Fighting for Symmetry

My last SuitWatch, "Fighting for Radio" , ended this way:

So there are two fights here. One is against regulation of the very place where radio is moving, naturally, at the end of the Analog Age. The other is for new gear. We need stuff that's as simple and straightforward as crabbing, and as portable and revolutionary as the transistor radio.

The piece received more than the average amount of positive inbound linkage, plus some very nice emails, including one from Scott Woolley, author of "Broadcast Bullies". That one was fun to get because I had just finished reading Scott's story when I received the email. On the other hand, Scott also took some offense to what I said about publications like Forbes --

As always with Big Business Media, they look mostly for action on the supply side. When your business is doing play-by-play for Vendor Sports, that's the game you like to cover, even when nobody is playing it.

-- and suggested I might want to rescind the insult after reading "Broadcast Bullies". Which I do. it's a terrific piece.

In my email back to Scott I also pointed to some of the many pieces I wrote for Linux Journal (including several SuitWatches) back in 2001, when there was still a fight going on between independent webcasters and the RIAA over the regulatory regime, required by the 1998 Digital Millennium Copyright Act, which the Library of Congress' Copyright Office eventually made law in 2002, effectively stopping the Internet radio business from growing past the zygote stage.

Here's a nearly full list of links, ending with the LoC rulings:

• The Choice
• Open Source Radio
• Run Streaming
• Bizarre vs. Bazaar
• Biting the Hand that Beats You
• Arbitron Throws the Book at CARP
• CARP Put to Death, but DMCA Still Sleeping
• Hollywood Steps Up Its Assault on the Net While Webcasting Death March Claims KPIG
• Broadcasters Oppose Net Radio Fees
• Copyright Office: Webcasting Rates
• Copyright Office, Library of Congress, Final rule and order: Determination of Reasonable Rates and Terms for the Digital Performance of Sound Recordings and Ephemeral Recordings

One more link worth mentioning: Jamie Zawinski's "Webcasting Legally", which describes, in detail, the labyrinthine requirements that must be met by any webcaster attempting to operate within the new regime.

Many of the links in the above pieces are gone. SaveInternetRadio.org, for example, is dead. But Save Our Streams (SOS), from Rice University, is still up, and remains a good source of current information on the fight to limit the destructive regulation of Internet radio. The latest item there points to the ipnewsblog, which reported in March that the House of Representatives had passed H.R.1417, a "resolution" which will "replace the administrative construct within the U.S. Copyright Office that determines copyright royalty rates and the distribution of related royalties under various compulsory licenses."

The SOS site adds this:

SOS fully supports HR 1417! This bill would reduce the costs of participation in the fee setting process by #MILLION$, thus allowing Educational and Community stations to participate in the rate setting process! It would also allow the current rate structure for webcasting to be extended in length at the discretion of the involved parties.

Two things worth noting there. First, SOS' concerns are mostly with noncommercial webcasts. Second, there is still a substantial regulatory gauntlet facing anybody who wants to become a serious broadcaster of music on the Internet. At least in the U.S.

This remained the case even after Jesse Helms, on his way out of the Senate in late 2002, greased the Small Webcaster Settlement Act (H.R. 5469) into law. This brought some relief to some -- but far from all -- Internet broadcasters.

Then, in February of this year, the Copyright Office set new royalty rates for webcasting, described this way by InternetNews:

The deal calls for commercial non-subscription and new subscription services to decide between paying per performance rates (per song, per listener) or aggregate tuning hour (per listener, per hour). It also sets rates for what is described as "new subscription services" to have the option to pay a percentage of subscription revenues. Large-scale commercial broadcasters also have choices of royalty payment terms, the Copyright Office said in a statement.

The Copyright Office also designated SoundExchange as the collection and distribution agent for the royalty fees.

The royalty agreement means that large scale Internet-only webcasters like Microsoft (Quote, Chart), Yahoo (Quote, Chart), America Online (Quote, Chart) and RealNetworks would pay either .0762 cents per song per listener of 1.17 cents per listener per hour. The minimum payment for Internet-only webcasters is $2,500.

For subscription services, the Internet-only options are available along with a third option of paying 10.9 percent of revenues. Fees for commercial and non-commercial radio broadcast simulcasts are fixed separately

Simple, huh?

I've spent several days trying to figure out what's happening here, and ... well, it's complicated. But the bottom line for me -- the fact that tells the most important story -- is that KPIG is still off the Web.

