Mereja

Author: Stacey Higginbotham

  • Federal Court Questions FCC’s Ability to Regulate Broadband

    Updated: A three-member panel of the U.S. Court of Appeals for the District of Columbia today ruled that the Federal Communications Commission didn’t have the authority to censure Comcast for throttling peer-to-peer packets, and also called into question the agency’s ability to regulate broadband as a service. The move not only undercuts the FCC’s Comcast decision, but is a huge blow to the agency’s efforts to regulate network neutrality.

    However, for those worried that the FCC’s loss means Comcast will start throttling again, a spokeswoman says the cable provider plans to keep its existing network management plan, which slows speeds for heavy users only during times of congestion. The FCC has not yet responded to my request for comment, and notably could appeal this decision to the entire court of appeals or even to the U.S. Supreme Court. Update: The FCC issued its comment saying that while the court closed one door to net neutrality, the FCC won’t drop the issue and its broadband policies. However the agency said, “It will rest these policies — all of which will be designed to foster innovation and investment while protecting and empowering consumers — on a solid legal foundation.”

    Comcast filed its appeal of the original FCC ruling in August, calling into question the FCC’s ability to force it to follow the so-called “broadband principals” that governed net neutrality at the time without ever having established a rulemaking proceeding for them. It also called into question the FCC’s ability to regulate broadband under a broader clause in the 1934 law that resulted in the agency’s creation. A month later, the FCC formally began a rulemaking process for net neutrality (the final round of comments on the issue are due this week), and it of course argued that it did have the ability to regulate broadband.

    However, this ruling could mean that the FCC’s efforts on net neutrality and perhaps other broadband regulations such as privacy efforts or Universal Service Fund reform will need more Congressional help. If it can’t regulate broadband under its original authority, then Congress would have to act to give it that authority. For a history of the issue, check out Susan Crawford’s post on the topic. It boils down to the difference between providing transport or an information service. Back in the day the FCC said the phone companies were clearly transport companies, while the cable providers were information services.

    That decision is now coming back to haunt the agency — and may, in the process, haunt all those companies in favor of net neutrality. After all, there are plenty of members of Congress who aren’t too excited about net neutrality.

    Related content from GigaOM Pro (sub req’d):

    The New Net-Neutrality Debate: What’s the Best Way to Discriminate?

  • The iPad’s Not So Revolutionary Inside

    The inner workings of the iPad reveal that Apple has learned much from its iPhone development, using many of the same components and cramming those chips onto a pretty small board behind the device’s 9.7-inch screen. Today, I managed to snag a few minutes with David Carey, VP of technical intelligence at UBM TechInsights, to talk about his experience tearing down the iPad.

    He said that so far, the only big surprise was the new processor inside, but he couldn’t yet tell me if it was a new CPU using engineering that Apple acquired via its PA Semi acquisition or a a souped-up ARM Cortex A-8 processor. But he did point out some interesting design choices that Apple has made with its machining, and showed off all the insides. Enjoy.

  • Weekend Box Office: iPad vs. the iPhone 3G

    Whether you like or hate it, it is hard not to be astonished by a Hollywood-blockbuster style opening day enjoyed by the iPad. Apple just announced that it sold 300,000 of these devices. At a base price of $499 (for the 16 GB model), that makes it about $150 million on day one.

    Add to the fact that Apple says nearly a million apps and 250,000 eBooks were downloaded — we are looking a nice little chunk of change here. Some analysts estimated that Apple would  sell more than 600,000  iPads over the weekend. Clearly that didn’t happen. From the Apple release:

    Apple today announced that it sold over 300,000 iPads in the US as of midnight Saturday, April 3. These sales included deliveries of pre-ordered iPads to customers, deliveries to channel partners and sales at Apple Retail Stores. Apple also announced that iPad users downloaded over one million apps from Apple’s App Store and over 250,000 ebooks from its iBookstore during the first day. “It feels great to have the iPad launched into the world — it’s going to be a game changer,” said Steve Jobs, Apple’s CEO. “iPad users, on average, downloaded more than three apps and close to one book within hours of unpacking their new iPad.” (Apple Press Release).

    In comparison, Apple sold just over 250,000 units during the first weekend iPhone became available in July 2007. In July 2008 when the 3G iPhone first launched, Apple sold 1 million of those phones over the weekend after its Friday launch, and folks downloaded 10 million apps from the four-day old app store. That’s an average of 10 apps per phone as compared with 3.3 apps for the iPad, although we have had fewer days of sales to measure the success of the iPad.

