SAN JOSE, Calif. - A pair of Supreme Court rulings this week is stoking fears that the Internet is becoming an ever-more centralized platform for entrenched corporate interests - the antithesis of the digital commons envisioned by technophiles and civil libertarians.
But others predict that innovation will actually be encouraged by the rulings, since they create a framework of sorts for how to build businesses in the digital age.
The immediate impact of Monday's decisions against broadband provider Brand X Internet Inc. and file-sharing companies Grokster Inc. and StreamCast Networks Inc. will be to discourage entrepreneurs from creating products that compete directly against telecommunication conglomerates and Hollywood, said Jim Pickrell, president of Brand X.
"Times are definitely changing - not just in the Internet business but everywhere," said Pickrell, whose 9-year-old Santa Monica, Calif.-based company specializes in high-speed Internet access for business and residential lines. "The current administration has made it clear that the U.S. economy would be best run by a small number of large corporations, whether Verizon or SBC or the biggest players of the recording industry."
The American Civil Liberties Union argues that the rulings portend a worst-case scenario in which oligopolistic broadband giants control Web sites, e-mail and Internet telephone services. That could turn the Internet into the opposite of what it is today: an inexpensive forum for public expression easily accessible to independent voices - from bloggers to unaffiliated political candidates.
"No one should think that the free Internet that we currently enjoy is somehow immune from change or guaranteed to stay free," said ACLU attorney Chris Hansen.
Phone companies are required to share their pipes with independent providers of broadband Internet service. And that has encouraged competition. But the justices decided in National Cable and Telecommunications Assn. vs. Brand X to uphold a Federal Communications Commission ruling that exempts cable operators from a similar regulation. The result: limited competition in Internet access for cable TV subscribers, consumer advocates say. (Cable broadband service typically costs more than a DSL connection over a telephone line).
In Metro-Goldwyn-Mayer Studios v. Grokster, the high court ruled Monday that the movie and music industries could file piracy lawsuits against companies that encourage customers to steal copyrighted works.
A major victory for recording studios, the ruling could discourage innovation by hardware and software engineers - from Silicon Valley researchers hoping to come up with the next iPod to teenage music enthusiasts writing the next generation of peer-to-peer networking software.
Jennifer Granick, executive director of the Center for Internet and Society at Stanford Law School and a former co-counsel for Grokster, says the message to entrepreneurs is clear:
"The big entrenched interests continue to enjoy a lot of success in the law. The little guys constantly have uphill battles," Granick said.
The Consumer Federation of America also complained, calling the Grokster case Hollywood's attempt to "resist adapting their business models to the new technology."
New programs that have fostered the spread of data over peer-to-peer networks include BitTorrent, an open-source tool that breaks files into small fragments and makes it fast and easy to download videos and other big data files, and spinoffs such as Blog Torrent, another free program. Blog Torrent lets the non-technical post files for download on their Web journals, or blogs.
It's also unclear how Hollywood will respond to the emerging phenomenon of podcasting - amateur radio broadcasts published online, which may or may not include copyrighted songs.
According to the Grokster ruling, companies that develop file-sharing technology can be sued if they deliberately encourage customers to download copyrighted files illegally. But a company can find a "safe harbor" and avoid being sued if it doesn't encourage customers to use its products for illegal purposes.
A balancing test would determine whether the company "does nothing to compromise legitimate commerce or discourage innovation having a lawful promise," the court said.
Many peer-to-peer companies operate in "murky" legal environments without laws or case precedent, said John Delaney, partner in the New York office of Morrison & Foerster LLP. The Grokster ruling provides guidance.
"Now that the rules are clear, we have a good set of conditions for innovations to flourish," said Delaney, who focuses on technology and intellectual property.
Cydney Tune, a copyright lawyer in the San Francisco office of Pillsbury Winthrop Shaw Pittman LLP, said the Grokster ruling will force engineers to work more closely with legal and marketing departments but won't stifle creativity.
"It reminds me of the old adage about a river flowing: If something blocks the river, the water just goes around it - that's the way technology evolves," said Tune, who chairs the firm's copyright practice team.