ratpie

Category: regulation

  • The Dog in the Manger

    Nobody ever claims to have contributed to a traffic jam, despite all the evidence around them when they are doing so. And clearly had they not contributed, the jam would have been less of a delay for everyone, especially them. So it is with yearly summaries of markets; the great temptation is to see the aggregate as something to beat, or be beaten by, or as an inexorable force that prevents good outcomes for oneself while making inevitable better outcomes for one’s competitors or vice versa. Or, as some kind of gestalt which absolves participants from their responsibility to repair and regenerate for next year what this year they have fed off.

    Quick off the mark UK 2014 music numbers from the BPI are reported in the FT this New Year’s Day 2015, and they show a retail value decline of 2% to £1.03b. While that might not sound like much it is still about £20m that record companies and artists had last year and not this. The FT is absolutely sure about the cause of the decline, which it ascribes to the effect on downloads of the growth of streaming services, which in revenue terms are up 65% to £175m compared to 2013. A bit of math tells us that roughly speaking, if the relationship is simple and the numbers are right, every £1 in streaming growth reduces the retail value of recorded music by about 30p. Of course nothing is quite so simple, but it is an interesting thought nevertheless.

    And here’s the bit where we play spot the dog. On 1st August Vivendi put out a press release so brief I can quote the whole thing:

    Vivendi announced today that its subsidiary UMG has completed the sale of its share (approximately 13%) in Beats to Apple for a total amount of 404 million USD.

    That is £260m of revenue for the world’s largest music company that cannot and should not figure in any of the retail recorded music markets, but that few could honestly argue is completely unrelated to UMG’s portfolio of recorded music rights and roster of popular artists. If 10% of that were returned to the UK recorded music revenue pool it would more than offset the loss that the FT considers due to streaming. Perhaps the FT needs a better model!

    That £1.03b retail value returns probably around £700m wholesale revenue to suppliers, and as the FT points out we do like our local music currently with all of the top 10 albums coming from UK artists. It would be foolish even to try to second guess how Apple’s acquisition of Beats is going to grow the retail value of recorded music in the UK. Taking 10% as perhaps a slightly generous estimate of the UK’s share of the world market, approximately £200m of the price of Beats needs to wash its face in Blighty. Coincidentally, a 10% annual return on an investment that size would be remarkably close to the £20m net shrinkage in the retail market last year. If significant growth in the UK market seems a bit far fetched, especially against the net shrinkage that success with Beats seems more likely to cause, there are two other obvious ways buying a competitor can be justified. A defensive buy neutralises future threat; consolidation also controls wholesale prices.

    The dog in the manger eats none of the food it so assiduously guards. If streaming is popular among downloaders, then it is missing by a wide mile the theoretical average person of wage earning age. UK resident 16-75 year olds averagely spend roughly £23 each on recorded music each year. Spotify subscribers spend £99.96 excluding VAT on their annual subscription. To get the net shrinkage observed in the annual numbers, each of those would have formerly to have had a £156 per year download and CD habit. In a Gaussian worldview, perhaps that £99.96 could represent a point from which to measure likelihood of consumers to convert from ad hoc sales to a fixed and predictable future spend, less than ideal to the extent to which it shrinks the total pool (currently about 1:1.3 according to the BPI numbers). But even if it were 1.3:1 it would not necessarily follow that the manger was fuller, nor that anyone could get at the food.

    Wholesale revenue could be under more pressure than retail, for several reasons. Inventory continues to grow (with 43m tracks reportedly on iTunes worldwide) increasing competition which reportedly, at least for now, Apple with its single take-it-or-leave-it indie deal is not taking advantage of. More of the wholesale revenue is now going to suppliers of public domain recordings, and this will only grow as the public domain expands each year (retailers could usefully tweak the incentives in that area).

    And the new wildcard is changes in private copying regulation which introduce new competition at the retail level from music lockers, which will be exempted from licensing and not required to pay compensatory levies. These will offer mobile access to music collections and could be filled with rips from second hand CDs, or worse, files found from who knows where. And just as with Vivendi’s Beats sale, locker money is part of the music economy but not part of the music market.

    So the conclusion, after a little excursion around 2014 in the industry is that there are several quite surprising dogs in the manger. Between them they contributed to a 2% decline in the retail value of recorded music in the UK, with further declines anticipated. Market gestalt says that this will be a self-fulfilling prophesy. Perhaps 2015 will bring a much needed new manger.

  • The US Net Neutrality Debate; Sleepwalking into Walled Gardens

    Being an outsider to the US Net Neutrality debate, I don’t feel the pain of cable monopoly, or the blight caused by expensive and poor quality broadband. Over here in the UK we hear more about Verizon FiOS and Google Fibre, and mobile investments and megadeals, than we do about coax. In the UK, and increasingly in Europe, our regulators manage markets with perhaps too much diligence.

