The mobile era is here

Since 2007, with the introduction of the iPhone, the smartphone age has moved to an accelerated speed. More an more startups, including my own, have started to focus on opportunities in the mobile space. But how big is that market? And how does it compare to what’s available in terms of the regular PC-based internet market?

To answer those questions, I pulled data from two different lists: Wikipedia’s list of countries by number of mobile phones in use and Internet Stats’ list of the top 20 countries by internet users. When taken side by side, the data looks like this:

So, at first glance, the natural inclination would be to say that the mobile opportunity is over twice as large as the internet opportunity would be (or two and a half time, to be more correct). That screams extreme opportunity and you would be dumb to not invest in this.

But there’s a cautionary part to the story that is not being covered. An assumption being made when looking at mobile numbers is that we are at the beginning of the revolution and numbers will go up from there. A main issue I would take with that approach is when looking at the penetration rates. For that, it’s useful to look at the actual population data for countries involved.

This table seems to tell us an interesting tale: of the top 20 countries by mobile users, it seems we are seeing an average penetration rate of 91 percent. That would point to those markets being mostly saturated at this point.

Mobile devices have been on the market for around 20 years and, for many countries, have served as a way to leapfrog the landed phone revolution. While people in the developed world look as mobile as an extra line and talk about abandoning landlines for mobiles, the reality in a lot of the world is that the landline was never much of a mainstream offering and mobiles quickly became the way most people dealt with phone service. And for large segment of the global population, the concept of a phone tied to a cable in the wall is as foreign as the idea of using a telegraph to send a message is to us.

So where does that leave us in terms of market opportunity? Does the opportunity encompass those 91% o the population that use a mobile phone?

I’d say no.

A substantial portion of that number is, unfortunately, functionally illiterate. They may know how to get a phone number but a lot of mobile users in underdeveloped countries simply cannot read. Reading is still, in large part, a privilege reserved to a small portion of the overall public.

But we do know about people who can read and have used the internet. This is what we currently see as the internet population. So if we are to recontextualize the internet population as the user groups most likely to get and use smartphones in the future, the picture may look like this, assuming that the percentage of internet users remains constant:

This is still a pretty substantial number, representing an untaped opportunity equivalent to the internet today.

What’s the market today?

But if 1.2 billion is the total addressable market, what is today’s addressable market? A few weeks ago, Apple reported that it had now sold over 100 million iphones. Meanwhile, there were around 20 million Android devices sold in the last quarter of 2010, probably putting the total number of such devices at the current time at somewhere between 20 and 30 million globally. So we’re looking at roughly 130 smartphones available globally. This means that we are barely 10% of the way to the addressable market being saturated. By comparison, it took 8 years for the internet to get to that kind of level.

So if you want to place bets on the future of the mobile internet but are not sure of whether it exists, ask yourself if you would have bet on the growth of the internet in September 2003.

If the answer is no, you may look at this as a bubble. If the answer is yes, you may be looking at a growth period that includes the invention in the mobile space of such companies as Facebook (created in February 2004) or Twitter (created in March 2006).

On top of that, you still have to consider that the internet itself is still growing and new devices like tablet computers are adding to the fray. With all those things taken in mind, there seems to be ample opportunities to justify the amounts of money being invested into the next generation of technology leaders.

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

Strategy: Hardware? Software? Service? Partnership?

Let’s take a look at the players in the “smart phones” market: Apple, Nokia, Microsoft, RIM (blackberry),  Linux Mobile, and Palm. Sun used to have a Java Mobile but it seems to have dropped off the market, in terms of device market share. And then, there’s the new pretender to the crown in the form of Google, with its Android OS offering.

How do they stack up in terms of Hardware? Operating System? Service Offering? Well, here goes:

A first glance at this table seems to reflect some of the player’s pre-existing biases. Microsoft is known for its software business so that’s where it put the most weight; Google is all about free software to power their services; RIM and Palm do a hardware software combo; Apple throws its weight behind a fully Apple controlled experience.

However, there are a few caveats: For example, while Microsoft is in the space primarily as a software provider, it also owns Danger Inc., makers of the Hiptop. And while Palm has its own software, many of its devices are powered by Windows Mobile.

But apart from those exception areas, it appears that strategies are organized across four business models:

• OS only: This strategy is preferred by Sun and Linux. The model here is to provide an operating system that can be used by others. For Sun, this strategy has largely failed as substantially less than 1% of all handsets around the world is powered by their OS. Linux, which really was the first open source mobile OS has captured about 4 percent of the global smart phone market to date. Microsoft is the big leader in terms of that strategy, with its Windows Mobile OS currently powering about 12 percent of all smartphones around the globe.
• Software + Service: All this leaves us with Google and their Android offering. Much of the commenting today is that the move Nokia just made was aimed at the fact that Google had an “open” operating system. But what Google is really trying to do is provide an operating system that melds OS and services. Either that or they are in the OS only camp. Either way, they are not playing in the same space as the iPhone or Nokia (see triple play below).
• Hardware + Software: This model is preferred by RIM, makers of the Blackberry, and Palm (especially with their inexpensive Palm Centro line). This strategy works best if you want your device to be focused on few use scenarios: The blackberry is first and foremost a portable email station; Palm devices are first and foremost PDAs. This orientation comes from a past where the device wasn’t initially intended as a phoe but morphed into one.
• The triple play (ie hardware/software/service): This is the strategy currently used by Apple with the iPhone: they provide the hardware, the software, and a set of services (me.com, iTunes, Software store) on a complete package.  Through recent acquisitions, Nokia has been moving in this direction: while they were traditionally a hardware player, they started adding services to their devices. With today’s announcement, they’re also getting some control over software.

So looking at this, it becomes apparent that while many are pointing to Nokia going after Google, it may not be the target. Since Nokia does service and hardware already, getting more control over its own OS is probably an important move.

Open Sourcing

I can already hear some readers snickering: Symbian’s been open-sourced so Nokia does not have control. Let me make something very clear: the gold rule (“he who’s got the gold makes the rule”) applies to Open Source as it does in other areas. While it won’t get exclusivity, Nokia, having paid $400+ million to open source Symbian will be considered “more equal than others” by the Symbian foundation, I’m sure.

But why open source? If we look at the players mentioned above, their position on open source and their market share, the picture becomes clearer:

Looking at the market share date, Nokia’s move doesn’t seem to make sense: They currently control 65 percent of the market, why would they bother? But here’s the thing: There’s this newcomer called Apple and they didn’t exist 18 months ago: they now have 7 percent of the market and are growing.

If I’m a Nokia executive and I’m looking at this data, I start worrying. So what do I do? I look at competitive advantage: initially, I try to compete with cooler devices (the Nseries) and while it stops some of the bleeding, it doesn’t appear to fully halt the competition. So I start looking at services as a way to stabilize revenue (Maps, Music, Games) but that doesn’t stick. Then I realize that my problem is the operating system: I’m stuck with that alliance of partners I have but they’re slowing me down. So I have to take over. But I can’t do that by just kicking all of them out. So I acquire and open source.

The open source move fills three strategic objectives:

• I get to keep partners still involved but get them to agree to my taking charge.
• I get other people to improve my code and/or developing FOR it, thus allowing me to counter a potential Google threat if it ever materializes.
• I get to look more “open” than Apple and will use that in my messaging

The Future: Collateral Damage Then Status Quo

Of course, while it works out great for Nokia, there is a little bit of collateral damage:

• Sun’s offering, while interesting had already sunk largely into irrelevancy so they’re no longer a player.
• Palm OS, was teetering on the edge but now it’s pretty much cooked.
• Linux, while still having teeth, will probably see its market share dwindle as its unique selling proposition (more open than others) is gone.

So that’s unfortunate but what does it do to the rest of the market. Well, in fact, it looks like today’s events wont’ have much impact: Palm, Linux and Sun represent about 5 percent of the market. With Apple at 7%, RIM at 11%, Microsoft at 12% and Nokia at 65%, it looks like the market will stay pretty consistent. The remaining 5% will be carved out by the existing players and by Google’s entry into the market. Nokia will remain at the top for now.

Potential events that could have a more disruptive effect: a Microsoft/RIM partnership (or outright acquisition) which, when integrated would give Windows Mobile a 23% market share. But short of such a move, it looks like the situation will mostly stay at status quo for the time being.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title No Changes in Mobile. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

iPhone: 3G OK but not everywhere

As expected, Apple did introduce a version of the iPhone that will run on third generation (3G) networks. Steve Jobs made a big deal about the wide availability of this new device globally, highlighting a large number of countries in which the product will soon be available.

Glossed over, however, is whether it makes much of a difference. Let’s take a look at 3G coverage offered by AT&T in the United States (I managed to get to this map from a list AT&T provides):

On this picture, the areas marked in blue are the areas where AT&T offers 3G services, as the following legend reminded me:

So while it is true that you will be able to buy a 3G iPhone in most of the US, it’s not necessarily a guarantee that you will be able to use 3G service in areas outside of major urban centers. It was not mentioned on Monday and I think I may have a good idea as to why: to say that you are offering a tool which will be available only to urbanites would have stolen some of the magic.

However, the truth of the matter is that most of the current iPhone buyers appear to live in the target areas. In my experience, while iPhone are fairly ubiquitous in the New York, Chicago, DC, and San Francisco circles I tend to run in, I haven’t seen as many of them when I go to other areas. It could be that the device is attractive to people who live in certain areas and may not be as attractive to others. I don’t know why it is but it’s just an observation.

Cost

A possible reason for the phone currently being more popular in large cities may have been price, an item that Steve Jobs also mentioned as something they needed to work on. When the iPhone was first introduced, its $599 price was seen as high compared to the rest of the market. Subsequent price cut brought the price of the phone to $399, a price that was more or less in line with what other smart phones were retailing for.

When it was first introduced, Apple dictated that customers would pay full price for the device and, on top of it, AT&T would pay Apple an extra $18 per month for every iPhone subscriber (or $432 over the 2 year contract that a subscriber would be locked in for).

When the iPhone was introduced, plans were ranging from $59.99 (for 450 minutes, 200 SMS, and 5000 night and weekend minutes) to $99.99 (for 1350 minutes, 200 SMS, and unlimited nights and weekends minutes) with no extra data charges for browsing, email etc…

So, assuming a low cost $59.99 individual plan, the 2 year outlay for an iphone user would be $1440 for subscriptio. Tack on the $399 price of the iphone and that’s $1840 over a two year period.

That’s a lot of money and Steve Jobs announced that they had heard complaints about the price, which have now resulted in this new device being available for prices ranging from $199 to $299.

The new plan, according to an AT&T press release, start at $39.99 was voice service only with an extra $30 for 3G. This means that the most basic plan is now $69.99. By the look of it, the extra $30 plan is similar to the existing PDA Personal plan they are offering (It’s unclear whether SMS is included in the plan but AT&T does not seem to provide any information as to SMS related charges).

So, over the two year life of the plan required by the contract, the cost would be $1680 for subscription. Tack on the $199 to that price and you end up with a total of $1879 over a two year period, roughly $40 more than the outlay for first generation devices.

The interesting thing here is that the price is roughly the same even though the entry point is lowered by a third. This plays to the perception that the price has been drastically lowered but the truth of the matter is that it hasn’t changed much.

Revolutionary Model?

What has changed, it seems, is the relationship between Apple and AT&T. A year and a half ago, when Steve Jobs introduced the iPhone, it looked like AT&T had bent over backwards to ensure they would get the device. Apple was receiving kick-backs; Apple was dictating the price of the device; Apple was controlling the interface; Apple was controlling the activation (which could be done from home); You could buy an iPhone at the Apple store, go home, use iTunes to activate your phone and, apart from receiving a bill from them every months for the following two years, you didn’t really have to deal with AT&T.

Fast forward to today.

The device is heavily subsidized; AT&T keeps all the revenue from subscription; Apple still controls what’s on the phone deck; AT&T requires in-store activation.

Suddenly, the business model doesn’t seem so revolutionary. In fact, it seems that Apple is now falling in line with every other phone device manufacturer. Yes, it still has control of the interface but it seems that wireless providers are more lenient when it comes to that these days.

What I suspect is that reality has largely set in. While lofty goals of selling 10 million iPhones were mentioned, 6 million units have shipped. 6 million is a very respectable number. In fact, it’s an impressive number when you consider the price the device sold at.

The problem is that 6 million is still a long way from ensuring 10 million devices sold by then end of December. So AT&T must have mentioned that fact to Apple and told them that while it was all very nice and they still wanted exclusivity, they would have to renegotiate terms. And the negotiation brought Apple “back in the fold.”

A funny thing is that while AT&T executives were high-fiving themselves over that success, Jobs was probably looking at another portion of the market they had not discussed: software.

See, hardware is all great and fun but ultimately, it’s a sucker’s bet: there’s only so much money you can wring out of a device and margins never really increase. The previous iPhone was costing about $220 to build. This one, with a 3G chip and a GPS will probably cost a little more. Of course, it’s subsidized by AT&T (i’d suspect that AT&T pays between $100–200 per iphone) so Apple still makes some money but that’s pretty consistent. Increasing margins on such a device would be hard as it requires heavy negotiations with suppliers to get better costs for parts and reconfiguration of production lines to improve efficiencies. Those are not easy areas and investments need to be pretty heavy in order to see returns.

But then, there’s software.

Software is almost diametrically opposed in its scalability of cost (for a good understanding of the advantage, see dictionary under Microsoft ). Yet software, in itself is still pretty expensive to produce (the same is true of music or any other creative endeavor where the product can be digitized). However, imagine being able to build a marketplace where one would sell software produced by someone else. It would look like the type of marketplace one would use to sell things like music, or maybe movies, or TV shows.

Oh wait, I know, it would look like the leading marketplace for selling music. You know, the one by Amazon… uh, no, not that one. Who makes that leading marketplace? Oh yeah, Apple with the iTunes store.

Control

In the fourth quarter of fiscal 2007, Apple reportedly made $808 million in the category that includes the iTunes online store. This, largely by providing infrastructure to sell other people’s product to users of its iPod.

Now comes the iPhone as, essentially, the next generation of the iPod… and it seems that, as Apple initially strong-armed the music industry into giving it a portion of revenue it didn’t need too, Apple is now working on ensuring that it will get control over what goes on their own next generation iPhone.

Last year, when they first introduced the device, it was locked down and fully under Apple’s control. But over the year, tools appeared to break that stronghold and people started developing applications that enhanced the device for anyone who was basically willing to void warranty.

