EU pushes for more expensive electronics

FOR IMMEDIATE USE: 21 September 2004

The European Commission was criticised today by the Foundation for Information Policy Research (FIPR) for making a great flourish of liberalising the market in car components, such as exhausts and door panels, while quietly pushing for law changes that will make the more expensive electronic accessories pricier still.

Internal Market Commissioner Frits Bolkestein wants wider adoption of rights-management mechanisms. These are the electronic locks which ensure, for example, that you can only use an ink cartridge from Hewlett-Packard with a Hewlett-Packard printer, or a battery made by Motorola in a Motorola mobile phone.

Rights-management mechanisms are often associated with Internet based file-sharing of music and films, but the technology has many other applications, and is now being widely adopted by car makers. While you can you can get a handheld satellite navigation system for about a hundred pounds, you can pay over 300 pounds to get one that will fit into your car and read the input from the speedometer. Much of that mark-up goes to the car maker.

At the same time, Bolkestein in proposing to liberalise the market in external auto spares - low-cost items such as bumpers and door panels.

The car industry is just one example.

By increasing the protection of rights-management technology, the EU will make life easier for large firms and tougher for small ones. For example, it will be easier for Sony to hound small British companies who sell Playstation games without paying them royalties; it will be easier for Sky to force customers to use their own personal video recorder product rather than a TiVo; and it will be easier for Microsoft to extend its operating system monopoly into music using Windows Media Player. (This despite the EU's antitrust finding against Microsoft.) The big monopolies will get bigger still, while entrepreneurs will have a harder time setting up the new small businesses that provide tomorrow's jobs and growth.

FIPR's views were expressed in a response to an EU consultation on rights-management technology, which is available in full online at:

http://www.fipr.org/copyright/ipr-consult.html

Quotes

Said Professor Ross Anderson, Chair of FIPR:

`As more and more products get computerised, software will provide more and more of the value. That means that many businesses will become more like the software business. We will get the good (flexibility), the bad (frustration) and the ugly (monopolies). Learning to deal with industry that's not just globalised but software-driven will be a big challenge for governments over the next ten years.'

On the car industry specifically, he said:

`Loosening car makers' monopolies in low-cost spares is well and good, but it doesn't help much if at the same time the Commission tightens the makers' control of higher-value markets in car electronics. The car makers' market control will be deepened. This piece of cynical sleight- of-hand will mean even dearer cars for British buyers. Behind the smoke- screen of cheap bumpers, the Commission will let car makers rip consumers off with expensive electronics.'

`Changing laws so as to make electronics and software more expensive is the last thing that the EU should even think of doing,' he added. `It will make Europe's industry less competitive and leave us even further behind the USA in terms of growth and jobs.'

Contact for enquiries

Professor Ross Anderson
Chair
Foundation for Information Policy Research

chair@fipr.org
01223 33 47 33 (from outside the UK: +44 1223 33 47 33)

Notes for editors

1. The Foundation for Information Policy Research (http://www.fipr.org) is an independent body that studies the interaction between information technology and society. Its goal is to identify technical developments with significant social impact, commission and undertaken research into public policy alternatives, and promote public understanding and dialogue between technologists and policy- makers in the UK and Europe.
2. Professor Anderson argues that instead of promoting rights- management technology, the EU should be regulating it to prevent it being abused to set up monopolies that will hinder growth and job- creation.
3. Rights-management technology will also be used to subvert the Single Market - the European Union's single greatest achievement. Once most products have a software or online component, it will be legal (and easy) for vendors to charge different prices to people in different European countries - and indeed to people with different income levels in the same country. This `price discrimination' is one of the avowed purposes of rights-management technology. However it is almost always unpopular and is widely perceived as unjust. For the EU to promote it will undermine one of the core purposes of the European Union.