Open Source file-sharing software Tribler.

The project is ambitious in several aspects: First, quality of service in decentralized P2P systems is notoriously difficult to manage, which has so far reduced the commercial value of this technology for streaming rich content like e.g. a TV signal. Still, the area is highly competitive with several projects like Joost or China’s PPlive innovating in the market for years with mixed success. One major challenge outside the control of any innovator is the asymmetric design of the dominant DSL lines, which provide fast down-streaming, but have limited capacity for up-streaming, which throttles down any decentralized architecture.

Second, the team will have to come up with a smart answer for copyright management in their “next generation” P2P network to avoid headlines like “European tax payers money used to build next generation Pirate Bay”. Both Pirate Bay and the next generation P2P solution are based on BitTorrent technology, which has so far been successful to resist against effective enforcement of copyright law. The “next generation” P2P solution will be more decentralized than conventional P2P tools like Kazaa or eMule and hence be even harder to control. But with a budget totalling almost 20 million Euro, the team has a lot of pocket money to spend to address these challenges.

British record labels seem to miss yet another chance to regain leadership in shaping music distribution on the Internet: Instead of announcing the launch of an innovative, convenient, legal file-sharing platform, today the national news broke that the music industry, represented by their lobby organisation BPI, had agreed with 6 ISPs serving the UK on a process of distributing “warning” letters for illegal file sharing to their customers. Although the controversial termination of the Internet connection as a final threat, as discussed in previous proposals and planned to become effective in France later this year, has been replaced by the threat of “slowing” the connection, the measures focus on deterring customers from using their Internet connection to use for file sharing.

A recent survey by the publishers and artists association British Music Rights and the University of Hertfordshire has shown how much students value their music, but also how rampant file sharing is in these age groups. Instead of exploring models to capture the social value of file sharing, the music industry continues to believe that they will be able to bring the Genie back into the bottle. These alternatives already exist and do not necessarily require government involvement. Companies like Playlouder.com in the UK or Noank Media in the US have developed the models and technology required to collect content fees, measure the amount of file-sharing traffic, and distribute the fees to the copyright holders. Instead of preventing file sharing, they allow ISPs and copyright owners to participate and benefit from the distribution of digital content by consumers over the Internet.

BPI has claimed for a long time that the rampant use of illegal file sharing networks prevented the creation of legal alternatives. Their approach to solve this hen-and-egg problem seems to focus on using the stick first and rely on the magic of the market to bring about the alternatives. If their logic was right, consumers should expect to see legal alternatives emerging soon as the stick is out now. Until then, I will feel inclined to believe that the industry underestimates the social significance of file sharing and will continue to develop models which fail to meet the demands of their (potential) customers.

Last week started with a public announcement by the US lobby group IFPI to increase their enforcement attempts against illegal music downloads in China, allegedly by targeting the big search engines. According to IFPI, 99% of all songs currently circulating on the Internet in China were illegal copies. Unfortunately, IFPI did not have to detail their plans on how to proceed with their enforcement attempts and thereby got around explaining what they would do different this time, because somebody else stole the show from them:

On Wednesday, the WSJ published an article, that Google – also a major power in the Chinese search engine market – had partnered with a local Chinese company (most analysts agree that the partner will be top100.cn) to provide legal music downloads in China. Although the details are still nebulous (Which labels are on board? What watermarking or DRM technology will they use? What restrictions on reuse and sharing will come with the license?) this move has the potential to change the rules of the game.

When I talked about file sharing in China together with my friend and colleague Leah Belsky at a conference on IP law in Beijing last year, we concluded that gatekeepers, among those search engines, were in a prime position to move ahead and shift the paradigm from prohibiting file sharing to capturing the value inherent in file sharing. While it took the market power of a player like Google with the golden lure of their ad revenue to shake up the inertia of the industry, this is only the beginning of a transformation process from business models relying on scarcity to those monetizing wide circulation. There is still value left on the table: the question now is who will be first to recognize where the value potentials are and who will be first in devising the tools to capture these potentials? The race has just started and will remain thrilling!

I realized that I have neglected blogging quite a bit recently. There is no excuse for that, but there is an explanation: Last week we finally presented the findings of the joint project between the OII and the McKinsey Technology Initiative to an audience of academics and invited executives from all over Europe. Coordinating a team of 15 researchers and numerous McKinsey consultants spread out across three continents and 5 time zones was indeed a challenge: fun, but demanding!

The workshop was preceded by a public lecture the day before at the Said Business School featuring Distributed Problem Solving experts Scott Page (Michigan), Karim Lakhani (HBS), and John Wilbanks (Science Commons), and the OII’s own Paul David as a moderator. The lecture is now available as a webcast on the OII’s website in case you missed the show.

We will also publish shortly the set of case studies the team conducted on current distributed problem solving networks like Sermo, Digg, a high energy physics experiment at Cern called Atlas, the community behind Firefox, Open Content Film production, and several others. If you are interested in the project or the findings, check the project’s webpage, which should be updated soon and will contain the most recent documents on the topic.