Apple saw what was happening and initially tried to fight it but the company eventually realized that attempting to fight such a trend was essentially like a game of wack-a-mole. Fun for sure, but hardly profitable and/or potentially successful. So Apple relented by providing a software development kit, a move that it hopes would bring developers back into the fold.

This plugged the issue of non-standard development and, thanks to the requirement to agree to certain terms and conditions, Apple can now dictate what applications can and can’t be created for the iPhone and it’s not the first time that Apple uses its SDK agreement to limit what applications can and can’t be built using it.

At this point, though, it still OK as Apple gives its developers ways to fill gaps that exist on the device by providing software that Apple did not provide.

And that’s where Apple’s Push Notification Service comes in. At first blush, it looks like a nice idea: instead of running all applications in the background, you just have your current application talk to that service and that service then relays information to the Apple server before passing it on to you. It “simplifies” things and saves battery juice. That’s all great, until you start thinking about the implication: Apple now knows what works and what doesn’t in terms of applications.

The company will not only know which applications are being downloaded to iPhones, since the only way to load an application legally is through the iPhone store provided by Apple, but it will now know whether the applications are actually used and what kind of usage pattern they have.

Of course, one would assume that since Apple is such a great company and so developers friendly, it will share this information in almost real time with the application developers.

Except it won’t.

The other thing this does is that it provides Apple with a central system that knows what users are doing with their iPhone. This is basically focus groups on a global scale and it’s very impressive.

Apple has essentially created for itself a device that will keep information on what applications are being used on it, how much they’re being used, and by how many users. From there, I suspect it won’t be too hard to build an interesting roadmap that seems to magically mirror the best applications.

And the developers of applications that were filling the gap created by Apple at the time? Well, it will be a problem for them to try to compete with Apple but I’m sure the company will be happy to have them develop other applications after it plundered their previous successful one.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title iPhone 2: More than meets the eye. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Recently, though, TechMeme has gotten me thinking about the tech blogosphere conversations as a whole and their longer term relevance. To the small “web 2.0″ community, TechMeme serves as a bit of a paper of record; The subhead even claims that it represents the “Tech Web, page A1”, claiming to bring us the important stories. But how do those stories fare over time? Is today’s hot topic a step in understanding a longer term trend or is it just a temporary distraction that will be forgotten a month/3 months/6 months/a year from now.

Fortunately, Gabe Rivera, the founder of TechMeme must have anticipated such a question and provided a way to look at TechMeme as it was a particular point in its short history. Using the simple interface, it’s easy to see the page as it existed at a precise point in time. So I decided to start looking at the site at the same time in single month spaces. The middle of the night and middle of the day position ought to be good time stamps so I decided to look at the site at 12am and 12pm on the selected date. I also had to discount the fact that April 1st is April fool’s day so I could not use the first of the month as this fact could skew the data. Here are the dates and times I ended up with:

• Today: June 2nd 2008 at 12am and 12pm
• A week ago: May 26, 2008 at 12am and 12pm
• Two weeks ago: May 19, 2008 at 12am and 12pm
• One month ago: May 2, 2008 at 12am and 12pm
• Two months ago: April 2, 2008 at 12am and 12pm
• Three months ago: March 2, 2008 at 12am and 12pm
• Six months ago: December 2, 2007 at 12am and 12pm
• Nine months ago: September 2, 2007 at 12am and 12pm
• One Year ago: June 2 2007 at 12am and 12pm
• Two years ago: June 2, 2006 at 12am and 12pm

With 20 data points, here’s what I discovered.

Today

Based on today’s news at noon, it looks like the important subjects at noon in the blogosphere are Adobe’s latest move, combining Flash and Acrobat with their entry in the already crowded (Google, Microsoft, Zoho, etc..) web-based office suite market. At midnight, things were a little less exciting, with discussion around the privacy issues Google Maps is raising with their StreetView offering.

Of course, it’s still too early to tell whether those stories will have a long term impact so let’s roll the tape back a little.

One Week Ago: May 26, 2008

At noon, a week ago, the top story was about a new type of SSD, developed by Samsung. Since it’s hardware, I assume that the impact of this news can’t be felt initially but there could be longer term repercussions. Also of note on that page is a small item lower on the page about Paypal outages. An interesting trend in my research on this is that this story is slowly developing over a period of weeks and months and the noise level appears to be increasing on it.

At midnight, the discussion was around Google’s power and the needed for another organization to work as a counter balance to that powerful force in the search engine space. Coupled with the discussions last night about privacy issues relating to Google maps, it seems we are seeing an emerging pattern here.

Two Weeks Ago: May 19, 2008

Two weeks ago, at noontime, the claim that Microsoft would eventually buy Facebook and keep it close was dominating TechMeme. At this point, no announcement has been made so this is largely conjecture and, while an interesting opinion, it’s not really news. This editorial was largely in response to the news item that dominated the previous 12 hour cycle about Microsoft’s statements regarding pursuing a possible deals other than a full acquisition with Yahoo!

One Month Ago: May 2, 2008

On May 2, 2008 at noon, the big news was… that the Google RSS reader is now available for the iphone. I’m sure many people consider this event as a major turning point when… well, hmm… a big big deal. Amusingly, Adobe was also in the news that day, with news that its flash plugin would escape computers and appear in set top boxes and mobile phones.

Another big subject was Steve Ballmer’s mention that Microsoft could go it alone without Yahoo, a discussion that dominated the midnight page on that day. The Yahoo/Microsoft chat has been kind of the soap opera of our industry and this latest installment was remembered as a turning point (or not) by many.

A possibly interesting trend piece, around midnight, was also intriguing: Will Grand Theft Auto IV hurt Iron Man opening weekend sales. I haven’t seen a follow up on that piece yet, which could tell us whether video games are displacing movies as the primary form of entertainment but my guess is that the answer is no.

Two Months Ago: April 2, 2008

On April 2, 2008 at noon, the top story on techmeme was about Intel’s plan for chips that would power up more mobile devices. Interestingly, this story was largely driven by mainstream media as the lead was taken by john Markoff of the New York Times, followed by comments from Forbes magazine, and Infoworld. The other related story was the press release itself, which can be seen as bloggers pointing straight to the source of the news. I suspect that this story will probably have more legs moving forward. A cursory glance provides glances at developing stories ranging from the rumor stage (that all important Google/Skype partnership or acquisition… which didn’t happen) to the focus on process (like the approval of Office Open XML as an ISO standard).

The departure of Google’s CIO dominated the prior night’s news cycle and word of Apple’s 3G iphone started to filter through.

Three Months Ago: March 2, 2008

March 2, 2008 at noon provides us perspective on today’s news, thanks to Microsoft’s announcement of ITS entry into the web-based office suite market. When put side by side with today’s announcement by Adobe, it seems to start pointing to more of a trend. Beyond that, little news that seems to be of note from a memorable standpoint.

The interesting thing here is that the same subject was leading the previous night’s news cycle. This seems to establish a first rule for techmeme: subjects that survive on the front page more than 12 hours may be worth paying attention to.

Six Month Ago: December 2, 2007

There’s an all saying in journalism that 3 items make for a trend. In the case of this study, it looks like Web-based office suite are definitely the hottest trend around, as the top news on December 2, 2007 at noon was information about the future of Google’s offering in that space (either that or there is an unwritten rule in the technology field that information about web-based office suites MUST be introduced on the second day of the month or wait until the following month).

The subject was starting to climb the chart 12 hours earlier, even thought the discussion at the time was dominated by a Facebook misstep (remember Facebook Beacons? Well, that was around that time). From an interface standpoint, it also brings up something that I’d like to recommend to Gabe: could you add and up or down arrow to highlight if a subject is getting more play or not. On something like this, it would be nice to get an idea of the stickiness of a topic. It appears many topic appear low on the page and move up over time, the quicker and faster they move up seems to indicate the importance of the story and it would be a nice addition to have that info on the screen.

Nine Month Ago: September 2, 2007

September 2, 2007 was a quiet news day. I guess everyone was mourning the death of the newspaper, which was forced by Google on that day, according to the noon-time headlines. There doesn’t seem to have been any other major news around midnight either. This, however, could be an artifact in the data as September 2, 2007 was a Sunday, which is generally a pretty quiet news day as most people don’t work on Sunday.

Interestingly, a story that is just now starting to get more notice is the continuing brushfires around Paypal’s outages. Not that sexy a subject but one that started to be raised around that time. At the time, discussion of Google’s entry in the mobile market centered around the idea they would deliver a device instead of a platform.

Last Year and Two Years Ago

A year ago, at noon, the Techmeme conversation was around porn. During the night, though, the conversation was centering around the acquisition of Feedburner by Google. This is probably remembered by people in the industry as an important milestone and here, techmeme shines at organizing a package with the appropriate conversations.

Things do not improve much if you go further back: 2 years ago, at noon, and midnight, gives us little to mull over.

Conclusion

The data seems to point that the front page of TechMeme largely represents what’s hot right now but does not necessarily highlight stories which have a longer term type of impact. In that sense, it may also be highlighting that discussions in the tech blogosphere are largely centered on insider-type minutia while failing to put things in a larger context. This appears to present a myopic view of the tech world that leaves us with lots of data but preciously little information. So while TechMeme provides a useful tool in terms of getting an idea of the pulse of the conversation “right now,” it does little in providing data that would allow someone to understand the larger trends that are affecting our world as a result of the internet (and web 2.0 revolution).

I would argue that the answer to the question I posed in the title for that post is a resounding yes. Because it deals largely with the trivial and assess little value to longer type impact, TechMeme creates a self-imposed myopia on its readers and participants. A possible exception is when a story manages to survives through multiple 12-hour instances, providing many angles to the same events. But those events are few and far between.

Whether the lack of headlines with a major impact is a phenomenon that is unique to TechMeme or to the tech world in general is a question I’d like to leave to readers and I’d appreciate comments as to your thinking around this.

But all this comes down to a simple fact: if you’ve missed what happened on TechMeme in the last XX hours, days or weeks, you may not necessarily have missed much. so kick back, relax, step away from the computer and, if you need to catch up, you can always pick up a mainstream publication that may cover a distilled version of what happened if it’s of any particular significance.

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 Techmeme myopic?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

As was the case for the previous part, I have only edited the content for formatting sake.

Q: Let’s switch gear to the unit replacement program: The Palm website seems to have difficulties recognizing existing accounts. Part of the frustration of my own experience was that, having bought a device from the Palm website in early 2007, I was unable to get to the information online because the site did not recognize the email address I used to register (even though I have some emails sent by palm to that email address). This resulted in my being unable to get the exact date of my purchase. When I talked to the customer service representative, I was told that we could not move forward with any replacement without that information. Considering the device hadn’t been in the marketplace for a year, I thought that it would be considered under warranty no matter what. Why is it that customers still need to provide a purchase date for devices that are less than a year old?

A: They shouldn’t have to, you are right. Unfortunately, since we primarily sell through the carrier channel, determination of an in-warranty vs. out-of-warranty device is not a perfect science. Our practice is to systematically derive the purchase date from the manufacture date, based on the serial number.

We have very reliable data on how long a product takes to move through distribution and sales channels that helps us ensure we offer all of our customers a minimum of 12 month warranty, as stated in our contract with the customer (i.e. the warranty). If an agent believes the product may fall outside of the 12 month period, we request proof-of-purchase (POP), which is not unusual in the consumer electronics industry. That being said, an agent must use their best judgment and always handle these discussions in a professional and courteous manner with the customer.

To better serve our customers, we’re currently exploring instituting a policy that will not require agents to check purchase dates for products that have been newly released (i.e. less than a year old). This should help eliminate unnecessary questioning and allow our agents to proceed directly to getting a customer’s issue resolved.

Q: If customers are not able to supply a date, why is it that there is no way for a call center operator to look up information for devices bought from Palm’s online store?

A: We do aspire to have all of our customers’ transactional information available to our service agents. However, this is not the case for a variety of reasons. First, there is some information that will never be available or kept; carrier sales information and information protected by privacy laws, for instance. But, for the rest, specifically any transactional information Palm is exposed to and legally able to maintain, we are making huge investments in a CRM program that is bringing this information all together in a master customer database. Just this past year, we integrated most of our direct sales transactions (e.g. from our online store) into our service application, loading both customers and assets. As for Tristan’s case, unfortunately the purchase last winter was prior to this integration going into effect, so the purchase record was not there.

Q: Forced to supply a date, I gave a date at random in order to push the call further. I was then told that it was the exact date of my purchase (a dubious claim at best since the date happened to be, after I checked, before the date of the press release announcing the release of the Treo 680). When I contested the possibility of this being the date at a later time, I was told that you are tracking devices dates by serial numbers. If that’s the case, why is that information not being used initially? (It’s generally easier to find a device’s serial number than its purchase date since the serial number (and incidentally, IMEI) is on the device)

A: I suspect that in this case, and what is probably routine behavior by agents, is to request the date of purchase from the customer, and to take their word for it — which is the proper thing to do. Now when a customer is not confident about the purchase date or does not have any recollection, then an agent is going to check out the serial number to get a good idea of the purchase timing — it’s only then that we are going to call into question the warranty, and perhaps seek proof of purchase.

Q: Vendors like Apple and RIM track their device purchase date by IMEI. Why isn’t Palm doing the same? And if it is, why isn’t that information available to call center personnel?

A: IMEI and ESN are two industry relevant codes for mobile devices. The serial number is a Palm-specific number generated at time of manufacture. Because it is consistent across all Palm products — where it is not for IMEI and ESN — we tend to rely on serial numbers as our default tracking method.

Q: The retail price for an unlocked Treo 680 is $379, the street price for an unlocked Treo 680 is around $250. In either of those cases, the device would come with a one year warranty. The replacement price for a Treo 680 is $199. Why is the replacement price so high?

A: The primary drivers of repair and replacement cost are parts and labor, and hence can’t be directly compared to the product. The wireless industry subsidizes phone purchase prices, making the total cost much lower than the actual cost of hardware and labor.

Q: Looking at the prices listed on your site, it appears that all your phones have the same replacement price ($169 by web, $199 by phone) However, prices for the unlocked devices listed in the Palm store range from $379 (for an unlocked Treo 680) to $669 (for an Alltel Treo 700p). Does that mean that the repair cost for all units is the same? Why isn’t there variable pricing on the repair costs?

