December 31, 2007
Volume XX, Issue 6
Operators Partner with P2Ps to Save Bandwidth
Excerpted from Telecom Marketing Report by Magnus Franklin
A landmark partnership among operators and peer-to-peer (P2P) service providers such as BitTorrent could enable operators to reduce the costly traffic generated by P2P services by 60%, say backers of the P4P initiative.
In January, US regional incumbent operator Verizon and file-sharing network Pando are due to test the P4P architecture, which has been devised by researchers at Yale University.
Provided the results of lab tests translate to the real world, P2P transfers would consume up to 60% less bandwidth and be 30% faster on its network, Verizon says.
Now other operators, including Spanish incumbent Telefonica and Verizon rival AT&T are joining the initiative, in a bid to conserve the amount of bandwidth taken up by P2P traffic.
The operators are keen to explore new ways of handling P2P traffic, which causes costly congestion on their networks.
Other measures are already in use, such as throttling the speed available to consumers during peak hours or blocking certain types of traffic using deep-packet inspection (DPI) technology, but they are unpopular with many subscribers.
In addition, the increasing use of P2P technology for video distribution by peer-to-peer television (P2PTV) services such as the BBC's iPlayer and Joost means that operators and content providers may have to find more productive ways to work with P2P traffic, or face spiraling costs and unhappy subscribers.
The P4P initiative was set up by the Distributed Computing Industry Association (DCIA), a US-based body aimed at bringing together P2P service providers, operators, digital-rights companies, and media owners.
According to Marty Lafferty, CEO of the DCIA, the initiative is a clear win-win for all involved. "P4P connects peers more quickly, giving them a higher quality of service (QoS), while ISPs benefit from significant savings in bandwidth," he said.
P2P traffic is often highly inefficient, taking unnecessarily long routes to its destination. "At the moment, P2P is random," said Doug Pasko, who represents Verizon in the P4P Working Group. "A user in New York might connect to a peer in Tokyo, even though there is one available down the street."
The P4P architecture builds on existing P2P protocols to solve that problem, enabling both the network owner and the P2P client to make a more intelligent selection of peers and ensuring that the traffic is routed in the most efficient way. The initiative is currently recruiting additional ISPs.
Pasko said that at a recent presentation at the European Peering Forum, carriers expressed surprise that P2P service providers were looking to cooperate with them.
John Dillon, Chief Marketing Officer (CMO) at P2P content-delivery network CacheLogic, which is also a member of the P4P initiative, said that more collaboration is needed among the different parties involved in delivering content, including ISPs, delivery platforms such as P2P, and content owners.
The P4P initiative could mark a turning point for such collaboration; it could even pave the way for operators to initiate talks with over-the-top service providers such as P2P networks to form some sort of revenue-sharing agreement in return for improved QoS. At the moment, however, the P4P working group's efforts are focused on just making P2P traffic more efficient.
P2P applications have not had an easy time since their conception in the late 1990s. Concerns about the unauthorized sharing of music initially led to the closure of networks such as Napster after record labels took them to court.
More recently, P2P applications have been the target of operators trying to limit the impact of P2P on their networks. Only 13% of Europeans have ever used P2P file-sharing applications, although in some countries of the region, 20% or more have done so.
The problem for operators is that this minority of users generates the majority of traffic on their networks.
Most recently, US cable operator Comcast incurred the wrath of consumers as news spread that the operator was blocking P2P traffic without informing them.
But Comcast is by no means unique in blocking or limiting traffic on its network. UK ISP PlusNet, which is owned by incumbent British Telecom (BT), imposes caps on the amount of data a user can download during peak times, which is clearly communicated to customers.
Neil Armstrong, Products and Marketing Director for the ISP, said that a clear traffic-management policy and responsible use of often-maligned technology such as DPI enable them to differentiate their service.
"Two years ago we started using DPI as a cost-control measure, but now we use it as a quality differentiator, as well as a cost-control measure," he said. In particular, Armstrong said, the use of DPI lets PlusNet prioritize certain traffic, such as video, that requires a stable, fast connection.
"We can recognize the difference between P2P traffic depending on whether it is downloading a file for later or streaming video using P2P in a client such as Joost or the BBC's iPlayer, and give the streams a higher QoS," said Armstrong.
This differentiation of traffic by content is becoming increasingly common.
John Burnham, Vice President for Marketing at Brix Networks, which supplies network-monitoring tools for operators, said 15 operators currently use its technology, with more to follow in 2008.
With Internet data volumes projected to grow significantly with the rising popularity of video, certain operators appear to have admitted that "excessive" use of bandwidth will become more common, by raising the ceilings on their "fair usage" policies.
Like PlusNet, UK cable operator Virgin Media has a clear policy for managing traffic, but earlier this month decided to lessen its bandwidth restrictions following a review of traffic on its network and investments in capacity.
The hours during which traffic is subject to limits have been reduced from 4-PM-to-midnight to 4-PM-to-9-PM. In addition, although it previously throttled the bandwidth of its top 5% of users, the operator now applies such action to only the top 3%.
Report from CEO Marty Lafferty
 We hope to see you this coming Sunday, January 6th, at the P2P MEDIA SUMMIT LV. As the DCIA's first-ever Conference within CES, this promises to be the most stimulating, timely, and valuable event since our inception.
Highlights of the day-long conference include the opening keynote by BitTorrent's Ashwin Navin, our luncheon session, sponsored by PeerApp, featuring the P4P Working Group's Doug Pasko & Laird Popkin and the National Association of Television Arts & Sciences' Shelly Palmer, and our closing keynote by QTRAX's Allan Klepfisz.
