The Internets breathtaking newness, by now, has faded. In 2001 the Net is part of our everyday routines. Many dot-coms have fallen back to Earth. "Aha!" we think, "Theres no such thing as the New Economy after all." Ho-hum. Life goes on.
And yet, huge tracts of digital terrain remain unexplored. Brand-new industries are springing up where traditional entertainment is colliding with the Internet, as Napster forcibly raises questions about intellectual property online. Content companies are still scratching their heads about which business models work and which dont. Governments and organizations continue to wrestle with questions of Internet taxation and privacy.
Here is our guide to whats in store this year for Internet entertainment and media, personal technology, politics and the international community — trends that will affect how ordinary people the world over access the Internet, and what theyll do there.
For the digital entertainment industry, last year was one of upheaval, marked by courtroom dramas, leaps of innovation and the emergence of fundamentally new business models.
Expect the chaos to continue in 2001. Protecting copyrighted material online will still be a contentious issue; the recording and movie industries will struggle to shape their Internet strategies; and a reformed Napster will attempt to attract a paying audience.
In the legal arena, courts are expected to issue rulings in two key cases. Early in 2001, look for the long-awaited decision by a federal appeals court as to whether to uphold an injunction against Napster instructing it to stop allowing its users to swap copyrighted music. Later in the year, another appeals court will rule on the so-called DeCSS case — the first major legal challenge to a controversial provision of the Digital Millennium Copyright Act — in which the movie industry sued a Web publisher that distributed software for decrypt ingmovies on DVD. The defendants claim the DMCA provision, which makes it illegal to circumvent copy and access controls for digital content, curtails their First Amendment rights.
If Napster survives its legal battle, the industry is eagerly waiting to see what sort of beast the unlikely partnership between Napster and Bertelsmann will birth. The companies plan to announce soon the details of a copyright-friendly version of Napster, but its success will depend on whether other major labels join the effort — not considered likely — and whether the offering is good enough to retain a significant chunk of Napsters user base.
In any event, BMG Entertainment and the other music labels are struggling to develop online business models that are attractive to consumers, but shield their content from unfettered copying. For now, the most likely one is a subscription model, charging users a monthly fee for unlimited access to music. Smaller companies like MP3.com and EMusic.com already offer subscription services, but there are many hurdles to leap before consumers will get access to vast catalogs of music. Issues include security, pricing, artist contracts and a framework for cooperation among the major labels. Nevertheless, in 2001, expect to see conglomerates like AOL Time Warner start to offer online music and other entertainment. — Sara Robinson, Senior Writer
Broadband has always been seen as the key to making the Internet a truly interactive medium, and content sites and advertisers will grow their broadband offerings in 2001. "There isnt that much we can ram down a 56K [56 kilobit-per-second modem] line. Broadband is what were all betting on," says Ted Driscoll, chairman of Be Here, which provides video technology that lets viewers watch movies and concerts from different camera angles.
Research firm eMarketer estimates that there are 9.4 million broadband users today in the U.S., and predicts the number will grow to 15.2 million in 2001. Even assuming that rate of broadband uptake, just one-fourth of all U.S. Internet users will access the Net by high-speed connections.
But many advertisers wont wait for more widespread adoption and increasingly will launch rich-media ads, which enable creative formats that are more engaging than static text and images. Likewise, content sites this year will add streaming audio and video to try to make their pages stickier, and perhaps even subscription-worthy. Many in the industry will be keeping their eyes on RealNetworks GoldPass subscription service, which costs >> $9.95 per month, to see whether consumers will pay for television-like broadcasts of concerts and other entertainment.
Content providers and advertisers also will expand their presence to non-PC devices, such as personal digital assistants, interactive TV, mobile phones and traditional phones, via voice portals. The efforts of America Online, Microsoft and Yahoo! to be accessible on multiple platforms will gain momentum in 2001.
Other trends to watch: Standards for electronic books and instant messaging could give each nascent industry a big boost; search engines increasingly will charge Web sites fees to be included in their indexes, as portals look for new sources of revenue. — Mindy Charski, Senior Writer
The PC industry once enjoyed 20 percent or more yearly growth, but now the overheated engine has cooled. After a disastrous fourth quarter in 2000 — in which PC sales were off by about 17 percent from the previous year — the outlook for 2001 doesnt appear much better, with a PC price war looming. Whats happening: The pool of first-time buyers is very close to saturated, and there are fewer reasons to upgrade to newer computers. Microsofts Windows 2000 and Windows Millennium Edition did not do much last year to stimulate PC sales.
