Tales of the Sausage Factory

Canada Continues To Play With Itself For My Amusement — CRTC Allows New Tarrif for Metered/Capacity Limited Wholesale Services.

Back in December, I was very excited by the decision of the Canadian Radio-Telecommunications Commission (CRTC) to permit Bell Canada to throttle traffic for its wholesale customers. This represented the first OECD country taking a major step away from mandatory unbundling since the FCC deregulated our telcos in 2005. As a lover of empirical data, the thought of another country playing games with its critical infrastructure to test market absolutism struck me as a welcome relief from the U.S. always playing the guinea pig on free market absolutism.

And now, CRTC has gone further. In this Order, the CRTC approves an interim tariff for usage based billing (UBB) or, as we would call it here, metered billing with a capacity cap. I’m not sure if, reading this, it merely permits Bell Canada to offer a wholesale metered plan or if it allows Bell Canada to drop their unmetered plans and offer only metered plans. If the later, CRTC has pretty much delegated the entire industry structure over to Bell Canada. But even if this is just an option, it lets Bell Canada set the business model for how ISPs can do metered billing. So again, Bell Canada is going to have pretty tremendous influence on how the business model for DSL delivery evolves going forward.

Bell Canada had also asked for a fairly steep charge against an ISP if the ISP could not identify the specific customer using capacity, since that would evade the capacity cap. Happily for independent ISPs in Canada, the CRTC decided to hold off on that one for a bit.

As always, I shall be very interested to see what happens as a result. It’s always rare to see a similarly situated country willing to become a laboratory for experiments with its critical infrastructure. I look forward to seeing multi-year data on what happens to their broadband penetration, pricing, and overall use as a consequence.

Stay tuned . . . .

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Tales of the Sausage Factory

Why Do People Hate “Free” So Much?

Watching Chris Anderson on Colbert last night gives me an excuse to write this little blog entry about Chris Anderson’s Free: The Future of A Radical Price. Certainly it has stirred up debate, as such notions should. But a number of Anderson’s critics seem positively affronted that anyone could make an argument in favor of “free” as a business model. They react as if Anderson were a cross between an evil genius out to destroy the capitalist system, a charlatan peddling snake oil to the gullible, and an ignorant posseur worthy only of contempt. Mind you, that’s always life in the blogosphere to some degree, but is it really that crazy?

Happily, Tim Lee over at Technology Liberation Front has already written a cogent defense of Anderson’s actual argument. “Free” doesn’t mean everything free everywhere all the time, but it does mean that folks need to rethink traditional business models in light of changing technology and user expectations. Using free to either collect something of value to someone else (such as personal information or an audience) and/or taking the opportunity to “up sell” a premium service (or, as Anderson explained to Colbert, “Fremium”) has worked for many people and businesses.

Indeed, let me go one further on the crazy meter for you. Back at the beginning of the century, someone came up with an even crazier business model than “free.” Looking at new technology, this ignorant young pup adopted the business model of “pay other people to take my stuff.” Now what dumb ass thinks that you could make a living investing lots of money in creating a product, then actually paying people to take it from you. What a moron, right?

The fellow in question was William Paley, who built the CBS network on the model of paying affiliates to take programming. Paley deduced that he could charge advertisers more than enough money to cover the cost of program production and affiliate fees if he could offer advertisers a big enough audience. Meanwhile, a few hours north in New York City, a number of electronics companies (RCA, Westinghouse, and General Electric) were developing a model around cheap content to sell advertising and radios.

So all I am saying, is give free a chance.

Stay tuned . . .

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Tales of the Sausage Factory

Fragmentation Games: Playstation Gets “Boxeed,” TV Anywhere Gets More Content.

In the latest twist in the broadband fragmentation games driven the overlap of MVPDs and broadband access providers, users of PlayStation 3 can no longer access Hulu. As some may recall, Hulu tried a similar trick with Boxee.tv, resulting in a good old fashioned tech arms race wherein Boxee camouflaged itself as browser and Hulu responded by encrypting html.

Now Hulu has shut off the spigot to Playstation 3. Why? As I noted when Hulu pulled this on Boxee in the spring, the people who make money off the existing video subscription model (both the cable operators like Comcast and the content holders like NBC Universal) really dislike the thought of streaming media actually competing with them. As long as video stayed on the laptop and occasionally stopped to buffer, it didn’t really threaten the established business models. But make it possible to watch streaming media on your regular TV, with a quality practically equal to what you get on cable, and it becomes a very disruptive technology.

