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Regulatory approaches to telecom


									The Rise and Fall of Hollywood? – Broadband Deployment vs. Controlling
the Right to Copy
Reed Burkhart
United States of America
In the dawning Global Network Age, policy and strategy must also rise – to
address the increasingly intertwined nature of Hollywood (broadly: mediated
entertainmenti ), broadband telecom, and electronics industries; while balancing
personal and professional publishing interests with due regard for technology.
While it is rightly assumed that global Internetworking presents a major new force
and opportunity, errant assumptions abound on basic issues that continue to
thwart progress with unwanted effects from massive bankruptcies and recession
to policy confusion. Sound commercial strategy and regulatory policy would be
wisely measured against three overarching objectives: 1) net societal benefit, 2)
commercially sustainable models, and 3) degree of efficient, sustainable
1. Big Questions for the Future
Will broadband become ubiquitous and profitable – spurred on by shrewd
government policy and cooperation between Hollywood, telecom and consumer
electronics?  Alternatively, absent any profit will the Internet completely
Will Hollywood adapt to exploit broadband Internet as it has the cassette tape,
VCR, and DVD? Will Hollywood succeed in outlawing the general-purpose
computer? Or will broadband succeed at the expense of Hollywood (rendering
Hollywood irrelevant) as users share content freely over the Internet?
How will public thought, behavior or national identities change as traditional
voices (private or state-owned national media delivery companies) weaken or are
completely replaced? What end -results are anticipated in society and the
economy – how can we accelerate good results and ward off bad ones?
Global Network Age Just Beginning With just a tiny fraction of all recorded
information yet on the Internet, and with the core Internet economy (Internet
infrastructure) on the rocks, our embarkation to a global economy reliant on
advanced communication network infrastructures (the Global Network Age) has
entered rough waters. Uncertainties and misapprehensions abound.
Security Perimeters        A crucial aspect of this age relating to content
distribution should be realized: that content, once outside its perimeter of
security, may be recorded as a high-quality „original reproduction‟ and shared or
distributed freely as long as the Internet and low cost computerized recording
technology (MPEG/MP3 software) are available – regardless of security
approachii. Every distribution system, electronic or physical, analog or digital,
has such a perimeter – one instance is called the „Analog Hole‟ iii – if the content

is ever to be used, putting (for the time being at least) digital networks and
Hollywood at odds iv .
Of all the uncertainties for broadband Internet‟s effects, Hollywood‟s uncertainties
are among the greatest. Yet Hollywood is only challenged to refashion itself
while broadband/Internet faces a far greater challenge – to create itself, in so
doing to create an entirely new industry – with uncertain long-term viability as
network traffic load continues its unabated growth. Understanding Hollywood‟s
facet of the voyage into the Global Network Age requires understanding all facets
of the broadband voyage, which, like wavelets, may combine favorably to propel
the broadband ship forward to sustainable broadband Internetworking, or may
sink the leaky broadband ship into broadband insolvency – the continued
bankruptcies of Inter-network service providers and broadband media companies
with Internet applications disappearing into an abyss.
Is Broadband a Plank-Road? In the early to mid-1800‟s, road technology
underwent experimentation to speed travel for horse, buggy, and carriage. Plank
roadsv were constructed by laying a contiguous series of bedded wooden planks
like a boardwalk. Plank road mania swept New England creating a boom in
transportation infrastructure investment follo wed by the inevitable bust that arose
when plank road commercial lifetimes were discovered to be 70 to 80% shorter
than advertised, so there could be no net return on invested capital vi. Before this
simple but unfortunate truth was discovered, many dollars were spent and many
planks were laid. During the boom, a person would have been considered
foolish to suggest that new plank-road technology was anything but the next big
thing. Plank road history is informative: an „obviously‟ promising development
such as advanced roads (or advanced broadband networking) may begin with
early technological implementations which in time prove to be unviable – that
from the very beginning, in fact, could never have become viable over the
medium or longer term, although deployed broadly due to the ignorance of plank
road‟s true lifetimes and mania-induced blindness in diligence vii.
Clearer and Broader Viewpoint Required          Sound broadband policy will be
key to entering the Global Network Age without further massive capital
misallocations viii. Even so, sound policy comes in a distant third behind 1)
sufficient market demand with a profitable business model supported by 2) sound
technology as prerequisites for successfully entering the Global Network Age.
Against Roxane Googin‟s concern that an unsolved problem in telecom could
keep the world economy at its knees (permacessionix ), Hollywood‟s challenge to
recreate itself appears relatively minor. In fact, current work on broadband policy
may be far more critical to economic and social stability than generally realized.
And if the most experienced capitalists failed to create a profitable Internet –
what greater vision and guidance are policymakers able to put forth? Where will
sound vision come from? This paper aims to:
   A) Stimulate a fresh look at the scope and context of broadband and
       copyright policy,

   B) Point out critical questions which, left unaddressed, could sink the ship
       (including some issues too complex to relate in full detail in this paper, but
       broadly analyzed separately by the author),
The goal is to enhance vision and promote the advancement of prudent policy
and strategy in order to more safely enter the inevitable Global Network Age.
2. Critical Developments, Critical Policy
Need to Advance Policy             As information, communication and even
transportation technologies accelerate, expand and intensify various aspects of
activity and life in general, policymaking must accordingly advance its vision
(diligence and scope) and application if we are to avoid costly errors propagating
at up to the speed of light around the globe – such as recent errant perceptions
about telecom, Internet, and technology that led to the greatest stock market
bubble in all history. Measuring telecom policy by the current health of the
industry, policymaking apparently missed the mark (although not completely x ).
Transformational technologies challenge policymakers and regulators to
formulate policies and regulations with sufficient diligence and scope.
Broadband Internet is anticipated to offer broad consequences involving many
benefits to society. To date, copyright policymaking has greater history and
precedent than broadband policymaking, narrowing the range of outstanding
issues. Yet copyright policymaking is also facing difficult questions especially its
co-dependency with broadband and broadband policy.
Focus Needs to be on End-Objectives                 Sound broadband and copyright
policymaking together should target – and later be measured by the contribution
toward – such end-objectives as: sustainable growth (versus a bubble‟s boom-
bust growth-recession), employment, competitiveness, individual liberties, quality
of life, peace, health standards, universal service, affordability, reliability,
security, national identity and integrity, etc. xi To succeed, policy must reflect a
fairly accurate vision of challenges and opportunities.
2.1 Policy Interconnections with a Complete Systems View
The Global Network Age implies a level of interconnection requiring a more
holistic (complete systems view) approach to policy. Policy cohesion is
increasingly required across at least two different axes: 1) technology-market-
regulation, and 2) local-national-international.
Technology, Market, Regulation             Will the society that leads the Global
Network Age be one that produces intricate systems with great technological
integrity though failing to meet basic market tests of business solvency and
sustainability? Will sufficiency exist in technology but not policy? Vice-versa?
Or will that leading society be the one that holistically integrates technology,
market, and regulatory vision and execution? When groups of individuals
develop new architectures and policies for global telecom networks of
unprecedented interconnectivity, they are building a core element of a connected
global future around which technical, market, and regulatory facets must
harmonize. The breadth and complexities of technical, market, and regulatory

issues render analysis difficult and harmonized solutions elusive xii. Yet, the
trajectories of our nations and our world depend on the soundness of steps
Local, National, International In a Global Network Age, policies must bridge
the regulatory divide – the divide between pre-Global Network Age regulations
(that vary from locale to locale) and globally harmonized policies that permit the
promise of a Global Network Age to be realizedxiii.
The following sections first review broadband and copyright policies in their own
right, and then consider the intersection.
3 Broadband Policy
  “Show me the money”
      - Unknown (also “Show me the cost” and “Show me the public benefit”)
3.1 Scope and Objectives
Broadband communications – like communications in general – offers
advantages to consumption of other resources; therefore broadband policy
interacts with environmental, energy and national security policy (not to mention
communications‟ direct impact on power structures in government and society).
Regulations directly affecting broadband xiv include 1) the regulation of shared
network infrastructures (telecom regulations), 2) the regulation of broadband
access devices (regulations pertaining to computers, cable modems, etc.), and 3)
regulations relating to content (copyright regulation for example, which is
addressed later). Why include access device regulations? Because broadband
capability and experience depends on the functionality of both the network and
the devices connected to the network.
In Understanding Broadband Demand: A Review of Critical Issues xv, the U.S.
Dept. of Commerce Technology Administration says, “the primary role of
government economic policy is to set an environment that encourages capital
formation, rewards risk and encourages competition, investment and innovation.”
Others articulate more end-results-oriented policy objectives such as, “high and
stable growth and employment xvi.” Regulations seem most wisely measured
against such things as: 1) net societal benefit xvii, 2) commercially sustainable
models, and 3) degree of feasible, sustainable competition.
Is It Worthwhile / Will It Work? Communications is widely recognized as
benefiting society by enhancing productivity and information flow – but not
without the cost of accelerating the spread of some social challenges xviii.
Measured against the common end-objectives (identified in section 2 of this
    1) Broadband appears to improve operating efficiencies, benefiting economic
       growth, employment, competitiveness, and health standards.
    2) Broadband appears to enhance quality of life, and increase individual
       liberties (although privacy issues require further attention).
    3) National identity and national integrity are important issues, which are in
       some ways increased and some ways diminished by broadband.

     4) Universal service, affordability, reliability and security remain open issues
        worth addressing if indeed broadband is as auspicious as it seems.
It is generally assumed that broadband is a wise, industrious activity worthy of
promotion by policymaking. Here, an anti-intuitive question is very important to
ask: since no Internet service provider (broadband or narrowband) has yet
reached positive cash flowxix , will they be able to do so in the future? It was
generally assumed that lack of positive cash flow was a natural condition of the
Internet‟s early phase of development, but plummeting valuations and
investments in the sector show that the financial markets began to disbelieve this
– especially as revenue maturity seemed to be arriving before and below cost
maturity. In a sense, the markets „understood‟ that something was wrong, even if
the markets could not pinpoint the difficulty or comprehend fully its source. A
more detailed assessment of the economic foundation of broadband is poised to
change the scope and conclusions of broadband strategy and policy dialogue.
3.2 Forming a New Industry
Investment Cycles             Almost without exception, major new infrastructures
or industries – such as railroad, telephone, and oil – have expanded to
substantially mature industries in only a single boom periodxx . If boom-period
investments complete the infrastructure build, but positi ve cash flow is not
reached before investors turn away (bust), it still may be possible to create a
sustainable business with positive cash flow through bankruptcy or receivership
reorganization and associated reduction in debt expense. Two major factors
influence ability to reach positive cash flow: 1) the period of an investment cycle,
and 2) insolvency leading to reorganization or liquidation. Of course, if operating
costs cannot be brought below operating revenues, then no level of
recapitalization wi ll permit ongoing commercial operations after cash runs out. If
operating deficits are unavoidable, then the activity must either disappear or find
long-term subsidy or public support – such as fire, police, library (public services)
and sometimes, rural telecom services.
Four Scenarios for Broadband             There are four possible scenarios for the
outcome of new-infrastructure investment cycles.
   Case 1) “As Planned”: investment yields returns without capital
   Case 2) “Recapitalizable”: capital restructuring produces sustainable
   Case 3) “Subsidizable”: absent 1 or 2, subsidy or public support produces
       sustainable operations, or,
   Case 4) “Disappearance”: absent 1, 2, or 3, the industry disappears.
Many Internet infrastructure companies (broadband or otherwise) have already
endured capital restructurings and either returned to operations, post -bankruptcy,
or underwent liquidation xxi. A major question for investment strategy and policy
going forward is which of the four cases is most likely. Different regions of the
world may result in different cases, depending on broadband demand density
(metro versus suburban or rural), labor costs, and intensity of development
during the recent telecom investment cycle. Case 2 typically will not exist in the

