Exploring the impact of broadband and technology on our lives, our businesses, and our communities.

Cong. Boucher talks about the Induce Act

Congressman Rick Boucher (D, Virginia) represents southwest Virginia, including Blacksburg. Boucher is guest-hosting law professor Lawrence Lessig's blog this week, and there is a cogent and fascinating discussion of the Induce Act. The Induce Act would build on the already questionable DCMA law to make it more difficult (in theory) to pirate digital media.

The Induce Act has already created a firestorm of criticism for its overbroad attempt to stifle piracy by making it illegal to introduct any new technology or device that MIGHT be used for illegal sharing. In other words, as it has been pointed out, the iPod and indeed, all MP3 players would be illegal. Boucher is co-sponsor of a bill that would try to hold back the Induce tide.

VoIP spam--the next horror?

CNet writes about the next potential spam horror--voice mail spam sent to your Voice over IP telephone. VoIP phones have an IP address, just like your computer, and spammers will probably figure out a way to send spam right to your phone.

It's not something worth worrying about yet....as we get better at tightening up anti-spam laws and regulations, we may stop it before it gets started. As the CNet articles notes, it may be that it can be forestalled by adding language to the Do Not Call law.

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Concrete and indium

Indium sounds like one of those made up compounds, like Intel's "Itanium" or Volkswagen's "Turbonium." but indium is a little known metal that is essential to the manufacture of LCD panels. The Wall Street Journal reports on a potential shortage of the transparent, conductive metal. It's refined from the tailings of commodity metals like zinc and lead.

The problem is that only a few hundred tons mark the entire world production, and the price has been rising rapidly. Even with the price increases, so little is sold that it's hardly worth it to the big zinc and lead producers to bother refining it. So while supplies are adequate right now, the exploding demand for big screen TVs and LCD panels suggests shortages may develop.

Cement is also creating a slowdown in the world economy. Paradoxically, the global Knowledge Economy is suffering from the high prices created by, of all things, cement. It's a useful reminder that for all the hype, the IT business is not the major driver in the global economy. It's a driver, but not the primary one (if there even is one). Businesses around the country, even in rural areas, are feeling the effects of the cement shortage because of demand in China and Iraq....proof positive that we can't ignore the interconnected, increasingly complex world beyond the borders of our own county and community.

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The emerging telecom wars

USA Today (Monday) has a front page article (Business section) on AT&T and its decision to get out of the consumer market for local and long distance services. Opinions are mixed on the wisdom of this approach, but the company does not really have much choice. With the FCC decision to allow the regional Bells to charge whatever they like for wholesale access to their infrastructure, AT&T could no longer profitably offer local dial tone service.

As I've said before, I think that the FCC made the right decision. If the Bells are expected to compete with unregulated companies (e.g. the cable and WiFI firms), it does not make sense to hobble them by requiring them to sell their own network to competitors below market rates. It is no coincidence that since that ruling a few months ago that the regional Bells have begun to announce FTTP (Fiber To The Premises) projects--they finally know they can make money doing so.

Buried in the article is a one line reference to the "Cable-Phone Wars." One reason the phone companies have finally jumped on the fiber bandwagon is that the cable companies have captured a large part of the broadband customer base by investing early. DSL is now selling in most of the country for about $15 less than cable service because the phone companies have to do something to get customers back--like actually compete on price and service. Horror stories abound, but generally, the cable companies, which tend to have more local offices and real service people working for them, seem to be winning the service battle.

The phone companies, in a better late than never strategy, are winning the price war right now. This is all good for consumers, up to a point. Quality of Service (QoS) is still shaky for both cable and DSL. Both are copper-based legacy systems that were never designed to deliver high speed data to homes and small businesses. Fiber and wireless can deliver data much better, but can't always provide the content (e.g. cable TV) and/or some services (like dialtone)--yet.

It is going to be a war. Communities and businesses are particularly at risk if a single company "captures" the local marketplace before competition fully develops. As always, the way to avoid this is to make modest investments on a communitywide investment to keep the playing field level for small and medium-sized companies. Those investments will help network access and service providers compete effectively against the cable and phone companies. Those investments will also keep prices down--that's always a good thing that makes the community and region more attractive to businesses.

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Buy out your local phone company

Information Week has an interesting article about SBC and Verizon. The two big phone companies are selling off their rural landlines to raise cash to run fiber to their higher density urban and suburban customers.

So instead of complaining about your local phone company, buy them out! The neat thing here is that if you buy out the lines, the customers come with them, so you have instant cash flow. Here's the business plan:

  • Form a coop.
  • Borrow money and/or get funds for starting coops from the USDA.
  • Buy out the phone company.
  • Start offering services and billing customers.
  • Develop long range plans to offer broadband; include VoIP services and other advanced services to help make the transition financially sound.

