InfoTech & Public Policy

This posting is a response to that of Gregory Redman entitled “Placeshifting” in which Redman discusses Sling Media’s Slingbox. This new technology allows users to watch their home television from anywhere as long as they have a connection to the Internet. This capability, when combined with a TiVo, is especially useful because it allows Slingbox users to watch not only wherever they want, but also whatever they want. However, buying a Slingbox is no cheap proposition. The device, which can be found in stores like Best Buy and CompUSA, costs about $250 — which is approximately the price of a brand new TiVo box. (Unlike TiVo, however, Slingbox has no subsequent subscription fee.)

In light of Redman’s posting, I would like to raise awareness about another technology which is very similar to Slingbox, yet absolutely free (i.e., costs consumers nothing). This is Orb Networks’ DVR Everywhere. (For more information about DVR Everywhere, see this article.) The key difference between this product and that developed by Sling Media, aside from cost, is that DVR Everywhere is a piece of software which runs on computers with Windows XP, whereas Slingbox is a piece of hardware which does not require a computer to run. While unfortunately I cannot offer any personal anecdotes as to whether one technology works better than the other since I have not used either of them, from what I have read it appears as though the free technology (DVR Everywhere) works just as well as the one that costs $250 (Slingbox).

The other major advantage of DVR Everywhere is that it does not require special software to be installed on the user’s computer. Rather, all the user needs in order to play and program television recordings is a Web browser and a streaming media player such as RealPlayer — both of which are standard applications on almost any computer. Slingbox, on the other hand, requires the installation of a special application called SlingPlayer which is only compatible with Windows at this point.

The problem with technologies like DVR Everywhere and SlingBox is that they challenge the rights of many copyright holders by violating the notion of proximity control, which according to the article discussed in class “restricts the distribution of content to specific regions and times.” As placeshifting devices continue to gain popularity, we must figure out how to protect the rights of copyright holders while at the same time allowing the consumer to reap the benefits of such a useful technology.

In recent posts I think I have often berated more than I have praised, giving little credit to innovative narrowcasting solutions currently being offered.  While I saved a lot of ink for TiVo and Sling I have made little mention of other technologies available.

When I type www.pandora.com into the address box of my Internet explorer I am whisked away to the magical music world of Pandora where I am greeted by the now familiar Music Genome Project mission statement.  The mission?  To “help me discover more music that I’ll like” and it is awesome.

Though Pandora’s 100,000 song jukebox is small by comparison to the iTunes Music Store’s 2 million, university students are increasingly tuning into personalized Internet radio.  Pandora is offering narrowcasting solutions at no or little cost to anyone with an Internet connection.  The catch?  There is no catch, subscribers can elect to pay either a small monthly usage fee or endure a single advertisement window.  I’m a recent Pandora convert but I can tell you the advertisement window has never shown me anything but links to purchase exclusive music through the iTunes Music Store and occasionally to purchase the squeezebox, their home stereo component.

Here’s how it works: you enter the name of a single song or artist you like and it roughly tailors a station to your tastes.  Then, as you listen to songs you can opt to comment on how much you like it with a simple thumb up/thumb down button.  The more you listen the better it gets.  If you ever decide you want to buy a song, one click and you are given the option to buy the song off iTunes or the album through Amazon.

Even more recently, the concept behind mp3tunes blew me away.  Mp3tunes offers subscribers an online music locker to back-up and access mp3 format music files using Internet Explorer or Mozilla Firefox.  This means your entire music library is available to you anywhere you have an Internet connection.  Mp3tunes is having issues for a variety of reasons.  Mp3 formatting is a real concern for most major recording labels because there are no provisions for Digital Rights Management.  Right now mp3tunes offers music primarily for small independent artists but with a more comprehensive format this could easily explode.

The point here isn’t the specifics of one company or one solution or even one industry.  No single entity is offering the ubiquitous, interactive, reliable, multi-media device/service we are craving but there is movement towards swarms of solutions that present some very exciting opportunities.  Blanket the world in WiFi and I’ll no longer need an iPod.  I could stream selections from my music library or tune into one of my private Internet radio stations to hear some new tunes.

