Tuesday, June 30, 2009

Openness in the news

A few tidbits highlighted in the inner pages of a friend’s WSJ this morning. All are about (to some degree) IT openness.

Comcast is partnering with Clearwire (and thus Sprint) to resell its WiMax service to its existing cable modem subscribers. In integrating its offerings, Comcast is seeking to increase switching costs. More fundamentally, either this suggests that Comcast realizes that revenue growth in its core business is over, or it decided it needs to bundle in-home and coffee shop Internet access for residential users to compete with AT&T (DSL + Wi-Fi hotspots) and other integrated telecom companies.

Meanwhile, Clearwire is eager to generate revenue and win WiMax adoption before the more widely endorsed LTE tsunami comes flooding in.

The EU has forced major mobile phone makers to adopt a standard recharger plug by 2010. Nominally to reduce the number of chargers in landfills, of course it’s really about forcing an open standard to reduce switching costs. While I think this is exactly the sort of trivial economic micromanagement that governments should avoid, fortunately the government didn’t have to push too hard as European and US telecom trade associations had previously brokered the plan.

Alas, the format is the relatively new (and incompatible) micro-USB instead of the ubiquitous mini-USB that I already have on all my hard disks and some of my existing cameras and cellphones.

Dell is rumored (by the WSJ and earlier reports) to be planning an Android device aimed squarely at the iPod Touch. This makes a lot of sense, since for many users, the value of the iPT comes from its WebKit web browser, a mail client, Google maps and an RSS reader. Assuming Android has gotten around to fixing their awful email client, the open source (and thus inherently commoditized) platform makes perfect sense for the company that seeks to copy Apple’s new technology innovations (and old production innovations) as its core commodity business declines.

As with other Dell technology efforts, it would enable the low R&D company to build upon the R&D efforts of others, a classic (if decades old) example of open innovation.

Monday, June 29, 2009

Who wants Flash?

When Flash 10 comes to mobile phones in the fall, it will be available for Android, the Palm Pre, Symbian S60 and even Windows Mobile. This leaves out the BlackBerry and iPhone — roughly 30% of the world market (and the majority of the US market).

Obviously this is not a technical issue — the ARM processors on the missing phones are no less capable than those that will have Flash. In the long-running iPhone saga, Steve Jobs has been explicit in rejecting the need for Flash.

This obviously slows Adobe’s efforts to make Flash a ubiquitous cross-platform mobile phone media platform, building upon its success delivering annoying animated ads (as well as YouTube videos) to desktop owners.

Will phone buyers prefer a phone that has Flash over a phone that doesn’t? So far, there’s no evidence of that Flash matters that much, but my hunch is if either RIM or Apple gives in to Adobe, the other will have to follow.

Meanwhile, economists and pundits crow about the importance of open standards, but then developers take the lazy way out and use a proprietary platform like Flash because it is powerful with good tools. (Like all proprietary systems, it’s partly open — in this case not being died to any particular hardware.)

So it’s fine to say that, all things being equal, developers and users and MIS managers prefer open standards over proprietary standards. The problem with that claim is that all things are never equal: the creator of a mostly proprietary standard has financial resources rarely available to more open standards (with their more limited options for appropriation).

Adobe has done a good job of re-investing the rents provided by its control of Flash to continuously advance the platform. In doing so, it builds upon the successful efforts by Macromedia since it bought FutureWave Splash in December 1996. (Ironically, Adobe founder John Warnock turned down the opportunity to buy Splash the year before).

Sunday, June 28, 2009

Money for nothing! Chicks for free?

The NYT reports that it now may be possible to get high levels of physical conditioning and endurance in a small fraction of the time previously thought. In lab rat and student studies, brief-high intensity exercise (with proper warmup, cooldown and rest) produced health benefits comparable to more extended efforts.

If this can be translated into a usable training regime, it promises the end to the mantra “no pain, no gain” for most fitness goals. I can’t wait to apply this to my irregular semi-weekly swimming workouts.

Since time is money, this scientific breakthrough promises to provide “money for nothing” for stressed-out professionals who don’t want to die of a massive cardiac arrest. The only disadvantage is that for individuals whose self-image (or social desirability) is directly tied to their muscle tone, such fitness will become less unusual and thus less differentiating.

This leaves a pressing question unanswered: once we can get money for nothing, how soon until we get chicks for free? I realize that Mark Knopfler no longer has to worry about this issue, but it would be of considerable interest for about half of the population. If cable weren’t so darned expensive, I’d add that I want my MTV.


Video source: dailymotion.com

Saturday, June 27, 2009

Efficient vs. inefficient regulation

As part of outsourcing economic criticism to save money during tough economic times, I’ve been quoting conservative and libertarian critics of the administration’s economic policies.

Today I’ll quote from three nominal supporters of the Waxman-Markey bill that passed the House Friday on a 219-212 party line vote (eight Democrats voted “no”.) All agree that “cap and trade” makes more political sense than it will ever make economic sense. Finally, I include a more skeptical analysis of the bill’s likely effects from one of the usual suspects.

The first two quotes are from the standard-bearer of American liberalism, the Gray Lady herself. From a May 17 NYT article by John Broder:

How did cap and trade, hatched as an academic theory in obscure economic journals half a century ago, become the policy of choice in the debate over how to slow the heating of the planet? And how did it come to eclipse the idea of simply slapping a tax on energy consumption that befouls the public square or leaves the nation hostage to foreign oil producers?

The answer is not to be found in the study of economics or environmental science, but in the realm where most policy debates are ultimately settled: politics.

Many members of Congress remember the painful political lesson of 1993, when President Bill Clinton proposed a tax on all forms of energy, a plan that went down to defeat and helped take the Democratic majority in Congress down with it a year later.

Cap and trade, by contrast, is almost perfectly designed for the buying and selling of political support through the granting of valuable emissions permits to favor specific industries and even specific Congressional districts. That is precisely what is taking place now in the House Energy and Commerce Committee, which has used such concessions to patch together a Democratic majority to pass a far-reaching bill to regulate carbon emissions through a cap-and-trade plan.
From a column by Thomas “World is Flat” Friedman, April 8:
Last week, House Democrats, with administration support, introduced a 600-page draft bill on energy and climate. At the center of it is a plan to reduce greenhouse-gas emissions through a complicated cap-and-trade system. These people have the very best of intentions, but I wish they would step back and ask again: Can cap-and-trade pass? Will it really work? And is it the best strategy, with all the bureaucracy it will require to monitor, auction emissions permits and manage the trading?

Advocates of cap-and-trade argue that it is preferable to a simple carbon tax because it fixes a national cap on carbon emissions and it “hides the ball” — it doesn’t use the word “tax” — even though it amounts to one. So it can get through Congress. That was true as long as no one thought cap-and-trade could ever pass, but now that it might under Mr. Obama, opponents are not playing hide the ball anymore.

Since the opponents of cap-and-trade are going to pillory it as a tax anyway, why not go for the real thing — a simple, transparent, economy-wide carbon tax?
A word from the Washington Post editorialists on Friday:
Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) have toiled for months to produce legislation that would mark the first of many steps leading to a carbon-constrained economy -- and that would also get votes. The result is a 1,201-page measure filled with political compromises, directives, subsidies and selections of winners and losers that most members won't be able to analyze before the vote and that leaves us wondering how effective it will be.

The government would set a cap on the amount of carbon dioxide that could be emitted and would issue allowances to polluting sectors that could buy and sell those rights.

This complex system has some theoretical advantages over our preferred alternative -- a straightforward, easily understood carbon tax -- but it could be vulnerable to manipulation that would compromise its effect. Already pollution credits and their revenue are being divvied up to the advantage of polluters. During the campaign, President Obama supported the cleanest variation of this mechanism: selling all emission allowances at auction. This week he abandoned that sensible stance with a full-throated endorsement of Waxman-Markey, which gives away 85 percent of the pollution credits in the first years of the program and provides many avenues potentially to evade compliance. While in theory the bill relies on the market to find the most efficient alternatives to greenhouse-gas emitting energy sources, in practice its subsidies, regulations and exemptions could skew the outcome in costly ways.
Finally, from the Wall Street Journal editorialists, also on Friday
The Cap and Tax Fiction

[T]he Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. … A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.

