If Google can pull it off, there's good reason for cable companies to start worrying – as investors already have, with Comcast stock dropping $1.96 today (Feb. 19) and Time Warner down $0.68. Google's plans start with free 5 Mbps service, $70/month Gigabit Internet-only, and $120 Gigabit Internet plus TV (which includes 200 HD channels, DVR, and on-demand content including Netflix). All plans have a $30 hook-up charge.
However, if you start adding on premium channels that's going to cost another $10 to $40 a month; bringing it close to the $180 I'm currently paying Comcast for TV, Internet and voice, and making it a trade-off for some customers.
So, what are we to make of this besides shorting Comcast stock?
One piece of intelligence that the Google Fiber launch reveals is that despite predictions that over the top (OTT) content services are the future, operating the underlying network infrastructure is still a competitive advantage.
Another message here from these tea leaves is that wireless networks still don't match the stability, reliability and performance of wired networks. And the exponential growth of mobile broadband use just underscores the importance of the wired backhaul supporting it.
I have a good chance of watching Google Fiber unroll first-hand because I live in one of the cities that's in talks with the Internet giant to one of those 34 "gigabit cities" – Santa Clara, CA. And although nothing's cast in concrete yet, Santa Clara enjoys some unique advantages as a showcase for Google Fiber – and not just because I'm an unashamed city booster.
The first and biggest reason is that the city owns its utility company. That means the city owns the poles and conduit where Google needs to run its fiber. That will expedite permitting and construction operations. (And because Santa Clara generates much of its own electricity, it costs about a third less to turn your TV on or charge up your tablet.)
The second advantage that Santa Clara offers is that a lot of the infrastructure Google Fiber needs is already in place. The city already has an extensive dark fiber backbone and it's already in business selling excess capacity to businesses and service providers.
Originally developed to link the city's electric substations, the fiber backbone was deliberately over-built and has been expanded over the last 15 years. The network not only covers Santa Clara's industrial corridor, it also reaches into residential neighborhoods to schools and fire stations. And the city already has a municipal WiFi network that was built out to support its smart meter system.
Santa Clara also has the 49ers high-tech Levi's stadium opening this summer. But Comcast just signed a 10-year deal to provide fiber throughout the stadium, as well as free WiFi for fans, so it's hard to see a Google opportunity there.
On the other side of the picture, there are questions.
One is whether Google really "gets" the level of performance required for consumer telecom service. Most of us still "watch TV," and regardless of what we want to watch on that TV, we have expectations for quality that aren't matched by, say, YouTube. People might be willing to deal with Gmail outages, but not TV outages during the Super Bowl.
And then there's history.
About 10 years ago, Google built a free, public WiFi network in Mountain View CA, and, at the time Google was widely expected to rollout similar networks in other cities and become a major ISP. As we know, that didn't happen and Google's public WiFi network dwindled into obscurity -- one reason being that it couldn't handle the traffic.
And then there's Google's dismal history with voice services, first with GrandCentral in 2008, and later with softphone Gizmo5. And then there was the short-lived marriage to Motorola.
However, Google is certainly investing a lot of marketing into this rollout. So I'll be watching with interest.
]]>That's what the curiously-named Per Vices – it's pronounced pir-veessiss – company is up to with its new Phi card, a transciever that captures all wireless signals from the air and demodulates and processes them, according to a post today by Broadcast Engineering's Michael Grotticelli has a good today about Per Vices. Certainly one application that's screaming to be deployed is true "any content, anywhere, any screen" – as opposed to "anything the carrier chooses to give you, on any device they let you have it on, and anywhere they let you get it."
On the other hand, I can see some shortcomings in this. For example, what happens when you have a house-ful of connected appliances? While it may be convenient to start the washing machine from your Kindle while you're sitting by the pool, what happens when you answer your mobile phone and inadvertently turn on the oven?
Anyway, priced at $700, I don't expect Phi is ready for the mass market just yet. The company is offering it currently to developers, hoping to foster some industry-disrupting innovation. There's also an Phi overview video on YouTube.
]]>
The world's most famous Internet company uses the annual conference of the company that practically invented the Software-as-a-Service industry to announce that Google's next business move is manufacturing telephones.
While everyone is running around with "software prohibited" buttons pinned to their sky-blue lanyards – get it, clouds in the sky? – one of the industry leaders in no-software applications is talking about making actual stuff.
Let that sink in.
There's certainly a message here. But not necessarily one that the boys – and I do mean boys, but more on that some other time – in Cloud Cukooland think they're hearing.
In other words, as more and more people attempt to do things "in the cloud," the Next Big Thing is making appliances that connect to it. Like, for example, telephones. Or e-readers.
Consider the Amazon Kindle. Remember Steve Jobs' remark when the Kindle was introduced, "The whole conception is flawed"?1 Four years later, Amazon's success with the Kindle is beyond doubt. In 2010, the Kindle eclipsed "Harry Potter and the Deathly Hallows" as the Amazon's single best-selling product. And that year e-books outsold physical books for the first time.2
Why is this? Simplicity.