    The usual way regulators deal with monopoly is to encourage or mandate competition. I have been surprised by the number of US states banning muni wifi – though I can understand the argument that common property should not be preferentially available to private interests. In many cases it seems to me that the public interest should clearly override, and that monopoly providers who gained their own wayleaves and easements under different regulatory and technological  environments should not be considered adequate provision for the next 20 years. Susan Crawford seems to agree with me (!) according to an article she wrote for the FT this week (Feb, 2014).

    Perhaps, though, the problem is as much about what content and services might be available over new competitor access networks, and on what terms, rather than how an incumbent should be obliged to manage their business and network.

    Here’s a simple question which illustrates in some ways how difficult the regulation challenge is. Should an aspiring competitor to Netflix or any other content or service provider, which does not yet have the subscribers or the bandwidth requirement of its competitors, be able to force a consumer broadband provider (CBP) to purchase public peering capacity at parity with whatever private arrangements the CBP (I avoid the term ISP deliberately) has made with competitor content or service providers?

    If your answer is no, they should not, then you are setting the bar higher for the Internet as an engine of competition and innovation; the new entrant will have to overcome market inertia as well as poor quality of service in order to grow. And that will be true of all networks, not just the problematic incumbents, be they monopolistic or competitive.

    The complex balance between colocation, private peering, and public peering seems to me very poorly understood by many content companies – sleepwalking into walled gardens in my opinion – and regulators, who have bought the narrative without looking at the grammar or semantics of what they were sold. It is very well understood by a very small number of highly successful content and services companies, who, not an accidental coincidence, are getting off the public internet as fast as they can.

    Whether or not a CBP tweaks its packets in favour of one content or service provider or another could be well covered by fair trade regulations; it could be dealt with completely outside the scope of telecoms regulation. How your CBP connects to the Internet is an entirely different matter, and one that only a telecoms regulator can really be concerned with.

    It is very tempting to gravitate towards one lobbying platform or another, and it sure gets a reaction from the crowd if a journalist or lobbyist can work up a good foam. Through my strongly sceptical filter, however, the US Net Neutrality debate looks as much about content and service providers trying to open CBPs to uncompensated private and colocated access, as it does about CBPs trying to use their control of the last mile to extract rents. It’s not as if there is anything to preserve – NN as it seems to be deployed by commentators and lobbyists was never adopted by the broadband industry, but emerged out of the evolution of the technology and business models of telcos, only to retreat as content and service providers became able to influence CBP profitability by stressing their networks.

    Framed in those terms, profitability will be a key metric of the relative success of the contestants over ‘connected world’ business models, as will their share price relative to current earnings as the market collectively decides who it thinks is winning. Again, none of this is a regulatory matter, beyond the usual fairness arbitration.

    This is not to say that telco regulators have no place. Far from it. If any of this analysis proves apt, regulators need to consider the connectivity and openness of the Internet itself, being how networks connect, who can connect to them, and the capacity, capability and status of that connection vis a vis any other ways that content and services get carried to people.

    But that is not neutrality by any ordinary definition of the term. What I think the progressives are saying in this debate is that we should use regulation to create an Internet governance policy which is sustainably open, and which has the capacity and capability to support the innovation and churn we need to remain healthy. This I wholeheartedly would support, but what Comcast or Verizon do to your Netflix or Google packets has no relevance at all to any of it.

    Wake up America! Thinking that it is all about whether Verizon throttles Netflix, or whether AT&T has ‘provider pays’ QoS, will just hand more advantage to incumbent content and service providers at the expense of new entrants, as colocation, caching, and private peering dig deeper into the CBPs’ networks. No wonder that the popular content and services companies are bleating about how much they need Net Neutrality; as currently framed it would be a great way to keep out competition.

    It is probably too much to ask that CBPs should be obliged to maintain a public Internet at parity, as posited in my simple question above. It’s not too much to ask that between them they maintain an adequate public Internet, even if their customers are blissfully ignorant of whether their 21st Century couch/remote combo ever touches the it on the way through.

  • Record Companies Should Give Up a Hard Won Right. Here’s Why.

    When the recording industry was young there was a genuine concern that it might be strangled at birth by owners of popular songs, who might naturally wish to protect their sheet music sales and public performance fees from competition from the new no-effort and high quality music experience offered by the phonogram. As it was, a sensible deal was struck to allow recordings to be made on payment of a low fee. This payment for the right to make copies of the songs embodied in recordings – the ‘mechanicals’ – became the biggest revenue stream for many of the writers and publishers, and the success of the recordings drove even more revenue through more public performance, and through broadcasting of the very recordings that some had feared would harm the pre-recording music business. This automatic right to perform and record songs became one of the foundations of the industry.

