Terabyte PC Coming

It's just a data point, but note that Asus, the Taiwanese computer maker, is planning on bringing to market a notebook PC with two 500 GByte hard drives from Hitachi Global Storage Technologies.

That's a terabyte. Those of you familiar with enterprise storage, think about it: a terabyte per user. Those of you who have to do your own backups, think about it: losing a significant portion of 1 Tbyte of data if your hard disks crash.

The upside is that such a user can 1,000 hours of video, or more than 350 feature length movies, or 250,000 four-minute songs. The downside? If those files are not backed up someplace, huge collections of audio or video can vanish.

The point is that storage continues to emerge as a function that is becoming harder to manage. It is harder to backup, harder to restore, harder to secure, index and retrieve. Part of the reason is that simply is so much more information to store. This graphic from searchstorage.com simply makes the point that storage and backup requirements grow steadily.

Which makes the argument for storage in the cloud ever more compelling. If one's authorized copies of music, video or other material are stored in the cloud, local hard drives can crash with little threat of losing the content. Not to mention that the files can be used on any number of endpoints (I didn't say downloaded to those endpoints).

4G: It Isn't Really a Technology Issue

As service providers start placing their bets on WiMAX or High Speed Downlink Packet Access (HSDPA) technologies, it is easy to fall into the trap of "technological determinism," the notion that the technology determines adoption or commercial success. Nothing could be further from the truth.

Commercial decisions, not the technology, will be the decisive factor. Business decisions almost always are. One can make a technology either way for WiMAX or HSDPA. But that won't be key. Operational issues, backwards compatibility, installed base, manufacturing volumes and even voice compatibility will turn out to be hugely important.

Some might argue that building a new broadband mobile network with a view to voice performance is nuts. The countervailing argument is that no matter what other "data things" users frequently do, talking will be one of them. And poor voice performance is objectionable in a way that OS instability and Web page unavailability are not. People routinely tolerate lower quality of service for their Web browsers, Internet connections and PC operating systems than they will their voice or video services.

Don't believe that? Watch what happens when movie download services become more prevalent. Every degradation of isochronous service disturbs users more than any non-real-time service. Users are unforgiving of voice or video service hiccups that would not faze them when the hiccups affect a non-real-time data service.

In fact, that's the point: user experience is not degraded by packet loss or some amount of jitter or latency when the application is not real time. User experience is visually or aurally affected in a highly visible way when the application requires predictable, sequenced delivery of the packets. Voice and video, to be specific.

Netflix Download -to-TV Service Coming

Netflix is working with LG Electronics to market a set-top-box=based movie download service for TVs, Business Week reports. The move is not unexpected, but is significant in terms of its timing. Netflix has over the last few years modified its statements about the DVD rental business, moving from a "consumers don't want to mess with downloading" to "we'll do it when it's the right time" stance.

The move now means it is "time." The transition from physical distribution of movie content to electronic download to TVs is underway, Netflix is signaling. The service, which extends the Netflix download service beyond "movies to your PC," is expected to begin service in the fall of 2008.

And though Apple TV has not gotten much traction, Business Week expects Apple to unveil its own download-to-TV service as well.

Netflix has been offerings downloads to PCs for about a year. But just about everybody who thinks about the matter agrees that downloads directly to TV screens is what is needed to really jumpstart the business.

Amazon.com, TiVo and Blockbuster also have decided they no longer can wait to enter the nascent business.

Again, what is important about the Netflix move is the timing, not the move itself. Netflix has concluded that even if revenues from online-to-TV downloading will not eclipse DVD rentals for some time, one tipping point has been reached. Netflix has to get into position now if it wants to maintain leadership in the movie rental business of the future.

By some reckoning, that business already is entering its 3.0 phase, having started with retail store rentals, followed by mail delivery and now starting the download phase.

And it is worth noting that if cable TV "pay per view" or "on demand" efforts had been quite a bit more than a niche, the video rental business and Netflix would not have developed. Cablers will note that studio licensing rules and release windows account for the rise of the independent video and DVD rental business.