Friday, June 26, 2009

Computer tip of the day

I was at the office supply store yesterday, looking whether any computer equipment was on sale (as with the Sears of old, no one buys at list price).

I spent most of my time looking at external disk drives, as my wife has filled up her hard disk with digital photos and I’m looking to buy something under $100 either to store the overflow or (more likely) to backup all her data so I can move the overflow to her existing backup drive. The store had 2.5" disk drives in the 160-500 Gb range, and 3.5" disk drives with a terabyte or more.

In front of the disk drives was a guy with an official-looking polo shit who turned out not to be a store employee — nor even a customer — but just someone from the disk drive industry doing competive research.

Given the latter information — and where we were standing in San Jose — it was pretty trivial to figure out he was from the old IBM disk drive group on Cottle Road. (You might have heard of them, since they invented the disk drive in 1956 and also the floppy disk in 1971).

Alas, the historic building was destroyed by a fire, and the giant Cottle Road facility is going to become a strip mall and houses. IBM merged its disk drive business with Hitachi in 2002 as a way to exit the business. Since then, I meet Hitachi engineers now and again, particularly when they serve as a fellow science fair judge dispensing awards the IEEE Santa Clara Valley chapter. Some of the Hitachi engineers worked for IBM 8 years ago, while others are new to Hitachi and its San Jose disk operations.

My new acquaintance from Hitachi Thursday was proud of the fact that their reliability (e.g. one year failure rate) was better than the other companies on the shelf. If company “H” has a 0.8% failure rate, then company “S” is next best at 1.2%. It’s hard to set a reliability for company “V,” since they don’t make their own spindles and buy from other companies on a product-by-product basis. (We didn’t mention company “M” because they were not on the shelves, nor company “B” or “I” or “ST”.)

However, the market is being driven by company “W,” which is although lowest reliability is driving demand and market dynamics through an aggressive price war. (Here we call that commoditization.) My engineer acquaintance seemed wistful about having to match price while maintaining quality, but he was also pragmatic that consumers want to save that last $10 for something they’re eventually going to throw away.

Because, as my acquaintance made clear, all of these disk drives are going to fail. However, I learned a few things about when and how.

Although power supplies can and do fail (and can often be replaced free), the main failure to worry about is when the head stops floating over the platter. (I think he was referring to what we 35 years ago called a “head crash”). Some disk drives will beep — warning that failure is imminent — which means that an immediate backup is imperative.

The #1 way to increase the odds of a head crash is heat. People stack their disk drives with other electronic devices, magnifying the heat beyond the original design spec. Or perhaps (as I do) they use them in an un-air conditioned residential room in California in the summer. (From now on, my backup HDD’s will stay turned off until the interior temp drops below 80° F).

The other point — which surprised me — is that the 2.5" HDD are more reliable than the 3.5" HDD. They are made from higher quality materials, which makes sense since they need a higher recording density. (Since most of them go into laptops, I would imagine they also need to be more rugged.) Of course, for external HDDs, today they are powered by the USB port which means there’s no power supply to go wrong.

So I guess my next stop is to go to Fry’s and buy a 2.5" hard disk drive made by company “H”, such as the 250 Gb external they have for sale at $60.

Thursday, June 25, 2009

Tweet if you want Microsoft standards compliance

Tweet http://fixoutlook.org/ if you believe in the value of email standards. As TechCrunch reports:

While it is pretty much the standard email client, Microsoft Outlook has long had problems rendering HTML correctly in emails. And the latest version, Outlook 2010, due sometime in the next several months, doesn’t look like it’s going to be any better — and it actually may be worse. And a lot of users aren’t happy about it at all.

A group of people apparently felt strongly enough to create a site called Outlook’s broken — Let’s fix it. The site is simple, it’s a constantly updating stream of users tweeting out their desire for Microsoft to fix this problem with Outlook.

Microsoft has responded, saying basically that Outlook isn’t broken and that, “There is no widely-recognized consensus in the industry about what subset of HTML is appropriate for use in e-mail for interoperability.”

Hmm, I don’t see these types of campaigns against any of the other email clients though. Expect this campaign to continue.
The website has examples of the Outlook 2000 and 2010 display for readers to compare. At the most recent count, this website (an effort of the email standards project) has attracted more than 22,000 supporters.

Nokia platform proliferation

Nokia made two major extensions this week to its platform strategies — one in handsets, one in infrastructure. Both are about finding growth in the face of increasing commodization.

For more than a year, I’ve wondered when Nokia’s Maemo and Intel’s Moblin were going to tie the knot. With Tuesday’s announcement, it’s clear that neither side has made an exclusive commitment, but both parties seem inclined towards something more than a dalliance.

Both Maemo and Moblin are Linux-based platforms for mobile devices such as tablets or netbooks. For Nokia this more about netbooks than being about phones. For Intel, it’s a chance to break into the phone segment, which it once tried (and failed) with XScale (which 3 years ago Intel sold to Marvell).

Nokia still has both the highest volume and broadest product line of any cellphone maker, as well as unparalleled global distribution through telecoms operators. Nokia is not going to share control with Google in the commodity (i.e. Open) Handset Alliance, so combining the two similar Linux platforms is a way for it to attract at least a few allies going forward.


However, this muddies the Nokia platform strategy considerably. Unlike its rivals, Nokia had a fairly focused platform strategy with the S40 and S60. Going beyond the limited Maemo experiments could muddy its platform waters considerably. What does it mean for Symbian, the technology it bought last year and is now open sourcing? LinuxDevices is pro-Linux, anti-Symbian, and now assumes Linux will displace Symbian:
The partnership news further suggests that the rumors that Nokia is moving forward with Linux -- and not, it seems, Symbian -- devices that combine MID and smartphone characteristics, are true. It also appears that Nokia will likely focus on Linux for its future high-end smartphones, while leaving a soon to be open-sourced Symbian to handle less powerful smartphones and feature phones.
I think this is wishful thinking on the part of a pro-Linux analyst. Unless Intel and Nokia plan on joining LiMo or Android, the world isn’t ready for yet another Linux-based handset platform.

Instead, the Nintel (Innokia?) alliance will be growing the segment in between smartphones and laptops, which will be distinct devices from either one. Will they make phone calls? Yes, but using earphones and not by putting it to your ear.

In this regard, they are aimed more at the low end of the laptop segment — and thus at Microsoft — rather than the high end of the smartphone segment. Presumably an alliance with Oracle’s OpenOffice.org will be necessary to support Microsoft Office documents needed by users of these devices. (This may also be aimed at Apple, which has both smartphone and laptop products and is rumored to be working on a tablet-sized iPhone).

Intel hopes this will head off the predicted shift of netbooks from Atom to Netbook. I am not sure that I agree that it will work, since Qualcomm is working hard with Android to extend its ARM-based processors into the Netbook territory, and TI is also working hard to move upmarket.

The other major announcement was that Nokia Siemens Networks is buying Nortel’s CDMA and LTE infrastructure unit for $650 million, less than the $850m it offered five months earlier for a slightly larger product portfolio. This is a consolidation of a fragmented industry that delivers North American market share to NSN, mainly Nortel’s relationships with Verizon and Sprint

It’s not clear how NSN really benefits from the Nortel acquisition, given that the CDMA business is facing end of life (even if existing customers like Sprint desperately want an support path). Although LTE is the growth path for Verizon (not Sprint), Nortel’s LTE efforts never got very far before Nortel gave up. NSN gets some sales contacts as well as 2,500+ Nortel workers, but with it new platforms that it needs to maintain — not necessarily conducive to achieving scale economies.

