Exploring the impact of broadband and technology on our lives, our businesses, and our communities.
Certain parts of the 'net have begun talking about building your own TV. Back when I was a kid, one of my favorite pastimes on rainy days was poring over the Heathkit catalogue. Heath of Benton Harbor, Michigan had a whole catalogue full of electronic kits, ranging from simple transistor radios to things like electronic keyboards and color televisions. I eventually built a shortware receiver, among other home-designed projects.
But with the advent of the microchip, Heath went out of business. Electronic stuff got so cheap no one was interested in putting things together themselves. So why the sudden interest?
We're beginning to see "perfect storms" in several areas. The phone business is becoming a perfect storm. Skype's CEO announced the other day that the company has 29 million users and is adding 155,000 PER DAY. Skype is free for Skype to Skype calls, and they charge a small fee for completing calls to non-Skype users. Skype is using the Google model--mostly free service and offering an optional fee-based service. And we all know what happened to Google.
But Google was not disruptive in the same way that Voice over IP is destroying the phone business because there was no global search business before Google. But the steady increase in broadband users, excellent voice telephony software from companies like Skype, and monopoly pricing from the telecoms has created a perfect storm in telephony that will shortly also swallow the entire cellphone industry, since WiFi carries Skype and other VoIP calls just as easily.
Similarly, the television business is also on very rough seas that will build quickly to a perfect storm. Again, broadband winds have increased the wave height. We're very close to a time when some innovative and brash content developer says, "Heck with the TV industry. We're going to produce a "tv" show and broadcast it over the Internet." The show will be so compelling (I'm guessing a comedy will be first) that millions will download and watch it, even if the picture quality is a little fuzzy. Once we have a single breakout show, the wave height will only get higher and eventually the existing model for television will be swallowed by the monster wave of Internet TV. This storm could start anytime in the next year or so, and TV as we know it will hang for a few years, but with fewer and fewer viewers day by day.
So what does all this have to do with building your own TVs? The Federal government has, using the law of unintended consequences, created a storm that will destroy the entire TV industry. Note that Japan will be more affected than the U.S. The V-chip requirement is looming, and we are only months from the requirement that all new TVs have a V chip. This is causing a current spike in TV sales for one thing, but that's not the real story.
Regulators keep forgetting that the 'net is intelligent. I don't mean the network itself, but rather the people connected by the network--that's the real 'net. And the real 'net is mad as heck. When the 'net gets mad, get out of the way. The 'net doesn't take to the streets, they don't write their congressperson, they don't go on talk shows to complain about how they feel. Instead, they go to work.
Hence, the 'net has decided to build their own TVs, without V chips. That's right, Open Source television. It's not going to be like the days of my youth, soldering together hundreds of electronic components and hoping you did not make a mistake. Hoembrew TVs are going to be mostly software, and you'll download and install a TV program--not a program like "Seinfeld," but a program as in software code. You'll need a cheap card that the cable TV connection plugs into, but it will be a lot less than a new TV. And then, presto, your computer will be a television. A V chip free television.
Regulators and the entertainment industry keep forgetting the basic premise of the Internet. Remember the origins of the Internet--it was a Department of Defense initiative. The DoD wanted a network that could continue working in the face of a massive nuclear attack. American genius designed just such a network, and that's what we use today. And guess what? Over-regulation, excessive fees, and monopolies, to the 'net, look like attacks. The 'net routes around such attacks and keeps on going.
It's a perfect storm.
One definition of insanity is doing the same thing over and over again and expecting different results.
I still see many regions continuing to build shell buildings designed for manufacturing. It used to bring jobs to the area, so why not just keep doing it? The problem is that kind of strategy is competing for fewer and fewer jobs (as few as 10% of all new jobs) against more and more regions willing to throw enormous tax incentives at manufacturers. Meanwhile, more and more manufacturing is going to other countries.
How about trying something different--something that will really give your region a marketing edge, for about the same price as a shell building? What if you could provide this resource to businesses by the hour, so that you don't have to find a single business to lease the whole facility for a long time?
How about a supercomputer?
Add Bowie State to the growing number of colleges and universities that are building supercomputers, both for their own academic research but also for use by local businesses. Virginia Tech's "Big Mac" project led the way, but other areas are beginning to do this as well. Here is the key information from the article:
The initiative is expected to increase grant opportunities and attract business partnerships. In the near future, Bowie State will generate revenue by selling and negotiating cycle time.
Wouldn't you like to be able to advertise to businesses that you have one of the 100 fastest supercomputers in the world? Doesn't that sound a little better than saying, "We've got a nice, drab metal shell building just like about 10,000 others in the U.S.?"
Guess what? They both cost about the same. Which one is most likely to project an image of being connected and being part of the global Knowledge Economy?
