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Be on the wave or under it™

The News – 04/01/02

In this Issue:

Recommended Reading

I realize this is the only newsletter you’ll ever need, but if you want more in-depth detail, check out:

Stan Hustad’s The Coaching Connection

Broadband Content Wars

It’s the old chicken and the egg problem for sellers of broadband services. This problem has confronted any new communications medium, from radio and television to fax machines to the Internet: no one comes because there's nothing there; there's nothing there because no one comes.

However, in this case, broadband doesn’t represent any radically new capability. It’s just more of the same, but faster. Despite fairly steep adoption rates, the broadband industry is finding resistance among users who can’t justify ponying up twice as much money ($45 - $50 a month) for faster access. And don't even get me started about the clueless telephone companies that won't extend the reach of DSL in fear of losing fat corporate T1 contracts.

Nonetheless, those who have broadband clearly like it. According to a 2000 study by Arbitron/Coleman, consumers with broadband access spent an average of 22 percent more time each day with electronic media, devoted much more of their daily electronic media time to the Internet, and were far more likely to use downloaded and streamed audio and video content than dial-up users.

Arbitron and Coleman’s 2001 update to the earlier study found some very interesting trends:

  • Nearly a third of American Internet users, or roughly 20 percent of all Americans, have broadband access. Nearly two-thirds of those get it at work while only a third get it at home. Only 15 percent have broadband in both places.

  • Residential broadband satisfaction levels remain exceptionally high.

  • Those with broadband access spend as much time using the Internet as they do with radio or television.

  • Entertainment—and not just speed—can potentially fuel future residential broadband adoption.

  • Streaming media show little potential for “hurting” traditional broadcast media and will more likely complement radio and television.

  • Heavy downloaders of music share many similarities with heavy consumers of prerecorded music. Those who listen to a lot of streaming audio share many traits with heavy radio listeners.

  • Recent restrictions on audio downloading are having an impact.

  • Awareness of the halting of media streams due to the rights controversies is high, and many of those who have encountered discontinued streams have easily found other sources of streaming audio that deliver similar programming.

  • Even among those who have broadband access, technical limitations continue to present a significant usage obstacle for streaming video.

  • Video downloading has achieved little more than novelty status thus far.

A study entitled Business Redefined (2001) by Ernst & Young and Cap Gemini Ernst & Young (from the Department of Redundancy Department) recommends that content owners let go of their paranoia about controlling the entertainment medium and go with the new flow:

The future of content will be about having on-demand access to it, not ownership of the physical medium [ . . . ] The explosion of digital broadband access means multiple new revenue opportunities for content producers, the creators of entertainment, news, software and business applications. As one CEO reflects, “technology will fundamentally reshape the way content can be delivered and stored.” Content producers who want to capitalize on the new opportunities will apply creative new approaches to advertising as well as take full advantage of the mix of revenue generators including content subscription, pay-per-use, time-specific pricing, mobile content and digitization of existing content.

The study was based on 128 in-depth interviews with CEOs and executives in the communications, entertainment, and enabling technology industries and analysis of secondary data from more than 100 information sources around the world. Among the study's other major findings and predictions:

  • Online advertising is in a sort of purgatory right now, but the CEOs surveyed are generally upbeat about its long-term prospects. “Advertising in the digital world will be a lot more effective. Consumers will have a choice to either remain anonymous and receive content for a premium, or surrender some personal information and receive the content with some personally targeted ads,” predicted one CEO.
  • Content producers who had been distributing their content for free or with traditional pricing will migrate rapidly to other models, such as subscriptions and per-transaction pricing and time-sensitive pricing.
  • Content packagers have emerged as a pivotal point of value creation. The term content packager describes an Internet business model in which an electronic intermediary helps people find what they're looking for by matching its knowledge of the customer against its knowledge of information and applications. The study even identifies application service providers (ASPs) as potential content packagers.

  • Network players finally have to place their bets on services. Network operators, with their core network franchises imperiled, must diversify into value-added services in order to survive. Revenue from data transmission is growing 18 percent per year, but that growth rate is beginning to slow and the prices are falling so rapidly that network operators are experiencing declining returns on their network investments. On the other hand, CEOs have noticed that revenue from communications-based services is expected to balloon by an average of 68 percent per year for the next four years.

  • Four implementation challenges guard the gates to a company's success. Winning the war for talent, building an agile organization, focusing on the customer and improving operational support systems surfaced as the universal business challenges shared by CEOs in the communications, entertainment and enabling technology industry sectors.