That is true. What also is true is that studio profit margins and gross revenues control the availability of product. Once studios decide they can make as much, or more money, by switching to online distribution, they will do it.

In that regard, a recent slowdown in growth rates for DVD sales in retail outlets is another important market indicator. Consumer fascination with DVD purchases might be waning, overall. Legally or illegally, online-delivered content might be a contributing factor.

So legal alternatives such as Netflix will provide should have a shot at success. What remains to be seen is how widespread adoption will be. Consumers are quite fickle about special-purpose electronics devices. If the value is high enough Netflix will not find there is a problem. "No late fees" and "no drive to the store" have proven to have high consumer value.

But Netflix also seems to be pursuing the integration of the decoder circuits into other Internet-connected devices. The decoding software might reside into a TV, a game player or media reader, for example. That would alleviate the "one more box" barrier, as some consumers just don't want another device, with cords and cables, around their entertainment center.

On the other hand, Netflix then encounters the "only available on one model or one brand" problem. Consumers generally don't want to bother with "this flavor of access on this device" issue.

And though on-demand video should in principle provide even more convenience, the problem has been the content release windows, which essentially dictate that by the time an on-demand movie is available, consumers have had lots of other opportunities to view the content.

For the moment, at least, Netflix should continue to have an advantage over cable, satellite or telco on-demand content. The studios aren't going to disrupt the profitable DVD window just because online delivery now is possible.

Providers of broadband access services face a more complex business challenge. Demand for download speeds should get a boost if the download services take off. The issue is how much actual profit might exist. The problem with video is that it offers scant returns on a cents-per-bit basis compared to voice.

Put another way, video necessarily "commoditizes bandwidth." For those of you who are Bellheads, think of it this way. A two-hour movie delivered in widescreen format essentially requires bandqwidth equivalent to a DS-3 with a holding time of two hours(45 Mbps). True, we compress and pre-process now so only 4 Mbps to 6 Mbps is needed.

But the point is that the value of a 4 Mbps to 6 Mbps circuit used continuously for two hours or so is "worth" what a consumer deems a fair price for watching a two-hour video event. Call it $3 to $7, depending on what the content is and when it can be viewed.

All bits are not valued equally. On a cents-per-bit basis, text messages represent the highest return, with voice someplace in the middle and video at the very low end of the revenue continuum.

It might not matter so much whether "streaming" or "downloading" is the delivery technique, though analysts at the Yankee Group so far think streaming will get more volume. Most consumers won't care. But downloading offers more opportunity for managing bandwidth.

$588 Billion in Information Overload Costs?

Interruptions from phone calls, e-mails and instant messages eat up 28 percent of a knowledge worker's work day, resulting in 28 billion hours of lost productivity a year, say analysts at Basex. That might be considered a $588 billion cost, assuming a salary of $21 per hour for knowledge workers. Basex argues that information overload has become a significant problem for companies of all sizes, with some large organizations losing billions of dollars each year in lower productivity and hampered innovation.

That's the sort of argument providers of unified communications and presence solutions will point to as arguments for such solutions. Others, such as Stowe Boyd, disagree with that thesis. Stowe argues people are not drowning in information, but ignoring most of the information, and reacting only when the information flow suggests something actually is important.

It is true that there is a lot more "information" streaming past any person these days. But people are smart. They don't actually pay close attention to most of it. In fact, people just selectively tune out most of it, like they tune out advertising that isn't relevant. Only some information gets a close level of attention. In fact, most of the "overload" is simply ignored.

So how can busy people safely ignore most information, most of the time? The environment, the people one works with and various information sources will signal what is relevant.

Multitasking is an example of this. People in meeting pay partial attention to what is going on while they check email on their mobiles. People remain connected while listening to conference panelists. Mobiles are set on vibrate while in both of those settings. TVs can be on, CDs can be playing while people are responding to instant or text messages and doing their homework.

That isn't to say people are not bombarded by a richness of information. It's just that they adapt by ignoring most of it, pay partial attention to some of it, and focus on just some of it.

Some of the multitasking, such as things people do in cars, is not entirely safe, though!

