Labels: 21st Century Global Summit, AT+T, Google, iPhone, ISP Products, next generation networks

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Following the recent two part series on personalised adverts, I thought it worthwhile grounding this into some sort of real life scenario. In spite of the references to Facebook, what I have written so far is pretty theoretical - networks could conspire with advertisers leaving you with little choice but to comply. Without grounding, you could be forgiven for thinking I'm off on one again.

The Birth of The Empire
As regular readers will know, I have occasionally highlighted Google's dark side. This is not because they have done anything to me personally - this is no vendetta. In fact, every time I have had cause to deal with them, they have done the job required quickly and more efficiently than any other product alternative. I almost exclusively use Google search and I am writing this on Google's Blogger service, after all!

My concern with Google surrounds how on the one hand they paint themselves as the white knight, defending the principles of the internet - freedom of speech, openness, ubiquity and so on - while on the other they continue to gather vast quantities of data about who I am and what I am interested in. There is a disconnect here for me between the PR values and the actions, primarily because the data is collected "secretly" and I have no clear way of reviewing it's accuracy or authorising its use.

Misdirection: The Access Network Wars
Perhaps I have just watched too much Star Wars, but I worry that we may wake up and realise that the battle we have been led into is part of a very different war from the one we thought we were fighting. It is a lot easier to think of Big Telco as the bad-guy because they are the ones that send you a bill every month and when things break, theirs is the more physical presence that is easier to see and therefore blame.

I just wonder whether this is actually the other way around. A desperate man can look like a mad man to most who see him... Of course I am biased towards Telco, that is where my history lies, so you should definitely apply a filter to what you read from me. Everyone has their own bias that they need to be aware of - including you.

Emergency Powers to Save the Internet
If Google wins the auction battle for 700MHz spectrum in January, they will be lauded by internet fundamentalists as the saviour of the net. They will undoubtedly deliver on their promises of a more open network for application innovation. This is not in dispute.

But saving the American dream? "This network will be a servant of America and not a master of our country's future". No, Google didn't say this, Frontline Wireless did. Frontline Wireless are nothing but a Lobbying Firm. They also added, "this election will determine is whether the wire-based internet remains open".

Please stop treating me like an idiot. Google are investing in a license for the same reason as anyone else would - to make money from it. Telcos have traditionally had different models, but Google's is that what they will receive in return for the license is a wealth of additional customer data that can improve their ad efficiency and hence what they can charge advertisers.

With Great Power Comes a Wealth of Data
Currently, Google does not know who I am. They just know me by my IP address and the profile they have of me is that I like to search for telecoms and internet news. If I was using Google Reader, they would be able to add a fair bit more - I am an Arsenal fan and I like cricket. I subscribe to BBC and Yahoo! news feeds, but I don't read them very regularly.

Consider then the additional information they would gather if they also provided my access. My IP address would be linked to my postcode, so they would have the full range of geo-demographics at their disposal.

They would know that I live in a five bed house in a village with two pubs and one curry restaurant. They would know that Tesco's and Waitrose are my supermarket choices and that I am more likely to be a Times reader than someone who reads The Sun. In fact, they would know an awful lot more than this, but I am not going to go into any further details because I don't know who is reading this. I don't want everyone to know who I am...

It was pointed out to me this week that if I have ever used Google Checkout (which I have, once), they may actually have this link already, but if they also provided my access there would be ever more about me that they could see.

A Very Slippery Slope
Because they would be providing my access, there would be nothing stopping them from collecting and analysing all my internet page requests - not just the search results and RSS feeds - but everything from my banking provider, who provides my electricity and so on and so on.

Where are the limits to what they can collect and what they can do? More to the point, who knows what they are collecting and what they are doing with it? Today there are clear lines demarcating access (with all the subscriber info coming from the address) and content.

Privacy Firewalls
Telcos already have access to the data described above, but this is not being collected, analysed and used for marketing purposes because that is not the Telco business model (today). The link between your IP address and your physical address currently held in trust by your service provider. This is a very important fact protecting your privacy.

It may well be that telcos decide to try and monetise this data too. If they did so, I would also expect them to be up front with their plans and what this means for your privacy. In fact I would expect this to be an opt-in model where you received a discount on service fees in exchange for agreeing to share your information.

