Like James, I also read the summary of what’s going on with the mega Danish FTTH deployment.

A few thoughts:

- The risk profile of laying glass pipes is one that matches a “utility” company, not a “telco” (whatever that means these days). This activity creates value for shareholders of the electric company because it creates a broader basket of similar-risk activities. This lowers overall investment risk whilst maintaining the general risk and return profile they expect.

- The core competencies of a utility are maintenance of holes in the
ground, negotiating wayleaves, buying upstream wholesale “supply” (power generation/Net connection/reservoirs) and simple recurring billing. Sending people on expensive jaunts to standards committees to invent NGN technology isn’t on the list.

- Delivering electrons, H2O molecules and photons via pipes all look like remarkably similar businesses. It reminds me of the master-stroke of Centrica a decade ago. They are a divestitiure of British Gas, and run (among other tings) the home appliance service business. Vans chock full of parts roll around to houses and fix broken boilers, paid for mostly through insurance. They shocked the market by buying the Automobile Association, a breakdown group. What on earth do cars and gas boilers have in common? Yet it was a great success! Why? Because the AA is a business that filled vans with spare parts that roamed around fixing broken-down cars, paid for by insurance.

Future success in network operation will probably come from doing the sort of supply-side tricks Dell mastered in the PC business. Bring all the supply chain into one tightly co-ordinated lean delivery system. And eliminate most of the marketing and distribution costs.

Doesn’t look much like a telco of today, I’m afraid.

5:05:44 PM    comment   

With this new fangled Apple nano device some questions are beginning to arise. Is large format flash the new storage solution? Some people, including Chang-Gyi Hwang, president and CEO of Samsung, believe so. Mainly, Hwang wants to cash in on the flash craze with his 16 Gbps NAND chip that can hold up to 32GB. Flash memory is mighty attractive. It's small and it's solid-state, but is the mini-HD really dead? If Samsung and Apple are any indication, it just might be.

Is flash memory the… [ars technical]

4:29:30 PM    comment   

In commenting on Oracleís acquisition of Siebel yesterday, Salesforce.com CEO Marc Benioff drew a compelling, if self-serving, analogy. Oracle, said Benioff, is the new Computer Associates. Just as CA bought up lots of mainframe software makers at the end of the mainframe era, consolidating them and milking their customers, so Oracle is buying up client-server software firms with the intent of sucking the profits out of their (slowly dying) businesses. The consolidation is thus a sign of the close of the client-server age and the dawn of the third great age of business computing ñ call it the On-Demand Age, or the Utility Age, or what have you.

So what role does Salesforce play in the analogy? Benioff left that unsaid, but Dan Farber connected the dots. With its ìAppForceî development platform and its new ìAppExchangeî marketplace for distributing applications, Salesforce is hoping to position itself as the Microsoft of the new era ñ the owner of a proprietary software platform that it hopes will become the dominant environment for business computing. The toll for entering the environment is not a Windows license but a Salesforce.com subscription.

Whatís most interesting about the analogy to me is the way it illustrates how a technology industry can go through consolidation and disruption at the same time. As the industryís reigning business model matures, and its core products turn into commodities, traditional players stop focusing on innovation and start focusing on buying customers through acquisitions. Itís the only way they can maintain profit growth as margins shrink and demand growth slows. But as this process plays out, a new business model often emerges, offering customers a cheaper and in the end better alternative. Because the new model destroys the old modelís core source of profits (in this case, software maintenance fees), the old players have trouble adopting it. That leaves them vulnerable to a new wave of entrepreneurs who take up the innovation mantle.

