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SpectralShifts Blog 
Thursday, December 29 2011

67 million Americans live in rural areas. The FCC says the benchmark broadband speed is at least 4 Mbps downstream and 1 Mbps upstream. Based on that definition 65% of Americans actually have broadband, but only 50% who live in rural markets do; or 35 million. The 50% is due largely because 19 million Americans (28%) who live in rural markets do not even have access to these speeds. Another way of looking at the numbers shows that 97% of non-rural Americans have access to these speeds versus 72% living in rural areas.  Rural Americans are at a significant disadvantage to other Americans when it comes to working from home, e-commerce or distance education.  Clearly 70% are buying if they have access to it.

Furthermore we would argue the FCC standard is no longer acceptable when it comes to basic or high-definition multimedia, video and file downloads.  These applications require 10+ Mbps downstream and 3+ Mbps upstream to make applications user friendly.  Without those speeds you get what we call the "world-wide-wait" in rural markets for most of today's high-bandwidth applications.  In the accompanying 2 figures we see a clear gap between the blue lines (urban) and green lines (rural) for both download and upload speeds.  The result is that only 7% of rural Americans use broadband service with 6+/1.5+ Mbps versus 22% nationwide today.

The problem in rural markets is lack of alternative and affordable service providers. In fact the NTIA estimates that 4% of Americans have no broadband provider to begin with, 12% only 1 service provider and 44% just 2 providers. Almost all rural subscribers fall into 1 of these 3 categories. Rural utilities, municipalities, businesses and consumers would benefit dramatically from alternative access providers as economic growth is directly tied to broadband penetration.

The accompanying chart shows how vital broadband is to regional economic growth.  If alternative access drives rural broadband adoption to levels similar to urban markets, then local economies will grow an additional 3% annually.  That's because new wireless technology and applications such as home energy management, video on demand, video conferencing and distance learning provide the economic justification for alternative, lower-cost, higher bandwidth solutions.

Related Reading

FCC Broadband Map

US 3G Wireless Coverage Map

The UK is Far Ahead of the US; Their deficient is our average

Rural Telcos Against FCC USF Reform

GA Tries to Reduce Subsidies, Again

 

Posted by: Michael Elling AT 08:09 am   |  Permalink   |  0 Comments  |  Email
Sunday, December 18 2011

 

(The web is dead, long live the apps)

 

Is the web dead?  According to George Colony, CEO of Forrester, at LeWeb (Paris, Dec 7-9) it is; and on top of that social is running out of time, and social is where the enterprise is headed.  A lot to digest at once, particularly when Google’s Schmidt makes a compelling case for a revolutionary smartphone future that is still in its very, very early stages; courtesy of an ice cream sandwich.

Ok, so let’s break all this down.  The Web, dead?  Yes Web 1.0 is officially dead, replaced by a mobile, app-driven future.  Social is saturated?  Yes, call it 1.0 and Social 2.0 will be utilitarian.  Time is money, knowledge is power.  Social is really knowledge and that’s where enterprises will take the real-time, always connected aspect of the smartphone ice cream sandwich applications that harness internal and external knowledge bases for rapid product development and customer support.  Utilitarian.  VIVA LA REVOLUTION!

Web 1.0 was a direct outgrowth of the breakup of AT&T; the US’ second revolution 30 years ago coinciding ironically with the bicentennial end of the 1st revolution.  The bandwidth bottleneck of the 1960s and 1970s (the telephone monopoly tyranny) that gave rise to Microsoft and Intel processing at the edge vs the core, began to reverse course in the late 1980s and early 1990s as a result of flat-rate data access and an unlimited universe of things to easily look for (aka web 1.0).  This flat-rate processing was a direct competitive response by the RBOCs to the competitive WAN (low-cost metered) threat.

As silicon scaled via Moore’s law (the WinTel sub-revolution) digital mobile became a low-cost, ubiquitous reality.  The same pricing concepts that laid the foundation for web 1.0 took hold in the wireless markets in the US in the late 1990s; courtesy of the software defined, high-capacity CDMA competitive approach (see pages 34 and 36) developed in the US.

The US is the MOST important market in wireless today and THE reason for its leadership in applications and smart cloud.  (Incidentally, it appears that most of LeWeb speakers were either American or from US companies.)  In the process the relationship between storage, processing and network has come full circle (as best described by Ben Horowitz).  The real question is, “will the network keep up?”  Or are we doomed to repeat the cycle of promise and dashed hopes we witnessed between 1998-2003?