It appears as though this is aimed at outlasting Alcatel (which now owns Lucent’s CDMA business) and Ericsson in the war of commoditization against the Huawei and ZTE. Based on an earlier interview, telecoms.com reported:
In a recent interview with telecoms.com, Tarek A. Robbiati, the chief executive officer of CSL, Hong Kong’s first-placed mobile carrier, predicted that Chinese vendors will come to dominate the global mobile infrastructure market. “Further consolidation will come in the next three to five years. In the end there will be only three [infrastructure vendors] left, and two of them will be Chinese. The European vendors are just too slow,” he said.
The chauvinism of a Hong Kong operator against European manufacturers would be expected, but Robbiati had a Euro-centric career since graduating from London Business School in 1996 — including work as an equity analyst for Lehman and a finance VP at Orange — before moving to Australia in 2005 and HK in 2007. So if he’s frustrated with European vendors, it’s the voice of experience.

Wednesday, June 24, 2009

Clearly flawed business model

On Monday night, the airport express security program “Clear” went out of business. As the website FlyClear.com says

Clear Lanes Are No Longer Available.

At 11:00 p.m. PST on June 22, 2009, Clear will cease operations. Clear’s parent company, Verified Identity Pass, Inc. has been unable to negotiate an agreement with its senior creditor to continue operations.

What will happen to my personal information?

Applicant and Member data is currently secured in accordance with the Transportation Security Administration’s Security, Privacy and Compliance Standards. Verified Identity Pass, Inc. will continue to secure such information and will take appropriate steps to delete the information.

Will I receive a refund for membership in Clear?

At the present time, because of its financial condition, Verified Identity Pass, Inc. cannot issue refunds.
Memo to TV airheads: of course they won’t pay refunds, because they’re broke. If they weren’t broke, they’d still be in business.

USA Today reports that the company was started by Court TV founder Steven Brill and attracted strategic investments from Lockheed Martin and GE Security in additional to VC firms. Apparently the company attracted about 250,000 customers before it died.

If I claimed “I hate to say I told you so” I’d be lying. A year ago, I didn’t see the revenue model: not customers willing to pay a large enough premium to solve the travel checkin hassle problem. (It doesn’t help that the most price-insensitive segment of rock stars and athletes never fly commercial.)

As I said back then:
It’s not clear (all pun intended) whether the problem is market size (of people willing to pay anything) or the revenue model (no ala carte pricing). It’s also not clear if (ala Iridium and Globalstar) they have a graceful fallback position short of bankruptcy. But if they can’t find significant paying customers in tech-wealthy Silicon Valley, they are not long for this world.

Tuesday, June 23, 2009

The Return of Steve

Something I had missed yesterday: the FT (and others) read the tea leaves — that by quoting Steve Jobs and calling him CEO, the iCEO is back:

Apple quoted Jobs and referred to him as the company’s chief executive in a press release touting the sales of 1m next-generation iPhones in their first weekend of availability.

It was the first time Jobs had been heard from in his official capacity since January, when he announced that he would need to take time off for unspecified medical issues. The company had not said in what capacity he would return.

“This effectively tells us he’s back in the job” with a backhanded disclosure, said Yair Reiner, an Oppenheimer & Co. analyst. “The intention here is to try to take Steve Jobs and not make him the lead of the story any more, to really try to refocus the investment community and Apple customers on the products and the expanding group of executives.”
And, in fact, Reuters reported Jobs visited the Apple campus Monday:
Jobs, who has been on medical leave since January, was seen by a Reuters reporter leaving the Apple campus in Cupertino, California dressed in his trademark black turtleneck and jeans. He walked out chatting with another person before climbing into a black car that then drove off.
The liver transplant rumor (leaked at a time when Apple was basking in favorable product publicity) has been confirmed. Jobs got his transplant at Methodist University Hospital in Memphis, which has one of the shortest waiting times in the country (less than 4 months).

The ethics of Apple’s non-disclosure (or misleading statements) rages on. Here is a quote from the FT:
“Some would argue that the liver transplant is the fix and is good news,” said Kirk Hanson, executive director of the Markkula Center for Applied Ethics at Santa Clara University. “Some would argue the liver transplant is bad news and ought to be disclosed to shareholders. It’s a close call and depends a lot on the specific medical details.”
Is anyone else struck by the irony of Mr. Hanson’s pronouncement? (Hint: where did SCU get the seed grant that created his center? And where did the donor get his wealth?).

USC on wireless industry growth

There’s a free Webinar tomorrow (10am PDT, 1700 GMT) on the growth of the wireless industry.

2008 was a good year--3.5 billion people paid over $700 billion for wireless services. In 2012, five billion people will shell out $850 billion.

Not bad scratch!

So let's dig a little deeper--what's behind those numbers? What can we expect from Femtocell technology, LTE, WiMAX, Smartphones (let's be more specific, iPhones), mobile social networking, etc.?

And how have these technologies enabled social protests in Iran?
The Webinar is by being presented by Steven Shepard and Morley Winograd of the USC Institute for Communication Technology Management.

I’d like to attend, but alas I’m in meetings at work all day Wednesday. Given the previous USC CTM workshops and seminars, the odds are good that it’s a worthwhile way to spend an hour.

Monday, June 22, 2009

iPhone 3.0 wows true believers

The iPhone 3.0 seems to be a success so far:

CUPERTINO, California—June 22, 2009—Apple® today announced that it has sold over one million iPhone™ 3GS models through Sunday, June 21, the third day after its launch. In addition, six million customers have downloaded the new iPhone 3.0 software in the first five days since its release.

“Customers are voting and the iPhone is winning,” said Steve Jobs, Apple’s CEO. “With over 50,000 applications available from Apple’s revolutionary App Store, iPhone momentum is stronger than ever.”
As the AP reported:
The iPhone 3G S went on sale Friday in the U.S. and seven other countries.

When Apple Inc. launched the previous model last year, it also sold one million units in the first three days, but that model launched simultaneously in 22 countries.

Piper Jaffray analyst Gene Munster had expected the Cupertino, Calif., company to sell half a million 3G S in the first three days.
AP makes it clear that Apple was very clever in organizing pre-orders from existing and new customers:
Apple did not break down where the million units were sold. Dallas-based AT&T Inc. is the iPhone's exclusive carrier in the United States and has said it sold hundreds of thousands of phones via pre-order.
Personally, I thought the most interesting 3.0 features were in the software and ecosystem, not requiring a hardware upgrade. Are these existing customers who really want a compass? Broke their screen? Are tired of slow performance? Or are they new customers who held off on buying an iPhone to wait for the new model?

I was not the only one who was pessimistic, as with this Barron’s report last week
June 18, 2009, 2:15 pm
Apple: 1st Weekend iPhone Sales Likely Below Last Time (Updated)
Posted by Eric Savitz

So will there be another frenzy? The first two times Apple (AAPL) started selling new iPhones - the original version and then the follow-up 3G version - Apple and AT&T (T) stores were jammed with customers eager to buy. Tomorrow is round three: the company debuts new models (and new price points) for the iPhone.

Pricing for qualified customers is $299 for the new 32 GB iPhone 3G S, $199 for the 16 GB version and $99 for the old 8 GB version. The really interesting question is whether the new low priced model will drive a jump in market share, as many analysts believe. And as I noted yesterday, there’s also some question about whether for many existing customers, the iPhone OS software upgrade that rolled out yesterday will be a big enough improvement that they will hold off on a hardware upgrade.

RBC Capital analyst Mike Abramsky expects the company to sell between 500,000 and 700,000 units in the first weekend, down from 1 million on the opening weekend for the iPhone 3G. He expects 18 million overall iPhone units in the September 2009 fiscal year, with 28 million in FY 2010, boosting the company’s global market share in handsets to 2.4%.

Piper Jaffray analyst Gene Munster sees opening weekend sales of 500,000, or half the number sold when the iPhone 3G launched, but well above the 270,000 sold in the first weekend for the original iPhone. He notes that the phones this time are launching in just 8 countries, compared with 21 last time. (The rest will catch up later in the summer.) Munster writes that he increasingly comfortable with his June quarter estimate that the company will sell 5 million units.
How many of those 5 million phones be the new discounted iPhone 3G rather than the updated 3G S? Given that the AT&T bill will run over $1900 over a two year period, I can’t see why anyone buying a new phone would try to cut $100 off the purchase price for a phone with half the memory and an inferior camera.

