Lawrence Lessig: The "Dinosaurs" Are Taking Over
If the media giants have their way, the Net freedom fighter says, content will be rigidly controlled and innovation stifled

SPECIAL REPORT -- THE FUTURE OF E-BUSINESS
Who should control the Internet? If Stanford University law professor Lawrence Lessig is right, the Internet will soon belong to Hollywood studios, record labels, and cable operators -- corporate giants that he says are trying to cordon off chunks of the once-open data network. Lessig's mission is to stop them. At age 40, he's already the Net's most famous freedom fighter. Since 1995, he has been a seminal thinker on many of the Digital Age's most important battles -- the AOL-Time Warner merger, Napster, and the Microsoft antitrust case.

In his latest book, The Future of Ideas: The Fate of the Commons in a Connected World, Lessig argues that imminent changes to Internet architecture plus court decisions that restrict the use of intellectual property will co-opt the Net on behalf of Establishment players -- and stifle innovation. On Apr. 29, Lessig spoke with BusinessWeek Online Technology reporter Jane Black about what he sees as some disturbing trends. Here are edited excerpts of that conversation:

Q: You argue that the Internet's popularity as a new medium is a result of its open architecture. How do you see this changing? And are the changes a threat to e-business?
A: There are two places where it's changing. One is at the physical level of the network. As we move from narrowband to broadband [access to the Net], broadband operators are developing technology that gives them control over applications and content on the network. Cable companies, for example, have a view of what the network should be used for. And they're beginning to pick and choose what kinds of content will flow quickly as a way of favoring -- or not favoring -- content providers. For instance, perhaps cable companies can make it more difficult [for Web sites] to use streaming video if that interferes with their video business. It's your father's AT&T all over again: They, not the user, decide what the network should be.

Q: What's the result of a controlled network?
A: The cost of innovation goes up significantly. Before, you just had to worry about complying with basic network protocol. Now you have to worry about making your program run on the full range of proprietary systems and devices connected to the network. Before, the network would serve whoever and whatever people wanted it to. Soon, you will need the permission of network owners. Think about other platforms in our lives, like the highway system. Imagine if General Motors could build the highway system such that GM trucks ran better on it than Ford trucks. Or think about the electrical grid. Imagine if a Sony TV worked better on it than a Panasonic TV. The highway and electricity grids are all neutral platforms -- a common standard that everyone builds on top of. That's an extraordinarily important feature for networks to have.

Q: And the second change that threatens e-business?
A: Dominant media is a huge threat. [Record labels and Hollywood studios] make their money because of the control they assert over the production and distribution of artists' work. In the music business, a handful of companies control more than 80% of the music in the world. These companies control not just distribution but a market where artists have to sell their souls to a record label just to have a right to develop music that can be distributed. That's the model for the last century. The economic reasons that might have justified that tightly controlled structure have disappeared. The Internet can support much greater competition in production and distribution than [is possible with] the dominant five companies. The record labels have launched lawsuits against every company that has a model for distributing [music and entertainment] content they can't control. That has sent a clear message to venture capitalists: Don't deploy a technology that we don't approve of, or we will sue you into the Dark Ages. The result is that the field has been left to dinosaurs. There would have been more chips, computers, and devices to deliver content if Congress had been more keen to allow innovation to occur. We've given control over the future to exactly the wrong people. And before we know it, the possibility for innovation will have disappeared.

Q: The current debate over Web radio is a good example. New fees that the U.S. copyright office has mandated threaten to put small Webcasters out of business.
A: Web radio is a perfect example. In the course of its testimony before the CARP hearings [the Copyright Arbitration Royalty Panel, the government group responsible for setting compulsory license fee for Webcasters] the RIAA argued that higher rates would reduce the number of competitors to four or five big players. That's their model: To wipe out diversity and get back to a place where only a few people control delivery. I understand why they want that. But I don't understand why Congress is giving it to them. And it's not just the fees that are ridiculously high -- it's the data collection that has been mandated [by CARP and is awaiting approval]. If the RIAA has its way, Webcasters would have to report every song that every listener heard. In essence, it asks to create a national police state of music listening by forcing Webcasters to collect data and turn it over to copyright holders. My question is: Why? It kills competition and the development of niche markets. This is a classic example where the legal process is being used to destroy creativity and innovation.

Q: Do we need a new definition or vision of copyright and intellectual property in order for e-business to move forward?
A: We don't need a new vision. We just need to recognize what the traditional vision has been. The traditional vision protects copyright owners from unfair competition. It has never been a way to give copyright holders perfect control over how consumers use content. We need to make sure that pirates don't set up CD pressing plants or competing entities that sell identical products. We need to stop worrying about whether you or I use a song on your PC and then transfer it your MP3 player.

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Sherry says:

I THINK THIS LESSIG GUY IS GOOOD. He makes a lot of sense.

This article shows why and how some firms are very keen to maintain their monopolistic position. You can easily identify the economics concepts he refers to in the article.

Characterisitics:
- oligopoly, significant market power -> "a handful of companies control more than 80% of the music in the world"

Methods they use are:
- develop technology that gives them control over the applications and content on the network -> makes it difficult for smaller firms to compete
- launch lawsuits against every company that has a model for distributing music and entertainment content they can't control -> using artificial/legal barriers to restrict the entry of new firms

Consequences:
- innovation stifled -> no incentive to be innovative since creative efforts are not rewarded (use of intellectual property rights restricted)
- kills competition and the development of niche markets -> market dominated by the few oligopolistic firms

Possible measures:
- pass low fixed compulsory license fees for distribution of music and entertainment content on the Web
- make it a crime to circumvent copyright-protection technology

That's it! (:

Sherry