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The News – 06/20/02

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

Management Signature's
The Express Read

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 fast enough.

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 Group.

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 I

Broadband Content Wars, Part II

Broadband Content Wars, Part III

Broadband Content Wars, Part IV

Briefly Noted

  • 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
  • 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.
    MSNBC (original 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 the math.

  • 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 Nokia Communicator 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 next SNS.

    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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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.

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In Memoriam

Gerald M. Ellsworth

March 14, 1928 - July 5, 2003

In Memoriam

Jane C. Ellsworth

July 20, 1928 - July 20, 2003