30 July 2007

Communications Technology 3

In the last post (CommTech2), we mentioned that the Sprint/Google relationship was about more than just securing finances for the FCC 700 MHz auction. It’s also about posturing for a strategic post-auction situation.

Sprint is a nationwide leader in industrial hardware for mobile networks. They have excellent nationwide coverage thanks to access rights on thousands of antennae towers, regional offices and neighborhood stores. With the advent of WIMAX, that is all you need in order to deliver a high-speed broadband connection to the public.

Beforehand, Wifi needed to have their high-speed connection piggy-back on in-ground cable and then broadcast from millions of in-ground cable hotspots. Now, WIMAX signals with extended range can broadcast and receive from the Sprint towers; and higher bandwidth means that the signal can provide high-speed service to all the people within range.

All Google needs for success with their internet application products is for the mobile public to be connected. Google currently does decent business with the stationary consumer , but mobile high-speed users are who they could really appeal to.

Stationary (primarily home and office) users already routinely use Google’s Search engine, Google Earth and Google Maps. But the stationary consumer aren’t desperately in love with Google Desktop, gmail, google calendar or google chat. Yeah Gmail is really nice in that you get free forwarding, free Pop-ing and that it syncs with your Outlook calendars and contacts, but the stationary consumer already has those things with Outlook, IM, Messenger or other similar programs.

If the FCC supports net-neutrality, mobile users will experience an internet similar to todays high-speed connections and all the Google applications will thrive. Gmail, Google calendar and Google chat will become much more highly desired. Mobile high-speed users will not want to carry around fragile hard drives and expensive processors in bulky handheld devices. Why should they? All they would need is a good touch screen display and an antennae ( and maybe a memory card slot for enough media to last the flight). They can have all their calendars, contacts, and files synced, and when they hit the road, they will have everything available to them on Google servers via Google applications. With Sprint providing a high-speed connection and Google providing quality applications, consumers will choose this option. Plus, the bandwidth will still support other goodies such streaming internet radio, YouTube videos, and even some television broadcasts. And for Sprint, they will no longer need to worry about losing customers to Google Chat and Voice Chat. (skype on the other hand should be pretty scared).

If the FCC does not support Net Neutrality, mobile users will not necessarily choose Google internet applications anymore. It depends on the business relationships between the Service provider and Google. Even Sprint would only favor Google as long as Google was willing to shell out market price for fast-lane data access speeds. Even if Google did pay the necessary money to be top-tiered, the natural oligopoly power of the major service providers would be able to vertically extract the majority of the Google profits. Sure, Google would still have good market share, but not great profits.

This may all seem like a pretty decent characterization of the motivation of some of the major communications technology corporations, but it leaves out a couple of giants. What about Microsoft and Apple? What will be their influence and desired positioning in the community? And also, what will become of the other medium in the short term? Next Posting.

27 July 2007

Communications Technology 2

Because of 1 & 3 (the impending auction for the 700Mhz blocks and the FCC’s decision on how to hold the auction), Google sought to persuade the FCC into allowing some “open blocks” in order to maintain “net neutrality” and “interoperability of hardware.”

“open blocks” are regions of the bandwidth that will not be controlled by a natural monopoly. For the gov’t the cost here is that if they mandate some blocks be open, they will be foregoing auctioned resources and would make less money. Also, this may make the controllable blocks also worth less because they will, in the future, be up against more competition. So, the government might be losing some revenue, which should translate into a negative for the American citizen consumer. On the upside for the consumer, open blocks provide the opportunity for entrepreneurs to introduce new technology to compete with and challenge the products of services of the blocks controlled by Verizon or whomever wins rights to the other blocks. Are the value of the entrepreneurs future product, service and price improvements to the quality of life of American citizen consumers in how the communicate and are availed to information now and in the future worth the foregone revenue of open blocks. It depends on what economists call your individual beta, your patience in discounting the future relative to the present. Probably, but it’s up to you to decide.

“interoperability of hardware” refers to the ability for you to buy any phone or mobile communications device and to have it work regardless of who your service plan provider is. Having “interoperability of hardware” and “open blocks” might mean that entrepreneurs would only need to challenge major providers in their products or services, but not necessarily both. At this point, the trade-off in the “interoperability of hardware” decision currently is a personal decision between bulkiness of phone and being tethered to your service provider. This is not a small decision. As the phone becomes a pda-phone becomes a supped up mediaplayer-phone-pda-gps-videocamera, are you going to want to trash it every time your provider treats you poorly. I believe major service providers generate a significant amount of profit from consumers feeling tethered trough the phone and incurred service plans. With “interoperability of hardware” requirement instituted into auction guidelines, this also would most-likely decrease how much service providers and their phone-making partners would be willing to bid. Do you believe that simplifying the phone and service buying process is worth the foregone FCC gov’t revenue. This is a close call. Let me know what you think. Post a comment. Are there any factors I’m leaving out here? I’d love to know.

