UBB Ruling Will Put Government In Cross Hairs

The CRTC is set to announce the results of its usage-based internet billing proceeding Tuesday afternoon. Far from being one of the regulator’s many dull procedural announcements, this one is surely the most anticipated, at least in recent memory. I’ll have an analysis on Wednesday (my posts generally go live at midnight, Eastern time) and probably some knee-jerk reactions on Twitter beforehand, if you want to check those out. In the meantime’s here a primer of what the ruling will involve and why it’s so important.

In the broader sense, usage-based billing is about charging internet customers for how much they download and upload. In Canada, a typical home user gets between 50 and 60 gigabytes included with their monthly fee; going over means more charges, just like a cellphone bill. Pretty much every Canadian is living with UBB right now.

As it relates to the CRTC drama for most of the past year, UBB is a more specific issue that has to do with smaller ISPs that use a portion of the networks owned by big telecom companies such as Bell to deliver their services to customers. Bell has been charging its own customers UBB for years and wanted to impose the scheme on these smaller ISPs. The CRTC gave Bell’s plan its blessing, agreeing with the thinking that all customers need to be treated equally. The logic is that if Bell was only giving subscribers 50 GB of monthly usage, yet an ISP such as TekSavvy was allowing 300 GB or more, then the smaller provider had an advantage.

Despite that apparent advantage, about 95% of Canadians get their internet service from big providers such as Bell, Rogers, Telus, Shaw and Videotron. Still, all hell broke loose earlier this year just before UBB was to take effect. The Open Media advocacy group got involved and motivated more than 500,000 people to sign a petition opposing it. While the ruling would affect only a few people, it was to be the final elimination of unlimited internet usage in Canada, the group argued. With UBB imposed on small ISPs, the big providers could effectively decide how much Canadians could use the internet. While many people who signed the petition were not customers of smaller providers, they did so to effectively draw a line in the sand and tell large companies that they shall go no further.

The government got involved, with both Prime Minister Stephen Harper and then-Industry Minister Tony Clement signalling they would take action on the CRTC decision if the regulator itself didn’t overturn it. And so, the CRTC went back to the drawing board, bringing us to Tuesday’s decision.

Since then, a few things have happened. Bell submitted a new proposal, called Aggregated Volume Pricing, that is a sort of diet-UBB. Rather than charging smaller ISPs for each of their users, the new scheme would total up their usage instead. Indie ISPs have said that while AVP is not as crippling as UBB would have been to their business, it’s still not exactly desirable.

Out west, UBB became a non-issue last spring when Shaw announced new plans with generous usage limits, which forced its main competitor Telus to match. The large Western ISPs added an interesting dimension to the debate – such large usage buckets completely negate the argument for UBB, which Bell and others have said is necessary to combat network congestion. If Shaw and Telus can give their customers so much usage without congesting their networks, why can’t their eastern counterparts?

On a related note, Bell also recently announced it was easing up on slowing down file-sharing by its customers. This “throttling” is another activity that is technically allowed by the CRTC, but which is hugely controversial and hated by many users. Many believe throttling is a violation of the regulator’s own net neutrality rules, yet the CRTC is doing nothing to stop it. As if to contrast Bell’s announcement, news also recently broke about how big Canadian ISPs – particularly Rogers – are some of the heaviest throttlers in the world.

Also perhaps relevant is the fact that the current CRTC chair, Konrad von Finckenstein, is on his way out. Von Finckenstein reportedly wanted to stay on for a second term, but given his penchant for disagreeing with his employer (the government), that was a highly unlikely scenario.

So why is the upcoming announcement on UBB so important? There are a number of reasons. Aside from the half-million signatures on the Open Media petition, there were also more than 100,000 submissions to the CRTC from the public. A lot of people are watching this one, which means the government is too. It’s safe to bet our friends to the south in the U.S., where large ISPs are testing the waters on UBB, are also watching.

I speculated recently that Bell’s announcement on throttling was a bit of quid-pro-quo with the regulator, as in you (CRTC) scratch our back on UBB, we’ll scratch your back on this other stuff. If the regulator approves Bell’s AVP proposal, as I suspect, it will sure look that way. There’s also the side drama of the outgoing chairman – will he stick to his guns in the face of government opposition one final time, perhaps just to make a point?

Chances are good that anything less than a total rejection of AVP and any other flavour of UBB won’t be accepted by opponents, which means attention will turn to the government. New-ish Industry Minister Christian Paradis has been doing his best impression of the Invisible Man since taking office early this year. If the UBB decision ends up being anti-consumer, he’s going to have to lie in the bed made for him by Harper and Clement.

If the unlikely happens and the CRTC actually comes up with a solution that everyone can live with, thereby restoring relative harmony to the Canadian broadband environment, it will clear a major issue from the table and put even more pressure on the government to get some sort of digital/broadband strategy going. Either way, it looks like the buck is about to be passed to the Industry Minister. That means no more hiding in the shadows.

Canada Has Shown Rare Foresight With Game Subsidies

Oh that Jesse Brown. He’s at it again. Regular readers probably remember our spirited back and forth recently about Apple’s relative level of importance to technology over the past decade. Now, with his latest post on Macleans, Jesse has me frothing over another topic: video games.

In his post, he takes issue with the big tax breaks and other financial incentives that video game companies have received in many countries to set up shop there, especially Canada. As Jesse puts it, it’s a highly profitable industry that’s also one of the most subsidized:

The health of the industry is inarguable—sales of video games reached $15 billion in the U.S. alone last year, eclipsing the music industry, if that still means anything—and it would likely do just fine without the charity. So why the corporate welfare?

He goes on to argue that the hundreds of millions in tax breaks that provinces have been “seduced” into giving the likes of Ubisoft and Electronics Arts are just being used to pay coder grunts. When developing countries have enough people to do the same jobs, the multinationals will eventually outsource that work to them and get it done at a fraction of the cost:

When developing workforces in, say, Bangalore train enough skilled code-monkeys to undercut local coders, the jobs will quickly migrate to India, leaving little of the creative economy behind.

I have the same concerns over the current subsidy battle going on not just between countries, but also between provinces. Ultimately, it’s a race to the bottom where whoever provides the biggest carrot wins – but, as is at the heart of Jesse’s concern, do they win in the long run?

The answer for Canada, both empirically and anecdotally, is yes. According to a recent study compiled by SECOR for the Entertainment Software Association of Canada – to which I contributed some input – the games industry here employs 16,000 people and will generate $1.7 billion in economic activity this year. That’s not revenue, it’s the amount of dough it contributes to the national economy. At that rate of return, the hundreds of millions the provinces have doled out in subsidies will be repaid in short order, if they haven’t been already.

