Lately the comments and replies on Fractals of Change have gotten a lot more intense and interesting, maybe because these are interesting times.
Typepad comment handling is pretty primitive so I've switched to DISQUS starting with this post. DISQUS supports threaded comments, has a more powerful profile system for commenters across blogs which use DISQUS, lets you (and me) get email notification of replies to comments and even lets us reply to comments with comments by reply email. Should be neat; let me know what you think.
For testing purposes, I'll be making the first comment on this post.
Full disclosure: I'm an indirect investor in DISQUS through Union Square Ventures.
No More Landlines â Comm Forecast #1.
By the end of President Obama's first term, there won't be any more copper landlines left in the country. One of the challenges facing the Federal Communications Commission and the new administration is how to deal with the fallout from the end of this venerable technology. It's gonna get ugly for some people â people who can't afford to do without communication â unless we're proactive about this problem.
Here's what's happening as you probably know. Young people don't bother with landlines (unless they live beyond cell coverage); they just use their mobile phones or Skype for voice communication. The slightly older set are buying cable's bundle of entertainment, Internet access, and VoIP. They cancel their landlines. People who have broadband access don't need the extra line they used to rent for their dial-up Internet access.
Verizon simply sold all of its copper plant in the three northern New England States to FairPoint. Verizon hadn't been investing in this plant and didn't want to put any more money in going forward. FairPoint, like Verizon and at&t, is losing access lines. In its latest financial results, it reported that access line equivalents are down 9.2% over the past year; total revenue is down as well.
In prime markets Verizon is replacing its copper infrastructure with fiber â one customer at a time; first are the most valuable customers but Verizon will move steadily down-market with its FiOS offer. FairPoint is making an impressive effort to add broadband access to areas where Verizon had not invested enough to make DSL work. FairPoint has also shown commendable willingness to move beyond traditional copper and use wireless to reach customers out of range of DSL. To compete with Cable's triple play, FairPoint has a loose bundle with DirecTV.
So look through the data points above to the trends. Revenue from POTS (Plain Old Telephone Service) is simply disappearing. The copper network is generating increasing revenue from DSL BUT cable appears to be winning the bandwidth war for Internet access and snaring the voice customers as well. Barring a technical breakthrough in the use of the copper infrastructure (one should NEVER bar a technical breakthrough), there are going to be less and less copper access lines in use. In the long term, this isn't a problem because there are better ways to communicate than over fixed copper wire. But we live now, not in the long term.
There are several public policy problems stemming from the decline of the copper network:
- At some point the carriers starting with some of the medium sized ones like FairPoint aren't going to be able to afford to maintain these networks with too few users. Network maintenance costs don't go down nearly as fast as the number of lines since you can't abandon any trunks as long as there are any customers attached to them. You still have to fix the lines when a tree falls on them even if most of the copper pairs in them are not in use. That's a big deal.
- Revenue for the Universal Service Fund is still predicated on the good old days when everyone used a landline. Cellular customers get a break. VoIP is a grey area. The USF will run out of money at a time when it may be getting more expensive to provide basic service to people in rural areas. The small rural carriers survive because of subsidies from both the USF and termination charges (which disappear when people don't use their landline phones).
- The USF mainly funds POTS. If POTS is kaput, there's nothing to subsidize.
All of these problems can be solved IFF they're recognized in time and if there's the political will-power to overcome the interests of those who have a stake in prolonging the declining status quo and postponing the future. For example, small rural telcos like the subsidies they get today and are not in as much immediate danger as their less-subsidized mid-sized brethren; they have substantial political clout with state and federal regulators. The duopoly of one large telco and one large cableco serving each area has resulted in some competition but not enough to stop Americans from having less bandwidth available at a higher price than most other developed countries. The duopoly has lobbyists to put it mildly.
The solution â at a high level â is breathtakingly simple. By the end of Obama's first term everyone in the US who has phone service today needs to have both an inexpensive mobile phone and broadband access (in some cases that'll be through the same device). The USF needs to shift its mission from subsidizing POTS to subsidizing connectivity. USF subsidies should go to consumers who are unable to pay for basic connectivity; not to telecommunications providers (rich people with homes in rural areas don't need an indirect subsidy; poor consumers should be able to choose which service provider to give their subsidy to). The revenue source for the USF either needs to move to the general tax base (good policy but bad politics) or at least be broadly-based across telecommunications services. There will need to be public investment in telecom infrastructure in rural areas but that may well be fundable by revenue bonds that get repaid from use rather than taxes; that's what we're planning in Vermont.
Do all that and the telecommunications future'll be bright. The cost of providing telecommunications is gonna come down very fast. More on that in an upcoming post.
Update: some smart people think my prediction about the death of the copper-POTS network is premature. Debate here.
The Facebook/MySpace model is wrong for most groups, we all agreed; it's inside out. We is VC and blogger Fred Wilson, FeedBlitz CEO Phil Hollows, Return Path CEO Matt Blumberg, and me. The venue is a panel at a Return Path sponsored event at the Museum of Natural History in NYC.