“net neutrality” refers to the inability of major service providers to favor certain internet users. Currently all websites can be viewed with equal access and download speeds. If major service providers were to favor certain websites and users, the service providers (currently time warner, cox, ..; but after the auction, Verizon, …) could generate higher revenues and profits through a more free open market of selling preferences. There are also pros to the consumer; you could download higher quality videos, news sites, and popular sites in higher quality. The downside to the consumer is that it will make it harder for website newcomers to crack thru. Also, you will have less access to diversity of news. Is the information held by society and its ability to network a “public good”? It’s non-rival, so I think so. Which means, that even if you are fiscal-rightwinger, you should believe that this is one of those rare instances that gov’t should at least moderately intervene. Sure TimeWarner, Cox and in the future Verizon will suffer slightly smaller short term profits, but total quality of life will improve for everyone in the long run. I think that net neutrality is a must.

Why does Google want to persuade the FCC to have “open blocks, interoperability of hardware, and net neutrality?” Are the altruistic, competition loving, or just crazy? Maybe a little bit of altruism, but I believe that they would like to maintain their strategic position in the World Wide Web. They are the premiere internet application provider, and rightfully so. Their products are excellent.

How is Google going to persuade the FCC to do these things? If you noticed, all three of those actions result in less direct revenue for the FCC. This week Google offered to provide the FCC with a guaranteed ~$4.6Billion from the auction if those items were implemented. This is a big auction and to drive policy you will need big money.

Latest speculations have the FCC splitting the auction into different geographic regions, making it harder for a nationwide open block to come about. That is, probably 3 of the 4 Google requests (see Google’s blog) will be met, under which Google is less than satisfied. It appears that their position is to have to guarantee the FCC more money if they would like all 4 objectives to be met. Hence Google’s plans to partner with Sprint/Nextel and some Canadian financing sources. Mind however, that Google’s partnering with Sprint/Nextel is about more than just financing now. It is also about preparing themselves for a nice post-auction teammate.

Take note that Google isn’t the only company trying to partner up. I believe Verizon and Vodaphone are partnering in order to get a large financial basis in order to fair well in the auction. Others will do the same in order to be in solid financial situations for auction day.

So what exactly does all this have to do with which technologies (wifi, satellite, cell phone, inground cable, inground phone and wimax) will develop to be used for mainstream communication, and in which ways?

Stay posted and you’ll see how I see this picture unfolding and how the different players (Google, Sprint, Microsoft) should best respond.

Communications Technology

"In the beginning" [meaning a couple years ago] there were 5 major communications medium(there are more if you count cb radio, walkie talkie, ham radio...).
They were Wifi , Cell phone (cdma/...) , Satellite, Inground Cable, Inground Phone.

Inground Cable-
inaccessible for the mobile user
great bandwidth
(services provided by TimeWarner, Cox, SBC,...)

impractical for common 2 way communication (unless you have a huge transmitter)
great coverage
(GPS, DirecTV, Sirius, XM)

2 way accessible
decent bandwidth (~60Mbps)
weak range (1/4 mile at best without a relay from a standard router antenna)
currently practically implemented mostly by piggybacking on cable signal and broadcasted from cable hotspots
(802.11 abg)

Cell phone-
2 way accessible
weak bandwidth (constantly being reoptimized, now can get mediocre transmission speeds on your cell phone, but nothing you want to use consistently)
decent range (couple of miles depending on cell phone tower and phone antennas)

Inground phone-
2 way accessible
original voice transmission mission being picked up by inground cable
current focus to support cell phone communications

with all these contenders, which technology was going to win out?
which technologies would develop to be used for mainstream communication, and in which ways?

the answer depends on 3 critical developments.
1. the digitization of old tv broadcast frequencies, which in turn frees up a whole new bandwidth, the 700MHz blocks
2. creation of WIMAX
3. how the fcc decides to auction the blocks on the 700Mhz bandwith. whether they keep a block reserved as open. whether they make "net neutrality" a priority. and how communications companies end up when the auction is said and done.

How do I see the communication picture unfolding?
Stay tuned for the next posting.

First Post

first blogging. check check check