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Lies, damn lies and the BSA

The BSA’s figures for software piracy in this country need adjusting. It could start by surveying some South Africans.

BY  Paul Furber , 1 July 20100 comments

Charl Everton, BSA, says copyright legislation is challenging and needs to change. | Photo by Suzanne Gell.Photo by Suzanne Gell.Charl Everton, BSA, says copyright legislation is challenging and needs to change.


If it’s May, then it’s time for the Business Software Alliance’s annual Global PC Software Piracy Study. The study, a comprehensive look at the state of unauthorised software around the world, is commissioned by the BSA and carried out by research giant IDC, which uses its data from quarterly PC shipments and market indicators from around the world to come up with a global figure as well as rates for individual countries. South Africa’s piracy rate was given as 35 percent this year, not as bad as some other countries but not good either, according to local BSA chairperson Charl Everton.

“A piracy rate of 35 percent is far from acceptable,” she says. “As we emerge from the most severe global economic recession in 20 years, it is essential that we continue to engage with government, businesses, and consumers about the risks of stealing software – and to educate the market on the true impact that software piracy has on the South African economy.”

How was the 35 percent rate arrived at? It’s a guess, or rather, a combination of guesses combined with some market data and presented as a final authoritative percentage.

South Africa wasn’t surveyed at all for the current report.

The BSA says surveys were conducted in 28 countries representing “a mix of geographies, levels of IT sophistication, and geographic and cultural diversity”. These included, among others, China, India, Pakistan, Thailand, Taiwan, Vietnam, Hungary, Poland, Russia, Germany and Italy.

IDC extrapolates numbers from the 28 countries to form conclusions about the 111 that appear in the final report. But even for those countries that are surveyed, the sample size is woefully small given the number of PCs there are in the world: just 6 000 consumers and 4 300 business respondents are the world’s global proxy for the final results. This works out to 150 businesses per four countries.

What’s the statistical error and standard deviation of this sample? The BSA in the UK told Brainstorm that the study “is not a statistical estimation or survey that lends itself to probability analysis, so there is no standard deviation.”

Calculations and machinations

How then is the number of applications per South African PC calculated? Using, er, statistical analysis.

“To calculate the software load in countries that were not surveyed, like South Africa, IDC determined the statistical correlation between a country’s position on the International Telecommunications Union’s (ITU) ICT Development Index (IDI) and the known software load for countries that were surveyed,” the BSA says. “It then used that correlation to determine the software load based on a country’s IDI placement.”

Software load is a key part of the final calculation. As senior VP and head of research John Gantz explains in a video on the BSA website, IDC multiplies the number of PCs getting software in a given year (which it gets from its quarterly PC Tracker report) with the average software load (based on the ITU index in South Africa’s case) to get the total software units installed. The number of pirated units (based on shipment numbers from the BSA’s members) divided by the total software units gives the piracy rate.

Michael Geist, law professor and Canada research chair for internet and e-commerce law at the University of Ottawa, calls the BSA figures “bordering on deceptive”.

“The BSA methodology is so suspect that there are enormous problems with placing significant weight on the study,” he says. “Thousands of Canadians have been speaking out on copyright, arguing for a balanced approach and against attempts to falsely paint Canada as a piracy haven based largely on questionable data. “The political pressure to cave to the US’ demands are intense, but many Canadians have grown sceptical of the outlandish claims of US-backed lobby groups.”

South Africa has yet to see the kind of lobbying pressure Canada has had but it’s coming. The BSA wants government to make unauthorised copying a crime.

“It’s very challenging when the legislation is the way it is. It cripples our ability to enforce it in the market,” argues Everton.

Andrew Rens, an intellectual property lawyer with the Shuttleworth Foundation, is unimpressed with the proposed changes.

“Over the last five months lawyers for the BSA, as well as the BSA chairperson, have been quite vocal about changes that the BSA wants made to South African law,” he says. “Those changes would shift the onus of proof so that when the BSA brings a case against someone, that person would have the onus of proof on him. They claim that these changes are necessary to combat the allegedly high level of software infringement in South Africa. But now it emerges that the claims themselves are suspect. And South Africa is not the only country where claims of large-scale infringement have proven suspect. The United States Government Accountability Office has found that estimates are not empirically verified.”

The GAO’s report, Observations on Efforts to Quantify the Economic Effects of Counterfeit and Pirated Goods, notes that the illicit nature of piracy makes estimating the economic impact of IP infringements extremely difficult, so assumptions must be used to offset the lack of data.

