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.

Are We Stressing the Environment?

Two major global concerns are the price of oil and level of carbon emissions. The US DOE makes a conservative estimate that oil will be consistently between $110-120 by the end of the decade. Population is the key driver as evidenced by the chart to the left comparing growth in population from 1900 to the production of oil.  Note in particular that despite conservation efforts in the mid to late 1970s, production has matched population growth over the past 25 years. Supporting the general trend up in demand and hence prices, the UN expects population to continue to expand for the forseeable future as shown in the below figure.  From there we see that population will rise from current 6.5B to between 8-10B by 2040.  That would imply production exceeding 100 million barrels per day.

Additionally, and perhaps more alarming is the increase in CO2 levels and average temperatures from the late 1800s through the present in the figure below.  The critical number for long-term environmental sustainability is 350 ppm of CO2.  As can be seen from the chart, that level was surpassed around 1990 and now exceeds 370; up 110 ppm over the past 130 years. 

Electricity production accounts for 1/3 of all CO2 production.  The 2011 U.S. EIA Energy Outlook Report states that electricity currently accounts for 40% of total residential delivered energy consumption in the U.S., with projections for both residential and commercial consumption expected to increase 1.2% annually from 2010 to 2035 (not including significant electric vehicle penetration). This growth will require over 200gW of additional electrical energy capacity. With 40% of this capacity already under construction and assuming current construction costs for a gas turbine plant with transmission facilities are $700/kW, additional electric generation costs will approach $90 billion in today’s dollars or $750/U.S. household.

This represents both an energy problem and opportunity for utilities, their customers and society as a whole.  Electric utilities and their customers need to focus on conservation and smart grid solutions to offset the rise in prices and take advantage of new technologies making alternative energy and electric vehicles more economic. The incremental costs for power generation of $750/HH can instead be invested in home energy management systems, at the same time reducing the total amount of CO2 that is generated.

Related Reading:

Map of US showing locations of renewable energy production

Map of US showing over 6400 facilities producing most CO2

A humble networking protocol 10 years ago, packet based Ethernet (invented at Xerox in 1973) has now ascended to the top of the carrier networking pyramid over traditional voice circuit (time) protocols due to the growth in data networks (storage and application connectivity) and 3G wireless.  According to AboveNet the top 3 CIO priorities are cloud computing, virtualization and mobile, up from spots 16, 3 and 12, respectively, just 2 years ago!   Ethernet now accounts for 36% of all access, larger than any other single legacy technology, up from nothing 10 years ago when the Metro Ethernet Forum was established.  With Gigabit and Terabit speeds, Ethernet is the only protocol for the future.

The recent Ethernet Expo 2011 in NYC underscored the trends and importance of what is going on in the market.  Just like fiber and high-capacity wireless (MIMO) in the physical layer (aka layer 1), Ethernet has significant price/performance advantages in transport networks (aka layer 2).  This graphic illustrates why it has spread through the landscape so rapidly from LAN to MAN to WAN.   With 75% of US business buildings lacking access to fiber, EoC will be the preferred access solution.  As bandwidth demand increases, Ethernet has a 5-10x price/performance advantage over legacy equipment.

Ethernet is getting smarter via a pejoratively coined term, SPIT (Service Provider Information Technology).  The graphic below shows how the growing horizontalization is supported by vertical integration of information (ie exchanges) that will make Ethernet truly “on-demand”.  This model is critical because of both the variability and dispersion of traffic brought on by both mobility and cloud computing.  Already, the underlying layers are being “re”-developed by companies like AlliedFiber who are building new WAN fiber with interconnection points every 60 miles.  It will all be ethernet.  Ultimately, app providers may centralize intelligence at these points, just like Akamai pushed content storage towards the edge of the network for Web 1.0.  At the core and key boundary points Ethernet Exchanges will begin to develop.  Right now network connections are mostly private and there is significant debate as to whether there will be carrier exchanges.  The reality is that there will be exchanges in the future; and not just horizontal but vertical as well to facilitate new service creation and a far larger range of on-demand bandwidth solutions.