Google's Business Case Needs Your Private Data
It is clear to me why Google are prepared to pay $4.6bn for the spectrum, but this is not to foster innovation on the internet. Google are not a charity and they can clearly see that personalisation of their ad model needs information that can only be determined from knowing who I am as a physical being. $4.6bn (plus another chunk for the network equipment) gives them this information.

The business case is simple: advertisers pay more to reach the people they want and only the people they want. Google's revenue grows so Google get the $4.6bn back with interest over the long term. My issue is that Google are not saying "we want the spectrum so we can find out who you are". If they were, would there still be so many avid supporters of a Google network?

Labels: 700MHz Spectrum, Google, targeted ads

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It's easy to be jealous of Apple. They are in your face and they are successful. You see their little white earphones on fellow commuters in the morning, you hear them brashly disparaging competing products, and you read about them. Not just here, but all over the web. iPhone Mania is here and all for a product only available on AT&T's network in the US.

Blogger generated content, most of it too. The PR department doesn't have to do a lot - just a few tidbits to the gadget freak bloggers out there and they're away. Sit back and watch the hype build. Unlike many gadgets though, their products break into the mainstream because Apple has that intangible - coolness.

The company was born on April Fools day in 1976... A child-prodigy, they took on the bullies in the playground with the Apple Lisa and got a whipping. Undeterred, they bravely came back for more, stronger and better looking with the Mac. Suddenly they were the teenager everyone wanted to be friends with (and more).

Whether it was hormones, or just being a stroppy teenager, the company went off the rails in their late teens until they hit a golden streak in their 20s with a change of tack, the iPod. Now, having just turned 31 and backed by AT&T and Google, the company is ready to take on the world (starting with a small corner of the United States).

The ups and downs of the Apple story, together with the visual brilliance of their product design make people want what they have to offer. Their exclusive with AT&T is for two years during which time expect to see significant iPhone driven switching.

What is happening is that the US mobile phone market is, perhaps for the first time, becoming style concious. Things have always been thus in some markets... I remember sitting in a cafe in Milan one evening in 1998 watching as the Italians strolled past, Nokia held casually in position as they stalked up and down the strip. Phones have always been a fashion accessory in Italy, but in the US, they evolved from pagers and were for years worn on belt-clips like an old fashioned gunslinger. At least the iPhone puts that to bed.

For sure, the AT&T launch will be a success in the US. Pre-orders and waiting lists show that to be a slam dunk as long as the yet-to-be-announced pricing plans don't get in the way. Are they hiding something by not publishing them yet? Of course they are. They don't want the details to get in the way of a good story.

Then there is the question of where next for the iPhone. Feature-wise, the application side has been thrown out to the open source world with the announcement of support for web 2.0. This will undoubtedly work for an aggregator like Apple who can keep the best and leave the rest by low cost trial and error. Oh yes, and there's also the tie up with YouTube on the iPhone.

This whole piece is a touch peculiar to me. On the one side you have a service that needs high bandwidth and on the other a network that is increasingly using 3G, and yet the iPhone device stitching them together is boasting EDGE, with 40 - 200kbps connectivity when the network is capable of so much more...? Of course the iPhone has a WiFi connection, so YouTube clips can still be downloaded over broadband, but its not ideal. Who's not ready? Apple or AT&T?

The irony of the Google -> Apple -> AT&T link up is surely not lost on those who watched the Network Neutrality debates. Has Google vs AT&T become Google + AT&T? Do you think that YouTube is going to get the same best efforts wireless connection to the iPhone or will we see QoS used to make sure that Google gets to its public "best on AT&T"? Google using priority routes..? Never.

Which brings me onto the other piece of "where next for the iPhone?" Starting with a small corner of the United States is a strategically good move. It gives the perception of scarcity, adding to the coolness of it all for those on other networks and in other countries. It also gives Apple a controlled ramp up minimising the impact of any critical post launch issues faced. It may also have been a strategically necessary move for both parties too. It is understood that the AT&T network integration required was not trivial but was driven by AT&T's desperation for an icon to drive its rebirth.

But it is only a start. It is this ability to start big and get bigger that gives Apple much of its kudos. They have set expectations high in the past and have exceeded them. For different reasons, regardless of whether you are a new entrant or an established network operator you have a decision to make about how to approach Apple. They don't need you, but you might need them...

