Digital control gone too far

So my wife and I drove down to Modesto for this weekend. I wanted to test out using my phone with my car’s Sync, because I noticed it had a USB connection. I tried to start playing Pandora and my car told me Sync was unable to play protected content through this device. Let’s think about how absurd this is. I have an auxilary input into my car, so I can easily use a headphone jack to play the exact same music through the car speakers. The only difference is that I lose the ability to use the on steering wheel music controls. Digital copyright maximalists have decided that to allow microsoft to use Sync they must limit the devices that can play protected content. How assinine. This means that it is now les safe for me to play music because I can’t use the dash screen to see what music is playing or other controls to keep my eyes on the road. I own both the car and the phone and I’m paying for Pandora through ads. There’s no logical reason that I shouldn’t be able to use these products in this way.

This is a bit of a first world problem sure, but the same idea that is limiting my ability to use products that I own how I want them is shaping the rest of the internet and controlling how media (digital or print in some cases) can be used and consumed the world over. One of the more famous cases of late is the story of a guy that bought a book from Thailand and sold it in the US. The got sued because apparently that’s might not have been legal (supreme court thankfully ruled in his favor) another one is the idea that any software is merely a license and not actually a product that you own. In this case Autodesk sued a guy that was selling an old copy of AutoCAD that he’d never opened, on the grounds that he bought a license and the terms of service (which they can change at any time without you knowing or re-agreeing to) said that he was unable to transfer this license. This wasn’t a digital download it was a physical disk with the content on it.

I believe that because the US market is becoming saturated in many regards for these types of technologies, these companies are looking to turn these aging platforms, technologies, and content into a continual revenue stream. Instead of risking money to innovate they are turning into monopolists that are exhibiting rent seeking behavior. They must do this to keep their stocks from falling. Even the fabled internet companies that are supposed to be different aren’t. Amazon has been accused of limiting access to drive book prices down from their suppliers. Amazon limiting access to books. Think about that. Can you think of anything more abhorent than limiting access to culture and/or knowledge to gain a greater profit margin?

Should companies make profits, by god yes. Should we enable companies that have innovative ideas to enter the market? Definitely, in fact it’s an imperative if we want to avoid rent seeking behavior. I’m not always a fan of Lyft, Uber, and AirBnB but they are making a serious effort to confront entrenched businesses, archaic laws, and meet an obvious market need. So, let’s work to enable market competition and limit monopolistic behavior. The former is good for everyone, while the latter only for those in power.

Powerful Microsoft investor wants MS to focus on Enterprise

According to the Washington Post an influential investor is pushing for a new direction at Microsoft. His goal is to get Microsoft to ditch the consumer market and focus solely on enterprise. He wants the X-Box gone (likely sold to someone), Surface gone (either sold or killed), and their other non-enterprise solutions eliminated as well. I think that from a Financial person’s perspective these are something of an obvious option. X-box isn’t killing it in the market, they are expensive and take a while to recoup the cost of development and all that. The Surface hasn’t had great sales – although it’s hard to separate weak sales of the Surface from the abomination of Windows 8 that sold with the bulk of them initially (I’d bet they’d be solid devices with Android on them).

I think it’s important to remember why Microsoft is Microsoft. It’s not entirely because of Enterprise. It’s because Operating systems are difficult to learn and people don’t want to learn more than one if they can avoid it. Only recently have the bulk of people been fluently on two different operating system – Windows/Mac/(few on linux) & iOS/Android/Windows Mobile/Blackberry. The most common interaction would have to be Windows & iOS and/or Android and Mac & iOS.

The reason for strong enterprise Windows sales is because of the massive consumer base that Microsoft has managed to hold on to despite it’s best efforts. If most people had to learn multiple different operating systems between home and work it would increase their stress levels at work. The skills they learned at home wouldn’t transfer well. I think this is also the reason why enterprise is conservative in upgrading their Windows OS – essentially skipping every other one. XP/Seven because those are the products that seem to build a strong enough user base on the consumer side. Most techies don’t like Win 8, so that hurts sales to Mom and Dad or their friends. They’ll tell them to avoid a product or get them to go back to Win 7 over 8 if possible.

The battle for the next OS is going to be fought on tablets and phones, before it’s fought on laptops and desktops. I know there are some tech experts out there calling for the death of the tablet, however, I think it’s far more likely that there will be a convergence between laptops and tablets. Where a tablet can meet our core needs of our laptop.

The more powerful of the two Surface products (Pro) was just that type of product. It was able to do a lot of WINDOWS laptop stuff, but in the form factor of the tablet. Should have sold well, except it cost a ton for a tablet or under powered laptop. I think that this really is the consumer space people will work from. We really don’t need more space unless we’re gaming and then people will build a desk top or buy a console.

