We are, in France, facing a big threat : the introduction of the graduate response bill, a law which would require Internet Service Providers to disconnect subscribers involved in multiple instances of illegal file-sharing (see here or here for some comprehensive understanding). Urgency procedure have been used to avoid multiple discussion and to pass the law as quickly as possible.
I had, before this, sent an open letter to our minister of digital economy. There was a strong response from other people on this topic, and I have been asked to translate its content in English.
You will find in this post the underlying concept of file sharing. These ideas may shed light on “illegal” downloading, and highlight the limitations of the French Government’s proposal.
1) Economy of tangible versus economy of intangible
There is a fundamental difference between a tangible and an intangible economy. The first one is an economy of scarcity, the second one an economy of abundance. Sharing a tangible good means divide it. Sharing an intangible good means multiply it. Therefore, the economic laws which govern the sales of pizza are totally different from the one which govern sell of a music file.
Internet propagates the caracteristics of an intangible economy. However, the content industry is doing its best to go back to an economy of scarcity, first by using DRM (a practice increasingly abandoned), or by applying heavy penalties – even, in some circumstances, imposing jail sentences – to people who have supposedly donwloaded content illegally.
This is the opposite of were the world is heading. Analysis (like this compelling excellent article, in French, by Roberto di Cosmo), show that Internet model creates more money for the artist. We see the emergence of web sites such as sellaband whose goal is to put together artists and fans, in order to allow the latter to invest in the production of a CD, then to be later rewarded by a percentage on the sales. This is not new, Kevin Kelly’s prescient an NY Times article dated 2002, already gave some hints about where was the value shifting. Another excellent analysis, from Sloan Scholl, had shown that Long Tail (which many people confuse with Pareto law) have added another 500 MUS$ revenus to the book industry, just by letting people acess to rare books.
The world is shifting to a peer to peer model (as I have propsed here), wathever the content industry think of it. Instead of projecting themselves in the future, they complain to the government. If the French government protect them, they will die, because history shows us that over protection always has, for consequence, lack of innovation (just like the Egyptian, who refused the alphabet and prefered to increase the power of the scribes, were eventually overtaken by the Greek who decided to built their society on top of the alphabet as a paradigm shift). How will they die ? Very simple, as new artists are digital natives, and as they understand the value of the peer to peer model as a faster mean to increase awereness of their potential audience, they avoid the old-school industry major. The catalogue of the content industry will therefore shrink, leaving us only with old stars or low quality artists. Not very sexy.
2) Network as the real issue
Internet is a peer to peer technology. It has always amazed me that very few people know the meaning of “A” from ADSL. It is very simple : Assymetrical. ADSL was invented by telecommunication operators, focused on VOD. Of course, for video viewing or downloading, more bandwidth is needed to stream the movie than sending information. For a 12+ Mb/s download, the upload is at most 1 Mb/s.
But, again, Internet is a peer to peer technology. People upload their content on flickr, Youtube, dailymotion, facebook. People write in forums, wiki, they send emails with tons of digital images. Going away from top-down vertical market, Intenet shifts the value in the peer to peer.With this vision, assymetry is a total non-sense.
We need more : as long as bandwith will remain low, usages will not take off. Back in 1997, when I was at France Telecom, Wanadoo had multiply by four teh capacity of a backbone link which was saturated. The link was saturated again 12 minutes later… Optical fiber network is the true crucial issue. No e-health, no e-environment, no e-learning can be properly done with ADSL networks. Our ancestors were able to build electricity down to everybody, the same must be done with fiber optical network.
Above this, the business model is of great importance. Any pay-per-use business model prevents the expansion of usages. In France, we have flat fee, but other countries are still on pay per use. Mobile usage is another example where not all operator undestand the value of flat fee. The roaming data tarif may become outrageous (in some cases, 10 euros per mega transfered !!!). But the telecommunication operator are reluctant to give up such models. Again, what will be the consequence of this lack of innovation in the business model ? As soon as an Internet provider, borne of the Internet culture, secures a a 3G license, s/he will install femtocell on every subscriber modem, and create a 3G network with little investment. Should a community business model (like Fon) sit atop this, then there would be real innovation, and real disruption. It would create a peer to peer based economy, which may prove more robust and more suited to the need of the citizen than any traditional vertical subscription based model.
The world is changing from a vertical flow of goods and information to a market place. Peer to peer is not to be feared, it is the future of many organisation. Rather that setting punishments, the role of government is to encourage, lubricate this dynamic into this market place, because this generates value.
Government should let the traditional economy gently, and concentrate their energies on building high bandwith symmetrical networks, both for fixed and mobile, and framing the creation of value inside this, for the benefit of citizen, and innovative companies.