Ericsson: File-sharing is a symptom of a problem, rather than a problem in itself

Considerarti recently published a study on piracy in the Netherlands. With expert advice coming from Warner, Universal, Buma/Stemra and other contnet parties, the outcome is predictable.

Fortunately, we have the Ericsson Business Review. In the latest edition (#2 2011), Rene Summer very eloquently explains what is wrong with the content industry:

ISPs are being forced to act as digital security agents on behalf of economic rights holders by listening in, screening, surveying and filtering the exchange of information between consumers. Such strict enforcement further damages the prospects of legal digital alternatives by introducing the principle of innovation by permission. It also carries unwelcome echoes of the old Eastern-bloc surveillance societies that modern Europe has decisively rejected.

File-sharing is a symptom of a problem, rather than a problem in itself. This problem is the inadequate availability of legal, timely, competitively priced and wide-ranging choices of affordable digital-content offerings. Consumers also expect to be able to make decisions freely regarding when and how to consume the content of their choice. By clinging to outdated business methods such as windowing and territoriality, economic-rights holders are in fact creating the consumer behavior against which they so violently protest.

How can we, as good Europeans, accept this state of affairs? The success of our European project is founded upon freedom of movement – for persons, goods, services and capital. Why should digital content be an exception? How can policymakers continue to endorse the vested interests of economicrights holders at the expense of the promises of the single market and our fundamental freedoms?

Ericsson is calling for full consumer access to legal, timely, competitively priced and wide-ranging compelling content offerings, and a free choice of when, where and how this legal digital content can be consumed. We call for an end to regulatory barriers and deliberate non-availability through windowing and territoriality. We call – a full 60 years after the Treaty of Paris – for a digital single market that not only meets the requirements of today’s and future European consumers, but also the requirements of European history.

Telco TV: in search of a strategy

Here are some follow-ups to my previous posts. Telco TV is the one common theme.

1. The P2P/net neutrality/broadband incentive problem
A valued reader and analyst at a major research firm pointed me to a solution out of it.

To put it in my own words:
Why not sell a portion of your bandwidth and reserve the rest for your own services? This way, you may sell e.g. 10 Mb/s (best effort) for 30 EUR/mo, and keep the rest for your own www and IPTV services.
I'm not exactly sure where the rub could be. To me it is interesting to see how telcos can learn from cablecos (as I pointed out before), because this is exactly what cablecos are doing: they sell BB, but keep most of the available spectrum for their own broadcast offering.

2. Blog roll
Here are some interesting recent posts out of the Fibre Ring:

Stephen Davies: white papers.
Rudolf van der Berg: on streaming video.
Stefano Quintarelli: on separation.
Kai Seim: on PAN, LAN and WAN (cool graph).

3. Video
There seems to be coming some urgency to the telco TV market.

KPN is raising the price of DTT (in this Opinion piece on Telecompaper.nl it is revealed that probably 1 in 10 of KPN's TV subs is on IPTV, the rest on DTT; 50-60k IPTV subs is far above what I personally had in mind), while HanseNet (the Telecom Italia subsidiary in Germany) is making basic IPTV free of charge (marketing talk of course: for 30 EUR/mo you now get a triple play, which used to be 40).

4. Poll
I intend to do a poll on structural separation.

The one problem I have is this: I have some trouble getting into the heart and mind of an incumbent. Who is willing to play devil's advocate and tell me why structural separation is such a "bad thing"? You can take the above link to Stefano's blog as a starting point.

P2P: down with Dvorak, up with Dvořák!

My second poll has ended. Time for some commentary and a new poll.

Basically, it is Andrew Odlyzko v. John Dvorak (not to be confused with Anton). (Anybody care to make a Wikipedia entry about me?)


1. Outcome of Poll #2

What to do about illegal P2P file sharing? (multiple answers were possible)

• It's like shoplifting: learn to live with it. 8%
• It's illegal and killing ISPs: keep fighting it. 0%
• People want downloads and streams, at lower price points, instead of disks, which are perceived as expensive: new distribution models and record companies are needed. 70%
• P2P file sharing can be legal, as well as a very efficient distribution model: new business models and DRM are needed. 41%

The third and fourth answer were similar, but especially the third obviously rings true with many file sharers. In the Internet era, where pop stars are born on YouTube, record companies are perceived as expensive dinosaurs. And who needs discs, if you can store them on ever smaller devices?
The fourth answers was quite popular too. It centers not on records and record companies, but on the technology itself.
The second option still has some support, but the good thing is that they focus on providing legal alternatives.