This week I want to discuss another recent case of an investigation which used a popular social networking website to get leads. This story is of a much more serious nature, however, than the Princeton Buildering Society facebook.com group about which I blogged about last time. After a brutal sexual assault and robbery, Boulder Colorado police explored the victim’s myspace.com profile to look for leads. The assailants never thought that their profiles on myspace.com could incriminate them in this investigation. The victim met her attackers over myspace.com, and agreed to have the party at which she was attacked over the same social networking website. The article mentions that she didn’t even know their last names, yet she felt comfortable enough with their online personas to invite them to her home so that they could rape her and rob her house. What concerns me regarding this case, is the fact that just by being a member of a group on myspace.com or facebook.com one can become a leading suspect. I am not arguing that law enforcement officials shouldn’t use all the investigative tools available to them, but I am once again cautioning all you facebook.com and myspace.com users to “be careful who your friends are.” I am also worried that these networking websites are becoming proving grounds for predators, and that many unsuspecting users are setting themselves up to be victimized.

On a lighter note, while reading the news I found a couple of articles discussing people who broadcast their own radio stations with their own equipment (without regard to federal spectrum licensing regulations), similar to those we discussed in class a few weeks ago. These “pirate radio” stations have been interfering with communications between pilots and air traffic control. These amateur broadcasters satisfy the demand for music that isn’t played by the licensed radio stations because it doesn’t have the financial support of the major record labels who decide what gets played on the air. The article cites that between “nine and 20” unlicensed radio stations are broadcasting at any point in time in Miami, and also that these amateur broadcasters stay one step ahead of the authorities by changing their broadcasting locations and frequencies before they can be tracked down. I see this case as one in which regulation and licensing play positive roles because these rogue radio broadcasts affect the safety of airplane pilots and their passengers. One way for these “radio pirates” to expose the public to unknown artists and their music is to use the distribution capabilities of the internet, and not interfere with the safety of air travelers.

A few weeks ago we discussed spectrum policy and part of this discussion was regulation of content. As part of the contract with the public to acquire the spectrum, broadcasters are subject to limits on their content. Certain shows cannot be broadcast until late evenings, lengths of commercials are limited, and fines are imposed for violations (see recent NYtimes/AP articles). While we may not always agree with the particular censorship decisions of the FCC, the regulation ensures control over a government-formed monopoly on television broadcast. I don’t think there is much doubt over the FCC’s right to regulate. But what about cable tv?

Cable television bypasses the spectrum scarcity by sending the signals over wires into each home. So one would think that this avoids the need for regulation. Yet while there is no government-created monopoly with power to control as a matter of public service, there is still a natural monopoly in place. Installing cable into every home is a huge investment and localities usually grant a monopoly to a single company to provide this service. In theory there is competition… if the locality isn’t happy with the service they receive, they could grant that monopoly to another company, and more recently, the industry was opened to direct competition (although I don’t remember the details offhand) which will only increase with video transmitted over the internet. What I want to point out is how in practice, large media companies control most of the cable tv markets. These companies then decide what content makes it into our homes. If the cable company wants to keep a competitor out of their cities, they can simply decide not to carry them. Think back a few years ago when ABC and other Disney channels were blocked to all of New York City. Do we trust these companies to use their monopoly power properly? At the same time, does the FCC or any other government body have the authority to impose rules on their behavior once their monopoly is not protected by localities, even though the barriers to entry are still too high to allow real choice for consumers?

As far as ideal policy, I’m not entirely sure what I’d like to see. If we don’t let the government regulate, the cable companies have the power to stifle creative new stations and more importantly innovation. Do cable companies have enough incentive to simulcast content over the internet when it is likely to transform their market from a natural monopoly to perfect competition? But is the alternative to give the FCC power to impose decency standards to a medium that doesn’t have intrinsic scarcity?

I’m seeking the ideal solution, in part because I don’t know how the regulatory environment is configured now. Is there regulation only because cable tv is tied to broadcast tv? If so, how far does it go? Does the government simply dictate that local broadcast channels must be carried, or can they also censor that content? What about other content carried or not carried? Then, is that enough to tradeoff competition?