long-term for satellite infrastructures because fleet replenishment costs are not
substantially reduced by recapitalization and lifetimes are typically between ten
and fifteen years.
Build It While You Can? One irony of infrastructure-related booms is: the
greater the intensity of investment excess, the greater the amount of „free‟
infrastructure built before the investment cycle ends. If there is a persistent
reason that investments cannot provide any return – as in the case of short-lived
plank roads that required additional capital after capital was no longer available
and after it was understood that no capital return could be expected – then case
3 (Subsidizable) or case 4 (Disappearance of the new paradigm) are the only
options. Policymakers would be wise to proceed cautiously, obtaining a clear
view of financial risks associated with undertaking loan guarantees or other
subsidies before allocating financial resources to any plan to advance broadband
We are now in the tail of a major telecom investment cycle, with companies
retrenching to survival mode, hoping the economic downturn is short-lived.
Speculative activities in telecom and Internet had much to do with creating both
boom and bust. Although a tiny number of brave white knights xxii anticipating
Case 2 have been bottom fishing the telecom industry, the author‟s own analysis
indicates that Case 4, Disappearance, is indeed a real possibility requiring only
very modest assumptions for continued traffic growth – i.e., that even with
recapitalization, positive cash flow would not be achieved and that the amount of
subsidy required to maintain broadband operations would be unreasonably
excessive unless new transformative technologies can be introduced with
substantially transformed economics.
3.3 New Options in Broadband Policy
Policy Menu          Broadband policy discussions involve three main areas:
content , conduit, and customer. Content and conduit issues are interlinked
supply-side factors. Customer issues are demand side factors spanning
applications, affordability and customer-premise technologyxxiv . Much of the
broadband policy dialogue concerns the comparative merits of various supply-
side or demand-side proposals, but a more basic question that needs to be
asked and answered is: “Can broadband work?” (Cases 1, 2, or 3, vs. 4). Only
then can answers be given to: “Should government invest in advancing
broadband?” and, if it should, then “How?” (Case 3).
According to the report xxv of the Canadian National Broadband Task Force
(CNBTF), the range of national approaches to broadband regulation spans three
degrees of involvement:
  “Light touch” (New Zealand)
  “Cooperative” (Australia, Germany, Sweden, United States), and
  “Comprehensive” (Japan, Malaysia, Norway, S. Korea, Singapore) –
    interventionist approach involving more intrusive controls
Issue categories relating to broadband (minus copyright) include:
    A. Monopolyxxvi, oligopoly or competition xxvii

       A - 1. Open programmatic accessxxviii
   B. Rural, underserved, low-income accommodations xxix
   C. Technical Interoperabilityxxx .
   D. Tax breaks, loans, loan guarantees, direct investments, Public Private
       Partnerships (PPP), and grants to build infrastructure (aside from rural,
       underserved, or low-income accommodations) xxxi,
   E. Investment in researchxxxii
   F. Application promotionxxxiii
   G. General xxxiv
There is no shortage of advice on broadband policyxxxv .
Rules of Play        Perhaps no industry beside telecom has come under greater
fundamental policy shifts from pro-monopoly to pro-competition – and quite
possibly back again (at least to oligopoly xxxvi). Since the early 1900‟s, Theodore
N. Vail and policymakers around the world have contended that monopoly was
necessary to achieve efficiency, reliability and economies of scale in telecom.
Current popular thinking is generally opposite – liberalization has become the
pillar of the World Trade Organiza tion‟s new policy embodied in the Basic
Telecommunications Agreement (BTA). Another recent proposal to induce
competition is to insert an artificial layer – creating „structural separation‟ xxxvii. Is
today‟s pro-competitive policy to blame for the sorry state of the telecom
industry? The situation would be far less acute if capital markets had stronger
mechanisms to avoid the eccentricities of speculation, as well as weak, biased,
or worse analysis. But is there anything telecom policymakers can do to tame
competitive telecom‟s extremes in supply or demand?
Dynamic Control of Bandwidth-Supply?                Eli Noam suggests telecom‟s
future will inherently involve cyclical instability requiring re -consolidation at least
to oligopolyxxxvi. An alternative approach to dealing with cyclical instability comes
from considering competitive telecom as a trading market whose natural supply
and demand swings – when excessive – adversely impact the overall economy.
Just as dynamic money-supply policy is used to stabilize supply and demand
swings in money supply to provide broader economic stability, there may be a
case to be made for dynamic bandwidth-supply policy that helps to stabilize
bandwidth supply in competitive telecom markets. Spectrum policy already
involves centralized controls (although not particularly dynamic) that regulate the
supply of spectrum on a market-by-market basis.
The sharp downturn of investment in bandwidth supply is a powerful force borne
out of elementary results (no one making any money, companies unable to
service debt obligations, revenue growth saturating) rather than detailed analysis
and understanding. The deep investment downturn has greatly slowed increases
in bandwidth supply, but drastic swings from greed (massive investment) to fear
(no investment) do not cultivate stability in telecom, financial markets, or the
economy. Telecom policymaking would be wise to focus first on returning
stability to the industry rather than taking up the unwise and probably impossible
task of resurrecting unwarranted hypergrowth. Only by clearly understanding
what went wrong – understanding how financial investment gambles and results

related to costs, technical architectures, traffic flow, markets and policy – will
decisionmakers attain sufficient vision to confidently undertake future
investments or sound policies that return stability xxxviii. One among a number of
major problems, cost sensitivity to traffic growth, has been identified and
analyzed in detail separately by the author – in a new global econometric model
of the Internet.
Disclosure and Transparency Prerequisites            In addition, financial and
operational disclosures of greater detail are needed to show more conclusively
why many companies failed to provide investment returns and others became
insolvent xxxix . New telecom policymaking should only be undertaken when the
problems in Internet econometrics are understood. For example, why require
universal service for broadband before companies find a profitable model for
broadband in urban markets xl? Why introduce restrictive technical policies or
standards in a slumping industry unless specific technical problems or
incompatibilities are known to be at fault?
Viability Prerequisite      Once an economically viable model is confirmed for
the new network, policy can be e xpanded to reinforce the interoperability and
universal service needs of people using the new network. Universal service
policy (whether rural, low-income or underserved area-based) apparently
benefits individual liberties, promising more capable social a nd economic
structures. Likewise, a policy of technical interoperability provides obvious
economic benefit – as long as the application of the associated technology
innovation can become self-sustaining or subsidizable in the marketplace. Only
when (and if) subsidies can clearly be seen to create a viable solution at
reasonable cost should they be employed.
Coming Up Short The transition to the Global Network Age is both too new
(cash flow never materialized) and too old (investment cycle is waning) to ha ve
established a viable economic model xli. This is the great conundrum for both
broadband policy and the topic of the next section – content policy.
4. Content Policy
  “[We need] balance between incentives for production and the free flow of
  technical ideas and innovation.”
     – Dennis Karjala, Professor of Law at Arizona State University (an
  opponent of copyright extensions)
4.1 Scope and Objectives
Parts of a Bigger Whole If music can be heard or video can be watch then it
can be copied. Technology created the ability to copy and so created Hollywood.
Hollywood aims to maximize control of production and distribution – to control
copying. Innovations in recording technology, beginning with printing, led to
copyright policy, but Hollywood‟s product is not only content – protected by
copyright – but also content recording and delivery technologies, especially
software – protected by copyright, patents or both. The scope of technologies
exploited today by Hollywood, and the scope of regulation associated with those

technologies is broad, including consumer electronics, telecom and broadcast
policy. Content policy truly includes all these.
Differences of a Lifetime         Within the area of intellectual property, content
policy is increasingly blurring between copyright policy and patent policy,
especially as software used by Hollywood today is both patented and
copyrighted. The value of copyrights decreases with the ease of copying. Patent
policy and copyright policy may arrive at different points in the continuum
between “incentives for production” and “free flow of technical ideas and
innovation” (ease of copying) creating the incentive for arbitrage (e.g., in the
United States, software copyrighted for 70 or 95 years may be preferable to
software patented for just 20). If absolute power corrupts absolutely, then the
result of a more absolute 95-year versus 20-year control period should eventually
appear in some negative way; but the realization of such a potential long-term
problem may come too late for remedying if we merely wait to discover it.
Controls that are too long may lead to media power that is too concentrated,
lacking diversity, flexibility and variety of opinion; if controls on software are too
long, the result may be even more inhibiting of societal growth. Software affects
the broadest spectrum of applications and activities – not merely entertainment,
news, and Hollywood (strongly influencing interaction styles in society); but
national security, telecom and networking infrastructures, to name a few.
Hollywood is strengthened whenever technology and policy tends towards
content totalitarianism and content imperialism – the ability to extend the control
of content from a central entity with complete authority (Karjala‟s “incentives for
An opposite extreme arises if copying restrictions are far greater than the
technical ability to broadly enforce them – as happened with the Internet
augmented by Napster and other P2P content exchange facilitators that vastly
simplify Internet redistribution (Karjala‟s “free flow of technical ideas and
innovation”). Freely available content sharing is somewhere between content
democracy and content anarchy, but much closer to content anarchy as entire
content industries have become threatened by clever 15 year old part-time
programmers (Norwegian Jon Lech Johansen who programmed DeCSS xlii).
Content anarchy can be viewed as a situation in which technology‟s power
becomes so generic and diffusive – as it is expected to become with advanced
computers and broadband Internet – that most anything could happen to a piece
of content, fatally sabotaging Hollywood.
What should be the goal for a content democracy? Content democracy should
be a balance between content anarchy and content imperialism that accords to
individuals substantial benefits from technology (short of content anarchy) while
according to corporations substantial benefits from technology (short of content
totalitarianism or content imperialism).
The new challenge for Hollywood is the combination of gene ral-purpose
computers and the Internet. Copying has never achieved greater facility with
fidelity. Hollywood is trying to meet this challenge by forcing copy protection

technology into every copying device that would challenge Hollywood‟s
hegemony – rendering facility sufficiently difficult and fidelity sufficiently lossy to
keep honest people honest, and thieves from stealing the farm.
Copyright regulations generally restrict in one or a combination of four ways: 1)
no copying permitted xliii, 2) bad copying permitted xliv , 3) a little copying
permitted xlv , or 4) unbridled copying permitted while device manufacturers pay
copyright owners xlvi. Of course, other related regulations and activities relate to
content community issues xlvii, and there is no shortage of opinion makers xlviii.
The perennial fight between individual and corporate interests in copy technology
and policy has been and will be played out again and again over a changing
terrain – with the Internet representing a topographic inflection point of extreme
proportion. Most unique about the current Internet-influenced terrain is the
confluence of general purposexlix capabilities enabled by interlinked media
processors (Internet-connected computers): word processing/publishing, email,
web browsing, IP telephony, video conferencing, video capture and storage,
spreadsheets, client-server applications. Making a general-purpose device not
general purpose is a big, big step – too bigl. A more sensible policy may be
requiring copy-enabling software programs (encoding, decoding, transmission
programs, etc.) to include copy protection features or interoperability that retain
or improve copyright status quo at the facilitated-application level.
4.2 Stabilizing an Industry
The movie and music industries themselves project, “the annihilation of the
entertainment industries and ultimately the end of commercial artistic creation
itself li,” presumably more for calling political attention and action to their plight
then out of any such underlying conviction lii.
What can really be done? Historical approaches to interdiction – copy protection
technologies, security technologies, electromagnetic security screening at retail
outlets – all aim to make it difficult to circumvent buying the product. Making it
impossible to copy or steal is itself impossible. The solution is one of influencing
average consumer behavior. Hollywood‟s business model remains intact so long
as it is a reasonably small minority who circumvents the buying process and
manages to get copies for free.
Hollywood‟s opportunity was and still is, to render mediated entertainment more
convenient to access. New form factors for recording media have permitted
progressively more mobile entertainment devices. In the extreme the media
becomes so manageable and access so ubiquitous that network access
becomes the norm in all the most common places we go, rather than having to
keep track of the media ourselves. If Hollywood can master such convenience-
rendering technologies, it will be much better prepared to tame the beast of illicit
In addition, business model experimentation is both suddenly more possible and
more required:

