The ability to deliver music, movies, games and other content to subscribers via streaming technology is a mixed blessing for communications service providers.
On one hand, such content can drive minutes on the network as well as demand for ever more bandwidth. In some cases, service providers even get a cut of the proceeds from the content or application itself. On the other hand, when a service provider acts as a middleman between the content provider and the consumer, it opens a Pandora's box of new considerations -- a key one being digital rights management.
While streaming creates new business opportunities for network operators, particularly wireless service providers with their new 2.5G networks, it also creates new liabilities for them, says Charles Gerlach, executive consultant for the communications sector at IBM. Record companies and movie studios don't want people to be able to grab and distribute content, says Gerlach, which is something that networks, particularly wireless ones, are especially good at enabling. He says new mobile phones and PDAs have lots of storage, allowing consumers to capture content they get from the network. Meanwhile, Wi-Fi provides high-bandwidth peer-to-peer networks between mobile devices and fixed devices, he says. "So now I have the ability to take my PDA or smart phone that is Wi-Fi-equipped and download a bunch of MP3s from my PC," he says. "Or, more frightening for the content folks, I'm in a public place and I search other devices and do peer-to-peer file sharing. It's a Napster scenario where people are in physical proximity to each other. Someone made up an application like this for Apple's iPod."
Mobile operators have touted their vision to control content through encrypting file formats to give media owners the protection they seek, says Gerlach. "Mobile operators' goal is to build encryption into their mobile streaming media standards," he explains. "They're saying 'If we can create the dominant standard and dominant distribution of musical standards, then they can establish a foundation with the content industry.' The problem is MP3, Wi-Fi and [other technologies are] already infringing on that."
While service providers that want to play a role in content delivery need to get involved in the groups pushing standards to address digital rights protection, Gerlach cautions it's a tenuous situation. "There's a lot of danger," he says. "Content firms are very interested in liability and pulling technology firms into policing rights for them."
He notes the Recording Industry Association of America (RIAA) has been pushing for legislation to make Internet service providers liable if their customers share music files without the permission of the copyright holders.
In late January a federal court judge ruled Verizon Online must disclose the identity of a customer who the RIAA alleges distributed more than 600 music files without the permission of the copyright holders. U.S. District Court Judge John D. Bates granted the association's motion to enforce a clerk-issued subpoena, thus requiring Verizon Online to disclose information about the identity of the Internet customer and terminate the person's Internet connection. Verizon's subscriber allegedly used its network to download copyrighted songs through peer-to-peer software without the copyright holders' authorization. Verizon Communications Inc., which last summer refused to comply with the subpoena, says this ruling could threaten the privacy of customers based purely on allegations of copyright infringement.
The court's decision "opens the door for anyone who makes a mere allegation of copyright infringement to gain complete access to private subscriber information without the due process afforded by the courts," says Sarah B. Deutsch, vice president and associate general counsel of Verizon.
Verizon argued it was not obligated to turn over the name of its customer because the music files were stored on an individual's hard drive, as opposed to Verizon's own network. The Digital Millennium Copyright Act requires carriers to reveal information under a clerk-issued subpoena only if the content sits on the ISP's network.
Verizon, which plans to appeal the ruling, says the recording industry should have filed a lawsuit against the alleged lawbreaker and obtained a subpoena from a judge.
However Judge Bates disagreed and ruled the subpoena authority of the Digital Millenium Copyright Act "applies to all service providers within the scope of the Act, including those like Verizon falling under subsection (a) an entity offering the transmission, routing or providing of connections for digital online communications.'"
The recording industry claims enormous losses due to copyright infringement through peer-to-peer file sharing and uses computer programs that can be used to search the Internet for such activity. However, the programs can identify only an IP address and the service provider, not the individual Internet subscribers distributing unauthorized files from their individual hard drives.
That said, Gerlach advises service providers to consider sticking to pure bandwidth provisioning and staying out of the content side as much as possible. "Telcos always had aspirations about becoming players in the media space and seeing revenue streams there," he says. "But users just want bandwidth to do that, so there are lots of business model issues there. The question is: Will transport or content drive revenue? I think for telcos the answer is transport."
