Music Industry "Goes Open" to Make More Money

One of the odd justapositions out there right now is the recent move by music companies to drop encryption measures (digital rights management) online music sales through Amazon.com as a way of increasing sales. Given the general vested interest in protecting content from copying, this is a bit strange.

Why would music labels voluntarily drop DRM measures that make it harder for users to port their music around? In this case, a move that essentially is more open is a competitive measure. Apple, which uses a DRM format to restrict downloaded music to playback on its own devices, essentially has gotten too much market power in the music business, the studios think.

And in this case, one way to wrest back more control is to stimulate sales of unprotected music through rival retailers such as Amazon.com.

Amazon MP3, the DRM-free music store of Amazon.com, now sells DRM-free MP3s from the four major music labels - EMI, Universal, Warner Music, and Sony BMG - and 33,000 independent labels.

Apple iTunes has more than two-thirds market share of paid online music donwloads.

The top 100 songs at Amazon MP3 come at a price of $0.89 each and most other tracks are offered at a range of $0.89-$0.99, underpricing iTunes titles which are sold for 99 cents a song.

It's a bit unusual to find any industry's leaders pushing a trend towards openness, rather than upstarts. But that's what happens when an upstart becomes too successful in a new line of business. If "open" sells better than "closed," they'll try it, despite an obvious interest in copyright protection that might be furthered by DRM measures.

Of course, the problem with DRM is that it angers legitimate customers as much as it deters piracy. It is a blunt instrument.

MPLS over DSL from New Edge Networks

New Edge Networks will offer its managed network customers in April the ability to tag and prioritize data applications traffic over low-cost, high-speed digital subscriber lines commonly used for wide area networks. The move is a challenge to T1 services that sometimes are alternatives to business-class DSL services, and which can offer tagging and prioritization.

New Edge says it also will support tagging and traffic priorities end-to-end through private networks

Businesses in various industry segments can use up to five classes of service to tag and prioritize their applications so that critical services such as VoIP telephone calls or inventory and price lookups move across DSL-based networks ahead of email or other less important business functions.

Currently, traffic tagging and prioritization with class of service are available only on more costly high-capacity T1 lines with MPLS technology, short for Multi-Protocol Label Switching.

New Edge will honor DSL class-of-service tags end to end throughout its customers’ private wide area networks.

The move means enterprise branch offices and remote locations or smaller businesses that cannot justify a T1 line will be able to buy class of service features at a business DSL price.

A typical DSL connection used as part of a managed, private network costs about $150. Monthly costs for T1 lines range from about $500, depending on distance and geographic area.

Mobile Web: The Browser Matters

On Christmas, traffic to Google from iPhones surged, surpassing incoming traffic from any other type of mobile device, according to internal Google data made available to The New York Times, says staff writer Miguel Helfta. So apparently the design of a mobile phone brower really does stimulate high levels of usage.

The data shows that although iPhone's used to access Google fell back into a more normal range after that, levels of access still were higher than from Symbian mobiles. Keep in mind that Symbian has something like 63 percent of the installed base while iPhone has perhaps two percent.

Yahoo also saysiPhones accounted for a disproportionate amount of its mobile traffic, Helfta notes.

There might more upside for Web application developers. If they can develop for mobile-optimized browsers, rather than for the details of individual devices or operating systems, there arguably is an easier path to ubiquity.

Telcommuting Downside

Telecommuting may boost morale for telecommuters, but it can have the opposite effect on those left behind in the office, according to Professor Timothy Golden, a management professor at Rensselaer Polytechnic Institute.

"Those who do not telecommute are more likely to be dissatisfied with their job and leave the company, says Golden. Golden's research suggests that their co-workers tend to find the workplace less enjoyable, have fewer emotional ties to co-workers and generally feel less obligated to the organization.

About 37 percent of U.S.-based and international companies now offer flexible work arrangements, with the number of those programs growing at a rate of 11 percent per year, according to the Society of Human Resource Management.

With a greater prevalence of telecommuters in a work unit, he said, non-telecommuters find it less personally fulfilling to do their work.

Greater face-to-face contact between co-workers when all employees are in the office and granting greater job autonomy can help, Golden argues.

He studied a sample of 240 professional employees from a medium-sized company.

Consumer Electronics Trumps Other Retail Sales

It doesn't appear to have been a good Christmas selling season, as this graphic by the Wall Street Journal illustrates.

But Best Buy says its December sales were up 1.5 percent over last year, compared to an increase of about seven percent in the 2006 over 2005 comparison. The company says the slower growth rate is due where the post-Thanksgiving week data was recorded. This year, that key week fell into the November numbers, instead of in the December reporting period.

Best Buy affirmed its 2008 guidance, suggested the company really did have stronger sales than it might appear. The contrast in sales might point to the increasing importance of consumer electronics as a component of discretionary spending.