Phil Hollows took our conclusion to heart. He went home and changed the FeedBlitz interaction with readers so that interaction occurs inside the context of the publisher's site rather than on the FeedBlitz site. FeedBlitz (which I'm an investor in) turns blogs and online newsletters into double opt-in email and tweets and other things; the email gets through spam filters. FeedBlitz is part of how publishers communicate with readers so it make sense that it appear on the publisher's site rather than lead readers away. Here's what Phil wrote on his blog:
"One of the challenges of using third party services on your site is that when a visitor needs to have a meaningful interaction with that service, they're transported away from your site and onto that service's site. Often the point of adding a third party service, widget or script is to add value to your own offering, but all too often the first thing these services want to do is take those visitors (and their advertising revenue potential) and park those visitors where the plug-in vendor's value is increased, not yours. Great for them, but for you? Not so muchâ¦
"So I'm delighted to announce an API-free embedded email subscription form that allows you to keep your subscribers on your site while they go through the initial subscription formsâ¦"Granted that we want the users of our service or the readers of our blog to form a community which interacts around the service or the content of the blog. We want and they demand that their interaction be horizontal as well as vertical â with each other as well as with the service provider or the author. In fact customer and prospect events in the real world. like the Return Path one we were speaking at, have long provided a forum for such interaction. But, in the online world, we send our customers to Facebook or MySpace to interact around OUR service; we send them away from our website; we fragment them according to what social network they happen to belong to. That's nuts! The fact that companies DO send their customers off to Facebook is evidence of how important the social networking function is â and of the fact that there is no good alternative.
Many large sites do support their own bulletin boards and chat services; this is particularly true where tech support is involved. My prediction is that these capabilities will end up imbedded in medium and small sites, even blogs, and that these services will usually be provided via third parties like FeedBlitz who understand that their brand is NOT the one that comes first for your users. Social networking will be in the context of sites and services, not the other way around.
Of course I have to take my own advice so I implemented FeedBlitz' new capability on Fractals of Change â it took about five minutes. When people click on the "subscribe me!" button at the top of the left sidebar of my site, they get the FeedBlitz signup form between MY sidebars -see below or click here for an example.
No More Landlines - Discussion.
"Don't hold your breath," says Ted Wallingford in his post replying to my assertion that there won't be any more copper landlines by the end of Obama's first term as President. Ted continues:
"I can easily counterpredict that there will be plenty of landlines left in the country by the end of Obama's term, and if he goes eight years, there will still be plenty of good old copper dial toneâ¦
"There are several more reasons why. First, reliable and abundant FAX-over-IP is still a dream that hasn't been standardized to the point where consumers have a consistent manner in which to use it. So those pesky FAX lines will be with us for some time. Second, digital last mile services like PRI are still too expensive for the majority of subscribers, even medium-sized business with 6 - 8 phone lines, in many cases. Third, lots of monitoring equipment, like that used by fire and security systems, still requires the use of copper dial-tone because its modems are too sensitive to the use of jittery VoIPâ¦"
Everything that Ted says in the second paragraph is true; but IMHO his counter-prediction is dead wrong. However, I don't think I was clear enough in my initial post on why copper-based POTS (Plain Old Telephone Service) will be gone before January of 2013 (to be honest, I once predicted it would be gone by the end of 2010 â now I'm hedging my bet a little).
Copper-POTS won't disappear because the last user voluntarily stopped faxing. People still will have alarm systems that they'll want to connect via copper because they weren't built with IP technology in mind. Plenty of people would be happy continuing to make their voice calls over copper pairs; worse, people in some parts of the country still may not have either good Internet access or cellphone coverage so they won't even have a ready substitute for POTS. That makes it all the more serious that copper-POTS won't be available then.
The reason copper-POTS will disappear is simple. Use of POTS landlines are declining. Worse, the most lucrative voice customers are the first to drop their landlines in favor of VoIP (often from cable companies) or just simply to do their calling and receive their calls on their mobile phones. This paragraph from at&t's last quarterly report is telling:
"AT&T's third-quarter wireline voice revenues, which include retail local voice and long distance as well as wholesale voice, totaled $9.5 billion, representing a decline of 8.1 percent versus results for the third quarter of 2007. These results continue trends in recent quarters, reflecting the industrywide migration of voice usage from wired to wireless platforms, customer transitions to broadband and VoIP services and increased local voice competition."
Verizon reports that it lost over 2.5 MILLION access lines in the last year, over a million of which were primary residence lines. Verizon is gaining FiOS (fiber) customers but at the expense of its copper network.
These losses of copper-POTS revenue may accelerate as the economy turns down. Strapped consumers at this point are more likely to give up their landlines than their cellphones. But the cost of maintaining the copper network WON'T go down nearly as fast as the revenue which supports it. Each span of the aging copper network must be repaired each time it fails or is tree-crushed even if very few of the pairs in the network are producing revenue. There are lots of tree-prone miles out there.
Within a year or two medium-sized phone companies (there are some) may well not be able to pay to keep the copper running. Small rural companies will need larger and larger subsidies to replace the lost revenue. Verizon and at&t will announce that they too must have huge subsidies in order to keep their copper networks running for the few remaining users; they will say that they can't continue to subsidize this legacy service with their revenue from wireless and fiber â particularly as prices for those two services begin to decline.
