IPcentral Weblog: November 2004 Archives

November 2004 Archives

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11.30.2004

Blogging & Scholarship

Marginal Revolution has a post on "The scholarly content of blogging", triggered by the news that Chicago School law and econ heavyweights Richard Posner and Gary Becker are about to start a blog.

For an extended discussion of scholarly dimensions of blogging, see Crooked Timber.

posted by James DeLong @ 2:16 PM | General

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More on Skype & Kazaa

Red Herring has an article on the Skype-Kazaa deal. It notes:

[T]he two companies are far from strangers. Skype's current CEO Niklas Zennstrom co-created Kazaa before licensing the technology to Sharman Networks in Australia after a flood of lawsuits by the recording and movie industries.

Skype is headquartered in Luxembourg, and is funded by Tim Draper, Draper Fisher Jurvetson ePlanet, Index Ventures, Bessemer Venture Partners and Mangrove Capital Partners. Sharman Networks is based in Vanuatu, and reveals nothing about its backing. Rumors about predatory multi-billionaires abound.

posted by James DeLong @ 8:17 AM | General

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11.29.2004

Robbers' Reward

I wasn't alone in my cynicism regarding Sharman's decision to add Skype to its latest Kazaa offering. Sharman is on trial in Australia, accused just as Grokster is in the U.S. case of enabling copyright infringement. According to CNet, an attorney for the recording industry said adding free VoIP to Kazaa was a "robber's reward."

Somewhat disconcerting was what appeared at the bottom of the story, a sponsored link titled "Download Kazaa Now." When you type "Kazaa" into the CNet search engine on its home page, three sponsored links appear at the very top, all for downloading Kazaa software. One says "Legally & Safely Download 1000's of Songs & Movies Don't Get Sued." That's quite a promise, not only because no such legal guarantee exists, but because Computer Associates just labeled Kazaa the Internet's top spyware threat. Not very safe.

All of the reader comments on the CNet story defended Kazaa and its users, and faulted the recording industry. The posts, unfortunately, reflected the usual lack of logic found in the free content universe, with the first arguing that the recording industry has "desire for TOTAL world domination." I likely watched too many James Bond movies this Thanksgiving weekend on Spike TV, but I thought that was the mission of the dreaded SPECTRE.

posted by Patrick Ross @ 6:43 PM | General

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Research Costs

At National Review Online, Deroy Murdoch has some real numbers on the costs of producing pharmaceuticals.

And if you think that government-directed research can fill any gaps, check out the cautionary tale of British post-war science on Declan McCullagh's Politech.

posted by James DeLong @ 9:03 AM | General

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History

Amazon just delivered John Steele Gordon's An Empire of Wealth: The Epic History of American Economic Power (2004), and abebooks.com sent a used copy of his The Business of America: Tales from the Marketplace (2001).

Empire begins with a wonderful quotation from Robert E. Lee:

The march of Providence is so slow and our desires so impatient; the work of progress is so immense and our means of aiding it so feeble; the life of humanity is so long, that of an individual so brief, that we often see only the ebb of the advancing ways, and are thus discouraged. It is history that teaches us to hope.

(Letter to Charles Marshall, ca. 1866) (But quare: should "ways" be "waves"? Google produces no help on the question.)

posted by James DeLong @ 8:36 AM | General

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UK Music Sales Doing Well

Thanks to Instapundit.com for this item on UK music sales, which are apparently doing well. I remain skeptical that anything will be this easy.

posted by Solveig Singleton @ 8:14 AM | Internet: P2P, Search Engines...

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11.26.2004

A la carte TV Channels

The FCC recently reported to Congress about the latest faddish telecom idea: compulsory a la carte pricing for cable and satellite channels. The FCC is unenthused, noting that one result would be a probable rise in the bill of the average TV-watching household of between 14% and 30%.

PFF's Randy May commented on the report, and on recent innovations in the private sector that will soon render the whole argument meaningless anyway.

posted by James DeLong @ 1:01 PM | General

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The "Open Source Community"

More on Sun's views on the meaning of open source, from a write-up of an interview with Jonathan Schartz in Open Source News.

The obvious question, then, was why Sun doesn't "Free up" their version of Java, and the answer is that Java is already "open," but not under a more liberal license because Sun doesn't want to open up the potential for a fork. The same fear is not present in the OpenSolaris situation because Solaris is more closely defined and controlled by Sun, while Java can be shaped by external forces easier, and so Sun doesn't want to take that risk. With over 2 billion devices worldwide running Java Sun is 100% committed to ensuring that anything 'stamped' Java is compatible. Folks really depend on that assurance.

Schwarz also reinforces the idea that being a good member of the "open source community," as that would be defined by the more ideological elements of that community, and being a profitable enterprise are not compatible goals:

He believes that Red Hat locks Enterprise customers in, just like Microsoft does, by steadily moving away from the LSB, by patching and forking code (including using a very non-standard Linux kernel) and so applications get certified or only work in the Red Hat codebase and no other Linux distro. Such an example is Oracle, where they do not support any Linux distro other than Red Hat-based ones.

Meanwhile, Newsforge has a piece on Windows developers share open source philosophy that asks:

Does the open source community embrace any group that chooses to develop and distribute code freely? If so, then the folks at OpenNETCF.org must be part of that open source community, even though they are all loyal Windows users.
OpenNETCF.org members develop extensions for the .Net compact framework and share the source code with anyone who wants it and is willing to agree to the license terms. The code license is the same "shared source" license that got Microsoft some play on Slashdot earlier this year. The developers at OpenNETCF.org say they are working in the spirit of the open source movement.

posted by James DeLong @ 10:58 AM | General

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11.24.2004

Bytes & Bullets

Larry Lessig has an oped in today's Washington Post entitled "Bytes and Bullets." Its import is that the proposed Induce Act is an effort to ban P2P technology, and that, were it to succeed, there would be no logical argument against banning guns. His reasoning is that P2P can be used for both infringing and non-infringing purposes, and guns can be used for both legal and illegal uses. So, if P2P is banned, ditto for guns.

