Thursday, January 25, 2007
Long time readers are well aware of this column's aversion to the prevalence of Digital Right's Management (DRM) schemes in many of today's consumer electronics. Far from being a tool only to prevent unlawful copying, DRM has been used by companies to stifle competition, prevent innovation, and protect monopolistic behavior. Until recently, a consumer's best protection against most DRM'd products has been to simply "vote with their wallets" and not to buy a particular item. Unfortunately, the biggest threat to your digital freedom is now coming from a behemoth of technology that can hardly be ignored: Microsoft. The new Vista operating system that will soon be standard issue on the millions of PC's sold worldwide is virtually crippled by content protection and DRM.

In the wake of peer to peer file sharing programs in the late 1990's, the major media companies have gone on a crusade to incorporate tighter copy protection and what is euphemistically called "Digital Rights Management (DRM)" into virtually any technology that uses digital media. From the media company's perspective DRM is a gift that keeps on giving. Not only does it prevent media consumers from sharing content with one another, it also forces them to buy and re-buy media over and over again for each digital device that introduces a new format to the marketplace. Short on cash? No problem, simply release the same old content in a new format and consumers will have to buy it all over again!

The New York Times recently published an Op-Ed, Ga dgets as Tyrants, in which the author related the question of a 12 year old attending CES (the consumer electronics show in Vegas) who wondered "why do I have to buy my favorite game five times?" Anyone with the wildly popular Apple iPod knows that songs they buy from iTunes won't play on any non-Apple device. In fact, Apple has made so much money from this scheme that they are planning on extending it to their recently announced "iPhone," to which the New York Times responded: "Want an iPhone? Beware the iHandcuffs" Are you unlucky enough to have bought a Microsoft Zune? Songs you purchase for that device won't play anywhere else either, nor will music you purchased for your previous Microsoft devices play on Zune. More and more, technology companies are tying their gadgets to proprietary media formats that are useless anywhere else, forcing the consumer to buy and re-buy their favorite media.

Unfortunately for consumers, these "digital shackles" placed on them by an alliance of technology and media companies not only prevent the use of purchased content on competitors' gadgets, they also prevent a person from enjoying the full potential of the media they purchase. Sony, and other music companies have crippled many of their new CD releases to the point that they won't play in most automobile CD players. There are signs, however that consumers might be fighting back and simply not buying content that makes their lives more difficult. EMI recently announced that they are "reviewing" their DRM policy and are currently producing discs with no DRM.

The movie industry, however, has taken the opposite approach. With the CSS "protection" on DVD's long cracked, the Motion Picture Association of America (MPAA) has fought diligently to impose much stronger protection on the new high definition formats that are set to debut in 2007 including Blue-Ray and HD-DVD. Viewed as successors to the DVD, these high definition formats will be replete with new DRM schemes aimed to ensure that the discs are used only in the ways the studios explicitly allow. The studios were not content with protection only on the disc itself however and worked with Microsoft to ensure that your PC could not be used for nefarious purpose either.

The new Microsoft Operating System, known as Windows Vista, comes with numerous DRM "protections" built right in. Consumers, however, may find some of these protections troubling. For instance, Vista literally cripples your computer by disabling access to certain interfaces whenever "protected content" is being placed. Such common devices as S/PDIF (a digital audio transfer mechanism), and YPbPr (a high end component video interface) are literally turned off by Vista when "protected content" is played because those interfaces predate the new operating system and don't contain any copy protection mechanisms. Vista also actively degrades some video and audio quality. According to Chris Mellor of Techworld magazine, Vista is crippled by content protection:

"Vista has another playback quality reduction measure. It requires that 'any interface that provides high-quality output degrade the signal quality that passes through it if premium content is present. This is done through a "constrictor" that downgrades the signal to a much lower-quality one, then up-scales it again back to the original spec, but with a significant loss in quality.' If this happens with a medical imaging application then artifacts introduced by the constrictor can 'cause mis-diagnoses and in extreme cases even become life-threatening.'"

In other words, installing Windows Vista on your computer can literally cripple your computer and significantly degrade the software and hardware you use. The problem is, that unlike choosing not to buy a Microsoft Zune or Apple iPod, consumers can hardly choose not to buy Vista as it will be installed automatically (and priced into) virtually every new PC sold after January 30, 2007. Vista is likely to become the defacto operating system standard whether you like it or not.

Through intensive lobbying, media companies have gotten legislation passed that supports much of their restrictive behavior. The Digital Millennium Copyright Act (DCRM) restricts a consumer's ability to circumvent copy protection, even for the purpose of making legal backups of their own purchased products. The proposed FCC broadcast flag aims to create restrictions on how consumers can view and record broadcast television. Even legislation passed to protect user rights has been attacked by media companies. The 1996 Telecom act required cable companies to make available "cable cards" to consumers who do not wish to use the restrictive set top boxes that are now so ubiquitous. While legally mandated, many cable companies either do not make them available, or make cable cards very difficult to acquire.

