On Wednesday, BitTorrent Chief Strategist Shahi Ghanem told me the company is relying on Amazon’s EC2 and S3 services to provide this kind of caching infrastructure. Files are taken off the cloud as soon as they are sufficiently shared by peers. The app will initially be Windows-only, but Mac users will be able to download an alpha version of the company’s µTorrent client that will offer them the same kind of personal file sharing functionality. Future Windows versions of µTorrent will also offer Share functionality.

BitTorrent's new Share app.

BitTorrent isn’t the first company to try to combine P2P and personal media sharing. Companies like Pando have long offered personal file transfers, but typically limit the size of files that can be transferred to manage hosting costs. Others like Podmailing were more aggressive, but eventually had to shut down due to exploding hosting costs.

Ghanem told me BitTorrent plans to avoid this kind of fate by building out its own P2P-powered personal cloud storage system. The system isn’t up and running yet, but the idea is that users will receive free storage for their files by sharing some hard drive space and bandwidth with other users.

Image courtesy of Flickr user Carlos Maya.

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Universal, Sony, EMI and Warner had sued Soto in 2008 in an attempt to shut down file-sharing applications powered by his Manolito P2P protocol, also requesting €13 million ($17.01 million USD) in damages. They were joined in their efforts by the local music rights group Promusicae, which now announced it will appeal the ruling. Soto, on the other hand, has said he wants to go after the labels and sue them for damages for wrongful prosecution.

The plaintiffs tried to blame Soto for copyright infringement committed by his users, pointing out his apps didn’t provide a proper mechanism to filter out copyrighted works. The court rejected this argument, however, and found P2P itself is neutral, according to a report from the Spanish newspaper El Mundo.

Pablo Soto may not be as famous as Shawn Fanning, but the Spanish P2P developer made some headlines when he briefly teamed up with the former Grokster CEO Wayne Rosso, who most recently was involved in an unsuccessful bid to buy The Pirate Bay. However, efforts to take Blubster worldwide and follow in the footsteps of KaZaA and LimeWire failed; the file sharing application never gained a lot of traction in the U.S.

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Their plan, they said, was to upset the payments industry by making it radically more simple and less expensive to move money from one country to another.

It wasn’t a message the audience particularly wanted to hear — after all, many of them profit handsomely from wire transfers and exchange markets — but the company got a fair reception, according to co-founder Kristo Kaarmann. “There were a lot of smiles in the audience,” he says.

Chances are those smiles were covering up some uncomfortable feelings, however, since Transferwise is one of those startlingly simple ideas that has the potential to be incredibly disruptive.

Here’s why.

Traditionally, people who want to send money to another country and in another currency (say from American dollars to Indian rupees) will go to a bank or an agency such as Western Union to organize the payment. They will pay money to the broker, who will then wire the money into the recipient’s bank account or destination for a price — usually at an exchange rate significantly worse than the underlying market figure, and often with fees or commission charged on top.

Transferwise makes things simpler by making the process much more transparent.

Instead of wiring the money into the recipient’s foreign account, it handles the back end by simply having accounts in the countries and currencies it needs to. That means when a customer wants to send some money, she pays it to Transferwise at one end, and the company can then pay it out to the recipient at the other end from a different account, directly in the target currency.

In order to minimize its own capital needs, the company tries to match payments on one side to payments going the other way. But if there are no matches it simply hands over money from its own coffers.

It is a simple idea that sidesteps the usual red tape and delays around international transfers — and allows the company to operate at lower costs, too. Those savings are passed on to the customer: There are no expensive wire fees and no cranked-up exchange rates. Instead users get charged a flat fee (£1, around $1.56) on small transactions or a small percent on larger sums.

It’s peer-to-peer payment — a sort of Skype for currencies.

The Skype analogy is no accident, either: The other co-founder, CTO Taavet Hinrikus, was an early employee at the telephony firm and has experienced the thrill of using the Internet to challenge a huge, expensive industry from the inside.

