Be on the wave or under it
The News – 06/20/02
Broadband Content Wars, Reader Feedback
In response to my request for comments on broadband’s killer
app, Alert SNS Reader Steve Harr writes:
Very interesting series on Broadband.
How long before Bandwidth gets priced like energy and fluctuates
from month-to-month based on supply and demand?
I think that professionals like yourself
that need the Internet for business will end up subsidizing
the casual home user.
As far as our modern day "Robin
Hoods": I don't condone ripping off copyrighted material,
but it's hard to feel sorry for a money-grubbing industry that's
taken advantage of us at least since the advent of the CD.
The pricing question is, of course, central to the adoption
of broadband. More important is the consumer’s perception of
price, as I mentioned in the last
SNS. People who think nothing of paying $50 a month for crappy
cell phone connectivity balk at paying the same amount for broadband.
I think the metering method that
Steve mentions is the way the industry is heading. The problem
with pay-as-you-go pricing is that it flies in the face of a
fact that has been demonstrated time and again: Users don’t
like variable pricing. They didn’t like it on the mainframe
years ago, and they won’t like it now because of two factors:
cheapness and usage disincentive.
Most people are cheap, and most have
a mental model of what things should cost. Anything priced above
their mental limit is expensive. Internet connectivity has been
associated with a price level of $10 to $21.95 per month in
consumers’ minds. If you pay the higher price, you expect more
services, like what AOL provides. Anything above 22 bucks a
month is expensive in their minds, no matter how much faster
it is. They’re willing to acknowledge the added value of an
AOL, but the same old thing, just faster, doesn’t appeal.
Usage disincentive is that nagging
thought in the back of your mind when you know you’re being
charged for usage. We all probably know a Depression-era person
who hates to talk long distance. Their mindset is, “long distance
calling is expensive, and the longer you talk, the more it costs!”
Saying to such a person, “at 5 to 7 cents a minute, who cares?”
will get you nowhere. They are disincented to chat long distance,
no matter who is paying. My grandmother was that way. Even when
I’d be paying for the call, she just couldn’t get off the phone
So consumers have the idea that broadband
is expensive. If they pay by the amount of information downloaded,
they become disincented. Thus they will get on, quickly go about
their business, and get off.
If the broadband providers are smart,
rather than adopt a pay-as-you-go model, they’ll adopt the cell
phone model (although certainly not the cell phone data model,
where you can pay $10 a megabyte to download).
In this scenario, you would buy a
tier of service, like buying a certain number of cell minutes.
If you don’t use all the bandwidth in a month, tough. If you
go over your plan, you pay a premium for additional service.
That way users are incented to help the ISP plan their capacity:
I say I’m going to use 20GB a month; you say you’ll use 5GB;
the ISP needs an average capacity of 25GB (or probably less,
based on idle times) to service us both.
Users seem to have accepted this
sort of variable pricing in cell phones, and because of it,
they have generally not seemed disincented to squawk away, hour
after hour. However, it remains to be seen whether they can
be weaned off of all-you-can-eat-for-$50-a-month plans. There
is precedence for this kind of conversion in local phone plans,
which used to be all-you-can-eat, but which are now mostly message-unit-based.
This is also a way that ISPs can
make money of file sharers. If they pay for the top tier of
service, who cares what they’re doing to fill the bandwidth?
One thing is for sure: The telecom
industry can’t afford to screw this up. XO Communications became
the latest telecom to file for bankruptcy recently. Sprint had
its debt-rating lowered, and Lucent Technologies' sales are
rapidly declining. The industry as a whole has seen some $2
trillion disappear from its collective market value.
Susan Kalla of Friedman, Billings
& Ramsey says, “I foresee
a near total collapse as the endgame. I've become more reactionary
in the last month as it becomes clear that almost nothing is
working in the industry's favor.” It’s pretty bleak: Revenue
is imploding, debt is exploding and profits are disappearing,
said Scott Cleland, chief executive of the Precursor
So they better get broadband pricing
right, or it isn’t going to be pretty.
What do you think? If you couldn’t
have flat-rate broadband, would you prefer to pay-as-you-go
or tiered, pre-purchased capacity?
Broadband Content Wars, Part
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
an email to
or check www.CTOMentor.com/wireless/
- Microsoft to Buy Telecom Companies?