A: The actual cost of repair may vary across units, but this variance is much less than you’d think. The process steps that all units go through for diagnostics, component replacement, cosmetic refurbishment, and logistics are identical. The only real difference is the value of the parts required for a given repair.

While variable pricing seems like the best thing for the customer, we actually provide fixed pricing to deliver a better customer experience. This is because we want to quote a price upfront and quickly process the replacement without having to come back to the customer and explain that their fix was different or more costly than what was expected at the outset. This would create unnecessary tension and delays when a customer needs their phone back to them in working order as soon as possible. We don’t really know what parts will be required until we open the device, and a call center agent would not be able to accurately estimate the costs.

Q: A year ago, the replacement cost for a Palm 600 was $100 (I unfortunately broke 4 screens on Palm 600s through the years so I’m familiar with that price). Today, such a replacement would cost $169. Why the price increase?

A: As products get older, our cost to service that product normally increases. It reflects the growing cost of acquiring parts, maintaining inventory, expertise and training for repair events that become more and more infrequent.

Q: Apple has made it a practice to sell special contracts (called AppleCare) on their devices that provide extended warranty. This includes selling AppleCare for iPhones (for $69). The program includes replacement of defective units at no extra charge and extends warranty from 1 year to 2 years. Why isn’t Palm offering a similar program?

A: With the first line of smartphone product support at multiple carriers, including warranty processing, an extended warranty program has been a challenge for Palm to offer — mostly because of channel complexities. We are presently working through the challenges that have made this difficult, and hope to offer this service feature to our smartphone consumers in the future.

Apple has a unique relationship with AT&T that may make these programs a bit easier to provide.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Palm responds, Part 2. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

At the time, I figured that this was a nice and convenient answer that really acted as more of a way to stonewall me. So it was with great surprise that I was contacted with a follow-up by John Moses, the VP of customer relations worldwide for Palm.

Not only did John apologize for my own experience but he was considerate enough to provide me with a lot of answers to questions I asked (and, in a closing to my encounter with Palm, he also provided me with a replacement unit for my Treo 680). While my faith in Palm hasn’t been restored yet, I think there is a lot to ponder in the questions and answers John provided me. Because there is a lot to digest, I am breaking this Q&A into two parts: The first one, which follows, addresses general issues around customer support and around my own experience. The second part talks about the unit replacement program and some of the decisions made there.

So without further ado, here is the Q&A, which is not edited in any way, save for light formatting to increase readability .

Q: First of all, thanks for taking the time to do this interview and alleviate some of the fears people may have after I posted my experience with Palm. The Treo 680 has been out for about a year now. As the head of Customer Relations, have you seen particularly high levels of calls relating to it as opposed to other palm devices?

A: Because of a special program we implemented and highly marketed this past year called 1–800 Free Setup Help, we have had a higher volume of calls related to the Treo 680. This Palm sponsored program — where we have also gained the support of our major carrier partners — encourages customers to call us at no charge within the first 90 days of purchase for dedicated device setup assistance. The results have been highly encouraging and we are continuing to evaluate additional programs that increase the number of interactions we have with customers so they get more out of their device.

We also strongly recommend that customers take advantage of the Treo 680 software updaters, as they do make a noticeable improvement to the performance of our devices. Customers can find these
on our website.

Q: It is my understanding that Palm works largely on second line of support for mobile phone companies they have partnerships with and works as first line of support for unlocked devices they sell. As a result, I would suspect that the number of calls for unlocked devices is probably higher. Is that the case?

A: You are right that for the majority of our phones — all of those sold through the carrier channel — we are the second level of support. Our carrier partners have extensive support capabilities and are interested in maintaining a connection with their subscriber customers — and we respect that. As a general rule, these customers are encouraged to begin support with their wireless service provider, and they will in turn escalate to us at Palm if the issue warrants additional device expertise.

There are exceptions to this, however, and customers frequently contact us directly; this most often is because they are taking advantage of our special programs including our Free Setup Help, which I mentioned before, or our MyPalm Membership, where customers can receive special benefits including a dedicated member assistance line.

For those customers who have bought unlocked devices directly from us on our website or in our stores, we certainly are committed to be their first line of support. In terms of call volume, we receive more for carrier-locked devices than unlocked ones, partly because there are just more sold, but equally so because we have a close relationship with our carrier partners which involves regular collaboration and warm transfers.

Q: Are calls for unlocked devices routed to different call centers than calls for locked (or carrier specific) devices? If that’s the case, could you explain some of the logic behind it?

A: No, support for both types of devices is provided by the same call centers, and with the same agents. Our support agents are trained on all Palm products and all customers are treated the same.

Q: Palm recently started to move phone support to a pay model (I believe it’s $19.95 per call unless it results in an exchange). Does Palm look to its phone support as a potential profit center?

A: First, customers transferred from a wireless carrier or a call with a basic inquiry will not be charged. Also, if a call results in a repair or if an agent cannot solve the issue, we would waive the fee.

Palm has always charged for phone-based technical support beyond 90 days of purchase, based on our standard support policy and warranty — this is standard industry practice for many consumer electronics manufacturers. We have just reduced (in December) the cost of post 90-day technical support (from $25 to $14.95), and when we do charge customers, the funds are used to subsidize the costs of the support infrastructure we provide.

Palm regards the relationship with its customers and support specifically, as an investment in the future, not as a profit center. We try to make Palm support valuable and affordable to customers by offering various options, including several options that are free of charge (e.g. Online Chat).

Q: Has reaction among customers to the move of phone support to a pay model been negative or positive?

A: As I mentioned before, Palm has always charged for certain phone-based support services. We have seen a positive response to our new “Expert” pay services, which certainly is evidence that customers don’t mind paying a fee for a service that they deem important and that is well executed.

Q: The level of expectations for a service one pays for is generally different than the level of expectation for something that is free. What has Palm done to ensure that the experience around paid calls is better than the previous (free) experience for customers?

A: Palm still provides many free service options, so a customer is never forced to pay for support. We also strive for and expect the best level of service for both types of calls — paid and free — as the same customer may experience both types of support options during the time they own their product and we want their interactions to always be consistent and of the highest quality.

Q: I am sure there are studies about user satisfaction across the industry as a whole. Do you have information about Palm’s standing, compared to its competitors, in terms of customer experience? Is it better? Worse? What are the main issues around it and what is Palm doing to address them?

A: I can tell you that our case satisfaction scores — those scores that rate the quality of the support given by an agent for a given service request — is either at the top or very close to the top of any comparative set you will find for true technical support on complex consumer electronics. Of course we always believe we can do better.

We have a number of teams that continually analyze everything from call center activity, to web searches, to satisfaction surveys in order to find ways we can support our customers more effectively. Thankfully, our customers take the time to give us feedback, and we take that very seriously, and we listen and apply it.

Q: Has Palm outsourced its call centers or are the overseas call center employees also Palm employees?

A: Yes, we have chosen to outsource and offshore a majority of our technical support. The technical aptitude and average tenure of the agent pools we use offshore are very high. We also supplement offshore service with onshore escalations (which should have been leveraged by the agents in your case). Interestingly, our customer and case satisfaction data over the past year show that the actual difference between our onshore and offshore agent service is marginal — a fraction of a point — so we believe that we are not compromising quality in any real way.

Q: What kind of training does a Palm call center employee customarily receive?

A: All of our agents get an average of three weeks of classroom training per year. This includes technical support training, operating system (Palm OS and WinMo) training, language and cultural skills training, customer service skills training, new product training, product refresher training, and Palm systems, procedure, and policy training. In addition, agents regularly receive intensive one-on-one coaching and mentoring using call recordings, quality monitoring and customer satisfaction surveys.

Q: In my own experience, as well as in other experiences documented online, it appears there have been many instances of Palm call center employees lying to customers. Just for the record, though I suspect the answer will be no, are Palm call center employees asked to lie to customers?

A: We invest a lot of time and energy in providing official scripts, bulletins, knowledge bases, and training that help agents to respond swiftly, professionally, and accurately to the myriad of consumer inquiries that they face each day. They are also encouraged to use our hierarchy of support to escalate calls and questions when they are not informed or positioned to answer — so there is no reason an agent should provide inaccurate information at any time.

In your case, the agent lost control of the conversation, and things were said that shouldn’t have been. These types of cases result in an investigation, and oftentimes interviews with those agents or managers involved.

Q: What would happen to an employee that is found to have lied to a customer?

A: We conduct an investigation — perhaps reading call notes, listening to calls if they’ve been recorded, interviewing agents, and so forth — to get a better idea of what really transpired. We would then follow our established guidelines for discipline, performance improvement, or dismissal.

Q: Also for the record, though I also suspect the answer will be no, does Palm CEO Ed Colligan take call center calls?

A: Ed is one of the most passionate and participatory executives you will ever come across. While I don’t believe he has ever taken a technical support call per se, he certainly will contact a customer directly, and does so all the time. He has a dedicated voicemail box where he receives customer messages that I don’t even have access to. He routinely is responding to not just voicemails but emails, faxes, and letters that come across his desk. And Ed knows the names of these customers, and he looks to me for status updates on how we have handled these cases and whether or not we have restored their trust in the Palm brand. He is zealous about this — and so am I.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Palm responds, Part 1. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

I was first walked through the script by employee C13763, who balked when I told her that I didn’t know the exact date of purchase of my device. Having purchased the device from the palm US store, I thought they could look that up but I discovered that it wasn’t the case. Keeping her on the line while I tried to login in the store, I discovered that palm no longer had any trace of any accounts of mine on their site. With 4 palm devices bought over the last 3 years, I was surprised by that fact, especially after checking the address on the welcome email (palm has a tradition of sending you a welcome note to their world every time you buy another device) and asking for a password to be reset for the email address I had received emails at from Palm.

But at that point, I could say it was all basically my fault for not keeping good records. I asked for forgiveness and gave a date based on my rough rememberance. It was around the end of the year and the Treo 680 has been introduced at a show in New York only a few days before. So I looked up the rough timeline (device introduced late November 2006 and released around December 2006) and gave a date (January 1, 2007). I knew the date was wrong as I had gotten the device later than that but figured I needed to give them a date that was within the range of warranty and on the outside of the date I bought the device.

After doing so, I was told that I needed to do a hard reset (I had already walked through that) and indulged the call center person (I figure they get enough abuse as is). That, of course, did not solve the problem since it was a hardware issue (speaker blown off due to the fact that the volume setting on the palm, if set too high blows off the speakers and the fact that the volume setting buttons do not lock with the rest of the buttons on the device, ensuring that any type of shaking in pockets or bags will ensure that your volume is either set to the top or bottom setting most of the time). After another 15 minutes of walking through the scenario, I was told that the replacement unit would cost me $299.

$299 would not be much of an issue, with one possible exception: the retail price for a brand new, unlocked, Treo 680 is $379. The street price ranges from $200 to $300. A new unit comes with a one year warranty on all parts. A replacement unit does not.

The message this sends to customers is that once you’re a customer, you’re hooked and therefore the company is going to try to milk any profit it can out of you. As a shareholder, I thought this was the wrong message so I asked employee C13763 to transfer me to her superior. After some going back and forth, I was finally transfered to employee C11329, a “senior technician” to whom I referred my case number (case number 1–511-464–84488) before continuing the discussion.

I first voiced my concern about the fact that there was a problem in terms of locating sales data from their own servers. Since I had bought the device from Palm’s website and I had given my serial number while on the previous call, I thought it odd that they could not locate the date of purchase of the device (especially since they consider it such vital data for customer service) . I was told that since my device was sold on January 1, 2007, the date I had given only a few minutes earlier to the previous call center person, it was out of warranty. I’m writing this on December 27, 2007 and, the last time I checked, a one year warranty generally extends 365 days from the date of purchase. My concern as a shareholder now turned to anger and frustration. With 3 other broken palm devices in front of me (2 of them my own fault so I won’t even bother talking to Palm about those), I thought that I could be considered a solid customer. But now I was told that warranties were not real and paying $199 (a drop in price of $100 in only a few minutes since talking to the previous person) was going to solve my problem. In the past, broken devices were repaired for $100 so this was getting closer to reality but I wanted to talk to someone more senior about two problems: first, it seemed that one can give any date and it won’t be checked (or maybe it will) and two, if it is checked, warranty terms do not apply for a full year.

So I asked employee C11329 to be transfered to her manager. She told me she was the most senior person at Palm. I asked her again politely to transfer me to her manager. She told me she had none. I asked to be transfered to the person that was reviewing her work, giving her assignments, etc.. I was told she had none. I told her I felt that was odd as, apart from the chairman and CEO, I didn’t know of anyone in a company not having a manager. She told me she was the CEO.

For a second, I paused. “You’re the CEO of Palm, Inc.?” I asked again, not really believing what I was hearing. “Yes, I am” she replied, now with a defiant tone. “So you’re telling me you’re Ed Colligan?” I asked. “I am the CEO and that’s all you need to know.”

Well, turns out I was now in a very odd situation. I had been at several industry events where Ed Colligan spoke (including a number of product launches from Palm) and, as far as my memory was concerned, his voice was neither feminine nor did it sound south-Asian in its inflection. My memory might have been playing games on me but I was pretty sure I was not talking to the CEO of Palm.

“Do you mind if I start recording this call? I’d like to get your answer to my question about being CEO on an audio record as I’m having a hard time believing it” I asked. The first part of this question is a standard I was taught in journalism school: if you’re going to record a call, first ask if it’s OK to do so. Laws applying to phone taping are a complex mess of regulations with little overlap between different jurisdictions: however, if both parties to a conversation agree to the taping of that conversation, it is generally recognized as OK to do so.

Obviously, I was dealing with someone who knew (or guessed) that I would not legally be allowed to record the conversation so she replied that “no, that would be illegal”. I was stuck so I asked her to transfer me to her manager again. She said no. I asked again with the same result. After another 15 minutes of back and forth, I finally figured that she being CEO, she could transfer me to anyone in the company so I asked to be transfered to the company’s general counsel. The call dropped. I let the line run for another few minutes figuring that maybe it was taking time for the transfer to occur but no, the line went dead.

After a few hours, I realized that while my experience had been horrible, I may have found a great story: PALM, the stock, is not doing so hot. Palm, the company is having its own issues, as are Palm the devices. In the past, the saving grace in all this was that the customer support was very good and decent. So the question is whether tech support (or other forms of horrible customer interactions) could be the straw that breaks Palm’s back. I called Palm’s PR agency to ask some questions about this but most of the people are on vacation. One of their agency’s PR people told me that she’d pass the message on so we’ll see what happens.