    1. Possible since electronically mediated (Internet) on-demand content
        access permits the introduction of additional revenue -generating features
        – such as on-demand, anytime, anywhere network access, marketing
        adverts, placements and tie-ins.
    2. Required because historical revenue bases have been undermined.
Network centric model for video delivery remains more expensive and less
efficient than on-demand models employing physical delivery (such as DVD
exchange services pioneered by Netflix).
Unfortunately, broadband could cost Hollywood far more in illegal copying than it
can ever hope to gain from expanding its market as we transition from a high
copyright value era to a low copyright value era (with easy copying). At worst for
Hollywood, entertainment industry economics will undergo drastic changes – as
we move from an era of accessing information and entertainment by paying for
something physical (a record, an audio or video cassette, a CD-ROM, a DVD) to
an era in which accessing information/entertainment becomes almost
synonymous with Internet access. At best, Hollywood will successfully establish
similar content pricing models over the Internet and the copy problem will be
adequately resolved.
4.3 New Options in Copyright Policy
To achieve both Hollywood‟s and the technology industry‟s objectives, and to
resolve their current impasse, it could be constructive to discriminate between
three segmentation levels – tools that underlie functions that underlie applications
– because it may be possible (and necessary) to restrict capabilities at the
application level liii, without any change required to general-purpose devices
(tools) or their basic functions. Most people will not write their own software
application, just as most people do not have their own recording studio – so the
content community could partially regain its status quo.
But since the applications themselves (computer programs) that enable
recording-oriented functions may be created by a clever 15-year old Norwegian
(or other) and then broadly disseminated to programming neophytes, a policy
that restricts application functionality could only be effective if: 1) the policy was
globally implemented; and 2) illegal application programs were made very difficult
to obtain. At the most basic level, the global problem -objective is one of
controlling computer code – coincident with the main business objective of one of
today‟s most famous, cash generating, technology companies (Microsoft).
Legacy copy-related computer programs in all likelihood will remain a
tremendous problem for Hollywood. Hollywood may best aim to replace or
augment legacy programs with programs offering far greater convenience but
that would impede prolific copying – thus returning something of the status quo
Hollywood needs to be able to thrive – which may prove quite difficult.
Global harmonization is an increasingly key issue, or the global network will grow
to become a weaker, fractured version of what it otherwise might be – as source,
destination and content eventually require constant monitoring in order to sustain
policy anomalies from one locale to the next.

 ISPs, as common carriers, are generally not responsible for copyright royalties –
 but in some cases, caching or serving from ISP‟s own servers changes ISPs
 status to no longer be that of merely a passive provider, and triggering liability for
 copyright royalties. When caching or storage is utilized to balance loads or
 otherwise as an alternative to bandwidth consumption, it may be argued that
 since end-functionality is virtually the same, there should be no copyright
 restriction on the ISP – a question worthy addressing in policy or interpretation.
 5. The intersection of broadband and copyright issues
    In a contest between champion and challenger; champion has everything to
    lose and nothing to gain, while challenger has everything to gain and nothing
    to lose. We may suspect the champion is Hollywood and the challenger the
    Internet, but they are actually in prolonged courtship – with the real policy
    battle still between the production capabilities of individuals vs. corporations
    and the most substantial question being the viability of the broadband bride.
 The line between telecommunications and entertainment continues to disappear,
 driven by advancing technology – a nearly irresistible force. Consider the
 following definitions:
        Telecommunications: a shared information infrastructure that people pay
        to access.
        Entertainment: (shared) content (information) that people pay to access.
In earlier forms, there was little overlap between entertainment and telecom in the
content-conduit continuum. Live entertainment or entertainment stored on
physical media transported to consumers, histo rically, had little to do with telecom.
But when the conduit between entertainment producer and consumer becomes a
telecom network (such as in centrally controlled broadcast networks), defining the
business as telecom versus entertainment becomes fairly arbitraryliv . It is useful to
consider the following principal of content-conduit inseparability:
    The more that conduit is used to carry content, and the more that content
    relies on conduit, the more inseparable the issues surrounding them become –
    technological, market/market access, and regulatory.
 Cross-Industry Conflict May Benefit Individuals       Before      detailing    the
 specific conflicts between broadband and copyright policy, a higher-level issue is
 raised. Today, policymaking for a given industry often relies primarily upon input
 from regulated companies in that industry. If policymaking objectives for two
 major industries (e.g. content and conduit) are at odds, then policymaking
 becomes a forum for cross-industry compromise.             In such compromise
 policymakings, there is the need and enhanced opportunity for rebalancing
 individual vs. corporate interests.
         The need is always present for governments to wisely balance
           corporate empowerment with their hegemony over individuals. The
           legislatures of the greatest societies have wisely balanced individual
           and corporate interests lv .

       The opportunity for a legislature to rebalance individual-corporate
        relationships is greatest when an issue arises pitting two different
        industries against one another, since opposing industries tend to
        present far more effective voices of opposition that may lead to more
        balanced vision and policymaking.
Content and Conduit Square Off         Capabilities from new technologies have
polarized the content and conduit communities – challenging policymakers to find
a suitable compromise position.
                                             The Content Community („Hollywood‟):
  Lawmakers and the courts must hold electronics manufacturers and
  telecom companies accountable for copyright infractions enabled by new
  capabilities that permit individuals to get music and movies for free by
  circumventing traditional delivery approaches.
       The Conduit Community (Telecom, Computer and other Digital Media Tool
  Content has and should flow freely over public access networks – content
  liability burdens should be borne by end users, not by carriers or by
  electronics manufacturers. Regulations should not limit the capability of
  computers (or other digital devices or networks) – including communications
  or publishing capabilities – which provide individual liberties fundamental to
  the “Global Network Age”. The much larger size of the conduit versus the
  content industry means policymakers should avoid the much greater risk of
  creating any new laws that may debilitate the conduit industry.
”Just as computers make it possible to create remarkably pristine images, they
also make it possible to make remarkably pristine copies,” said Michael Eisner in
a speech to Congress. The Consumer Electronics Association‟s Gary Shapiro
counters, “If we had previously heeded the concerns of the creative community,
we would have no radio, no TV, no VCR, no computer, no e-mail and no
Internet. lvi” Software programs operating on „general purpose‟ computer
hardware have greatly increased the modularity (i.e., independence) of functions,
substantially eroding the historical opportunity to link (or force dependent)
functionality – required for copy protection technology. Even if integrated copy-
protection features were required on all newly sold copy-related software, legacy
software would remain a substantial threat.
No disruptive technology in the history of Hollywood has presented so significant
a challenge as has the Internet. It is widely believed that successfully cracking
down on the theft of copyrighted material will expand the availability of
compelling broadband content, leading to greater broadband deployment.
Setting aside for the time being that compelling video content can be too costly to
deploy in the current Internet, there is still the problem of cracking down on the
file-sharing of pirated audio and video; and the higher the broadband penetration
the higher the piracy. Also, as noted by Dr. Andrew Odlyzko lvii, the most
compelling content for individuals is generally person-to-person – yet most ISP

policies restrict end-users from serving content and some have begun generally
curtailing any substantial degree of network loading by end-users.
What are the implications for the telecom industry? The strategic importance of
telecom to companies and individuals of all types continues to increase. The
„Network‟ (actually several somewhat-interconnected networks: Internet,
telephone, cellular, etc.) is rapidly becoming the de facto central source for
information and the primary conduit connecting us all. It is becoming increasingly
true that a business is defined by its information technology capabilities and
One could even say that „the network is the business‟ or „the business‟s use of
the network is the business‟. Will it also become true that „the network is the
entertainment business‟? That is, will the „Network‟ become the standard
distribution mechanism for entertainment? If one considers the „Network‟ to
include broadcasting, then it already has.
Broadcast networks (over the air, cable and satellite television) already account
for the vast majority of entertainment industry revenues – so you could say
telecom/broadcast network technology has already commanded a greater piece
of the pie. Fortunately for Hollywood, broadcast networks have successfull y
employed copy protection and conditional access technologies so that Hollywood
has been able to maintain distribution control. But the Internet is different.
Will the Internet network replace broadcast networks as the new entertainment
paradigm? Possibly. Will Hollywood master the Internet, will the Internet reduce
Hollywood, or will they reach a balanced coexistence?
Past technology adoption by Hollywood is a clue to the future. New and old
media converged successfully in broadcasting (over the air, cable and satellite
television and radio). Television networks owned infrastructure and controlled
content.     Cable networks built and owned new cable -based broadcast
infrastructures, developing some new content, while also carrying old content –
all controlled by the operator. Similarly, satellite networks built and owned new
satellite-based broadcast infrastructure, developing some new content, while
again carrying old content – all controlled by the operator. Each new „Network‟
infrastructure developed in a progression that took business away from – but did
not annihilate – earlier infrastructures. Total industry revenues increased after
each innovation in distribution.
Will the Internet follow this trend – building and owning new infrastructure,
developing some new content (e.g., Yahoo!) while also carrying old content (e.g.,
movies and music)? It has, but with unprecedented negative cash flows and lack
of profit. The Internet has begun converging with Hollywood – e.g., AOL Time
Warner, and Internet via cable modems. Movielink – the planned Internet video
on demand movie service backed by Sony Pictures Entertainment, Universal
Studios, Paramount Pictures, Metro-Goldwyn-Mayer and Warner Brothers – is
further example of Hollywood embracing the new technology, hoping that its
challenges can be surmounted lviii.

Policy proposals in the intersection of content and conduit today reflect mainly
the concern of illicit copying, seeking policy solutions yet more aggressively as
technical solutions seem fleeting. But will copyright protections serve to
“promote the progress of science and useful art lix ” or rather tend towards
reinforcing an entertainment industry that disseminates a greater and greater
portion of inane drivel than either science or useful art. Putting the full onus of
„no copying‟ on technology and networks will not “promote the progress of
science” if it shuts down the network. On the other hand, the artistic soul of
society, Hollywood, must not be eclipsed. There is need for a new soul in
Hollywood that harmonizes with technological realities yet promotes even more
“useful art” that enriches the soul of society.
Policymakers, strategists, investors and others should not assume any particular
new industry (broadband) will succeed or that a ny particular mature industry
(Hollywood) will continue in one or another expected manner after new
technologies of expansive impact are introduced. Seeing through a mania to the
fundamentals of transformational new technologies is critical to avoid hidden
pitfalls and surprises.
Pro-development broadband policies will increase the opportunity for piracy, but
if pro-broadband policies substantially advance larger economic and social
goalslx , then the issue of entertainment industry stability should be secondary.
Nevertheless, broadband is likely to advance best on its own merits rather than
through broad government interventions – unless a complete econometric study
reveals costs are both manageable and warranted by direct or indirect returns
(the author‟s own econometric analysis indicates further surprises may lie
Hollywood‟s artistic creation and distribution will continue, but the value of
copyrights will erode unless or until a more comprehensive environment is
created that enables stronger protection against copying. In the general-purpose
computer paradigm, this would require that all software used to create or
distribute media contain copy protection features. If successful, Hollywood‟s
slice of the pie may well increase, but the downside risk for Hollywood is greater.
Hollywood will likely remain the center of managed creativity by doing what it
does best and establishing licensing or other strategic relationships with
electronic content delivery technologies or systems that do what they do best.
For significant investments to be made in broadband, whether by governments or
private investors, substantially more detailed econometric analyses and
economic justifications are necessary.