Newspaper, Long Distance: Same Story

The market value of the American newspaper publishers entering 2008 as independent, publicly traded companies has fallen by $23 billion, or 42 percent, since the end 2004, the year before the wheels started coming off the industry, says Allen Mutter, managing partner at Tapit Partners.

The change is akin to similar changes happening in the global telecom business. Some legacy products are in irreversible decline, be that newspapers, wired access lines used for voice, dial-up Internet access or expensive, high-margin stand-alone long distance.

That doesn't mean people aren't "calling," or "reading" or "communicating." But products built on those activities are assuming new form. Newspapers won't disappear tomorrow.

As long distance prices have been in continual descent for decades, so newspaper readership and revenues will simply drift lower. The issue that must be faced is a transition of the assets to new formats and services.

Newspapers are both media--content creators--and a distribution format. Distribution clearly is changing more than the value of content creation. Voice is both an application and a driver of "access lines" or distribution. In both the newspaper and voice cases, the applications remain important. The distribution is becoming less relevant.

The issue is when a tipping point is reached, and decline becomes a problem executives no longer can manage. Something might be happening in the newspaper area, in that regard. One can fairly safely say the voice tipping point already has been reached, in many respects.

Nearly half the slide in the market capitalization of newspaper stocks came in 2007, when the shares lost a collective $11 billion, or 26 percent, of their value, Mutter notes. Newspapers lost nearly as much value last year as they did in the two prior years put together.

EchoStar, Dish Now Separated

EchoStar has completed the spin-off of its set-top box business into a new a company called EchoStar Holding Corp. The parent company, which now consists primarily of its satellite TV broadcasting business, will change its name to DISH Network Corp., and keep DISH as it stock symbol.

The transaction makes Dish a pure-play video entertainment provider, and arguably a cleaner asset for an acquirer or merger partner. There has been much speculation about an at&t purchase, but that seems unlikely given at&t's recent decisions about its stock buybacks, acceleration of its U-verse deployment and dividend increases.

The earlier proposed merger of Dish with DirecTV didn't pass regulatory muster, in part because the market was defined as "satellite TV" rather than multichannel video entertainment. At some point, as telcos gain more video market share, that argument might not be so compelling, and Dish and DirecTV might be allowed to merge.

Given that the consumer market increasingly is dominated by triple play, dual play and quadruple play providers, and where each of the services markets increasingly are saturated, regulators might take a fresh look at allowing the two satellite providers to merge.

The Dish Networks separation from the the EchoStar set-top manufacturing operations will help.

at&t Naked DSL Available

As part of its obligations as the acquirer of BellSouth, at&t was required to offer naked DSL--DSL sold without the requirement to buy a phone line--before the end of 2007. It appears to have done so, offering $19.95 DSL-only service on December 20.

The service is referred to as DSL Lite, and must be made available for the next 2.5 years. The company probably will not go out of its way to let consumers know it is available, or how to get it. And there are no assurances the product still will be availabe when the 2.5 year period is over.

Given the likely state of broadband access penetration by that point, at&t will have to keep doing so. In a couple of years, about the only way any service provider is going to get a broadband access customer is to take one away from another provider.

In Europe, where stand-alone DSL services are more readily available, penetration ranges as high as 30 percent.

Call Centers, Leaky PBX, Grey Markets

There are lots of reasons entities set up call centers: sell products; answer questions; technical support; fund raising; set up appointments.

Or, in some cases, to create not-quite-legal terminations for international long distance. Sometimes known as "leaky PBX" operations, the motivation for doing so is money. Significant amounts of money.

By some estimates, 30 percent or more of inbound global calls to Indian numbers are terminated outside the carrier-to-carrier settlements regime.

Estimates of traffic that skirts the settlements regime range upwards of 3.5 billion minutes a year or $150 million to $300 milliion a month that otherwise would have been earned by a licensed carrier.

In recent years, global carriers have paid Rs 5.50 in termination charges to an Indian domestic telephone company. In a leaky PBX or "grey market" operation, a service provider launders the traffic, making it look like a local call, avoiding the termination charges. This saves the global carrier about half what it otherwise would have paid. And the local termination network gains revenue because it makes money from the higher volume of traffic it gains.