Since launching quietly over the summer as a self-funded startup, he says, the company has saved users £250,000 ($390,000) in bank charges and organically grown a core of regular, dedicated customers who are helping spread the word.

Just getting started

Today the service is small, not least because it only works between two currencies: sterling in the U.K. and Euros. The team plans to roll out soon into new areas – first low-hanging fruit like the Swiss franc and the Polish zloty but then hopefully into other, more lucrative markets with very large expat communities. It is eyeing the Australian dollar, the South African rand and ultimately the U.S. dollar and Indian rupee.

That expansion will require a lot of regulatory work, since the company must comply with financial rules and laws to prevent its being used for money laundering (this is one significant benefit of starting in Europe, where a single regulatory burden covers 500 million people, 27 countries and 14 currencies).

But it will also have to work hard to outflank the banks, which are unlikely to be happy to lose any custom, and gain user trust — something that the team knows is going to be tough.

Kaarman says this is an area where Transferwise is moving carefully, because “the day you lose your first customer’s money, you are in trouble for a long, long time.” He’s right. A false step could easily kill off a startup.

So what comes next?

More currencies, more users, more awareness are all important — and to get there, funding could be high on the agenda.

So far the company has been self-funded, and it only has a skeleton staff. Scaling up will require more investment. If nothing else, it needs significant capital in each country it enters in order to guarantee prompt payment. However, given how straightforward and useful the service is, I don’t think it will be too long before there is some significant investment coming in.

Photograph used under Creative Commons license courtesy of Seedcamp

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Grapevine, as the service was called, never saw the light of day — which is too bad, because it had some really interesting features to compete with Spotify and possibly even convince hold-outs to try the idea of music subscriptions.

Grapevine's client. Click the picture for a larger view.

Grapevine was in the works for more than a year under the internal code name “spoon,” and a former employee of LimeWire told me that it became the primary and almost sole focus of the company by summer of 2010.

Part of the reason for that was obviously that LimeWire was handed a summary judgement in May, when the same New York court found that the company was responsible for widespread copyright infringement through it’s P2P file sharing client.

However, LimeWire had been working on licensed music offerings for much longer. The company launched an MP3 download store with content from numerous indie labels in early 2008, and I’ve been told that the internal goal behind Grapevine was early on to build “the best damn music service ever.”

So what was Grapevine going to offer? LimeWire tried bridge the gap between music ownership and an unlimited subscription in an attempt to gradually transition people towards a world where any song is available from the cloud and ownership doesn’t matter anymore. The Grapevine client automatically imported a user’s iTunes collection, and users could seamlessly combine locally stored music and songs streamed from Grapevine’s servers to playlists.

Some of the basic design principles behind Grapevine.

Spotify offers similar functionality, but Grapevine wanted to take the idea of combining ownership and subscriptions one step further: The service was designed to come with bundles of MP3 downloads, which would have allowed paying users to get DRM-free copies of a few dozen of their favorite songs per month on top of unlimited streaming. Users would have been able to transfer these MP3s to any of their devices and access them offline as well. As a result, Grapevine would have been priced higher than today’s subscription services. One price floated as a possibility was $19.99 per month.

LimeWire was actively pitching the service to the music biz, and I’ve been told that many indie labels were ready to sign up for the service immediately. However, LimeWire had learned with its MP3 store that an indie-only offering just didn’t make sense, and tried hard to get the majors on board as well. Someone familiar with Grapevine told me that “all the majors had seen it multiple times,” with meetings including the label’s top executives. Music execs seemed to like what they saw, but the majors only wanted to sign licensing deals after a settlement over LimeWire’s file sharing service was in place. LimeWire’s staff was already long laid-off, and the company wound down when that settlement was finally reached in May of 2011.

Grapevine also put a big emphasis on music discovery. The service allowed users to instantly build custom radio stations based on single tracks in their library.

With Grapevine never having a chance to prove its model, we’ll have to wait and see whether one of the other subscription services will eventually try to combine ownership and unlimited access. One of the people familiar with Grapevine told me that the thinking at LimeWire at the time was that “MP3s are the transitional product users need to get them to streaming.”