Of course, there are new entrants in many markets that would bite Apple's hand off for the chance of an exclusive in their territories, and that is the threat to all established operators worldwide. Here is a device, which in your competitors exclusive hands, could suck you dry if you let it. You'll no doubt see an emphasis targeting the not so unique touch screen USP with devices like the latest UTC or Prada phones. There are plenty of other devices which work the same way, and for them, the iPhone is a probably good thing because of the knock on impact. For the operator however, having the real thing on your books might be precious.

Its a dog eat dog world, right? Will operators stick to the "lower subsidy" policy, or will they go for broke and launch another device subsidy price war, either to sell or beat whoever is selling the iPhone? Apple don't care, they still get paid, as will the makers of other smart(er) touch screen phones. Will operators never learn...?

Or is it that they have no choice. Your money or your life? Certainly, in order to prevent an iPhone led exodus onto a competitor's network some pretty drastic sacrifices might be required.

We have seen device led markets, but have we seen anything "game changing" as AT&Ts CEO would have us believe the iPhone is? Has a handset manufacturer ever sailed so close to the wind with its lock in to an exclusive network? Probably not.

But does Apple not also need the operator? They are clearly getting a lot from AT&T!

Will Apple be blown off course as it tries to cross the Atlantic and Pacific Oceans to negotiate the countless treaties it needs to extend its reach? Will it be able to get its network rolled out before the rest of the market catches up? This is Apple's biggest weakness, and crucially is not something it faced with the iPod.

The iPod worked with a USB connection into any internet enabled PC, for anybody who bought one or was given one for a present. The iPhone is not the same. The iPhone is part of a system that requires elements in the network to make it operate as it should. Apple needs to work with the system. Can it do that or does it's coolness genetically predispose Apple to fight the establishment? Will it be coolness or jealously that wins? YouChoose.

Labels: Apple, AT+T, Google, iPhone

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The Question
There's a question that I have been struggling with for a while now. The problem is that it is too difficult to answer, because there are just too many angles for my little brain to cope with.

What is the economic value of broadband to a country?!?

Why does it matter?
The answer dictates the role that governments should play in telecoms policy making and infrastructure build.

After concluding in a recent article that BT were right to return cash to shareholders rather than invest in FTTH, and looking at the (remote) possibility of anyone else doing the same, it has been clear to me that we will be hearing ever more pleas for government intervention (as in April's BSG report). These pleas have come from all over the place, why?

Partly because no-one wants to spend the tens of billions that it may cost, I'm sure. If I want it, but I can't afford it, of course the government should buy it for me, right? Seriously though, is it because the economic value of broadband to a country stretches far and wide, well beyond the "telco value chain"? Can the breadth of benefits ever accrue back to a commercial entity making the investment, without distortion from naive attempts at creating artificial competition?

Market Failure
Of course, post Adam Smith, we are predisposed to giving the market a chance to achieve development and innovation without intervention from public funds, but are the benefits from broadband (the Broadband Dividend) too complex for the market to work out quickly without intervention? Would we have a ubiquitous phone network without earlier (direct) intervention? Where would we be without the phone...? Is the whole market-based philosophy wrong for such a national asset?

Ofcom are busily trying to figure out the Digital Dividend - the value of freeing up the spectrum that is still used by analogue TV - but I wonder whether this is missing the wood for the trees.

They are spending 56% of their £126.7m annual budget on spectrum allocation work, so let's hope they get this right. They can probably afford to put a little of this into answering the bigger question: Is broadband worth anything? Or is it that it will cost us to not have it? The answer to these questions matter a lot.

While it makes sense to look at spectrum allocation policy, I am struggling to understand how this can be ring-fenced from other digital transmission, wired and wireless. In the end, it is all just ones and zeros that can be used for anything from a phone call, to a TV station, a public health service to telematics. Call it digital if you will, but in order to encompass what I think is a much wider view than is described by "Digital Dividend", I am using the term "Broadband Dividend".

What am I talking about?
What is the Broadband Dividend then? Do countries need broadband in order to compete? Or is it even more acute: do their people in fact need broadband to access basic public services - to take part as citizens in society? Perhaps not today, but is that where we are going?

Consider this vision of the Broadband Dividend taken from a Memo to the Select Committee on Culture, Media and Sport:

As connection speeds increase, this digital revolution will continue to change our lives as consumers, as professionals and, provided we create the right conditions, as citizens: a universal [my emphasis - JP] and affordable supply of bandwidth could underpin a sweeping transformation in the delivery of many public services, ranging from the distribution of public information and the administration of bureaucratic processes to the provision of on-line education and health advice. For individuals, organisations, communities and the UK as a whole, this could help unlock new worlds of efficiency, opportunity and productivity.

