Will the EU’s Fine on Intel Impact DRM?

The European Commission imposed a fine of €1.1 Billion (US $1.1 Billion) on Intel last month for violating EC Treaty antitrust rules on the abuse of a dominant market position by engaging in illegal anticompetitive practices to exclude competitors from the market for x86 (CPUs) computer chips, and cease illegal practices.  Intel had a dominant position in the worldwide x86 CPU market (at least 70% market share). Europe accounts for 30% of the worldwide $30 Billion annual market for X86 devices.

Intel will appeal the fine and judgement.  This action had a long gestation period and was triggered by complaints from AMD, branded PC vendors  (Dell, HP, Lenovo, etc.), and others.

So what has this to do with DRM, you may ask?

Firstly, the market for X86 will be opened up to other suppliers whose chips will be similar but not identical.  Over time, this could begin to create featured niches in the market. It will also have an effect on ancillary chips, as well as internal and external communications and memory architectures, as system designers optimise for certain applications. Ultimately it will begin to have an effect upon the applications environment in a world which is becoming more SaaS and Cloud computing based. It won’t all move in that direction, since various limiting factors will stimulate clien- server architectures in a different direction.

Content and rights management has to exist in this evolving world.  DRM is a software/technology system that has to ride on platforms and networks. Architecture is crucial to successful implementation and operation. Bias the architecture a wrong way and users get frustrated that performance degrades since the systems can’t respond, or that software architectures are not congruent with hardware architectures. At worst, one can’t port the software onto the platforms.

In a monopoly environment, arguably and initially, implementation is more predictable. Therefore an axiom of the opening up of the market is that rights management may become less predictable, although we don’t know how.

But DRM has to operate in many differing environments catering for many differing types of rights and content. Interoperability is a challenge as “home” increasingly clashes and merges with “automotive,” with “broadcast,” with “office,” with “portable,” with “mobility,” with “games,” with “entertainment,” with “media,” etc.

Each of these silos has evolved its own architectures and solutions driven by industrial clusters evolving from differing geographical markets e.g. PCs from the US and China, automotive from Germany and Japan, mobile phones from Europe and the Far East, gaming from the Far East and US, etc.

The EU had convened a High Level Group to guide it on DRM issues identification. Of the above grouping, only HP participated, others being companies such as BBC, France Telecom, Nokia, Vodafone, Vivendi and a collection of trade associations. Intel and countless others (large and small businesses which could have contributed) weren’t present.

Yet at the launch of Microsoft’s Digital Entertainment offering at the Emmy Awards in LA, it had a large partnership ecosystem of companies and consortia with which it had worked to deliver its offering. Intel was one of these, as were others such as HP, Sony, etc. Intel’s positioning is “Today, Intel supplies the computing and communications industries with chips, boards, systems and software building blocks that are the ‘ingredients’ of computers, servers and networks and communications products.” The X86 is just one of those building blocks around which are other chips, buses, and software.

Yet the silos mentioned above have differing semiconductors underpinning their functionality and enabled by differing software. For example, ARM’s risk based architecture is a key component of the world’s 4.5 billion mobile phones, games console semiconductor devices optimized for gaming underpinned by AMD, Cypress and Freescale devices, broadcast underpinned by SGS-Thomson, Philips, National Semiconductor and others, etc.

But the desire is that content and rights will flow more freely (not in an economic sense) between these silos.

The European Union has interoperability (including DRM interoperability) as a key issue, which it stimulates through R&D programs, policy initiatives, and think tanks. Yet it controls few if any of the means to achieve its utopia.  I was instrumental in placing DRM and interoperability on the national agenda in UK in the context of national broadband policy which was subsequently taken up by the EU. And whilst there has been much activity and public comment, there is little clear articulation of any goal or objective and even less of the causality other than a catch all “consumer benefit”.

In a separate strategy piece for a Global 100 company, we identified 10 – 20 DRM and content management consortia operating over 5 platform domains. Most had a genesis in US, some European and PacRim membership operating over various hardware and semiconductor platforms.

Intel is a contributor to some but not all, as other commercial interests drive others. The EU’s fine will curtail Intel’s lobbying and influencing ability as it has done for Microsoft previously. Whether others will step into the gap crated by EU initiatives remains to be seen.

However, in EU’s European Year of creativity and innovation, the probability is that this influence over the semiconductor market will cascade into dependent markets, including content and rights management. Yet the EU does not have the resources to “control” all interoperable markets, so in any possible intervention for “consumer benefits” it must not only ask whether it should, but also what unintended consequences might arise and whether acting on one particular issue alone will bring benefits or impairment.

For that one requires a breadth and depth of understanding that spans markets to law to architectures and technologies.

For now, it will be interesting to observe how this fine on Intel will translate to modified behavior in the DRM markets.

Bill Jones is CEO of Global Village Ltd.

One comment

  1. Bill Jones · ·

    correction – the fine was $1.4bn (Euro 1.1bn)

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