In two different news stories summarizing the latest Nielsen Soundscan music sales report, the music industry is cast as growing at a remarkable clip or continuing its long, slow decline.

Variety takes the latter tack, moaning, “Album sales take a tumble in 2007.” In contrast, the Centre Daily Times celebrates the growth in total sales from 1.2 billion units in 2006 to 1.4 billion last year.

Of course, as this story filters into the rest of the media, Variety’s spin will undoubtedly carry more weight. Yet the shift to digital units is hardly all doom and gloom.

Digital delivery is cheaper–especially for the labels, considering that Apple, Walmart, and Amazon pay to host and move the files. End users do a great deal of the marketing for the labels. Ringtones are also a robust market. In short, this data suggests the year-to-year change in 2007 is roughly a wash.

It is painful for the music industry to change its business practices away from the physical distribution of albums to the digital distribution of tracks. For most industries, the collective response is, “Tough luck.” Nobody mourned the passing of the buggy whip industry. Yet the music industry gets political and rhetorical support befitting an endangered species.

In the long term, the music industry should be expected to adapt to consumer expectations–a strategy they finally seem to be taking to heart.

(Thanks to Joe Turow for the Variety link.)

US News interviewed a handful of cutting-edge tech gurus, asking them, “What if you were appointed innovation czar?”

Three themes run through the answers:

1) Portable, especially universal health care. People stay in uninspiring jobs because they need the health insurance. Provide this automatically, and risk takers are free to start new businesses, take chances on startups, and otherwise leave the safety net of the established economic players.

2) Provide thinner protection for legal information monopolies. Glenn Reynolds recommends simpler, thinner patent protection. Cory Doctorow urges the repeal of Title I of the DMCA, which prevents the circumvention of copyright management technologies.

3) Dump cash into targeted education programs.

Any of the three would accelerate innovation, and the combination would be explosive.

To help Antigua recover part of the vast sums lost due to the US blocking online gambling, the World Trade Organization is allowing the Carribean nation to make unauthorized copies of $21 million worth of US goods.

The decision is surprising, but it will be hard to enforce. US trade representatives and copyright industry attorneys will certainly contest the dollar value of every infringement (ask Jammie Thomas about this one), and the Times quotes an unnamed trade official warning that “such behavior would ‘undermine Antigua’s claimed intentions of becoming a leader in legitimate electronic commerce, and would severely discourage foreign investment’ in the country.”

Many folks have wondered how serious Google is about winning a slice of the 700 MHz spectrum in the upcoming auction.

Harold Feld answers this for us in the best blog post ever. Specifically, they’re bent on destroying the current business model of the mobile industry and preserving the last vestiges of an open internet. In other words, pretty serious.

So go read it already.

In my last report on this story, I put little thought into a minilink to an article by CNet’s Anne Broache, which frets that proposed net neutrality bills probably would not prevent Comcast’s ongoing peer-to-peer blockade. I no longer agree; I think even the weaker of the two bills on this count, if properly enforced (big caveat), would stand a good chance to stop these shenanigans.

This further investigation was sparked when I learned a good deal more from this awesome EFF article about the Comcast affair. This looks like a tight case: Comcast is almost completely obstructing Gnutella and BitTorrent traffic, and when confronted with effects on other programs (specifically, Lotus Notes and Windows Remote Desktop) has changed their algorithms to let that traffic through.

Thus inspired, I re-read the bill now in the Senate, Byron Dorgan and Olympia Snowe’s S. 215. I also re-examined Ed Markey’s bill from last year. Having done so, I’ve changed my mind: I think the plain text of the Senate bill and any reasonable reading of the House bill (pending FCC interpretation) makes it pretty hard for Comcast to continue blocking specific programs.

I start with the Senate bill which, unlike Markey’s proposal, has already been re-introduced in this Congress. Section 12(a) states, “With respect to any broadband service offered to the public, each broadband service provider shall (1) not block, interfere with, discriminate against, impair, or degrade the ability of any person to use a broadband service to access, use, send, post, receive, or offer any lawful content, application, or service made available via the Internet.”

This seems straightforward: BitTorrent and Gnutella have legal uses, thus Comcast would be prohibited from impairing or even degrading their subscribers’ uses of these programs. They could slow down the traffic to and from their heaviest users; EFF points out that they’re already doing this. But they couldn’t block specific programs just because some of their users are bandwidth hogs and some of their content is illegal. (A large share of HTTP is illegal, too, but Firefox is both legal and unencumbered.)

As Broache points out, the bill does allow an exemption for network management, as does Ed Markey’s House bill from last session (pdf) and his new bill expected soon in this session. The question is whether this exemption is big enough to allow Comcast’s new Berlin Wall impression to stand.

Broache and the experts she cites (including the very awesome Harold Feld of the Media Access Project) express concern that the Markey version in particular leaves a big enough gap to allow some potential for such a p2p blockade to stand. Let’s go to the tape.