We are just at the dawn of the computer age. I know that because we are finally seeing computers that are not just, well, computers. The $99 iPod shuffle, barely larger than a stick of gum, is thousands of times more powerful computationally than my first hand-built personal computer from 1977. And we don't think of an iPod as a computer at all, but it is. Cellphones are handheld computers that have been programmed to behave like phones (and cameras, and calendars, etc.).
I started thinking about this when I read about Asterisk, which is an Open Source software project that makes a cheap Linux or Macintosh computer behave like a PBX. PBX is an old phone company acronym for Private Branch Exchange, or a small telephone switch normally owned only by medium and large companies because they have been very expensive.
But now any small business can afford a PBX simply by downloading this free software and installing it. It works with most popular Voice over IP protocols, and interoperates with other common telephone equipment. It's an incredible piece of work that is the result of probably hundreds of people working collaboratively for the common good.
And it must scare the pants off companies like Lucent, Alcatel, and others that still make a lot of money selling telephone switches. The world we knew is crumbling around us, and dazzling new opportunities are emerging.
I've been reading a lot of historical fiction and nonfiction recently. I've slowly been ploughing through Neal Stephenson's three book opus on the late 1600s and early 1700s. I'm just finishing up book two, ,The Confusion. It's a fictional account of those turbulent times when the first global economy began to emerge and innovations like paper money changed the rules of nations and commerce simultaneously. Stephenson is a genius of a writer, rooting his story firmly in the real history of the time, including figures like Isaac Newton and Leibniz, both of whom had a profound effect on that era.
I think it is good to read this because it is reassuring--we've been here before, we've seen massive disruptions of business, commerce, and of nations, and somehow, over time, things have always gotten better. By fits and starts to be sure, but we need not be afraid--we need to be bold.
USA Today has an unintentionally funny article (page 3B) about Microsoft's "maniacally focused" effort to provide converged instant messaging, email, and voice communications on the Windows platform. The writer apparently fell hook, line, and sinker for Microsoft's PR flack about breakthroughs.
Millions of people have been using converged IM, email, voice, AND video communications for more than a year--it's called iChatAV, and Apple provides it for free on every Mac.
The only thing that might have been maniacal about Microsoft's effort is their determination to catch up with Apple, which has been consistently leaving Microsoft in the dust.
One interesting tidbit in a sidebar to the article--by 2007, it's predicted that 45% of U.S. businesses will be using Voice over IP. Still think this is nothing important?
The blogging community is abuzz with the latest threat to writing and journalism on the Web. There is a move afoot to extend the controversial 2002 Federal campaign laws to bloggers writing about politics. At this point, I don't know enough about the law itself to do much more than merely mention the controversy as an example of how the Law of Unintended Consequences continues to work in the age of the Internet.
It seems to be caught up in the age old (okay, about ten years old) controversy of linking. Some parties say you are campaigning if you simply put a link on your site to the Web site of a candidate running for office.
From a certain angle, I could agree with that. But I always like to look at the practical side. How do you enforce such a thing? Will the Federal Election Commission create "Web Police" who will roam the Web looking for unauthorized links? Will they set up massive, Google-like back room 'bots that try to crawl every site on the Web for a stray link to Joe Fiddleray, who's running for Dogcatcher in Left Elbon, Montana?
I remember reading once that for a law to be a "good" law, it had to be enforceable. I don't think this one is.
According to most reports that I have seen, the Heartland Institute is an "astroturf" organization (the term refers to a group that has a hidden agenda--in other words, it's appearance is fake, like Astroturf).
I mention them because the Institute has been busy issuing reports saying that community broadband is bad for communities, and does so mostly by using scare tactics, suggesting that community investments "could" raise taxes, as one example. The problem is that there is no evidence that it does, and some data that suggests it lowers taxes because of increased economic development. That's what happened in Cedar Falls, Iowa. After they invested in fiber, they were able to lower taxes while nearby communities had to raise taxes.
Don't believe everything you read (even this column). The beauty of the Internet is that you have the option of doing your own research and developing your own sources of reliable information.
Add Texas to the list of states that has some legislators who want to keep communities from managing their own economic future. This article documents the very successful WiFi project led by technology visionary Will Reed, and the legislators who apparently think "free" broadband somehow subverts capitalism.
But as others have pointed out, "free" street lights did not put light bulb manufacturers out of business, and "free" books at the public library did not put book publishers out of business. The notion that communities can not do anything that someone in the private sector might want to do is, at bottom, just nonsense. This kind of thinking turns the centuries old notion of the common good (as more important at times than individual needs) on its head, and if it prevails, it is the death of communities--communities will be "owned" by private sector special interests.
My comments are not meant to be a blanket indictment of business--this whole discussion is being whipsawed and controlled by a few giant companies that refuse to play fair. All most businesses want is an opportunity to compete, and most businesses understand the concept of the common good and recognize that common good investments like roads actually CREATE business opportunities, not take them away.