From a public policy view we can do nothing and then pay larger and larger subsidies for the few remaining copper customers â who will be real people in real need. Or we can assure now that either cellular or broadband service â preferably both â is available everywhere POTS service is now available BEFORE the copper network becomes financially unviable. We can invest private and public money in preparing for the future or we can waste public money in subsidizing the past.
Reader Bill is a pessimist. He comments that the subsidies will keep copper alive. I'm an optimist; I think we'll future-proof. Oh yeah, IP converters for alarm systems'll cost about $10 then and everyone'll have learned to scan and email rather than faxing. More important, people everywhere in the country will have an affordable alternative to POTS.
Nothing to Fear But Fear Mongers Themselves.
Have we been talked into a recession? There's little question that's where the economy is now and it seems to be spiraling deeper by the day as we anxiously cut back on almost everything and, in the process, help make our worst economic fears come true.
Did it have to be this way?
Just a few months ago we had mainly a severe problem with mortgages that should never have been written. The people who shouldn't have had the mortgages were losing their homes (or speculative investments); the people who shouldn't have bought the mortgages, including the companies that shouldn't have written the mortgages and the companies that shouldn't have securitized the mortgages, were in a lot of trouble.
But, other than housing prices which were arguably too high anyway, the real economy seemed to be doing pretty well. This being an election year there was a healthy dose of "stimulus" from Washington. Many more dollars than were in the stimulus program were saved by drivers who went on partial strike and helped drive the prices of gasoline and oil back to less than they were a year ago. Most of these were dollars that otherwise would have left the US economy so that was pretty much all gain.
So why are we having a recession? At least partially because we were talked into it. But who would want to do that? Who would want to spread so much fear that the mighty US consumer put his or her credit card under the mattress?
- Bankers who wanted a bailout (and got it)
- An administration that needed to justify bailing out the bankers
- A Treasury Secretary with a bankerish POV
- A Fed chief whose academic specialty was the Great Depression
- The Democratic Party which wanted to show how bad things had gotten on the Republican watch
- The McCain campaign which wanted to show it wasn't four more years of W
- Those who would like to regulate everything in sight (forgetting that regulated Fannie Mae and Freddie Mac were among the worst offenders)
- Those in Congress who didn't want the blame for pushing Freddie Mac and Fannie Mae to make worse and worse mortgages
- Everybody else who wants a bailout and has seen that the threat of bankruptcy is the best way to get one
- A press which is largely economically illiterate but can tell scary and sad stories well
Turns out there was almost a perfect storm of fear mongering and we got scared. Now there is a recession. Recessions happen when money stops moving (more on that here).
The consumer price index has fallen by a record amount month over month led by fuel and housing but other stuff is getting cheaper as well. The post-Christmas sales have started before Thanksgiving this year. Consumption has gone out of style â bad timing that.
If you're in debt, it IS a good time to cut back. Cash is king and we are at least partly in a deflationary time. But, if you have some money, it's not a bad time to go shopping both because you'll get good prices and because the economy needs you not to hoard. Want to be socially responsible, buy your family a fuel efficient car, furnace, or solar something or other. Good time to hire some people to do some work around the house you've been putting off. Good time to give to your favorite charity which is probably hurting.
Scary as it is, it's a good time to invest as well. We're somewhere between the end of the last bubble and the beginning of the next one. More fortunes'll be made by investing now and waiting patiently for returns than waiting for a safe time to invest.
Some ideas on how companies should invest are here.
It's also a good time for leadership â away from fear. Here's hoping we'll get that.
Mobile Trumps Fixed Broadband â Comm Prediction #2.
"80% of Web users will choose mobile broadband over fixed by 2013" is the headline of a Total Telecom interview with John Cunliffe of Ericsson. I agree with the conclusion although I think Ericsson will be unpleasantly surprised to find that LTE is NOT the technology which leads to this revolution.
Mobile access at speeds at least equal to what cable offers and at a price lower than today's cable broadband will be available both in the home and on the road within a year or two at the most. From the Total Telecom article:
"Cunliffe said that over the last 12 months Ericsson has been running LTE tests in Sweden. These have taken place in urban environment, with clear line of sight between the cell tower and the device for less than 40% of the time, while moving at speeds of up to 45 kilometres per hour.
"'We recorded peak speeds of 154 Mbps, an average of 78 Mbps, and minimum speeds of around 16 Mbps,' he said."What'll drive this change? My friend Pip Coburn argues persuasively that change doesn't happen until there is a perceived benefit large enough to overcome the perceived pain of adoption of a new technology.
Online cars will be the initial benefit in buying high-speed mobile connectivity. I just got my first connected GPS. It's called Dash Express and can connect either through GPRS (low speed mobile data) or WiFi. Here's what's really cool: all the Dash Express units can communicate the current speed they are moving through their data connections and have access to the aggregate traffic reports of all the other units â talk about crowd-sourced realtime traffic reports. Wow! I know I won't get much useful information here in Vermont until penetration of these devices are higher but friends tell me it is already useful in urban areas where the company has apparently seeded units. You can also do Yahoo searches for anything you're looking for and find cheap gas, all using real-time data rather than a stored set of points which quickly gets obsolete. I'll write more about this when I have more experience with it.