Both the Arbitron/Coleman and the E&Y&CGE&Y studies paint a rather rosy picture of the broadband future. But other voices are warning that broadband’s penetration is slowing and folks won't necessarily pay for online content. We’ll take a look at the other side of the issue in the next SNS.

Cap Gemini Ernst & Young

Briefly Noted

  • Shameless Self-Promotion Dept.: Nothing to push or pump at this time.

  • April Fool! Just kidding.

    Take our survey on corporate policies on home use of network resources.

    StratVantage has launched a new service, CTOMentor™, designed to allow Chief Technology Officers and other technical leaders to get rid of the Guilt Stack, that pile of magazines you’ll get around to reading someday.

    CTOMentor is a subscription advisory service tailored to customers’ industry and personal information needs. Four times a year CTOMentor provides a four-hour briefing for subscribers and their staffs on the most important emerging technology trends that could affect their businesses. As part of the service, subscribers also get a weekly email newsletter, Just the Right Stuff™, containing links to the Top 10 Must Read articles needed to stay current. These and other CTOMentor services will let you Burn Your Inbox™.

    As part of its launch, CTOMentor is offering a two-part white paper on peer-to-peer technology: Peer-to-Peer Computing and Business Networks: More Than Meets the Ear. Part 1, What is P2P?, is available for free on the CTOMentor Web site. Part 2, How Are Businesses Using P2P?, is available for $50.

  • Nano-whippersnappers or Buggy Whip Slayers? Business Week recently did a round-up on the topic of nanotechnology. For a technology with such a mammoth, paradigm-changing, old-line-business-killing potential, BW takes kind of a smarty-pants attitude before settling down to a serious consideration of the phenomenon: “300 nano-whippersnappers in the U.S. and overseas are targeting what promises to be a new Industrial Revolution. Nanotechnology will leave virtually no business untouched--or unscathed. The ability to create materials from building blocks the size of a virus will unleash unprecedented capabilities.” Makes me think of the smug buggy whip manufacturers of the turn of the 20th century. Note to people who make things for a living: Westfield, Mass. once was home to companies that made more than 90 percent of the world’s supply of buggy whips. There’s one buggy whip maker there today. The rest were run over by cars. Nanotech isn’t a car; it’s a fast train a-coming.
    Business Week

  • I Want This Phone: Alert SNS Reader Larry Kuhn sends along another cool phone: the PC-Ephone, which is based on the full-blown Windows CE operating system, unlike Microsoft’s impending SmartPhones. One of the coolest things about the phone is it has a 4-inch, 640 x 480 resolution, 256 color TFT LCD screen, thus bringing portable devices into the range of desktop PCs circa 1990.

    Even more interesting, PC-Ephone has licensed Wicom Networks’ family of 802.11a products and plans to make them available in their phones this year. As previously mentioned in SNS, 802.11a is much faster than its brother, 802.11b (WiFi), giving up to 24Mbps speeds. The technology uses the 5 GHz Unlicensed National Information Infrastructure (UNII) band, thus avoiding potential interference with other applications in the 2.4 GHz band, such as Bluetooth and WiFi. You can see why I think the 3G network providers need to worry about 802.11 networking.

  • Monster Server Farm: Now that’s a lot of horsepower! Pixar’s film, Monsters Inc., was rendered in the Pixar Renderfarm, which is powered by 250 Sun Enterprise 4500 servers, running Solaris™, each having 14 UltraSPARC™ II microprocessors, 14 gigabytes of system memory and 196 gigabytes of local disk space for a total of 3,500 processors in production with nearly four terabytes of main memory. The mind boggles. I'm taking bets as to when this decade you can buy this kind of capacity for your desktop. Or your palmtop.

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About The Author

Announcing CTOMentor, a New Service from StratVantage

Can’t Get Enough of ME?

In the unlikely event that you want more of my opinions, I’ve started a Weblog. It’s the fashionable thing for pundits to do, and I’m doing it too. A Weblog is a datestamped collection of somewhat random thoughts and ideas assembled on a Web page. If you’d like to subject the world to your thoughts, as I do, you can create your own Weblog. You need to have a Web site that allows you FTP access, and the free software from This allows you to right click on a Web page and append your pithy thoughts to your Weblog.

I’ve dubbed my Weblog entries “Stratlets”, and they are available at Let me know what you think.

Also check out the TrendSpot for ranking of the latest emerging trends.

In Memoriam

Gerald M. Ellsworth

March 14, 1928 - July 5, 2003

In Memoriam

Jane C. Ellsworth

July 20, 1928 - July 20, 2003