Economic Impact of Higher-Speed Broadband Remains Unclear

Logic suggests that there is some positive relationship between broadband availability and economic growth, though it is hard to separate "causal" from "correlated" effects.

"We estimate that between 1998 and 2002, communities in which mass-market broadband was available by December 1999 experienced more rapid growth in employment, the number of businesses overall, and businesses in IT-intensive sectors," say researchers By William H. Lehr, Carlos A. Osorio and Sharon E. Gillett of the Massachusetts Institute of Technology and  Marvin A. Sirbu, of Carnegie Mellon University. See http://www.broadbandproperties.com/2005issues/dec05issues/Measuring%20Broadband%20Eco%20Impact,%20Lehr,%20Gilett,%20Sirbu.pdf.

Connected Nation likewise argues that broadband promotes economic growth. See http://connectednation.org/_documents/Connected_Nation_EIS_Study_Full_Report_02212008.pdf. The Organization for Economic Cooperation and Development likewise concurs. See http://www.oecd.org/dataoecd/62/7/40781696.pdf.

What remains unclear is what relationship exists between "ultra-high" broadband and merely "fast" broadband. One might legitimately point out that it is hard, in advance, to determine the impact of features not widely used. But the question is a fair one, given the huge investments that will have to be made to provide 100 Mbps service, for example. If one assumes investmetn capital will be scarce, a rather reasonable assumption, then the question becomes a matter of where to make broadband investments to reap the highest social reward.

These days, it is hard to argue that returns are not greater in the wireless, than in the fixed network sphere.

Nor is the eivdence about how broadband availability affects rural areas uniformly clear or positive. See
http://bits.blogs.nytimes.com/2009/02/20/rural-broadband-no-job-creation-machine/. In fact, Professor Raul Katz says it simply isn't clear whether broadband in rural areas is all positives, and no negatives. See http://www.elinoam.com/raulkatz/Dr_Raul_Katz_-_BB_Stimulus_Working_Paper.pdf.

Beyond that, the issue is whether the economy and society are better served by investment in mobile or fixed networks, beyond a certain point, if choices have to be made. And few would doubt that choices in fact must be made. There simply isn't enough capital, or enough demand, to invest very aggressively in both fixed and mobile networks, if the goal is 100 Mbps on the fixed network and 50 Mbps or more on the wireless networks.

That's one reason why fixed network investment has been "starved" so the wireless network can be fed, or why the number of employees in the wireline segment have been shrinking, while the number of employees working on the wireless network has been growing.

The issue is not so much whether there will be investment in either network. The issue is how much investment, and where those making the investment believe they can earn the higher returns.

The point is simply that, so far, there is no real evidence that the return from 100-Mbps networks is twice that of 50-Mbps networks, in terms of economic growth or social welfare.

Just about anybody likely would argue that a 100-Mbps network is better than a 50-Mbps network. The rub is that it is harder to determine whether 50-Mbps wireless networks might be even better, or whether 50-Mbps fixed or wireless networks would provide more economic growth and welfare than 100-Mbps fixed networks.

"Chrome to Phone" A Fixed-Mobile Integration Indicator

Google's new "Chrome for Phone" extension is one more way fixed-line applications and services are interworking with mobile apps and services.

"Chrome to Phone" adds a button to a user's Google Chrome browser that instantly sends the current web page, map, YouTube video, or selected phone number or text to that user's Android device running Froyo (Android 2.2).

Net Neutrality is a Serious Compromise

Predictably, some policy advocates have said the Google-Verizon agreement on network neutrality does not go far enough, as it exempts wireless networks from the agreed-upon rules, namely the reservation of any quality-of-service features to Google, and barring Verizon from applying them.

In the past, though, many have argued that network neutrality rules that forbid any packet discrimination, even when users may want it, would impair network investment and prevent service providers from innovating in the access business.

The Google-Verizon agreement essentially creates this situation for Verizon, though exempting the wireless network, which has more technically-challenging network management issues. Some observers have opposed network neutrality rules precisely because they would remove incentives for continued investment in the network.

But that is what Verizon has agreed to. It cannot offer enhanced services beyond the plain-vanilla Internet access service to content providers at any price. Some will note that this is a form of price regulation, and that one should expect the normal response to price regulation, which is a shift of attention and investment elsewhere, where prices are not regulated, and where growth prospects are not constrained.

The point is that Verizon has made serious compromises, as has Google. That's generally what happens in such policy debates when industry contestants face a major change in regulation and they want to have some say in shaping the outcome.

The compromise agreement is not a disaster, or an unqualified win, for either Verizon or Google. Google might face some constraints in the wireless realm as Verizon faces constraints in the fixed network realm.

All initiative now rests with Google as far as creation of real-time Internet services whose value can be captured financially, on Verizon's fixed-broadband network. Verizon has had to trade away initiative on fixed networks to keep its options for wireless services.

The agreement also means Google is free to innovate in the realm of Internet services, while Verizon has to concentrate on managed services not part of the Internet. You might argue that allows each company to play to its historic strength. It also might be fair to say neither company was forced to play in realms where it has no natural advantages. That's a compromise, maybe even a grand compromise.