One of the big flaws in the whole telecom debate is a chronic focus on the past. The telecom companies and the FCC both tend to rely on looking backward, and by extension, it's a problem at the state level because the incumbent providers have been much better at getting their message to state legislators than purchasers of telecom services.
Here's a concrete example of what I mean. The Times-Picayune has a story today on the fast-growing "iPod Economy," which is the exploding market for iPod accessories. According to one researcher, iPod owners spend half as much as the cost of their iPod on accessories. With most iPods selling for between $200 and $300, that's a lot of money. And iPod sales itself grew 525% last year. By some estimates, iPods account for as much as 80% of the total portable audio player market.
So what's the point? The point is that very few people could have predicted this three years ago. Technology innovation is creating incredible business opportunities. If you browse through the companies selling accessories, none of them are "big name" companies, and many of them are garage start-ups, especially those that make protective sleeves and cases for the iPod.
The telecom discussion tends to be framed by what is called the "triple play," which is voice telephony, video, and (Internet) data. I've seen a lot of business cases that "prove" that communities can't recover their costs using a triple play model. I think the reports are right, but for the wrong reason (which makes them wrong overall).
It's really a quadruple play, with voice, video, data, and what I call "advanced services." Advanced services are anything that will be delivered via the Internet that we have either not thought of yet or just are not including. My favorite example is network backups. Knowledge Economy startups like Data Ensure are growing rapidly by playing in the Advanced Services arena, and Data Ensure, in particular, is creating jobs in a remote part of southwest Virginia. They just happen to be in a vertical business incubator with fiber in the basement--part of a regional fiber project.
Who could have predicted, five years ago, that the old coal town of Norton, Virginia would have world class fiber and a Knowledge Economy "advanced services" business? It's the advanced and emerging services, the fourth part of the telecom equation, that make community investments in broadband practical from a business model perspective, and sensible from an economic development perspective. If you leave that whole chunk of business out, well, yea, you end "proving" that you can get what you need from the phone or cable company.
Why are advanced services being left out? Because the phone and cable companies hate competition. They want to control what we do with broadband, and don't want third parties like Data Ensure getting some of your money. So they conveniently frame the discussion in a way that favors their arguments and weakens arguments for community investment.
Trying to jam the telecom debate into a one hundred year old model can only produce one hundred year old results--we call that the Manufacturing Economy, which is long gone.
One of the things driving the iPod Economy is broadband. Every day, thousands of iPod users are downloading "podcasts" to their iPods via a broadband connection. Podcasts, are portable talk radio. The audio equivalent of bloggers are recording commentary, posting it to their Web sites, and listeners are using RSS-enabled podcast feeds to squirt the audio files directly into their iPods. Typically, they listen to them in the car on the way to or from work. Podcasts are one of the things that are killing commercial radio as we know it. Who could have predicted podcasting two years ago?
How about your community? Are your leaders still thinking about the local economy in terms of what it was? Wouldn't it be better to think about what it could be? The first step, maybe, is to get an iPod, or at least talk to someone who has one. This is not about the music...it's about the economy, and the emerging markets being created while you read this. For all you know, you may have an iPod accessory maker in your community, selling their products over the 'net from their home. If you did have one of those companies, would you even know? I can almost guarantee those startups aren't joining the Chamber of Commerce.
And that begs another question--why not? But we'll save that for another day.
Congresswoman Heather Wilson of New Mexico calls it the "emerging duopoly. This Washington Post article discusses the impact the telephone mergers may have on communities and telephone users. The duopoly refers to a community that has just two telecom companies--one large phone company and one large cable company. These big firms can engage in cartel-like behavior, and the pattern so far has been not to compete on a level playing field but rather to simply buy competitors.
James Carlini has a must-read article that has some solid data on the value of municipal investments in broadband, as well as some fascinating historical data that shows community investments in "new" infrastructure pay off.
Carlini has new data on the Waterloo, Iowa and Cedar Falls, Iowa comparison (here is a one page summary--look for the handout titled Case Studies). Waterloo, Iowa decided to let the cable and telelphone company decide what kind of broadband the community had. Twenty-five miles away, Cedar Falls, with less developable land and some other economic development disadvantages, invested in community fiber. Five years later, Cedar Falls lowered taxes slightly, and Waterloo had to raise taxes. Why? Because business investment in Cedar Falls boomed because of the community fiber, and economic development in Waterloo stalled.
Carlini also provides some historical data on St. Louis and Chicago. At the end of the Civil War, St. Louis was the major gateway to the West because it dominated water-based trade. Chicago was much less prosperous, and decided to really push railroads. St. Louis decided to pass laws that discouraged railroad development, and tried to protect water routes by discouraged railroad bridges across the Mississippi. The result--Chicago's population boomed from the economic development the railroads brought, while St. Louis barely grew at all.
We're at the same place today. The telephone and cable companies are trying to get our legislators to hold back the railroads to protect canal barge traffic. Does your community want to be St. Louis or Chicago? Waterloo or Cedar Falls?