2. Commentary

Several topics are related to the P2P problem:

• Usage growth. In June, Cisco predicted a 46% CAGR for global IP traffic during the 2007-2012 period. Then in August, Andrew Odlyzko picked up a very conspicuous decline, the first ever on a quarterly basis, in the data traffic on Cogent Communications' backbone (-1% qoq, with school holidays to blame at least partly). On Telephony Online it was suggested that CDNs could have something to do with it (pushing content closer to end users, so we should look at last mile traffic separately) and that internet-based video is far from mature. Odlyzko himself is still seeing 50-60% growth rates. Dave Burstein of DSL Prime has some AT&T statistics, such as: growth per customer is 25-30% per year. I would add that the availability of high-speed networks causes usage to go up, as Ventura Team has pointed out.
  
• Net neutrality. Should network owners be free to 'shape' (or whatever term they use) traffic, or would that be a threat to innovation? Too much is being said about this problem, but I will add one thing. Operators are trying to squeeze more money from the likes of Google, who already pay to put their content in the cloud (!), just because they have no pricing power at the other end, as the retail market is very competitive. In other words, it is one possible answer to the:
  
• Broadband Incentive Problem (MIT, September 2005). Flat-fee pricing is at the heart of our broadband economy, but at the same time it perversely stimulates ISPs to discourage usage. "... operators have not yet found access pricing mechanisms that both make sense to users and effectively align user behaviors with the costs they impose".
  
• Usage-based metering. Is this then the answer? The first argument against it is to say that the 5% of users that use up most of the available bandwidth changes every day. However, I don't see how that would make usage-based metering an unfair pricing mechanism. I could even go a long way with John Dvorak, defending a metered internet. He is absolutely right - except that he is totally wrong. We must remember that dial-up was really bad and that the internet is meant to bring lots of benefits (economically, socially, environmentally). We should not return to the 90s. Instead, usage must be stimulated (as Odlyzko says, or read this piece by Colin Dixon), not discouraged. We must remember that bits aren't like water or electricity. When it comes to bits: the more the better. Water and electricity however are scarce and producing them requires energy and puts a strain on the environment. But some folks just won't stop.
  
• FTTH. I suppose throwing bandwidth at the problem is at least a partial solution. However, I have heard people say that they refuse to believe in FTTH, because there is no legal use for such networks. "Why should we pump money into it, if all people do with it is illegal file-sharing?"
• The value of music. Last but not least my personal view on modern music cultures. These days music is all around us. Long ago, it was limited to concert halls and in the 19th century people like Franz Liszt produced piano reductions for people to enjoy the great works of art in their homes. The rise of popular music has accelerated this technological development, and now we have iPods and iTunes. Thirty years ago, people complained about elevator music, aptly called muzak. But I don't hear the term muzak anymore. Today, we have gone so low that DJs make CDs. This dear reader, is behind the third option in the above poll. People want to listen to DJs, but at least they are right about one thing: it shouldn't cost them anything. May I suggest you go to your web store (I would suggest jpc.de) and get yourself a decent set of Olivier Messiaen (born 100 years ago) and Elliott Carter (100 years old this year, and composing like mad) CDs. Just so you know good music is still around and very much alive. And not very expensive.
  

3. New Poll

My third Poll is in the right hand column. Cast your votes!

Poll revised

A valued reader explained to me how he thought that something was missing in the three possible answers in my second poll (see right hand column). I adjusted it according to his views, so cast your vote again (more than one answer is possible).

Basically, I added an option (the third answer), which I originally thought was included in the last option.

New poll: P2P file sharing

A new poll can be found in the right hand column: "What to do about illegal P2P file sharing?".

I wonder if there will be any sort of consensus. I believe that there is some very negative sentiment around the issue, when it is related to FTTH: "Do we really need that super-highway, if all people do with it is illegal file-sharing?".

Let's just say that traffic growth will remain 100%

Rudolf pointed me to this great Ars Technica article. I included it in the right hand column (under 'Favorite Articles') and here is a link to a Google Doc for easier downloading (Ars Technica allows the .pdf file to be downloaded to paying subs only, but hey: Content is not king anymore).

First, here are the main points:

• There is no 'exaflood' (Bret Swanson), since traffic growth is at a manageable (for backbones, that is) 100% sort of level, and actually falling. Put quite differently: it is here already, since worldwide traffic totals 3-5 exabytes/month. In itself, this undermines arguments aimed against net neutrality. Capacity can rather easily and cheaply be upgraded.
• The last mile is the real bottleneck. In this respect the US is falling behind (even if there are different points of view) because of a lack of competition (no line sharing). South Korea has almost as much traffic as the US, or 6-7 x more per capita.
• Media companies (such as the Hulu venture) face exploding bandwidth costs. They will flee to P2P delivery systems.
• Andrew Odlyzko suggests ISPs should stimulate usage rather than limit it. In David Isenberg's words: "In other words, the problem is completely mis-framed. Comcast and Verizon -- and even Net Neutrality Advocates -- are talking how to manage scarcity. We should be talking about how to achieve abundance."

