• Gearing Up
• Meeting of the Minds: Net Neutrality and Peering: Online Games Crushed in a Battle of Titans?
• Industry Highlights
• Betting on the Future of Sports Gaming
• Massachusetts Considering Tax Incentives to Entice Video Game Developers
• As a Strategic Move, Disney Shuts Down Propaganda Games
• Grateful Dead to Enter Online Gaming World
• Hacker Takes and Holds Runes of Magic User Data Hostage
• Jane McGonigal's Vision of the Virtual's Virtuosity

Gearing Up

Peter Freese Conference Director LOGIN 2011

Net Neutrality and Peering

Online Games Crushed in a Battle of Titans?

Back in the Mesozoic Era of online games (think dial-up hosts like GEnie and AOL), modem speeds were slow and bandwidth was at a premium. How much money the host paid for a game was partially dependant on how little bandwidth the communication path ate. I remember negotiating contracts with both providers where the key sticking point was how many megabytes a month the game could transmit before the host started ratcheting down the royalty rate. Programmers worked like mad to minimize the data exchanged between host and client. And users paid by the hour to play online games. With the advent of the "free," "all you can eat" Internet, the gaming industry largely forgot this old paradigm and assumed that users had an unlimited pipe and ping times under 100 ms. OnLive is building an entire business on the notion that it can stream online games in their entirety to users.

Yet two forces are moving together with the force of Scilla and Charybdis (that's a Rock and a Hard Place for you non-Homerians), and online gaming could eventually get caught in the middle. The hottest words right now in the telecommunications industry are "network neutrality" and "peering." Industry behemoths are fighting over who controls the pipe, and who pays for the pipe. In December the FCC adopted (by a 3-2 vote down party lines with the Democratic Chairman getting his way) new "net neutrality" rules with three principles: transparency; no blocking; and no unreasonable discrimination.

Under the transparency principle, providers must inform users of their network management practices, network performance, and clearly articulate the commercial terms of their broadband services. The transparency principle applies to fixed and wireless networks.

Under the no-blocking principle, fixed providers may not block lawful content, applications, services, and non-harmful devices. Fixed providers also cannot charge providers of these services simply for delivering traffic to and from the network. Wireless providers, meanwhile, would be banned from blocking access to lawful websites or blocking applications that compete with their own voice or video telephony services. It does not apply to mobile broadband app stores.

Finally, fixed broadband providers cannot unreasonably discriminate against lawful network traffic. But it doesn't mean that providers can't charge heavy users more.

Verizon immediately filed suit against the FCC, claiming that the new net neutrality rules go beyond the legal mandate set for the FCC by Congress. Meanwhile folks are already claiming rule violations: Consumer groups say wireless provider Metro PCS is blocking Skype, and Level 3 and Voxel (backbone traffic carriers) say Comcast has unfairly raised prices for them to deliver online videos to home subscribers.

Then there is the subject of "peering." The Internet has functioned successfully because carriers have agreed to exchange Internet traffic to each other largely free of charge. The assumption has always been that "it all evens out in the end," and trying to put some sort of meter to charge for Internet traffic would both slow down the Internet and ultimately not result in substantial charges flowing between carriers. Carriers both considered Internet traffic to be ancillary to the lucrative voice traffic, and the thought of instituting a second set of "inter-carrier compensation" equations on top of the Byzantine rules for voice was unpalatable.

With so much voice traffic now being transmitted via IP, and exponentially increasing amounts of data being streamed, carriers are beginning to rethink free peering. In the same fight where Level 3 is claiming Comcast has violated the net neutrality rules, it is also claiming that Comcast has violated the free peering standard by charging it a fee to transport Netflix videos (which by one estimate accounts for 20 percent of U.S. Internet traffic during evening hours). Comcast claims that carriers often charge large users of bandwidth and that free peering is not required.

It's too early to predict how this will all play out, but one path is eminently possible: The days of "all you can eat" Internet could be coming to an end. If carriers jettison peering and go for a paid traffic model, ultimately you and I are going to have to be charged for the amount of bandwidth we use. Rather than paying a monthly fee based on the theoretical size of the pipe we use, we'll instead be charged based on the amount of data going through that pipe (be it fixed or wireless). The first to be impacted by such a change no doubt will be the providers of streaming video, such as Netflix, but I can foresee the day that that 400 meg patch or live voice add-on to an online game might start costing something in download fees. If that happens, many programmers may have to make a few trips to the Home for Retired Programmers to find out how their forefathers managed to squeeze all that data down a 1200 baud pipe.