Moreover, the Canadian industry is growing quickly and is expected to expand 17% over the next two years. That means even more employees and more contribution back to the economy.

The economic impact was at the core of the Pushing Buttons series we did back at the CBC almost exactly a year ago. In one of the series’ stories, I discovered the more ground-level impact of the video game industry – that the production companies often revitalize the neighbourhoods they’re based in. With the average age and salaries of game employees being 32 and $68,000, respectively, that means there’s a whole lot of well-paid young people running around town. Such workers tend to want to be close to the action so they live downtown rather than in suburbs, so they buy condos. They’re also conspicuous consumers who eat at restaurants a lot, go to movies and concerts and buy the newest plasma screens and other expensive gadgets.

In Montreal, this has meant the revitalization of Mile End, a part of town that was quite sketchy prior to Ubisoft’s arrival in 1997. The same happened to Yaletown in Vancouver. It’s already happening in Toronto; one of the first things I noticed when I attended Ubisoft’s studio opening in the Junction area last year were the high-end condos going up right across the street. I went to high school near the Junction, so I’m particularly looking forward to that area getting cleaned up.

Jesse’s characterization of the types of people who work in video game design is off quite a bit. While the “coder monkeys” are indeed the people needed to ultimately make a game go, they’re only a small piece of the overall puzzle. And indeed, much of the simple coding work is already being outsourced to the likes of Singapore and Romania.

One of the more fun things I did for Pushing Buttons was put together a video on the making of a game, in which I talked to the many creative types – those highly paid young people – involved in design. Here’s the video:

Anyone who thinks games are made by interchangeable coder monkeys really should watch this because it underlines the fact that you can’t just plop a studio into any geography. The locale needs to have a smart and creative ecosystem in the first place, with the proper schools and skills around to feed the likes of Ubisoft and EA.

While the race to the bottom in subsidies is concerning, the good news is that Canada has a big head start. The ball is now rolling quite well and it’s going to take a lot for other countries to catch up, if they ever can. Video games are created through the confluence of creative and technological ability, which is something Canadians have proven to have in spades. Our governments shouldn’t be criticized for supporting the development of this industry, they should instead be praised for showing rare and uncharacteristic foresight.

Unfortunately, much of the media still lacks that same foresight. As I’ve written before, video games are still woefully misunderstood at best and discriminated against at worst. Alas, it’s a generational thing and eventually, gamers won’t just rule the world, they’ll rule the media too.

What A Conservative Majority Means For Tech & Telecom

Well, that certainly was an exciting election! Not many people expected a Conservative majority to emerge and even fewer saw the NDP forming the official opposition. I’ll save the general political punditry for the… er… political pundits, but I can add some thoughts on what this might mean for tech, science and telecom in Canada over the next four years.

Generally speaking, a Conservative majority is not likely to be a good thing in those areas. When the election was called, I gave the Conservatives failing grades for their policies on the internet, foreign ownership and science in general while giving them barely passing grades on copyright and deregulation. I also gave them a decent mark for their treatment of wireless. For an explanation of those grades, I’d suggest checking out that post from back in March.

Prime Minister Stephen Harper will doubtlessly take the majority as an endorsement of his government’s overall policies, and as well he should. Like it or not, the people have spoken. As such, it’ll be more of the same – if not more so.

During the election, a few other issues came up. First, Industry Minister Tony Clement indicated he is not at all in favour of structural separation – or the breaking up of telecom companies into network-owning and retail segments. That idea, which is gaining popularity among the public, is not likely to see the light of day until at least the next election. That’s too bad because if Canada is ever going to do it, it’s going to be a long process. The discussion needs to start happening now.

Secondly, the issue of lawful access came up. Harper promised to pass a bill within the first 100 days of Parliament that will allow police to get internet users’ personal information without a warrant. To say that’s concerning would be an understatement. The bright side is, it’s so egregious it’s very unlikely to pass  easily. I’m sure University of Ottawa professor Michael Geist, who is an expert on such issues, will have a thorough dissection on his blog poste haste (I’ll link to it when he does). I’ll write more about it too once I’ve given it some decent thought.

Thirdly, just before the election the lovely folks at Wikileaks released some cables that detailed U.S. lobbyist efforts to influence copyright law. The cables confirmed pretty much everything Geist has been saying for the past few years about how the Conservatives have simply been trying to ramrod a U.S.-written law down Canadians’ throats. The government’s previous copyright reform law, Bill C-32, is going to be resurrected – the Conservatives promised as much in their platform – but it’s going to be very interesting to see how it plays out. The government may be emboldened by its majority and simply try to push it through, but I suspect the public’s opposition to it – which was already palpable – is only going to increase as well as a result of the new evidence. Copyright reform may very well ignite all-out revolt before this year is out.

From there, it’s on to new business. Clement, who was re-elected, kept promising before the election that a long-awaited “digital strategy” will be released this spring. Hopefully that still happens and while I don’t expect it to be good, I’ll give him the benefit of the doubt before passing judgement.

With any luck, Clement will remain Minister of Industry. He may not seem to know how to fix many of Canada’s tech and telecom problems, but he has at least shown a solid awareness of their existence, which is much more than can be said about a good many MPs from all parties. At the very least, we can expect some sort of action on the whole usage-based billing issue, which Clement very vocally opposed.

The big bonus of a Conservative majority – and it’s a huge one – is that the government may finally move to get rid of those foreign ownership limits on telecom companies. With the fate of Wind Mobile continuing to dangle in the wind (pun intended), this is likely to be addressed quickly. All the work has been done and the hearings have been held – the trigger simply needs to be pulled.

The smart money is that the government will lift ownership restrictions on small companies, so foreigners can own the likes of Wind or start up new businesses, with the shackles coming off the big guys in a few years time. As I’ve written many, many times, this is a painfully overdue step that needs to be taken and it could ultimately be the most important thing the government can do as far as tech and telecom are concerned. In the end, Harper haters may ironically end up owing him a big debt of gratitude – his government may change the rules that eventually lead to companies such as Bell and Rogers ceasing to exist.

While the Conservatives’ performance on tech, science and telecom issues up till now has been wanting for the most part, some of that may very well have been because of the caution that a minority government must operate under. There is consequently a lot of room for improvement – let’s hope we see it.

Why I’m A Tablet Fanboy

About a month back, my man Jesse Brown wrote a rather provocative post on his Maclean’s blog titled “The iPad sucks.” I was on vacation at the time so I didn’t really have a chance to respond, so now seems as good a time as any.

Ordinarily, I’m very much on Jesse’s wavelength as we agree on many things, like copyright and broadband. If you don’t know him, he’s the host of the great Search Engine podcast for TVO and co-founder of Bitstrips.com, a website that features online comic strips.