The answer is, “maybe”; maybe the communications oligopolies will liken themselves to IBM in front of the approaching WinTel tsunami in 1987.  Will Verizon be that service provider that recognizes the importance of and embraces open-ness and horizontalization?  The 700 mhz auctions and recent spectrum acquisitions and agreements with the major cable companies might be a sign that they do.

But a bigger question is whether Verizon will adopt what I call a "balanced payment (or settlement) system" and move away from IP/ethernet’s "bill and keep" approach.  A balanced payment or settlement system for network interconnection simultaneously solves the issues of new service creation AND paves the way for the applications to directly drive and pay for network investment.  So unlike web 1.0 where communication networks were resistently pulled into a broadband present, maybe they can actually make money directly off the applications; instead of the bulk of the value accruing to Apple and Google.

Think of this as an “800” future on steroids or super advertising, where the majority of access is paid for by centralized buyers.  It’s a future where advertising, product marketing, technology, communications and corporate strategy converge.  This is the essence of what Colony and Schmidt are talking about.   Will Verizon CEO Seidenberg, or his rivals, recognize this?  That would indeed be revolutionary!

Related Reading:
February 2011 Prediction by Tellabs of Wireless Business Models Going Upside Down by 2013

InfoWeek Article on Looming Carrier Bandwidth Shortages

 

 

 

 

 

Posted by: Michael Elling AT 09:56 am   |  Permalink   |  0 Comments  |  Email
Sunday, December 11 2011

Look up the definition of information and you’ll see a lot of terminology circularity.  It’s all-encompassing and tough to define.  It’s intangible, yet it drives everything we do.  But information is pretty useless without people; in fact it doesn’t really exist.  Think about the tree that fell, unseen, in the forest.  Did it really fall?  I am interested in the velocity of information, its impact on economies, societies, institutions and as a result in the development of communication networks and exchange of ideas.

Over the past several years I have increasingly looked at the relationship between electricity and communications.  The former is the number one ingredient for the latter.  Ask anybody in the data-center or server farm world.  The relationship is circular.  One wonders why the NTIA under its BTOP program didn’t figure that out; or at least talk to the DOE.  Both spent billions separately, instead of jointly.  Gee, why didn’t we add a 70 kV line when we trenched fiber down that remote valley?

Cars, in moving people (information) around,  are a communications network, too; only powered by gasoline.  Until now.  The advent of electric vehicles (EV) is truly exciting.  Perhaps more than the introduction of digital cell phones nearly 20 years ago.  But to realize that future both the utility and auto industries should take a page from the competitive wireless playbook.

What got me thinking about all this was a  NYT article this week about Dan Akerson, a former MCI CFO  and Nextel CEO, who has been running (and shaking up) GM over the past 15 months.  It dealt specifically with Dan’s handling of the Chevy Volt fires.  Knowing Dan personally, I can say he is up to the task.  He is applying lessons learned from the competitive communications markets to the competitive automotive industry.  And he will win.

But will he and the automotive industry lose because of the utility industry?  You see, the auto industry, the economy and the environment have a lot to gain from the development of electric vehicles (EV).  Unfortunately the utility industry, which is 30 years behind the communications and IT revolution “digitizing” its business model, is not prepared for an EV eventuality.  Ironically, utilities stand in the way of their own long-term success as EV’s would boost demand dramatically.

A lot has been spent on a “smart grid” with few meaningful results.  Primarily this is because most of the efforts and decisions are being driven by insiders who do not want to change the status quo.  The latter includes little knowledge of the consumer, a 1-way mentality, and a focus on average peak production and consumption.  Utilities and their vendors loathe risk and consider real time to be 15 minutes going down to 5 minutes and view the production and consumption of electricity to be paramount.  Smart-grid typically means the opposite, or a reduction in revenues.

So, it’s no surprise that they are building a smart-grid which does not give the consumer choice, flexibility and control, nor the ability to contribute to electricity production and be rewarded to be efficient and socially responsible.  Nor do they want a lot of big-data to analyze and make the process even more efficient.  Funny those are all byproducts of the competitive communications and IT industries we’ve become accustomed to.

So maybe once Dan has solved GM’s problems and recognizes the problems facing an electric vehicle future, he will focus his and those of his private equity brethren’s interests on developing a market-driven smart-grid; not one your grandmother’s utility would build.

By the way, here’s a “short”, and by no means exhaustive, list of alliances and organizations and the members involved in developing standards and approaches to the smart grid.  Note: they are dominated by incumbents, and they all are comprised differently!