BitTorrent is the global standard for delivering high-quality files over the Internet. With an installed base of over 150 million clients worldwide, BitTorrent technology has turned conventional distribution economics on its head.
The more popular a large video, audio, or software file, the faster and cheaper it can be transferred with BitTorrent. The result is a better digital entertainment experience for everyone. With tens of thousands of new users every day, BitTorrent has three lines of business: the BitTorrent Entertainment Network, BitTorrent DNA, and the BitTorrent Software Licensing program.
QTRAX is the world's first free and legal P2P music service. Showcasing an innovative ad-supported delivery model that easily directs revenue back to artists and other rights holders, QTRAX has successfully signed licensing deals with the major labels, music publishers, and leading independents.
QTRAX, which officially launches on January 27th at MIDEM/MIDEMNET, will provide fans with access to a colorful and diverse catalog with millions of high-quality, high-fidelity digital music files, representing the broadest artist-based fan-directed array of products available anywhere.
We are also very pleased this week to announce that Microsoft's See-Mong Tan has been added to the P2P MEDIA SUMMIT LV agenda in a special session that will introduce the new P2P platform in Microsoft Windows to conference delegates, entitled "P2P in Windows."
P2P MEDIA SUMMIT LV keynote speakers also feature AHT International's Ron van Herk, Motorola's John Waclawsky, Pando Networks' Robert Levitan, Veoh Networks' Jennifer Betka, VeriSign's Jeff Richards, Vuze's Gilles BianRosa, and Zattoo's Sugih Jamin.
Please click here to register for this must-attend event. Our morning sessions will feature Policy, Technology, and Marketing Tracks; and afternoon panels will address Content Provisioning, Solutions Development, and Business Strategy with industry leaders from around the world.
There will be a continental breakfast, conference luncheon, and VIP networking cocktail reception with live entertainment.
"The Post MGM v. Grokster World - New Rules for P2P" will address policy matters. As consumer lawsuits and corporate litigation settlements continue in the wake of the landmark US Supreme Court decision, what other changes in the regulatory environment affecting P2P technologies do they presage? What will be the impact of the most recent court opinions with respect to continuing advancement of P2P? What else has to happen from a legal and policy standpoint to foster investment and robust commercial development of P2P?
"P2P File Sharing - The Evolving Distribution Chain" will focus on technology issues. What is the current landscape for web-based content distribution and what role do file-sharing technologies play? What trends are emerging in P2P implementation by participants in the distribution chain and in consumer usage? What impact do advances in digital rights management (DRM), data compression, caching, content acceleration, swarming, streaming, and other P2P-related technologies have?
"Business Models - What's Working and What's Not" will deal with marketing concerns. Has any alternative business model - paid-download, subscription, or advertising-supported - yet proven to be more promising than adware that first predominated in P2P? Is file sharing more of a promotional tool than a direct sales channel? Have any more innovative approaches been attempted and what has been the learning? How can users navigate among entertainment industry sanctioned P2P service offerings?
"Artists and Rights Holders - P2P for Content Creators" will address content provisioning. What has been the experience to date of content creators who have embraced P2P? What changes do they need to more effectively harness file-sharing and related technologies? Are there innovative art forms in development for the P2P distribution channel?
"Advancement - Creating the Commercial P2P Ecosystem" will focus on solutions development. What architectural, content-security, and other technological solutions are now in development that will optimize P2P deployment for the benefit of all participants in the distribution chain? Which of these have been tested and what have been the results to date? Can P2P streaming technology help broadcasters and content providers overcome the limitations of live streaming?
"The Next Frontier - Business Practices for P2P Industry Leadership" will deal with business strategy. How does P2P fit into the glacial restructuring of the telecom and media sectors? How should P2P companies approach macro-business issues from financing to competitive differentiation to strategic alliances and alternative exit strategies? What are the optimal approaches for protecting and enhancing brand reputations in a Web 2.0 world?
CES International 2008 is shaping up to be the largest Consumer Electronics Show in history with over 140,000 attendees coming together in Las Vegas. CES Keynotes include Microsoft's Bill Gates, the Consumer Electronics Association's (CEA) Gary Shapiro, Intel's Paul Otellini, Comcast's Brian Roberts, Panasonic's Toshihiro Sakamoto, and General Motors' Rick Wagoner.
Registration for both CES and the P2P MEDIA SUMMIT LV can still be done online at http://registration.expoexchange.com/ShowCES081/Default.aspx.
Alternatively, you may call 410-476-7965. For sponsor packages and speaker information, please contact Karen Kaplowitz, DCIA Member Services, at 888-890-4240 or karen@dcia.info. Share wisely, and take care.
P2P is More than Cheap Bandwidth
Excerpted from NewTeeVee Report by Janko Roettgers
2007 has been the year of the P2P content delivery networks (CDNs). Akamai bought Red Swoosh, BitTorrent started to showcase its DNA streaming solution, and Pando inked a deal with NBC to P2P-power the distribution of shows like "Law & Order" through the network's NBC Direct download service.
Combining traditional CDNs with P2P makes a lot of sense from a business perspective, but unfortunately it doesn't make the platforms themselves any better.
In other words, just because something uses P2P technology doesn't mean it won't suck. Platforms that suck won't find any users, and platforms without a solid user base can't leverage the potentials of P2P. Call it "Joost's Law" if you will. So how do you stop things from sucking? By acknowledging that P2P is about more than just saving a few bucks.
Granted, combining P2P with CDNs seems like a great idea on paper. Use the upload capacity of your customers for content distribution, and you'll get higher scalability and lower costs in return. But why would users want to help a company distribute its movies? Why would they install one specific client or browser plug-in if there are a dozen others out there that promise pretty much the same thing? And why wouldn't people just continue to get their content from sites like The Pirate Bay?
