A bit of history

In order to understand the importance of the current shift, one needs to study a bit of history. Since the dawn of the personal computer era, applications have been written and running largely on the user’s desktop. In the mid-90s, Sun Microsystems co-founder John Gage started claiming that “the network is the computer.” Marc Andreessen, co-founder of Netscape, the leading browser company at the time, was claiming that Netscape would “reduce Windows to a set of poorly debugged device drivers.”

However, due to limitation in terms of bandwidth and computer power, this vision didn’t come to be until well into our current decade. Today, individuals still mostly use Windows, even if most use it primarily to launch their web browser.

In more recent times, the availability of always-on, higher speed internet access, has allowed companies like Google to start offering more powerful websites, which took on features of full-fledged software applications. Leveraging technology that first saw the light of day in the 1990s (Flash was born in 1995 and XMLhttp, which powers AJAX applications was created by Microsoft in 1999), those applications started offering compelling competitors to existing products.

One the leader in that revolution has been Google. First with the release of Gmail and then with the release of Google Apps, the company has been working on offering online version of tools like email, word processing, spreadsheets, and presentation software. Leveraging its establish power in the advertising space, Google has figured that, by offering document and email management features to its users for free, it could create extra advertising inventory that it could then resell.

So Gmail, Google Docs, and Google Apps were born. Since they were consumer focused products, presenting them as products “in progress”, complete with a beta stamp and an advertising-based model. Jeff Jarvis warrants that such act was not only bourne out of humility but also as a  call to collaborate. This week, however, the company decided to shed the beta logo for most of its applications.

With its direct language to IT manager and its message emerging from the enterprise group, Google is making it clear that this announcement is not targeted at the consumer space. In a sign of growing business maturity (most software company attempt to appeal to the enterprise space as they get older and need to develop more predictable financial groundings), the company is now trying to appeal to the enterprise space, aiming its offerings towards a space that has traditionally been controlled by Microsoft (with its Office Suite) and, to a lesser extent, IBM (with its Lotus division offerings).

Poorly debugged device drivers?

But Google realizes that much of what it does is dependent on the continued goodwill of the different operating system providers and browser suppliers. Were it not for web browsers or operating systems, Google could not exist. Last year, the company started reducing that dependency by introducing its own web browser, named Chrome. Chrome was actually quite interesting in terms of browser development as it was the first browser to treat each window session as a separate application, ensuring that if one web page failed, the other tabs would not. This could be seen as something not completely unlike the way an operating system (or kernel, etc) doles out memory and CPU power to each of the applications it deals with and orchestrate who gets what.

The unstated strategic goal of the Chrome browser is to help reduce the dominance of Internet Explorer in the online space while providing Google with more of a say in terms of where web standards were heading (I’m sure some people will try to debate that point but, if Chrome is not intended as an Internet Explorer competitor, why is the only “official” version of the browser a Windows one, with no such offering on OSX or Linux?)

Chrome is not only an attack on Microsoft’s browser dominance in the web space but also an attempt at ensuring that neither Microsoft NOR Adobe get control of the future of web applications. Google’s CEO Eric Schmidt knows how trying to fight Microsoft can distract a company from very real threats by other unexpected contenders: he did come from Sun Microsystems and Novell before joining Google and saw, first-hand, how those two companies saw their focus on unseating Microsoft’s dominance in their respective areas blinded them to the threat that Linux came to be to both of them, ultimately dooming each of the companies’ efforts without Microsoft having to do too much.

So, as a veteran of the OS wars, Schmidt is now being careful in balancing its entry in the space. On one hand, he doesn’t want to offend existing partners like Apple and the open source community. On the other hand, he needs to ensure that his company’s offerings are actually going to appeal to hardware vendors. The OS will ultimately be little more than the minimum required to make the Chrome browser run. That means it will include an IP stack, some basic drivers to interact with the keyboard and screen (or a way for companies to offer those) and a UI that will be a full screen version of the Chrome web browser.

The description of the OS, as stated in the press release, describe it as such:

Google Chrome OS is being created for people who spend most of their time on the web… without wasting time waiting for their computers to boot and browsers to start up. They want their computers to always run as fast as when they first bought them. They want their data to be accessible to them wherever they are and not have to worry about losing their computer or forgetting to back up files… Even more importantly, they don’t want to spend hours configuring their computers to work with every new piece of hardware, or have to worry about constant software updates.

Put quite simply, this is a web browser with the basics to make it run online and offline (the offline components probably being based on Google Gears (already built into the Chrome browser) or some HTML 5 offline approach). Users will not really store much on their computer but everything will be sitting on Google’s servers, accessible from anywhere. Operating system upgrades will happen automatically in the background and everything will run in the browser. For those people expecting to run Firefox (or any other application) on this thing, sorry… it won’t happen.

