Why App Coverage Will Drive Everything

Given the smartphone’s ubiquity and our dependence on it, “App Coverage” (AC) is something confronting us every day, yet we know little about it. At the CCA Global Expo this week in San Antonio Glenn Laxdal of Ericsson spoke about “app coverage”, which the vendor first surfaced in 2013.  AC is defined as, “the proportion of a network’s coverage that has sufficient performance to run a particular app at an acceptable quality level.”  In other words the variety of demand from end-users for voice, data and video applications is outpacing the ability of carriers to keep up.  According to Ericsson, monitoring and ensuring performance of app coverage is the next wave in LTE networks.  Here’s a good video explaining AC in simple, visual terms.

Years, nay, decades ago I used to say coverage should be measured in 3 important ways:

• Geographic (national vs regional vs local)
• In/Outdoors (50+% loss indoors)
• Frequency (double capex 1900 vs 700 mhz)

Each of these had specific supply/demand clearing implications across dozens of issues impacting balance sheets and P&L statements; ultimately determining winners and losers.  They are principally why AT&T and Verizon today have 70% of subscribers (80% of enterprise customers) up from 55% just 5 years ago, 84% of total profit, and over 100% of industry free cash flow.  Now we can add “applications” to that list.  And it will only make it more challenging for competitors to wrestle share from the “duopoly”.

Cassidy Shield of Alcatel-Lucent, further stated that fast follower strategies to the duopoly would likely fail; implying that radical rethinking was necessary.  Some of that came quickly in the form of Masayoshi Son’s announcement of a broad partnership with NetAmerica and members of CCA for preferred roaming, concerted network buildout and sharing of facilities and device purchase agreements. This announcement came two weeks after Son visited Washington DC and laid out Sprint’s vision for a new, more competitive wireless future in America.

The conference concluded with a panel of CEOs hailing Sprint’s approach, which Son outlined here, as one of benevolent dictator (perhaps not the best choice of words) and exhorting the label partner, partner, partner; something that Terry Addington of MobileNation has said has taken way too long.  Even then the panel agreed that pulling off partnerships will be challenging.

The Good & Bad of Wireless

Wireless is great because it is all things to all people, and that is what makes it bad too.  Planning for and accounting how users will access the network is very challenging across a wide user base.  There are fundamentally different “zones” and contexts in which different apps can be used and they often conflict with network capacity and performance.  I used to say that one could walk and also hang upside down from a tree and talk, but you couldn’t “process data” doing those things.  Of course the smartphone changed all that and people are accessing their music apps, location services, searches, purchases, and watching video from anywhere; even hanging upside down in trees.

Today voice, music and video consume 12, 160 and 760 kpbs of bandwidth, respectively, on average.  Tomorrow those numbers might be 40, 500, 1500, and that’s not even taking into account “upstream” bandwidth which will be even more of a challenge for service providers to provision when consumers expect more 2-way collaboration everywhere.  The law of wireless gravity, which states bits will seek out fiber/wire as quickly and cheaply as possible, will apply, necessitating sharing of facilities (wireless and wired), heterogeneous network (Hetnet), and aggressive wifi offload approaches; even consumers will be shared in the form of managed services across communities of users (known today as OTT).  The show agenda included numerous presentations on distributed antennae networks and wifi offload applied to the rural coverage challenge.

Developing approaches ex ante to anticipate demand is even more critical if carriers want to play major roles in the internet of things, unified (video) communications and the connected car.  As Ericsson states in its whitepaper,

“App coverage integrates all aspects of network performance – including radionetwork throughput and latency, capacity, as well as the performance of the backhaul, packetcore and the content-delivery networks. Ultimately, managing app coverage and performance demands a true end-to-end approach to designing, building and running mobile networks.”

