Ma Bell, The Web's New Gatekeeper

As AT&T weighs technology to catch pirated content on its network, privacy advocates get the chills

By Peter Burrows

About a month ago, Google (GOOG ) caused barely a ripple when it unveiled technology to filter out copyright violations on its YouTube video Web site. After all, YouTube had been under constant fire from big media companies for hosting unauthorized clips. But now a move by AT&T (T ) to adopt similar technology across its entire broadband network is raising the hackles of critics.

The phone company is in talks with NBC Universal and Walt Disney (DIS ) about embedding a "content-recognition" system made by tiny Vobile Inc. right into AT&T's Internet transmission apparatus, BusinessWeek has learned. The technology would be used to guard against illegal distribution of those companies' shows and films.

Critics fear that by assigning a phone carrier a gatekeeper role over a broad portion of the Internet—some experts say half of U.S. Net traffic may touch AT&T's network—the system would threaten users' privacy, freedom of speech, and equal access. Up to now, most of the talk about filtering videos and other media content has centered on getting individual Web sites, such as YouTube, to use the technology.

Industry sources say AT&T and Disney have put more than $5 million into Vobile, and NBC Universal is expected to follow.AT&T confirms its investment, but spokeswoman Claudia Jones says the company has "not selected or endorsed any specific technology" for its anti-piracy efforts. She didn't confirm talks with either Disney or NBC Universal, which is owned by General Electric (GE ). In an Oct. 19 interview, CEO Randall L. Stephenson said AT&T had been looking at some startups that have 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."

Big Hollywood studios and TV networks would welcome such a system. It could create a kind of no-piracy zone where they would feel assured of getting paid for the use of their films and programs. Media executives argue that such safeguards would free them to offer more of their best stuff online, at a lower price. Consumers would have a virus-free, legal means to get clips. Download times may be faster, since fewer unauthorized files would hog the Net.

In an age when a piece of video—from a 30-second home movie to a $100 million, feature-length film—can be zipped around the Net with a couple of clicks of a computer mouse, content creators are demanding assurances their handiwork won't be ripped off. Google unveiled its filtering system to automatically scout out pirated clips on YouTube in October, seven months after it was hit with a $1 billion suit from Viacom (VIA ). Days after that, a consortium of media and Internet companies, including Disney, Microsoft (MSFT ), News Corp. (NWS ), and NBC, issued guidelines for how sites should fight piracy.

`SERIOUS, SERIOUS STUFF'

AT&T said in June it would work with Hollywood and the music industry to develop filtering technology to prevent copyright infringement, but many industry sources thought any real progress was far off. News of more concrete plans is eliciting howls of concerns from privacy advocates, who already have slammed the largest U.S. phone company for its role in helping the Bush Administration tap citizens' phone lines for information on terrorism. "They better be very careful," warns Lee Tien, a senior staff attorney with the Electronic Frontier Foundation (EFF). "This is serious, serious stuff, to basically invade the privacy of all of your subscribers."

Then there are questions about freedom of speech. What, for example, happens when a movie critic or political activist uses a copyrighted clip in the course of their work? "No filter is smart enough to tell if a person is engaging in authorized, legal, or fair use" of the clip, says Gigi B. Sohn, president of advocacy group Public Knowledge. She also questions the effectiveness of the system, pointing out that video pirates have proven remarkably resourceful. AT&T's approach could lead professional pirates to encrypt their files. Studio executives insist they're only interested in big-time pirates and admit they're in a cat-and-mouse game. "None of us is under the illusion that these technologies will be 100% hack-proof," says one.

AT&T's Jones and others close to the companies say few details have been nailed down for how the initiative would work. While Jones wouldn't comment on the potential timing of any deployment, other sources say it would be put into commercial use no sooner than late 2008. Sources say Stephenson, Disney CEO Robert A. Iger, and NBC Universal President and CEO Jeff Zucker have been involved in discussions.

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 a digital ID for each movie. Data that's streaming over AT&T's network would be run through racks of Vobile servers, which would look for matches. In a recent test of such systems, held by the Motion Picture Association of America, Vobile performed better than a dozen or so other systems when it came to identifying pirated content.

AT&T has been testing Vobile's technology since early spring. But besides the laborious job of tuning it to operate inside a massive, carefully monitored network, AT&T is also working on a plan for how to present the program 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 [the technology] all seem a lot more innocent," says Forrester Research (FORR ) analyst James McQuivey.

But clearly, the filtering system also could boost AT&T's business by differentiating it from the scores of phone companies, cable providers, and Internet Service Providers that are out trying to land deals with media companies. It also could free up billions in capital investments and make room for paid content by eliminating pirated files that by some measures amount to half of overall Net traffic.

And if AT&T can persuade consumers to let it monitor what they're watching through so-called opt-in agreements, it could collect far more detailed information on their likes and dislikes. Then AT&T and its content partners could land lucrative deals with advertisers hungry for such data.

AT&T and NBC Universal also could offer a choice to those who go looking for a pirated TV show, says Ed Lewis, a consultant and general partner with Relevant C Business Group: download it for $5, get a one-time stream for $2, or watch an ad-supported version on an NBC Web site for 50 cents.

The reality might be far different, of course. While AT&T could win consumers by striking exclusive content deals, it could lose others who don't want Ma Bell acting like Big Brother, says Fred von Lohmann, an EFF lawyer. He cites research that one in five Internet users engages in file-sharing, and adds: "Certainly, you're going to have a lot of unhappy customers."

Burrows is a senior writer for BusinessWeek, based in Silicon Valley

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