Congress Considers Music File Standard; Apple Shuns Hearing

A U.S. House panel doesnit want to force a single standard on digital music protection, but hinted Wednesday that it might have to consider such legislation if companies like Apple, RealNetworks and Microsoft canit band together and find a single solution.

During a hearing to discuss mandating interoperability standards between competing music platforms, the House Subcommittee on Courts, the Internet, and Intellectual Property heard from a variety of industry experts, all of whom concluded that legislation would not be the answer and that the industry needs to find an answer that still furthers competition.

Representatives of Apple Computer, who control 75% of the market for online music downloads with its iTunes Music Store (iTMS), declined to appear before the committee, taking the ire of Rep. Lamar Smith, R-Texas, chairman of the subcommittee.

"Companies with 75% market share of any business, in this case the digital download market, need to step up to the plate when it comes to testifying on policy issues that impact their industry," said Rep. Smith. "Failure to do so is a mistake."

An Apple spokeswoman declined to comment to The Mac Observer Wednesday on the hearing and why a company spokesman did not attend.

Rep. Smith said "legitimate questions have been raised regarding the impact of digital interoperability on consumers," and said that while a proprietary digital rights management (DRM) technology like Fairplay "is a good thing for Apple, (it) perhaps (is) not for consumers."

"Government intervention can probably prohibit innovation," said Rep. John Conyers, D-Mich., senior Democrat on the House Judiciary Committee. "Consumers will choose interoperability over closed platforms."

Concerns had been mounting about Appleis dominance in the music download industry after the company altered its iPod and iTunes technology to prevent the playing of files downloaded from RealNetworksi Harmony system. iPods can only play downloaded files from iTMS because of deliberate restrictions in its DRM.

"The digital music interoperability issue is of interest to more than consumers," Rep. Smith commented. "Performers and songwriters are affected by the decisions made about how their music is made available. Music that is made available on only one digital music service will limit the options for artists to earn royalties."

Industry experts cautioned that while there might be consumer confusion in music formats, laws forcing one DRM standard could make matters worse.

"Thereis no question weid benefit from some sort of interoperability with the iPod," said William Pence, chief technology officer for Napster, Inc.. "Perhaps Apple is confident that its market-leading position is best maintained by promoting a closed environment, and that is a legitimate business decision that some endorse and others may question."

Mr. Pence said it didnit seem "prudent" for the federal government to "pick a winner in the continuing, but still quite early-stage, marketplace battle between Appleis Fairplay DRM and its competitors," and that the marketplace would "continue to drive innovation in the DRM arena.

"I do not see Government intervention as the solution, as it would stifle competition and innovation that will benefit consumers and copyright owners at a very early stage of the market?s development," said Mr. Pence.

Dr. Mark Cooper, research director for the Consumer Federation of America, testified that if the industry canit come up with one single DRM standard, the next best thing would be for companies like Apple and Napster to at least advise customers through labeling that their products and services are not compatible.

"Choice is one thing," he said. "Giving facts and guidance is another and I think these companies can at least give consumers the honest facts to let them make up their own minds."

Ray Gifford, president of the Progress and Freedom Foundation, a Washington think tank focused on digital issues and public policy, urged Congress to focus on the real issue of competition and consumer choice.

"Much of the brow-furrowing over interoperability in digital music stems from the success of Apple?s iPod platform," said Mr. Gifford. "I urge this Subcommittee not to give in to the politics of platform envy, however. Instead of being concerned with the business decisions of a firm, and the preferences of consumers, the Committee should celebrate the triumph of the iPod platform as Schumpeterian competition at its best.

"Any call for the government to prefer one standard or model over another must be subject to most exacting skepticism," Mr. Gifford commented. "Standards are hard. Interoperability is a good thing, but not an absolutely good thing. Consumers? tastes, for the most part, will drive toward interoperable platforms, but not necessarily...From Congress? point of view, the best course would be to resist calls for mandates or technology limitations in this dynamic space.

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