He likened it to the way Netflix used its DVD business to launch its online video subscription service. That may not be the best sales pitch for such a model right now, given the troubles Netflix has been facing lately, but still: If you want to grow music subscriptions from a business with a few hundred thousand paying customers to one that could eventually bring growth back to the music industry, then you may need to think about combining access with ownership.

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The New York City-based startup launched its service in April, offering a platform for users to offer real-world classes of any kind to interested students. The service, which rolled out in New York first, is now poised to branch out to San Francisco and Philadelphia starting Aug. 15 and is looking to expand to Boston and Los Angeles later this year. It’s already built a strong community of users, who are leveraging Skillshare in much the same way Airbnb has transformed short term room rentals, Kickstarter has evolved project fundraising and Getaround is changing car sharing.

So far, Skillshare has helped organize about 500 classes in New York with 2,500 students and many more users who have browsed the site. People pay on average of $15 to $25 per class, 15 percent of which goes to Skillshare. Some classes can generate more than a $1,000 at a time. The company doesn’t review the classes but highlights the most interesting ones on its site. They can be about anything from cocktail mixing and documentary film making to start-up fundraising and buying your first home.

Skillshare, which has already raised $550,000 in a seed round from Founder Collective, SV Angel and other angels, is talking to investors about another round. We’ve heard that Spark Capital and Union Square Ventures are close to funding Skillshare’s Series A round with an announcement coming as early as next week. Silicon Alley Insider also reported Friday that Skillshare is finishing up its Series A funding with ”some excellent investors at a healthy valuation.”

(Check out a video interview with Skillshare CEO and co-founder Michael Karnjanaprakorn. Apologies for the dark video)

Fixing the education system

Michael Karnjanaprakorn, CEO and co-founder of Skillshare, declined to comment on the company’s fundraising plans. He said he came by the idea after being inspired by shows like the Wire, which delved into the shortcomings of the educational system, and his stint volunteering at a charter school in New Orleans after Hurricane Katrina. His own uneven education experience at the University of Virginia (not so beneficial) and Virginia Commonwealth University (much better fit) also helped shape his views on the limits of the education system.

He said it all came together after a successful run through the World Series of Poker last year, when he was besieged by friends hitting him up for a poker lessons. He decided to hold a class and began organizing it on Eventbrite but the thought hit him: why isn’t there an easier way to offer classes to people?

He and friend Malcolm Ong took the idea and some advice from Kickstarter founder Perry Chen and built Skillshare, which Karnjanaprokorn said is centered on the idea that everyone has something valuable to teach.

“Our vision is we want to covert every city into a campus, every address into a classroom and every single inhabitant into a teacher and student,” he said.

Layering community over a marketplace

Karnjanaprakorn, who previously led the product team at Hot Potato before it was bought by Facebook, said people are increasingly open to sharing and transacting directly with each other, something that was popularized by eBay and Craigslist but has been transformed by the layering of community on top of a marketplace. He said that is helping nudge people away from hyper consumption to hyper sharing and in the process, giving rise to companies like Skillshare, Airbnb and Kickstarter.

Building a community has been the focus of Skillshare in the early days. By creating a strong culture early and supporting teachers and students, it can help produce a healthy environment conducive to growth, said Karnjanaprakorn.

Managing trust in a P2p community

A big concern for any P2P economy company is the threat of bad users, something that has been highlighted in the case of Airbnb and its struggles with a couple of rogue renters. Karnjanaprakorn agrees that trust is paramount for companies like Skillshare. He said classes are not allowed to be one-on-one. And Skillshare is in the process of building out more features like teacher reviews, badges and achievements as well as a recommendation engine that will help users find the best classes. So far, no teacher has been banned from the site though some refunds have been made, often because users attend a class that doesn’t fit their skill level.