High speed mobile data connections are about to become very cheap because of technologies like WiMax and LTE and, IMHO, even more importantly because of the FCC's action in freeing up the "TV" white spaces for unlicensed use. Now think of that GPS screen in the car. It's a lot bigger than the screen on your mobile phone; it's connected to the car battery so doesn't have to worry about battery life. It's going to have realtime video of traffic conditions, attractions you are passing, and is going to deliver entertainment â hopefully to the passengers. Of course there'll be another screen for the kids in back, already is in many cars but now it'll be Internet connected.
So we'll all need to connect our cars. Once we do that, we'll start to wonder why we need a separate connection for our house. It'll take us awhile to drop these where there already installed and working; but, when it comes time to upgrade for higher speed, we'll tend to switch to the mobile connection for home use as long as it's fast and cheap enough. For new subscribers the choice'll be easy: they'll just buy one connection.
Ericsson's customers are carriers so they think of how much easier it is for a carrier to let a customer self-install mobile than to make a house call for a fixed-connection: "Installation of a fixed connection into the customer premises is a nightmare for both the consumer and the service provider, compared to a mobile connection which self-installs and automatically connects to the network," Cunliffe says. We won't rush out and buy mobile connections to make life easier for carriers although easy installation will help bring the price down. We WILL buy mobile connections because the pain of being unconnected while in motion'll be too high and there will be little or no incremental cost for mobility and because they meet our need for high-bandwidth when we're sitting still.
Marooned on an island; adrift on a ship; locked in a seedy, spooky deserted mansion; lost in a cave â these are all staples of fiction. And these are all descriptions of the times we live in from an entrepreneur or VC point of view.
All the exits are shut. No IPOs for the foreseeable future. Google and Microsoft and Yahoo and Cisco aren't buying. Even the successive waves of VC capital at ever-increasing valuations are no longer there to float the stranded ships off the beach.
What to do?
VC Fred Wilson suggests that the rules which govern public sales of stock be loosened. He posts that even those willing to invest in these troublesome times are legally precluded from investing in the Union Square Ventures portfolio companies"
"I've written extensively that we need a secondary market for privately held shares of venture backed companies that want or need to stay private. This is already happening with Facebook shares and it's going to happen with the shares of other privately held companies going forward. The public markets have failed to solve this problem so it's going to get solved in some other way.
"We also really ought to find a way for small investors who know what they are doing to place a small bet on a company they really like. And companies like Boxee and Twitter [nb. USV-backed companies] could really benefit from that too.
"This is the year that the banking and brokerage industries have completely let us down. They have failed to invest our money wisely. And the regulators who set the rules, the very regulators who make sure that no reader of this blog can invest in one of our deals, have allowed that to happen."
Fred is defying current conventional wisdom by suggesting less regulation rather than more. But Fred knows well that laws likes Sarbanes-Oxley, which were well-meant to protect investors from frauds like Enron, have instead restricted the ability of young companies to grow and made it impractical for many of them to tap public markets even when the public markets were still open. Fred knows that an SEC which focuses on the minutiae of every public statement a public company makes (which IS their job) somehow missed the fact that publicly traded banks were insolvent and their financial statements (with hindsight) meaningless. Fred knows that the all the enormous amounts of money which public companies spent on "independent" outside auditors cut into the capital available for growth and still didn't expose the fact that some of the country's top financial institutions were naked emperors.
What Fred didn't say â but I will â is that the appearance of regulation may have lulled investors into a false sense of confidence in the wrong institutions.
What do you think? Has regulation succeeded in locking all the exit doors with investors trapped on the wrong side? Or do we need even more regulation? Or different regulation?
The answers' not easy. Getting it right may be crucial to our economic future.
We Are ALL Part of the Change We Need.
Tim O'Reilly blogged yesterday on the need for those who supported Obama in the election to stay involved and help the new administration but, more importantly, the country succeed. Those of us who didn't support Obama have an equal obligation: we can't sulk; we can't work for the failure of the Obama administration; we have to work for the success of the country no matter who gets the credit if for it and regardless of future elections. To do that we have to work with the administration wherever possible and be constructive and principled when we disagree. Change IS needed.
Tim asks "What do we do next?" and gives four substantive answers and one procedural.
Substantively:
- "Actually apply for one of the jobs in the new administration." (This certainly applies even to those who didn't work for getting the administration elected. We should take the new administration at its word that it'll be open to former opponents and new ideas.)
- "Whether inside or out, the tech community can continue to lead by example."
- "Identifying specific proposals for best practices and points of leverage."
- "We really need to weigh in on the issues that matter. From climate change, to open spectrum, to education policy, to investments in science and technology, we need to make our voices heard." (These voices, even from the tech community, won't be unanimous but they need to be heard. Particularly easy for us bloggers to do.)
Procedurally Tim proposes posting ideas to the transition team's website change.gov. Tim does note that the site itself should change so that submissions to it are not just one-way emails but visible to other visitors who can then comment. In the spirit of constructive suggestions, I'd suggest that anyone have an ability to post to it â subject to after-the-fact moderation for egregious abuse. Also would strongly suggest that the blog on the change.gov site be open to comments. That would be a mechanism for and a demonstration of the change we need.
Removing Obstacles to Obamaâs Job Growth Plan.
