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Oh, for Streaming Out Loud!

When the major patent holders of the MPEG-4 technology recently announced its proposed licensing terms for the would-be standard, it sent shockwaves streaming throughout the digital media community. The consortium in question, MPEG LA LLC, offered what it called "fair, reasonable, non-discriminatory," access to patents. Numerous organizations, such as the MPEG-4 Industry Forum (M4IF), the Internet Streaming Media Association (ISMA), and companies like Apple Computer that profitted by employing digital media were naturally concerned.

For the uninitiated, MPEG-4 is a open compression technology for digital multimedia created by the Moving Picture Experts Group (hence, MPEG), which also forged MPEG-1 (interactive video on CD-ROM) and MPEG-2, the core compression technology underlying the transmission, storage and display of digitized moving images and sound tracks. Featuring far greater compression than MPEG-2, MPEG-4 is the next logical step to bolster the quality of streaming video over the Internet. The format promises to send images using less data and network capacity, which ultimately enables full-motion video over the Internet.

"Wait one second!" you say. You already get streaming video over the Internet, don't you? Of course you do, and it's supplied by Microsoft Corp.'s Windows Media Player, RealNetworks Inc.'s RealPlayer, or Apple's QuickTime Player. The former two players, which dominate desktops, are based on proprietary technologies. MPEG-4, based in part on QuickTime, is a standard that calls for interoperability, or one open, universal route to deliver streaming video.

What MPEG-LA proposed at the beginning of the year was a set of licensing terms offered under the umbrella of one MPEG-4 (Visual) Patent Portfolio License. Under the license terms, licensees would pay 25 cents per encoders and decoders for personal use, with a $1 million cap. Firms such as Apple were fine with that.

What Apple and others were concerned about was the proposed, uncapped playback fee of 2 cents per hour for MPEG-4 streams or downloads that a service provider would have to pay to the MPGE LA to deliver video to consumers. This includes pay-per-view, subscription and advertiser/underwriter-supported services. The thinking is that service providers such as AT&T Broadband or NTT DoCoMo may not go for this. This royalty, to be paid by entities that disseminate the MPEG-4 video data, is not subject to a cap. Moreover, this same metered fee extends to MPEG-4 video on each copy of packaged medium. However, MPEG LA suggested users who sign the licensing agreement would be granted a year of MPEG-4 use royalty-free.

Dissenting opinions
That announcement went live Jan. 31, opening the floodgates to public outcry. On Feb. 5, M4IF praised the MPEG LA's progress in proposing a licensing program, but noted concern among M4IF members over whether the terms are practical for the variety of markets adopting MPEG-4. M4IF said it heard myriad reactions to the licensing program, ranging from "this sounds reasonable" to "this will never work." The group called for "further clarification and discussion."

The ISMA, a group of 34 companies whose goal is to create specifications for the interoperability of MPEG-4, voiced similar feelings.

"The ISMA is pleased to see that the outline of MPEG-4 video licensing terms have been made available, and we are asking that the MPEG LA opens the proposed terms for industry review and discussion," ISMA President Tom Jacobs told InternetNews.com. "ISMA is very concerned that the specific royalty model MPEG LA has outlined in its press release will not foster the development of a commercially viable market for MPEG-4 video streaming solutions."

MPEG LA's terms also fanned the fires of competition. Douglas A. McIntyre, president and chief executive office for On2 Corp., which has developed an open-source codec for video compression, decried the MPEG LA's licensing terms, and offered On2's VP3.2 as an alternative to MPEG-4.

"The fees announced by MPEG LA covering encoders, decoders, and usage will almost certainly curtail the adoption of a single standard for video compression and distribution," McIntyre wrote in a letter addressed to the ISMA. "These fees, which will be passed from content owners and infrastructure providers to the end user, unnecessarily restrict the use of streaming and downloaded video in the business and consumer marketplaces. It is antithetical to the main reason for which ISMA was founded."

But ISMA didn't bite and is sticking to its MPEG-4 guns. ISMA's Jacobs said in an e-mail that while "ISMA values such unsolicited input from the industry" it is "currently seeking to work with MPEG LA to achieve revised terms for the MPEG-4 Visual patent pool."

McIntyre boiled down his opinion on the terms for InternetNews.com.

"What the MPEG LA has done is propose to charge fees to firms that are higher than what the firms think they can afford," McIntyre said. With that, the adoption curve is going to be much, much lower. The idea of MPEG 4 when people talked about it way back when, is that firms don't have to go to Real or Microsoft for streaming. They figured the best way to do this was to have 1) good technology and 2) rational pricing. Now they are very worried that the second of those two things didn't happen."

On February 12, Apple took action, in the form of inaction. Apple vowed to stall the release of its fully MPEG-4-capable QuickTime Player 6 until some changes were made in the licensing terms. Frank Casanova, director of product marketing for QuickTime, said he and his colleagues at Apple didn't see those questionable terms coming.

"We have no problem paying for the intellectual property [encoders, decoders] that we use, but asking service providers to pay a use royalty didn't seem right," Casanova said.

Casanova said the model resembled the model used, in part, to proliferate MPEG-2, but while it worked well enough for the former standard, he feared a similar model won't apply for MPEG-4.

Casanova posed the example of AOL Time Warner, saying that if it offers subscriptions that are uncapped, an end-user can turn on some video stream and that "2 cents an hour per stream can add up fast with 30 million subscribers. This will never let [MPEG-4] achieve its full potential."

MPEG patent holders are said to be reconsidering some terms of their licensing policy but for the most part they still stand by the usage fee structure. So where does MPEG-4 go from here? See Page 2.