I love talking to my smartphone and got a lot of grief for doing so from my friends last summer while on vacation at the shore.  “There’s Michael talking crazy, again,” as I was talking TO my phone, not through it.  “Let’s ask Michael to ‘look’ that up! Haha.”  And then Siri came along and I felt vindicated and simultaneously awed.  The latter by Apple’s (AAPL, OCF = 6.9x) marketing and packaging prowess; seemingly they had trumped Google/Android (GOOG, OCF = 9.6x) yet again.  Or had they?   What at first appeared to be a marketing coup may become Tim Cook’s Waterloo and sound a discordant note for Nuance (NUAN, OCF = 31x).  At its peak in early February NUAN hit a high of 42x OCF, even as Apple stood at 8.2x.

The problem for Apple and Nuance in the short term is that the former is doubling down on its Siri bet with a brand new round of ads by well-known actors, such as Samuel L. Jackson and Zooey Deschanel.  Advertising pundits noted this radical departure for a company that historically shunned celebrities.  Furthermore, with two (NY and LA) class action suits against it and financial pundits weighing in on the potential consumer backlash Apple could have a major Siri migraine in the second half.  Could it be as big as Volvo’s advertising debacle 20 years ago; a proverbial worm in the apple?  Time will tell.

The real problem isn’t with Apple, the phone or Siri and its technology DNA, rather the problem lies with bandwidth and performance of the wireless networks.  Those debating whether Siri is a bandwidth hog are missing the point.  Wireless is a shared spectrum.  The more people who are on the same spectrum band, the less bandwidth for each user and the higher the amount of noise.  Both are bad for applications like Siri and Android’s voice recognition since they talk with processors in the cloud (or WAN).  Delays and missed packets have a serious impact on comprehension, translation and overall responsiveness.  Being a frequent user of Google’s voice-rec which has been around since August, 2010, I know when to count on voice-rec by looking at the wifi/3G/2G indicator and the number of bars.  But do others know this and will the focus on Siri's performance shift to the network?  Time will tell.

The argument that people know voice-rec is new and still in beta probably won’t cut it either.  I am puzzled why major Apple fanboys don’t perceive it as a problem, not even making it on this list of 5 critical product issues for the company to address.  But maybe that’s why companies like Apple are successful; they push the envelope.  In the 1990s I said to the WAN guys (Sprint, et al) that they would have the advantage over the baby bells because the “cloud” or core was more important than the edge.  The real answer, which Apple fully understands, is that the two go hand in hand.  For Sprint (S, OCF = 3.2x) there were too many variables they couldn’t control, so they never rolled out voice recognition on wired networks.  They probably should have taken the chance.  Who knows, the “pin-drop” company could have been a whole lot better off! 

Related Reading:
First impressions of i4s from Android user and Pros/Cons of Siri

A natural opposite for "siri" for the droid crowd would be an "Eliza", based on Audrey Hepburn's famous 'The Rain in Spain' character.  Eliza is the name of a company specializing in voice-rec healthcare apps and also a 1960s AI psychotherapy program.
 

“There is no clear definition, but usually the Singularity is meant as a future time when societal, scientific and economic change is so fast we cannot even imagine what will happen from our present perspective, and when humanity will become posthumanity.”  Futurist Ray Kurzweil wrote the Singularity is near in 2005 and it sure felt that way at CES in Las Vegas in 2012. 

In any event, we didn’t come up with this association.  Matt Burns at TechCrunch did during one of the live streamed panel discussions from the show floor.  But given that we’ve been at the forefront of mobile devices and networks for 2 decades, we couldn’t have said it any better.  After all this time and all these promises, it really felt like all the devices were connected and this app-ecosystem-mass was beginning to move at a pace and direction that none of us could fully explain.

Vernor Vinge, a sci-fi writer, coined the expression back in the early 1990s.  When you look at the list of publications at the Singularity Institute one can’t help but think that the diaspora of different applications and devices self organizing out of CES 2012 isn’t the beginning of AI.  Will AI develop out of the search algorithms that tailor each individuals specific needs, and possibly out-thinking or out-guessing the individual in the process?

We probably won’t know the answer for at least a decade, but what we do know is that we are about to embark on a wave of growth, development and change that will make the past 30 year WinTel-Internet development look embryonic at best.  After all the Singularity is infinity in mathematical terms.  Hold onto your seats.

