As per my previous post Is "lost sales to piracy" a fallacy, the problem is really coming down to the content industry not knowing what to do with the new dynamics of distributing content at light speed, to reach all those potential customers around the world.
The industry could reach an even larger number of customers, billions even, if partnering with the right digital media companies, and breaking geographical limitations. Services provided by these digital media companies include Apple iTunes, Amazon MP3 and a new kid in the block, Google Music.
Have you heard of Google? Apparently they reach every corner of the world, and they have a huge content distribution network, with lots of storage, switches, routers and that is needed for content distribution. Economy of scale! Distribution speed! Cheaper copies of bits! Instant money transfer!
And what does the music industry do? They turn greedy and lose their senses.
Labels of all sizes wanted upfront advances. Google was willing to pay upfront advances. But some labels wanted larger upfront advances than others. And then other labels would learn of the advances agreed to in those deals and then demanded similar rates. And the independent labels wanted to be treated on equal terms as the majors.
Obviously if you can create scarcity then you can control prices. But this is a false scarcity of a digital item that could actually be distributed over and over again, without the manufacturing costs required for
LP 8 track compact cassete CD/DVD. Why not go for the volume instead of the limited market?
Another example of how this industry doesn't know what to do to keep up with the times. And a new copyright law is not the answer for their problems.
A couple of weeks ago I had the opportunity to talk to TelstraClear CEO Dr Allan Freeth about the company, services, customer services and regulation. Just a week after our meeting, Scoop's Alastair Thompson recorded an interview with Dr Freeth.
Rather than transcribing my own findings, after listening to this series I decided to post it here.
I should also make it clear that we are currently running some TelstraClear advertising on Geekzone (at the time of my post), and I was one of the few people who had access to the 100 Mbps DOCSIS3 trial.
Here are part 1 and part 2 of this interview...
In this segment:
- Introduction to the NZ$2 billion TelstraClear network in New Zealand. The two main elements to this are the HFC coaxial cable networks in Wellington and Christchurch and a fibre backbone network around the whole country.
- Dr Freeth explains how the network came into being, what its capabilities are, and what services are sold over it.
- The interview then turns to discuss the ultrafast "Warpspeed" 100mbs DOCSIS3 technology that now stands behind the TelstraClear cable network, and which is capable of delivering ultra fast broadband to homes in Wellington and Christchurch today.
- Dr Freeth begins by discussing the NZ internet connections to the outside world - Australia and the United States - and what implications capacity constraints on these networks have on pricing and availability in NZ.
- Dr Freeth concludes by explaining why the constraints on overseas connectivity result in low data caps for New Zealand customers - and how in many respects these are more of an issue to customers in NZ than speed at present.
In this segment:
- Dr Freeth explains how issues of network traffic growth are considered by network operators;
- Discussion then turns to the issue of where most content used by residential customers originates - i.e. overseas - and to the policies and practices of the multinationals whose content forms the bulk of traffic over the NZ residential network.
- Dr Freeth says that issues around the delivery of content are ones which need to be worked through by the industy and that there are technical solutions available if the will is there.
- He also addresses the issue of whether regulation might be required over the Southern Cross Cable connection to the outside world.
- The issue of IPTV content is then discussed and Dr Freeth explains the content use patterns of his teenage children which do not significantly involve IPTV in the traditional sense.
In this segment:
- The fact that demand for broadband speed is far from homogeneous - not everyone wants or can use 100mbs speed - and nor are the likely to want to pay for it.
- The complexities of getting houses connected to fast broadband - i.e. the need to not only upgrade the connection but also all the internal equipment in the house including the computers themselves.
- The security (and network stability) risks associated with fast broadband in homes.
- At 6 minutes into the video the discussion moves on to discuss the telecommunications industry alliance against the Government's broadband plans.
- Dr Freeth begins by explaining how the group came together after the Government tabled its legislation to implement its UFB plans.
