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CONTACT: Patrick Ross
April 6, 2005
(202) 289-8928
Let Markets Decide Music Interoperability
Gifford in Testimony Urges Congress Not to Interfere

WASHINGTON D.C. - The last year has seen a rush of new digital music services, from pay-per-song downloads to streaming to mobile subscriptions, and it has also seen some friction over standard-setting and interoperability. That is as it should be, says Progress & Freedom Foundation President Ray Gifford. In testimony today before a key House subcommittee, Gifford urged government restraint in this nascent market. "From Congress' point of view, the best course would be to resist calls for mandates or technology limitations in this dynamic space."

Addressing the House Judiciary Subcommittee on Courts, the Internet & Intellectual Property, Gifford outlined three key points: 1) Digital music is a new market, and competitors should be allowed to try different services and platforms, even if there isn't immediate interoperability. 2) The market is the best place to decide the merits of an open or closed platform. 3) Digital rights management tools should be an available option for any business that chooses to use them.

Competition among platforms is as important as competition among services, Gifford testified, because it can spur innovation. It's natural for competitors to envy the success of one platform -- for example in the digital music market, the iPod -- and want to compete on that platform. While it is not uncommon for markets to gravitate toward interoperability based on consumer demand, it is inappropriate for Congress to intervene. "My first advice," Gifford told the subcommittee, "is don't give in to platform envy and mandate some sort of interoperability."

Regarding the debate over open and closed platforms, Gifford testified: "For Congress, I do not think this should be of particular concern because the market will sort out what is superior, or at the very least make a better judgment about the inevitable tradeoffs involved." "Because we cannot know in advance what consumers will prefer or what is truly superior," he said, "we should forbear from interfering."

In addition, Gifford testified, the market is the best place to determine when DRM should play a role. DRM allows some providers to make available content they might otherwise not, and it helps create tiered offerings, where consumers can pay various amounts for different bundles of rights. But Gifford said that market could be threatened by legislation that would permit circumvention of copy-protection mechanisms. "It's not hard to imagine that in a world where DRM hacking is legal," he said, "there would be little incentive for content providers to compete with various business models, as we see now with Napster To Go. That would mean less content with fewer price options, and thus a loss for consumers."

The subcommittee's hearing, called by Chairman Lamar Smith (R-Texas) and ranking Democrat Berman (California), was titled "Digital Music Interoperability and Availability," and information on the hearing can be found here. In February Gifford joined other senior fellows in Milan and Brussels for a series of conferences and speeches on standards and interoperability, the Progress & Freedom Foundation's first annual Digital Europe.

The Progress & Freedom Foundation is a market-oriented think tank that studies the digital revolution and its implications for public policy. It is a 501(c)(3) research & educational organization.



The Progress & Freedom Foundation