“Efforts to estimate losses involve assumptions ... which can have enormous impacts on the resulting estimates,” it says. “Most experts observed that it is difficult, if not impossible, to quantify the economy-wide impacts.”

Previous BSA studies assumed that every unauthorised copy was a lost sale, an assumption seriously questioned by Geist, among others. So now the BSA estimates the commercial value as “the value of the software if sold on the market representing a blend of prices including retail, volume licence, OEM, and free/open source,” according to the UK office.

The report says that freeware and open source are treated the same in the final calculation – one assumes zero dollars per unit but it doesn’t say. Unlike sales figures for the BSA’s member organisations, there are some clear numbers available about open source shipments.

Version 3.0 of the free OpenOffice suite was downloaded 100 million times last year and the Firefox web browser boasts some 350 million users worldwide. The commercial value of both packages is arguably enormous to their users but won’t show up in BSA members’ bottom lines. Nevertheless, the BSA fixes the global piracy rate at 43 percent in its report and assumes that open source only takes market share from paid-for software, a claim trivially refuted.

The BSA methodology is so suspect that there are enormous problems with placing significant weight on the study. Michael Geist, University of Ottawa.

There are other problems with its final conclusions, particularly about the effect on the economy and on tax revenues. If all South Africans with unauthorised copies of software were to pay for them tomorrow, nearly a billion dollars would be added to our economy, says the BSA (after first being subtracted from the economy, but it leaves out that part). It also double-counts the number of dollars in its economic claims.

“IDC estimates that for every dollar of software sold in a country, another $3 to $4 of revenue is generated for local service and distribution firms, as opposed to margin or profits,” says the BSA’s UK office. “If a vendor sells a package for $100 to the channel who sells it for $200 to an end user, both of these transactions count as revenue. When you also add in revenues derived from implementation, and ongoing maintenance, this initial dollar spend on the software itself creates an additional $3 to $4 of revenue.”

But economics 101 says that before the transactions, the channel had $100, the end user had $200 and the vendor had the software package. After them, the channel has $200, the vendor $100 and the end user the package. And if the vendor is not South African, then a portion of the profits go overseas.

Copyright reform

Should the BSA’s survey influence South African copyright reform as the BSA wants? Our law certainly needs an update, since it harks back to 1978. Modern conveniences such as creating an MP3 for personal use are still illegal and there is no scope for access to copyrighted material by the disabled.

Says Rens: “The current Copyright Act does not work for South Africa because it was never appropriate for a developing country. Now digital technology has fundamentally changed the way that most creative works are produced and distributed.”

Attorney Paul Jacobson agrees. “Copyright law should be updated but it should be brought into line with modern attitudes towards content and current technologies,” he says.

Developing countries have always been contentious ground for copyright skirmishes. Since they are net importers of material covered by copyright, there is often considerable pressure on them by copyright holders to tighten up laws and enforce them. Those countries argue that protection of rights needs to be balanced with the need for poorer countries to have access to information including properly defined exceptions to copyright for fair use. That’s a debate which should include everyone, says Rens.

“There has never been a process in which the development needs of South Africa were taken into account in writing intellectual property legislation. There is quite a debate about how to reform or replace copyright. In that debate, it’s very important not to be taken in by phrases such as ‘creative industries’ or ‘copyright industries’. “There is a value chain in which actual creators – journalists, photographers and software writers – have very little power. Then there are the distribution channels: the old ones like record companies or proprietary software vendors, and new ones like Apple, Amazon and Google. Each part of the value chain has a different set of interests. The creators’ interests are not the same as the distributors. The old distributors have an interest in suppressing the new business models of the new distributors. There is no monolithic industry.”

And that could open the floodgates for more one-sided laws, says Jacobson.

“If the BSA persuades Parliament to make copyright law more onerous and protectionist, it won’t be too long before Big Content comes rushing in with the same arguments and pretty soon we have extended copyright terms and ACTA-like ‘three strikes’ laws kicking people off the internet for being suspected of infringing copyright. Rather than protecting innovation, copyright law could stifle it to benefit a broken business model that has better funding.”

There’s no doubt that counterfeiting and unauthorised copying are a problem for proprietary software vendors – exactly how much of a problem is difficult to say – but any changes to our law should include the needs of all South Africans.


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