[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


 
 REDUCING PEER-TO-PEER (P2P) PIRACY ON UNIVERSITY CAMPUSES: A PROGRESS 
                                 UPDATE

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON COURTS, THE INTERNET,
                       AND INTELLECTUAL PROPERTY

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 22, 2005

                               __________

                           Serial No. 109-56

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov


                                 ______

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                       COMMITTEE ON THE JUDICIARY

            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois              JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina         HOWARD L. BERMAN, California
LAMAR SMITH, Texas                   RICK BOUCHER, Virginia
ELTON GALLEGLY, California           JERROLD NADLER, New York
BOB GOODLATTE, Virginia              ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio                   MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California        ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee        SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah                   MAXINE WATERS, California
SPENCER BACHUS, Alabama              MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina           WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana          ROBERT WEXLER, Florida
MARK GREEN, Wisconsin                ANTHONY D. WEINER, New York
RIC KELLER, Florida                  ADAM B. SCHIFF, California
DARRELL ISSA, California             LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona                  CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana                  DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas

             Philip G. Kiko, General Counsel-Chief of Staff
               Perry H. Apelbaum, Minority Chief Counsel
                                 ------                                

    Subcommittee on Courts, the Internet, and Intellectual Property

                      LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
ELTON GALLEGLY, California           JOHN CONYERS, Jr., Michigan
BOB GOODLATTE, Virginia              RICK BOUCHER, Virginia
WILLIAM L. JENKINS, Tennessee        ZOE LOFGREN, California
SPENCER BACHUS, Alabama              MAXINE WATERS, California
BOB INGLIS, South Carolina           MARTIN T. MEEHAN, Massachusetts
RIC KELLER, Florida                  ROBERT WEXLER, Florida
DARRELL ISSA, California             ANTHONY D. WEINER, New York
CHRIS CANNON, Utah                   ADAM B. SCHIFF, California
MIKE PENCE, Indiana                  LINDA T. SANCHEZ, California
J. RANDY FORBES, Virginia

                     Blaine Merritt, Chief Counsel

                         David Whitney, Counsel

                          Joe Keeley, Counsel

                          Ryan Visco, Counsel

                    Shanna Winters, Minority Counsel


                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 22, 2005

                           OPENING STATEMENT

                                                                   Page
The Honorable Lamar Smith, a Representative in Congress from the 
  State of Texas, and Chairman, Subcommittee on Courts, the 
  Internet, and Intellectual Property............................     1
The Honorable Howard L. Berman, a Representative in Congress from 
  the State of California, and Ranking Member, Subcommittee on 
  Courts, the Internet, and Intellectual Property................     9

                               WITNESSES

Mr. Daniel A. Updegrove, Vice President for Information 
  Technology, University of Texas at Austin
  Oral Testimony.................................................    11
  Prepared Statement.............................................    14
Mr. Richard Taylor, Senior Vice President, External Affairs and 
  Education, Motion Picture Association of America (MPAA)
  Oral Testimony.................................................    35
  Prepared Statement.............................................    37
Mr. Norbert W. Dunkel, Director of Housing and Residence and 
  Education, University of Florida
  Oral Testimony.................................................    41
  Prepared Statement.............................................    43
Mr. William J. Raduchel, Chairman and Chief Executive Officer, 
  Ruckus Network
  Oral Testimony.................................................    50
  Prepared Statement.............................................    52

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Report from the Joint Committee of the Higher Education and 
  Entertainment Communities submitted by the the Honorable Lamar 
  Smith, a Representative in Congress from the State of Texas, 
  and Chairman, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................     3

                                APPENDIX
               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a 
  Representative in Congress from the State of California, and 
  Ranking Member, Subcommittee on Courts, the Internet, and 
  Intellectual Property..........................................    63
Prepared Statement of the Honorable John Conyers, Jr., a 
  Representative in Congress from the State of Michigan, and 
  Member, Subcommittee on Courts, the Internet, and Intellectual 
  Property.......................................................    64
Prepared Statement of the Honorable Adam B. Schiff, a 
  Representative in Congress from the State of California, and 
  Member, Subcommittee on Courts, the Internet, and Intellectual 
  Property.......................................................    65
Prepared Statement of Frederic Hirsch, Senior Vice President, 
  Intellectual Property Enforcement, Entertainment Software 
  Association (ESA)..............................................    65
Supplementary Statement of Daniel A. Updegrove, Vice President 
  for Information Technology, University of Texas at Austin......    69


 REDUCING PEER-TO-PEER (P2P) PIRACY ON UNIVERSITY CAMPUSES: A PROGRESS 
                                 UPDATE

                              ----------                              


                      THURSDAY, SEPTEMBER 22, 2005

                  House of Representatives,
              Subcommittee on Courts, the Internet,
                         and Intellectual Property,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:15 a.m., in 
Room 2141, Rayburn House Office Building, the Honorable Lamar 
Smith (Chair of the Subcommittee) presiding.
    Mr. Smith. The Subcommittee on Courts, the Internet, and 
Intellectual Property will come to order.
    I have to tell you, I do think several Members are on the 
way, but apparently this is an early hour for a number of them. 
In point of fact, we originally were going to meet at ten 
o'clock and, because of conflicts with other Subcommittees, we 
needed to move up our hearing time. I can only say that I am 
grateful that the witnesses are all here and that there is 
still a large audience who are interested in the subject at 
hand.
    We are going to proceed, incidentally, with the agreement 
of the Ranking Member, Mr. Berman, who is on the way but will 
be delayed a few more minutes. I am going to recognize myself 
for an opening statement, and then we'll move on and begin to 
hear from the witnesses.
    Today the Subcommittee will receive an update on the 
progress that has and has not been made in combatting peer-to-
peer piracy on university campuses. First, let me note that 
there have already been several significant actions that have 
occurred off of the university campuses. Only a few months ago, 
the Supreme Court clearly delineated the lability of P2P 
software providers. Until this decision was released, certain 
P2P providers had consistently disclaimed any liability for the 
piracy that their software enabled. Now many of these services 
are trying to become distributors of legal sources of content. 
However, universities are aware P2P piracy flourishes, and I am 
pleased to see progress on many campuses in combatting such 
piracy.
    Copyright issues are no longer an afterthought at many 
universities. During the last academic year, several 
universities offered legal services to lure students away from 
illegal downloading and file sharing. Other institutions 
offered serious education programs or better enforcement of 
their copyright policies.
    Coming from high school environments where copyright issues 
are usually ignored, or simply unknown to parents and teachers, 
college students are ready to use the high-speed Internet 
connections as a source of free content. While college students 
often test boundaries, campuses should not be places where 
illegal activity becomes a routine of a student's life that 
will only continue after their graduation.
    Universities have recognized their part, and their 
educational mission is not only centered on turning out 
architects, lawyers, nurses, musicians, and economists. Their 
mission also includes graduating well-rounded individuals who 
respect others as well as the laws of the country.
    Several years ago, it was obvious that respect for the 
nation's copyright laws was not a high priority of many 
university students or their universities. To address this 
issue, a joint university content owners group was created in 
2003. Co-chaired by Graham Spanier at Penn State and Cary 
Sherman of RIAA, this working group has met regularly to bring 
together groups that have rarely interacted before. This 
working group has provided the Subcommittee with an update of 
its activities in its written submission today.
    The Subcommittee will hear today from two universities, 
including one from my own district. Both universities have 
undertaken several efforts related to student education, 
ranging from copyright information provided on orientation day 
to automated systems that warn students of conduct not 
permitted under university guidelines.
    We will also hear from one provider of legal content to 
universities, and the experiences that they have had. Finally, 
we have a representative of a content trade association, who 
can speak to the increasing use of high-speed university 
networks to transfer large video files. This is a good time to 
understand why some universities have clearly stepped up to the 
plate of educating their students, while others simply have 
not.
    The Subcommittee will continue to hold hearings on P2P 
piracy to monitor progress and to update Congress on what still 
needs to be done.
    I mentioned in my opening remarks a minute ago the Joint 
Committee of the Higher Education and Entertainment Communities 
that had been meeting since 2003. One of the co-chairmen of 
that group is Cary Sherman, who happens to be in the audience 
today. Glad to see you. And since you're here, I want you to 
note that we're going to, without objection, be putting in the 
record your most recent report that we saw yesterday.
    [The information referred to follows:]
      Report from the Joint Committee of the Higher Education and 
Entertainment Communities submitted by the the Honorable Lamar Smith, a 
   Representative in Congress from the State of Texas, and Chairman, 
    Subcommittee on Courts, the Internet, and Intellectual Property



    Mr. Smith. And also, maybe just as a part of my opening 
statement, let me read a couple of the conclusions from that 
report, as well:
    ``This joint committee today issued an update to Congress 
outlining the latest efforts to address illegal file sharing on 
campuses and the emerging challenges ahead.''
    According to the report, and this is the good news:
    ``The number of schools with legitimate services on campus 
has more than tripled, to nearly 70 in the last year.''
    Now, that's the good news. The other news is that, 
according to the report, student-run file-sharing systems on 
schools' local area networks, as well as the increased use of 
unauthorized hacks of the legitimate online services, iTunes, 
are emerging as significant problems. So obviously, there's 
much work to be done, but we are making progress.
    That concludes my opening statement, and the gentleman from 
California, Mr. Berman, is recognized for his.
    Mr. Berman. Well, thank you very much, Mr. Chairman, and 
I'm sorry I was late. But I personally appreciate you 
scheduling this hearing on campus-university peer-to-peer 
piracy.
    I think there's no question of the devastating impact 
piracy has had on the entertainment industry: a serious decline 
in total value at the retail level. In March 2005 alone, 243 
million songs were downloaded from illicit peer-to-peer 
services. It's estimated that approximately 400,000 films are 
illegally downloaded every day.
    But when it comes to downloading content that is not paid 
for, there seems to be a disconnect between--there's a 
disconnect that students exhibit between intellectual knowledge 
and actual behavior.
    There was a very telling discussion that occurred during a 
program about P2P file sharing organized by my colleagues, Adam 
Schiff and Linda Sanchez, and me, for students from different 
colleges who are interning on the Hill. The students all 
acknowledged that downloading content from P2P networks was 
possibly morally wrong, probably legally wrong, and potentially 
harmful to their own networks from spyware or adware; yet many 
of them continue to use P2P file-sharing as a means of 
obtaining music, movies, television shows, and games.
    At this hearing last year, Gordon Spanier--Graham Spanier--
one of the chairs of the joint committee, and a man who's 
really a visionary in undertaking the lion's share project at 
Penn State, testified, ``I don't think there is any one part of 
the solution. It has to be a set of variables that universities 
use to bring about progress in this area.''
    Awareness of the effects and solutions to the piracy 
problem can be addressed through education, enforcement, 
technological improvements, and affordable legitimate 
alternatives. The good news, in no particular order, is that 
there has been progress on every front. The Supreme Court's 
decision in Grokster set a clear message that companies that 
encourage theft can be held liable. Immediately after the 
decision, iMesh, one of the original peer-to-peer services, 
announced the transition from a free to commercial-based, 
authorized P2P business model, which ensures competition to 
creators--compensation to creators. Others began to follow 
suit. As late as this week, Grokster itself is rumored to be 
attempting to turn legit.
    Since the Grokster decision, there have been other positive 
impacts on campuses around the country. The University of 
California and Cal State University, two institutions I know 
well, announced a deal with Cdigix which provides 
administrators at all 13 UC and 23 Cal State campuses the 
option of offering online music and movie sales to students.
    Of course, providing students with legitimate alternatives 
to the KaZaAs and the Groksters is a key part of any solution 
to the piracy problem. But as the report released yesterday by 
the Joint Committee on Higher Education and Entertainment 
Communities indicates--the report that the Chairman referred to 
at the end of his opening statement--we have a long way to go.
    Free is still an option; and while the Grokster decision 
may have stemmed the wave of piracy, many continue to ride that 
wave and persist in illegally downloading music, movies, and 
software. Again, as the report mentioned, we have to confront 
the piracy which takes place on the schools' local area 
networks and the increased use of unauthorized hacks of 
legitimate online services.
    Just this Monday, the movie industry announced a concerted 
effort dedicated to mitigating the effects of piracy. The goal 
of the new non-profit research and development company, Motion 
Picture Laboratories Inc.--``MovieLabs'' it's known as--will be 
to create new technologies to protect the distribution of films 
and other works, as well as to protect against electronic 
theft, particularly on the Internet.
    Just last week, RIAA and MPAA joined Internet2, something 
we had been concerned about. They joined as corporate members, 
with the objective of working together on new technologies for 
secure digital distribution.
    It is the combination of the many methods, and not just one 
silver bullet, that will address the campus peer-to-peer issue. 
Perhaps, as more simply put by Aristotle--that's what good 
staff is for--``In educating the young, we use pleasure and 
pain as rudders to steer their course.'' I could give you the 
exact cite, if you'd like. [Laughter.]
    The universities and content providers must educate well; 
as it is this future generation which will educate the next. I 
look forward to hearing from the witnesses. Thank you, Mr. 
Chairman.
    Mr. Smith. Thank you, Mr. Berman. I liked your quote by 
Aristotle. I don't think you've ever quoted him before.
    Mr. Berman. I have. I have on many occasions, but not in 
this Subcommittee. [Laughter.]
    Mr. Smith. Okay. I won't ask you for the reference for the 
quote, either. But, appreciate your comments.
    Before I introduce our witnesses, would you all stand and 
be sworn in, please.
    [Witnesses sworn.]
    Mr. Smith. Our first witness is Daniel Updegrove, Vice 
President for Information Technology at the University of Texas 
at Austin, where he is responsible for the university's 
information technology. He is also an adjunct faculty member at 
the UT School of Information.
    Mr. Updegrove is a member of the Network Planning and 
Policy Advisory Council of Internet2, and is on the Board of 
the World Congress on Information Technology for 2006. Mr. 
Updegrove previously held positions at Yale University; the 
University of Pennsylvania; Educom; the National Bureau of 
Economic Research; and Cornell University, where he did his 
undergraduate and graduate studies.
    Our second witness is Richard Taylor, Senior Vice 
President, External Affairs and Education, at the Motion 
Picture Association of America. Mr. Taylor joined MPAA in 1995. 
In his current position, he is responsible for forging 
partnerships and strategic alliances on behalf of MPAA, as well 
as increasing outreach to students, teachers, and 
administrators. Mr. Taylor graduated from Brown University in 
1986, with a bachelor of arts degree in history. He has also 
studied public policy at American University.
    Our third witness is Norbert Dunkel, Director of Housing 
and Residence and Education at the University of Florida. His 
primary responsibilities include serving as chief housing 
officer for 9,000 students and their families. Mr. Dunkel 
serves on the executive board of the Association of College and 
University Housing Officers International. He has also authored 
or edited eight books and monographs and over 40 other 
publications on various aspects of campus housing.
    In 2003, his network services staff developed the 
groundbreaking software platform ``Icarus,'' which has 
transformed the University of Florida housing network through 
education and mitigation of peer-to-peer file sharing.
    Our final witness is William Raduchel, Chairman and Chief 
Executive Officer of Ruckus Network, a digital entertainment 
service for universities. Before joining Ruckus Network, Mr. 
Raduchel served as executive vice president and chief 
technology officer at AOL/Time Warner, and as chief strategy 
officer for Sun Microsystems. Named CTO of the Year in 2001 by 
InfoWorld Magazine, Mr. Raduchel has been a professor of 
economics at Harvard University, and holds several issued and 
pending patents. After attending Michigan Technological 
University, Mr. Raduchel received his undergraduate degree in 
economics from Michigan State University, and earned his AM and 
PhD degrees in economics at Harvard University.
    Without objection, your entire opening statements will be 
made a part of the record, but please limit your oral testimony 
today to 5 minutes. And I thank you all, and Mr. Updegrove, 
we'll begin with you.

