Biting the Hand that Beats You

by Doc Searls

NOTE: I'll be at PC Forum in Arizona starting Sunday, March 24. Among the speakers I'll see (and perhaps meet) are RIAA President Hilary Rosen, FCC Chairman Michael Powell, Intel President & CEO Craig Barrett, Intel EVP Les Valdasz and Senator Maria Cantwell. If you have any tough questions or constructive suggestions you want me to bring to them (and others), write me at [email protected]. I'll be there and on the Net wirelessly (if all goes well). Rosen, Cantwell and Powell are there on Sunday, Barrett's there on Monday. Also look for reports from the conference on the Linux Journal site. —DS

This morning, I went to the kitchen to graze among the leftovers and refuel on coffee. For company I turned on the radio and punched up my favorite station, SCAN. Since the radio happened to be on the AM band, its first stop was one of the half-dozen or so signals that carry Rush Limbaugh. Surprise: the big guy's panties were knotted around campaign finance reform. As usual, he was punching away at liberals, this time mocking their worries about the influence of “special interests”, which he called a liberal label for “anything that's critical of government.”

I nearly blew coffee out my nose. As interests go, none are quite so special as the entertainment industry. And, as it happened, I had been busy at my desk trying to find how many pieces of silver it took to turn Senator Ernest “Fritz” Hollings into the entertainment industry's sock puppet.

According to The Register, AOL Time Warner, News Corp, CBS (Viacom), NBC and Disney have each spent upwards of five figures over the last few years on Sen. Hollings. All told, individuals from various entertainment companies have contributed $287,534 since 1995. Not a huge sum, as soft money goes, but apparently enough to buy The Industry what it wanted. Which was—all together now—more government!

Last September, Senators Hollings and Ted Stevens together authored the Security Systems Standards and Certification Act (SSSCA), which the EFF says (in that last link there) was mostly written by Walt Disney Corp. and would mandate digital rights management (DRM) in all new PCs and other consumer electric instruments for the conveyance of “content”.

Linux, which mostly runs on wide-open generic hardware, would be screwed, along with the Net and the whole computer industry, not to mention the economies that depend on them. This naturally fails to concern the protected inhabitants of “the regulatory environment”. In fact, these cattle think it's high time to regulate and bureaucratize technology's wild frontier—to their advantage, of course. That's why they bought Mr. Hollings.

For a better look at the invisible gland that works Hollings' mouth—and how it inveighs against the invisible hand of the real marketplace—here are some excerpts from the Senator's opening statement at the Hearing on Protecting Content in a Digital Age-Promoting Broadband and the Digital Television Transition (yes, it was called that) on February 28. Fittingly, Hollings spoke in all-caps, which makes him easy to quote:

WITH THE EXCEPTION OF RURAL AMERICA AND SOME UNDESERVED AREAS, THERE IS NO BROADBAND AVAILABILITY PROBLEM; WE HAVE A DEMAND PROBLEM. 80% CAN GET IT, ONLY 10-12% TAKE IT. MOST AMERICANS DON'T WANT TO PAY $50 A MONTH FOR FASTER ACCESS TO EMAIL. IF MORE CONTENT WERE AVAILABLE ONLINE, CONSUMERS WOULD COME.

Translation: if it were television they'd be all over it.

The reason most people don't want to spend $50 a month for broadband (a low estimate, no?) is that, like Sen. Hollings, they don't understand it. Two reasons: 1) The biggest OS vendor on Earth makes broadband as complicated as possible, and 2) The biggest ISP on Earth doesn't want its dial-up customers to understand it.

A few days ago I spent over an hour trying to get my sister-in-law's Windows machine to run the crapware that plays way too much of the stuff on the Web that requires broadband. The poor box kept insisting that it needed new versions of Flash, Windows Media Player and RealPlayer, all of which took forever to install and reinstall, involving multiple crashes along the way, with no useful assistance from anything on any of the vendors' sites.

Although it's true that AOL offers some kind of broadband, finding out about it is a whole 'nuther matter. Just for chuckles, go to the AOL site and look for the broadband link. Hint: Scroll down. It's in the lower right corner of the page.

Here's what it says:

AOL PlusAOL Offers High Speed DSLInstant On! Download up to 50 times faster. Free activation—click for info.

Click on the link and what do you get? “Welcome to America Online! Start your 1000 Hour FREE trial now! (for 45 days see details below)”. Not one word about “AOL Plus”, DSL, faster downloads or anything else. Is AOL ready to give up narrowband that pulls more money per household than basic cable?