  In this paper, the issue of cultural hegemony (Hollywood versus Bombay or
Borehamwood) or the structure within the global entertainment industry is not the
primary focus – although broadband may indeed become a new force for
diversity vs. hegemony in mediated entertainment.

    This idea is reinforced in, “The Darknet and the Future of Content Distribution,”
by Peter Biddle, Paul England, Marcus Peinado, Bryan Willman – all of Microsoft.
     Since most all digital transmissions revert to unencrypted analog before
sending the content to a display or player, the analog signal can be encoded as
an „original duplication‟, hence the „Analog Hole‟. Watermarking aims to embed a
mark that transits both domains – analog and digital – to maintain content control
in the analog as well as digital domains.
    Silicon Valley dream, Hollywood nightmare / Technology, copyright law clash in
Congress, courts, San Francisco Chronicle, 9/24/2002.
    Daniel B. Klein, “Plank Road Fever in Antebellum America: New York State
Origins,” New York History, Jan. 1994, pp. 39-66.
     A strong venture capital culture easily fuels the fire of passionate speculation,
as long as venture investors can exit investments in early-stage companies by
selling private stock to a bubble-greedy public before the mania and the
investment cycle end. So part of the policymaking challenge for technology
advancements lies further afield in securities policy and a wiser accounting for
human behavior.
      According to the U.S. Federal Communications Commission‟s Report
Availability Of High-Speed And Advanced Telecommunications Capability
(mandated by Section 706 of the 1996 Telecom Act), “advanced
telecommunications capability [broadband, really] is being deployed in a
reasonable and timely manner.” At the same time, policymakers, the industry
and commentators all suggest broadband rollout is too slow. Were plank roads
deployed in a reasonable and timely manner? Should governments have struck
policies that accelerated their deployment? Is broadband a plank road?
     Estimates have been made in the range of $250 to 500 Billion in real losses for
telecom investors, and several times that in (inflated) market losses.
     David Isenberg, SMART Letter #64: Avoiding Permacession, Dec. 2001 at
    Price reductions or new services are other factors to consider in judging the
success of policymaking – indicating that policies are not patently in error, at
least, when considering a broad set of results. Stirring the pot can be helpful
now and then in regulated-monopoly industries if indifference impedes progress.
    The subjective nature of any of these goals does not justify discounting that
goal. S. Korea‟s broadband policy is especially comprehensive in promoting
applications in education, entertainment and commerce. Beside policy, the
aggregations of individual determination, effort, empowerment, and ingenuity
determine a society‟s effectiveness, competitiveness and ultimate impact; while
providing resilience against bad policy.
     Typical models of organizational and inter-organizational cooperation (design
by committee) are challenged by anything more than simple and straightforward
problems; rendering the multidimensional meta -problem of diligently planning
and deploying a global network that meets technical, market and regulatory
conditions a very challenging task.

     While international policy dialogues (at WTO, The United Nation‟s WIPO, ITU,
and Worldbank, etc.) have taken useful steps in the direction to resolve global
policy disparities pertinent to broadband Internet and cop yrights, the
consequences of unaddressed policy disparities in untold categories may balloon
as the Global Network Age advances. One effort to remedy this is the Hague
Conference on Private International Law (an intergovernmental organization with
fifty-seven member states – including all the E.U. Member States and the United
States – organized to promote "the progressive unification of the rules of private
international law." The Hague Conference on Private International Law is in the
process of drafting a Convention on Jurisdiction and Foreign Judgments in Civil
and Commercial Matters, “aimed at setting international rules for determining the
court in which foreign parties can be sued and when countries must recognize
the judgments of foreign courts.”
      N.B.: General use of the term „broadband‟ is inconsistent. Broadband is
generally defined by access speed, but other technical parameters such as
latency, load, and statistical attributes of these parameters (oversubscription, et
al.) are also important to user experience for a statistically multiplexed data
communication network such as the Internet. Regulations require a specific
definition of broadband.
     Ashok Bhundia, et al., “UK policy coordination: The importance of institutional
design,” Fiscal Studies, Mar. 2002.
       In Managing Internet-Driven Change in International Telecommunications
(c2001, Artech House), Rob Frieden relates social policy goals supporting
access by rural and low-income users: “The PTT model represents a monopoly
postal and telecommunications enterprise owned, operated, and regulated by
government. Advocates for this model believed that only centralized, public
management can temper profit-maximizing strategies with the duty to achieve the
following social policy goals:
   Universal service or at least affirmative efforts to provide affordable basic
        telecommunications services to rural areas and low-income user;
   Rate making that prevents price gouging, except where socially desired,
        (e.g., overpricing outbound international telephone rates to generate a
        source of revenues for cross-subsidizing local telephone services);
   Price averaging that blends high- and low-cost routes (urban versus rural
        and dense versus sparse) and transmission technologies (cable versus
        satellite) into a single, composite rate;
   Rate setting that serves social goals (e.g., subsidized lifeline rates to low
        income users)
   Long-range planning that achieves development objectives (e.g., deploying
        advanced broadband digital facilities and services to rural locales even in the
        absence of demand and the likelihood of fully recouping investment);
   Political brokering that balances, on one hand, the interest in weaning the
        telecommunications sector from government subsidies and moving it toward
        global competitiveness and, on the other hand, securing political support

        from the large, often unionized body of telecommunications employees
        whose numbers may decline as a result of streamlining initiatives.”
       The learning and imitation of bad (even violent) behavior is obviously also
subject to acceleration by communications technologies.
      The author suspects there are exceptional and anomalous cases in which
profitability has been obtained – with circumstances not representative of the
viability issue in general. Please let me know of any such cases.
      In “Will The Boom Resume?” (Three piece article in America‟s Network
Magazine, Jun./Jul. 2002) Dan Sweeney argues that a second boom in telecom
is very unlikely, given historical economic precedent in railroad, oil, telegraph,
telephone, electric lighting, radio, television, and automobiles. Capital market
structures permit huge variations in capital availability and allocation – permitting
such booms – according to risk and opportunity assessments. While hands-off
policies permitted a mania with massive failed telecom investments in the recent
investment cycle, and while more restrictive policies might have meant lower
capital losses, it is possible that Internet econo metric issues guaranteed losses
largely independent of policy and that a more heavy-handed policy may have
only resulted in greater losses.
      Bankrupt companies include: @Home Networks, 360 Networks, Adelphia
Business Solutions, Advanced Radio Telecom, Ardent Communications, Birch
Telecommunications, Covad, Exodus, FLAG Telecom, Genuity, Global Crossing,
McLeod USA, Metricom, Northpoint, PSINet, Rhythm Netconnections, RSL,
Teleglobe, Williams Communications, Winstar, XO Communications, Yipes, and
many others.
       Berkshire Hathaway (Warren Buffet), Legg Mason, and Longleaf Partners
Funds investment in Level Three (in turn Level Three‟s investment in Genuity);
Liberty Media‟s (John Malone) investment in Casema; Hunter Hall‟s investment
in Worldcom, Leucadia‟s investment in WilTel Communications Group, Sofaer
Capital‟s investments in Atlantic Telecom and Carrier1.
      OC&C Broadband Content Pilots Study,
       UNDERSTANDING BROADBAND DEMAND, A Review of Critical Issues,
Office of Technology Policy, U.S. Department of Commerce, September 23,
2002 – and
Brookings Working Paper, The United States Broadband Problem: Analysis and
Policy Recommendations, Charles H. Ferguson, The Brookings Institution –
xxv Available at
       Of the two options – regulations supporting monopoly or supporting
competition – the monopoly model is the only with a long proven history, yet with
two obvious flaws: 1) inertia for innovating new services, and 2) lack of
competitive pressure to provide top value. Rapid changes in computer and
communications technology heightened awareness of these flaws, leading to
procompetitive regulations aiming to accelerate introductions of beneficial
innovations. Procompetitive regulation succeeded in creating a financial risk

adoption climate that enabled the Internet to be built, succeeding in bringing forth
innovation – but at the unexpected and high price of destabilizing telecom.
Throughout all this, certain monopolistic forces remained as an inherent basic
element of the telecom industry: 1) the high cost of establishing a network –
particularly at the edge, and 2) the economic property of network scale that
benefits larger operators and prompts consolidation. Regulations cannot reverse
telecom‟s inherent degree of monopoly, but have increased innovation and value
– assuming the new models are sustainable (which is hoped for, but far from
Today the competitive carrier‟s existence is challenged, and the voice from that
corner is pushing for greater conformity to the procompetitive objectives of the
1996 Telecom Act – which sounds like a reasonable objective. At the same time,
telco and cable incumbents find themselves struggling with weaker to negative
cash flow and higher debt from investment in advanced services, and the voice
from their corner is for less restrictions so they can make a better go of things as
they argue they are the only ones who can truly drive broadband forward – which
also sounds like a reasonable objective. Ultimately, two subtle yet basic
elements will play a role in determining the outcome. One is the degree of
natural monopoly, which allowed separate monopolistic voice and cable video
networks to coexist, but only because they were separated by distinct target
markets. No longer is the target marke t distinct with broadband Internet services,
bringing cable and local telephone into closer competition and inevitably more
challenging economics. The other subtle element is the fungibility of access –
Internet protocol communications do not particularly care which set of cables or
fibers they transit, rendering service differentiation far more difficult. These two
forces would seem to make an ideal situation for consumers, except that
changes in the fundamental network load value proposition will be a big problem
for either cable or telco service providers – and a uniform problem for all vendors
becomes a problem for customers by pushing up prices and reducing service
quality of not only new broadband Internet services, but narrowband Internet and
voice services as well.
      A sub-theme of deregulation today is broadband promotion – viewed by some
as the best way to free incumbents to accelerate broadband deployment, viewed
by others as RBOC-pork. Stanford University Law Professor Lawrence Lessig
suggests an alternate policy approach of network neutrality be established if
open-access requirements are eased. The Report on Availability Of High-Speed
And Advanced Telecommunications Capability (mandated by Section 706 of the
1996 Telecom Act) ironically concludes that, “advanced telecommunications
capability [broadband, really] is being deployed in a reasonable and timely
manner” – while policymakers, industry and commentators suggest rollout is too
slow. According to Professor Rob Frieden, “The exclusive carrier model became
unsustainable and unacceptable when a growing body of empirical evidence
proved that competition does not jeopardize the ability of the incumbent to
survive, even as it stimulates lower rates, service diversity, efficiency gains, and
infrastructure development as measured in such quantitative indices as number

of telephone lines per 100 inhabitants,” but it may merely be that the exclusive
model needs a stirring of the pot now and then. The range of policies and policy
discussions for “monopoly, oligopoly or competition” include:
  [U.S. – law] AT&T divestiture (1982)
  [South Korea – law] South Korea‟s Telecommunications Business Act said to
     be revised by Ministry of Information and Communication (MIC) to strengthen
     the role of the country‟s top telecom regulator, Korea Communications
     Commission (KCC).
  [South Korea – competition policy] Hanaro Communications was formed in
     1997, backed by the government.
  [South Korea – law/policy] Korea Information Infrastructure plan, KII,
     proposed in 1993 by former President Kim Young-sam; later modified
     including provision for:
     o KII-G, a nationwide government owned fiberoptic network finished 2
         years ahead of schedule in 2000, as well as including provision of
         broadband services to all government agencies and schools by
         December 2000;
     o KII-P, regulations enhancing competition for private (nongovernmental)
         usage, enabling loans, as well as demand side promotion for commerce,
         education and entertainment (especially „PC Bang‟, gaming centers).
     o KII-R (aka Korea Advanced Research Network, or KOREN), funding a
         high-speed research network interconnecting with similar facilities in
         other countries.
  [Virginia – law] 56-484.7:1. Offering of Communications Services – permits
     municipal governments to offer broadband services.
  [European Union requirement] European Union Member States must take
     certain steps towards telecom competition by July 2003. Stated intent is to
     reduce unnecessary regulation and provide greater legal certainty for
     telecoms and communications firms, but some question if the Commission‟s
     charter permits it to redefine the type of markets where national regulators
     should have the power of intervention, and some believe that rather than
     providing greater legal certainty, that such certainty will be removed, with
     increased complexity in market analysis and with inconsistent treatment of
     markets favoring mobile companies over fixed-line firms.
  [U.S. – proposed bill] S2863 Consumer Broadband Deregulation Act of 2002
     (Senator John McCain, R-AZ) would promote investment and innovation in
     broadband via deregulation to advance user choices for broadband access.
  [U.S. – proposed bill] S2430 Broadband Regulatory Parity Act of 2002
     (Senators John Breaux, D-LA, and Don Nickles, R-OK) was blocked by
     Hollings but would have encouraged RBOC investment by removing
     restrictions for DSL to put more on par with cable modem and broadband
     wireless services considered by many to be too restrictive of states ability to