By the way, I found this “old” (circa 2005) chart from the MEF illustrating what and where Ethernet is in the network stack.  It is consistent with my own definition of web 1.0 as a 4 layer stack.  Replace layer 4 with clouds and mobile and you get the sense for how much greater complexity there is today.  When you compare it to the above charts you see how far Ethernet has evolved in a very rapid time and why companies like Telx, Equinix (8.6x cash flow), Neutral Tandem (3.5x cash flow) will be interesting to watch, as well as larger carriers like Megapath and AboveNet (8.2x cash flow).   Certainly the next 3-5 years will see significant growth in ethernet and obsolescence of the PSTN and legacy voice (time-based) technologies.

Related Reading:
CoreSite and other data centers connect directly to Amazon AWS

Equinix and Neutral Tandem provide seamless service

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.

Even though the US has the most reliable electric system in the world, utility companies are not schooled in real-time or two-way concepts when it comes to gathering and reporting data, nor when it comes to customer service. All of that changes with a “smart-grid” and may be the best explanation why so many smart-grid solutions stop at the meter and do not extend fully into the customer premise. Unfortunately, utilities are not prepared to “get” so much information, let alone “give” much to the customer. Over 20 million smart meters, representing 15% penetration in residential markets, have been deployed as of June, 2011 according to IEE.  They forecast 65 million (50%) by 2015, at an average cost of $150-250 per household.  While these numbers are significant, it will have taken 15 years to get there and even then only 6 million premises, less than 5% of the market, are expected to have energy management devices by 2015.  So while the utilities will have a slightly better view of things and have greater controls and operating efficiencies, the consumer will not be engaged fully, if at all.  This is the challenge of the smart-grid today.

Part of the issue is incumbent organizations--regulatory bodies, large utilities and vendors--and their desire to stick to proven approaches, while not all agreeing on what those approaches are. According to NIST, there are no fewer than 75 key standards and 11 different standards bodies and associations involved in smart-grid research and trials. The result is numerous different approaches, many of which are proprietary and expensive.  As well, the industry breaks energy management within smart-grid into 2 broad categories, namely Demand Response Management (DRM or the side the utility controls) and Demand Side Management (DSM or the side the customer arguably controls), instead of just calling it “end-to-end energy management;” which is how we refer to it.

Another challenge, specifically for rural utilities is that over 60% have PLC meters, which don’t work with most of the “standard” DRM solutions in the market, necessitating an upgrade. This could actually present an opportunity for a well designed end-to-end solution that leapfrogs the current industry debate and offers a new approach.  Such an approach would work-around an expensive investment upgrade of the meter AND allow DSM at the same time. After working with utilities for over 10 years, we’ve discovered that rural utilities are the most receptive to this new way of thinking, not least because they are owned by their customers and they can achieve greater operating efficiencies from end-to-end “smart” technology investment because of their widely dispersed customer base.

Ultimately the market will need low-cost, flexible end-to-end solutions to make the smart-grid pervasive and generate the expected ROI for utility and customer alike.

A couple of themes were prevalent this past week:

• iPhone/Android location logging,
• cloud computing (and a big cloud collapse at Amazon),
• the tech valuation bubble because of Groupon et al,
• profits at Apple, AT&T vs VZ, Google, most notably,
• and who wins in social media and what is next.

In my opinion they are all related and the Cloud plays the central role, metaphorically and physically.  Horowitz recently wrote about the new computing paradigm in defense of the supposed technology valuation bubble.  I agree wholeheartedly with his assessment as I got my first taste of this historical computing cycle over 30 years ago when I had to cycle 10 miles to a High School in another district that had a dedicated line to the county mainframe.  A year or two later I was simulating virus growth on an Apple PC.  So when Windows came in 1987 I was already ahead of the curve with respect to distributed computing.  Moreover, as a communications analyst in the early 1990s I also realized what competition in the WAN post-1984 had begat, namely, Web 1.0 (aka the Internet) and the most advanced and cheapest digital paging/messaging services in the world.  Both of these trends would have a significant impact on me personally and professionally and I will write about those evolutions and collapses in future Spectral issues.

The problem, the solution, the problem, the solution, etc….

The problem back in the 1970s and early 1980s was the telephone monopoly.  Moore’s law bypassed the analog access bottleneck with cheap processing and local transport.  Consumers and then enterprises and institutions began to buy and link the PCs together to communicate, share files and resources.   Things got exciting when we began to multitask in 1987, and then by 1994 any PC provided access to information pretty much anywhere.  During the 1990s and well into the next decade, Web 1.0 was just a 1.2-way store and forward database lookup platform.  It was early cloud computing, sort of, but no-one had high-speed access.  It was so bad in 1998 when I went independent, that I had 25x more dedicated bandwidth than my former colleagues at bulge-bracket Wall Street firms.  That’s why we had the bust.  Web 1.0 was narrow-band, not broadband, and certainly not 2-way.  Wireless was just beginning to wake up to data, even though Jeff Bezos had everyone believing they would be ordering books through their phones in 2000.

