The fix is in -- Congress thinks it's getting money to cover the 2007 deficit, Hollywood gets the right to choose who to sue and we all lose. What makes this so troubling is that this is all being done in the open in the highest tradition of public service.
To understand what is happening we need to step back and think about the concept of television. You read about Policy vs Reality for a general overview.
The term "Hollywood" has come to signify a particular business model. It's easy to forget that this is just one model and is an accident of history.
Television is at the center of our lives whether or not we're glued to the tube. It is the entertainment industry. Congress played a vital role in setting the rules for television (via the FCC). The 1940's were a prelude and by 1950 it was poised to become a fixture in our homes and our lives.
Classic Hollywood viewed television as a competitive threat because it had the potential to displace the movie theaters as the primary distribution channel. Over time, movie theaters and television were joined by tapes and discs as simply additional distribution channels in the merged entertainment industry of the 1990's.
The Internet isn't just another distribution channel because it's symmetric. There is no special role for the "broadcaster". There is no fundamental distinction between your home movies and the World Series. The differences are more in degree than kind. The web provides an outlet for creative experiments as well as traditional video content. The barrier to entry is now a slope. The whole concept of TV programming (in the sense of placing a program on a grid of times and channels) goes away since there is no constriction point that requires allotting scarce slots.
It's no surprise that once again we have vested interest pitted against each other. The difference this time is that the most important interest has no representation because it is not an organized industry -- it's the disparate collection of people who can build upon the basic connectivity offered by the industry.
The Internet eliminates the asymmetry that defined Hollywood. While current entertainment companies represent a coherent political force, those who are taking advantage of the new opportunity are just a disparate group. In speaking to one Congressman about the RIAA he wanted to know what to vote for. He didn't accept the idea that we could just let the marketplace do its job and give new industries an opportunity. It's hard for a politician to ignore all those with well articulated agendas in favor of those who just want to be left alone.
In the absence of an actionable alternative Congress continues to focus on its old agenda of stewarding (defining and managing) the television broadcast industry and protecting the "rights" (AKA interests) of the current content providers. Even better, it clings to the notion that spectrum is a valuable resource and by auctioning it off it can help cover the massive deficits. It's nonsense but makes perfect sense according to the conventional wisdom that frames the world in terms of the 1990's or even the 1950's. Whether or not it's true is secondary to be ability to it's contribute to budget projects -- this Congress doesn't have to worry about the reality of 2007.
Congress now requires that in 2007 televisions must have digital tuners (Digital Signals Rule for New TVs Upheld). This is supposed to free up the spectrum used by the current analog televisions so that Congress can auction off the vacated spectrum for umpteen billion dollars. In return for its support, Hollywood gets the "Broadcast Flag". To Congress it seems like a wonderful deal because they get help with their budget while protecting a major industry and, even better, an industry whose support is vital.
And there's nary a complaint because this all makes perfect sense to most people. And that's the real tragedy.
It's the price we pay for ignorance:
- The idea of auctioning off the spectrum no longer makes sense. Even if we continue to cling to the notion that spectrum is property, its value has declined because the communications transports are no longer special and we are finding new ways to share the spectrum. The windfall profit from such a sale won't be there. We've seen this in the past -- CB radio was granted extra channels just as cellular phone made their debut and CB radio was no longer interesting or very popular. In Europe the "winners" of the auctions seem reluctant to actually use it.
- Cable TV started out modestly as a way to share an antenna on a hill for communities with poor reception. It has grown because it wasn't hampered by the restrictions associated with broadcast and today over-the-air is definitely second-class. The cable is now moving from being a broadcast medium to a far more flexible narrowcasting medium. Once this is available for Internet connectivity it is moving ahead of Congress' own "broadband" agenda requires that we have sufficient connectivity everywhere though it vague about the details. The broadband connection itself provides a wider selection than the broadcast model. One-way over-the-air broadcast is more than just a waste of time and effort. It perpetuates a disconnected underclass which can only watch TV but not participate. It undermines the goals of universal and emphasizes the degree to which Congress seems to be unable to understand that bits are bits and TV bits are not special. The importance of this concept goes far beyond telecommunications -- social constructs like good and evil are built on top of indifferent bits.
