Friday, August 29. 2008
There is quite a hullabaloo going on over Comcast's decision to cap bandwidth for consumer users at 250 Gb. Typical of the wails of protest are say here at GigaOm:
Karl Bode over on DSL Reports reports that Comcast will institute a 250 GB cap on its broadband connections starting Oct. 1. Expect other carriers to follow suit and make tiered broadband a reality. Much as I would like to think otherwise, this is the end of the Internet as we know it.
Is this the "end of the internet as we know it" - well yes - but that's because the last few years' "internet as we know it" was economically unsustainable - it was largely subsidised by distributors charging sub-economic prices to encourage the filling of their pipes (which most of them got at cut price after the dotcom bust - a one off benefit). But web video changes all this, as it puts a huge load on the pipes, threatening to fill them to bursting. At this point the distributor either has to build more capacity, or restrict usage. The "game theory" of the situation can be summed up as in the diagram below:
Digital Media Value Chain - Who pays for Video?
Quite simply, today there is a mismatch over who is bearing the costs and who is gaining the benefit. In a way Distributors have themselves to blame, as they have subsidised the pipes in order to fill them, indulging in price wars and thus creating unrealistic expectations of bandwidth pricing. This is because the economics of any high capital cost utility is to get as much usage as possible as fast as possible. The problem is the huge growth of video is now threatening to fill the pipes to overcapacity, and in order to handle that the pipe owners have to change strategy. There are only two options available right now:
(i) Upgrade the pipes - but this is enormously expensive, and in the current Internet model no one will pay for this except the distributor - which gives them unacceptable risk. Solution - meter usage and extract payment from either upstream or downstream users, typically in exchange for QoS benefits.
(A third option is to improve compression, but that is a ways off - but maybe capping will stimulate more innovation here?)
And, being the Distributors with company cultures we all know and love, they will be heavy handed, arrogant, clumsy etc in how the execute this - but it doesn't mean they are wholly wrong.
Aggregators (and some content providers) also share some of the blame, they have in many cases built their business models on the assumptions of a continued "free ride" (or at least heavily subsidised one) over these pipes, and are now reaching for all sorts of straws (such as "Net Neutrality") to continue this practice.
The user has enjoyed the largesse primarily by getting low cost, unmetered bandwidth. This has created a false view of the price of bandwidth.
The "path of least resistance" for the distributor is to cap the heaviest users of the pipes, by imposing financial penalties. This both (i) reduces the rate of pipe filling and (ii) extracts revenue to pay for the upgrades. And despite all the hullabaloo, this is fairly standard in any utility. (Someone willl have to explain to me how the same people who call the 'Net a utility "cloud" one week can wail about utility based pricing the next). Also, owing to the power law (ie 80/20 law - or 99/1 in this case apparently) nature of usage, only a very small number of users will be heavily impacted.
The main unanswered question question in the value chain is to ask who shall help pay - right now the upstream players pay very little, payment is nearly all from the users and via distributor subsidy. Yet some of the worst offenders are upstream, and some of them (GooTube) make superprofit. This implies that the upstream end will be asked to fund some of the capacity buildout - and since at the end of the day they run over the distributors pipes, they have no choice but to pay. (Which is of course why Google is building its own network - they are smart people, they can see the game is up).
Which brings us to the heart of the "Net Neutrality" debate, and its endgame. The Net Neutrality argument is that if the upstream players are asked to fund the pipes, then only the richest will have access and this will deny newer small players and thus innovation. The solution to that is simple of course - the downstream user must then pay more. However, another tenet of the Net Neutrality position is that heavy users must not be penalised. (Conflating "free" as in equal opportunity to access with "free" as in pay nothing)
Now, as the chart above shows, the only way you get both of those freedoms is if the distributor picks up nearly all the costs. That ain't going to happen again, so it will now be a test of how much users will want to pay for a "neutral" net, vs how much they really care about the type of content the neutral net is dishing up.
(For the record - we believe that the Neutral Net should allow equality of access, and the user should pick up the tab for the services they consume as they would in any other utility model)
Footnote - I meant to put this in, but in todays market 250 Gb is not a draconian cap, thats about 200 hours of standard def TV a month - say c 7 hours a day - and is a lot higher than others that have been proposed.
Footnote 2 - I see quite a few people are arguing that this capping is all to protect distributors' in-house services eg IPTV etc - maybe, but what is not mentioned is that users are normally paying extra for those services. If there was not an option to pay extra to get competing servies via internet, then there would be an issue.