Finally, the Apple press release is interesting in that it includes a quote is from Steve Jobs, who has not made an official public appearance since going on leave five months ago and whose health has been the subject of considerable (and recent) speculation, including renewed discussions about Apple’s lack of transparency.

Saturday, June 20, 2009

Steve's hormone imbalance

From a Jan. 5 Apple press release containing an open letter from Steve Jobs:

As many of you know, I have been losing weight throughout 2008. The reason has been a mystery to me and my doctors. A few weeks ago, I decided that getting to the root cause of this and reversing it needed to become my #1 priority.

Fortunately, after further testing, my doctors think they have found the cause—a hormone imbalance that has been “robbing” me of the proteins my body needs to be healthy. Sophisticated blood tests have confirmed this diagnosis.

The remedy for this nutritional problem is relatively simple and straightforward, and I’ve already begun treatment. But, just like I didn’t lose this much weight and body mass in a week or a month, my doctors expect it will take me until late this Spring to regain it. I will continue as Apple’s CEO during my recovery.
From an exclusive story in Saturday’s Wall Street Journal:
Steve Jobs, who has been on medical leave from Apple Inc. since January to treat an undisclosed medical condition, received a liver transplant in Tennessee about two months ago. The chief executive has been recovering well and is expected to return to work on schedule later this month, though he may work part-time initially.

Mr. Jobs didn't respond to an email requesting comment. "Steve continues to look forward to returning at the end of June, and there's nothing further to say," said Apple spokeswoman Katie Cotton.

When he does return, Mr. Jobs may be encouraged by his physicians to initially "work part-time for a month or two," a person familiar with the thinking at Apple said. That may lead Tim Cook, Apple's chief operating officer, to take "a more encompassing role," this person said. The person added that Mr. Cook may be appointed to Apple's board in the not-too-distant future.
...

At least some Apple directors were aware of the CEO's surgery. As part of an agreement with Mr. Jobs in place before he went on leave, some board members have been briefed weekly on the CEO's condition by his physician.
From an earlier Bloomberg exclusive, January 16:
Apple’s Jobs Said to Be Considering Liver Transplant
By Connie Guglielmo, John Lauerman and Dina Bass

Jan. 16 (Bloomberg) -- Apple Inc. Chief Executive Officer Steve Jobs is considering a liver transplant as a result of complications after treatment for pancreatic cancer in 2004, according to people who are monitoring his illness.

Patients with Jobs’s condition can survive for 20 years or more from the time of their original cancer diagnosis, and the surgery often gives good results, said Steven Brower, professor and chairman of surgery at Mercer University School of Medicine in Savannah, Georgia. Brower hasn’t treated Jobs and doesn’t know details of his condition.

Jobs, who appeared increasingly thin and frail throughout 2008, hasn’t provided details about his condition. In a statement released Jan. 5, Jobs said he was suffering from a “hormone imbalance” and that the remedy for his weight loss was “relatively simple.” On Jan. 14, he announced that he was taking a five-month medical leave because his health issues were “more complex” than he originally thought.

In a telephone interview today, Jobs said he won’t comment further on his health.

“Why don’t you guys leave me alone -- why is this important?” Jobs said.

Apple spokesman Steve Dowling declined to comment. The company’s board members -- including Intuit Inc. Chairman Bill Campbell, former U.S. Vice President Al Gore and Google Inc. CEO Eric Schmidt -- either couldn’t be reached or declined to comment.

...
Surgery

Jobs said in 2004 that he underwent surgery to remove a neuroendocrine islet cell tumor, a rare, slow-growing type of cancer that affects as many as 3,000 people in the U.S. annually. These tumors are distinguished by their tendency to overproduce hormones such as insulin. Excess hormones can lead to low blood sugar, low blood pressure or other symptoms.

Neuroendocrine tumors that originate in the pancreas, as Jobs’s did, often spread to the liver. One option doctors have in these cases is to perform a liver transplant, Brower said.

“It’s one of the tumors for which transplantation can be considered,” said Brower, who is a member of the American Society of Clinical Oncology. “It’s rare, but it’s sometimes done.”

Jobs underwent extensive abdominal surgery when his tumor first appeared. He may have undergone a Whipple procedure, in which parts of his pancreas, small intestine, stomach and bile duct would have been removed, to try to rid his body of all cancerous tissue. The pancreas often ceases functioning after such surgery and needs to be removed.

Treatment Outcome

Brower said the transplant might work out well in a patient whose neuroendocrine cancer began in the pancreas, in part because this tumor type often spreads only to the liver and grows so slowly. Even after having had a Whipple procedure, a patient might expect to have good quality of life, he said.

“The outcome can be quite good,” he said. “With immunosuppressive drugs, the patient can expect to have a significant, durable life expectancy.”

Some liver transplant patients get part of an organ from a living donor. After the operation, the livers of the donor and recipient grow back to normal size.

A patient getting a liver transplant for a neuroendocrine tumor that has spread from the pancreas might get a partial organ, Brower said. Complete organs that come from cadavers are in short supply, and are generally reserved for patients with liver failure, cirrhosis or certain kinds of liver cancer, he said.
From USA Today, January 26, 2006:
Doctors have found ways to extend the lives of patients who have liver and pancreatic tumors, two of the most difficult cancers to treat.

At a meeting Friday in San Francisco of four leading medical societies, researchers noted that liver transplants can be lifesaving for some liver cancer patients.
...
Yet few patients — only 21% — are lucky enough to receive liver transplants ...

Liver transplants are rare partly because not enough organs are available. There were 6,169 liver transplants in the USA in 2004, according to the United Network for Organ Sharing. Nearly 2,000 people await transplants every year, says Robert Merion, a University of Michigan professor and transplant surgeon who was not part of the study.
...
Doctors from Germany also announced at the San Francisco meeting that certain drugs can help pancreatic patients live slightly longer. Pancreatic cancer afflicts 32,180 people a year and kills 31,800, the cancer society says.
From the University of Maryland Medical Center:
Transplant Center
Liver Transplant Program

Patients with end stage liver disease who have failed standard medical and surgical therapy can be considered for liver transplantation. Signs and symptoms of end stage liver disease include jaundice, ascites, edema, variceal bleeding, low platelet count, fatigue, severe itching and worsening mental confusion. A number of acute and chronic diseases of the liver can result in end stage liver disease. Appropriate patient selection is paramount to the overall success of liver transplantation.

Due to limited availability of donor livers, the procedure is contraindicated for patients who are unlikely to survive the procedure or receive long-term benefit. Patients are considered individually and their candidacy is assessed by a formal multidisciplinary evaluation process.
I’ve tried to give Apple and Jobs the benefit of the doubt, but it appears that Apple and/or Jobs released intentionally misleading information up through his January 14 announcement of a 5½ month medical leave.

Friday, June 19, 2009

Anti-social smartphones

Not only are students cheating more, but they are using the Internet and smartphones to do it. According to a survey of American teens by Common Sense media (reported by CNET and the LA Times, among others).

For example, one third of the students surf the web looking for an answer key, while 20% use the Internet to find answers while taking an exam. However, dishonesty is manifest both in behaviors and attitudes.

It appears that the amoral core of this lost generation is roughly 20-25%. That’s how many find it OK to share test answers with other students, such as by taking a picture of the exam or sending the answers via text message.

Alas, this is only the latest data point showing dishonesty is common among American teenagers, as with last year’s survey by the Josephson Institute.

While college instructors are not blameless, IMHO we are mostly at the receiving end of a 18-year period of shaping young adults: by the time they get to us, it’s too late. Somewhere along the way, parents and teachers have done a worse job than previous generation of imparting right and wrong, whether due to their declining morals, indifference, lack of time, or lack of support from other institutions.