The premise is faulty, though. No one -- repeat, NO ONE -- is arguing that P2P as a technology should be banned. The effort underway is to ban the infringement-dependent businesses that make use of this technology while avoiding action that would cripple new technologies. Granted, it is extremely difficult to craft language that draws the appropriate line between the technology itself and the uses made of it, which is why the interested parties have not yet reached agreement on language for the bill and it is dead for this year. But people can and must keep trying.

Lessig's argument boils down to the proposition that because guns have legitimate uses, we cannot outlaw armed robbery.

posted by James DeLong @ 9:32 AM | General

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Further Jonathan Zittrain Dialectic

Jonathan Zittrain has responded to my response, thus:

Me: Substituting tax for copyright gets rid of the main mechanism, market prices, by which consumers communicate their needs to producers. No good substitute for this mechanism has been found. (If surveys and sampling work so well, why don't we run the entire economy that way?).
JZ: Well, the Neilsen ratings have been used for TV for decades. They might be laughably inaccurate, but they really do determine the hundreds of millions of dollars -- far larger than the entire music industry! -- that change hands thanks to ad buys on free TV. Is selling ads on free TV any less a market mechanism because the rates are agreed upon between broadcaster and advertiser nearly mechanically on the basis of those surveys?

Also - the "market" for CDs is itself distorted by the act that it's government entitlement to begin with that determines the scope and nature of what a producer is able to unilaterally hold back and therefore charge monopoly rents for. Even monopolists operate according to market forces, of course, but with the industry as concentrated as it is, and the relationships among current rights holders (performance licensing organizations, record companies, radio stations, etc.) as tangled as they are, the status quo is one in which there is a substantial amount of
friction in the market. (Indeed, nearly everyone seems to wish for a reconfiguration of the entitlements to allow for new business models.)

Surveys are a second best substitute for the price determined by a willing buyer and willing seller -- but of course a market itself is only a second best to rank abundance! Hence no market in the air that we breathe. The intangible goods in question here are abundant, and it's only the instrumental desire (a legitimate one, to be sure) to maximize their production through the right incentives, that points towards the creation of a market. But my point is that any market here is one whose very existence and boundaries will be (and are) determined by government policy intervention. (This is not so the way a "normal" market in, say, corn, might develop, even with laws prohibiting the stealing of corn. And putting corn subsidies aside. :) )

Me: Switching the complexity to the tax system and a bureau to dole out the
proceeds to make it less visible to consumers is not a good thing. Those best
able to navigate bureaucracies will continue to benefit disproportionately, and
hardly anyone will care. But we will all pay.
JZ: Yes, there are serious public choice problems to the extent the allocatory bureaucracy has any discretion in what it does. (Also perhaps a hydraulic pressure among the benefiting special interests to keep increasing the size of the pie to be distributed by pushing the surcharges/taxes higher and higher.)

Me: With the copyright system, true, the government sets the ground rules
(as usual with statutes) and the courts step in as arbiters in the case of
disputes. But the government is not present in the vast majority of exchanges
involving copyright, which are not disputed. But with a tax system, government
is present as a middleman in every single exchange. On balance, concerns about
free speech tip me in favor of copyright. (If one is wavering on this point, consider how a tax scheme would go over with the publishers of books!).

JZ: Every single exchange involving the use and publishing of music to the
public has a staggering array of rights holders at the trough. It is an odd form of freedom when one has to clear rights to, say, broadcast an interview with someone conducted at a public place when music happened to be playing in the background. The current system, ostensibly free of direct government restriction or participation, is one where those wishing to use the new tools of technology to "rip, mix, and
burn" their own speech are essentially stymied -- unless they want to risk
the government being called in to punish them.

Me: By doing away with market prices, it makes consumers less sensitive to
prices, which in turn reduces the incentive of producers to innovate to lower
their costs.

JZ: I think producers always have an incentive to lower costs, unless it's a Pentagon contractor-like cost-plus incentive scheme! No matter how much someone is making through monopoly pricing, cheaper inputs are always better. Hence the poor quality of food at the stadium to go along with the high prices, no? Consumer sensitivity
would be displaced from individual transactions -- this is a feature, since now they can enjoy all the music they can stand to listen to! -- to overall size of market, perhaps through objection to an increase in the overall tax.

Me: It would end competition and innovation in business models for delivering content. If there is something beyond P2P or disks, we will never know.

JZ: I'd have thought the opposite -- thanks to a clearing of the legal brush that has choked the mobility and derivability of music and movies, Fisher's proposal would make it easy to innovate with these materials -- creating new derivative works and new distribution models. The publishers would be behind this, because they'd profit
each time someone moves the work (or a derivative) over the Net. This seems a great incentive for downstream creativity, while allowing the forces that already are in place to distribute widely to continue to do so.

Previous blogs related this one may be found here, here, and here. Clearly, we could go on like this for some time.

posted by Solveig Singleton @ 8:59 AM | Comments from Readers , Tax-Funded IP

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11.24.2004

The New Media Marches On

posted by James DeLong @ 8:52 AM | General

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Politics & Markets

posted by James DeLong @ 8:31 AM | General

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