The most popular grey market routes serve mobile phone traffic in high-cost termination markets. And that's where the call centers come in.

Grey routes often are created by call centers, as VoIP in some markets is legal when it is IP-based endpoint to endpoint. Until the laws change, and as India market mobile penetration climbs, so will the grey market.

"Nothing But Net"

Online ad spending is growing at a faster rate than broadband access, according to PMorgan Internet analyst Imran Khan. In a nutshell, the story is that Internet stocks will do well in 2008.

JPMorgan expects 34 percent earnings growth in 2008 for the Internet stocks it covers versus 8 percent earnings growth for the S&P 500.

From my perspective, the story is that online advertising is going to grow because attention is shifting that way. And advertising follows attention.

A Must-Attend Conference

If you are the sort of person who is very interested in the future of IP applications as they relate to the global telecom business, EComm, to be held in March in San Jose, is going to be a "must-attend" event. Go to the link at the bottom of this post to get the details. Check it out. Register.

Aside from the quality of the program, I am compelled to note that this is a bottoms-up, user-generated event with no corporate sponsorship. It is the community pulling itself together, with Lee Dryburgh doing the heavy lifting. We need your support, in the form of your attendance.

You won't agree with everything you hear. But you will hear from some smart people who spend their time thinking about and building the next generation of communications. Fair and balanced. Policy advocates, telcos, application developers, consultants, solution providers.

Up close and personal. Some of you know I am a huge fan of smaller, intimate meetings where people get to talk to each other a lot. This will be that kind of place. Get there.

Confirmed speakers:

Lee S Dryburgh, SS7 Networks Limited
Martin Geddes, STL
Tony Nadalin, IBM
Phil Wolff, Reef9 Media
Brough Turner, NMS Communications
Sean O Sullivan, mySay
Ken Banks, kiwanja.net
Gary Miner, MIR3, Inc.
Stanley Chia, Vodafone
Thomas Huhn, Solution Media
Michael Codini, VoiceObjects, Inc.
Shidan Gouran, Jazinga Inc.
Blaine Cook, Twitter
Evan 'Rabble' Henshaw-Plath, Yahoo! Brickhouse
Kellan Elliott-McCrea, Yahoo! Inc.
Shai Berger, FōnCloud
Dean Bubley, Disruptive Analysis
Anders Carlius, TerraNet
Johannes Ernst, NetMesh
Michael Roth, British Telecom
Adrian Cockcroft, Netflix
Mark Rolston, Frog Design
Kevin Nethercott, LignUp Corporation
Ken Rehor, VoiceXML Forum
Thomas McCarthy-Howe, The Thomas Howe Company
Brian Capouch, Saint Joseph's College
Matthew S. Hamrick, Homebrew Mobile Phone Club
Stipe Tolj, Kannel Software Foundation
Rocky Nevin, DataSea, Inc.
Piotr Cofta, British Telecom
Norman Lewis, Wireless Grids Corporation
Ram Fish, Trolltech
Blaine Cook, Twitter
Sheldon Renan, Vision (+) Strategy
James Body, Truphone
Jim Van Meggelen, Core Telecom Innovations
Paul Amery, Skype
Tim Panton, Westhawk Ltd
Gabriel Sidhom, Orange-FT Group
Moshe Maeir, The Flat Planet Phone Co.
BJ Fogg, YackPack
Simonie Wilson, Open Methods
Michael Roth, British Telecom
Peter Saint-Andre, XMPP Standards Foundation
Michael Shiloh, OpenMoko
Marc A Smith, Microsoft Research Internet Services Research Center
Boaz Zilberman, Fring
Bob Frankston, Frankston Innovating
Mark Cooper, Consumer Federation of America
Kevin Nethercott, LignUp Corporation
Fabrizio Capobianco, Funambol
Koushik Chatterjee, Embarq
Sam Aparicio, Angel.com
John Waclawsky, Motorola
Michel Bauwens, P2P Foundation
Michael Codini, VoiceObjects, Inc.
Amit Desai, Dial Directions, Inc.
Dawn Nafus, Intel
Nathan Eagle, MIT Design Laboratory
Jeff Bonforte, Yahoo! Inc.

