Telco Busting Business Model #487

Imagine for a minute all iPads were 3G enabled.  Now, imagine that no data plans were sold with them.  Next, all users get free access to the iTunes app store.  Now, everything is an app.  Connectivity is an app (for random browsing).  Bundles of call minutes could be sold as an app.  Text and instant messaging too, if anyone still pays for that stuff.  All other apps would have access bundled with them in a 3G context, in the same way as books for the Kindle have access bundled with them.  Telcos become infrastructure providers for consumer electronics and applications (media) providers.  The end.

The Untethering of Telco

Telcos have been losing their customer ownership and authority for many years.  First there was 1984, and the anti-Orwellian breakup of AT&T, and the ensuring deregulation of telecommunications around the world.  Then there was mobile, and the internet, two upstart technologies that threatened everything about telco.  Then there came over the top (OTT) service providers, and the device manufacturers – first mobile phone manufacturers, then every other consumer electronics manufacturer, then every metering and instrumentation manufacturer who could stick a SIM card in their electronics.  Now Google has changed tack on Android, and is upping the ante in its relationship (if it can be called that) with the service provider.  It is going to work with device manufacturers to get their devices out early and direct – specifically targeted at wresting control from the carriers.  According to the Wall Street Journal, this shift “marks a bid to exert more control over key features and apps that run on Android-powered phones and tablets, thus reducing the influence of wireless carriers over such devices.”

Tor many of the device manufacturers, telcos represent important channels.  for others, that’s less the case.  Austek, for example, has no such channel, and is deciding that rather than laboriously build such a channel, telco by telco, country by country, they will sell directly over the internet.  Motorola of course is becoming part of Google, and will continue its hybrid approach to the market, presumably in a trajectory that continues to reduce its dependence on the telco as channel.  Apple has long had alternate channels, and as tablets play an increasingly more important role in their business (especially with the much touted 7″ iPad due for release later this year) their dependence on iPhone sales will be reduced.  Tablet with a dialer, rather than phone with apps, you see.

The remaining tether to the service provider appears to me to be the phone number.   You know what would be a great app?  An identity app.  A simple, single function app that’s free, and that you share with your friends, that allows you to publish your current phone number, or – better again – that simply updates automatically when you swap SIM cards.  Then when you want to call someone, all you have to do is connect the app to your contact book, and call your contact using the app, instead of 555-1234-5678.  It would be great for people who swap SIMs a lot.  What’s more, it could ‘sense’ when someone else has changed SIM, or phone.  It would tie both SIM and IMEI number together, and create a single identity.  So when someone calls in, the app would be aware of the incoming call, go back to the server and ask about the number that’s dialling, and return with information to the recipient of the call saying that even though you’ve never seen this number before, it’s John who’s calling.

In Japan, something similar could be done with an email app, as email addresses are tethered to telcos there as well.

The net result would be a small footprint app, distributed for free, and promoted across social media.  We could figure out a business model later :-)

An Irish company called YAC (You’re Always Connected) tried to do something similar about ten or twelve years ago, but it wasn’t the same – they had this thing called YAC numbers, which were actual phone numbers, but universal across networks (www.yac.com seems to be still limping along with a kind of eReceptionist thing).  Zouk Ventures (now a clean tech investor) had an investment in them.  There was a lot of config required both by the user and by the caller, which was a bit much.  They couldn’t quite get it over the line.  But the basic concept – removing the phone number tether from service provider control – remains valid.

Now.  Who can build my app for me….

The Sun Ain’t Shining on TV No More

The New York Times reports on falling Spring viewership for TV just as we approach what they call in the biz the “upfronts”, or the ad buying season.  Fox is down 20%, ABC 21%, CBS 8% and NBC 3%, all of which are quite savage.  One of the interesting things is the list of excuses as to why this is happening.  A substantial amount of the blame goes on the abandonment of linear viewing, that PVRs have allowed people to choose when they watch a show (skipping ads, of course).  Delayed viewing according to one exec would be the second biggest show on TV if it were ranked that way.  The decline of American Idol too has impacted, which is of course a live show, and therefore not as susceptible to the nonlinear thing.  They blame the quality of some of the shows…and they even blame the weather!  Bless!

None of them mention channel offset, which has to be one of the most significant factors.  I mean, there’s a simple question – if people are not watching TV, what are they doing?  How are they being diverted or entertained?  Why do none of them want to acknowledge that?  Maybe it’s because it’s such a pervasive trend (the shift from TV to internet, peer to peer and non broadcast media) now that it goes without saying…but I thought it was odd no one mentioned it.  Maybe – and here’s a wild thought – maybe people are reading books again? Ah, sure we can only dream!

Java, Oracle, and The Patent Disco

** Full disclosure – your correspondant works for IBM, though this is entirely a personal view.  He does not work in the patent side of the business. He also holds IBM shares.

The tyranny of lawyers is descending upon us.  When Oracle bought Sun, most of the headlines concentrated on Oracle’s new found love for hardware (notwithstanding its insistence on the irrelevance of cloud computing).  As a software company, however, it was its merger with the doyen of Open Source Software that was more important.  MySQL, OpenOffice, and in particular the Java programming language were managed by Sun, were now to be housed in one of the most profiable software companies in the world.  The Sun ecosystem had been driven around hardware sales, but how would ‘free’ software sit inside Oracle?  One blogger wrote that “Oracle could finally democratize the JCP (Java Community Process) by making it more transparent and inclusive,” though most were more circumspect.  The majority of concern centered on MySQL, a free database that clearly competed with Oracle’s core software business.

