Jeff Pulver responds to the recent Wall Street Journal piece entitled “Phone Companies Set Off A Battle Over Internet Fees.”
Think about it this way. If instead of e-mail these companies delivered express-postal mail, it would be like the consumer deciding to pay more for a fast FedEx shipment (as they have for broadband) and then FedEx turning around (unbeknownst to the consumer) and also requiring the receiver of the package to pay more in order to ensure the package receives priority treatment and arrives on time. It’s a double dip.
Jeff adds a new wrinkle to recent discussions of a Two-Tiered Internet by raising some questions about E911:
I’ve written a lot about E911 lately, so how does this relate? Well, now that VoIP companies have invested heavily in advancing E911 solutions faster than any other communications tool, will consumers be prevented from making that emergency call when their VoIP phone is used over a DSL network unless this additional access charge is paid? Will this VoIP E911 call not receive priority over the network? Is it possible for the phone company to degrade the call quality so the 911 call-taker can’t hear potentially lifesaving noises in the background? (Let’s not even address the ability for IP-technology to allow for lifesaving video images, and what could happen if the Internet Access Provider determines to degrade video as well as voice. Until the day that the emergency response network is broadband and IP-enabled this issue, I guess, is not ripe.)Posted by Mitch Shapiro at 8:25 PM | Print | Comments (0)
Speaking at Citigroup’s Global Entertainment, Media and Telecommunications Conference, Chase Carey, CEO of DirecTV, shed more light on the company’s WiMax service, first revealed by an earlier presentation at the same conference by Rupert Murdoch, CEO of DirecTV’s parent, News Corp. “It’s always great to follow Rupert,” Carey said, when asked about Murdoch’s bombshell announcement.
At first Carey danced around the question, saying that of course “we have to look at the world where broadband is clearly going to be a primary component…To the degree we can find ways to try to push that forward, we’ll do so. We would be quite happy if those alternatives emerged on their own.”
He did say that Murdoch’s billion-dollar figure was on the “high end,” in terms of how much DirecTV plans to spend on WiMax. Later, he dropped the coy locutions and all but said that DirecTV will invest (his phrasing at times seemed to indicate that the investment had been made) in a third-party who is already eyeing the WiMax market just to get the ball rolling.
“We’re not really thinking about this as a business that we own that we have to invest in,” Carey said. “We’ll have rights to access the product whether through wholesale or through some other form…the build out and the operation of the broadband business is a third-party business.”
The goal is to break the high-speed Internet duopoly of cable-telco broadband. “We’d like to make sure there are entrants in the broadband business beyond cable and the RBOCs,” Carey said.
Posted by Cynthia Brumfield at 7:42 PM | PrintDavid Smith has an interesting post on his Preoccupations blog that discusses DRM and, more broadly, the evolution of the web. In it, David cites posts by Julian Bond, Doc Searls, Rafael Behr and David Berlind, all of which echo a mix of idealism and pessimism as to the value and future of the web. I share and admire their idealism, but am not convinced that the pessimism reflected in some of their comments is justified.
The free and open Internet…built on an end-to-end, peer-to-peer architecture, is slowly being privatized and nationalized, one DRM file, one blocked port, one platform silo, one walled data garden, one legislative action, one regulatory decree, one Supreme Court decision and one national cyberwall after another…The open and free marketplace the Internet provides is shortly going to look like the best darn mess of few-to-many distribution systems for “content” the world has ever known. It will not be the free and open marketplace it was in the first place, and should remain. The end-state will [be] a vast matrix of national and private silos and walled gardens, each a contained or filtered distribution environment. And most of us won’t know what we missed, because it never quite happened.Observer Online editor Rafael Behr discusses the strategy of News Corp., starting with a quote from Rupert Murdoch:
“The digital native doesn’t send a letter to the editor any more. She goes online and starts a blog. We need to be the destination for those bloggers,” he said. The News Corp strategy can be simply pieced together: take possession of the web allotments that all but the most hardened geeks depend on to pitch their blogging tents, then rent them out; sweeten the deal with privileged access to music and movies. The goal must be to marshal the energy that bloggers currently expend on creating their own content into the consumption of industry-manufactured, pay-per-view content. Big Media want to retain the marketable frisson of Citizen Media and weed out the current culture of activism. The way to achieve this is by monopolising not only the copyright material that web users like to play with, but the tools that make it so easy for them to play.
As Rafael suggests, there are some elements of the online world that encourage people to flock to the walled gardens being developed by News Corp and others:
[F]or large media owners, fear of the poorly lit, sinister back alleys of the web is useful. It drives people into ‘walled gardens’, safe havens of manicured web content, provided on subscription; guaranteed free of bad guys; well stocked with familiar brands.
