Let's not kid ourselves, dear readers. P2P's best use cases all revolve around the liberation of data, software, music, movies, and other copyrighted and rather expensive content. You may direct your angry emails to Rep. Edolphus Towns (NY-Dem.), who chairs the House Oversight and Government Reform Committee.

At the outset, the bill proposes the banning of P2P software use for government employees and contractors "and for other purposes." The bill mandates the long-term examination of "each open-network peer-to-peer file sharing software program" that might currently be in use by government and law enforcement personnel.

Towns cited the exposure of sensitive information via such networks as the reason for the bill. He cited the following leaks as proof of the need for stricter P2P regulations:

• Schematics for the President's helicopter, Marine One.
• Financial data on Supreme Court Justice Stephen Breyer.
• Location of a U.S. Secret Service safe house for the First Family.
• Specifics of a House Ethics Committee document containing a list of ongoing investigations

But let us be realistic: Copyright claims, Creative Commons concerns, and IP violations are the molten core at the center of any legislation on P2P networks. And based on recent internationally agreed-upon efforts to uphold the claims and wishes of copyright holders, the U.S. government seems to be introducing yet more legislation to restrict piracy.

Are P2P networks truly responsible for such serious security breaches? Or are these claims merely politically motivated scapegoats for government to crack down on user behaviors - behaviors that may need more examination than legal discipline?

Most importantly, if this bill is made law, will it act as a precedent for stricter policing and eventual shutdown of P2P networks altogether? Or are we reactionary skeptics who need to calm down and quietly resume our download of our Hello, Dolly torrent files? Choose your own adventure in the comments.

Before jumping to it, it may be smart to remind yourself of the legal issues currently facing both the Pirate Bay founders and perhaps more importantly, the non-commercial cases of Joel Tenenbaum and Jammie Thomas-Rasset.

Most recently, the Department of Justice upheld the award of 1.92 million dollars to the RIAA from single mom Jammie Thomas-Rasset. Minnesota woman Thomas-Rasset is expected to pay $80,000 per song for 24 KaZaA files she'd downloaded in 2004. The RIAA has gone after more than 20,000 people for music piracy, but has more recently chosen to focus on internet service providers rather than on non-commercial infringers. Depending on your country of residence, getting caught using the Pirate Bay archive file could be devastating.

If you're still curious, or you simply want to read the comments, the download page is available here.

Who Pays, Who Doesn't

The European Commission's Digital Competitiveness Report (PDF) is a comprehensive annual resource which looks at everything from broadband penetration to use of social networks and more. One of the chapters in the latest report, published earlier this month, deals specifically with online entertainment.

In this chapter, the EU study reports on the state of the online entertainment industry, revealing factoids like "less than 5% of Europeans have paid for online content in the last three months."

The most interesting results from the report, though, are not the details about who pays, but about who doesn't. Among the non-payers, factors like lower prices would convince about 30% to pay while things like better quality, wider choice, better availability, and others would convince between 15-20%. Yet one figure stands out: only around 20% of online users would pay for online content if all the other free options suddenly disappeared.

Peer-to-Peer File Sharing Not to Blame, Says EU

The impact of this finding didn't escape the notice of the EU researchers, who go on to point out that this seems to mean, contrary to what industry execs say, illegal copying is not to blame:

"...the low percentage of individuals that consider the possible lack of freely available online content as a reason for paying, calls into question the argument put forward by representatives of the content industry that European consumers will in the long term suffer from a lack of commercial availability of high quality content if the current model of audiovisual content distribution, based on illegal copying, is not curved."

Instead, what seems to be happening is that people pay for their internet connection and then gorge themselves on the abundant free content that's available online. Because there's so much out there which costs nothing at all - from web news to streaming video to software applications - internet users tend to balk at the idea of actually having to pull out their wallets to make a purchase. It's the internet itself that has led us down this path to a place where old monetization models simply no longer apply.

What's the Answer?

The report goes on to look at the business models of all sorts of content sites in detail including online news/newspapers, video, movies, music, and online games. While the ways consumers access these different types of content may vary (RSS for reading news, streaming videos, downloading music), the findings are relatively consistent across the board. With only a few exceptions (Apple's iTunes Store, music-based games like Guitar Hero, etc.), many of the current business models are not sustainable.

