1. Copyright 2005 1 P2P Technologys Strategic & Policy Implications Roger Clarke Xamax Consultancy Pty Ltd, Canberra Visiting Professor at A.N.U., U.N.S.W., Uni. of Hong Kong http://www.anu.edu.au/people/Roger.Clarke/...... /EC/P2P-StratPol-0509 {.html,.ppt} ECOM-ICOM Expert Address University of Hong Kong, 8 September 2005

2. Copyright 2005 2 P2P Technology and Its Strategic & Policy Implications Themes What P2P Is, and What It Does Who It Threatens, and How The Business Opportunities P2P Creates What Business Models Can Be Applied P2Ps Broader Policy Implications

3. Copyright 2005 3 P2P – The Motivation P2P is class of applications that take advantage of resources (storage, processing capacity, content, human presence) available at the edge of the Internet Each participating program is both Client and Server and hence each workstation is a host as well, e.g. your music playstation can be a mixer too your PDA can host part of a music catalogue your PC can host part of a music repository

4. Copyright 2005 4 P2P Architecture Cooperative Use of Resources at the Edge

5. Copyright 2005 5 P2P Differentiated from Client-Server

6. Copyright 2005 6 Why P2P Is Attractive Much-Reduced Dependence on individual devices and sub-networks (no central servers) Robustness not Fragility (no single point-of-failure) Resilience / Quick Recovery (inbuilt redundancy) Resistance to Denial of Service Attacks (no central servers) Much-Improved Scalability (proportionality) Improved Servicing of Highly-Peaked Demand (more devices on the demand-side implies there are also more server-resources)

7. Copyright 2005 7 P2P Networks and Protocols http://en.wikipedia.org/wiki/Peer-to- peer#Networks.2C_protocols_and_applications BitTorrent network: ABC, Azureus, BitAnarch, BitComet, BitSpirit, BitTornado, BitTorrent, BitTorrent++, BitTorrent.Net, G3 Torrent, mlMac, MLDonkey, QTorrent, SimpleBT, Shareaza, TomatoTorrent (Mac OS X) [2], TorrentStorm eDonkey network: aMule (Linux, Mac OS X, others), eDonkey2000, eMule, LMule, MindGem, MLDonkey, mlMac, Shareaza, xMule, iMesh Light, ed2k (eDonkey 2000 protocol) FastTrack protocol: giFT, Grokster, iMesh (and its variants stripped of adware including iMesh Light), Kazaa by Sharman Networks (and its variants stripped of adware including: Kazaa Lite, K++, Diet Kaza and CleanKazaa), KCeasy, Mammoth, MLDonkey, mlMac, Poisoned Freenet network: Entropy (on its own network), Freenet, Frost Gnutella network: Acquisitionx (Mac OS X), BearShare, BetBug, Cabos, CocoGnut (RISC OS) [3], Gnucleus Grokster, iMesh, gtk- gnutella (Unix), LimeWire (Java), MLDonkey, mlMac, Morpheus, Phex Poisoned, Swapper, Shareaza, XoloX Gnutella2 network: Adagio, Caribou, Gnucleus, iMesh, MLDonkey, mlMac, Morpheus, Shareaza, TrustyFiles Joltid PeerEnabler: Altnet, Bullguard, Joltid, Kazaa, Kazaa Lite Napster network: Napigator, OpenNap, WinMX Applejuice network: Applejuice Client, Avalanche, CAKE network: BirthdayCAKE the reference implementation of CAKE, Direct Connect network: BCDC++, CZDC++, DC++, NeoModus Direct Connect, JavaDC, DCGUI-QT, HyperCast [4], Kad Network (using Kademila protocol): eMule, MindGem, MLDonkey, LUSerNet (using LUSerNet protocol): LUSerNet, MANOLITO/MP2P network: Blubster, Piolet, RockItNet, TVP2P type networks: CoolStreaming, Cybersky-TV, WPNP network: WinMX Other networks: Akamai, Alpine, ANts P2P, Ares Galaxy, Audiogalaxy network, Carracho, Chord, The Circle, Coral[5], Dexter, Diet- Agents, EarthStation 5 network, Evernet, FileTopia, GNUnet, Grapevine, Groove, Hotwire, iFolder[6], konspire2b, Madster/Aimster, MUTE, Napshare, OpenFT (Poisoned), P-Grid[7], IRC @find and XDCC, used by IRC clients including: mIRC and Trillian, JXTA, Peersites [8], MojoNation, Mnet, Overnet network, Peercasting type networks: PeerCast, IceShare - P2P implementation of IceCast, Freecast, Scour, Scribe, Skype, Solipsis a massively multi-participant virtual world, SongSpy network, Soulseek, SPIN, SpinXpress, SquidCam [9], Swarmcast, WASTE, Warez P2P, Winny, AsagumoWeb, OpenExt, Tesla, soribada, fileswapping, XSC