On a personal note, I’m joining the many others who are abandoning palm the device. I am also, like Mary Hodder, regretting all the recommendations I made. I’m now shopping for another device and would welcome any recommendation. I also wouldn’t mind getting some information about how other people feel about tech support not only at Palm but also at other unlocked devices sellers. Is unlocked a category of the market that most vendors dismiss, reserving their best services for 3rd party mobile providers and is it something that might change in the future? I don’t know but what I do know is that I am now part of the group of people who must say: “Don’t ever buy a Palm device.”

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

I was recently describing my update process to David Strom, after he had posted an entry on his blog about how poor the contact management system in Gmail was, and I hit upon a realization: A lot of the work that goes into keeping all that information up to date seems to be something that ought to be more suited to some level of automation. Why is it that there is no real linkage between my address book, different email systems, social networks, IM systems, Skype (and other voice over IP solutions) and my mobile phone? Each of those appears to live in a silo, unable to offer me a full view of the people I know.

While Plaxo does a good job of synchronizing metadata about people (What I would consider as rank, name, and serial number ie. the basics like physical address, IM address, phone, and email), it has yet to evolve into a solution that would give me a full view of the relationships I have.

I also played with a number of CRM packages like SugarCRM but ultimately, they fail because their view is completely sales-centric, with the idea of people being largely seen as members of a company and sales prospects to be closed. I am not much of a salesperson (unless you consider pushing new ideas on people a type of sale, which arguably it is) but my view of the world is much richer than that. I don’t want to think of people as buyers.

However, the concepts of grouping information in CRMs is somewhat attractive. What I want is a view of my relationship with people that would group:

• The basic type of address book information available in my address book and/or on my PDA and/or phone.
• The rich email discussions I have had with said people
• The similarly rich IM discussions I have had.
• SMS or MMS discussions synched from my phone.
• Social Networks interactions
• Feeds for the person (to things like their blog, their last.fm account, etc…)
• Trackbacks and other blog related discussions.

The interesting thing is that each of this information is available in a digitized fashion but there is no centralized point that allows me to see said information about Joe Smith.

Why is that?

So I’d like to suggest the creation of a new class of software called the “Personal Relationship Manager” or PRM. The purpose of a PRM would be to help you manage your life instead of trying to manage sales.

Basic Personal Relationship Manager

Of course, people are going to say that this product or that product solves my existing problem. In order to get those people to think before they push their solution, let me describe in details what I want:

Contact Information

• Integration of my address book across different email services: the contact part of this is largely completed by Plaxo as they have managed to integrate and aggregate the address book from a number of services. They need to provide an interface to integrate others but they seem closer than anyone else on this.
• Integration of my address book across different IM services: top line, the following would be needed from day one: AIM, MSN IM, Yahoo IM, Google IM, ICQ, and Jabber. I should not have to reenter information for each.
• Integration of my address book across different social networks: this is getting trickier as most of the popular social networks look to that type of data as owned by them. However, an ideal PRM would integrate and aggregate the information my friends give on a social network into a single view.
• Integration of my address book and mobile and VOIP solutions: Caller ID on my VoIP solutions like Skype, Vonage, etc… and on my mobile phone should be integrated into a contact view. Today, my Treo asks me if I want to create a new contact or add a number to a contact if it’s not in my address book already. I want that type of feature across all voice communication solution.

Conversations and Status

• Integration of Email conversations across all email services I use: At minimum, this should allow to bring IMAP and POP into my PRM.
• Integration of IM conversations across all IM services I use: Most IM services now have an archival feature. That should be presented as part of a user view.
• Integration of Social Network Status and related messages across all socially-aware applications: From social network status to Last.FM music, from WeSabe to Twitter, my friends are updating information in a variety of services. I should have a dedicated news feed for each individual view.
• Integration of SMS/MMS history: SMS and MMS sent to my mobile phone should be integrated into the overview of people.
• Possible Integration of Voicemail and audio messages: At a later time, integrating those into the package would be a nice to have.

Input

• The PRM should manage relationships across social network: This ought not be aggressive but the system should check when people I know join a particular network I’m on. If it finds a match, it ought to tell me that it did and, based on my settings, either ask for a linkage automatically, or ask me to approve/deny asking for such linkage.
• The PRM could (not should) become a single point of entry for broadcast messages. For example, if I change jobs (as I did recently), I would update that system with the job change status in a single location and it would update that information across all the touch points where I have entered that information.
• The PRM could (not should) be a single entry point for status broadcast. At the very least, it should allow me to set which system ought to be integrated via simple rules similar to filtering (for example, I could say “If I update Service X, also update Service Y and Service Z.”

Programming Bits

• Low change footprint: A new application should not force me to change everything I already use. Instead, it should work with the applications I already use. This is probably the hardest thing in developing the application I’m highlighting as it will have to integrate with other services/software via some kind of service oriented architecture but not take over their basic features.
• Fully addressable via API: The PRM, if built successfully, would become central to managing relationships. As a result, it could become the source of data that applications could be built on. Because much of the data is personal, a strong set of security and access controls would need to be in place in order to ensure that only the data people in my PRM want to distribute is distributable. On the other hand, the data should be formatted in such a consistent way that developers could build applications that integrate with the PRM.
• Online/Offline addressable: Knock me off the network and I should still be able to have access to some of the data. Put me back on the network and I should be able to resync it all with the most up to date information.
• Decentralized: People tend to prefer having their contact info in the hands of more than one providers as they feel that type of information is largely personal. A PRM solution would thus have to be in a mode that can be federated so no single entity is in full control of the data.

So the purpose of the system, once built, would be to give me a view of my friends/contacts/etc… that is consolidated. It would probably provide me with a high level contact overview (listing all the ways to get in touch with someone), and then allow me to drill on the different conversations I’ve had with the person across a variety of systems (Email, IM, phone, social nets) as well as give me an overview of what they’ve been up to thanks to a status message and socially aware apps screen. And it would have to do all that without me changing any of the systems I’m currently using. It’s a tall order but it’s one that, if satisfied, could easily become the central way for people to manage their relationship.

If your product does indeed satisfy all those requirements, you may have made a sale. And if you have an interest in developing a PRM, I’ll be happy to be an alpha tester.

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

Of course, day one is always amusing. First, it’s clear that the security claims are not fully justified. And moving from the confines of the OSX world, which is generally like a meticulously cleaned up suburban neighborhood into the wilds known as the world of Windows was bound to test some of Apple’s mettle when it comes to security. But that’s really besides the point: the software is not a full released version and one can hope that it will be improved upon further down the line (then again, hope springs eternal.)

But all this is really besides the point. In order to see what is happening, one must start thinking about why would Apple think about a new browser today.

The first popular line is that it works as a good environment for developing applications for the iPhone, now that Steve Jobs has stated that this would be the only way developers can currently develop for that new device. GigaOm believes that AJAX will change the way mobile devices applications are developed. I’m not sure I share Om’s enthusiasm for that approach: for starters, the system sports WiFi and EDGE but no higher speed wireless network. So, unless you’re near a WiFi hotspot (and I’m sure one was available for Steve Jobs’ presentation), you may find responsiveness sluggish. Small amounts of data are OK when running on an EDGE network but the startup for a new AJAX-powered application will probably be on the slower side. However, having denied access to the core system on the iPhone to developers (as it did for the iPod), Apple had to toss them a bone and Safari was that bone. That bone is called Safari.

The next challenge for Apple was that, while a lot of developers use OSX, the majority of development is still not happening on their platform. In fact, more energy is expanded in the web development community to making sure that something works with the Firefox browser than is to make sure that it works with the Safari browser. By now swinging the tantalizing carrot of iPhone coolness, Apple is making sure that more developers ensure their sites work with Safari. From that sense, it avoids future problems with some of their mac users being unhappy with the fact that some sites don’t work on Safari, blaming Apple for it instead of the site’s developers, and it creates a new platform for itself: develop something on Safari and it will run on macs, windows, and the iPhone.

Apple is basically pushing Safari as a new platform, borrowing a strategy that was first highlighted by Marc Andreesen almost 15 years ago: back in the day, Marc stated that he wanted Netscape to replace windows or just turn it into a set of basic components with everything running into the browser. Of course, this was at a time when you were lucky if you had a 56k modem so it didn’t make much sense then. In a world where bandwidth is high enough, applications can now resides largely on the network so Apple pushing Safari as a new platform could make some degree of sense.

The next step to think of is that while an application may make sense in terms of running fully online, even Google has seen some of the limitations of that model. Their offering of the Google Gears showed that they are interested in moving some of their application to an environment where a network connection is not required 100 percent of the time.

So Apple’s strategy would require a way for Apple to ensure that things can be installed locally within Windows. This is where something that was not mentioned by the folks at Apple is showing up when you install Safari:

Now that’s very interesting. Why would Apple be so interested in installing those two pieces of software on your computer? After all, they are not necessary for developing applications for the iPhone. But before going into speculations as to why they are there, let me explain what those two applications do:

• Bonjour, according to Wikipedia, is “Apple’s implementation of ZeroConf,” a technology that allows inexpert users to connect computers, networked printers, and other items together and expect them to work automatically.
• Software update, also according to Wikipedia, installs the latest version of Apple software on a computer. It was first introduced on the Windows platform as part of iTunes.

The presence of those two packages higlights that Apple is not just interested in the desktop but wants to play within a wider environment:

One can assume that Bonjour might be embedded in the iPhone and AppleTV as well as future version of the iPod. This would basically hit right at the heart of Microsoft’s strategy of creating a distributed environment where the Xbox, Windows Media Center, and other Windows powered devices are all interconnected. Apple would now enter that world and get all their stuff also connected on Microsoft’s turf.

The presence of software update, while not fully mined yet, could be equivalent to Google Pack, which also happens to include the Google Updater, which Google describes as follows:

The Google Updater is the program that downloads and installs all the software in the Google Pack. You can use the Google Updater to monitor the status of your installation, run software that’s been installed, or uninstall software. A Google Updater icon will appear in your system tray and will display notifications when new software is available.

With that in place, the windows desktop is increasingly looking as a new battleground. On one site you’ve got the incumbent, with Windows Update, then you have the new claimants to the throne in the form of Google and Apple. Right now, Apple is actually starting to push new products with the Apple Software Update: installing the new Safari software on a virgin machine (ie. one without any Apple software update) yielded the following Software Update Window:

So I install a browser and the next thing Apple is telling me is that I should really consider installing iTunes and Quicktime. What next? This is obviously a good delivery vehicle for Apple to push more software down the lines.

So they’re developing their own eco-system right on top of Windows. In a way, one could think that they are basically taking the same approach as Microsoft did with the Office platform: Develop on someone else’s turf but also optimize for your own.

It’s a brilliant strategic move and one that could eventually yield to much more software coming from Apple to the Windows platform.

So why would Apple care about Windows?

Well, beyond the basic point that there are more Windows users than there are mac users is the fact that Apple is working on setting up new ecosystems for itself. The iPod was the first obvious move in that direction and they are betting that the iPhone will be a similar winner for them. Earlier this year, when Steve Jobs introduced the iPhone, he also dropped the word computer from the name of the company. Apple’s future is not in the computer space (and it is appears the company is running out of new ideas for its operating system as the new OS features presented in yesterday’s keynote were incremental at best) but in the consumer electronics space. They hope to control what’s in your hands (iPod, iPhone), what’s on your screen (iTV, iTunes) and how you access the content. By having control to the access point, Apple can then influence the pricing models in the delivery of media and ensure they take their own percentage along the way: it’s something that worked for them in the music space, something they’re working on in the video space, and I suspect something they’ll eventually look into in the software space.

Apple wants to control the points of entry and charge a fee for access to them (further highlighting that point is this blog entry by Larry Dignan at ZDnet, which highlights that Apple is getting some nice revenue from Google and Yahoo). All and all, Apple could eventually succeed on grounds that Microsoft once wanted to claim as its own: to become the tollbooth to the Internet and the new world of media.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title Safari: Apple’s New Platform?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

It’s a very smart move on the part of Apple, which highlighted the change in the way the company is operating by changing its name from Apple Computer, Inc. to Apple, Inc. , reflecting the fact that they are no longer just a computer company.There were a few interesting items of interest, though.

For starters, no mention of how the phone will sync up with a computer. Are we to assume that it’s Mac Only or will it synchronize with computers running Windows too? If so, does that mean that a new set of applications will be available to Windows users to sync their address book, calendar and email with systems like Outlook or will the device require to manage those things specifically using Apple applications on Windows?

The other thing that was interesting is the announcement that the phone will run on quad-band GSM and will be using EDGE network. This means that the phone will get decent but not great data service. Perfect for email and light web browsing but not quite fast enough for video streaming. However, the introduction of WiFi in the device, which many other companies have avoided for fear of losing battery capacity, could take care of that.

The other interesting thing is that the operating system on this device is OSX. This seems to point out to two possible issues: First, what does that mean for PortalPlayer, which has traditionally provided Apple with the operating system (embedded on a chip) for the iPod? The second question is what does it mean in general: What Apple has introduced is basically a mac in a small form factor, which could easily compete with the UMPC specifications introduced by Microsoft. It’s pretty clear that Apple has a lot of plans in the future for that device but they didn’t say much about the significance of OSX, providing it almost as an aside (and what does it mean for the next version of OSX, which was not mentioned during this keynote at all, a surprising omission in itself.)

Who loses?

Judging from the reaction on the stock market, it’s pretty obvious to see who loses: Palm (makers of the Treo), RIM (makers of the Blackberry), and Motorola and Nokia will obviously not be thrilled with the entrance of Apple in this market. The exclusive deal with AT&T (ooops, sorry, Cingular) will also have a negative impact on Verizon, Sprint, and T-mobile as Verizon will see a number of users switching to them in order to get their hands on this device (in informal discussion with a number of fellow geeks, the disadvantages of moving to Cingular were far outweighted by the coolness of this device).

Let’s take a quick look at specs and see how the difference devices fare against this new entrant:

So looking at it, this phone is pretty expensive (you pay for the Apple premium) but packs a lot more features than other phones in the same category. It’s got a better camera, more memory and a larger screen as well as WiFi. It’s talk time (for the category) is actually pretty good (only bested by Nokia’s E-62) and it is a little heavier than the competition. For a first entry in the market, I’d say that Apple has a winner on its hands.

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 iPhone is here. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Mobile

Last year, I declared that video would be big in the Internet space and this year, I believe that mobile will be a major focus.