 

Electricity Advisory Committee
Gridwise Alliance
Gridwise Architecture Council
NIST SmartGrid Architecture Council
NIST SmartGrid Advisory Committee
NIST SmartGrid Interoperability Panel
North American Energy Standards Board (NAESB)
SmartGrid Task Force Members (Second list under Smartgrid.gov)
Global SmartGrid Federation
NRECA SmartGrid Demonstration
IEEE SmartGrid Standards
SmartGrid Information Clearinghouse


 

 

Posted by: Michael Elling AT 10:52 am   |  Permalink   |  0 Comments  |  Email
Sunday, December 04 2011

Be careful what you wish for this holiday season?  After looking at Saks’ 5th Avenue “Snowflake & Bubbles” holiday window and sound and light display, I couldn’t help but think of a darker subtext.  I had to ask the question answered infamously by Rolling Stone back in 2009, “who are the bubble makers?   The fact that this year’s theme was the grownup redux from last year’s child fantasy by focusing on the “makers” was also striking.  An extensive google search reveals that NO ONE has tied either years’ bubble themes to manias in the broader economy or to the 1%.  In fact, the New York Times called them “new symbols of joy and hope.”  Only one article referenced the recession and hardship for many people as a stark backdrop for such a dramatic display.  Ominously, one critic likened it to the “Nutcracker with bubbles” and we all know what happened to Tsarist Russia soon thereafter.

The light show created by Iris is spectacular and portends what I believe to be a big trend in the coming decade, namely using the smartphone to interact with signs and displays in the real world.  It is not unimaginable that every device will soon have a wifi connection and be controllable via an app from a smartphone.  Using the screen to type a message or draw an illustration that appears on a sign is already happening.  CNBC showcased the windows as significant commercial and technical successes, which they were.  Ironically the 1% appear to be doing just fine as Saks reported record sales in November.

Perhaps the lack of critical commentary has something to do with how quickly Occupy Wall Street rose and fell.  Are we really living in a Twitter world?  Fascinated and overwhelmed by trivia and endless information?  At least the displays were sponsored by FIAT, who is trying to revive two brands in the US market simultaneously, focusing on the very real-world pursuit of car manufacturing.  The same, unfortunately, cannot be said about MasterCard, (credit) bubble makers extraordinaire.  Manias and speculative bubbles are not new and they will not go away.  I’ve seen two build first hand and know that little could have been done to prevent them.  So it will be in the future.

One was the crash in 1987 of what I like to call the “bull-sheet market of the 1980s”.  More than anything, the 1980s was marked by the ascendance of the spreadsheet as a forecasting tool.  Give a green kid out of business school a tool to easily extrapolate logarithmic growth and you’ve created the ultimate risk deferral process; at least until the music stops in the form of one down year in the trend.  Who gave these tools out and blessed their use?  The bubble makers (aka my bosses).  But the market recovered and went to significant new highs (and speculative manias).

Similarly, a new communications paradigm (aka the internet) sprang to life in the early to mid 1990s as a relatively simply store and forward, database look-up solution.  By the end of the 1990s there was nothing the internet could not do, especially if communications markets remained competitive.  I remember the day in 1999 when Jeff Bezos said, in good bubble maker fashion, that “everyone would be buying goods from their cellphones” as a justification for Amazon’s then astronomical value of $30bn.  I was (unfortunately) smart enough to know that scenario was a good 5-10 years in the future.  10 years later it was happening and AMZN recently exceeded $100bn, but not before dropping below $5bn in 2001 along with $5 trillion of wealth evaporating in the market.

If the spreadsheet and internet were the tools of the bubble makers in the 1980s and 1990s, then wireless was the primary tool of the bubble makers in the 2000s.  Social media went into hyperdrive with texting, tweeting and 7x24 access from 3G phones apps.  Arguably wireless mobility drove people's transiency and ability to move around aiding the housing bubble.  So then what is the primary tool of the bubble makers in the 2010s?  Arguably it is and will be the application ecosystems of iOS and Android.   And what could make for an ugly bubble/burst cycle?  Lack of bandwidth and lack of efficient clearinghouse systems (payments) for connecting networks.

Posted by: Michael Elling AT 08:51 am   |  Permalink   |  0 Comments  |  Email
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Information Velocity Partners, LLC
88 East Main Street, Suite 209
Mendham, NJ 07930
Phone: 973-222-0759
Email:
contact@ivpcapital.com

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