Thursday, June 18, 2009

First, assume omniscient regulators

From an editorial Thursday by the WSJ

Hope vs. Financial Experience
Next time, we're told, the regulators will have 20-20 foresight.

The main idea behind the Obama Administration's new financial revamp is essentially this: With more power and a modest reshuffling of the bureaucratic furniture, the same regulators who missed the last credit mania will somehow prevent the next one. If nothing else, this concept is certainly true to President Obama's campaign theme of "hope."
...
For all of its systemic worry, the Treasury proposal doesn't really address the biggest cause of risky financial business: the fact that some institutions have become too big to fail. ...

The danger is that once the market understands these banks are too big to fail, the banks themselves and their lenders will begin to consider them to be like Fannie and Freddie. Their cost of funds would become cheaper than those of smaller competitors, and the incentive could be for more and more institutions to get bigger to rate the "systemic" brand of too big to fail.

This is the moral hazard that Paul Volcker mentioned in recent remarks that we excerpted Tuesday but that goes unaddressed in the Obama plan. ...

The larger question is why all of this regulatory reshuffling needs to be done so quickly, when we are still too close to the mania and panic to have truly absorbed their policy implications. The political class wants to rush through something to claim it has solved the problem, even if it means creating new and different problems later.
From a speech by former Federal Reserve chairman Paul Volcker on June 11:
Another important common concern is the "too big to fail" syndrome -- the presumption that an institution is so large or so inter-connected with counterparties that its creditors (possibly even shareholders) must be protected. One unfortunate consequence of the massive public assistance provided both banks and nonbanks in dealing with the present crisis is that moral hazard may, I am afraid, become more deeply embedded.
“Too big to fail” created a moral hazard that got us into this mess. Doesn’t anyone remember Fannie Mae?

Of course, if we had perfectly honest and perfectly prescient executives and regulators, we wouldn’t need institutions, controls and laws. The perfectibility of humans or human systems is (most recently) a socialist delusion not supported by any evidence from 300+ generations of recorded human history.

Quote without comment

Financial Times, June 7:

In the long run, the most important thing to come out of the Worldwide Developers Conference will probably not be the latest phones. It will be the revisions to iPhone software and the App Store, which aim to widen Apple’s lead.

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions.
OpenIT Strategies, June 9:
Apple has average hardware, superior ease of use on software, and a distribution and monetization system unmatched in North America or Europe.
Forbes, 9am PDT June 18:
The real breakthrough is what the phone's software will unlock for the developers creating third-party applications for the device. ...

Start with the App Store, which is now packed with more than 50,000 applications. Now add the ability for software developers to sell subscriptions that deliver premium content or additional levels for a game. "Basically when we look at the iPhone we don't see a mobile phone, we see a computing platform," says Shervin Pishevar, chief executive of Social Gaming Network (SGN).

Wednesday, June 17, 2009

Interpreting the MySpace layoffs

Tuesday, Fox subsidiary MySpace announced it was laying off 420 of its 1,420 employees. It’s hard to tell from outside what this means, and it’s in fact likely that today even the most knowledgeable insiders can’t say for sure what the future brings.

Here are four possible explanations.

1. MySpace was fat, dumb and happy. This sentence appeared in dozens of news accounts:

“Simply put, our staffing levels were bloated and hindered our ability to be an efficient and nimble team-oriented company,” MySpace CEO Owen Van Natta said in a statement.
Van Natta was only hired in April and previously was a top exec at Facebook. Perhaps Van Natta was right: late last year, the larger Facebook had an estimated 700 employees (according to Reuters via Wikipedia).

2. Fox has botched the acquisition. MySpace was once dominant, but being a subsidiary of big old media has not helped MySpace cope with increasing competition from its Web 2.0 rivals (especially Facebook). Fox Interactive Media (the division created four years ago to manage all the parent company’s new media efforts) is also in trouble and facing its own layoffs.

3. MySpace is in trouble. Its subscriber base is flat, while Facebook has been rapidly growing. Facebook took #1 worldwide last year, and passed MySpace in the US last month. Meanwhile, Twitter is also gaining on MySpace.

Network effects business rewards those who get ahead, and right now it’s hard to see how MySpace will dislodge Facebook. Is it consigned to be a permanent #2 (or even 2nd tier) ala Yahoo or HP workstations or Sony Ericsson or Motorola cell phones

On the other hand, MySpace could find a nice way to segment its audience to meet needs not being met by Facebook. The latter has found some clever ways to apply its technology, and so far LinkedIn has a distinct (even if overlapping) value proposition with Facebook. Apple has found its niche PC business to be a profitable one, and has used it to support its market leading music distribution system. (MySpace is the only one of the big 3 with a full-fledged media company behind it).

4. It’s symptomatic of broader Web 2.0 problems. A chronic problem for Web 2.0 companies (like many Web 1.0 companies) has been winning users but not revenues. MySpace was among a list of 11 Web 2.0 companies that CNET last year predicted were facing trouble. (The forecast troubles also included Twitter but not Facebook).

My crystal ball doesn’t say whether MySpace can turn it around, or whether these troubles extend to Facebook and Twitter. Right now, I feel like the Web 1.0 skeptics did in 1999: which would have caused me to reject spectacular failures like Webvan and Pets.com, but also (apparently) lasting companies like Google and Amazon.

Tuesday, June 16, 2009

Pyrrhic victory

Although Sony won the Blu-ray standards war, the FT reports that it’s failing to help the bottom line:

Hollywood's expensive bet on Blu-ray technology has failed to prevent a sharp decline in home entertainment sales, dealing a blow to the film industry as it grapples with the global economic downturn.

Home entertainment revenues across the industry fell more than $2.6bn in 2008 as sales of standard DVDs tumbled, according to a new report from Screen Digest, a research company.
There are a variety of explanations for falling DVD sales. Some say piracy, some say rentals, some say downloads. I personally think the issue is the declining marginal utility of additional DVDs: in 1998 it was novel to own a random-access (semi) durable movie, but eventually everyone had video pacifiers for their kids and more movies than they ever watch.

Meanwhile, the lack of demand for Blu-ray has been noted for some time. Again, I wonder whether the marginal value of the increased quality (and slight manufacturing cost increase) justifies the 50% price premium.

Whatever the reason behind declining DVD sales or the failure of the next generation to catch on, this is a reminder that it’s impossible to accurately estimate a priori the value of winning a standards war. The Blu-ray circumstances may be unique, but as David Wood reminds us, it’s hard to predict the future.

Sunday, June 14, 2009

Strangest story of the week

From an Italian Ministry of Finance press release, June 4:

Duecentoquarantanove bond della Federal Reserve statunitense, del valore nominale di 500 mln di dollari ciascuno, piu' 10 bond Kennedy da 1 mld di dollari ciascuno, occultati nel doppio fondo di una valigia, per un totale di ben 134 mld di dollari, pari a oltre 96 mld di euro.

E' quanto hanno sequestrato alla stazione ferroviaria internazionale di Chiasso, al confine tra Svizzera e Italia, funzionari della Sezione Operativa Territoriale di Chiasso, in collaborazione con i militari della Guardia di Finanza del Gruppo di Ponte Chiasso, nel corso dei controlli volti al contrasto del traffico illecito di capitali.
Or, as translated (with some human help) by Google translate:
249 bonds of the US Federal Reserve, the nominal value of 500 mln dollars each, plus' 10 bond Kennedy 1 billion dollars each, hidden in the double bottom of a suitcase, for a total of 134 billion dollars, equivalent to over 96 billion euros.

And 'what they have seized the international railway station of Chiasso, the border between Switzerland and Italy, officials of the Chamber of Chiasso Operativa Territoriale, in collaboration with the soldiers of the Guardia di Finanza Group Ponte Chiasso, at the controls to counter illicit trade in capital.