    Times change. Great songs still are at the heart of the business; that is fairly uncontroversial. But low production costs and almost no barriers to entry in the digital market have brought a flood of badly performed and badly produced imitations of popular recordings. Artist names and song titles are often created to trick the public that they are getting the real thing. These records might generously be called ‘tributes’, but the tribute is to the earning power not the performance or the art involved in the recording. As a class these records are one of three main drivers of the ballooning inventory that is adding so much cost to the digital music business (the others being PD and ‘generic’ music). The cost in consumer displeasure is harder to quantify, but they add risk to the retail experience and that means a worse business for everyone not playing the ‘full vocal Karaoke’ game.

    One response to this problem is certainly for music services to get much better at weeding out the genuinely interesting cover versions from the chancers and soundalikes. This is happening already, but is clearly a difficult, expensive and time consuming activity. They will too need to lose their fear of seeing uncompetitive if they have only the 10 million tracks people will enjoy rather than the 25 million that producers want them to carry.

    But there is another approach, far more radical, and I would argue far more in tune with the times. Record companies should willingly give up their automatic right to make copies of the embodied song when they sell records. The right to perform need not be touched; the right to record for private and personal use can remain too. But making copies of the composition for the sale or performance of sound recordings would benefit greatly from reverting to exclusivity and private negotiation.

    The question for the owner of the song would then become not how many copies can be tricked out of an undefended public, but whether a particular recording adds real value to the song itself, now and in the future. Record companies too will perhaps pay more, but for an exclusivity in their own asset, the recording, that should pay them back many times over in the market.

    The contention here is that every horrendous cover of Born in the USA is a cost borne ultimately by the owners of the copyrights therein, and unfairly benefits free-riders on the value created by the writers and producers of the song and original recording. Digital markets sometimes need new approaches to copyright; in this instance what might seem a retrograde or undemocratic move would serve the public and the music industry better than the current free for all.

     

  • The Cost of Granularity in Music Copyright

    It might be just my very partial view on some high volume/low unit price markets, but it seems that at some point the cost of the granularity required for a royalty based remuneration system is just too high, and the wholesale market should move to upfront fees for creators, and to catalogue brokering. This assumes that the cost is visible however, and is falling on the parties who can take appropriate measures to contain it, or change their models.

    By way of illustration, even semi-efficient developed economy CROs end up taking deeply unfair and desperate measures to keep their rosters small, the goal being not to notice as many performances as they can get away with. The ‘300 highest-grossing live concerts’ method used by ASCAP for instance is clearly going to weight distributions heavily in favour of an elite cadre. But would a random sample of 300 from the top 3000 be any fairer?

    This is one of many examples where it seems that collectivisation really does not work in a way that many would consider modern and fair. Chop the market into three on the vertical and you can easily see how ‘fairness’ for each third has its own particular sweet spot, and how different they are. It’s probably a bell curve with the edges migrating into their neighbouring sections where possible. The super-elite are trapped into paying costs to collect for their inferiors; nobody wants to serve the ‘penny a year’ horde.

    Chop it in thirds on the horizontal – giving three organisations each roughly a third of the total revenue, and you can imagine how the different platforms might innovate to attract particular communities of musicians. Being great at collecting from arts centres and publicly funded halls perhaps would serve the modern classical and jazz performers and composers. Beer halls and cafes would presumably skew towards Schlager in some places. But that means a kind of ‘genrefication’ as creators seek markets with more efficient collection and stop breaking the rules quite so much (as they do now, but with less explicit data to guide them).

    What does this mean for the organisations and businesses that depend upon a skewed distribution of granular royalty flows, or that have built franchises in collecting and skewing those flows? Many of the latter are quasi-governmental, or operate under ‘no competition’ regulatory regimes. Dislodging them and the businesses that depend on them will not be comfortable.

    For many creative people however getting paid up front and allowing others to take the risk has great value. On a revenue per minute basis the revenue flows from royalty models still demand a large aggregate producer subsidy; which seems perverse and gives both producers and platforms very odd incentives, growing inventory and competition and depressing the investment per minute that could produce compelling and sustainable content production.

    Perhaps we are looking at a world of billions of copyright transactions per hour just because the machines can do it, without sufficient thought for what we should incentive and reward. Correcting and improving the administration of collectives might be entirely the wrong thing to do to help creators in a world of giant and relatively open platforms.

  • Music Industry Grasps Wrong End of Carrot

    A UK Parliamentary report is out today, 26 September 2013, that represents a fierce fight back by the creative industries, led by music, against a rogues gallery of pirates, ISPs, and technology and digital advertising and media companies.

    No doubt it will be greeted with a few cheers, and a pint or two in the pubs around the trade associations. It manages however spectacularly to miss the mark on a number of points; more of a Maoist Great Leap Forward than a Stakhanovite revolution in creative industries thinking.