As far as the iPad is concerned, though, our mindsets couldn’t be more different. His main beefs are that it’s a product in search of a solution, that it doesn’t really do much new and that it is a closed device that Apple hamfistedly controls.

On all of those accounts, to quote Thor, I’d say thee nay.

True, when the iPad was first released, no one really knew what it would be used for. Analysts and journalists speculated that it would kill netbooks and revitalize newspapers and, as Jesse points out, it has probably done neither. But the same could be said for just about any technology product. There is always the use cases that its manufacturer intends, but then people figure out how to use it in different ways. The PlayStation 3, for example, was intended to play video games and movies, yet astrophysicists have used them to calculate black hole effects.

That’s an extreme example, but the point still stands. In many cases, if you build it, they will come – and each person figures out their own way to use it. The iPad has sold a gazillion units, which is proof that it’s actually a highly versatile device. While Apple suggested a few ways to use it, the millions who bought it – and the app developers who created for it – figured out their own use-case scenarios.

The one that has me totally sold is how the iPad allows users to completely eliminate paper from their lives. If you’re a regular reader, you may remember my recent rant about the exorbitant cost of printer ink. When my HP Photo Smart printer recently ran out, I resolved to go paper-free, which seemed like it might be a bit tricky given that I was getting ready to go on vacation to Thailand. Normally, I’d print out my hotel reservations and plane tickets and make photocopies of maps or relevant sections of my guide book.

This time around, I copied all my tickets and reservations onto the iPad as PDFs, where I could read them using a number of apps (I use Comic Zeal, which is ordinarily for reading digital comics books). I got a few weird glances from front-desk clerks at hotels when I handed them my reservations on an iPad rather than a piece of paper, but nevertheless, they were just as good. And rather than tote photocopies around, I downloaded a few apps that gave me maps and all the information I needed about the places I was going. Moreover, with the good and ubiquitous Wi-Fi I found in Thailand, I was able to find nearby restaurants and navigate with the GPS, not to mention get all my email and stay up to date on stuff.

Could I have done all that on a laptop or smartphone? Sure, and I did actually bring a phone along. I didn’t really use it though – in cases where I needed an internet connection, the iPad and its larger screen was always more convenient and better to look at and far more convenient than whipping out a laptop and firing it up.

Since I’ve been back, I’ve found myself strangely inundated with contracts to sign. Having banished my printer to the closet to await its eventual violent destruction (don’t worry, I’ll record and share that), this proved to be a bit of a problem and seemed to be the last obstacle in my quest to achieve printer-free bliss. Then I discovered a great app, SignMyPad, that lets you open PDFs and sign them by drawing your signature with your finger. You can also add in text and check marks, so you can fill out all manner of contracts and application forms. That’s something I surely wouldn’t want to try on a smartphone and it’s simply not possible on a regular computer. As it stands, I can’t see a situation in which I’d ever need a printer again. I can’t express enough how happy that makes me.

Many people – myself included – were initially concerned about how restrictive Apple would be regarding the content and apps that could go on the iPad. I was worried that if you wanted to put a movie on the device, for example, you’d have to purchase it from iTunes. Not so. The VLC app, for one, lets you copy over any movies you may have – ripped from DVDs or acquired in other ways – and completely bypass iTunes. That was a life saver when I discovered the earphone jack on my airplane seat was faulty. Rather than sit and listen to crackly sound for 15 hours, I was able to watch my own movies and TV shows on the plane.

Apple is known for being a very closed and secretive company, which are characteristics that manifest themselves both in the way the company does business and its products. And, as I’ve pointed out many times, the company is also very hypocritical when it comes to sex and pornography on its products. But so far, as it pertains to what can or can’t go on the iPad or any of Apple’s other mobile devices, fears of censorship and micromanaging control haven’t come to pass. That’s not to say they won’t, but there doesn’t seem to be any sort of media or content – porn included – that you can’t easily get on to the iPad.

Other companies’ tablets are sure to be just as good, if not better, and some will even be more open. Indeed, I played with the Motorola Xoom last week and it looks like a nice competitor. The iPad isn’t the be all and the end all, but it certainly isn’t all those things Jesse said it is. In my own experience, it does do new things and it does solve problems I have and it’s as open as I need it to be. Those who like to tinker with the guts of a device will surely figure out how to do so, but that’s something that just doesn’t concern me. I just want the thing to work and to do what I want it to do. Running Linux on it just isn’t high on my priority list.

I’m already hard-pressed to think of situations where my laptop is better than the iPad – viewing websites that use Flash is one obvious case, as is any situation where extensive typing is required. As such, the laptop is starting to gather dust from all the disuse of late. The trend is only going to increase as tablets, whether they’re Apple’s or someone else’s, are going to continue getting better.

UPDATE: I didn’t actually know VLC got pulled from the app store back in January. That said, there are other apps available – these may get pulled at some point too if they similarly run afoul of Apple’s app store policies. Even still, in a worst-case scenario there are many types of converting software out there that will translate your DVDs into formats that can be copied onto the iPad. It’s nowhere near as convenient but still completely doable.

Download Limits Only A Symptom Of The Problem

I thought I’d take a break from blogging about all this adult entertainment stuff that went on last weekend and instead write on a related topic: how Canadian internet users are getting screwed.

I came across a couple of items this week that relate to the issue. The first was an open letter addressed to the media and various government departments opposing the metered usage schemes that have been implemented by big internet providers here in Canada (also known as usage-based billing). The letter, posted on the Open Media internet activist website, goes into detail about how this is bad for Canada in a number of ways. The Reader’s Digest version:

1. Smaller and smaller download limits runs contrary to how Canadians are using the internet, which is more and more.

2. With that dichotomy in place, it means we’re inevitably going to be paying multiple times for certain services. Netflix, for example – not only do we pay a monthly bill to access the internet so we can get the service, we also pay a monthly subscription fee to Netflix. With smaller download limits, that means we ultimately have to pay a third time if we watch more than a few movies on it.

3. Given those facts, such services are going to avoid doing business in Canada, or they’re going to be considerably more expensive here, as a recent report found.

4. There are also involuntary services that chew up our bandwidth, such as software updates for computers. Sure, we can decline these, but then Canada is going to a haven for the viruses, etc., that inevitably get through. Nobody wants that.

5. Notwithstanding all of that, low usage caps will also significantly limit the ability of any such Canadian services developing, such as a competitor to Netflix. In other words, low caps limit innovation and stifle new businesses.

I can’t say I disagree with any of those arguments, but I do think the letter writers are barking up the wrong tree. I’m not necessarily opposed to usage-based billing, but I do think that market forces need to exist to keep such schemes honest. If the big internet providers want to keep lowering usage limits, there need to be alternative ISPs that won’t – that way the consumer can decide which company and plan is right for them. The problem in Canada, as I’ve said before, is that those market forces don’t exist and smaller ISPs have had the bigger companies’ business models foisted on them.