Google’s view is that everything will run online and all data will be stored online. In technical terms, this is called sending information into “the cloud.”

However, there’s the question of how to plug components in there. I suspect that Google will lean heavily on its partners to release any device related drivers through the equivalent of an online application store, similar to the app store on the iphone, where Google controls the experience in terms of what gets installed on the user’s desktop and can recall or upgrade an install if needs be. The idea being that the hardware device does not need much power as most everything is coming from the web.

Developers will not be allowed to develop anything that runs on the machine itself:

For application developers, the web is the platform. All web-based applications will automatically work and new applications can be written using your favorite web technologies. And of course, these apps will run not only on Google Chrome OS, but on any standards-based browser

With these few words, Google is taking the same approach as Apple first did when itintroduced the iPhone: don’t look to us to provide you with any SDK, the web is the platform. Build your application using HTML 5 and all will be OK. This basically means that right now, Google either has no intention to provide an SDK or will keep it accessible only to select partners who want to integrate with their OS. They will first provide access to the device makers and then, over time, will create an SDK and an app store that they may even be willing to share with partners by white-labeling that store to sweeten the deal for any partner willing to install the OS.

The reason I suspect this would be part of the strategy is that pricing will not be a heavy deciding factor in whether partners will adopt the new OS and Google desperately needs the new OS to be implemented as widely as possible.

Many have said that cost was a large part of their strategy but I suspect it cannot be: Consumers have already been trained to consider the operating system as a freebie or low cost tool. On the windows side, consumers see the OS as something that comes with their machine, not something they buy separately. This effectively brings the price to 0. Even Mac users, who generally tend to be more willing to pay for products offered by Apple, were grousing at pricing on OSX, forcing the company to take a deeply discounted approach when offering the next version of its operating system for about the price of dinner and a movie. And pricing has proven to be a contrarian indicator in the netbook market, as consumers decided to pay extra for the Windows XP version of devices that also offered the same hardware at a lower price point with Linux.

Interesting timing

Having established that the company is looking to get more control of its end to end experience, one big question is why do it now? Why not do this, for example, at their developer conference, as they did for Google Wave? Why announce something that will not be available in the near term?

My suspicion here is that part of the reason for this vaporwave release is that Microsoft is about to unveil a series of cloud focused initiatives at its WorldWide Partner Conference next week: those offerings will include a major push for their cloud platform, Microsoft Azure, along with announcements regarding the Gazelle project (their own browser as an OS offering), and Office 2010, a substantially revamped version of the popular suite that will move collaboration and synchronization front and center. At its core, the revamped Office suite will not only include the existing components and features of older version but its guts will have been rebuilt with some DNA acquired as part of the acquisition of Ray Ozzie’s Groove Networks and its offerings.

I suspect that Groove and Ozzie have Google shaking in its boots. Much of Google’s strategic message is that it is more collaboration friendly than Office and, by leaving one’s documents on Google’s servers, one doesn’t have to worry so much about revisions and versioning. With Office 2010, Microsoft is fixing these problems and telling corporations that while Google’s message is nice, your proprietary information will be sitting on Google’s server. How about getting the same type of functionality but keep the documents on your own servers. Because most corporate IT department tend to be paranoid when it comes to their corporate data, the Microsoft message will resonate better.

So Google is not starting to position itself in the consumer market, hoping that applications which can run in the consumer world will eventually help tear down the corporate walls (to date, few corporations have adopted Google Apps and, if Microsoft offers a competitive product, I suspect it could remain that way for at least a decade). Having to do something, they have now decided to attack a core tenet of the Microsoft empire: its windows OS division.

The battle lines are now drawing:

• Google is asserting that the world runs solely within a browser and all application logic is in the cloud; Microsoft will assert that substantial amounts of complex tasks require the power of the desktop and the cloud is there primarily as a tool for collaboration and synchronization.
• Google is asserting that desktop PCs are merely thin clients; Microsoft is asserting that desktops are still the center of the computing experience.
• Google is asserting that the net is safe enough a place to leave all your information; Microsoft is asserting its not.
• Google is asserting that developers don’t want to run applications natively on a machine; Microsoft is asserting that the tightest integration happens at the OS level.

Each company is presenting a different vision of the cloud. I can’t say which is right as both offering compelling advantages and substantial flaws but I can highlight one important feature: in the future the software you are running will be connected to the internet most of the time and still be able to work when offline. And in that future, I suspect that the notion of software as a product you buy will probably disappear, with software as a rental model becoming the emerging approach. And I also believe that this is the beginning of the cloud OS wars.

Update: As expected, Microsoft sends out its reply.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The Cloud Wars. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Traditionally, the model or rent vs. own has been one that most consumers and companies have mostly considered when it came to real estate (and traditionally, people have looked at renting real estate as more normal than owning, with the possible exception of the last couple of decades, during which real estate ownership appeared more attractive). But today, that concept seems to be increasingly extending to other arenas.