KPIG is the pioneering webcaster (the first commercial one on the air) that we first profiled in January 2001, and which remains one of the most interesting and creative stations on the radio dial (it radiates on 107.1 from Freedom, CA, and on 94.9 from Cambria, CA). And you can still get it on the Web, sort of, if you subscribe through Real. But the free, live, over-the-Web transmissions are gone. The CARP regime, or whatever it is now, made the economics prohibitive for KPIG's owners, who aren't huge broadcasters by any stretch; but also aren't small enough to benefit from Small Webcaster Settlement Act.

What makes KPIG significant is that if anybody could make the economics work, it would be them. So what we have here isn't a canary in a coal mine, but rather a coal mine so stinky and dark that almost nobody, even the biggest and strongest, wants to go inside.

Yet there are still Webcasters on the air. I don't know what their economics are. My guess is that they're all either working through loopholes or just thumbing their noses at whatever the regulations are. Or, of course, out of the country and operating under some different regime.

Among my faves is the lo-fi (32kbps .mp3) Jambalaya Jam, which is served up by the slow and complex Live365, and by Apple's iTunes.

Live365 used to feature its stations for free, but now shunts visitors to subscription offers. Between Real and Live365 and satellite radio, it would seem that subscription radio is the wave of the future.

But I don't think so.

That's because a couple weekends ago I was out scouting campsites with my kid in Paradise Valley, north of Santa Barbara. Although the campsites were primitive (running water, but no electricity or showers), you had to go online to make reservations. So we did that, on the spot, with a bluetooth-equipped laptop and a new Sony Ericsson T-637 cell phone, which uses bluetooth and GPRS to serve as a live bridge to the Internet. Not satisfied with the coolness of that move, I plugged a little Belkin TuneCast II FM transmitter into the audio-out jack in the laptop, brought up Jambalaya Jam, and listened to live Jambalaya on the car radio, nearly all the way back to Santa Barbara.

So I'm thinking... Why should satellite radio (of which there are a whopping two companies providing all the service) be the only alternative to old-fashioned AM and FM? Why shouldn't we be able to listen to any stream, from anybody, over a cell phone? Why not a market for cell/car radio bridges? Or who knows what else?

Right, I know there are bandwidth issues, and that the RIAA is already freaked by the prospect of hackers making digital recordings off XM satellite transmissions.

But what if we came up with a way to pay the rates, on a per-listener, per-song basis? Look at the original CARP requirements. What we're talking about here are micropayments -- thousandths of cents per tune. It looks an accounting nightmare, but that's what big companies with complex billing systems are for.

On cell phones we're already used to micropayments, sliced down to the minute or less.

Back this Spring, at the Open Source Business Conference, R0ml Lefkowitz of AT&T Wireless offered to open source the billing system of an acquired company. He stood on stage, waving two silver CDs, and pointed out that the software was "kewl" because it did micropayments. Among other neat things. And his tongue was not entirely in his cheek. I know one CIO who says he actually does want to do some fun stuff with R0ml's offer.

I'm not suggesting that there's an outright open source play here. Maybe there is, and maybe there isn't. What I'm suggesting is that there's a cell phone carrier play.

Here's an industry that could use something new and kewl and interesting that might really make money. Think about it. According to Ringtonia.com, the ringtone market is worth $2.5 billion right now. Think what would happen if anybody could stream music to anybody.

The will is there. Several weeks ago we had a party at our house in which guests, all in their thirties, took turns running their iPod playlists through our house audio system.

What if anybody could play their playlists for everybody, in a market regime that allowed artists and labels to actually get paid?

The biggest and most commonly repeated mistake we've made about the Net, since the beginning of its commercialization, has been to build asymmetries on a profoundly symmetrical architecture. We did that because Business as Usual -- pre-Internet business, Industrial Age business -- was deeply asymmetrical in its idealized (i.e. big, successful) forms. It was few-to-many, producer-to-consumer. Hell, it even invented the whole concept of the "consumer".

But the Internet lets anybody act as a producer. It supports AWA -- Anybody With Anybody -- as well as P2P, and every other market shape you want to build with it.

Linux, the Net, the Web, the LAMP suite, plus countless other infrastructural architectures and building materials, both express and support a profound shift in the world marketplace. They all let the demand side start to supply. None are built to make money in themselves, but instead support countless new ways of making money all over the place.

I'm not holding my breath waiting for the cell phone carriers to say "Hey, let's disintermediate the broadcast business by facilitating a whole new anybody-to-anybody system!" Even if there's lots of ways to make money at it.

I am hoping that we can bring some fresh thinking to some mighty stale problems, just by looking at what's possible on both sides of the natural symmetries between supply and demand. Especially when millions, and not just two, or a dozen, suppliers are involved.