    However, the iPad is supposed to sell  7.1 million units worldwide in 2010 according to research firm iSuppli, whereas our GigaOM Pro analysts estimate that the conservative sales of the device will be around 6.1 million in 2010. (Forecast from GigaOM Pro: Tablet App Sales to Hit $8 Billion by 2015.)

  • Comcast’s Queen of Convergence Speaks

    Comcast is a quarter of the way into what I believe will be its year of embracing convergence. Recognizing just how much damage over-the-top video could do to its bottom line, the cable giant is adding content and services as part of a unified communications and entertainment package.

    Will customers continue to subscribe to such services as part of a bundle, or will they elect to buy access to the pipe only? I spoke with Cathy Avgiris, who was recently promoted to the role of Senior Vice President and General Manager of Communications and Data Services for Comcast and as such, is now responsible for the company’s Xfinity feature, as well as its digital voice, mobile and wireline broadband offerings. But after chatting with her on why the bundle will remain in a converged world and when Comcast might offer Wi-Fi to their users, I like to call her the Queen of Convergence.

    GigaOM: What is the value of the bundle in a converged world?

    Avgiris: We enable our customers to enjoy the services they have from Comcast on as many platforms as possible — it’s less about an individual product than the experience. They are able to watch some shows on a PC and we have a broadband suite of services such as security and online storage. You can see us extending that to, say, video content that you’ll want to store in the cloud and access from anywhere, with the phone holding that together.

    GigaOM: And landlines?

    Avgiris: As for landlines, they still matter. Eighty percent have a wired phone and I want to participate in that market share. At the end of 2009 we had 16 percent penetration, so there’s a lot of opportunity to offer phone services tied to our other products — so you get voice mail via email or caller ID on your TV. It’s less about competing as a traditional telephone provider and being the converged provider.

    GigaOM: What are the challenges for Comcast as services converge? Do cord-cutters frighten you?

    Avgiris: We have an amazing backbone infrastructure and the first application for why we needed a connected network was to offer broadband. Digital voice was step two, and over time you’ll see more video enabled over our IP network.

    GigaOM: True IPTV? When?

    Avgiris: We have 24 million customers on a platform that exists today and we will leverage and maintain it and continue to improve it. That evolution will happen over time, but that’s why we’re providing some video content online and enabling certain video functions like remote programming from the DVR.

    GigaOM: So is broadband a profit center, as I see when I look at your earnings? Or is it a commodity that can be traded out if the market were more competitive?

    Avgiris: There is an element that is access and provides access to other services and features and what you would expect from Comcast, but there is also the comprehensive suite that could protect your computer and offer storage and give access to your content. We want to offer extra value as a service provider and keep you as a customer.

    GigaOM: What about wireless? You guys are in a partnership with Clearwire  for 4G but customers also want Wi-Fi access outside the home. Is that something Comcast would offer? Is it competitive to selling Clear’s mobile broadband?

    Avgiris: Our mobility strategy has several legs: with the 4G in partnership with Clearwire, mobile applications, and then there’s Wi-Fi, which we’ve done a number of different things with, such as partner with Cablevision for Comcast Wi-Fi on trains in the Northeast. As for more Wi-Fi  hotspots, we’re testing that out and will see how it plays. With Wi-Fi and mobile 3G and 4G  the whole point is enabling the customers to take their experience inside the home outside the home. But for timing on Wi-Fi rollouts, we’ve no specific plans or announcements on hotspots. It’s really early for us and we’re focused on Wi-Fi in the home.

    Related GigaOM Pro content (subscription required):

    A Closer Look at Comcast’s NBC Universal Acquisition

  • Are Harbinger’s LTE Network Plans a Red Herring?

    A New York-based private equity firm’s plans to build out an open nationwide 4G wireless network may simply be a facade aimed at pumping up the value of the spectrum held by its portfolio companies, according to several satellite industry analysts. Harbinger Capital Partners unveiled its LTE network plans last Friday as part of its bid for FCC approval to take over satellite company, SkyTerra. But I, and others, have remained skeptical that the network will ever come to fruition.