Netflix

For example, Netflix has build a very solid model around renting movies over the Internet. True enough, many people will mention that rental of media dates back to the early days of the video store and were a substantial component in the rise of companies like Blockbuster (born Blockbuster Video). True also that said companies have been falling on hard times lately. But the substantial difference between what Netflix offers and the traditional rental model is focused on convenience: one could argue that Netflix’s original business model was largely centered around the distribution of physical media (the DVDs themselves) but I would argue that the true success of Netflix will be due largely to its digital distribution model, allowing for instant distribution of movies and TV shows with the click of a few buttons. The instant (and the emphasis here needs to be put on instant) access to a large media collection can easily call into question the concept of owning similar content in a physical form: What is the advantage of having a physical copy of a movie sitting on your shelf, collecting dust most of the time, when the same movie is available at the touch of a remote control button from the Internet?

However, the challenge in such concept is that once someone stops paying Netflix, the access to said collection disappears. An owned movie is paid for upfront and can be watched time and time again by a consumer but a rented one can only be watched as long as one keeps paying the owner renting party.

Apple

With Apple’s recent move to sell music tracks without any digital rights management features on it, one could safely assume that Apple is not in the rental business. Apple’s move was largely a response to Amazon’s own marketing around selling DRM-Free music but it is interesting to note that, while the restrictions on music went away, the same was not true of similar restrictions around music videos, movies, and TV shows. The lock-in that appears here is similar to that which exist with Netflix in that if you decide to end your relationship with Apple, the media you bought will stop working. Under such restricted mode, can one really assume that he/she owns the media he/she purchased?

Similarly, Apple is renting out, in partnership with telecommunication vendors like AT&T, an ingenious device called the iPhone. The reason I would call it a rental model is that use of the device is limited by the partners to people who have paid the initial fee and continue to pay a fee to the telecommunication provider on a regular basis. It is a model that exists for most phone providers, as devices tend to be tied to a specific vendor. Once again, people will highlight that it is possible to get rid of that lock-in with software but I will counter that doing so is a violation of the contract terms of the device, voiding warranty and your agreement with Apple. To claim otherwise would be similar to saying that everyone has access to as much money as they want, as long as they are willing to rob banks. (In the interest of disclosure, I should highlight here that I own an iPhone which is not connected to the “authorized provider”.)

Going a little further, Apple gets to lock-in who can and cannot play on an iPhone, only allowing developers who submit themselves to Apple’s whim and offering what is sometimes only temporary access to the userbase as release of every update to a product still has to go through Apple’s review. In other words, Apple gives developers temporary access to the iPhone user base, an access it can choose to revoke at any time.

The Amazon Kindle

All this conversation bring us to Amazon and a couple of its products, starting with the Kindle, which serves as the incentive for writing this lenghthy post. The Kindle, much like the iPhone is a pretty impressive device, bringing several technologies (always on device, e-ink) out of the labs and into more mainstream consumption. And like the iPhone, it has both fans and detractors. And once again, the Kindle offers an interesting kind of lock-in, allowing you to read titles purchased on the kindle (or through the iPhone kindle software) but allowing you access for only as long as you keep a relationship with Amazon. Where the model moves to rental is around magazines and newspapers: you may purchase subscriptions but, should your Kindle be completely full as a result of your subscription, you may loose access to the back issues you “own”.

But Amazon’s move to a rental model is not just around the kindle device. On the consumer end, Amazon now play in the same spaces as Apple and Netflix, renting out or selling digital versions of movies, TV shows, and music.

Renting at the Enterprise Level

In other example of the evolving trend moving from the consumer to the enterprise space, Amazon is now renting itself, or rather portions of its own operating capacity, to anyone willing to pay a fee. Its infrastructure (storage, computing, and databases ) are all available to organizations who are willing to put their application on top of Amazon’s own servers. Amazon offers similar solutions for payment services, and goes as far as providing space in their warehouses along with complete pick, pack and ship capabilities.

The infrastructure component is part of a trend in which enterprise vendors are now providing data center capabilities on a per data transaction costing model. For many Chief Technical or Chief Information Officer, it changes the basic questions around data center from a “Build vs. Buy” to “Build vs. Buy vs. Rent”.

In the process, it also changes the dynamics of how a business can be built as a substantial portion of a company’s activities can now be outsourced to outside players (I’ll go into more details around the enterprise related issues in my next post)

Is it all bad?

If you read this far, you might assume that, by this point, I’m going to claim that this is all about the over-reach of DRM and that it is all a horrible thing.

I’m not.

What I am trying to highlight here is that the experience around internet driven goods is changing. As connectivity speeds increase, the ability to access any movie/TV show/video/ music clip/ books / magazines / etc is going to have a substantial impact on our relationship to said goods (in a fashion similar to the type of relationship kids now have to music, assuming that music on the Internet ought to be free of restrictions, while at the same time assuming that mobile phone ringtones are something one ought to pay for).

