Looming battle: Content providers vs. service providers

In my last post about the PS4, I discussed how the PS4 is a long term play and that over time the product will move away from playing directly on the PS4 towards utilizing servers to stream the game to the user. This was an argument to counter many PC gamer’s disdain for the specs for the system. Sure, the specs aren’t great, but they are a huge advancement over the PS3, which is still able to play, rather well, new games.

Most of the feedback I got on the article basically went “well that’s great and all, but the infrastructure isn’t there for this in the US.” This is extremely valid feedback. AOL still records $500 Million in revenue from dial up connections. The US rates among the worst in developed world for internet speeds and penetration. Of course there’s the argument that our country is so much larger, well, the EU as a whole tops us, it’s not uniform across the EU, but that still makes it a valid comparison. The other thing to remember, the console won’t just come out in the US. Many of these features will work better in Korea and Japan than in the US. Typically Sony has released different features by region and will likely experiment with the sharing features in Japan before rolling it out to the US, where Sony knows it will have infrastructure difficulties.

This discussion raises additional concerns though, infrastructure isn’t just about the lines in the ground, but also the structure of the service providers that allow access. In the case of the US, not only does quality and speed of the connection vary wildly but we also have more restrictions on the amount of data we can download than other countries. For a typical family you end up buying the internet 2 or 3 times at the minimum (smart phone access per family member and then the main house connection). Each of these connections likely has a different maximum for downloading or uploading with fees for going over this.

This creates a lot of difficulties as we don’t always know how much bits a specific file will use as we access it. In many cases, it likely drives consistent under utilization of the service do to excessive fees and user dissatisfaction for those hitting the cap. Americans are starting to cut the cord in record numbers, my wife and I don’t have TV, just cable internet; I have a lot of options without Cable. This is going to start increasing the rate of frustration users have with caps. I typically watch live streaming video in 720p while my wife surfs the net and watches a show on Hulu.

I have absolutely no idea how much bandwidth is being consumed on a typical night. There is no easy way for me to measure this or plan for getting close to a cap. Furthermore, both my wife and I use our phones to access the internet, listen to music, watch videos, and play games on our phones. Again, all of these use bandwidth and likely push us against our cellular plan. Sure there’s meters for these, but they are notoriously inaccurate.

This issue with be further exacerbated by the proliferation of cloud services like Drop Box, video sharing on YouTube, streaming new services all the time, and the eventual goal of offloading computing power to the cloud. The measurement of these services will be extremely difficult and planning for how much data these services will require will be absurdly difficult at best for the average user. It is likely that these services will push users over the usage caps on a monthly bases.

I think that we need to start looking for another solution. I think that Google Fiber is a start, it would make sense for Netflix, Amazon, Dishnetwork, Microsoft, Intel, and other content providers to join a consortium that will introduce a new service provider to attack the incumbents. I have heard that Dish is currently working on creating their own system with Google or some other company, I think that this could potentially shake up the industry and allow users more options. There are going to be a wealth of new services that require more and more bandwidth and higher speeds. If these content providers want users to be able to access and enjoy their services they need to challenge the status quo to enable their customers.

Ubiquitous free high speed wireless: Business

In my previous blog I discussed some governmental issues with ubiquitous free high speed wireless internet. In this piece I’m going to discuss the impact on businesses. I’ll start with some really obvious impacts and then move into some that may be more interesting.

First, this would effectively kill the current business model for telecoms. Not just internet providers but it would also have a massive impact on telephony and television providers. Internet providers would basically go out of business unless the governments that implemented the network hired them to manage the networks and perform the upgrades required to ensure expected performance. It should also be expected that net neutrality should be the norm as the internet is free as in free beer and as in free speech in a situation like this. This would impact telephony in a similar manner. With free internet phones could be designed to work on wifi (or whatever the network type is) and use services like Google Voice (which is popular in the US and free). These services provide a telephone number as well. Further more skype communication or similar type programs could become the norm as they are free and easy to use. The impact on television would be a continuation of the current system. With Netflix and Hulu driving usage to the web. Without easy access pirating will be the norm and extremely easy.

In the US Starbucks is extremely popular for two reasons, gigantic flavored coffees and free wireless internet. I think in the Dutch context free wireless internet would spur an increase in the amount of business meetings that happen at cafes. With the slow service which is designed to encourage conversation and being social, it would be a great way to work remotely from outside of home. As it stands there aren’t that many places, at least in Eindhoven, that have wireless internet like that. I think it will spur sales at restaurants.

The broadband movement is already increasing the number of people that can work from home and be educated at home. I think there will be some differences though. Mostly because of the freedom that is allowed with the wireless connections. You are able to connect everywhere and anywhere. I think this will create more flexible schedules. I’d be able to work nearly as easily on a train as I would be able to in the office. I would be able to get on a train at the time I’m supposed to be at work get there for some meetings and finish up around the same time just on the train.