The devices

While mobile devices will continue to grow on the existing curve, adding more processing power and more memory, they will also add a number of features with are significantly different from the ones we’ve been accustomed to see on a mobile phone. Cameras will increasingly become just a tick on the feature list and location-aware devices will become more prevalent (they will sport a GPS chip).

The new features will come in 3 key areas: first, more mobile devices will be able to multi-task, allowing users to use functions on their phone while making a call at the same time. The multi-tasking will extend to wireless services too and people will be able to surf the web or use internet-based application at the same time as they are making a phone call. A key hardware change in those mobile devices will be an increase in the number of phones (and other mobile device) that not only have a GSM or CDMA chip but also sport a WiFi receiver. This will allow the devices to run across a variety of networks. I suspect (and am probably going out on a limb here as my guess is that this would be early) that some of the devices will conform to the 802.11n WiFi standard, and will use that technology as a bridge to 3G because 3G deployment in the United States will be slow.

The second big hardware innovation in mobile devices will be the presence of RFID readers and chips that will allow users to use them for person-to-person or person-to-business commerce, turning mobile devices into electronic wallets. Deployments in Near Field Communications for credit cards have already started to happen on a trial basis in cities like New York.

The third big hardware innovation in mobile devices, in my mind, will come from the fact that some devices will be DNLA certified, allowing them to exchange, photos, music and videos with other devices in your house.

The services

This year, the rise of mobile services will be powered by a sharp drop in the price of data service offerings from mobile operators, with some operators offering flat-rate all-you-can-ear services to their customers.

In the content arena, the most popular type of service will be near-CD-quality audio downloads. There may be some offerings in the streaming audio market but I suspect that those will be very limited. The second most popular content service, in the mobile space, will be mobile video, with TV and user-created content (mobile YouTube and competitors) filling that gap. Those services will be advertising supported, with revenue sharing agreement between the mobile operators and the content providers.

Map services will also enjoy some level of success. The recent introduction of Google Maps on the Treo platform can be seen as an example of that trend and location-aware device will offer richer experiences in that space, with live traffic info, weather, and maybe some advertising being part of the offerings.

However, content will not take the forefront on mobile services, which will still be dominated by communication as the primary type of application. In that space, though, regular phone service will not be the predominant form of communication. SMS and MMS will be integrated with instant messaging platforms and email, to provide a complete communication package. Expect features like the ability to send text messages to multiple parties at once to start appearing, allowing for chat-like interfaces on phones.

As a result of those changes, social networks will also start integrating mobile applications more closely this year. MySpace and other networks like it will offer integrated solutions for mobile blogging, podcasting, and vlogging, as well as integrated chat and location aware social networking services. Dating services will be another arena to go mobile with the ability to identify matches within your general area.

Wrapping up the offerings will also be limited trials in the videophone space, leveraging off new next generation 3G infrastructures. The videophone trials (and 3G in general) will still be limited offerings by the end of the year, due to the high premium charged for such services.

On the voice end, the introduction of WiFi on some mobile devices will give rise to VoIP mobile applications. If the devices sport 802.11n receivers and such infrastructure is deployed, services around that space could eclipse traditional voice traffic.

Apple

Due to the added power mobile phones now have, the iPod is threatened. Apple makes a defensive move by unveiling the Apple ecosystem, centered around use of media in general and of the Apple iTunes store in particular. With the introduction of its own offering in the mobile space (an iPod with phone functionality and not a phone with iPod functionality) and in the living room (the already pre-announced iTV components), Apple presents a strategy that allows for simple integration of all their components into a digital lifestyle offering.

In the non-media space, Apple bundles blogs and wikis with the new version of OSX and starts offering Web 2.0-like functionality on its Xserve servers, in a bid to get a spot in enterprise racks. They will also merge in social networking features in their calendaring and address book applications, allowing for a more integrated experience.

In another bid for enterprise positioning, Apple will include virtualization of other Operating Systems natively in the next version of OSX, allowing their computers to run Windows and OSX applications side by side under OSX. The feature will take some of the existing Apple bootcamp attributes and turns them into an equivalent of Parallels.

In a surprise move, Apple will also announce that it has signed a partnership with Google, which will offer the Google Apps for your domain as a replacement for the .mac service offered by Apple. The service will now be available either as a free ad-supported service, or on the same premium service offering as before without ads.

On the hardware end, Apple will endorse 802.11n as their standard for media distribution, equipping all new computers and the iTV device with receiver cards so it can leverage off the higher speeds offered by that standard. Because of its long-standing relationship with Sony, the company will also decide to side with BlueRay as their standard for next-generation disks, equipping their new laptops with drives following that standard.

Microsoft

Microsoft’s oft-delayed Windows Vista will finally be released but adoption of the new operating system will be lackluster as few of today’s computers can support it. The same will be true of the release of Microsoft Office 2007, as most users feel perfectly OK with the version of those products they have running on their desktops.

With the major release of updates to the Windows and Office platforms behind it, the company will focus efforts in other areas. In the console market, Xbox 360 will become the dominant game platform, due to slow adoption of the PS3 platform. Microsoft will innovate heavily on that platform, leveraging its positioning in the living room to offer more movies, more TV shows and other types of services around it. Meanwhile, the company will also work on a major revision of their Zune offering, offering a new version of the iPod competitors that will be better received than its predecessor. However, Zune 2.0 will not make a major dent into the iPod market. On the web end, Microsoft will consider the acquisition of either Yahoo! or AOL as a way to shore up its MSN offering and adopt a more aggressive stance in its fight for online advertising revenue.

Virtual Currencies

There will be more talk about the digitization of money this year. Microsoft will use its Microsoft points as a new form of currency that can be used not only on the Zune marketplace and the Xbox live marketplace but also as a way to pay for goods and services online with approved merchants. This will be followed by support for a payment solution (like Google Payment or Paypal) in a stake to get a stronger foothold in that space.

Google will continue pushing its Google Payment engine, moving it to an international base before year end. Meanwhile Paypal will continue expanding its lead in the space and will start offering virtual credit card numbers that will be usable on any system and tie back to Paypal on the back-end.

But the big stories in the virtual currency space will be around the rise of virtual worlds like SecondLife and others, which will see their own virtual currencies rise against the dollar. Their will be discussion about the power those virtual worlds operators have over money flows and calls for regulations of those currencies (and possible taxation of revenue made in those virtual worlds) in several countries around the world.

Virtual Worlds

Speaking of virtual worlds, there will be a continuing explosion in the growth of this phenomenon. By year end, SecondLife alone will have over 15 millions residents, but will be experience growth pains. At least one other major virtual world operators will appear in the space but most corporations will rush to SecondLife.

The initial hype that started appearing in the mainstream press about SecondLife will give way to a number of negative stories, probably talking about some of the darker aspects of the virtual world phenomenons, including gold farming, the sex trade, and gambling. Some politician will use the negative press as a way to grab headline by calling for a government inquiry in the dealings of virtual worlds operators.

While I declared 2007 the year of mobile, virtual worlds will come of close second in terms of highlights for the year. I suspect that LindenLab will surprise people by announcing that it will open up its platform and present the underlying components as a new standard for the web. The company will then start offering their grid software as a standalone application that corporations can install on their own servers if they want more control. LindenLab will also allow companies to use customized version of their thick client that could be branded with company destinations and other goodies.

Due to LindenLab’s strength in the space, many companies will consider acquiring it but many will be turned off by all the negative press and potential for government involvement.

Media

Mainstream media will continue trying to co-opt successful bloggers and will also turn its attention to successful podcasters and vloggers. New stars will emerge online, develop followings there and make the jump to mainstream media, while the reverse path will be taken by mainstream reporters and actors, who will increasingly start vlogging and podcasting (they’re already blogging).

Pressured by lower viewership in their traditional timeslots, TV stations will start posting more content online, with at least one TV station offering all its primetime slate online in and advertising supported fashion. Smaller video distributors, in the meantime, will start investigating using bittorrent for distribution of their content. Some old TV show will see its archive fully posted online and will start receiving a new stream of revenue as a result of that online appearance.

Meanwhile, ad revenue will continue to shift to web, and media will reluctantly follow. By year end, most newspapers will have combined their print and online newsrooms, and many will be cutting back on print to focus more on their online presence. As part of this shift to online, we will also see increased reliance on user generated content, with some newspapers offering blogs to their readers and encouraging active participation in making the news.

However, most of those efforts will not generate the expected returns as Google gobbles up increasing share of overall internet ad revenue, and starts expanding to audio and video. Discussion in the traditional media will start shifting to whether Google is too powerful for everyone’s good.

Death of the website/webpage

Another important shift in the media space will be the death of the concept of traditional website or web page as a result of increasing consumption of content via RSS or through distribution of widgets that can be embedded in other people’s sites. People will move away from the term web site and start talking about web properties. Because content will not necessarily be consumed in the creator’s site, there will be discussions of a new for new advertising/revenue models for such content and a need for new metrics to identify reach and audience. This will present a new opportunity for companies in the web analytics space.

As the web page is no longer seen as the best way to measure the success of a web property, the CPM will be on its last gasp as a model for selling online advertising, replaced largely by cost per click (CPC) and increasingly by cost per action (CPA) as the way to sell ads online.

Web 2.0

There will be increasing verticalisation in the web 2.0 space, with social networks, search, and web service offerings becoming more focused this year. However, this will also mean that many companies that were only single features will not be able to adapt and will die. Others will continue to be acquired for sums in the under $100 million category and few, if any, will go public.

Tagging will become more and more implicit, with less and less users actually doing the tagging and more and more tags being generated algorithmically. More applications will start looking at people’s behavior and creating the appropriate tags or making the appropriate modifications in the background.

But it’s not all doom and gloom for web 2.0 as Enterprise 2.0 becomes a reality. Use of blogs, wikis and VoIP behind the firewall commonplace at most large corporations and other technologies introduced as part of web 2.0 (AJAX, podcasting, etc…) will become more common in Global 100 corporations.

And speaking of the enterprise space, enterprise search will be huge, with Fast and/or Autonomy being acquired by Oracle, HP, or Microsoft. More focused will be paid on creating strong search solutions for the unstructured data on intranets and IBM will be a major player in the space.

Conclusion

At year end, many of those predictions will be wrong but a few will be correct. In the meantime, I’ll try to keep everyone up to date and hopefully will keep providing great content throughout the rest of the year.

I think 2007 will be another banner year and believe that we are looking at another existing set of new developments. Feel free to comment below and tell me what you think I may have missed (or point me to other prognostications, as I haven’t had time to get to my aggregator since Christmas).

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2007 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Understanding the mobile landscape

In a lot of ways, the mobile phone landscape in the United States could be considered a case study into how sometimes the free market fails end users. Let me explain: in the late 80s and early 90s, there were two different types of technologies available in the US for mobile phone delivery: CDMA and TDMA. However, due to vendor differences, the market fragmented even further with Sprint PCS (now Sprint Nextel) adopting a different flavor of CDMA than Verizon. Meanwhile, Nextel (now part of Sprint Nextel) adopted a proprietary technology called iDen, which was based on TDMA while T-Mobile and Cingular adopted GSM, a flavor of TDMA that has become the global standard outside of the US.

The bottom line on this whole acronym soup is that most mobile operators in the United States cannot operate on each other’s networks because they are using different technologies. This is why foreigners visiting the US generally lament about the poor quality of the mobile experience in this country and why the US is falling behind in the global mobile race. This is also why most American mobile phones don’t work abroad.

Because Cingular and T-mobile used the same GSM technology, they agreed to share their networks, allowing their customers to use both networks transparently, in a situation similar to the one one would witness outside of the US. The fact that they use GSM is also why a lot of cool phones make it to their networks before they are available to other providers. Verizon is now hedging its bets by introducing hybrid CDMA/GSM phones under the heading of Global Phone Service. To many outside the US, it looks like GSM is already the winning format in the standards war.

Enters Apple

Traditionally, Apple has been known for its exceptional industrial design (creating hardware people lust after) and marketing (also known as the reality distortion field). However, one of the other interesting features of Apple is the company’s willingness to take a standard and move forward with it. For example, by rebranding the 802.11b standard into Airport and later the 802.11g standard into Airport extreme, Apple pushed forward usage of wireless networking. Apple was also the mainstream PC first company to decide to drop disk drives being installed by default on their machines, prompting the rest of the industry to follow suit. The recent removal of modems from their new laptop lines does, in my view, harbor the death of modems being built into computers by default.

Meanwhile, the recent success of the iPod eco-system has gotten many vendors to rethink their strategy when it comes to the portable media player.Microsoft is now creating a closed system called Zune, following the Apple iPod + iTunes strategy and Sandisk and Real Networks are working on a similar walled garden approach. These trends seem to be defying common wisdom as to the progression of markets, whereas markets would generally tend towards standardization.

But what does all this have to do with mobile, you might ask?

Well, the question here is how successful Apple can be. If it creates a product that is so compelling that users will be interested in switching carrier for it, Apple may actually tip the scale on adoption of GSM in the United States. Going back to the ThinkSecret piece

insiders say Apple is internally estimating that shipments of the iPhone will top a staggering 25 million in 2007 alone

According to Gartner, roughly 700 million phones will be sold this year so it’s not improbable that Apple would try to sell 25 million, which would garner it a marketshare of 3 percent. But the overall market numbers may be misleading as many of those mobile phones are on the lower end of the price range, aiming at the developing world, a market Apple is not current going after. The numbers get more interesting when one considers single operators: for example, Cingular is the largest US operator with 56 million subscribers. If Apple were to work its magic here, Cingular could see anywhere up to a 10% growth or more in their subscriber base just on that one product. These users would move to a GSM network and away from CDMA technology.

From there, two possible scenarios could evolve: Apple could decide to license CDMA technology from Quallcom (CDMA is a proprietary technology so every vendor has to pay Quallcom for its use) or say that they are happy in the GSM-only market. If they were to do the latter, they could potentially tip the scale in a life-long fight in the US, making GSM the standard.

But why is Apple interested in mobile?

When considering rumors about an iPhone, one might wonder the interest Apple may have in that marketplace. After all, it’s not one that the company has ever entered and there doesn’t seem to be much overlap with their current existing products.