The change in our relationship to media forces us to reassess the value of the physical good. In the case of our household, we have made a leap of faith, assuming that the content of certain DVDs will always be available online from one rental provider or another. The reason for that approach is that the experience of watching such thing on our TV using an internet connected video player is not diminished by the lack of a physical medium. Living in a more constrained space (in Manhattan, space is always at a premium), the physicality of a DVD box is actually an impediment to the experience of the medium. As a result, the internet connectivity, and the rental model, appears to make much more sense than the physical ownership of DVD boxes.

In the same way, the value of a CD collection is in what’s on the CD rather than the plastic container it’s in. Much of the value of the physical container of music has decreased: in the past, LPs were designed and the wraping of the LP was almost has important to the experience as the music itself. However, as CDs reduced the size of the cases, and music production companies spend less time on designing custom boxes, physical CDs became more of a commodity, with the music on them being the only thing that truly distinguished one CD from another.

But what about books, magazines, and newspapers?

To a large extent, I would venture that the relationship we have with magazines or newspapers is different from that of a book. When I first saw the Kindle, I was not attracted to it because I could read books on it but rather because I might be able to subscribe to newspapers or magazines. The clear line falls in the arena of experience: with a few exceptions, magazines and newspapers are read and then discarded. The ephemeral nature of that experience archetype seems to make such relationship a prime candidate for digitization: Once again, the convenience of something like a Kindle seems to trump the experience of having to fold a newspaper in a crowded subway or the guilt associated with recycling large amount of newsprint or magazines on a regular basis: because the intrisic value of newspapers or magazines is as conveyors of temporal information that now appears to be archivable and retrieveable online, the need for ownership of that data appears to be lowered.

Books, on the other hand, are a different issue. Reference books may lend themselves to a good digitizable model (O’Reilly, for example, has had success with its Safari offering, as have encyclopedias like Brittanica and the OED) but fiction books may be in a different class. The book as object may be falling into the same class as those ancient LPs, being designed as a full object rather than just its content and rental of such good (though people will mention that books have been something you can borrow from a library for a long time) may take longer to break through as the advantage of reading such a book on a Kindle is not necessarily higher than that of a physical good. I may be romantic in my thinking, attaching to books not only the content and the packaging but its experience in a greater space, as each book I own has, in itself, a number of memories attached, in the form of sand from a beach where it was read, or wrinkles from being carried on a trip or fold marking and writings from a particular era. In those rare cases, the books serve as containers for more than the stories they held when first presented on a bookshelf or through the online presentation they had: they are containers of a full experience and that, at this point, is not yet something that any digital device (whether it is a kindle or other) has yet been able to reproduce.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Is Ownership Passé?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Televisions: Connected and Flat

It’s been 15 years since the Internet revolution started to take hold and about 3 since video on the Internet has become a more viable option. With the rise of devices connecting portions of the Internet video space to your television (for example, allowing to buy movies or TV shows from the iTunes store or download video streams from Netflix), we’re seeing more ways to connect the Internet to television without requiring a computer. I suspect this trend will only continue and expect this year to mark a turning point with some of the first ethernet-enabled televisions appearing. This type of connection will be available first from Samsung and LG, who have already built such connectivity into their BluRay players so I would expect them to port those capabilities to TV sets shortly.

The other improvements in the TV space will include the introduction of more OLED screens on the high end, providing a third option in the flat screen space ( LCD and Plasma being the other two.)

The economy will pressure many of the companies in the space to drop their margins on televisions and I wouldn’t be surprised if flat screens start dropping under $500 by year end. This will force some of the last CRTs off the market, leaving Plasma as the cheap choice, LCD as the average one, and OLED as the high end one.

BluRay: Losing to Downloads

2009 ought to have been a good year for BluRay. Having killed its main competitor in the next generation physical disk format (HD-DVD), BluRay appeared to have the field open to itself.

But through both blunders on the part of people in the media and consumer electronics space, BluRay has succeeded at painting itself in a corner: having priced disks at a premium, executives have to justify the advantage. The approach they took was that BluRay was a higher video and audio quality experience than regular DVD. But this has represented a major hurdle for them as most consumers are fairly happy with the quality they are getting from their existing DVDs.

The other issue is that the war for a next generation format was not about a physical medium, as they had expected. Sure, Sony and Toshiba tried hard to make it about that, because royalties on selling rights to such formats can go in the billions of dollars over several years, but truth be told, the market bypassed physical as a medium almost half a decade ago.

