Internet Service Providers (ISPs) regularly insist that data caps are a legitimate tool to ease congestion on their networks and an effective way to signal value to consumers. But, as we haveargued, data caps do not resolve congestion, are confusing to consumers, and lend themselves to unfair and anticompetitive behavior. 

In light of this disagreement, it is a promising sign that a recent study published by the National Cable & Telecommunications Association (NCTA) and co-authored by Steven S. Wildman, the new Chief Economist of the FCC, moves beyond some of the previous rhetoric and takes a significant step towards focusing the debate on real areas of conflict.  

Unfortunately, it stops short of recognizing a critical distinction in understanding the heart of the disagreement. Let’s take a look:

Congestion is not the Issue

The absence of data hogs in this report is encouraging. 
Image created by Vimeo user Nick Cross.

The most refreshing section of the study is the one that is not there.  There is no meaningful discussion of usage-based pricing as a tool to reduce network congestion or a suggestion that monthly data limits are a reasonable way to impact congestion.  There is also no invocation of the mythical “data hog,” a sinful creature that can only be punished with data caps.  Hopefully, the omission is NCTA’s tacit admission of two things: that cable networks are not congested and, if they become so in the future, monthly caps will do little to address that congestion.

Price Discrimination is the Key

Instead, the report focuses on usage-based pricing as a form of price discrimination.  This type of value-neutral economic discrimination (in contrast to other types of discrimination that are morally, politically, and even economically problematic) appears to be one of the key motivating factors behind the imposition of usage-based pricing.  At its core, price discrimination is about making people who value something more pay more for it and allowing people who value something less pay less for it.  This is the way that most of the economy works and there is no reason that price discrimination per se should not be allowed for broadband pricing.

Both types of seats will get you where you are going, but one will cost a lot more. 
Images by flickr user Richard Moross and flickr user johnporcaro.

This is the report’s key argument.  Price discrimination happens every day across our economy.  As an economic practice it creates value generally and can do the same in the world of broadband.  Furthermore, price discrimination can make a form of a good or service available to people who might be priced out without it.

All of this is true and all of this is important to understand before having a meaningful discussion about usage-based pricing and data caps.  However it is the beginning, not the end, of that discussion.  But it is also where the report stops.

Price Discrimination is not the Problem, Data Caps are

The key question about usage-based pricing is not if the general practice of price discrimination has a place in the world of broadband.  After all, ISPs have used speed to implement price discrimination since the beginning of broadband.  Instead, the key question is whether using data caps or usage-based pricing to implement price discrimination has a place in the world of broadband.  On that question the report is silent.

That silence is disappointing.  Public Knowledge’s position is that data caps and usage-based pricing is a type of price discrimination that is especially susceptible to anti-consumer manipulation by ISPs and can suppress activities that we generally encourage.  That is why they warrant attention.

At its core, price discrimination relies on sending signals to consumers.  A consumer values X highly and therefore should pay more for it.  That same consumer sees little value in Y and therefore should pay less.  One of the fundamental problems with using data caps and usage-based pricing as part of a price discrimination strategy is that the signal is hard for consumers to receive.  This deficiency becomes clear when usage-based pricing is compared to the existing price discrimination tool: speed.

Speed is a Signal That is Easy to Understand

Imagine a consumer operating in a world where speed is used to implement price discrimination.  She chooses a speed tier and begins using the internet.  Some things she wants to do work well at the speed she selected.  However, other things do not work as well.  Perhaps pages load too slowly for her liking or video buffers and displays at a low resolution.  Every time a page loads slowly or video buffers she gets a clear signal: “your tier does not support the activity that you are doing at this very moment.”  This signal is temporally connected to the activity and easy to understand – slow load times are because of a slow connection.  

At that moment the consumer can consider how valuable the activity is to her, and how often she has gotten that signal in recent days or weeks.  If the activity is sufficiently important or the buffering occurs with annoying regularity, she may decide to upgrade her tier.  Having used the low tier to its fullest capacity and found it wanting for a collection of known activities, that decision is a reasonably informed one.