   [U.S. – proposed bill] The Telecommunications Competition Enforcement Act
    of 2001 would curb RBOC violations of Telecom Act of 1996 with new fines
    and require structural separation between RBOC wholesale and retail arms.
   [U.S. – proposed bill] HR1542, Internet Freedom and Broadband
    Deployment Act of 2001 (RBOC Relief Act or Tauzin Bill) would liberate
    RBOCs and encourage their investment by permitting them to carry data
    traffic across LATA boundaries without first complying with open access
    requirements. Would have eliminated the rights of state attorneys general to
    bring anti-trust suits against incumbents, while eliminating Department of
    Justice oversights (also including anti-trust) delineated in the 1996 Telecom
    Act. In this bill, broadband is 384 kbps.
   [U.S. – proposed bill] HR1697/1698, American Broadband Competition Act
    of 2001 (Cannon Conyers bill) (Chris Cannon, R-UT, a rural spokesperson;
    John Conyers, D-MI, leader of the congressional black caucus) would restore
    statues that Tauzin Bill aimed to eliminate, would establish a $3B loan
    program to finance broadband deployment in rural and underserved urban
    areas, would establish that anti-trust law does apply to telecommunications
    (contradicting and rendering impotent a 7th U.S. Circuit Court of Appeals
    decision), and would require incumbents to open access to their networks
    until at least 15% of lines were not served by incumbent.
   [Michigan] Senate Bills 880, 881 and 999 set up the Michigan Broadband
    Development Authority (MBDA, a program financed and possibly started by
    the Michigan Economic Development Corp. – MEDC), made rates uniform
    throughout the state.
   [United States – related proposed bill] S1364 The Telecommunications Fair
    Competition Enforcement Act of 2001 (Sen. Ernest Hollings D-SC) would
    advance structural separation and increase fines for RBOC rule violations.
   [United States – related proposed bill] S696, Third-Generation Wireless
    Internet Act (Sam Brownback, R-KS) would increase spectrum limit for a
    single company (spectrum limits aim to avoid undue concentration of
    spectrum ownership)
   [United States – related proposed bill] HR2535, the Spectrum Resource
    Assurance Act (Rep. Cliff Stearns R-FL)
   [United States – law] 1996 Telecom Act Section 271, precludes RBOCs from
    offering long distance services to customer in-region until they have opened
    their networks (today, including DSL services) to local competition as judged
    by a 14 point checklist.
   [United States FCC proposal] Classify Internet access as an “information
    service” – would release incumbents from 1996 Telecom Act restrictions on
    DSL-Internet (as would Tauzin-Dingell or Breaux-Nickle bills).
   [United States – law/status-review] 2nd Triennial review of the 1996
    Telecommunications Act‟s wholesale access provision (Unbundled Network
    Element Platform or UNE-P) is being contested by RBOCs who complain
    mandated TELRIC wholesale pricing (at as much as a 40% discount) is
    below cost. Bells are trying to remove switches as one of the UNE-P

       components. (Independents in rural regions were exempted of 1996
       Telecom Act provisions regarding requirements for resale, collocation and
       unbundling, and will also lose subsidies if DSL is deemed by the FCC an
       “information service” rather than „telecommunications service”, or by
       congress deregulating DSL as in Tauzin-Dingell or Breaux-Nickle.) Newly
       Republican-controlled Senate will no longer have Ernest F. Hollings (D-SC) –
       an RBOC opponent – heading the Senate Commerce Committee, possibly
       making their three main objectives easier (getting into long distance,
       deregulating broadband, easing UNE-P requirements).
   [FCC Notices]
       o Cable Modem Notice (considers the definitional question of the regulatory
           classification of cable modem service).
       o Incumbent LEC Broadband Telecommunications Services Notice
           (examines the appropriate regulatory requirements for the incumbent
           LECs‟ provision of domestic broadband telecommunications services).
       o Triennial Review Notice (addresses incumbent LECs‟ wholesale
           obligations under section 251 to make their facilities available as
           unbundled network elements to competitive LECs for the provision of
           broadband services).
   Broadband Notice (considers statutory classification of wireline broadband
       Internet access services – are they information services or other as per Title
       1 of 1996 Telecommunications Act – especially regarding universal service,
       access, interconnection or other objective)
       Cable TV and satellite DTH are under regulations that reflect co-ownership of
content and conduit (or at least the control of programmed content) whereas
telephone and mobile, involving the opposite paradigm of separate ownership of
content and conduit are under substantially different regulations. The Internet is
more like the telephone or mobile phone networks – any computer can ring up
most any other computer and its content whether connected via a cable Internet
or a DSL connection. Even though content and conduit in the Internet paradigm
are sometimes under common ownership, the nature of the Internet‟s
architecture and operation is most conducive to content-conduit independence –
and so a regulatory regime more like that of telephone or mobile phone networks
may be most applicable. A major complaint of the telephone companies is
conduit self-determination, which is different from content-conduit independence,
although both involve conduit auto nomy. Conduit self-determination is regulated
differently in the United Sates between cable and telephone companies, because
telephone companies are required to provide competitors access to their
networks while cable companies are not. Policies and policy discussions for
“open access” include:
   [U.S. – related proposed bill] Tauzin-Dingell DTV Transition Proposal: all
       stations must be digital by December 31, 2006 (current law only forces
       transition when 85% of viewers get digital TV signal). Digital “mus t carry”

     FCC Categorization of Cable Internet as “Information Service” – does not
      require opening of access, and may not give FCC legal power to keep
      service going in the case of operator insolvency.
     Universal service is a common objective for telecom. Building the Foundation
for the Networked World – a report released 1/2002 by Computer Systems Policy
Project (CSSP comprised of Dell Computer, EMC, Hewlett Packard, IBM, Intel,
Motorola, NCR and Unisys) – said US economic expansion was dependent on
broadband growth. It recommended that by the end of 2003, 80% of US homes
should be able to get data at 1.5mbps, and 50% of homes should be able to
receive data at 6mbps. It also called for nationwide 100mbps access by the end
of 2010. The range of policies and policy discussions for “universal service”
   [New Zealand] “Kiwi Share” universal access program extends low speed
      Internet to rural areas (begun ~2000).
   [Sweden] Small Community Broadband Infrastructure Initiative will extend
      access to 30% of Sweden‟s population in small communities (pop. < 3,000)
      or beyond reach of current broadband services. Government to subsidize
      community-owned shared networks, with local governments sharing costs
      (mirroring Stokab network in Stockholm).
   [France] Rural loan subsidy.
   [Japan] Rural fiber subsidy.
   [U.S. – proposed bill] S2307, HR4122 Rural Broadband Enhancement Act
      (S2307 Sen. Byron L, Dorgan, D-ND; HR4122 Rep. Bart Stupak, D-MI)
      would amend the Communications Act of 1934 to direct the FCC to initiate a
      proceeding to provide universal service support for broadband to rural
      communities with populations less than 20,000, and would amend the
      National Telecommunications and Information Administrative Organization
      Act to have the Department of Agriculture‟s Rural Utilities Service provide
      loans and credit extensions to help finance broadband service deployment to
      such communities.
   [U.S. – proposed bill] HR496 Independent Telecommunications Consumer
      Enhancement Act of 2001 (Rep. Barbara Cubin, R-WY) would ease
      regulatory burdens on small and mid-sized telecommunications companies
      working in rural areas.
   [U.S. – proposed bill] S-2448 Broadband Telecommunications Act of 2002 –
      Ernest “Fritz” Hollings‟ (D – SC) broadband bill – see section below on tax
      breaks for further detail.
   [U.S. – proposed bill] Broadband Internet Act of 2001 – see section below on
      tax breaks for further detail.
   [U.S. – proposed bill] S88, HR267 The Broadband Internet Access Act of
      2001 (S88, Jay Rockefeller, D-WV; HR267, Rep. Phil English, R-PA) – see
      section below on tax breaks for further detail.
   [U.S. – proposed bill] S2307, HR4122 Rural Broadband Enhancement Act
      (S2307 Sen. Byron L, Dorgan, D-ND; HR4122 Rep. Bart Stupak, D-MI) – see
      section above on universal service for further detail.

   [U.S. – proposed bill] Broadband Internet Access Act of 2000 (Sen. Daniel
       Patrick Moynihan, D-NY and Sen. John Kerry, D-MA) – see section below on
       tax breaks for further detail.
   [U.S. – proposed bill] HR5069 Minge-Hooley-Baird Comprehensive Rural
       Telecommunications Act (Rep. David Minge, D-MN) – see section below on
       tax breaks for further detail.
   [U.S. – proposed bill] S2321 Rural Telecommunications Modernization Act of
       2000 (Sen. Jay Rockefeller, D-WV) – see section below on tax breaks for
       further detail.
   Historical: lifeline service (1982).
     Standards of interoperability are needed in many industries, and are generally
either privately collaborated or policy mandated (sometimes both). Reasons for
interoperability standards range from increased efficiency to operational
necessity. If a standard is controlled privately (like that of computer operating
systems), it is potentially a tool of abuse by the entity that controls it. Ideally, a
combination of centralized guidance and decentralized market industriousness
allows innovations to be brought forward with the best vision – on the simple
principle that both have something unique to add. The perennial debate is the
balance between centralized and decentralized control.
      Broadband promotion apparently has much political will, but lacks firm
direction – as evidenced by the disparity of approaches. Policies and policy
discussions for “tax breaks and other broadband deployment incentives” include:
   [China] $151 Billion telecom infrastructure investment 5-year plan focused on
   [Minnesota] Connecting Minnesota (project discontinued), $200M project
       laying fiber along freeways failed in early 2001 due to court delays, telecom
       downturn, and finally lack of funding.
   [Japan] Infrastructure tax incentives. Broadband planned to be deployed to
       every home and business by 2005 (not sure if this is a plan or a motto).
   [Australia] Access@schools - direct investment or public private partnership
   [Canada] Public sector high-speed network - direct investment or public
       private partnership (PPP).
   [Denmark] Public sector delivery of broadband - direct investment or public
       private partnership (PPP).
   [Sweden] Public sector high-speed network - direct investment or public
       private partnership (PPP). Infrastructure subsidy. Tax incentives to users.
   [United Kingdom – policymaking group] United Kingdom‟s Broadband
       Stakeholders Group: The Office of the e-Envoy is leading the drive to get the
       UK online, to ensure that the country, its citizens and its businesses derive
       maximum benefit from the knowledge economy. To support this aim, the
       Office has three core objectives: 1) to make the UK the best environment in
       the world for e-commerce by 2002, 2)to ensure that everyone who wants it
       has access to the internet by 2005, and 3) to make all government services
       available electronically by 2005. The government‟s program of work is to