With the rise of the iPod, people have grown more comfortable with the idea that they could buy a media asset (a song, a TV show, or a movie) electronically without having to deal with the piece of plastic that carries it. The revolution started with music because those files were smaller but, as bandwith availability increases, the amount of time required to download a TV show or movie is dropping. Along with the availability of streaming video, this has changed the level of expectations when it comes to media consumption in such a way that, increasingly, people want access to their media without having to deal with a physical component to carry it (one could argue that the on-demand shows provided first in hotel rooms in the 90s and on most cable boxes in the last few years fall in the same space.)

So downloads are going to be the thing that undoes BluRay. As a result, I expect Sony to start touting downloadable media more heavily than BluRay in its PS3 marketing. I also expect most BluRay players to offer some way to access internet media either through direct partnerships with the providers (Netflix, for example) or through the creation of an open format content providers could leverage.

Mobile Phones: Smart is in but so is Simple

The recent success of the iPhone has gotten every phone providers to focus on developing more smarts for their phones, essentially turning them into multi-use devices. This trend is hardly new (I’ve owned a smartphone since around 2000, starting with the first Treo) but its acceptance by the general public is.

What I expect to happen in the space this year is a continued drop in prices as new contenders enter the space. Palm will make a play at the space with a new net-centric phone and operating system that will come with a under $100 price-tag to follow the recent success of their Centro offering. This will, in turn, force Windows-mobile and Google Android-based phones to come down to the same price range, with some of them even being offered by carriers for free with 2 years contracts. Apple, on the other hand, will keep its $199 price tag and may offer a software upgrade that would turn on video recording on the iPhone. RIMM, with its Blackberry offering, will continue to be the darling of the business world but most of its efforts in the consumer space will be rebuffed.

Meanwhile, on the other end of the spectrum, we might see the rise of phones that have a single feature: making phone calls. Those phones will be marketed to two different segments of the market: elderly people, who barely use computers and want something that has as little complexity as possible and the first grade set, with some level of parental control being available on the devices.

Computers: Smaller, Cheaper, and More Wireless

Netbooks started making the news last year. Sporting a web-browser and generally less power than traditional computers, PC makers have discovered that there is a large audience for such devices. This is a problem with chip makers like Intel and AMD who have relied on Moore’s Law to get faster and beefier processors out the door at heavier costs to consumer. The problem they are faced with today is that most processors are good enough for what people want to do (ie. read email, go on the web, and maybe edit a few documents). So I expect netbooks to be the only real growth sector for PC makers. This represents quite a challenge as margins on such devices are low and the business model around them is a volume one.

The market is now fragmenting into 4 segments:

• Netbooks, which are probably good enough for most people.
• Powerhouse machines, which are used primarily by computer gamers.
• Office machines, which will demand more security features (eg. Lenovo)
• Luxury machines, which are more in line with the fashion space than the electronics one (eg. Apple MacBooks)

I expect a slowdown in the number of machines sold in the computer games market and a flattening in the office market. This leaves netbooks as the growth area and I would put a question mark on the luxury machine market as I’m not sure it could see more growth if the economic climate continues turning sour.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2009 Predictions: Hardware. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

At $30/month, Wi-Fi service can currently be seen as an expensive toy for the mobile worker. But if you consider the possibility to make phone calls for the same price, the price seems low. Compared to most cellular phone programs that offer a few hundred or thousand minutes every month for roughly the same price, the idea of unmetered service could represent a huge growth opportunity for anyone offering a hotspot. However, the issue will then become one of available bandwidth. As more and more hotspots are added, the pervasiveness of Wi-Fi makes the possibility to bypass the phone network more real.

The next step in that evolution would be for the Wi-Fi protocol to include some kind of mechanism to check the strength of signal. If you think of the cellular phone system, you will realize that your cell phone conversation moves from station to station as you are moving. Every second, the cell phone checks where the nearest antenna is and changes access accordingly. This ensures that you get the highest signal possible and allows for the phone to stay connected even as you get further away from the original antenna you used. Wi-Fi does not currently have that checking capability in place but when it does, Wi-Fi phones could become more common.

It is interesting to see this happen as cellular phone companies might find themselves displaced in much the same way they are starting to displace land lines. New technologies keep cropping up that disrupt the way business is done and put more pressure on revenues (because they are, invariably, introduced to users at a cut-rate price in order to gain market shares).

However, the economics of wireless networks rely on a limited use of equipment (for example, as more people sign up for a mobile phone service, the quality of the service drops because more people are trying to use the same equipment). With the rise of Wi-Fi and the introduction of small operators (coffee shops, etc…) it will be interesting to see what will happen. My guess is that we will eventually see all the large mobile phone operators introducing Wi-Fi plans over the next 12–24 months. We will then see the rise of one or two new companies that will hook up smaller operators into a different set of networks. As the cost of providing the service increases (because more bandwidth will be required), the smaller players will shake out of the market. Once that has happened, the winners in that fight will start to increase prices again.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Disruptive Technology. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Tivo and Digital Media Servers. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

First of all, by acquiring Linksys, Cisco gets a strong foothold in the small office/home office market as well as the hobbyist/consumer market. Why? Largely because this is where Linksys’ strength is. What Cisco gets out of this is a new source of revenues in a market it has had troubles getting into. The announcement that they will not change the name of the company and will let it run as an independent unit seems to point to that end.