All of these restrictive practices and DRM schemes are threatening to stifle the very innovation that encouraged the gadgets they are now used on. If Sony had its way in the famous Betamax Case, devices such as the VCR and Tivo might never have gotten off the ground. Creative use of technology has been a hallmark of innovation in the United States. Consumers free to use their legally purchased items as they wish, rather than how the content owner's wish have repeatedly created new markets and new companies that have led to unprecedented growth in technology markets. The current restrictions being imposed on us by media companies, hardware designers, and software giants have gone too far.

It's time to push for legislation that reestablishes the principles of "Fair Use" for consumers and to prevent media companies from shoving DRM down our unwilling throats. For too long congress has bent to the lobbying of the media companies to the detriment of consumers. Curbing the trend towards DRM will not only encourage new innovations in technology, it can also seriously reduce the cost of many consumer electronics by making unnecessary the huge expenditures in new forms of protection being developed by media companies. Of course copyright laws need to be protected and copyright owners have every right to profit from the content they create. They do not have the right, however, to cripple our computers and tell us how, when, and where to use the media we purchase.
Thursday, January 25, 2007 11:26:51 PM (Pacific Standard Time, UTC-08:00)  #    Comments [0]  | 
Wednesday, January 17, 2007
In his state budget proposal this week, California Governor Arnold Schwarzenegger proposed one of the most ambitious and sweeping changes ever in the state's social welfare system by proposing universal health care coverage for everyone in California. Modeled somewhat after Governor Mitt Romney's program in Massachusetts, the California scheme similarly mandates insurance for all, but differs significantly from the Mass. model in how it will be paid for. While both governors should be lauded for bringing the problems in the health care system to the forefront of public attention, the plans need to be examined very carefully so that they don't do more harm than good.

Schwarzenegger's plan is based on three major platforms: A.) Prevention, Health Promotion, and Wellness B.) Cover All Californians C.) Affordability and Cost Containment. Each of these platforms is based on a real deficiency in the current system, however many of the proposed plans to solve these deficiencies have some major flaws that need to be addressed.

In his bid to increase prevention, health promotion, and wellness, the governor proposes "structuring benefits and providing incentives/rewards to promote prevention, wellness and healthy lifestyles" through public and private programs. He also advocates "establishing a national model for the prevention and treatment of diabetes; preventing medical errors and health care acquired infections; reversing obesity trends; and continuing the battle against tobacco use." All of these sound like good things, however his proposed budget allocates $150m in state funds to accomplish all this and expects the federal government to match the rest (a theme often repeated in the estimated budget for the proposal). Furthermore he wants insurers to be "required to offer a health benefit package that includes incentives/rewards programs, including premium reduction."

The governor's wellness programs are aimed at reducing the overall cost of health insurance by increasing the fitness of Californians, however their efficacy would take decades to determine while the costs of the programs would be borne immediately. The aim of keeping costs down to ensure the longevity of health care programs and their availability are admirable but likely highly optimistic.

The central pillar of the universal health care plan is the goal of covering all Californians. According to the UCLA health care survey, of approximately 36 million Californians, there are an estimated 6.5 million people uninsured at any one time. The same study, however claims that of these, 1.5 million people are insured within 4 months, which means that they are likely to be between jobs. Of the remaining 5 million: 2 million are those who have the financial means to purchase insurance and choose not to; 1 million are in the US illegally; and 1 million are those who are just above the state limits for Medi-Cal and cannot afford insurance on their own. The governor's plan would make health insurance mandatory, imposing penalties for those who do not purchase a plan and subsidies for those who want to but cannot otherwise afford it.

The issue of affordability and cost containment is the last major component of the plan and it is here where things get the most murky. The governor estimates that his plan will cost approximately $12 - $15 Billion dollars and will save approximately $10 Billion in costs that are already in the system but accounted for out of the general fund. This is mostly payments to hospitals for emergency services provided by law but not paid for by patients, something the governor's office calls the "hidden tax on all Californians." Even if the governor's numbers are accurate and not wildly optimistic, his tax proposals to pay for them only account for about $5.5 billion with the rest to be made up by Federal and local governments.

The problem with this plan is that in attempting to propose a "bold new initiative," many details that are either highly unrealistic or potentially disastrous have been seemingly overlooked.

The governor estimates that only about 1 million Californians are uninsured and here illegally and expects the cost of insuring them to be about $2 billion. The funds to cover this are supposed to be split evenly between Federal and local governments, neither of which have made any commitment to provide these funds. Even if the money were budgeted, it is extremely likely that far more than 1 million people would line up to take advantage of free government health care and the figure certainly doesn't take into account potential increases in the number of undocumented workers.