The values were owned by two Japanese fifties fell to Chiasso train station by a train coming from that at the time of customs control, have claimed they have nothing to declare.
Building on a (very flowery) report by the Italian newspaper Il Gironale, the Japanese news service Kyodo reported:
Two Japanese nationals were detained by Italian financial police last week after trying to enter Switzerland with $134 billion worth of undeclared U.S. bonds, mostly Treasury bonds, an Italian daily said Wednesday. The Japanese consulate general in Milan confirmed that the detention had taken place and said it was trying to confirm with Italian authorities whether the two were indeed Japanese nationals and their identities.

According to the report in il Giornale, two unidentified Japanese in their 50s concealed the bonds, including 249 U.S. Treasury bonds each worth $500 million, in a suitcase with a false bottom that was searched by the Italian authorities June 3 when they were in Chiasso, at the border with Switzerland, about 50 kilometers north of Milan.
Bloomberg helpfully notes that $134 billion in bearer bonds is more than the US debt held by the U.K. Presumably Her Majesty’s treasury does not transport its Treasuries to unnumbered Swiss bank accounts in false-bottomed suitcases.

Several reports have helpfully speculated that the bonds are more likely counterfeit than genuine. Obviously something’s not quite right.

Saturday, June 13, 2009

Passages

At Open IT Strategies, we introduce a new section: “Passages.”

NTSC. (1953-June 11, 2009). Sometimes referred to as “Never Twice the Same Color,” this analog encoding system for broadcast television was the standard for the United States and key export markets for more than a century. Cause of death: DTV transition; complicit in its death: Congress, FCC, National Association of Broadcasters and many others. Survived by ATSC.

Record Store Chain. (1960-2009). The chain has been on life support since 2006, with the death of Tower Records. The last surviving record store chain, Virgin Megastore, is expected to breath its last breath on June 14 with the closure of its remaining NYC and LA stores. Cause of death: starved to death with the death of the CD at the hands of Napster, iTunes Store and Amazon.

Semi-private, semi-open name spaces

I had dinner with a friend Thursday night, who remarked back in 1993 some of his friends working on the Internet suggested that he should reserve a domain name. Sex.com, movies.com, McDonalds.com — all would have been potentially valuable.

Since that time, the first-come-first-served name space of the Internet has meant an Oklahoma-style land rush, without the (minimal) process fairness and limits of the Sooner era. Now cybersquatters have all the good unused .coms, forcing really odd company name choices, and every so often causing an Internet snake-oil salesman to claim a new top level domain (.info, .mobi, etc.) will be the sure path to riches for those who pay top dollar in the latest land rush.

However, there’s entirely distinct name space — or actually dozens of them — which are nearly as valuable as the .coms. The first such name space was the email address — originally AOL and then MSN, Yahoo and gmail. The real cognoscenti can be identified by a common first name, as my friend has with his pacbell.net account (back when there was a Pac Bell, before it became part of SBC-that-pretends-to-be-AT&T).

Movies have long since given up on getting the relevant domain name, so the Pixar hit Up is pixar.com/featurefilms/up (or disney.go.com/disneypictures/up while the Eddie Murphy vehicle Imagine That is www.imaginethatmovie.com. The regular domain names for these two movies are respectively a railroad and an advertising company.

The problem is a flat name space across all geographies and industries. In trademark law, it’s quite OK to have a Delta airlines and a Delta faucet and Delta insurance company. There could also be a Chin’s or Mario’s restaurant in every town in the country, but only one gets the simple .com URL.

Private name spaces seem like they are both more open and less open than others. More open in that new name spaces can be created, allowing new entry; if I didn’t get a good gmail address, maybe I can get a good ymail address. Less open in that there are no process fairness rules for assigning names, which means that anything goes. (Presumably relatively reputable companies will be relatively fair, but as in the rest of life there are no guarantees.)

The namespace that has interested me recently has been Web 2.0. As with the email case, a private entity (rather than the nominally fair ICANN and its registrars) has sole right to say who gets the name space. On the one hand, their procedures discourage squatting (I won’t say prevent since I have 6 gmail accounts, not counting the one I got for each family member). So this summer’s X-Men prequel has the MySpace-assigned URL myspace.com/X-MenOrigins.

On the other hand, the private namespace owner could choose any allocation system it wants — most notably, auction to the highest bidder. Of course, if it’s MySpace’s namespace, it can do what it wants. It would be more expensive to get JackSmith, while FIFO is more like a lottery ticket. Alternately, as with today’s cybersquatter domain system, FIFO owners of lottery tickets could resell their choice names (as has happened with MySpace names).

Saturday at 12:01am (EDT) marked the beginning of the Facebook namespace land rush. Of some 200 million members, only 0.1% reserved names in the first few minutes. (Some elite insiders and friends were able to pre-reserve their names). I got my preferred name for Facebook (as with LinkedIn but not aol, gmail or yahoo).

I don’t know that the new names are going to change how people use Facebook. LinkedIn has had this for years but I still find business associates mainly by searching. I could see posting LinkedIn on a business card — or MySpace on a movie ad — but Facebook seems like more something that you either find by searching or email to a friend. I guess — as with email addresses — unique custom names signal innovators (or early adopters) as distinct from members of the late majority.

Friday, June 12, 2009

Feeding Tweety

I have the TwitterFeed working, and now the number of people following my Twitter feed has quadrupled (up into double digits). I’m guessing this is something that’s convenient for hardcore Twitter users.

Apparently I’m not alone, since one estimate put Twitterfeed at 9.2% of Twitter traffic, the highest of all 3rd party Twitter tools.

Interesting, Silicon Alley Insider (later copied by PaidContent and Reuters) reported Wednesday that reported that a majority stake in the venture had been sold to Betaworks (a Twitter investor) and also TAG. Betaworks has been aggressively investing in Web 2.0 startups.

One of the Betaworks investments was Bitly, which reportedly had a $7 market cap a few months ago. If that’s true, I would think Tweeterfeed is worth even more, because it has a strong market lead, while bitly is a distant 2nd (to TinyURL) in a badly fragmented market segment. (Of course, as in the Web 1.0 era, pre-revenue valuations are of dubious accuracy).

The TwitterFeed website asks for donations, which is not really consistent with a multi-million dollar seed round investment. In response to my email inquiry, founder Mario Menti wrote:

so far I used the donations to keep twitterfeed running, since it was a side-project of mine (it was never a charity as such, just not funded by anyone other than myself and whatever donations I could get).
He says the newly funded site will get a new design, new launch (and presumably as reported new back-office infrastructure), and the donation button will disappear.

Presumably the investors will also want a new business model. There are questions about the role of URL shorteners as an intermediary for web traffic, but it’s clear that many key services (today Digg, presumably someday MS, Google and Yahoo) will provide shortening services for their own content. The technology of TwitterFeed seems easier to imitate, but it would take more than a slightly better mousetrap to steal its apparently loyal customers.

Thursday, June 11, 2009

Next century not so promising

Today marks the second century of broadcasting, which promises to be far less auspicious than the first.

On Thursday, radio station KCBS will be broadcasting from the San José building where it predecessor began exactly 100 years ago.

Most (even Wikipedia) report Charles “Doc” Herrold as launching his first radio broadcast on June 11, 1909, and credit him as launching the first regularly scheduled radio broadcast a few years later. He had a radio station before the government license radio stations: he later got a license for KQW, which was bought by the (now news radio) station KCBS (later moved from San José to San Francisco).

As a publicity stunt, KCBS will be broadcasting from downtown SJ, then Herrold’s “College of Wireless Engineering” and now Fairmont plaza (covered by the SF press club and the Radio Business Report). Among those inspired by Herrold include Fred Terman (the man who grew Stanford’s college of engineering and cemented its relationship with Silicon Valley) and Herbert Hoover (who founded a thinktank at Stanford).

Unfortunately for KCBS, radio is dying off. Music is competing with iPods, and will die before news or talk. (Abolishing the “Fairness Doctrine” 20 years ago gave talk radio a new lease on life 20 years ago, so it might outlive news).