That would accord with increasing broadband and mobile penetration, plus continuing interest in high-definition and flat screen TV displays, gaming, digital audio and even personal computers.

Over the past decade, for example, the percentage of disposable income now going to communications and electronic entertainment goods has been rising in virtually all North American, Far Eastern and European regions.

iGoogle for Mobiles Now Live

If you are the sort of user who uses iGoogle, and you put Real Simple Syndication feeds on the iGoogle page, this is helpful. Also, Google has authored a number of its other applications, including Docs and Spreadsheets, the RSS reader, Picassa, Gmail, Google News and even the basic search function in ways that are compatible with a mobile screen. Very nice.

Business Phone Systems: Still Lots of TDM

After dipping one percent in the previous quarter, enterprise telephony equipment manufacturers saw an 11 percent jump in worldwide sales in the third quarter of 2007 to reach $2.6 billion, according to Infonetics Research. But IP-based phone systems did not get all the growth. In fact, Infonetics researchers say the rate of growth in the legacy time division multiplex segment actually outpaced that of the IP PBX segment.


In fact, hybrid PBX systems account for 64 percent of all PBX and key system line shipments worldwide. Pure IP lines account for 18 percent of shipments while TDM lines represent 17 percent of total.

It looks like lots of buyers still are hedging their bets or have reasons to support TDM systems even as they migrate to IP.

Mobile VoIP Proliferates

One wonders how long mobile carriers will wait before launching their own lower-cost global calling plans. At some point they will. The only issue is how much market share they are willing to tolerate losing to VoIP providers before they counterattack. Raketu is the latest contestant in the business calling space, by virtue of its compatibility with RIM BlackBerry devices.

What is emerging now is the IP equivalent of "over the top long distance" calling plans that used to be prevalent in the U.S. market. Under such plans, created in large part for reasons of regulatory compliance, users selected one provider for local calling and then another provider for long distance. At one point, one could not select one's local voice carrier for that purpose.

So you see the business effect: a regulatory framework creates an entire "long distance calling" business. It lasts for a while, as competition knocks prices way down. Then, at some point, regulators decide markets are competitive enough to allow the local phone companies back into long distance.

And then the independent long distance industry collapses.

VoIP over mobile, indeed VoIP itself, is headed for such a day of reckoning, at least for that portion of its use as a substitute for landline or wireless calling. Nobody knows when the day will come. It might come carrier by carrier. But at some point, mobile and wired service providers are going to reach a point where it makes sense to offer much-lower global calling from their existing services and devices.

That isn't to say independents will not gain share and build businesses in the short term. Nor is it to say VoIP features embedded into other experiences are likewise susceptible to telco repositioning and pricing. It is to say that past telco responses to regulatory and technologiccal change offer some obvious clues about what they will do in the future.

As scale players, they tend to ignore new threats and markets until some critical mass or clear strategic interest emerges. Then they move, and fairly quickly. They'll do so again.

Raketu Launches VoIP over BlackBerry

Raketu has launched a new peer-to-peer VoIP application designed to run on Research in Motion Blackberries. The app furthermore is intended to be used by enterprise, small and mid-sized business users.

Raketu does not require a client download and is accessed from the BlackBerry's Web browser at www.BlackBerry.raketu.com.

The application obviously will make most sense for business users who need to send and receive text messages from international locations, as well as users who need voice communications in a global context.

FiOS Best, Says Consumer Reports

The February issue of Consumer Reports features a survey of broadband access providers, and names the Verizon FiOS service, best for reliability and performance for its Internet, television, and telephone services.

Better cable companies include Cox, Bright House and Wow, the survey indicates.

For Internet service offered through a cable company, Wow, Cincinnati Bell and Bright House also did well in the survey. Verizon's DSL Internet service was rated "average" for value, reliability and support, but scores for performance were lagging, according to Consumer Reports.

Slowing Economy or Just Slowing Growth?

That's the question as at&t Chief Executive Officer Randall Stephenson claims slowing economic growth has led to "softness" in the home-phone and Internet businesses while Verizon COO Dennis Strigl says that's not the case.

“We have seen virtually no economic impact,” Strigl says. "Any challenges facing the company have more to do with competition," said Strigl, than the economy.

It is possible Verizon's customer base simply isn't feeling the economic pinch or hasn't felt it yet. It is possible Verizon simply is faring better in the competitive battle with cable and other contenders. Maybe there is some other explanation.

Could it be FiOS? Also, Stephenson pointed to wireline voice and broadband growth. In some ways, that is no surprise. Landline share continue to shrink, in large part because of wireless substitution and cable market share gains.

Broadband adds have been slowing for a couple of quarters, at least, in part because most people who rely on the Internet already have broadband, and suppliers now are facing customers who don't own PCs, so have no need for broadband; customers who think dial-up still is adequate; and customers who have PCs but don't use the Internet. It is no surprise that broadband additions are slowing.