To complete the journey, compare the cable tv scenario to the recording industry. The RIAA and large labels control the copyright over most popular music, and then use that control to monopolize the promotion of new music. They roughly control what goes on the radio (touches back to spectrum policy) and also has great influence on concert promotion. They have enough market-share through copyright, promotion, and broadcast that the competition of independent artists and labels are insignificant. As we discussed in class, it’s not usually the best music that becomes popular. Isn’t that the exact effect that should make us take a closer look for anti-competitive behavior?

Last Wednesday BBC1 posted its weakest prime-time rating.  ITV announced an 8% slide in viewership and that advertising revenue was down £50 million.  Google reports that the average Briton now spends 164 minutes online each day, compared with 148 minutes watching television.  The evidence paints a gloomy forecast for broadcast television.

The simple fact is people are busy.  Consumers are tired of sifting through the garbage to find the content they are really looking for.  I think it is safe to say that we have gotten to the point where we need to stop trying to shove the old model down peoples’ throats and start trying to figure out what comes next, and I don’t think I am alone.

Narrowcasting is the solution.  At the risk of being redundant from earlier posts: it is an unnecessary waste sending out lots of information all the time when what we are really looking for is specific information when it is convenient.  Unfortunately, it isn’t enough to just bang the table demanding what we want, viable solutions to some of the problematic aspects the shift will create are needed.  Though there are certainly many to consider, two of the most prominent are the impact the shift will have on advertisers and on the public as informed citizens.

Advertising.

The advertising industry is already adapting and finding new ways to get their message across.  Fight Night: Round 3 a new boxing game offered on Microsoft’s Xbox360 platform prominently displays logos for Under Armor, Burger King, and Dodge.  In the hit TV show 24 the main character Jack Bauer drives a Ford Explorer and nearly every episode concludes with a shot of the vehicle, even his name is an allusion to one of the auto makers high end lines.  NJ.com is even up on the times offering short highlight clips from the state high school wrestling tournament, but only after a short commercial for Global Auto Mall.  While narrowcasting certainly poses some interesting challenges for advertisers, I think it is safe to say that this is a case where those nimble enough to adapt will survive.

An informed public.

While the Super Bowl’s 137 million viewers is certainly more sizable than the President Bush’s State of the Union Address with 47 million I think the public has a right to be informed (who knows, maybe American’s feel there is more at stake with the Super Bowl).  Concern has been raised over the switch to digital broadcasting effectively turning off televisions for several million American’s.  To say that it is just too bad, we are making the switch regardless is an unacceptable solution.  However, I don’t think it is a right as a citizen of the United States to have access to the vast amount of spectrum being exploited by analogue broadcast.  American’s have a right to be informed, not to be entertained.  The solution here seems clear, limited analogue broadcast television.  A few channels is all that is required, free up the spectrum so that it can be more efficiently allocated by the market.  One of the biggest limitations on narrowcasting is ubiquity.  Right now the TiVo/Slingbox tag team allows me to watch whatever I want, whenever I want, wherever I have an Internet connection.  The limiting factor here is my Internet connection, and who knows you free up some of that spectrum and I just might have broadband access everywhere my cell phone works.

We discussed several ways to overhaul today’s licensed-spectrum allocation model, and the arguments generally fell in the category of “technology and innovation will fix everything,” as implied by Werbach’s open-spectrum approach, or “the market will fix everything,” inspired by Ronald Coase’s free-market approach to spectrum and trumpeted by economists since. Proponents of both views do seem to agree on one thing, by implication if not directly - the FCC, as it currently stands, has outlived its purpose.

In the article The Evaporation of the FCC and the much more scathing critique The Spectrum Should Be Private Property, writers from the Ludwig Von Mises Institute claim the FCC’s existence is increasingly detrimental. These articles provide a good survey of everything the FCC has been accused of, including massive spectrum waste, censorship, subservience to special interest groups, and particularly technologically short-sighted decisionmaking. Most of these are uncontestable, but I think they fail to prove that the FCC is either without purpose or inherently bad. I will focus on the “free market” approach to allocating spectrum.