    The committee had a clear brief, to discover how Government could better support the creative economy. Several other Govt sponsored groups are looking at this very subject, from the Technology Strategy Board to a new academic initiative called CREATe. Some very obvious themes consistently emerge when experts manage to get behind the curtain.

    The first to appear is usually sclerotic licensing, driven by internal industry competition rather than a desire to maximise the size and dynamism of the sector. This ‘beggar my neighbour’ approach sees groups who should be cooperating, record labels, music publishers, artists, for instance, openly at war with each other. Only this year a prominent manager issued a call for peace at the BPI AGM. Why did he need to? Why do the various music sector lobbyists always reserve the right to lobby independently from their collective voice? No amount of public money or effort has shifted this problem one iota, and nor would anyone sane expect it to while there is so much to gain for those at the top of the licensing tree.

    The latest initiative, the Copyright Hub, is welcomed by the committee, but even such a confused and ineffectual vessel apparently needs a shot across its bows. Membership should be voluntary says the report. Hargreaves wisely suggested a bit of push might be required as well as pull to get enough engagement to deliver a meaningful benefit to downstream users of music licences. That, for this committee, would clearly be an outrage. Similarly the EU’s ambition for a digital single market gets short shrift. Again, apparently, there is no problem. Licences are available. Of course they are, but only under the strictest secrecy, so we shall just have to take their word for it. Given the short term of licences in the market and the devastating effects of withdrawal of the major content companies, no rational licensee will turn whistleblower.

    So what could Government do to help? Perhaps it would be too drastic to compel some information about licences into the open for analysis, so that creators and new entrants to the creative industries could see what they are getting into. But it most definitely should not just take the licensor’s word for it that ‘everything is hunky dory just look at Netflix and Spotify guv’. And if there is one party that the committee should feel a very strong responsibility to it is the 20 year old who will have to decide whether to get a job with MegaContent Corp, or try to bust the market right open with a new venture. And I hope it is completely obvious that Government should always prefer the innovator and market entrant to the incumbent, no matter how many dinners and gig tickets it might have to forgo.

    Back to the exemplar expert, peering behind the curtain, who sees soon enough that the stage machinery is rusty, frayed, creaking. The creative industries have failed to keep their collective infrastructure in synch with the digital age. Standardisation is happening in a patchy way, but is very much too little and too late. Even now the music industry has no consistent way to identify an artist globally, and governance of the sound recording identifier scheme is woeful. Supply chain data that should have been developed in the 1990s is creeping towards normality, but sales reporting is still ad hoc and fundamentally broken. Even the moral right to be identified as the creator of a work has been lost in digital incompetence.

    This is very important but seems to have been completely invisible to the committee, who presumably made sure that they did not talk to anyone who has to grapple with the problems, rather than who benefits from the misallocation of resources that is the inevitable result. How could the Government help? Small amounts of cash for training and conferences and workshops would be transformative. Currently the cost of the dysfunction and the overhaul is being disproportionately born by the small and the innovative while the larger players drag their feet. In particular collecting societies should be shamed into using international standards as part of their code of conduct.

    Metadata and supply chain reform and reconstruction is also the pachyderm house guest of the committee’s table thumper, copyright infringement. And here is the spectacular fail. It would be reasonable and justified for the committee to recommend that the small minority of mostly well off young men that Ofcom tells us are the diehard infringers should be hit with a Soviet style re-education campaign. Make them polish Billy Bragg’s boots for a month, or do community service in a music recording workshop for 14 year olds. But to introduce new systemic monitoring and notification infrastructure is to give too much of a franchise to enforcement at a time when the creative industries should be trying every thing they can think of to make it unnecessary.

    In a world where there are tens of thousands of legitimate ways to book a hotel room in Bognor, 60% of search result links to hear or download a pop song is a music industry failure and requires first a music industry response specifically targeted at making legitimate music ubiquitous. Broad licensing, freedom for retailers to advertise their services, and industry approved whitelists all would help. Perhaps the target 70% of revenue that the music industry seeks from licensees is not a rich enough margin to encourage the variety of music services that consumers need. Instead of asking these sorts of questions the committee seems to have taken a Mandelsonian shortest path between ear and mouth approach to industry lobbying.

    So, evidence of crowding out on Google search results should be taken as a sign that there are not enough retailers competing for the public’s attention, and that those there are have their hands tied either economically or contractually on how they can advertise. The Government should ask the simple question to the creative industries and their business partners, ‘can you tell Google definitively what you have to offer and where it can be found?’ If the answer is no, then it’s back to the workshop for another round of supply chain reform. Stopping people from finding pirates should always come a distant second to helping people find legitimate and remunerative ways to enjoy content.

    The committee criticised Hargreaves for bringing forward flimsy evidence to support his recommendations, but did not care to inoculate itself against the same charge. And it missed its chance to become the promoter of open and fair markets for creators, underpinned by IP law just as today’s are, preferring to become a booster for incumbents and a protector of their interests.