     TESTIMONY OF DANIEL A. UPDEGROVE, VICE PRESIDENT FOR 
     INFORMATION TECHNOLOGY, UNIVERSITY OF TEXAS AT AUSTIN

    Mr. Updegrove. Good morning, Chairman Smith, Ranking 
Democratic Member Berman, and Members of the Subcommittee. 
Thank you for this opportunity to discuss the University of 
Texas at Austin's approach to reducing peer-to-peer piracy on 
our data network.
    Let me begin by stating that the university is dedicated to 
developing leaders who exhibit responsible and ethical civic 
behavior, whether in the real or virtual world.
    Founded in 1883, UT Austin is the flagship of the 15-campus 
University of Texas system. Of 50,000 enrolled students, 6,500 
reside in campus housing, and approximately 95 percent own 
computers. Already one of the largest U.S. campuses, our ranks 
increased when we welcomed 425 students and 20 faculty members 
displaced by Hurricane Katrina. I can't predict what our 
enrollment will be next week.
    The campus data network, UTnet, links to the commodity 
Internet, Internet2 Abilene Network, NSF TeraGrid, Texas 
Lonestar Education And Research Network, and National 
LambdaRail. UTnet serves 55,000 computers on campus, and 1,300 
wireless access points.
    Management of information and technology resources is based 
upon four principles: respect for intellectual property, 
including its fair use in the academic setting; respect for 
privacy and academic freedom of students, faculty, and staff; 
compliance with law and UT regents rules; and stewardship of 
our financial resources.
    Quoting from our policy:
    ``It is a violation of university policy and Federal law to 
participate in copyright infringement. Copyrighted materials 
include, but are not limited to, computer software, audio and 
video recordings, photographs, and written material. Violators 
are subject to university discipline, including suspension, as 
well as legal liability, even if the work did not contain a 
written copyright notice. It is a violation to use your 
computer to copy, display, or distribute copyrighted materials 
such as software, MP3 files, or MPEG files illegally.''
    This policy is supported by extensive information programs, 
a network bandwidth monitoring system, compliance with the 
Digital Millennium Copyright Act, and campus-wide licensing of 
security-related and other software.
    Our staff conducts a mandatory orientation for freshmen 
before they can obtain IT services. We highlight use policy and 
respect for copyright, which are reinforced by posters and 
screen savers in computer labs focused on risks of illegal 
music sharing.
    This year, we added a streaming video program on IT policy, 
security, and copyright concerns. I welcome the opportunity for 
you to view the video, and will be happy to make it available 
to you.
    While they represent only 13 percent of total enrollment, 
students in our residence halls receive special attention, 
since they are more likely to use network connections for 
recreation. Students pay a fee to access the residential 
network, and their use of external bandwidth is subject to 
weekly limits.
    Our website lists legal alternatives for obtaining music 
and videos over the Internet, including Apple's iTunes Music 
Store, Napster, Ruckus, and others. UT monitors experiences of 
universities that provide blanket access to commercial services 
either at no cost to students or at substantial discounts. The 
no-cost model holds little interest for us, however; as it 
would require either a diversion of scarce academic funds or a 
universal fee imposed on students who may not use the service. 
One or more optional services available at discount would be 
more attractive; although the take-up rate for such services on 
other campuses appears to have been low.
    Monitoring of data traffic is not limited to students in 
ResNet. We have established a set of predicted patterns of 
external network usage, as well as programs to detect unusual 
activity. Substantial traffic into and out of UTnet may be 
normal for key servers supporting research, instruction, and 
administration, but elsewhere could merit further scrutiny. We 
believe students subject to network authentication and 
bandwidth quotas are less likely to engage in piracy and other 
illegal behavior.
    DMCA compliance is entrusted to the information security 
office, which responds within one business day to any 
complaint. First offenders receive a warning, 71 percent of 
which elicit a response and are closed out within 24 hours. 
Close-out requires take-down of any copyrighted material and a 
first-offense official referral to the dean's office. In the 
rare case of a second offense--only eight in the past 14 
months--access is automatically disabled, and a student must 
meet with student judicial services before service can be 
restored.
    Respect for intellectual property at UT is not limited to 
music and video file sharing. The university licenses a broad 
suite of security and other software. And UT's software 
licensing supports copyright compliance, as well, since one 
source of pirated content is insecure computers hijacked via 
the Internet.
    UT and other members of the Internet2 consortium are aware 
of the rogue i2Hub file-sharing system that uses the Internet2 
Abilene network for data transport. This activity is in no way 
affiliated with or endorsed by Internet2 or any of its 207 
university members. At UT Austin any illegal use of i2Hub is 
subject to the same sanctions as other violations.
    Looking forward, UT Austin is critically dependent on 
access to information, computational resources, and 
collaborators around the world. Technological innovation is 
transforming what, whom, and how we teach; the foci and 
methodology of our research programs; and our ability to serve 
society.
    Critical to innovation and service to society, as 
anticipated by the framers of the Constitution, is a balanced 
view of copyright. As the pace of innovation increases, the 
university is committed to participating in this ongoing 
discourse with our partners in industry and Government, to 
maintain the balance. Thank you very much.
    [The prepared statement of Mr. Updegrove follows:]

               Prepared Statement of Daniel A. Updegrove




    Mr. Smith. Thank you, Mr. Updegrove.
    Mr. Taylor.

 TESTIMONY OF RICHARD TAYLOR, SENIOR VICE PRESIDENT, EXTERNAL 
 AFFAIRS AND EDUCATION, MOTION PICTURE ASSOCIATION OF AMERICA 
                             (MPAA)

    Mr. Taylor. Thank you, Chairman Smith, Ranking Member 
Berman, and Members of the Subcommittee, for the opportunity to 
appear here today. I have the privilege of representing the 
member company studios of the MPAA and the hundreds of 
thousands of workers within our great industry.
    I'm particularly grateful that this Subcommittee has 
recognized the pivotal role the university environment can play 
in curtailing theft of movies and other copyrighted works 
online. The U.S. Supreme Court in the recent Grokster case 
cited earlier not only clarified its Sony Betamax decision, it 
voiced a very clear message to users of the Internet: theft of 
intellectual property is wrong; whether it takes place by 
stealing a physical copy from a video store, or downloading it 
in cyberspace. As Justice Breyer said in his concurring 
opinion, ``Deliberate, unlawful copying is no less an unlawful 
taking of property than garden-variety theft.''
    The Members of this Subcommittee are well aware that piracy 
is the greatest obstacle facing our industry. And I'd like to 
use my time today to outline some measures we are taking and 
recommending in order to reduce current online theft levels.
    As mentioned earlier by Ranking Member Berman, we have 
recently had two significant announcements that are reflective 
of our industry's tradition of being at the forefront of 
technology. Along with RIAA, we announced that we've formally 
joined Internet2 as a corporate member. And we plan to 
collaborate with the IT community to develop innovative content 
distribution and DRM technologies. We're excited at the 
opportunities the emerging technologies bring as a means to 
allow more people safe and legal access to movies and 
television programming.
    Earlier this week, we also announced the establishment of 
Movie Labs. This industry-funded initiative will be dedicated 
to advancing the future of distribution by identifying secure 
means of protecting our valuable creative works.
    Now, another essential area of focus for our industry is 
the education community. And in recognition of that, MPAA 
president Dan Glickman recently established a new external 
affairs and education department within our organization, 
dedicated to this mission, which I'm privileged to lead. And 
through face-to-face meetings with university administrators 
and students across the nation, we've begun to identify best 
practices that, when in place, can significantly reduce campus 
network abuse. These practices target four key areas: 
technological measures, the offering of legitimate 
alternatives, education, and enforcement.
    Now, there are innovative and effective technological tools 
available right now, today, that can greatly reduce campus 
network piracy. In Grokster, the Supreme Court found that, 
``there is evidence of infringement on a gigantic scale'' on 
P2P systems. Studies have also shown the prevalence of 
pornography, identify theft, spyware, viruses, and other 
malware, courtesy of these P2P services. And therefore, it 
seems appropriate to restrict illicit P2P access in university 
networks.
    The University of Florida, with Icarus, has impressive 
statistics that show how restricting access to illicit P2P can 
be a tremendous benefit to an institution. I believe Mr. Dunkel 
will be sharing some of those stories with us shortly.
    Other technological options include network filtering, 
which filter out infringing transmissions by matching their 
fingerprints against a master database. Also available are 
bandwidth shaping tools, which ratchet down bandwidth 
allowances for users systemwide or individually, and thus limit 
the volume of uploading and downloading taking place.
    Legitimate services, as the Chairman referenced, can also 
play an important role in encouraging legal activity on campus. 
However, the experience of our friends in the music industry 
has shown the legitimate services can best take root once 
technological measure to block illicit P2P have been adopted on 
campus.
    It's critical that students being prepared for their place 
in society are encouraged to obtain their entertainment 
legally, and not via illegal P2P means. It's also critical that 
colleges and universities clearly and repeatedly inform 
students of the importance of respecting copyrighted works, 
campus policies, and the law.
    Some suggested steps in the area of education include:
    Clear acceptable use policies, easily accessible by school 
network users, not buried several clicks within a site;
    Orientation materials should include information on 
copyright and illegal file theft;
    Parents, through letters and orientation sessions, should 
also be informed of the seriousness of the issue and the legal 
and institutional penalties that await violators;
    Students should be required to take and pass a brief quiz 
reflecting school policy regarding their network use;
    And universities should implement visible, pervasive anti-
piracy campaigns throughout the campus.
    In order to make clear the institutional commitment to its 
policies, enforcement measures must be consistent and 
meaningful. We've found that recidivism is low at those schools 
with well defined and applied enforcement policies. And I would 
add that, while we are encouraging strong enforcement by 
university administrators, we continue to take enforcement 
actions ourselves in order to protect our creative works. A 
prime example is our actions against users of the i2Hub system 
referenced earlier.
    Now, we believe that application in these four areas will 
greatly deter and reduce piracy, while making clear to students 
the universities take seriously this issue.
    I thank the Chairman, the Ranking Member, and all Members 
of this Subcommittee for holding this hearing. I would ask that 
if any Members of this Subcommittee have institutions within 
their district they would like for us to specifically reach out 
to, we'd welcome that opportunity. And the MPAA would also 
welcome an opportunity to return before this Subcommittee at a 
later date, to reexamine the piracy landscape at colleges and 
universities.
    I look forward to answering any questions that you may have 
about this important matter. Thank you.
    [The prepared statement of Mr. Taylor follows:]