8. Copyright 2005 8 P2P Multi-Protocol Applications http://en.wikipedia.org/wiki/Peer-to- peer#Networks.2C_protocols_and_applications eMule (Edonkey Network, Kad Network) (Microsoft Windows, Linux) aMule (eDonkey network) (Linux, Mac OS X, FreeBSD, NetBSD, OpenBSD, Windows and Solaris Op Environmt) Epicea (Epicea, BitTorrent, Edonkey Network, Overnet, FastTrack, Gnutella) (Microsoft Windows) GiFT (own OpenFT protocol, and with plugins - FastTrack, eDonkey and Gnutella) and xfactor (uses GiFT) (Mac OS X) Gnucleus (Gnutella, Gnutella2) (Microsoft Windows) Hydranode (eDonkey2000) (Microsoft Windows, Linux, Mac OS X) iMesh (Fasttrack, Edonkey Network, Gnutella, Gnutella2) (Microsoft Windows) Kazaa (FastTrack, Joltid PeerEnabler) (Microsoft Windows) Kazaa Lite (FastTrack, Joltid PeerEnabler) (Microsoft Windows) KCeasy (Gnutella, Ares, giFT) MindGem (Edonkey Network, Kademlia) MLDonkey (BitTorrent, eDonkey, FastTrack, Gnutella, Gnutella2, Kademlia) (MS Windows, Linux, Mac OS X, Palm OS, Java) mlMac (BitTorrent, eDonkey, FastTrack, Gnutella, Gnutella2) Morpheus (Gnutella, Gnutella2) (Microsoft Windows) Poisoned (FastTrack, Gnutella) Shareaza (BitTorrent, eDonkey, Gnutella, Gnutella2) (Microsoft Windows) WinMX (Napster, WPNP) (Microsoft Windows) XNap (OpenNAP, GiFT, Limewire, Overnet, ICQ, IRC) (Java) Zultrax (Gnutella, ZEPP)

9. Copyright 2005 9 P2P Processing Services (cf. Grid Computing) Pattern-Searching of Data (cf. SETI@home) Data-Space Searching, in particular as part of a collaborative key-discovery process (cf. EFF's DES cracking project) Numerical Methods, large-scale / brute-force (e.g. fluid dynamics experiments, meteorology) Gaming, multi-player, networked Message Transfer: conferencing/chat/instant messaging cooperative publishing

10. Copyright 2005 10 P2P Digital Object Sharing Services Software: Fixes/Patches Releases Virus Signatures Announcements, e.g. of technical info, business info, entertainment info, sports results, promotional messages, advertisements News Reports, by news organisations, and by members of the public Emergency Services Data Backup and Recovery Data Games Data, e.g. scenes and battle configurations Archived Messages, for conferencing/chat/IM, and cooperative publishing Learning Materials, in various formats Entertainment Materials, in various formats

11. Copyright 2005 11 The Predominant Use 1998-2005 Consumer Sharing of Entertainment Materials: recorded music, in MP3 and other formats video, as bandwidths increase Copyright-owning corporations assert that a large proportion of those file-transfers is being performed in breach of copyright law There is evidence to support the assertion