The slumping PC market certainly is not good news for Internet appliances, which will try to prove their long-term viability in 2001. Theyll need to cost less — less than $500 — and offer consumers a better reason why theyre preferable to PCs for certain tasks. So far, Internet appliances smaller size, instant-on features and supposed ease of use havent been obvious winners.
Some digital gadgets should fare well this year. Look for a plethora of new MP3 players — both portables and MP3 stereo components — and more powerful handheld computer models from Palm, Handspring and Sony. Expect personal video recorders, devices pioneered by TiVo and ReplayTV, to become integrated into cable set-top boxes such as those from Motorolas General Instrument and Scientific-Atlanta.
Home networking will continue to make inroads, but it wont be a breakout year. Intel and Motorola will continue to back the Home Radio Frequency specification for wireless home networking, and a faster version of the HomeRF technology operating at 10 megabits per second is expected by the end of 2001. But its only a matter of time before HomeRF loses the war to the much more widely supported Wi-Fi spec, also known as IEEE 802.11b.
And what about Bluetooth? Dont hold your breath. The stunningly overhyped short-range wireless technology — which acts as a cable replacement, essentially — will start to trickle out this year. Analysts expect cheap Bluetooth components — $5 apiece — to start showing up in many devices by the end of 2003. — Todd Spangler, Matrix Editor
The 107th U.S. Congress is ready to wade into a thicket of potentially divisive Internet issues as soon as it convenes this month.
Lawmakers definitely will slug it out over Internet taxation. It may be the biggest high-tech battle on Capitol Hill this year, and it wont be pretty. At issue is whether states can force remote merchants to serve as tax collectors. The National Retail Federation, a trade organization whose members include Wal-Mart Stores and other established retailers, is teaming up with state and local government organizations to persuade members of Congress to give states — West Virginia, for example — the right to demand that Amazon.com collect West Virginia sales taxes when a West Virginia resident buys a book from the online retailer based in the state of Washington.
Governments fear their coffers will dry up as consumers increasingly turn to the Web to do their shopping. They want a piece of the online revenue pie, and they will use the specter of declining local services — such as schools, police and fire protection, and roads — to try to convince Capitol Hill and the country that requiring Internet merchants to collect taxes is the right thing to do. Brick-and-mortar retailers want online companies to be forced to collect taxes to have a "level playing field."
Privacy will also be a biggie in Congress this year. Privacy advocates want to see some sort of "baseline" privacy legislation enacted that would set minimum standards for how Web sites collect information about consumers, what they do with the information and what kind of access consumers have to the information collected about them. The Internet industry generally champions self-regulation, meaning it wants Congress to stay away.
Other issues: Revisiting the governments telecommunications policy, as well as legislation dealing with spam; intellectual property, brought to the fore last year by Napster; and pornography, a topic that wont go away for lawmakers. — Doug Brown, Washington Bureau Chief
High-tech leaders around the globe will have their hands full with several thorny policy issues in 2001. Expected to be among the most contentious is an effort to craft an international treaty aimed at curbing cybercrime.
For more than three years, the Council of Europe, a 41-member organization that promotes human rights and other issues, has been working on a draft convention that would harmonize cybercrime laws and increase cooperation among law enforcement officials around the world. This year, the organization is expected to give final approval. Privacy advocates and U.S. industry representatives have voiced strong reservations about the convention, and they may urge the U.S. government not to sign it.
Observers also expect to see more examples of governments trying to extend their laws to foreign companies that operate on the Web, as France did in 2000 by ordering Yahoo! to block French citizens from accessing auctions of Nazi memorabilia on the companys site. Such moves may put pressure on delegates to the Hague Conference on Private International Law to come to an agreement on a treaty dealing with the recognition of foreign judgments and jurisdiction that is expected to affect e-commerce.
But given the difficulty of resolving the issue of which countrys laws apply to the Internet, the European Union and other organizations will likely continue to promote online alternative dispute resolution as a way of resolving disputes over e-commerce transactions.
Other issues that will continue to be debated include taxation of e-commerce and online privacy. The EU aims to reach an agreement by the end of June on a proposal to extend its value-added tax to sales of products delivered electronically to EU customers from foreign companies. If the EU succeeds, some expect other countries may move to extend their consumption taxes to electronically delivered goods.
At the same time, countries will continue to adopt laws to address concerns on online privacy and to comply with an EU law that bans the flow of personal information about EU citizens to countries without adequate privacy protections. — Juliana Gruenwald, International Editor