Thursday, July 29, 2004

The company says it'll rewrite its software to thwart Real's customer-friendly hack -- and I use that word in the benevolent sense -- that lets people use what they've bought with just a bit more freedom than Apple wishes to grant.[...]What we customers want is cross-platform compatibility: standards. What the companies want is lock-in. They may win, but they're only locking me out -- because I won't play by those rules. [Dan Gillmor's eJournal] This is libertarian drivel. Apple is not a free agent here, for several reasons: Their deal with the copyright holders must impose on them to do due diligence to preserve the integrity of their DRM. Several efforts to create standards, starting in the late 90s, were sabotaged by the copyright holders. It's obvious that they want a Balkanized media environment, which preserves their power. The emperor of lock-in, Microsoft, and big consumer electronics (Sony), are breathing down Apple's neck with their own proprietary formats. Real Networks is not a charity. They pretend to be on the side of freedom, but they were pretty happy with lock-in before they were brought low by competition (fair and unfair). Apple's DRM has problems. All DRM has problems. Linking Real's DRM to Apple's DRM won't have any fewer problems. Transcoding hurts sound quality as well. Apple is justified in not wanting an additional source of customer complaints ("my iPod stopped working after I downloaded music from Real") that is tied to zero revenue, and lots of PR headaches ("the iPod is broken, it doesn't play Real music well"). 1:37:38 PM

Wireless and other networks pose new challenges to the duopoly. [CNET News.com] As Steve would likely note, yet another display of cluelessness about physics, about economics, and about regulatory politics. Leaving aside the physics, the critical advantage of the cable and local phone companies is that their capital costs for the development of their infrastructure were much lower than that of any new competitor, because their de jure or de facto monopoly status allowed them to raise capital on much better terms, over a long, long time. All the infrastructure — central offices, poles, conduits, power supplies, cables, boxes — that gets DSL to my home was paid for with low-interest bonds over many years. Much of it depreciates slowly, and the attendant rights-of-way are invaluable. Consider a new wireless entrant. Even if the FCC shows more backbone than we have seen so far, it is unlikely that they will be able to get free bandwidth over the screams of wireless incumbents (who are for the most part subsidiaries of the local phone companies, especially after AT&T Wireless is acquired by Cingular). They will also have to create a dense web of access points, with suitable backhaul. The capital costs of all of this boggle the mind, especially given the great financial risk (everyone who bet against the incumbents lost badly since the supposedly liberating 1996 Telecom Act). 9:39:57 AM