Given current "environmental" legislation, it will be impossible to create a meaningful number of jobs except for engineers and lawyers by next summer no matter how much federal money we allocate to this worthy endeavor. Decades of well-meaning legislation and regulation, a reaction and then over-reaction to real environmental abuses of the past, have left us unable to begin construction on any significant project until decades â I mean that literally â after the approval process has begun.
The good news is that this is all under our control IFF we can pull together to maintain essential environmental protection AND eliminate unnecessary delay. We can and we ought to be rebuilding our roads and bridges and our power grid by next construction season. We ought to be increasing access to domestic energy from both traditional and alternative sources. Those jobs are badly needed and a trillion dollars spent on infrastructure projects has an almost certain return â very unlike the trillion or so we're spending to bail out banks and bankers.
When I was Vermont Secretary of Transportation in the '80s, it took twenty years to build a road â seventeen went to getting the necessary permits, one to property acquisition, two to construction. Since then things have gotten worse â the delays have gotten longer. These weren't massive projects; any activity of any scale requires an environmental impact statement and myriad approvals. Each approval process is open to intervention both by those with genuine concerns and those who'd just prefer that no development of any kind occur anywhere near them. Each approval is subject to court challenge and seemingly infinite delay. There is little cost to the intervener for frivolous intervention but huge costs to the builder for delay. Absurd compromises are made under essentially extortionary pressure of threatened delay.
Genuine environmentalists are hardly the main cause of delay. Those who'd prefer not to see any windmills on a ridgeline in their view develop a sudden concern for migrating birds. Those who'd prefer not to have a new powerline nearby discover a family of squirrels with strange colored tails not easily found elsewhere in proximity to a planned footing. Rumors of aboriginal burial grounds â or the impossibility of proving that one never existed in a particular location â can hold up a needed project for years.
If we were able to assure that environmental and other concerns could be given an appropriate hearing in a short time certain, we'd not only be able to create the new public jobs the President-elect is proposing in the requisite timeframe but would also see a flood of private projects unleashed. These project can't get funding now because of the huge uncertainty about the elapsed time to revenue.
It'll be easy to get Congress to pass a massive jobs bill; but Obama has a bridging challenge here between the "environmental" and "jobs" wings of the Democratic Party if the jobs are actually going to get created in the near future. President Bush neatly and cynically exposed this gap when he proposed that the $25 billion slated to help the auto industry retool for greener cars be released without restriction to save auto maker jobs. Speaker Pelosi and Majority Leader Reid were having none of that even though John Dingell (now deposed as committee chair in favor of "environmentalist" Waxman) would've gone for it in the blink of an eye.
The main threat facing the environment today is that ALL environmental legislation will be swept aside in the understandable panic of massive job loss. The job for us environmentalists is to propose sensible alternatives that DO allow jobs to be created and DO NOT allow environmental protection to be used to impose unreasonable delay.
There is an urgency of now.
The FCC White Space Regs â Pretty Good at First Look.
My comm prediction #3 is that LTE and WiMAX are toast. The new great thing will be WRANs (wireless regional area networks). WRAN's will extend and eventually subsume WiFi.
The detailed regulations which implement the FCC decision to free the spectrum formerly known as TV white spaces have now been released. They look pretty good from the POV of someone who believes the unlicensed use of this spectrum has the potential to make a huge difference in the way the world communicates.
Once radios are built to these regs and get through FCC testing, wireless broadband at cable speeds - 10 Megabits per second (Mbps) downlink initially and increasing - ought to be rapidly available at competitive prices in more and more of the country â especially in rural areas where good broadband is often hard to get but where white spaces abound. Give this just a year to start having an effect.
Slightly longer range but in about two years both mobile voice and data will be widely available at a quarter of the price of today's prices for the two combined in "unlimited" offers. The download speeds for mobile will be better than 5 Mbps. If I'm right (many knowledgeable people do and will disagree with me), LTE is DOA and WiMAX will be eclipsed before getting to critical mass. That's bad news for at&t and Verizon who are betting on LTE and for Sprint with its bet on WiMAX.
Here are some of the highlights of the announcement:
Fixed radios in this spectrum are allowed a power output of up to 4 watts EIRP (effective isotropic radiated power, if you really wanted to know). This is the same power output as the most common radios used by wireless ISPs (WISPs) today BUT these are usually operating at much higher frequencies so they have an effective radius of less than 10 miles and don't go through leaves, trees, and walls very well. Operating in the white space frequencies should give these new radios an effective radius of up to 30 miles. That's a huge economic difference to a WISP installing radios.
Personal/portable devices are restricted to 100 milliwatts EIRP (a milliwatt is a thousandth of a watt). I would have liked to see that number a little higher but it'll do for starters. A rough calculation with some help from my friends and a good tutorial by Barry McLarnon indicates that, in good conditions, these should be able to communicate in about a five mile radius of a fixed radio acting as a base station. These personal/portable devices are going to end up in mobile phones, in USB dongles, and built in to laptops, PDAs, and GPSes the way WiFi is today.
For the sake of comparison, 100 milliwatts is about twice the power of most laptop WiFi radios today and the power goes further than WiFi because of the characteristics of the spectrum. On the other hand, this is much less power than mobile phones are allowed to use and mobile phones do operate in similar frequencies. On the third hand â soon I'll be an economist â mobile phone usually operate at 100 milliwatts or less to preserve their batteries and avoid interfering with each other even though GSM phones are allowed a full 2 watts.