11:17:14 AM    comment   

When he unveiled Salesforce.com's AppExchange, Marc Benioff called it the "eBay of on-demand software" as well as the "iTunes Music Store of enterprise applications." I thought of an earlier precursor: IBM's SHARE user group. Back in the 1950s, when businesses began buying computers for the first time, there was one big problem that held everything back: a lack of software. There was no software industry then, there were only a few programmers (most in the military), and the makers of mainframes supplied only the most rudimentary of programs with their machines. Faced with the high cost and enormous difficulty of writing code, a lot of companies sat on the sidelines and even those that did buy mainframes couldn't do a lot with them. IBM, realizing that the lack of software might kill off demand for its machines, organized a user group for the owners of its 700-series mainframes. The members of the group, which came to be called SHARE, simply gave one another the software they had written. By providing easy and cheap access to an ever-growing pool of applications, SHARE helped jump-start the mainframe market while also increasing the attractiveness of IBM's own products (the software, of course, couldn't run on other vendors' machines).

My guess is that Benioff hopes AppExchange will set off a similar phenomenon: expanding the pool of hosted "on-demand" software while increasing the attractiveness of Salesforce.com's proprietary platform. It will be interesting to see how many users, as opposed to developers, post their own creations.

11:16:51 AM    comment   

Fortune's David Kirkpatrick makes a brave attempt to defend eBay's multi-billion-dollar purchase of Skype. But it doesn't wash. He ties the deal to the Internet's "empowerment of the individual," saying that "eBay seems intent on creating the first genuine conglomerate of what I have called the Contribution Economy." To achieve that (dubious) honor, eBay "will need as much of that economy's true currency - empowered users - as it can get. So we might expect to see more acquisitions by eBay of companies that meet a basic philosophical criterion: They give individuals great power they never could have had before the Internet came along. Those businesses don't have to be directly connected to eBay's online marketplace; I'm suggesting that eBay may see itself as not just an online intermediary between buyers and sellers but a nexus of personal Internet empowerment."

A nexus of personal Internet empowerment? No, eBay's a large, profit-making business whose fortunes rise and fall not with its philosophical purity but with its economics. As Meg Whitman herself took pains to point out, eBay's strength lies in its rigorous focus on being "just an online intermediary"; it's not about to reposition itself as some fuzzy nexus. Besides, what exactly is the basis for Skype's great "community of users," as Kirkpatrick terms it? Fellow-feeling? A shared love of empowerment? The harmony of the spheres? Nope, nope and nope. The community exists for one major reason: Because Skype is free. Charge ten bucks for the software or slap on a $5 a month subscription fee, and that community goes up in a communal puff of smoke. Yes, Skype takes in some money by charging for off-network phone calls, but again the attraction there ain't community, it's dirt-cheap rates. And with low barriers to entry and low switching costs, it's going to get harder and harder to make money in that business, particularly when you get Google subsidizing its own service with ad revenues. (Reuters quotes one Skype member about fears that eBay will muck up the service: "We can just sit back and watch. Smile. And hey, if eBay is doing that bad we can just switch to tons of other VOIP software.")

One of the best ways the Internet "empowers" users is by letting them do things for free or really cheap that they used to have to pay dearly for. Courting such empowered users as customers is a tricky business. If you're not damn sure how you're going to make money off them, you probably won't.

So it comes back to a simple question: Was buying Skype the cheapest way for eBay to add voice communication to its auction service? I have yet to see anyone, including eBay itself. make a convincing case there. Hell, Skype would have probably bent over backwards to be eBay's voice channel, on terms that would have given eBay a big chunk of any user fees with no upfront investment at all. And if Skype wasn't game, one of its competitors surely would have been.

The best analysis of the deal I've read is by John Hagel. He sees is as a classic case of "The Curse of the High Multiple." He explains: "Once your company ascends into the stratosphere and convinces shareholders that it has extraordinary potential for profitable growth, what does it do then? Well, you have to deliver. The higher the multiple goes, the more challenging it is to meet those expectations ... The pressure can become overwhelming. It pushes companies to look for really big plays that can feed the expectations engine (and potentially divert attention from the slowing growth in existing businesses). Since organic growth rarely delivers big enough impact (especially once a company moves beyond a certain threshold of size), management starts to rev up the acquisition engine."

In other words, the stock market made her do it.

11:15:16 AM    comment   

I just held a nano for the first time, and it pretty much confirmed what I was thinking before hand… My thoughts? Big whoop. No really.

