Derek Kerton’s Techdirt Profile

derek

About Derek Kerton

Techdirt Writer/Contributor

In the Telecom industry.
Own a consulting firm since 2001.
http://www.kertongroup.com
Chairman of the Telecom Council of Silicon Valley
http://www.telecomcouncil.com
Various Advisory Boards

15 years of alliances, biz dev, strategy, and product management across software, infrastructure, applications ,and content for consumer and enterprise users.

Clients include: SK Telecom, British Telecom, NTT DoCoMo, Sun Microsystems Javasoft, Ameritech (now SBC), Disney, Thin Multimedia, WiderThan, Infoseek, Bouygues Telecom, Leapfrog, Digital Fountain, Global UMTS TDD Alliance, IPWireless, Rezn8, DRMlabs, Mavenir Systems, Aegis Mobility, OnAir, Synapse Group, NextG Networks, Broadcom, University of Waterloo, Fireside Financial, Jackson Walker LLP, and WiFinder.

@derekkerton

http://www.linkedin.com/in/kerton/



Posted on Innovation - 21 February 2012 @ 8:06pm

Smart TVs: Not Such A Smart Idea

from the Temporal-Pre-crime dept

A Smart TV is a TV that includes at least a rudimentary OS, access to web and Internet functions, and streaming content. They have been a hot product category at the last two CES shows, and the rumor that Apple is about to launch one is adding fuel to the fire. The Apple rumor is somewhat reliable, since it is partly based on a quote from the Steve Jobs biography where Jobs says of the Smart TV: "I finally cracked it."

But having looked closely at the offerings at CES, and comparing them to the mobile phone industry, I don't believe that the entire concept of putting extensive intelligence into the TV is a wise one. The reason is mostly because of the temporal mismatch between the lifetime of a TV, and the lifetime of a mobile device, mobile OS, or mobile processor. You see, people want large screen TVs, and these are expensive investments. The main screen in most American homes runs around $1,100. And those screens are designed to have a half-life of around 60,000 hours of viewing. Now, it's not clear how long the average consumer will keep a 1080p TV bought in 2012, but I'd suppose that 10 years is not a ridiculous guess, so humor me and work with 10 years.

So if there is one component of the Smart TV that costs $1,100 and lasts most people about 10 years, does it make sense to mate it to the "smart" part? The cost of the "smartness" is fairly easy to estimate: A Roku box, Google TV box, or Apple TV box run around $70-$100, a Boxee box goes for around $200. So, the "smart" factor runs between $70 and $200 street price. But what is the life-cycle of the average "smart" device? For that, I look to the phone market, where people cycle their smartphones every two years. Apple fans line up at the store to replace their one or two year old 3GS for a 4G because of added features and function. On Android and iOS alike, the latest OS versions, features and apps only work on the latest hardware. Does anyone here have an old phone or smartphone sitting in a drawer? Yes? Do you want to do the same with your $1,100 TV investment? It's a given that a TV is not a smartphone, but for now we're asking them to do similar tasks: apps, streaming media, social updates, etc. The Internet performance of the TVs will become out of date like smartphones do. Tying relatively cheap, 2-3 year life-cycle smarts to an expensive 10 year product just doesn't make sense.

It seems the obvious solution is already here: keep the TV dumb, and provide a set-top box (STB) that has the smarts. The STB can thus be replaced cheaply, once out of date. Consumers can easily have more than one STB, not committing to any one company's ecosystem. Do people really want to buy their TV's by ecosystem? "Hey, I love this Sony's picture, price, and size...but I want an iCloud, so I'll buy this smaller TV instead."

Really, the Smart TV is just a sales vehicle dreamt up and promoted by the TV OEMs. They had a bang-up decade updating everyone to flat panels, then pushing the upgrade to 1080P. They've had less success with 3D, and are looking for the hook to make another upgrade worthwhile. For now, Smart is it. But I doubt customers are eager to jump on, given they can just buy a STB. Even those actively looking for a TV may resist if there is a price premium, given most Blu-ray players and many cable or telco STBs already provide smart features. The TV OEMs are going to have to bundle in the smarts for free, and hope that they can make money back on the content ecosystem. But will they enjoy ecosystem lock-in for 10 years, or less?

So far, the Smart TVs sold to market are too new to have suffered from the life-cycle mismatch. The earliest Smart TVs can still compete on level ground with the latest, since it's only been a year or so since they've been in shops. But it won't be long until we start hearing complaints from those customers that "I can't stream that resolution." or "Why can't I watch programs with that new MP4 codec?" or "That app doesn't work for me. Why can't I get the latest OS on my TV?" Some of those people will end up with a newer STB, and just obviate the smarts that had been built into their TV, much the same way most of us don't use the TV tuner that is bundled with our sets.

Ultimately, whatever the problem that Steve Jobs "cracked", or whatever smarts are provided by Sony, Google, LG, Samsung, etc. I think those smarts will be better placed in a STB (or tablet, or other smart device) than in a TV.

103 Comments | Leave a Comment..

Posted on Techdirt Wireless - 20 February 2012 @ 8:01pm

Why You Should Regret LightSquared's Setbacks

from the competition-is-good dept

LightSquared is a new wireless carrier that has been trying to launch a wholesale 4G network across the USA. Funded by private equity firm Harbinger Capital, it sought to re-purpose satellite communication frequencies to build a nationwide cellular-satellite hybrid network, and then re-sell the network capacity to other brands. In January 2011, the FCC, eager to foster new competitors in the mobile space, gave LightSquared the green light to launch using their spectrum with one provision - that their network equipment NOT interfere with GPS signals and devices. Well, over a year has come and gone, and despite incredible effort and wrangling, the independent testing keeps indicating that LightSquared's terrestrial towers are not compatible with GPS device use. As such, the FCC has basically rescinded LightSquared's request to launch service on their 1.5GHz L-Band spectrum.

Note that, while LightSquared DID knock out GPS devices, it was not LightSquared that transmitted on the GPS frequencies, but rather the GPS devices that sloppily "listen" to the adjacent LightSquared frequencies. The GPS chipsets were generally cheaply made with inadequate filtering. That said, who is at fault is irrelevant: it remains LightSquared's problem to solve if they want to launch their network. A long history of spectrum policy states that new entrants must not mess up the existing radio devices.

What we've lost here is the chance to have a truly innovative wireless carrier which would have stimulated competition, energized the vendor community, and provided a white-label network for MVNOs. LightSquared had, in fact, signed up dozens of partners who would offer LTE wireless services as cellular companies, CE makers, and store brands like Best Buy, for example, who could sell connectivity in a bundle with laptops. Maisie Ramsay over at Wireless Week explains how a vast community of over 30 technology vendors have also lost a valuable path to market.

What strikes me, as someone who works with wireless carriers (LightSquared included), is that we may lose one of the scrappiest players out there. And markets thrive when a scrappy player stirs up the pot. Hutchison Whampoa stirred up the UK markets when it launched 3G in 2003, Free is currently doing the same in France. In the USA, we have regional players like Metro PCS, but nothing at the national level. My role at the Telecom Council of Silicon Valley is right where innovators meet with the telcos, and it was gratifying to see the tornado of new ideas, vendors, and possibilities that came about with a new network. Without legacy systems nor legacy thinking, lots of great ideas are free to emerge.

For now, with LightSquared's options dwindling, we may have to have to look elsewhere for new competition and open creativity. The WiFi space is fairly promising, as the spread of hotspots continues to soar, and new versions (802.11ac) promise greater range and throughput. Chipsets are cheap, and billions of WiFi devices have been produced. Republic Wireless exemplifies the possibilities of leveraging WiFi in mobile phones to the limit. Lots of people are hoping that the "white spaces" frequencies in between TV channels will be offered up to a WiFi variant, which will mean low-frequency spectrum that penetrates walls and buildings much better than today's WiFi. I like what the US carriers have done with the (globally) early launch of LTE, but there's no doubt that with increased competition we'd have a more dynamic market.

73 Comments | Leave a Comment..

Posted on Techdirt Wireless - 17 February 2012 @ 12:01am

A 4G iPad Requires A Sensible Shared Data Plan

from the cellular-operators-losing-the-battle-for-connected-devices dept

The Apple rumor mill is spinning at full speed again, with word of a new iPad release in March. This would be on schedule for Apple, so the real speculation is around exactly what improvements this iPad will feature. The Wall Street Journal, normally not the town gossip, wrote that the upcoming iPad would feature a smaller 8-inch screen, and would be LTE-enabled. LTE is the latest, fastest network technology available from Verizon, AT&T, and other network operators. But the intention here is not to pile on to the speculation of what Apple might deliver. The intention is to speculate instead as to what the carriers might have up their sleeves with respect to an LTE tablet pricing plan.

When the LTE iPad hits the market, expect to see it sold with a "shared data plan", or a plan that is connected to a smartphone plan, and share a common pool of MB of traffic per month. Verizon, in particular, has hinted that just such plans will be emerging soon. Lowell McAdam said in December that such plans would emerge "sometime in 2012" to accommodate the increasing number of people with multiple mobile Internet devices. Such devices include smartphones, laptops, tablets, and others. More and more, subscribers are adding devices, and are getting frustrated at having to open a separate account, with a ~$50/month price, just because they choose to browse on their tablet instead of their smartphone. Most customers, rightly, assume that it should make little difference to the operator whether they access the net on their tablet, laptop, or phone. This is just a substitution of the access device. Because of the current punitive billing, owners of multiple connected devices are defecting from the cellular game, and instead opting to use Wi-Fi only on laptops and tablets...and liking it!