That brings us to the second item: a regulatory ruling yesterday on something called unbundled local loops. Warning: this is a topic that can put even the biggest nerds to sleep, so I’ll try to keep it brief and simple.

For much of the past decade, Canada and virtually every other developed nation has recognized the need for competition between internet providers. Only when such companies compete with each other do consumers benefit from faster, better and cheaper services. However, governments and regulators have also recognized that it is considerably expensive to build competing networks.

As such, the concept of local loop unbundling was rolled out across most of the developed world. The idea was to take the networks owned by major phone companies and allow other providers to access them to sell their own internet services to customers. So for example: a small company such as Chatham, Ont.-based Teksavvy could connect to Bell Canada’s network and get its own subscribers.

Under this scheme, there was of course the recognition that the network owners should get some sort of compensation for other companies using their networks. Those other companies were thus effectively charged rent, generally determined by regulators, to do so.

The intent behind the whole plan was to allow smaller, less well-funded companies to build up a good business, at which point they could afford to build their own infrastructure and eventually ween themselves off the networks of the big phone companies.

The trick, however, has always been in the rent set by the regulator. If that rent was set too low, a smaller internet provider would have no incentive to ween itself off the bigger company’s network; why spend money building a network when the one you’re using is really cheap? If the rent was set too high, though, the smaller provider wouldn’t make much money and therefore couldn’t afford to build its own network.

Guess which situation unfolded in Canada? You got it: the rents are too high. According to a Harvard report (PDF, on page 168), “Canada has the highest monthly charge for access to an unbundled local loop of any OECD country.” I believe the term for that is: booya.

The result: small Canadian internet service providers can barely eke out a living, let alone think about building networks to compete with the likes of Bell and Rogers.

But wait, it gets better. Not only is that a problem, even if a small ISP performed relatively well and was able to position itself as a decent challenger – which some miraculously have, like Teksavvy – it’s not like they could even find someone to loan them the money they’d need. We all know a non-Canadian company can’t get involved, thanks to our foreign ownership limits, and I believe the Canadian banker’s proper response when somone asks them for money to compete against Bell and Rogers is: “Bwahahahahahaha!”

What have the big boys been doing during all of this? Well, they wouldn’t be smart if they weren’t trying to put their foot into the smaller ISPs’ figurative nards. Bell applied to our regulator, the CRTC, to raise those rents further and, from the looks of it, got them. According to some of the smaller ISPs, yesterday’s ruling will cause those local loop rates to change, generally not for the better, which is further going to squeeze them and their ability to build their own networks (translation: it’s not going to happen).

To go back to the beginning of this post, while it’s good that people are complaining to politicians about our incredible shrinking usage limits, the issue is only a symptom of the deeper problem. I’ve said it many times: lack of competition is the real problem and it needs to be fixed, pronto. That’s what people should be complaining about.

There are two potential ways to do this: either the government lifts those foreign ownership restrictions and throws open the battlefield for anyone to enter, or as a consumer watchdog group recently suggested, it orders the CRTC to start taking a heavier and more proactive hand in regulating again. Given the ideological bent of our government, it’s obvious the first option is much more preferable. To put it bluntly, Industry Minister Tony Clement needs to crap or get off the pot because things are really starting to stink

How Much Of Porn Is Gay?

A little while ago, I promised that I’d further look into the numbers behind gay porn. The situation arose from a the Authors @ Google talk I did back in March, where I was asked why I didn’t use any male imagery during my presentation. For a defense of my straightness, see here.

The exchange got me curious as to what percentage of porn is gay, or geared toward a homosexual audience. As with trying to get a straight-up demographic estimate of the population at large, such a figure is somewhat hard to come by, largely because of definitions. I checked in with a couple of people in the porn business who I know and the best answer, as is often the case, came from Kim Kysar at Pink Visual. Rather than paraphrase, here’s her whole unabridged answer:

Just as there’s a huge glut of straight porn out there – gay porn seems to follow the same trends; gross quantities of gay productions, cheaply made, poor quality, fly by night studios – which are actually starting to dwindle as these weaker companies get weeded out due to the industry/economic downturn and piracy issues that are hitting us all. Even with these ups and downs over the years, gay porn has maintained a steady 5-15 gay scenes for every 100 straight scenes shot.

The gay market is unique in that they will pay for quality, they tend to be much more brand focused than straight porn consumers, and much more tech savvy. Half-assed gay production companies don’t survive. It’s very hard to penetrate the market dominated by the likes of Falcon, Lucas, and Mustang due to their quality, ethics, and the gay consumer’s brand loyalty. The gay consumer is much more likely to vote with their wallet when it comes to issues like 100% condom use, or supporting their favorite talent, director, or brand.

So, as Kim says, the best estimate would be that gay porn amounts to five to fifteen percent of the market, which is roughly equivalent to the best estimates for population.

Wholesale Wireless Not The Answer For Canada

Wholesale telecom services are a lot like selling the big guys’ hand-me-downs.

Ten per cent. That’s the best reason for why the Canadian government shouldn’t be – and probably isn’t – thinking of wholesale service as a solution to what ails the country’s wireless market.

On paper, the wholesale scheme seems to make sense: Big network owners are forced to provide airtime to any and all commercial interests at regulated terms and rates, which other companies then resell to consumers at whatever prices they see fit.

Here in Canada, the consumer advocates over at Open Media see this as a great answer to high wireless bills. Failing the arrival of a big foreign competitor, regulated wholesale access would inspire the likes of Toronto-based Ting – which is having some success in the United States – to spring up here, they argue. Such companies offer wireless users big savings compared to incumbent carriers.

True, but: 10 per cent. That’s the estimated market share of these wholesale carriers – known as Mobile Virtual Network Operators (MVNOs) – in the United States. Much has been written about how MVNOs are currently enjoying a Renaissance down south in the face of the big guys’ similarly high prices. They are indeed getting some traction of late, but there’s a whole lot of buts.

For one thing, there’s the nature of that 10 per cent. Of the 34 million MVNO connections in the United States, about 23 million come from TracFone, a unit of Mexico’s big wireless carrier America Movil. While TracFone certainly serves a purpose with its low rates, it’s essentially the cellphone company of a decade ago – it’s all about voice. Android and iPhone are virtual aliens to the company, with one of the few smartphones it does sell being this handsome ZTE Valet (I’m being sarcastic – it’s a horrible phone).

The few MVNOs that do offer data are operating on carriers’ older, slower and even near-obsolete networks, such as Sprint’s 3G and mobile WiMAX that Best Buy is using for its wireless business. Analysts seem to be unanimous in thinking that MVNOs getting good and proper access to modern 4G LTE networks is going to be a challenge, if not impossible.