Consoles – the X-box isn’t just a console, it’s supposed to be a full multimedia PC replacing the need of a desktop. You pair the Surface Pro with an X-Box and you’ve got everything you need for your house. This is what Microsoft is envisioning. Everyone is still using Office on their Surface, Skyping on both X-Box and Surface, and everything is based on the familiar (sort of) Windows OS. Keeping it front and center.

Let’s say MS ditches the console and Surface. They’d have to license out Windows to run on tablets and wouldn’t have the ability to help shape those conversations. They are competing with 2 Rabid fan bases in mobile OSes, one that many companies are able to use for free (with some licensing fees to MS), Google is pushing to replace MS in netbooks and likely other environments – Chromebook and ChromeBox. All of these could threaten their dominance as the work station in enterprise. For the bulk of the work I do, I could probably do it on a tablet as long as I have a compatible office suite.

Furthermore, MS isn’t the only option in many of the enterprise spaces. They aren’t the only OS, Office Suite, or Enterprise service company (Dell, IBM, Accenture, SAP, etc…) it’s not a guarantee this process would work. Furthermore, people are already talking about an Android server for some activities. These are all threats to MS core business OS and Office Suits. Leaving the consumer space only opens them up to more threats as people will want to stay in a similar environment.

This is another example of the Innovator’s Dilemma and MS should look to use Lean to help solve their cash and process challenges. Both the Surface and X-Box are good products. They just need to figure out how to find the right market for the Surface.

Technology obsessive culture leads to product worshiping

Apparently, today is the 30th year since the Macintosh computer was introduced. All over the internet was a big masturbatory fest over this great achievement. Honestly, I don’t really give two shits. Quite frankly, I don’t think that it really changed everything and anything – similarly I don’t think that the iPhone did. In both of these cases the technology had been in the market, it just required the right type of interface or marketing. It’s well known that there were a lot of similarities between the work that was being done at Xerox PARC and at Apple. In fact, Steve Jobs went to visit and learned a lot about what the computer gods of Xerox were doing. Did he steal ideas from there? No, but I’m sure that his ideas were enhanced and improved because of his visit. Similarly to the way that his ideas were enhanced and improved by all the competition to the iPod including the Palm Pilots, BlackBerry, Windows Mobile and so on.

Apple was the first to market for really easy to use printing interfaces as well as type faces. However, at the same time that Apple came out with their product, Adobe was developing their similar product which was a spin off from Xerox. Similar, Microsoft Office was developed by an ex-Xerox employee.

Did the Macintosh change things? It’s likely from a design perspective more than anything as both Windows and Apple’s operating system were similar to the Xerox operating system. What happened, why did Apple succeed and change things and not Xerox? Because Xerox didn’t know what to do with what they had. Apple, coming from a different perspective, different cost structure and different corporate culture, was able to move into the market with only competition from IBM. IBM was a business first company and didn’t really understand the market they were helping to develop. This is why IBM wasn’t able to dominate the market the way they did in the minicomputer and mainframe days – in fact, IBM has completely exited the x86 market. Because of IBM’s business decisions we now have Microsoft and Intel (and others of course).

We idolize the great personalities and the beginning of a new technology. But the movement and technology wasn’t created by Apple even though they get the credit. Apple did do great work, they helped to shape an early portion of the computer age, but the introduction of a specific product only notes a specific point in the total arc of that technology. Computers went racing on by, new ways to interface with computers have emerged and were even invented before the Macintosh was released.

The Macintosh was certainly was a high mark at the time and was a great introduction to many people to the greater opportunity of computing. It allowed more people to access computers. I know that I used a version of Macintosh while I was growing up in elementary school, however at home we never owned a Mac, we only ever owned PCs while I was growing up. The Mac was already on the way out by the early 90s, which at the time was fairly fast, considering the quick ramp of computer since then.

Should we honor the Mac? No more than we should honor the first Palm, Blackberry or Android phone. I fully expect the iPhone will be honored as much or more in 3 years when the iPhone hits ten.

Is Net Neutrality regulation commie nonsense?

Network Economy

Regulation’s a bad thing, right? Personally, I think there are instances where regulation is an amazingly good thing that drives innovation. We also need to be cautious about who is saying regulation is good or bad. Back in the 90’s we’d hear that regulating in anyway to prevent acid rain would cripple business and kill our economy. This clearly didn’t happen, we have acid free rain for the most part, we have more productive manufacturing than ever. We also hear that regulating CEO pay by median rather than average is significantly more complicated to the point that a place stacked full of MBA’s can’t figure it out. Then there are regulations that pick winners like Solyndra and turns out to be a disaster. These cause higher taxes and are actual drains on the economy (personally I’m on the fence about experimenting with new technologies and having the government support them, but that’s me).