    ensure the UK is a world leader in the knowledge economy revolution as set
    out in the UK online Strategy. Public sector high-speed network - direct
    investment or public private partnership (PPP). The latest report from the e -
    Minister and e-Envoy to the Prime Minister, detailing progress against the
    action plan set out in the UK Online Annual Report, was published on 5
    August 2002.
   [France] National grid leveraged for Internet backbone communications.
   [Sweden] National grid leveraged for Internet backbone communications.
   [Singapore] Infocomm 21 is the master plan of Singapore‟s Infocomm
    Development Authority (IDA). Singapore One began in 1996, and aims to
    provide universal broadband and broadband application access. Singapore
    is targeting global leadership in information and communication industries.
   [Australia – pseudo government policy] Telstra Broadband Fund (Telstra is
    50% owned by the government) $250,000 cash or in-kind grants to fund
    development of commercially exploitable innovations.
   [Montana – law] SB172 Montana‟s Telecommunications Act authorized the
    Advanced Telecommunications Infrastructure Committee to provide tax
    credits to advance broadband deployment in Montana (Senator Mignon
   [Colorado – law] HB1102 enables government to encourage investment in
    broadband infrastructure by serving as anchor tenant for new broadband
   [U.S. – proposed bill] National Broadband Strategy Act of 2002 (Sen. Joe
    Lieberman, D-CT) would require incumbent (opposition) leadership to come
    up with a plan to promote broadband within 6 months of passage
   [U.S. – proposed bill] S-2448 Broadband Telecommunications Act of 2002 –
    Ernest “Fritz” Hollings‟ (D – SC) broadband bill – would employ tax breaks
    and loan subsidies funded by telephone excise taxes to reward companies
    serving rural areas, and would fund exploration of alternative broadband
    technologies applicable to rural and underserved areas (criticized as further
    imbalancing regulatory regimes against incumbents by helping competitive
   [U.S. – proposed bill] Broadband Internet Act of 2001 (Sen. Conrad Burns,
    R-MT?, Sen. Sam Brownback, R-KS?) would employ tax breaks and loan
    subsidies to reward companies serving rural areas.
   [U.S. – proposed bill] bill funding the U.S. Agriculture Department to invest in
   [U.S. – proposed bill] S88, HR267 The Broadband Internet Access Act of
    2001 (S88, Jay Rockefeller, D-WV; HR267, Rep. Phil English, R-PA) would
    provide investment-tax-credits to promote broadband deployment in rural
    and underserved urban areas
   [U.S. – proposed bill] S150 Broadband Deployment Act of 2001 (Sen. John
    F. Kerry, D-MA) would amend the Internal Revenue Code of 1986 to provide
    tax credits for broadband deployment.

 [United Kingdom – proposal] Government plan-in-formation for public/private
  funded broadband portal to speed development of UK broadband content, in
  turn to accelerate adoption of broadband.
 [U.S. – proposed bill] S2698, HR4728 The Broadband Internet Access Act of
  2000 (S2698 Sen. Daniel Patrick Moynihan, D-NY; HR4728, Rep. Phil
  English, R-PA) would amend the Internal Revenue Code of 1986 to provide
  tax credits for broadband deployment.
 [U.S. – proposed bill] S2307, HR4122 Rural Broadband Enhancement Act
  (S2307 Sen. Byron L, Dorgan, D-ND; HR4122 Rep. Bart Stupak, D-MI) – see
  section above on universal service for further detail.
 [U.S. – proposed bill] HR1697/1698, American Broadband Competition Act
  of 2001 (Cannon Conyers bill) – see section above on monopoly for further
 [U.S. – proposed bill] Broadband Internet Access Act of 2000 (Sen. Daniel
  Patrick Moynihan, D-NY and Sen. John Kerry, D-MA) would offer a 5 year
  tax credit to Internet service providers: 10% credit for 1.5-Mbps service to
  rural and low-income areas, 20% credit for 22-Mbps service to rural, low-
  income, and underserved residential areas – aiming to increase broadband
  penetration in rural, low-income, and underserved areas.
 [U.S. – proposed bill] HR5069 Minge-Hooley-Baird Comprehensive Rural
  Telecommunications Act (Rep. David Minge, D-MN) would provide rural
  broadband investment tax credits, permit Department of Agriculture‟s Rural
  Utilities Service to make low-cost loans to rural broadband service providers,
  and establish competitive grants for national distance working centers to
  permit telework.
 [U.S. – proposed bill] HR3598 National Free Public Internet Access Act of
  2000 (Rep. James Rogan, R-CA) would amend the Internal Revenue Code
  of 1986 to allow a tax credit for businesses providing free public Internet
 [U.S. – proposed bill] S2321 Rural Telecommunications Modernization Act of
  2000 (Sen. Jay Rockefeller, D-WV) would amend the Internal Revenue Code
  of 1986 to provide tax credits for rural broadband deployment.
 [U.S. – policy recommendations] Should the broadband superhighway be
  viewed like the Interstate Highway system conceived by Eisenhower
  o TechNet has asked the Bush administration for a U.S. broadband policy
       of 100 Mbps to 100M homes by 2010.
  o Government subsidy (recommendation of Keith Kayes, Democratic staff
       director at the Senate Commerce Subcommittee).
  o Suggestion the U.S. government authorize 30-year low-interest bonds for
       broadband deployment in underserved rural areas and for facilities based
       competitive carrier infrastructure builds (Rick Roscitt, Chairman and CEO
       of ADC Telecommunications).
  o Broadband universal service policy and investment of public monies in
       jump-starting broadband industry (Reed Hundt, Mckinsey Consulting).

        o Universal service (Dan Moffatt, CEO of New Edge Networks).
        o Pay broadband services providers $300 per new subscriber guaranteed
           to be at rate no more than $30 per month for three years (Michael Price,
           Vice Chairman of Evercore Partners).
        o Tax credits and loans for broadband deployment in rural areas
           (suggested by the National Association of Regulatory Utility
           Commissioners, or NARUC).
        o Diversion of telephone excise tax fees.
        o Subsidize application development (Ford Cavallari, senior vice president
           and head of the broadband and media practice at Adventis).
        o Charles H. Ferguson of Brookings Institute claims that, “the monopolistic
           structure, entrenched management, and political power of incumbents
           …worsened by major deficiencies in the policy and regulatory systems,”
           is the main reason for slow broadband deployment, and that failure to
           advance broadband deployment may, “reduce U.S productivity growth by
           1% per year or more, as well as reducing public safety, military
           preparedness, and energy security.” (Brookings Working Paper: The
           United       States   Broadband       Problem:    Analysis    and  Policy
           Recommendations, Charles H. Ferguson, The Brookings Institution,
 , May 31, 2002)
      Policies and policy discussions for “research” include:
        [European Union – current initiative] spending 4bn Euros on
          communications research over next four years.
        [U.S. – law] Next Generation Internet Act of 1998 funded advanced
          Internet research for several national agencies to work with businesses,
          educators, et al. to architect a broadband network 1,000 times faster than
          the Internet.
        [U.S. – law] High Performance Computing Act of 1991 created NITRD,
          which is run by a working group within the National Science and
          Technology Council. Member agencies collaborate in funding research for
          selected projects by private companies and universities in areas of: High-
          end computing; High-end computing infrastructure and applications;
          Human-computer interaction and information management; Large-scale
          networking; Software design and productivity; High-confidence software
          and systems; Social, economic and work force implications of IT and IT
          work force development.
       Policies and policy discussions for “application promotion” include:
   [Canada] Infrastructure subsidies – January 2001 formed the Canadian
        National Broadband Task Force (CNBTF) to form strategy for broadband
        availability in every community by 2004. Broadband for Rural and Northern
        Development Pilot Program ($105M Canadian/ $67M U.S.) launched
        September 2002 by Industry Canada and FedNor – requiring demonstration
        of benefits. Criteria for deployment (they imply here an interventionist
        approach, with conflicting criteria) include: 1. Respond to community needs
        (demand aggregation), 2. Private sector should play an active role, 3.

       Governments should foster competition and provide communities with
       opportunities to play a leadership role, 4. Provide third-party open access, 5.
       Competitive and technologically neutral process, 6. Sustainable and
       scaleable, 7. One-Time Federal Capital Investment. 1. conflicts with 3., 4.,
       and 5. 6. is in question (big broadband question), and also may conflict with
       3., 4., and 5.
   [Denmark] Promotion of government teleworking.
   [Holland] Kenniswijk content subsidy.
   [Italy] Syndicating state television rights.
   [S. Korea] Schoolwork online.
   [United Kingdom] NHS/Telewest content project - direct investment or public
       private partnership (PPP).
   [U.S. – policy task force] E-Government Task Force aimed to ease burden
       for individuals and businesses to work with government agencies and to
       reduce costs by eliminating redundancies.
   [U.S. – proposed bill] HR1992, Internet Equity and Education Act of 2001
       (Rep. Johnny Isakson, R-GA) would revise the Higher Education Act to
       remove some regulatory and statutory impediments to better leveraging of
       the Internet in higher education.
   [Malaysia] Tax incentives for local language content.
   [Australia] Rural subsidies.
      Policies and policy discussions of a more “general” nature include:
   World Economic Forum‟s Global Digital Divide Initiative (GDDI) Task Force
       aims to spur more entrepreneurship, e-readiness and education technology
       for developing countries.
   [Australia] The ICT Framework for the Future group and Broadband Advisory
       Group – consultations on advancing IT and broadband.
   [Australia] E-Lab content subsidy.
   [California] „Broadband or Bust‟ Initiative
   [New Zealand] Demand aggregation subsidy.
   [United Kingdom] Demand aggregation and infrastructure subsidies.
   [Ohio] Ohio Broadband Initiative
       o Ohio Broadband Link (state acts as deal maker to get better broadband
           access prices for businesses)
       o The Third Frontier Network (linking Ohio colleges and research facilities)
       o ECommunities (state-PUC-coordinated small business training pilots)
       o eVantage Ohio (Internet training for small businesses to utilize
       o Governor-appointed council to review and coordinate statewide
           broadband activity.
xxxv A brief sampling would be: Center for Digital Democrac y, Center for

Information Technology Research in the Interest of Society (CITRIS),
Corporation for Education Network Initiatives in California (CENIC), The Center
for Civic Networking, Center for Digital Government, Consumers Union,

eCommerce & Telecommunications Users Group, Americans for the Digital
Bridge, Adventis, Precursor Group (Scott Cleland of Precursor was advisor to
Bush‟s presidential campaign), Evercore Partners, Media Access Project
(promotes publics First Amendment rights to hear and be heard in electronic
media), United Kingdom‟s Broadband Stakeholders Group.
       Tom Nolle of CIMI Corporation, suggests, “[Regulatory] relief would allow the
RBOCs to do [more]” since the new entrants have been ineffective in deploying
broadband. Eli Noam suggests in “How Telecom Is Becoming A Cyclical
Industry, And What To Do About It” (Jun. 2002) that telecom‟s future will
inherently possess cyclical instability that will require consolidation to oligopoly.
In this suggestion, Eli appears to have changed his perspective somewhat from
earlier anti-consolidation-of-power proposals: separation of programming and
transport functions in cable television, and further divestiture of incumbent
monopolies – themes possibly offering greater public benefit, but never reali zed.
        “Structural separation” presumes essentially that raw-goods wholesale and
finished-goods retail is an enabling distinction in telecom on which competition
may be introduced, whereas the wholesale-retail distinction may be so lacking
that the main outcome is merely competition in selling, which could be a formula
for substantial customer dissatisfaction as unrealistic selling promises are made
in attempt to different the undifferentiatable. A similar approach,“Unbundling” or
“open access” – sometimes likened to „freeloading‟ – presumes that a newcomer
can effectively compete with massive incumbents, selling the incumbents goods.
         Bottom fishing in telecom has an unusual element of risk if bottom fishers
activities are based upon an investment opportunity premise of timing current
supply and demand fluctuations supposing long term industry stability, since is
not yet known what type of long term stability Internet data traffic will exhibit.
       The U.S. FCC has been criticized for cutting back its accounting and auditing
activities just as substantial investment in the communications sector is driving
industry change with uncertain final outcome.
    Robert Frieden argues that universal service is probably more expensive and
difficult to attain in the Internet (“Without Public Peer: The Potential Regulatory
and Universal Service Consequences of Internet Balkanization” at
     An interesting question is whether S. Korea or any other fast builder wit h high
demand density may be an exception.
      15 year old Norwegian Jon Lech Johansen reportedly launched DeCSS in
October 1999 through membership in hacker network MoRE - Masters of
Reverse Engineering which gave him access to CSS code (CSS stands or
Content Scrambling System, how DVD/Digital Versatile Disc content is protected
from copying, easier to break than more complex codes the U.S. Government
does not allow exported). DeCSS unscrambles the DVD video just as any player
software would, but rather than directing the content only to the screen it directs
the unencrypted content to an unencrypted DVD file on a hard disk. MPAA sued
The Hacker Quarterly and publisher Eric Corley for promoting DeCSS. In August