THERE IS ALMOST NO LEGAL, HIGH QUALITY CONTENT AVAILABLE ON THE INTERNET.

Translation: Nothing in the galaxy of goods on the Net even begins to count. Not the on-line journals, not the music, not the good information put up by governments, individuals and businesses all over the world—including the very testimony we're quoting here. (It's there in .pdf)

WHY? BECAUSE THERE IS NO SINGLE, OPEN STANDARD PROVIDING TECHNOLOGICAL PROTECTION TO COPYRIGHTED PRODUCTS TO GIVE CONTENT OWNERS THE CONFIDENCE TO PLACE THEIR PREMIUM CONTENT ONLINE.

Translation: the only content worthy of the name, or the adjective “premium”, comes from big-name copyright holders.

THE SAME IS TRUE FOR DIGITAL TELEVISION, WHERE PIRACY DETERS PROGRAMMERS FROM PUTTING DIGITAL CONTENT OVER THE AIRWAVES.

True for the supply side. But what about demand? Where are the millions of viewers, waving their remote controls in the air demanding to see Friends on their Gateways?

Earth to Fritz: Television isn't in the business of selling “content” to viewers. What they call “content” is just fertilizer for potatoes whose eyes are sold to advertisers. Want to know why the potatoes don't miss fertilizer on their computers? Listen to the Mute button, dude. On computers they're not “consumers” any more. They're customers, and they're not buying stuff that worthless even when it's free.

...ABSENT STRONG TECHNOLOGICAL PROTECTIONS LAYERED ON TOP OF THE COPYRIGHT LAWS, IT IS VIRTUALLY IMPOSSIBLE TO ENFORCE THE LAW AS IT EXISTS. YOU CAN SEE TODAY. THOSE AMERICANS WHO DO ACCESS TOP NOTCH CONTENT ONLINE ARE OFTEN STEALING IT. EVERY WEEK A MAJOR MAGAZINE OR NEWSPAPER REPORTS ON THE THOUSANDS OF ILLEGAL PIRATED WORKS THAT ARE AVAILABLE FOR COPYING AND REDISTRIBUTION ONLINE. ACADEMY AWARD WINNING MOTION PICTURES, PLATINUM RECORDS, AND EMMY AWARD WINNING TELEVISION SHOWS - ALL FOR FREE, ALL ILLEGAL.

Here's a good example: Steven Levy, writing in Newsweek, published on the Web by MSNBC, “The Customer is Always Wrong: Music and film moguls, and a few senators, think fans are thieves and want to cripple technology to stop you from making copies”.

WHEN CONGRESS SITS IDLY BY IN THE FACE OF THESE ACTIVITIES, WE ESSENTIALLY SANCTION THE INTERNET AS A HAVEN FOR THIEVERY. THIS PROBLEM CANNOT BE MINIMIZED. PIRACY IS GROWING EXPONENTIALLY ON COLLEGE CAMPUSES AND AMONG TECH SAVVY CONSUMERS. OVER TEN MILLION PEOPLE USE FILE SHARING SITES ON THE INTERNET TO DOWNLOAD MOVIES, SONGS, AND TV SHOWS, WITH NO PENALTY. SUCH AN ATMOSPHERE CONTRIBUTES TO THE STUDIOS AND RECORD LABELS' RELUCTANCE TO PLACE THEIR DIGITAL CONTENT ON THE INTERNET OR OVER THE AIRWAVES.

Translation: Rather than a real marketplace where businesses have enormous opportunities to innovate and interact directly with customers, the Net is just as a den of thieves. Nice “thinking”, Fritz.

The Net's only defender at the Hollings hearings was Intel EVP Les Vadasz, also president of Intel Capital, the VC arm of the chip giant. Here's some of what he had to say:

The IT industry is all about innovation; we embrace and champion technological progress. The content community, by contrast, has historically feared technology—from the advent of sound recording, to the development of the VCR, the DVD, the PC and other digital devices. Yet every advancement in technology has proven to be a major growth catalyst for the studios. Videocassette rental and sales totaled about 11 billion dollars last year, exceeding box office receipts by some 2+ billion dollars. This is the device once referred to by Jack Valenti as the “Boston Strangler” of the film industry. Other “attackers” of the film industry include the DVD, which added another 5.9 billion to studio receipts in the last year.

...Any attempt to inject a regulatory process into the design of our products will irreparably damage the high-tech industry: it will substantially retard innovation, investment in new technologies, and will reduce the usefulness of our products to consumers.

