Copying right? The Digital Age of Consumer Media

High-speed internet, CD and DVD burners, personal video recorders, high-capacity hard drive, iPods, mp3 players, satellites and receivers made it effortless to transfer, reproduce and store trillions of bits of data at the touch of a button. Few groups, with the exception of the consumer have kept up with the technologies in their rapid state of flux.


Is 'file sharing' really stealing?!?
The entertainment industry put out an advertisement condemning the pirating of intellectual property. Their assertion is that stealing a television is the same as stealing a satellite signal. The list price of the service could be the same as a television, yet there is an important philosophical distinction. While intellectual property has apparent value, it does not have any tangible value. A person stealing a satellite signal only causes lost revenues for the provider if the thief would otherwise have paid for it. This does not make such a theft ethical; by law the violator could face penalties as if he/she stole a tangible good of equal value. It is still stealing, but it does require the distinction from someone who steals a material thing effectively removing a salable product from inventory, thus causing more apparent harm to the rightful owner. Many people continue to have little sympathy for entertainment executives and pop artists and movie stars that continue to earn millions despite the fact that it is the smaller artists that rely the most on record sales for their revenues.

The Law
The legal process is far too slow to keep up with the latest technologies and proved ineffective. By the time Napster was closed by the courts, peer-to-peer networks like Kazaa and BitTorrent were already set to take their place. The industry then went after the individuals that 'shared' the most content. This strategy had minimal success and created a PR mess in the process. Some of the violators were children using their grandparents internet account to do all their illegal downloading. People sympathize with ninety year old grandmothers accused of copyright infringement who don't even know how to write an email. The approach failed to dissuade large masses of people from downloading illegally.

The Lawmakers
The lawmakers (politicians) are part of an older generation that generally does not use or understand the technologies being used in potential copyright infringements. In 1998, President Clinton signed the Digital Millennium Copyright Act into law. Despite a modern-sounding name, the act did not provide the protections the record industry had hoped for. Less than a year later, Shawn Fanning released the original Napster that popularized 'file sharing'. Canada has yet to pass it's own version of copyright reform for the new millennium, but proposals have been tabled. A version of Bill C-61 will likely get re-introduced since the bill did not get passed before the 39th session of parliament was dissolved. The law will likely not have no more success at curbing illegal and/or unethical copying than it's American counterpart did.

While Canadian copyright laws have yet to be overhauled, the Canadian Private Copying Collective (CPCC) was created by the Federal Government in 1998 to collect and distribute royalties on blank media on behalf of music rights holders hurt by illegal copying. The tariff amounts are based on statistical data of music downloads. The table below shows current levy rates being charged to all blank CD's purchased in Canada. The proposed tax on music-based digital storage media and devices (such as iPods) was struck down by the Canadian Federal Court of Appeal on the basis that the CPCC does not have the legal authority to impose such a tariff (link). Others argue that it's unconstitutional because it is based on the presumption that consumers are not paying for the media on their digital devices. Some even argue the tariff encourages 'file sharing' because it compensates artists. It's certainly hard to believe that someone buying a digital camera should have to pay up to $10 to the record industry for their flash memory card.

	Tariff
Audio cassettes of 40 minutes or more	29¢
CD-R or CD-RW	29¢
CD-R Audio, CD-RW Audio or MiniDisc	29¢
Removable electronic memory cards over 256 MB (MMC, SD, Compact Flash, etc.)
no more than 1 GB	$2
more than 1 GB and no more than 4 GB	$5
more than 4 GB	$10
Digital Audio Recorders (iPods, mp3 players)
No more than 1 GB	$5
more than 1 GB and no more than 10 GB	$25
more than 10 GB and no more than 30 GB	$50
more than 30 GB	$75

Source: CPCC Tariff Backgrounder

The Enforcers
Without entering into the offices and living rooms of millions of private citizens, it's very difficult and in some cases impossible to monitor the massive amounts of data that gets transferred between electronic devices. In some cases, it's virtually impossible to determine who downloaded or uploaded something using an unsecured wireless network from a laptop that leaves little to no trace of itself. Recently, several police agencies complained that Blackberry's (made in Canada by RIM) are too secure--they can't intercept and monitor drug dealers who are using them. The trouble is that if security holes are deliberately built in to the devices, they become more susceptible to hackers. This extremely reliable security of the device was likely the only reason President Obama was allowed by the secret service to be the only standing president with a mobile communications device.

