Google CEO Lauds Professional News Organizations, Steps in a Mess?

A smart chief executive officer knows how to tailor his or her remarks to an important ecosystem partner. The trick is to do so without alienating another important part of the same ecosystem. I'm not completely sure Eric Schmidt, Google CEO, completely succeeds on that score.

He makes the point that the importance of "journalism" is its quality, compared to much content produced by bloggers. At some level, that's simply a reflection of reality. Blog content is uneven. And Schmidt is right in catering to the professional content producers whose help could be invaluable in creating more-powerful advertising models for Google.

Still, there are relatively more artful, and less artful, ways of phrasing things. Perhaps another approach would have made the same point without risking some amount of potential blogger ire.

What's the ROI from Telepresence?

Unfortunately, "usage" is not the same thing as "return on investment" If those two metrics were in fact directly related, nobody would ever have a problem figuring out the return on investment from deploying any unified communications solution.

Generally speaking, one has to assess "success" using soft measures, though some will point to offset travel costs. The problem is that it is difficult to quantify "better quality communications" or "faster development time" or "reduced friction," though those are the sorts of benefits one would expect to see.

The trouble is that most of what one can quantify is "usage."

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Verizon CEO Says Market Can Sort Out Tough Issues

Ivan Seidenberg, Verizon CEO, said at a Council on Foreign Relations meeting that there was a danger of government regulatory overreach of several types in the current environment.

" I always worry about unintended consequences of government reaching into our business," Seidenberg said. "But I believe the players in the industry--like Google, like Microsoft, like the Silicon Valley players, as well as AT&T, and us and the rest of the industry--we're creating a better dialogue."

Seidenberg also thinks the industry has to do a better job of self-policing, though, more on the model of the advertising industry. That would lessen the need for very-detailed rules crafted "in advance" of a particular problem occurring, rather than a focus on fixing such problems as actually do arise.

"In the telecom business we need industry to do a better job at policing behavior, because, in the final analysis, government could never possibly regulate every condition, in every single circumstance that could ever happen, and do it efficiently," Seidenberg said.

Seidenberg thinks one of the key problems with proposed "network neutrality" rules that would prohibit virtually any sort of packet prioritization is that it makes very hard the task of providing different types of service to customers who may want it, at the lowest-possible prices.

 "Most people think a carrier wants to charge for every minute on a linear basis in perpetuity, infinity," he said. But "we don't really want to do that."

"What we want to do is give you a chance to buy a bundle, a session of 10 megabits or a session of 30 megabits," he says. "The problem we have is five percent or 10 percent of the people are the abusers that are chewing up all the bandwidth."

"So what we will do is put in reasonable data plans, but when we now go after the very, very high users, the ones who camp on the network all day long every day... we will throttle and we will find them and we will charge them something else," he says.

"We don't want to have a linear pricing scale," he said. "We do want to find a way to give the majority of people value for bundles, but we have to make sure we find a pricing plan that takes care of that 10 percent that's abusing the system. And it's that simple."

"And therefore you have to have rules, give us discretion to run our business," Seidenberg said. "Net neutrality could negate the discretion to run your business."

"Anytime government, whether it's the FCC or any agency-decides it knows what the market wants and makes that a static requirement, you always lose," he said.  Seidenberg noted that although access speeds might be higher in Korea or France, household penetration in the U.S. market is higher than in any country in Europe, he said.

"Japan may have faster speeds, but we have higher utilization of people using the Internet," said Seidenberg.  "So our view is, whenever you look at these issues, you have to be very careful to look at what the market wants, not what government says is the most important issue."

"If you look at minutes of use, the average American uses their cell phone four times as much as the average European," Seidenberg says. But what about penetration rates?

"If you look at Europe, they publish penetration rates of 150 (percent), 160 (percent), 170 percent meaning that people have more than one phone, two phones, three phones," he notes. Seidenberg suggests the high roaming rates are the explanation.

"My guess is you probably have two or three different phones to carry to use in different countries because your roaming rates are so high," he adds. "So my point is it's a fallacy to allow a regulatory authority to sit there and decide what's right for the marketplace when it's not even close."