Why Business Should Oppose Net Neutrality - Robert E. Litan and Hal J. Singer - The Conversation - Harvard Business Review

Chrome to Phone Launches

Google has officially launched "Chrome to Phone" to the public. The extension allows you to push web pages, phone numbers and maps directly from your Chrome browser to your Android phone.

On the roadmap? An update that will provide push capabilities in the other direction, from phone to browser.

download the extension here

"Nothing Bad Happens If Net Neutrality Fails"

There's a missing element in discussions about network neutrality, says Dan Frommer, Deputy Editor of Business Insider. "No one has convincingly and realistically explained what would happen that's so bad if ISPs were not forced to observe net neutrality, and if they were allowed to sell faster access to the highest bidders," Frommer says.

"The reality is that nothing really bad would happen," he maintains. Some think the internet access providers cannot be trusted. To be fair, everybody agrees with that, up to a point. The reason Adam Smith said we can rely on markets is that greedy, avaricious behavior by any actor is met in the market by offers from competitors who will offer a better deal. "Greed" is met by competition, and competition restrains greed.

Any ISP that behaves badly will quickly be met by a rival response from competitors eager to take that ISP's business and customers.

"If anything, things could get even more expensive for consumers if net neutrality is enforced," Frommer maintains. Why?

ISPs operate in competitive markets. They aren't perfectly competitive, only workably so, given the high barriers to entry.  If ISPs lose revenue opportunities because of net neutrality, they certainly will look elsewhere for new revenues, and raising effective prices is an obvious path to take.

There is an argument that if quality-assured tiers of service are allowed (something the Google-Verizon deal precludes), better-capitalized firms will be able to pay, and start-ups will not. That's mostly true.

But bandwidth costs are not the major cost item for new software upstarts. To the extent that "more bandwidth" fixes some latency issues, even real-time services can continue to use the best-effort Internet as bandwidths continue to climb.

The vast majority of Internet businesses won't pay for priority bandwidth, if it's ever available. And the ones who do will figure it into their costs of doing business, the same way they do with rent, staff and health insurance, for example.

Some will not agree. Market power is an issue in business. But competition is the natural restraint. Innovation will occur in the presence of, or despite, network neutrality rules. And the Google-Verizon agreement ensures that all application providers have exactly the same prospects in the Internet access part of the ecosystem.

If other ISPs adopt the same framework, fixed network access will remain a "best effort" service offering no advantages to any single application provider.

link

iPad Users Change Reading, Browsing, Gaming Habits

If results of a U.K. consumer poll are any indication, tablet PCs are about to change Web browsing, gaming and reading preferences.

According to survey conducted by Cooper Murphy Webb, Apple’s iPad is the preferred method of reading newspapers and magazines among consumers already owning the device.

The poll also found that a plurality of iPad owners prefer the device for reading books and gaming. Perhaps surprisingly, respondents indicated they used their dedicated gaming consoles and iPads about equally when gaming. If that holds up, it could mean trouble for game console suppliers. 

And a significant percentage prefer the iPad for Web browsing as well. That finding is less surprising, if one assumes the tablet device is designed to be used as a content consumption device.

Cooper Murphy Webb  polled 1034 U.K. iPad owners.


It's hard to tell at the moment whether the behavior of early adopters will be the same, or similar to, habits of more mainstream users.


The results, if they are replicated by other surveys, suggest the tablet has potential to disrupt and replace user behaviors for any number of other consumer electronics devices. Mobile phones and MP3 players are probably safest. PCs, notebooks, netbooks, ebook readers and game consoles would seem to be most at risk.


That's a rather broad base of devices threatened by tablet devices.

iPad Consumer Usage Study | Cooper Murphy Webb

Skype Files For IPO, Only 6 Percent Of Users Pay

Skype’s proposed initial public offering may offer a bit of insight on the future of international voice revenue. According to TeleGeography, Skype represents about 13 percent of global long distance traffic.

As of June 30, Skype was averaging 124 million users a month, with only 8.1 million of those paying users (out of a total of 560 million registered users). So 6.5 percent of Skype users are paying for services.

As a rough calculation, free Skype minutes of use therefore represent about 12 percent of global traffic. If the ratio of paid to non-paid use does not change, and if Skype keeps growing, the percentage of non-paid international calling, texting and video sessions will keep growing as well.

Paying Skype users, however, pay an average of $96 a year. Skype’s strategy is to keep growing its overall number of users and convert more of them to paying customers.

At least for the moment, most international trafiic represents a revenue stream for some service providers. But the percentage of non-paid traffic seems bound to increase. At the same time, the average revenue any single session represents likely will keep falling.

This implies that voice revenues will get cheaper, on a per-minute basis, while more traffic will move to the "free" category.

Skype revenues for the first six months of 2010 were $406 million, with a net income of $13 million. But a big portion of that was from interest income. That is a three percent net margin, overall.

Its income from operations was only $1.4 million for the six months, though margins on that business are 51 percent.

Skype Files For IPO, Only 6 Percent Of Users Pay