Platforms like Joost and the BitTorrent Entertainment Network have taken the first steps in the right direction. Free, ad-supported content offered through a convenient streaming solution that doesn't make you wait for hours before you can watch your downloaded movie or TV show - that's a start to compete with copyright infringement. But infringement isn't just about free content, and competing with it doesn't just mean that you need to lower your own price point through advertising and bandwidth-saving P2P technology.
One often overlooked reason torrent sites are so immensely popular is that they offer their users a sense of community. People love to comment on the content they are downloading, they love to chit-chat in forums and comment sections, and they're more than willing to contribute bandwidth and exclusive uploads if they feel at home on a site.
Take the music site Oink for example, which was one of the biggest P2P stories of 2007. The music industry succeeded in shutting down Oink in October, and the press releases of the record industry made it sound like Oink was a haven for pre-release copyright infringement that operated under a shield of an exclusive, invite-only membership system.
That's certainly one way to look at it, but the truth is that keeping sites like Oink private isn't really more than a gesture when it comes to shielding them from anti-piracy organizations. In fact, invite-only torrent communities get infiltrated all the time. But the whole process of invite-only initiations fosters a sense of community that you can't find on any commercial download site.
Even public sites like The Pirate Bay, with millions of users that don't even bother to register for a user name, tend to have strong communities with multiple layers that are held together by a few dedicated uploaders, a bigger circle of people who comment, and finally all those users who willingly contribute their own bandwidth to keep things going.
Capturing this sense of community is the key to making P2P CDNs work. Engage your users, and they'll be more than happy to support your platform. But getting there means that you have to give up on the notion that P2P is just a technology, and embrace the social aspects of file sharing.
Emotional Business Bonding on Social Networks
Excerpted from Research Brief Report
New research from Communispace, supporting the hypothesis that people are looking to fulfill six essential social needs online, and drawing on the Maslow hierarchy of human needs, concludes that businesses that help facilitate those needs are more likely to create deeper emotional bonds than usually exist between companies and customers.
In the report by Julie Schlack, Michael Jennings, and Manila Austin, "Meeting Business Needs by Meeting Social Needs," the Communispace researchers, building on the work of social scientists, have identified the specific social needs that are met through participating in social networks.
The study addresses "Six Social Needs" and relates them to online social networks, suggesting that business can take advantage of these observations in creating more affinity with their prospects and customers:
1) Online social networks provide people with the ultimate tool for defining and redefining themselves, as evidenced in profile pages on Facebook and MySpace.
2) The need for autonomy, recognition, and achievement are essential to our sense of self-worth; and are fulfilled in online communities, blogs, and social networks that provide a way to develop and manage a virtual reputation.
3) People have a need to both seek and provide help to others. Mutual assistance among strangers is a phenomenon that has been uniquely enabled by the Internet.
4) Online communities are becoming the way people find, create, and connect with others "just like me" - people who share similar tastes, sensibilities, orientations, or interests.
5) A sense of belonging or affiliation alone is not equivalent to a true sense of community. Achieving a real sense of community requires long-lasting reciprocal relationships and a mutual commitment to the needs of the community as a whole.
Communispace referenced its other research on social networking behavior and found that when companies meet the full range of social needs, they gain trust and deep insights into their consumers and community members. And when companies go still further to actively embrace and act on people's ideas they fulfill a sixth social need:
6) People want to be reassured of their worth and value; and seek confirmation that what they say and do matters to others and has an impact on the world around them.
Meeting all 5 + 1 of these social needs generally requires the level of intimacy and facilitation that are the hallmarks of smaller, invitation-only online communities.
GDH to Distribute Animated Works with P2P
Tokyo-based GDH has announced that animation titles produced by its GONZO subsidiaries will be distributed online via a new P2P network. GDH will provide "SpeedGrapher," and a new title to be released in the spring, "The Tower of Druaga - the Aegis of Uruk," both of which were produced by GONZO, and "Project PAPO," produced by GONZO Rosso, using SkeedCast, a P2P platform for digital content distribution developed by Kyoto-based DREAMBOAT.
DREAMBOAT was established in 2005 for the purpose of offering a new service model based on P2P technology. SkeedCast, a secure digital content transmission platform centered around ASP service, includes SkeedCast Business as a B2B solution, and aims to set an industry-wide standard for high quality content delivery transmission.
This venture will serve to evaluate how the utilization of P2P networks can contribute to a reduction of server load and costs, and to assess the feasibility of P2P file-sharing schemes for new business models by distributing not only promotional footage but also animation episodes for a fee. In response to the expansion of Internet broadband usage and the resulting advance in video distribution technologies, GDH will continue to experiment with new video distribution systems that allow delivery of high-resolution quality content, and explore effective applications of online networks.
The distribution service is being provided in part to assist a deductive experiment conducted by the P2P Network Experiment Council supported by the Ministry of Internal Affairs and Communications. The Council is chaired by Tohru Asami, Professor, Graduate School of Information and Technology, at the University of Tokyo, and was established on August 9th for the purpose of further advancing social understanding towards P2P file sharing, conducting technical research, and identifying issues that need to be addressed in the near future. The Council is currently conducting various experiments on distribution services that utilize P2P technologies.
New Secure File Access Control Technology
Excerpted from Manufacturing Business Technology Report
Erik Riedel of San Francisco, Mahesh Kallahalla of Palo Alto, and Ram Swaminathan of Cupertino, CA, have developed a secure file access control method.