While offline classes are the start, Karnjanaprakorn says he can see a bigger future for Skillshare. He said if Skillshare continues to gain momentum, he envisions users sharing their Skillshare profiles as part of their resume, something Stack Exchange is doing. And eventually, he said the company could offer online classes or even physical schools if all goes well.

“If we can build a community of teachers and students, the sky is the limit after that,” he said. “This could be really big.”

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Truth be told, the Horatio Alger connection breaks down pretty quickly from there. The food Busque needed was for her dog, Kobe, and she had plenty of money to pay for it. But it was a cold and dark winter night, and she just didn’t feel like leaving the house. Irritated, Busque thought about how other people in her neighborhood were probably already planning to go to the store that night. Wouldn’t it be cool if she could just outsource the dog food run to one of them, for a small fee?

In a “flash of inspiration,” Busque started sketching plans for an online marketplace where neighbors could arrange to do simple tasks for each other. Within a few months, she had quit her full-time job as a software engineer at IBM, and the company now known as TaskRabbit was officially born.

In the three years since then, Busque’s leap of faith has paid off. TaskRabbit announced Wednesday it has raised $5 million in a Series A funding round led by Shasta Ventures. The startup, which currently brokers tasks in San Francisco and Boston, will use the money to expand its reach to other metro areas nationwide, Busque told me in an interview this week, parts of which you can watch in the video below.

TaskRabbit works essentially as a two-way marketplace: People who need help with tasks, or “senders,” negotiate prices on TaskRabbit with people who have free time to complete these tasks, or “runners.” TaskRabbit is set apart from part-time job finding services like Craigslist’s et cetera section by several layers designed to add security. TaskRabbit runners are vetted by a comprehensive background check and all TaskRabbit transactions are processed by the company’s proprietary payment system, which helps protect both senders and runners from scams.

Because users have grown to trust TaskRabbit’s platform, today the company’s purview extends well beyond dog food pickup. The price of the average TaskRabbit deal is now $45, Busque tells me, and the company currently facilitates thousands of tasks per month. TaskRabbit does not disclose its revenue, but Busque said the company collects an average commission of around 15 percent on each deal it brokers.

“We’re really empowering people to sell their free time and their special skills and services,” Busque said. “I feel like we’ve really only scratched the surface of what TaskRabbit can be used for.”

TaskRabbit has already become a household name in certain San Francisco circles. I know people who use it to outsource everything from picking up their dry cleaning to waiting in line for the latest iPhone. As it expands to more geographic locations, the company could well become an eBay-for-services, much like Etsy is an eBay-for-crafts.

Watch Leah Busque describe her vision for TaskRabbit in her own words:

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The latest beta of Audiogalaxy's file sharing service never launched.

It’s a neat product, but not exactly what Audiogalaxy founder Michael Merhej had in mind when he quit his job at Microsoft in 2007 to rebuild the Audiogalaxy sharing service. Merhej partnered with Jim Griffin of the Warner Music-backed Choruss project to power the industry’s first legal file-sharing offering. Griffin and Merhej envisioned a service much like the old Audiogalaxy, offering access to pop hits as well as obscure cover versions of any song you can think of recorded in someone’s garage. Users would pay a flat monthly subscription fee and distribute this money amongst rights holders. Merhej even built a new Audiogalaxy website that promised the launch of a legal service at campuses this fall.

That beta site has since been taken offline, and Merhej acknowledged this week in a blog post that licensed file sharing isn’t likely to materialize any time soon. “Unfortunately, nobody can offer this experience today because it is next to impossible in the current copyright environment,” he wrote.

I got in touch with Jim Griffin to get an update on Choruss, and he said the project is effectively on hiatus. “My fault; I blew it,” he told me, saying he’d underestimated the complexities of pulling off a legal file-sharing service.

Choruss was backed by Warner Music and reportedly able to secure support from two other major labels. However, a licensed file-sharing service would need each and every songwriter to sign on, because its not a product that’s for sale, but a service with a revenue-sharing agreement. That’s where Choruss’ trouble started. “We couldn’t even find half of the rights holders,” said Griffin. Without locating these rights holders, it was impossible to secure the necessary licenses. That meant half of the songs shared through Choruss could have potentially resulted in copyright lawsuits, both against file sharers and operators of the system, with statutory damages of up to $150,000 per song: a risk no one involved was willing to take.