                  Prepared Statement of Richard Taylor

    On behalf of Dan Glickman and the companies that comprise the 
Motion Picture Association of America, I very much appreciate this 
opportunity to testify about the film industry's efforts to address 
peer-to-peer (P2P) piracy on university campuses. The livelihoods of 
nearly one million men and women in America are impacted by the film 
and television industry, which entertains millions of consumers every 
day.
    Piracy is the greatest obstacle the film industry currently faces, 
costing our industry approximately $3.5 billion annually due to hard 
goods piracy of DVDs and VCDs alone. Deloitte and Touche estimates that 
approximately 400,000 films are illegally downloaded every day. 
CacheLogic, an Internet monitoring group, has estimated that over 60 
percent of all Internet traffic in the U.S. is attributable to peer-to-
peer usage. In Asia, over 80 percent of all traffic on the web is from 
P2P. Furthermore, well over 90 percent of all the content on P2P 
networks consists of unauthorized copyrighted files.
    In light of these facts, it is important to understand that the 
film industry rests upon a fragile fiscal base. Each film is a massive 
upfront investment with absolutely no guarantee of return. The average 
film costs over $100 million to make and market. Only one in ten films 
recoups this investment through its theatrical release. Six in ten 
films never break even. To recoup the considerable investment required 
to make and market a movie, the film industry relies on foreign 
distribution and ancillary markets (home video/DVD, pay per view, 
premium cable, basic cable, free TV, etc.) to make a profit or break 
even. It is these ancillary markets, especially home video and foreign 
distribution--economic engines that are essential to this industry--
that are most vulnerable to the corrosive effects of film piracy.
    Contrary to the repeated accusations of those who oppose reasonable 
content protections, the film industry has always been in the forefront 
of technological innovation: DVDs represent but one example. This 
tradition is even more important now, and the MPAA is working with the 
technology sector to help move our industry into the future. Our 
consumers have clearly shown a desire for more choices and flexibility 
in their filmed entertainment choices, and in turn the MPAA and its 
member companies are heavily involved in ongoing efforts to create the 
next generation of secure digital delivery platforms to meet that need. 
We recognize that the speeds of transfer so dazzling today will likely 
seem akin to a horse and buggy when new technologies such as Internet2 
become the standard. To that end, two weeks ago MPAA joined Internet2 
as a corporate member. MPAA plans to collaborate with the Internet2 
community to consider innovative content distribution and digital 
rights management technologies, and to study emerging trends on high-
performance networks to enable future business models. We view secure, 
high speed Internet delivery of films as being integral to our 
industry's future, and we are excited by the possibilities this 
collaboration presents.
    In addition, MPAA this week announced the establishment of ``Movie 
Labs,'' a research and development venture that will develop copyright 
management and other technologies to protect against piracy. The future 
of film depends upon the development of innovative delivery 
technologies allowing new, user-friendly business models, and the film 
industry is diligently working to make these technologies a reality. So 
you can see that, while we continue our appeal for others to do their 
part in preventing the illegal abuse of copyrighted works, we are 
appropriately taking the lead in this regard.
    I am particularly grateful that this Committee has recognized the 
pivotal role the university environment can play in curtailing the 
theft of movies and other copyrighted works online. As you are well 
aware, college campuses today harbor some of swiftest computer networks 
in the country and that, unfortunately, has led to a situation where a 
significant level of piracy is taking place around the clock on our 
nation's campuses.
    The MPAA is aware of the critical need to reach out to the 
education community, from elementary school-aged students to university 
administrators, in order to tackle head-on the threat of piracy and to 
stem the disturbing societal trend of illegal activity online by 
students of all ages. That is why Dan Glickman has established a new 
enterprise within the MPAA called External Affairs & Education. This 
new department, which I am honored to head, is dedicated to working 
with educators, administrators and student leaders to affect behavior 
and policy.
    Since the establishment of this new department within MPAA, I have 
been spending a good bit of my time on the road, traveling to a dozen 
campuses and convening face to face meetings with administrators and 
students. Dan Glickman will also be doing a speaking tour of college 
campuses. The chief goal of these sessions has been to learn more about 
what universities are currently doing to address this issue of piracy. 
Truly, we are just at the start of the MPAA university initiative, so 
it is somewhat premature at this point to gauge success. However, as we 
get farther along into it, I would welcome the opportunity to report 
back to the Subcommittee about the successes we do achieve, and any 
ongoing obstacles we face.
    Even at this early stage, however, it is clear that there are a 
range of measures available to universities today that can 
significantly reduce piracy on campus. This emerging set of what the 
MPAA would call ``Best Practices'' provides a roadmap for 
administrators to follow in order to meaningfully impact the problem of 
network abuse and illegal copyright theft. I'd like to use the 
remainder of my time to share with this Committee what we have 
discovered and what we would recommend university administrators adopt 
to impede their students' illegal activity via campus networks.
    Our suggestions focus on four areas in which schools have taken 
action: (i) network filters and other technological measures, (ii) 
legitimate online services, (iii) education, and (iv) enforcement. 
Undoubtedly, education and enforcement continue to be important 
components in any program schools undertake to address piracy. However, 
experience has shown that the offering of a legitimate online service, 
coupled with an effective network technology that decreases or, 
preferably, eliminates illicit peer-to-peer (``P2P'') file-sharing 
traffic, produces the best results for colleges and universities.

                         TECHNOLOGICAL MEASURES

    As you are undoubtedly aware, a significant proportion of piracy on 
campus is occurring through illicit P2P services, which enable 
individuals to copy and distribute millions of unauthorized songs, 
movies, software applications and games. The P2P applications that 
enable this illegal activity, freely available as downloads over the 
Internet, are hugely popular at colleges and universities where 
students have access to extremely fast computing networks.
    In the much-publicized Grokster case, the U.S. Supreme Court 
recently stated that ``there is evidence of infringement on a gigantic 
scale'' on P2P systems, and it has been estimated that over 90 percent 
of the use on these systems is infringing. (Of course, other studies 
have also reported that pornography, including child porn, and identity 
theft are prevalent on such systems.) With such a disproportionate 
amount of illegal traffic on certain P2P protocols (and given the 
threat to network security and individual PCs from viruses and other 
malware), it seems entirely appropriate to restrict the use of these 
illicit P2P systems generally. While prohibiting the use of 
predominantly illegal P2P applications, universities can still protect 
and promote the legitimate use of other P2P applications for research 
and scholarship.
    This approach has already been employed at certain universities to 
extraordinary effect. For example, the University of Florida developed 
Icarus, a network-based system, that can selectively prohibit the 
transmission of any information bearing the signature of an unapproved 
P2P application, and manages adherence to University policies. The 
Icarus architecture supports other capabilities to address the full 
range of security management issues including: viral and worm attacks; 
spyware; and other outbound malicious behavior. All of these can have 
huge effects on the operation and cost efficiencies of the university 
network.
    Some statistics on implementation of Icarus tell the whole story. 
In the first year of operation, there were nearly two thousand students 
that attempted to use P2P systems. They were effectively stopped and 
reminded online through an educational message that such activity was 
against University policy. Only 20 percent tried a second time and only 
2 percent a third time. As new classes of students were introduced in 
the next two academic years, these numbers were reduced by 50% and 80 
percent respectively. Additionally, the school has received no DMCA 
infringement notices since the inception of Icarus. Additionally, last 
year the developers of ICARUS were recognized by the Davis Productivity 
Awards for their work. The awards are part of a government improvement 
initiative in Florida and sponsored by Florida TaxWatch. The awards 
panel estimated that ICARUS saved the University of Florida nearly 
$500,000 by reducing the flow of illicit P2P onto UF computer networks 
and automating the notification process when a violation of policy did 
occur.
    While exceptions can be made for appropriate use of such 
applications, it is not surprising that the school has received very 
few requests for permission to use illicit P2P systems. Indeed, it is 
questionable whether such P2P applications are at all necessary (or 
beneficial) in an academic environment. Faculty and students remain 
able to share and distribute academic material through such secure and 
reliable means as websites, FTP, and email. In addition, there are 
legitimate and licensed P2P networks emerging--such as Penn State's 
LionShare--which are dedicated to, and specially configured for, 
academic environments.
    Should a university not find feasible the implementation of 
programs such as Icarus, MPAA suggests installing a network filtering 
system. Rather than prohibiting all P2P or other applications based on 
a particular protocol, these systems filter out infringing 
transmissions by matching them against a master database. While these 
types of applications are content-based filters, this technology is in 
fact no more intrusive than what most schools are already employing to 
scan for viruses and other malware.
    A third option is to effectively implement a bandwidth shaping tool 
such as Packeteer. Although limiting the resources available for 
infringement is always a positive step, the way such technology is 
being implemented at most schools too often renders the application 
ineffectual. These schools ratchet down bandwidth allowance during the 
peak hours of the day, then provide increased bandwidth at night. While 
this process may indeed reduce infringement to some extent, it 
unfortunately sends the wrong message that illegal file-sharing is 
acceptable--as long as it's done at certain times. This is a minor and 
short-term fix for a much larger and long-term problem. By sanctioning 
such ``windows of infringement,'' schools do little to discourage 
students from engaging in piracy (and, of course, fail to impart a 
sense of ethical behavior and appropriately prepare their students for 
life after college as moral and law-abiding citizens).
    By employing technologies that prohibit infringement-based P2P-
networks on campus or at least make it harder for students to infringe 
on such systems, schools are laying the groundwork for the second 
component of a proven anti-piracy campaign: the successful 
implementation of a legitimate online service on campus.

                       LEGITIMATE ONLINE SERVICES

    Adoption and sign up rates of legitimate online music and movie 
services by students is often highest when the school has first reduced 
the availability of illegal file-sharing, thus developing the thirst 
for legal content. Services and schools alike have reported 
particularly positive results from this staggered approach. (Experience 
has also shown that it may be unwise to implement both network 
filtering technology and a legitimate online service simultaneously, as 
students tend to blame the online service for the cutoff in illegal 
file-sharing.) Without first addressing the illicit P2P problem on 
campus, it is extremely difficult for legitimate services to take root. 
If students have unfettered access to enormous amounts of pirated 
content, no service--regardless of pricing or content offerings--will 
be successful in that environment.
    Overall, the growth of legitimate online services at colleges and 
universities across the country has been exceptional. In the past year 
alone, the number of schools partnering with a legitimate service has 
grown more than threefold to nearly 70. Services such as Cdigix, 
Napster, RealNetworks's Rhapsody, and Ruckus offer students a wide 
array of entertainment content in a fun, safe, and legal way, and help 
to build a sense of community on campus
    Of course, it is true that legitimate online movie services are not 
yet a compelling substitute for the illegal P2P services. Besides the 
little matter of price point, no legal online movie service currently 
has the breadth of selection, new releases, ease of use, and 
interoperability of the illegal P2P services.
    Why is this? Not for a lack of incentive or effort. As for-profit 
enterprises, MPAA member companies have every incentive to tap the 
clear consumer demand for online access to movies. MPAA member 
companies are committed to developing compelling, consumer-friendly 
online movie services, and each one devotes considerable resources to 
this effort. The MovieLabs and Internet2 announcements are just the 
latest evidence of their commitment.
    However, in order to protect their huge investments, our member 
companies must ensure that their services operate in a secure 
environment. Learning from the experience of the music industry with 
its initial rollout of legal services, they also know it is critical 
that the consumer's first experience with a legal service a happy one. 
Thus, legal services must be out of beta and fully ready for mass 
consumer adoption before they are rolled out widely.

                               EDUCATION

    Obviously, education is an extremely important component of any 
anti-piracy campaign. Colleges and universities are in the best 
position to inform students of the importance of respecting copyright 
and valuing the creative effort invested in copyrighted works. Further, 
as creators, developers, and owners of intellectual property 
themselves, colleges and universities have a huge incentive (and 
responsibility) to instill in their students such respect and values. 
The following are some examples of steps schools can take toward 
educating students about illegal file-sharing and copyright 
infringement generally:

          Institute Acceptable Use Policies that clearly 
        outline the appropriate use of school resources. Such policies 
        should illustrate unacceptable behavior, including illegal 
        file-sharing, and provide details on penalties imposed for 
        failure to abide by such regulations. A comprehensive policy, 
        however, is only as useful as it is accessible; administrations 
        should conduct surveys or otherwise ensure that students (and 
        others) are able to find them, including on the school website.

          Include information on copyright, piracy, and illegal 
        file-sharing in orientation materials.

          Inform parents, through letters and at orientation, 
        of the seriousness of copyright infringement and the penalties 
        imposed, both legally and academically, for violations. 
        Encourage them to discuss the risks with their children.

          Require students to pass a quiz about P2P and piracy 
        before allowing access to the school's computing network. This 
        educates the student and provides documentation negating any 
        claim of lack of awareness.

          Engage students by incorporating discussion of 
        illegal file-sharing on school websites and radio stations, and 
        in papers and classrooms.

          Launch pervasive and visible anti-piracy campaigns 
        using posters, brochures, banners, videos, fliers, etc.

          Send students periodic emails directly from the 
        President/Provost/Dean to remind students that the school takes 
        copyright infringement very seriously and to indicate the 
        seriousness of any offense.

    While it is indeed beneficial to offer an in-depth look at 
copyright, P2P, and illegal file-sharing, the first step in any 
educational campaign is to express concisely and unequivocally that 
copyright infringement, through physical or online piracy, is illegal 
and simply wrong. The U.S Supreme Court in Grokster not only clarified 
its Sony Betamax decision, it voiced a very clear message to users of 
the Internet: theft of intellectual property is wrong, whether it takes 
place by stealing a physical copy of a movie from a video store or by 
stealing a movie in cyberspace. As Justice Breyer said in his 
concurring opinion, ``deliberate unlawful copying is no less an 
unlawful taking of property than garden-variety theft.''

                              ENFORCEMENT

    As with any education campaign, it is necessary to ensure adherence 
to rules and regulations through consistent and meaningful enforcement 
measures. The administration should remind students that entertainment 
and other content industries have sought to enforce their copyrights 
through lawsuits against students and other individuals. Students 
clearly are not immune to legal action, and this awareness is reflected 
in the many steps taken by schools to curb piracy on campus, as well as 
in the overall change in attitude of administrations and students 
alike. Yet, there undoubtedly remains a feeling by some students of 
``safety in numbers'' inherent in a nationwide campaign. The threat of 
disciplinary action by schools, however, resonates locally and can 
quickly diminish the sense of security from enforcement (and anonymity) 
mistakenly felt by students.
    We are not suggesting that enforcement is solely the responsibility 
of these institutions. In addition to bringing action against theft 
enablers such as Grokster, our industry has also sued individuals 
engaged in copyright theft. We have also pursued those using I2Hub, a 
pirate file trading network catering exclusively to university 
students. This ``darknet'' system took extraordinary steps to exclude 
individuals from outside of university networks in order to frustrate 
enforcement efforts by rights holders. However, our investigators were 
able to learn a great deal about this phenomenon. For example, on April 
11 at 4:23 p.m. EST, there were 7,070 users connected to I2hub sharing 
99.21 Terabytes of content, enough space for 99,000 movies! As you can 
see, this closed network of activity can inflict a great deal of 
damage. I raise this particular form of piratical activity to 
demonstrate that there are unique areas where we do need the university 
networks administrators to be particularly aware and vigilant. The 
scale and scope of illegal activity within this campus-linked arena is 
significant.
    I would like to add that school-wide Acceptable Use policies 
regarding online piracy and the appropriate use of school resources are 
not merely for the benefit of copyright owners. Such rules and 
regulations, just as with those regarding hacking and other violations, 
safeguard the security and integrity of the school's computing system. 
Illegal file-sharing applications and illicit P2P networks threaten 
such systems with increased bandwidth costs, as well as with malicious 
viruses, worms, Trojan horses, and spyware.
    Students should understand that there are extreme repercussions for 
violation of these policies. Accordingly, schools must be diligent in 
learning of such infractions and in carrying out swift and appropriate 
punishment. Most schools take a tiered ``three strikes'' approach:

          First offense: Remove the offending computer from the 
        network until the student complies with any obligations and 
        understands the repercussions for further violations. Some 
        schools require the student to talk to a University 
        administrator before network access is restored.

