Antitrust won't help Google's codec fight

Nowadays, Google is normally considered the next monopolist on the losing end of antitrust scrutiny. This month, Google is getting help from antitrust authorities in its uphill efforts to get VP8 video codec (and its WebM project) established against the dominant H.264 codec.

In January, Google announced plans to drop support for H.264 in its Chrome browser, nominally because of the H.264 patent royalties. Meanwhile, Google licenses VP8 and its associated patents with the claim that it’s royalty free:

Please explain how WebM is "royalty-free."

Some video codecs require content distributors and manufacturers to pay patent royalties to use the intellectual property within the codec. WebM and the codecs it supports (VP8 video and Vorbis audio) require no royalty payments of any kind. You can do whatever you want with the WebM code without owing money to anybody. For more information, see the License page.

However, all Google can promise is that it won’t charge royalties on VP8. It can’t promise that its source codec doesn’t infringe the patents of others: that’s up to the patent holders to allege and (ultimately) for a court to decide. (Its policy is that people can’t use WebM without licensing their own patents to WebM users.) The only way around third party patents would be for Google to indemnify users against these claims.

Since MPEG LA is in the business of managing and licensing patent pools, including a pool of some 800 patents that read on H.264 (including 273 US patents and 469 Japanese patents) it has long expected that many of these patents could also be essential for implementation of VP8. So last month it asked all parties (both current and other licensors) to submit their patents for review. Needless to say, this brought squawking by Google and the usual anti-software patent crowd.

Now, the Wall Street Journal reported that the US Justice Department is looking to help Google in its efforts to resist MPEG LA patents:

Antitrust enforcers are investigating whether MPEG LA, or its members, are trying to cripple an alternative format called VP8 that Google released last year--by creating legal uncertainty over whether users might violate patents by employing that technology, these people added.

The Justice Department and Federal Trade Commission start many more antitrust investigations than they bring to court. There is no per se legal problem if patent holders want to charge royalties to VP8 users, as long as they are on comparable terms to those charged to H.264 users. As the FTC antitrust website states:

Restraints in the supply chain are tested for their reasonableness, by analyzing the market in detail and balancing any harmful competitive effects against offsetting benefits. In general, the law views most vertical arrangements as beneficial overall because they reduce costs and promote efficient distribution of products. A vertical arrangement may violate the antitrust laws, however, if it reduces competition among firms at the same level (say among retailers or among wholesalers) or prevents new firms from entering the market.

So the only problem is that MPEG LA wants to run the licensing business for both H.264 and VP8. Normally in competing standards (think Blu-ray vs. HD DVD) competing organizations run the patent pools. So while the DoJ will not find anything wrong with charging patent royalties for VP8, it might force MPEG LA to exercise greater transparency in royalties or even to spin off the VP8 pool efforts.

The research has clearly shown that patent pools increase the efficiency of patent collection for both licensors and licensees. (The only downside is that licensees might hope that without pools that would-be licensors might not bother to enforce royalties.)

If MPEG LA comes under pressure, I think it could easily solve the transparency problem by separating royalties into three piles: patents that apply both H.264 and VP8 (or WebM), those that apply to H.264 and those specific to VP8. If the terms for the first pile are the same for either standard, VP8 supporters would be hard-pressed to show any anti-competitive effects of the patent policy — other than their fantasy of releasing a patent-free codec.

All this kerfuffle over MPEG LA royalties ignores three other factors:

• the effect of the annual royalty cap (as with H.264) in making MPEG LA royalties negligible for large firms like Apple, Google or Microsoft
• as with any other standard, the existence of other patents that are not “essential” to the standard but may be commercially necessary
• Google’s ability to use its own patent leverage (including those it acquired when it bought the WebM developer) to force a cross-license or non-assertion agreement by key patent holders

Open platforms and semi-open standards

For unexplained strategic reasons, last month Google said it didn’t want the semi-open H.264 video codec supported in its Chrome browser, but was favoring its semi-open WebM codec instead. This meant that the most popular HTML5 video format would not be available for Chrome users.

Not available, that is, until the intervention of an unlikely savior. Today Microsoft announced that it is supporting H.264 on the three main Windows browsers: its own IE9, and via plugins for Chrome and Firefox. The latter two make use of the extensible browser platforms that their respective open source sponsor created to encourage third party support (albeit not originally intended to help Microsoft.).

(Apple remains firmly committed to H.264 and HTML5 on both Mac OS and iPhone OS, as part of its pointed rejection of Adobe’s Flash.)