Now, I admit, I’ve been wrong before about this stuff. Hell, my original thoughts of the iPod mini were way off - I ended up buying one, but not before lambasting it on this blog. But the nano is getting a bunch of kudos for its design, etc. but my thought was simply, “What’s the big deal?” It just plays music! It’s an MP3 player with a shiny finger-print trapping exterior and a really small color screen. Really small. Even for me and I’m used to looking at mobile phone displays if that tells you anything. The black 4GB one is pretty neat, but my 1GB Shuffle will do quite nicely for most uses and I won’t have to handle it with kid gloves to make sure it doesn’t get scratched.

In general, I’m thinking… “Meh.”

Now, I just held a Sony Ericsson Walkman phone with the slot for a Memory Stick Duo, and a 2 Megapixel camera. Now *that* is something to get excited about. What a phone! It’s a bit bigger than the nano, but not really, and saves me from having to worry about charging two separate devices at night. This is the key: Separate devices are bad, convergence is good. The nano is a converged device that forgot to bring along the rest of the functionality. Right away people were joking about hot-gluing the nano to a phone and a camera, does that tell you anything? People expect that sort of thing now! Where’s the camera? Where’s the phone? Where’s the video? Where’s the games? Why would I spend $250 on a device that *just* plays music?

Yeah, I’m sure there’ll be luddite whiners who’ll go on about form and functionality and how they just want their iPod to play music and their phone to make phone calls and their cameras to take pictures and their Gameboys to play games and their PDAs to do their PIM stuff. You can tell these people by the quantity of bags and charging cords they carry around with them. Me? I prefer one device in my pocket that does everything, and just as well. As the Sony Ericsson has shown us is possible.

Oh well. Not like Apple isn’t going to sell a bazillion of those bad boys, but personally I think Apple has crossed the line from functionality to pure fashion, and it’s too bad. They should have been the ones leading the way on an iTunes phone, and not farming it out to Motorola and concentrating on the bling.

-Russ

11:11:05 AM    comment   

A most valued reader (i.e. my brother — my mum is the other reader) points me to a colleague’s friend’s blog busy referring to my previous entry. So to complete the nepotistic circle of cliquedom, I’ll point you back to the other side of the echo chamber. It’s one of the more succinct observations of what the Skype-eBay thing is about:

Google is now going to have to play an uphill battle. That battle was made conspicously apparent when Google released GoogleTalk. Why does Google continue to insist on invitations to grow it’s Gmail accounts? Why is the only other registration mechanism is to use a mobile phone? I take it that Google understands the value of tying one’s digital identity with something tangible in real world. That is you have a Gmail account because of your real world contacts or your ownership of a mobile phone.

Interestingly enough, it is eBay that has the enviable position of providing digital identities with true value. eBay’s reputation system is without competition. A seller’s ability to command a premium bid is affected by his reputation. Buyers without established reputations are sometimes barred from bidding. Paypal’s verified attaches a real bank account to an identity. When one attaches a credit card to an identity, the address becomes verified and adds additional reputation for a buyer.

This is an elaboration of Stuart’s allusion to the digital identity imperative of eBay and Skype:

Skype and eBay profiles: A huge winner in this area is possible. eBay will provide just one form of reputation data. Caller ID solutions are not far behind.

I gave a talk about 18 months ago one why the real asset of a telco was the data in its customer database, and not the network. Nice to see the real world catching up.

One shouldn’t ignore the international aspects of this deal. It’s easy to be parochially US or Euro centric, as Jonathan Boutelle notes:

This also means that in many emerging markets no one has heard of eBay, and eBay has no effective way to reach these markets other than expensive late-stage acquisitions.

Owning Skype will make eBay immediately relevant to millions of Pakistanis, South Africans, and Georgians. It gives them a way to reach customers and drive marketplace adoption in every country on earth.

The only way an eBay-Skype hookup can justify the price paid is if eBay infects Skype with transactional functionality. Skype has to burst out of a pure C2C voice play as there’s not enough money in it to support big-league financial expectations. There are many break-out points, but B2C/C2B communications strikes me as the easiest to mine for gold.