          Second offense: Students lose network access for a 
        certain period of time. Some schools are increasingly imposing 
        fines.

          Third offense: Students usually permanently lose all 
        network access privileges and must report to the Dean of 
        Students or Judicial Affairs for formal disciplinary 
        proceedings. While rare, some schools have suspended or even 
        expelled students for third offenses.

    Of course, enforcement measures vary widely from school to school. 
For example, Harvard University has stated that it will terminate a 
student's network access for one year upon a second offense. Students 
at UCLA will be summoned to the Dean of Students after their second 
offense. In any case, experience has shown that recidivism is rare at 
schools with well-defined and strongly-implemented policies.
    It is important to note that the model enforcement policies 
described above only work when a copyright owner is able to find an 
infringement taking place and notifies the university. And, in most 
cases, copyright owners will not be able to find all infringement on 
campus. While setting out and implementing a strict enforcement program 
is important, it is the application of effective technical measures 
that can best stop the vast majority of piracy before it takes place. 
This reduces the burden of processing potentially dozens of DMCA 
notices and directly targets the problem of student piracy on 
university networks.
    We believe strongly that universities taking these measures will 
significantly reduce the level of illegal activity taking place via 
their networks by students under their charge.
    While I know today's session is devoted to a discussion of college 
campus piracy, I think it is worth noting that the MPAA is also working 
diligently to reach and educate students at the secondary school level 
as well as educating parents of school-aged children. We are working 
with well-respected Internet safety organizations such as WiredKids and 
iSafe to raise awareness and understanding of this issue to the 
emerging generation of computer users so that, hopefully, when they do 
arrive on the campuses of this nation, they will be better equipped to 
understand and adhere to the rules of the university and the law of 
this land.
    I thank the Chairman, the Ranking Member and all Members of this 
committee for holding this hearing. I know that if I were to ask anyone 
in this room to name their favorite film, a lively conversation would 
begin. Such is the love of this uniquely American art form and all the 
more reason that we all have a stake in its continued health and 
survival as well as the health of all of the creative industries from 
music to books to software. The stakes are very high, not just for 
those who have the privilege of working within these industries but to 
the overall economy of this great nation.

    Mr. Smith. Thank you, Mr. Taylor.
    Mr. Dunkel.

    TESTIMONY OF NORBERT W. DUNKEL, DIRECTOR OF HOUSING AND 
         RESIDENCE AND EDUCATION, UNIVERSITY OF FLORIDA

    Mr. Dunkel. Thank you, Mr. Chairman, Ranking Member Berman, 
and distinguished Members of the Subcommittee. Good morning, 
and thank you for the opportunity to appear before you today. I 
will provide you information regarding the education of college 
and university residence hall students, stewardship of our 
technological resources, and an update on a very successful 
software program to mitigate P2P file sharing.
    First, I want to take us back just a few years when we 
lived in our college or university residence hall. You will 
remember coming to college with one suitcase, a box, perhaps a 
piece of carpet, a radio--and someone had the typewriter. 
Today, our students are bringing color TVs and stereo DVD 
players, refrigerators and video game systems, desktop 
computers and laptops, along with their Blackberry, iPod, Nano, 
Razor cellphone, and a lot of clothes.
    It is this technology that they use to communicate, to 
study, to receive entertainment, and to research. Today it's 
more important to plug the computer in before they plug in 
their refrigerator.
    We now have over two million students living in residence 
halls on campuses in the United States. One of the greatest 
additions to campus life in recent years is the high-speed 
Ethernet connection and wireless environments. These 
connections are used to support the institution's mission by 
allowing students access to online classes or class syllabi, 
signing up for classes, replaying video classes, and the like.
    We are seeing connection speeds that only seven or 8 years 
ago were the slow dial-up modems, to speeds now at 1,000 
megabits or a gigabit connection. As a comparison with the dial 
modem, it would take a person about 29 hours to download the 2-
hour movie ``Star Trek.'' With a gigabit connection, it takes 
about 6 seconds to download that same movie. Downloading music 
files are inconsequential at that speed. The speed and 
efficiency is tremendous, and will only continue to gain in the 
future.
    In the housing profession, we know we have a captive 
audience. Most of the first-time-in-college students will live 
in on-campus residence halls. We have an opportunity to educate 
our residence students as to the acceptable use of their 
computer and the network.
    We also have a duty to be good stewards in maintaining our 
technological infrastructure. A colleague and I found that 92 
percent of institutions with high-speed connections actively or 
passively educate their students. Some institutions, like the 
University of Delaware, require students to take a responsible 
computing exam before they can obtain a network ID and 
password. The University of Hawaii in Moana has residents sign 
for a handbook accepting responsibility for reading and 
following the rules contained within.
    At the University of Florida, residents register their 
computer online and electronically sign that they have read, 
understand, and will abide by the policies governing acceptable 
use. We know that for some students reading the policies is all 
they'll ever need. These students will accept the policies and 
make no attempt to circumvent policies. For other students, we 
need to be more active in our oversight and education.
    To be good stewards of our technological infrastructure, my 
staff developed software to serve as a new network management 
program. We had to develop this software because the network 
could no longer support the academic needs, due to high peer-
to-peer volume. One tool available through this program 
mitigates illegal peer-to-peer file sharing, while continuing 
to simultaneously educate students; all while maintaining a 
network service free of illegal copyright sharing behaviors.
    Before we turned on the Icarus program on October 1, 2003, 
we were using 85 percent of the upload bandwidth of the entire 
University of Florida pipeline. When Icarus was turned on, we 
immediately dropped 95 percent of our impact on the upload 
bandwidth, because we immediately stopped 3,000 students 
illegally sharing copyrighted music. Perhaps amazingly, we saw 
an increase in download bandwidth, because students were 
migrating to legitimate network sites, such iTunes or streaming 
radio. Since implementing Icarus, we have not received a DMCA 
complaint.
    We wanted first-time-in-college students to understand when 
they arrive on campus and move into the residence hall a new 
level of personal behavior and responsibility on the use of 
their computers and Internet would be expected. Most students 
arrive on campus having unabated access to the network, no 
knowledge that they need to install virus protection; and they 
allow anyone to use their computer with their password. The 
education taking place on campuses stresses that students need 
to take responsibility for their computer and the use of their 
computer.
    With me today is Mr. Rob Bird, the architect of the Icarus 
software platform, and Rob is also available to answer any 
technological questions surrounding Icarus. Thank you.
    [The prepared statement of Mr. Dunkel follows:]

                Prepared Statement of Norbert W. Dunkel

    I want to thank you for the opportunity to appear before the 
Subcommittee on Courts, the Internet, and Intellectual Property to 
provide you information regarding the education of resident students 
and a new approach to mitigating Peer To Peer (P2P) file sharing. With 
me is Mr. Rob Bird the architect of the Icarus software platform.
    There are over 2 million students living in residence halls on 
campuses in the United States. Today, first year students are moving 
into residence halls where suites and apartment style living is 
becoming increasingly available. There exists greater studying and 
recreational facilities; contemporary dining accommodations; and larger 
rooms with more storage to name a few. However, one of the greatest 
additions to residence halls has been the high speed Ethernet 
connection.
    The Ethernet connection in residence halls serves as its primary 
purpose to support the academic mission. Many institutions, including 
the University of Florida, utilize this high speed residential 
connection for on-line classes; accessing on-line services (i.e., class 
registration, room sign-up, ordering class textbooks, etc.); replaying 
video classes; accessing class syllabi; working on group projects, and 
the like.
    We are seeing connection speeds that only seven or eight years ago 
were the slow dial up modems to now 10 MB, 100 MB, or 1000 MB (1 
Gigabit) speeds. As a comparison, with a dial up modem it would take a 
person about 29 hours to download the two hour movie, Star Wars. With a 
Gigabit connection it takes about 6 seconds to download that same 
movie. The speed and efficiency of this technology is tremendous and 
will continue to gain in the future.
    In the housing profession and as a member of the Association of 
College and University Housing Officers--International, we have two 
duties regarding the data connections we provide to students in 
residence halls. First, we have a duty to educate our resident students 
as to the acceptable use of their computer and the network. Second, we 
have a duty to be good stewards in maintaining the technological 
infrastructure that we provide students in the residence halls.

                               EDUCATION

    In educating the resident students, we know many of our housing 
operations across the United States have integrated the academic 
community within the residential setting. Institutions have residence 
halls with live-in faculty, ``smart'' classrooms, faculty offices, 
space for tutoring, space for academic advising, and the like. We see 
science-based (i.e., engineering, math, etc.); education-based 
(teaching, etc.); and fine arts-based (i.e., architecture, dance, 
theatre, etc.) residentially-based academic communities. These types of 
arrangements and others lead to increased grade points for residents, 
increased graduation rates, increased respect for faculty, and 
increased psychosocial development, to name a few. The education of our 
students does not only take place in the classroom environment. The 
classroom environment is now in the residential setting.
    Accompanying the residential academic environment is the need for 
housing operations to assist in the education of resident students on 
acceptable uses of the technology available to them. In an on-going 
study (J. Haynes and N.W. Dunkel, 2004), we have found that of the 
institutions surveyed with high speed connections in residence halls, 
92% actively or passively educate their residents on the acceptable use 
of their computer and the Internet.
    There exist a number of different approaches to this education. The 
information that is shared with residents may be as simple as defining 
terms and providing answers to frequently asked questions. The 
information may provide a general overview of the various aspects of a 
network and computer usage. At the University of Delaware students must 
take a responsible computing exam before they can obtain a network ID 
and password. The exam covers copyright resources, computer security, 
spam and harassing e-mail, bandwidth measurement, and commercial and 
charitable use. At the University of Hawaii in Manoa residents sign for 
the handbook accepting responsibility for reading and following the 
rules contained within. At the University of Florida residents register 
their computer on-line and electronically sign that they have read, 
understand, and will abide by the policies governing acceptable use.
    We know that for some students reading the policies is all they 
will ever need. These students will accept the policies and make no 
attempt to circumvent the policies. For other students we need to be 
more active in our oversight and education.

                         STEWARDS OF TECHNOLOGY

    Housing professionals must be good stewards of the technological 
infrastructure provided to students. The information that follows 
provides a summary of the Icarus software platform developed by Mr. Rob 
Bird.

Introduction
    The University of Florida Department of Housing and Residence 
Education's Mission Statement is to provide well-maintained, community-
oriented facilities where residents and staff are empowered to learn, 
innovate, and succeed. As staff worked to develop a software program to 
mitigate P2P file sharing, discussion continued on how to 
simultaneously educate resident students while maintaining a network 
service free of illegal copyright sharing behaviors. This was a 
daunting task as most first year students arrive to campus having 
practiced P2P file sharing at home during their high school years. 
According to students, during high school years very little education 
on illegal file sharing was provided either by their high school or by 
their parents and student behavior remained unchecked.
    University of Florida housing staff wanted resident students to 
understand that when they arrive on campus a new level of personal 
behavior and responsibility on the use of their computer would be 
expected.

Icarus
    Described as ``an extraordinary success'' (Sherman, 2004), Icarus 
is a massively concurrent, distributed processing engine designed to 
provide the power of collaborative grid computing to the enterprise 
network management and security space. This patent-pending system is 
based on the Java language. The Icarus engine has been built to act as 
an open-standards middleware processor, allowing applications, 
libraries and scripting languages to be harmoniously coordinated 
together to accomplish tasks across the enterprise or federation. It 
has extensive applications in distributed computing, security, 
collaboration and management. By applying this system, a comprehensive 
net has been constructed at the University of Florida to eliminate P2P 
and residential `Dark Nets,' while comprehensively addressing the 
educational needs of the students. In addition, Icarus integrates with 
the University's Judicial Affairs, trouble ticket and network 
management systems, solving all facets of the management problem. 
Icarus is currently licensed to Red Lambda Software (www.redlambda.com) 
by the University of Florida.

Department of Housing and Residence Education Network Architecture--
        Technical
    The University of Florida Department of Housing and Residence 
Education computer network (DHNet) consists of Cisco switching 
equipment, and supports standards-compliant TCP/IPv4-services for its 
residents. The core network consolidates edge switches via Gigabit 
Ethernet connections. Each resident is supplied with a 1 Gigabit 
Ethernet connection, monitored and regulated by Icarus. Virtual LANs 
are deployed on a per-building basis to provide proper segmentation and 
encompass multiple levels of access granularity (Table 1). Specific 
services are subsequently provided to the resident depending on the 
source of access.



Development and Deployment of Icarus
    Beginning in December of 2002, the Department of Housing and 
Residence Education Network Services group initiated the development of 
a system to automate the enforcement of its computer security policy. 
The system that was created was known as Icarus.
    Icarus was designed to meet three primary design goals. First, to 
create a fully-distributed processing framework that allows for the 
collection of information from a variety of disparate sources so that 
the data can be evaluated and acted on in a unified fashion. Second, to 
create a system that allows for the real-time identification, 
containment, and education of managed network users while striving to 
minimize the impact on their academic use. Third, to contribute to the 
community software environment through the advance of internet 
standards and technologies using BSD and GPL-style licenses.
    Initial development of Icarus focused on three core tasks. First, 
it was necessary to build a system for identifying users and tracking 
hardware movement within the network while allowing for the flexibility 
required of a residential system. The initial system comprised three 
levels of access, and did not include a registration process for 
residents. While this system was adequate for private residence port 
authorization, it did not adequately support the use of public access 
ports, accommodate Icarus' protection on wireless networks, or provide 
a way to handle the containment of security outbreaks. This solution 
was also deemed inefficient due to its heavy reliance on SNMP. Later, 
this system was expanded to ten levels of access to address these 
additional operational requirements, and moved to leverage VMPS for 
superior access management. At this time, the Icarus team released the 
first database-backed VMPS server to the open-source community. User 
registration was also added to more positively establish authorization 
without the use of network logon technologies, which are often 
cumbersome in ``always-on'' residential environments. Second, 
development was focused on containing P2P application use as an example 
of Icarus' ability to detect and react to complex network management 
situations. By combining data from a variety of tools, it became 
possible to take an automated multi-factor approach to application 
recognition. This approach allows Icarus to detect so-called ``secure'' 
encrypted P2P applications, and quickly react to both changing 
applications and policy requirements. This flexibility is accomplished 
by removing the reliance on a single application or appliance's ability 
to fully identify and contain unacceptable P2P use, virii, malware and 
other security challenges. Third, development was focused on creating 
an extensible GUI interface to allow the management of large Icarus 
`clouds' or collections of cooperating Icarus peers. This system makes 
full use of open standards, and supports a federated management 
architecture to allow organizational collaboration without exposing 
organizational concerns.