According to the US Patent & Trademark Office (USPTO), the invention relates to a "technique for secure file access control via directory encryption. File names of data files stored by a network server are encrypted so as to protect them in the event the server is untrustworthy, such as in a distributed computing environment."
An abstract of the invention, released by the USPTO, said, "Two encryption keys are employed so as to provide different access capabilities. For example, clients of the server that are authorized to perform read-only operations on the files may be prevented from modifying the files, while clients that are authorized to perform write operations, may modify the files or even delete the files.
In a preferred embodiment, encrypted file names replace plain text files in a directory structure without otherwise changing the directory structure.
Because the directory structure is otherwise unchanged, the server may still have adequate information to perform file management and space management functions."
The inventors were issued US Patent No. 7,313,694 on December 25th. The patent has been assigned to the Hewlett-Packard (HP) Development Company.
P2P's Most-Traded Movies, TV, and Songs of 2007
Excerpted from Wired News Report by Michael Calore
If you want a true snapshot of what people are watching and whom they're listening to online, look no further than the file-sharing underground.
With Hollywood sweating over copyright infringement and record labels crying over losses, activity on P2P file-sharing networks has emerged as the most reliable barometer for determining what's hot and what's not among the most tech-savvy media consumers.
To find the most-traded files in the world of P2P, Wired News turned to BigChampagne Online Media Measurement, a Los Angeles-based firm which tracks media-consumption trends across all digital channels.
For this study, we asked BigChampagne to concentrate solely on P2P traffic. The firm then compiled a set of top-ten lists using data from all the major file-trading protocols and networks - BitTorrent, Gnutella and eDonkey included. Private BitTorrent trackers and invite-only trading communities were excluded from the study, as were private LAN-based sharing networks.
But what remains, we feel, is an accurate picture of what the file-trading world at large got excited about over the past 12 months.
Each list shows data from the beginning of the year up to December 10th, 2007.
The top P2P songs of 2007 were: 1) Shop Boyz, "Party Like A Rock Star," 2) Akon, "I Wanna Luv U," 3) Sean Kingston, "Beautiful Girls," 4) Mims, "This Is Why I'm Hot," 5) Akon, "Don't Matter," 6) T-Pain, "Bartender," 7) Soulja Boy, "Crank Dat Soulja Boy," 8) Justin Timberlake, "My Love," 9) DJ Unk, "Walk It Out," and 10) Jim Jones, "We Fly High."
All of 2007's biggest names in cross-over pop and hip-hop are represented on the list of most-traded songs. But there's almost no correlation to sales of full-length CDs.
The Shop Boyz and Mims both had hugely successful breakout singles in 2007, seven of which were widely downloaded. But sales of their respective albums disappointed by failing to go gold. Sean Kingston, whose song "Beautiful Girls" ranked No. 3, hasn't even released an album yet.
The only top-fiver with a successful long-player is Akon, whose "Konvicted" CD is certified triple-platinum.
BigChampagne Co-Founder & CEO Eric Garland sees this as a reflection of the sea change currently afoot in the music business. In days past, an artist's success was determined largely by album sales. The world of digital downloads, however, is centered solely on singles.
"If Soulja Boy and Shop Boyz would have sold as many CDs as they did singles, they'd be household names," said Garland. "They'd be superstars on par with 50 Cent and Kanye West."
Further evidence is the fact that the biggest ring-tones of 2007 dominate our most-traded list. According to recent data, from AT&T, Shop Boyz' "Party Like a Rockstar," Mims' "This Is Why I'm Hot," Akon's "Don't Matter," and Soulja Boy's "Crank Dat Soulja Boy" were some of the best-selling ring-tones among telco's wireless customers.
The P2P top music artists of 2007 were: 1) T.I., 2) T-Pain, 3) Akon, 4) 50 Cent, 5) R. Kelly, 6) Lil Wayne, 7) Justin Timberlake, 8) Fergie, 9) Ludacris, and 10) Snoop Dogg.
For the list of top artists, BigChampagne tracked P2P downloads of both singles and full albums. The names here are better known - 50 Cent, R. Kelly, and Snoop Dogg, for instance - but the list is still primarily made up of singles artists.
Garland said his firm tracks downloads of full CDs, but you'll never see them at the top of the charts.
"Songs are the new currency online," he said. "The volume of downloads for individual songs dwarfs the downloading of albums."
Indeed, anyone following the online music business this year would expect to see Radiohead on the list of most-traded artists. The British rock band generated a huge amount of buzz with the early October release of its album "In Rainbows," which it sold as a pay-what-you-like digital download. Even though around one-third of the album's downloaders grabbed it for free off of BitTorrent rather than pay a cent, the activity wasn't enough to make a much of a dent in the world of P2P.
"The only area where the Radiohead was possibly the story of the year was complete album downloads," Garland said. "They aren't a singles band. Consequently, Radiohead has never done the kind of volume that these big video-driven stars du jour command."
The top P2P Movies of 2007 were: 1) "Resident Evil: Extinction," 2) "Pirates of The Caribbean: At World's End," 3) "I Now Pronounce You Chuck & Larry," 4) "Ratatouille," 5) "Superbad," 6) "Beowulf," 7) "Transformers," 8) "American Gangster," 9) "Harry Potter and the Order of the Phoenix," and 10) "Stardust."
It's no surprise that a film based on a videogame franchise and starring fetching actress Milla Jovovich did well among the P2P crowd, which is made up largely of younger males. What is surprising is that 2007's top-two box-office draws in the United States - "Spider-Man 3" and "Shrek the Third," respectively - didn't even crack the top 10. Also, 2007's No. 3 movie in the United States, "Transformers," only placed in the No. 7 slot.