Data Caps are Much Harder

Contrast that with a consumer operating in a world with a monthly data cap, the most popular implementation of usage-based pricing.  She selects a cap tier and begins using the internet.  Some things she wants to do work well at the tier she selected.  Others do not.  Unfortunately, it can be hard to tell which is which because she does not find out she has run out of data until her cumulative monthly use exceeds her cap. When she receives that alert, or her bill at the end of the month full of overage charges, she gets a muddled signal: “your tier does not support something, or some combination of things, you did in the past month.” 

At that moment the consumer likely does not remember everything that she did over the past month online, or how it compares to other months.  Did she watch five videos or six?   Was the website she visited two weeks ago featuring abnormally rich interactive content?  Did she upload photos to share with her friends?  Are any, or any combination, of those things worth paying more for?  

In the face of uncertainty, many consumers will come to a frustrating but reasonable conclusion: the best path is to over pay and under use.  As long as they buy a higher tier than they need and avoid trying anything new online, they should be fine.

Focusing on Policy Differences

When Public Knowledge and others raise concerns about usage-based pricing, those concerns are about usage-based pricing, not price discrimination.  Price discrimination that relies on usage-based pricing, especially if it is implemented by an ISP with a pay-video business to protect, raises a number of usage-based pricing concerns. That is why our usage-based pricing whitepaper Know Your Limits ends with a series of usage-based pricing-specific recommendations.  Assertions that price discrimination can help expand access or increase value to consumers may be true, but they are not particularly interesting or relevant to the conversation.

The debate around usage-based pricing can only move forward when people stop talking past each other and start focusing on real policy differences.  By moving past congestion and examining price discrimination, this report marks a significant step towards that goal.  However any argument that focuses on price discrimination alone, or that relies on assertions that are merely true for price discrimination generally, do this issue a disservice.  Hopefully the next report from ISPs will try to explain why usage-based pricing, and not just price discrimination, is a reasonable way forward for the broadband market.

On Friday, Rep. Steve Israel reportedly invoked 3D printing to illustrate his concerns about undetectable plastic firearms.  This may represent the first time that a lawmaker has explicitly linked 3D printing with a perceived threat to society.  Hopefully, Rep. Israel recognizes there is no such thing as a 3D printing-specific solution to the problem of plastic guns.

Let’s be clear about one thing: nobody wants people sneaking guns onto airplanes or into other areas protected by metal detectors.  And we have all seen In the Line of Fire enough times to understand that plastic guns can be smuggled into places that metal guns might never see.  But any attempt to address these concerns should focus on plastic guns, not 3D printers.

Fundamentally, this is because there is not a 3D printing-focused solution to this issue.  3D printers work by turning a digital file into a physical object.  That physical object can be made out of any number of materials.  While a digital file may work better or worse with some materials than others, nothing about the file is inherently tied to a given material. 

This versatility is one of the characteristics that makes 3D printing so powerful.  Even without a 3D printer of your own, you can buy Bathsheba Grossman’s Gyroid sculpture in plastic.  Or steel.  Or silver.  Or glass.  Or sandstone.  You could travel to a Dutch Staples and print it in paper.  You could make nice with Hod Lipson and Jeff Lipton at Cornell and print it in cheese or batter.  That is just as true for a gun file.  The difference between a detectable and undetectable 3D printed gun lies in the printing.  Not the file.

And that file is a digital file just like any other.  For all intents and purposes, once it exists in one place online it exists every place online.  Congress cannot make a file for a 3D printed gun disappear off the internet any more than it can do so for a pirated version of The Avengers.

Finally, there is no way to stop a 3D printer from printing a particular type of thing.  As we havewritten before, a 3D printer is a general purpose machine that can be used to make just about anything – both good anythings and bad anythings. Printers do not run software that checks with a central approved database before they print something out.  In fact, because 3D printerscan print themselves, there is not even a central database that keeps track of all of the 3D printers in the world.

That is why, as a general rule, we do not focus on tools when we are trying to solve a policy problem.  We would never try and stop bombs by passing a law controlling wires or try and stop hacking by passing a law controlling the use of command line tools. 