But, Rafael also raises questions about whether walled gardens will, in fact, “take over” the Internet:
The problem with walled gardens is that people get bored. They hanker for the vagaries of life on the frontier. Once there, they soon discover that the dark side does not leap out at you; you have to hunt it down. The medium isn’t to blame.
That is what makes the web a ‘pull’ medium. You make the show yourself, another reason why traditional media are flummoxed. They only know how to push stuff down the pipes. They keep building walls around the garden as fast as the web users breach them.
It seems to me that Rafael’s last statement can be flipped around to say that “Web users breach (or find ways to remain outside) the corporate-controlled gardens as fast as garden owners build walls around them.”
Yes, the push toward longer and more restrictive copyright terms delivered in often painfully restrictive DRM packages designed by corporate content owners does run counter to some of the core principles of the Internet as envisioned by Doc, Rafael and others. But, at the same time, more open alternatives continue to blossom—not only the illegal sharing of copyright material that gets so much attention because it represents the “breaching of the walls,” but more importantly in my view, developments like Creative Commons licensing, Wikipedia and blogging (just to name a few). These represent the strategy of “remaining outside the walls” of corporate-controlled content gardens.
As Rafael puts it:
In an era whose triumphant idea is capitalism, where success is generally measured in the accumulation of wealth, it is hard to conceive of a parallel society established and self-governed on principles of trust and common ownership. But it exists. The biggest aggregation of human experience and knowledge ever created belongs to everyone, it is available on demand and it is free.
I’d add that this parallel society continues to expand. I think Chris Anderson and others makes a compelling case regarding the economic ( and social and potentially political) impacts of the Long Tail, and that Umair Haque of Bubblegeneration does a good job of explaining (see Powerpoint slides) how the transition from Mass Media to Micromedia presents serious threats to today’s dominant media players, while opening up opportunities for new content creators and for new service providers that Umair refers to as “smart aggregators,” “micromedia platforms” and “reconstructors.”
Though the press tends to focus on piracy, legal manifestations of Long Tail markets are emerging on multiple fronts, with the music industry being one good example. Today’s New York Times reports on a company call the Orchard, which “hopes to sell hundreds of copies of thousands of albums” and has already “made deals to sell about 650,000 tracks from 72 countries to various services, including ring tone outlets.” And, on the video front, a range of companies (see IPD posts here and here) are helping to develop an economically sustainable ecosystem for Internet-delivered Long Tail video content. An important component of this is the increasingly low costs associated with broadcast-quality video production and editing.
And though I included a pessimistic-sounding Doc Searls near the top of this post, here’s what Doc had to say today:
As Neo said to the Architect, it’s about choice. If you don’t like what they give you, make some of your own. We need to do with video what we’ve started doing with music: building a new and independent industry. Yes, the next generation of PCs and Macs will have DRM cripplecrap in them…But current PCs already have DRM, truth be told. (Try getting a screen shot of a DVD frame on your Mac.) Yet you can still make music and movies that can be heard, watched, produced and distributed outside The System. That won’t change. And that’s what matters most. Because in the long run, the indies will win. That’s how we got the Net, folks. And that’s how we’ll keep it, too. Even if our dawn’s early light is years away, it will come. Meanwhile, we have to endure this winter of dissed content.
Of course, there’s also the issue of network neutrality and the question of how much control the owners of access networks will ultimately have on what is delivered on the web, and on what terms. Because they own the only widely available distribution pipes, cable and telephone companies have unique advantages when it comes to creating walled gardens and demanding a share of revenue generated within the walled gardens developed by other entities.
I think this remains a significant issue, but not yet one that merits pessimism about the future of the web. In a recent post, I argued that:
…market and regulatory dynamics seem likely to encourage alliances in which local communities join forces with private Internet-based companies like Google and Earthlink to design, build and finance Big Bypass networks that are extremely high capacity, symmetrical and “open access” in design and, especially if Google is involved, that leverage the power of “intention-based commercial information” (i.e., targeted advertising) as a source of revenue to finance construction and maintenance of these networks.
Trying to look at things from Google’s perspective, I’ve written that:
[If Google] felt that it wasn’t getting sufficient access to end-users, [it] could pursue deals with cities along the lines of its Wi-Fi proposal for San Francisco, or even more ambitious deals that involved investments in near-infinite-capacity fiber optic networks that could out-perform cable and telco networks…or work with cities to deploy and integrate the most cost-effective mix of wireless and fiber networks.