Two things happened in the 2000s.  First, high speed bandwidth became ubiquitous.  I remember raising capital for The Feedroom, a leading video ASP, in 2003 and we were still watching high-speed access penetration reaching the 40% “tipping point.”.  Second the IP stack grew from being a 4 layer model to something more robust.  We built CDNs.  We built border controllers that enabled Skype VoIP traffic to transit foreign networks “for free.”  We built security.  HTML, browsers and web frontends grew to support multimedia.  By the second half of the decade, Web 2.0 became 1.7-way and true “cloud” services began to develop.  Web 2.0 is still not fully developed as there are still a lot of technical and pricing controls and “lubricants” missing for true 2-way synchronous high-definition communications; more about that in future Spectrals.

The New “Hidden Problem”

Unfortunately, over that time the underlying service provider market of 5-6 competitive service providers (wired, wireless, cable) consolidated down to an oligopoly in most markets.  Wherever competition dropped to 3 or fewer providers bandwidth pricing stopped falling 40-70% like it should have and only fell 5-15% per annum.  Yet technology prices at the edge and core (Moore’s Law) kept on falling 50%+ every 12-18 months.  Today, the price differential between “retail” and “underlying economic” cost per bit is the widest it has been since 1984.

That wouldn’t be a problem except for two recent developments:  the advent of the smartphone and the attendant application ecosystems.  So what does this have to do with cloud computing, especially when that was “an enterprise phenomenon” begun by Salesforce.com with its Force.com and Amazon Web Services.  A lot of the new consumer wireless applications run on the cloud.  There are entire developer ecosystems building new companies.  IDC estimates that the total amount of information accessible is going to grow 44x by 2020 to 35 zetabytes.  And the average number of unique files is going to grow 65x.  That means that while a lot of the applications and information is going to be high-bandwidth (video and multimedia), there are also going to be many smaller files and transactions (bits of information); ie telemetry or personal information or sensory inputs.  And this information will be constantly accessed by 3-5 billion wireless smartphones and devices.  The math of networks is (N*(N-1))/2.  That’s an awful lot of IP session pathways.

Why is That A Problem?

The problem is that the current wireless networks can’t handle this onslaught.  Carriers have already been announcing datacaps over the past 2 years.  While they are falling over themselves to announce 4G networks, the reality is that they are only designed to be a 2-3x faster, and far from being ubiquitous, either geographically (wide-area) or inbuilding.  That’s a problem if the new applications and information sets require networks that are 20-50x faster and many factors more reliable and ubiquitous.  The smartphones and their wireless tether are becoming single points of access.  Add to that the fact that carriers derive increasingly less direct benefit from these application ecosystems, so they’ll have less and less incentive to upgrade and reprice their network services along true technology-driven marginal cost.  Neustar is already warning carriers they are being bypassed in the process.

Does The Bubble Have to Burst?

Just as in the late 1990s, the upper and middle layer guys really don’t know what is going on at the lower layers.  And if they don’t then surely the current bubble will burst as expectations will get ahead of reality.  That may take another 2-3 years, but it will likely happen.  In the meantime, alternative access players are beginning to rise up.  Even the carriers themselves are talking about offloading traffic onto femto and wifi cells.  Wifi alliances are springing up again and middle layer software/application controls are developing to make it easier for end-users to offload traffic themselves.  Having lived through and analyzed the advent of competitive wired and wireless networks in the 1990s, my sense is that nothing, even LightSquared or Clearwire in their current forms, will be significant enough to precipitate the dramatic restructuring that is necessary to service this coming tidal wave of demand.

What we need is something that I call centralized hierarchical networking (CHN)™.  Essentially we will see three major layers with the bottom access/transport layer being controlled by 3-4 hybrid networks.  The growth and dynamic from edge to core and vice versa will wax and wane in rather rapid fashion.  Until then, while I totally get and support the cloud and believe most applications are going that route, let the Cloud Players be forewarned of coming turbulence unless something is done to (re)solve the bandwidth bottleneck!

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.