What about the FCC “regulating” net neutrality? I think that it’s important to look at how this all started. First, I’ll start with a bit of a history with the telecoms, then move to how the internet was developed, and move to comparisons between other monopolies.

AT&T has been described as a natural monopoly. This was partially helped by the US government because the government wanted coast to coast telephony and selected AT&T as the standard for that activity. This gave AT&T incredible market strength, but was also extremely fragile as it was continually under threat of being broken up for being a monopoly (which is was). To do everything they could to avoid this, the geniuses at Bell Labs continually designed ways to keep their costs down, improve quality, and make very thing better. They also had some government deals that helped them a lot (military contracts for telecom stuff, like the first satellite). The value of AT&T’s network grew every time a person joined the network.

The fact that one person joined Network A over Network B could further impact the growth of that network. Let’s say Person A is friends with 5 people and is already on Network A, it’s likely, if they are really good friends and A is known for making good decisions, that those five people will join A on Network A. The value increases by more than simply 5, because all five of those people can talk to each other as well as every other person they know on Network A. Now if Person A has more friends, but not as good of friends and they actually are better friends with Person A’s friends they will also likely join Network A. This sort of cascade effect will continue to happen. This is also known as Metcalfe’s law.

When AT&T was force to break up, all of that interoperability remained. Instead of one big monopoly there were regional ones instead. As we’ve seen over time, these same regional operators have slowly re-joined back into 2 Bells versus the non-Bells. AT&T being split is a type of regulation for sure, but it did spur some interesting competition for a time.

How the Internet was designed:

The internet was originally designed to operate in many different application layers. Essentially the bottom of the stack was Internet Protocol which was agnostic to the type of information being sent across it. At the time, the most efficient method was over Ethernet so there was not any requirement to be concerned over the application medium. Over time there would be some concern, but that was really addressed by the protocol.

What would happen is that the applications that required information to be sent on either end would translate the information to be used by the layer below it to send out, such as a web browser to the OS, to the network driver to IP, across the internet to the network driver to the OS to the web server application. Across this entire process the actual data being sent was unknown to any of the nodes in between the application layers. (If you’re interested in this check out Internet Architecture and Innovation).

Of course the companies providing the bandwidth for that did not want to find itself in a similar role as they had after the break up of AT&T where they were forced to become “dumb pipes” for whatever people wanted to send across their network. To prevent this they created capabilities like deep package inspection and other tools to identify what content was being shipped across their lines. This also was the beginning of violating “True” net neutrality.

Why were they dumb pipes? Because they were defined as a common carrier to increase competition across the land line providers and ISPs the telephone companies had no choice. This lead to the explosion of ISPs like AOL, Century Link, and so on. What has happened since? The broadband lines have been ruled that they are not “Common Carriers“. Meaning that the data across the line can be treated however the companies that own the lines want.

Why is this bad in a network economy?

In a network economy, being able to fully control anything and everything can be very bad for the consumer if there is no other option. Now, you could argue that there are options, but in most cases because of other monopoly rules there are few options for allowing a new ISP.

A perfect example where a network monopoly isn’t a big deal is in Smart Phones. The iOS App Store is a natural monopoly in a network. The more people using the iPhone the more valuable it became and more app developers developed apps. It never became a problem that Apple regulates the entire experience BECAUSE there were other networks you could shift to, such as Blackberry, webOS, Windows (whatever mobile version you want to include), and, of course, Android. All of these ecosystems offer very different options for devs. Additionally, within Android there are competing App stores which further benefits the consumer. If there were no other competitors to iOS and it’s App Store the constraints that Apple puts on their product would likely be viewed as very anti-competitive and a type of “foreclosure.”

Market foreclosure is using one monopoly to enable another monopoly. Now, regardless of if you think that this should have happened or not, it did. Microsoft was hit for using it’s Window’s OS to foreclose on the internet browser market and was looking to do the same with their music player. What resulted was that MS was required to offer other browsers when a new Windows OS was launched and helped to reduce the market share of IE.

How does this apply here? Comcast is already trying to do the same with Netflix in the streaming video business. Comcast owns the content (Universal, NBC, etc), the connection (Comcast Cable ISP), the rules (data caps), and if they want to charge to access their network or not. Eliminating the rules of net neutrality tilt the table in the direction of Comcast to a degree that Netflix may never recover. If Netflix, at one point 2/3 of all internet traffic, had to pay for every bit they streamed to allow for an enjoyable streaming experience they would be bankrupt in very short order.