    Help train the young and retrain the workforce, encourage and enable cooperation where appropriate, arbitrate if necessary on things of common utility such as standards; if the Government would do that the creative industries would look after themselves with the enthusiastic support of citizens and consumers. That it was so much at the music industry’s prompting that the Culture, Media and Sport Committee came out 100% stick shows that music is still a reluctant passenger in the digital economy, clinging firmly to the wrong end of the carrot.

  • Preserving the Open Internet the Easy Way

    No regulation is easy of course, so to start, here’s an apology for the misleading title. Sorry. But it need not be as difficult as it might seem to make the few small adjustments needed to ensure that the next decade does not see the effective end of the open and public internet which promises to deliver so much to humanity.

    Consumer ISPs love to shout about how much bandwidth they are offering their customers. Just look at the words they use! “Unlimited BT Infinity 2 Superfast broadband” screams BT, the UK’s former nationalised network owner. In this case the consumer offering is 76Mb/s download speed, and 19Mb/s upload. But those are qualified – ‘up to’, which of course starts with zero Mb/s.

    As alternatives to the commoditised ADSL 2Mb/s heavily contended offerings appeared in the market, the UK’s Ofcom felt the need to help ISPs avoid misleading the public with false promises. Here’s their key message:

    There has been a noticeable trend for some ISPs to advertise their products based on faster and faster headline speeds . However, the evidence from Ofcom’s research indicates that these headline speeds are rarely achievable in practice by the majority of consumers that buy them.

    from the 2010 Code of Practice that you can read in full here:

    http://stakeholders.ofcom.org.uk/telecoms/codes-of-practice/broadband-speeds-cop-2010/code-of-practice/

    Observant regulators will of course have noticed that the speed being advertised applies only to the connection from the consumer to the ISP’s own network, and that thereafter it is anyone’s guess how much bandwidth will be available to a given content provider or service. And, that while to an extent the consumer ISP has no control over how much bandwidth a third party will have provided to get their message to the public, they do have some control over the way and with how much capacity their networks connect to the world.

    The movement of large and popular services off the public internet and into private connections is well understood and well documented by now. It would be an ignorant regulator who somehow conflated Google, Facebook, Amazon and the rest with an open internet agenda; surely such a regulator would be laughed out of town. For these large network owners, ‘open’ is simply an unfortunate stage you have to go through before cajoling consumer ISPs into closing again, and shutting public traffic out of the connections that carry their traffic.

    Faced with the prospect of competing on price per Mb/s, while making large investments in their core networks almost solely for the benefit of third parties who themselves are turning their backs on the open internet, it is not entirely surprising that the ISPs with the means to do so are trying to develop their own content services. In the UK, BT has bought sports video rights to try to tempt people into its TV service. Other ISPs around the world are buying film rights and other bundles of content, in the hope that their own bandwidth intensive services will enable them to compete internally for their customers’ attention and money in a zero sum game of their own making,

    So there, in a nutshell, is the intersection of several strong commercial incentives, which between them are conspiring to deprive the open and public internet of the investment it needs if it is to continue to enable the innovation that created the private peering behemoths in the first place. If trends continue, what’s left of the internet will become the ‘third service’ alongside ISPs’ own services and the major private networks (Google et al.). It would not be surprising, given that everything politicians hate – from illegal content to freedom of speech and protest – will be flowing down it, this third service will not be high on the list for care and protection.

    Neglecting the open and public internet would be a mistake however, even for Governments which are naturally concerned with preserving their currently pre-eminent internet business sectors. Here’s Neelie Kroes summarising for us at the IGF meeting in Kenya in 2011:

    The Internet is changing the world, and it’s not just trillion dollar marketplace. It is a forum where people connect, a platform for astounding innovation, and a powerful vehicle for human rights and fundamental freedoms.

    Kroes will surely recognise better than almost anyone else on the planet that if you have to define those terms, innovation, human rights, freedoms, and even the more narrowly focused network neutrality, you have failed before you start. As an aside, a proxy measure for the scale of this failure might be found in corporate spending on non-corporate activities – higher is worse – as companies spend to defend their franchises, not to open them to competition.

    The opportunity here, the ‘easy way’ in the mischievous title, harnesses the competitive nature of consumer ISPs to investment in the open and public internet. It pushes the proper questions of who should be allowed to run a computer network, and who should be allowed to connect their network to the internet, to where those questions are best answered, in national regulations and internet governance. It recognises the central role of IXs, internet exchange points, in enabling the internet to be what it is. Topically, it borrows the idea of capital adequacy from international banking reform efforts.

    It is simply this; ISPs should be obliged to provide a reasonable percentage of their total sold bandwidth through public peering at an internet exchange. Then as consumers we could be sure that we really are buying reasonable access to the open and public internet, and as participants in business and culture we could have confidence that our access to the world will not be starved away by neglect or by gatekeeping on the last few hops. And as an important side effect it would remove the incentives Governments have to help corporate interests grow unfairly at the expense of the conditions on which future innovation and freedom rest.