- Dr Freeth says the primary catalyst for forming the group was the tabling of a Supplementary Order Paper related to structural separation of Telecom. TelstraClear then became the nucleus of an opposition movement around the Government's plans. Dr Freeth observes that the bill as drafted gives Chorus 2 (post Telecom separation) protection from regulation around competition issues for 10 years, as well as immunity from Commerce Commission action around acquisitions - a provision which appears to encourage Chorus 2 becoming a network monopoly.
- At around 11.00 minutes Dr Freeth moves into the detail of how TelstraClear views the details in the Governments UFB legislation.
In this segment:
- He begins by pointing out that a similar regulatory holiday proposal was ruled illegal in Germany;
- The discussion then turns to provisions in the legislation which will result in making ADSL and VDSL (the most common current form of broadband to homes) more expensive.
- This, Dr Freeth explains, is because the whole structure of the legislation is aimed at discriminating against existing networks to encourage high uptake of customers on the new fibre network - which is needed to make it economic for its builders and investors.
- Pricing indications which were recently made public via leaks are then discussed (see. NZ Herald and Internet NZ).
- The pricing wholesale is indicated at NZ$40 per customer for TelstraClear and other retail providers - in practice this will likely means costs of actual connection of closer to NZ$100 per month.
- Dr Freeth is also skeptical about uptake rate assumptions of 60% in the Crown Fibre Holdings plans. If these fall short then pricing is likely to be higher than expected and customers will possibly have no alternatives. "Gravity always works".
- Dr Freeth says that one of the fundamental flaws in the Government's plans is the assumption that fibre to the home is the only technology that should be employed. And that it should be employed everywhere. He points out that 4g wireless - which is already deployed in places- is capable of supplying speeds comparable to those being discussed under the UFB plan.
- In Dr Freeth's view the most likely driver of lower prices for UFB in the NZ market would be a market with multiple technologies competing - instead we are headed for the opposite.
- In addition to this he asks "where is the demand" and suggests that building infrastructure far ahead of the demand curve is costly for consumers and network providers alike.
- Finally in this part he discusses how this situation most likely came about in the negotiations with Telecom. Telecom had already built fibre to every node and was therefore in a very good negotiating position with the Government. Either they should be included in the build, or they would be in a very good position to compete against it by providing VDSL services over the entire country. This would make the fibre build uneconomic.
- Dr Freeth expresses some considerable sympathy with Telecom about how it has been treated in recent years, and comments that if Dr Paul Reynolds pulls off this deal and "reestablishes Telecom's monopoly with Government money and Government protection", then he will take off his hat off to him. "That's one hell of a deal, and I will be very impressed if he can do it"
In this segment:
- This regulation will fragment and breakup the profit pool and stifle innovation in the NZ Market. TelstraClear and Vodafone and other players will move their capital out of the market.
- Dr Freeth explains that Telstra currently spends $100 million a year in capital investment in its network and that it will be hard to justify continuing to do this in the coming regulatory environment.
- He has told Minister Steven Joyce that the plans as they stand will lead to a third world telecommunications environment in NZ.
- He says there are likely unintended consequences in what the Government is doing. Using a Basil Fawlty analogy he says there is a fine line between renovation and destruction, and in this case the Government is bordering on destruction.
Not discussed here was the topic of customer services in general, but this is something we talked about. Dr Freeth recognised there is work to be done in bringing customer services to a higher standard, and that some of his people are currently involved in this.
Juha's blog post What "lost sales to piracy"? is right on the spot... How can content distributors claim "lost sales to piracy" if their content is not available in a select market?
I am just highlighting that post because this morning I saw a link to "20 Web Services Not Available in Estonia". Here is the list copied from that blog (in case they disappear in the future). Note any similarity with New Zealand's own?
