Exploring the impact of broadband and technology on our lives, our businesses, and our communities.
Video is driving the broadband business
This article discusses what I have been saying for a long time: Video is finally turning broadband into a business. For reasons that are really no one's fault, the broadband business is upside down. If you are in the business of selling Internet access--dial up, wireless, DSL, cable, fiber, satellite--you make the most money if your customers never use your product. You make the least money if your customers sit in front of their computers all day long fooling around on YouTube and Joost.
It is a lose-lose situation. Internet providers lose money if their customers love the service, and customers lose because if they love the service, the service can slow to a crawl or become nearly unusable.
The problem is that there is no feedback mechanism between use and cost that informs customers about the real cost of the service. Under the current system, users pay a fixed cost and appear to get unlimited service. Demand is decoupled from supply because of this inadequate pricing feedback.
The solution is to get away from selling bandwidth and to start selling services, whose prices are more directly tied to the real costs of providing the service. Open service provider broadband networks are going to emerge quickly as the preferred business model for broadband because they pay their way, and local governments that help develop them can get new revenue streams from telecom while lowering costs for public and private customers.
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Lots of business will be in space
This short article on emerging deals between Virgin Galatic and Robert Bigelow's space hotel venture show that the Space Economy continues to quietly roll along. Even more interesting is the recent deal between Virgin Galactic and NASA to share development on various space gear like heat shields, space suits, and rocket motors. Taxpayers may eventually be the biggest winners as private industry gets into the space business and starts making money. It will become much more cost effective for NASA to buy what it needs from private firms than to build everything in house, as it does right now.
In terms of economic development, California and New Mexico are in the lead, with Virginia close behind. All three states have active spaceport development programs, and formerly obscure chunks of real estate are turning into boom towns.
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Music sales plunge
The New York Times (registration required, links disappear) has an article about the plunging fortunes of the music industry. Sales of CDs have fallen more than 20% in the past year. While the article does acknowledge that a lack of good music may have something to do with it, no mention is made of the possible effect price also has on buying decisions. Most new CDs cost $18 and up.
The music companies continue to try to blame online music sharing as the primary culprit, but I am inclined to believe that they have cause and effect reversed, at least in part. High prices encourage "free" sharing, even though it is illegal. The record companies need to find better music, cut their high overhead, increase royalties to the musicians, and lower the cost of music. Continuing to blame customers and labeling their customers indiscriminately as thieves is obviously not working.
Is the Internet to blame? In part,sure. There is no reason to distribute music on CDs anymore, but the fact that file sharing is easy via the Internet does not automatically kill the music business. Good music at a fair price is step one.
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Knowledge Democracy:
U.S. enjoys slow broadband
Compared to other major industrialized countries, the U.S. "enjoys" some of the world's slowest broadband. Even worse, when you factor in price, we pay more and get less than countries like Japan, South Korea, France, Canada, and Sweden. Over the past decade, the U.S. has gone from being the world leader in broadband to 16th in the world.
Communities and regions waiting for the Federal government to solve this problem are going to fall farther and farther behind economically. To be fair, it is important to remember that places like South Korea and Japan are not much bigger than some regional trading areas in the U.S. (that is, 2-4 rural counties in size). Are we really going to settle for an economic development slogan of "Our region...broadband almost as good as some tiny countries from overseas?"
The good news is that the technology and systems needed to take high performance fiber and wireless connections everywhere in a region (every single home and business that wants service) are mature, affordable, and available off the shelf. It is time to just roll up our sleeves and get the job done.
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Community news and projects:
Google's total information obsession
Anyone who worries about government snooping has not been paying much attention to Google and it's long term goal of "total information" about every single person on the planet. The Google founders are becoming wierdly creepy with their happy talk discussions of wanting to tell people "what job to take" and "what to do tomorrow."
Google apparently is not satisifed with making billions from advertising; they also want to be your nosy, domineering, and overbearing "friend" who has an opinion about everything you are doing.
The company continues to expand it reach, and the recent acquisition of online ad giant DoubleClick means the monstrous company is well on the way to complete vertical integration of the Web.
Lots of people like Google's "free" services, but as always, there is no free lunch. Google's "free" email service also means giving Google permission to read all your email to look for data that can be used to create customized ads for you. Write to a friend about a hiking trip, and ads from LL Bean and REI might start popping up on your screen. Or worse, write to someone about a medical condition, and microseconds later, Google has added that information to your dossier that it keeps on you, and you start getting targeted drug advertisements.
Google's online applications are even more risky. Use Google's online word processing service, and Google knows everything you have ever written with it.
Google should be free to pursue whatever corporate goals it wants, but Google users should know the price that is paid for the convenience.
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Knowledge Democracy:
Resilient electric power
Energy is powering the Knowledge Economy. That may seem like a statement of the obvious, but broadband by itself is not a complete economic development strategy. Increasingly, it is the combination of affordable, high performance broadband AND reliable, resilient electric power that makes a region attractive to business.
In New York City, ConEd, the power company, is designing a new main power line that will be highly resistant to terrorist attacks and extreme weather. The low temperature, superconducting cable will have enormous capacity and will help reduce brownouts and power surges, which are a big problem for all the electronic equipment that powers business networks.