Playstation 3 and other game consoles are obvious candidates to disrupt the existing business model. They already plug into your television set, you are very familiar with the controls, and the manufacturers are always expanding the capabilities of the units to make them more “media centers” and less “game centers.” Like Boxee, they represent a real threat by making it possible for me to stream online content effortlessly on my TV and watch in exactly the same way I watch anything else.

Meanwhile, Time Warner and Comcast have found lots of other content networks eager to join the “Entitlement Program.” This initiative appears to be gathering critical mass very rapidly, which is not too surprising. While some of the bigger folks like Disney may hold out to see how they can maximize their return, the midsized players anxious about possible changes to the business model are likely to want to get in while the getting is good.

To conclude, what we have here is not anything obvious or dramatic. It is a few more ripples in the pond, indicating where the big fish swim. Any one of the “fragmentation games” incidents I’ve discussed, for example the ESPN360.com business which has been slowly ratcheting up to include more ISPs, is not necessarily significant on its own. Taken together, however, I see a pattern emerging that tells me where the fun and games will happen over the next few years. Heck, at this point, I’m not even sure what policy prescription I would offer. I just know that I’m seeing a bunch of ripples that might be nothing. Or it might be bunch of salmon and a great place to cast a line. Or it might be a school of piranha and I need to be very careful before wading in.

Stay tuned . . . .

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Inventing the Future

Publishing: A “New Yorker” for the 21st Century

I’ve bumped into a series of issues related to publishing recently. I don’t know that they ever will or should combine to form a coherent idea, but it feels like I should record them as though in a design notebook…

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Inventing the Future

Context is King

Musing: While Google’s business model is based on advertising, it seems to me that the essence of their business is that they are all about meta-data. They don’t own or deliver data, but rather they keep subject, ranking, tagging, and other data about the data. In an information world, if you can’t own the info, owning or at least organizing the metadata about it is pretty good.

In this way, I think my professional activity is all about context. I don’t create or control collaborators nor the artifacts they collaborate on, but I do try to provide a means for people to organize and recognize the contexts in which these act. When we can access everything that anyone in history has ever done, plagiary becomes meaningless, and content is no longer king.

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Tales of the Sausage Factory

The UK Broadband Infrastructure And the Debate We Should Be Having.

This article from the London Times is useful both for its substance and for what it says about the sorry state of the debate in the U.S. While the U.K. has much higher available penetration and speed than the U.S., it is considered rather pokey and slow for Europe. As the article observes, the problem is that private companies don’t want to invest in upgrades of infrastructure.

More below . . .

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Tales of the Sausage Factory

It's Nice When the FCC Listens Part II — The Cyren Call Investigation Is Out.

When it rains, it positively pours. The FCC just released its Inspector General Report on whether Cyren Call screwed up the D Block. As readers may recall, I and my friends from the Public Interest Spectrum Coalition (PISC) sent a letter to the FCC as soon as the auction ended, asking the FCC to investigate the allegations over whether Cyren Call scared away D Block bidders. To his credit, Martin referred our letter to the FCC’s inspector general. The IG did a quick and thorough job, which you can read here. I shall add that it always gives one pause to find oneself as a subject heading in an IG report.

Generally, I’m satisfied with the report, which confirms my own suppositions after the anticollusion rules lifted and Cyren Call started yapping. Critically:

1) The meetings took place;

2) They were understood by all participants to be business negotiations, not “take it or leave it” demands;

3) The lease payment itself was not a deal breaker, but the potential bidders interviewed said that so many questions about potential financial liability and business model remained — aggravated in part by the uncertain role of Cyren Call — that they opted to stay away (or, as the IG concludes “this was just one drop in many different buckets”);

4) No FCC rules were broken and no one acted in bad faith, therefore there is no need for a referral for any criminal investigation.

Personal reflections below . . . .

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Tales of the Sausage Factory

We Interrupt This CES Convention For A Breaking 700 MHz News Item

I’m out here at the Consumer electronic Show with actual blogger credentials (primarily so I can get the free back pack and use the blogger lounge). So, of course, we get major 700 MHz Auction news today before I can even start to do CES blogging.

As reported by my fellow PISC-ER Gregory Rose and elsewhere, Frontline Wireless has dropped out of the bidding. That’s kind of a surprise, given how Frontline fought to get a designated entity credit and still pursue wholesale as a real business model. It’s also impossible to say (at the moment at least) why Frontline self-destructed at the last minute.

Leaving aside the Frontline specifics, the big question is “how will this impact the auction” and “will we see wholesale emerge at all as a model.” Unsurprisingly, most analysts are going conventional and saying (a) D block (which Frontline had targeted) may not attract bids to meet the reserve price, and (c) This makes it even less likely we will see a new entrant, let alone a wholesale new entrant.

