Original computing articles by a systems administrator

SOPA: Balancing the Concerns of Industries

SOPA and Protect IP are a large concern for those of us who work in industries that are based on the Internet. It is important to really try to understand what is happening, what these laws are about, and why people are trying to pass it. As someone that is in part responsible for a large Internet property (The “Stack Overflow Network”, currently 167 largest in the U.S. reaching nearly 7 million people a month to Quantcast) I have an interest in the Internet remaning an open global global network, and since my company is about the free exchange of knowledge, regulation generally goes against those interests. In particular, the DNS filtering system proposed and legal risk is of concern to the Internet industry.

However, the U.S. Government, in theory, should be concerned with the health of industry as a whole in the United States, not just the entertainment industry or the Internet industry. It is their difficult job to balance the concerns of two entire industries, the awesomeness of this responsibility should not be taken lightly by anyone. If a politician considers both industries, then I would consider them to be honorable regardless of their conclusion, if they only focus on the concerns of a particular industry then they failing to represent the people of the United States justly. So for myself, dismissing the concerns of the entertainment industry offhand can not lead to a just opinion. However, when looking at what SOPA does for the entertainment industry and piracy prevention I still feel strongly that SOPA and Protect IP are not in the best interest of the United States.

The Entertainment Industry’s Concern

At face value the concern seems pretty obvious, that the entertainment industry, distributors, and the government are losing money and tax revenue due to the piracy of intellectual property. Although the extent is difficult to pin down, that the concern is a legitimate and the loss is substantial seems to be true. When it comes to SOPA and Protect IP the concern is not piracy as a whole, but rather a subset of piracy.

Policy Institutes or “think tanks” are often good sources for briefs on the basis policies or ideologies being carried out in the United States. Both the RIAA and MPAA have sited the Institute for Policy Innovation (IPI) as a source of information regarding IP theft (the MPAA has also disputed findings from the IPI but still frequently cites them). Therefore the IPI’s “Protecting Propery Rights on the Web: Thoughts on the Protect IP Act” seems to be a reasonable source for the motives behind SOPA and Protect IP. The following excerpt points to the issue that SOPA and Protect IP primarily attempt to address:

The very successful Digital Millennium Copyright Act of 1998 (DMCA) and the recent PRO-IP Act of 2008 have given lawmakers tools to combat online piracy and counterfeiting for websites hosted within the reach of U.S. law. The track records of both laws demonstrate that they have succeeded in carefully targeting illegal behavior without creating hardships or unintended consequences for the Internet ecosystem. So U.S. law enforcement officials already have tools to deal with rogue websites hosted domestically. But, of course, rogue websites residing on offshore servers or otherwise hosted by overseas companies remain safely outside the reach of these U.S. laws. And we’re all familiar with how easy it is to move a website to an offshore server in order to escape the reach of domestic law.

The scope of the problem that SOPA/Protect IP is attempting to address is vital to understanding this legislation. It is trying to limit Intellectual Property (IP) theft by U.S. citizens using foreign websites as their source. DMCA already addresses sites hosted within the U.S., and obviously that law has no effect when the person downloading the content is outside of the U.S. SOPA itself also describes this:

A service provider shall take technically feasible and reasonable measures designed to prevent access by its subscribers located within the United States to the foreign infringing site (or portion thereof) that is subject to the order, including measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name’s Internet Protocol address.”

The reason why understanding the scope of SOPA is important because if you are going to weigh the concerns of these two industries, you need to understand the cost and gains to both of them, not just one or the other. To understand how this benefits the entertainment industry you have to estimate the damages to the industry that fit this specific scenario or scope. This then needs to be weighed against the concerns of web industry and the burnden it puts on the justice system and the Internet Service Providers (ISPs).

Scope of the Bill and the Entertainment Industry’s Concerns

The MPAA says the total economic output lost because of Piracy is $58 Billion. For this they cite the IPI’s “The True Cost of Copyright Industry Piracy to the U.S. Economy” which in turn cites a study done by LEK Consulting. I was able to find this PDF file which looks like it is from LEK. When talking about the losses to the U.S. motion picture studios it estimates about 20% of the 6.1 billion (1.3 billion) are piracy losses in the U.S. (I believe that this means the consumers are in the U.S., not the source of the pirated goods). Further narrowing that, they state that of the total, only 2.3 billion was via the Internet, making the U.S. losses for Internet piracy in their estimate to be $447 million. Another interesting point is that 44% of the U.S. losses in this case are college students.

