A long, long time ago in a blog far, far away, I discussed the interesting story of how Antigua was economically damaged by the United States' clamp down on Internet gambling in the early '00s (see the original posting below).

Yep ... Antigua and Barbuda is that little dot.

The background to this tale is that with considerable prescience Antigua had seen the writing on the casino wall and in 1994 engineered a place for itself in the online gambling world by passing its Free Trade & Processing Act. This act allowed licenses to be granted to organizations that applied to the government to open online casinos and all went well ... at least until the US made the use of online gambling services illegal for US citizens. The consequences for Antigua were profound. I quote from myself:

From a maximum revenue of $2.392 billion and 59% of global online gambling in 2001 while employing 1,014 people, the Antiguan online gambling industry shrunk to an estimated $948 million in 2007 and a miserly 7% of global online gambling with just 333 people employed.

In 2003 Antigua started proceedings with the World Trade Organization (‘WTO’) challenging the United States’ total prohibition on cross-border online gambling services and they won! Yep, in 2004 the WTO Dispute Panel found in Antigua's favor and when the US appealed the verdict the judgement was upheld. The US was given one year to correct its laws but ... and most of us will find little to surprise us here ... the country -- our country -- did nothing of the sort. We became international scofflaws.

Thereafter some ugly diplomacy ensued that saw the US try to wriggle out of its original WTO agreement but the WTO would have none of it. On January 28 this year, just nine months ago, the WTO authorized Antigua to suspend US copyrights. Yep, you read that right; Antigua can do as it pleases with US copyrights and US copyright holders can't do jack about it.

This means that under the WTO's authorization Antigua will be able to provide US copyrighted works on any terms they please to anyone without any compensation whatsoever to whichever American entities own the works up to a value to Antigua of $21 million annually!

Of course, what will make up the $21 million won't be goods sold at anything like US prices. For example, that $9.99 album you just bought on iTunes? Maybe it will be $0.99. Or less.

But that's just the tip of the copyright iceberg. Movies, books, ... and, yes, software! You name it ... it could be the biggest bargain basement sale in history and the financial impact on US copyright holders will be enormous if not bankrupting.

What I can't figure out is why the likes of the RIAA and the MPAA aren't lobbying to get the US to reverse it position! It's unfathomable that these fearless protectors of copyright who have made a business out of harassing consumers under the banner of defending their members' rights can't see the incredible financial black hole their government has allowed to open and is willfully unwilling to deal with.

Lest you doubt that the Antiguan government will go through with their legal heist their PR firm just sent out a press release that explains:

Antigua and Barbuda’s “WTO Remedies Implementation Committee”, comprising of several persons with expertise in the areas of intellectual property rights, drafting of domestic intellectual property rights legislation, international trade policy and law, information technology and economics continues its work with the convening of a meeting geared towards harvesting benefits from Antigua & Barbuda’s WTO Gaming case ... Although its proceedings are confidential, the Committee is said to be recommending the establishment by the Government of Antigua & Barbuda of a statutory body to own, manage and operate the ultimate platform to be created for the monetisation or other exploitation of the suspension of American intellectual property rights authorised earlier this year by the WTO. It is understood that the necessary domestic legislation to implement the remedies is in the final stages of preparation for submission to Parliament. Additionally, an announcement regarding the opening of tenders for private sector participation in the operating of the platform should be announced shortly.

The Antiguan government is doing this right by putting the project on a solid footing of legislation and inviting the world's entrepreneurs to make it happen.

You may well find yourself paying a lot less for music, books, movies, and software this Christmas.

Shiver your timbers below or at gearhead@gibbs.com then follow me on Twitter, App.net, and Facebook.

My original post from a blog that shall remain nameless:

Pirates of the Caribbean: Antigua and Barbuda Turn From Internet Gambling to Legalized Piracy

When the Internet first entered the public domain in the early 1990′s I consulted with a number of companies as they tried to establish new online business models.

In many client meetings the topic of developing online gambling came up and, at that time, the question of legality was, to all intents and purposes, up in the air.

As I told my clients at the time, predicting with any certainty whether the US government would permit such a thing was impossible. That said, my money was on online gambling being prohibited and, alas, my bet came true.

The US Department of Justice has taken the position that the Federal Wire Act prohibits all forms of online gambling (despite court rulings to the contrary) and has obsessively worked to indict, arrest, and impede both online gaming sites and US players.

Of course the DoJ’s zealous protection of US citizens from the depravity of online gambling looks more than just a little statist when you consider that 46 US jurisdictions have lotteries (only Alabama, Alaska, Hawaii,Mississippi, Nevada, Utah, and Wyoming do not) and state-controlled gambling is a business of staggering size.

