Copyright 2000 Federal News Service, Inc.
Federal News Service
April 11, 2000, Tuesday
SECTION: PREPARED TESTIMONY
LENGTH: 2581 words
HEADLINE:
PREPARED TESTIMONY OF PETER F. HARTER VICE PRESIDENT GLOBAL PUBLIC POLICY AND
STANDARDS EMUSIC.COM, INC.
BEFORE THE HOUSE
COMMITTEE ON COMMERCE SUBCOMMITTEE ON TELECOMMUNICATIONS, TRADE AND CONSUMER
PROTECTION
SUBJECT - "INTERNET CONTENT: ALL DRESSED UP WITH NO
PLACE TO GO"
BODY:
Mr. Chairman and members
of the Committee. It is a pleasure to appear before you to discuss the broadband
revolution that is taking place today on the Internet. My company, EMusic.com,
Inc., is the world's leader in online, Internet-based distribution of
downloadable, digital electronic music. We are a key player in that broadband
revolution, and can report to you that the new commercial, educational and
recreational opportunities that broadband-based Internet content promises to
make available will transform America's communications and economic system in
very profound ways, for the benefit of all Americans, and indeed the entire
world.
Introduction There has been much discussion of broadband as a
form of Internet transport, that is, a "faster pipe" to bring the Internet into
the homes and offices of Americans and throughout the world. But in reality,
broadband is about far more than mere transmission speed alone; it is about the
new and exciting forms of rich, interactive digital content that this high-speed
transmission supports. Just as television replaced movie theater newsreels, and
now 24-hour cable news channels have virtually supplanted the once-dominant
network news divisions, broadband will allow not just faster content, but new
forms of digital-based information. This feature-rich content-- making the
Internet an interactive experience instead of an adventure through static World
Wide Web pages--is just beginning to appear. EMusic and the digital music
revolution are the vanguards of broadband content, but we are just the start.
Ten years ago the telephone companies were all abuzz about "fiber to the home"
and the promise of interactive television. Like many false starts on the way to
the Information Superhighway, that one turned out to be a clear dead-end. But
now, Digital Subscriber Line(DSL) services, cable modems and fixed wireless
services-- as well as satellite-delivered, locally cached broadband
packet-switched networks are bulldozing away the underbrush of these old pipe
dreams to create a new type of Internet. From the Bells to Covad, from Akami to
Excite@Home and RoadRunner, among others, firms are building a new Internet
infrastructure that will provide a platform for new Internet content. We in the
content business are eagerly awaiting the continued development of this new,
broadband Internet, because our businesses benefit directly from consumers'
having access to a broadband Internet connection in all of America and
throughout the world.
Since the explosive growth of the Internet began
less than ten years ago, demand for Internet content has increased dramatically.
Americans spend on average more than one hour online every day. More than 40
million Americans subscribe to an Internet service provider, and it is predicted
that this number will double by 2005. Stephen King has published the first
Internet novel, and the downloadable music service industry is changing the
recording industry forever. In my roles as President of the Digital Media
Association and member of the Board of The Progress and Freedom Foundation, I
have been happy to observe the very rapid growth of membership. In just a short
two years, DiMA has grown from a handful of founding companies to more than 50
companies in the audio and video products and services industry. These companies
know how important public policy is and are working diligently to educate policy
makers about digital media issues.
About EMusic.com
Let me take
a few moments to tell you about EMusic. Since it was founded in January 1998,
EMusic has established itself at the forefront of how new music will be
discovered, delivered and enjoyed in the next decade. In addition to having the
Internet's largest catalog of downloadable MP3 music available for purchase,
EMusic operates one of the Web's most popular families of music-oriented Web
sites--including Rolling Stone.com, EMusic.com, DownBeatJazz.com, and IUMA. The
company is based in Redwood City, California, with regional offices in Chicago,
Los Angeles, New York, Nashville and Austin.
