Wednesday, May 28, 2008

Two minor victories for openness

Wednesday’s paper brought news of two minor victories for openness.

The most clear cut was the concession by the National Association of Realtors that it would stop fighting the US Justice Department over control of its home listings. Some NAR brokers (regional bodies?) had adopted rules saying that their home listings couldn’t be shown on non-Realtor websites, and so in 2005 the Justice Department filed an antitrust suit.

This is an example of disintermediation — cutting out the middleman. Theoretically, any listing originated by a Realtor could be sold by a web-based discount broker who passes its savings onto its customers. Two examples of such firms are Zip Reality and Redfin, although the WSJ predicted that the effect of competition on overall commissions will be slow.

If this plays out, the commissioned human being in real estate will eventually be replaced (as in plane tickets and many financial services) by a computer serving a website. Given the stakes and risks, I worry a little bit about new home buyers (or sellers). On the other hand, the fraud (mainly by overleveraged home buyers) in the past few years show that the existing system of real estate agents, appraisers and lenders already had gaps big enough to drive a mobile home through.

The other interesting tidbit was the proposal by major US cable TV operators to standardize distribution of advanced cable services, allowing Sony to incorporate set top box functionality in its TVs. The reports say that the standardization is mainly in software — a Java application called “tru2way” that is used to arbitrate requests for access to interactive services. (Of course, access to unscrambled cable channels has been governed by FCC-approved standard frequency allocations for decades).

This has to be bad for the two major producers of settop boxes: General Instruments (now owned by Motorola) and Scientific Atlanta (owned by Cisco). Once upon a time, Microsoft hoped to dominate settop boxes with Windows CE, but the cable companies said nyet to Microsoft creating another platform monopoly and instead went with Java. The (relatively) open nature of the Java standard means that any STB maker (and now TV maker) can implement a Java-based connection standard.

The other interesting thing to me is the parallel to the Carterfone decision that allowed consumers to hook any standardized device up to their home phones. Once upon a time, phone companies and cable TV companies charged on a per-connection basis. I remember as a teenager wiring an extension in my bedroom without notifying (or paying) The Phone Company, and going to great lengths to minimize the chances that TPC could detect the extra line.

Now consumers will be paying for their connection to the network, plus any equipment they rent — but soon the commodity functionality of switching channels will be bundled into most new TV sets. The tru2way standard comes from the CableLabs and (in the tradition of “Wi-Fi”) is the consumer-friendly name of what used to be called “OpenCable Applications Platform” (or OCAP).

As the LA Times (and the trade press) makes clear— but the business press does not — Sony is a holdout late to the CableLabs party, lagging Panasonic, Samsung and LG.

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