The News – 06/13/02
Broadband Content Wars, Part IV
When discussing possible killer apps for broadband, people
who should really know better often point to music file sharing.
Sure, scofflaws sharing other people’s property on Kazaa, Morpheus,
LimeWire and the other services use a huge amount of bandwidth.
The top file sharers hog countless megabits of upstream broadband
connections serving files from their multi-gigabyte collections.
But there are several fatal flaws in counting on this type
of illegal activity to drive broadband adoption. As I mentioned
in Part III, even though there
are millions of users participating in file swapping, these
scum-sucking parasites still aren’t the majority of Internet
users. A killer app, by definition, is adopted by the majority.
Second, file-swapping activity really doesn’t generate revenue
for anyone. It’s a revenue-destroying app, and thus is not a
great candidate for killer-appness. I suppose you could say
the same about email, although most of the free email companies
today are struggling.
However, the most important reason why file sharing, as currently
practiced, won’t become a killer app lies in the nature of its
economics. The only reason file swapping can exist is because
of flat rate Internet accounts. This simple fact forms the basis
of the economic viability of the practice. It’s virtually free
to scarf the latest hot album from an obliging host because
it costs him (yeah, him) nothing extra to send it to you, and
it costs you nothing extra to receive it. So why not share your
legally and illegally procured music collection with the world?
You can strike a blow against the bloated, corrupt music industry
if that’s your thing, or you can just revel in the thrill of
getting away with something. And it won’t cost you a penny extra.
Well all that’s about to change. The cable broadband companies
are getting ready to pull the rug out from under the economic
disparity that makes file swapping viable.
AT&T Broadband, Charter Communications, Cox Communications
and other cable broadband providers are planning on moving away
from the old flat-fee pricing scheme. No longer will users –
scofflaw and law abiding – be able to pony up $50 and get all-you-can-eat
bandwidth. New pricing policies could limit bandwidth usage
per month and charge additional fees if users exceed set limits.
The demise of at the beginning of this year Excite@Home and
its contracts with cable companies has freed cable providers
to set new policies. Under
the old system, @Home controlled prices and speeds – not all
that awfully well, apparently, given their bankruptcy. The thinking
now is that “one-size-fits-all doesn't make sense anymore. As
more people sign up for broadband, it makes even less sense,”
Mark Kersey, a broadband analyst with ARS in a recent BusinessWeek
article. “Now [the cable companies] are in complete operational
control, and they can do what they want.”
Great. I’m going
to have to pay more for my connectivity because of the abuses
of a bunch of self-styled latter-day Robin Hoods.
thing about this change in flat rate policies is that it will
probably not stop the file-swapping phenomenon. It’s just too
big now to die. File-sharing enthusiasts will either come up
with more efficient compression or trading techniques, or, as
has already happened, cable hackers will devise ways to turn
off bandwidth counters and grab as much capacity as they want.
Even the music industry concedes that the new pricing plans
won't completely eliminate piracy.
So what will happen?
Honest people like you and me will pay higher prices; intellectual
property thieves will find a way around the system; and still
file sharing won’t be broadband’s killer app. At least it won’t
until the music industry adopts some rational policies about
online music, and accept the fact that some people just won’t
the best test of a killer app is the Mom test. If your mom wouldn’t
use it, it’s not a killer app. In my case, my Mom has never
used email, although my Mother-in-law does. My Dad, on the other
hand, has a Web site: www.JerryEllsworth.com.
I got a couple
of responses to my request for comments on Part III of this
series. The first, from Alert SNS Reader Larry Kuhn, points
out a characteristic of broadband that provides part of its
appeal: It’s always on.
From what behavioral changes I've
observed I would say that the “killer” part of broadband is
the “always on-ness.” I would agree with your sentiment that
Grandma and Grandma Nontechie don't need high-speed -- but whether
they know it or not, they do need always on. The family's relationship
with our computer has changed immensely since we got broadband
mainly due to the removal of the “dial-up disincentive” - now
it is easier to look up a movie show-time or restaurant
menu or store hours on the computer than it was to dig out the
newspaper or phone book.
So, there's probably a fortune waiting
for someone out there who can offer <=$21.95/mo. “always
on narrowband” residential access. If the price is the same
and the convenience is more, it will sell.
That's a good
point. My family has also experienced the effect of “always
on-ness.” I wonder how feasible less-than-broadband always-on
service is? You'd have to include the expense of the phone line
in the cost equation, and that usually brings you back up to
~$50. Thus you're still talking about some kind of digital solution
that would allow you to share a single phone line for voice
and data. Kinda sounds like DSL.
The big problem broadband companies have is the tremendous cost of
installation. The cable companies really have it bad, as connecting
someone requires a truck roll (at $600 to $1000 per). On the
DSL side, Earthlink tries to handle installation remotely, and
will ship a DSL modem to the user, hoping that they can install
it without help. Any sub-broadband digital phone service would
need to take a similar approach. The doggone Bells could do
it if they just had their act together.
The other response came from a gentleman I really should have quoted
earlier in this series, Alert SNS Reader and director of the
University of Minnesota’s Digital Technology Center, Dr. Andrew
Odlyzko. Professor Odlyzko has a bit of a reputation as a contrarian
since he brings a rational approach to often-overhyped new technology.
For example, I attended a lecture of his entitled “Content is
Not King” which argued that high value content like Video On
Demand (VOD) and other content would not now and never had in
the past driven technology adoption.