Telcos More Open to 3rd Party Partners

One difference between 2006 and 2007 was that global telco executives began to shift attitudes about the importance of working with third party application and service providers. Where they might arguably have been more focused in 2006 on cost cutting and other internal measures, 2007 found executives more focused on how to position themselves for new services.

Though there arguably is more recognition that advertising operations will demand partners, there also seems to be more recognition that core communications capabilities can be leveraged as a revenue stream if those features are made available to other application and service providers.

This is a very big and quite important shift in thinking.

Why VoIP Won't Escape Voice Regulation

Telephone subscribers in Oklahoma City and 223 other communities throughout the state will be required to pay a two percent "line inspection fee” on the basic residential rate beginning in February. The fee has been assessed by cities for decades, but up to this point at&t has simply "eaten the cost." It now will pass the fee through to users.

Apparently at&t pays a fee to maintain the rights of way for its telephone lines in 224 of about 490 communities it serves in Oklahoma.

And that's one of the reasons VoIP-as-a-replacement-for-wired-voice will not forever escape regulation of the sort legacy voice services are subject to. There are many vested interests at the local and state level, as well as at the national level, that generate revenue from voice services. As IP-based communications begin to displace huge chunks of the services base, those interests inevitably will move to protect the revenue by pulling VoIP into the older framework.

Now, the way this gets done might change. Where a "subscriber line charge" now is assessed for each "voice line," it might someday be assessed on a "broadband access connection." The revenue won't be allowed to evaporate.

Startling BT FTTH Trial

BT is installing what amounts to a test fiber-to-the-home network at Ebbsfleet, Kent, U.K. What's interesting about the 10,000-home network is the early announcement of prices.

Because U.K. broadband access operates under the wholesale Openreach model, the first thing BT is doing is announcing wholesale prices to be charged to competing service providers and BT itself to use each of the lines. Retail pricing will be set by each of the wholesale partners.

Rates range form £100 a year ($195) for a basic line to £530 ($1,038) a year for the fastest connection, at 100 Mbps.

BT still is wranging with U.K. regulators about the ultimate shape of regulations surrounding widespread fiber-to-customer networks. BT wants more freedom to use its own assets, of course, including freedom from mandatory wholesale regimes of the current sort, in the best case scenario.

From a U.S. perspective, it is striking that the first pricing information is about wholesale rates rather than retail pricing, a measure of how different the regulatory frameworks now are.

What's Good for Suppliers Also Good for You?

If you casually stroll past displays of PCs on the shelves of any electronics retailer, you'll see at least a few notebooks preconfigured for one brand of wireless data card access. Now, in one sense this is the same strategy used when software comes preloaded on your brand-new machine. Dial-up Internet access services, anti-virus, firewall and security, media players, browsers, games and so forth provide examples.

In the same vein, there has been an argument that the notebook screen represents real estate that a provider's icon must occupy to get more usage or attention. Up to a point there's a clear logic to such thinking.

But there's some point at which the strategy breaks down. Lots of machines sport RJ-11 connections for dial-up Internet access. I don't know how many of you think that's a "feature" instead of a "bug" anymore, but it's clearly not an important feature for many.

The point is that USB and Ethernet ports, like RJ-11 ports, are general purpose computing capabilities. They don't lock anybody into a continuing commercial relationship with any single provider. The user has choice.

Providing that a new notebook has sufficient hard disk capacity, most users probably just ignore all that preloaded software and most of the offers. Norton might disagree, of course, and that might be one of the salient exceptions. Others of us have to spend some time removing all the unwanted software from the machine or at least disabling their ability to start up automatically.

Suppliers might think otherwise, but the incremental cost of preconfiguring a PC for one flavor of 3G data card access probably outweighs everything but the revenue the manufacturer gets from the service provider for preloading the software.

Most people don't seem to have any problem buying a card when they want to use wireless broadband services. To be sure, there might be some instances where a particular buyer of a particular model actually wants to buy wireless broadband from the precise supplier whose access software is preloaded on that machine. But not very often.

Perhaps an argument can be made that the revenue gotten by the PC manufacturer from such deals helps in some small way to control the overall cost of the device. In that sense, there is a consumer benefit. So maybe this is the PC equivalent of advertising. Users might not "like" it, or "want it," but it might help lower the cost of acquiring and using something else (their PC).

Still, it's hard to imagine that preloading broadband wireless for a single provider can be done on a wide-enough scale to produce incrementally-significant customer additions.

The way this could work, though, is to do the reverse: sell a cheap device that actually is configured to use one broadband access provider. Consumers can do the math. If the value of getting a general-purpose computing device is low enough, and the price is lock in to one broadband access supplier, some buyers will do so.