UK ISP “Levy” Paper Co-Author Clarifies His Position

David Touve, co-author of the recent “Moving Digital Britain Forward, Without Leaving Creative Britain Behind” paper produced for PRS for Music, offers his thoughts about the paper and the overall need to “jumpstart (or in some cases resuscitate) the market for licensed music venues online.” The Q&A is the first of a two-part series.

Last week I reported how PRS for Music, the UK’s leading royalty collection society, is calling for “market based solutions” to solve the problem of online copyright infringement.

The recently enacted Digital Economy Act requires that the country’s Office of Communications (Ofcom) establish a methodology for estimating the level of illegal file-sharing in order to assess the effectiveness of the Act’s measures. PRS believes that “if a problem can be measured it can be priced.”

“Moving Digital Britain Forward, Without Leaving Creative Britain Behind” outlined two different possible approaches to solve the problem: a “negative spillover” approach that would assess a fine that “would rise and fall based on the level of piracy on an ISP’s network,” or a “positive spillover” approach that would require ISPs to pay a fee to obtain a blanket license that would allow them to transmit copyrighted material on their networks.

I had a chance to speak with David Touve, one of the co-authors of that paper, to learn a bit more of what his thoughts are, and to ask him to expand on the ideas he presented.

“The paper was, in fact, an example of at least two perspectives on the issues, albeit joined by the theme of ‘compensation in lieu of control,’” notes Touve in an email exchange.

He also briefly noted that, in regards to a blanket license, the phrase “‘”Require” is not completely true and was a mistake (oversight) in the paper.”

“ISPs could opt for such a license right now if they saw value beyond takedown notices.  And even a legal decision or legislation would not require the sort of license–the parties involved would negotiate.”

Now first off I would like to tell readers that David Touve does not work for PRS for Music nor does he speak on their behalf.

With this in mind I posed a series of questions to Touve and the first part of that outcome is as follows:

ZP: Why do you disagree with TalkTalk’s CEO that monitoring P2P traffic won’t have the “huge implications in respect of directives on privacy and data retention” that he argues it will?

DT: I  disagree that a compensation-based solution, at the ISP level, necessitates monitoring P2P traffic, or internet traffic in general, in ways that would make people uncomfortable.

I actually agree with the TalkTalk CEO that monitoring traffic, even as described in the U.K.”s Digital Economy Act (regardless of our paper’s contents) has huge implications for privacy and data retention.  I think these issues should be taken rather seriously and require much more and open debate.

We were not able to go into this matter in detail in the paper.  We did however introduce another angle—that of an “arms race.”  Monitoring traffic could incentivise developers, users, and ISPs to “hide”traffic, through private networks and encrypted communications.  I think that is a wonky outcome.  Ideally, people should *not* feel the need to treat music (or other media) files like national secrets.

ZP: The intent of Page and your’s paper was to develop “market-based solutions,” or “compensation in lieu of control,” to the harm caused by illegal file-sharing, proposing both a “positive and negative spillover approach.”

DT: First, and to clarify a misconception, in the paper we don’t propose both a positive and/or negative spillover approach.  We do not propose a levy or a license.  We advocate a compensation-based approach and then introduce these positive/negative perspectives and how the differences in mindsets might lead to different responses.  And believe me, the word “license” can engender as many snarls as the word “levy’ depending upon the person reading the paper.

In fact, it is very unfortunate that the paper was immediately interpreted as a position paper, advocating something more specific than a serious consideration of what compensation might look like.  We tried to trigger a debate inside the paper, and it is to the credit of PRS in their desire to trigger a debate both within and beyond the paper.  These insight papers benefit the industry when given the opportunity to speak openly about controversial issues.  I fear that opportunity may now be constrained.

Second, I am not a fan of approaching these issues based upon “harm.”  This difference of opinion is actually apparent in the differences between the “negative” and “positive” spillover approaches in the paper.   I reckon music on networks has value, and would like for this industry to better understand this value.

That said, we need to understand whether and how copyright law or practice might encourage, or even require certain media owners to pursue these issues by way of a harm argument.  They may only be given a decent stance in court on this issue when one foot is firmly planted in “harm.”

Ultimately however, the real issue is one of value—does music on networks have value?  The premise that music has value does not necessitate proof of harm.  In the end, its really a discussion related to willingness to pay, regardless of whether and how the volume of unlicensed media might be measured.

ZP: Doesn’t the paper fail to take into account research showing that illegal file-sharing oftentimes has a positive rather than a negative effect on sales?