As for the majority of the plan that is to be funded by the state, Schwarzenegger proposes three new taxes (actually fees in order to avoid the 2/3 vote necessary in the legislature for new taxes) as follows: Doctors will be required to pay 2% of gross revenue (not profits), and hospitals 4% of gross revenue. Businesses with 10 employees or more will be required to offer their employees health insurance, or pay the state 4% of their total payroll in lieu of insurance. The problem here is that both the taxes on doctors and hospitals will be passed on to the health care consumer thus making the cost of care immediately higher. Businesses having to decide what to do about insurance for their employees will be faced with some difficult choices: If a company is just above the 10 person threshold, it might make sense to simply let go of a few employees rather than face exorbitant health care costs. Larger companies who pay significantly more than 4% of payroll towards better health care might find it cost effective to simply pay the tax and shift the health care burden entirely to the state. This will likely become even more attractive as health care costs continue to rise year to year. It would be ironic if in attempting to increase employee health insurance, the state actually ends up causing many California businesses to drop their insurance plans altogether.

Another potentially major draw back from this plan is the likelihood that care could be adversely affected by it. The reason for this is Economics 101: Supply and Demand. The governor's plan establishes a series of caps on insurance costs including a 15% maximum on administration, reduced premiums for those in his wellness programs, and caps on what can be charged for services. On the other hand, many of his proposals significantly increase the cost of care: Mandating that insurance companies accept everyone including the old and infirm, forcing insurers to pay more to out of network providers, and providing low-income individuals affordable coverage. This has the effect of significantly increasing demand (universal coverage) while keeping price points artificially low (caps). Any first year economic student can tell you that this would effectively reduce the amount of available supply (care providers). Rather than ensure that more hospitals will stay open and more care would be available, it is far more likely that this scheme will lead to fewer doctors practicing in the state (as their compensation would be lower) and that wait times for care in the hospitals available would likely increase significantly. Far from simply an academic exercise, this is precisely what has happened in most countries that have tried socialized health care or universal health plans.

The California plan has many positive aspects to it. Insuring all Californians increases the actuarial pool among the healthy and the sick thereby spreading the risk throughout the entire population. While this will necessarily raise the total cost of insurance, it should decrease the per capita cost significantly. Furthermore, if everyone necessarily has insurance, hospitals will be spared the enormous costs of paying for emergency care for the uninsured. Of course, these costs are already subsidized by the taxpayer so shifting the cost to insurance will simply be another way to account for the same money. The benefit will be if people actually use their insurance for preventative care and thus save on necessarily expensive emergency care.

Rather than presenting his plan as a fait-acompli, Schwarzenegger wisely stated that "My proposal is a beginning. I look forward to a vigorous and open debate. Everything will be on the table and I want to hear from everyone. If we have the will - and I believe that we do - we can heal our broken system." The plan as currently presented has some major flaws, but its goals are noble and potentially solvable. Whether or not we have the will -- or the political stomach -- to accomplish a workable universal health care system remains to be seen.
Thursday, January 18, 2007 3:16:48 AM (Pacific Standard Time, UTC-08:00)  #    Comments [0]  | 
Monday, January 08, 2007
In a year of resurgent prime time game shows, does anybody remember the long running "Truth or Consequences?" In the show, contestants were asked to answer a difficult question and if they failed to get the "truth," they had to perform some zany and often embarrassing stunt as a "consequence." It would seem, somehow, that Truth or Consequences is back, with all of America as the contestant, and that the war in Iraq is some awful consequence of our failure to get to the truth.

The problem is that none of the decision makers that had a stake in bringing about the second Gulf War believed how ugly the consequences of their decisions would be. Take, for example, Saddam Hussein. Saddam believed that after fighting the Iranians to a stalemate for a decade and surviving and then fighting the Americans in Gulf War I and surviving, that he could pretty much survive anything. Saddam clearly misunderstood the Bush administration's resolve to see his regime toppled and as such found himself hiding in a hole, only to face the hangman's noose a few months later. Had Saddam thought through the consequences of his continued intransigence, he might have opted for a course similar to Muammar Qaddafi, another former pariah dictator, who is suddenly not only tolerated but even cited as an example of reason in the Middle East. By giving up two of his security agents (indicted by the World Court for their role in the Lockerbie bombing), and agreeing to verifiably surrender his covert nuclear program, Qaddafi not only saved his own skin, but is now being courted by many Western companies eager to develop the resources in his country.

Similarly unaware of the consequences of their actions are those in the Bush administration who launched a very successful attack on Iraq without thinking through the aftermath. Thomas Friedman of the New York Times (who advocated the forceful overthrow of Saddam's regime) famously wrote before the war that "if you break it, you own it," warning Americans that putting Iraq back together again was no small task. Few expected the overthrow of Saddam's regime to be as relatively easy as it was, yet the administration had clearly not thought through the consequences of "owning" Iraq following the military victory.

