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The News – 06/06/02

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, Part III

OK, I admit it. I stalled in writing this third installment. The main reason for my reluctance is this: I don’t think there’s any compelling need in the majority of Internet users to pay $50 a month for a high speed Internet connection. That’s probably not a very popular opinion, especially among the telecom crowd, but it is one shared by an increasing number of industry analysts.

Broadband’s killer app has yet to arrive. You remember the previous computing killer apps: VisiCalc (and then Lotus 1-2-3) drove PC adoption; Solitaire drove Windows adoption (OK, I’m kidding. MS Office was the real killer app.); the Mosaic browser (and then Netscape) drove early Web adoption; email drove Internet (as distinct from Web) adoption; and crippled email, known as Short Messaging System (SMS), is driving cell phone adoption in Europe.

The thing is, few of the popular applications of the current Internet require much more than a 56Kbps modem. Sure broadband would make everything that consumers like about the Web happen faster, but there’s nothing really out there that absolutely demands faster communications and justifies paying twice as much for access. You could argue that music file sharing services increase one’s appetite for bandwidth but, let’s face it, despite the hysteria of the music industry, ripping off music is not a common activity among the majority of Internet users.

On the business side, there are some emerging uses that require broadband: video conferencing, watching videos of archived events, and the like. But broadband penetration in business is not really the issue here. I don’t think the growth of business broadband is going to be enough to stop telecom industry heavyweights like Mike Volpi of Cisco and Rick Roscitt of ADC from whining (see Broadband Content Wars, Part II for more details). No, the consumer market has got to heat up for these guys to get well (and for my @#$*+ Cisco stock to go up!).

So what’s the problem with consumers? Why aren’t they jumping on the broadband bandwagon?

Part of the reason is cost. Fifty bucks a month is a lot harder to justify than the $21.95 AOL charges for a modem connection. “Anecdotal evidence from around the globe suggests that subscriber growth only accelerates when the price drops below US $40/month,” notes John Yunker of Pyramid Predictions. “Consider Deutsche Telekom (DT). Since DT began offering DSL service at US $22/month, it signed up 1.3 million DSL subscribers in 2001 alone. [. . .] Compare DT with Verizon and BellSouth in the U.S., who both charge $50/month for a DSL line - and, combined, added less than 1.1 million subscribers in 2001.”

Hmmm. And the major US broadband companies are actually increasing costs at this point.

Despite the cost problem, US broadband adoption has actually been fairly brisk. The FCC reports that the number of high-speed lines increased 250 percent between August 2000 and June 2001 to 9.6 million. Sage Research, in a report commissioned by Cisco, found that 44 percent of US households would be willing to pay for internet-delivered entertainment services while 42 percent would pay for communication services, and 39 percent would pay for education services. But consumers are notorious liars when it comes to surveys.

SBC Communications surveyed their DSL customers, and found them quite satisfied. A whopping 96 percent said they believe DSL is the most important technology in their home. Most would gladly sacrifice to retain DSL: 78 percent would give up their daily newspaper, 74 percent would give up their radio, and

63 percent would give up their coffee. But remember, these are the already converted, and they’re not the majority.

So what is the consumer’s killer app for broadband? What will it take to ignite the rocket under consumer demand and return the telecoms to the black?

I think it will involve video, both the movie and TV kind and the video game kind. John Yunker agrees, saying, “Online gaming is in fact one of the primary drivers of broadband uptake in Korea.” Korea, with 4 million DSL subscribers, has the highest broadband penetration in the world, partial due to the way the Korean government has been actively engaged in bringing schools and communities online, investing $7.5 billion in broadband infrastructure over five years.

Korea is every telecom company’s favorite example, because it shows how aggressive government policy can spur broadband adoption.

Sure video games will help drive broadband adoption, but not without the cooperation of the current gaming giants like Sony, Nintendo, and Microsoft. And let’s face it, not everyone plays video games. A true killer app has got to be used and useful to the majority, not just thumb twitchers.

Hollywood movies or favorite TV shows on demand will also be big, although broadband to the home is the least of the infrastructure upgrades that will be necessary to support mass adoption of Video On Demand (VOD). I personally think a distributed approach to disseminating video, like that provided by Onion Networks (inventors of Swarmcast), will be absolutely essential to VOD becoming a mass phenomenon. Another key will be the adoption of a less-than-Neanderthal attitude toward fair use and the inevitable unfair piracy by Hollywood. I’m not holding my breath on that one.