Thursday, August 28. 2008
It is a fact (usually downplayed for public consumption) that there is a lot of por...Adult Content* on the 'Net. Also downplayed is that as an industry it is very cutting edge in its use of new technologies, owing to the surplus funding it gets from its eager customers. It is often the "early adopter" of many later standards. However, the industry has been going through the same travails as the Mainstream from enthusiastic amateurs making free user generated content, and new services like YouPorn following in YouTube's wake and being vast services for posting up copyrighted content.
And now it looks like its forging the way in determining how this issue will evolve - from TechCrunch:
It will be interesting to see how this ruling reflects on the much higher staked Viacom / Youtube spat.....
*in fact, porn is now having to compete like never before for attention and wallet with other Adult vices like gambling.
From Jemima Kiss over at the Grauniad - she reports on how they took the next crop of Seedcamp prospects and ran their prospectuses and revenue models through Wordle:
Seedcamp 2008 Prospectii and Revenue Models via Wordle.net
A word to the wise - I wouldn't count on the Advertising, guys......
For those interested in the trends of trendiness, here are the 2007 TechCrunch 40 brief descriptions in Wordle too:
TechCrunch 40 via Wordle.net
As you can see, the memecloud was in a different place a year ago.......there is less video and search but more information and mobile now. Social is still popular. For the record, Financial Services startups did well in both last year. I don't have the TC40 revenue models, but I'd bet Advertising was in the same spot....
Wednesday, August 27. 2008
Once upon a time being a hacker required deep skill in arcane arts and links to near-mythical chat boards where initiation ceremonies make the Freemasons look tame. Now all you have to do is read Techmeme, it seems. Nice article by Larry Dignan here on ZDNet re all the scares on internet security, tallies with what I was thinking:
Thus far this summer, the Internet has not cracked, even though Dan Kaminsky basically revealed all the details of a flaw in the Domain Name System that could have led to a train wreck on the Internet. Thankfully, he cautiously provided the details, so patches could be put in place to prevent identities of users of banking and other sites on the Web to be hijacked, first.
The Kaminsky affair sent us scurrying around our own DNS (see Dave's thoughts here), and I also felt that in this sort of situation, a bit of dignified silence in public forums wouldn't hurt. Serious question though is, how should one disseminate data of this sort? I can't believe there are not people at all the major Telcos, ISPs, standards bodies and manufacturers who could not be tipped off first.
(Dave notes that Dan Kaminsky did actually get all the DNS vendors together in secret to work on patches before the flaw was publicly
announced. The news did leak, but the vendors still got a good head start. The usual model when a "good guy" discovers a vulnerability is to give the vendor 30, 60 or even 90 days to fix it before going public. Most security people seem to regard this system as imperfect, but no one can think of a better one!)
I've just noticed that a small milestone has been passed in our household. That is, that for most "public service" TV content, we now have three ways of watching it "on demand". We are in the UK and so public service content comes from the BBC, ITV, Channel 4 and 5.
We can now watch recorded programmes on the BSkyB Sky+ PVR (satellite), we can watch the Virgin Media "On Demand" VOD service (cable) or we can stream video from the broadcasters' websites over the Internet. The BBC, in particular, has quite advanced solutions for cable and the internet, branded as "iPlayer". The other broadcasters are not far behind, but iPlayer is more comprehensive and consistent to use.
The BBC is interesting to watch as it shows what is technically possible. (The BBC has a mission to provide content to licence fee payers and is funded by the licence fee, so they don't have to worry about getting revenue from a new service.) It's clearly getting very easy to package and move content around, but is it commercially sustainable? I have been following the saga of ITV in the UK, who are funded almost entirely by advertising and they are seeing a steady decline in that revenue as advertising spend moves to the Internet and PVR's undermine TV ad spots.
So how do the three platforms measure up?
On an Standard Definition TV, I usually can't tell the difference between the Sky+ PVR and Virgin Media on demand. I have seen a few MPEG artefacts on the Virgin Media on demand service, but that might have been because I was looking for them! Over the internet (as you would expect) the picture resolution is noticeably lower and the frame rate also appears to be lower (giving a jerky picture, especially on slow panning shots.)
How about navigation? The most obvious point is that a PVR has to be programmed before the show is broadcast, although series linking mitigates this. (Some people would say that PVR isn't really "on demand", although it does give a similar user experience.) I have to say that the time/channel grid is still a very intuitive way of finding a show that I want to watch, but that might be because I am old fashioned
The navigation of a VOD catalogue on a TV does have a fundamental navigation problem as catalogues are large and TV screens are small. The early versions of the Virgin Media (then NTL) VOD were very cumbersome and slow to navigate, but Virgin and their VOD/middleware supplier SeaChange, have made many improvements and it is now quite usable. In particular the BBC iPlayer application, which is overlaid on the SeaChange platform, is very easy to navigate and even has a free text search option. It is still not a quick and simple as a Sky+ PVR, but that's because it is giving access to a much bigger library of content.