The Historian and journalist, Michael Oren once remarked that "there are only 3 nation states historically in the Muslim Middle East: Egypt, Iran, and Turkey. The other nations are make-believe. The borders are arbitrary and the governments are artificial." Nowhere is this more true than in Iraq. The country we know of today as Iraq has not been a cohesive entity since the days of the Babylonian emperors who fell to the Persians (under Cyrus the Great) in 539 BC. Modern Iraq was born out of the 1919 Paris Peace Conference, which formally made the country a British mandate. The borders of the modern country were drawn, rather carelessly, by the British along the lines of the Sykes-Picot agreement of 1916 with the French, whereby the former Ottoman territories were divided between the two allied powers on the assumption of victory over the Turks and their German allies. Whereas under the Turks there were three distinct provinces of Mosul, Baghdad, and Basra divided under historical, tribal, and ethnic lines, the British lumped all of these areas together and called them "Iraq."

The British hadn't clearly thought through the consequences of their actions, and when Iraq became independent in 1932, it saw a few kings from the (British installed) Hashemite line, only to see the monarchy violently deposed in the 1950's to be followed by a series of strong-men dictators, culminating in the rule of Saddam Hussein in 1979.

Having now overthrown Saddam, it would seem that many Americans are not thinking through the consequences of their actions in Iraq either. While the Bush administration clearly underestimated the difficulty of the job it would take to rebuild Iraq, his critics are similarly underestimating the chaos that would result as a consequence of our leaving. "Bring home the troops" may make for a nice slogan, but if anyone thinks the world will sit idly by as Iraq disintegrates, they are clearly ignorant of the region's history.

All of Iraq's neighbors have a large stake in the outcome of the current sectarian strife. Saudi Arabia has publicly stated that if America leaves it will "have no choice" but to support the Sunnis in their battle with the Shi'a. Iran clearly has a vested interest in supporting their Shi'a kinsmen; while Syria and Turkey -- both of whom have large Kurdish minorities -- have varied interests in any "civil war" that may result.

In fact, the very term "civil war" is something of a misnomer in describing Iraqi current events. A civil war implies fighting between fellow citizens for dominion over a nation. The violence in Iraq today is at worst tribal, and at best confessional. It is highly unlikely that any one group could claim dominion over the entire area of Iraq as the spoils of military victory. More likely, the country would disintegrate into loose confessional confederations not unlike the old Ottoman provinces.

If Americans want to understand the "truth" of what is going on in Iraq today, we must realize that we are directly responsible for bringing down the old order, and like it or not, it is now our responsibility to bring about a new order. This new order will help shape the Middle East for decades to come and is vital to our national interest. The "consequence" of our actions is that we can no more simply "bring home our troops" then we can allow Iran to control the region.

While we cannot simply exit Iraq, we are not out of options either. We might learn something from the way the Turks ran the provinces we now know as Iraq. They were once a loose confederation of locally administered provinces answerable to the Turkish Sultan. Americans do not claim dominion over Iraq and have no interest in establishing hegemony over the country. Bush has publicly claimed that he would like to see Iraqis establishing a pluralistic, Democratic country that will act as a bellwether against the spread of Islamic extremism in the region.

Perhaps one way to achieve this is to reduce the day to day friction of Western soldiers patrolling the streets of Iraqi cities. As soon as the Iraqi army and police forces are strong enough to take over the duties of security, a task they are increasingly already doing, American forces could consolidate into fortified bases responsible only for strategic threats. America can maintain order and act as a bulwark against interference by Iraq's neighbors, while Iraqis themselves begin to build their country and their institutions. Instead of insisting on a strong federal system from Baghdad, we can instead encourage a weaker federation of provincial governments much like what is happening on the ground today anyway.

The Kurds have been running a state within a state in the north since Gulf War I. The Shi'a have near autonomy in the South, while the Sunnis continue to fight because they see their privileged status from the former Iraq disappearing as the Shi'a gain increasing power in Baghdad. By giving the Sunni a provincial government of their own in the center of the country, answerable to a central Federal authority in Baghdad, we would be pragmatically restoring a system that held for hundreds of years while not tearing apart the modern Iraq.

For too long both the advocates and critics of American policy in Iraq have ignored the truth of what's been going on or the consequences of their preferred ideologies. We have too much at stake as a nation to ignore the problems we have played such a large part in creating. The best we can hope for now is to think carefully through the consequences of our decisions on the ground and begin to shape a pragmatic solution that will make the region, and by proxy the world, safer for Western style liberalism.
Monday, January 08, 2007 11:27:41 PM (Pacific Standard Time, UTC-08:00)  #    Comments [0]  | 

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