Griffin is still pursuing the idea of licensed file sharing, but he has changed some of his core assumptions on the set-up of such a service. Choruss tried to obtain all its licenses through market-based negotiations. Griffin now thinks that the legislature needs to step in. “There needs to be a compulsory or statutory licensing environment,” he said, explaining that it’s simply impossible to negotiate with each and every rights holder individually.

Another essential piece of the puzzle is a registry for copyrighted works that would make it easier to locate and eventually compensate rights holders: a project that Griffin and his company Onehouse LLC are concentrating on now. He’s envisioning a database that works much like the DNS system, with information contributed from rights holders worldwide. It wouldn’t do much good to have a statutory license for Audiogalaxy and similar services without such a database, he argued.

Griffin told me that implementing such a database correctly would take at least three years. So when will we be able to use a legal file-sharing service that offers access to any song we can think of while compensating rights holders? “I think it’s gonna take the rest of my lifetime just to get this right,” Griffin told me. However, the fact that there was plenty of interest for such a service amongst students and universities keeps him going, and he still believes that monetizing file sharing is inevitable.

That belief is shared by Michael Merhej, who wrote this week: “We can’t offer this kind of music experience today, but when the time is right, Audiogalaxy will be ready.”

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Information Week’s Alexander Wolfe makes a case that content owners could still use DRM in legitimate P2P music-swapping networks at some point in the future, “when peer-to-peer networks reemerge from their current sub-rosa position and become popular, brand, public-facing methods of distributing content,” enabling Microsoft to reap considerable royalties. Indeed, P2P technology has a place in above-board distribution as it partially powers everything from streaming music service Spotify to several video distributors, so Wolfe is onto something. But if the idea is that the old paradigm will be flipped — you can do what you want with the file you pay for, but you can’t duplicate the free file you find on P2P networks, instead of the other way around — I have my doubts that these “public-facing methods of distributing content” will ever dominate if they’re full of DRM.

Wolfe asserts that “the whole ‘Web wants to be free’ versus ‘evil corporations with their DRM’ argument…hasn’t been resolved,” despite evidence that 95 percent of digital music acquired by consumers today is pirated (and presumably virtually all DRM-free). Apple has dropped DRM from its market-leading music store after consumers resisted DRM to the point that the music industry finally gave up. Copy protection is eroding as people flock to unprotected alternatives, and most DRM has turned out to be breakable anyway. It’s hard to imagine where this patent will fit in — unless the past six years have simply obviated it, and Redmond isn’t planning to do anything at all with it anymore.

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Of course, the same argument was made when UDP-based VoIP connections and video streams became popular — and the Internet hasn’t ceased to exist. The truth is that uTorrent’s UDP implementation could actually be a step toward alleviating congestion problems. Bennett, however, decided to ignore this and instead serve up nothing more than a thinly veiled rant against net neutrality.

Bennett’s piece is based on a belief that UDP traffic is “aggressive” and uncontrollable, whereas TCP is the nice and proper protocol that can be easily managed. This notion ignores the basic fact that P2P developers, in order to make the protocol work at all, need to implement TCP-like functionalities on top of UDP, one of which includes congestion control. You simply can’t operate a P2P client that eats up all of its users’ bandwidth, much less build a successful business model on top of it.

BitTorrent Inc. has been working on establishing itself as a CDN solutions provider, offering media companies the ability to tap into its vast user base to deliver video and other huge files. Of course, this only works if end users are actually willing to provide some part of their upload bandwidth, and they are only willing to do so if file transfers don’t stop them from doing other things, like playing online games or making VoIP calls.

