Verizon Gets it on File-sharing

Last Updated Mar 17, 2008 4:35 PM EDT

Blender magazine recently named the killing of Napster by the major labels the Biggest Record Company Screw-Up of All Time. While that's hardly news, it is interesting that the title was bestowed in a time when there is evidence that, seven years after Napster was squashed, big corporations are finally getting peer-to-peer (P2P).

On Friday, the Associated Press said Verizon was breaking ranks with major ISPs who are trying to restrict heavy P2P activity, which account for a third of the traffic on their networks. Since last summer, Verizon has collaborated with Yale University and file-sharing software makers to find a way to make file sharing faster, more efficient and cheaper for itself.

The group claims to have found a way to connect users not randomly, as most networks do, but that relied more on local connections. It works even better if other ISPs join in, but that will require them to change their thinking. But with legal file-sharing likely to happen through new services like Hulu, that could change. The story quotes a sofware exec as saying,

"This test signifies a turning point in the history of peer-to-peer technology and ISPs," said Robert Levitan, chief executive of file-sharing company Pando Networks Inc. "It will definitely show ISPs that the problem is not peer-to-peer technology, the problem is how you deploy it. It is possible to deploy P2P to their advantage."
Meanwhile, record companies are reportedly warming to a proposal pitched by music-industry consultant Jim Griffin, who argues the best solution to music piracy is a $5 a month surcharge on broadband connections. (More on his views can be found here.) Artists would collect the money based on popularity of their downloads.

Both of these developments inject efficiency into broken business models while making things easier for consumers. Both have been resisted by companies who have suffered self-inflicted wounds from their short-sightedness. But both also suggests companies are learning from their past screw-ups.

  • Kevin Kelleher

    Kevin Kelleher writes a regular stock column at TheStreet.com and is a contributor to Wired, Popular Science, and GigaOm. He has previously worked as a reporter and editor at Bloomberg News, Wired News, and The Industry Standard.