Research from The NPD Group has shown how the attach rates (portion that sign on to cellular service) for cellular-ready tablets have been less than stellar, and decreasing over time. In April 2011, NPD says that 60% of tablets only connected via Wi-Fi, but by December 2011, that number had jumped to 65%, showing how Wi-Fi has been winning out over the more expensive and contract-laden cellular offerings. Tablets like the Kindle Fire are sold as Wi-Fi only, contrasting with the earliest Kindles which all had cellular radios embedded. The carriers are at extreme jeopardy of losing the connected device market (and embedded market and M2M) simply because they have lagged in offering the kinds of flexible plans that make sense.

Once a trend away from cellular connection takes hold, it becomes harder to stop. Wi-Fi networks will respond with increased capacity and increased hotspots, OEMs will respond with more Wi-Fi-only devices, and consumer behavior will respond by considering tablets as "portable" Wi-Fi devices, not fully mobile like smartphones. The strategic cost to the carriers is significant. While the trend won't be stopped, it is certain that carriers could retain significance by offering pooled data plans at sensible bundled prices. This means selling data to a consumer, not to a consumers specific device. And what better way to launch such a new pricing plan than with a device that the market has proven to love - a new iPad?

So whatever the shape of the new iPad, and the fantastic new features that fanbois laud while naysayers explain how they were just repurposed from other devices, we should fully expect an LTE iPad with a new kind of cellular pricing model, which drives up the attach rate, increases device utility at a reasonable price, and creates greater carrier loyalty and long-term gains. If Verizon and AT&T do this right, we could all win.

41 Comments | Leave a Comment..

Posted on Techdirt Wireless - 1 September 2011 @ 3:13pm

HP Tablet Fire Sale Lets Us Put A Price On The Value Of A Strong Development Community

from the apple-and-orange-sales dept

A couple of weeks ago, HP made the significant decision to get out of the consumer hardware business, simultaneously shutting down their PC business and their mobile device business built around the WebOS purchase that came with Palm, Inc. When they abruptly did so, HP also announced they would be clearing out the supply chain by offering their very capable, $500+ TouchPad tablet for $100 (16GB models).

What followed was a mad rush of purchasing, with people clamoring for a cheap, but powerful tablet. This is by no means a bad device: remember that the WebOS was critically acclaimed, and this tablet had a 9.7" screen, webcam for video chat, lightweight, 1.2GHz dual-core processor and more. These are flagship-grade tablet specs, and although we've learned that UX is more important than specs, good hardware is a definite plus. The biggest problem with the device was the lack of developer support for the ecosystem, so there are "thousands" of apps available according to HP, but not the 'hundreds of thousands' that work with the iPad.

This fire sale has provided a fairly interesting experiment in the market clearing price for non-iPad tablets. The base iPad sells readily for $500, and is often sold out. This is the high-water mark for tablets, which no other has matched. Other vendors have built competitive hardware and tried to sell it in the same price range (Motorola Xoom, Samsung, Playbook) but were rewarded with lackluster sales. Some of those devices, on paper, are arguably better than the iPad, so the most likely reason Apple can extract a premium is the power of their App developer community. An iPad can do much more than a Xoom partly because of what Apple offers, but mostly because of the 'whole product' which includes 400,000+ apps.

Device industry executives must stay up at night wondering how to price their tablet. The HP experiment will prove useful. Now we know that at $500, buyers walk away from the deal. But at $100, they literally rush the store like Walmart on Black Friday. This tells us that the correct price for a good tablet with weak developer support is between $100 and $500. That's a fairly wide range. I wish HP had set the price higher, to provide a better test. Unfortunately, whenever an OEM company sets the price, what we get is their desired price, but not the market value. For that...we have eBay. Many of the buyers at HP's firesale were just arbitrageurs looking to flip the tablet to make a quick buck, and those tablets quickly showed up on the auction site. A look at eBay today reveals a high number of TouchPads on offer, and sold for a market price of ~$250.

If the hardware alone is valued at about $250, how does iPad sell for $500? Well, we'll have to attribute some of the premium to the "cool, sexy" mystique of Apple products. But I wouldn't go too far with that. The Samsung Tab or HP TouchPad are both very slick looking products. A chunk of the premium has to be allocated to Apple's excellent and easy UX. The mass market doesn't want to geek out, they want easy products. But Honeycomb and WebOS aren't so far behind...

No, the dominant reason that iPad can sell out at $500 (even as sales have tipped well beyond the fanboi segment) is the value brought by apps. Apple is making cake because it has the biggest developer community coding around the OS, and the value of that community is currently worth something on the order of $200-250 per tablet. It's going to be tough for any other tablet to breach this market, where Apple already has the supply chain dialed in, the developer community, the innovation lead, and the brand. Android may progress bit by bit, but for now Tablets are Apple's private playground. Competition will heat up if Android tablet versions of the Nook and Kindle go to market around the $325 range (making their profit on books instead). Note that the TouchPad has an estimated $318 Bill of Materials (BoM).
In a few years, Moore's Law and steady Android progress will reduce the cost and app advantage iPad now enjoys.

HP will be emptying the supply chain in a couple of weeks with the final production run of TouchPads. I wish they would bump up the price to see if the market would bear $318 direct from the manufacturer (ostensibly, a more desirable seller than eBay members), but it seems that they will keep the current fire sale price.

62 Comments | Leave a Comment..

Posted on Techdirt Wireless - 16 August 2011 @ 7:06pm

What Google Gets With Motorola Mobility

from the yet-another-IP-market-distortion dept

Having already covered the basics of the Google deal to buy Motorola Mobility, we asked Derek Kerton to weigh in with his thoughts on what the deal really means.

Some suggest that Google bought Motorola Mobility Inc (MMI) so that it can vertically integrate and produce flagship phone models that have the polish and seamlessness of the iPhone. But the real reason is a common theme here at Techdirt: Google needs to build its defenses against patent lawsuits in the smartphone industry.

On the very face of it, Google doesn't need a handset subsidiary to make a custom Google phone. They can easily commission a handset exactly how they want it from OEM brands like HTC and Samsung, and have already done just that with the Nexus models. They could easily design their own brand of phones and have it built by contract manufacturers like Foxconn (as Apple does). I've read elsewhere that Google now gets the benefit of better understanding of the challenges of integrating Android into handsets. That's also incorrect. Google has a history of sending teams of engineers to most of their handset and tablet partners to work side by side overcoming those challenges.

Perhaps Google just saw a good deal on Motorola. Its stock price has been dropping through the decade, and also the past year. The market value prior to today was just $7.3 Billion, compared to $20B for Nokia or $13B for RIM. Perhaps, like Nortel before it, the value of Motorola's Intellectual Property (IP) is being hidden by a poor operational record. A buyer like Gordon Gekko (of the 1987 film Wall Street) could have bought up MMI, divested the operational arm from the IP portfolio, and realized a gain by separating the parts (as Gekko famously did to an airline). Of course, that's a 'private equity' view on the purchase, but Google has indicated it will retain MMI for now. Still the sum of the parts might be worth more than the whole. Although not a startup, this seems similar to Masnick's post yesterday that the value of a startup's patents might exceed the value of the operation.

There is also the less-mentioned factor that Google now also owns MMI's set-top-box division, which might give a shot in the arm to the fledgling Google TV business. Bundling Google TV into every STB would be great for Google, but I would expect that, since these boxes are all bought by cable operators, the cable companies would ultimately decide if Google TV actually remained in the box once it was installed on the customer premises. Since Google TV competes with their on demand services, it may end up as popular as the built-in laptop tethering feature is on Verizon's Android smartphones - i.e. Verizon takes it out.

My understanding is that Google intends to run Motorola as independently as possible. That is, no doubt, to head off what is known as 'channel conflict'. Channel conflict occurs when one member of a supply chain, say the Android OS supplier to many handset vendors, expands into another part of the chain, in this case the handset industry. Now they are both a supplier AND a competitor to companies like HTC, Samsung, LG, etc. Historically, the other vendors start to mistrust their OS supplier, and become more reluctant to use the OS as they search for other options.

We've seen this before with Nokia's handling of Symbian. Since 2001, Symbian was, ostensibly, an openly available smartphone OS that any handset manufacturer could use. Nokia got behind this idea full force, not wanting to cede the market to OS companies like Microsoft. They pushed the idea of other handset vendors joining them, in competition against Redmond. Some did adopt Symbian, including Ericsson, Motorola, Siemens, NTT DoCoMo. But Nokia struggled with the notion that Symbian was "too controlled by Nokia" since around 2003, so they spun it off into an open consortium in 2009. Too little too late. The other OEMs didn't ever really believe that Symbian was truly independent. The end result is that very few other handset vendors ever got fully behind Symbian, even during the time when it was the best smartphone OS in the world. So Nokia just ended up buying it back again in 2010, and finally killing it off recently.

With Android linked too closely to Motorola, companies like Samsung might be driven more to their own OS, called BADA, while others like LG could seek new alternatives (Windows, QNX...) Thus, Google now must re-interpret the same dance that Nokia did years ago: "No, don't worry, Android is still open. You will have as equal access as Motorola." This may succeed, but is a precarious position. The dance partners may have changed, but the music is still the same. Let's see if they come up with some new moves.