However, one has to look at the natural progression of the music business to understand why Apple would be interested in this market segment. While its current iTunes store sells roughly US$2 million a week of tracks, the ringtone market is much larger and the margins are supposedly better. So Apple is getting into the market for two possible reasons: first, it needs to protect the market it’s created with the iPod and sees mobile as the next evolution and a potential competitor to their single use device. Second, the company sees a market it wants to dominate. So that adds up to a new phone

But can Apple tip the scale on GSM?

As it stands, GSM in the US is supported by 2 of the big four operators. If Apple is successful, one could see defection from the other two. It’s not going to be an overnight kind of thing but, much like Apple has forced its competitors in the music field to reconsider their position, it could happen in the communication field.

Of course, all this is predicated on those standards still being relevant further down the line. If phones move towards more of a VoIP model, as I suspect will happen over the long run, this may all be irrelevant but, for the time being, a major shift of that kind could have tremendous impact in the telecom 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 Could Apple Solidify GSM in the US?. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Today’s news that the Net Neutrality bill was defeated may create future problems for American internet businesses but will not kill the Internet, as some have claimed. Instead, it will probably dictate, in the long run, the death of the very proponents of a ban on net neutrality: phone and cable companies which have been trying to overreach in their attempt to fatten up their bottom line.

Looking at the stakes

At issue in this debate is how bandwidth is distributed and whether it should be metered in any fashion. At the current time, in the US, most people who get broadband pay a flat monthly service fee that gives them unlimited bandwidth at up to a certain speed. Under a new model many phone companies and cable companies are trying to popularize, this would change. Their view is that certain services, like phone service or video service, require more bandwidth and therefore should be charged in a different way. they would basically introduce new charges that would offer access to such service for a premium.

The fear from many is that such model would get them into the business of monitoring what type of services are available and being selective in what access they offer. For example, they could start offering access to certain sites at a premium fee but decline access to other sites or degrade the service in such a way that those other sites would not work well on most computers.

Short term impact

In the short run, few will feel the impact of the communication providers’ strategy. A few pockets here and there will start failing but, all and all, only new services will be affected. Where it gets interesting, however, is when new offerings start making their way onto the Internet.

At the current time, the US is already starting to lag in broadband penetration. This will become a bigger issue if the telecommunication providers have their way as they will probably start moderate increase in the basic price of broadband access. Some may consider this view alarmist but history tells us that basic rates on phone service have generally been increasing, which is interesting considering the complains about competition forcing companies to lower their rate. The same increase in rates has been true on the cable side of the equation, where rates of service are slowly moving up.

As price is one of the major levers in increasing broadband adoption, such rise in prices will only slow things down. Of course, it may not be a point of concern until one considers the global marketplace. Unlike the United States, other countries are rapidly moving to increase broadband adoption and the speed of broadband lines altogether. What that will result in is a greater capacity to create and develop next generation applications that they will then be able to resell to the rest of the world.

We’ve already witnessed the rise of foreign companies establishing themselves almost overnight as major player with the recent appearance of Skype, a company that was born outside the US borders and rapidly acquired a following that made it worth several billion dollars. This wealth generation happened outside of the US because broadband was cheaper and more accessible there. I’ve also recently seen offerings by a couple of non-US companies that may follow the same curve and I am getting concerned about the US ability to compete if bandwidth is not widespread, increasing in size and inexpensive enough for all.

Restrictions on broadband access and degraded (or uncompetitive speeds) may ultimately represent a major Achilles heel in the US ability to compete on the global stage.

Long Term Impact

But what if…

John Gilmore, prominent Internet activist, once said

The Net treats censorship as damage and routes around it.

Extending the approach, one could start wondering how the net would work around censorship at the source (which is basically what limited access could become).

Enters the concept of Mesh Networking. In a mesh network, computers can work in a peer to peer fashion to connect to each other. One could envision mesh networks being created out of thin air (using wireless Internet access card) without having to go onto the lines of the telco providers. Of course, the issue would still be in terms of traveling over long distances to ensure that sites that are located in far away locations are still accessible. This problem could be solved by some of the content providers themselves, who could enter in some form of social contracts amongst each others agreeing that they would carry each other traffic back and forth, bypassing some the last-mile telco providers in the process. Under such a model, Google’s data center would allow for amazon to use their bandwidth and vice –versa, Microsoft or Yahoo would allow each other similar rights of way and so on… As they all operate large facilities, they could cover a substantial portion of the US public and bypass the telcos all the same.

Under such a scenario, people would start abandoning the restrictive networks offered by phone and cable companies to access the more free and open network offered by the content providers. The result would be an eventual displacement of the telco providers in the long run and, due to probable resentment fostered in the process, an evaporation of any revenue from their other services as those would probably be tied to line access.

Conclusion

If Net Neutrality goes, US competitiveness will be affected negatively and will result in more new wealth being generated outside of the US than in the US. Furthermore, in the long run, an overreach could result in people abandoning the telcos altogether, if Mesh networks take off.

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

Software

The first thing I’m taking a look into is what are the software packages each offers:

So it looks like we will be dealing with three different types of digital right management systems, making it difficult to actually have content play on every single device. If only Apple, Microsoft, and possibly Google, could sit down and agree on a standard way to handle this, it would make everyone’s life easier. However, because they all want to lock-in users, we will see an increasing amount of incompatibilities pop up. This becomes more visible in the portable space, which I’m highlighting below:

If my analysis is correct, Apple is using its dominance in the iPod space to try to gain power in the living room; Microsoft is using its dominance in the living room to try to get traction in the non-PC world (and gets an early edge as it will play on the Sony Playstation Portable and works on the Treo 700w); Yahoo! is hoping that an alliance with Nokia, which has a strong position in the mobile phone business, will help it in that space. This makes for a future battle in the portable video space with Microsoft getting an early hedge.

What content and how much?

But all the discussion so far has been one of technology. The real question is what content is available and how much it will cost. Let’s look at what they will offer:

Apple has done a good job in capitalizing off its early lead in the space to get music related content and some TV content. However, it is weak in the news, weather and sports arena, which could be an issue (I’ve actually heard from people at several large content providers of those types that they fear the power that Apple has in that space and, as a result, are wondering whether they should offer content to Apple at all because they are afraid to be led down a path where Apple would be in the lead, with them getting little input into price and strategy).

Also of note here is the fact that none of the portal is yet offering movie download. I expect Apple to be the first out the door with such an offering. Google and Yahoo! may also enter that space but Microsoft will not (as some of its partners like MovieLink, CinemaNow and Starz, are already offering such things) and AOL may only offer Time-Warner content (other studios will probably not want to offer their content through a competitor). Yahoo! will probably hedge out Google in that area too, largely due to the fact that its management has deep ties into Hollywood.

Last but not least is the amount of user-content. Google and Yahoo! are playing with the long tail, hoping that user-generated content will help them fill some of the pipeline. This will be an interesting test as to how compelling that content can be and there may be some tricky issues relating to copyright but it seems to be a risk those two players are willing to take.

The next question is how much this will cost:

In this space, it is interesting to see two different business model collide: on one side, you have companies that are looking to offer advertising supported content to the masses and charge a premium for some of the content. The charging model on the premium content is also divergent from player to player: Apple is looking at a fixed per unit price, while AOL and Microsoft are looking at an all you can eat price for a larger fee. Although Yahoo! has not announced much in this space, they look primarily to the advertising supported model as the way to go. Google, on the other hand, is going to try to create a marketplace based on variable rates, and will probably use something similar to an AdWord for Video type of program to subsidize their own free content.

Update:

I’m making a few changes to the tables (primarily in the Google columns) based on the latest information I’ve received.

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

Broadband penetration

Broadband penetration will continue to increase in the United States and Europe. Large scale deployments of city-wide broadband efforts in several large cities will start making internet access similar to phone or electric service, widespread and the type of thing few people think of. On the bleeding edge of the Internet access development world, some large scale networks, most probably coming from phone companies, will break the 10-Mbps barrier and close in on the 100-Mbps speed, making internet access on par with regular local network access.

The downside of this widespread deployment of high-speed internet access will be in the phone industry, where next generation (3G) rollouts of high speed wireless networks will prove costly and offer lackluster service considering its high price. This will force a drastic reduction in prices towards the end of the year or early 2007, in an attempt to recover some revenue from the large investments.

Implications of increased broadband penetration

The increase in broadband penetration will have several large implications, including the rollout of more voice over IP services, video services, and the infrastructure security.

Voice Over IP

Voice over IP will continue to see widespread deployment and large phone companies will start migrating their full networks to IP-based traffic. This will make VoIP the primary form of telephone communication for wired lines by the end of 2006, though few people will be aware of the change as it will largely happen behind the scenes, not touching people’s independent system.

Telephony services will increase as the VoIP phenomenon continues to increase. Expect early efforts in video telephony to start rolling out and becoming more mainstream towards the end of the year. Also expect to see the rise of wireless devices that can bridge the gap between computer and regular telephony, providing access to the network in a number of different ways.

Video

Video over IP will be very hot in 2006, with several major changes in the industry. First will be the announcement, by Apple, of its new mac-mini intel-powered platform designed specifically for the living room. Following on the success of the iPod, Apple will market the device less as a computer and more as a video consumption tool that will include stunning high definition resolution and will offer direct access to the iMedia store (formerly known as the iTunes music store) where one will be able to download movies and TV shows, as well as content created by amateurs.

Google, in partnership with AOL (and its sister companies within the Time-Warner world), will offer a pay-per-view system, mirroring some of the iMedia store offerings. The system will be available both in the AOL closed garden client (where it will use some level of acceleration to speed up delivery) and on the web through a new client package offered by Google and largely developed by the AOL client software team. The strength of the move will generate enough positive buzz for AOL that Time-Warner will be able to spin-off the unit and will be considering an IPO towards the beginning of 2007.

Seeing their advertising revenues eroding, TV stations will start offering more content online, also sponsored by advertising. New types of online video ad insertion and tracking system will be created by several companies, with Google, Microsoft, and Yahoo! offering aggregated model based on something similar to Google AdWords but offering not only targeting based on keywords but also based on certain demographic information.

New video aggregators will start appearing, offering a way to customize your own TV station. Some will be acquired by the major portals (unless the portals themselves have already developed that capability by the time this trend manifests itself). Meanwhile, Tivo will recast itself as one of those portals and will be acquired by Microsoft and merged with MSNTV (unless it is acquired by Sony, and merged with the PlayStation 3, or Panasonic, and kept as a standalone.)

Having lost in the bidding war for Tivo, Yahoo! will decide to acquire NetFlix and merge it with some of its video offerings, providing not only distribution of DVDs but also online streaming of content.

On the strength of revenues from online ads, some small cable or local TV stations will start offering their complete programming slate online, for free, and adverting supported. This will rankle a few of the cable companies and syndicators who looked to those companies as another revenue stream. Meanwhile, on the same basis, most local TV news will be available online for free through an advertising supported model. During one major story, a local TV station’s feed will compete with the national networks in terms of reporting, as more viewers flood its website than watch the same story unfold on television.

The competition for those types of stories will continue to increase, as citizen journalism provides raw unscripted video of events. Videocasting, following on the success of podcasting, will start seeing some traction with a few podcasting and vidcasters signing deals with traditional media. Traditional media will look at it as an interesting set of development but one that ultimately won’t be trusted by the public because they do not have the right seal of approval; their prediction will turn out to be wrong.

Infrastructure

The rise of broadband and the increasing numbers of basic services running on the internet infrastructure will give rise to fear that the infrastructure is under-protected. From a technical policy viewpoint, electronic infrastructures will become a major national security matter with fears that the very openness of the internet could represent a large security risk. This will be seized upon by the network providers (phone companies, cable companies) and some security consultants as a way to push for policy that will allow those incumbent communications services to administer their networks with tighter control, with decision as to what they are willing to let run on the network and what they are not willing to. A subsequent battle will ensue as VoIP companies and media companies will complain about the network providers squeezing them out. No decision on any of this will be made in 2006 but the debate will continue through 2007 and beyond.

Growth and Scalability

2006 will be an explosive year in the Web 2.0 sphere. Explosive because it will see triple if not quadruple digit growth in number of users but also explosive because it will see several popular sites unable to deal with the capacity issues relating to that explosion.

On the RSS end, the explosion in growth will really start when Internet Explorer 7.0 becomes a priority upgrade on windows stations. The inclusion of some RSS feeds as defaults in the browser will prove to be too much for some sites which had not expected the onslaught of millions of new hits. Readership from RSS readers will increase as more users realize that they can get their favorite sites delivered to them instead of going out and checking to see if they are updated.

As more people discover RSS, more of them will start valuing blogs and many will start their own. However, the concept of becoming a professional blogger will decrease as many people who thought they could make money off their blog will find that the effort in doing so was higher than they had expected and will abandon their blog.

Meanwhile, other web 2.0 subjects will fail: Tagging services like del.icio.us will be see as too complicated by the general public (although they will continue to thrive in the more geeky world) but tagging of pictures (as in Flickr) will continue to grow. Most blog networks will fail to attain the amount of traffic required to play seriously in the advertising world and will be forced to either merge or shut down. Meanwhile, companies offering only a set of web services with the idea to generate revenue solely from advertising may find themselves in a bind as advertising revenue will fail to grow at the same pace as the new offerings.

Implications of Growth

The explosive growth in traffic see during 2006 has implications across a number of players in the blogging world and metadata space. It also has implications in terms of scalability, business, and trust.

Blogging, podcasting, vidcasting

As blogging takes better hold in the mainstream (your parents WILL be blogging), the number of subscribers per individual blog feed will drop into the low teens, with blogs being read by close family members and friends only. A few breakout blogs, specializing on particular narrow subjects will manage to increase their readership but the world will largely consolidate around less than 1,000 major blogs: of those, the vast majority will not be from any members of the Technorati 100 or any other such list. The vast majority of those mainstream blogs will be the ones created by mainstream media outlets, which will use their existing reach to heavily promote their own blog.

Radio stations will increasingly start offering podcasts and TV stations will offering vidcasts. Most, however, will do so through centralized hosting capabilities provided by their parent companies. Smaller podcasters and vidcasters will have a hard time to compete with those larger companies as they are forced to look into ways to support their own bandwidth costs and will sign contracts with hosting services promising a share of advertising revenue in exchange for doing the hosting: that share will largely go to the hosting service with many podcasters/vidcasters finding they are not really making more than a few 100 dollars a months from all their hard work.

Crash and Burn

One of the hosting services will crash in a major way, taking with it a few days worth of the hard work of thousands of people who were hosting on it. The provider will initially recover but suffer a subsequent crash that will seal its fate as a doomed company. The majority of its users will leave and join one of the larger hosting services provided by Yahoo!, Microsoft, and Google.