Also as usual, I will play the contrarian here. D Block is still very attractive to the conventional carriers looking to get national footprint or others looking for national footprint and willing to work with public safety. If AT&T and Verizon are both serious about this auction (and indications are that they are), both may push hard for D Block — especially if C Block is competitive.

On the new entrant side, it still remains to be seen what Vulcan and Google will do. Even if — as I suspect — Google wants to win the network but not build out, it may find D Block attractive. As holder of D Block, Google could still negotiate with third pary carriers (such as Alltel, US Cellular or even Sprint or T-Mobile) to build the network on its terms and to the satisfaction of public safety. The much lower price of D Block would offset the the aggravation of working with public safety and ensuring that their needs come first.

Finally, there’s Towerstream and the other wild cards like Qualcom. Who knows what they intend, especially given the likely competitiveness for C Block.

So while I’m sorry to see Frontline go, I don’t think it hurts the odds for a very competitive auction or a new entrant. It does potentially make a wholesale network more of a stretch, because Frontline was really the only bidder gung-ho on the model (Google being traditionally in favor of wholesale but making no promises at this point beyond “open”). That’s a shame, but not devestating or fatal to a new entrant.

Stay tuned . . . .

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Tales of the Sausage Factory

Full text of statment from Jim Ciconni on Martin’s Plan for the 700 MHz Auction

For my analysis, see here. Text reproduced below . . . .

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Tales of the Sausage Factory

Open Access Gains Another Convert, AT&T Denies Poisition Change

A brief update on my recent post that AT&T recently conceded it might consider bidding on an open access license. Unsurprisingly, Frontline Wireless — the party pushing for the “E Block” public safety/open access network — filed a copy with the Commission stating that this proves that an E Block auction would attract bidders and that the business model is workable. In response, according to today’s (6/29) Communications Daily an AT&T spokesperson said: “Our position has not changed. As we’ve stated on the record at the FCC, mandated ‘open access’ conditions on licenses in the 700 MHz band should be rejected. We need to see the specific rules the FCC adopts for auction before determining our level of participation.”

The carefull reader will note that these statements are not inconsistent. Of course AT&T would prefer not to have open access, and — at the drop of a hat — will explain why open access is an unworkable awful idea and you should ignore all the evidence from Europe or from the U.S. until we abolished open access in 2005. But there is a huge difference between “we hate open access and think it’s a bad idea” and “we absolutely refuse to bid on a license with an open access condition and nobody else with any money would bid either.” Given that the most potent argument against open access from a political perspective is “don’t mess with the revenue” (as evidenced by the recent Op Ed in the Washington Post by two CTIA lobbyists wearing their “think tank” hats), proof that folks other than Frontline will even show up to bid (and folks with deep pockets at that) on an open access license is rather significant.

Meanwhile, open access for the 700 MHz auction continues to attract new supporters from different sectors of the industry. Northop Grumman, rather a heavy-weight in the equipment manufacture and public saftey/defense contracting world, filed this document supporting open access and explaining that yes, you really can construct a secure public safety network that shares spectrum with an open access commercial network. So much for “it will never work, it’s too hard, lets stick to what we’ve always done.”

In addition, the Frontline cover letter on the submission that introduced the “Well Connected” post with the AT&T interview stated that Citibank had made a presentation to the Commission “last week” explaining that open access is a workable business model. Annoyingly, I can find no record of this presentation in the record for Docket 06-150, but I may just be missing it (it is a pretty big docket). (UPDATE: My thanks to Susan Crawford for pointing me to the appropriate ex parte filing.)

But assuming that Frontline accurately describes a presentation that took place, we now have:

1) A statement by a major financial investor that open access is an attractive and workable model from a business perspective;

2) A statement by a major equipment manufacturer and network operator that commercial open access — even in the more complicated universe of a dual use public safety network — is technologically feasible;

3) A statement by a major incumbent that it would at least “look at” bidding on an open access license if the Commission adopts such a rule;

4) Statements by wireless equipment and wireless application providers that there is a desperate need for open access in the wireless world and in the provision of broadband services generally;

5) Over 250,000 individuals saying the status quo sucks and we want open networks and new providers.

On the other side, we have the entire incumbent industry and its usual cheer leading section chanting that everything is vibrantly competitive, we live in the best of all possible worlds, everything works perfectly and competitively, and even thinking “open access” too loudly will scare away bidders and reduce revenue to a fraction of the expected $10-15 billion. And besides, open access can’t possibly work either on the business side or the technical side.

And all the while, the clock ticks away, as everyone scrambles to get this done before the end of the summer.

Stay tuned . . . .

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