Since these devices are portable, they don't have to be installed. Going out to houses and installing radios is a huge expense for WISPs. If they can just mail you a cheap radio or count on it already being in your laptop, the price of wireless data goes down and its utility goes up because you can wander around the house, yard, or neighborhood with it. Soon (couple of years+) roaming agreements'll let you go everywhere with this connection. This is the way of the future but a few more milliwatts allowed power would help.
The fixed devices and some of the mobile devices need to know here they are. This can be accomplished with a GPS chip or an installer of a fixed device telling the device where it is; portable devices which act as clients to smarter devices don't need to know where they are; otherwise they, too, need GPS capability. GPS chips are cheap so this shouldn't be much of a problem. The devices communicate with a geo-database (which you can bid on supplying to the FCC if you want) to make sure they are not using frequencies which are in use by licensed tv stations or wireless microphones; the devices also have to register their own locations and characteristics in the database and can be shutdown or ordered to shutdown if they misbehave. All of the devices need to listen for licensed users or wireless microphones which they might be interfere with and leave them alone. This is an intentional belt and suspenders approach.
How "portable" can a fixed device be? That's an important question since fixed devices are allowed forty times as much power as portable ones. The regs just define them as "A TVBD [nb. TV Broadband Device] that transmits and/or receives radio communication signals at a specified fixed location. Fixed TVBDs may operate as part of a system, transmitting to one or more fixed TVBDs or to personal/portable TVBDs." They obviously anticipate they might move or they wouldn't need to have a GPS in them. The receive antennas for fixed devices, however, must be outdoors and at least 10 meters above the ground while the transmit antennas may not be more than 100 meters above the ground. The latter could be a problem in an area of high trees.
So, you ask, what standard will all these devices follow? The FCC paid a fair amount of attention to the 802.22 project of the IEEE although they did not completely defer to it. NO standard is mandated which is a good thing; there is plenty of room for innovation. More on 802.22 in an upcoming post.
No Thanks, Mr. Paulson, Weâre Repairing Our Balance Sheets.
The newest push-on-a-string plan from Treasury Secretary Paulson is to force more federal money into consumer credit. The idea is that we can then max out our credit cards to new limits, buy houses and cars with too little down, and finance too much of too-inflated college bills. Presto, sales go up, housing prices become absurd again, cars roll off dealer lots and⦠and we can all get back to the good old days when the banks that lent us all this money could flourish.
What if we don't want to be in debt during deflationary time? What if we don't want to pay 18% interest on revolving charge accounts any more than we want to buy $4/gallon gas? What if we buy houses for reasonable prices with reasonable down payments so we can have smaller mortgages? What if we've realized that "zero percent financing" on a car just means that the sticker price has been inflated? What if we borrow a smaller percentage of college costs and shop for lower tuitions?
I don't want to be un-American or anything but we'll all be stronger if we have more savings and less debt â all except the debt merchants, of course.
There was a nice story on local TV station WCAX last night about local stores reinstating layaway plans to help people budget for Christmas gifts. Wal-Mart says not necessary; people'll always use plastic. We'll see.
There's an anguished story in today's New York Times which begins: "Come Christmas, McKenna Hunt, a gregarious little girl from Safety Harbor, Fla., will receive the play kitchen and the Elmo doll she wants. But her mother, Kristen Hunt, will go without the designer jeans she covets this season." Maybe Kristen Hunt is smarter than both the Times and Treasury Secretary Paulson.
There's no question that the sudden switch from an over-indebted society to a fiscally responsible one is causing a painful dislocation which'll probably get worse before it gets better. That's why we do need a jobs program building infrastructure which is properly financed with debt; that's why we do need extended unemployment insurance and a safety net. But what we don't need is to recreate the excesses of the past and to create so many business opportunities for merchants of debt.
Over the river and thru the wood,
To grandmother's house we go.
The GPS knows the way
To guide us today,
Even if traffic is slow, oh.
Over the river and thru the wood,
We're always in the know.
My new Dash Express
Has GPRS
To see how the traffic does flow.
Over the river and thru the wood,
What if we need some gas?
Live Yahoo Search,
From Dash's perch,
Stuck to the windshield glass.
Over the river and thru the wood,
We do our part as well:
We broadcast our speed,
For others to read,
It's e-show and tell.
Cliff notes:
Dash Express is a car GPS with WiFi and GPRS built in. Although it can grab open WiFi connections while moving, WiFi is really more useful in your garage for getting updates. GPRS is a slow data access technology which works on cellular networks and is usually available along roads. Dash has some arrangement with the cellular operators so that Dash Express can use the GPRS networks; you pay Dash 12.99/month for this Internet access ($10.99 if you sign up for a year). This may seem a lot but it includes free map updates which are expensive on some other GPSes so not so bad.
When you're connected, you can allow your car to send automatic anonymous speed reports. These become part of the Dash database. So route calculation can take into account both historical and extremely current road conditions. You can also see how traffic is flowing assuming there are enough other Dash users driving where you are (obviously early adopters won't get all these benefits right away).
