AT&T to Get Tough on Piracy

It wants to incorporate antipiracy technology to protect video content and attract advertisers, but runs the risk of enraging privacy advocates and others

AT&T (T) may soon beef up its antipiracy arsenal. The biggest U.S. telephone company is considering technology that could give it a heads-up when customers are watching partners' copyrighted video, BusinessWeek has learned. AT&T is in talks with NBC Universal and Walt Disney (DIS) about using the knowhow to guard against illegal distribution of their shows and films.

By embedding the technology, a so-called content recognition system made by tiny Vobile, AT&T could prevent users of its network from distributing or viewing copyrighted material or force them to watch it in ways sanctioned by the content owner. In effect, the company would create a kind of no-piracy zone where studios and producers would feel safe distributing content, knowing they'd be paid for its use. BusinessWeek has also learned that AT&T, NBC, and Disney have invested a combined $10 million in Vobile.

Piracy-Fighting Bandwagon

AT&T said in June that it would work with Hollywood and the music industry to develop filtering technology to prevent copyright infringement. Adopting Vobile would be one of the first signs of progress. In an age when a piece of video content—from a 30-second home movie to a $100 million feature-length film—can be zipped around the Internet in a mouse click or two, content creators are demanding assurances that their handiwork won't be ripped off.

That's got Internet companies and telecommunications providers scrambling for foolproof ways to guard against unlawful distribution, and thereby free up more content to be sold in more ways.

Seven months after it was hit with a $1 billion suit from Viacom (VIA), Google (GOOG) released its own content recognition system designed to scout out pirated clips (, 10/16/07) on its YouTube site. Days later, a consortium of media and Internet companies including Disney, Microsoft (MSFT), News Corp. (NWS), and General Electric's (GE) NBC issued guidelines for how Internet sites should fight piracy.

Slippery Slope

AT&T's approach is likely to raise the hackles of privacy advocates, who have already slammed the phone company for its role in helping the Bush Administration tap citizens' phone lines. "They better be very careful," warns Lee Tien, a staff attorney with the Electronic Frontier Foundation. "This is serious, serious stuff, to basically invade the privacy of all of your subscribers."

Backers of so-called Net neutrality, who fear that carriers will restrict or impose higher fees for some forms of traffic, probably will also raise a ruckus. That's because the recognition system potentially could be used to shut off or slow down traffic—say, content owned by a rival, or a controversial documentary. (AT&T has denied it would use any technology in this way.)

Some detractors also question the effectiveness of content recognition systems. "I think that would be a pretty unfortunate development, mostly because it would be futile," says Fred Van Lohmann, another EFF lawyer. "Every technology person who has thought about this thinks that the moment such a technology is deployed, all the file-sharing stuff will just be encrypted—driving it further underground."

"DNA" Tracker

AT&T confirms it has invested in Vobile, but a spokesperson says the company has "not selected or endorsed any specific technology" for its antipiracy efforts, and didn't confirm talks with Disney or NBC. In an Oct. 19 interview with BusinessWeek, AT&T CEO Randall Stevenson said the company had been looking at some startups with promising technology and was talking to movie studios and other content producers. "We're doing a lot of work in this area," Stephenson said. "If you look at what's driving massive amounts of traffic on our network, a lot of it is illegal content."

Sources say few details of how the initiative will work have been nailed down, and that it would be put into commercial use in late 2008 at the earliest. But the general idea is that NBC Universal and Disney would agree to let AT&T maintain a database of some of their movies, shows, and other content. Vobile's technology does two things: It extracts a string of bits from each digital file—what it calls "video DNA"—that serve as digital IDs for each piece of video. Then, traffic on AT&T's network is run through racks of Vobile servers, which look for matches.

In a recent bake-off held by the Motion Picture Association of America, sources say Vobile tested better than a dozen or so other systems when it came to identifying pirated content—even clips that had been altered by hackers hoping to avoid detection. It did so without generating many false positives or instances where it claimed piracy when none had occurred. That's considered critical for any filtering system, as Net service providers fear the backlash that would occur if they wrongly accused customers.

Customer Appeal

Soon after the June ending of the MPAA bake-off, Disney and NBC Universal got interested. AT&T first learned of the Santa Clara startup through its chairman, Vernon Altman, a senior partner at Bain & Co., who also knows CEO Stevenson. Sources say AT&T's Stevenson, Disney CEO Bob Iger, and NBC Universal's Jeff Zucker have been involved personally in the discussions.

AT&T is proceeding cautiously. Sources say it has been testing Vobile's technology since early spring. But besides the laborious job of tuning the technology to work inside a massive network, AT&T is also working on a plan for marketing the approach to consumers. One possibility is to focus at first on using the technology as a way to filter illegal content, such as child pornography. "This could make it all seem a lot more innocent," says Forrester Research (FORR) analyst James McQuivey.

Proponents also could argue that the technology could give consumers access to higher-quality content. Rather than mess with virus-infested video from illegal file-sharing sites, consumers who ask for a given show might be invited to buy a higher-resolution copy from a legal site.

Exclusive Content

But clearly, the focus of the effort is more about business than law enforcement or creating a virus-free Web. And Ma Bell is likely to argue that it will free up huge amounts of bandwidth now taken up by pirated content. This could reduce the amount AT&T would need to invest to continue expanding network capacity, and possibly boost download speeds.

AT&T also stands to get a reliable content recognition system that would help it stand out from the scores of phone companies, cable providers, and Internet service providers trying to land content deals. What's more, if AT&T can convince consumers to let it monitor what they're watching through so-called opt-in agreements, it could offer far more detailed information on their likes and dislikes, in turn enabling AT&T and its partners to land lucrative deals with advertisers hungry for such data.

Sounds simple, but the reality might be far different—and marked by lawsuits rather than win-win business deals. Having full knowledge of what's on the network could make distributors more liable to copyright lawsuits, say some legal experts. And while AT&T may think it's going to win over hordes of consumers by striking exclusive content deals, it may lose just as many who don't want Ma Bell acting like Big Brother, says EFF's Van Lohmann, citing research that almost 20 million Americans—and one in five Net users—engages in file-sharing. He adds, "Certainly, you're going to have a lot of unhappy customers."

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