The problem is that the idea of broadcasting — and the mass media in general — was a concept of limited bandwidth rather than customer demand. Due to limited radio spectrum and startup costs, a city might have 5 radio stations or 3 TV stations, so everyone got the same content at the same time from these stations. Broadcasting was also enabled by (and enabled) nationwide distribution, providing a channel for a national broadcaster or network, whether Paul Harvey or Edward R. Murrow.

But since the Betamax, DVD sales and the Internet, it’s clear that broadcasting is a second choice for most media consumers. People get news when they want it from a website, music from a music site and talk from a podcast. Internet connections are not commonplace in cars, but they will get there soon (whether directly or via handheld cellphones).

So the first century of broadcasting included its high water mark, whether it was World War II (for radio) or the space race (for TV). It’s a record it will be unable to match in its second century.

Wednesday, June 10, 2009

Tweet tweet

During my visit last week to UOI 2009, I met with many readers of my Open Innovation blog. One of those was Alexander Schroll, an Austrian PhD student studying open innovation.

Schroll has recently shifted his emphasis from blogging to tweeting, the latter via an automatic keyword search on Twitter. For me, as a former journalist, I see myself continuing as writing articles. I’d rather write a few articles that are snapshots of history rather than share my own shallow 140-character insights. (It’s probably a generational thing — it makes me old school).

I asked Schroll if there was some way to automatically link my blog to twitter, and he recommended TwitterFeed. He noted that my friend and co-author Karim Lakhani (a user innovation and open source researcher) is actively tweeting.

I’ve set up a TwitterFeed for this and my other blogs to post to my twitter account (apparently available via RSS). While I’ll continue to read news via RSS, we’ll see if this provides useful information to regular Twitter adherents.

Tuesday, June 9, 2009

iPhone 2.5, App Store 2.0

Monday brought the announcement (sans Steve Jobs) of the curiously named “iPhone 3G S.” I guess the name is intended to suggest this is merely an incremental improvement on the iPhone 3G (which remains in the product family); if not, it’s an example of the foolishness of Apple’s rabidly minimalist naming strategy as when “iPod” could mean “iPod 5th Generation late 2006” or “iPod (dock connector)” or “iPod (scroll wheel)”.

The phone adds a number of features available in some (if not all) competing phones: video recording, a compass, and (eventually) MMS support. The camera goes from 2.0mp to 3.0mp, Faster performance and supposedly better battery life. Even with voice command and supposedly 2x better performance, it still seems like a slightly enhanced iPhone 3G, not the radical leap ahead of rivals that the 1.0 iPhone brought back in 2007.

Of course, one of the problems that Apple has that it has two models — this year’s and last year’s, both mid-market smartphones — rather than a range of products like RIM or Nokia. Take, for example, the camera. The iPhone camera goes from 2.0mp to 3.0mp — roughly equivalent to a Blackberry Curve (but without the zoom). but camera on the high-end Nokia N97 is 5.0mp, as is the more affordable Nokia 6220. (Samsung is pushing the envelope even further).

The big news is the enhancement to the business model. The FT captured what is likely to be Apple’s main push this year, with the next iteration of the App Store:

A big innovation is that the store will start allowing developers to collect money not just when a user buys and downloads an application, but through follow-on transactions or subscriptions. Apple is likely to show off some of the most compelling repeat-purchase offerings at the conference.

The change dramatically increases the potential pay day for developers, provides Apple with an additional revenue stream from the percentage it takes on app sales, and gives users more choice – and more reasons to stick with the iPhone instead of switching to the me-too hardware reaching the marketplace.

Some of the biggest beneficiaries among developers, at least at first, will be game publishers. Six-year-old Gameloft already has dozens of titles for the iPhone and iPod touch, including Asphalt 4, a racing game that allows players to use the device as a steering wheel.

In Asphalt 5, players would be able to pay more for extra cars and different tracks, and suggest their friends do the same, said Michel Guillemot, Gameloft chief executive.
In other words, Apple has average hardware, superior ease of use on software, and a distribution and monetization system unmatched in North America or Europe. (Of course, NTT DoCoMo had a comparable monetization system with i-mode almost a decade ago). The question is whether these advantages will be enough to hold off the proliferation of models by Android and other competitors.

Monday, June 8, 2009

Steve Jobs' return

Speculation (fueled by the WSJ) is that Steve Jobs will return today, and that he’ll announce the iPhone 3.0. All Apple will say is that marketing SVP Phil Schiller is doing the keynote at this week’s WWDC, and that Jobs will be back at the end of the month.

The WSJ article includes a health update:

While Mr. Jobs has been on sick leave, some Apple directors have gotten weekly updates about his medical condition from the CEO's physician, according to a person familiar with the matter. Mr. Jobs's recovery "is coming along" and he is on schedule to return to work later this month, said this person, who has seen Mr. Jobs in recent weeks.

"He was one real sick guy,'' added this person. "Fundamentally he was starving to death over a nine-month period. He couldn't digest protein. [But] he took corrective action.''

Mr. Jobs occasionally has come into Apple's headquarters since his leave began, said a person who has seen him there.
We don’t know if this is the last health scare he’ll have during his career, but it’s great to hear that Steve Jobs the father and husband has come back to health.

As I’ve said before, I hope Jobs does not return as CEO. The company has learned to operate without Steve, as has the investor community. There will need to be a succession to Steve someday, and this is the natural time to do so. Also, Steve has created three great businesses for Apple (Apple II, the Mac and the iPhone) and a hit machine at Pixar; what’s left to prove?

Steve could stay on as a non-executive chairman for a year or a decade. He could still be involved in new product decisions and the occasional rollout. He could even be part of an office of the CEO, with a special responsibility for new product strategies.

The problem with Steve stepping down — now or later — is that no one at Apple (or almost anywhere else) matches Steve Jobs for charisma. For 30 years, Jobs has been making people not only believe, but want to believe. The Apple products have been good the past decade, but Steve made them even more exciting.

Since a charisma transplant is not possible, and the Apple ranks do not suggest a logical replacement, I don’t know what will happen next. Before Jobs returned to Apple, the company suffered when lead by two charisma-deprived CEOs (Spindler, Amelio) who were clearly not up to the task. Neither Schiller nor COO Tim Cook will ever fill Jobs’ shoes as company spokesman.

If Jobs does reduce his role, the company must also start grooming a successor for Cook. The two men have been the heart of the company for a decade, and with Jobs stepping back, the company is even more dependent on his continuing performance and health. As Jobs’ bouts with pancreatic cancer remind us, no one knows how long he’ll be on this earth, so companies must plan for the unthinkable (sudden death) or inevitable (age and retirement).

Sunday, June 7, 2009

DTV is coming: this time we mean it!

On the 2nd day of this year, I wrote:

One prediction I will stand by: digital TV is coming, and analog TV will be gone by mid-February.
As it turns out, I was wrong because I underestimated the spinelessness of our political “leaders.” In January, Congress made a big show of postponing the DTV transition by 4 months so the poor and oppressed masses would not be deprived of their over the air TV.

Well, guess what? Next Friday is the last day for NTSC broadcasts anywhere, and some people aren’t ready. As a car-carrying ally of the scaremongers, the NYT tried Saturday to sound the alarm:
Millions of households will lose television reception next week when about 1,000 broadcasters around the nation shut off their analog signals and complete their conversion to digital programming, federal officials say.

The government has spent more than $2 billion to ease the transition to digital television, and in the last few months has cut in half the number of households that are unprepared for the final conversion on June 12. But the latest survey by the Nielsen Company indicates that as of the end of May, more than 10 percent of the 114 million households that have television sets are either completely or partly unprepared.