The economists’ approach suggests that establishing a completely free market for spectrum will resolve the massive inefficiences in its allocation and eliminate the need for a governing body. Proponents envision an active secondary trading market in which spectrum is bought and sold rapidly as needed - this is almost an econ major version of the “dynamic spectrum allocation” promised by open-spectrum. Faulhaber and Farber even lay out a plan for doing so, gradually phasing out the FCC as it transfers ownership to private entities. I fail to see a real-life precedent for this, and it appears to me one of many instances of giving the market far too much credit.

The first flaw is simply poor simile use. Private-spectrum proponents continually either compare spectrum to things it doesn’t resemble at all, or pretend that free market forces act equally on every type of good. Spectrum isn’t like potatoes or widgets because one cannot manufacture more of it simply because demand exists. Werbach’s analogy of the spectrum as a sea is problematic too - no private entity has the economic means to fill the sea with so many ships that nobody else can pass, while it is conceivable in a free market to buy so much spectrum that competitors and technologies are choked out. If the economists’ analysis is to be used, the good in question must be communication, and spectrum ownership must be a measure of market power in this good. After all, an entity’s ownership of spectrum is generally proportional to its influence in communications, and gives it the power to suppress competitors. Market power in all other goods is held in check by the FTC, and similar leadership is necessary here.

I fail to see what private-spectrum leaders are referring to when they claim the free market ensures efficient allocation. Perhaps the days when the United States economy was unconstrainted by Federal Anti-Trust Laws, and monopoly abuses abounded? Maybe it’s the randomness of stock prices, everyone’s favorite example of the supposedly omnipotent knowledge of “the market”. Even in this example, stock prices are generally “correct” because they are kept in check not only by an army of behemoth financial firms dedicated solely to that purpose, but by government agencies and extensive regulation - pretty unwieldy for an “invisible” hand. I anticipate that privately owned spectrum would run into the same problems the US economy sees in other markets. Incumbents will buy enormous bands of spectrum and refuse to resell unused spectrum, anticipating the high costs of buying it back if it’s utilized successfully. Spectrum owners may develop “gatekeeping” technologies to keep out even low-interference devices. The spectrum market will require a governing body to ensure that participants’ behavior is aligned with social welfare and technological innovation. The FCC would no longer simply license spectrum and retain the power to withdraw it in cases of misuse, but actively manage and regulate a domain it no longer controlled.

TiVo is revolutionizing the way we watch television.  Digital cable subscribers are no longer limited by their busy schedules or their ability to program the everyday rubix cube that is the VCR.  Not surprisingly TiVo has one of the highest customer satisfaction ratings as TiVo allows customers the ability to timeshift, to easily watch the programs they want when they want.  From my limited experience with TiVo I have nothing but wonderful things to say, it is easy to use and tremendously convenient.

In the wake of my first truly awesome experience with TiVo (I think I saw Desperate Housewives for the first time… the show was only ok) I thought, “what more could I ask for?”  Sling Media answered that question with their slingbox, a spacey silver box that allows me to placeshift.  What is placeshifting you ask?  Placeshifting is nothing more than timeshifting’s cousin, allowing me to not only watch what I want to, but also where.  The slingbox allows me to control my home television, and up to 3 other home theatre devices from my computer anywhere I have an internet connection, and I don’t even need to have a computer in my home to do it.

For the sake of brevity let me get to the point.  Sling media and TiVo have mutated television to the point where it no longer matters where or when the actual live TV broadcast is made.  I can simply record what I wish and watch it at my leisure wherever I have an internet connection.  If you don’t believe this is a television revolution, consider some of the ramifications.  What if nobody watches live TV broadcasts?  Does it make any sense to restrict mature audience programming to the after hours?  Placeshifting and timeshifting combine to create an environment that really calls upon us to challenge some of the policies we attached to traditional time and place limitations.

With regards to spectrum the point I am trying to highlight here is the fact that it seems there is a sea change occurring in the way many of us watch television and as time and place become increasingly less relevant it might make sense for us to challenge the industry to explain precisely how it is that they are the most efficient use of valuable spectrum and not a heavy waste.  People are demanding better services in the form of On-Demand delivery capabilities, and broadcasting a lot of general information on a fixed timetable when what we are really looking for is a little specific information at specific times convenient to you seems a little obtuse.  The internet offers a seemingly ubiquitous solution and should not be discounted.