“To establish an MVNO model for data is very difficult… I don’t think you’re going to see an unlimited data plan for an MVNO,” one analyst told Fierce Wireless. “Unless you have deep pockets, you won’t see a lot of data MVNOs because it’s a competitive issue right now,” said another.

In Canada, where around three-quarters of all cellphone users are smartphone users, that’s just not going to fly. A voice-oriented mobile provider is ultimately going to serve a very small, uber-budget-conscious market and is ultimately going to look a lot like Public Mobile. And oh yeah, that company just failed and got bought by Telus. Canadians don’t just want cheap voice – they’d also like the cool smartphones they’re accustomed to at reasonable prices. An MVNO isn’t going to be able to do that.

The data issue highlights one of the big problems MVNOs have in competing with big network owners in that they just aren’t equipped to offer higher-end services. In Eastern Europe, wholesale operators barely managed to squeak out four per cent market share and in Poland, 13 of them cobbled together less than one per cent after six years of operation. “This failure is attributed to the inability of MVNOs to compete with [network operators] in terms of pricing as well as service offering and quality, which translate into poor customer retention. Indeed a few MVNOs stopped activities altogether, such as wp mobi in Poland,” an InfoCom report found.

Virtual operators haven’t fared well in Canada. The biggest, Virgin, was half-owned by Bell from the start and eventually swallowed whole by the company. A few, such as Amp’d, flamed out while a handful – such as President’s Choice and 7-11 – are still hanging on. Like their U.S. counterparts, they’re either voice-oriented or have overall rates that aren’t much better than incumbents’.

Could regulation of both access and rates make MVNOs more feasible? Sure, but then that market would start to look a lot like another one – home broadband, where smaller internet providers get mandated access to the networks of Bell, Rogers and the other big guys.

Smaller ISPs have had this access for decades and, while they do provide a certain amount of competitive discipline to the big players, their market share is – you guessed it – about 10 per cent. That’s fewer than a million households compared to the 10 million serviced by incumbents, despite years of bickering in front of regulators over access terms, rates, wordings and so on.

There have been some positive effects of the scheme, to be sure. Without indie ISPs fighting against things like usage-based billing a few years ago, it’s a fair bet that Canadians wouldn’t have access to larger monthly caps like they currently do with companies such as Teksavvy and Distributel.

But in the grand scheme of things, it’s worth asking whether the whole wholesale regime has really accomplished anything. As Ookla’s recently updated Net Index so strongly highlighted, Canadian broadband is still slow and expensive by world standards. The best that can be said about indie ISPs in light of such continued results is that they’ve possibly kept a bad situation from becoming really bad. That’s not exactly shooting for the stars.

Part of the problem is the broadband market’s similarity to MVNOs. It’s only recently, after much arguing at the CRTC, that indie ISPs got access to faster fibre speeds, which network owners have in the meantime been selling for years. It’s great that these companies were able to price their services for less than incumbents, but that advantage was largely negated by the bigger companies’ ability to sell better and faster products. After all, who’s going to want a 5-megabit connection when for a few dollars more they can get 50?

These disputes are never-ending on the regulatory level, but on the consumer front they have a very clear psychological effect: the smaller guys are effectively selling the big guys’ hand-me-downs, which is how the network owners want it. It’s how they tolerate it.

This phenomenon may actually be detrimental because it allows those network owners to suggest that consumers have lots of choice. In reality, it’s meaningless competition because the services aren’t on par by any stretch of the imagination and likely never will be, which is why they’ll always be stuck at 10 per cent.

If the government is going to consider regulated wholesale wireless access, it would have to ensure that it doesn’t just enable hand-me-down services. Realistically, though, that hasn’t happened elsewhere so there’s no reason to expect it would in this situation.

Level Wireless Playing Field? Not In Canada

Bubble-Level1Over the course of this summer’s wireless war, the Big Three have thrown just about everything at the wall to see what would stick with the government and the public – threats of job losses, anti-American xenophobia, “dishonest” and “misleading” statistics, fears of service slowdowns, security concerns and the exacerbation of the rural digital divide. None of it has had any palpable effect, so now they’re leaning heavily on the “level playing field” idea.

To back up their claims that the government is favouring and even enticing foreign players such as Verizon into Canada, Bell and Telus wheeled out a nonsense survey (links to PDF) the other day that apparently shows Canadians to be against such a thing.

The headline result of the survey, commissioned by the two carriers from Nanos Research, is that a clear majority (81 per cent) of respondents do not want any companies – foreign or Canadian – favoured in the upcoming spectrum auction. As it stands, new entrants – or companies that have less than 10 per cent of the market – will be allowed to bid on two prime blocks of airwaves, while the Big Three will be limited to one.

The incumbents are also complaining that they are not allowed to buy smaller carriers including Wind and Mobilicity while the likes of Verizon can, and that new entrants will be allowed to use their cell towers after the auction is concluded (they usually leave out the fact that they will be well compensated for this usage). Bell, in particular, has been vocal about the need for the government to close this trio of “loopholes” so that the Big Three can compete against foreign giants on a supposedly level playing field.

The Nanos survey is full of leading questions, with results that are foregone conclusions. For instance, here’s the question that got the 81-per-cent response:

As you may have heard, the Government of Canada will soon be auctioning access to a new type of airwaves for use by wireless companies. Under the current rules, it would be possible for a large foreign company to bid and win access to twice the amount of airwaves as most Canadian companies. Which would you think is in the best interest of consumers:

  • Allow Canadian-owned and foreign-owned companies to bid for and win airwaves without favouring either (81%)
  • Allow foreign-owned companies the advantage of bidding for and winning more than Canadian-owned companies (10%)
  • Unsure (9%)

Hmm, well, when you put it like that…

Of course, if that question were asked in just about any country, the results would probably be the same. The only thing it measures is reflexive nationalism, bereft of any relevant reality.

If there’s a valuable question in the whole survey, it’s this one: “Which of the following aspects of your wireless service is the most important to you,” to which the top answer – from 41 per cent of respondents – was “price.” Customer service was a distant second at only 15 per cent.

The Big Three maintain that their prices aren’t high, despite numerous studies saying the opposite. The Nanos survey actually confirms it – “price” is not the number one concern for people when they don’t think they’re being overcharged.

The natural follow-up to the question might have been something like, “Would you be in favour of giving a foreign company special advantages in a wireless auction if it meant that your bill would go down?” The answer would probably have been equally predictable (“Absolutely. Bring on the Yanks!”).