Navigation on a PC is better that the two TV based alternatives, but it would be, wouldn't it? There's more screen space and the computer has more processing power to keep the GUI running quickly. Of, course, we get into the "lean forwards / lean back" debate i.e. computers are for working on and TV's are for relaxing. Again, I might have an old fashioned view on this. Once I have done the hard work of finding the content, I always find that my children are happy to relax and watch the content on a computer
Techmeme's Gabe Rivera points to a video by Penn & Teller, of all people, looking into the Greenscam around recycling waste. According to the report, the only thing that makes sense is aluminium can recycling, as aluminium has value (I suspect that's also true of any metal).
It's on Google Video over here (there is no embeddable thumbnail on Google Video, which is an indication of why Google had to buy YouTube )
The rest of the industry is apparently less green than pure landfill as it takes more energy to recycle anything else and only exists on subsidies. However, the subsidies are now creating an entire faux value chain - that is starting to use legal approaches to ensconce itself (its now a multi billion $ industry, based totally on subsidies). They also point out that there would be far fewer trees if we didn't use paper, as trees are a crop like potatoes.
So why put it all up here, on a digital multimedia blog? Apart from being interesting, there are two relevant reasons:
To be clear, being Green is good - but the Greenscam, which is typically an attempt to either use consumer (or even enterprise) guilt to extort money, or to gain public subsidies, is a distortion to the Tech / New Media market. If we were cynical (as if ), we would hypothesize that the new ICT Greenlove is more about getting additional money over and above the surplus hours, Ad funding and VC cash that the market is currently subsidized by.....
*I have a friend who is researching for a PhD thesis showing that since the 1950's, the mass media has increasingly been subverted from an inform / educate role to an entertain / advertise role - ie its an adjunct to the consumer society, not the informed citizenry. Its apparently accelerated in the last decade or so. Compelling reading.
Tuesday, August 26. 2008
Very interesting post on Techmeme about Google investing in subsea cable:
Google is working with a consortium of carriers planning to build an intra-Asian submarine cable system. The new cable, dubbed the Southeast Asia Japan Cable (SJC), would link Unity's landing station in Japan to Guam, Hong Kong, the Philippines, Thailand and Singapore. The cable is still in the planning stage, and the consortium has yet to announce a supply contract. 'Given the current flurry of undersea cables under construction, the SJC cable will probably not be ready for service until 2011 at the earliest,' said TeleGeography analyst Alan Mauldin
This follows huge investment in quite a number of other distribution plays, including wireless spectrum. So why do this? Now part of this requirement is clearly to move traffic between datacentres, but to say the least, its unusual for a media aggregator and Ad server to want to be a major global Telco.
So, a thought experiment - Google's business model initially was to allow users to find content they want on the internet, and to pay for this it monitors their behaviour in order to optimise adverts it serves to them. Over time the model has more become about selling advertising by capturing various strands of user data, of which search is now just one component. Strategically, Google "pwns" the content market by making it easy to find it. Its market dominance allows it to "pwn" the consumer market in many ways. However, the one area it dows not "pwn" is the distribution function. But that traffic travels over the assets of some of the few companies in the world who are both rich enough and smart enough to give them a run for their money. Google gets a "free ride" right now as operators are (i) charging users for pipe and (ii) subsidizing it to grow traffic, so that their fixed costs are amortised over more people (and they get more subscription). But what if the Telcos thought the upstream players should also help pay for the next upgrades, especially those pumping out the video that is filling their pipes?
Our hypothesis is thus that Google's greatest strategic Achilles heel is in internet distribution. This is the one area where it faces a major competitive threat, as the distribution companies (mainly Telcos and ISPs) can control Google's traffic, and extract value from that. AT&T made this point very clearly when it showed that it too can monitor internet behaviour. And when it comes to who has the whip hand, its the Telcos in the final analysis. They own the means of distribution.
Hence a content aggregation and search company is making such a play in becoming a pipe owner.