And, though the technology still faces challenges, there’s also broadband over powerline (BPL), which Google has invested in and which is starting to move into commercial deployments.
In terms of public policy, I’m inclined to think that issues related to Internet access and network neutrality will increase in visibility and potentially in terms of partisanship. One indication of both trends is the Washington Monthly’s recent publication of an essay entitled “Let There Be Wi-Fi,” which was co-authored by John Podesta, former Clinton Chief of Staff and now President and CEO of the Center for American Progress.
In another post I cite Michael Parekh and the Washington Monthly essay in arguing for:
“wholistic” public policy that takes into account the interrelationships between network neutrality issues, market competition, municipal broadband and spectrum policy…especially so with a big chunk of high-grade spectrum to be soon returned by broadcasters.
With small chunks of broadcast spectrum already auctioned off, one initial indicator of how this spectrum might be used is Qualcomm’s plan to apply its home-grown MediaFlo technology to a 6 MHz channel it won at auction, to “broadcast” video channels to cell phones through alliances with cellular operators that are already using their own spectrum to “unicast” video content to their customers. On this front, Qualcomm faces competition from Crown Castle International, a large owner of transmission towers, which is using spectrum up in the 1.6-1.7 GHz band and a competing technology based on the DVB-H standard.
Qualcomm’s plans seems to make sense from its perspective and that of today’s cellular providers. But when much larger chunks of prime broadcast spectrum are made available, the range of potential players and applications seems likely to expand.
It seems that prospects for a continued healthy “open Internet” model will improve if spectrum auction rules favor bidders that are not existing wired and wireless network operators. Otherwise the risk is that we end up with a handful of owners controlling the vast majority of both wired and wireless connections—Verizon; AT&T-BellSouth-Cingular; and cable operators working with Sprint/Nextel.
It also seems desirable to build on Wi-Fi’s still-limited but impressive success by carving out a significant chunk of broadcast spectrum for unlicensed use. As I said in an earlier post:
Given the impressive value that unlicensed Wi-Fi has squeezed out of tiny slices of “junk” spectrum bands, one would hope that the fate of large bands of high-grade broadcast spectrum are decided on grounds more strategic (from economic, social and geo-political perspectives) than the political expedience of paying down a small chunk of the federal government’s vast and irresponsibly-created deficit. To do less would only compound that irresponsibility.
As the date for the return of broadcast spectrum nears, it’ll be interesting to see whether companies like Intel (a strong Wi-Fi and WiMAX proponent) and the GYMAAAE Internet giants (or anyone else, for that matter) come up with proposals for unlicensed or licensed uses that create new broadband access pipes and spur competition and innovation.
Setting aside a significant portion of broadcast spectrum for unlicensed use strikes me as something worth pushing for in Washington, and a position that that can hopefully gain support from within the tech and consumer electronics communities, and perhaps some other influential quarters as well—and maybe even from one of the two major political parties.
So, all in all, I remain hopeful that, in the shift from mass media to micromedia, and from analog RF to digital IP, there will be enough distribution capacity, Web 2.0 (and 3.0, etc.) tools—and certainly enough creativity—to support both profitable walled gardens and a thriving commons on the next-generation Internet.
Posted by Mitch Shapiro at 5:33 PM | Print | Comments (0)Comcast CEO Brian Roberts has to be a little bit freaked out. Not only did he just get an eyeful of all the video-over-the-Internet gizmos and business plans unveiled at CES, but today, at Citigroup’s Global Entertainment, Media and Telecommunications Conference, his presentation followed those of both Ivan Seidenberg and Rupert Murdoch, CEOs of two of Comcast’s top competitors. (Go here for webcast.) Seidenberg and Murdoch vowed to mount greater competition to cable, the former by deploying FTTP to 20 million homes and the latter by announcing an impending roll-out of WiMax technology.
Still, Roberts seems to have the healthiest attitude a cable company chieftain might have as cable’s cushy core businesses come under competitive attack from all sides. Roberts’ bottom-line attitude seems to be: que sera sera.
That’s overstating it a bit, but Roberts was pressed to answer about the phenomenal technology shift underway with video-over-IP, a too-new development that he can’t possibly assess. “We got to execute… we got to stay focused,” Roberts said, regarding how Comcast will respond to all this new competition. “We can’t answer what we can’t answer.”
On the other hand, Roberts seems to nominally embrace the crazed ramp-up in alternative forms of video delivery. “We’ve been waiting a long time to change linear television,” he said. “I do not believe that change is negative.”