BitTorrent has traditionally entrusted its users with figuring out how to balance their network load, meaning that users had to manually limit their client’s maximum upload and download rate in case they encountered choppy Skype connections or similar problems.

uTorrent’s new implementation wants to automate this process by regulating its UDP traffic in relationship to ongoing TCP transfers. The company has tested its congestion control in recent months, and the first results seem encouraging, as a quote from a report (PDF) that the company recently shared with the IETF reveals:

“In one example, (BitTorrent) was used to download and seed game updates while an online multiplayer game was being played. With TCP used for transport the way it is usually used in BitTorrent, ping times shot up to 2000 milliseconds and beyond and stayed there while seeding. With the novel congestion control, ping times were in the 50-100 millisecond range, while the upload rate remained essentially unchanged.”

For now, we do have to take the company’s word for it that this actually works. uTorrent is not open source, and the client’s UDP file transfer protocol hasn’t been publicly specified, either. BitTorrent Inc. V-P Simon Morris has declared in a public response to the Register article that his company is working with the IETF to find “solutions that can be standardized and broadly adopted in due course.” In fact, BitTorrent engineer Stanislav Shalunov is co-chairing an IETF working group for this very purpose.

So why did Bennett chose to ignore all of this? Because a little scaremongering can go a long way to make the case for an ISP-based network management clampdown on P2P traffic. The only way to prevent the coming Internet meltdown, he contends, is to filter out uTorrent’s UDP transfers on the ISP level, and the only way to get this done is do away with net neutrality. Right — because if there’s one thing that we’ve learned from the financial sector, it’s that meltdowns are best prevented by doing away with regulation.

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A federal judge ordered YouTube to hand over its user data to Viacom. If it stands (the Electronic Frontier Foundation says the judge’s order violates federal law), that means Viacom will know all about your secret obsession with making Avril Lavigne’s “Girlfriend” the most-watched video of all time.

Two big-name Hollywood types (and fanboy faves), Seth MacFarlane and Joss Whedon, are experimenting with new content models online. MacFarlane (“Family Guy”) will create “Seth MacFarlane’s Cavalcade of Cartoon Comedy,” an animated series with a multimillion-dollar budget that will be distributed by Google AdSense to targeted sites. Whedon, on the other hand, will release his musical web series “Dr. Horrible’s Sing-Along Blog” in three parts for free, online, for a limited time, then yank them off the web and make the whole show available for purchase.

Speaking of innovative distribution, after being disappointed with the token theatrical release of his indie film “The Nines,” director John August said that “leaking” the film on P2P networks would have built better buzz for the film than playing Sundance. Take that, Robert Redford!

And finally, what better way to wash down those hot dogs than with a little vodka. Kanye West is the latest pitchman for Absolut and created a kooky (though unoriginal) infauxmercial to hawk the beverage.

Now be done with work. Go outside and enjoy the holiday!

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Josh Silverman, the company’s new CEO, acknowledged that from a usability standpoint, things hadn’t changed much, even as Skype kept adding more features such as embedding third-party plug-ins. Skype needed a better, easier and cleaner client — and Skype 4.0 beta, likely to be available for download tomorrow, is a start. 

 

The new client is going to cause an uproar amongst many Skype loyalists used to the IM-like nature of the current software. With this version, the software takes up the entire PC desktop screen, mostly to accommodate a growing number of features. (Skype Journal’s Jim Courtney & JKontherun tell me that you can change the screen size, though it isn’t that obvious or easy.) I found it hugely annoying as it forced me to constantly toggle between the client and the desktop; merely doubling or tripling the size of the client seems like it would have sufficed. 

The real reason for the redesign, however, is Skype Video, which desperately needed a new layout because it requires an ease-of-use that eludes the current client. As I pointed out a few weeks ago, video communication (which accounts for about 28 percent of total Skype calls) has been one of the fastest-growing features on Skype, thanks to the easy availability of built-in cameras, especially in devices used by mobile workers.

I often use Skype to conduct calls with my friends around the planet, and occasionally for work as well. As the bandwidth on our broadband connections grows, I think the idea of quick video conversations with friends, family and co-workers will catch on. In this era of rising oil prices and unfriendly skies, it makes sense to simply call someone and see them on computer screen.