I think that there will be more business models based on highly interactive advertisements and user driven actions out in the “wild.” I’ve seen a lot of the QR codes outside of buildings as it is, but I think there will be an increase in the number of these. Users will be more willing to activate them because they are going to get the data from them significantly faster than previously. This will drive traffic to these sites and potentially new jobs from the different types of videos/ads that could be created with them.

I think this will also be something of a technological discontinuity. Broadband at home encourages one type of behavior, but I think there will be very different interactions with broadband everywhere. In the long term there could be a slew of different devices that will take advantage of the continual connections. Clothing could be that could measure the current weather conditions real time which could be uploaded to get real time weather information. We could collect data at levels we’ve never seen it before. This is just one usage of the informational sphere we’ll be living in. There will be a huge number of new applications that will radically shift the way people think about knowledge, information and computing products. Predicting the next wave of technologies based on the wireless web is difficult. It’s likely to be impossible.

However, I think that in my next blog on Computing, we’ll see the largest changes.

Ubiquitous free high speed wireless

One of the people I follow on twitter posed an interesting question. What would happen if there was free broadband wireless all over Europe. I sent them my 140 character answer but felt really unsatisfied by that. I’m going to devote some blog space to it over the next few days because I think that there would be a lot of changes. I’m going to break this into a few section. I haven’t worked out all of them but there will be government, business, computing and social changes. This structure loosely follows some of the structure within Lawrence Lessig’s Code 2.0. He also argued there were four structures that impact community building on the internet. It is written in the US context, but can be applied in other countries.

I’m going to start with Governmental changes.

One of the first things that will happen will be further encroachments on the ability for users to be anonymous and use pseudonyms online. Initially the requirement to login will be used to track which areas have the highest user rates and things like that, but this could be an incredibly powerful tool to prevent copyright abuse from users of the network. IP addresses would go out the window as an enforcement tool of nearly any online abuses. For instance, the safest place to download a movie from the internet would be on the train. You’d be changing IP addresses frequently and it would be very difficult to track a single user from one IP address to the next.

To deal with these problems there would have to be strict oversight to protect users of the network from invasions of privacy from the government and third party users of the network. Currently, the US government has a significantly heavy hand in collecting data from ISPs, Cloud data and social networking data. This includes both European and US data. This would need to be prevented.

Paying for and managing this network would need to be determined as well. One route could be to put a tax on advertisements that are displayed in a IP address range. Since IPs are distributed through regions this would be technically possible. Google just announced they made $9.7 Billion and nearly all of that is from ads (99% was from ad revenue in 2008). Putting a modest tax on this revenue will help pay for this network. Assuming that this infrastructure would need to be rolled out and continually upgraded I would expect at least $2-3 billion annual investment is required. I’m basing this on how much Verizon Wireless and AT&T invest in their network annually. This of course would change based on the amount of capacity required (a lot) and what technology used (WIFI, Wi-Max, LTE) for the network.

Since, this will effectively kill the business model of the telecoms, like T-mobile and KPN, they could be used to help manage the network. Governments and the like aren’t the best at managing these networks these old companies would be the best suited to manage it. That or create an organization that is based on former employees.

Finally, the network would have to be net neutral. Otherwise, it would effectively be government censorship if there was a reduction in access to any portion of the web. This means that the internet would be free as in free beer and free as in free speech. This would ensure the most positive results from the free internet on the business side and improve ability of users to participate in democracy.

Biggest changes? Management of the network, increased privacy concerns, paying for the network and copyright owners influence on data controls.

In my next blog I’ll discuss how this would change the business environment.

Is the internet a truly democratizing technology?

Boring title I know. However, I believe this is an extremely important discussion to have. Are technologies political things? Many people claim that the internet has radically changed things. That through the internet now all sorts of political activities can happen. Things are freer and more open. Is this true? Is this a result of technology? Does this technology have to be democratizing? I’m going to argue that while there are political implications of many technologies, there are other factors to considered when talking like this.

Can a road have political implications? Most people would argue that, no it’s a road, you use it to get from point A to point B, or just for fun. Well, what if you have to use public transportation and some one designed a bridge so that the bus couldn’t go over it? Would it be political then, or would the person who designed it be instilling political capabilities into a technologies? I would say in this case, the technology was used to prevent the lower class from reaching a nicer area in New York. A designer named Robert Moses designed many bridges for NYC from 1920-1970 that prevented exactly this type of traffic from occurring (Winner, 1986).

Other cases include using assembly lines to control how workers work and the steam engine to force people to work at a steady pace, or a takt time. Other technologies such as an automated tomato picker forced a lot of other changes in California. For instance it laid off workers, forced small farms to combine into larger farms to use the technology, which drove down the cost of tomatoes which big farms were taking advantage of, and also changed the tomato itself. It actually forced the development of a harder tomato so it could survive the automated picking. Which really pissed people off.