  • Netflix Explains Why The Internet Is Not Good Enough For Them

    The migration of new digital services off the public internet is an established pattern. Driven by economics, and with real money at stake, it is not likely to slow down any time soon.

    To recap, large content providers such as Google (with YouTube), Facebook, Amazon (mostly driven by its Web Services division), and Netflix, among others, are taking their traffic out of public exchanges and setting up private connections with consumer ISPs. They make a compelling offer. ISPs save costs by connecting directly and the exchanges that ISPs largely fund avoid the investment that would enable this traffic to remain on the public internet.

    Helpfully, Netflix has been sharing its technical architecture and its offer, called Open Connect, to ISPs. Here’s a presentation from a recent network operators’ meeting:

    [file no longer online – 5/11/2017]

    and you can see the original powerpoint (link updated 2017) here:

    https://dknog3.dknog.dk/agenda/

    and here’s the horse’s mouth:

    https://signup.netflix.com/openconnect

    Free is a very convincing price, and few network operators have the tools to measure the future impact of a lack of investment in common resources.

    Netflix even sweetens the deal, by offering a higher quality video stream to subscribers who accept the Open Connect equipment and connection. And this illustrates the policy issue very well indeed.

    If our policy makers believe that the open and shared internet is a driver of innovation and value for the public they should be concerned. It is being re-engineered to deliver a second rate level of service. We are still a long way from the point where ISPs don’t need the public internet at all, but arguably that is a destination now in sight.

  • Inspiration for Privacy from Copyright and Beer

    It is quite impossible to make informed choices about privacy, and about the uses of content and data we generate. The terms and conditions of services we use are too long and complicated to read and understand, and anyway are drafted to conceal as much as they reveal. Third, fourth, and fifth parties make their livings off our traces. As individuals, we simply don’t have a way to insist that corporations, or even other individuals, show us proper respect online.

    To some degree we accept our weakness, preferring that these useful services should be there rather than not, and celebrating the disruptive force of digital business even where we know we are both fuel and product. Perhaps we have a sense that we are still at the start of a journey, and hope that the destination will a humane and respectful place. Not many of us want to be evil, no matter where or for whom we work.

    Should we accept this compromise, as unwilling parties to a trade that is at best tolerated and at worst coerced? I do not think it is inevitable that we need to lose so much of our privacy or our expectations of good behaviour and respect in the online world. We have dealt with similar situations in the past, and steered the ship off the rocks. There is no reason we should not do so again.

    When aristocratic patronage and its cousin, censorship and State control of speech, failed to keep pace with the modernisation of societies, with technological advances, and with population growth, authors and composers, artists and performers found themselves similarly empowered by the accessible technology of the printing press, and exposed to growing corporate exploitation. Some used their new power to test how far the tolerance of the State for sedition would stretch. Many found themselves victims of plagiarism, bowdlerisation, and copying for sale and profit.

    This abuse led to real hardship, and a sense of injustice. The earliest uses of the word ‘pirate’ to describe a copier of another person’s writings actually precede England’s first authors’ copyright act by half a century. Here’s Daniel Defoe writing in 1704 in ‘An Essay on the Regulation of the Press’:

    [Abridgement] is the first Sort of the Press-Piracy, the next is pirating Books in smaller Print, and meaner Paper, in order to sell them lower than the first Impression.

    a practice he says is “down-right robbing on the High-way, or cutting a Purse.”

    Defoe had no doubt at all that the press should be regulated, and authors punished for scurrilous writings. But he sought an equilibrium of interests rather than the imposition of top down prohibitions. In brief his answer was to remove the right of anonymity for published work, define as clearly as possible what was out of bounds, set penalties for transgressions, and establish that the rewards of the labour of writing should go solely to the author or his assignees.

    To achieve the last of these aims Defoe proposed a construct by which words, previously considered a crude kind of property which only force or secrecy could protect, came under the regulation of the law, fully identified with their author for both their consequences and any material benefits that might arise. Copyright substituted a new tradable authors’ right for the failed printers’ monopoly right, and then customised it for its expressed purpose, to benefit society by encouraging learning and publishing.

    Defoe’s argument largely carried the day in the first authors’ copyright act, the Statute of Ann, enacted in 1710. Over the following three centuries Defoe’s principle, of a balance between responsibility and benefit, has been extended in scope and term and geography and remains the dominant theme of copyright law and regulation. It recognises the weakness of individuals as well as their propensity for mischief, and seeks to draw all authors into a healthy relationship with society and commerce. By the end of the 18th Century it was possible, if still difficult, to be a professional author, selling copies or copyrights, the private patronage system was in retreat, and literacy was the norm. It had worked.