So what's the answer? There isn't really a good one just yet. Many businesses try "freemium" models which convert power users to paying users. Other sites try sustaining themselves on online ads (which is difficult to do in a down economy). But the best ideas for new business models may very well be the ones that haven't even been thought up yet. The only question is whether or not they'll be discovered in time before more content-producing industries fail.

Image credits - used freely thanks to the Internet and Creative Commons: downloading, flickr user Arenamontanus; I love P2P, flickr user Brocco Lee; p2p logo, flickr user jatop

On the blog, the group hopes to alleviate concerns by saying:
"If the new owners screw around with the site, nobody will keep using it. That's the biggest insurance one can have that the site will be run in the way that we all want it to. And - you can now not only share files, but shares, with people. Everybody can indeed be the owner of The Pirate Bay now. That's awesome and will take the heat off us."

Judging by blog comments, it's obvious that users are extremely concerned. Global Gaming Factory will be taking over operation of the site in August 2009. As part of this acquisition, GGF can now incorporate the KTH Royal Institute of Technology and SICS, Swedish Institute of Computer Science's new data distribution technology - Peerialism. Presumably the service will increase torrent speeds.

Additionally, says GGF CEO, Hans Pandeya, "We would like to introduce models which entail that content providers and copyright owners get paid for content that is downloaded via the site."

It will be interesting to see if fans will stick with the service and how the company's revenue program will differ from predecessors like Grooveshark's compensation service for file uploaders.

Thanks to Steven for the tip!

UPDATE: According to TorrentFreak, The Pirate Bay will be using a 3rd party tracker and host for torrents. We'll just have to wait and see if this has to do with GGF's move with Peerialism.

At the moment, the UI is a bit clunky and the file sizes are capped at 20MB, but the service presents an exciting opportunity nevertheless. Once mobile capabilities are introduced, FileTwt would allow more freedom for the 9-to-5ers among us. And it already allows for mass sharing (either via public streams or multiple-recipient DMs) of files, which is awesome news for self-marketing musicians, who desperately need better online promotional tools.

Here's an initial test DM:

Here's the FileTwt page for the download:

Redirect! The adventure continues at RapidShare's site:

But RapidShare wants you to consider a paid account for a few seconds:

Finally: The download.

Filetwt is now uploading files only to RapidShare. They plan to add more hosts, namely DepositFiles, FileFactory, and MegaUpload, in about one week.

The 20MB file size limit has been instated to allow the startup to remain profitable, since any significant volume of traffic will mean more server bandwidth. Premium accounts for larger file shares will be introduced in the event that a significant number of users demonstrate a demand for increased bandwidth usage, according to company representative Ankit Sakhuja.

"We see Filetwt as more of a document sharing tool," he wrote in an email Sunday afternoon. "The private share option was introduced specifically for that purpose."

He noted that site developers are also working on a better user interface, a progress bar for uploads, and a virus scan, among other features.

As with any peer-to-peer file-sharing service, copyright infringement and piracy are immediately raised as primary concerns. The site states, "It is our policy to respond to notices of alleged infringement that comply with the Digital Millennium Copyright Act," no other information is given. Particularly for direct messages, how would FileTwt receive notice of illegally distributed files? Unlike the downloads that occur on larger P2P or torrent-sharing sites, these transactions are primarily going to be one-to-one or one-to-a-select few.

However, RapidShare has been successfully sued in a German court in 2007 over copyright infringement, specifically for MP3s. Although the DMCA Safe Harbor clause might prevent RapidShare and similar file-hosting companies from prosecution in the U.S., it certainly makes no exception for end users. Ultimately, users are given the standard "enter at your own risk" caveats with little available information on exactly how illegal one-to-one MP3 sharing is or what the consequences (or likelihood of getting caught and being prosecuted) are.

Finally, we've concluded through our own testing of the service that smartphones and other mobile devices do not handle FileTwt well. But of course, FileTwt is working on mobile apps, which Sakhuja promises will be "one-of-a-kind."

BayTSP, a Los Gatos, CA-based company, is best known for putting the cease-and-desist smackdown on peer-to-peer copyright violators. The site serves infringement information forms to offending parties on behalf of the copyright holders. Think of them as the online debt collectors of the BitTorrent universe, with all the information security risk that implies.