I've obviously oversimplified this a good deal, but coops are a tried and true business model that have successfully offered wireline services in rural areas for decades. And fiber is nothing more than another cable. If coops have gotten a cable to their customers in the past for telephone and electric services, why can't they do it in the future?

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Light updates through August 9th

I'll be on vacation through August 9th, and updates may be light. Have a great week!

Technology News:

Broadband policy changes needed

CNet has a terrific article on community broadband and the policy issues surrounding community development of telecom infrastructure. It's a must-read article; it's long but provides an excellent overview of community telecom landscape, including the benefits communities are seeing, the anti-competitive opposition from the big companies, and the lackluster support for these initiatives at the Federal level.

Bottom line? We're not doing enough in the United States to stay competitive with the rest of the world. Our fractured approach to creating world class networks is being manipulated by special interests and anti-competitive forces, and the Federal government is doing enough. This is depressing stuff, but needs to be thought about carefully.

South Korea is pointed to as an example of how this is being done right. I often reference South Korea myself, but we need to remember South Korea is smaller than two-thirds of the states in the U.S., so the national government there is dealing with a scale that is much smaller. Furthermore, because it is small, there are fewer layers of government.

As much as I would like to see state and Federal help pick up steam, I don't think communities can wait--the risk is too great that the state and Federal governments never do get their act together. Community and regional projects, funded modestly with modest goals, can and will get the job done over time.

Cellular providers choke off innovation

The EETimes has an interesting article on how U.S. cellular providers are choking off innovation and profits in the electronics industry. As I have long predicted, cellphones are absorbing the features of standalone gadgets like PDAs; PDA sales have been flat for some time. One of the hottest "gotta have" gadgets is the Palm Treo 600, which is a cellphone with the Palm PDA built in.

So what's the problem? Fewer things (and fewer chargers) to lug around sounds good, right? Not when you can't buy any of the new gadgets on the open market. Try buying JUST a Treo 600. You can't do it. You have to buy a cellphone plan with it; when you do so, you get a discount off the "Manufacturers Suggested Retail Price" (MSRP), which we all know means nothing in an open market.

By tying cellphones to service plans, the cellular companies have created an odd kind of monopoly, in which they have captured and now control the marketplace for handheld consumer devices. The EETimes article discusses the potential impact on the digital camera market--as cellphones get megapixel cameras built in, the digital camera marketplace will disappear. Not only that, consumers lose choice and competition, which keeps prices low. MP3 players are another threatened market; by adding extra memory, cellphones become music players, and the MP3 marketplace disappears.

Consumers are already losing in this situation, and it will only get much, much worse. Bundling, which is what the cellular providers have been doing, is a classic strategy for locking a marketplace up and creating a monopoly. In effect, gadgets like the MP3 player and the digital camera become free, in the sense that the real cost is hidden in the cellphone service contract. And the cellphone companies are now demanding two year renewals on service contract, making it harder and harder to switch.

Microsoft destroyed the market for Web browsers in exactly the same way. Internet Explorer, by giving it away, wrecked the market for every other company. But Internet Explorer is not really free; Microsoft bundles the cost of IE into the cost of Windows--you pay for IE whether you use it or not.

Ironically, just as cellphone number portability is available, it is becoming harder and harder to make use of it. I'd love to have a Treo 600, but my cellphone provider does not offer it, making the feeble and pathetic excuse that "no one wants it." Uh huh. That's why Palm is making them as fast as they can. But the electronics industry is groaning as well. All these cellphones are being marketed at low margin OEM prices directly to cellphone service providers. Profits are nonexistent when you can't move any product at all at dealer or retail prices. It's the same squeeze that Walmart uses on its vendors--sell to us at your lowest possible price or we'll buy from someone else.

In the short term, consumers get lower prices (Walmart) or more features (cellphones). In the long term, when choice is driven out of the marketplace, we all lose bigtime.

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Broadband is a "necessity"

A Ziff-Davis news article chronicles a series of new broadband projects and applications using broadband, and calls broadband a "necessity."

Big Stone Gap, Virginia is keeping some employers in town and attracting new ones with the help of their fiber network. Led by Skip Skinner of the Lenowisco Planning District, the region has been laying fiber in Emtelle microduct for the past year, building a regional fiber backbone and making fiber available to downtown businesses in Big Stone Gap.

Design Nine has been working with Skinner and Lenowisco Planning District since early spring on a telecom master plan for the entire region, and of course, the fiber buildout is a cornerstone of future plans.

Community news and projects:

South Korea is laughing...

I reported here last week on new data that shows that broadband is now in about 30-35% of American homes. The new study was widely reported in the media, and Anthony Townsend, who is doing an extended study in South Korea on the social and economic impacts of broadband in the country, reports that the news "...made my Korean friends laugh at how far behind the US is."

South Korea has achieved virtually 100% broadband penetration, with DSL and cable broadband available nearly eveywhere, and fiber to the home is quite common. South Korea has a national goal of fiber to every home and business by 2008. What is the goal for your region and community?

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