BigChampagne's Garland points to the fact that while Hollywood films and content produced in the West dominate the lists, the file-sharing community is truly global.
The myth that higher-quality DVD rips of movies are in higher demand than "cams" - copies captured by camcorder-toting pirates in theaters - is also dispelled by the list of top trades.
"Beowulf," for example, is No. 6 on the list despite having been released in theaters only in November. The No. 5 movie, "Superbad," had only been available on DVD for a week when this list was compiled, meaning most of the traded copies were likely cams.
"You get two release windows intermingling at once," said Garland, "the most popular movies in theaters and the most popular new releases on DVD. They're all competing equally online."
Garland also points out that the art of taping a movie from the audience has come a long way of late.
"Cams can be remarkably good and perfectly watchable," he said. "It's nothing like the days of buying VHS copies off the sidewalk in Manhattan."
The top P2P TV Shows of 2007 were: 1) "Heroes," 2) "Prison Break," 3) "Top Gear," 4) "Smallville," 5) "Desperate Housewives," 6) "House, M.D.," 7) "Lost," 8) "Grey's Anatomy," 9) "24," and 10) "Dexter."
NBC's sci-fi drama "Heroes" was a runaway hit on prime-time television in 2007, and the story was the same online. The show was a smash on P2P networks - almost twice as popular as runner-up "Prison Break."
"Top Gear," the BBC's weekly show about cars, is a surprise hit - but the average P2P trader likely drools over cars online and off, and responds positively to the show's irreverent, danger-loving hosts.
Most of the shows on the list are produced by major networks and broadcast over-the-air. But filling the No. 10 slot is "Dexter," a moody drama about a serial killer produced for Showtime. The show is only available on pay TV, giving it the added allure of scarcity and feeding its popularity among P2P traders.
The possibility that some of these highly traded shows were originally purchased at an online store as DRM-locked files has little effect on their popularity, said Garland.
"Copy protection doesn't make any difference," he said. "Once one copy is unlocked and made available in the public domain, it's a short order."
One-Third of PCs Have P2P Programs
Excerpted from Ars Technica Report by Jon Stokes
Pop quiz: what music and movie downloading app is installed on over one-third of the world's computers, according to a new report from Digital Music News and media tracking specialist BigChampagne? The answer isn't iTunes, nor is it any other DRM-encumbered media program that has been blessed by Big Content. The answer is open P2P, with a presence on an estimated 35.4% of the world's PCs.
Clearly, the so-called "darknet" remains far and away the world's leading provider of online media content, drowning licensed download services in a flood of "free."
This data also should give the major labels pause in their ongoing attempts to convince Apple that $0.99 per song is way too cheap.
The labels may be tempted to take comfort in the report's other finding that, as prevalent as the leading open P2P application LimeWire is (at about 18% of PCs globally), its uptake has been virtually flat over the past year.
But a recent report on night-time P2P traffic levels found BitTorrent to be the dominant P2P protocol, suggesting that either BT clients are even more popular than the already ubiquitous LimeWire application, or that BT users download more and/or larger files.
Between LimeWire and BitTorrent, the ongoing and extremely widespread popularity of P2P as a media delivery vehicle suggests that music prices remain stuck at too high a level while the capacity of portable media players continues to balloon.
Does anyone remember the iPod launch, when there were jokes about how it would cost a user a few grand to fill up an iPod at the iTunes music store? Now that number is well into the five figures for a current-generation iPod, a fact that forces users to turn to other sources of digital content if they're to come even close to filling their iPods.
And when I say "filling iPods," I do mean the iPod specifically, and not portable media players generically. Unlike non-Apple DRM offerings from movie and music providers, LimeWire happens to be 100% compatible with the most popular media player on the planet.
This has to be a factor in its ongoing popularity - it's a free alternative to iTunes for users who just want that single NOW, or who don't care that it takes 45 minutes to put together a complete album plus artwork at a decent bit-rate.
Please note that the idea on which this article is premised - i.e., that a thriving gray or black market in a particular commodity is evidence of overpricing (typically from a monopoly or cartel) in the "legit" market - is pretty uncontroversial in economics when applied to things like drugs and non-union labor.
There's not a lot to disagree with here, at least from the standpoint of basic arithmetic. Gray and black markets are about simple supply and demand.
Black markets typically carry with them a certain amount of cost for participants (i.e., the lack of government sanctioning makes contracts hard to enforce, increases risks, exposes participants to legal liability, etc.), so they're by no means "free."
People, as rational actors, make a calculation, and they're willing to incur those black market costs when they're priced out of the "legit" market. So this is about old-fashioned supply and demand.
With about 35% of all PCs having some type of P2P file-sharing software installed, for media downloads, the "darknet" still rules.
High-Capacity MP3 Players Prove P2P's Popularity
Excerpted from OmniNerd Report
A little mathematics analysis at Ars Technica reveals that it should be "too" expensive to fill a standard iPod with retail music. Thus, while it is well known that P2P applications dominate the Internet's bandwidth, the extent to which the general population utilizes P2P has never been fully conceived.
With the widespread ubiquity of iPods, Zunes, and other portable MP3 players sporting enormous capacities, it becomes a trivial exercise to question the legitimacy of the player's files and whether or not the owner makes use of a P2P download application.
Current iPod offerings from Apple include the Shuffle, Nano, Touch, and Classic - sporting maximum capacities of 1GB, 8GB, 16GB, and 160GB, respectively.
Assuming an MP3 is recorded at roughly 192kbps with VBR, a four-and-a-half minute song will encode at approximately 5MB. Using a 99-cent download fee as the benchmark price for a "legitimate" single track, filling each iPod should cost approximately: iPod Shuffle - $200; iPod Nano - $1,600; iPod Touch - $3,200; and iPod Classic - $32,000.