                     EDUCATION OF RESIDENT STUDENTS

    The education of resident students takes place passively and 
actively. The passive educational program includes:
    (a) Distributing an acceptable network use brochure during the 
check-in process. This brochure contains information on the overview of 
the housing network; the fact that housing aggressively enforces its 
ISP policies; briefs the student on servers, copyrights, and the 
Digital Millennial Copyright Act (DMCA); provides information on the 
housing network monitoring and service restriction process; provides 
answers to frequently asked questions; and information on how student 
computer behavior is a part of the University of Florida Student Code 
of Conduct.
    (b) The placement of informational stickers by each housing data 
port. These informational stickers provide instructions to resident 
students on how to register on to the housing network.
    (c) The residence hall staff have participated in a training 
session prior to student check-in. This training session provides them 
basic information to be able to answer many of the student questions 
regarding the housing network.
    (d) The UF DHNet web site contains all the information regarding 
HRE Network Services. Students can read the information prior to their 
arrival at the University of Florida to understand what is expected and 
necessary when they register on to the housing network.
    The active educational program designed by HRE is powered by ICARUS 
and supported by the UF DHNet and HRE websites. When Icarus detects 
user activity deemed unacceptable by policy, an appropriate series of 
actions are performed. In the case of a violation of the HRE P2P 
policy, for example, the user in question is sent a notification pop-up 
message to their machine, a notification email to their official 
University email account, and all the computer systems owned by that 
resident are promptly restricted to campus-only network access (Table 
2). This restriction is in effect regardless of where the resident 
physically goes within the HRE network, preventing abuse by those using 
public access ports. Simultaneously, an entry is created in the DHNet 
violation system, HAMMER. A snapshot of the user's activity, including 
all evidentiary data, is then added to the database, and correlated 
with past violations (if any). Residents are required to then visit the 
DHNet website in order to restore their access. When the resident 
visits the website with any of their computers, the page automatically 
recognizes them, and presents the resident with the list of violations. 
Instructions are provided for remedying each violation, and then a 
violation-dependent policy presentation is provided. Student violators 
are then presented with the terms of their restriction. It should be 
noted that the time counter for restriction does not officially begin 
until they have signed the on-line form with their University ID 
(access was still restricted before, however).



Residents who ignore the restriction, and take no action, automatically 
have their network access terminated after 10 days.
    Similar action scenarios exist for a variety of situations, from 
virus/worm quarantining, to the active notification about available 
operating system patches, to the active control of malicious activity.

                            IMPACT OF ICARUS

    The impact of Icarus on P2P usage, and more importantly, behavioral 
trends, has been immediate and profound. The recidivism rate and first-
offender rates have dropped dramatically, and exhibited a downward 
trend, despite an increased number of residents over time, and the 
impact of mass quarantines due to Internet worm outbreaks. Furthermore, 
fewer residents even attempt to use P2P applications, showing Icarus' 
unique ability to sidestep the `P2P arms race' and change students' 
perception by consistently integrating comprehensive education with 
enforcement (See Table 3).



    We are pleased to provide you with this information. Housing 
professionals do have a responsibility to educate resident students on 
the acceptable use of their computers and the network. There exists 
numerous opportunities for students to use technology with legitimate 
purposes. Educating students to these purposes is part of our 
responsibility and stewardship.

                               REFERENCES

Haynes, J., & Dunkel, N.W. (pending). P2P resident education in the 
    United States.
Joachim, D. (2004, February 19). The enforcers. Network Computing, pp. 
    40-54.
Sherman, Cary, President, RIAA (2004, September 3). College and record 
    executives tell Congress steps to curtail music piracy. Chronicle 
    of Higher Education.

    Mr. Smith. Thank you, Mr. Dunkel.
    Mr. Raduchel.

TESTIMONY OF WILLIAM J. RADUCHEL, CHAIRMAN AND CHIEF EXECUTIVE 
                    OFFICER, RUCKUS NETWORK

    Mr. Raduchel. Thank you, Mr. Chairman, Ranking Member 
Berman, other Members of the Subcommittee. On behalf of our 
employees, investors, content and distribution partners, and 
the creative talent to whom we pay royalties, I thank you for 
the opportunity to be here today to talk to you about the legal 
market for music and media services in campuses.
    In the last year, we've seen a marked increase in demand 
from institutions. It's gone from trial to adoption. Schools 
are buying this as a regular part of their operation. Where the 
institutional support has included a blanket purchase agreement 
so that all students have access to the service from the 
beginning, we've generally been able to get adoption rates over 
60 percent, some as high as 85 percent. But where the schools 
have chosen instead to tell the students that they must opt in 
for the service on an elective basis, the entire industry has 
faced significant challenges in getting students to move from 
what they call the ``free model.''
    Music and movie downloading is not just about an individual 
activity. It's also a community activity that is very much 
about sharing and expressing preferences with other students. 
The experience is therefore a lot richer when all the students 
are there from the beginning as part of the community; and less 
rich when the students have to join one by one, and the first 
students do not see much of a community, obviously, because 
there aren't many people there.
    As you reported in the report that you read in your initial 
remarks, Mr. Chairman, there has been a great increase in the 
number of schools.
    [Sound of buzzer.]
    Mr. Smith. You can ignore that.
    Mr. Raduchel. Ignore that? Okay. Our investors have 
invested more than $20 million in capital. Our students now 
have access to over 1.2 million tracks of music, which is about 
what's available legally, and a bouquet of video content that 
changes daily. Subscribers can take the music on portable 
players, as long as they are the right form. And we just added 
an exciting roster of films and TV from Warner Brothers, one of 
the members from the MPAA.
    So we've been getting support from lots of quarters. We 
found a path to let students share both their experience and 
their preferences among each other. They want to share their 
media with friends. They want to use people as the way to find 
media, because in a 1.2 million track library searching for a 
title isn't nearly as interesting as seeing what you like, or 
the person next to you likes, or your neighbor down the hall. 
So we've tried to support that along the line. We've tried to 
understand student behavior.
    But we all face four major obstacles in the legitimate 
services area. Two years ago, our research showed that students 
arrived on campus and learned about file sharing in the first 
week. It happened very quickly, but it happened on campus. 
Today, with much greater penetration of broadband and with 
faster computers and bigger hard drives, students frequently 
arrive on campus today with their music library already built 
up illegally, and frequently with a portable player already 
filled with that illegal music. Obviously, that creates a 
challenge to start selling them a legal service once they 
arrive on campus.
    Secondly, as the report you mentioned in your opening 
remarks cited, more and more of the file sharing now occurs 
within the campus, rather than to the campus from the Internet. 
The Hartford Courant had an editorial recently we think we 
copied, which was talking about, with anonymous interviews, how 
students use DirectConnect, myTunes, Redux, and ourTunes to 
copy music on the campus. We attached an editorial from the 
Diamondback at the University of Maryland about what students 
do there. So the copying has moved onto the campus, and it's 
much less, I think, to and from the Internet.
    When subscription music libraries number in the thousands 
of tracks--and that's what the students have--the only economic 
option that's viable is a subscription service for $15 a 
semester. That, students can contemplate. Buying 5,000 tracks 
is something students are not going to go do. But there are 
technological restrictions that make subscription services 
feasible [sic].
    At one of our schools, the school mistakenly identified us 
as the reason that they blocked peer-to-peer with a service 
similar to Icarus. Our employees on campus that day had to turn 
their teeshirts inside out and leave the campus, because they 
were being abused so strongly by other students. The students 
do not like restrictions. They want this content, you know, for 
free, without restriction; which I guess anybody could want. 
But opinion is not yet there.
    And finally, as has been discussed at earlier hearings, 
there's a lot of complexities about getting content. It's very 
hard to explain to a student why a song is only available for 
subscription download, is not available for permanent download, 
or was available last week but isn't there this week. I 
understand all the reasons for it. I've been there. But the 
fact is, it makes it very hard to market legitimate services 
against all of that complexity.
    How can Congress help? I think there are two things that 
Congress can do. The first is, I believe Congress should look 
at creating a criminal and civil safe harbor for universities 
that get legitimate services operating on their campus, against 
the copyright liability they share, for the internal copying 
that occurs on those networks. This would do two things. This 
would reward the universities with immunity that are driving 
for legitimate adoption, and it would put on notice the other 
institutions that are not.
    And secondly, as you discussed, I believe modernizing the 
music laws is really critical to making online services 
successful. It's just to hard now, and there's too much 
complexity in getting it done.
    Thank you very much for the opportunity to be here today.
    [The prepared statement of Mr. Raduchel follows:]

               Prepared Statement of William J. Raduchel

                              INTRODUCTION

    Mr. Chairman, Representative Berman, and Members of the 
Subcommittee:
    On behalf of Ruckus Network's employees, investors, our content and 
distribution partners, and the creative talent to whom we pay 
royalties, thank you for the opportunity to speak with you today about 
the emerging college and university market for legal online music and 
media services. Thank you also for your attention to this marketplace, 
because without the subcommittee's vision I'm not sure that campus 
leaders and industry would be collaborating so intensively to educate 
students about the value of America's creativity, and to promote means 
of simultaneously enjoying and respecting creators and their work.

              STATE OF THE LEGAL DIGITAL MEDIA MARKETPLACE

    Formed in 2003 by two graduate students, Ruckus quickly developed 
strong partnerships with media companies of all kinds and attracted top 
technical talent to put together an innovative product. Like all 
industries that promote and serve transformative dynamics, Ruckus and 
our competitors in the industry have hit speed bumps along the path to 
success, but in the last year we have seen a marked increase in demand 
from institutions. Where institutional support has included a blanket 
purchase, we have been able to gain significant adoption, in excess 
generally of 60%. However, where schools have chosen an ``opt-in'' 
model, where the students have to individually adopt and pay for the 
service, we, and we understand our competitors, have all faced 
significant challenges in moving students away from what they call the 
``free'' model.
    For this demographic, music and movie downloading is not just an 
individual activity: it's a community activity that is very much about 
sharing and expressing preferences with other students. To that end, 
the experience is much richer when there is critical mass of people 
using the service and getting the full benefit of it (e.g.; legal 
filesharing and social networking). By definition, we can offer these 
services only among subscribers. So it becomes clear that where there's 
critical mass--e.g., at blanket purchase schools where it is available 
to everyone--there is quicker adoption and therefore a greater 
experience because there is a real community behind it.
    The good news is growing demand from colleges and universities. 
Last year, our industry served tens of colleges and universities, but 
mainly on a trial basis. We see more favorable articles about our 
industry in the media, and perhaps most importantly, administrators 
from schools are calling us to ask for sales information. I think all 
of the legal digital media services would agree there has been growing 
interest in the market over the past year.
    Our investors have invested more than $20 million in capital so far 
and will invest more. Our students have access to over 1.2 million 
tracks of music and a bouquet of video content that changes daily. 
Subscribers can take their music with them on any compatible Microsoft 
Plays for Sure subscription music players. We added an exciting roster 
of films and TV content from Warner Brothers and a unique partnership 
with Audible, offering price breaks on audio books for our subscribers. 
In short, there has been significant growth in the content we're 
offering our customers.
    And Ruckus has found a path--technically--to deliver that content 
in a style that is much more in keeping with the way students want it. 
Specifically, they want to share their media with friends and use their 
friends to find media. When you think for a moment about how 
unrealistic it is to search or browse a million plus track library, you 
quickly understand why many students prefer searching by people more 
than by song. Ruckus customers can send playlists to friends, make 
media recommendations, and broadcast to the campus their personal 
tastes. This is very motivating for this demographic. Finally, we added 
the capability to quickly share music inside the dorm on the university 
network--legally.
    Today, I believe the industry is making progress in balancing the 
needs of consumers with the needs of artists and the respect required 
of copyright law. And I believe the marketplace is beginning to realize 
the importance of this balance.
    However, all legitimate services continue to face major obstacles. 
Two years ago, our research showed that students learned about ``file 
sharing'' when they arrived on campus. Today, increased broadband 
penetration at home and much larger harddrives on ever cheaper 
computers means that students frequently arrive on campus with their 
music library already built and often a portable player. Persuading 
them to change to legitimate service is clearly a greater challenge.
    In addition, more and more file sharing now appears to happen 
inside the university network where it is very difficult to both detect 
and block. The Hartford Courant covered this in depth just a few weeks 
ago. Software such as DirectConnect, myTunes Redux and ourTunes allows 
students to easily copy music on their campus network. It is this 
functionality we recreated legally within our service.
    When student music libraries number in the thousands of tracks, 
only subscription services seem economically feasible as a legitimate 
alternative for students on student budgets. However, the technological 
usage restrictions and controls required to make it economically viable 
for the music owners are greatly disliked. And our usage restrictions 
can have other unfortunate impacts. At one of our schools last year, 
when the school mistakenly identified us as the reason for their 
separate action to block peer-to-peer services on their network, our 
employees had to turn their t-shirts inside out to avoid further verbal 
abuse. We have pushed these limits as far as we know how, but we still 
cannot support all portable players or allow students to mix or mash 
the music. A June 16 editorial (attached) in the University of Maryland 
student newspaper complaining about one of our competitors--but in 
truth they could have same complaints about us--shows well where much, 
maybe most, student opinion lies.
    Finally, all legitimate services face constraints and complexity in 
obtaining content. It is very difficult to explain to a student why a 
song is not available at all or is only available for subscription or 
purchase download but not both, or is not available today but was last 
week. There are complex legal--or music publishing legal--reasons for 
all of these, but they confuse students and encourage them to rely on 
illegal sharing. Moreover, there is a lot of so-called gray content (a 
recording made by someone at a live concert, for example) that is 
unavailable on legitimate services. In fact, Congress recently enacted 
severe criminal penalties for sharing prepublication copies of 
copyrighted works, precisely the most sought peer-to-peer content.