Google is in the NYT for managing its cost base via cutting subsidies for child care facilities and evening canteen services, and this apparently implies it is losing its Mojo (via Slashdot):
Actually, we noted the first sign of MoJo loss was when it bought YouTube, which we believe was its "Netscape Moment", for 3 main reasons:
At the time (18 months ago) we reflected that from now on a number of other behaviours are predictable, such as:
(i) Increasing reliance on acquisitions for making up revenue growth, and paying increasing premiums for them...;
Another classic sign of the "End of the S Curve" and the move to utility is cost management by perks removal. This usually implies two things are going on in the business:
(i) It is unable / unwilling yet to confront where the real main cost wastage is, so "easy" targets (ie no Baron owns them) are hit first - aka reshuffling or removing "Deckchairs on the Titanic"
For those who have been around the corporate block, this sort of behaviour is very predictable owing simply to the amount of times its been seen before in the last 50 years or so (at least). These are classic signs of slowdown of margins, even if revenue is still growing. That's due to the flattening of the growth curve as the business moves into its Utility phase. Other signs are typically a shift in reliance from technological innovation to economic (acquisition, price crashing) and legal means to gain competitive advantage.
This is not good or bad per se*, merely a stage in the growth of any major enterprise. Google is becoming the new Microsoft. Microsoft is now the new IBM. IBM is the new GE....
So who is the new Google?
*The daycare ploy here is a little bit more cynical than most, however, as by reducing subsidy it raises annual daycare prices to $50k+ per annum, thus limiting it to more senior (ie powerful) employees:
In other words, the net effect is that junior new mums are taking the brunt (and maybe being managed out the business, as they are both expendable and no longer able to sleep under their desks on all nighters?). Maybe not Evil, but definitely not a nice way of doing things.
A few weeks ago we noted that this cycle of Cloud Computing aka Grid aka.....(etc) was probably going to be kindly put to bed after a host of high profile woes, and wondered what it:
will be resurrected as next time. Our money is on a biological analogy.
El Reg has stepped up to the breach and noted that there will of course be a Grab for Green (props to RedCatCo and Jof Arnold for link):
The next time around, it will be pitched as a "green" technology. Why ruin the environment with your data center? You can run a social media website and still love the earth.
Dang, we should have seen that one coming. Patrick's Law* makes this the most likely correct scenario. It's not true of course - massively concentrated datacentres are as ungreen as you can get, but it is definitely a wonderful straw to clutch on to.
*Patrick's Law states that, for most human endeavours where greed, fear or power is involved, the most cynical explanation is usually the correct one
(Update - any worries I had that I was overly skeptical about the head-in-the clouds set is dispelled by the comments over here on Crunchbase)
Monday, August 25. 2008
A Friend for All Seasons
This was post was sort of inspired by 3 things - firstly, a comment by Robert Scoble on a post by Louis Gray where La Scoble noted, re the plethora of SocNets LG is on, that.....
I'm very close to getting off this train. What you are writing here won't be understood by most people for two to five more years. So, adding more things onto the plate won't help unless they add REAL value. So far I'm totally not impressed by many of the things in this genre. Even my wife says she doesn't get FriendFeed (and if she doesn't get THAT she certainly won't get other lifestreamers).
Secondly, an ongoing interest in how filtering would work in a "too much information" world, and also thinking through how you would, in a wisdom of crowds environment, screen out those friends, followers, twerps etc who you do not think have as relevant a voice on problem area X. (For the arcane minded, I was following the arguments last night on relevant performance of the F 22 Raptor vs the Eurofighter Typhoon*. It is actually possible to have a fact based discussion on this subject as most of the data is there - if you know how to interpret it - but if you read the blogosphere on the subject, you will find that fact based discussion is the last thing you will get - and hence god help anyone relying on the quality of socially mediated advice in less data driven areas.).
Lastly, I've been playing with Blip.fm for a week or so, and am of course shocked by the appalling taste in music so many of my friends have . More seriously, I had noted a few weeks ago that I found, in baking off Last.fm vs Pandora over the last year or so, that Last.fm hit a ceiling where eventually it could optimise no further, whereas Pandora - which focusses on the music itself, rather than your friends' music, carries on optimising. A number of others said they had noticed the same - and I wondered if the next stage for Last.fm and other socially mediated filters was to start discarding "weakest link" friends. (For all I know it does this already).
And thus I got to thinking about how one could take a "cross network snapshot" of all my friends, and what I could deduce, and what it may look like. And then I thought about all the things that one could potentially fall out with a friend over, as sources of Friction. Hence the chart above. (Apparently Twitter is now populated by Middle Aged Men, and as you know we are prone to "Grumpy Antisocial Networking - hence the Friction Feeder" chart axes )
Feel free to add "axes of evil" to it....
*Raptor v Typhoon is a cost v quality optimum argument of course!
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