2002 a New York district court ruled that publishing DeCSS online "is analogous
to the publication of a bank vault combination in a national newspaper.”
      The range of policies and policy discussions for “no copying permitted” include:
   [World Trade Organisation (WTO) agreement] Trade-Related Intellectual
       Property Rights (TRIPs) agreement
   [International copyright convention] Berne Convention for the Protection of
       Literary and Artistic Works – first organized in 1886.
   [International copyright convention] Convention for the Protection of
       Producers of Phonograms.
   [International copyright convention] Universal Copyright Convention (UCC,
       79 country multilateral copyright treaty).
   World Intellectual Property Organization Copyright Treaty (WIPO Copyright
       Treaty – among other things
       provides that all computer software must be protected in each nation‟s
       copyright laws – incidentally providing legal support for Microsoft‟s business
   World Intellectual Property Organization (WIPO) Performances and
       Phonograms Treaty (WPPT) covers the protection of the rights of
       performers, other than their rights in the audiovisual (1996).
   [European Union Directive] EU Directive 2001/29/EC (European Union
       Copyright Directive) seeks to harmonize technical protection measures,
       infringement penalties, et al. within the EU. In December 2002, Greece
       became the first EU member to bring local laws in line with this copyright
       harmonizing directive.
   [U.S. – law/constitution] Constitutional Convention of 1787 – “The Congress
       shall have promote the progress of science and useful arts, by
       securing for limited times to authors and inventors the exclusive right to their
       respective writings and discoveries…” (Article I of United States
       Constitution). Congress has extended copyright period 11 times since 1962,
       and the original term for copyright protection was only 14 years with the
       additional requirement that the author still be living, with an option for
       another 14 years.
   [U.S. – law] Copyright Act of 1790 (signed by George Washington) gave life
       to the constitutional empowerment of Congress to “promote the progress of
       science and useful arts, by securing for limited times to authors and
       inventors the exclusive right to their respective writings and discoveries” –
       originally specified to apply to books, maps and charts. Extended to prints
       and engravings in 1802. Extended to musical compositions in 1831 (with the
       duration of the first term extended to 28 years – for a total 42 years).
       Extended to public performance of dramatic works in 1856. Extended to
       photographs in 1869. Extended to paintings, drawings and statues in 1870.
   [U.S. – law] Copyright Act of 1909 extended scope to “all the writings of an
       author” and duration of renewal term to 28 years (total 56 years).
   [China – law] Copyright laws enacted/revised in 1920, 1915, and 1928 then
       repealed in 1949. New copyright policies established in 1980‟s, then

    Memorandum Of Understanding on the Protection of Intellectual Property in
    1992 plus provisions for implementation of international copyright treaties.
   [U.S. – law] Copyright Felony Act (October 1992). Expanded scope of
    copyright to computer software, and lowered the threshold for felony
   [U.S. – law] Sound Recording Act of 1971 – first copyright protection of
    sound recordings.
   [U.K. – law] Copyright Designs and Patents Act 1988 (CDPA 1988 – U.K.)
    strengthens protections. Porter wrote in an overview of the CDPA 1988,
    “copyright law is not derived from one overarching principle, but from the
    negotiation of a series of contradictory premises.”
   [U.S. – law] S1623, HR3204/4567 1992 Audio Home Recording Act (AHRA)
    aka Copyright Act of 1976 (S1623 Sen. Dennis DeConcini, D-AZ;
    HR3204/4567 Rep. Jack Brooks, D-TX and William Hughes, D-NJ) prevents
    suing of consumers who make personal copies of music using digital audio
    devices specified by the act (but does not require copyright holders to make
    this power available). Requires Serial Copyright Management Systems
    (SCMS) in all consumer digital recorders – prevents copying from digital
    audio tape (DAT) to DAT. Extends copyrights to any, “original works of
    authorship fixed in any tangible medium of expression,” including, “(1) literary
    works; (2) musical works, including any accompanying words; (3) dramatic
    works, including any accompanying music; (4) pantomimes and
    choreographic works; (5) pictorial, graphic, and sculptural works; (6) motion
    pictures and other audiovisual works; (7) sound recordings; and (8)
    architectural works,” and deals with compilations and databases. Also
    establishes compulsory licensing-like system by providing immunity from
    liability for copyright infringement by manufacturers and importers of digital
    recording devices, while imposing a levy on these devices, the proceeds
    from which are to be distributed to copyright owners. AHRA was a
    collaborative policy effort between content and consumer electronics
    industries, but focused on where the market turned out to not be going – it
    did not deal with CD-R, the most popular digital audio recording device.
    Other compulsory or compulsory-like licenses include:
            o The Mechanical License: Congress in 1909 created a right against
                the reproduction of musical compositions in mechanical forms
                (piano rolls). Congress limited this right however, through the
                creation of the mechanical compulsory license for musical works.
            o The Cable License establishes a compulsory license for secondary
                transmissions by cable television systems.
            o The Satellite Retransmission License establishes a compulsory
                license for satellite retransmissions to the public for private viewing.
   [U.S. – law] 1997 No Electronic Theft Act. Copyright holders can sue those
    who copy products valued at $1,000 or more – even if recipients are friends
    and family. No instances of use yet, but Justice Department claims it will
    employ law against file traders.

 [U.S. – law] Sonny Bono Copyright Extension Act of 1998, or Sonny Bono
  Copyright Term Extension Act of 1998, or CTEA (Rep. Sonny Bono, R-CA)
  extends existing author‟s copyrights from 50 to 70 years after author‟s death,
  and corporation-held copyrights from 75 to 95 years.
 [U.S. – proposed bill] National Information Infrastructure Copyright Act, NII
  Copyright Act (Sen. Orrin Hatch, R-UT and Patrick Leahy, D-VT, ~1995)
  would have incorporated recommendations from the white paper of
  President Clinton‟s Working Group on Intellectual Property Rights of the
  Information Policy Committee (IPC) of the Information Infrastructure Task
  Force (IITF) – that mainly focused on protecting the content industry.
 [U.S. – proposed bill] P2P Piracy Prevention Act (Rep. Berman, D-CA)
  Would allow attacking PCs of pirates
 [U.S. – proposed bill] S-2048, Consumer Broadband and Digital Television
  Promotion Act, or CBDTPA, (earlier proposed version was called, “Security
  Systems Standards and Certification Act” or SSSCA) (Senate Commerce
  Committee Chairman Sen. Fritz Hollings, D-SC and Sen. Dianne Feinstein,
  D-CA) would create unprecedented U.S. government standards for personal
  computers and other devices to require prevention of copyright theft –
  requiring telecom infrastructure and consumer electronics companies to
  insure the protection of copyrights.
 [U.S. – proposed bill] HR 5211 Berman P2P bill (Rep. Howard Berman, D-
  CA, and Rep. Howard Coble R-NC) would hold copyright holders harmless
  for hacking activities targeting "disabling, interfering with, blocking, diverting
  or otherwise impairing the unauthorized distribution" of copyrighted material
  via P2P networks.
 [U.S. – proposed bill] Biden anti-counterfeiting bill (Sen. Joseph R. – Joe –
  Biden, Jr., D-Del) to deter digital redistribution
 [U.S. – proposed bill] Digital TV promotion bill – that requires Broadcast Flag
  Copy Protection Technology (House Energy and Commerce Committee
  chairman Billy Tauzin, R-LA) Broadcast Flag Technology aims to stop
  copying directly from digital broadcast to computer and Internet (idea
  attributed to Fox Group‟s Andy Setos)
 [U.S. – proposed bill] HR 2724 Music Online Competition Act of 2001 (Chris
  Cannon, R-UT, and Rick Boucher, D-VA) would mandate copy-protection
  online, while requiring nondiscriminatory licensing of online content
 [U.S. – proposed bill] S1284, HR2441 National Information Infrastructure
  Copyright Protection Act, or NII Copyright Protection Act (Sen. Orrin Hatch,
  R-UT; HR2441, Rep. Carlos J. Moorhead, R-CA ~1995) would prohibit the
  manufacture, sale, or use of devices that circumvent copy protection (e.g.
  computers and the Internet).
 [U.S. – proposal by RIAA] Audio Performance Flag Technology (similar to
  Broadcast-Flag Technology. Aims to stop copying directly from digital audio
  to computer and Internet

 [Commercial developments] Microsoft is developing new “Palladium” system
  for computer security, and Intel is simultaneously developing a similar
  system, “LaGrande”.
 [U.S. – court case] Major record labels v. Napster forced Napster to shut
  down its P2P file swapping service in July 2001 since it engaged in
  wholesale infringing of copyrighted materials.
 [U.S. – court cases] (now part of Vivendi) – many ongoing lawsuits
  and settlements (even a suit by against its own attorneys).
 [U.S. – court cases] Suits against P2P networks: Aimster/Madster, Sharman
  Networks (KaZaA), StreamCast Networks (Morpheus, Grokster).
 [U.S. – court case] Motion Picture Association of America (MPAA) vs.
  Antonio Daniele Ill (2001) settled for $110,000 after illegal distributing movies
  over the Internet.
 [U.S. – court case] Arista Records Inc. et al. v. AT&T Broadband Corp.,
  Cable & Wireless USA, Sprint Corp.‟s Advanced Network Services and
  WorldCom's UUNet Technologies Inc. (SDNY, August 16, 2002) Suit against
  ISPs seeks court to demand ISPs block access to certain international
  websites where copyrighted material is being found available for download
  (exercising a provision in the Digital Millennium Copyright Act providing for
  injunctions by copyright owners against internationally-based websites). Will
  it be possible to keep the door closed to free copies from afar by disabling IP
  address one by one when the number of such address is exploding from
  about 2^32, or 4.3 billion {4.3 x 10^9} to 2^128, or 3.4 x 10^38 – a really,
  really, really big number?
 [U.S. – court case] Recording Industry Association of America v. Verizon, in
  U.S. Dist. Court, D.C. seeks to minimize illicit copying by compelling Verizon
  to disclose – with no formal subpoena – subscriber data regarding who is
  illegally copying music online.
 [U.S. – court case] Eric Eldred vs. Attorney General John Ashcroft. Pending.
  Plaintiff holds that Congress overstepped constitution in 1998 revision of
  copyright law (Sonny Bono Copyright Extension Act) that extended duration
  of rights 20 years (author‟s copyrights from 50 to 70, corporate-held
  copyrights from 75 to 95).
 [Calls for prosecutions] July 2002, Sen. Dianne Feinstein, D-CA and 19 other
  congress-persons wrote asking Attorney General John Ashcroft to get the
  Justice Department to work prosecuting individual users and operators of
  P2P networks for mass copying of copyrighted works.
 [Policy discussions / Warnings] Recording Industry Association of America
  (RIAA)‟s November 2002 letter to 2,300 college presidents stating that
  copyright infringement is theft requesting the universities to take immediate
  corrective action to address piracy on university networks and support of
  hacking-like activities – spoofing the P2P networks to think a phony music
  file is valid (would add substantial unconstructive traffic to networks).