                         HOW CAN CONGRESS HELP?

    I have been a student, graduate student, teacher and administrator. 
After leaving the university, in my business career, I have been on 
both sides of the technological progress versus copyright protection 
debate. As a citizen, I find it frightening that we are raising a 
generation with so little respect for fundamental intellectual property 
rights. A friend of mine, a senior university administrator, was widely 
attacked on his campus for observing that students who illegally 
acquired media were but a small step away from plagiarism, but he was 
right.
    Congress should consider creating a civil and criminal safeharbor 
for colleges and universities for filesharing inside their networks for 
those institutions where 80% or more of the students utilize legitimate 
music and movie services. No institution can police all of its students 
all of the time, but institutions that achieve meaningful adoption of 
legitimate services should be rewarded with immunity. At the same time, 
those institutions that knowingly tolerate widespread filesharing on 
their networks should continue to be on notice that it must stop.
    Congress must modernize music licensing laws to make it easier for 
services such as ours to offer students legally what they want. Your 
hearings have demonstrated this need; it is now time to legislate a 
solution. And device interoperability, as you know, remains an obstacle 
for legal digital media subscription services to compete effectively.
    On behalf of Ruckus and the many other stakeholders in our 
industry, we want to express our appreciation to the Committee for your 
determination to allow legal digital media services to compete fairly 
in the marketplace.
    Thank you.

                               ATTACHMENT



    Mr. Smith. All right. Thank you, Mr. Raduchel.
    Before I begin my questions, let me announce--because it 
will indicate to our witnesses and to the audience how serious 
we are about trying to reduce piracy on campuses--and that is 
that in the next few days Mr. Berman and I will be signing a 
letter to the Government Accounting Office asking them to 
conduct a study of all the major universities and colleges in 
the United States; and not just studying to see what their 
progress or lack of progress has been in regard to reducing 
this piracy, but I actually want them to rate the colleges and 
universities.
    I don't know if it will be a letter-grade or if it will be 
a word rating. But I want to move forward with that, so that we 
can increase the scrutiny and increase the public attention to 
the piracy that occurs on campuses today.
    As I mentioned earlier, we're making progress, but I want 
to quantify that progress over the course of the next several 
months.
    Mr. Updegrove, let me direct my first question to you. And 
this really is a follow-up on our earlier conversation before 
the hearing began. I had asked you if the University of Texas 
was able to sort of quantify their progress. You said it had 
been modest, but at the same time successful. And would you 
elaborate a little bit on how the University of Texas imposes 
sanctions? You mentioned the one, two, and three strikes. And 
just very quickly describe that to us.
    Mr. Updegrove. We have a three-strikes policy at UT. In the 
case of a first offense, a permanent record in the student 
judicial services; in the case of a second offense, service to 
the network is automatically disconnected and an in-person 
visit is required with student judicial services. And frankly, 
we have never had a third offense. We've had only 8 second 
offenses in the last 14 months.
    Mr. Smith. It sounds to me that would not be modest 
progress; it would be substantive progress, if you've had no 
third infractions.
    Mr. Updegrove. Well, I should confess that when I talk to 
my colleagues around the country, third offenses are very, very 
rare. We believe that there is a prevailing sense that file 
sharing on the Internet is anonymous, voluminous, and therefore 
safe. And I think it comes as quite a surprise to people who've 
been doing it when their identity is revealed and when it's 
clear that the Internet is not--the Internet, properly managed, 
is not an anonymous haven for this kind of behavior.
    Mr. Smith. A quick follow-up question. Are you satisfied 
with the progress that you're making at UT? Or would you 
consider an Icarus type program? Or do you think you've got 
sort of what you need in place that over time is going to yield 
the results we want?
    Mr. Updegrove. We think that we have an appropriate balance 
between controlling the costs of network provision, the 
behavior on the network, and respect for the privacy of our 
users. I mean, we think we could eliminate student parking 
tickets if we banned cars, but we don't think that we want to 
go that far. We think that an education program, a very well-
enforced policy, and bandwidth management takes us as far as we 
wish to go.
    Mr. Smith. Okay. Very good. Thank you.
    Mr. Taylor, you made it clear what you want universities 
and college officials to do, as well as students to do. Would 
you elaborate a little bit more on what MPAA itself is doing, 
both in regard to bringing lawsuits, and so forth?
    Mr. Taylor. Well, as Members of this Subcommittee are 
aware, we have begun a number of actions against both end-
users, individual end-users, as well as entities who are 
building business models around providing unauthorized access 
to our copyrighted works. We'll continue to enforce these every 
step of the way. As I mentioned earlier, we're also looking for 
better ways to protect our works in technological means, to 
make it more difficult to rampantly borrow, steal, our 
material.
    But I think it's also worth noting--and I neglected to in 
my opening remarks--to say that we recognize that by the time 
students get to the university campus there are some behaviors 
that are, unfortunately, well ingrained with regards to illegal 
activity online.
    So part of what we're trying to do at the MPAA is work with 
respected educational organizations to reach kids at an earlier 
age, trying to modify behavior before they get to the college 
campus. We're working with ``Wired Kids,'' for example, a well 
known Internet safety organization which now includes piracy as 
what they call their four ``Ps'' of concern in Internet safety: 
privacy, pornography, predators, and piracy. They all go 
together.
    And we're also working, we'll have an announcement shortly 
with a nationally known education in-school organization to 
help bring this topic to the forefront for principals, 
students, teachers, and parents of younger children.
    Mr. Smith. Mr. Dunkel testified a minute ago that you can 
download a movie now in 6 seconds. Have you seen an increase or 
decrease in the illegal downloading of movies just in the last 
few months? I mean, is there any trend that's evident yet?
    Mr. Taylor. Well--Well, we have this summer. Thankfully, 
when folks are not on campus there is a down-tick in the levels 
we're seeing. We've also adopted increased ability in our 
ability, however, to monitor the landscape. And we are getting 
regular reports, and we're about to have a new report 
internally that we'll be evaluating. But sadly, the trending is 
up. We're monitoring that landscape very regularly and 
prioritizing which institutions to go to accordingly.
    Mr. Smith. You'll be able to compare this fall, say, to 
last spring. How does last spring compare to the fall before 
that? Do you know?
    Mr. Taylor. Sadly, it's on the uprise. As it becomes faster 
and easier to do, unfortunately, the behavior continues.
    Mr. Smith. A lot of work to do.
    Mr. Taylor. Indeed.
    Mr. Smith. Okay. Very good.
    Mr. Dunkel, let me squeeze in a last question for you. I 
happen to think Icarus is a great technological solution. And 
either you or your colleague who is here, who developed it, can 
respond to this question. And that is, it seems like such a 
great solution; why is it more colleges and universities are 
not using it? Is it just limited to the University of Florida, 
or is it more widespread use than that?
    Mr. Dunkel. Certainly. It has everything to do with where 
the product is in the pipeline, and the availability to private 
and public entities. The company currently is identifying the 
last of two Beta sites, and we're finalizing venture capital 
for implementation teams on those sites. So within about 30 to 
60 days after those sites have been able to use the Beta, then 
we'll make that product available. So within a handful of 
months, it'll be available to the open market.
    Mr. Smith. But it's just not available now.
    Mr. Dunkel. Right.
    Mr. Smith. Authority is almost experimental, then?
    Mr. Dunkel. Correct.
    Mr. Smith. Okay. And you would expect widespread use, or at 
least greater use?
    Mr. Dunkel. We've had over 200 institutions express a 
strong interest in the product.
    Mr. Smith. Wonderful. I'm not endorsing it. I can't do 
that. But it sounds like a great product to me. Thank you all.
    Mr. Berman is recognized for his questions.
    Mr. Berman. Thank you very much, Mr. Chairman.
    I wanted to just make sure I understand. It's Mr. Raduchel? 
I thought I heard you say during your testimony or in response 
to a question that these days, in terms of college students, 
most of the music they're obtaining illegally is coming from 
the universities' own internal networks, rather than the 
Internet. Did I hear you right?
    Mr. Raduchel. Correct.
    Mr. Berman. Thank you. You also mentioned that where 
institutional support included a blanket purchase, we have been 
able to gain significant adoption, in excess generally of 60 
percent.
    Mr. Raduchel. Sharing is a community experience. So if you 
don't have everybody in the group, coming in and selling just 
one service, you can't share any of that music. But if 
everybody is in the group, then the kids can share the music 
among themselves.
    Mr. Berman. I'm curious why it's only 60 percent in that 
situation.
    Mr. Raduchel. Well, this is where it----
    Mr. Berman. It doesn't cost them, right?
    Mr. Raduchel. It doesn't cost them. We've gotten as high as 
85, at a school were the president committed to ethics and 
said, ``I want my students to be ethical.'' But some kids 
cannot be weeded away from illegal, or they've already built 
up--they've already got their libraries. Freshmen are easier to 
switch than seniors. But we haven't been able to get above 60 
to 70 percent, in general.
    Mr. Berman. Okay. Mr. Updegrove, what can Internet2 do to 
prevent the network from being hijacked by pirate services like 
i2Hub?
    Mr. Updegrove. Internet2 is a passive transport, and the 
end component of Internet2 are the 207 institutions. And so I 
think it's incumbent upon all of us who share the benefits of 
Internet2 to adopt the four-part strategies that were outlined 
here: education; bandwidth management; strong policy 
enforcement; and when appropriate, offering a sound commercial 
alternative.
    Mr. Berman. And that implementation will deter or prevent 
the hijacking?
    Mr. Updegrove. Prevention is a difficult challenge, as I'm 
sure you know, Congressman. The Internet protocols are open. 
There's an enormous amount of technical innovation occurring 
monthly, weekly, and daily on the Internet. There is, frankly, 
a worldwide ``whack-a-mole'' challenge going on, with new 
protections built one day and new work-arounds built the next. 
So it's difficult for us to guarantee that we can prohibit 
illegal behavior. But we're all committed to working on it.
    Mr. Berman. Mr. Dunkel, you mentioned that using the Icarus 
program has saved the University of Florida money in the long 
run. Would it be difficult or costly for other universities to 
implement Icarus on their campuses?
    Mr. Dunkel. It would not. First of all, it saved the 
University of Florida about a half a million dollars in 
unnecessary infrastructure improvements. It saved our 
operation----
    Mr. Berman. Because of the reduction of band using?
    Mr. Dunkel. Right. Absolutely. It saved our operation about 
$2 million. We were able to delay our infrastructure 
improvements and, during that delay, the cost of that equipment 
came down $2 million. That was important.
    This is a very easy application for other institutions. 
It's an application where institutions do not have to buy 
additional equipment. It can be installed on the equipment that 
they currently have.
    Mr. Berman. Thank you. And once again, Mr. Raduchel, your 
testimony points to issues such as the complex music licensing 
scheme--ah, yes--as one of the barriers to entry with students. 
We're working on that, sort of. And what are some of the 
impediments to providing students with access to movies?
    Mr. Raduchel. Movies, we just did a deal with Warner 
Brothers which was truly revolutionary in terms of the pricing, 
giving students, you know, access to movies. But we have to 
be--the windows that exist, of course, for movie release force 
us to 3- and 4-year-old movies, rather than current titles. 
Again, it's trying to match--we're competing against free. So 
$20 a semester is all we think we can charge students and get 
widespread adoption.
    So now we have to get the movie industry to believe that 
$20 a semester, shared with them and with all the other costs 
along the way, makes for an attractive proposition. We got one 
studio to go along and believe that that's important, to try to 
get students attached and attracted to having subscription-
based movies. But that's certainly--I mean, the movie industry 
licensing, as you know, is complex, as music.
    Mr. Berman. Thank you very much. Thank you.
    Mr. Smith. All right. Thank you, Mr. Berman.
    The gentleman from California, Mr. Issa, is recognized for 
his questions.
    Mr. Issa. Thank you. Mr. Raduchel, I guess, if I heard you 
correctly, you're trying to compete with free. Because you're 
saying that when the students have to opt in and pay, they 
don't choose it; and when the university absorbs substantially 
the cost, 60 percent participate. Did I hear that right?
    Mr. Raduchel. Roughly, yes.
    Mr. Issa. Okay. One of my challenges is, I don't think that 
you compete with free and just shift the cost to somebody else, 
whether it's the university or not. Because in real life, 
students are going to leave and it's not going to be free any 
more. So that's one of the challenges that this Member faces.
    The other one, I guess, is, although I would love to have a 
$20-a-quarter, or a $50- or $60-a-year annual cost of unlimited 
movies, it's not very American to say that the value of ``Star 
Wars''--which, by the way, cost me $2.50 in Russia--in Russian. 
I know you haven't released it in DVD yet, but it is available. 
And I think I paid retail. You know, I don't want to tell them 
what the price is.
    So I guess Mr. Taylor, representing the studios, is there a 
number that we're starting to get to for subscription that 
could provide substantially all of the catalogue--the backlot 
catalogue, if you will, not the recent releases, but sort of 
the basis of everything that's ever been on TV? Is that 
something that is foreseeable, as you see it, coming out of the 
industry? And I guess I'd direct it to both of you, because one 
is a buyer and one represents----
    Mr. Raduchel. That is what Warner Brothers gave us. So the 
backlog of titles we have available at a very attractive price. 
So that they do have--you know, there is that. New movies, cost 
money. New movies, you're going to have to pay on a pay-per-
view basis.
    Mr. Issa. Right. But that's one large studio--and granted, 
a large library. But I guess, do you expect to see several 
other major studios able to bring that together to where you'd 
have the entire library.
    Mr. Raduchel. We're talking to a second big one now. And we 
hope, if we get that one, we can get a third, and to get more 
people onboard.
    I want to say that in most of the blanket-purchase schools, 
the student government has agreed to the charge. So there is a 
charge. It is a collective charge. But it has been done with 
the students' support. And so that does go into the student 
fees. So there is an increase in fees that the students see, 
and they do vote for it.
    This is not something that's been imposed, in general, by 
the administration. So when I talk about blanket purchase, it's 
because the students have agreed to go along that way.
    Mr. Issa. I guess I'll follow up before I go to Mr. Taylor. 
When you have--I don't know--nine libraries put together, if 
Warner Brothers were the model----
    Mr. Raduchel. Right.
    Mr. Issa.--and their contract with you is none of my 
business, but if you were to look at it, the unsubsidized 
amount, the amount to the public--because although today it's 
dealing to a great extent with universities and peer-to-peer, 
ultimately the question is if everybody that wants to be able 
to both have movies to see, download, and put on their Digix 
players--which are now going to be very available for Christmas 
and so on--wanted it, what is the subscription fee that you 
think we would get to? You know, sort of forecasting your 
business model to the entire United States.
    Mr. Raduchel. In range, I would say $10 a month for back 
title. The rates we pay are approximately the same rates that a 
broadcast television station would pay per head for putting a 
movie up to be seen over broadcast television. So it's not that 
we're way off scale. I mean, we're paying roughly the same that 
a broadcast television station would pay for that same movie.
    Mr. Issa. Okay. Mr. Taylor, how do you view this emerging 
technology, particularly as it gets past the university?
    Mr. Taylor. Well, I would just note that, as a for-profit 
enterprise, you know, the MPAA member companies have every 
incentive in the world to provide and take advantage of these 
new digital delivery means. And I know our member companies are 
committed to developing new delivery systems and taking 
advantage of those that are emerging.
    That said, like with any business enterprise, we have to 
make sure they can operate in a secure environment. So they're 
making, you know, business decisions studio by studio. We just 
heard about Warner Brothers' recent development. I have no 
doubt our other member companies are looking at the landscape 
and figuring out how best to take advantage of it.
    The name of the game, when we make a movie in Hollywood, we 
don't make it just to show on the studio lot. The more folks 
who can see it, paying a fair and reasonable price, obviously, 
the better. So we're as excited as anyone by the new 
technologies that are emerging. And that's one reason we've 
established things like Movie Labs and joined up with 
Internet2, so that we can be at the forefront of that movement.
    Mr. Issa. Okay. And just one follow-up, and this can be 
done for the record. I mentioned the Digix products that are 
coming out, players, en masse for Christmas. I mean, this is 
going to be the first year in which there will be--every 
Circuit City, every Best Buy, and loads of others will all have 
a large amount of hand-held products. Do you, Mr. Taylor, think 
that any of these models are arriving just in time to 
facilitate the legitimate use of these products? Or are they 
going to take you where MP3 players such as the iPods and so on 
took the industry of music?
    Mr. Taylor. We'll put on our optimistic hat, and know that 
as we continue to work very hard to secure our works and 
identify business models as an industry that can work, these 
are the type of devices as they come on, provided they respect 
those protections, that can be a great benefit not just to the 
industry but to the consumer.
    I can look back in recent history at the DVD model. The 
film industry was the leader in the development of the DVD. And 
there are reasonable content protections on those discs, each 
of those discs.
    And when people hear the term ``content protection,'' a lot 
of, you know, people's hair stand up. But what did the content 
protection do? It unleashed an avalanche of titles into the 
marketplace; it provided a DVD player that respects those 
protections; and it led to the most successful new product 
introduced in the consumer electronics enterprise.
    And most of all, most importantly, consumers were the great 
beneficiary of those reasonable protections, because now 
they're building personal libraries of their favorite films 
like never before. So reasonable protections, new technologies: 
When those go together, good things happen. And we'll be 
leading that charge.
    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Smith. Thank you, Mr. Issa.
    The gentlewoman from California, Ms. Sanchez, is recognized 
for her questions.
    Ms. Sanchez. Thank you, Mr. Chairman.
    Mr. Taylor, one of the concerns that I have with the 
various subscription services is the impact that they have on 
the revenues for the creators. And I'm going to give you an 
example. Yesterday I had some songwriters come visit me in the 
office that were talking about subscription services that allow 
people unlimited access to download songs for as little as $5 
or $10 a month. And they saw that as a big threat to their 
income stream. And I know that the business model for the 
motion picture industry is somewhat different, but I'm 
wondering if there's been any discussion of any types of 
safeguards that you might put into place to try to protect the 
creative talent and their revenue as you move forward, in terms 
of the new technology and the subscription services.
    Mr. Taylor. Right. Well, in Hollywood, each of the segments 
of the creative community--writers, actors, directors, grips, 
all of them--are represented, and through negotiations these 
terms are worked out. And as new means of delivery come into 
the marketplace, when next windows for negotiation take place, 
those are the type of things that we've worked out in that 
environment.
    Suffice to say, we're an industry that has had a long and 
productive and fruitful relationship with all elements of our 
creative talent. And one of the reasons that I consider it such 
an honor to testify on this subject today is it's not just 
about the names on the marquee that we stand here trying to 
speak about and protect. It's those names that scroll and 
continue to scroll as you walk out of a theater, get in your 
car, and drive out of the garage at the movie theater.
    All of those folks have a stake in this fight, and they're 
the ones who are really, truly on the front lines of it. So we 
are most interested, and very interested, in making sure that 
everyone in our industry is well taken care of and protected. 
And it begins by making sure that there is some compensation 
for the works that are available and made.
    Ms. Sanchez. But I mean, have you had meetings with folks, 
you know, from beginning to end of production that contribute 
to this process? It seems to me, and this is sort of a follow-
up question for--Mr Raduchel; is that correct? You know, who 
sets the, you know, $20-a-semester, you know, subscription, I 
mean, for an entire catalogue of movies? Call me crazy, but 
that seems like--you know, for all the people and all the work 
that goes into producing these works--very little.
    Mr. Raduchel. They only get access to a limited number on 
any given day. It's 50 titles on any given day, and we cycle 
through the titles over the course of the semester, the course 
of the month. So it isn't everything.
    You know, you have very good questions. I cannot disagree 
with them at all. The issue that we're trying to do, and the 
industry is supporting us on, is getting kids to agree to pay 
anything. And the step one is to get them habituated to paying. 
And the belief is that if they're habituated to paying 
something, as they get older, have more money, go on in life, 
they will be willing to pay more.
    That is the theory. It may be right; it may be wrong. But 
if kids come out of college habituated to paying nothing, 
unfortunately, a 24-year-old is not a lot different than a 22-
year-old or an 18-year-old, and this habituation to free will 
go on and persist in life. And I think that threatens all of 
the creative talent.
    I mean, we care a lot about the creative talent. I mean, we 
want them to earn money. That's what we're trying to go do. But 
we are competing against free in a very broad catalogue, and so 
there's a limit to what pricing we can charge and expect we're 
going to get any adoption at all. But your points are very 
valid, and I understand them.
    Ms. Sanchez. All right. No further questions, Mr. Chairman.
    Mr. Smith. Okay. The gentleman from South Carolina, Mr. 
Inglis. Do you have any questions?
    Mr. Inglis. No questions.
    Mr. Smith. Okay. Thank you. Are there any other questions 
by any other Members who are present?
    Mr. Berman. Mr. Chairman?
    Mr. Smith. The gentleman from California.
    Mr. Berman. Just to ask if the record could remain open. I 
think the gentleman from California, Mr. Schiff, wants an 
opportunity to put in a written statement on this issue.
    Mr. Smith. Okay. Without objection, his written statement 
as well as the opening statements of any other Member will be 
made a part of the record.
    Thank you all very much. This has been very informative. 
And this is going to be one of those hearings which lives on, 
so to speak. We've had hearings on this subject before; we will 
have hearings on this subject in the future. I mentioned the 
GAO report that we will be requesting in the next few days. And 
so we'll continue to monitor the progress, and you all have 
been a big part of the progress that has occurred so far. So 
thank you for your input, and thank you for your testimony.
    [Whereupon, at 10:15 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