The source may surprise you - it is taken from a submission by NTL... Admittedly, its dated October 2005, but it was quirky so I thought I'd include it.

What's wrong with the approach?
If this is the future, then perhaps we should be challenging some of the core assumptions underlying current government, regulatory and spectrum allocation policy? Viviane Reding certainly seems to think we should. "I do not believe that high stakes auctions in which only those with the deepest pockets can take part would be effective. We need to encourage investment and competition — we need cheap, wide-band services for all"

If we auction the valuable resources, we artificially inflate the cost of access. Auctions are nothing less than an airwave tax which filter down to increased prices to users. But, argues Ofcom, "It is the organisations that have the business plans to make the most effective use of that spectrum and maximise revenues [that will win out] if we have an auction mechanism."

The Politics
Network Neutrality the Sequel: this time the battleground is the ultra-valuable UHF spectrum, with Google arguing that this should not be hoarded by netcos as a defensive measure against competition for their sunk assets. The problem for regulators is that in many cases, the cost of sunk assets was a direct result of regulatory policy at the time of investment - like the auction of 3G licenses.

Although there may, even now, be a case to tear up history for the sake of the greater good going forward, doing so might trigger a lawsuit or two from those who have invested in the past in good faith. Companies bought licenses or sunk fibre on the basis that doing so gave them a certain competitive advantage over those who did not. If there is a risk that today's investments could be invalidated by swings in regulatory policy tomorrow, that investment won't happen and there will be no Broadband Dividend. That, I'm afraid, is the flip side of the argument: just tabling the possibility of a rethink may ensure a failure in the overall objective of encouraging investment in new capacity.

But that is not how some see it. Of course spectrum should be given away to anyone and everyone, argues Google, how else will users be able to get onto their services? How can we make money if users have to pay someone else first, they might ask (I made that up, but I'm getting an increasing feeling of a dark side to the big G).

Although I am uncomfortable with Google's role in the debate as they so clearly stand to gain commercially from the outcome, their position raises an important point on Broadband Dividend question that I think is being fudged because of the difficulties balancing past policy with future opportunities and needs.

The Greater Good
If broadband is required by countries, to establish favourable conditions for business and to citizens, to enable them to take part in society, we are now talking about a higher goal than can be catered for in a "business plan" as suggested by Ofcom. In fact, business plans and economics in general assume scarcity, whereas the higher goals mentioned require equality, ubiquity and perhaps even subsidy.

Does Broadband become a requirement in order to interact as a citizen with your government, and the public services that they provide you? If it is a requirement on the citizen to interact in this way with their government (because it makes government more efficient) or if it gives you advantages over your fellow citizens who do not have access, then does the government have the obligation to ensure that equality of access is available to all?

If the Broadband Dividend is significant, it suggests that countries need to ensure ubiquity of access within their territories to level the playing field for their citizens and maximise the use of scarce land & property resources. For business, high bandwidth might give the country a competitive edge with their neighbours so it may not be enough to simply ensure ubiquitous coverage - ubiquitous high speed coverage may be required. Is this a recipe for success in the global market economy? Or a lavish white elephant like the Millennium Dome?

Some Reference Points
The Central Development Corporation states that for Canada at least, the Broadband Dividend is CA$ 75bn annually (£36bn) or CA$ 2,500 (£1,200) per citizen. There seems to be no other source for that number, but if nothing else it's a stake in the ground.

When the Korean government undertook their thought leading intervention in 2004, they estimated that their project would add US$ 225bn of economic value over 10 years and lead to the creation of 820,000 jobs. Clearly, this is not a zero-sum game in their view... I wonder how much of this saving came from a reduction is the cost of the clergy?

Citynet quotes a study by the Allen Consulting Group in Brisbane, Australia into the value of broadband there, but it all seems a little woolly. Another stake in the ground, if nothing else.

Intangibles
What is a country's Broadband Dividend except a wild guess anyway? Measuring the impact has not yet started because we do not understand where all the benefits, and costs, of internet access are. Consider some of the contributing factors to an answer, and how little of these benefits will ever accrue back to the commercial entity making the investment in the infrastructure that makes all this possible.