In terms of Comcast’s own effort to change linear television, Roberts released some statistics on the company’s VOD service. Comcast On-Demand now offers in a typical month 7,000 programming choices, with 800 movies (over 300 of those free), 500 sports and fitness shows and more than 275 children’s programs. During December 2005 alone, Comcast On-Demand fulfilled 140 million on-demand orders.
Proclaiming that he didn’t see anything that “disruptive” on display at CES, Roberts believes that cable’s programming models will dominate the video marketplace for the foreseeable future. “Our video product is superior and will stay that way for a long time,” he said.
In any event, Comcast is doing what it can to stay ahead of the pack. “We are innovating and time will tell,” Roberts said.
Posted by Cynthia Brumfield at 4:50 PM | Print | Comments (0)News Corp. chairman Rupert Murdoch let one big cat out of the bag today at Citigroup’s 16th Annual Global Entertainment, Media & Telecommunications Conference Conference (go here for webcast). DirecTV, News Corp.’s U.S. direct broadcast satellite arm, is gearing up to launch WiMAX service, according to Murdoch, pending last minute tests of the technology.
“We want to make broadband more ubiquitous,” Murdoch said. “You’ll be hearing from us I think in two months on a very clear plan of what will happen. It’s not as expensive as you might think,” adding that DirecTV is sitting on $4 billion in cash and would spend approximately $1 billion on a WiMAX network.
This move makes a lot of sense given that News Corp. in general, and DirecTV in particular, can’t compete in the quadruple play service bundles now dominant in the U.S. multichannel media market without a terrestrial broadband offering. News Corp. has already diversified into the broadband business in the UK as is clearly looking in the U.S. to overcome the limitations of DBS’s one-way technology.
The unexpected revelation by Murdoch no doubt caught DirecTV’s CEO Chase Carey by surprise. Carey will also be speaking at Citgroup’s conference today at 3:40 PT, 6:40 ET. (A webcast of Carey’s presentation can be found here.)
Posted by Cynthia Brumfield at 4:25 PM | Print | Comments (0)Verizon is in the hot-seat with investors for its focus on expensive fiber-to-the-premise technology, but the telco’s CEO is convinced that the narrowband-to-broadband transformation is key to the company’s growth. Speaking at Citigroup’s Global Entertainment, Media and Telecommunications Conference today (webcast and presentation can be found here), Ivan Seidenberg left no doubt that he believes the $8+ billion in capex costs for FTTP is critical to Verizon’s survival.
“In the long-term creating a competitive network that competes with cable…comes with capital infusion in the business at this point,” Seidenberg said. “We’re very confident that the whole platform which focuses on speed and the futuristic things you can do on the network is going to sell.”
And sell it has, if take-rate statistics and projections are any indication. Seidenberg said that Verizon expects the penetration rate of its FiOs high-speed service to be in the 30% range within four years, noting that the company is “already scaling at a greater rate than this.”
Layered on top of the high-speed service is Verizon’s nascent FiOs TV service, which kicked off in Keller, TX last year. In Keller, FiOs TV has quickly obtained 20% penetration and Verizon will shortly launch FiOs TV in California, New York and Massachusetts, Seidenberg said.
The fiber-based network passes around three million homes today, and will pass an additional three million homes this year, and each following year, until Verizon hits 15 to 20 million homes passed, which will make the telco the third largest broadband provider behind Comcast and Time Warner. Seidenberg is more confident than ever that FiOs is the right strategy, and the internal numbers seem to back him up.
“All of our metrics are getting closer to our long-term targets. We’re very bullish about the fact that as we build this out we will get to a business model that works,” he said. (In terms of the 10 to 15 million homes in Verizon’s territory that aren’t projected to ever have FTTP available, Seidenberg said that by 2010, “we could make some judgments to prune [our] portfolio of access lines,” meaning that these territories are ripe for sale to another company.)
Of course Verizon expects to be a leader in not only terrestrial broadband services but also 3G wireless offerings. Seidenberg said that not only will Verizon Wireless maintain its mobile lead going forward, but also “we have a chance of widening the lead going forward.”
Verizon’s Vcast Music service, announced at CES, is one example of the kinds of new applications that will fuel Verizon Wireless’ continued growth. The music download option is kicking off with 500K music titles, a number expected to ramp up to one million by spring. The capacity of Vcast will soon expand so that users can store up to 1,500 songs on Vcast phones.
In terms of Verizon’s integration of MCI - the deal officially closed last Friday - Seidenberg said the synergies of the MCI merger promise to drive growth in cash flow, with EBITDA climbing from $500 million in 2006 to $826 million in 2007, and $1.1 billion in 2008.
Posted by Cynthia Brumfield at 11:14 AM | Print | Comments (0)
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