Instead, we focus on behaviors.  It is illegal to blow something up with a bomb no matter how it was made.  It is illegal to hack into protected database no matter how you do it.   If you believe that people should not be able to carry plastic guns, make it illegal to possess plastic guns.  No one is worried about printing undetectable guns with a 3D printer per se.  They are worried about undetectable guns. 

It is probably a good thing that Rep. Israel is pursuing a conversation about plastic guns, and these days invoking 3D printing is a good way to bring attention to an issue.  But in crafting a solution, hopefully Rep. Israel will focus on the problem – not just a high-profile tool.  After all, if Congress passed a law banning undetectable guns in 1988, and John Malkovitch’s Mitch Leary was creating plastic guns in 1993, eliminating 3D printing from the equation is not going to solve any problems.  But it could cripple the growth of legitimate applications for this promising technology.

While you were preparing to get your Thanksgiving on last week, news broke that one of the oldest and largest 3D printing companies, 3D Systems, was suing one of the newest, Formlabs, for patent infringement.  Besides the obvious question (is Formlabs actually infringing?), the suit raises two other interesting questions: what does it mean when an established 3D printing company sues an upstart for patent infringement?  And why did 3D Systems decide to sue Kickstarter as well?

First, a bit of background.  

3D printing has existed since the mid-1980s.  However, it was not until 2007 that Professor Adrian Bowyer created the RepRap – the grandfather of almost all “home” 3D printers available today.  Why the delay?  Largely patents.  

Once the first 3D printing patents began to expire in 2007, the community quickly embraced, and rapidly improved upon, the 20-year old technology.  In just a few years a number of companies were selling their own version of a home 3D printer.  

While each of these printers are unique, almost all of them worked in essentially the same way – they built objects up layer by layer from melted plastic.  This was because everyone in the market was building off of the same expired patents (and was limited by the same existing patents).

That was one of the things that made Formlabs’ FORM 1 printer so interesting.  It had higher resolution and used a fundamentally different technology than most existing printers.  While it was no doubt an impressive feat of  engineering, the real achievement appeared to be a feat of lawyering – how had everyone missed this hole in the existing patent wall?

3D Systems Suing Formlabs

Although there is a great deal of interesting discussion about problems with the patent system (especially software patents) and with the relationship between patents and open source 3D printers, those concerns are not necessarily relevant here. I will not pretend to be an engineer nor a patent attorney (and will update this post when I am corrected in my interpretation), but the patent in question seems to be reasonably close to what people might think of as a “regular” (non-controversial type) patent involving materials science.  The larger debate around patent reform rarely focuses on these types of patents, and no one can accuse 3D Systems of being a non-practicing entity (also known as a troll) or of hiding the fact that they own many patents related to 3D printing.

Similarly, the larger openness question does not directly apply to this case.  Formlabs may not have patented its technology, but it has not embraced openness either.  From an openness standpoint, this is essentially one closed company suing another.

All of this means that 3D Systems’ decision to sue Formlabs should not automatically make it a bad actor.  If they had a valid patent and Formlabs was infringing upon it, they have every right to sue. Furthermore, if Formlabs was able to beat all of its (consumer-grade) competitors by ignoring the patent that was keeping everyone else away from a better 3D printing technology, they should not necessarily be rewarded.

Of course, if 3D Systems loses aginst Formlabs it does raise a few questions, not the least of which are “have the home 3D printing compaines been avoiding this technology for no reason?” and “why hasn’t 3D Systems tried to sell this technology to the consumer market?”

3D Systems Suing Kickstarter

This is a bit more troubling, and could have a significant chilling effect on Kickstarter as a catalyst for innovation.  For those of you who are familiar with how websites that host third party copyrighted content work online, this section is going to sound familiar.  