OEM confidence that Google will keep equal access to Android to all handset vendors is made even more precarious since the recent moves by Google to prefer some vendors of its formerly "open" Android OS. Google only released the latest tablet version of the OS (Honeycomb 3.0) to select partners, shutting out the open source community and other hardware vendors from the OS for now. The first to get exclusive access? Motorola, for the Xoom tablet. This is not the best way to ease OEM concerns around equal access, given that some may be 'more equal than others'.

It becomes clear that what Google truly needs from the acquisition is the patent portfolio of Motorola Mobility. The smartphone patent wars have been raging lately. It seems every handset vendor is getting sued by big competitors and by patent trolls alike on a daily basis. Android vendors, for example, pay nothing to Google for use of the OS... but they must pay about $5 per phone to Microsoft because MSFT had the smartphone patent leverage against Google. In another dire example of the risk of patent assault on Android device makers, the Samsung Galaxy 10.1 Tablet has been shut out of European and Asian markets by injunctions based on patent claims from Apple.

To fend off patent assaults, companies seek to build their own patent arsenals. That, for example, is why so many vultures hovered around the carcass of Nortel, and bid up its patent portfolio to 4x what the market expected. Google bid, but did not win at the Nortel auction. But with Motorola's 14,000+ patent portfolio in the mobile phone industry, Google can not only defend Android much better from the patent assault (by threatening counter-assault), but Google can thus reduce risk and uncertainty for its handset partners, thereby making Android more attractive.

Think about it. One of the biggest features of the Android OS for device makers was the license fee: free. Free, as Techdirt readers know, offers some very powerful mathematical and business implications. Suddenly, building an in-house OS for your car stereo or TV remote control may look less attractive than a more powerful, free, Android OS. Same goes for tablets, fridges, netbooks, or phones. But if MSFT and Apple (and countless others) can layer up license fees, the attractiveness of Android starts to diminish. The power of 'free' disappears, and instead, uncertainty and risk of lawsuit reign supreme.

So, the deal results in two opposing forces for the future of Google: IP cost and risk mitigation, and potential channel conflict. If Google can succeed at making the IP risk mitigation more important than the channel conflict for the OEM vendors of the world, thereby winning more handset and device partners, the Motorola purchase can be a success. If channel conflict is the more important part of the equation, Google loses big. I wonder if Google might someday sell off the handset maker, but keep the IP. Big news, either way. It'll be interesting to see how it plays out.

38 Comments | Leave a Comment..

Posted on Techdirt - 26 August 2010 @ 6:03pm

Stealth Mode = Miss The Boat Mode

from the that-train-has-already-sailed dept

"Stealth Mode" is the name of a start-up strategy where the founding team develops their product and business in secret. The tactic is based on the fear that, if their idea were to get out, other companies would copy it, and the originators would face competitors. The use of Stealth Mode has swung in and out of fashion in Silicon Valley over the past decade, but was hottest during the tech bubble at the end of the last century. Back then, .com startups were so hot that investors would salivate over the latest stealthy startup, eager to throw some easy money at it. But whatever the fashion, with few exceptions, I think that running a startup in Stealth mode is short-sighted, arrogant, and counter-productive. Here's why:

  • Founders who want to operate in stealth are usually of the opinion that their idea is soooo very unique, that to share it would be to divulge the crown jewels. There are two reasons that is naive:
    1. Your idea is almost certainly not unique. Someone else has had the same idea, and if it's any good, someone else is working on developing it.
    2. You are going to have to share your idea at some point in order to sell it, so your secrecy is short-lived at best.

  • A consistent Techdirt posit is that execution is far more important than idea. Whether you reveal your idea or not, how you execute versus direct competitors and near substitutes will determine whether you succeed or not (see bullet 4).

  • If execution is important, a critical part of execution is networking, getting your idea out there, meeting the right partners, employees, VCs, Angels, channels, and early adopters. In fact, this professional networking is the core of Silicon Valley culture, and "Stealth" is the antithesis of that culture. Ask yourself: Which culture worked better over the years: Silicon Valley's open idea sharing, or Route 128's tight secrecy and control?

  • Stealth mode prevents the creation of any kind of buzz around your company. Early in a company's life, buzz among the tech community (VCs, executives, industry insiders) is very valuable. You want to be the first name that rolls off of someone's tongue when your startup sector is mentioned, like Admob was for mobile ads, Slingbox was for place-shifting, or Loopt was for social LBS. This gives you tremendous advantage in word-of-mouth mentions, as a "must check" comparable before a VC invests in a competitor, as a target for any large partner seeking to adopt similar technology, or a corporate M&A effort seeks to buy a sector leader.

  • Stealth mode prevents feedback from savvy friends, the tech community, beta adopters. It limits the fresh thinking, free advice, and diversity of ideas that go into product cycles.
Suffice to say that I have found that more times than not, stealth companies miss the boat. Their idea isn't that special, and some other company has grabbed all the advantages of being the First Mover long before the stealthy come out of hiding. There are, of course, exceptions, ex: ideas that take years of R&D, rock-star exec teams, ideas that truly are unique, & a few others.

Partly as the result of this kind of thinking, Stealth Mode is out of fashion these days. Most VCs refuse to even sign NDAs with startups, not wanting to don legal handcuffs, while being less interested in a company that is counting on secrecy as one of the tenets of their success.

Part 2 - Case In Point: Checkpoint 

I was reminded of the issue of stealth companies today when I read about CheckPoint at Wireless Week. CheckPoint is a startup that is in "Stealth Mode" and is building a mobile app for checking into retail stores, and then having the app suggest products to have a look at in that store. Wait... How is it that I can tell you what CheckPoint does if they are in Stealth? Well, I guess it's because stealth is such a lousy idea that the CEO himself revealed the company strategy to Wireless Week one month before coming out of stealth mode! Basically, with yesterday's Facebook's announcement that it is entering the location check-in sector, CheckPoint has realized that the party might be over before they even show up. They have missed out on the buzz grabbed by startups FourSquare and Gowalla as they dominated the sector before the giant Facebook stepped in to mop up.

CheckPoint's CEO tries to make the best of the situation by saying,

...[CheckPoint] has very little in common with them [FourSquare, Gowalla, Facebook] because they're primarily for social connections. CheckPoints is focused on tangible products and helping consumers connect with products that are interesting to them...There's no one really focusing on product in this space right now...

If he honestly thinks that, he really has been in hiding for too long! All of those Check-In services are clearly focused on driving product sales in the locations users visit. It's just that they are using your friends as the bait that makes the app sticky. First, get the bait, then move the product. CheckPoint's secret strategy is [shh] "First, push the in-store products, then offer discounts." It's like a scavenger hunt with discounts as the reward. I'm not saying it's a terrible idea, but I think the Facebook/FourSquare/Gowalla approach seems better.

Either way, CheckPoint's reaction to Facebook's sector entry is a cold reminder of the real threat for any startup: it's not that someone else will steal your idea - someone else probably already has it - nope, the real threat is that you will toil in obscurity as better-known and/or larger players execute on grabbing market share.

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Posted on Techdirt - 24 March 2010 @ 3:54pm

Are Automated Status Updates From Location Check-In Apps Degrading Your Social Network?

from the this-dept.-is-checking-out dept

Does this look familiar?

@YourBuddy
 I'm at the Apple Store Palo Alto in Palo Alto http://gowalla.com/spots/9591
 about 7 hours ago via Gowalla

It looks all too familiar to me. And these messages are increasing in frequency in inboxes and social sites. What's going on here is that a fairly new kind of app, the "location check-in" service, is starting to get more traction among early adopters, and the usage is resulting in rapidly increasing "10-20" updates. Last week, the SXSW conference was ground-zero for this battle, as two of the hottest players, Foursquare and Gowalla, battled it out a year after both launching at the same event. Gowalla, behind for most of the year, gained steam at SXSW, winning a SXSW Web Award. Gowalla launched an updated app in Austin...and that's where my trouble began.

It seems that many of my social contacts have decided to try Gowalla this past week, and as a result, my Status Updates from my Contacts in LinkedIn, and "What's Hapenning" in Twitter are getting stuffed with spammy updates of every time one of them shows up at some coffee shop. This is the worst of social...the anecdotal "I'm brushing my teeth now" update that we all made fun of before we discovered the real value of Twitter.

What has happened is that these Check-In apps are degrading the average value of the messages my friends send. As a "follower", I tend to only follow people who put tight filters on their tweets, usually offering some deliberate thought about politics, telecom, or technology. But once these people connected Check-In apps to Twitter, their deliberate, pensive, witty tweets are being overrun by location spam. I'm not your mom, and I don't care where you are!

To be fair, the Check-In apps, by themselves, are not bad, and can be quite cool. I like being able to sign into locations, leave virtual notes there, leave pictures on a virtual board, rate the place, get discounts. Many of the uses are fun, informative, and even whimsical. I like the goofy competition for "being the mayor" of the bubble tea shop. If you have no idea what I'm talking about, Shane Snow over at Mashable describes the leading apps well, including a head-to-head feature chart. So while the apps can be engaging, it's just the optional connection of these apps to automatic outbound messages that is problematic and can generate too much chaff.