I get that Comcast’s of the world don’t want to be dumb pipes, they own the content and that’s king. However, not every ISP owns content (Verizon/AT&T) so they aren’t at such an advantage to companies like Netflix. However that’s where AT&T’s data plan comes in. Which would essentially level the table compared to Comcast. We, as end users, wouldn’t see any benefit out of this. It’s not that our subscription fees would lower or we’ll magically get faster internet. This is simply rent seeking behavior and bad for the economy overall. Only true new competition can lead to that. Changing these rules have zero impact on that competition.

What it does do though is negatively impact the creation of new businesses that want to stream video or provide a novel product that requires high bandwidth and equal rights to streaming. Removing the protections on net neutrality dramatically increases the cost of streaming that otherwise could go into building that startup’s infrastructure. Think of the problems at Twitch.TV with their growth. My subscription fees pay for the growth of the network that I subscribe to regardless if it’s something like Twitch or Comcast. Anything else will go to shareholders and CEOs.

Could we develop other options like a Mesh network? It’s possible, but for that to work the option would have to be a public/private venture. Most citizens aren’t going to help create that and likely don’t have the technology savvy to do so. To further complicate this issue many ISPs are actually pushing to make it illegal for cities to create their own ISP.

In many cases regulation is bad for business. However, in cases like net neutrality it’s returning the net to it’s roots and enabling much stronger competition based on the merits of the company providing the service, not the arbitrary whim of network owner.

A bit remiss

Sorry dear readrs, I’ve been very bad about writing any blogs lately. I’ve had some pretty big changes in the past two months as you all know. I’ve moved back from the Netherlands to the US, did some consulting work and I just started a job at AMD. Consequently, I’ve not been able to post as much as I have in the past. Big changes have been happening in my life.

Because of these changes I wasn’t able to pay enough attention to the CISPA fiasco that just occurred in the US. This law is a terrible step in the direction of data tyranny. I’m even being hyperbolic about this either. I wrote about the risks of having a voluntary data sharing program and in my review of Consent of the Networked I discussed the different data and Government regimes out in the “wild.” These concerns are valid. We need to be aware of what’s going on. Now, I have to say we pretty much blew our collective internet protest load with the SOPA/PIPA protests. Which is actually a problem. I would hazard that in many ways CISPA is as bad or worse than SOPA, however I didn’t see as much chatter about CISPA on reddit, twitter, Google+ or Facebook about CISPA as I did about SOPA.

I think there are a few reasons for this actually. First, the majority of the people were able to clearly understand the risks associated with SOPA. These risks are pretty straight forward and understandable. These risks affect us tomorrow not in some future time period. In many ways SOPA like acts can already happen today. This makes it extremely obvious why SOPA/PIPA are terrible laws and should be opposed at many levels. Second, with CISPA coming so quickly after the SOPA/PIPA protests there was likely something of a protest overload or disbelief that another law could come through so quickly that is as bad or worse than SOPA. Especially with the language that was being used at the time of SOPA. It would have broken the Internet, how could anything be worse than that? Third, there was more support by large companies for this law than for SOPA. Apparently that actually matters more than we realized. We were able to push Wikipedia, Facebook, and other large companies to protest this law. However in this case Facebook and Microsoft supported the law while Google sat on the sideline saying nothing about the law.

I think from this stand point, people that weren’t happy with CISPA but didn’t understand the importance likely didn’t do anything about it. However, whenever a fantastic website like Wikipedia blacks out in protest for a law it will get people who are only on the fence about the law to actually do something about the law.

CISPA and SOPA are both bad but in very different ways. CISPA is something of an abstraction of risk. Losing your privacy when so many people already voluntarily give up so much information about themselves on Facebook and Twitter might not seem like as big of a deal. The secondary abstraction is a lack of understanding of the impact of the data sharing. It’s unclear of what exactly the Feds would do with the data once they have it. It’s unclear how data sharing would occur within the government. However, it is likely that the data would be shared throughout the government including the military. Which many privacy experts are say essentially legalizes military spying on US civilians. The third problem is that many people also feel that if you aren’t doing something wrong you don’t have anything to worry about. However, this is a fallacy as even people who are doing things that aren’t wrong can get in trouble. I’ve discussed the cases where people are fired for posting drunken pictures on Facebook. Additionally, this type of law represents the biggest of the big government that we can imagine. There’s no reason why the government needs to know what we’re doing in this level of detail.

It’s going to be a long and difficult fight to keep our internet free. However, it’s something that we must do and I believe we can do it. We will just need to keep vigilant and work together to ensure that our internet stays our internet.