But back to the software and my initial impressions (their PR team only sent me the beta download link this morning.) I think after people get over the initial shock related to the bigger size, they will quickly learn to love version 4.0.

I found the improved ability to conduct conversations by consolidating the tabs, which allows you to easily switch between various conversations, especially useful. And initiating a video call is dead simple, almost as simple as Apple’s iChat client.

Skype 4.0 is a much more complete communicator, even despite its beta status. With it, using Skype for instant messaging, making video and voice calls, sending files and sending SMS messages are all easier. I think it’s well worth the download (Available for download tomorrow.) But it’s a shame they don’t have a Mac client — the 4.0 version will initially only be available for Windows-based computers — since Mac is my everyday machine.

The company is also working on introducing features such as auto-redial, call transfer, and most importantly, the ability to send money. I guess they figured out how to integrate eBay’s PayPal with Skype. Now wasn’t that worth spending billions of dollars on?

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Through LinkedIn, we were able to find that amicima co-founder Mathew Kaufman has been working as Senior Computer Scientist for Adobe since October 2006. His co-founder, Michael Thornburgh, is also said to be at Adobe. Both of them have vast experience in networking and P2P technologies. The two of them worked at Tycho Networks, and later at DSL.net, after that company acquired Tycho.

I have been following this closely, and my sources say that this is a solid technology with the potential to seriously disrupt the CDN market, especially those companies that rely on clients. I wonder, for example, what will happen to RedSwoosh, which is owned by Akamai, or to other, similar providers of P2P-based client services. I think one shouldn’t get caught up in the CDN-killer aspect of this technology.

From what I have learnt, there are some elements of this technology that make it necessary to have a server infrastructure for situations where traversing NAT’s/Firewalls isn’t possible. It also needs a centralized registrar is also needed that maintains the ID’s of all the P2P clients (nodes) connected to a service. In other words, a CDN operator work with Adobe, charging for traffic that goes through their proxies as and when needed by the Flash 10. By the way Adobe has an arrangement with Kontiki, a CDN operator of sorts.

Williams’ post digs deeper into this in a thoughtful, intelligent way. “[I]s the innovation that will be unleashed by making P2P technology an assumed part of the web protocol stack?” he wonders. (I think that’s why it’s important that we start harping about upload speeds on our broadband connections.)

The reason we should pay attention to this product is Adobe’s distribution strength. The company can easily upgrade its Flash clients and instantly become owner of one of the largest P2P services. What that means is that now anyone can contemplate a Joost-like service that works within a browser. Using AIR to extend those P2P abilities to the desktop would be fairly easy as well. Ironically, both Joost and Jaman have spent considerable time, money and attention doing this.

The early version of Flash is rather simple, but it does offer a way to lower bandwidth costs while still delivering high-quality video. In addition, companies like Tokbox (our story) and Woome (NTV story) can add more functionality, such as cheaper, live video-voice service, without spending too much money.

It’s clear that Adobe is not going to become a huge P2P service overnight. But this release does portend to an interesting future.

PS: If anyone wants to share their thoughts, please leave a comment or drop me an email.

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As part of the research I’m doing for another piece, I had a long conversation with Danny McPherson, CTO of Arbor Networks, which makes all sorts of network-management and traffic-shaping tools. Arbor is used by dozens of ISPs around the planet and, as a result, McPherson is privy to details about traffic flows and usage patterns across many broadband networks.

McPherson shared with me some interesting stats and facts about broadband usage and peer-to-peer networking usage patterns. Given that Arbor makes a living selling its technology and products to carriers, it is prudent to maintain a degree of skepticism about the numbers. That said, they are nevertheless interesting enough to share.