Note: The information presented here is necessarily of a general nature and cannot be regarded as legal advice or applying to any particular fact or circumstance. You should contact competent counsel if you have a question about how this article may impact you

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James E. Dunstan Mobius Legal Group

Industry Highlights

Betting on the Future of Sports Gaming

Virgin Gaming, a division of Sir Richard Branson's Virgin family of companies, is bringing its online wagering games to the majority of Electronic Arts sports franchise games, including multimillion game-selling Madden 11 and FIFA 11. Virgin's service allows video gamers to wager on the challenges they play out
in their respective games on the Xbox 360 and PlayStation 3. The gamers involved in the wagered challenge are then tracked to ensure they are not cheating. The winner is then handed a payout,
which can be as high as in the tens of thousands of dollars. Virgin has said it already has 170,000 users from 30 countries signed up on its online wagering service.

This partnership between Virgin Gaming and Electronic Arts will be a concern for government regulators, who are still wrangling with the complications of Internet-based gambling and parents, who will need to watch their wallets and their kids' gaming sessions.

Story at VancouverSun.com

Massachusetts Considering Tax Incentives to Entice Video Game Developers

Lawmakers in Massachusetts are now considering a wide-scale economic enticement plan to game industry developers and publishers to their state. Although Massachusetts has a $2 billion game industry and is home to name brand developers like Harmonix, Irrational Games and Turbine, former Boston Red Sox pitcher and owner of 38 Studios Curt Schilling moved his company from Massachusetts to Rhode Island after being extended a low-interest state loan of $75 million.

The legislation calls for tax breaks and tax credits associated with production and hiring goals being met; the goals of legislation extend further into creating development zones and innovation centers around the video games business. Also being considered are low-interest loans and free use of surplus state property for start-up video games companies. Through this ambitious plan supporters hope to expand the scope of Massachusetts business to an equally ambitious $20 billion in valuation in five years.

Article at Gamespy.com

As a Strategic Move, Disney Shuts Down Propaganda Games

Vancouver-based Propaganda Games has been shut down by its parent company, Disney. This move follows the scrapping of its Pirates of the Caribbean game and a series of layoffs, resulting in another
75 to 100 people losing their jobs. On the larger scale, this move apparently signals Disney's (which acquired major social game developer Playdom) move from traditional console games toward social games and other digitally distributed product on different platforms.

Story on HollywoodReporter.com

Grateful Dead to Enter Online Gaming World

Call it another mixture of pop culture and the continually expanding world of online gaming. The Grateful Dead are partnering with Curious Sense, who has already created a game dedicated to REO Speedwagon, for the iconic San Francisco band that made its name in the '70s and '80s. Curious Sense will have access to the names and likeness of the band members, including their audio and video recordings, photos and artwork, but the game will not be a Guitar Hero or Rock Band play-alike. Apparently, online gaming Dead Heads should expect a psychedelic journey to worlds that reflect past imagery and ideas the band has created, then tie the players in with matching gaming elements.

Article at USAToday.com

Hacker Takes and Holds Runes of Magic User Data Hostage

In an apparently significant breach of security, a hacker identified as "augustus87" has hacked into the database of Frogster's popular Runes of Magic MMORPG and claims to have taken the data of 3.5 million users. The hacker claims he or she will release user data in waves unless several demands, including increased security for users, are met. Frogster disputes the value of the data theft, saying it's old data from 2007, but is still considering it a serious breach and a criminal offense. The German online game developer and publisher is conducting an internal investigation and is working with authorities to track down the hacker.

Story at gamrFeed

Jane McGonigal's Vision of the Virtual's Virtuosity

Jane McGonigal, a game designer, has penned a new book, "Reality is Broken," and the subtitle spells out the counterpoint, "Why Games Make Us Better and How They Can Change the World." In her book McGonigal explains the basic values of gamification and how gamers are "fully engaged, exceptionally hard working and even heroically inspired" in games and how making real life more game-like can make the world a better place. Games, for example, are already in use by the military, clinical psychologists and many others in solving real-world problems. One question worth posing is, though, can gamers be part of a more connected, gamified world, or would they prefer the real world and the virtual world be more separate?

Story at thestar.com

Sponsorship Opportunities Available at LOGIN 2011

Without our sponsors there would be no LOGIN! We are currently seeking sponsors for the 2011 event. Interested? To learn more about sponsorship opportunities at LOGIN visit the sponsorship page on our website, contact Cynthia Freese at cynthia@loginconference.com, or call 1.425.533.5973.