12. Copyright 2005 12 Indicators of Scale Sep 2002 – 31m Americans used P2P to share music 2003 – FastTrack peaked at 5.5m users and 60% of the market, then fell due to publicity about lawsuits 2004: P2P data volumes estimated at 10% of traffic (Web 50%, all email incl. spam 3%) c. 10m simultaneous users, c. 50 m searches per day FastTrack still had 4m users (40% of market) and enabled access to 2m files, >10 terabytes 50% of files audio, 25% video, 25% other 2005: 10-12m users, 1 billion files, eDonkey, FastTrack dominate

13. Copyright 2005 13 Copyright-Owner Perspective – 1998- 2005 esp. RIAA, increasingly MPAA Serious Risk of Loss of Control over © Objects (appropriation / theft / piracy) Serious Risk of Cannibalism = killing existing high-margin revenue-lines (CDs) by substituting low-margin revenue-lines (digital) Lack of Clarity about ePublishing Business Models Exploitability of Market Concentration and Power

14. Copyright 2005 14 Avenues of Copyright-Owner Fightback Political Copyright Expansionism Criminalisation / Cost Transfer Legal Lawsuits Publicity Technological Digital Rights Management Reduction of the Power at the Edges

15. Copyright 2005 15 The Action, 1998-2005,... Expanded copyright laws; and highly protectionist US copyright laws imposed in other countries, e.g. AU Aggressive action by RIAA in the courts Success against (centralised) Napster Limited, slow success against (decentralised) others Some success in dissuading consumers from using the targeted P2P schemes (threats, content pollution) But many consumers simply migrate to new schemes Limited success to date with DRM technologies Changes to the Internet infrastructure (devices, protocols) would be slow and difficult

16. Copyright 2005 16 Conventional Use of Intellectual Property Exploit the Monopoly through High Prices Leverage the Monopoly Extend the Brand Cross-Promote Sustain the Monopoly Very Constrained Licensing Technological Protections Lawsuits to stop, and to chill, behaviour: Commercial Violations Single-Purpose Technologies Incitement (Authorisation) Multiply-Usable Technologies Consumption

17. Copyright 2005 17 Shapiro & Varian – Information Rules, 1999 One-Way Loyalty – consumer to marketer Lock-in through Switching Costs, to achieve monopoly space that can be exploited Ch. 4 pp. 83-102: Rights Management give away (a little of) your content in order to draw them in, and then charge for: convenient access repeat access other-party access enhanced versions searchability/navigation timely access archival access but recognise when to let the market grow...

18. Copyright 2005 18 The Alternative Approach P2P As Business Opportunity 1.Re-discover sustainable ways to do business 2.Re-discover the capacity to value-add 3.Appreciate the diversity of eBusiness models 4.Look for eBusiness Era: Revenue-Sources Cost-Savings Strategic Advantages

19. Copyright 2005 19 1.A Sustainable Proprietary Approach Identify price resistance-points in the various customer-segments i.e. what the market will bear Set prices accordingly (and hence sustain payment morality) Make backlists and new releases available via for-fee P2P channels Discourage and prosecute breaches where the purpose is commercial Take no action over breaches by consumers (esp. time-shifting, format-change, even sharing?) The Evidence Since 2003, Apple iTunes charges USD 0.99/track!? Copyright-Owners get USD 0.70 In 2005, theyre asking for more

20. Copyright 2005 20 2.Re-Discover Confidence in the Ability to Value-Add Conception Pre-Promotion Expression Copyright Clearance Preparation for Publication Quality Assurance Promotion and Marketing Logistics Payment Collection Contingent Liabilities