Beyond the hosting world, scalability will also be a hot buzzword as more services, ranging from RSS hosting providers like FeedBurner to search engines like Technorati and Feedster to analytics providers like Google and MeasureMap will experience temporary failures and growth pains.

The cost of upgrading the service infrastructure will be too much to bear for some companies, which will be forced to shutter their door, sell out, or merge with a similar service. Meanwhile, many web-based service companies will fail to generate enough advertising revenue to continue upgrading. A flurry of mergers and closures will happen over a few months, leading people to wonder if this is bubble bust 2.0.

The downside of all those fears about a bust will be in the increased number of negative stories about technology in the mainstream media. Stories will mention the hubris of web 2.0 founders and will showcase Google as a typical example of this hubris, highlighting its free lunches and other things that were thought cool in 205: As a result of all those negative stories (and others but more on that later), Google will loose several billions (possibly even tens of billions) of dollars from the high of its market capitalization, shedding anywhere from 10 to 25 percent off its high.

After the consolidation, there will only be one or two independent players in each of the following (notwithstanding the fact that there will also be offering from the bigger portal players): blog hosting , vlog hosting, podcast hosting (WordPress and Typepad will either be the two in these three sectors or will have merged), blog search, social networks (speaking os social networks, Yahoo! or Microsoft will buy LinkedIn (if it’s Microsoft, LinkedIn will quickly be integrated with Outlook and offer Plaxo-like features).

Meanwhile, a sector which will have been decimated will be tagging. Following slow adoption by the mainstream, largely due to the complexity of adding tags to pages, many tagging companies will fail. Tagging, as a concept, however, will remain and be adopted by most major search engines: as Metadata entry is simplified with the introduction of Windows Vista and Office 12 (both of which will be delivered by Microsoft to a relatively lukewarm market), and tagging becomes a browser feature, it stops being a differentiator.

Trust is hot topic

Fear of Google knowing a little too much about people will bring a slate of bad press for a company that was the darling of the mainstream media in 2005. The introduction of its Google finance service, hooking up into people’s bank accounts and payments systems will be seen as the company becoming too large a player, with fear of it becoming a monopoly. The backlash will first start in silicon Valley, with many tech luminaries starting to tear down the company. It will continue with publications that were once its biggest cheerleader becoming its biggest detractor. As a result, many of the companies that relied on Google for key services (advertising, analytics) will try to distance themselves from it and start looking for other providers (meanwhile, companies looking for funding will excise Google from their business plans, in order to avoid being associated with it by VCs). Yahoo! will pick up some of the adsense/adwords business, along with Microsoft, which will offer a similar service.

Meanwhile, in the analytics space, new companies will be formed and attract a lot of venture capital. Many of them will offer ways to opt-out of their tracking and some will offer added incentive to people willing to provide them with more information. New models in the space will emerge and at least one player will provide a revolutionary approach that will change the analytics landscape.

In the blogosphere too, trust will be a major subject as some of the top bloggers will grapple with issues surrounding defamation of character, libel, accuracy, and reliability after a top-name blogger is sued for something he/she said or linked to. Furthermore, some of the top bloggers will grapple with issues relating to invasion of privacy as they become more famous in the mainstream media.

On the Wikipedia end, anonymous editing will be abandoned after the revelation of a major hack altering minor facts over several months in an automated fashion has rendered a core version of the wikipedia unusable. The wikipedia trustee will revert wikipedia to an earlier date, erasing all changes performed during that period of times and destroying several significant entries on 2006 current events. The mainstream press will pile on about the inaccuracies of wikipedia, bringing back earlier scandals as proof that no information on the internet can be trusted unless it comes from a reliable source (incidentally presented as being a member of the media establishment).

Conclusion

In late 2006, a substantial portion of these predictions will be wrong and some may turn out to be dead on (although most of the ones mentioning companies by name will most probably be wrong).

Meanwhile, on a personal level, 2006 will be a year of big changes. However, I promise it will also be a year of continued writing on TNL.net, even if it is at the same substantial post every week or two rate that readers have gotten accustomed to. I hope you’ll join me for the ride.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2006 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

There is no competitive advantage in offering a different charger and yet it seems that every vendor has come up with a different approach when it comes to the charging port. As a result, scores of users have to pack multiple chargers when they travel. Just off the top of my head, a typical user would generally pack different chargers for each of the following devices: laptop, mobile phone, camera, mp3 player, and PDA. Granted, a way to solve the problem is to aggregate devices (for example, as I do with the Treo, use a smart device that includes many of those functions) so you have to carry fewer chargers but ultimately, there’s always more than one and few people around with a charger that is compatible.

There is, however, a competitive advantage for vendors in establishing a standard. That advantage goes to the age old issue of price. If two players agreed to a similar set of power chargers, they could not force their vendor (chargers are generally subcontracted) to build them and then work on creating competitition between those vendors, hence putting pressure on prices. Innovation could then start appearing in that market as the vendors would be forced to look at features they could use to remain competitive. For example, one could see companies developing chargers that are smaller, recharge batteries faster, or consume less energy when converting power. In the future, one could even envision a world where “power charger not included” would become more of a de-facto rule from electronics vendors.

End users would, of course, benefit from this since they would be able to go anywhere and find a charger that is compatible with their devices. One could go to a conference, or visit friends, or go to a hotel and easily find a way to recharge. Furthermore, if one lost or forgot their charger somewhere, they would be able to easily replace the missing charger cheaply.

All and all, the current state of affairs when it comes to the power issue is sad and I wish the electronics industry would agree on coming up with a common standard and set of approaches when it comes to power, which would benefit everyone.

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

Size matters

My first thought, when I read the specs, was about the size of the device. My Shuttle computer, is 6 inches high by 8 inches wide and 12 inches long (yes, I had to pull out the ruler on that one). By comparison, the Mac mini comes in at 6.5 inches square and 2 inches high. Something tells me that there is more to the dimensions that pure aesthetic design. For comparison’s sake, I decided to take a quick look at my entertainment center: 2 inches happens to be about the height of my VCR (yes, I still have one) and my DVD player is taller than that.

I then decided to look around the web. Tivo 2 boxes come in at over 3 inches in height; The smallest Windows Media Center edition machine (from Hush Technology) comes in at 3.9 inches in height. In fact, I could find very few items that would come in at the same size. Somehow, I don’t think it’s a total coincidence or has much to do with design.

It seems to me that the play here is for the living room and not just the living room but right there under the TV. I would not be surprised if a future version comes in slightly larger but with things like a TV tuner built in or what not.

But the entertainment center is just the first place where a Mac mini would fit. It seems perfect for a car too. Apple has been courting a lot of car companies about integration with the iPod. What if the play is larger than that? Somehow I don’t think BMW, Mini Cooper, Mercedes-Benz, Volvo, Nissan, Alfa Romeo and Ferrari are only interested in the iPod. What if Apple has showed them something more? Something like a Mac mini as in-car entertainment center. The power input seems to be external to the mini itself, something that not only save space but is also unnecessary if you already have a power converter (as cars do).

Since Apple is currently playing the consumer card (hence the iPod strategy), why not take it all the way. The size seems to point to more than just the desk (so we can already assume the entertainment center). The car partnerships have one thing in common: generally higher end (luxury) cars. These are the types of cars that usually sport in-car entertainment centers (DVD player, television, GPS navigation, integration with cell-phone, etc…) so it seems that it’s a solid high end consumer market.

Price point

Which makes the price point all the more interesting. It’s a small computer so you’d expect to pay a premium but no. Apple has decided that this is their new entry point price, selling the machine at under $500. Why? Well, for starters, it makes it easy to go after the switcher market (they have monitors, keyboards, mouse, etc… already) so Apple plans to capture people that have bought iPods (or lust after one) and get them to check out the Mac. Cool… and obvious.

Less obvious, however, is the price to retailers. If you think that the average price on an in-car multimedia is around $500–800, then it starts to makes sense. About $400 for the machine, throw in another $150–200 for LCD screens and GPS navigation and you’ve got a good car system. All it needs is an interface.

The Interface Conundrum

So the iPod is nice but its interface is very text-centric, a bad thing if you’re sitting across a room. However, it’s simple and Apple has learned a lot about how consumer use electronic devices in the process. They are now learning about the mobile phone market, observing through their partnership with Motorola. With all this experience, they’re refining. I remember talking to the WebTV management team when they were getting started. One thing that always stuck with me was that they had all worked for Apple at one time and that they had all worked on set-top boxes. It means that, for almost a decade now, Apple has been playing around with the concept of entertainment centers.

The simplicity of the iPod interface was largely due to the fact that it was designed outside of Apple. However, the simplicity lesson may be one they learned. Look at the Shuffle and realize that they have seen how to “simplify” interfaces to the point where they become ubiquitous.

Ubiquitous computing or Apple as consumer electronic giant

Ubiquitous computing has long been a dream but Apple may be working on it. Notice how they tend to look at the PC world: ugly boxes, bad design, etc… The only company that seems to scare them a little is Sony. Why Sony?

Well, because Sony is a consumer electronic giant and that’s where Apple wants to play. At the end of the day, Steve Jobs realizes that the days of Apple as a computer company are numbered. However, the company can reinvent itself as a consumer electronics giant.

This is where the mini goes. It’s not really a computer but it may be the second front in the battle for consumer electronic supremacy.

I can already hear nay-sayers going “But Steve always says that there is no play for Video…”

If that’s truly the case, explain the work on Quicktime? Explain why the company continues to invest in products like iLife and Final Cut (and its express version)?

The truth is that up until last week, Steve Jobs was on the record poo-pooing the flash MP3 player market (that is, until he introduced an Apple branded one.)

At the end of the day, what he’s building with the mini is a platform, not just offering a new product.

Apple vs. Microsoft

When talking about Apple, the elephant in the room is always Microsoft. This is where it gets interesting. Apple and Microsoft are going after the same market but looking at it from different standpoint. In a way, Apple is the revolutionary storming the castle, offering a view of the world that is shaped around creating and sharing digital content (hence the iLife products and their higher end counterparts). Microsoft is about receiving content that has been created by others (hence the Windows environment, where the focus is on being able to record television, buy music, etc…) That’s the commonly expressed view, anyway.

However, upon closer inspection, Apple is trying to lock more down. Their strategy is an end-to-end one: we have the software, the music store, and the devices to play the music on. Microsoft is more egalitarian in its approach: we build the environment, what people do with it is up to them and we hope some good software will help us sell more.

Both companies offer DRM but with a difference. Apple keeps its DRM to itself. Microsoft sees their DRM offerings as respecting boundaries. I’m not sure I fully buy into the Microsoft argument or the Apple one but I know that I will be writing more on all this soon.

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 Mac Mini platform. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

Voice Over IP

VoIP experienced tremendous growth in 2004 but it was just the beginning. This year, much more will happen in that space.

Cable providers will start deploying VoIP services on their networks and phone companies will start bundling VoIP services with their DSL offering as a way to compete. By year end, all major broadband providers, whether they are offering services over cable or DSL lines, will have a VoIP service bundled with their access service.

Unable to compete with the larger telcos, some smaller players in the market will merge on order to lower their cost per subscriber by bringing their infrastructures together. Also, independent VoIP companies will sign peering agreement with each other in order to bypass traditional telcos and lower the cost of connectivity from one independent VoIP company to another.

Further pressure will be put on all players on the American market as overseas companies will start targeting U.S. customers. Before year-end, at least one company will offer an unlimited calling to several countries plan. Other plans will provide unlimited calling to each continent. This will start putting pressure on established government monopolies in several countries, especially in Europe.

VoIP will also experience strong growth within the enterprise, with companies looking to open-source solutions like Asterisk to replace their PBX infrastructure with a lower cost alternative.

As all this happens, equipment will not only become cheaper but will also become much easier to use and install. Along with it, new sets will come out, with cordless VoIP offerings becoming much more common. Competition in this space will be on features available in new handsets.

With substantial portions of the phone network switching to VoIP, video telephony will start taking hold. However, the price of equipment will still be too high for those services to experience the kind of growth other sectors in the VoIP market will experience.

Entertainment Convergence

The convergence of the computer and other entertainment forms (television, radio, gaming, mobile phones) will continue, further blurring the lines in the convergence world.

With broadband now being the major way to access the Internet in the United States, Internet usage for new forms of entertainment will grow. Along with it, however, will be a continuing challenge to the established media order.

The challenges faced by the music industry with the introduction of Napster will now be the new reality for the movie and television industry. Five years ago, I started seeing the phenomenon emerge and believe the four step process of the digital asset dance will be full blown for the MPAA this year. The MPAA will spend part of the year suing companies and users for downloading movies. However, they are also better prepared that the music industry in that they are already offering legal download services like MovieLink.

While litigation will be one of the ways convergence appears on the front page, many providers will find a way to mine this new world for new dollars. Expect some companies to start offering legal download of television programs for a fee. As the Internet becomes the standard telecommunication infrastructure, content will start getting carried more heavily. Phone companies will start using this to offer bundle TV services with their DSL offering as a way to compete with the cable TV companies that have invaded the telecom turf. Before year end, at least one traditional telco will offer TV over IP. All that content will be protected by DRM systems, getting people more and more used to having less and less rights over the content they receive.

Meanwhile, on the wireless end, the introduction of more powerful mobile phones and the introduction of faster mobile phone networks will also play out in the favor of content producers. As voice traffic revenues continue to decrease, expect mobile phone companies to push data services such as downloadable movies and downloadable music more heavily. By year, MP3 will be the standard format for cellphones and Apple will offer a mobile phone version of the iTunes music store, allowing users to download music from the store and customize their phone with the latest hits.

On the non-Internet end of things, video on demand will continue the strong growth it experienced in 2004 and more programming will be offered in HDTV format, prompting an increase in sales of televisions and tuners that can receive those signals. Meanwhile, radio will follow the path taken by cable television in the early 80s. As satellite radio takes hold as the new “edgier” alternative to traditional radio, people will get more used to the idea of paying for radio. However, they will also require that those services be offered over the Internet as well as over the proprietary networks like XM and Sirius.

But not all content will be coming from big corporations. The grassroots will also play a key role in the distribution of online media in 2005. While podcasting has been the domain of a few geeks in 2004, easier to use tool will bring the phenomenon to the forefront and expect more audio services to be available from regular users. Following on the tail of this phenomenon will be an increase in videocasting from individuals. Much of it will be disappointing but a few gems will emerge, creating new stars who will emerge from the Internet and move on to more traditional media, based on the fame of their online offerings.