Not only can automated messages add up in quantity, but they can occasionally send the wrong signals, or be cause for embarassement. On one funny occasion, my wife visited someone at the hospital, and she turned on Foursquare. Because of the lingo of these apps, her Facebook page and friends were pushed the message "Liz just checked-in @ Kaiser Permanente Medical Center - Walnut Creek". Now, much as we liked the free flowers, we're not sure she was sending the right signals.

Like email and spam in the 90s, the good-quality, human written missives are being substituted by pointless, automated messages. It's far easier for a server to crank me out a message than for a person to type out 140 characters, so I predict this unfortunate trend to continue. An increasing number of status updates will be coming - not from your friends - but from machines they've allowed to send on their behalf. Too bad. I wanted to stay in touch with my friends, not their software.

27 Comments | Leave a Comment..

Posted on Techdirt - 11 March 2010 @ 3:09pm

Skype Deliberately Crippling Functionality of iPhone and WinMo and Verizon Apps?

from the New!-Improved!-Exclusive!-Broken! dept

There's something anti-competitive afoot in the 'VoIP over 3G' space this year. Let me run you through a timeline, and see if you can't spot the dirty pool:

  1. Skype has had a highly functional VoIP client for Windows Mobile devices for a few years. It allowed smartphone customers to use most features of Skype over WiFi OR a carrier's cellular data network. It was distributed around the carriers direct to customers of Skype, and was designed for those customers' benefit.
  2. March 2009: Skype on iPhone is launched, but is unable to do VoIP over the 3G data channel because AT&T and Apple blocked that functionality. Skype, Google, the FCC, and consumers cried "foul" at AT&T and Apple.
  3. Oct. 2009: After considerable FCC and consumer pressure, AT&T relents, and allows VoIP over 3G (and was even publicly applauded by Skype's CEO Josh Silverman). Skype users, naturally, expect an updated Skype version that will leverage 3G data.
  4. Jan 16, 2010: Skype releases a new iPhone version which DOESN'T take advantage of the new leeway AT&T (and ostensibly Apple) allow for VoIP over 3G. Skype points fingers, mostly back at Apple.
  5. Jan 27, 2010: Apple removes any 3G VoIP restrictions. Now there is nothing holding Skype from doing VoIP over 3G on iPhone.
  6. Mid Feb, 2010: At MWC in Barcelona, Verizon and Skype announce a special version of the Skype app that will run on Verizon. While most press outlets rejoice at the "openness" Verizon wireless is finally showing,  it turns out to be a limited, crippled version, which is designed to fit Verizon's agenda, NOT customer wishes. This version can use the 3G data network, but just for chat and 'control', not for voice. It requires a >$10/mo data plan, is not available for phones with Wi-Fi, and 'Skype out' cannot be used to make domestic phone calls. In this deal, it appears that VZW paid Skype for some exclusivity in the USA.
  7. Mid-Feb, 2010: Also at MWC, Skype CEO Silverman tells Om Malik that we can expect 3G VoIP on iPhone "Very soon", with no firm commitment.
  8. Feb. 26, 2010: Skype completely pulls it's very functional Windows Mobile apps with little explanation, and no suggestion of when they might return. The app, which works fine, just goes away. Why pull the most functional Skype mobile app and leave only crippled versions?

Looking at the timeline above, it's pretty easy to guess what's going on here. Skype has been negotiating with Verizon Wireless for some exclusive deal in the USA. But unlike the relatively good, open Skype deal enjoyed by Hutch "3" subscribers in the UK, the Verizon version is crippled with confusing limitations, complications, conditions. It's clear the Verizon goal is to use Skype to upsell data plans to users who don't yet have one, and to drive or retain Minutes of Use of cellular voice traffic. Skype just sold its US mobile users down the river! Skype still promotes "Skype Mobile" on its US web pages, but if you click on any OS like Android or Blackberry, you'll see the bold headline "Coming Soon: Skype on America's most reliable wireless network." And are basically told to wait for the exclusive product.

The only reason Skype offered for retracting the WinMo app is "because we want to offer our new customers an improved mobile experience – much like the version that has proved so popular on the iPhone..." Wait...Is that the same version that annoyed users because it couldn't do VoIP on 3G? And how does killing a product with no replacement offer an "improved mobile experience"? Seems like more of an absent mobile experience.

Going forward, this also could position Skype well for offering a premium paid version of a fully functional app at a future date, when exclusive deals expire. A freemium model would be less unsavory than the exclusive/crippled structure that we apparently have for now. At least with freemium, the free market can choose to pay or not from any given carrier. With the exclusive/crippled structure, customers have little choice - except the choice to use another VoIP provider who is focused on giving end users what they want.

The result of this exclusive deal is, essentially, to deprive an entire country of the value of a good VoIP service (Skype) on mobile phones, and instead to offer us a crippled version that is designed not to delight any user, but to delight a carrier. How ironic, then, that Skype's Silverman has been at the forefront of the push for more "open" networks:
"Nonetheless, the positive actions of one company are no substitute for a government policy that protects openness and benefits consumers. We're all looking forward to further developments that will let people use Skype on any device, on any network."
or when he said this from a September lobby trip to DC:
 "We have witnessed certain broadband providers unilaterally block access to phone calls delivered over data networks and implement technical measures that degrade the performance of peer-to-peer software distributing lawful content. And as many members of the Internet community and key congressional leaders have noted, there are compelling reasons to be concerned about the future of openness."
Compelling reasons, indeed. It seems that in this case, AT&T actually followed through with their promises to be more "open" while Skype and Verizon have just painted a big "open" sign on the gates of the walled garden. Enter at your own risk.

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Posted on Techdirt - 10 February 2010 @ 10:58am

What Would Broadband Competition Look Like?

from the what-if-Net-Neutrality-were-a-foreign-concept dept

The Reverse MVNO 

There has been a big trend towards MVNO carriers in the mobile space - that is, carriers who are Mobile Virtual Network Operators, and don't actually operate their own cellular towers, spectrum, and network. These MVNOs outsource that part of the business to the big cellular operators as wholesale buyers, and focus on the marketing, the handsets, the retail, the billing, and the services. But in telecom these days, it's highly desirable to offer bundles of services, mixing fixed, mobile, Internet and TV packages to drive up total revenue and customer loyalty. Thus, it's interesting to note the start of a new trend, the FVNO, where the F is for Fixed. In the UK, O2 mobile has decided to expand their business into the fixed telecom sector, and is doing so by reselling the infrastructure of BT (British Telecom) under their own brand.

On Broadband Competition 

Aside from the quirk of building MVNOs backwards, the shift is notable for readers here in the US, because it is illustrative of the kind of competition that can result when incumbent players are required to wholesale their fixed assets. O2, now owned by Spain's Telefonica, was a wireless-only company, but already offers fixed broadband to enterprise customers using BT's all-IP "21st Century Network". This move is indicative of a market where new entrants are free to launch, consumers have a wider range of choices, DSL speeds are faster, and yes, prices end up lower. So how exactly is that telco-cable duopoly working out for us in the US?

American readers not yet upset with the state of broadband in the US should feel free to click any of the links in the preceding paragraph to see the effect that competition has on a market. It makes all the players better, and offers huge benefits to consumers. The USA had exactly the same kind of competition codified into the Telecommunication Act of 1996. The act required incumbents to share their last mile through a regulation called UNE-P. UNE-P had some early effects: You may remember DSL upstarts that sprang onto the market like Speakeasy or Covad. But our UNE-P lacked teeth, and the incumbents were able to charge much higher wholesale prices than in Europe, where competition picked up steam. So by 2005, instead of re-enforcing UNE-P in the Telecom Reform Bill, your Congress killed it completely. In this article, Masnick talks about how it mattered little, because the wholesale price was sabotaging the effort anyway.

On Net Neutrality 

So now here we are in the US in 2010, still debating Network Neutrality. Does it look like "Net Neutrality" regulation is necessary in the UK? Heck no. Competition has completely obviated the need for Brits to regulate. Regulation is only necessary when monopoly powers are in effect, and the free market can't push Supply to offer what is in Demand. And what of the doomsday outcomes incumbents predict if they are forced to share assets? Did BT fall apart? Go bankrupt? Stop investing in any new infrastructure (as lobbyists say is the obvious outcome.) No! They became global leaders in rebuilding, investing, modernizing infrastructure, and launched the all-IP 21Century Network! BT became very good at wholesale as well as retail. Competition made every UK stakeholder better. So why don't we Americans forget Net Neutrality: Let's focus on bringing competition back to the US market. Our duopoly experiment has failed (surprise, surprise), the European examples are crystal clear. This debate is no longer theoretical.

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Posted on Techdirt - 15 January 2010 @ 5:48pm

The Killer Feature I Would Design Into An Apple Tablet

from the e-Reader,-we-hardly-knew-ye dept

To be clear, I've no influence in Cupertino, and the closest I've ever been to Steve Jobs was when I wore a black turtleneck skiing. But that said, there were a few developments at CES that got me thinking about a killer feature for a tablet. So here are the specific three developments from CES that stood out to me, and how I'd combine them in a disruptive tablet.

First, small, portable computing platforms were hot. No surprise to anyone, but Netbooks were all over the show, in creative new formats, layouts, OSes, and component make-ups. This sector has already proven to be a consumer favorite, and the OEMs are responding in force. Tablets, slates, and new formats were being shown by a variety of vendors hoping to get the jump on Apple, notably Microsoft in what could be described as an anemic Keynote by Ballmer.