Asleep At The Switch
The CRTC is the "Independent public authority in charge of regulating and supervising Canadian broadcasting and telecommunications." Radio waves and satellite communications typically prove to be a very difficult thing to regulate since they pass through Canadian airspace whether the CRTC wants them to or not. Broadcast radio was not too difficult to control in urban settings because U.S. broadcast frequencies could simply be overpowered by stronger signals on the Canadian side of the border. Satellite radio did not have the same overwriting capability. During the first three years of the service, satellite radio was not officially available in Canada. Still, many Canadians were using the American service 'illegally' by registering 90210 as their zip code since the signal could be picked up even in northern parts of the country.

Another example is Pandora internet radio. The US-based service provides 'radio' stations customized to the users individual tastes. The CRTC forced the Music Genome Project (Pandora) to block its content for Canadian IP addresses in 2007. This did not stop some Canadian internet users from circumventing the block. In other cases, the blocking algorithms on the site simply do not work allowing Canadian IP addresses to access Pandora content freely (albeit violating the terms of use of the site).

It seems clear to me that everyone from lawmakers to enforcers, record industry execs to artists have a long way to go when it comes to adapting and bringing themselves into the twenty first century. The neo-luddites will lose the war against the Digital Revolution just as their counterparts lost their fight against the Industrial Revolution.

You're Smarter Than You Think: Part 1

In my June post, I predicted why Barack Obama would be the 44th president of the United States, and at the end of that post, I said that I would discuss his flaws and strengths in detail in a later post. In the spirit of political rhetoric, I will 'refine' this promise: such a posting will be indefinitely suspended due to the over saturation of media coverage on the subject of Barack Obama.

The McCain 'straight-talk express' translation: I don't think anyone needs or wants to hear any more about Barack Obama right now. Anyone wanting to know more about him, his ideals or his policies can (and will) consult the multitude of media on the subject including--but not limited to--the two books he has authored.

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photo by allie^TM

Introduction

So instead of talking about Obama, I will use the former Vice Presidential candidates as an introduction to my next topic, a series of posts I call "You're Smarter Than You Think".

Contrary to popular belief, Sarah Palin is not unintelligent. Clearly she has not spent an inordinate amount of time studying political science. For example, she could not name any supreme court decisions other than Roe versus Wade (nor can I, but both of us could learn). Lack of political knowledge could make a legitimate case that Palin was not quite ready to assume the role of vice president, but it says little about her raw intelligence. Her former counterpart, Vice President-elect Joe Biden, has become an expert at giving the public the illusion of political knowledge. He certainly does have political knowledge, but the number of times he misspeaks is quite worrisome if one assumes he makes policy decisions based on this flawed knowledge. In some university and college multiple choice tests, the examinee is penalized marks for incorrect answers. In such a test, I'm not sure Joeseph Biden would score any higher than Sarah Palin on the political science front. It's really quite amazing how many of these smart-sounding people get themselves into positions of responsibility. They make themselves sound smart to create the illusion that the are smart. They often find themselves saying that they are smart, perhaps because they are compensating for their fear that they are not smart enough. The "You're Smarter Than You Think" series is not intended for these types of people who think they are smarter than they are. It is intended for those who underestimate their capability and never reach their full potential as a result.