On fixed and mobile broadband networks where consumer services are provided (i.e., NOT interprovider or typical dedicated Internet access for commercial enterprises):

• 10 percent of subscribers consume 80 percent of bandwidth.
• 0.5 percent of subscribers consume about 40 percent of total bandwidth
• 80 percent of subscribers use less than 10 percent of bandwidth

This supports the arguments made by some of the larger ISPs, including Comcast. In a recent interview, Comcast Cable CTO Tony Werner told me his company would try and deal with the tiny number of subscribers who use most of the bandwidth by slowing down their connections during peak times. (Personally, I find that to be a distasteful solution, and I believe that folks should learn from newer ISPs like Free.fr and better architect their networks so they can provide more bandwidth for all — without imposing any penalties.)

The P2P stats are the ones that came as a complete surprise. Like you, I have read many reports that suggest P2P applications account for the majority of the traffic on high-speed networks. But McPherson’s data suggests otherwise:

• 20 percent of traffic is P2P applications
• During peak-load times, 70 percent of subscribers use http while 20 percent are using P2P
• Http still makes up the majority of the total traffic, of which 45 percent is traditional web content that includes text and images. Streaming video and audio content from services like YouTube accounts for nearly 50 percent of the http traffic. It shouldn’t come as a surprise to anyone — streaming TV shows from Hulu and videos from YouTube have been on a major upswing, as noted by our colleagues over on NewTeeVee.

So, what do you make of these numbers?

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Class was in session when Stanford law prof Lessig delivered a powerful lecture on the need for neutral networks, telling the assembled FCC chairman and commissioners to their faces that they were part of a 10-year-long failure by the agency to “make a clear statement of policy” about how infractions against the open, end-to-end connectivity of the Internet would be policed or enforced.

Lessig’s key points — which included the assertion that the historic openness of the Internet has been the key to its economic boom — are important to record, since they are very likely to become key talking points for Net Neutrality proponents as the battle over potential neutrality regulation heats up during the current congressional session. But the lack of a viable opponent in the arena made for a somewhat lukewarm event, with more than half the auditorium’s reported 716 seats going empty. Those who were present cheered mightily for Lessig, while only issuing soft “boos” for Republican FCC commissioners Robert McDowell and Deborah Tate, whose brief remarks basically indicated their opposition to any Net Neutrality regulations.

Unlike the other assembled panelists, who had just a few minutes to present their specific-interest cases, Lessig was given all the time he needed to make a strong case for the need for clear network neutrality policies, either from the FCC or Congress. Two of his stronger points, which you can expect to see repeated, were one, that Net Neutrality principles have been the historic base of the Internet, and have been responsible for its unbridled competition and growth. And two, that providers should be governed by clear rules that make it more expensive for them to restrict network access than to provide broadband that doesn’t differentiate or prioritize different traffic types.

The FCC, Lessig said, should pass rules that make it more profitable for service providers to behave than to misbehave. “You have to make it so playing the games is not a good business model for them,” Lessig said. “If we really didn’t have a reason to worry that they were playing games [with network management], then what they did inside their networks would be of less concern.”

Though invited by FCC chairman Kevin Martin, all the major Internet service providers — AT&T, Verizon, Comcast and Time Warner Cable, among others — declined to participate in Thursday’s open meeting. Comcast, which waded into a debacle on several levels at the last such open meeting at Harvard, was slammed by several panelists Thursday, including by Robb Topolski, who is credited as being one of the first to detect Comcast’s disputed P2P blocking activities.

Comcast’s activities, Topolski said, “are non-standard, and not accepted by the industry.” And Jon Peha, a computer engineering professor at Carnegie Mellon, disputed Comcast’s claims that it wasn’t “blocking” traffic, part of an seemingly unsolved question that Lessig said was at the heart of the problem.

“The most outrageous thing is that [the FCC] can’t get the facts straight,” Lessig said with regards to the Comcast controversy, expressing wonderment that a government body like the FCC was still somewhat in the dark about what Comcast was or wasn’t doing. “The least we should be able to do is get the truth about what is happening,” Lessig said.

Watch the entire session on video.

Paul Kapustka, former managing editor for GigaOM, now has his own blog at Sidecut Reports.

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