When estimating the damages this bill would save, there is one other factor in terms of scope that needs to be accounted for. If the DNS filtering is done in a way that doesn’t inspect packets, but rather prevents DNS entries for rogue sites from resolving to an IP address, this will only stop yet another subset of pirates. For illustrative purposes, let us break people into three groups: “The Geeks”, “The Tech Savy”, and “Mom & Pop”. When it comes to piracy, if the geeks want to pirate stuff then stopping them, at least in a systematic way, is futile. You can certainly find and arrest them on a case-by-case basis, but as a group they are ahead of the technology curve — it is like thinking locks will stop locksmiths intent on breaking a lock. Next there is the “Tech Savy”, they are not experts in technology but can figure out how to do a lot of things. Lastly, you have “Mom & Pop” who can’t do much without the help of their tech savy relatives and friends. In terms of DNS filtering without packet inspection, to bypass it all you have to do is change your DNS server to one located in another country, this is so trivial (just a network setting) it won’t even slow down people in the tech savy group. Going back to the LEK study:

The 16-24 age group is particularly high in the category of internet piracy, … It is even higher in the US, where the same age range represents 71 percent of downloaders.

If for an estimate, we conservatively accept that the tech savy are mostly in that age group, then we are left with 29% of $447 million or $129 million losses for all the movie studios in the MPAA by their own study. I think this same subset will apply everywhere in the entertainment and software industries.

Missing from the report is the basis for this calculation, which in my mind would be the most important piece of information, as the results from the survey multiply this. For instance, if they assume that everything that is pirated would have been bought, this assumes price would not impact buying decisions (in particular for 16-24 years old with limited disposable income), which would greatly inflate the numbers. Making the $129 million, already a small fraction of the “billions” being frequently cited even smaller.

Taking all of this into account, SOPA does seem to address the Industry’s concern regarding piracy, but only a very small subset of it: Illegal downloads by Non-Tech Savy Users in the United States using sources outside of the United States.

The Concerns Internet Industries

SOPA is legislation that will attempt to regulate a complex technical system. Some of the foremost experts in this system, many the creators of core components that make the Internet work, have spoken out against SOPA. The consequences for the technical foundation of the Internet are huge. In addition to this, many innovators on the Internet such as the founders of Google, Twitter, LinkedIn, YouTube, PayPal, Craigslist, and Yahoo have also raised objections because they feel it will harm innovation on the Internet.

The people above and news blogs like techdirt have covered the concerns of the Internet industry well, so I won’t repeat them here.

Conclusion

In the one hand, there are legitmate concerns from the entertainment industry and other industries that suffer losses due to Internet piracy. In the other, there is the web industry where SOPA could harm innovation on the Internet and also fracture parts of the Internet’s fundamental structure (namely DNS). There are also the free speech concerns attached to any form of censorship — that it could be abused.

If these two are weighed fairly, the huge impact this could have to the ecosystem of the Internet outweighs the relatively small subset of piracy SOPA might help prevent: downloads by non-tech savy users in the United States using sources outside of the United States. Therefore in this instance the Internet and web industry should be favored and this bill should not pass in its current form.

One Response to SOPA: Balancing the Concerns of Industries

  1. “that…the loss is substantial seems to be true”

    That is what they want to make you believe, because it’s the only argument they have. Still there are quite a few studies out there which show that there is no loss in money.

    The basic argument of the entertainment industry boils down to the following: If we do not force people to pay, they will not pay. And that very argument is wrong for creative works. The opposite is true: People who can wholesale enjoy the art without pressure seem to be more willing to pay – and that can make a difference of paying 50% more per year, as a recent study from the entertainment industry itself showed: http://www.michaelgeist.ca/content/view/6699/125/

    The only thing they lose is power: They can not decide anymore which media is accessible to the majority of people. They cannot make sure that music disappears which young people might prefer over the stuff the industry creates nowadays. As an example: Many young people are now listening to J-Pop which they learned to know while watching illegally fansubbed Anime which was not available in their country and/or language.

    So the basic premise that there is a need for stronger protection for having a successfull entertainment industry is simply wrong. So from the view of society, there is no argument at all for implementing SOPA or similar.

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