So, to avoid getting nabbed in an RIAA lawsuit, remember to practice safe P2P downloading.
AT&T and Cisco's Bandwidth Bonanza
Excerpted from Business Week Report by Olga Kharif and Peter Burrows
When AT&T went shopping for high-tech gear to soup up its communications network with advanced video, broadband, and voice services, it turned to long-time supplier Cisco Systems. On December 10th, the nation's largest telco announced a deal that could be worth up to $500 million to Cisco over the lifetime of the upgraded AT&T network, according to Jim Kelleher, an analyst at Argus Research.
What's noteworthy isn't simply the size of the deal but the vast amount of bandwidth it represents. When Cisco brought out its top-of-the-line router in 2004, many analysts felt it was so powerful that only a handful of companies would ever buy one. Now, AT&T plans to link 25 cities with these mighty machines to help it handle the rising tide of Net traffic - particularly video. This bodes well for a Cisco unit that has traditionally brought in a steady 25% of the networking giant's $34 billion in sales.
Now other telcos and cable companies, located everywhere from Korea to Bulgaria, are flooding Cisco with orders - and helping realize its dream of conquering the telecom market, long a domain of Alcatel-Lucent, Ericsson, and Nortel. Cisco's service provider business finally had a major growth spurt this year, shooting up to nearly 30% of overall sales. To put this in perspective: Cisco's carrier revenues are nearly as large as all of Nortel's. And service provider sales "could grow another percentage point or two as part of total sales next year," said Eve Griliches, an analyst with consultancy IDC.
Why is Cisco on such a tear? It enjoys a far broader product line than most rivals, both for the basic routers that carriers need to run their networks and for related products, such as Scientific Atlanta cable TV set-top boxes and pricey videoconferencing systems, that can be resold by carriers to consumers and corporations.
Thanks to all this activity, Cisco has been grabbing market share. Its piece of service provider sales has grown from 7.5% to 8.4% between the second quarter of 2007 and the same period last year, according to IDC. That growth has come at the expense of Alcatel-Lucent, establishing Cisco as the world's fourth-largest equipment provider for carriers, a bump from No. 5 last year.
As telcos jump into video services, they're replacing separate voice, data, and video networks with a single one based on Internet technology.
"Cisco has become a lot more relevant," said Tony Bates, Senior Vice President and General Manager of Service Provider Technology at Cisco.
The quick growth of its service provider business carries huge implications for Cisco. In a world in which more and more computing occurs out on the Internet as opposed to inside PCs and corporate networks, the companies that handle all the communications needs - carriers and cable companies - become increasingly crucial.
But Cisco also wants to sell to consumers that want to buy gear directly, rather than rely on carriers. It's a question of so-called channel conflict. Cisco is well-positioned to reach consumers in both ways, either by striking a deal with your local phone or cable company or by selling you gear at the local Best Buy.
Many analysts think the latter will become more popular, as a generation of web-savvy consumers seeks to create their own Internet experience rather than pay a big monthly bill for premium services from carriers.
Cisco's challenge: how to go after this direct business without ostracizing its carriers, which are banking on selling those premium services to avoid having to subsist on selling basic connections at commodity prices.
Witness the company's recent behavior as evidence of this conundrum. For years, Cisco has been working to build a consumer brand of its own, as familiar to children and grandparents as Intel, producing chips for PCs.
But several sources say the company has yet to decide on a product strategy to back it up. Earlier this year, Cisco seemed poised to move ahead with a slate of new products to be sold directly to consumers. Now that effort seems to have slowed down-in part over concerns from people at Cisco's Scientific Atlanta unit, which relies solely on sales to carriers.
To be sure, Cisco needs to tread carefully. Whenever a big phone or cable company wants to roll out a new service, the company gets a lucrative twofer: Not only do new services require the purchase of new kinds of gear but they also require an upgrade of the basic Internet infrastructure to handle all the additional traffic.
AT&T, for example, will buy the new CRS-1 routers that can each cost $1 million or more to build out next-generation broadband networks. Such routers can be thought of as traffic cops, directing packets of transmitted data where to go and when. And by putting such vast bandwidth in place, AT&T will have the room for new services its marketers dream up.
Sales of routers and switches alone for such new networks based on Internet Protocol (IP) exceeded $7.6 billion in 2006 and will nearly double to $14 billion by 2011, according to IDC - making this sector one of the fastest-growing equipment markets around.
The carrier relationships could also lead to higher sales to corporate and government customers, Cisco's bread-and-butter market and 70% of sales. As business networks get more complex, their owners are outsourcing a greater part of their management to carriers like AT&T, explained Kelleher. If AT&T is happy with its own CRS-1 gear, "they'll act as a dealer of Cisco's equipment," he said.
To win carrier goodwill, Cisco is making it easier for carriers to tinker with software that comes with its equipment, so that the service providers can create nifty custom applications and video services. The company is also expected to unveil several new set-top boxes in 2008, allowing people to move video more easily from one room of the house to another and to take phone calls right on the TV.
Cisco may also introduce a new, so-called edge router, moving smaller chunks of data along the telecommunications network. While the CRS-1 routers haul massive amounts of Net traffic between major cities, edge routers pull it off these interstates of the Net and deliver it to the company, home PC, or cell phone it's meant for.
With so many regions of the world receiving a growing variety of services, this is where much of future innovation and growth is expected to occur. "Eventually, it will be a very good sales boost," Griliches says.