The BI Norwegian School of Management, the largest business school in Norway and the second largest in all of Europe, concluded last year that file-sharers actually buy 10 times as much music as they download for free, and a Canadian federal government-funded study from a few years ago found that “P2P file-sharing tends to increase rather than decrease music purchasing.”

DT: I hope your readers take a very close look at the research related to the apparent impact of, or relationship between file sharing (or simply unlicensed media) and purchase behaviors.  This subject requires a discussion into research methods and the question of causation that is far bigger than the space here.  Since we were ultimately focused upon value, or at least I am focused upon value, this relationship with sales is less thorny of an issue.

Briefly, via most research in this area (on both sides) we more often than not lack the “before file-sharing” and “after file-sharing” experimental condition so we can measure the behaviors of the same individuals (or panels of similar individuals) that we need to really make a causal claim.  And so, what we end up with, more truthfully, is a “goes with” sort of relationship in these data.

What we in fact “know” from the sort of research you describe above is that people who are big consumers of media tend to be big consumers of media—whether the sources of that media is licensed or unlicensed.  And that people who make use of unlicensed venues tend to be consumers of greater amounts of media (licensed and unlicensed).  From other research (e.g., that of Oberholzer-Gee & Strumpf), we quite honestly and simply realize that music that is popular in record stores is also popular in certain files-sharing venues.

Unfortunately, what we don’t know is whether these people are purchasing more or less media than they purchased in the absence of unlicensed sources/venues.  And as more time passes, we lose the ability to find the before/after condition, whether in the wild or by experiment.

Since this debate is so heated, what we also lack is the space to think more openly about the implications of this research beyond the “harm” dimension.  Why do people who download unlicensed media then go out and buy what they have already acquired?  What sort of music do people just “acquire” and what sort do they “purchase?”  That latter question would offer a number of hints into the nature of value as applied to media.

ZP: The music industry seems to be placing the entire blame for declining music sales solely on illegal P2P, and thus your paper advocates that by measuring it you can develop “market-based solutions” to mitigate it’s harm. However, research shows that P2P usage is actually down by a third, at least among UK youth, and therefore any blame for continually declining music sales must lie elsewhere.

Between December ’07 and January ’09 the percentage of 14-18yos who were file-sharing at least once a month dropped from 42% to just 26%. The survey also shows the ratio of total pirated to purchased tracks has halved since between December ’07 and January ’09 from 4:1 to 2:1.

In fact, another survey conducted last year found that UK youth were choosing streaming music over P2P because of the convenience, ease, and lack of legal implications.

If these studies are correct, then doesn’t your paper’s suggest solutions for a problem that may be beyond measurement?

DT: To be clear, *some people* in the music industry might place the entire blame for declining music sales on illegal (or unlicensed) means.  ”The music industry” (at-large) does not hold this position, however.  There are many people who recognize that a number of factors could be contributing to the the year-over-year decreases in total revenue—unlicensed sources, unbundling albums, lower wholesale prices, other media, etc.).

Our objective in the paper was definitely not to place the entire blame (your words) for the decline in sales on unlicensed means.  In fact, the line in the sand that is the music industry revenue before the decline stands as somewhat of a hindrance to moving forward on these issues—setting in motion an expectation of “recouping” the bulk of seemingly lost revenue, rather than triggering a conversation about the value of music and revenue that might be foregone.

Furthermore, I think we both know that P2P is a set of all sorts of things—protocols, in particular.  Protocols are not de-facto illicit.  I don’t even know if a protocol could ever be illicit.

This is why in the paper we tried to drive the discussion towards “venues” or sources, and not technologies.  There are ways to acquire media, some of those ways are now licensed, some are not.  As we state in the paper, “the difference between a legitimate and a pirated media file is simply whether or not use is authorised (and compensation has taken place.)”  Frankly, you could remove the phrase “and compensation has taken place,” which is why I placed that phrase in parentheses here.

The internet, by its very nature as a network of networks, presents copyright owners (and the rest of us) with a significant set of questions.  Do creative things fixed into files have value if those files cannot be reasonably “excluded”?  If we believe these works do have value, then how can be exchange that value given the circumstances?

Some people default to just state these files of copyright things don’t have value.  An economist might then ask, “If there were no value, why do you expend time, effort and even money to acquire these things?”  Or alternatively, would simply put a price on time and effort while considering other money spent to end up with some hedonic (guess)estimate of “value.”

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Stay tuned tomorrow for part 2 of my discussion with David Touve.

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