Slowly however it began to dawn on the outside world that the rationale for the acquisition may have been driven more by the lawyers than the technology strategists.  The R&D credentials of Sun were huge.  The patent register was impressive.  The extent to which Oracle could use its ownership of Sun to ward off nefarious encroachment by all sorts of interlopers who would steal its clothes.  It became obvious for Oracle’s actions not immediately, as speculation focused on how and whether Oracle would deal with the hardware business.  But in 2010, Oracle launched a lawsuit against Google for a billion dollars because Android had been written in Java.  Huh? Yeah.  Suddenly, everyone got jittery.

Google bought Motorola Mobility, substantially for it’s patents.  Facebook, Yahoo and Microsoft all executed moves to develop their patent portfolio.  Facebook recently countersued Yahoo with a patent it had registered by a former Yahoo employee!  The great Daddy of them all IBM spends $6bn a year on R&D and has led patent registrations for many, many years.  Apple’s patents- the subject of many high profile battles with Samsung and others – are primarily hardware related.

Now, we’re seeing a rash of litigation that threatens to undermine the entire technology business.  Value, and the openness that has characterised the innovation of the Internet, is pushed into the background as defensive landgrabs from major ecosystems and major (predominantly US) players establish what appear to be zones of control.  Oracle’s case against Google – is particularly interesting in that it posits that the Java language is itself intellectual property (rather than the code / binaries that it produces) and therefore that Google’s android software owes Oracle compensation for its use of Java.  The thing is, an enormous amount of the world’s software is written in Java.  That would mean undermining a massive swath of the economics of the software business – and potentially massively enriching Oracle.

One can’t get away from the sense that this is only the first act – and that the main event will happen when these US behemoths take on the Indian and Chinese companies that are coming in the next decade or two.  And the lawyers will be in the vanguard.

Google and the Art of Deception

The Australian Courts have found Google guilty of deceiving search users by placing ‘misleading’ results to searchers.  Essentially, someone looking for “Honda” would be shown an ad for “CarSales” which was competitive to Honda.  Several issues arise here.  There is no contract between Google and the searcher that their search will provide exactly what they are looking for.  Google is not a finder of truth.  Google is an advertising business, a customer-salesman matching business, and it continues to attract customers not because it is a purveyor of truth, but because it invariably helps people to find what they need, which is in many circumstances different from what they are looking for.  The implication of the ruling is that there is some contract that has been breached, or some duty that has been abrogated, in this ‘deception’.

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Whaddya mean you don’t remember me?!

"What's in a name? that which we call a rose By any other name would smell as sweet!"

You know those awkward moments when you meet someone you know, but you just can’t quite remember their name?  And then, briefly, you think the name is coming to you, and then, quick as it almost came to you, it vapourises and you know you’re toast… And of course we’ve all been on the other side of that as well, when people we think – we hope! – will remember us, and really they didn’t.  It’s not nice.  That translates of course into Commerce.  Airlines try hard to welcome people by name, especially frequent fliers.  Telcos make a point of mentioning your name when you call their call center.  Hotels train their staff to refer to guests by name.  It’s personal, it’s nice, it’s warm.  We like it.  We equate it with good service.

It’s particularly impressive when you have no idea who these people are (as opposed to walking into your local Chinese restaurant that you go to regularly), and the default view is – hey, these guys really worked hard to deliver to me a personalised experience – even if sometimes you just wonder a little how they knew your name.

Now. think about that on a web site.  You go to a web page that you’ve never been to before, and it knows stuff about you.  How is that possible?  How do they know?  What else do they know?  Paranoia kicks in.  You start to wonder whether these guys are monitoring you, following you.  Data protection regulators and Privacy Tsars in governments detect this and start sounding off about customer protections, and identity protection, and privacy and civil rights.  If a human knows – that’s ok.  But if the machine knows, well that’s a whole other thing.

So Google and a bunch of other webcos have finally said that they will support a “Do Not Track” button on browsers.  This won’t stop everything though.  While if a user clicks this new “Do Not Track” button, the website will not be able to use user data to customize ads, they can still use it in “product development”, which, with the right amount of statistical abstraction and algorithm cleverness, will do the same thing.  Here’s the point – Commercial Radio stations for seventy years or more have been tailoring their business to be more and more and more and more accurate in terms of designing “product” for the purposes of advertising.  As  result, based on product design, they can tell to a 95% degree of accuracy who’s listening in any 15 minute segment.  This is completely untethered from the customer, that is, we’re not tracking the customer in real time, but we know who’s there.

Maybe this will mean we don’t remember your name, but we’ll still know exactly how to match you with an advertiser, or a commercial partner that can allow web economics to function just as well as they always did.  So the experience becomes not one that is personalised – because for a machine to get personal is just too freaky, it seems – but the experience becomes astonishingly relevant and useful.  And that’s something I think we’d all appreciate.

Why networks matter

The Week

The Week (UK edition) had the following snippet

The Daily Mail famously publicized the Stephen Lawrence case, branding six suspects “Murderers” on its front page and daring them to sue. What’s less well-known is the link between Neville Lawrence and the Mail’s editor, Paul Dacre. Lawrence, it turns out, once re-plastered Dacre’s bathroom.

So when he felt the Mail had unfairly blamed him and his wife for a protest riot, he rang Dacre to ask him: “How could you do that? You know me.” After that, the paper became dogged in its pursuit of justice.

It is amazing to think that a case that changed the course of British justice by exposing institutional racism in the police force and leading to the repeal of the “double jeopardy defense” in murder cases was in a certain way dependent on a chance relationship.

It really was a case of you never knowing when a relationship will make a real difference.