"The Problem With Socialism..."

My favorite Margaret Thatcher quip: "The problem with socialism is that eventually you run out of other people's money.

My favorite corollary:  "The government has no money of its own; it's all your money."

Google Fiber Does Best Delivering Netflix

The new Netflix "ISP Speed Index" shows that Google Fiber is the best ISP in the United States, in terms of supporting Netflix streaming. 

At 3.45 Mbps, Google Fiber in the U.S. provides the highest average Netflix streaming bitrate anywhere Netflix is available, slightly increasing its average over last month, Netflix says.

Will Google Buy WhatsApp?

Though it is obvious why competing ISPs will be watching what Google does with Google Fiber, after it launches service in Austin, Texas, they might want to look elsewhere.

Google reportedly is negotiating to buy WhatsApp, the popular messaging app. Though both moves--selling 1-Gbps fixed network broadband, and owning and packaging WhatsApp, will affect communications service providers, it is WhatsApp, not Google Fiber, that will have the bigger immediate financial impact. 

The reason is that people use WhatsApp as a primary messaging app, and then use text messaging only when they cannot use WhatsApp. That is dangerous for mobile service providers because messaging most frequently is used between friends and people who already know each other.

Since most communication happens between people who know each other, you can figure out what WhatsApp means for carrier revenue. 



In the lucrative international SMS business, growth has gone into reverse, precisely because of the use of WhatsApp and other messaging services. 

For service providers, the biggest problem with WhatsApp and other messaging services is not so much that they disrupt revenue streams by shifting demand. WhatsApp and other messaging services do that.

But the bigger problem is simply that over the top messaging apps destroy the market, turning what once was a highly lucrative, high margin revenue stream into a feature that generates only modest revenue. 

Google Fiber is a potential threat. WhatsApp already is disrupting a key mobile revenue stream. If Google gets WhatsApp, that trend only will accelerate. 

Some 1995 Criticisms of the Internet Still Resonate

"What the Internet hucksters won't tell you is tht the Internet is one big ocean of unedited data, without any pretense of completeness. Lacking editors, reviewers or critics, the Internet has become a wasteland of unfiltered data." 

That was written in 1995, before the Web really became what it is today. Some might say the critique is partly true, even today. But the larger point is that it was very hard to foresee what the Internet actually would become.

That we should be circumspect about other similar big innovations is the lesson. We can't really predict the impact of a truly-big innovation. 

More Evidence: Austin is Getting Google Fiber

Austin is getting Google Fiber, a local Austin TV station now has reported. April 9, 2013 is the day we will know for sure.

Google Fiber now offers users in Kansas City, Kan. and Kansas City, Mo.  symmetrical 1 Gbps fiber connections for $70 a month, or symmetrical 1 Gbps fiber connections and a full array of television content for $120 a month.

Users in targeted neighborhoods also have the option of paying a $300 up front fee to have their home connected, then getting free 5 Mbps service. Google has a multiple-year time limit on the “free service” offer, but most think the offer will be extended indefinitely.

As always, there are a couple of big questions. People wonder whether Google Fiber actually is a sustainable venture, long term, or only a marketing investment. The other question is whether Google might decide to become an ISP on a wider basis.

Given the capital investment required to build a national network, most observers probably are persuaded Google would not do so. On the other hand, the cost of becoming a national mobile service provider are much less, and that probably is a more realistic “danger” for existing ISPs.

It's Hard to be a Telecom Regulator, Sometimes

These graphs from the International Telecommunications Union illustrate why it sometimes is so hard for communications regulators to come with policies that match the way the world is becoming, instead of what it has been.

Consider the irony of the U.S. Telecommunications Act of 1996, which aimed to spur innovation in the telecommunications business by allowing more competitors in the fixed network voice business. 

As the graph indicates, 1996 was about the inflection point where the whole global telecommunications  business became a "mobile" business. 

That year also was the point at which Internet use by consumers began its long rise. Then, sometime between 1998 and 2001, the adoption of Internet access and applications in emerging markets likewise reached an inflection point. 

The point is that no amount of backward-looking regulation was going to help much, since growth already was poised to shift to mobile and Internet. "

Granted, regulating "forward" probably isn't much easier. Of course, that is one reason Internet and communications executives often urge caution about prematurely imposing new rules. 

Only in retrospect is it possible to see when old problems don't need to be solved, because new solutions, behaviors and possibilities already are being born. 

Will Some "Entertainment" Spending Shift to "Communications" Spending?

PwC expects entertainment and media spending to keep growing. Video subscription service providers might not agree that can hold up over the long term. While it might be true that advertising spending is growing, especially in the online and mobile areas, it might not be so true to forecast continuing end user spending on video services.

PwC thinks consumers will keep spending five percent a year more, for the next several years. But no market grows to "infinity," and there are abundant signs that younger consumers do not watch television so much, do not own televisions, and do not want to pay for television, even when the cost of doing so is not an issue. 

All the while, new experiments with Internet-delivered video continue to grow. Intel plans a new streaming service. Netflix, iTunes, Google, Dish Network, Amazon Prime, Hulu and others are going to keep expanding their menus. Aereo appears ready to disrupt the broadcast TV revenue stream. 

And even though video service providers allow some streaming to keep their traditional video subscription service customers, all it takes is a change of heart by the content owners, and a willingness to go "direct to the end user," for significant change to happen. 

On the other hand, consumer budgets are not infinite, either. So a reasonable supposition is that most people will substitute one form of spending for another. In other words, if able to buy discrete programs or channels, and stream them, they will spend less money on traditional video subscription services, increase spending for online alternatives, and then likely increase the amount of money they spend on broadband access, as well.

But it wouldn't be unreasonable to predict that the net change in recurring spending will not be much different from what people spend now. Perhaps oddly, many consumers might find they do not actually wind up saving much money. The lower video service payments will be matched by new online subscription fees and higher broadband access spending. 

So one might predict that average spending on broadband access could grow, at some point, as traditional video service spending falls. But recurring payments would probably be equal to, or less than current payments. In fact, spending should be less, overall. 

The reason is that people are rational. They will decide whether they can save money overall by switching. If they can't save money, there is little incentive to switch.