In fact, Seidenberg argues that the U.S. market is more advanced in ways that count.

"Verizon has put more fiber in from Boston to Washington than all the Western European countries combined," he notes. Also, "if you look at smart phones, they have exploded this market in the U.S. market."

"Ask any European if they're not somewhat envious of the advancements of smart-phone technology in the United States," he says.

The FCC is "overreaching in regulations," he says. "It's a real problem to have well-intentioned people in Washington regulating the business as they understood it to be in 1995. Bad idea."

"I don't think there is no role for government," he says. "I just worry about, when you allocate capital and you look at consumer behavior, that is not a strength of, I think, everyday transactional activity of government agencies, particularly federal government agencies."

On the technology front, Seidenberg pointed out that the opportunities for distributed, remote or cloud-based applications is growing very fast.

"But here's the thing about the iPad that's very interesting," Seidenberg said. "We look at it as a fourth screen."

"Now, the interesting thing about the iPad, from how Verizon looks at it, from a network person, first of all, it has no hard drive, right?" he said. That means lots of need to get applications from the network, sort of reversing the trend of the client-server era to put more processing and storage at the edge of the network. That has postive implications for a firm such as Verizon.

Seidenberg also does not think the FCC should attempt to take spectrum away from broadcasters and reallocate it for mobile use, Seidenberg says, although Verizon has said it generally supports FCC plans to reallocate spectrum for mobile use. "I think the market's going to settle this," he said.

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Another Reason Why Handset Suppliers Have Gained Value in the Mobile Ecosystem

The mobile user experience keeps getting more complex as mobile operators add spectrum bands, even though most users do not directly encounter any of the particular issues. The reason is that it is harder to maintain connections moving from cell to cell and network to network as new frequencies must be added.

Voice and Internet connectivity issues also become marginally harder as hanset antennae have to accomodate more signals at different frequencies. Also, mobile Internet handsets have to conduct all sorts of signaling operations to support social networking, email and other applications. And then there is the simple matter of different air interfaces.

New fourth-generation Long Term Evolution networks will make the problem worse, especially for "world phones" that are supposed to work in many regions of the world.

When GSM, the first "digital" air interface was firs used in Europe, there was only a single frequency band at 900 MHz band. Than an 1800 MHz band was added, then 2100 MHz.

In the United States, the 850 and 1900 MHz, 1700 and 2100 MHz bands are used. That has lead to "quad band" and "tri-band" devices. And now LTE frequencies will have to be added.

In Europe LTE will likely start on 2600 MHz and potentially also be used on 1800 MHz and 2100 MHz bands, with some use at 800 MHz.

In Japan, LTE will be used on 2100 MHz with an additional band likely to follow. In the United States, the situation is even more divergent. Verizon uses a 10 MHz block in the 700 MHz range.

Some other operators might launch LTE in the 1700 and 2100 MHz bands. Finally, there are rumors of Clearwire jumping from WiMAX to LTE in the 2600 MHz band but with TD-LTE.

So global roaming capabilities of devices will be challenging. So how does this all work out on the consumer end user front? First, cost becomes an issue. Battery life is affected. In some cases, there are form factor issues and reception issues, as the physical placement of the antenna makes a difference.

The potential band and technology combinations for GSM, CDMA, UMTS and LTE are huge, as air interfaces also are different between operators in the U.S. market. All of that means there also are volume manufacturing issues, as devices have to be customized to a certain extent, by operator and by intended region of operation.

All of that means some devices will work better, quite apart from the obvious user interface issues, because of hidden requirements such as the networks each device is intended to work with, signaling operations and even the physical placement of elements within each device.

More-efficient producers will have an advantage as well, as the complexity of these decisions will mean there is an advantage for manufacturers and designers that can leverage the customizing process.

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A Decade After the Bubble, Another Round of Spectrum Auctions

It has been roughly a decade since European mobile operators placed big spectrum bets on "third generation" mobile broadband, and then largely watched as killer apps failed to emerge, customer use of the new networks remained sluggish, and executives ruefully noted they had overpaid for spectrum.