Top Ten Trends for 2008
Excerpted from Techtree Report
With year-end in sight, it's time for predictions about the year to be. In this vein, inCode, a VeriSign company, has come out with top 10 predictions for the wireless industry for 2008.
First and foremost, chances for global harmony are greater than ever with the anticipated battle between LTE, HSPA, and WiMAX no longer happening, thanks mainly to the difference in maturity levels of the three technologies.
With the 700MHz spectrum auction soon coming up, a new wholesale carrier will emerge that will focus on being cost-effective. The new model will be driven by companies like Google, and will operate at lower costs per minute.
Open access, and strong competition in the chipset industry will push device- and handset- vendors to bypass carriers, and build closer ties with end-users.
With a decreasing number of players, carriers will change focus from expanding their respective networks to optimizing the customer experience.
Wireless broadband will continue to be the fastest-growing and most loved service since pre-paid and SMS.
Long criticized for helping unauthorized file sharing, P2P will go mainstream, beginning to be used for licensed distribution of content.
Carriers will follow an 'inside out' strategy, with coverage focused on where needed most rather than blindly.
With increased roll-out of 3G infrastructure and bandwidth-intensive data services, carriers will need to optimize and/or upgrade the back-haul portion of their networks to ensure that the quality of service is not compromised.
As in the case of the Internet, the wireless space, too, will give preference to advertising-based models vis-a-vis subscription-based models.
iPhone and everything iPhone will continue to gain in significance - especially sensitivity of data on iPhones.
Last but not the least, with the quality of mobile services continuing to deteriorate for the eighth year in a row, the wireless industry will be forced to get back to basics in response to consumer demand for more reliable phones and phone services.
Best Stocks for 2008: VeriSign
Excerpted from Blogging Stocks Report by Georges Yared
VeriSign had excellent performance in 2007. The stock ran from the low $20s to the low $40s, and now has settled in at $37.54. My 2008 price target for VeriSign is $55. It will be an interesting year for this company - the toll booth of the Internet.
I wrote about VeriSign back in late May 2007 when the tenured CEO, Stratton Sclavos, abruptly left the company. Sclavos was CEO for 11 years, having taken the company through its 1998 IPO and many, many acquisitions. Since his quick departure last May, the stock has gone up from $25 to its current price. The market has voted favorably on this CEO's departure. So what makes VeriSign a great buy for 2008?
VeriSign is the Internet's gatekeeper. All addresses ending in .com and .net are housed with VeriSign, as it serves as the master registry. All communications from e-mail to web searches must go through the VeriSign data center. As of last quarter there are 75 million domain names ending in .com and .net, and they're growing by 25% year-over-year.
Regardless of where the .com or .net address was purchased, VeriSign earns $6 per name per year. VeriSign has the authority to act as the master registry from the US Department of Commerce, which recently allowed for a price increase of 7%, allowing VeriSign to earn $6.42 per .com address. VeriSign can further raise the price 7% per year in three of the next five years.
The VeriSign data center handles 20 billion look-ups per day. VeriSign is also the largest issuer of website digital certificates. The certificates secure the sensitive e-commerce connections. Certainly you have seen the term "VeriSign Inside" when you've bought something through Amazon or other secure e-commerce web sites. VeriSign encrypts the transaction and has never been hacked. The beauty of the sales model is that the certificates are sold on a per-server per-year basis, and pricing averages about $240 per server.
The registry for .com and .net, and the website digital certificates business yield extremely high gross and operating margins. VeriSign's stock has lifted these past few months because new senior management has indicated they will sell off several non-core business lines and sharpen VeriSign's focus. This is why the stock will continue to run in 2008.
VeriSign is involved in the telecommunications sector and the e-commerce bill-paying and bill-settling space. Basically, these are non-core, and will more than likely be sold off in 2008. These other business lines have been a drag on growth and margins. The operating margins have actually risen to 23%, but if VeriSign sheds the non-core businesses and focuses on the registry and website digital certificates, the operating margins could climb up to 38%-40%. Revenue and earnings should also post 25%-30% growth and be sustainable for the next several years.
VeriSign will be in the news a lot this coming year as it sells off its peripheral assets and unleashes the underlying growth of its core business.
Responsible Downloading
Excerpted from NY Times Report by David Pogue
I recently wrote about how, in one of my talks, I walk the audience down a garden path of hypothetical copyright-morality situations. The point is to illustrate how many shades of gray there are, in the law and in people's ethical compasses.
And I noted that when I recently posed the same series of questions to a college audience, I was never able to find the young people's morality threshold. Digital music and movies, they clearly felt, are made to be shared.
The outpouring of reader responses has been astonishing. You should read them at Pogue's Posts; it's a complete course in current attitudes toward digital copying.
Many of you suggested that I might have gotten different responses from the audience if I'd asked different questions:
"A few more hypotheticals you might try: 1) Can I borrow a CD from a public library and rip it onto my iTunes, provided I don't share the songs? 2) My friend has finished ripping all of his CDs. He's offering to sell me his whole collection for $10. Is that OK? 3) I review CDs for my blog. I often receive promotional CDs from record companies. Can I burn those CDs onto my iTunes, preserving the physical CD in case the record company wants it back? 4) Is it OK to convert my LPs to MP3s? How about my old cassette tapes? MiniDiscs? DATs? Reel-to-reels? Wax cylinders?"
"The problem with the RIAA is that they don't care about shades of gray. Young consumers find it ludicrous and counter-productive to spend all of their time parsing our actions. That's why it's so much easier for so many people to say, 'Forget it: I'm just going to download it for free.'"
"Next time, try: 'OK, let's try one that's a little less complicated: You want a movie or an album. You don't want to pay for it. So you steal it from the video store.'"