If the information were secure, this might be fine. However, in some monumental lapse of judgement, the entire site was left open to search spiders and accordingly indexed by Google, allowing anyone with hackerish leanings ample opportunity to create all kinds of mischief.

A Google search for "'infringement information' site:baytsp.com" yields distressing results. Some of the pages have been removed, but you can still have a look at the cached versions:

Whoops!

Not only have the forms been online for Google and the waiting world to view; the forms could also be completed and submitted online by just about anyone.

More technically savvy tricksters could send infringement notices of their own. "And, on top of that," the TechDirt blogger writes, "some have discovered that BayTSP's site has some scripting vulnerabilities such that you could create a fake complaint and get people to, say, download malware or enter credit card data."

Although this recent debacle is simply one more PR disaster for the media industries themselves, my first thoughts were echoed by TechDirt commenter Mechwarrior: "Once this hits 4chan, it's over."

The entertainment industry, as Mike Masnick points out on Techdirt, will celebrate this as a major victory in the fight against piracy, but in reality, shutting down the Pirate Bay will do little to deter filesharers and won't help the entertainment industry regain any lost market share or find a new business model.

It is also important to note that even though the Pirate Bay may be the most visible torrent-sharing site right now, others like Mininova host almost as many torrents.

This arrangement was brokered by New York State Attorney General Andrew Cuomo and, at its core, resembles the RIAA's deal with a number of colleges.

It's Not that Easy

We are happy to see the flood of lawsuits against file sharers come to an end, but we also think that there are some problems with this plan, which, of course, is mostly geared towards allowing the RIAA to save on legal fees while being able to reach far more people by simply sending an email to an ISP.

More importantly, however, we agree with Cindy Cohn of the Electronic Frontier Foundation, who argues that this will mean that people won't be able to access the Internet "based on allegations of breaking a law that have not been evaluated in a court of law."

It is still a bit hard to flully evaluate this deal without knowing the exact details and which ISPs actually agreed to this, but, as most people could have told them a long time ago, the RIAA has clearly decided that its current approach wasn't working, as overall music sales have continued to decline, while file sharing has only increased.

In March of this year, they launched an iTunes-esque music store. Now, according to the LA Times, LimeWire plans to add more social features to its service. Better late than never.

"Users will be able to create their own private file-sharing networks with friends and/or family members, with greater control over what gets shared with whom. In a recent interview, Kevin J. Bradshaw, Lime's chief operating officer, described it as the ability to create a 'personal publishing platform' that delivers photos to family members or homework assignments to students."

Clearly, the social features are less about being social and more about being anti-social. It doesn't take a huge intuitive leap to realize that this new feature set also offers the ability for users to step out of the larger sharing community and form trusted sharing networks with other users.

The question is: will these smaller networks truly protect users who are sharing the types of copyrighted content that draws the ire of the RIAA? Or will the desire to get the latest and greatest music and videos continue to expose these smaller networks to the same problems that have plagued the larger community?

Other P2P services have tried a variety of ways to avoid litigation. So far, at least as far as the "-sters" go - Napster, Grokster, and Aimster - none has met with a great deal of success.

With current economic conditions causing even the most successful companies to reduce expenditures, can LimeWire continue to fend off the legal eagles and make a success of its service? We'll just have to wait and see.

Formerly known as iSlsk, MewSeek is a native P2P Soulseek client for the iPhone. If you wish you could download free songs legally to your iPhone, then this is just the app you need. MewSeek works over EDGE, Wi-Fi, and a 3G connection. Since being released in the past few hours, this app has already seen over 3000 downloads. According to the developer's site,

"MewSeek is only was released only for experimental and testing purposes. I admit it is not quite stable yet and I also had to disable a few features temporarily until I find better ways to implement them (e.g. the "Downloads" screen, the ability to prevent Wi-Fi from disconnecting when locking the device, and a few others). However, the core and basic features are working as seen in iSlsk."

Basically, it's still a little buggy. To get started you'll need to set up a username and password first. Once that's done, click the connect button and you'll be good to go. MewSeek found just about every song we could think to search for, legal and otherwise. We advise you to use it at your own risk and MewSeek clearly states not to use the app to download songs that you do not have legal rights to.

Could MewSeek Be Worth The Effort?