He goes on to describe the comparative sizes of the IT and entertainment industries ($600 billion vs. $35 billion) and the role freedom from government interference has played in IT industrial growth. Then he adds:

This dynamic of innovation would be choked by any attempt to regulate the design of products solely for the benefit of one industry. Designing products through a regulatory process, as some studios have advocated, would inject political influences into technology development in very destructive ways. Investment and innovation will both suffer, as a fear of entanglement with government processes will have a chilling effect on investors and subject new ideas to “reg review”.

He concludes:

I would like to leave this Committee with the following thoughts:

  • First, listen to the consumer—he is paying the bill for all of our products. Consumers want flexibility and power in digital products and robust applications.

  • Second, do not tinker with the IT industry by trying to regulate the development of our—technologies. Irreparable damage will result—the pace of innovation, productivity growth, and our industry's contribution to economic growth will all decline.

  • Third, do not buy into a view of content protection that will deprive consumers of the ability to get the full benefit of the capabilities of the PC by neutering it—when it comes to content management—to be nothing more than a more expensive version of a “dumb” DVD player.

Think about how many of the Web's servers are running on Linux, and you start to get the penguin perspective on the matter—and on Intel's relationship to the popularity of Linux. Then consider the compute power behind some of the private web services we take for granted, such as Google's, which runs on more than 10,000 boxes with both Linux and Intel inside, all searching through more than two billion pages of that worthless content Sen. Hollings talked about.

Then go back and ask what's so special about Disney's interest in Sen. Hollings.

Simply put, Disney is interested in maintaining the powerlessness of The Consumer. Michael Eisner and his congressional puppets want to dismantle the Net for one single reason: it's a platform for markets where demand has just as much power as supply.

What's really scary for Mr. Eisner isn't The Consumer paying the bill for Intel's products. It's the fact that the Net makes The Consumer into a real, in-your-face customer.

A year ago in Florida I spoke at a meeting of GE Global eXchange Services, a B2B e-commerce network that processes over a trillion dollars in transactions for more than 100,000 trading partners all over the world. Harvey Seegers, the President and CEO of GEX, told me he agreed with me that “the Net creates a balance of power between supply and demand”. As a commanding supplier, GE used to be in charge of its customer relationships. “Not anymore”, he said. “It's a whole new world.” It was clear at the meeting that GEX was busy doing everything it could to cope with operating in a new kind of marketplace. And they were excited about it.

But not Disney. Not News Corp. These guys are having trouble making the transition from potato farming to whatever comes next. They have no idea how to do business with resourceful human beings rather than passive vegetables. So they run to government for protection.

True, a lot of customers are still in the dark about OS choices other than Microsoft and about ISP choices other than AOL. But when it comes to the supply side of the entertainment production and distribution business, customers have seen the dark at the end of the tunnel. Thanks to the Net, they've turned toward the light that comes from each other.

Let's look at what they've done:

  • Napster and its successors are the listeners' workaround of the failed radio industry, which replaced trusted music connoisseurs with payola-driven robots that serve only as freebie machines for the record industry's pop music factories.

  • Internet radio is one way music connoisseurs are working around the same problem from the supply side.

  • DeCSS is the people's workaround of the consumer electronics cartel, which doesn't know how to cope with an operating system that isn't owned by a vendor.

Other workarounds are bound to follow, over and over, until the entertainment industry starts serving fully empowered customers or gets replaced by something that will. Protective legislation will only make the process happen faster. But that's no reason to just let nature take its course. The Net is a geek-built world. We can't passively tolerate insults to its ecosystem.

In the last SuitWatch newsletter, I raised a warning about another regulatory time bomb; the Copyright Arbitration Royalty Panel (CARP) report, which seeks to regulate internet radio (webcasting) as an entertainment performance venue in the form of a file downloading service (in which each file streamed can be charged at up to .14 cents a piece, retroactively to 1995).

As it turns out, the deadline for filing comments on CARP has been extended to April 5.

So now is the time to call and/or write your elected representatives. Let them know that you listen to and value Internet radio. Tell them you don't want it taxed at the source, that you don't want it regulated out of business before it even has a chance to become one.

For more on the subject, visit any or all of these sites:

Let's show these creeps how markets really work.

And when we're done with that, let's show them how democracy works, too.

Doc Searls ([email protected]) is Senior Editor of Linux Journal. He is also co-author of The Cluetrain Manifesto.

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