   [Study commissioned] The United Kingdom‟s Commission on Intellectual
       Property Rights (CIPR – usually more patent-focused than copyright-
       focused) has commissioned a study on copyright issues.
   [Hong Kong – court case] Lik Sang International Ltd. vs. Sony, Nintendo and
       Microsoft (for time being, Lik Sang is prohibited from selling game console
       „mod chips‟ that bypass protections against pirated and out-of-market
     The range of policies and policy discussions for “bad copying permitted”
   [U.S. – law] HR2281 Digital Millennium Copyright Act (DMCA), 1998. Among
       other restrictions, one highly controversial provision prevents researchers
       from publishing information on new vulnerabilities. The first criminal trial
       concerning violation of the Digital Millennium Copyright Act ended December
       17, 2002, in the acquittal of Elcomsoft Co., Ltd. of Moscow, whose $99
       software program circumvents eBook security. Dmitry Sklyarov, once an
       Elcomsoft employee, wrote and copyrighted Advanced eBook Processor that
       cracks eBook‟s copy protection mechanisms. Skylarov, no longer employed
       by Elcomsoft, cut a deal for immunity with U.S. Federal prosecutors. Proving
       “willful” creation of a DMCA-infringing program by a company in Russia
       where no similar law existed turned out to be too high a goal for prosecutors.
       DMCA also includes the important, “First Sale Doctrine”: an owner may sell
       or otherwise dispose of his or her copy without authority of the copyright
       owner – permitting lending of books by libraries, renting of videocassettes,
       and sale of used materials. DMCA section 1201(k) effectively mandates
       Macrovision „copy-degradation‟ copy protection.
     The range of policies, policy discussions and interpretations for “a little copying
permitted” include:
   [U.S. Supreme Court – decision] 1984 Betamax decision (Sony Corp. v.
       Universal City Studios) established it was “Fair use” to make a copy of a
       copyrighted work at home. “Fair use” is inconsistently defined and applied.
   [U.S. – proposed bill] Digital Choice And Freedom Act (Rep. Zoe Lofgren, D-
       CA) permits purchasers of Internet media downloads, CDs and DVDs to
       make personal copies plus sell or give away their originals
   [U.S. – proposed bill] Digital Media Consumer Rights Act of 2002 (Rick
       Boucher, D-VA and John Doolittle, R-CA) would reaffirm fair-use for the
       digital media form of music, books and other content that is copyrighted
   [U.S. – proposed bill] H.R. 2652/354, Collections of Information Antipiracy
       Act (Howard Coble, R-NC) would provide criminal penalties for the use of all
       or part of a "collection of information gathered, organized, or maintained by
       another person through the investment of substantial monetary or other
       resources." Includes Fair Use provisions.
   [U.S. – historical] Hollywood and electronics manufacturers discussed in
       1996 a digital videotape recorder system that only permitted a single copy to
       be produced (Sony and Matsushita Electric Industrial). Motion Pictures
       Association of America (MPAA, whose members include Disney, Sony,

       MGM, Paramount, Universal, Warner and Twentieth Century Fox) supported
       the proposal, but the Information Technology Industry Council (ITIC) stood
       staunchly against the proposal that would have changed computer
       functionality to the detriment of all other uses.
   [U.S. – court case] 321 Studios Inc. a small family owned firm in
       Chesterfield, Missouri has written DVD X Copy (copyies DVDs to DVDs) and
       DVD Copy Plus (copies DVDs to CDs) and is now suing Metro-Goldwyn-
       Mayer, Sony Pictures, Columbia Pictures, Tristar Pictures, Time Warner
       Entertainment, Universal Disney, Saul Zaentz Co., and Pixar to challenge the
       constitutionality of DMCA and to decide it is legal to create backup copies of
       DVDs (what 321 Studio‟s products do).
   Fair Use stems originally from the use of a President‟s letters in a biography,
       but also stems more recently from a VCR-related 1984 supreme court
       decision: The U.S. Supreme Court decision in Sony Corp. v. Universal City
       Studios, decided on the side of consumers‟ natural interest in exploiting new
       technologies for “fair use” of copyrighted material – they should be permitted
       use the new VCRs to tape a television show to watch later and on a different
       device. The new VCR technology ultimately gave Hollywood substantially
       greater revenue opportunities and was codified in one conceptualization in
       sections 106 & 107 of the United States Copyright Act with four criteria: 1)
       “the purpose and character of the use, including whether such use is of a
       commercial nature or is for nonprofit educational purposes;” 2) “the nature of
       the copyrighted work;” 3) “the amount and substantiality of the portion used
       in relation to the copyrighted work as a whole;” and 4) “the effect of the use
       upon the potential market for or value of the copyrighted work”. The
       economic effect is generally the facet of greatest interest. Fair use is not
       indisputably defined.
   [U.S. – court case] Electronic Frontier Foundation is seeking to confirm fair
       use rights for people using devices such as Replay TV (suit initiated June
      Policies, policy discussions and interpretations related to this include:
   [U.S. – law] S1623, HR3204/4567 1992 Audio Home Recording Act (AHRA)
       aka Copyright Act of 1976 – for more details see section above.
      Policies, policy discussions and interpretations related to the content
community include:
   Memorandum of Understanding regarding national "plug -and-play" digital TV
       standard for "one-way" cable services (signed by eight of the largest MSOs,
       and 14 major consumer electronics manufacturers) would allow copyright
       holders to limit ability of consumers to copy with codes like: "copy never,"
       "copy once" or "copy freely."
   Fred Upton‟s proposed Bill (Rep. Fred Upton, R-MI) would have granted
       corporate tax breaks for investment in information- security programs.
   Webcasting legislation sponsored by Senators Patrick Leahy, (D-VT) and
       Jesse Helms, (R-NC), centralizes contract negotiation authority with
       SoundExchange (the principal royalty agent for the music industry)

        representing artists and record labels in contracts with smaller webcasters.
        A six-month grace period is provided for royalty payments for noncommercial
        webcasters. A .07 cents per song webcasters royalty was a recent
        requirement imposed by the Library of Congress retroactively to the 1998
        passage of the Digital Millennium Copyright Act.
   Small Webcaster Settlement Act (SWSA) signed December 4, 2002,
        provides a royalty scheme between Voice of Webcasters (VOW –
        representing small webcasters) and Recording Industry Association of
        America‟s SoundExchange ranging between 8 and 12% of revenue or 5 and
        7% of expenses.
   The National Stolen Property Act (NSPA) provides criminal sanctions for any
        who "transports, transmits, or transfers in interstate or foreign commerce any
        goods, wares, merchandise, securities or money, of the value of $5,000 or
        more, knowing the same to have been stolen, converted or taken by fraud...."
        Federal courts have held that under certain circumstances the NSPA is
        applicable to the theft of tangible property containing trade secrets, even
        though the NSPA was not designed or intended to apply to trade secret theft.
   Economic Espionage Act of 1996 (EEA) makes the theft of trade secrets a
        federal crime. The EEA established two criminal offenses under which
        governments can prosecute trade secret theft. The first offense, "economic
        espionage", arises only when the theft benefits a foreign government. This
        carries higher penalties than the second offense, "theft of trade secrets",
        which is broader and generally concerns all trade secret theft. The "theft of
        trade secrets" offense, though broader, includes three requirements not
        necessary for prosecution under the "economic espionage" offense. One is
        that the benefit intended to be conferred must be economic in nature.
   National Strategy to Secure Cyberspace (NSSC) sets three main strategic
        goals: securing shared systems, fostering and reinforcing an economic and
        social framework that will allow security issues to be addressed, and
        developing national contingency plans and policies. NSSC started in the
        Office of Homeland Security, will move soon to the new Department of
        Homeland Security – created by a bill in Congress. Leader of cyberspace
        security strategy is Richard Clarke, chairman of the President's Critical
        Infrastructure Protection Board – PCIPB. The plan offers 17 priorities and 80
        recommendations, but aims to avoid regulation, perhaps aiming to propel the
        private sector to take action to avoid finding more stringent policy objectives
        become regulations. Ironically, the definition of security does not include
        copyright – which is perhaps the greatest security issue on the Internet, i.e.,
        the security of content itself.
   Intertainer suit against Movielink (September 2002) for anti-competitive
       Including for example:
   House Judiciary Courts, Internet & Intellectual Property Subcommittee
   Recording Industry Association of America (RIAA)
   Motion Picture Association of America (MPAA)

       National Music Publishers' Association (NMPA)
       Copy Protection Technical Working Group (CPTWG)
       Home Recording Rights Coalition (HRRC)
       [Consumer electronics law firm/lobbyist] Patton Boggs
       Computer Systems Policy Project
       Copyright Arbitration Royalty Panel
       Campaign for Digital Rights (
       Boycott RIAA (
       Consumer Federation of America, Consumers Union, Center for Digital
        Democracy, Media Access Project (MAP)
    Secure Digital Music Initiative (SDMI)
    Software Publishers Association (SPA)
    Broadcast Protection Discussion Group (BPDG)
      “General Purpose” does not mean any purpose. For example, technical
limitations preclude typical Internet connections and typical computers from
handling high-quality real-time video encoding and transmission.
   Restricting functionality that can only be applied to illicit purposes would be a
reasonable step.
    Silicon Valley dream, Hollywood nightmare / Technology, copyright law clash in
Congress, courts, San Francisco Chronicle, 9/24/2002.
     Music industry revenues have decreased about 20% since the arrival of
Napster and others like it. Whether or not the 20% represents the first of 5
annihilating periods leading to zero revenue or merely represents the totality of
buyers who will transition to illicit copying, before revenues stabilize is uncertain.
The actual case could actually involve a net increase in revenue.
     One approach has been called responsible authoring technology – authoring
tools that insert hard-to-remove identification information about the author so that
illicit reproduction through reauthoring of end products may be identifiable. This
aims to address the „original duplications‟ problem that will plague broadcast flag
or audio flag technology that tags Hollywood-sourced content to try to keep it
from being copied to the dangerously open computer network environment,
unless it is augmented to deal with high-quality re-encoded copies („original
     One reasonable distinction would be defining entertainment as a network with
centralized programmed, but telecom as a network programmed by users
(decentralized programming).
     Corporations‟ myopic focus on profit though prevalent is not ubiquitous, and
may shift as it is realized that maximizing markets maximizes value, and markets
are maximized when policy accords individuals substantial power in appropriate
balance with corporate interest.
     “The VCR is to the American film producer and the American public what the
Boston strangler is to the woman home alone,” said Jack Valenti, President and
CEO of the Motion Picture Association of America in 1982.
          “Content     is    Not     King,”    Andrew     Odlyzko,      Jan.     2001

     Of course, Hollywood may need to avoid undue concentrations of power. It in
fact may need multiple online intermediaries – the kind that RIAA
members sued nearly out of existence.
    Of the hundreds of thousands of books published between 1920 and 1950, less
than 6,000 remain in print (source, American Library Association). Would it not
be in the interest of the advancement of scientific research to permit them to be
published freely – electronically – rather than wither from lack of use due to
copyright protections?
    A big „if‟, since it is unlikely that government policy, short of direct investment,
can stimulate broadband deployments to the point of broadband ubiquity.


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