Ok, but we’re in the age of the internet. Big deal, what’s your point with all these old technologies? Arab Spring. Protesters were able to rally using the internet. The US government created these things called suitcase internet This allows users to create a mesh network and connect to websites so users are able to get around the walls that governments put into place. Wikileaks is another source of political technology. Sure, it’s just a site where you can upload files, but you could say that anything is just a site. The point is that there are norms and expectations around Wikileaks that allows some one to feel secure if they leak something to.

Additionally, governments are starting to and continuing to control the internet and how it is used. Eric Schmidt, of Google, is worried that this sort of governmental control is only going to increase. Hacktivists such as Lulz Sec and Anonymous are only going to increase the likelihood of this. The US government itself has a conflicting approach to hackers. In the cases where these hackers are going after groups that are not within the US or not the US government, the State Department has been extremely supportive. However, as soon as these groups change focus to the US, they are declared terrorists groups, or something close, which much be destroyed. NATO recently declared much the same thing.

We are in the beginning of a struggle over the future of the internet. Hacking groups are standing up for regular users and attempting to change the direction of governments. There have been a few successes coming from unexpected locations. This op-ed has some of them. The TL;DR of the article is that the UN lambasted some of the UK’s laws, and that an Australian ISP backed out of a filtering agreement with the Government.

Clearly there are many different uses for the internet. These uses can be good and bad. However, these uses have political ramifications. The choice to hack, the choice to be social on the internet, and the choice to educate yourself all impact how the future of the internet goes. I don’t support hacking. However, it is forcing transparency and increasing awareness of people both in and out of cyber space, what is actually going on in the Interwebs.

Also, the UN declared the three-strike laws for copyright, where if you get caught three times you lose internet for life, to be a violation of human rights.

References:
Winner, L. (1980) “Do Artifacts have Politics?” Daedalus, Vol. 109, No. 1: https://wiki.brown.edu/confluence/download/attachments/75695134/Langdon+Winner+Artifacts+and+Politics.pdf

Soft War: http://www.cbsnews.com/8301-504943_162-20073030-10391715.html

Regulation and Broadband investment

Just finished reading a rather interesting paper from Telecommunication Policy: Regulation, Public Policy, and investment in communications infrastructure: Johannes M. Bauer.

This paper deals with the different regulatory frameworks that relate to Next Generation Networks for telecommunication. There are two major implications for implication. First, looking at opening up the network to additional services will have a short term impact, but may hamper innovation in future networks. Second, investment and innovation at the market platform can lead to higher prices and in some cases slower penetration where there is minimal return on investment on the infrastructure (think middle of no where US).

This is important as in the US we hear about how prices are cheaper for services in Europe. This is very true and some countries have significantly better broadband infrastructures than the US. Such as the Scandinavian countries, South Korea and Japan. Many of these countries have had very active partnerships between public institutions and the private firms rolling out the new network.

We all can remember what it was like on dial up back in the mid to late 90s, and how after some time we started to see a huge increase in the number of service providers. This is because the regulators did something called “unbundling” which forced the telecoms to open up their network to any service providers. This caused a drop in price, but it reduced any sort of infrastructure investment at the dial-up level. With broad band we are starting to see this to some extent, but not nearly at the level we saw it with dial-up. This has to do with the fact that these networks are still being deployed. If these networks are opened up to just any old service provider the incentive to continue to invest drops off as a firm like Verizon will make less money off of their large investment to lay down fiber.

However, we should concern ourselves with the medium of the broadband. Cable services are much more prevalent than fiber networks, dynamic regulations are required to account for the differences in the network. Opening up the cable networks at this point may be desirable as the infrastructure for the network is well established with high prices for these services. Perhaps it is time to unbundle the network from the services.

In the picture above are the different types of regulations and the short term impacts on innovation and investment. From this table, it’s clear that depending on the situation of the network different regulations need to be in place.

So, my take on this: we need to have extremely flexible regulations that work to drive incentives for investment and innovation. In the US there needs to be different regulations than in Europe as there has been a different history of regulations. However, to drive down costs while pushing for innovation into the next generation of networks, I think a fair method would be to allow for something similar to patents for these networks. A given time period after a large portion of the network has been installed where the telcom that laid down the network has exclusive access. Then after a given period, 5 years or so, the network has to be opened up and no preference to the data can be allowed. This will allow the firm to recoup investment as well as plan for the next generation of networks. So possibly faster fiber switches, or all wireless or whatever.

I still think that the networks need to be data neutral because there can be consequences on unregulated markets if the networks aren’t open. For instance gaming and video streaming would be the first to take a hit. This would have repercussions in a network completely unrelated to the broadband company, yet still have potential for financial impact. In other words, gamers may get pissed and stop gaming.