Sharing for Profit

For many, the phrase “peer-to-peer” conjures up images of teenagers in dark rooms, flouting copyright laws as they download digital music files and zip cracked programs across the Internet. Yet the concept has more innocent manifestations, including instant messaging, Webcams and photo sharing. More than any new networking technology, peer-to-peer seems to produce confusing — and often conflicting — meanings.

Whatever definition is assigned to peer-to-peer, the wireless industry is focused on one particular meaning: revenue. For all the fancy applications in the wireless universe, the most popular, addictive, enduring and profitable have been peer-to-peer applications — specifically voice and short messaging services.

Enter Apeera Networks, a 3-year-old Paris-based company that is trying to extend the popularity of those two services to the data backbone. With high-speed data networks coming online, carriers are looking for ways to generate traffic. And four years of wireless data flops has shown that people don't want to use their handsets to communicate with machines. So Apeera wants to find other ways for them to communicate with each other.

“Who really enjoys connecting to a machine?” Apeera CEO Bruno Suard said. “Only the techno-freaks. Person-to-machine interaction isn't working. It's not going to drive revenues.”

That's where Apeera hopes to find its niche. The start-up wants to bring the file-sharing world of the fixed Internet to mobile devices, allowing users to swap games, music, pictures and files of any sort between handsets.

But there is one element of the wireline file-sharing model that Apeera plans to leave out: the criminal one. Under Apeera's managed file-sharing solution, the content resides on the network and the carrier maintains control over every swapped file.

By definition, Apeera's approach isn't a true peer-to-peer solution; content is exchanged between servers rather than handsets, and the operator can identify every file. But if it looks like a file-sharing service and acts like a file-sharing service, then users will treat it like a file-sharing service. The only noticeable difference will be the pop-up windows demanding payment when a copyright-protected file is downloaded.

“Obviously, as an end-user I want to be able to download MP3s,” said Adrian Bisaz, Apeera's vice president of marketing. “Unfortunately, this is illegal. That ‘free’ world we've become so accustomed to over the years is becoming obsolete. We're moving to pay models. But from a business point of view, it is a good opportunity for an operator. They can collect revenue off of content sold, as well as from network traffic.”

Apeera's biggest obstacle is the entertainment industry's skepticism about bringing its content to a digital medium, which is based in large part on the computing industry having not yet developed a standardized method of marking and administering digital rights across different media formats.

In the last few years a host of companies have sprung up that claim to have solved digital copyright woes, but many have gone under. And the most prominent of the digital rights management (DRM) developers, Intel and Microsoft, have yet to find support for their media management solutions because they're caught in a debate over whether such offerings should be based on software, hardware or a combination of both.

If carriers hope to convince the entertainment industry to allow content onto their networks, they will have make a convincing case that the content will be protected, said Adam Zawel, director of wireless mobile enterprise and commerce at The Yankee Group. “Carriers want to create an open network to attract customers and traffic, but they have to somehow convince the content providers that they'll protect their property.”

A DRM standard could be years away. And until the debate is settled, no carrier could run an open peer-to-peer network unless it would be willing to track every file traveling across its pipes. But Apeera is unperturbed. The company is still in the developmental stage, and its staff of 20 won't even have a product ready for trial until next year.

“DRM is still a very hot topic, and while there may be no standards yet, we are providing the bricks with which carriers can build a copyright-protected network,” Apeera's Suard said. “We'll be ready when the industry is ready.”

But until then, carriers still have the opportunity to make money running closed networks with select content. And the biggest moneymaker, Suard predicted, won't be music or video, but gaming — one of the hottest growing segments in the wireless industry today.

Apeera envisions a way for carriers to not only sell downloadable games, but also allow customers to swap games back and forth — for a fee, of course. The peer-to-peer connection has other advantages. Users can create direct links to each other and play games head-to-head, which drives more traffic onto the network.

Apeera sees that model expanding to other closely regulated content, whether it's screen savers, promotional music or ringtones. As security improves, Suard also sees Apeera's model used in closed enterprise networks. And when the DRM debate is finally settled, the network can be opened to all content, using digital signatures encoded in copyrighted files to determine when and how much royalty is collected.

The same reasons that compel carriers and the entertainment industry to adopt Apeera's platform may prompt users to avoid the service, though. File-sharing services will always draw comparisons to Napster and offspring such as Morpheus and Kaaza, said Linda Barrabee, a senior analyst with The Yankee Group. Mobile operators may be in uncharted territory, but consumers may shy away if they too closely associate Apeera with such services.

“If there isn't freedom or flexibility inherent in the system, customers might find it unappealing,” Barrabee said. “There will have to be a transition phase. Carriers will have to educate their users about what the service is and what it isn't.”

Apeera's solution may not be the ideal answer to carriers' network traffic problems. But even if it isn't, something very similar is, said Andrew Cole, wireless analyst with Adventis. The fact is, carriers can't get people interested in data without some form of peer-to-peer sharing.

Already reeling from the impact of SMS in Europe, the telecom industry is pursuing multimedia messaging with a vengeance. In the U.S., carriers are marketing camera phones not on the performance of the camera itself, but on sending photos to friends.

But while MMS and instant messaging applications are limited by the types of content they can send and receive, Apeera's solution is agnostic. Carriers can't help but be interested, Cole said.

“[Peer-to-peer]is the one proven area that generates revenue,” Cole said. “It's the one indication that there is to be a future in this industry beyond voice.”