Telepocalyptic prediction #1: We’ll see a “merchant edition” of Skype within 12 months, and this will be indirectly a paid-for service to eBay sellers. Skype becomes the “PBX for micro businesses”, and it’s the seed from which eBay can grow a bigger assault on the moribund PSTN application, particularly the 800 number market. The economic driver will be increased conversion rates, larger transaction sizes, lower transaction defect rates (e.g. wrong address), and increased up-sell during closure. Only an advanced multi-modal client can achieve these things.

Telepocalyptic prediction #2: Within 18 months, Skype will be giving away ougoing PSTN calling to places with low call termination charges, in exchange for people adopting the Skype/eBay identity and proffering personal data. eBay needs to grow Skype as fast as possible to keep as much calling on-net as it can. There comes a point when your network effect means you can suddenly drop the price for a wide range of vital services to zero (think: search, browsers) in order to support an adjacent business.

As Yannick Laclau notes, the telcos will respond with their own scorched earth policy of offering PSTN service for free in conjunction with Internet access. As he later observes, this is fatal for the PSTN disintermediators:

The internet players are deflating voice to support their applications-layer businesses in commerce, content, and advertising; the telcos are deflating voice to support their growing broadband access business.

The losers in this will be folks who only make money selling voice. Top of mind in this category is Vonage, SunRocket, Packet8, VoiceGlo, GossipTel, and the other pure VoIP guys. Skype, I felt, was dangerously headed in this category until today’s rescue by eBay.

Many of the telcos unloaded their directory businesses in a fit of panic to raise some cash during the downturn. This will now look foolishly short-sighted as local search becomes the hottest part of the telco value chain. Expect to see the most “e-enabled” local search providers being snapped up by Google, eBay and Amazon. (I’m not brave enough to make specific predictions! Apart from anything, I’ve not been tracking the space closely — go read Om and Andy for the detail.) This local directory business will be particularly critical to integrating “voice-centric” small businesses like plumbers, take-away restaurants, etc. rather than the web-centric ones that are the traditional eBay fodder.

The collective loss of the directory businesses will also weaken the ITU cartel’s ability to dissuade the listing of non-PSTN contact identifiers.

Ultimately, though, I can’t beat Stuart’s pithy cluetrained comment:

A marketplace is nothing without conversations.

Whether the messages over Skypenet are worth the crate of gold that was offered, I’m skeptical, but the strategic fit is certainly there. We definitely live in interesting times.

11:08:40 AM    comment   

A totally non-actionable, useless, pie-in-the-sky thought.

Old fashioned desk phones are a bit like thin-client web terminals. A limited set of UI functions are communicated to a central, smart server. Management costs are minimised as a result.

The stupid network wants to invert all of this, and make the edges smart. When the telephony application is in a state of rapid flux, replacing a $100 device with a new, smarter $100 device is much less intimidating than risking the upgrade of a $10,000 PBX in the hope you’ve picked the right feature set. We’ve taken to using $1000 laptop PCs as telephones to get the functions we desire, because they’re more adaptable, and the change can be done with free or cheap software upgrades.

But there’s that little niggling issue of manageability of heterogenous distributed network devices. So I just wonder … could the idea of a “thin client” smartphone be feasible? Say you want a desk telephony device that can display Skype buddy presence, for example. Is the device itself the best place to put the Skype-specific application logic? Or is a device with a few softkeys, and a stripped-down web browser or Flash-type interface a better bet, interfacing to a server of some kind out there in the cloud?

There’s an unresolveable tension here. The stupid network is adaptable to change, and small incremental change at the edge is quicker than large change in the core; but change costs money, and co-ordinated change managed centrally can reap economies of scale. So as the level of uncertainty drops about what customers want out of Voice 2.0 over the next 5 or 10 years, expect to see the architecture shift accordingly.

11:08:04 AM    comment   

Second useless, disconnected, time-wasting thought of the day.

The Domain Name System is often though of as an integral part of the Internet. Without it, how can you ever locate anything?

Well, quite easily, thank you very much.