Yahoo executed on the portal concept better than any other company and one time was worth $113B.  Today it is worth $17.6B and is trading at 12.9x operating cash flow.  But its interest in Chinese and Japanese subsidiaries is $19B pretax or $13B aftertax.  Either way YHOO is absurdly cheap on $5B of revenue and $1.4B cash flow and 700 million users.  So new CEO Thompson has a chance to pull off the turnaround of the century for a company that is hard to define by many.

What would we do in his shoes?

First, we would go back to what made Yahoo so valuable in people’s eyes to begin with, namely an approach that used others’ content and turned it into gold via traffic streams and advertising revenue.  As a tools and application company they have been pretty poor at monetizing their innovations.  Ultimately, the chief reason people came to Yahoo was the breadth and easy accessibility of the information, making people shout “yahoo” in joy.  The brand is a great brand after all and one of the real internet originals which will fix itself.

So what is the “new” content today?  Applications.  Yahoo should evolve from content portal to "app-portal".  More specifically we are about to witness an explosion of cross application solutions and commerce that will develop entire new ecosystems of revenue opportunity.  And these will exist across multiple platforms and screens as one writer points out.  Facebook is trying to harness this opportunity with Opengraph, but already people might be concerned that it is just too much confusion and overkill and TMI.

Yahoo can not only remove that confusion but allow people to tailor their own environments.  HTML5 and connectivity across smartphone, TV, tablet and PC/ultrabook will pave the way.  Understanding and harnassing the big data required to do this is one of Thompson’s key attributes.  At the same time virtual currencies can be created to monetize this interactivity beyond mere advertising and that’s what Thompson brings from Paypal.

With over 70 different services/tools and 14,000 employees, Thompson will definitely have to restructure, reduce and refocus in order to have the resources to aggressively develop an app-portal future.

(The web is dead, long live the apps)

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

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

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

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

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

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

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

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

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

InfoWeek Article on Looming Carrier Bandwidth Shortages

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

Would gamification work in the smart grid?  Possibly.  Others have asked the same question.  But some would ask, why do you need to incent people to save money?  Because people’s self-interest might not be aligned with the smart-grid as currently envisioned by vendors and utilities. 

Gamification’s value is to do something against one’s self-interest without realizing it.  At the same time, people play games to accomplish something aspirational.  How can these two, somewhat contradictory, precepts be applied to the smart-grid? 

People resist the smart grid because of its perceived complexity, expense and intrusiveness.  They are acting in their self-interest.  Secondly, the smart-grid is supposedly about giving the end-user controls over their own consumption.  Unfortunately, utilities are scared by this future, since it runs counter to revenue growth.

Enter gamification where everyone might win.  If introduced into the design of smart-grid solutions from the get-go it could have a fundamental impact on penetration, acceptance and ultimately revenue and profit growth for the utility industry.   Why?  Because the demand for electricity is potentially unlimited and the easier and more efficient the industry makes consumption the greater the growth potential.

So what might gamification of the smart grid look like?  It would need to satisfy the following conditions: personal growth, societal improvement and marketing engagement.   Right now solutions I’ve read about focus on individual rewards (see Welectricity and Lowfoot), but there is a growing body of evidence that people respond better when their use is compared to their neighbors.  So why not turn efficiency and production into a contest?  Research is already underway in Hawaii and Chicago.  Small, innovative app-driven solutions are entering the market; even supported by former US Vice Presidents.

To get as much participation and ensure wide-spread rewards smart-grid gamification contests should be held at home, neighborhood, city, county, state, all the way to national levels.  It should provide for both relative and absolute changes to provide ALL users an incentive to win; not just the largest users.  And not just individuals, but groups as well.  Contests could also get down to the appliance level and ultimately should include contribution/cogeneration (here’s another example). 

Utilities have done a poor job of getting customers to look at their info online; less than 10% on average.   Playing games with customers and following recipes like this might be a way to change all that.  Win, win, win.

Related Reading:

Gaming across all industries

Without access does the cloud exist?  Not really.