All these uses of video over the Internet will have their place in driving broadband adoption. But I think home video will be the true broadband killer app.

According to IDC, digital camcorder sales went from $6 billion in 2000 to $7.1 billion in 2001 and are expected to grow to $7.9 billion this year. The cool thing about these cameras is, you can download the video to your PC, use an inexpensive non-linear editing program such as Pinnacle DV Studio, Dazzle, or Video Factory to tart it up a bit, and email the grandparents the latest in your 2-year-old’s developmental saga. So for about an extra $100, you can become a movie producer. And you and your audience will need significant bandwidth for you to attain the stardom you deserve.

When you think about it, home video has the same kind of appeal as email, the perennial killer app. It facilitates person-to-person sharing of thoughts, ideas, information and, most importantly, stories. As a species we love to yack, and we especially love telling each other stories. The way video and special effects technology is progressing (see The 405, put together by a couple of video professionals in their spare time with consumer-grade equipment and software), you could rival George Lucas in a matter of a couple of years.

Leave aside all the fancy effects and gimmickry – it’s all about stories. Desktop video will allow the majority to easily share their own stories, whether it’s baby’s first steps or avant garde expressionist musings on the nature of life. For $600 you can be in show biz, and the Internet will be your theatre.

But that’s just my opinion, and I could be wrong. I’d like to hear what you think will be broadband’s killer app. Send in your ideas and I’ll feature them in a future SNS.

Briefly Noted

  • Shameless Self-Promotion Dept.: CTOMentor's white paper, Peer-to-Peer Computing and Business Networks: More Than Meets the Ear, is now featured on eBizQ's site. eBizQ is the insider's guide to e-business.

    CTOMentor has just released a new wireless white paper, the first in The Wireless Future series: You Can Take It With You: Business Applications of Personal Wireless Devices. This first paper in the series is free; others that will be available for a nominal fee will include:

  • Wireless Insecurity: Can Wireless Networks Be Made Secure?

  • Islands Make the Net: Wireless Networking and the Evolving Mesh
  • 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 Broadband Services

  • 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 an email to or check

    You also may want to check out the article I wrote on Instant Messaging in the latest issue of the TaylorHarkins Insights to Action newsletter.
  • Through the Glass, Darkly: Merrill Lynch says that in early 2001 there were 39 million fiber-optic miles installed in North America. That’s a lot of glass, but most of it was dark: Only 35 percent was "lit," meaning in use, and only 20 percent was carrying paying traffic.
    Wireless Future Magazine

  • Wireless Waste: Alert SNS Reader Andrew Hargreave sends along this story about the pollution caused by cell phone disposal. In the US alone, consumers will throw out more than 500 million mobile phones by 2005, creating a huge pile of waste containing dangerous pollutants. Haven't they heard of eBay?
    Yahoo News

    Turning Japanese: There’s a hilarious site that lists real examples of that East/West collision known as Engrish, the earnestly mangled English produced by our well-meaning, and not-quite-bilingual, Japanese brethren. The caption for this example made me laugh for five minutes: “She don't rie, she don't rie, she don't rie...”

  • Good Competition: I profiled the Good handheld device in the last SNS. Here’s a news analysis that stacks the Good up against its likely competition, the BlackBerry.
  • Convention on CyberCrime: I wrote about The Council of Europe's Convention on Cybercrime in a previous SNS. The US is a signatory, along with more than 30 other countries, and businesses should definitely be concerned. Basically, the Convention allows the law of foreign countries to be used in tracking and prosecuting Internet crime. So whatever you do on the Internet, you need to be sure you’re not contravening a signatory country’s laws. The classic example is selling Nazi memorabilia on eBay and being prosecuted based on the laws in Germany. Everyone should be aware of this important treaty.

  • Hacking the Lights: Scientists have figured out how to derive data by monitoring the flashing lights on modems and routers and the indirect glow from monitors as it plays across your office wall. While there may be easier ways to steal data, this method will make you rethink siting your data center against glass windows. Dial-up modems running at up to 56 kilobits per second are at risk. Higher-speed connections using cable modems or digital phone lines appear safe.
    Wired News

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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