Prepared Statement of the Honorable Howard L. Berman, a Representative 
     in Congress from the State of California, and Ranking Member, 
    Subcommittee on Courts, the Internet, and Intellectual Property
    Mr. Chairman,
    Thank you for scheduling this hearing on campus university Peer-to-
Peer piracy. The beginning of the academic year is the perfect time to 
assess what progress has been made by universities to stem the 
proliferation of illegal file-sharing by students on their campuses.
    There is little question of the devastating impact piracy has had 
on the entertainment industry. The total value for the music industry 
at retail declined from $14.5 billion in 1999 to $12.1 billion in 2004. 
In March 2005 alone, 243 million songs were downloaded from illicit 
peer-to-peer services. (NPD Musicwatch). Furthermore, it is estimated 
that approximately 400, 000 films are illegally downloaded every day. 
However, when it comes to downloading content that is not paid for, 
there seems to be a disconnect that students exhibit between 
intellectual knowledge and actual behavior. There was a very telling 
discussion that occurred during a program about P2P file sharing 
organized by my colleagues, Adam Schiff and Linda Sanchez, and me for 
students from different colleges who were interning on the Hill. The 
students all acknowledged that downloading content from P2P networks 
was possibly morally wrong, probably legally wrong and potentially 
harmful to their own networks (from spyware or adware). Yet many of 
them continue to use P2P file sharing as a means of obtaining music, 
movies, television shows and games.
    Last year at this hearing, Graham Spanier, one of the chairs of the 
joint committee and a visionary in undertaking the Lion's Share project 
at Penn State testified ``I don't think there is any one part of the 
solution. It has to be a set of variables that universities use to 
bring about progress in this area.''
    Awareness of the effects and solutions to the piracy problem can be 
addressed through:

          Education

          Enforcement

          Technological improvements and

          Affordable legitimate alternatives.

    The good news, in no particular order, is that there has been 
progress on every front. This past June, the Supreme Court, in a 
unanimous 9-0 opinion in the Grokster case, sent a clear message that 
companies that encourage theft can be held liable. Immediately after 
the decision, iMesh, one of the original peer-to-peer (P2P) services 
announced the transition from a free to commercial-based authorized P2P 
business model which ensures compensation to creators. Slowly others 
have begun to follow suit. As late as this week, Grokster is rumored to 
be attempting to turn ``legit.''
    Since the Grokster decision, there have been other positive impacts 
on campuses around the country, for example, the University of 
California and California State University announced a deal with Cdigix 
Inc. which provides administrators at all 13 UC and 23 Cal State 
campuses the option of offering online music and movie sales to 
students. Of course, providing students with legitimate alternatives to 
the Kazaas and Groksters is a key part to any solution to the piracy 
problem.
    But as the report released yesterday by the Joint Committee of 
Higher Education and Entertainment Communities indicates, there are 
miles to go before we sleep. Free is still an option and while the 
Grokster decision may have stemmed the wave of piracy, many continue to 
ride the wave and persist in illegally downloading music, movies, and 
software.
    We must confront the piracy which takes place on the school's local 
area networks (LANs) and the increased use of unauthorized hacks of the 
legitimate online services. We cannot afford to become complacent about 
ensuring that the creators receive just compensation for the works that 
students enjoy.
    Just this Monday the movie industry announced a concerted effort 
dedicated to mitigating the effects of piracy. The goal of the new non-
profit research and development company, Motion Picture Laboratories, 
Inc. (Movielabs), will be to create new technologies to protect the 
distribution of films and other works as well as to protect against 
electronic theft, particularly on the Internet. Just last week RIAA and 
MPAA joined Internet 2 as corporate members with the objective of 
working together on new technologies for secure digital distribution. 
We must continue to work together to help address the piracy problem.
    It is the combination of the many methods and not just one silver 
bullet that will address the campus peer to peer issue. Perhaps, as 
more simply put by Aristotle, ``in educating the young we use pleasure 
and pain as rudders to steer their course'' (Nichomachean Ethics, Book 
X.) The Universities and content providers must educate well, as it is 
this future generation which will educate the next.
    I am looking forward to hearing from the witnesses and learning 
about some of the remaining pitfalls to curbing piracy on campuses.
    I yield back.
                               __________

Prepared Statement of the Honorable John Conyers, Jr., a Representative 
  in Congress from the State of Michigan, and Member, Subcommittee on 
            Courts, the Internet, and Intellectual Property

    According to a March 2005 PEW Internet & American Life Project 
survey, young adults continue to be the largest group of Internet users 
who share files with others online. File sharing among students can 
provide many beneficial uses in education, research, and professional 
development. Unfortunately, college students have exploited the 
intended use of the peer-to-peer network by trafficking in music, 
movies, software, video games, and other copyrighted material without 
permission. While the Supreme Court unanimously held this past summer 
in the Grokster case that the file trading companies can be liable for 
their misconduct, we cannot turn a blind eye to the users of such 
software.
    Aside from the issue of copyright infringement, this illegal use of 
peer-to-peer networks can lead to invasions of student privacy, 
viruses, and other potential security threats to the university's 
network.
    The content industry is stepping up its battle against digital 
copyright piracy on college campuses, encouraging higher education 
leaders to monitor their students and impose restrictions on violators. 
On the other hand, monitoring raises privacy concerns and could chill 
the use of peer-to-peer technology that can otherwise have valuable 
academic rewards. I also would be concerned that monitoring could turn 
university officials into spies, thus creating an atmosphere in which 
the First Amendment and privacy rights of students are significantly 
devalued.
    Because piracy has proven to be a lethal threat to the content 
industries, we must address the legitimate concerns of creators. One 
approach to reducing peer-to-peer piracy on university campuses that 
does not require monitoring seems to be working: providing a legal 
alternative for students to access music, films, and other media while 
educating students about the importance of copyright issues. Two major 
universities in my home state, the University of Michigan and Michigan 
State University, have taken the lead in this approach.
    After the University of Michigan inked an agreement with Cdigix, 
students were able to choose from a wide variety of media and 
entertainment services for only a nominal monthly fee. Because of the 
University's agreement with Cdigix, its acceptable use policy, and its 
education campaigns on copyright infringement, the Recording Industry 
Association of America cited the University as a model for how 
universities should combat illegal file sharing.
    At Michigan State University, the University has implemented the 
multi-tiered approach of information campaigns, an acceptable use 
policy, and technical measures to prevent illegal file sharing. These 
measures have led to a 75% reduction in the monthly rate of Digital 
Millennium Copyright Act violations on campus. In addition, MSU is 
conducting advanced discussions with venders such as Cdigix to provide 
a legal avenue for students to access digital entertainment. MSU's 
strategy strikes the appropriate balance between preventing illegal 
sharing of copyrighted files and respecting the privacy of personal 
communications over the University network.
    By providing legal alternatives to file sharing and through 
education, universities can and will continue to teach students to make 
good decisions regarding online entertainment. Furthermore, by becoming 
familiar with services like Cdigix, students will develop the habit of 
paying for music that will extend beyond the university setting.