The right telecom infrastructure is necessary, but not sufficient. Regions with a history of power problems are not going to be successful in attracting certain kinds of businesses that make heavy use of computer and network equipment. And remember that heavy manufacturing today is almost totally dependent on networks and computers. There is no going back to the old Industrial Economy; everything--every kind of business of any size is part of the Knowledge Economy, no matter what they make. A region's economic development strategy has to address the needs of those businesses, starting with affordable broadband and reliable electric power.
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WiFi-only projects are failing
There is an AP article circulating this morning about failing muni WiFi projects (not yet on the Web). This is something I have been predicting for a long time, based on the past performance of early WiFi efforts.
Here is a short list of problems with municipal WiFi-only efforts:
- WiFi is expensive if you truly want total coverage. Many WiFi projects underestimate the number of access points that are needed--something that is causing problems with the much touted Philadelphia WiFi effort. Some contractors and vendors may be underestimating the number of access points to keep costs lower, so it is important to be realistic during planning stages about what a community can do.
- WiFi is not a business class solution. Few businesses of any size are willing to run their business on a WiFi connection. It may be okay for small one or two person businesses, but most businesses want a more secure and more reliable wired connection.
- WiFi has reliability problems. Even if you are in range of an access point, foliage on trees, building walls, rain, snow, and other access points can degrade the signal. Because WiFi is an unlicensed service, anyone can run an access point. All those home wireless routers can cause interference and slow down other access points.
- WiFi, even the newer G and N services, can't handle video very well, and this limits the potential of such a service to be financially viable. A municipal broadband system has to have a solid business model that is financially sustainable, and that means being able to carry business and residential video services.
Wireless services are often a good first step for a community system. And wireless is not going away; it will remain as an important component of a well-designed community broadband system--as a mobility solution. As we travel around the community, we want to be able to access the Web, check email, make phone calls, and do other sorts of things. Wireless services enable that. But wireless is not a complete solution.
What is?
Communities need to regard telecom as essential public infrastructure, critical to community and economic development. And that well-designed community infrastructure includes both wireless access and fiber to every home and business. With the right business and financial planning, such systems can pay for themselves and provide new revenue streams to local government, while lowering the cost of telecom services. Everybody wins.
Technology News:
DRM may be going away on music
Digital Rights Management (DRM) may be on its way out. Amazon has announced it intends to get into the music business and will offer only digital tunes that do not have DRM, which limits what buyers can do with the music.
Amazon has enough clout that it may succeed where other companies have failed, but even Amazon may not make much headway against Apple's iTunes Store, which is also beginning to introduce DRM-free music. Amazon will offer the music in MP3 format, which is not quite as good in sound quality as the AAC lossless format used by Apple.
It is also not clear how many music companies will offer music without DRM. Right now, Amazon has only one record company willing to do so.
One myth that has been repeated in some other stories on this topic is that iTunes music only plays on iPods. This is dead wrong, and has never been true. You can easily move iTunes music around and it is possible to play the tunes on MP3 players made by competitors.
Apple has consistently said it will remove DRM if the music companies will let it, and it appears that cracks are beginning to appear in the stubborn resistance (so far) of the music companies to sell music without DRM.
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Knowledge Democracy:
Has Google killed the Internet?
The Web has been a good place to do product research for the past four or five years, but a couple of recent experiences trying to check on a couple of consumer products has me wondering. What I noticed is that the first couple of pages of Google search results were almost all link farms and link aggregators, meaning there was not really any content on any of the pages, but just links to other pages, and most of them also turned out to be just lists of links.
In other words, Google was coughing up useless results. Are there still good sites with valuable information? There sure are, but it is increasingly harder to find them if you don't already have a bookmark for them.
Google's advertising program has made it profitable to set up these link farms; if even a few people click on some of the ads or paid links, the sites make money. The sites work because they have carefully studied the way Google ranks sites, and these sites make sure they have all the right keywords and links to rank high in the search ratings.
Google does not really care, because they get their cut of ad revenues no matter where the ad links are placed, but over the long term, it could be the death of Google, and indeed, any search site that values ad revenue more than useful results.
More broadly, this is the tragedy of the commons. A few unscrupulous people are ruining the "old" Internet, where there was a volunteer spirit and a commitment of mutual collaboration to make things work. Over the next five to ten years, more and more content will move behind carefully managed private networks where users will pay for content and services. In return, they will be spared the dreck and spam that is weighing down the public Internet. We'll still be able to roam the World Wide Web, but we won't be spending nearly as much time there.
This is not necessarily a bad thing; it means the Internet is growing up. The important issue is to make sure these private networks are managed by the community or a region, for the common good, so that innovation and commerce can flourish.
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Network in the sky
I wrote recently about Hughes Satellite's new pricing options that make it very attractive in rural areas where landline broadband may not be available. Hughes is also working on new technology that will provide much better quality of service for satellite broadband and will improve some of the latency (delay) issues that have been an issue in the past.
Hughes is putting a new satellite up soon that will have routing capabilities on the satellite itself. This is a dramatic and important change from the past, where the satellite has been a passive conduit and simply passed data packets from one earth station to another.
The new approach will have each packet examined on the satellite, and it is destined for another Hughes customer, it will be directed straight to that customer, rather than being sent up and down. For some traffic, this could cut transit time by 50% or more--a huge boost when talking about network latency. This will be especially popular for businesses managing several locations that use Hughes services, as Hughes can create a private network with much higher performance.
Innovations like these are making satellite increasingly attractive for rural areas. And with improved performance, satellite may have an important long term role to play in providing network redundancy.
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