21. Copyright 2005 21 3.A Business Models on the Web Taxonomy Rappa (digitalenterprise.org/models/models.html) Brokerage Marketplace Exchange, Buy/Sell Fulfilment, Demand Collection, Auction Broker, Transaction Broker, Distributor, Search Agent, Virtual Marketplace Advertising Portal, Classifieds, User Registration, Query-based Paid Placement, Contextual Advertising, Content-Targeted Advertising, Intromercials, Ultramercials Infomediary Advertising Networks, Audience Measurement Services, Incentive Marketing, Metamediary Merchant Virtual, Catalogue, Click&Mortar, Bit Vendor Manufacturer (Direct) Purchase, Lease, Licence, Brand Integrated Content Affiliate Banner Exchange, Pay-per-click, Revenue Sharing Community Open Source, Public Broadcasting, Knowledge Networks Subscription Content Services, Person-to-Person Networking Services, Trusst Services, Internet Services Providers Utility Metered Usage, Metered Subscriptions

22. Copyright 2005 22 The Interpretation Adopted in this Analysis An eBusiness Model is Answer to the Question: Who Pays? For What? To Whom? And Why?

23. Copyright 2005 23 Internet-Era Business Models Lessons from Open Source and Content WHO PAYS? For What? To Whom? And Why? Customers, for the Good/Service Distribution Providers Third Parties Customers, for Complementary Goods/Services Consultancy, Training, Installation, Customisation, Integration, Audit

24. Copyright 2005 24 Internet-Era Business Models Lessons from Open Source and Content Who Pays? FOR WHAT? To Whom? And Why? Goods & Services Value-Added Goods & Services Complementary Goods & Services Infrastructure After-Sales Service Data Information Expertise / Knowledge An Idea in Good Standing Timeliness Quality

25. Copyright 2005 25 Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? TO WHOM? And Why? DirectIntermediated Retailer Franchisee Value-Adder Bundler Transaction Aggregator

26. Copyright 2005 26 Internet-Era Business Models Lessons from Open Source and Content Who Pays? For What? To Whom? AND WHY? Resource Control Switching Costs (capture, lock-in) Perceived Value Cost Advantage Quality Advantage

27. Copyright 2005 27 Lessons from Open Content Business Models Reciprocity: direct and immediate indirect and/or deferred Reputation Revenue from Complementary Services

28. Copyright 2005 28 4.The eBusiness Era Revenue Sources – 1 of 2 Direct and Immediate Reciprocity low rates per access or copy for volume sales differentiated services for higher prices (taking into account short shelf-life) Indirect and/or Deferred Reciprocity donations, sponsorship advertising the-artist-pays / vanity press shareware – use now, maybe pay later (e.g. to trial artists and wannabe genres)

29. Copyright 2005 29 The eBusiness Era Revenue Sources – 2 of 2 Complementary Services Installation Customisation Education and Training Consultancy The After-Market Accessories Upgrades Enhancements Extensions Replacements

30. Copyright 2005 30 The eBusiness Era Cost-Reduction Possibilities Digital Reproduction and Transmission, esp. via P2P, are hugely less expensive than with Physical Media Cost-Transfer to Consumers: Product Conception (prosumer participation) Pre-Promotion (fan-zines) Production (prosumer mixing) Promotion (viral marketing) Distribution (P2P shifts transmission costs away from the corporate server, to the operators of participating client-servers)

31. Copyright 2005 31 The eBusiness Era Strategic Opportunities Build Consumer Networks Search for Network Effects Encourage Viral Marketing Build Brand Value and Sub-Brand Value, through: Reputation- Establishment Reputation- Maintenance Freeware – use it now, become habituated, and buy something later Engage Tofflers prosumers, cf. market research and focus groups, for: feedback, ensuring: quality assurance product refinement enhancements, extensions

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34. Copyright 2005 34 Broader Strategic Impacts The I.T. Industry IAPs – The Nature of Internet Connections Demand for Relative Bandwidth Symmetry e.g. SDSL not ADSL ISPs – Servers Demand is switching from central servers to dispersed devices at the edge of the net Society Non-Commercial Leaks Whistleblowing Hypocrisy Revelation Political Statements Religious Tracts... News No longer controlled by the Media, Government, and Big Business