According to British industry analyst Bloor Research, Microsoft
may be circling the wounded telecom herd, looking to pick off
one or two weak and sickly companies. It’s one good way to get
the mobile operators to adopt devices that use the Windows operating
systems and to make .Net actually happen. Bloor says that WorldCom
may be one of Microsoft’s targets.
- Aussies Can Teleport Light: In the
Truth is Stranger Than Fiction Department is the recent
announcement by a team led by Australian researchers that they
have successfully teleported light. [Insert your own “shrimp
on the Barbie” or Star Trek joke here.] In the lab, the
team has destroyed a beam of light carrying encoded information
and recreated it a short distance away. That’s pretty incredible,
but even more unbelievable is the time it takes to do this:
It takes 30 billionths of one second to teleport the laser beam
one meter. That’s 100 times the speed of light (299,792,458
meters/second)! “My prediction is ... it will probably be done
by someone in the next three to five years — that is, the teleportation
of a single atom,” said project leader Ping Koy Lam, who has
worked on teleporting since 1997.
research from 1997)
- CEOs’ Security Concerns Increased: According
to a Booz Allen Hamilton survey of Fortune 1000 CEOs conducted
during the last two months of 2001, prior to the attacks, corporate
security was only a midlevel concern for US CEOs, averaging
6.0, with 10 representing the highest level of concern. Since
September 11, this concern level has increased 25 percent to
7.5. These results are consistent across industries, company
size, and dependence on overseas sales, according to the study.
- Earthlink Hungry for Customers: Although
ISP Earthlink’s broadband business is expanding, its flagship
dial-up business is flat or shrinking, down from 4.3 million
to 4.2 million customers. That puts them behind AOL (34 million)
and United (5.2 million with 9.5 percent growth). So the company
is buying customers by buying other ISPs. The latest is PeoplePC,
whose business model was to sell Internet access at the same
rates as everyone else, but throw in a PC. Great idea. EarthLink
is paying about $80 a head for PeoplePC's 560,000 customers.
It’s not a sure deal that those customers, currently paying
$13 a month, will migrate to Earthlink’s $22 a month service
without at least some grumbling. United charges $10. You do
- If You Can’t Beat ‘Em, Join ‘Em: Nokia,
up until now primarily a purveyor of TDMA and GSM-based phones,
has released its first-ever phones that can work on Qualcomm's
CDMA2001xrtt 3G standard. The Nokia 6370 will cost $99 and is
available in only Denver and Phoenix. Also, at long last, the
is finally available in the US to VoiceStream users. The Communicator
is the quintessential converged phone, with a full keyboard,
PDA functions, and wide color screen.
- RIM Sues Good: I guess Good ain’t good
enough. RIM, maker of the popular Blackberry always-on email
pager/PDA, is claiming Good is violating four of its patents:
one “for a method and apparatus to remotely control gateway
functions in a wireless data communications network”; a second
that “relates to a method and system for loading an application
program on a device”; a third that “relates to a method and
system for transmitting data files between computers in a wireless
data communications environment”; and a fourth that “relates
to a mobile device that is optimized for use with thumbs.”
Regular readers know what I think of the overly broad patents
the clueless USPTO
has been issuing in information technology. RIM has taken this
practice to a new level, receiving 40 patents and even patenting
a “removable retaining clip assembly,” known to you as a pager
belt clip. The language in this patent is really pretty funny.
The device is described as:
a) providing a clip assembly
having a recess, and the recess having a tab;
b) providing a panel defining an aperture, and having a tongue
located in the aperture and having a slot configured to mate
with the tab; and
c) directing the clip assembly into the aperture so that the
tongue mates with the recess and the tab mates with the slot,
thereby to attach the clip assembly to the panel.
The Alert SNS Reader who sends in the most concise, plain
language revision of this description will be featured in the
In a somewhat related matter, I received a cease and desist
notice from a lawyer for McLaughlin & Associates asking
me to change the description of P2P vendor Kontiki in my P2P4B2B directory
of peer-to-peer companies. Seems M&A has trademarked the
phrase “Personal Delivery®*” and Kontiki used the term in describing
their network. I merely repeated the phrase in my description
and I get lawyers on me.
Let’s keep it together here, people. I’ve half a mind to trademark
the word “the™”: “relates to a method and system for denoting
particular, specified persons or things.”
* Personal Delivery® is a registered
trademark of McLaughlin & Associates.
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