To listen to anything that you download you'll have to also download PwnPlayer from Cydia. PwnPlayer is a unique alternative to the native iPod player on the iPhone and worth checking out even if you won't use MewSeek. Just remember that these apps are for jailbroken iPhones only.

In an extensive guest post on TorrentFreak, a well known BitTorrent blog, Dan Morrill told his experience with offering his latest eBook, 'Selling Books On Amazon, Tips and Secrets' on popular BitTorrent tracker Mininova. Dan explains that his initial reason for releasing his eBook using BitTorrent was not for marketing purposes, but "to control the release and gather good stats on the process." We don't think he could've picked a better service. Within the first 24 hours, Morrill's eBook had been downloaded close to 700 times.

Based on the stats he received from Mininova, Morrill was also able to pinpoint the countries in which the eBook was being downloaded the most. Africa ranked high on the list, which is understandable because of the relatively large amount of e-commerce businesses that are set-up in Africa. Morrill was surprised to see India contributing to 5.2% of the overall downloads.

Operation BitTorrent a Success

Morrill rated his overall experience as highly satisfying and recommends using BitTorrent as a great content distribution channel for those that don't mind. The expansion of the BitTorrent network will only increase in the next few years. In doing so, we think this may be a tool that publishers will eventually start taking a lot more seriously than they do now. It's undeniable that BitTorrent can prove to be an effective marketing tool for a cheap price when used correctly. Nine Inch Nails concluded the same in March of this year when they uploaded part 1 of their 4 part album Ghosts I-IV to numerous BitTorrent sites. It became the #1 most downloaded album on The Pirate Bay, which helped to increase their sales tremendously for the rest of the album.

We can only wonder when others will catch on to the effectiveness of using BitTorrent sites to market and distribute content. You can download Dan Morrill's eBook 'Selling Books On Amazon, Tips and Secrets' here.

A major problem that plagued the release of Spore was the inclusion of a DRM system. This has caused multiple reviews of Spore to be disappointing for Electronic Arts (EA), the developing and publishing company of Spore. If EA hoped the problem would go away, it hasn't. Fans and "pirates" have taken things one step further to make Spore one of the most pirated games ever.

The DRM system included in Spore has caused an outrage in the gaming community. We stated in our review of the game that the DRM system would have to go if Spore wanted to succeed. Apparently, consumers of the game seem to feel the same way. As of today, Spore has been downloaded over 500,000 times on various bittorrent sites and doesn't look to be slowing down. The first 300,000 downloads of Spore happened after just one day of the game being released. These pirated versions of Spore remove the DRM system that users encounter when installing the game. While it's not uncommon for popular games to hit those type of numbers on P2P sites, it's unusual for it to happen so quickly. Currently, the game has been the most popular download all week on The Pirate Bay, one of the most popular and controversial bittorrent sites around.

DRM is Not the Answer

The Sims 2 currently holds the record for the most pirated game. Pirates and disappointed fans are looking to change that. According to the TorrentFreak blog,

[Spore's] download rate exceeds that of any other pirated game in history, and in a week or two from now it will be the most pirated game ever on BitTorrent.

Spore is still one of the worst rated games on Amazon. Since its release it has been given a rating of only 1 star by more than 50% of its reviewers. The majority of these ratings address problems with the DRM system. DRM is not the answer and continues to provoke "pirates" to release what publishers should have given to customers from the beginning.

There's no doubt that Spore would've been pirated regardless of the DRM system. However, users of P2P networks are now encouraging others to pirate the game in order to teach EA a lesson. A commenter on the Pirate Bay known as "deathkitten" stated,

"You have the power to make this the most pirated game ever, to give corporate bastards a virtual punch in the face."

Due to the transparency of college networks, students are an easy target for the RIAA's resistant efforts. However, don't get it twisted. Colleges are not about to start defending the students that actually violate copyright laws. For not only are these students violating the laws of the music industry, but also those of the college. With that being said, colleges are fighting back because they feel that the resources and time spent on chasing these students is cutting into better things that faculty members could be doing.

The Costs and Efforts of the Hunt

So what exactly does it cost colleges to hunt down these students? With the increasing number of subpoenas and "cease-and-desist" letters coming from the RIAA, it's become a full-time job for college administration to keep up with students across their network, especially if the campus is huge. This has resulted in some colleges having to hire more full-time employees to monitor the networks and make sure the correct correspondents are actually violating the law and receive their notices. Talk about a time-consuming job! Not only that, colleges have also had to install more software to help track and monitor illegal network activities, which results in yet another software that IT employees have to get a handle on.