Last week BBC Newsnight ran a feature on rural communities which included a piece on a Dipsticks Research. They employ around 30 people and are based on an old farm in Northumberland (far, far away from some of their competitors in Central London). "Emmerdale with Laptops", they said. Certainly, what they do is not possible without broadband.

Such outward migration of the population - away from the cities but still "connected" by broadband - can save companies and employees huge sums of money in rents and other costs and it leaves some of the benefit as new money into the host communities. This benefit might just be the occasional £50 for a tank of petrol at the local station or an employee or two deciding to relocate closer to work - increasing house prices - but all of it increases the wealth in general of the host community.

For centuries, populations have migrated towards the cities and the coastal regions (see this map of population density), driving property prices in those areas skywards. While this has driven growth in those cities, it has left great chunks of viable land severely under-utilised simply because people living there have the economic power of an ant. If that space can now be used by people to live in without compromising their employment prospects, we might be able to host larger populations - with the associated growth in the economy as a whole.

Consider also the ongoing change to working patterns, in particular, to the regular place of work. Broadband does not eliminate travel, but it can significantly reduce it: "In spring 2005 there were around 3.1 million people in the UK who worked mainly in their own home, or in different places using home as a base", according to the ONS. This was up from 2.3m in 1997, saving ever more time that would otherwise be wasted commuting. The economic and environmental impact of broadband driven reductions in travel could be very significant, but we do not understand the question let alone the answer. Don't forget the benefit to those that remain in the city - one less person trying to squeeze on the Tube in the morning...

Over and above the impact on travel, there is a positive impact on innovation and entrepreneurialism. Starting a business from an office with fixed costs from day 1 can break a business plan. Now of course, it is possible to run many businesses from home just as effectively as from the centre of a large metropolis. 62% of those home workers in the ONS data are self-employed and while many of them may make only a marginal contribution to the economy there are of course diamonds hidden in the rock that could make a big difference, especially in knowledge based sectors.

The End
I could go on working through the various areas where broadband can have a fundamental economic impact on a citizen or on a country, but like everyone else's attempts, it would be partially complete. Solving this question will take some big brains a lot of time (and money). My aim in this post is to get some thoughts going because as Confucius said "a walk of a thousand miles begins with a single step".

Labels: digital divide, FTTH, Google, next generation networks, Ofcom

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Talk of a tie up between Apple and Google has been reaching a crescendo over the last week or so. We should not be surprised, Google's CEO did join the Apple board at the end of August last year, and the companies complement each other well. And, of course, and they both hate Microsoft...

It may be easy to think of this as the companies "getting into bed" with each other, but if that's what is happening, it's likely to be a hedonistic no-strings affair rather than an engagement. Lust, not love in my view.

The .Mac story on Wired looks like a semi-educated guess. It says, basically, that Google's cloud (it's storage space) will be hooked into the .Mac offering allowing Google to offer SaaS services to Apple's customers. Perhaps, but so what?

The story in the FT looks like having a much greater impact. They state that Apple is going to use its TV platform to enable the controlled rental of DVDs online. Just as music is made DRM free, so DRM reappears in online movies - this time from the beginning(ish).

The FT and the WSJ (who also run the same line), do not make stuff up. They do not guess. They do not even make educated guesses. They don't need to because they get fed previews (leaks) by the parties themselves in the run up to a major announcement (it's Jobs' keynote at the Apple Developer Conference today).

The tie back to Google may have already been announced. Last week, Apple and Google said that YouTube would be available on Apple TV. Immediately we thought of user generated content, but perhaps this wasn't about UGC at all? Perhaps this was about a publishing platform... The same GB storage in the Wired was the basis for the .Mac speculation.

Why does Apple need Google for this? They already have the iTunes store, so they already have a customer facing offering much more refined than anything Google or YouTube can offer.

What Apple doesn't have, and would find it a huge stretch to develop, is the delivery network needed to get so many large files down to the Apple TV boxes. Joost's new CEO made a public pitch to fill that gap through him GigaOM interview last week. Maybe Google has already got the gig...?

If I were Joost, vying for Apple's love, I would not be unduly concerned. Joost is younger and prettier than YouTube and Apple may find Google to be a bit overweight for its long term tastes. In the mean time though, the gossip mags can fill their boots with shots of California's latest celebrity couple...

Labels: Apple, Google

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