According to Professor I. Nelson Rose in his excellent 2010 article “The Third Wave of Legal Gambling”:

Every year Americans buy about $10 billion in tickets at the nation’s approximately 36,000 movie screens. By comparison, lotteries operating in 43 states sell more than $60.6 billion in lottery tickets. And the comparison is appropriate. A potential customer can decide to spend about $8 for a little entertainment by buying a movie ticket, or can buy eight $1 lottery tickets. But, where American spent a record $10.49 billion on 1.46 billion movie tickets in 2009, they spent approximately six times as much, buying 40 times as many lottery tickets … Looking just at revenue, Americans spent more money on gambling, $92.3 billion, than they did on all live events, concerts, plays, all movie theaters, all spectator sports, and all forms of recorded music — combined.

Now, in 1994 an important event in the history Internet gaming occurred when “[the] Caribbean nation of Antigua and Barbuda passed the Free Trade & Processing act, allowing licences to be granted to organisations applying to open online casinos.”

Operating as a base for numerous online gaming companies Antigua started to make serious revenue from their activities and by 2000 this amounted to $1.716 billion.

In the early 00′s, when the US started to clamp down heavily on Internet gambling this, not surprisingly, had a profound impact on Antigua’s revenue and employment figures.

From a maximum revenue of $2.392 billion and 59% of global online gambling in 2001 while employing 1,014 people, the Antiguan online gambling industry shrunk to an estimated $948 million in 2007 and a miserly 7% of global online gambling with just 333 people employed.

Antigua had seen the writing on the wall prior to 2003 and, as explained by Antigua’s web site on the topic, the nation “commenced the dispute resolution process of the World Trade Organization (‘WTO’) to challenge the United States’ total prohibition of cross-border gambling services offered by Antiguan operators.”

In 2004 the WTO Dispute Panel ruled in Antigua’s favor and “issued a confidential ruling in favor of Antigua, finding that the US restrictions against online gambling violated international treaties.” The US, of course, appealed and the Appelate Body delivered a somewhat confused verdict which was actually in Antigua’s favor. The US was given less than one year to correct its “offending laws.” Not surprisingly, this didn’t happen.

In 2006 Antigua complained to the WTO over the US’s failure to comply and in 2007 the WTO’s Compliance Panel found that, indeed, the US taken no actions to comply and had no case to argue.

After this, the case gets ugly with the US government trying to weasel out of its original WTO agreement that allowed cross-border gambling and betting services and Antigua finally making:

… a request to level concessions against the US – to offset the economic effect of the continuing failure of the US to comply with the rulings and allow Antiguan operators access to American consumers. In determining what concessions to impose, Antigua is entitled to ensure that they be a “practical and effective” way of inducing US compliance. Antigua has requested approval to achieve its concessions by suspending up to $3.4 billion annually in intellectual property rights with respect to American copyrighted and trademarked products under the WTO’s intellectual property rights agreement.

On January 28, this year, at a meeting in Geneva, the WTO authorized Antigua to suspend US copyrights!

In other words, copyright for US works such as music, photographs, films, and books would no longer apply in Antigua and thus Antigua could provide those materials on any terms they pleased to anyone without compensation to whatever American entities own the works … to the tune of $21 million annually!

TorrentFreak broke the news on January 24:

TorrentFreak is informed by a source close to Antigua’s Government that the country now plans to capitalize on this option. The authorities want to launch a website selling U.S. media to customers worldwide, without compensating the makers … Antigua’s attorney Mark Mendel told TorrentFreak that he can’t reveal any details on the plans. However, he emphasized that the term “piracy” doesn’t apply here as the WTO has granted Antigua the right to suspend U.S. copyrights.

If Antigua follows through with their threat the repercussions will be huge. Will content from the Antiguan site be prohibited to US buyers? Will Antigua simply flood the world with dirt-cheap US content? What pressure will be put on the US political machine to settle before what could well be a disastrous blow to the US software, music, and film industries happens? Just think, Windows 8 for $1? The entire catalog of Universal Music, Warner Music, or Sony for $25? The entire Corbis library for $50?

While there’s a certain justice in the WTO decision, the mechanism for extracting justice is going to heavily penalize and impact American business and not the people who created the problem in the first place: Overzealous US politicians and government bureaucrats.

If the US government is smart, it will attempt to settle before Antigua does anything concrete. Unfortunately, I rather doubt that any kind of settlement is going to happen. 2013 is going to be a really interesting year.