Second, it provides Linksys with strong support in enterprise sales. Linksys has been getting into the enterprise largely through the back-door, with employees installing cheap wireless routers in offices. Now, with Cisco’s backing they can get into the enterprise as part of a more complete solution.

The next question is what this does to Cisco’s strategy as a telecom vendor. Linksys already sells voice over IP products. There may be some people at Cisco edging their bets in terms of the telecom bet. It could be that they figured that VoIP could also come in through a cable connection, which in itself would undermine sales of equipment to large phone companies and move more telephone traffic into the hands of cable companies. Alternately, Cisco could start selling solutions that would allow for a complete end to end solution for VoIP: Large offices would use Cisco’s existing solutions and smaller branch offices could take advantage of the Linksys offerings.

However, the real prize in this acquisition is in the wireless space. Linksys has already established itself as one of the strongest players in that market and Cisco will probably take advantage of those gains, eventually demising its own offerings in that market. The advantage for them is consolidation of product lines and an early toe in the 802.11g arena.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Cisco acquires Linksys. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Strong Growth

France had been a leader in terms of establishing an information society but was starting to get trapped by its legacy Minitel tool. The Minitel was introduced in France in the late 70s as essentially a precursor to the web. The service allowed users to read online versions of magazines and newspapers, shop in online catalogs, chat, play games, and have access to every government office. In the early 80s, Minitel penetration became so high that the government-owned phone company decided to drop printing of phone books and move that service to the Minitel.

Fast forward to the late 90s. France is still on the Minitel and the Internet has gotten wide acceptance in the United States. At that point, Internet penetration in France is sluggish as few people see any value in it. As a result, the French government issued an ambitious plan to move France onto the Internet. As is the case for every major government project, little happened for several years.

However, the combination of government support for a new Internet initiative and the rise of global services finally started a revolution in French online services. According to several people I talked to in Paris and in the south of France, the effects of the Internet were not really felt until about a year ago, when a sudden usage explosion started. From 1999 to 2001, the number of Internet users in France tripled and it is expected to double this year to about 30 million. As more and more services are now moving away from the Minitel and onto the Internet (as I was told by an American living in France, the Minitel is now fairly useless as most everything has moved onto the Internet.)

Combined with growth in other European countries, this represents a market of almost 150 million users in Europe.

Broadband

While most Internet users in Europe still use narrowband, a few people are starting to make the move to broadband. However, prohibitive costs for DSL mean that most broadband users in France are accessing the net via cable. A DSL line can cost over 100 euros whereas a cable modem connection can be had for as little as 15 euros, with averages of 30–45 euros per months for a 500Kbps connection. The big advantage of such connections in Europe is that local phone is metered whereas broadband is not. As a result, heavy Internet users are finding that it is less expensive to get a broadband cable connection than it is to use a modem and phone line.

The Euro

For the first time in history, 12 countries have simultaneously gotten rid of their currencies and moved to create a single monetary block: the Euro is here and it has wide implications on global E-commerce.

No more Austrian schillings, Belgian, Luxembourg or French francs, Finnish markka, German Marks, Greek drachma, Irish punts, Italian lira, Dutch guilders, Portuguese escudos, or Spanish pesetas. No more complexity in trying to convert those from one to the other when doing electronic transactions. Now, the Euro is the currency for this whole zone (dubbed the Eurozone) and it represents a very large market, larger, in fact, than the American market in terms of customers.

One the biggest challenges in dealing with the European market was the lack of standardization when it comes to laws, shipping, currency, and language. With the Euro, a large portion of that problem can be taken care of as members of the Eurozone start moving towards developing a similar set of economic policies.

Essentially, the Euro takes away the barrier of multiple currency transactions that held back some users from shopping online and some vendors from launching e-commerce sites.

A couple of years ago, I alerted our readers to the fact that Europe was quietly rising as a new giant in the global E-commerce arena. With the rise of the Euro, this message is becoming more important. Now that a market of almost 150 million people has been created, the US is no longer the only place where E-commerce can work and as such, it is important for people in the US to start looking at technological developments in Europe. In the long run, a number of European companies will probably become some of the larger players in the online space.

Wireless connectivity

While everyone in the U.S. is starting to pay attention to WiFi, the wireless computing revolution has not yet taken hold in Europe. On the one hand, cell phones keep getting smaller and offering more features (Multimedia messaging is started to take hold among European digerati), there seems to be some lag in the adoption of wireless computing offering. A few underground efforts are getting organized, in a fashion similar to that seen in the USA a couple of years ago.

