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A press conference yesterday orchestrated by a "public interest" group brought together three congressman and some tech representatives to announce creation of the Personal Technology Freedom Coalition, a new organization to support H.R. 107. For some press reports, see InfoWorld and The Register.
The session was an orgy of folksy self-righteousness. All these backers want to do is protect "Fair Use" -- the consumer's right to make a back-up copy, or to put his favorite tune on his iPod or share it with his family. Heaven forfend that they condone piracy! When asked about the limits of the fair use principle, the answer was that these limits are for the courts to determine, in case-by-case litigation directed at each user. (By this reasoning, they must all support the music industry's law suits against P2P file uploaders, but no one asked them about this.)
No one noted that the practical impact of the bill would be to legalize mass distribution of DRM cracking tools and render both content and telecom companies impotent to prevent not just unlimited replication of of content but even outright theft of service. (Don't believe me? Check the position of the Electronic Frontier Foundation on possession of devices for theft of satellite service.)
As usual at these affairs, only the press was allowed to ask questions. So here is one that I did not get to ask: WHY ARE ALL OF YOU SO OPPOSED TO THE REAL INTERESTS OF CONSUMERS?
In reality, as opposed to the imaginary world of the Rayburn Building, consumers are better off if the functionalities available can be divided into different packages and sold at different price points.
To take the back-up copy example: Imagine three customers. A wants a CD for his home stereo. B wants an extra copy to play in his car as well. C wants both of those uses, plus another copy on his iPod. A logical structure that would benefit all would be three different prices, say, $12 for A, $14 for B, and $16 for C.
Under the theory of H.R. 107, this structure is not possible. All three customers must receive the same package of rights, and all must be charged the same price. This means the price will wind up somewhere in the middle, probably around $14. A is not allowed to say: "Hey, I only want one use; how about giving me a price break?" C is happy, of course, since he gets subsidized by A, which may show that the constituents for this bill are rich yuppies who can afford $500 iPods and like being subsidized by those who are less well off.
Of course, as a result, some As will be priced out of the market, so the cost of the CD will rise further, which will price some Bs out, and so on. Price will reach an equilibrium, but at the cost of significant loss of consumer benefit.
The logical end point of the arguments made yesterday is that the video rental business should be eliminated. A consumer should not have the right to buy a limited-duration use of a video -- he should be forced to buy it outright. And what about Netflix? Surely it is intolerable that I not be able to make copies of its DVDs to share with my aged mother, who can't afford the $20 per month. The fact that this would put Netflix out of business and thus force everyone to buy (or pirate) every CD is simply not within the ken of the people at the session yesterday.
One of the glories of the real property system is its capacity to slice and dice rights into infinite variations. Fees simple, life estates, leaseholds, easements, mineral rights, water rights, and on and on. There is a good reason for this; it permits people to fill their precise needs at a price that reflects the value of the rights they want, and no more. It is a glorious engine of economic progress and consumer satisfaction.
Admittedly, the content people have a problem in that their current stance is that the consumer who wants a back-up CD or DVD should buy a second copy. Consumers resist this, and rightly -- the value of the back-up functionality is not as great as the price of the initial CD.
But the real stakes here concern the future, and, with DRM, the content providers will be able to develop Internet delivery systems that slice and dice creative products in the same fashion as rights to physical property.
Current concepts of fair use are the product of a complicated interaction of technological possibility, institutional structure, and transaction costs. As these factors change, so should concepts of fair use. So yesterday's session was like being transported back in time 1,000 years and listening to a bunch of Medieval peasants grumbling that land tenure in fee simple was good enough for Sven the Hairy, and the king ought get rid of these weird merchants with their ideas about leaseholds and other new-fangled packages.
posted by James DeLong @ 10:54 AM | General
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