Just as requiring YouTube or Facebook to review every video or post for copyright infringement would make it impossible for those sites to operate, requiring Kickstarter to review every project for patent compliance would effectively end its ability to host hardware startups.  While it is true that Kickstarter already reviews projects before they go live, that review is for compliance with a set of fairly straightforward project guidelines.  Requiring a full patent check for every hardware startup would fundamentally change the verification burden (this is not to say that Kickstarter does not have any obligations to existing rightsholders, as illustrated here).  

While retailers often deal with concerns about patent liability by demanding indemnification from their suppliers, that guarantee is near useless to a site like Kickstarter.  Kickstarter is a place for projects to find their launch funding.  Almost by definition, that means that they do not have very much money.  As a result, a promise from a project to cover Kickstarter if it gets sued for patent infringement is unlikely to be backed up by very much actual money.

In light of this, including Kickstarter in the suit could be read as an attempt to push Kickstarter away from hosting hardware startups in the first place.  Since new 3D printers are one of the most popular types of hardware startups on the site, this could be interpreted as 3D Systems trying to use its patent to cut off the flow of rivals – not just shutting down one that infringes on its patent.

Moving Forward

In many ways, this is a sad story.  It will be unfortunate if it turns out that Formlabs did not really find a way through the patent wall surrounding one of the more advanced 3D printing techniques.  It will be unfortunate if it turns out that Formlabs did manage to find a way through the patent wall but has to spend a great deal of money proving it.  It will also be unfortunate if 3D Systems’ inclusion of Kickstarter in its suit makes it harder for new 3D printers – and all hardware projects – to get funding.  

It will also be sad if it contributes to the narrative that traditional 3D printer companies are uninterested – or unwilling – to serve the emerging home market.  Sometimes these existing companies look like the old mainframe companies at the dawn of the PC age – pointing out all of the things that the new home printers cannot do, while looking past the things that they can do at a fraction of the cost of existing “powerful” machines.  

For the past year, it has looked like 3D Systems was interested in engaging the home market.  To their credit they rolled out their own home 3D printer, albeit with the same expired patent technology that everyone else was using. They did not seem interested in turning any of their still-patented technology into an affordable consumer-grade model, but they were interested in offering the home market a product. 

Now, they have not only sued a company that tried to bring next-generation technology to consumers but also the pipeline for the next-next 3D printing company.  

It is not clear what will come of this lawsuit, or even what should come of it.  As long as we have a patent system, 3D Systems has every right to defend its valid patents and Formlabs has every right to prove that it did not infringe (or that the patent is invalid).  At the same time, one could hope that 3D Systems might try and bring new options to the market, not just block others from doing so.  Furthermore, including Kickstarter in this fight, which has fueled the creation of so much hardware innovation, seems like a decision designed to alienate exactly the type of people who you might want to sell 3D printers to in the future.

And so now we watch.  This may be one of the first patent lawsuits to affect the home 3D printing market, but probably for reasons beyond Formlabs’ survival.  It could effectively shut Kickstarter’s door to hardware startups.  It could also signal that traditional 3D printing companies are more interested in suing the consumer market out of existence than cultivating it.  In any event, it is certainly something worth watching.

Today the Register of Copyrights and the Librarian of Congress announced the 1201 exemptions.  You may remember that the 1201 review is the triannual process whereorganizations, communities, and individuals request permission to circumvent Digital Rights Management (DRM) technologies that prevent them from doing otherwise perfectly legal things.  This time around, Public Knowledge requested an exemption that would allow people to rip DVDs they already own in order to transfer the movie to a device that cannot play DVDs (like a tablet).

That request was rejected.  Furthermore, the Register and the Librarian explained that they were unconvinced that space shifting was fair use at all.  That has huge implications well beyond people who want to watch the movies they own on DVD on their iPad.

“Space Shifting” is what you do any time to take a file and move it from one medium to another.  The best known example of this is probably ripping CDs to move the songs on to digital music devices like iPods.  If you think it is ridiculous that such activity is illegal, you are right.  