Professor Odlyzko, thankfully, said in
his note that he agreed with my position on killer apps and
sent along a letter to the editor that he was asked to write
by the magazine, Issues in Science and Technology. He’s
given me permission to quote from it, and some of his points
The rates of adoption of dial Internet
access, as well as the utilization patterns of data networks,
proved many years ago that the "insatiable demand for bandwidth"
was a myth. New products and services take time to diffuse widely.
Today, when offered the choice, most people vote with their
pocketbooks for extremely narrowband wireless phones over comparably
priced DSL or cable modem links.
This is a very good point. People think
very little of spending $50 a month on a cell phone, yet the
same amount for broadband seems out of the question for many.
To pick up my thread from Part III: What do we do on cell phones?
Among other things, we tell each other stories. While you may
argue that the utilitarian side of cell phone use is its killer
app, I know plenty of people who are buying them primarily for
the free long distance so they can yack with friends and family.
Although mobility currently trumps
broadband in the market, that may not persist forever. Adoption
rates for broadband, although disappointing by the expectations
of Internet time, are high, higher than those of cell phones
at a comparable stage in the development of the wireless industry.
The question is whether we should strive to increase these rates,
and if yes, how to do it.
I agree with this point as well, as is obvious from Part III, in
which I presented the really pretty remarkable growth rate of
broadband over the past couple of years. Professor Odlyzko also
tackles the question of government subsidies as a stimulus for
As the example of South Korea (with
over 50% broadband penetration) shows, lower prices can do wonders
for demand, and some “spending initiatives or subsidization
efforts,” if well targeted, might lower prices in the US. However,
[it] is likely right that it would be unwise to make giant investments
of public money in this area, where technology and markets are
changing very rapidly.
See? What’d I
tell you? Everyone likes to use South Korea as the shining example.
Notice, however, that Professor Odlyzko credits the lower price
as the factor driving adoption, not government intervention
per se. He goes on to propose three possible methods of stimulating
broadband adoption in the US, “one intriguing but totally impractical,
one very practical but incremental, and one speculative.”
The impractical method for stimulating
broadband adoption is to make music free on the Internet. [
. . . ] Napster and its cognates have been among the main reasons
people buy broadband connectivity. Instead of using the law
to choke file swapping, perhaps we should encourage the telecom
industry to buy off the music studios. Total recorded music
sales in the US come to a grand total of about $15 billion per
year, while telecom spending is over 20 times higher. Thus in
the abstract, it might be a wise investment for the phone companies
to buy out the studios. This is of course wildly impractical
for business and legal reasons, but it would quickly stimulate
demand for broadband. (It would also demonstrate that the content
tail should not be wagging the telecom dog, as it too often
does in political, legal, and business discussions.)
I love this idea! We should lobby our congresspersons to make
it happen. Then the network could institute rational charging
schemes for the use of copyrighted intellectual property.
A more practical method for stimulating
broadband is to encourage migration of voice calls to cell phones
(which currently carry well under 20% of total voice traffic).
This would force the Baby Bells to utilize the competitive advantage
of wired links by pushing broadband connectivity. This migration
could be speeded up by forcing the Baby Bells to spin off their
wireless subsidiaries, and by making more spectrum available
for cell phones.
What a truly evil idea! And the coolest thing is, it only accelerates
a change that is happening anyway. Just last night, two people
told me, in separate conversations, that they were considering
getting rid of their phone lines and converting entirely to
cell. When you consider how gawd awful even the best cell phone
connections are, that’s pretty incredible.
The third technique for stimulating
broadband is to encourage innovative new wireless technologies,
such as those using the unlicensed bands (as in 801.11b, AKA
Wi-Fi) and Ultra Wide Band. The technical and economic feasibility
of these technologies for providing connectivity on a large
scale is unproven as yet. However, if they do work, they might
offer a new mode of operation, with most of the infrastructure
owned and operated by users.
This idea, which builds upon a trend that is already rapidly
accelerating, represents the true threat to the Bells and other
wired and wireless telecoms. More and more people all over the
country are putting up Wi-Fi hotspots and allowing strangers
to use their Internet connections. See the SNS issues from last August and this past March for more information. While the Wi-Fi threat to
things like wireless 3G networks is pretty easy to see, add
in something called Voice over Wireless LAN (VoWLAN, which sounds
like a religious thing) and the threat to voice networks becomes
clear. Talk about your killer app: Imagine wandering through
a major metropolitan area talking for free to friends all over
the world, courtesy of groups of anonymous altruistic geeks
with Wi-Fi hotspots (GAAGWots).
You know, the funny-but-true aphorism for the Internet used
to be “On the Internet, nobody knows you’re a dog.” Nowadays
it seems this truism might be replaced by “On the Internet,
no router knows what it routes.” Cahners InStat, taking a pretty
pedestrian view of the explosive potential of VoWLAN, predicts
shipments of half a million VoWLAN handsets annually by 2006.
If this stuff works even halfway decently, I think that estimate
will be blown away, and the Bells and the wireless carriers
could be in deep sheep dip.
Once again, I encourage your comments.
Broadband Content Wars, Part
Broadband Content Wars, Part
Broadband Content Wars, Part
- Taking Your Business On the Road: The Car
As Wireless Office
- Standards, Standards Everywhere: A Business
Guide to Wireless Standards
- M-Commerce: Are We There Yet?
- Wherever You Go, There You Are: Mobile
Location-Based Wireless Services
- The Wireless Last Mile: Fixed Wireless
- Beyond Keyboards, Beyond Wires: Voice
Activated Wireless Services
- Information, Entertainment, and Access
At Your Fingertips: Interactive Wireless Information Services
These white papers will be released over the coming months.
To be notified when a new white paper is released, send
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or check www.CTOMentor.com/wireless/