Of course, the problem with this example is that stealing something physical is not the same as downloading a copy of something. When you shoplift, you're actually taking the item away from the original owner.
That's a point reflected by this reader:
"Parents teach kids that stealing physical things is wrong, but are they in any position to teach their kids about the moral and legal issues surrounding downloads? How many parents even understand the issues surrounding downloaded content? How many parents don't really see it as wrong themselves?"
Some people fell clearly on the "stealing is wrong" side:
"I was taking a Photoshop course. Almost all of my fellow students could have been my children. One day a discussion came up about the cost of the Photoshop application. How expensive it was, how much profit Adobe made off of it, and therefore it was OK for them to obtain infringing copies of it. I was stunned by this logic.
"I suggested to them that their logic if applied to other situations might go like this: I want to be a carpenter but I can't afford the tools of the trade. So I steal them. They looked at me like I was from another age. Or another planet."
I also heard from some members of the age group in question:
"I'm a comp-sci major, a sophomore, but there's a whole different group of people that know me only as Nitricacid. I was a major supporter of Oink, TorrentSpy, and Demonoid before they got shut down.
"Your article isn't entirely correct. Most college students know that downloading is wrong; we just don't care. Too many people are doing it for us to be worried that we will be singled out. In fact, I have several friends that will go out of there way to buy CDs purely to support the artist.
"On the other hand, most of my friends don't think twice about tweaking their connections to the university limit and downloading the maximum they can, 24/7. (Your article was good by the way; it made me think.)"
Predictably, a lot of people wrote that the college students' moral compasses are 100 percent correct, that it's the copyright system itself that's broken.
"I'm thinking that the kids may be onto something here; the notion that someone can 'own' an idea or music or art might just be wrong. DaVinci was not copyrighted. Nor was Mozart. Nor Shakespeare. Most artists used to think that their work belonged to the public; the notion that they could claim it as 'property' was unthinkable. Copyright is a historically recent invention."
The problem there is suggested in this response:
"I'm in the music business and have been following this subject all along. Next time, ask a question based on this scenario: you have achieved your life-long dream of being a rap star. Your first CD is greeted with rave reviews. It looks like you are going to be a mega-star! But when you check out your sales figures to see which Ferrari you can afford, you see that only 3 copies have been sold - but the BitTorrent copy has been downloaded over 13 million times in 2 weeks!
"The Radiohead experiment, in which the band released a downloadable version of an album, and welcomed listeners to pay whatever they thought it was worth, said it all to me: Most of the people who downloaded the music thought it was worth nothing, even though they took the time to download it and listen to it all the time."
That's my question for all of you "copyright is antiquated" opinion holders. We all agree that copy protection is a broken system. But none of you are yet suggesting how, if everything is to be freely shared, the creating artists are supposed to make a living.
Finally, a few readers argued, pretty convincingly, that my conclusion was incorrect. (I had asked: Right now, the customers who can't even see why file sharing might be wrong are still young. But 10, 20, 30 years from now, that crowd will be everybody. What will happen then?)
"I agree that there is a generational aspect, but also there is an age/poverty factor. They rationalize it the same way we did: I simply don't have the money to buy it from the large, multi-gazillion-dollar corporations that own it.
"I'm not defending the practice, but I think that if most of these students had the disposable income available that most middle-aged, middle-class people in America do, more students in your audience would have raised their hands."
Anyway, there are a few points to ponder as you ring in the new year. Download responsibly!
Coming Events of Interest
P2P MEDIA SUMMIT LV - January 6th in Las Vegas, NV. This is the DCIA's must-attend event for everyone interested in monetizing content using P2P and related technologies. Keynotes, panels, and workshops on the latest breakthroughs. The Conference will take place in N260 in the North Hall of the Las Vegas Convention Center and the Conference Luncheon in N262-264. This DCIA flagship event is a Conference within CES - the Consumer Electronics Show.
IPv6 - Connectivity, Community & Consumer Electronics - Monday January 7th from 3-4 PM at The Venetian, Las Vegas, NV. This CES panel will discuss how the new IPv6 protocol will impact the consumer and enterprise experience of a connected world. Topics will include mobility, interoperability, media content distribution, and what IPv6 means for consumer electronics manufacturers.
CCNC 2008 - The Fifth Annual IEEE Consumer Communications & Networking Conference, January 10th-12th at Harrahs, Las Vegas, NV. Now co-promoted by the DCIA. The latest research developments and technical solutions in the areas of home networking, consumer networking, enabling technologies (including middleware), and novel applications and services. See www.ieee-ccnc.org for details.
MIDEM/MIDEMNET - January 26th-31st at the Palais des Festivals in Cannes, France. Never has there been such demand for music. By putting you in direct contact with nearly 10,000 music and technology professionals from over 90 different countries, MIDEM connects you with the players matching this unprecedented demand. Delegates from the recording, publishing, live, digital, mobile, and branding sectors gather to do deals, network, learn, and check out new talent.
Digital Music Forum East - February 26th-27th in New York, NY. Major and indie music label executives, artists and their representatives, and technology and consumer electronics leaders come together for this "must attend" event. Now in its 8th year, Digital Music Forum East is the leading event focused on the intersection of technology and music. Don't miss the opportunity to be part of the industry's future.
P2P ADVERTISING UPFRONT NY - Sponsored by the DCIA March 11th in New York, NY in conjunction with the Media Summit New York (MSNY). The industry's premiere marketplace focused on the unique global advertising, sponsorship, and cross-promotional opportunities available in the steadily growing universe of open and closed P2P, file-sharing, P2PTV, and social networks, as well as peer-assisted content delivery networks (CDNs).
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