Second, e-Readers were exploding out of the booths. There were new e-Readers on display from Huawei, Spring Design, Plastic Logic, Entourage eDGe and many more. Many analysts predict growth in the e-Reader sector, largely predicated on the notion that the readers use crystal clear e-ink screens, which greatly extend battery life, are easier on the eyes, and can be read indoors or out. Devices with standard LCD screens like Netbooks or iPhones churn through batteries too quickly to pose a direct threat to e-Readers. Thus, for now, this sector is seen as "protected" from the cheaper or more versatile Smartphones, Netbooks and tablets.

Third, there was an immense amount of innovation in screen configurations across Netbooks, TVs, laptops, etc. We saw two-screen laptops, touchscreens, tablets, double screen e-Readers, MEMS displays from Qualcomm, and more. Among the cool new screen technologies was one from PixelQi (discussed at GigaOm). The PixelQi (pronounced Pixel Chee) screen can operate in two modes: one which is like a standard backlit LCD laptop screen, and a second that closely resembles the e-ink of the Kindle. In this high-resolution, black-on-white mode, power consumption is cut to ~1/3 of a regular laptop screen. This mode also is easier on the eyes, and can be read easily in sunlight. PixelQi technology is cool in and of itself, since, as processors get more efficient, screens are becoming a relatively larger portion of the power budget - any savings here could have a dramatic impact on battery life. One could switch a laptop into "ink mode" and extend battery life at the expense of color.

I think you see where I'm going. If I were Jobs, I'd launch a tablet that used the iPhone OS, had access to the app store, iTunes, Safari browser...AND had an 8-10" dual-mode screen. Such a tablet could suck the air out of the room for e-reader makers. A company like Apple has the clout to get access to a wide range of book content, including the NYT bestseller lists. If so, Apple's tablet could quickly end the dedicated reader era. Consider a tablet that offers the value proposition of an e-Reader, a Netbook, GPS, and 100k apps. That's the kind of product that could justify a price premium over a $300 Netbook or Reader.

Either way, I see the dedicated reader market fading in the future, much as PDAs did. Not that they're not in demand, but the dedicated Readers will evolve and be subsumed into general-purpose tablets, or will be beaten by tablets that can do more. If it's not Apple or PixelQi next month, it's going to be somebody else within a year. Either way, buyers win: we're all going to benefit from the active innovation in the screen/display category, and more functional devices with better battery life.

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Posted on Techdirt - 7 January 2010 @ 5:00pm

Embedded Wireless: A Step Towards Dumb Pipes?

from the open,-but-not-that-open dept

At a FierceWireless panel during the CES show today, panelists from Verizon, AT&T and T-Mobile discussed the progress the embedded sector has seen over the past year and is expected to show in 2010. Embedded wireless, from a consumer electronics perspective, means factory installing a cellular radio into a (non-phone) device. The devices range from the obvious Netbooks and Kindles, to the less obvious cameras and media players, and more. The panelists were keen to point out that in the past year, the pieces of the puzzle all fell into place -- what had been lacking was affordable embedded modules, strong data networks, and flexible enough rate plans that didn't try to capture $60 a month from every device. I would agree that the carriers have finally become eager to consider a range of pricing models, all in the past year. From ad hoc daily netbook connection fees, to the integrated pricing seen on the Kindle, the Nook, and Garmin Nav devices, we're finally seeing some flexibility in the way carriers charge for data access. It's about time, too: for too long mobile data followed the $80 Rule, where the only way to get cellular data was an $80/mo lengthy contract.

As an example of the changes from just the last year, Verizon Wireless previously offered just a $60/mo contract for laptop connectivity, where now they sell a prepaid day pass, a week pass, and different tiers of subscription plans. That's good progress, but market forces are going to demand a wider range of solutions, and at more reasonable discounts for lower tiers. For example, how long will the market support Verizon's 5GB/mo subscription at $60 and their 250MB plan at $40? The lower plan is 5% of the throughput at 66% of the price! Clearly, there is room for these prices to move a little more.

An interesting point raised by Sue Marek of FierceWireless was whether embedded connectivity deals like that on the Kindle relegate the carrier to dumb pipe status. After all, when a great embedded wireless user experience is created, the carrier becomes invisible. Good question, but I think the answer is no. The carrier becomes a white label partner, but not a dumb pipe. That's because, so far, most of these deals have involved cooperation between the CE vendor and the telecom operator, in order to make the activation seamless and simple for the user. The carrier has been integral to the development, activation, and service management. That trend is likely to continue for the reason I explain in the following paragraph.

Consumer Electronics makers, like Garmin, could just put a GSM radio in their devices and say "connect to your choice of service provider by inserting your SIM". However, the cellular module costs are hovering just under $100, and that's a big nugget to add to the Bill of Materials on any CE product. And the CE makers know that they have leverage, since they have the ability to steer their customers onto a specific wireless carrier, and that any carrier will be attracted to a block of new subscribers. Guess what happens... that old, familiar word, subsidy. If Garmin chooses to partner with a specific carrier, the carrier will pay for the opportunity and in effect subsidize the device's radio. This brings down the cost, and the MSRP of the product, which in turn helps Garmin and the consumer. For this reason, until the radio modules are very cheap (like Wi-Fi modules are), we will generally see embedded wireless tied to a specific carrier.

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Posted on Techdirt - 6 October 2009 @ 5:08pm

iPhone To Be Offered From Multiple Carriers, eh

from the in-God-Phone-We-Anti-Trust dept

Given all the talk in DC lately about anti-competitive exclusive cellphone distribution arrangements, it's very interesting to see a rumor broken by the Globe and Mail about the iPhone in Canada. According to The Globe, Rogers will soon lose its iPhone exclusive as both TELUS and Bell Mobility add the iconic device to their Christmas line-up. Bell and TELUS are migrating away from the CDMA technology they have used up to 3G, towards the more globally compatible GSM evolutions. To minimize costs, the two carriers are building a single shared-infrastructure network, on which they will both sell services. While Rogers, the long-time GSM user, will have the wider network footprint and offer iPhones fall-back to their 2G data networks when out of 3G coverage, that advantage is countered by TELUS and Bell offering 3.5G HSPA+ speeds to Rogers' 3G. Under current coverage conditions, iPhone urbanites might prefer the new entrants, while sub-urbanites may prefer Rogers.

What is most interesting here is the break from Apple's conventional one-country-one-carrier strategy, which has attracted the attention of more than a few countries' regulators. The Canadian case will be the first market where competing carriers offer the iPhone, without a regulator forcing Apple's hand. Perhaps Germany will follow Canada: there are rumors that T-Mobile will lose their exclusive deal with Apple by year's end, and British/Spanish carrier O2 will enter the market with preferable iPhone plans. In the USA, most of the hot water Apple is swimming in is because the FTC isn't happy with the iPhone app approval process, which nixed the Google voice app. But while the FTC branch is focused on the App Store, some Congressional Reps are voicing their displeasure at the exclusive iPhone deal with AT&T. Governments around the world aren't sure what to make of exclusive phone distribution deals - which, strangely, never seemed to raise an eyebrow until the iPhone. In France, the Orange-Apple 5-yr exclusive was smacked down by the feds who argued that an exclusive arrangement would add "a new element of rigidity in the sector which is already suffering from a lack of competition." But here's where I'm not so clear.

I agree that exclusives, when examined in isolation, are anti-competitive. But overall, I'm not clear on how a 2007 new entrant (Apple), with a disruptive device that lit a fire under the incumbent vendors, could be perceived as "anti-competitive" in terms of net results. In fact, the exclusivity has undeniably forced the competing carriers to work their butts off to come up with a comparable device, seeking it from the likes of Nokia, Samsung (which are scrambling to respond, though they'd never admit it), or newer players like HTC or INQ. The exclusive deals seem to be spurring competition. In contrast, in a world where every telco carries the iPhone, the telcos actually can worry less about offering something else that's equal or better. I suppose someday it could make sense to go after Apple exclusives, but why not wait until the net effect on society is actually negative in some measurable way? A good rule for government should be, "When in doubt, leave it alone."

Meanwhile, the Canadian case will certainly offer Canadians more choice among iPhone providers, and most notably iPhone plans. Canadians tasted the bitter flavor of inadequate competition when iPhone data plans were first announced there in mid 2008. Three-year contracts, no unlimited data plan, high per-MB pricing, and a triple lock-in. Yes, Canada may soon see more service competition around the iPhone -- but will Canada see more or less device competition?

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Posted on Techdirt - 31 July 2009 @ 9:24am

iPhone Haters Are Stick-Shifters In An Automatic World

from the P-R-N-D-iii--ii--iPhone dept

Every time we post a story at Techdirt about the iPhone, we see the comments rapidly bifurcating into a religious battle between the "fanboy idiots who make excuses for the useless little iPhone like a beaten wife just because it's trendy and shiny" and the guys who "whine because [the iPhone doesn't do] everything and cost nothing" (this is what the two sides are saying, not us). It's sad to see such an interesting, seminal device be reduced to "nyah, nyah" levels of discourse. Our position on the iPhone is hopefully more objective. No, it's not perfect, lists of gripes are frequently made, but overall it's the phone to beat.

