December 4, 2003 4:55 PM PST

Should ISP subscribers pay for P2P?

Several proposals to collect money from Internet service subscribers to pay for online music swapping are bubbling to public attention in the United States and Canada.

A trade group representing Canadian songwriters and music publishers argued in front of that country's Supreme Court on Wednesday that ISPs should pay into a nationwide pool--similar to a tax now imposed on blank tapes and CDs--to compensate copyright holders for widespread music downloading.

On Tuesday in Los Angeles, the Distributed Computing Industry Association (DCIA), a peer-to-peer industry trade group, proposed a related idea that would ultimately give file-swapping networks a service model similar to cable television. Under the early stages of the DCIA proposal, ISPs would collect a fee from anybody using file-trading software and distribute that pool of money to record labels, artists and music publishers.

The DCIA's suggestion was the second in a planned series of three alternative business models aimed at turning file-swapping networks into profitable distribution channels for music. The group is trying to bring record labels, ISPs and file-swapping companies together to discuss an end to the legal wrangling that has dominated the peer-to-peer world to date.

"We're conduits for other people's ideas," said Marty Lafferty, executive director of the DCIA. "We're trying to get three strong proposals together and start wrestling with them by January. We want to get a critical mass of ISPs, music companies and software companies who can say, 'Yes, let's move ahead with one of these.'"

The separate proposals each represent aspects of file-swapping ideas that have been widely discussed in academic circles, but largely rejected by the major music companies.

Dubbed "compulsory licensing," the broad idea would treat online music swapping more like radio listening than retail music buying. Record companies would be required to allow people to trade music but, in turn, would be compensated, much as music songwriters are paid when their songs are heard on the radio in the United States.

The proposal in the Canadian court, backed by the Society of Composers, Authors and Music Publishers of Canada, is more limited than this. Rather than explicitly legalizing file swapping, the proposal would simply implement a fee to provide songwriters ISP-collected royalties as a way to ameliorate potential losses from piracy. The idea has already been partially approved by a lower Canadian court, but only for those cases in which ISPs make temporary local copies or "caches" of content to speed downloads.

The proposal is bitterly opposed by telecommunications companies and ISPs in Canada, which say they are simply conduits of information, not distributors, and so should play no role in collecting royalties. They say the fee would increase Internet costs across the country.

The court is expected to take at least six months to rule on the case.

The DCIA plan is more ambitious. The group suggested putting a $5 surcharge on file swappers' monthly ISP bills in the initial stage and distributing that money largely to copyright holders. Even if some peer-to-peer users decided to stop using the software, the plan could raise nearly $2.5 billion a year, Lafferty said.

Under the plan, ISPs would have to install software such as that from Packeteer or other network-management companies that can identify which applications subscribers are using. Some portion of the fee would go to fund those activities, Lafferty said.

Later stages of the plan would evolve into a structure more like cable television. File swappers could subscribe to "channels" of encrypted content focused on a specific type of music for an extra fee. Ultimately, a top tier of service would be added in which subscribers could pay for individual, tightly copy-protected songs that would not be available at the free-trading lower service levels until a later date.

Both future phases of the plan would require strong encryption and digital rights management technology to be developed that would block the songs from finding their way into the unregulated file-swapping networks.

A previous plan floated by the DCIA looked more like the business model currently used by Brilliant Digital Entertainment subsidiary Altnet, one of the DCIA's founders. Under that plan, copy-protected files would be sold on file-swapping networks in early stages, but ultimately ISPs would install file-identification software inside their networks and bill file swappers for every song downloaded.

A third DCIA-proposed business model that focuses more on entertainment company interests, rather than ISPs or file-swapping software companies, will be released later.

The group's efforts have previously met with skepticism from a different file-swapping trade association, P2P United, which represents companies including Lime Wire, Streamcast Networks, Grokster and Blubster.

 

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