Just Not Worth All the Effort

In the end, it's understandable for some colleges to simply stop helping out the RIAA. Their efforts are costing them a ton of money and time. Instead, colleges are opting to focus their efforts towards their school's mission statements and to the academic well-being of their students. Colleges could spend more time better educating their students on the most current software, upgrading their own systems to reflect these teachings, and overall helping their students in a variety of other ways. We're sure students will be happy to hear this, but we'd like to warn college students once again that campus efforts to stop piracy will not stop completely.

P2P Innovation in Startups

This week we also saw the launch of Wuala, a P2P Cloud Storage solution (our review here).

Earlier, we reviewed a P2P approach to search (Faroo) and a P2P approach to video sharing (Metaaso).

With the exception of Skype, these are all tiny little start-ups. Interestingly, they have all originated outside America:

Skype - telephony - Estonia
Wuala - storage - Switzerland
Faroo - search - Germany
Metaaso - video - India.

This geographic origin may not be coincidental.

You need $ gazillions to be a Cloud Computing Platform. Those server farms cost a lot. Skimping, or misjudging demand, leads to outages, slow response and other confidence-killers. This is a game for the big boys - Google, Microsoft, Yahoo, Amazon, AT&T, Sun. These are all American firms, with access to plenty of capital. Disruptive innovation usually comes from start-ups that are starved for capital. You replace capital with technical innovation. That was true for Google, Microsoft, Yahoo, Amazon, AT&T, Sun as well when they started.

That is why I have believed for some time that P2P is the next big disruptive technology at the infrastructure level.

P2P and Bigcos

Disruptive technology sometimes needs support from big companies as well. Fortunately for P2P, 3 very big companies would benefit greatly from more use of P2P as infrastructure - Microsoft, Apple and Intel. It's a great way to mop up those underutilized desktop CPU cycles. And attack the cloud computing incumbents.

Historically, P2P start-ups have tended to focus on music sharing and have been hurt by legal issues, but they have been fine technically. Skype makes P2P respectable and proves that scalability does not have to be an issue. Skype is taking on one the biggest and most entrenched industries in the world and millions of people increasingly rely on Skype as a mission critical alternative to landlines or cellphones.

P2P: Next Big Thing for Infrastructure

P2P infrastructure could play very well behind the enterprise firewall. It reduces CIO security fears about too many cloud based apps outside the firewall. This is important for P2P start-ups. They would need a lot of capital to go to market entirely with a consumer/SOHO offering. If they can get enterprise adoption at the same time, then they can accelerate cash flow and reduce need for funding.

Watch the P2P space. It's the next big wave of innovation at the infrastructure level.

While Wuala will happily sell you additional storage space (from $25 a year for 10GB to $1000 for 1TB), you can also trade your own local disk space for cloud storage space. If you share 5GB of space on your local drive, you will get an additional 5GB of online storage. Given how cheap hard disks have become, this seems like a fair trade-off. Users who share their local hard disk space can also turn off advertising on Wuala.

Wuala's client basically looks like a local folder and you can decide if you want to share any of your files stored on Wuala with either your friends or a group of users.

Encryption: The Good and the Bad

Even with the strong encryption Wuala uses, though, the fact that some information is going to be stored on machines outside of even Wuala's control is not going to sit well with a lot of people. While most private users can probably live with these risks (which are inherent in any cloud storage solution), businesses will probably stay very far away from Wuala.

There is also the question of how people will use Wuala - after all, the service provides almost unlimited and strongly encrypted storage. As Wuala has little control over what is shared on the network, Wuala might turn out to be a haven for rather unsavory activities. But then, the same can probably be said for most other cloud storage services as well.

Where's the Money?

The cloud storage market is highly competitive, but so far, no clear front-runner has emerged. Wuala's competitors include Box.net, Dropbox, Mozy, as well as Apple's Mobile Me and Microsoft's various online storage services, including SkyDrive and Mesh. There are also various software solutions to make backing up to Amazon's S3 more consumer friendly. All of these have different business models and feature sets, but Wuala's simplicity and P2P sharing approach will make it very competitive.