Conclusion

The Internet space in France seems to now follow a curve similar to the one experienced in the United States in the late 1990s. However, the lack of venture capital and the fact that, much like the United States, France is suffering from an economic slowdown, have tampered the explosion. While acceptance for everything Internet is growing, the adoption of networked technology is following a course that is different from that of the US and UK. While there will be strong growth in the Internet field in France over the next year, expect that revolution to be relatively quiet, compared to what was experienced in other countries.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Internet in France 2002: An overview. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

As many of you already know, the game station is a small box that attaches to your TV and on which you can play video games. However, the firepower of new generation boxes now on the market is now equivalent or higher than that of most computers. The main logic behind this was that gamers wanted a more realistic experience and crunching 3D representation in an ever-changing environment required more and more processing power.

Playstation 2 opens the gate

Last year, Sony introduced the Sony Playstation 2, a new gaming system that included a built-in DVD player and a 3D graphic engine that made computer video card look ridiculously outdated. At that time, Sony admitted that their goal was to go beyond games and control the digital living room. Recent partnerships with Macromedia, AOL, and Real Networks seem to show that Sony has established a clear roadmap as to how it would get into the online market. And with a growing installed base of (8 million so far, and an expected 34 million by 2004), Sony could become a major online player.

Microsoft unveils the Xbox

Having survived the browser wars with Netscape (Internet Explorer now controls 80% of the market), Microsoft is starting to worry. If one could download music and exchange videos via a gaming station, as well as play video games, where would the home PC go? And where would that leave Microsoft’s ambitious .net strategy?

As a result, Microsoft had to play in that field and to do so, it went to game developers. After much discussion, the result is here for everyone to test: it’s called the Xbox, and is essentially a PC packaged as a gaming station. If you read the documentation, the Xbox becomes more difficult to classify as simply a gaming box. For starters, there is a DVD player, which was added just to match Sony’s Playstation 2 DVD player. But Microsoft goes further by building a Dolby decoder within the system as well as adding parental controls to the box.

The second thing they added to the box is the ability to put in a CD, play it, and burn it onto the built-in hard drive (through what they call a music manager). All of a sudden, the Xbox becomes a music stereo box.

Going further is the matter of the Ethernet port and the mysterious broadband network touted by Microsoft. Early inside reports point to the first broadband gaming network that might go beyond gaming. At the current time, there are rumors of a network that would also allow for Internet browsing, email, and instant messaging, as well as gaming.

The messaging portion is an interesting one since it would include and optional plug-in for the box called the communicator, a headphones and microphone device people would use to communicate either via IM, or while playing online games. The unit includes a wireless headset with microphone, which could easily be used to make phone calls if Microsoft uses some of the technology it is currently building into the Microsoft Messenger. Long term, the Xbox could become another entry point into MSN, and into the web as a whole.

Moving forward: the Playstation 3

Sony, however, is not resting on its laurels. Now that Microsoft is entering its turf, the company is seeing its dominance on the digital living room being challenged.

With the PS3, originally slated for mid 2003 but possibly being released earlier, Sony plans to integrate offerings from its music and movie divisions into the system.

Considering the fact that the company already offers a suite of MP3 players, it is easy to see that the company will build that functionality into the next box.

Rumors are that the company will build a large hard drive within the box, which would make it a perfect storage area for an MP3 collection.

But going beyond music, the company is also looking at packaging a digital TV recorder within the unit, turning it into a device that would compete with Tivo and Replay in the market for customized television.

Also built into the box would be a TV tuner, and rumors has it that the system would also include a satellite TV decoder. In order to counter the online capabilities of the Xbox, Sony will release an online pack for the PS2 but will build that functionality directly into the PS3 box.

The unit would be offered in two different version: a light version, which would focus on gaming and be sold for around $250-$300 and a more expensive full featured convergence version which would retail for $400-$500.

Games Only: The Game Cube

Meanwhile, Nintendo believes that games and only games is what consumers want out of their boxes. As a result, the GameCube is a smaller, less pricey gaming box. However, this does not mean that it is offering less performance. It’s just that it’s a different take on the world. As far as Nintendo seems to see the world, gamers will want to pay no more than $200 for a gaming box but may be willing to pay extra for new features.

In a concession to Microsoft and Sony, the box will soon sport two different modem adapters: a 56k module for people who use a phone line and a faster broadband module for people who have a network at home. Rumor has it that Nintendo is preparing a membership network with services like online video game, full Internet access, and the distribution of music data. Since the GameBoy advance can interface with the GameCube, it seems that Nintendo is working on a hardware strategy that will make the gamecube a connecting station into the home, while the GameBoy will become a roaming device that can get updates from that box.