Recently, we've decried Apple's autocratic governance of their App Store. But don't let that mislead you into thinking we're down on the whole product. The iPhone is a turning-point device, which changed the usability level of the mobile Internet. All of a sudden, the mass market - who until then had no interest in muddling with clumsy mobile data services - was able to connect to the web on their phone, browse sites, download apps, and truly realize the promise of "anytime, anyplace, any info". The phone also revolutionized the mobile phone UI. While the other handset vendors developed each application and hardware in its own silo, Apple designed it all as a single whole experience, also sketching-in the content and application ecosystem. And it's been no shock that good user experience matters a whole lot! Lastly, the iPhone shattered the iron grip carriers had on handset vendors, and the phones their customer's eventually owned. Apple yanked some of that control away, and their more open (than carriers) approach has blown open the barn doors of developer creativity. The iPhone sales figures and data usage stats are in. Its a success. So if you are one of the people that says the iPhone is nothing more than a shiny toy, you need to come back to reality.

So why do so many criticize the iPhone, if it's so great? I think it's because they make the classic marketing mistake of thinking "It's all about ME." It isn't. The iPhone haters see the limitations (hard keys, cut/paste, tethering...) of the phone, and they focus on how the phone doesn't have any tech breakthrough or meet THEIR specific needs. But the mass market is what really matters in business. Is the mass market even aware of the limitations of their iPhone? If you told one of them, would they care? They would tell you that, on the contrary, their iPhone has not limited them, it has empowered them to access the mobile services and networks that have been "available" since 2000, but were blocked by poor user experiences and walled gardens.

I liken the whole debate to the stick-shift versus automatic transmission debate decades ago (still in the EU). True motoring aficionados could not accept the dumbed-down, lazy automatic transmission. They insisted on doing the work themselves. It was harder, but it was "the only way to truly 'drive' the automobile". Tough luck if it put driving out of the reach of some. By now, the mass market has decided that "easier" trumps a religious argument about "real feel for the road". Good products take people to their destination as easily as possible. The market has spoken: Getting there is not half the fun.

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Posted on Techdirt - 22 July 2009 @ 4:02pm

The Zer01 Story: Lots Of Buzz, But Is It Actually Real...?

from the evidence-lacking dept

A disruptive mobile phone company claims to have launched on July 1. It's called Zer01, and if on the level, would radically incite price competition in the US cellular market. Zer01 is an MVNO or MVNE (depending on when you spoke with them), and they say that they can offer cheap unlimited service by the 3G GSM cellular data network of a national partner, which they will resell. Voice services would be delivered as data using VoIP. Zer01 launched with unlimited voice, text, and data plans for $79.95 a month - including tethering your laptops all you want, and with no contract. The problem is: there is no evidence that this service actually exists. Nancy Gohring at ComputerWorld digs in to the story, and found a lot of reasons to be suspicious about the company. Added all together, it looks pretty shady, and reminds us of the Gizmondo scandal back in 2005.

But a few people in the comments of Gohring's article said Gohring pulled a hatchet job on a legit young company. They argue that many young companies start out looking rough around the edges. "Where was Microsoft's headquarters when they launched?" Perhaps some young companies do look this sketchy at the onset, but not the hundreds of startups that I've seen and evaluated in my career! And certainly not any company that has a serious shot at taking on the national Tier-1 cellular carriers, head-on. If you want to battle with Verizon Wireless, nationwide, for data, voice, and support services, your business needs to look a far sight more established than a startup with a mailbox in a Vegas strip mall. If you claim patented technologies, devices, a customized On Device Portal, then you should have a team of engineers on staff somewhere, and the USPTO should be aware of your patent. SK Telecom and Earthlink launched an MVNO, Helio, which failed at taking on the big carriers despite the track record of being the #1 carrier in South Korea, and a decent kick off investment of $440M, then $200M more, then $270M more. But OK, let's suspend disbelief just a bit longer: Maybe a small, scrappy company is just shrewd enough to win where others have failed. I want to believe, too. But after interviewing Zer01, I just can't buy into the dream.

I interviewed Zer01 CEO, Ben Piilani at CTIA this year (April Fool's Day). I was lured by their PR release about their plan, which sounded incredible. But after our half-hour interview, my parting words were "Good luck to you, but sign me up as skeptical." During our chat, Piilani said lots of things that struck me, as an experienced telecom analyst, as... um... wrong. Here are just three parts of the interview:

  1. Piilani told how, in delivering wireless data to phones, the wireless part of the connection is the easiest part to handle, and since ZER01 uses its own fiber backhaul network, but only uses the Wireless Carrier for that easy wireless jump, host carriers don't mind the impact because there is ample capacity. I thought, "Wha? That doesn't fit with all the research coming out saying that wireless capacity is being pinched. Nor does it jibe that the carriers just spent $Billions at the spectrum auctions for access to more cellular channels." But then Piilani went on, "You know that in Europe, data is basically free. You can show up in the airport and buy a SIM card, slap it in your phone, and the data is unlimited." Um... I thought, "I was in Europe last month for MWC, and at least once a year for the past 10 years. And as a wireless data analyst, I've bought about 20 of the SIM cards he's talking about. I'm pretty sure I would know if there were an unlimited data, SIM-only option."

    As anyone in telecom knows, there is not. I thought to myself: "How odd that he would say such an absolute falsehood. And odder still that he does not know enough about the cellular industry to understand how obviously false he sounds."


  2. I wanted, most of all, to see the proof in the pudding. I wanted to make a call over the company's VoIP over 3G solution. I asked Ben if I could make such a test call, and he said sure, and hooked me up with a Product Manager at the end of our interview. I asked if we could place a call, but the PM began instead by showing me the phone's fancy looking On Device Portal (ODP) UI running on WinMo. He was explaining the great UI and all the apps that were to be included. So I said, "Click on one or two of those nice-looking icons and show me the apps." I picked the icons, and behind every one was an "under construction" response. He picked a couple, and there were some deeper pages. But the ODP was basically window dressing with nothing inside.


  3. So I pushed, and said, "Mr. Piilani sent me over here to make a phone call on your device. Let's call my phone." He replied, "Oh, sorry. Our PR firm told us not to make any calls on the show floor, because the wireless signal here is so unreliable with so many people using it." Odd that Mr. Piilani wasn't aware! I said, "Sure, but the carriers have all put COWS onsite, and no one is having signal problems this year. Look there's one guy talking on his phone right there, and my phone is four bars." He said, "Well, PR told me not to." I thought, "Fail."

I left with serious doubts about Zer01's ability to deliver on their promises, and some suspicion that they might not be on the level. Piilani and his team must have impressed someone, though, because they ended up wining a Best In Show award from Laptop Magazine, and getting praise from some analysts, even while at least a few others were more suspicious. Gohring's much more thorough recent investigation pretty much blows the top off of this story, though. Gohring suggests that Zer01 bears some resemblance to a pyramid scheme, where the real money comes from an ever growing network of distributors or "e-affiliates" who pay money for the right to resell the service. In fact, Zer01 is sold through a network of "e-affiliates" using a Multi-Level Marketing (MLM) setup managed by two other companies, Buzzirk and Global Verge. The Buzzirk cost of entry and compensation schemes incent distributors to join in at $150 the first month, and then $100 monthly thereafter. There are lower join levels, but they don't offer the MLM revenue benefits. For their money, distributors gain the right to a lookalike e-affiliate website that appears... ahem...bush league, and the right to sell the phones... which haven't actually appeared yet. Zer01 itself claims a network of 50,000 distributors. Assuming that is so, MLM revenues could be over $7M in just the first month -- but that's got nothing to do with actual service revenues.

For an example, check out "Robin and Jerry's" e-affiliate website, replete with photos of the phones they haven't touched yet. The pictures are of standard Windows Mobile devices, and it's interesting to note that the UI shown is either MSFT generic, or the product of (totally legit) German software company Spb Software House. Funny that they're using Spb's images to sell Zer01 instead of actual Zer01/Buzziker screens. Since the phones aren't available, the only thing the MLM websites really sell is a position as a distributor, lower down the food chain.

The MLM world is infamous for its own jargon. Buzzirk is no exception with a "3x9 matrix with vertical and horizontal compression." Most of the distributors defending the scheme at scam.com were saying they would find vindication when the "Triple Diamonds" got the phones. Triple Diamonds are those e-affiliates who have recruited at least 25 active e-affiliates under them, and they are the elites who are expected to get the phones first, and can finally validate whether there is any reality to the story or not. So far, the Triple-Diamonds are only getting delays from Buzzirk and Zer01.

So, is this whole thing legit? Will there be phones? Is it a pyramid scheme, or just MLM?

In the US, a pyramid scheme is illegal, and is defined by an utter lack of product, and a focus on the recruitment of additional distributors instead of product sales. But since Zer01 is a separate legal entity from the MLM distribution companies, they can't be accused of a pyramid scheme -- they simply sell their phones to 'entirely separate companies'... with similar office locations. Meanwhile, Buzzirk and Global Verge, despite recruiting their e-affiliates with a focus on the mobile phone offering, also are clear that they offer other products that their e-affiliates can sell, such as a "water saver," a "power saver," and "identity theft protection." Thus, it is possible that the phones will never arrive, Zer01 will say "Sorry, just couldn't pull it off," and blame it on Ma Bell. Buzzirk and Global Verge can say, "Sorry, e-affiliates, no phones. Thanks for the fees, but stick around to sell the water saver," thus, engaging in legal MLM, not a pyramid. This paragraph is certainly just speculation, but cautious investors might want to investigate further whether the mobile phone service is just an oasis to lure them into an expensive "water saver" MLM franchise.

