Telco cowardice and DRM

At a panel on DRM at the recent 3GSM conference in Barcelona, David Birch of Consult Hyperion, a U.K.-based independent IT consultancy, cut loose in rather politically incorrect a fashion against a telecommunication industry that he feels should stand strong against the DRM demands of content companies. From the article:

"Why are you such a bunch of big girls?" asked Birch. "Why don’t you tell the content owners to just get stuffed?"
He continued unabated: "You’re too seduced by the content industry, Hollywood is not even a $10 billion industry. Hollywood is small compared to the telecom industry. Why don’t you take a stronger line? Consumers don’t want DRM at all. You can’t sell DRM."

My thought upon reading that was "yes, they could tell them to 'get stuffed,' but then again, Hollywood executives in fashionable shoes could say they won't license their media for use on mobile devices." Telcos can attract the punters with the latest episodes of "Lost" - albeit with DRM protections demanded by content companies, or they can attempt the same with Joe the Verizon Engineer's rendition of Shakespeare's "Taming of the Shrew" set to hip-hop music written by Dan the Call Center Guy (because they sure as heck won't be using any music by anyone well known). One of those is going to attract a lot more users to your video store, and sorry, it ain't the Joe and Dan show.

The telecommunications industry may be big and would love to have lots of free content to send down their pipes and drive up data transmission fees, but the content companies have their own business model, and they own the content. Furthermore, they have a fundamental right to decide how they want to package and sell that content. If I want to produce movies that I only allow people to watch in my apartment (naked, of course, so as to prevent anyone carrying in a video camera), then that's my right. The same applies to content studios, and they aren't even forcing people to watch their content naked.

Of course, the fact that content companies have a business model that works at right angles to telecommunications companies does not mean telecommunications companies don't have room to build a world more to their liking, as this writer at Ars Technica proposed in his discussion of Mr. Birch's outburst. If telecommunications companies - or to spread the potential wider, any provider of hardware that might benefit from an explosion of free content - dislike the rules placed on existing content, why don't they produce some themselves?

In the tech industry, the price of a new fab is currently around US$5 billion, a price that puts such facilities out of reach for all but the biggest players like Intel and IBM. Still, that's 25 King Kongs, or over 350 Brokeback Mountains, or 1,000 five million dollar episodes of a big-budget HBO series like Rome or The Sopranos. My point is that, for even just half the price of a single 65nm fab, the tech industry could buy a few small studios and just start throwing tons of free content at the world. Or, for the full price of a fab, they could fund almost a decade worth of low- and medium-budget content to give away as an inducement for people to buy hardware.
Intel, IBM, and other tech companies with large investments in Linux know full well that you can sell a lot of hardware by giving away the software. Why not give away the content too? How many dollars worth of media center, home networking, and home network attached storage hardware could you sell if consumers knew that there were terabytes of free, unencumbered, high-definition, processor-intensive, storage-hungry, bandwidth burning, digital content awaiting them on the Internet—content that they could copy, share, and shuffle around among as many newly purchased media devices as they like?

That's an interesting proposition, and seems far more ethical than saying people who create something should lack control over the terms governing its use. Granted, I'm not sure if they would be able to replace the demand for content produced by media companies, as big media companies live and die by their ability to "monetize" the intellectual assets they produce (music, movies, TV shows), not to mention understand the industry far better than engineers. It would, however, give hardware companies more license-free content to send down data pipes and fill up hard drives. Combine that with attempts to become a clearing house for up and coming talent more interested in exposure than money up front, and the hardware industry might start to build a credible library of content that is interesting in its own right.

Again, I doubt that it will replace Hollywood. Though you can download free content for the Video iPod, I bet the fact that you can get episodes of Lost and "Desperate Housewives" on iTunes has more mass appeal. Likewise, which is more profitable, licensed sale of media or revenue derived from distribution and infrastructure (network charges, hardware, etc.)? If the former, then wouldn't share holders demand maximum return on investment, thus turning those vendors of "free" content into clones of the existing content production system?

I don't know. The theory, however, of revenue derived through alternative means is interesting. All it takes to test the theory is someone with the resources to take the risk and build the foundations of a model not dependent on sale of media assets.