- The broadcast bit is a danger to democracy! "Hollywood" has given up on the idea that it can protect content with technology so have settled for a flag that says "do not copy". The legal actions taken against those who had the temerity to decode their own DVDs and RIAA lawsuits against those who share music bits even if they own the CD (as in the case of mp3.com). In order to enforce the broadcast it is necessary to make sure that any device that processes the signal honor the bit. Since all of the processing is done in software that anyone can write on a generic PC we have a law that criminalizes normal activities and requires that any new technology be approved before it is deployed! If that weren't bad enough, all this effort will do little to prevent copying of video content such as using snippets in home movies. Having a law that is routinely flaunted and leaving enforcement to the discretion of a special-interest industry group undermines the legal system. Normal activities are criminalized and selective enforcement is an irresistible opportunity for corruptions.
- The concept of a television as well-defined box with a monitor and a tuner is a relic of the past. Today's displays (especially the newer LCD displays) are just viewing surfaces. The major market (in the US) has been for computers because of the willingness to pay for the extra quality but they are also very good television monitors thanks to signal processing technology. It's just a matter of which video source. Today that source is likely to be a computer or a set top box. A conventional tuner for over-the-air broadcasts is an option but usually not necessary. Rather than tuning the TV to channel 3 (or 4), the video signal comes directly from the set top box or the DVD player or the computer.
- The term "television" is also used for the industry of selecting and broadcasting content (TV shows). The confusion between the device and the industry reflects the implicit assumption that the TV set exists to serve the industry and the industry is focused on delivering content to the device. It makes it easy to accept behavior that would otherwise be outrageous? Why do people accept the idea of a cable company choosing what we may view instead of letting us decide? That might have been necessary when the broadcast model was the only choice but that is no longer the case. By necessity the video distribution business is shifting to using the same generic IP transport as everyone else but it is an attempt to retain the privileges it enjoyed as a monolithic industry. With the Internet:
- There are no impediments to immediate adoption of new formats including not just HDTV but far higher quality. A computer monitor typically has 1024 lines of progressive (that means, no fuzzy interlacing) display and increasingly 1240 lines. HDTV is significantly lower resolution! There is no excuse for a long transition as all the intermediate gear is replaced but it is consistent with the model that has defined the industry for more than half a century. A video stream is just a data format and you don't need to replace a studio just to add a new format!
- The concept of DTV or Digital TV is meaningless when everything is becoming digital. More important, DTV is a one-way system where as the Internet is fully bi-directional.
- The Internet is symmetric. With IP distribution there is no longer a special status for broadcasters. If the goal of Universal Service in telephony is inclusion then symmetry must be a goal here too.
- Symmetric means that there is no technical reason for a broadcast industry. Telephony and video distribution differ only in the number of bits per second and we are moving toward IP connectivity that gives everyone more than ample capacity to treat video streams just like auto streams and VoIP can mean Video over IP as well as Voice over IP.
- The idea of protecting an industry is at odds with Capitalism. The current "Hollywood" was created in the early 1900's and is still defined by the asymmetry of expensive production amortized over a large marketplace. From the beginning with Edison it has been characterized by maintaining strong control over all aspects of the system. The costs of production and distribution made this feasible even when the courts set limits. The advent of television was a challenge to the distribution system but it had the same asymmetry and they constitute the "Entertainment" industry. Unlike Television, computing and the Internet change the fundamental rules by removing the specialness afforded by high costs of production and distribution. There is a new Hollywood emerging. This new Hollywood doesn't even depend on TV though it has had an impact. Unlike the traditional expensive pilots for new series, South Park was created as a video Christmas card shared among friends. It was only by accident that it became a TV show. Unlike traditional "Hollywood" this new industry flourishes in an environment that is toxic to the old Hollywood. It's not even a coherent industry -- just a process of discovery and explanation and it certainly has no unified voice in Congress. It's invisible and doesn't even seem to exist!