DNS is used implicitly for many services, such as web browsing. It also includes explicit extensions for a few applications such as e-mail. (I’m talking here about DNS the system, not DNS the technology that can be re-purposed to things like ENUM.)

But the most notable thing about DNS is its receding importance.

Firstly, we’re spending more and more time finding things via search. I bookmark things much less than I used to. I don’t type domain names in very often. The standard approach is to Google the approximately right term. If the Google link was a hard-wired IP address or some other naming/indirection system, nobody would really care. AOLers have been bypassing DNS with keywords for years.

DNS is also getting stiff competition from other namespaces. We don’t use DNS to locate people; increasingly we use handles from private IM services like MSN, Skype, AOL, etc.

We don’t use DNS to locate ideas. We’ve gone tag-mad instead.

We don’t use DNS to locate places. We just cut’n’paste the URL from Google Maps or Mapquest.

DNS plays a small role in all of these, as a bootstrap mechanism. There’s still a skype.com to get the software, or a google.com to prefix the location. But the bootstrap locations could equally be baked into your browser, just like the crypto keys for setting up secure connections are.

This was really brought home to me recently when my DNS service at home suffered a glitch from my useless ADSL router malfunctioning again. (Westell Versalink 327W — don’t buy it: confusing UI, bad documentation, lacks the functions you need.) I didn’t notice for a while, because Skype doesn’t need DNS to operate, and a green Skype icon means the network is up. My home network server had the only DNS lookup that mattered (my ISP’s mail server) happily cached away, and could have easily been hard-coded. It was only when I went to the Web that I came unstuck.

A great deal of ‘Internet governance’ effort is expended on DNS. But you have to ask yourself - is it really part and parcel of the Internet? Haven’t we learned anything about separating connectivity from application services? Do none of the other namespaces deserve ‘governance’?

The danger is that DNS will be treated as a panacea, and will continue to be pressganged into more functions for which it is ill-suited. Problems at other layers get neglected.

For example, if you could reliably locate an IP address, a lot of emergency service issues get much easier. Many security problems with the Internet could be addressed by tightening up the semantics and process of IP address assignment. Why doesn’t an access service provider ever get an opportunity to assert anything about who, what and where you are? Yes, privacy is an issue; but if you’re a good actor, it can be to your benefit for your ISP to vouch for your location, identity and trustworthiness.

As always, you have to remember that the Internet is just a prototype Stupid Network that escaped from the lab one night and spread out of control before the results were in. Now we’ve got the results, and it’s time to go back and fix some of the problems — before someone less benevolent does it for you.

11:06:58 AM    comment   

One thing I know about Danish-owned Bang&Olufsen: Everything they make looks really, really good (even monkey enjoy the delicious phones they make). So hearing that Samsung has partnered with the high-end consumer gadgets company to produce a phone, made me squeal with delight. Almost. And that's mainly cause I haven't seen it yet. So I may still squeal. These new phones won't have all the techie bells and whistles, according to B&O's CEO, but will just look stunningly good. He believes simple=better for business clients who don't need to send blurry images to their friends or download the latest 50 Cent ringtone. I tend to agree, so I'm looking forward to this down-to-earth, good-looking handset. Oh, and did I fail to mention that the phone will be launching in Europe, with no immediate plans to hit the US? Holding on line 1, as usual.

Bang &: Olufsen and Samsung to sell top-end phones [Reuters]

11:01:44 AM    comment   

Worried about going into cardiac arrest while using your cell phone? Yeah, me too. Luckily, Active Corporation has introduced a new product bundle for your Treo 650 called ActiveECG, which turns your pda into a "diagnostic quality, portable cardiac monitor." The next time I run a marathon or eat a really big steak, I'm sure it'll come in real handy. The bundle goes for $699 and includes the ActiveECG cardiac monitoring hardware, a Treo 650 compatible serial cable, software for the Treo 650 and companion software for the PC, ECG leadwires, battery, test cable, extra cover and one set of ECG electrodes.

ActiveECG adds cardiac diagnostic features to the Treo 650 [Mobilemag]

11:01:14 AM    comment