Analysis:ISPs across the EU will monitor the major labels' action, writes John Collins
THE GAZE of Europe's record companies, internet service providers and telecoms firms will turn to Ireland next month when the four major record labels take Eircom to the Commercial Court.
EMI, Sony BMG, Universal and Warner Music are trying to get the State's largest broadband provider to take steps to ensure that its network cannot be used to illegally download music.
The case is being taken in the name of the copyright owners but is actually being organised by trade organisation, the Irish Recorded Music Association (Irma), and follows Eircom's refusal last October to install software from US firm Audible Magic. The software scans networks for the unique fingerprint of a copyrighted piece of work and then blocks the traffic.
This is the first case taken against an internet service provider (ISP) in Ireland. In the past, actions by the music industry have been against the person downloading music. ISPs have largely co-operated in these cases.
However, a speech by U2 manager Paul McGuinness at a music industry conference in January signalled that record companies were preparing to go after telcos and ISPs in their fight against illegal downloading. The European Union's E-Commerce directive, transposed into Irish law in July 2000 as the E-Commerce Act, has provided protection to ISPs and allows them the defence of saying that they are not responsible for what is sent over their networks.
"This is brand new territory and many Irish technology companies will be watching the case," says UCD law lecturer and the chairman of Digital Rights Ireland, TJ McIntyre. "If the record companies win, this could be extended to other entities. For example, Google might have to police the actions of its users."
The interest in the case extends outside Ireland as well. The Belgian Society of Authors, Composers and Publishers (Sabam) has an ongoing case against the Belgian ISP Scarlet, which is now owned by Belgacom, the incumbent telecoms operator. Last year the court found in favour of Sabam, but the case is being appealed.
"Nobody believed that case had been properly decided and since they have been bought by Belgacom, it's going to be appealed all the way," says Malcolm Hutty, head of public affairs with the London Internet Exchange.
"They have to win a case to convince everyone else and, because Eircom is a big company, maybe they believe that's it."
In the Sabam case, an independent expert looked at 11 possible technical remedies that Scarlet could introduce. The Audible Magic solution was costed at €6 per user per annum. With 561,000 broadband users, the annual bill for Eircom would be at least €3.3 million. Filtering technology is also far from perfect, according to Mr McIntyre. "Files that are out of copyright, excerpts used for documentary purposes, even home videos where music is playing in the background - all of these are likely to be blocked by this technology, infringing freedom of expression," he says.
The record companies claim that sales of music declined from €146 million in 2001 to €102 million last year. An examination of their accounts show that profits are generally falling.
In 2006, Sony BMG Music Entertainment (Ireland) had a pretax profit of €4.2 million and during the year paid a dividend of €6.5 million. However, four years earlier, Sony Music Entertainment (which merged with BMG in 2004 to form the new company) only had a profit of €2.15 million.
Another of the plaintiffs, Universal Music Ireland, reported a net profit of €6.6 million in 2006, compared to €8.1 million in 2001.
Warner Music Ireland had pretax earnings of €1.2 million in the 12 months to the end of September 2006 versus a pretax profit of €2.5 million for the year to the end of November 2001.
"Essentially, new business models and new commercial developments from the copyright holders are the only long-term solution," says Mr Hutty. "Trying to impose technical solutions is, at best, a stopgap and is not satisfactory for anyone."
Mr Mr Hutty and Mr McIntyre believe lasting damage will be done to the internet if a precedent is set that ISPs have to monitor traffic. Even if the music industry wins the case, technology may make it a Pyrrhic victory.
"Two things will happen," says Mr McIntyre.
"Users will simply start using encrypted file transfers and they will start sharing using e-mail and other methods which the ISPs will also be asked to monitor."