Business

Mergers and acquisitions will dominate the software world this year, as more companies realize that the only way into the enterprise is through a complete set of offerings. Expect several multi-billion dollar mergers and/or acquisition. In my mind, McAfee will be acquired or merge with either Symantec or CA; SAP will be acquired by Microsoft; Business Objects will be acquired by Oracle. As holds true for such precise predictions, none of this will actually happen the way I predicted it.

In late 2004, IBM left the personal computer business, selling its unit to Lenovo, a Chinese manufacturer. Expect the same to happen to at least one other PC vendor this year as the margins on personal computers continue to decrease, turning them into commodities.

Apple

Apple, which to date has resisted the price pressures other computer manufacturers have experienced, will introduce a cheaper version of their Macintosh. This, however, will not stem the continuing loss of market share they are experiencing. As Linux continues to grow, the Apple story in the computer business becomes more and more difficult and the company will increasingly rely on the consumer device business as its savior, building a new economy around the success of the iPod and iTunes music store.

The company will not, however, release a video player this year. Among some of the new features I would envision coming from Apple are:

• A flash-based iPod, which will be even smaller than the iPod mini and will be in the $100-$150 price range
• A partnership with a phone company to create a phone that will be able to download music from a special version of the iTunes music store and play MP3 ringtones
• An iPod with audio recording built-in
• A portable camera with iPod-like features
• A new way to send pictures from the iPod directly to printer via Airport express

While it focuses on the music business, Apple will not spend much time updating its laptop business. Adoption will drop in that part of the business as PC vendors start selling sub-$500 laptop PCs, making the iBook look expensive by comparison. Apple will try to enter the low cost market but not with a laptop: they will introduce a mac without monitor for under $500, offering integration with the iPod, and plugs to attach the computer to a television as its major features.

On the software end, the company will introduce a Word Processor and Spreadsheet program. They will release them, along with Keynote, as a complete package named iWork which will be aimed at students and small businesses. The package will be available for free on new computers.

Development

Blogs and RSS will continue their growth and will move strongly within the enterprise space. Adoption of RSS will continue its explosive growth but crest in 2005 as users start trying to find ways to cope with the information overload. New components in RSS readers will attempt to help organize RSS feeds but those basic efforts will initially fail and discussions will be set towards the end of the year as to the effective way to organize large amounts of data.

Weblogs and content management systems will start covering some of the same ground and enterprise will start using weblogs internally at the departmental level. Meanwhile, external employee weblogs will start becoming the focus of more litigations as corporation try to retain their intellectual property and fight the kind of transparency that comes from having employees talk openly on the web. Internal rules and regulations will be set in how employees can use blogs.

Meanwhile, in the development world, Service Oriented Architectures will continue being the approach to delivering next generation services. SOA will grow largely internally but some companies will start exposing some web services via XML to their partners. A new set of interesting new applications will come out as a result of those exposures.

Security and trust will continue to be big subjects and I suspect that trust will become an even bigger one with new standards emerging around the concept but no general agreement as to the best implementation.

Open source software will continue its strong growth, getting into more and more specialized fields. With the delays in delivery of Microsoft’s next operating system, Linux will continue to grow but complaints about price will start to arise. While the open source movement has offered free software, there will continue to be an increase in the price of supported version of the software.

Personal

I’ll promise to update the blog more often, will do OK for a little while and will then fall back into my regular pattern of a couple of updates a week. Or not… Either way, only the new year will tell.

Tristan Louis is the founder and CEO of Keepskor and writes the influential tnl.net weblog, where this was initially posted under the title 2005 Predictions. You can follow him on twitter here or receive his weekly newsletter by subscribing here.

So what is number portability?

Well, effective today, you can change mobile phone provider without having to worry about changing your phone number. For example, if your phone number is (646) 555 1212, you can still keep the same number but choose between different mobile phone providers.

An added extra is that you can also take your land-line phone number and port it to a mobile phone line.

What’s the catch?

Mobile phone operators sometimes work on different networks: GSM, CDMA, or TDMA. If you are switching between companies that are using different networks, you might have to change phone.

If you are switching between GSM providers, all you may have to do is change your SIM card. If you are using a CDMA or TDMA provider, you might have to go to the store to get your phone reprogrammed with the new number.

If you are still under contract with a provider, some penalty fees will be assessed. Make sure that you are no longer under contract with your mobile provider if you want to avoid those charges.

How long does it take?

The FCC estimates that it should take about 3 hours but providers seem to have a different view on this. Estimates vary from provider to provider, however 3 days seems to be the average. Do not turn off your old provider immediately as you may find yourself without service if you do. Wait until your number has been moved to a new provider before canceling your old service.

At the current time, about 70% of the USA has access to wireless number portability. Full coverage for the rest of the country will take effect by May 24th, 2004.

How much does it cost?

This varies from provider to provider. However, most of the providers will attempt to lure you by lifting off any charges relating to porting your number.

Did I hear you say I could move from a land line to a mobile line and keep my number?

Yes, you did. While the industry is still trying to fight this provision, it is now in effect so you can change your land line to a mobile one without having to change your number. However, the availability of this may vary from region to region as wireless and land line companies argue over what land lines can and cannot move.

What else?

Wireless number portability is going to herald a new age of competition in the mobile phone space. Expect wireless providers to start offering much better deals as they now have one less way to lock you up.

Today is a great day for wireless consumers so have a happy P-day!

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

Thursday was a regular day at the office… until about 4pm. At a few minutes ’til 4pm, something happened to the lights in our building. I was looking at my computer screen and noticed a slight dim. As I was wondering whether this was due to lack of coffee or a sugar low, or just general dizziness due to too many hours staring at the screen, the lights went out for a few seconds, and every computers went dead. A few seconds later, the power came back up in the building. Across the street, above the building in which our web servers are hosted, a giant cloud of black smoke erupted. It was at that point I realized we had not only lost electricity for a few seconds but were now running on borrowed time. My phone rang. It was my wife calling to tell me that they had lost power in her office. I told her to stay put and that we would talk soon.

Meanwhile, the building fire alarm went off. A message telling us to evacuate the building was streaming through the different alarm system. After making sure that everyone on my team was heading out, I made my way down the 11th flights of stairs, no real big deal. As we got downstairs, I tried to call Amy. Phone signal at that point was already spotty (as thousands, if not millions of cell phone users tried to make similar calls). I sent Amy a text message instead and this would be our primary form of communication over the next few hours. The wonders of text messaging is that their light load tends to trump phone calls, making them easier to carry on overloaded networks. The same is true for most kind of data traffic currently available on either GSM or GPRS service. Based on that idea, I decided to try to get a little news. Everyone was getting a little edgy, especially considering our past experiences with September 11th. The question on everyone’s mind was, of course, whether it was terrorism. We didn’t know. I tried to calm people down by telling them that we could only assume the best for now.

A connection to CNN.com provided a few more details, highlighting the fact that other major cities were under the same kind of conditions. This made us all feel better as it provided some basic deduction that Indian Point, the local nuclear power station, was not the only part to have blown up. After 15–20 minutes, CNN had a full report with the mention that terrorism had been ruled out. With this in mind, and based on the fact that things were not going to be fixed any time soon, I headed for the Ferry landing with a few co-workers. There, people waited patiently to get their tickets. One of the thing I must add in order to explain that kind of behavior is that most of the people now working in the neighborhood I work in (the Pavonia Newport Center in Jersey City) had been relocated there after September 11th. As a result, many of them were actually veterans of that last disaster and realized that the best way to behave was to be calm.

Apparently, that lesson had been lost on some people on the other side of the river. When we arrived to the 38th street Ferry Landing (about 6:30pm), thousands and thousands of people were trying to do the reverse trip into Jersey. Many of them were very unruly and my fellow passengers and I had to fight our way through the crowd to get out of the area. At that point, my best guess estimate is that there were close to 5000 people congregating in the area. Considering the potentially dangerous combination of large crowds and pissed off people, I decided to head back home by the least crowded route. I assumed side streets would be less crowded than main arteries and that the bike path along the west side might be the best way to move south quickly. Within a few minutes I was on 28th street, walking east from the river.

The street was a little eerie. While I have left behind throngs of people, I now found myself in a neighborhood that was completely deserted. For two blocks I walked without bumping into another soul (a glance up and down the avenues showed that people were still congregating north on 34th street and south on 23rd). By the time I made it to 10th avenue, the crowds had returned. There, civilians had stepped in, attempting to replace the traffic lights by directing what could only be described as traffic pandemonium. Every car in every direction wanted to move. Some cars were trying to head the wrong way down streets and avenues. The result was total gridlock. Once again, figuring that I was planning on getting home and wasn’t trying to be particularly heroic, I walked on.

A few minutes later, I was on the corner of 28th street and Lexington. There, only half a block from home, I felt I could contribute and started trying to direct traffic. Let me just say that this little experience (only about 45 minutes worth of work) gave me new respect for traffic cops. First of all, when directing traffic, one realizes that trying to get a car driver to do your bidding, when you’re just a foot soldier, is not as easy as it seems. For starters, cars are bigger than you are. Secondly, car drivers do not really care that much for pedestrians trying to tell them what to do. So a lot of work went into cajoling drivers into doing the right thing. Some did, got out of the intersections, and let traffic through. Others (and I hope Dante has a particularly bad circle of hell built up for those) could not be bothered and had to have their way, gaining no advantage whatsoever by moving in the middle of intersections and blocking traffic coming from main avenues.

Tired from trying to get all this moving (and a little less optimistic about the good nature of drivers), I went home. Amy was waiting for me in the lobby, wondering where I was (she had gotten home a lot faster than me). We went up the dark stairs with a light lent to us by the doorman and, while there was still light out, gathered up candles, matches, flashlights and oil lamps. After doing so, we filled up the bathtubs with water, figuring that water could be going next. We then called our parents and a few friends to reassure them that everything was OK. I asked mom to hit my site (TNL.net) and she told me it was down.

This all took a few hours, during which we brought more candles down to the lobby (due to our recent wedding, and our indecision as to what the proper candle arrangement would be until the last minute, we found ourselves sitting on what could be consider a godsend on blackout day: a large collection of candles) and Amy started to cook stuff that was in the freezer. We left our door open to throw some light in the hallway and, every so often, a neighbor would stop by. We ended up having a massive dinner with one of our neighbors, during which we talked about just about anything but the blackout. One would hardly have known that we were in the middle of a national crisis, save for the fact that a quick glance out the window showed, well not much, it was dark.

Later that night, we went out for a quick walk around the neighborhood. People had pulled out chairs, beers, and candles, and were generally hanging out. The whole neighborhood had a party feel to it. A few bars and restaurants were still open, cooking on barbecues or running through whatever alcohol they had. A few blocks down, a sushi place for offering dollar sushi. To light their little stand, they had parked a car sideways and were using the car headlights. The streets, surprisingly, were more crowded than they are on a regular day as a lot of people must have figured that no light was the perfect excuse to go bar-hopping. Down on 23rd street, National Guardsmen were directing traffic. Along Park avenue, a few buildings (notably the New York Life Building) were running on generator. With this quick observation, we went back home, climbed up the 8 floors and went to bed.

The alarm clock on my Palm can be a very handy thing in a black-out. Just set up wake up as an event, set up the alarm and you’re done. I woke up at 7am on Friday, as usual. The only difference was that the electricity was gone and my paper had not been delivered. Dropping a bucket into the bathtub and using a washcloth, I did my best to take a quick shower over the toilet, using it as a drain. I then put on some clothes and went down to the computer room. The wireless connection from the Wi-Fi station provided by Verizon seemed to be down. My own DSL router was useless too. However, the phone line was working and the battery on my laptop was still good. I got online using a dialup line (for once, AOL picked up on the first ring, probably because very few other people were trying to get online). There, I received an IM from Charles Rawls, who heads Dorsai. He had gotten juice back around 6am and was working on bringing machines back up. One of those was TNL.net and I posted a quick message telling people I was fine. I sent shot a few work-related emails off, just in case I might not be able to reach people again. I also tried to reach a few of the sites we were hosting at work. All of them were responding OK so I knew that things were pretty much under control at the office. However, the site for our US division, the one where I might be able to get some information as to who to contact in the US, was down.

I tried calling my boss, but he wasn’t answering. One of the things we take for granted in this day and age is the ease of accessibility to people. Mobile phones give us direct access. Answering machines give us delayed access. Without electricity, neither is good. Mobile phone towers only store electricity for a few hours, a critical flaw that, hopefully, will be investigated and resolved in the future. Answering machines are pretty useless without electricity. I tried to reach other people at work but no one was available. So I decided I would hike up to corporate headquarters. Walking up, I passed a few restaurants that were serving barbecue-cooked breakfast. I also passed a few banks that had employees sitting around. Stopping by one of them to check on the ATMs, I learned that all ATMs were down, with suspicion that the whole ATM network may be out. This was bad news so I just tried to head straight to headquarters where, if the ATM network was out, people like myself could be of use.

There, I was told that they didn’t have any information, and was given a phone number. I called but it was ringing busy. With nothing to do there, I decided to just head home again. On my way home, I passed a deli stand that was selling the New York Times. I picked up a copy, figuring that I could read that while redialing the business contingency line. Got home and started dialing. After a few hours of redialing, I gave up. A few hours later, my boss, having received email from me, called me and said that things were under control and that the day was going to go on skeleton staff. With no way to get to the office anyway, I figured I would just stay home, which I did.

We read for a while and then started to get hungry. Food in the fridge was starting to spoil so we decided to throw that away. Through the informal network of people chatting on the phone, we’d found out that other parts of town had power. So we headed out in search of electricity, a laptop and two cellphones in a backpack, and hopes that we would find a place with ATMs, electricity and water. As we were walking out on a power-rich part of town (lower 20s on the west side, around 4:30pm), Amy said that we might want to hike up to the upper west side, where her aunt and uncle had power). A quick call and we were up there, enjoying the power of warm showers and available outlets). We then went to get some prepared food at a nearby store and headed back down to our neighborhood late in the evening. There, we sat down with some of our neighbors for dinner. A few minutes before our arrival, power had finally been restored, to the loud cheers of a neighborhood ready to rejoin civilization). With prepared cooked foods and champagne, we celebrated our good fortune, happy to have survived the blackout of 2003.

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