I was able to predict the winner of the election because of the poor fundamentals of the economy in addition to the low voter confidence in the incumbent party and not because I'm smarter than anyone else. Most people that know me are aware that I'm terrible at remembering names and birthdays, I can't solve a Rubik's cube, I'm not even 'smarter than a 5th grader', let alone a Jeopardy contestant. These facts should not limit myself (or anyone else) from doing anything I want to do in order to be successful. Knowledge is often misunderstood for intellectual capacity. The next series of posts will build on the story of why you very well could be smarter than you think.

The White House of Cards

The problem with foreclosures is that often times the pledgor is not cognizant of the severity of the problem until it's too late. It happened with millions of Americans who lost their homes. It happened with large institutions like Bear, Fannie, Freddie, Lehman and Wachovia. Now it is happening with the U.S. government.

Many financial advisers continue their rhetoric about a pending recovery of the U.S. economy, as it 'always does'. As mentioned in earlier posts, the U.S. economy is structured on cheap oil, which despite the crisis, still does not exist right now. In USD terms, oil is still more expensive than it was a year ago. Either the financial advisers don't get it, or they are lying the way Enron executives lied to their shareholders while funnelling their money out the back door. I suspect it is the former. Following weeks of market turmoil, record low auto sales and continuing record high oil prices, Citigroup finally began recommending to investors to sell shares in GM and Ford this week after their shares fell 82% and 67% in the last year. At least they made their statement sound eloquent:

"[W]e believe the risk-reward balance [on automaker stocks] has tilted decidedly negative on both absolute value and relative value versus underperforming suppliers," -Citigroup investment note.

Thanks Citi for the timely advice. Neither Ford nor GM has had a profitable automotive division in over 6 years. Better late than never I suppose.

Many had hoped that swift approval of the bailout plan would restore confidence in the U.S economy. Such an effect has yet to be seen as even the hopeful are growing skeptical. Hank Paulson said it will not prevent all bank failures--which are likely to resume their course now that the short selling ban has ended. Violent and sometimes even more damaging aftershocks continue to ripple worldwide as the USD is still the most widely held currency. The only stable asset right now is gold (it appears moderately unstable because of the gyrations of the currencies in which it is valued). Few signs of a bottom can be seen yet and confidence continues to slide.

Anyone who has been overseas recently knows that the once universal US dollar began to fall out of favour by merchants for other currencies over a decade ago. Unfortunately most Americans have never been overseas and don't even understand what is happening with their 401k's. Even the presidential candidates appear naive (or perhaps it is merely election rhetoric). They appear to think that they can solve the 'crisis' by investing in the economy (cutting taxes, fixing health care, energy independence spending, gas tax holidays, and so on). Unfortunately, it's probably too late for that, as they don't have any more pre-approved credit to invest. They would have to borrow it from foreign investors (or print it and make the USD worthless). The flaw that proved fatal for many of the failed institutions was the assumption that they could always raise more capital, if required.

House prices will always go up, storied institutions can always raise debt, and foreign investors will always buy up U.S. treasuries. The first two cards have already fallen. With foreign investors fleeing, the U.S. government needs to prove to its lenders that it will not default and is serious about paying back its debt rather than running deficits indefinitely. Serious action could take the form of pulling out of Iraq as quickly as humanly possible--this would likely split the country in three and destabilize the region, but the U.S. economy is pretty unstable itself if anyone hasn't already noticed; furthermore, as Alan Greenspan notes, Iraqi oil production has only now recovered to pre-war levels, so staying longer is unlikely to result in significant cheap oil supply anytime soon. It would also be wise to pull out of Afghanistan as soon as possible and negotiate a deal with the Taliban--this may not be in line with offical public policy; but as John McCain said, unofficial policy is often quite different from public policy. Most importantly, they need to sit down with the leaders of economic powerhouses and negotiate a set of terms to repay their debt and stabalize confidence. The first two cards have already fallen, if the third were to fall, it would get ugly. Barack Obama talks about hope and change. Let's all hope someone understands the severity of the problem and is willing to make the change required to avert a catastrophe.