EMusic.com is the Web's
leading site for sampling and purchasing music in the MP3 format, which has
become the standard in the digital distribution of music. Through direct
relationships with leading artists and exclusive licensing agreements with over
650 independent record labels, EMusic.com offers music fans an expanding
collection of more than 100,000 tracks for purchase-- individual tracks for 99
cents each or entire downloadable albums for $8.99. EMusic.com
features top artists in all popular musical genres, such as Alternative (Bush,
Kid Rock, They Might Be Giants, Frank Black), Punk (Blink-182, The Offspring,
Pennywise), Jazz (Duke Ellington, Dizzy Gillespie, Louis Armstrong, Concord
Records), Blues (John Lee Hooker, B.B. King, Buddy Guy), Hip Hop (Kool Keith,
The Coup), Country (Willie Nelson, Merle Haggard, Patsy Cline), Rock (Phish, Goo
Goo Dolls, David Crosby), World (Nusrat Fateh Ali Kahn, Lee "Scratch" Perry) and
Vintage Pop (Liza Minnelli, Eartha Kitt, Judy Garland).
To give you an
idea of how fast the downloadable music industry is growing, the company has now
sold over 1 million songs in the popular MP3 format since its launch. This total
includes single-track sales as well as tracks included as part of albums and
special collections. In addition, we recently announced an exclusive deal to
sell all of Elvis Costello's albums in MP3 format online.
I have brought
a sample of EMusic services to demonstrate for the Committee how Internet
content can work. (DEMONSTRATION.)
Broadband Content Needs Broadband
Networks
Consumers' search for online music, film, video games, shopping
and educational services in many cases is far greater than the supply of network
facilities that must support it. Asso often happens, demand has outran
technology. One reads in the news that the traffic from college students
downloading the 300 greatest songs of all time has congested campus Internet
servers. Many e-commerce shopping Web sites ground to a halt over Christmas,
unable to serve the millions of Americans eager to do their shopping without
braving the malls. Thus, though the services are there for consumers, access
remains limited. The Internet needs the communications industry to catch up.
More importantly, Internet content has become increasingly rich,
consisting of large data files that become interactive news, video and sound at
the end user's computer. This richness of content requires large amounts of data
to be transmitted efficiently, which is achieved through compression and
decompression technologies (CODECs). MP3, for instance, a shorthand for MPEG-3,
is a format initially developed for digital transmission of motion pictures.
Because MP3 files can be either audio or video or both, they are perfectly
suited for the digital transmission of music, and today are the dominant form in
which digital music is stored, sold and transported over the Internet. EMusic
principally sells its music in MP3 file format, but is in fact format agnostic,
and will distribute content in whatever form is desired by consumers.
We
are also particularly conscious of the need to provide legal, efficient
mechanisms for the distribution of digital content that do not undermine the
interests of musicians and other content creators. While the term MP3 has often
been coupled to the concept of piracy, EMusic has proven the skeptics wrong by
fashioning a viable revenue model for the sale of licensed MP3 files on the
Internet.
But whether a digital music file is encoded in MP3,
RealPlayer, LiquidAudio or any other CODEC format, it takes a huge amount of
bandwidth to make downloadable music work seamlessly. For instance, EMusic is
now offering, as a free cut, "Radio, Radio," a song from one of Elvis Costello's
first albums in the 1970s. In MP3 format, this three-minute cut is a full 2.3MB
(that's nearly the size of two 3.5" floppy disks). For those members of the
Committee familiar with dial-up Internet services, even using the fastest 56
Kbps modem available (which provides an effective throughput of only three to
five kilobytes per second), this song would take approximately 15 minutes to
download. At ISDN speeds (144 Kbps), download time is reduced to about three
minutes. And at T-1 or ADSL speeds (1.55Mbps), download time is something on the
order of 30 seconds or less.
Without delving too far into the technical
realm, the lesson is clear: feature-rich Internet content requires bandwidth,
bandwidth and more bandwidth. The ubiquitous availability of high-speed Internet
connections will create a sea-change in the distribution of digital information
of all sorts. Not only will consumers be able to get more and faster content,
they will get higher quality content. Soon the compression loss that is inherent
in squeezing broadband content into the narrow, slow confines of dial-up
connections will be a thing of the past. No longer will streaming video look
like a Keystone Cops silent film when delivered over a truly broadband Internet.
Public Policy for Accelerating Broadband Deployment
The communications industry is striving to meet the needs of Internet
content. EMusic applauds the efforts of this industry to provide broadband
capability to consumers. Cable modems and DSL technologies are leading the way,
providing Internet connectivity at speeds 20 to 100 times faster than dial-up
modems. These technologies make seamless, high-resolution Internet and data
communication possible, enabling Americans to access information and services as
quickly from home as from any office building. The continuing development and
deployment of broadband technology will truly build the Information Superhighway
and give content providers like EMusic a path to every American home.