And the RIAA and the MPAA agree with you.  In 2005, their lawyer (now the Solicitor General of the United States) assured the Supreme Court that “The record companies, my clients, have said, for some time now, and it’s been on their Website for some time now, that it’s perfectly lawful to take a CD that you’ve purchased, upload it onto your computer, put it onto your iPod.“

Movie executives agree as well.  Mitch Singer, the Chief Technology Officer of Sony Pictures Entertainment explained to author Robert Levine that the idea for the movie industry’s UltraViolet program evolved out of Singer’s own frustration with transferring movies between PCs in his home.

So do members of Congress.  Earlier this year, Representative Darrell Issa did a IAmA on Reddit.  Rep. Issa told Redditors that it was already perfectly legal to make personal copies of DVDs for their own use.

If all of this, combined with the fact that all major media management software comes with space shifting technology built into it out of the box, is not enough for the Register of Copyrights and the Librarian of Congress, then it is time to for Congress to step up.  

Public Knowledge has already proposed a bill, hosted on the Internet Blueprint,that would incorporate noncommercial personal uses into the definition of fair use.  Congress needs to pass the bill in order to make clear that the millions of Americans who have copied songs they own onto their iPods and movies they own onto their laptops and tablets are not copyright infringers.

Recently, Antonio Regalado at Technology Review identified a patent on Digital Rights Management (DRM) for 3D printing.  The patent, granted to Nathan Myhrvold’s companyIntellectual Ventures (IV), initiated a wave of discussion about DRM and 3D printing.  While this is a discussion that is worth having, the existence of the patent it not particularly relevant to it.

DRM is a generic term for a suite of technologies that, in theory, allow people to control how others use digital information.  DRM is usually applied to things protected by copyright (like movies on DVD) in the hopes of preventing unauthorized copying.

DRM is problematic for many reasons, but two are particularly relevant to this discussion.  First, almost by definition, DRM cripples the functionality of devices or programs, making themdefective by design.  As applied to 3D printing, DRM could transform a general purpose tool capable of making anything into a specialized tool that can only be used to create a handful of pre-approved items.  Such a transition at this point could cripple the growth of consumer 3D printing.

Second, and perhaps more importantly, DRM does not work.  The highest profile uses of DRM have been attempts to restrict unauthorized copying of works like music and movies (while the music industry has largely moved away from DRM, the movie industry clings firmly to it).  Despite being protected by increasingly sophisticated types of DRM, unauthorized copies of just about any movie released on DVD or Blu-Ray can easily be found online.  Since only one person needs to be smart enough to crack a given DRM in order for everyone to be able to circumvent it, DRM inevitably fails.

Unfortunately, that does not mean that DRM does not have an impact.  Although DRM does not prevent bad actors from making unauthorized copies of works, it does prevent good actors who wish to comply with the rules from making legitimate uses of them.  In this way, DRM imposes costs on consumers without granting any legitimate benefit to rightsholders.

Enter IV’s patent.  The patent appears to be quite broad, and to cover many of the ways that DRM might be implemented on 3D printers.  Does it change anything?

Probably not.  When confronted with a digital disruptive technology, many people reflexively turn to DRM in an attempt to control the disruption.  IV’s patent is not the first time someone has thought about this, and it will not be the last.

Also, the patent does not appear to represent an actual functioning DRM mechanism.  This probably should not come as a surprise.  Intellectual Ventures is widely known as a “non-practicing entity” by some and as a patent troll by others.  Their general strategy is to stake out an area and charge people to license their patents, not to actually develop technology to implement.

Furthermore, and this is important, having a patent does not allow you to force people to use the technology that you have patented.  Since the patent does not represent a way to implement 3D printed DRM, its existence does not really move 3D printing closer to a DRM world.

Finally, in some ways this patent could actually slow the adoption of DRM in the 3D printing community.  Assuming the broad patent survived a challenge in court (a big if), most people dreaming of imposing DRM on 3D printing would be forced to pay Myhrvold and Intellectual Ventures a licensing fee.  That increases the rightholder cost of using DRM, which is a good thing.

The emergence of this patent has helped raise awareness of the possibility of using DRM in connection with 3D printing.  However, that awareness raising may ultimately prove to be its most relevant impact on 3D printing’s development.