- iTunes (present in New Zealand iTunes including music and limited number of movie titles, no TV series)
- Android Market (present in New Zealand)
- Windows Phone 7 (present in New Zealand)
- Sony Playstation Store (present in New Zealand)
- Xbox Live Arcade (present in New Zealand)
- Nintendo Wii Store (present in New Zealand)
- Amazon App Store
- Amazon Movies (I've added this to the list)
- Amazon MP3 Store
- Samsung Bada Apps
- Pandora Radio
- BBC iPlayer
- ABC Player
- NBC Video
Here is a list of some other content services available in New Zealand (in addition to the ones marked in the list above):
TVNZ On Demand (TV shows, free)
Zune Marketplace (movies only, not the music catalogue or Zune Pass service)
It seems we do have access to some content, including music (via iTunes, Digirama), movies (iTunes, Zune Marketplace) and a limited selection of TV series (TVNZ On Demand). From what I've seen though people want more, and mainly in the movies and TV series front.
Instead of our MPs pushing flawed laws that punish consumers that otherwise have limited access to a artificially scarce content, shouldn't they be asking large corporations and lobby groups to work on a solution to their distribution problems before crying foul?
And to our MPs, who wrongly stated in Parliament that "file sharing is illegal", I introduce Vodo to them. Vodo is just one example of a legal content distribution service offering content via bittorrent. Movies on Vodo are made available free to the public by their creators, with appropriate licensing that allows legal free distribution.
There are quite a few web sites distributing content created by independent artists. It doesn't mean "free". It means "independent of large studios holding their contracts". In other words, these artists still make their money when they sell, and they found out that there's a way to reach content consumers everywhere in the world, not only in select geographical markets. Obviously the large corporations can't get the idea that there's a huge market outside their backyard.
I remember there are quite a few independent content distribution sites. Please leave in the comments links to other sites, but only those sites that legally offer content for download.
In a few weeks I will be at the HP Discover 2011 in Las Vegas (6th - 10th June), which the company claims is "the largest HP conference in history". Looking forward to spending a few hours selecting which of the 800 sessions I will be attending.
If anyone here is planning to be at this event, please contact me (here or on Twitter).
Thanks to Ivy Worldwide for the logistics, and as full disclosure requires, HP is sponsoring my trip.
The timing is very interesting... Just about the same time the New Zealand Parliament was discussing the New Zealand Copyright (Infringing File Sharing) Amendment Bill, Google decided to "educate" its users with a You Tube Copyright School video and quiz:
This video is shown to YouTube users who are caught repeatedly uploading copyrighted material. Note this is obviously under U.S. copyright law, but it's quite similar to our own.
Someone not involved in technology looked at some of the comments in various discussions around the approval of New Zealand's Copyright (Infringing File Sharing) Amendment Bill and told me "of course these people are complaining. They all benefit from infringing copyright".
And that person seems to be correct.
It is important to note that we should be working together to protect intellectual rights. People who produce work of art need must be rewarded by their creativity.
Is there disagreement on how large corporations do this? Yes. But that's not what should be debated here.
The law sets a precedent in which a copyright owner can provide a notice of infringement and by default that will be accepted as correct, truthfull and evidence of wrong doing.
This is the opposite of what we accept as due process where there's an accusation, evidence is supplied and a guilty verdict is imposed.
The law assume the accused is guilty.
This is against the due process as we know it.
I don't really have any interest to know that the program you like most on TV is not available from TV One, therefore it's your $deity given right to download it from the Internet, regardless of source, respect for the author's claims for compensation and so on.
This is the wrong approach and people will get nowhere with it. Time to get smart people. Time to show new directions to the industry. Time to join these organisations and led them in the right direction.
The technology is disruptive and they don't know how to use it, yet. Actually they know, they just haven't extended it outside some artificially small niche markets.
This is a video demo of Internet Explorer 9 rendering a HTML5 page during the MIX 2011. And winning...
Clare Curran MP comments on passing the New Zealand Copyright (Infringing File Sharing) Amendment Bill
Today Clare Curran MP for the Labour Party wrote in the party's blog Red Alert "No New Zealander can be disconnected from the internet".