Dash also supports Yahoo local search so you can get up-to the-minute reports on gas stations, restaurants, movies etc. â much better than the canned Points of Interest (POI) files in most GPSes.
Another cool feature is you can send addresses from a web application to your Dash or even other people's Dashes (with permission). When I made hotel reservations for this trip, I immediately sent the hotel address to my Dash so it's already available as a destination.
Hat tip to friend David Isenberg who found our house with his Dash and made me a convert before we'd finished lunch.
Happy Thanksgiving.
It's easy to believe that Citibank is a tottering tower whose collapse would endanger us all in the canyons below. However, keeping a financial corpse walking further endangers every other financial institution.
When Citi is declared too big to fail, it becomes a more attractive bank to do business with than its competitors who are either not failing or are not too big to fail. Arguably, the competitors who are not failing are better run than Citibank; but now they will lose when they compete with Citi. Some of them, in turn, will fail even though they might have survived if Citi were not in the federal protection program. If they're real big, they'll be bailed out, too. That increases the pressure on the good banks whose only sin is not being too big to fail. Soon we'll be left with only the large losers for banks⦠or car manufacturers⦠or insurance companies.
Q: Is this good public policy?
A: The answer's obvious so,
Q: For extra credit, what's the alternative? We don't want the ruins of Citi and AIG and GM crashing down around our heads.
A: If controlled implosions won't take them down, they ought to be carefully demolished.
In general, that's what bankruptcy does. It may be true that the bankruptcy law is inadequate to protect the public interest from the collapse of a giant institution. In that case we need a managed bankruptcy by the Fed or someone else with certain creditors protected more than they would have been in a standard bankruptcy to protect "the system". Obviously who gets such special protection must be crystal clear which it certainly isn't now. As in any bankruptcy, shareholders should come last and will usually get nothing and holders of preferred stock get preferred over the common holders and no one else. Most important, the end result of such a bankruptcy must be to disassemble the threatening wreck, not to apply scaffolding. The bailed-out entity CAN'T be left in a position to compete with and bring down better-managed competitors.
So the wind-down of Citi might mean that depositors are made whole even above the $250K FDIC cap. It may mean that mortgages held by Citi go into a special workout pool. But it CAN'T leave Citi taking new deposits or writing new business. The deposits should go to better banks.
AIG policy holders should be protected. If it's really true that the survival of life as we know it requires holders of AIG-written credit default swaps be protected (I'm not convinced but let's assume it's so), fine. But AIG shouldn't be writing any new insurance policies. If it's true (as I believe it is), that its insurance subsidiary is solvent, then it should simply be sold in one piece or many with due continuing protection for policy holders.
If GM is virtually bankrupt (no reason we shouldn't believe them about that), then let's admit it, pick up the pension liabilities and unemployment liability we have anyway, and arrange the sale of its assets to anyone who'll buy them. Note that we aren't going to buy less cars because GM is gone; we'll just buy them from more efficient manufacturers who managed to survive on their own. Long term we'll probably keep more car manufacturing in the US by letting GM die than by leaving it to damage its competitors.
On the other hand, if GM IS bailed out (as I bet it'll be), then Chrysler and Ford (which might well survive on its own), are in greater danger. Moreover, foreign governments will bail out their manufacturers as well (just as they've done with banks). The bailouts end up canceling each other out AND harming the better competitors AND costing public money.
Some people will say that letting Lehman fail caused the whole current cascade of problems; it's at least as likely that SAVING Bear Stearns either caused its competitor Lehman to fail or made Lehman to cocky to sell itself when it still might have.
Too big to fail SHOULD mean too big for life support. Emergency collateral damage control is sometimes necessary; perpetuating the failed institutions only causes cascading failures among their competitors.
Free, Slow, Censored Internet â A Bad Idea.
The FCC is looking for an organization to provide free, slow, and censored Internet access. The censorship apparently would include email as well as websites. According to an article in today's Wall Street Journal: "Outgoing Federal Communications Commission Chairman Kevin Martin is pushing for action in December on a plan to offer free, pornography-free wireless Internet service to all Americans, despite objections from the wireless industry and some consumer groups [nb. and from me]⦠The winning bidder would be required to set aside a quarter of the airwaves for a free Internet service[ nb. the WSJ hasn't got that part quite right. More below]."
Here's what the FCC's NPRM (Notice of Proposed Rule Making) says:
"(a) The licensee of the 2155-2188 MH band (AWS-3 licensee) must provide as part of its free broadband service a network-based mechanism:
"(1) That filters or blocks images and text that constitute obscenity or pornography and, in context, as measured by contemporary community standards and existing law, any images or text that otherwise would be harmful to teens and adolescents. For purposes of this rule, teens and adolescents are children 5 through 17 years of age;
"(2) That must be active at all times on any type [emphasis added] of free broadband service offered to customers or consumers through an AWS-3 network."
The NPRM is silent on which community's standards should be used to determine what is harmful to "teens and adolescents" (I'm glad my children weren't adolescents at five). But note that all services must be filtered for whatever it is that "otherwise[?] would be harmful". The FCC will be the ultimate judge, however, since they enforce the terms of a license and can determine whether or not to renew. They may think my blog is harmful; I think junk science is really dangerous; you may have still some other pet peeve.