The reality is, the level-playing-field conceit is perhaps the most bogus talking point of this whole debate. There are at least 10 reasons why any new entrant – big or small, Canadian or foreign – won’t see any sort of level playing field against the Big Three for years to come, if ever. They are:

1. Spectrum quantity. Bell, Rogers and Telus have been accumulating spectrum – the all-important airwaves that make cellphones work – for decades. Like a Baskin Robbins, they have all flavours of spectrum: good spectrum, bad spectrum, high-frequency spectrum, low-frequency spectrum, big blocks of spectrum, little blocks of spectrum. You need spectrum? They’ve got spectrum. Existing newcomers such as Wind and Mobilicity, and any potential bidders in the upcoming auction, have or will have relative peanuts in comparison. This is important because the more spectrum a carrier has, the better – and broader – service it can provide. Foreign pockets can’t be deep enough to change this very basic fact.

2. Spectrum quality. Hand-in-hand with quantity is quality. The spectrum that Wind and Mobilicity have – known as Advanced Wireless Services operating in the 1700/2100 MHz bands – is fine for providing basic service, but it’s not exactly “beachfront property.” It doesn’t penetrate walls very well, meaning that if you’re in a basement, odds are good your service may cut out (I speak from experience). Generally speaking, the lower the frequency, the better the spectrum, which makes the upcoming 700 MHz auction a good one. Nevertheless, if Verizon or anyone else buys the two smaller Canadian carriers – or those two continue on independently – they will have major deficiencies not just in how much spectrum they have, but also the quality of it. This doesn’t just affect signal quality, but also the variety of compatible phones they can choose from.

3. Towers and other infrastructure. Two months ago, Rogers felt the wrath of North Vancouver residents as they opposed the building of new cell towers proposed for their neighbourhood. It’s the sort of thing that happens any time anyone wants to put up a new one. Yes, it’s true the Big Three have weathered these battles and they perhaps have an ideological point when they say competitors should be forced to as well. But the reality, as the North Vancouver residents illustrate, is that nobody wants new towers anywhere. New entrants can start from scratch and fight these long, tedious and expensive fights, but in the meantime they can’t offer service or make revenue. One more advantage to the Big Three.

4. Coverage. Further to that, Bell, Rogers and Telus can offer something new entrants can’t and likely won’t be able to for some time: nation-wide coverage. They’ve had decades to build it up, so it’s madness to expect anyone – even a rich company such as Verizon – to have a solid coast-to-coast network lickity-split. This is why a Mobilicity customer in Toronto, for example, pays $1.50 per megabyte as soon as he or she goes a few kilometers north of the city; they’re paying roaming charges to one of the Big Three.

5. Cash flow. In 2013, the Big Three funneled about 13 per cent of their service revenues back into network expenditure, according to the Bank of America Merrill Lynch Global Wireless Matrix. That relatively small percentage is a luxury no newcomer that is busy building infrastructure is likely to see for some time. Yoigo, a newcomer to Spain’s wireless market, spent about 100 per cent of its revenue on capital expenditure in 2007, then almost 40 per cent again in 2008. That’s a lot of money that isn’t available for other things, such as acquisitions, customer retentions, advertising and so on, all of which is of course available to the incumbents.

6. Bundles. Remember how price is important to consumers? Well, they can apparently save some cash if they sign up for multiple services from the Big Three, which many do. There’s also the small comfort in getting only one bill a month, as opposed to three or four. Regardless, this isn’t an option immediately available to new wireless carriers, without further acquisitions being made. Bundles are also a double whammy in that a consumer changing wireless providers then inevitably sees the price of their other services go up, which acts a further disincentive against switching.

7. Media integration. With Bell and Rogers owning everything from magazines, TV channels and sports teams, there’s an awful lot of of bonus content they can throw at wireless subscribers. The recently launched Bell TV app, which gives the company’s customers special access to programming, is a case in point. Yet another untouchable feature for new entrants, big or small.

8. Contracts. Two-year deals recently became the norm thanks to new rules from the Canadian Radio-television and Telecommunications Commission, but the reality is there are still many subscribers hooked into the early days of three-year agreements. The Big Three often make it very enticing to renew those contracts close to their end dates or, as in the case of my poor, unwitting mother, they trick them into doing so or even reset them without the subscriber’s agreement. In the most recent report from the Commissioner for Complaints for Telecommunications Services, contract disputes made up more than a quarter of the issues dealt with. As the CCTS’s annual report puts it, “customers often complained that they were charged fees for the early termination of a contract to which they had not consented, or that their contract had been renewed without their authorization.” Canada is already a small market. Keeping a good portion of customers locked up, one way or another, makes it an even smaller one for new competitors.

9. Brand awareness. Further to the media and sports ownership, Bell, Rogers and Telus also have their names on everything. There is likely no Canadian that isn’t aware of these companies and it’s indeed hard to go through a day without being reminded of one or more thanks to their pervasive advertising and brand marketing. Some Canadians have indeed heard of Verizon, but very few had heard of Wind prior to its start-up and certainly no one knew anything about Mobilicity. Many people subscribe to the old maxim of how the devil you know is better than the one you don’t, which means that newcomers inevitably have to spend a small fortune just to get their names out among the din. See #5: Cash flow.

10. Lobbying. Here’s a funny joke for the next time you’re at a cocktail party. Q: How can you identify a politician? A: He’s the one with the trail of telco lobbyists following him. Between the three of them, Bell, Rogers and Telus racked up an amazing 73 communications with politicians and bureaucrats over the first six months of the year, according to the registry of lobbyists. That averages out to each of the Big Three meeting or communicating with someone of importance every single week. Add in their official lobby group, the Canadian Wireless Telecommunications Association, for an extra visit each month. Anyone who wants to compete with that kind of favour-currying is going to have to spend big bucks on lobbyists – and indeed Wind has, with a healthy 17 communications over the same time frame. Ask the company’s executives if they’d rather be spending those resources elsewhere, instead of preventing an overwhelming in Ottawa, and the answer is obvious. Sure, Verizon could afford the lobbyists, but it would take the company years to get the lay of the land and build relationships.

Put all of these reasons together and it’s no surprise that Bay Street analysts were so doubtful that Verizon – or anyone else, for that matter – would come to Canada. Who in their right mind would with so many cards stacked against them? Level playing field? Not in this country – not now, and likely not ever.

That said, perhaps Nanos should do another survey, this time with some rephrased questions. How’s this for starters:

As you may have heard, the Government of Canada will soon be auctioning access to a new type of airwaves for use by wireless companies. Under the current system, the big existing service providers already have copious amounts of top-quality spectrum (some of which was gifted to them) that runs across nation-wide infrastructure built over decades; a good portion of potential customers locked up in contracts and bundles; and a whole pile of cash to burn on advertising, affiliated businesses, sports arena naming rights and political lobbying. Which would you think is in the best interest of consumers:

  • Give every conceivable advantage to any company crazy enough to tackle this market?
  • Duh, wha?