Interesting read, but I will reproduce something here for documentation only, just in case one day we can't find that specific page anymore:
There's been an intense reaction to the Bill in social media. I acknowledge, understand and am sympathetic to many of the criticisms and concerns raised by people who are deeply discomforted by having a termination provision in the law even if it is on ice.
The government's bottom line was to have termination in the Bill. Ours was to not support it. The compromise position was to leave it in but require the Minister to put what's called an Order In Council into effect to switch it on. This is very unlikely to happen.
The onus is now on the creative industries to prove there is a case to terminate access and that the notice system is not working. Rather than oppose it outright, we preferred to compromise to ensure New Zealanders are not denied access to the internet.
Account suspension remains in the bill and could theoretically be used in the future, but any Minister who implements termination will have to wear the consequences. It won't be a Labour Minister.
Even more interesting is that at last a politician spells it out clearly and have seen the light:
Evidence before the select committee strongly indicated that sales of music and movies on the internet were going up, not down, and that the industry remains viable and strong, if needing to change the way it distributes material.
Also interesting to see this paragraph:
The fundamental issue here is why so many people illegal downloading and sharing material. This law will hopefulyl have the impact of educating more people who are illegally filesharing and don't understand it is illegal. I would hope that New Zealanders do not condone illegal filesharing.
Why are so many people illegally downloading and sharing copyrighted material? Because the industry is lost and can't come up with new, legal ways of distributing content fast enough. I'm sure if New Zealanders had access to content without the virtual barriers imposed by copyright merchants more would be willing to buy than to copy.
How come users in other countries have access to a larger number of titles through online stores such as Amazon, Apple iTunes, Microsoft Zune and others? Why is that users in other countries have the option to stream content directly to their PCs and multimedia centers through services such as Netflix and Hulu? The answer is commercial interests that create a virtual regional lock on content that want to be free to flow from creators to consumers. Free as in freedom, not free as in gratis.
Those are the same commercial interests that will benefit directly of a law passed by our Parliament, that seemed to have worked against us instead of working with us, by rushing the reading of a copyright bill during a session discussing earthquake-related topics. in the middle of the night.
It looks like Gareth Hughes MP scored some points tonight...
This is what Melissa Lee, National List MP sent out on her Twitter account, just a day before her comments during the parliamentary session discussing the Copyright (Infringing File Sharing) Amendment Bill:
"Ok. Shower... Reading ... And then bed! listening to a compilation a friend did for me of K Pop. Fab. Thanks Jay."
This just show that the concept of copyright is not well understood around. This is important, because the bill assumes an infringement notice is correct, and the accused is guilty by default. And if not even the MPs can clearly understand what is infringement and avoid it, how could we trust organisations with money interests to act in a truthful way after such a bill passes?
(1) In proceedings before the Tribunal, in relation to an infringement notice, it is presumed:
(a) that each incidence of file sharing identified in the notice constituted an infringement of the right owner's copyright in the work identified;
(b) that the information recorded in the infringement notice is correct;
(c) that the infringement notice was issued in accordance with this Act.
(2) An account holder may submit evidence that, or give reasons why, any 1 or more of the presumptions in subsection (1) do not apply with respect to any particular infringement identified in an infringement notice.
(3) If an account holder submits evidence or gives reasons as referred to in subsection (2), the rights owner must satisfy the Tribunal that, in relation to the relevant infringement or notice, the particular presumption or presumptions are correct.
UPDATE: in a later tweet we read "lol. Does it count if the friend is the composer?"
Good question. It would also be interesting to know if those files were transferred over the Internet, or were moved from one storage device to another directly. Did said friend provide evidence of transferring ownership rights?
UPDATE: As noted by some readers, even if the composer is a friend, there are copyright in place for other pieces of the work such as performer, publisher, etc.
UPDATE: Melissa Lee told the New Zealand Herald all songs on the compilation had been legally downloaded and paid for. But the copyright law allows format shift only for members of the same household. Does her friend live with her? If not, did her friend received permission to distribute copies of this content?