In 2006, cloud computing entered the collective intelligence in the form of Amazon Web Services.  By 2007, over 330,000 developers were registered on the platform.  This rapid uptake was an outgrowth of web 1.0 applications (scale) and growth in high-speed, broadband access from 1998-2005 (ubiquity).  It became apparent to all that new solutions could be developed and efficiencies improved by collapsing to the core a portion of processing and storage that had developed at the edge during the WinTel revolution.  The latter had fundamentally changed the IT landscape between the late 1980s and early 2000s from a mainframe to client server paradigm.

In late 2007 the iPhone was born, just as 3G digital services were introduced by a competitive US wireless industry.  In 2009 “smartphone” penetration was 18% of the market.  By the 3^rd quarter of 2011 that number reached 44%.  The way people communicate and consume information is changing dramatically in a very short time. 

The smartphone is driving cloud (aka back to the mainframe) adoption for 3 reasons: 1) it is introducing a new computing device to complement, not replace, existing computing devices at home and work; 2) the small screen limits what information can be shown and processed; 3) it is increasing the sociability, velocity and value of information.   Information knows no bounds at the edge or core.  And we are at the very very early stages of this dramatic new revolution.

Ice Cream Sandwich (just like Windows 2.0 multi-tasking in 1987) heralds a radical new world of information generation and consumption.  Growth in processing and computation at the edge will drive the core and vice versa; just as chip advances from Intel fed software bloat on desktops further necessitating faster chips.   

But the process can only expand if the networks are there (see page 2) to support that.  Unfortunately carriers have responded with data caps and bemoan the lack of new spectrum.  Fortunately, a hidden back door exists in the form of WiFi access.  And if carriers like AT&T and Verizon don’t watch out, it will become the preferred form of access.

As a recent adopter of Google Music I have become very attuned to that.  First, it is truly amazing how seamless content storage and playback has become.  Second, I learned how to program my phone to always hunt for a wifi connection.  Third, when I do not have access to either the 3G wireless network or WiFi and I want something that is stored online a strange feeling of being disconnected overtakes me; akin to leaving one’s cellphone at home in the morning.

With the smartphone we are getting used to choice and instant gratification.  The problem with WiFi is it’s variability and unreliability.  Capital and technology is being applied to solve that problem and it will be interesting to see how service providers react to the potential threat (and/or opportunity).  Where carriers once imagined walled application gardens there are now fertile iOS and Android fields watered by clouds over which carriers exert little control.  Storm clouds loom over their control of and ROI from access networks.

5 Areas of Focus

1) How does information flow through our economic, social and political fabric?  I believe all of history can be modeled on the pathways and velocity of information.  To my knowledge there is no economic science regarding the velocity of information, but many write about it.  Davidow (OVERconnected) speaks to networks of people (information) being in 3 states of connectivity.  Tom Wheeler, someone whom I admire a great deal, often relates what is happening today to historical events and vice versa.  His book on Lincoln’s use of the telegraph makes for a fascinating read.  Because of its current business emphasis and potential to change many aspects of our economy and lives social media will be worth modeling along the lines of information velocity.

2) Mapping the rapidly evolving infomedia landscape to explain both the chaos of convergence and the divergence of demand has interested me for 20 years.  This represents a taxonomy of things in the communications, technology and internet worlds.  The latest iteration, called the InfoStack, puts everything into a 3 dimensional framework with a geographic, technological/operational, and network/application dispersion.  I’ve taken that a step further and from 3 dimensional macro/micro models developed 3 dimensional organizational matrices for companies.  3 coordinates capture 99% of everything that is relevant about a technology, product, company, industry or topic.

3) Mobile payments and ecommerce have been an area of focus over the past 3 years.  I will comment quite a bit on this topic.  There are hundreds of players, with everyone jockeying for dominance or their piece of the pie.  The area is also at the nexus of 3 very large groupings of companies:  financial services, communications services and transaction/information processors.  The latter includes Google and FaceBook, which is why they are constantly being talked about.  That said, players in all 3 camps are constrained by vestigial business and pricing models.   Whoever ties/relates the communications event/transaction to the underlying economic transaction will win.  New pricing will reflect digitization and true marginal cost.  Successful models/blueprints are 800, VPN, and advertising.  We believe 70-80% of all revenue in the future will derive from corporate users and less than 30% will be subscription based.