    Like the printers and booksellers of 1704, today’s digital services want all the benefits of the content and data we provide them, but none of the responsibilities either to the creators or to society. They make this very clear if you do manage to struggle through the terms of service and privacy policies, placing compliance with law and all the consequences of offence and infringement with the creator, but an unbounded freedom without compensation to abridge, adapt, publish, sell, and every other kind of exploitation in all media throughout the universe and forever with themselves. It looks almost as if they collectively anticipated the ‘right to parody’ being proposed now to governments; record companies could never get away with such terms!

    It would be unfair to suggest that anyone other than ourselves should accept responsibility for our words and deeds. Yet most of us would I expect be perfectly happy going about our business without a printer and bookseller embedded in every trivial act of conversation or commerce. It may turn out that we cannot have the benefit of these services without ceding control over our speech and data; this is a conversation we should have from a position of understanding, not denial and ignorance.

    Nor should we accept unquestioningly that digital services are more like public spaces and not an extension of our private lives. For a start, there is nothing public about any of them. They are owned by private corporations, they require a formal agreement before you can enter and use, and your use is entirely on terms dictated by their owners. That they publish is not evidence that they are public. Concomitantly,  looking at a web page or using an app should by presumption be private. Why should anyone be allowed to observe without your explicit permission?

    To illustrate, imagine that your local pub forbade you from grumbling about tax evading technology companies until you had assigned them a perpetual licence to exploit your presence, image, and conversation with no compensation. Those t’s & c’s would for sure be described in very colourful terms! In fact, ancient laws and customs give Inns and Public Houses duties rather than rights, to serve equally anyone who is able to pay and in reasonable condition.

    This comparison is relevant in another way too. Centuries before the internet protocol networks we now depend upon, Inns performed a different kind of packet switching, taking letters and documents for the Crown and later for the public. Their importance was recognised by another regulated duty; many were obliged to keep stables and horses. (Some even developed an early form of parallel currency, issuing coins and operating exchanges much like Bitcoin today).

    As so often, the signposts to show us the way to solve present problems lie partly in a good examination of how similar problems were solved in the past. Drunkenness was contained not by ever stricter control on the supply of alcohol, but by a liberalising law that allowed any householder to become a pub and make and sell beer, as long as it was of good quality, and they kept good order. The old mediaeval Inns, part of the fabric of society, adapted to become relatively safe places of rest, refreshment and recreation for an industrial nation. The intention was clear in the 1830 Beerhouse Act:

    …for the better supplying the public with beer in England, to give better facilities for the sale thereof than are at presented afforded by licences to keepers of inns…

    Any person, being a householder, who shall be desirous of selling beer etc to apply for and to obtain an Excise Licence for that purpose

    Our digital problems today will yield to the same principles as were brought into the regulation of printing, and of pubs, in the past. Our words and images are of course our own, but it required a gift from society in the form of copyright laws before we could usefully exercise control, and that gift was given in order to create a benefit for all, not a private monopoly. Printers fought the early extensions in term because they feared the price they had to pay authors would increase. 21st century record labels lobbied hard for extensions to their rights because they knew artists could not benefit from the extra years.

    Behaviour on digital networks is now studied and debated as a social harm, like drunkenness in the early 1800s, with cyber-bullying, indecency, and downright illegal content widely available to children as well as to responsible adults. Defoe understood that it was not enough just to legislate to hold authors accountable. They had to be brought into a different relationship with society, and that meant making them property owners. Again, the law stated its purpose, to encourage learning and increase the supply and availability of books, as well as their quality and authenticity. More good beer in better facilities justified new freedoms for the creation of pubs.

    If we owned our privacy and the data and content we generate, digital services would be required to trade with us for them. With that ownership would come responsibility, as we would need to be strongly identified with our online selves in order to benefit from that trade. Of course laws could be developed to constrain online service providers, and attempt to enforce privacy and data protection. And a fierce debate is taking place over control of hate speech, harmful content, and all sorts of undesirable behaviour. But ownership would allow us to regulate ourselves, making irresponsibility and intrusion a risk for the perpetrators, not for society, and making prohibition and enforcement the exception rather than the rule.

    So, if we want to steer our online relationships away from harm and towards a productive relationship with society and commerce then we could do worse than heed the lessons of beer and copyright. To guide us away from irresponsible anonymity, we should consider strong rights for all of us over the content and data we generate. Services should be held to standards, required to serve anyone in reasonable condition, risk penalties for trespass into our private conversations and commerce, and carry the King’s messages if necessary.

    Most importantly, we should understand that as individuals we are simply unable to maintain our digital rights and principles against well funded corporations. Printers fought against the gift of rights to authors; distillers fought laws that opened the beer and pub market to householders. Government and lawmakers faced them down, and regulated for citizens. We need our digital lawmakers to do the same.