- Congress is continuing its seemingly essential role of setting standards for the broadcast industry. This may have made sense in the 1950's as a way to help a nascent industry overcome technical problems but now amounts to nothing more than stifling control over innovation. But this is exactly what the broadcast industry is desperate for because it protects their privileged position and allows them to perpetuate the lie that you need to replace all the old equipment each time you make even a minor change in the format of the content. They even managed to perpetuate the concept of "interlace" -- a kludge from the 1930's that blurred the images out so they looked better on the early television tubes while assuring that freeze-framing looks lousy.
Congress is doing what it does best -- making deals that look fine from a distance. Even better, they are either ignorant or cynical and thus can rest comfortably knowing that they have accomplished something and it might even help them get reelected. Certainly they won't be taken to task for giving people better television.
TiVo has become the symbol of the transition. For many who yearn for better TV TiVo seems to be the future in which we have a "real" choice and are in control. The new Video on Demand services like those from Comcast are similar except that the cable operator defines the selection.
But TiVo only lets you choose among the programs that happen to have been available recently. Compared with the selection on DVDs TiVo is extremely limited. The Video on Demand was a wonderful concept back in 1995 before the Web but a side-by-side comparison makes this VoD seem like a vintage product. The actual selection is very limited. CNN is available but none of their current news (though they do provide current video on their web site). Each content provider needs to negotiate with each cable operator.
What the VoD services really demonstrate is that the broadcast model is dead and the Cable operators can indeed provide a high speed connection to each individual subscriber. It is an admission that there is no excuse for maintaining the control inherent in being the arbiter of the choice of what to broadcast!
The shift from broadcast to connectivity presents the cable operators with the same dilemma that the telephone operators have -- how to restructure their business after once the transport facilities become common municipal services. Companies like Comcast that own both content producers and distributions will have to disaggregate themselves.
The walls around the entertainment industry gave it strong control over the content. The bits representing the content are protected at the edges by the set top box which servers to guard the secrets. It's essential function is decrypting video streams. Since the video streams are just bit streams it's still possible to do end-to-end encryption using the same set top box mechanisms. The problem is not technical. The problem is that once the artifact of the cable system is gone the problems of the set top box become too obvious.
People seem to accept the inability to coordinate the set top box with other devices like their video recorder. One appeal of TiVo is that it does the integration. But it does this by selling its soul to the broadcasters and joining them within their walls in a deal that leaves the consumer as the outsider. Once the consumers can compare the video offerings with other content on the Internet such backroom deals are far more difficult to hide.
The framers of the US Constitution recognized the value of giving people the incentive to innovate by granting them limited control over their worksjoin. Current patent and copyright laws define means to achieve this. Congress seems to have lost sight of the goal and is unable to rethink the means of achieving that goal despite the conflict between the old rules and the current technology.
I don't claim to know what business models will be viable given the impact of the new technologies but given the demand for entertainment and the many people who want to entertain us we have the boundary conditions that can define a new marketplace. The problem is that the new market will not look at all like the old one. Perhaps the movie industry will look more like industry in which a small team can author a work at a low cost. Lower costs are more easily recovered from a small audience. This can create a wide variety of choices with perhaps a handful of best sellers. It may also mean that most authors need a day job to sustain themselves. This is the reality of current entertainment industry with a few winning big while the rest go begging. The hordes of support people require by the current expensive productions will find new opportunities including the freedom to be creators themselves.
I don't promise that it will work out exactly that way. The book publishing industry itself is struggling with the challenges of electronic distribution and still finds refuge in paper publishing as a way to get a payment for each copy.
Congress is an institution that doesn't deal well with change; especially when it must get ahead of a constituency that views the present as the only possible future.
Hollywood's job is to tell stories with feigned sincerity and marketing finesse. Here too we have an industry defined by the constraints of the past and self-selecting for those who believe in its reality. It's a life-or-death struggle for an industry that faces not just competition but a challenge to its very legitimacy.