Convergence is here

Based on those recent developments, it seems pretty clear that hybrid boxes are now starting to pop up and that we will soon see more applications (initially in the gaming world but eventually in other areas) become the norm. I would strongly recommend that TNL.net readers who are involved in developing online consumer applications pay attention to the gaming space as it is the next arena for which we might have to format our outputs. Based on early showing, I would say that Playstation 2 will keep its predominant position for the next year or so but may be getting some competition from the new underdog in this arena: Microsoft.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title The Convergence Game. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Last week, while on a business trip in California, I bumped into what may be the largest barrier to a wireless Internet: lack of connectivity.

San Francisco had OK coverage but the Silicon Valley, supposedly ground zero for the Internet revolution, seemed to lack the proper infrastructure. At any moment, your connectivity is jeopardized and a move of a few feet can make all the difference in the world between connection and lack thereof. All and all, a sad state of affairs.

However, it was perfectly understandable, considering all the hills and valleys covering the area. What is more worrisome is that I have yet to find someone else addressing this issue. In the last week, I have talked with several people in that area and most of them looked at wireless internet access as somewhat of an oddity. All the people I talked to are actively involved in the Internet industry, either as I-builders, content developers, or software manufacturers. All of them took it for granted that bad cellular coverage and lack of reception was a fact of life. A lot of them were involved in wireless development.

What does all this mean? It means that we are dealing with people developing applications without really using them. Is that good? I doubt it. From my point of view, one can only make truly revolutionary advances in a field if he or she lives within that environment.

So the progress will have to come from somewhere else. Last year, I warned of Europe potentially becoming centerstage to the Internet revolution; This year, I am starting to see proof of that.

In Finland, Nokia has already connected most of the country with a very impressive WAP network. 65% of the people have cell phones and most of those are WAP enabled. Want to check a movie time or restaurant reviews, you can do so, using WAPit, one of the largest portals in the world for WAP applications (unfortunately, most of the content is in Finnish so if you dot know the language, is pretty difficult to use).

Most people over there send short e-mail like messages over the SMS protocol. At 160 characters per message, you cannot say much but is enough for “Meet you at the movie theater at 7pm” or “Lunch?”

In Spain, Motorola and Packet Video recently demonstrated wireless video over a GPRS ( the next generation of high speed GSM) network. For the Barcelona exhibition, both streaming and live video content are being provided from the Internet and a selection of web cameras, and transported across the Motorola end-to-end GPRS solution to the end-user device. The web cameras are situated at PacketVideo’s headquarters in San Diego, at the Barcelona congress centre itself, and at the Invisix centre of excellence in London, a Motorola/Cisco joint venture says the press release.

In Japan, the revolution is in color. A recent survey by Nikkei Market Access showed that over half of the Japanese phones produced this year will have color LCD screens. Those will be use to not only surf the web (in full color) but also potentially to do videoconferencing over GPRS.

Why is progress happening outside to the US? Quite simply put, because they have agreed on a standard (GSM) and are now all working on building its next generation. In the US, we are crippled by a number of different proposals from each of the providers, which has crippled progress as each company goes its own way developing its own proprietary network and technology.

What is needed now is for the American wireless service providers to sit down and agree on implementing GSM. Once that first step is accomplished, they will then need to figure out a system to charge each others back for carrying a competitors traffic on their network. Here’s how it would work. At some set times, the wireless service providers would sit down and agree on a standard and a rollout schedule. Once that is accomplished, they would jointly rollout GSM networks all over the country and work on building a system that would allow anyone to use anyone else’s wireless network. The companies would then charge each others back at the end of the month for all the minutes that non-subscribers have spent on their network. The result would be increase coverage for everyone, but may be a little more expensive than the service we have nowadays.

Where phone companies would innovate is on package of new services they could offer and still on the discounting schemes they already offer.

The customers might have to pay a little more for service from their provider but they will not have to worry whether they are running on AT&T, Sprint, or someone else’s network.

Crazy concept? I dot think so. Do you worry about whose network you’re running on when you are making a long distance call on your landline? No, you do not and the kind of agreement I am talking about already exists among telcos in that space. Why should it be different in the wireless world?

You’re probably wondering why any company would agree to something like this? How about to regain a leadership position in the world market and allow to use your phone anywhere. If such a plan were to be put in place, you could technically have the same phone whether you are in the US or in another country and the wireless provider could expand into overseas markets more easily. Foreigners are already starting to get onto the American market (British company Vodafone, for example, merged its American wireless operations with Bell Atlantic). If American companies want to continue their growth, thell have to expand overseas.

Last but not least, the Internet industry will have to eventually push for something along those lines if it truly wants the wireless revolution to happen. Otherwise, the US will still remain one of the most disconnected country in the world.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title It’s Connectivity, Stupid!. You can follow him on twitter here or receive his weekly newsletter by subscribing here.