Now European mobile operaters are about to embark on a new round of broadband spectrum investments for fourth-generation mobile networks. You can expect them to try to be more-prudent investors this time around. In the 2000 round the German government, for example, raised 50 billion euros, or about $67 billion, on 3G licenses. Some anticipate the government will raise five billion to 10 billion euros this time around.

We'll see. The difference between the 2000 auctions and the current 2010 round is that Internet access has emerged as the "killer app" for mobile broadband, and the difference between 3G and 4G is that 4G looks to be a potential replacement for fixed-line broadband.

"With LTE, mobile phone networks will become a real alternative to cable or DSL (broadband telephone connections)," says Herbert Merz, head of the German hightech association Bitkom.

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Value Chain Conflict Takes Contradictory Forms

Struggles over value and revenue in the Internet ecosystem take the form of "network neutrality" debates in the United States, and oddly enough may take the reverse form in the European market. In the U.S. market, the effort is to induce the government to bar revenue sharing, where in the European market there may be pressure to get governments to compel revenue sharing.

Telefónica, France Telecom and Deutsche Telekom all say Google should start paying them for carrying bandwidth-hungry content such as YouTube video over their networks.

César Alierta, chairman of Telefónica, said Google should share some of its online advertising revenue to compensate the network operators for carrying the technology company’s bandwidth-hungry content over their infrastructure.

Alierta says that if no revenue sharing agreement was possible between the internet search engines led by Google and the network operators, regulators should supervise a settlement.

“Let’s see the development of digital society in terms of the winners and the victims," says Stéphane Richard, France CEO. "And today, there is a winner who is Google, there are victims that are content providers, and to a certain extent, network operators."

"We cannot accept this,” says Richard.

René Obermann, Deutsche Telekom’s chief executive, likewise says Google and others should pay telecoms groups for carrying content on their networks. “There is not a single Google service that is not reliant on network service,” he says. “We cannot offer our networks for free.”

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Will Apple Make History?

Those of you familiar with the evolution of computing technology over the past few decades are aware of the way historians describe the key "eras" of that history. We begin with mainframe computing, transition to mini-computers, then to personal computers, then to a period we generally call the "Internet" or "Web" era and now seem to be at the beginning of the next era, for which we do not generally agree on a name.

The point we like to make is that, in each era, and eras do not break cleanly and neatly into 10-year periods, there are some firms which dominate the business in terms of market share and influence. What we also have seen, though, is a different set of leaders in each era.

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The leaders of one era do not lead the next era. Again, this is a matter of relative influence and character, not an indication of enterprise death, though that has happened in some cases. So the interesting question right now is what companies, or what sorts of companies might arise to challenge even firms that are dominant today, such as Google.

All of this matters to companies in the communications business because each era of computing has created new requirements and opportunities for providers of computer communications. Generally speaking, as computing has migrated into the fabric of everyday life, the need for communications has grown steadily.

Arguably the biggest change in volume of devices requiring communications came with the "Internet" era, when virtually every computing appliance began to require communications.

Today, we can point to smartphones as the latest wave of computing devices that require communications.

To be sure, executives in the business are well aware of the historical implications of changing eras. And the fascinating question right now is  whether any company that has been a leader in any of the previous eras can make the transition to leadership in a subsequent era. The question is interesting simply because it has not ever happened.

But then there is Apple. And one way to make Apple "fit" into the typology is to remove it from the ranks of 1980s leaders, and then place it into the era of mobile Internet computing. Or one can leave Apple where it logically is categorized, and then assume that it is a candidate to make history, by becoming one of the dominant firms in the coming era.

That, in any case, is why some observers might believe Apple is better positioned than Google, as fearsome as Google seemed two or three years ago, as a possible "leading" firm in the era that is coming. Already there is some thinking that "desktop search," as key as it has been to Google's prominence, will be challenged in the era to come by "mobile applications."

It might seem odd to say Apple is a more-likely candidate to lead the next wave of computing than Google. The "safe" answer is to say neither will be a market leader in the next era. But Apple could make history, in more ways than one.

Apple always has been a believer in the power of "closed" ecosystems, at a time when the rest of the world has shifted to "open" systems. Observers who think "network neutrality" is important because it is seen as related to the preservation of an "open" applications environment could well be "barking up the wrong tree" entirely.