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Thursday, March 28, 2002
D.C. anti-piracy plans fuel culture clash


Entertainment executives are accusing big technology companies of turning a blind eye to rampant online piracy. High-tech executives say that's ridiculous. But in an effort to prove their good faith, some are now scrambling to show public support for new anti-piracy plans that would have a significant effect on the way consumers watch and share movies, music and TV shows.

"We believe that the lead must come from the private sector, complemented where necessary by targeted and constructive government action," Intel and AOL Time Warner said in a joint statement released last week, opposing a sweeping government anti-piracy mandate. The companies said they would accept "narrow government action...appropriate for proper enforcement of the consensus solution."

Now, a bill has been introduced by Sen. Ernest "Fritz" Hollings, D-S.C., that would require all "digital media devices" to have built-in technology to block unauthorized copying. While few expect that bill to pass, it has put technology companies on the defensive in Washington and has increased the likelihood that some form of government-endorsed copy protection will eventually be adopted.

In the eyes of the movie and music companies, there's a simple problem: Hundreds of millions--perhaps even billions--of songs and movies are freely traded every month over services such as Morpheus and Kazaa.

The music industry has faced this for several years and points to a 10 percent drop in sales in 2001 as the first tangible evidence of the piracy's influence. The movie studios are just beginning to see their feature films traded on a widespread basis, and they have become adamant in their call for a technological fix.

The search for technological safeguards has been going on for years. The Secure Digital Music Initiative, led by the record industry, collapsed after several years of feuding between record labels, tech companies and consumer-electronics manufacturers. Cross-industry efforts have had better success in the video realm, where Hollywood and tech companies have agreed on anti-piracy standards such as those protecting DVDs against copying.

Irreconcilable differences?

A serious cultural gap separates Silicon Valley from Hollywood, and Hollings' bill is a sign that efforts to bridge that gap aren't going well. Content executives complain bitterly that the technology industry hasn't been serious about solving the piracy problem. Walt Disney CEO Michael Eisner told Congress last month that "high-tech companies have simply lectured us that they have no obligation to help solve what they describe as 'our problem.'"

Another content industry executive said this week: "The (information-technology companies) never expressed any interest in addressing piracy on a mass scale facilitated by computers. It's like religion: They don't want to be told what to put in their computers."

Big technology companies bristle at suggestions that they haven't been playing a critical role in the content-protection drive. They've helped with the anti-piracy features for DVDs; they've dedicated thousands of man-hours to researching copy-protection technology that can be built into consumer electronics and disc drives, they note.

"Suggesting that (technology companies) have not been fully engaged on copyright-protection issues is ludicrous," said Jennifer Greeson, a spokeswoman for the Computer Systems Policy Project, a Washington, D.C., trade group representing Intel, Compaq Computer, Dell Computer, IBM and others. "Our companies are engaged at the very highest level."

But the content companies' cries for help are being heard with increasing sympathy by Congress, and more legislators are getting involved in the issue. Hollings introduced his bill with five powerful co-sponsors, including California's Dianne Feinstein.

Not many legislators are yet willing to go as far as Hollings and his co-sponsors. But it's clear that lawmakers are losing their patience. In a hearing earlier this month, Judiciary Committee (news - web sites) Chairman Patrick Leahy called Hollings' approach "wrong-headed"--but nevertheless told technology and content companies to report back to his committee every two months on the progress of their negotiations.

Meanwhile, the political skirmishing is helping to coalesce a movement to preserve what many activists call "common sense" rights, such as the ability to make MP3 copies of a CD at home. According to a new consumers' rights group called DigitalConsumer.org, close to 10,000 people have faxed Congress in the last week alone opposing Hollings' legislation.

"The way Hollywood has framed the debate, you're either with (the studios) or on the side of the pirates," said Joe Kraus, a former Excite executive who is leading DigitalConsumer's drive for a Consumer Technology Bill of Rights. "It's a tough fight...But we think Congress is looking for a third way."

Compromise on the way

The 80-year-old Hollings, a former governor of South Carolina, is an appropriate adversary for the technology industry. A longtime advocate of protecting and regulating American industry--in particular his home-state textiles--he's consistently opposed issues supported by Silicon Valley such as expanding foreign trade and increasing the number of visas issued to skilled foreign workers.

In one widely circulated comment on the Senate floor several years ago, he declared that he would "much rather have BMW than Oracle or Microsoft" as an employer in South Carolina.

But Washington insiders say he is a powerful negotiator who often advocates extreme positions to draw a compromise closer to his side of the argument. Some say the current bill is just this kind of negotiating tactic, aimed at drawing tech companies into copy-protection agreements more quickly.

In fact, Hollings' and the other legislators' pressure has spurred a new wave of public statements in support of copyright protection from the tech industry. Late last month, a group of nine CEOs, including Microsoft's Steve Ballmer, IBM's Louis Gerstner and Dell's Michael Dell, sent a joint letter to the heads of the major media conglomerates expressing their desire for more "interindustry cooperation."

Hollings could not be reached for comment for this story.

Most notably, Intel and AOL Time Warner in their joint statement last week expressed support for limited copy-protection plans. These proposals--which still would have a considerable effect on the way digital media is used--now appear likely to find their way into law as soon as this year.

One of these, the so-called broadcast flag, would create a digital marker to be included in digital TV broadcasts that would block shows from being distributed without permission over the Internet. A cross-industry group called the Copy Protection Technical Working Group is working on a standard for this and expects to have a proposal ready in a month or two.

Another issue, dubbed the "analog hole," is more difficult. Many existing televisions and stereos have the ability to send an analog signal to a computer that could record copy-protected songs or movies as they play.

Technology companies, studios and consumer-electronics makers are seeking to develop so-called digital watermark technology that would block this by embedding "don't copy" or "don't play" instructions inside video streams. Computers, CD burners and DVD players would then read this watermark and refuse to play unauthorized copies.

For either of these proposals to work, however, nearly every computer maker and consumer-electronics manufacturer would have to support the technology inside its machines. Even AOL Time Warner and Intel say the government would likely have to step in to enforce that.

"This is an example of how private multi-industry efforts can yield a technical solution where narrow government action is appropriate for proper enforcement of that consensus solution," the two companies wrote in their joint statement last week.

The next several months will be a critical test for technology companies navigating rocky political waters. They're relative newcomers, although powerful ones, to Washington inner circles. The entertainment industry, by contrast, has long been among the most generous donors to political campaigns, with influential lobbying forces.

Some insiders say big tech's political inexperience has already put the industry in catch-up mode.

"They don't appear to engage until Hollywood has moved the ball half the way down the field, and then they're playing defense," said one executive at a prominent Internet company. "The question is whether they're going to do anything strategic...or play defense and help cut some backdoor deal that just puts the problem off for a year or two."


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