Will Licensing Issues Kill Internet Video?

FRAMINGHAM (07/17/2000) - There's probably no issue about the Internet that provokes as emotional a debate as the matter of "free" content or distribution of material. As recent cases involving MP3 audio have shown, the Internet can become a battleground between those who believe in free exchange of entertainment media and those whose living depends on selling that material.

Now we may be headed for a similar face-off in the video space.

Most video material is produced for broadcast or cable television. While the laws that govern this material vary from country to country, it's generally true that the owners/producers and the broadcasters have rights to benefit from their investment. In theory, they could set virtually any fee structure for rebroadcast of their material, and that would include Internet distribution.

In practice, governments have routinely passed "compulsory license" laws, which require broadcaster/owners to license material to be broadcast on another media for a government-regulated price. We already see this with the cable television industry, which rebroadcasts network and local programming. Some think we should see the same principles apply to the Internet; others disagree. Congress recently opened hearings on whether the compulsory license principle should apply to the Internet, so the political process may step in and decide. The issues are complex, though, and finding consensus may be tough.

One option is for Congress to do nothing. This is a view favored by broadcasters and studios, which want to let the free market determine the royalties paid to rebroadcast video on the Internet, and some Internet advocates, who don't want any government regulation of the Internet. We had a taste of this argument in the disputes over redistribution of music on the Internet.

A Canadian dot-com company, iCraveTV, has attempted to provide free video on the Web. The company was sued and subsequently agreed to stop broadcasting the material until "Canadian law is clarified." If the Web were declared to be a kind of copyrightless zone, the impact on overall distribution of entertainment and other media would suffer. Furthermore, the courts have generally upheld the right of copyright owners to prevent free distribution and use of their material. It's unlikely that U.S. public policy would reverse this trend, and thus unlikely that truly free Web video will be possible.

Some of the larger Internet players, including America Online Inc., seem to favor compulsory licensing, although support for this measure would surely depend on how royalties were set. Their concern is video material might not be offered to Web providers at all, helping to preserve the role of cable, broadcast and satellite players. By getting a compulsory license law for the Internet, video material would be guaranteed to be available.

But even a Congressional solution might not be a complete one. The Internet is multinational, and copyright law and broadcast rights vary considerably from place to place. What happens if material offered in a country that does not have licensing fees for rebroadcast is captured there, then introduced onto the Web? How are rights enforced, particularly when even software copyrights aren't always honored in the world market?

The issue may be especially critical now that the regional Bell operating companies are beginning to deploy DSL in earnest. SBC Communications Inc. expects to be able to service 18 million DSL customers by year-end. With true asymmetric DSL, the new network would support video content delivery if business and regulatory issues were resolved, and if SBC had the incentive to make it work technically.

I've always thought voice over IP was dumb. I still do. But video over IP might be something else, and the Internet has the potential to offer the most flexible video delivery mechanism we've ever known. It also has the potential to lay the biggest video egg in history. Congress can hold the hearings, but it may be the public attitude on this issue that will decide the future of compulsory licensing. That, in turn, may decide whether you can look at the Web or watch it.

Nolle is president of CIMI Corp., a technology assessment firm in Voorhees, N.J. He can be reached at (856) 753-0004 or tnolle@cimicorp.com.

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