As a Mac guy, I rarely agree with Microsoft on standards battles, but I think they’re dead right on several issues.

Here are a few excerpts:

A Web without video would be a dull Web and consumers, developers and businesses want video on the Web to just work. As an industry we know this and have, until recently, been on a path to make this a reality with HTML5 by integrating video into Web pages more natively using H.264.
…
We’ve been clear from the first public demonstration of IE9 that the community deserves a reliable platform for delivering video as part of the modern Web.
…

• IE9 will play HTML5 video in the H.264 format. Why H.264? It is a high-quality and widely-used video format that serves the Web very well today. We describe many of those reasons in blog posts here, here, and here.
• Any browser running on Windows can play H.264 video via the built-in Windows APIs that support the format. Our point of view here is that Windows customers should be able to play mainstream video on the Web. …

Although predictably snarky (as it is about all things Microsoft), The Register noted the significance of Google’s action and Microsoft’s response:

H.264 is the mostly widely used video-playback codec on the web, but Google said in January that it was removing support for H.264 from future versions of Chrome.

Google said its resources would now be directed towards "completely open codec technologies," as the giant's goal is to enable "open innovation" on the internet. H.264 was built by Apple, Microsoft, and others, and is licensed by MPEG LA.

Future versions of Chrome will support only the royalty-free WebM codec that was owned and open sourced by Google last year, and the Ogg Theora codec.

As someone who’s been studying standards wars for more than 15 years, I think the Microsoft people are exactly right. The correct answer for web standards is choice and competition — just as we have choice and competition for cars, TVs, laptops, tablets and smartphones.

Accessing web pages is not like playing back 8-track tapes: it’s easy for a modern computer (and perhaps even a modern tablet or phone) to support multiple browsers.

I have four browsers installed on my MacBook Pro: Safari, Camino, Firefox and Chrome. Mainly I use them because I want to group a different set of pages for different windows, but sometimes I find that printing or browsing works better on one that the other.

Whatever its motives, Google attacking H.264 by banning it from its browser platform is the same idea as Microsoft trying to kill Java by discouraging its availability on Windows. It’s up to vendors to make their case to customers — both content providers and content consumers. Eventually the formats will shake out, but competition will force the codec providers to offer the best price and performance they can.

Google's war on semi-open standards

Google stirred up a controversy this week with its decision dumping H.264 video codec support from its Chrome browser in favor of Flash and its own WebM (VP8).

This clearly is good for Adobe’s Flash, and bad for efforts to build a Flash-free HTML5 Internet that was (until this week) a joint effort of Microsoft, Apple and Google.

The claim that Google is motivated by openness is quite hollow. While technically a Windows browser doesn’t need Google’s help to distribute a free Flash player, Google has been very pro-Flash in its efforts to help Android overtake the iPhone.

Also, even though royalty bearing, H.264 is an open industry standard, whereas Flash and VP8 are not. Flash has only one proprietary implementation.

Still, some speculate that argument one reason is the H.264 business model, specifically that Google doesn’t like the H.264 royalties charged by MPEG LA. Here is what Google’s revised justification said Friday:

We acknowledge that H.264 has broader support in the publisher, developer, and hardware community today (though support across the ecosystem for WebM is growing rapidly). However, as stated above, there will not be agreement to make it the baseline in the HTML video standard due to its licensing requirements. To use and distribute H.264, browser and OS vendors, hardware manufacturers, and publishers who charge for content must pay significant royalties—with no guarantee the fees won’t increase in the future. To companies like Google, the license fees may not be material, but to the next great video startup and those in emerging markets these fees stifle innovation.

The idea that Google’s latest push will cause VP8 to pass H.264 is fanciful at best: it will take more than support from the #3 browser to cause the rest of the industry to shift from H.264. If anything, Google’s efforts fragment and thus undercut any efforts to establish an open alternative to Flash.

One theory is that Google wants to ditch H.264 support from YouTube (which, if true, would send iPhone users away from YouTube — good for Android, bad for YouTube.) The theory that Google hates H.264 royalties doesn’t hold water according to an analysis by Ed Bott of ZDNet, because even the worst case cost is not material for a $29 billion/year company.

Clearly there is more to this strategy than meets the eye. A company that aspires to be the (unregulated) benevolent dictator of the Internet would be more transparent about its motivations — perhaps something the next CEO will be better at.

But for now, the only good explanation I’ve found is at the comic strip “Joy of Tech,” which argues that it’s part of a cynical Machiavellian strategy by the “do no evil” crowd to retaliate against Apple and generate controversy.