Michael J. Copps, the acting head of the Federal Communications Commission, said that the people most likely to lose reception are society’s most vulnerable — lower-income families, the elderly, the handicapped and homes where little or no English is spoken. The transition will also hit inner-city and rural areas hardest, he said.
Horsepucky. It turns out there is really no story here:
More than three million homes that do not subscribe to cable or satellite services are totally unprepared for the transition and will lose their reception, according to Nielsen. Another nine million homes that subscribe to cable or satellite services but that have spare television sets — typically in bedrooms and kitchens — that are not connected to any service are also expected to lose reception. The conversion does not affect cable or satellite distribution.
So some people have old TVs that aren’t worth upgrading and they won’t be using them come Saturday morning. (I have two). So what? A converter box cost $40 and a new TV (better than the 15 year old junker) costs $150 from Costco, Wal-Mart or Amazon. And most people (particularly the less technically savvy) are better off getting a new TV rather than try to figure out how to get mediocre results with a complex converter box setup. (If Congress were serious about conversion, they would have means-tested the coupons and used the savings to allow the disadvantaged folks to use their coupon towards a new TV.)

The real number — the one used to justify the delay and extra spending and press releases and squatting on other people’s (expensive) spectrum — is 2.6%. That’s a tiny number. Economists figure 5% unemployment is as close as the economy can get to zero unemployment, and the fraction of people temporarily without TV is half that.

The FCC knows better. Every few years it splits area codes, and people ignore the split until the recording comes up “this number is no longer in service.” Then they go find the new area code.

The idea that the number could be pushed closed to 0% is a typical delusion of statists who believe in the (illusory) magic of a centrally planned economy. It’s not possible to plan this number down to zero. A transition involving 114 million households has to be done by decentralized actors working in their own self-interest, not in response to some centralized mandate. And some of these people aren’t going to deal with it until they have no choice. It is (or at least was) a free country.

So despite the delay, some homes will have dark screens Saturday — because there were always going to be some homes with dark screens. These same people will solve the problem within a few weeks of when they are forced to, just as they would have solved them if the transition occurred 4 months ago. So by the time NFL and the fall network shows start, this transitory inconvenience will just be a bad memory.

Saturday, June 6, 2009

Oh oh it's Magic!

Leaving Hamburg after 4 days at the User and Open Innovation 2009 conference.

Here in Hamburg, I saw no sign of the iPhone (except in the hands of my well-educated professor friends). In fact, the only mobile device I saw promoted was the HTC Magic, aka the G2. Of course, Vodafone needs the G2 to counteract the Deutsche Telekom iPhone 2.0, and presumably DT (T-Mobile) will be promoting the iPhone 3.0 when it ships later this summer.

Still, there were more ads for the G2 than I recall for the G1 when it launched in the US. (In fact, I don’t recall seeing TV for print media ads for the T-Mobile USA G1 until it was getting stale — perhaps because the free Android publicity was enough to carry it the first few months.)

In the HVV subway system, there were both posters and a poster-sized video board extolling the G2’s praises on Vodafone’s dime. The ads were clearly branded as Vodafone, with its garish red (not to be confused with the orange of Orange).
Still, from the big print on the displays, I really only learned three things about the device. First, it has a big color screen. (Big compared to what? I dunno, but it was nearly 1 meter high).

The second thing was that it’s “Ab 1,€”. It doesn’t take my high school German to know that means “from $1.40”. The fine print on the paper poster notes the requirement of a 24 month contract with some sort of minimum subscription plan. The fine print also said the phone is exclusive to Vodafone until July 31.

The final point — more prominent in the video ad than the paper one — was that the phone is “mit Google”. All of the screenshots in the video have the Google G search bar—with “Google-suche” as the search text in case that’s too subtle. Two frames say “Das neue HTC Magic mit Google™.” One of these shows the back side of the phone “with Google” imprinted next to the camera lens.

As others have reported, the Google branded phone is only available on Android handsets that have the Google applications (such as search and mail) pre-installed as the default choice. It’s not quite the same as Microsoft’s bundling of Internet Explorer and Windows Media that brought antitrust lawsuits in the 1990s — but the principle is the same.

Of course, Android doesn’t have 90+% market share of Windows. Also, its lawyers noted that mollifying competition authorities merely required distributing the OS without the bundled applications. Still, I find it interesting that Europe’s largest mobile phone carrier found it necessary to promote/leverage the Google brand to sell a handset.Note to overseas readers: title is reference to a hit song by the Electric Light Orchestra.

Friday, June 5, 2009

Free to choose: free riding inherent with free software

Blogging is mainly suspended this week as part of my full-time efforts to cover the User and Open Innovation Workshop 2009 in Hamburg.

Bill Snyder of InfoWorld had a provocative article earlier this week about free riders in open source projects. Here is how it began:

"Leeches" -- that's how Dave Rosenberg, co-founder and former CEO of MuleSource, and now part of the founding team of RiverMuse, refers to companies that use open source technology but don't give back to the open source community. Companies like Cisco's Linksys subsidiary, whose routers rely on Linux. Companies like Amazon.com, whose Elastic Cloud Computing (EC2) service depends on Eclipse Foundation's open source offerings.

Your ear doesn't have to be pressed to the ground for long to hear angry grumblings in the open source community about leeches, vampires, or freeloaders.

"The future of Eclipse is in danger," Michael Scharf, a member of the Eclipse Foundation's architecture council, said in an angry April blog post. "The problem is that there is no real pressure for companies to contribute back to the community and it is easy to use the Eclipse 'for free' for their own products. The Eclipse community should create peer pressure to prevent the freeloaders and parasites from getting away without punishment," he wrote.

Scharf likens the lack of contributions back to the community to the "tragedy of the commons," in which greedy individuals unthinkingly destroy a shared resource. And in an e-mail exchange, he put it this way: "The general mentality of the industry frustrates me; the attitude to take advantage of something like open source and not give back anything to the system."
It’s a silly notion. The Open Source Definition explicitly says everyone can use code for any reason — that what makes it open source. There is no responsibility to contribute changes or otherwise participate in its development.

I’ve been studying open source since 2000 and a few years ago co-authored a paper looking at movement ideology and its role on adoption of the Linux platform. From my own experience, I would disagree slightly with one point
It's not surprising that the discussion has become so polarized. There's long been a tension within the open source community between those who have seen it as a movement and those who believe it is a business.
If there was an ideological movement, it was really the Free Software movement — a desire to create code that’s perpetually available to hackers without corporate control.

The Open Source gang explicitly disclaimed ideology, positioning and organizing themselves to be more friendly to businesses creating and adopting open source. (There is some blurring of the two, since the GPL/LGPL of Linux is blurred by the more open source ethos of Linus Torvalds and the IBM/Intel/HP corporate support for Linux). My new friend Benjamin Mako Hill (a FSF board member) here at UOI 2009 points out that the Open Source types claim that open source is inherently better, whereas the fearless leader of the Free Software movement makes no such claim.

So open source is about making great code and giving it away free (free as in beer). It’s stupid to get upset about people using it for free, particularly free-riding is an inherently invariant human trait.

And the tragedy of the commons metaphor is inaccurate. Here in Hamburg, we have the end of the North Sea fisheries: that’s a real “tragedy of the commons.” Software is a non-rivalrous good, which means the good is no less valuable if 3 billion people use it than if 300 do so. (Don’t try that with a herring fishery).

The problem (other than the egos of a few F/OSS contributors) is never how many people use without contributing, but merely how many do. If a core development team of 20 people is adequate for 5,000 users, why is it inadequate for 5 million? Yes, if the 5 million are submitting bugs, that’s a lot of work to keep up, but if users are “not contributing” that would include not contributing bugs (since bugs are considered a contribution in the F/OSS world.)

The problem is also naturally self-correcting. If the team is understaffed, then users will get unhappy and complain or possibly switch. The firms that make money deploying OSS have to keep the bug fixes and improvements coming or their business will dry up — so that encourages them to step up and get involved.

If anything, the complaints about "leeches” is an effort by OS (or F/OSS) activists to de-legitimate their own movement. If the development and maintenance of the code depends on the passion and volunteer efforts of activists (who will inevitably burn out), then a given project or movement is not sustainable and viable over the long haul. If the technology is economically valuable, there will have to be people whose primary responsibilities (i.e. their job) including keeping the code vibrant and up to date.

Open source projects run by grown ups will focus on attracting new contributors. Whining may be the last gasp of projects about to burn out because they don’t have a sustainable inner core of contributors to keep the project going.