In Section 4(b), we find:

EXCEPTIONS.—Nothing in this section shall prohibit a broadband network provider from implementing reasonable and nondiscriminatory measures to (1) manage the functioning of its network, on a systemwide basis, provided that any such management function does not result in discrimination between content, applications, or services offered by the provider and unaffiliated providers.

This is flawed and open to interpretation. If the period comes after “services” the exemption is airtight. You can manage bits however you want, but don’t pick and choose winners from losers. As it stands, though, I still think Comcast is almost without a leg to stand on.

First, Comcast is definitely in a business that competes with BitTorrent–namely, the cable television business. BT is largely a means of acquiring video; at least in terms of total bandwidth traffic (important when evaluating the rhetoric of network management), video is surely the lion’s share of BT usage.

Second, Comcast’s current efforts are neither reasonable nor nondiscriminatory. They’re effectively blocking all users from seeding any files regardless of current network congestion or usage patterns, which is unreasonable when they could provide much better overall traffic management by adjusting it to reflect congestion and each user’s bandwidth greed. (See the EFF link above.) And they’re blocking some bidirectional filesharing programs (BT, Gnutella) but not others (LotusNotes), which is clearly discriminatory.

Markey’s 2006 version is indeed not as tight as the Dorgan-Snowe version in the Senate. Dorgan’s network management exception requires that all decisions not be inconsistent with the mandated nondiscrimination provisions, including the requirement that the provider not pick and choose winners among applications and content. This is an important distinction. Under Dorgan, network management must be done without resorting to picking off specific applications. Under Markey, though, it simply must be “reasonable and nondiscriminatory,” which probably means something different to Michael Copps than Michael Powell.

Two more points are worth mentioning. First, any regulation is surely a substantial disincentive for Comcast to try something so boldly against specific applications. The marginal value of choosing this over choosing more sensible (and cost effective) traffic management is greatly diminished in the face of even a potential drawn-out, multi-venue legal proceeding. Thus, even if the bill does not force the FCC’s hand here, Comcast would never know how it would play out, especially in light of massive political pressure, so they would pick something safer, which means less discriminatory.

Second, both bills require providers to disclose all limitations on broadband networks. Comcast won’t want to publicly admit that they’re doing this; they’ve dragged their feet on doing so before finally chalking it up to “network management”. If they had to disclose it, this would dissuade them from doing it in the first place.

Of course, they could still do it and try to hide it, but they would surely realize this makes any necessary FCC proceeding even more likely to come out against them. They’d have a much harder time explaining it as mere network management if they were hiding it from their customers.

Either Markey’s or Dorgan and Snowe’s bill probably does the job, but the Senate version is the better of the two.

CNet describes Google’s announcement that it will bid on 700 MHz spectrum as “Google versus the telecoms.”

According to CNet’s Anne Broache, the answer is: probably not.

The current legislative proposals allow network management, and Comcast could probably use this exemption to justify its decision to degrade BT traffic. It would only hit a wall if it was also offering another paid peer-to-peer service that always worked perfectly.

Internet users in France who use their connections to violate copyright law may lose their connections under a new policy announced this week.

In a three-way deal between internet service providers, the French government, and copyright holders, those accused of infringement will receive warnings from their ISPs. If they are identified as continuing to download infringing files, they will be cut off. Reports are vague about the means by which specific users will be identified as regular infringers.

As CNet reports, “The deal also creates obligations for film and music companies, who pledge to make their works available online more quickly and to remove technical barriers such as those that make music tracks unreadable on certain platforms.” This promise to drop proprietary DRM is nice, but if it happens at all, I doubt it will be before users start losing access.

The parties negotiating the deal did not include any civil society groups who could speak on behalf of user-citizens, and unsurprisingly, those groups are angry at the outcome. CNet continues, “Consumer group UFC Que Choisir said in a statement that the deal was ‘very tough, potentially destructive of freedom, anti-economic and against digital history,’ arguing that tough antipiracy penalties are already in place.”

While I find this deal objectionable, I am curious to see how it plays out.

On Thursday, the US House passed a FISA reform bill without granting immunity to telecommunications companies accused of assisting illegal eavesdropping on US citizens.

As we noted last month, the White House and telecoms pressed for retroactive immunity. This pressure has not worked–at least not yet–despite Bush’s threat of a veto.

As we reported earlier, Section 494 of the College Opportunity and Affordability Act of 2007 (pdf) would turn colleges into copyright cops. Now, the bill is in front of the full House thanks to a unanimous committee vote in its favor.

The section (on pp. 411-413 of the draft above) requires schools to buy some sort of “alternative” to infringing peer-to-peer downloading and implement digital rights management technologies on their networks.

This is the worst idea since Title I of the DMCA.