When Good Chatbots Go Bad

In this week’s issue of New Scientist magazine, I have a feature article that takes a look at the evolution of chatbots, or computer programs that are designed to have conversations with real people. While there are a wide variety of chatbots out there, from fun, entertainment-oriented ones such as Cleverbot to customer service agents such as Shaw’s “Ask Amy,” my story specifically looks at how these programs are starting to go bad – or the chatbots that are being used by hackers and criminals.

Viewing the story requires a subscription, but fortunately it’s free. Go here to check it out.

As with all such features, there was a lot of material left on the cutting room floor. One particular aspect, which actually served as the intro to the story in an earlier draft, was the story of Roman Yampolskiy, a researcher and assistant professor at the University of Louisville who has applied human-like biometrics to chatbots.

Yampolsky and his colleagues actually studied commercial bots such as Jabberwacky to see if they exhibited writing styles, the same way that human writers often do. They found that they do indeed and that they can be identified using this technique, which is also employed by police forensic researchers.

What’s equally as fascinating is how Yampolskiy got interested in the topic. It all had to do with a bit of an obsession with online poker. Here’s his tale, from the early version intro to my article:

Roman Yampolskiy used to love playing chess and poker online. He relished the idea of pitting his skills against other players, but finding willing opponents of similar skill near him in the real world was tough. The internet, on the other hand, provided an instant wealth of suitable partners to square off against.

But then something ruined it for him: Robots.

As a PhD candidate in computer science and engineering at the University of Buffalo, he couldn’t help but notice that many of his poker opponents exhibited peculiar behaviours. Many would be online at all hours of the day, they’d click buttons in exactly the same spot every time or they’d ignore chat requests.

After some simple monitoring, he concluded that at least half the players in a typical game were bots, or software programmed with the rules of poker. In higher-stakes rooms, these bots were even more sophisticated – they were able to carry on conversations and pass themselves off as real people. For actual human players, that was grossly unfair.

“What makes them unethical is that people combine multiple bots into a single system and they share private card information, so you’re not really playing against five bots, you’re playing against a team of five bots,” says Yampolskiy, who is is now an assistant professor at the University of Louisville’s cybersecurity lab.

“If you have a population of very good artificial poker players, you’re not going to get many humans playing. They don’t like losing.”

Bots aren’t ruining just internet poker. Left unchecked, researchers and security experts say they have the potential to turn people off many online activities, including gaming, chat rooms and social networking sites. With nefarious bots that lure people into giving up personal data popping up in all of these places, and with the improving state of such applications, the impetus to develop tools and techniques to differentiate between humans and robots is growing.

Researchers are thus trying to create a better Turing test, the exam proposed by British artificial intelligence pioneer Alan Turing more than 60 years ago. Turing, who would have been 100 this June, thought that machines could be distinguished from humans by quizzing them through conversation. His test is still years away from being beaten, but bots are routinely fooling human judges in more limited versions of it, such as where conversations are restricted to a certain topic. Like, say, poker.

Yampolskiy’s discovery sparked an interest in the emerging field of virtual biometrics, or the detection of robots through human-like traits, such as writing styles and language usage. In April, Yampolskiy and his Louisville colleagues presented a paper at the Midwest Artificial Intelligence and Cognitive Science Conference detailing an experiment that charted the writing style of 11 well-known chatbots.

Using several years of transcripts submitted for the Loebner Prize, an annual contest that tests chatbots’ ability to pass as humans, the group looked for certain words and patterns. They found that several bots, particularly Alice and Jabberwacky, did indeed exhibit stylistic traits – much like human writers – that allowed them to be accurately identified.

Complicating the experiment, however, was the fact that several of the chatbots evovled in style as their creators improved algorithms or as programmed learning functions kick in, resulting in “behavioural shift.”

“That’s what makes this problem even more difficult. It’s not enough to establish an initial profile, you have to keep up with changes as time progresses in the style of those bots as well,” Yampolskiy says.

“If the bot gradually learns and changes over a period of years, we can keep up with that. If, all of a sudden, someone replaces all source codes with new ones and now it’s a completely different bot, obviously we won’t be able to do much about it.”

The Legal Side Of Gaming’s Digital Revolution

Writing about video games isn’t all about sitting on the couch in your underwear and staring at a TV for hours on end. There are those rare occasions when those of us who do it get out and actually, y’know, talk to people involved in games.

Such was the case this week at the Montreal International Games Summit. I listened to and chatted with a great range of people across the whole spectrum of the industry, from writers and programmers to executives and even recruiters.

I’ll have more on MIGS over the next little while, but today I wanted to share one of the more interesting conversations I had. I interviewed Maxime Gagne, a lawyer from Heenan Blaikie who represents video game developers. Many wouldn’t think a conversation with a lawyer would be fun, but given how quickly video games are changing thanks to digital distribution and interaction over the internet, Gagne is covering some particularly poignant areas.

This rapid change was the topic of a presentation he did at MIGS. I chatted with him afterward about it, as well as the legal aspects of free-to-use services such as Facebook and Canada’s controversial copyright legislation, Bill C-11. Here’s an edited transcript of the interview.

How would you boil down your presentation to its essence?

The first big aspect that needs to be looked at in the context of the end user license agreement is the ownership of the game itself, which can include the ownership of player generated content. With digital distribution that’s really taken a whole new meaning. You have even through retail a few games that allowed user to go online and interact with each other but [so many now] have the ability to upload content and enhance the game, it’s really changed the way we have to license those games.

Also, when you’re looking at the end user license agreement you have to take into account all the consumer protection laws, the laws regulating access by minors – whether it’s advertising to minors or your game is rated for a certain audience – and of course in most online games either the developer or the distributor will collect data with respect to the users, whether it’s purchase patterns or to sell that data for advertising or for the purpose of establishing an audience. That data needs to be managed. What I see more and more is the outsourcing of that data, which poses problems too and people are not aware of that.

What we’re looking at broadly is an increasingly complex set of rules that regulate the game industry and the conduct of the gamers and their interactions with the game. From both the developer’s and the consumer’s standpoint it’s getting increasingly complex, that’s for sure. That’s where we step in. Lawyers oftentimes make the process more complex or less complex. My role as a lawyer is to play on both ends and sometimes take the role of the player and look at the license and say, “Can I understand any of this? Is it reasonable in a certain manner?” I keep reinforcing it with my clients that even though you’re drafting this agreement, you can’t just write anything in there, you can’t write all the rights in for yourself. You can’t get unlimited assignment of representations because it’s not the way it works.

Do you play games yourself?

I do. I’m not an avid gamer, but yes I do.

The obvious question is, how enforceable are end user license agreements (EULA) given that virtually no one reads them?

