April 23, 2014

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The Decline of DVD-by-Mail, or Further Thoughts on the Digital Death of Copyright’s First Sale Doctrine

Netflix reported a second-quarter profit last week as customer demand continues to drive a transition in the company’s primary delivery model from DVD-by-mail to Internet streaming. According to The New York Times, “[t]he company’s net losses among DVD-by-mail subscriptions outpaced its gains in net streaming subscriptions in the United States, reflecting the continued challenge of converting from a physical disc business to one predominately online.” The company, of which I am a longtime subscriber and fan, has famously struggled with the business implications of this transition since it began offering streaming service in 2007. (Remember the Qwickster debacle?) Those business implications derive in some interesting ways from copyright law.

The DVD-by-mail model, on which Netflix built its success, was enabled by the first sale doctrine, which cuts off a copyright owner’s distribution right with respect to a particular copy of a copyrighted work when that copy is first sold. Because of the first sale doctrine, Netflix was not required to get permission from movie studios to set up its business. In the early days, Netflix simply bought DVDs—lots of them—from whatever retailers were selling them and then rented those DVDs to its customers. If the movie studios didn’t like that, well, too bad.
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Open Internet Advisory Committee kick-off

Last Friday, we had the first meeting of the Open Internet Advisory Committee (OIAC), called for by the FCC in the recent Open Internet Order. The members of the OIAC  consist of a mix of folks from venture capital firms, ISPs, governance organizations, community organizations, and academics like myself.  The OIAC’s mission is to “track and evaluate the effect of the FCC’s Open Internet rules, and to provide any recommendations it deems appropriate to the FCC regarding policies and practices related to preserving the open Internet.”  The video of our kick-off meeting is online.

In addition to the full meeting of the OIAC, we broke into four working groups — on mobile broadband, economic impacts of Open Internet frameworks, specialized services, and transparency. I’m chairing the group looking at Mobile Broadband, a tremendously important area since wireless and cellular networks are rapidly becoming the dominant way users access the Internet.  I’m looking forward to working with the rest of the working group, and the rest of the OIAC, to better understand how to ensure openness and transparency, while preserving the ability of service providers to manage their networks.  One thing is certain — fun and interesting times lie ahead!

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Firefox Changes its HTTPS User Interface… Again

A year and a half ago, I wrote about major changes to the way that Firefox indicates whether the connection to a web site is encrypted. I noted that, especially with the emergence of mobile browsers, the traditional “padlock icon” of standard SSL-secured connections and the “green glow” of Extended Validation was being implemented in varied and conflicting ways across different browsers (“Web Browser Security User Interfaces: Hard to Get Right and Increasingly Inconsistent”). For standard SSL connections, Firefox had removed the padlock icon entirely, relying instead on a “blue highlight” color. I criticized this change because it confused users and made Firefox even more atypical:

Firefox 14 shipped last week. The padlock icon is back and the blue glow is gone (this page describes the new indicators):

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I Tell the FCC to End In-Home Video Encryption

In my last post, I asked “Who Killed the Open Set-Top-Box?.” There were some great comments on that post, which inspired me to write up my thoughts and send them to the FCC. The FCC has long tried and failed to mandate that cable companies make their systems more interoperable with third-party consumer devices. Nevertheless, the Commission recently opened a proceeding (11-169) to consider whether to end the “encryption ban” that had preserved the ability of third-party devices to receive basic-tier television signals. Boxee initially protested because its users often rely on these unencrypted signals, but eventually relented when Comcast promised to deliver a Digital Transport Adapter (DTA) workaround that would involve, “the creation of a licensing path for integrating DTA technology into third-party devices.” This push to impose licensing regimes on third-party devices is the latest in a series of such pushes stretching back to the mid-1990′s. I just filed a comment arguing that if the FCC wants to get rid of the encryption ban on basic cable, it should simultaneously think about doing away with problematic licensing and encryption schemes on the consumer-facing side of the set-top box. You can download the PDF from the FCC, or read the text after the jump.
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