4) Exchange models and products/solutions that facilitate the flow of information across upper and lower layers and from end to end represent exciting and rewarding opportunities.  In a competitive world of infinite revenue clouds of demand mechanisms must exist that drive cost down between participants as traffic volumes explode.  This holds for one-way and two-way traffic, and narrow and broadband applications.  The opposing sides of bill and keep (called party pays) and network neutrality, are missing the point.  New services can only develop if there is a bilateral, balanced payment system.  It is easy to see why incumbent service and application models embrace bill and keep, as it stifles new entrants.  But long term it also stifles innovation and retards growth.

5) What will the new network and access topologies look like?  Clearly the current industry structure cannot withstand the dual onslaught of rapid technological change and obsolescence and enormously growing and diverging demand.  It’s great if everyone embraces the cloud, but what if we don’t have access to it?  Something I call “centralized hierarchical networking” will develop.  A significant amount of hybridization will exist.  No “one solution” will result.  Scale and ubiquity will be critical elements to commercial success.  As will anticipation and incorporation of developments in the middle and upper layers.  Policy must ensure that providers are not allowed to hide behind a mantra of “natural bottlenecks” and universal service requirements.  In fact, the open and competitive models ensure the latter as we saw from our pro-competitive and wireless policies of the 1980s and 1990s.

In conclusion, these are the 5 areas I focus on:

1)      Information Velocity

2)      Mapping the InfoStack

3)      Applications and in particular, payment systems

4)      Exchange models

5)      Networks

The analysis will tend to focus on pricing (driven by marginal, not average costs) and arbitrages, the “directory value” of something, which some refer to as the network effect, and key supply and demand drivers.

Today, April 18, 2011 marks my first official blog.  It is about making money and having fun.  Actually I started blogging about telecommunications 20 years ago on Wall Street with my TelNotes daily and SpectralShifts weekly.  Looking back, I am happy to report that a lot of what I said about the space actually took place; consolidation, wireless usurpation of wireline access, IP growing into something more robust than a 4 layer stack, etc…  Over the past decade I’ve watched the advent of social media, and application ecosystems, and the collapse of the competitive communications sector; the good, the bad, and the ugly, respectively.

Along the way I’ve participated in or been impacted by these trends as I helped startups and small companies raise money and improve their strategy, tactics and operations.  Overall, an entirely different perspective from my ivory tower Wall Street research perch of the 1980s-90s.  Hopefully what I have to say is of use to a broad audience and helps people cut through contradictory themes of chaotic convergence and diverging demand to take advantage of the rapidly shifting landscape.

I like examples of reality imitating art.  One of my favorites was Pink Floyd’s The Wall, which preceded the destruction of the Berlin Wall by a decade.  Another, the devastating satire and 1976 classic Network, predating by 30 years what media has become in the age of reality TV, twitter and the internet moment.  I feel like a lot has changed and it’s time for me to start talking again.  So in the words of Howard Beale (Peter Finch) “I’m as mad as hell, and I’m not going to take it anymore.” 

Most of the time you’ll see me take an opposite stance from consensus, or approach a topic or problem from a 90 degree angle.  That’s my intrinsic value; don’t look for consensus opinion here.  The ability to do this lies in my analytical framework, called the InfoStack.  It is a three dimensional framework that maps information, topics and problems along geographic, network and application dispersions.  By geographic I mean WAN, MAN, LAN, PAN.  By network, I mean a 7 layer OSI stack.  And by applications, I mean clouds of intersecting demand.  You will see that I talk about horizontal layering and scale, vertically complete solutions, and unlimited “cloud-like” revenue opportunity.  Anything I analyze is in the context of what is going on in adjacent spaces of the matrix.  And I look for cause and effect amongst the layers.

I see us at the beginning of something very big; bigger than in 1987 at the dawn of the Wintel revolution.  The best way to enjoy the great literary authors is to start with their earliest works and read sequentially; growing and developing with them.  Grow with me as we sit at the dawn of the Infomedia revolution that is and will remake the world around us.  In the process, let’s make some money and build things that are substantial.