Second, let's make another effort at pinpointing sources of traffic growth and reasons to build FTTH networks. I don't know if growth will keep falling, stay around the 100% level or actually accelerate (to the 300-500% level Cisco's John Chambers predicts), but there is a lot yet to come:

• Video. Include 3-D, HD, holography. Not 'just' YouTube, but also VoD, streams, Hulu and BBC's iPlayer, place-shifting (SlingBox, PC-to-TV boxes such as Daily Media, etc.).
• User-generated content.
• Gaming and virtual reality. Massive multi-player online gaming, which depends on very low latency. Second Life moving to a level of realism we know from Pixar.
• Cloud computing, teleworking, telepresence, e-health, e-learning, monitoring.
• P2P (even though the effect will be mitigated somewhat by P4P). Includes legal filesharing. Traffic on munifiber explodes when on-net filesharing among subscribers is enabled.
• In other words, there is truth in 'Field of Dreams' after all: 'Build it, and he will come'. Don't forget about new applications!
• There are some cross connections. Many of the above require symmetric connections, i.e. FTTH. Also, 3-D, HD and holography will be coming to gaming, telepresence, monitoring etc.
• Not to mention regular growth contributors and enablers such as increasing penetration (Internet, broadband, PC, credit card), emerging markets coming on board, etc.
• And from a different perspective: don't forget all the social, economic and environmental benefits of true broadband (i.e. FTTH) networks.

Enhancing cablemodem broadband

Broadband over cable benefits from the upcoming DOCSIS 3.0 standard. It enhances the user experience by expanding the downstream bandwidth to 160 Mbps. Approaching the bandwidth issue from the other side, namely the ISP's (i.e. dealing with efficiency), there are several options: fiber node splits, switched digital video technology, digital simulcasts, plant upgrades to 1 GHz spectrum, MPEG-4.

Also, two interesting companies are providing technology to MSOs.

First, Vyyo frees up bandwidth and had a number of equipment orders, as well as funding from Goldman Sachs and a board member appointment from another Wall Street firm. All this basically leading to a doubling of its share price.

Second, I stumbled upon this press release from PeerApp, which allows MSOs and ISPs to add P2P caching.

Peer-to-peer round-up

We have recently seen growing interest in peer-to-peer technology - for several reasons: efficiency ('the Internet was not designed for TV'), attacking illegal file-sharing, starting new businesses.
BitTorrent's Bram Cohen invented the protocol of the same name in 2001. It uses 'swarming': files are broken into small pieces and stored on the PCs of network participants.
Keep in mind that there is a difference between downloading (the old illegal p2p file-sharing services) and streaming (e.g. Joost's legal service).

Recent news:

• BitTorrent launched the BitTorrent Entertainment Network.
• Veoh launched. Azureus' Zudeo is to follow shortly.
• Joost launched its closed beta - an open beta to follow this summer. As an early user (but not much of a couch potatoe) I have to say it looks great. At this stage I think it makes no sense complaining about hiccups or limited content.
• Babelgum too. An open beta is scheduled this month.
• The BBC plans the iPlayer May or June for distributing BBC content.
• ROO Group (News Corp bought 10%) acquired Wurld Media, operator of Peer Impact, for its p2p technology.
• UUSee, over in China, raised American dollars.
• Robert Cringely speculated about Apple TV as the foundation of Apple's own p2p network, allowing the company to cancel its Akamai contract and save on network costs.

Comments:

• Bandwidth has its price. In general, it always makes sense to be efficient about it (compare such diverse things as MPEG4, AJAX and spectral efficiency of WiMAX - all aimed at being prudent about your use of bandwidth).
• Alexander Cameron points to the fact that p2p networks require 'a critical mass of users watching the same content' and that 'it will bring the ISP's war directly to the content owning communities door'. I might add to the first quote: this spells doom for unpopular content. P2P will not serve the long tail very well.
• In the end, efficiency (p2p) is fine, but we still need to throw a lot more bandwidth at the capacity crunch problem. Robert Cringely had an interesting introduction to yet another solution (besides CDNs such as Akamai): NuMetra. By the way, he apparently agrees with Cameron: 'p2p cost savings isn't a true savings but is rather a hidden cost borne by the Internet Service Provider running the last mile connection'.
• DRM comes into play; the new BitTorrent is cumbersome because of it. For a round-up of DRM issues, go here and click on the links in the first paragraph.
• Who knows illegal file-sharing can be migrated to any of the above legal networks - especially when the services are free + ads (Joost, Babelgum). Skyrider serves ads in video files on p2p networks.

BROADBAND://The truth about the Dutch lead

Here is why the Netherlands are among the leading nations when it comes to broadband penetration, P2P downloads, traffic levels at the Amsterdam Internet Exchange, etc. It's called stinginess.

I'm afraid the Dutch are notorious for this characteristic. It's not just college kids addicted to free downloads.

Happy Holidays, Scrooge!