I agree with you, but there are ways to make them enforceable. One of the ways that I personally favour are the summary statements of the rights and obligations of players. Twitter, even though it’s not a game, has an interesting example of this. If you go on the Twitter website, even though they have a full-length license agreement, they have a summary that tells users in clear language what they’re allowed to do and what they’re not allowed to do. Often times, even though that’s being followed by a very long license agreement, if the basic principles are made clear to the end user right off the bat, then you have a much greater chance of having an enforceable EULA. I always say to my clients, if it’s important to you, make it clear and summarize it.

Also, it looks simply but often what you’ll see is that the EULA will pop up on the screen and you already have the “I agree” button even though there are 77 pages that you don’t have to read to click it. If at the very least you can demonstrate that the player had to go through the entire license before clicking “I agree,” in most circumstances it will be enforceable. That being said, there are rules in respect to unconscionable contracts that are unfair to the user. Within the frame of mind that most EULA are consumer contracts, courts will tend to favour consumers over developers in the interpretation of those EULAs.

Did you ever see the South Park episode about Apple’s EULA, where one of the characters inadvertently agreed to have his mouth sewn to someone else’s rear?

No, but that’s hilarious. That’s basically it. I would tend to think those kinds of situations could never happen. If there are such things as unfair provisions, the courts will strike it down, which is why from a developer’s perspective, well-crafted survivability clauses are a must but I won’t bore you by going into that.

Are we headed towards all games having EULAs, or could each platform – like Xbox, or iTunes – just aggregate them as one on behalf of developers?

They could definitely aggregate it by platform but the problem with EULAs is its becoming excessively complex. Every game has its own type of content that will be input or uploaded so yeah, you could aggregate it, but then you’d end up with a EULA that’s 177 pages long. And then the question is, do you really expect anyone to go through 177 pages of legalese? I personally wouldn’t recommend it to a client because the information the end user is looking for is lost in a mass of information. You have to make it easy for the player to retrieve information. It would become overly complex.

But isn’t the problem also that if players have more EULAs to read, they’ll probably read fewer of them?

Yeah, but on a case by case basis that’s more or less would have an impact on the enforceability. There’s such a rule in contracts that you can’t claim ignorance. If you’re presented with a document and you decide not to read it, you can’t just claim ignorance, you’re bound by it. If you’re a developer and you’re able to establish that the contract was presented to the person and he had a reasonable chance of going through it and agreeing to the terms, then technically if all other provisions are valid in the contract, it should remain enforceable. So yeah, it is true in practice. As more and more EULAs are flourishing through the digital distribution channels, people will read them less and less. But then again, the reality is even through regular retail outlets people don’t read the fine print. It comes to the lawyers and judicial side of things to make sure there are clear statements for the users that they can understand. That’s always been a problem with contractual law and it doesn’t really change with digital distribution.

One of the things you said during your presentation is that if you’re not paying for a product, chances are good you are the product. Can you expand?

It is the reality of the web and most free games. You have to realize that developers are looking for revenue streams. They’re in a business just as you and I are in a business and if they’re not making revenue directly from payments from the players, they’re making revenue otherwise. That otherwise in many cases is selling consumer data. That can be done, it’s not a problem, but it has to be clear to the user whenever that information is collected. That consent has to be clear and right at the beginning before I purchase the game because later on it’s not valid, so I have the option to opt in or out. People have to realize that there’s not much that comes for free in life. If you’re playing a free game, you’re paying for it in another way.

So people who complain about things like Facebook violating privacy, do they just not understand that?

There’s more and more concern about the realm of privacy and people are not realizing that those companies are making an investment in developing a platform that they use for free. There has to be a way for them to be able to generate revenue so they can enhance that platform and keep it available. Yes, I don’t think people realize the costs to having access to that platform is that, that they can sell not necessarily information that will render you identifiable as an individual, but they’ll take your information in aggregate. They’re selling advertising like that. There’s an increased awareness of what privacy is and what personal information is, but then again, you can’t have your cake and eat it too. If you’re going to have access to those services and take advantage of them, then part of the deal is you relinquish some information.

The copyright bill, C-11, also came up during your talk. You said it will be good for game developers. Can you expand?

Digital rights management is good news for developers in a sense that DRM in Canada is not protected. If you break DRM you could be found in violation of the EULA, but there is no statutory provision that will make you liable for a fine, for example. That would come into place in the new act. It is a good move for developers. That said, users have been really outraged over the user DRM, mostly to regulate the use of and transfer of their license. For example, if you have a game on one platform and then you sell your X-Box and you want to transfer that game, in some cases you won’t be able to do it. DRM will prevent you from doing that. From the consumer’s perspective, it may be seen as a setback.

What I’m hopeful about with the protection of DRM is that it will be used to locate the actual copies of games and make sure that they’re traceable. The problem we have now and why we don’t allow copying, in most cases, of video games is that you can make one copy or five, six, seven, 10 and you can decide to distribute them. As a developer with the DRM, which are basically technological tracking systems, I can see that you’ve taken your copy and just transferred it to another platform. I’m hoping that with that tracing being possible, the developers will allow users more and more to transfer their games. Right now because it has no protection, DRM isn’t being used to its full capacity to enhance the rights of the users, which they could do. Tha’s a misunderstanding people don’t often see in DRM. Right now because there’s so much piracy, it’s primarily used to prevent copying.

There’s the suggestion that C-11 should have an exception to the lock provision, where people could break DRM for their own private use. Some say that such an exception would make the rule itself pointless. What do you think?

I haven’t seen the exception but there could be ways that it’s crafted that wouldn’t necessarily make it pointless. It would allow private copying but still prevent the uses that are technically restricted to the author of the work, meaning distribution or public performance of the work. That would still be considered infringement. You could break the DRM and make a private copy but you can’t break the DRM and make 160 copies and sell it. It doesn’t render the provision pointless, it just makes clear that there are certain limited uses that you’ll be able to do.

So you’re not in favour of one approach or the other? Private copying could be enabled by the digital locks or by the non-infringement exception, right?

Yes.

So it’s potentially good news either way?

The DRM is not necessarily a move that’s coming out of nowhere. There are international treaties for the protection of intellectual property that require protection of DRM. Canada was not in compliance with those treaties so it’s a move that’s also being forced by international organizations. Whether those standards are good or not for developers and distributors, that’s a debate that’s been going for quite a while. So we’re not just trying to mimic what the States are doing.

Critics of C-11 have said the DRM protection isn’t required by treaties such as WIPO and that it’s just being pushed by U.S. entertainment companies. Are they just interpreting the treaties differently?

I do see it definitely as a response to the criticism that we’ve had from the United States, but with that said, that’s not the only reason why we’re moving towards it.