net.wars: This means law
by Wendy M Grossman | posted on 22 August 2009
You probably aren't aware of this, but there's a consultation going on right now about what to do about illegal peer-to-peer file-sharing; send in comments by September 15. Tom Watson, the former minister for digital engagement, has made some sensible suggestions for how to respond in print and blog.
This topic has been covered pretty regularly in net.wars, but this is different and urgent: this means law.
Among the helpful background material provided with the consultation document are an impact assessment and a financial summary. The first of these explains that there were two policy options under consideration:
Implementing that requires ISPs to cooperate by notifying their subscribers. There will be a code of practice (less harsh than this one, we trust) including options such as bandwidth capping and traffic shaping, which Ofcom will supervise, at least for now (there may yet be a digital rights agency).
The document is remarkably open about who it's meant to benefit – and it's not artists.
Government intervention is being proposed to address the rise in unlawful P2P file-sharing which can reduce the incentive for the creative industries to invest in the development, production and distribution of new content. Implementation of the proposed policy will allow right [sic] holders to better appropriate returns on their investment.
The included financial assessment, which in this case is the justification for the entire exercise (p 40), lays out the expected benefits: BERR expects rightsholders to pick up £1,700 million by "recovering displaced sales", at a cost to ISPs and mobile network operators of £250 to £500 million over ten years. Net benefit: £1.2 billion. Wha-hey!
My favorite justification for all this is the note that because there are an estimated 6.5 million file-sharers in the UK there are too many of us to take us all to court, which has been the rightsholders' preferred deterrence method up until now. Rightsholders have marketing experts working for them; shouldn't they be getting some message from these numbers?
There are some things that are legitimately classed as piracy and that definitely cost sales. Printing and selling counterfeit CDs and DVDs is one such.
Another is posting unreleased material online without the artist's or rightsholder's permission; that is pre-empting their product launch, and whether you wind up having done them a favour or not, there's no question that it's simply wrong. The answer to the first of these is to shut down pirate pressing operations; the answer to the second is to get the industry to police its own personnel and raise the penalties for insider leaks.
Neither can be solved by harassing file-sharers.
It's highly questionable whether file-sharing costs sales; the experience of most of us who have put our work online for free is that sales increase. However, there is no doubt in my mind that there are industries file-sharing hurts. Two good examples in film are the movie rental business and the pay TV broadcasters, especially the premium TV movie channels.
As against that, however, the consultation notes but dismisses the cost to consumers: it estimates that ISPs' costs, when passed on to consumers, will reduce the demand for broadband by 10,000 to 40,000 subscribers, representing lost revenue to ISPs of between £2 and £9 million a year (p50). The consultatation goes on to note that some consumers will cease consuming content altogether and that therefore the policy will exacerbate existing inequality since those on the lowest incomes will likely lose the most.
It is not possible to estimate such welfare loss with current data availability, but estimates for the US show that this welfare loss could be twice as large as the benefit derived from reducing the displacement effect to industry revenues.
Shouldn't this be incorporated into the financial analysis?
We must pause to admire the way the questions are phrased. Sir Bonar would be proud: ask if your proposals are implementing what you want to do in the right way. In other words, ask if three is the right number of warning letters to send infringers before taking stronger action (question 9), or whether it's a good idea to leave exactly how costs are to be shared between rightsholders and ISPs flexible rather than specifying (question 6). The question I'd ask, which has not figured in any of the consultations I've seen would be: is this the best way to help artists navigate the new business models of the digital age?
Like Watson, my answer would be no.
Worse, the figures do not take into account the cost to the public, analyzed last year in the Netherlands.
And the assumptions seem wrong. The consultation document claims that research shows that approximately 70 percent of infringers stop when they receive a warning letter, at least in the short term. But do they actually stop? Or do they move their file-sharing to different technologies? Does it just become invisible to their ISP?
So far, file-sharers have responded to threats by developing new technologies better at obfuscating users' activities. Napster… Gnutella… eDonkey… BitTorrent. Next: encrypted traffic that looks just like a VPN connection.
I remain convinced that if the industry really wants to deter file-sharing it should spend its time and effort on creating legal, reliable alternatives. Nothing less will save it. Oh, yeah, and it would be a really good idea for them to be nice to artists, too. Without artists, rightsholders are nothing.
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Wendy M. Grossman’s Web site has an extensive archive of her books, articles, and music, and an archive of all the earlier columns in this series. Readers are welcome to post here, at net.wars home, follow on Twitter or send email to netwars(at) skeptic.demon.co.uk (but please turn off HTML).