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July 23, 2004

A Heads Up from DC

If two bills making their way fast-forward through Congress are any indication --and, rhetorically speaking, it's not likely we would have brought them up if they weren't-- Mr. Lumpen Citizen is asleep at the wheel when it comes to what goes over here in Washington DC.

In one bill, Congress is putting up roadblocks to truly cheap telephone or voice over the Internet (VOIP) connections. In reality, it's only a matter of time before this technology becomes mainstream as more people get highspeed internet connections and the technologies that support them like DSL are made more efficient. Using the cover of new market development, the telephone and ISP industry are trying to cut out state taxman and keep more of the future profits for themselves.

In the other, spearheaded by Senator Orrin Hatch, and nicknamed the INDUCE ACT, there is a serious attempt to rebalance the flow of copyrighted content in favor of the copyright holders and to the detriment of new technology development.

Both of these bills seriously impact just about every American but chances are the people most affected have heard little about them and understand the tradeoffs even less. It is the old story of mainstream media inattention and a kind of understandable but no less tortuous apathy that allows our lawmakers and the lobbyists to play out their battles with almost no input from those most impacted by their actions.

Since both these bills can, with a little forcing, be boiled down to pretty simple stuff, we thought we'd take a shot at sifting through the tinted waters to get down to the tea leaves. The scoop on the VOIP bill goes like this: The real value of this technology for most users is not computer to computer telephony, where two or more parties are sitting at their terminals and ring each other up. It's about business and home consumers hooking their telephone systems into their network and being able to call others on their regular wired or mobile telephones. In order to do this --i.e., make the other party's everyday phone ring-- VOIP services have to be able to hook back into the plain old telephone system (POTS). That's where Congress enters the picture. The bill under discussion as originally introduced by Senator Sununu would have forbidden the states from taxing at this juncture. And since the states derive serious income from their ability to tax the POTS providers at the point of interconnection, it was their ox that was to be gored. Bottom line: Congress appears to have decided not to allow internet to POTS connections to bypass state tax departments. So don't expect major savings when VOIP, with its less than optimum service, gets introduced by players big (Verizon) and small (Skype) in the near future. The good news for desk potatoes at home or business: this doesn't affect computer to computer calls.

The INDUCE ACT is a little more complicated but still boils down to a few critical threads. What the entertainment industry through Hatch et al. are trying to outlaw are the future equivalent of VCR's, whatever that might be. In a now famous Supreme Court decision back in 1984, referred to as "Betamax", the Court (in a 5-4 vote) decided that any technology that people use for legal purposes would be legal -- even if the device could be used for illegal purposes, like content piracy. As a result of the ruling, the consumer electronics industry and Hollywood went on to develop a thriving market in home video and DVDs.

In INDUCE, the bill tries to retilt this decision by outlawing machines that "induce" someone to commit the illegal act of piracy, or any other illegal act for that matter. In this new world --"induce" even has an Orwellian ring to it-- TIVO and iPOD type devices become suspect (see some of the Cherry Picks in the right column) and the flow of information enters a world of new and future minefields.

The big losers are the public who could very well end up with players that only play officially sanctioned content of one type or another. You can imagine, in another age, the campuses or streets up in arms, but it will be the electronic device manufacturers and their lobbyists who will carry the fight with a little help from the information freedom folks, who have about as much real clout in Washington as a stalwart Nader supporter with the Democratic Party these days. Unfortunately, that's the way things work in our brave new world.

Of course, the INDUCE ACT, in particular, if passed, will serve to put the same kind of choke-hold on technology development in this country as the ban on stem cell lines has on biotech.

Posted by dymaxion at 05:40 PM

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