This NPRM is a reworking of a proposal by venture-backed and politically-connected M2Z networks, which was setup to provide this free (actually ad-supported) service in return for the right to also use the spectrum for subscription service and may well be the only bidder if the auction goes forward on these terms.
Let's forget for a minute what an absolutely terrible idea it is for the government or its agent to determine what the content of our communication is allowed to be although this whole proposal SHOULD be junked just because of this. The principle DOES matter a lot but, in practice, no one is going to use the free Internet service.
The requirement is that the free service have a download speed of at least 768kilobits/second; this is the speed of the slowest DSL. This is not a mobile service where we might accept a slightly slow speed in return for mobility; it is meant to be primary residential access to bridge the digital divide. But, by the time this service actually exists, the web will not be usable at such a slow speed. Websites get designed for the capabilities of the top 50% of users; that's why dialup is now useless for surfing even though it used to work fine.
By contrast, the Vermont legislature specified that a service won't count as broadband at the end of 2010 unless it is at least 1.5Megabits/second AND realizing that this requirement must escalate, charged the Public Service Board with appropriate and timely upper revision. Nevertheless, this requirement stays the same in the NPRM for the full ten years of the license. 768Kbs will be as obsolete as your old 300 baud modem ten years from now; but it will be the only free service the licensee is required to offer.
The licensee has no incentive to offer better free service because it will also sell a higher-powered service. The NPRM does NOT specify that a quarter of the network capacity be used for the free service; it says "up to" an "as needed". If no one uses the free service, then no network capacity need be devoted to it.
It's nice to think that people who have no service will get it from M2Z; don't hold your breath. The licensee is required to build out to 50% of the population within four years and 95% within ten. The licensee will, of course, build first where the people are and where there are plenty of other service options. The areas without adequate Internet access now might get it in ten years â and might not. Even the poor in the urban service areas won't be helped much. They can't use the service without a computer and a modem which M2Z estimates will initially cost $200. In urban areas DSL at this pathetically low speed is usually available for $12.95/month or less and without a requirement to purchase equipment.
There's another interesting gotcha in the proposed regs: the paid service must be open to all devices and applications which is good. The free service, however, has no requirement that it be open to all applications. In theory the provider could charge Google, for example, to be accessible to the free users â assuming there are some which I don't think'll be the case.
It's good that the FCC recognizes that previous spectrum auctions haven't gotten the US to the point where it has the connectivity it needs. There's nothing wrong with the concept of a "free" Internet service paid for by advertisers; in fact, I'm confident that such a service will be one of the offers that surface in the newly deregulated white spaces. The spectrum at issue is unused and that's a waste. This proposal, however, should be rejected once on civil liberties grounds and again because the promise of free Internet access is meaningless and unhelpful.
Lesson for Next Time: Small is Beautiful.
Antitrust law needs to be updated to include "too big to fail" as a criterion for dismemberment. The alternative is pervasive regulation and/or government ownership of institutions which control huge swathes of the economy.
Financial regulation as we've seen is, a chimera: whether or not you blame Fannie Mae and Freddie Mac for being a partial cause of the current collapse, there's no question that they WERE regulated â as is Citibank â and that they collapsed. All public companies in the US are regulated to some extent by the SEC and have draconian external audit requirements. Neither the regulation nor the auditing warmed stockholders of the potential collapse of AIG, Lehman Brothers, and now GM. Why? It's not that all the auditors and regulators are corrupt or even incompetent even though some are surely both. The problem is black swans as Nassim Taleb elegantly pointed out in his book of the same name: you are in more danger from the unknowable than the knowable risk; the past is an extremely misleading guide to the future. Put less elegantly, shit happens and all the regulation in the world can't prevent or predict it. The appearance of regulation is dangerous because it gives us a false sense of confidence â we even start believing financial statements.
Government ownership of finance and manufacturing is even worse. Witness the late not-lamented Soviet empire or China or India before they shook off their socialist ways. You do need some regulation â especially safety, environmental, and fraud regulation to govern the terms of competition; government should perform that function in an adversarial role to the private sector. Government is at its worst in regulating itself. Chernobyl was a government reactor.
A century ago the continued success of capitalism required harnessing the "trusts" â especially Standard Oil, business which got so large that they could throttle all competition and swallow adjacent parts of the value chain. Railroads had to pay Standard Oil a fee for each barrel of competitors' oil they dared to ship. Antitrust law largely accomplished what it set out to do.
Today's problem â and tomorrow's if we don't address it â is businesses which are "too big to fail". They are certainly unfair competition to their smaller competitors who can't count on bailouts. They can make up for their size-induced lethargy and opulent life styles (for executives) by taking risks secure in the knowledge that it's heads we win and tails you lose. When the mortgage securitization risks paid off, AIG and Citi could reap the rewards; when they failed, we paid.
It was hard to write and establish the law which defined dominant market position and has been used (and misused) in the last century of antitrust enforcement. It'll be hard to write the law which define "too big to fail" and it'll be subject to endless court interpretation. It shouldn't be a crime to create an entity which is too big; however, the government should have the power to require the dismembering of such an institution just as it can dismember a company whose market position is too strong to allow the market to function.
If no company is too big to fail, than market discipline will be a much more potent regulator than it is today.
Refresh.