To spread the word/k, Tobias Escher and I will participate in an upcoming workshop organized by OpenDemocracy on “Credibility in the New News” in London and contribute our findings from the Online News Aggregator case study, which we drove together with our colleague David Bray from Emory University (and who also maintains a witty blog on his pet topic: knowledge ecosystems).

During the upcoming OII excursion to Berlin we will present yet another paper based on the News Aggregator case study at the Re:Publica conference, but more on this will follow in one of the next blog posts…

Online identity theft has been on the hype cycle for quite a while. But sometimes it is really helpful for Internet researchers to be reminded of the earthly aspects of existence. Such happened to me last Saturday, when my car fell victim to an offline identity theft.

OK, it was Rugby Saturday, and yes, there was also Soccer, but is that enough to explain why somebody would bother to take the license plate from a car???

To continue the OII’s tradition of gathering all active (and wannabe) bloggers at the OII to share their experiences and discuss about possibilities to further improve the visibility of the OII’s blogosphere, Malte Ziewitz has called in another OII blogging roundtable. For the first time, also the new DPhil students were invited to join the roundtable. The OII webteam presented on the OII’s development agenda and their priorities for 2007/2008: In particular the RSS feed and the possibilities to include new plug-ins in the OII’s WordPress blog caught on with the crowd.

The major area of concern was how to further broaden the range of topics covered in the blogs and how to even better expose the richness of the OII experience to the outside world. Three major initiatives were approved by the roundtable and will be implemented as soon as development capacity allows:

1. The blog will be used to introduce visitors at the OII. Continuing the early success of the email introduction of visitors to all OII members established last year, we should also use the blog space to portray the variety of visitors currently visiting at the OII. This is also to encourage visitors to document their time at the OII in the blog or to include their existing blog into the OII’s blog during their stay. The same also applyies for the new DPhil students, which have just joined the OII and are eagerly exploring the space. We should expect to see short introduction by the new DPhil students soon, and hope that many of them will join the blogosphere as active bloggers themselves.

2. Priority will be given to use the OII blog to cover the numerous events taking place every week at the OII. The roundtable found that instead of posting the official event description on the blog, we should strive to cover all events in a short blog post. To achieve this ambitious goal, the webteam will approach bloggers in advance and encourage them to cover certain events.

3. Another priority should be to announce successful papers produced at the OII. We agreed that the OII blog should not only serve as the window into the OII’s social community, but also mirror the academic life. The blog should serve as an amplifier for the amazing research projects going on at the OII, many of which have relevance far outside the traditional academic networks and deserve appropriate visibility. Even prior to the establishment of a publication repository at the OII, which is planned to launch in the near future, we should aim to post abstract or plain English descriptions of all publications produced under the roof of the OII.

In order to lower the barrier of entry into the blogosphere, the webteam will explore the feasibility of installing an email address through which posts can be directly posted to the OII research blog without logging on to WordPress. The email address will be announced to all OII members after implementation.

And last but not least: the next blogging roundtable will be coming up soon! We will continue the tradition of inviting prolific and outspoken bloggers (e.g. last year Wendy Seltzer) to share their experiences and give first-hand advice on how to start and maintain a lively blogging culture.

During a recent stay in Beijing, Eric Priest invited me to join him for a panel presentation on “New approaches to the IP Challenge” during the HPAIR 2007 conference. I happily accepted the invitation and used the discussion with the students as a focus group to better understand how Asia’s “Digital Natives” (John Palfrey gave a talk on his pet topic to the panel the day before) use the Internet to access and produce digital media. The group was a diverse crowd of students from China, the Americas, and other Asian countries, who were united by their interest in Media in Asia.

The general gist of the discussion followed what was to be expected: While the majority of the US students indicated that they had stopped file sharing, most Asian students were still using the Internet as their primary source of digital information and entertainment. The only limiting factor, in particular for the Chinese students, seems to be the available bandwidth, which makes access to larger files like movies still a cumbersome process. While CDs have virtually disappeared from the lives of the students and only lead a niche existence as presents, the (unlicensed) DVD is still a popular medium for movies, at least in China:

I learnt that the current DVDs sold in the street corner stalls contained up to 4 movies thanks to the use of advanced compression technology, and that some of the vendors even offered a home delivery service making the walk to the video store around the corner obsolete. I stroke me quite odd to see the creativity of DVD pirates in China to develop new products and services, which address the challenge posed to their “business” by the emergence of alternative distribution channels on the Internet. In the absence of any other means to protect their illegal business activity they decided to compete on the service dimension!

I started to wonder in what kind of world we would be living today if all the time, money and effort, which has been spent on developing DRM technologies, which make a legal product more difficult and cumbersome to use than its illegal, DRM-free copy, had been spent on improving customer satisfaction.