                               __________

Prepared Statement of the Honorable Adam B. Schiff, a Representative in 
  Congress from the State of California, and Member, Subcommittee on 
            Courts, the Internet, and Intellectual Property

    I'd like to thank Chairman Smith and Ranking Member Berman for 
convening this important hearing. The testimony we will receive today 
demonstrates that peer-to-peer piracy is still out of control, posing a 
serious threat to the livelihood of copyright creators, many of whom 
live in my district.
    According to some estimates, over 60 percent of all Internet 
traffic in the U.S. can be attributed to peer-to-peer usage. Over 
ninety percent of all content on peer-to-peer networks consisting of 
unauthorized copyrighted files, and an estimated 400,000 films are 
illegally downloaded every day. Given the prevalence of high speed 
Internet connections at universities across the country, peer-to-peer 
piracy of music, television shows, and movies has reached epidemic 
levels at many institutions.
    A few months ago, Ranking Member Berman, Rep. Linda Sanchez, and I 
hosted a panel discussion for House interns regarding piracy on campus 
and the availability of legitimate online entertainment choices that 
are available. At the event, many students acknowledged the continued 
prevalence of illegally downloading music and movies via peer-to-peer 
networks on campus.
    A number of universities have taken important steps to address this 
problem. In particular, the University of Florida, with its innovative 
program targeting unapproved peer-to-peer applications and prohibiting 
transmission. It is encouraging to hear that this program has 
reportedly kept the network free from illegal copyright sharing, while 
faculty and students remain able to share and distribute academic 
material through secure websites, FTP, and e-mail. This model should 
serve as an example for other institutions to follow.
    Universities in my home state of California have exhibited mixed 
results. Some campuses in the California system have already worked 
diligently to address the problem of piracy on campus. I'm pleased to 
hear that the University of California in collaboration with the 
California State University system has recently contracted with a 
number of online entertainment providers to offer discounted 
subscriptions for music, movies, and other digital entertainment to 
students. I strongly encourage each of the individual campuses within 
the system to review the details of the various offerings and work to 
make one or more of the services available as soon as possible.
    In closing, I'm pleased to learn that this will not be the last 
hearing on this topic and that the Subcommittee will continue to 
monitor progress in this area. With the proliferation of new peer-to-
peer systems such as i2Hub and ``local area networks'' (or ``LANs''), 
we must continue our vigilant oversight in this area and determine 
whether a greater degree of congressional intervention is necessary.

                               __________

     Prepared Statement of Frederic Hirsch, Senior Vice President, 
 Intellectual Property Enforcement, Entertainment Software Association 
                                 (ESA)

    On behalf of the Entertainment Software Association (ESA) and our 
member companies, I thank you for this opportunity to add a statement 
to the record to update you on the impact peer-to-peer (P2P) piracy on 
university networks is having on the entertainment software industry. 
In the three years since our President, Douglas Lowenstein, appeared on 
Chairman Smith's University P2P Piracy Panel at the University of Texas 
at Austin, our industry has taken a number of significant steps to 
combat the piracy problem on American college campuses. Nevertheless, 
campus P2P piracy remains a threat to the economic contributions the 
computer and video game industry makes to the United States economy.
    As ESA's Senior Anti-Piracy Executive, I would like to update you 
on the progress we have made in addressing college-level P2P piracy 
over the past few years on the educational and enforcement fronts. In 
addition, I would like to review the growing challenges we face, 
including the rapidly increasing use of BitTorrent for infringing 
activities, as well as to highlight what universities need to continue 
to do to help reduce the P2P piracy threat on the nation's campuses.
    As you may know, the ESA is the trade association serving the 
public affairs needs of the world's leading publishers of video and 
computer games, including games for video game consoles, personal 
computers, handheld devices, and the Internet. ESA members produced 
more than 90 percent of the $7.3 billion in entertainment software sold 
in the U.S. in 2004. In addition, ESA's member companies produce 
billions more in exports of American-made entertainment software, 
driving the $25 billion global game software market. Entertainment 
Software is a vibrant and growing segment of the American economy, 
providing highly skilled jobs and ever-increasing exports.
    Entertainment software companies invest significant amounts of 
capital in each of their games and the intellectual property that these 
represent. Developing and launching a top game often requires a team of 
more than 100 professionals working for more than three yearst, with 
development and marketing costs often running at least $5 million and 
often $10 million and higher. As with any hit-based industry, only a 
small percentage of these titles actually achieve profitability. 
Nonetheless, the demands of the game-playing market compel ESA members 
to continue to work even harder to develop faster and more exciting 
games, requiring larger investments in the programming and technology 
that will produce the effects and challenges that game players seek. 
The new generation of game consoles that will be launched over the next 
six to nine months will require game publishers to make even more 
significant levels of investment as the processing power of these new 
machines will permit more complex and realistic game design, further 
enhancing the game-playing experience for consumers.
    Over the past few years, illegal and unauthorized uses of game 
software have proliferated rapidly, as the popularity of playing 
interactive games has commanded an increasing share of Americans' 
leisure-time activity. Among certain segments of the population, 
notably college students, the playing of games represents a dominant 
form of recreation and entertainment, increasingly displacing other 
forms of diversion such as watching television. The current generations 
of college students have been playing computer and video games for more 
than a decade. A Pew study in 2003 revealed that over 65% of college 
students play interactive games on a regular or occasional basis. Most 
of them bring to their college campuses the game-playing habits 
cultivated over many years at home. Thus, it is easy to understand why 
college campuses continue to be areas of major concern for ESA members, 
particularly as college students, open and eager to learn and try new 
things, often fall prey to the temptations of easy access to hundreds 
of free interactive games over the Internet.
    A digital file containing an interactive game consists of, on 
average, over 650 megabytes of information, a large digital file over 
150 times the size of the standard music mp3 file. Downloading such a 
file over a dial-up connection where the speed of the connection is 56 
kilobits per second is a daunting proposition at best and, at more than 
24 hours, practically unfeasible for all but the most determined of 
downloaders. Despite the dramatic increase in broadband access to the 
Internet among American households, most American homes access the 
Internet through dial-up connections. Thus, most students, when they 
first arrive at college, have not had any experience downloading 
interactive games. However, the broadband systems that exist on most 
American college campuses offer a dramatically different technological 
context for the average student, who becomes quickly informed about the 
many wonderful ``facilities'' of high-capacity access to the Internet. 
Indeed, in such a broadband environment, the download time for a full 
game file can be cut to 3-4 hours and sometimes faster, a much more 
enticing opportunity than what these students might have found on their 
home computers. ESA's tracking of online pirate activity confirms that 
almost all illegal game downloads occur over broadband connections.
    The high-speed access offered by such campus broadband systems 
become problematic when combined with other personal and lifestyle 
elements found among many student communities: substantial amounts of 
free time, high levels of technical knowledge and attraction to 
interactive games, and a close community with a generally high 
percentage of active game players. On many campuses, this congruence of 
factors produces environments marked by high rates of illegal copying 
and distribution of game software. Moreover, the efficiency of peer-to-
peer software and networks offering a wide variety of illegal versions 
of games makes downloads of game software all the more accessible to 
the average college student. Indeed, ESA's monitoring of Internet 
piracy of its members' leading games shows that the overwhelming 
majority of illegal downloads (89%) of such games on college systems 
are executed through P2P protocols.
    ESA plays a significant enforcement role on behalf of its members 
by pursuing efforts to reduce the illegal uses of its members' game 
software. Needless to say, much of ESA's anti-piracy work has been 
focused on addressing pirate activity on the Internet. The online 
enforcement program begins with our automated monitoring of the 
Internet, which detects and identifies infringing activity and sites 
involving game product. Such detection is followed by ESA's manual 
verification of the infringing activity and transmittal of notices 
advising ISPs and MIS managers of the illegal activity detected among 
users of their systems and requesting their intervention in procuring 
the termination of such activity. Over the past year, ESA has sent over 
173,000 such notices. The ISPs responses to these notices run the gamut 
of no response, to an automated acknowledgement of receipt of the 
notice, to an e-mail response, to a phone call or letter describing the 
action to be taken in response to the notice. Unfortunately, the vast 
majority of responses sent to ISPs regarding P2P activity fall into the 
no-response category.
    The good news is that college and university MIS administrators 
have distinguished themselves from the large group of non-responsive 
ISPs with a high level of response and cooperation in response to our 
notices. Their responses are generally very informative and go beyond 
what we normally receive from commercial ISPs in terms of describing 
their efforts after receiving the notice of infringing activity. Some 
colleges, notably the University of Oklahoma and Webster University, 
routinely describe to us in detail the steps they have taken to address 
the instance of piracy identified in each of the notices we send them. 
Such steps can range from warning letters to suspension of access to 
the university network. We have been very encouraged by this level of 
response and have used the opportunity of our contacts with university 
administrators to offer them additional support and information that we 
encounter with respect to game piracy.
    Fortunately, universities and colleges across the United States 
have done more than merely respond to our notices regarding pirate 
files appearing on their systems. Many of them have taken a pro-active 
approach to educate their students, faculty and employees about online 
piracy and have adopted policies governing the use of their systems and 
networks aimed at establishing clear lines regarding the consequences 
of students, faculty or employees engaging in illegal copying or 
transmissions of IP-protected content. We think that these educational 
efforts are among the most important areas of activity for university 
administrations. Such educational initiatives over time will do much to 
dissipate the ``anything goes'' attitude that permeates many college 
campuses with respect to Internet usage. Addressing the ethical and 
legal aspects of infringing activity and abuse of intellectual property 
is an important function that we think college administrations are 
ideally suited to perform. We also think that a continuing dialogue 
between IP industries and college administrations regarding the way 
these issues are raised and presented to students could serve to 
further enhance colleges' efforts to educate students about 
intellectual property abuse and piracy.
    We are also aware that many universities have instituted 
technological measures to reduce the illegal activity resident on their 
networks. Whether it is the ICARUS system implemented by the University 
of Florida, the Quarantine Approach initiated by UCLA, or Audible 
Magic's CopySense, or bandwidth-shaping technologies that limit the 
amount of data that can be sent over networks, many colleges have 
availed themselves of technological solutions that serve to either 
preempt or deter the use of their systems for illegal transmissions of 
infringing files. In addition, the University of Nevada has installed 
technology that automatically deletes files saved to communal computers 
when switched off making it impossible to store illegal files there. We 
applaud such efforts and believe that wider application of such 
technologies will ultimately help preserve the college networks for the 
educational uses which should be their paramount purposes.
    Enforcement, education and technology are all critical elements in 
the effort to reduce piracy on university systems. We think that many 
universities have stepped up to take on the challenges that this 
Subcommittee set forth for them last year by taking a pro-active and 
engaged approach to this problem. While the ESA and its members are 
gratified by the level of response and communication that we have seen 
from universities with respect to instances of game piracy found on 
their systems, we must also point out and caution that Internet piracy 
is a dynamic and rapidly evolving phenomenon, raising new concerns and 
issues for those trying to confront it effectively. P2P technologies 
are changing quickly, and some, such as BitTorrent, have set new 
benchmarks for the speed and efficiency with which they permit the 
copying and distribution of digital content. The constant change we see 
in the pirate Internet environment requires continuing dialogue between 
the IP industries and university administrators to coordinate and 
collaborate on the best way to respond to these new challenges.
    In addition to the problem of P2P piracy, ESA members remain 
equally concerned about another form of illegal activity occurring on 
some university systems, beyond the knowledge and awareness of their 
administrators. Federal investigations and enforcement actions against 
members of Internet piracy rings known as ``warez groups'' over the 
past few years have revealed that many members of these groups have 
surreptitiously used university systems to store their illegal 
``warez'' files, consisting of illegal digital copies of games, movies, 
software and music. Some of these were cases of intrusion, where one or 
more members of these groups successfully hacked into a university 
system and then undertook to quietly hide several thousand files beyond 
the purview of system administrators. Other cases were ``inside jobs'', 
in which a member of the university MIS staff was also a member of one 
of these groups or was co-opted into permitting the groups' use of 
university servers and bandwidth capacity for their illegal purposes.
    While we understand that such activities were in no way sanctioned 
by the universities involved and, in fact, consider them also to be 
victims of such groups, we would like to underscore that such 
unauthorized uses of university systems remain a major concern for the 
game software industry and its efforts to curtail the activities of 
these warez groups. We believe that the college MIS systems that were 
targeted by these groups in the past must institute technical measures, 
procedures and internal audits which will serve to prevent any 
recurrence of such intrusions in the future. We also think that other 
colleges not yet similarly victimized should take proactive steps to 
prevent such unauthorized high-jacking of their bandwidth. In short, 
this Subcommittee should stress to universities that they must maintain 
a high degree of vigilance with respect to their IT equipment and 
networks, as the members of these warez groups are constantly on the 
prowl for the storage and bandwidth facilities that university systems 
offer.
    We applaud the work of this Subcommittee and the outstanding 
efforts it has made to focus attention on the important issue of P2P 
piracy and illegal uses of university systems. As noted earlier, the 
entertainment software industry has a particularly large stake in 
seeing that college environments are free from the illegal copying and 
distribution of their game products. We earnestly believe that the 
interest of this Subcommittee in this area has made a material 
contribution to the great progress that the university community has 
made in that direction. For this, we are most grateful.
  supplementary statement of daniel a. updegrove, vice president for 
         information technology, university of texas at austin



                                 
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