Wednesday, January 18, 2012

SOPA and PIPA - A Step Backward for Net Neutrality



We're not saying that we want to pirate copyrighted material; we just think there is a better way of handling copyright infringement.

After reading the Stop Online Piracy Act and the PROTECT Intellectual Property Act in their current forms, I'm fairly convinced that these two pieces of legislation could virtually stop the Internet as we currently know it. Some of the requirements include having Internet Service Providers (ISPs) block any networks that serve content that is suspected of being copyright infringement. Search engines would also be required to wholesale block entire domains from the language included in the drafts. This poses a tremendous risk for cloud computing and multi-tenant systems because an attempt to block one set of content could wind up taking down a content delivery network for everyone else who is hosting legitimate content. This is effectively a government initiated denial of service attack against the companies that may or may not be perpetuating the infringement.

It is clear that the movie and music industries (who have yelled the loudest since piracy took off in the 1990s) lobbied to create these two extremely misguided pieces of legislation, but let's get to the heart of the issue. The music, movie, and cable TV industries are failing to adapt their business models to the changes in the business environment from the late 20th century and early 21st century. Additionally, these industries are feeling too lazy to police their own intellectual property, so they are trying to make it a taxpayer issue to bring criminal charges against infringement on private property. For the rest of the world, this is handled in civil (lawsuit) case law. If you thought the bailout of the banks in 2008 was a waste of taxpayer money, The bills threaten to increase the amount of federal spending on copyright infringement related enforcement..

We've heard a lot of arguments that piracy is hurting jobs and piracy is hurting incomes for different businesses, but this is not the real cause of the issue. The loss of jobs is't from piracy, it is from a natural evolution of these markets as they are revolutionized by technology.

Let's take the music industry for example, in the 1990s there was not an alternative to buying a full CD for $10-$20. What this typically meant was that the average individual would end up paying $10-$20 for a single good song on the CD. An artist gets a hit and the record company (not the artist) sells 100,000 records and makes $2 Million. Now with MP3 services like iTunes and Amazon, the single good song can be purchased for $1, and the other 19$ worth of crap on the CD doesn't need to be bought (because it won't be listened to anyway). Now assume the same hit occurs and now the record company only makes $100,000. Most people would call this progress because the average consumer pays less and is able to get a product/service that is tailored to their wants and needs. From an economic standpoint, this is more economically efficient and serves to motivate intellectual property creators to produce more high-quality content to make the same revenue. Fewer jobs are needed because artists are only producing their best work since they know that people won’t buy the junk any more...

Let's take it a step further, numerous services like Youtube, Grooveshark, and internet radio services like iHeartRadio and Pandora are now used to listen to full songs/albums before a consumer buys them and to discover new music. In most cases the consumer is going to buy the songs that he/she really likes (to put onto their iPod, Zune, or whatever), but this means only a few dollars in revenue for a record company instead of dozens or hundreds. In an economic study on music piracy, researchers from MIT found out that the average person who pirates a song doesn't like the song enough to actually buy it, and the real net effect is that someone has a song that they didn't buy that is taking up space on a hard drive, but not being listened to... Nowadays, people don't even pirate music, they simply look to stream it.

The Cable TV industry is now suffering a similar fate because of the evolution of streaming services like Hulu and Netflix. More and more people are asking the obvious questions, "Why should I watch commercial supported broadcasts when I can have on-demand, commercial free access to my movies and TV shows?" I myself dropped my Comcast Cable TV earlier this week so that I could save 60$ a month on something that I never watch anymore (I watch Netflix mainly now...). The reaction isn't to embrace the times and change with the business environment; instead Comcast implemented a 250 GB cap on monthly data traffic with a stern threat of cancelling service for users that go over the limit. This is an implied attack on net neutrality because it biases customers to use Comcast's cable TV service instead of using bandwidth consuming streaming services. This is especially effective if someone is using their Internet connection for voice, data, and TV-ng services and is using a lot of bandwidth. The bottom line is that the FCC should probably prohibit this policy under network neutrality rules.

It's time for the music, movie, and Cable TV industries to join the 21st century and adapt their business models to the changing times. Write/call your congressional leaders and get involved in stopping this train wreck of new legislation that threatens the continuation and evolution of the Internet...

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