The Telecommunications Act of 1996 ("1996 Act"), fashioned by this
Committee, has created a competitive marketplace that has spurred the fastest
rollout of innovative communications technologies in history. Just two years
ago, almost no one except corporate Internet users was able to get a high-speed
Internet access service. Today is vastly different. The robustly competitive
telecommunications environment forces prices down and increases carrier
efficiencies. In addition, by unleashing competitive forces into the
telecommunications arena, the 1996 Act has broad broadband connectivity to
consumers at an unprecedented rate. Cable modems, DSL providers, and fixed
wireless services connect millions of Americans to each other and the world
through the Internet.
The varying types of broadband services help to
ensure that every American has access to at least one choice of service and
service provider, enhancing the ability of content providers to reach as many
consumers as possible. Equally as important, this competitive environment has
ensured that the prices for these services have consistently decreased as their
reach has widened. EMusic congratulates this Committee and the FCC for fostering
this competitive environment for all technologies and carriers, by leveling the
playing field rather than picking technological winners. We believe that public
policy should encourage providers to deploy broadband services by reducing
barriers for "last mile" interconnection and by ensuring that the government
maintains a hands off policy towards the Internet. We do not believe that
government can manage or structure the development of broadband networks better
than the competitive marketplace.
Addressing the "Digital Divide"
Broadband access is limited, however, by the Digital Divide facing
America today. This divide lies not only in the fact that personal computer
penetration is far lower in minority and lower-income American homes and
schools, but also that rural, inner-city and low- income areas do not typically
offer the population density or economics to make rapid entry possible in the
near term. Although the Digital Divide grows more narrow every day as the
competitive broadband industry widens its footprint, it is clear that some
governmental attention to this social problem is warranted, in order that we do
not unwittingly create a two-tiered system of access to digital information and
the Internet. EMusic supports this Committee's continued efforts to monitor,
analyze and remedy this inequity that to varying degrees remains a divisive
force within our society and threatens to disenfranchise many areas from the
economic and information revolution that the United States is experiencing.
But there is another divide that persists and, in many cases, lies along
the same boundaries: This divide creates different have-nots-- Americans living
in areas that have limited commercial presence. These persons include the rural
doctor who must travel miles to the nearest pharmacy, the woman living in an
inner city abandoned by the retail sector, and the elementary school situated 50
miles from the nearest supply store. It is this divide that makes the Internet
so necessary, for only the Internet can reverse the abandonment of inner-city
and rural citizens by the forces of commerce. Just as the Sears Catalog
empowered rural Americans in the late 19th and early 20th centuries, a broadband
Internet will empower both rural and inner city Americans in the 21 st century.
The Internet makes every library, doctor and music store immediately
ubiquitous. Its tremendous economies of scale and ability to operate in the
realm of the virtual allow it to reach every American in every sector
simultaneously. The Internet server has replaced the "bricks and mortar"
storefront, and a well-constructed sales Web site performs faster and more
reliably than any staff. Without adding any urban infrastructure, without
constructing another shopping mall, the Internet can become the nation's
library, video rental store, and CD player. It can become the nation's
equalizer, for it cannot detect the race or ethnicity of its users and has no
means to discriminate among cities, neighborhoods or customers.
To
realize these benefits, the United States must ensure that the sophistication
and diversity of Internet content is supported by the nation's
telecommunications network. This Committee can assist in this effort by
exploring ways to encourage all technologies and carriers to build faster, more
efficient communications networks. It was the procompetitive but
technology-blind 1996 Act that spawned the broadband industry in the first
instance. Through local network unbundling and interconnection, as well as a
consistent policy of forbearance in information services regulation, Congress
and the FCC have created rampant competition out of monopolies. With competition
came the incentive, if not the necessity, to win customers by providing faster,
less expensive services. Innovation was the result.
EMusic is committed
to working with this Committee, the FCC and other federal and state government
agencies to address the Digital Divide, to improve technological and
informational literacy in our nation's impoverished areas and to help grow the
Internet as a liberating force for rural and insular Americans. This is a truly
exciting time to be involved in the broadband Internet content business. If you
thought that the Web changed the world in 1995, just wait!
I again thank
the Committee for its time and attention, and would be pleased to answer any
questions that the members have.
END
LOAD-DATE:
April 12, 2000 