Do People Want Dual Mode, Convergence?

Dean Bubley has a nice list of things that will happen in the wireless market this year. Several caught my eye, one of them being that in our rush for all things "converged," we might be missing something, and taht is that people might be better at managing multiple devices, numbers and identities than we usually give them credit for.

Bubley argues that suppliers and service providers have a hard time creating the "one device that does everything" because, in fact, "people are happy with complexity."

"People like multiplicity," Bubley argues. "They want multiple service providers."

Some people certainly seem not to mind complexity, multiple bills or providers. Others probably prefer to buy in a sort of "best of breed" mode, despite some incremental friction.

I suspect that although lots of people say they like triple play services because it is more convenient using one provider instead of three, the adoption driver really is the discount.

The issue here probably is that many attempts to converge functions, identities and so forth involve some compromises, some effort and some limitations. People might be willing to put up with some amount of complexity or effort to get more choice.

But not much. According to the Reuters news service, half of all malfunctioning products returned to stores by consumers are in full working order, but customers can’t figure out how to operate the devices.

Product complaints and returns are often caused by poor design, but companies frequently dismiss them as “nuisance calls,” Elke den Ouden found in her thesis at the Technical University of Eindhoven in the south of the Netherlands.

The average consumer in the United States will struggle for 20 minutes to get a device working, before giving up, the study found.

Sprint Settles Patent Infringement Suit

...and it doesn't involve Vonage. A subsidiary of Acacia Research Corp. and Sprint Nextel Corp. have settled a lawsuit alleging that Sprint Nextel had infringed on four patents for technology used to display mobile vehicle information on maps. No terms were revealed.

Telecom has been a tough business for a decade. But operations seem to be getting riskier in the service provider business, for reasons that used to be an issue primarily for hardware and software suppliers.

Search Ads Will Drive U.K. Spending Growth

Internet searches will contribute around three-quarters of the growth of U.K. advertising in 2008, according to Group M, a unit of WPP Group, says the Dow Jones news wire.

U.K. advertising will grow by six percent in 2008, and all but 1.5 percent of that will come from search engine ads.

Group M also said the value of the Internet advertising market will come close to that of the television advertising market in 2008.

Newspaper advertising revenue is expected to decline by 2.8 percent in 2008, after a 3.4 percent decline in 2007, Group M forecasts.

Mobile to Lead Japan Online Ad Growth

Online advertising in the Japanese market is lower than in other markets, but growing at a faster rate.

Japan’s leading advertising agency, Dentsu Group, says search spending accounted for 27 percent of Japan’s online ad marketing in 2007, a figure significantly lower than in the United States (40 percent) and the United Kingdom (60 percent), eMarketer notes. By 2010, Dentsu predicts search will reach just 30 percent of Japanese online ad spending.

Dentsu also estimates that Japan’s mobile ad market grew by 42.5 percent in 2007. Mobile advertising is expected to remain the fastest-growing segment through 2010. Dentsu forecasts double-digit growth for the entire Japanese online ad industry to 2011, when growth is expected to slow to 9.6 percent.

54% of U.S. Cable Operators Face Telco Video Competition

Fifty-four percent of the cable systems surveyed by In-Stat say they face a telephone company that already is offering video service in their cable TV service area, In-Stat says. Oddly enough, though rural areas often are considered to be service backwaters, lagging urban and suburban areas in broadband access, for example, rural areas often are places where telcos have moved early to offer entertainment video services.

Historically, rural telcos have been licensed cable operators as well. But some telcos that aren't wired competitors rely on satellite partnerships to get the job done. And there's a scale effect here. It takes a long time for a large telco to upgrade nearly any part of its infrastructure.

Small operators, simply because they are small, can upgrade much faster. Keep in mind that rural operators often have a few hundred to several thousand customers, not millions. The same sort of process works at the level of a country. A small country can upgrade its facilities much faster than a larger country, simply because of the differences in scale.