I've seen all forms of wacky claims made by Zer01 re-sellers while researching this post. I've read how it roams from AT&T, to T-Mobile, to Rogers, to TELUS (with no mention of the fact that TELUS uses CDMA networks not supported by the phones they offer). I've read that it will work in airplanes, that "it's got the 2100MHz speed," that you can download a movie to your laptop in 3 minutes, that it includes SMS MasterCard mobile payment, and that it uses "the proprietary patented technology that Zer01 has that allows your phone to switch from GSM, Tri-Band, Quad-Band, Wi-Fi to connect to the VoIP," that it's 4G, that it's 5G and that it offers 20Gbps on a private FTC-licensed 2100MHz network. The claims range from the improbable to the technologically incoherent or both. The company leaders suggest that this is caused by confusion, and overzealous distributors. Perhaps some clear, correct, and well-presented franchiser information would abrogate the need for the creation of falsities? When so many of the e-affiliates are lying, I think the company at the center still deserves at least some of the blame. Besides, much of the gibberish is right off the Buzzirk franchised website, like "Internet speeds will range across GPRS, EGPRS, EDGE, and even 3G when available." Someone should have told these telecom experts that EGPRS and EDGE are exactly the same thing.

There will surely be Zer01/Buzzirk/Global Verge defenders popping up in the comments, some from the companies, others that just disagree, and some from the 50k "distributors" who have already been convinced to re-sell Zer01. There is a whole army of people out there who, once fooled, have pride, cognitive dissonance, and personal financial interest in defending Zer01. Comment away, call me a hack, and exercise polite free speech. But please also make your case: offer your telecom credentials if you have any, tell us where the Zer01 engineers are, what the special technology is, where the towers are erected for that proprietary 2100MHz network, who the network provider is, how standard HTC phones can push 20 Gbps of data with just a SIM card upgrade, where the claimed patents are, with whom Zer01 has Mobile Network Operator contracts, and if you have used one of the Zer01 devices personally and can vouch that they exist, and work (and aren't just AT&T SIM phones with an ODP).

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Posted on Techdirt - 13 July 2009 @ 4:03am

Does The Mainstream Press 'Make' or 'Own' The News?

from the you-make-it,-we-bake-it dept

Part I - Who Makes The News
In his recent post, Mike discussed how there is a two-way street between blogs and newspapers, in which both become aware of stories from each other, and both borrow ideas. Techdirt believes this is part of the free market for ideas, and that nobody can own news, but we contrast this belief with the mainstream media moguls, who rant about how bloggers "poach" the news from the newspapers, offering naught in return. There is a trend of major publishers talking about how they "own" the news they "made", even when they themselves are just reporting on stories that occurred to other people. If anyone made the news, isn't it the people involved? But news is really just facts, and nobody can "own" reality.

Continuing along the lines Mike laid out, let me introduce another group of people who often create a great deal of the content in mainstream news, but go under-credited in this debate: Analysts and Experts. When news breaks, or a general interest piece is planned for a mainstream publication, the reporters often seek the advice and opinions of industry analysts and experts. I know, because I'm often called regarding issues in the Telecom industry. The reporters will ask your expert opinion, some catchy quotes, and will integrate them into their story. However, oftentimes, I find the reporter is just starting the writing process (in 'research'), and actually doesn't know exactly what is interesting about the story. In these cases, I often spend half an hour on the phone with them explaining the background, the trends, the real scuttlebutt, the interesting aspects, who else they should talk to, what is "real" and what is spin (IMHO, of course), and who they can contact for an opposing view. Independent analysts also normally have less bias than a corporate PR rep. Often, I will refer the reporter to an article I've written or a Techdirt post on the subject. The eventual story occasionally follows my narrative quite closely.

Am I angry about this state of affairs? No. I think it's great. All I ask is that the reporter put a quote or two from me in the piece. I get some marketing exposure, and I'm more than happy to help them build their story in return. This is one way reporters do their job, and it IS useful and productive. One would guess that lots of stories are made this way. There is no problem with this, but there is a problem when the news organizations start to think they "own" the story. What they did was add professional writing, fact checking, additional interviews, but most importantly provided distribution and an audience - all of which adds value, but none of which conveys ownership.

Allow me to triple repeat myself: I have no problem with this, and in fact seek out opportunities to work with reporters. This is a system that works...right up until the publishers act like - nay, claim - they are the sole creators of the news and that bloggers are mere parasites. In many cases, the bloggers are just the same experts going straight to the market with their ideas. As an analyst, I know I can go straight to market, but I'd rather go through the NYT, because that's where the audience is.

Part II - Paywall Paradox:
So what happens when newspapers go behind a paywall, and reduce their readership by 90% to the 10% of people willing to pay? What if, at the same time, Huffington Post, Techdirt, and WiFiNetNews all offer their stuff for free? It's not just the advertisers that will follow the audience: the experts want to go where the exposure is, where the readers are. If the mainstream media reduces their audience to a small fraction of payers, then analysts would have to revisit the cost/benefit of spending half an hour with mainstream reporters. If my contribution to their mainstream article is not indexed by Google, it does ME a lot less good. I want my quotes in the results when someone searches on "muni wifi" or "derek kerton". If they're locked up, they don't promote me, and I can't link to them.

Result: many experts will prefer to work with the free publications, where the larger audience reads, and where their quote is indexed by Bing and linkable. Subsequently, paywall newspapers will find sources harder to find, and less willing to spend time. Big media reporters are accustomed to everyone eagerly returning their calls within 30 minutes. That kind of enthusiasm follows the readership, not the newspaper.

Next step: guess where the writers will want to work...

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Posted on Techdirt - 15 June 2009 @ 9:48am

In Defense Of Mobile E-Mail 'Addiction'

from the Best-Use-Of-Your-Time dept

There is an interesting Reuters article about how former NY state Democratic Majority Leader Malcolm Smith had a meeting scheduled with billionaire Tom Golisano, a major political fund contributor. (Eschewing the issue of how political contributions are accepted without question, as paid access to our elected officials,) the article describes how Mr. Smith spent enough time on his Blackberry to offend Golisano. The billionaire has clout, and subsequently engineered the ouster of Smith. The article's true focus, then, is how dangerous it is for people to use their mobile email devices during meetings, during social engagements, in the car with family, etc. It points out how rude it can be, and also point out how it can actually be less efficient, because a person's attention is split.

That is all true, but whenever one of these opinion pieces comes out, it ignores the other case: that oftentimes at meetings, our attention simply isn't necessary or productive. In any given multi-person meeting, for what % of the time is each person's participation and attention truly productive? Is every topic related to you? Could a quick check of email be more productive? I would argue that optimal participation is usually less than 100%. Same goes for conferences: Sometimes the conference agenda will include a speaker that is just not very relevant to your individual interests. Yes, you could learn something by listening, but perhaps you could be more productive by responding to your clients, staff, or boss on your mobile device. I've met a few people who take offense at every sighting of a Blackberry, but that's usually attached to a big ego that takes offense too easily. Not every word you say is golden, or even directed at me. In a one on one meeting, obviously one should be focused on the person in front, and one should not feign listening while actually reading. But in multi-party meetings, there are good opportunities to mentally duck out. A blanket Blackberry backlash isn't well-reasoned. As in most debates, a balance needs to be struck.

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Posted on Techdirt - 8 June 2009 @ 5:03pm

The Jitterbug Phone...Turns Out It's For Seniors

from the Embarrassed-About-Our-Own-Customers dept

Mobile Health is a growing trend in the mobile application industry. There is a lot of interest around the potential to use mobile devices as medication reminders, and as local hubs of a Personal Area Network (PAN or BAN for 'Body') which can relay body sensor data to a central system, or medical personnel. Imagine a glucose sensor affixed to a diabetic tracking real-time blood sugar levels and relaying those to a doctor or a parent. With that, the MobileHealthNews blog has sprung up to cover the sector, and I read a good interview there with Jitterbug CEO David Inns. Jitterbug makes a phone that is pictured at the preceding link, which is designed to be easy to use for seniors, and provides associated services which older subscribers may find useful. Good. I have a lot of respect for a good segment strategy.

But when I saw them at trade shows, Jitterbug managers would say: "No, we're not just for older people, we're really for anybody who wants a simple experience." I reply "No, you're not. You boast bigger keys, a wizard interface, simple Yes No buttons, an audible dialtone, a three button model, hearing aid compatibility, operator assist, one touch 911 calling, and large fonts. Ergo, you're targeting seniors." They would deny it, so I'd pursue, "OK, so where's your marketing spend. I've seen you in AAA magazine, but haven't come across your ads on MTV yet. Where else do you advertise?" Knowing full well they advertise in the AARP magazine and launch products at AARP conferences [pdf]. But no soup for me. For years, I couldn't get the Jitterbug reps to admit that it was a phone for old people. I'll give them points for rigorous PR training, and keeping on message, but I don't agree with the strategy.