Google has expressed itself very clearly on this point in the past:
"Google doesn‘t set out to create feature-rich products; our best designs include only the features that people need to accomplish their goals… Google teams think twice before sacrificing simplicity in pursuit of a less important feature. Our hope is to evolve products in new directions instead of just adding more features."3
And this is an argument that it's time to get back to basics. Certainly, Salesforce.com's own success grew from its simplicity. Salesforce.com did one thing, was simple to start using, and the initial investment – money, time and effort – was low.
Something like a telephone.
Next: Cloud Dreamin' – Desperately Seeking InfrastructureReferences:
]]>
The recent Skype outage highlights a fundamental problem, according to Lagerway. Pure-play VoIP providers ultimately don't control the underlying network that delivers their service.
"I've been in this business 15 years and over that time VoIP has been in beta 15 years. The main reason is that the network that people are riding on is unreliable," he says. Unless a provider owns the upstream broadband network, a 'best effort' service is all a provider can promise.
"If the upstream provider has decided they're going to be making some changes, you're going to be feeling those changes. If the upstream provider decides they want to filter out [other providers' VoIP] packets or handle them with less priority than their own packets, you're going to experience that regardless of what kind of service you have.
"If they decide they're going to route packets to Istanbul, they can do that," he says, adding, "The long and short of it is that the incumbents have their long arm deeply inside the network."
Having said that, Lagerway does allow that Skype's proprietary peer-to-peer (P2P) architecture – a closely guarded "black box" -- leaves the system unnecessarily vulnerable in a way that conventional centralized services like Vonage don't.
"My main issue with Skype is that it's a closed system," says Lagerway, an outspoken evangelist for the open communications standard, SIP. "Having one guy [Janus Friis] create the entire peer-to-peer architecture, it's destined to fail – no one is smart enough.
Lagerway points to Skype's implementation – a self-organizing P2P network operating exclusively on users' PCs – as untenable for providing a service to millions of users. "To have such a dependency on so many people's PCs, that's pretty risky business. What happens if a whole lot of people decide to de-install?"
A better approach for a P2P network is an architecture that fails back to a centralized client-server network – the way TelTel's P2P VoIP network operates, for example. "That's the way SIP operates," Lagerway explains. "It's a peer-to-peer network but it bootstraps the operation with a client-server network."
In the end, while no one can ever fully escape Murphy's Law, a more open approach could have helped Skype avert this particular disaster, Lagerway says.
"If this [Skype] had been an open standards projects, you would have had much more peer review. If they had used SIP, this particular outage would have been less likely. It could have possibly been averted," he explains. "Correcting it now is going to be costly."
****
For those of you who've been wondering what happened to the VoIP Princess, over the last five months I was overwhelmed with a family crisis. If you're interested, you can read about how I became an unpaid caseworker for the Pennsylvania Department of Public Welfare, here.
]]>
The reality is that nobody stays in business selling something for less than it costs -- despite the self-indulgent fantasies of dot-com startups. And in the brave new always-connected world, devices (other than Apple products) to connect may be dirt cheap, but the infrastructure that makes it all work is anything but. AT&T isn't the first carrier to observe that more is less when it comes to iPhone profits. As smartphone subscribers eat up rich media and interactive content, operational costs grow faster than ARPU.
Selling the iPhone hurt Southeast Asian carrier SingTel's operating margin by about 4%, the company told Reuters a year ago. Scandinavian carrier TeliaSonera reported a 20% decline in Danish ARPU (average revenue per user) in the two years since introducing the iPhone -- from US$38.35 to US$30.39 - according to the same report.
AT&T's move points to the future. Once upon a time, minutes were a relevant measure of telecommunications infrastructure cost. When minutes became irrelevant, that didn't mean that the infrastructure was free. Today bandwidth is the meaningful measure of infrastructure cost and average profitability per user (APPU) is more important than ARPU. The pricing model will change simply because businesses that can't sell their services at a profit won't be in business to offer high quality all-you-eat data plans.
And that will have another impact. When network operators' returns match investment, the infrastructure business - the pipe - is going to be a lot more attractive. Which, no doubt, is part of the reasoning behind Google's 1-Gbps FTTH network "experiment" that the Internet giant announced last February. Certainly, Google stands to benefit from increased use of its Web-based applications, ad revenue from the new network, and control of the underlying delivery infrastructure.
But the bottom line is that Google sees a business opportunity in becoming a traditional telecommunications company. And why not? One of the greatest beneficiaries of VoIP disruption of voice communications business was Comcast Cable - now the 3rd largest US telephone company.
For more analysis of AT&T's new pricing, read media sociologist Shelly Palmer's June 6 post, Understanding AT&T's New Limited Data Plan.