Many technologists outside of Hollywood itself buy into this story with companies like Intel and Microsoft seeing DRM (Digital Rights Management) as a vital issue. Even though the content business is relatively small compared to the computer and consumer electronics industry there seems to be a belief that it is necessary to support the old industries. That's not very surprising considering that it's a simple story -- if the computer is supposed to displace the TV then it should act like a TV. But that makes as much sense as putting a knob on a computer so you can turn the platen as if it were a typewriter. Some early word processors did just that.
Even those who see the danger in Congress' effort to preserve the past find themselves befuddled by skirmishes over mind-deadening arcania of regulatory policy. It's as if we were trying to market evolution on a case by case basis while trying to avoid offending anyone by including our own species or even admitting that we were just another species.
When a marketplace is working well benign neglect is indeed a reasonable policy. That's not the same as hands-off. Rules governing collusion (including anti-trust) and fraud are important. Telecommunications (including television broadcasting), however, is not a real marketplace and is governed by a set of rules that presume that there is an inherent interdependence between the contents and services and the transport facilities. Since anti-trust rules could not apply, regulation was necessary.
We now understand that this interdependence is not necessary or even desirable.
With the Internet and narrowcasting the scarcity that defined television is being replaced by an abundance that can give each of us a voice and access to the world. Television policy reflects this -- it's all about how to share a scarce resource.
Such policies now assure scarcity. Policies that regulate communication now are unjustified impositions on free speech and thus are in direct conflict with the US Constitution. By diverting resources into extending the broadcast regimen Congress is denying people the ability to participate in society. Even something as simple as applying for government services are moving online because it is so much more effective. Paper forms are becoming a concession.
For Congress and its constituents a first step is to understand the concept of connectivity. In pragmatic terms this means that audio and video content are just streams of bits that can be carried over the standard packet network. The telephone companies and broadcasters are already doing this internally. The problem is that they are maintaining an artificial barrier between their internal use of the Internet and what the customer's use. This partitioning is economically dysfunctional but maintains the illusion that there is something special about the "official" services.
The marketplace is already creating a bypass via Internet and competition is working to increase availability and capacity. We are at the point that carrying voice over IP is a real alternative to traditional telephony. The deployment of narrowcasting as in the new video on demand demonstrates that the same will soon be true for video. There is no longer a technical problem.
The big problem is misunderstanding symbolized by TiVo-envy. People are so excited by the incremental improvements that they get from the broadcasters that they resent those who try to explain how much more than can get if they have a choice of doing it themselves. TiVo is especially interesting because it started out as an application outside the walls. Unlike its competitor, Replay, it chose to ally with the broadcasters as a delivery vehicle and eschewed threatening options such as sharing home videos since there is no simple way to distinguish between "Hollywood" bits and personal bits.
The broadcast flag doesn't solve this but puts the onus on the user to never accidentally mingle the bits. Well, almost never since small snippets are illegal but acceptable. What if I set the bit on my own home movies? Hmm � maybe I too can have a weapon to use against friends and neighbors.
Ultimately we have to face up to the implications of two policies that are directly at odds. Once connectivity (AKA broadband) is available the transport becomes a public utility. Ownership of a private transport confers no advantage and is just an expense.
Congress is simply in denial in pretending that 2007 will be like 1995 when Interactive TV seemed the future and the Web was still a novelty. Congress is acting like it is the 1950's when it seemed necessary for it to play a role in defining the technical standards for the nascent television industry.
2007 won't be like either and policies predicated on the presumption create uncertainty. Investments that presume the continued specialness of the broadcast industry would be foolish since it's only a matter of when it disappears. Investments in future opportunities are too risky since rational planning can't account for the perverse effects of meddling.
We already have the technology to give us abundant connectivity and opportunity. Instead of worrying about how to preserve past privilege we should focus our efforts on removing impediments to realizing the opportunities. Ideally Congress will work with us towards this end. Otherwise they can annoy and delay but they can't prevail against a concept as simple as connectivity.