  • Copyright, Human Rights, Development, Privilege

    Two things in particular I have been enjoying surprising people with recently. The first is that copyright is part of the Universal Declaration of Human Rights. All right it is near the end, so fewer people will have had the stamina to read through and find it. But it’s clear and unambiguous at Article 27.

    Article 27.

    (1) Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.
    (2) Everyone has the right to the protection of the moral and material interests resulting from any scientific, literary or artistic production of which he is the author.

    http://www.un.org/en/documents/udhr/index.shtml#a27

    The second surprising fact is that the UN maintains a ‘best practice’ set of music industry  contracts. Here’s their justification:

    First and foremost, the fight against music piracy involves the use of contracts drafted in compliance with good professional practices. In order for music contracts to achieve their desired effect and be used on a widespread basis, artists, themselves, must be convinced of contracts’ usefulness. Therefore, UNESCO, trusted by artists from around the world due to its ceaseless efforts to promote creativity, cultural industries and cultural diversity, believed it important to produce this guidebook in order to assist artists and music professionals in overcoming their distrust of current music contracts and to provide them with information about their rights and good professional practices.

    download it from here: http://portal.unesco.org/culture/en/ev.php-URL_ID=40107&URL_DO=DO_TOPIC&URL_SECTION=201.html

    One of the oddest interactions in the story of UK Government fiddling with copyright came when Professor Hargreaves was challenged at a Parliamentary hearing on the assumption of the value of an exception for private copying.

    The exception, covering the transfer of music to portable players for instance, had been valued in a report at £2billion, which does indeed seem a lot for what appeared to MP John Whittingdale as a technical tweak to stop normal and everyday behaviour remaining infringing. Hargreaves pointed to general confusion and ignorance about what copyright allows and forbids, and makes a fairly bland comment, ‘well it might increase confidence in the market’.

    See it here at about 10m 50s http://www.parliamentlive.tv/Main/Player.aspx?meetingId=12191

    Perhaps John Whittingdale is too busy to spend the hours required rummaging around in the human rights and development literature. Perhaps he, along with many others, imagines that the UK and other developed markets are beyond the kind of concerns that our taxes promote for less fortunate societies. Perhaps he has just forgotten what it was that created our prosperity in the first place. Categorise this fault as looking down the wrong end of the telescope.

    Whatever, I wish that Professor Hargreaves had had the courage under fire to point out to the politicians that all participants need confidence in our markets if they are to invest in creating value; and that music, an intangible and fragile market, needs more confidence than most in an age of non-excludability.

    The billions of decisions that collectively make up the market are diffuse and complicated, so we can be sure that we will never really know how much confidence there is in the market, or whether more might deliver that extra £2b for the UK. Turn the telescope around however and look at the whole world in sufficient detail, and confidence seems to be one of the most important ingredients in the markets that support musicians and culture.

  • The Internet is No Longer a Duck

    It waddles and quacks, but is the Internet still a duck?

    The Guardian published on March 28th 2013 an article by Cory Doctorow with the headline ‘Copyright wars are damaging the health of the internet’. His argument is simple and persuasive – that the Internet has become too important to our civil, cultural, and personal lives and well-being, and our ability to protect our freedom, to be compromised in the attempt to prevent copyright infringement.

    But many people, mostly without knowing it, have already deserted the Internet. Their traffic is now carried over private networks owned by large content and service providers. The Internet is by definition a network of networks, and your packets used to find their own way often across many other networks. The Internet still exists, but compared with these high capacity and well connected private networks, internet traffic is decidedly second class.

    If this seems surprising, consider a few of the more popular internet activities. Watching a cat video on YouTube, for instance. Google has been keeping up with YouTube’s huge traffic requirements by connecting to all the large consumer ISPs directly. GMail the link to a friend, G+ it, and you use the same private connection. Tweet it and even for such tiny data demand as tweets, quality of service issues could well have driven your message via Twitter’s private connections. Your DropBox is hosted by Amazon – yes really, the online shopping site -, another private network currently spinning its own web. If it is big or successful, the chances are it is getting off the Internet as fast as it can.

    This does not mean the Internet is not healthy. Far from it. The open Internet is enabling extraordinary innovation all over the place. Having the giants on their own expressway ensures that the smaller players don’t get flattened on the common roads.

    It does mean, however, that for ordinary users, including bloggers and tweeters of all persuasions, the health of the Internet is irrelevant. Regulators are now dealing with the behaviour of a relatively small number of very big companies, not with anything that can really be considered a ‘common’, or public space.

    A much deeper understanding of today’s reality and direction of travel is needed if those regulators are to protect open innovation and communication for us. The fact that internet protocols make seamless the connections between networks that allow public ‘rights of way’ – the old public Internet – and the new private networks, should not confuse us. It might still waddle and quack, but the Internet is no longer the duck it once was.