I get it. Great Call (Jitterbug) has decided that they don't want to look "uncool" by identifying their segment. But I'm not sure that is good business. If you're embarrassed about your customer base, are you likely to be serving it as well as you could? Is it that you are worried about scaring off young potential customers because your product "smells like old people"? Get over it. Most young people don't want a Jitterbug, just as most seniors wouldn't want a Nokia N95. If you completely believed in market segmentation, you'd get over yourselves, and get real.

That's why the recent interview with the CEO was such fun. The potential revenue of the Mobile Health sector is a powerful lure, but it's hard to play a central role when you are in denial of your attractive customer base of aging baby boomers. As a result, Jitterbug is scrambling to finally admit -- nay, boast of -- who their customer base is. CEO Inns says, "So many examples of wireless health services are being shown running on iPhones,... [is opportunity] really with the 30-year-olds? ...If you want to get serious about tackling the healthcare problems in this country where they actually exist, which is in the 60+ age group, then you should be working with us to develop services that are easy to use so they get compliance."

Jitterbug has built a community that has value, but has distanced itself from that community. That's not the way to open up opportunities in the 21st century, and that notion just clicked back at the Jitterbug Boardroom. Thank you, Jitterbug. It's taken about four years, but you've finally admitted who your customers are. Was that so bad?

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Posted on Techdirt - 5 June 2009 @ 8:33am

If Everyone Likes The Palm Pre, Why So Much Hedging?

from the I'm-Totally-Sure...Well,-Maybe dept

The Palm Pre launches at Sprint this Saturday, and you've probably been seeing an increasing amount of buzz on the subject [that is a Google search link, and today will show buzz, but if you're reading this later, will be meaningless]. I wrote about the Pre on Techdirt after being very impressed with the phone at CES and MWC Barcelona. I wrote, "I'm not sure when the bandwagon is going to hit the trail for this device, but I'm saddling up right now." And in the intervening months, I've noted that more and more reviewers were, like me, heaping praise on the device. But there was something else: many reviewers couched the endorsement of the Pre with caveats. At the end of every glowing article was a conclusion that seemed out of sync with the review. Here were mine, "I can't predict whether the developer community will rally around the Pre, or whether Sprint and Palm will be successful in selling big volumes, but I want to call this one early: the Pre is a great smartphone." Walt Mossberg at the WSJ wraps up his glowing review with, "All in all, I believe the Pre is a smart, sophisticated product that will have particular appeal for those who want a physical keyboard. It is thoughtfully designed, works well and could give the iPhone and BlackBerry strong competition -- but only if it fixes its app store and can attract third-party developers."

The caveats were reasonable. Developers have limited resources, and collective uncertainty in Palm and Sprint performance has us hedging our bets. Sure, we could assert that the device is great, but we could not be sure if the ecosystem would grow around it. But I think I'm in a better position to do that now. When 98 out of every 100 reviews say the device is great, isn't that one hell of a consensus? I haven't seen that kind of agreement in this industry since AFTER the launch of the iPhone. That's exactly the kind of community consensus that seeds an ecosystem. I officially retract my hedge. What content developer wouldn't be at least attracted to a device that gains such consistently high grades? Is it just hype? No. A landslide of positive reviews from people who actually tested isn't hype - it's straight As. That's good news for Palm, good news for consumers in that we get another competitive device to run alongside the iPhone, but only marginally good news for Sprint. Verizon took the wind out of Sprint's sales [sic] by announcing they, too would carry the Pre by year end, and AT&T is rumored to want a GSM version.

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Posted on Techdirt - 26 May 2009 @ 3:40pm

E911 Tax Money - When It's Not Going To Boots, It Just Goes

from the Fleece-'em,-Danno dept

Your U.S.A. cellular phone bill, since the early 1990s, has had a fee levied on it by governments for E911 services. The fee differed from state to state, and was ostensibly to fund the upgrade of 911 call centers. The public safety call centers were to be readied to receive location information from cell phones, and to use that information to instruct emergency crews. The cellular carriers were required to collect this tax for the government, but were also separately required to design, create, and deploy the (much more expensive) systems that can determine where the caller is. The government basically required the carriers to fund a public safety system (which you may or may not agree with). One thing with which none of us could agree was that the E911 taxes on our phone bills were promptly squandered by governments, for years, on just about everything except 911 call center upgrades. Money was mis-spent on ballpoint pens, conference attendance, dry cleaning, and boots.

Most of that is history; much of the US is now ugraded. (Please don't rely on E911, as it only works when you have a good cell signal, battery power, and a few other things. Don't use it as a crutch or as a "safety device"!) So what do you think will happen to those monthly taxes that were collected for so many years? Time to cancel them, right? Not so fast, says the State of Hawaii, which gets 66 cents of E911 fees from every monthly bill. This article in the Honolulu Advertiser shows how various government agencies are trying to get their hands on the "windfall." A few examples of this include: the Honolulu PD wants a new dispatch system for $20m, the Board that manages the fund wants their mandate extended to spend on other tech like VoIP location, the State hired a new Executive Director of the E911 fund for $294,421/yr, the legislature is taking $16M from the fund to help balance the budget, and some are trying to build new cell towers with the money. The article predicts future raids on the funds, and given what we've seen nationwide, we would agree.

What is it about this country that we can't just call a tax a tax. We seem to have an addiction to tucking and hiding fees into a wide range of services, where over time the fees have little to do with the services. Dear government: If you're going to tax me, please just do it up front, talk to me honestly, and say it's a tax. I want to feel you reaching into my pocket, instead of having you just skim the till behind my back.

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Posted on Techdirt - 14 May 2009 @ 4:43pm

Are Cellphone Carriers Like Gas Stations?

from the Liger-In-Your-Tank dept

It's a simple lesson from Kindergarten: Share. You probably don't think of oil companies as being particularly good at this - except perhaps in the sense of sharing oil price hikes at the pumps - but it turns out they have another hidden sharing skill that they'd rather you didn't see. They share gas and pipelines, run by pipleline firms called "common carriers". Although not widely known, there is very little difference between the gas you buy at competing fuel stations in the US. The gas is a commodity product based on quality specs, and the differences are mostly marketing.

The privately-owned national gas/oil distribution infrastructure is quite formidable (offering a massive legacy advantage over any future fuels). There are pipelines that cross the country, refineries, trucks, equipment, tanks, catchments, reserves - all to deliver fuel to a growing economy (yes, growing...over the long-term at least).

But it would be prohibitively expensive to build such an infrastructure for EACH of the gas station brands. So instead of separate pipelines snaking the country, one each for Chevron, Shell, Texaco, Philips, etc...they share. Tanker ships deliver a standard grade of oil to refineries where it is refined to standard grades of fuel. And while the refineries may be owned by a specific oil company, the fuel they produce is put in common pipes to transport across the nation. Thus, the premium gas that Shell puts in the pipe in California could be taken out by Texaco in Nevada. Since it is a commodity product, it doesn't matter whose batch of fuel is taken out of the pipe, it only matters how much. This pipe is quite "dumb", but the network is shared, and the commodity that is transported is a standard package - sound familiar to any telco people?

The Fair Trade Commission in the US has stopped gas companies from making false advertising claims, and if the companies are selling the same gas, they can't claim it to be better. Thus claims like "More powerful" get replaced with the metaphorical, nonsensical "Put a tiger in your tank!" Is shared infrastructure and a standards-based product killing the gas companies? No. How do they compete if the product they sell is EXACTLY the same as their competition? What's the value of brand?

The answer lies in a small trick. The FTC won't allow them to say their gas is better if it's the same. But if they inject some small amount of "additive" just before selling the gas to customers (This additive can be anything...even a secret formula of 11 herbs and spices) that's all it takes to claim a different product. And with a different product, the gas companies can claim to have a "cleaner running" product, or "burns better" or whatever angle they want to promote with their brand. It works. They have been sharing pipes for decades, so maybe their case is instructive for telcos.

There IS money to be saved from sharing a single infrastructure. Especially when the product is standards-based. GSM, EDGE, 3G, HSPA, LTE are all pretty standard. As are Metro Ethernet, IP backhaul, etc. So I believe the carriers are on to a good idea in reducing their CapEx by sharing common network elements. Even more so because of the frequent 2G-3G-4G-... upgrades needed to compete. They can easily continue to differentiate by offering special "additives" to their product.

And while the gas companies' additives are mostly snake oil. The telecom "additives" are quite important, and can truly differentiate a mobile subscription over the raw bits inside the dumb pipe: Customer service, retail presence, data services, location platforms, fixed/mobile integration, easy-to-read bills, the iPhone, fave-5, rollover minutes...these are all very important parts of the service mix, and are true differentiators about which customers care. The things that subscribers don't care about might as well be shared. Amazon.com and buy.com both ship with UPS - do you care that they share the delivery mechanism?

Sol Trujillo, outgoing CEO at Australian cellco Telstra, is making the opposite gamble, detailed in a speech at MWC. He thinks the differentiator is the network infrastructure, and is piling money into it to be the first carrier to offer high-speed LTE technology, contrasting his approach to the common-carrier approach of Telfonica and Vodafone. While LTE is great, thinking that the network is a differentiator is wrong, and shortsighted. No customer has ever cared about the technology or the infrastructure. And while Telstra invests in a brief technology lead with LTE, their higher costs of upgrades may eventually make them technology laggards compared to competitors that share.

I can see it now: "Cleaner burning Vodafone Wireless", or "AT&T. Put an Apple in your tank!"

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