    “I don’t think we’re going to see an LTE network built by Harbinger,” said John L. Stone, Jr., a director with Near Earth LLC, a boutique investment bank that has a specialty practice focused on satellites. Stone expects Harbinger’s moves with the FCC  to result in a sale of spectrum holdings rather than an open 4G network. However, as a condition of its takeover of SkyTerra, the FCC prohibited Harbinger from selling the spectrum to AT&T or Verizon or letting traffic from the nation’s two largest carriers comprise more than 25 percent of its traffic.

    Tim Farrar, an analyst at TMF Associates, has similar doubts, surmising in a report published today that Harbinger may in fact be pleased by the objections to the FCC conditions associated with its SkyTerra deal that AT&T has filed. Farrar writes:

    On the other hand, given that AT&T is challenging these conditions, it may conceivably be the case that Harbinger has given the FCC the rope to hang itself by: if the conditions are declared illegal, then it would presumably be much harder for the FCC to oppose a sale of the spectrum to AT&T (perhaps even before Harbinger launches commercial service). In the meantime, by declaring its intention to actually build the network, Harbinger has forced AT&T and Verizon to take ATC a lot more seriously than they have done in the last few years, and perhaps even to rethink whether they want to invest in ATC spectrum, something that the leading cellular operators have apparently dismissed on previous occasions.

    Harbinger has access to 53 MHz of spectrum and the total spectrum in the MSS band where it has investments adds up to 90 MHz. That’s a significant chunk of the 500 MHz the FCC plans to free up as part of its National Broadband Plan — and the spectrum would be available today if those pesky conditions were removed. If nothing else, the FCC order and Harbinger’s plans have suddenly made the big carriers take notice of the value those airwaves may have — something that Harbinger no doubt is happy about.

    Right now there are a lot of people throwing water on this deal, and few defending it on the record, which doesn’t inspire confidence. Perhaps Harbinger will release more information on its network partners, or the FCC will go on the record about how impossible it will be for Harbinger to flip its spectrum. Until then, I’m keeping my excitement in check.

  • Spansion’s Green Flash Memory Tech “Nearly Dead”: Report

    Virident, a green data center startup that launched in 2008 with a box that could cut down on server power consumption by up to 80 percent, has stopped using Spansion’s green Flash memory technology, dubbed EcoRAM, according to EETimes. An executive from Virident confirmed to the publication that it was no longer using the Spansion technology, but said it was still exploring solid-state drives as a solution for its boxes. Is this a blow to the EcoRAM technology or is it a message that the data center world isn’t ready for solid-state memory to provide DRAM in servers?

    In 2008, I covered Spansion’s technology, which aimed to replace Flash memory in the data center and saved power by not refreshing as often. At the time it was a huge opportunity for Spansion, as power consumption was beginning to gain attention as a key constraint in data centers. Power is still constraining what companies can do inside their data centers, but they’re also turning toward solutions such as containers, cloud computing and other options in order to avoid building entirely new data centers. Some are envisioning greener data centers rather than focusing on greener gear.

    For those interested in new energy-saving data center gear, it will be among the topics we’ll explore at out upcoming Green:Net conference on April 29. Meanwhile, we’ll have to wait and see if EcoRAM has a future once Spansion emerges from bankruptcy this year.

  • April Fools: We’re Not In Google Anymore

    Ready your skepticism, world. Today is April Fool’s Day and the web, Twitter and your Facebook pages will likely be littered with hijinks such as Google’s apparent name change to Topeka in honor of the Kansas city that changed its name to Google in a bid to win the Google Fiber service. The joke’s on us, though because it effectively puts Google’s experimental fiber network right back at the front of our minds for yet another day. So share the web’s best pranks with us today (I’m enjoying the image of Virgin Media’s fiber-fixing ferrets) and come back to see what’s happening in the comments. In the meantime, enjoy the following ones:

    • Johns Hopkins has apparently changed its name, losing the “s” since it was too hard to get people to use it. From a release announcing the faux change: ”We give up,” university President Ronald J. Daniel said. “We’re fighting a losing battle here. And we strongly suspect the extra ’s’ was a typo in the first place.”
    • Verizon decides to employ a crash test dummy as an executive.
    • Introducing the iCade! Turn your iPad into an 80s-style arcade game ! Offering the ability to turn your “otherwise useless iPad” into a “beautifully retro styled, handcrafted wooden tabletop arcade cabinet and MAME emulator.”

    And an innovative glass company has come up with a prescription windshield for race car drivers who need glasses, which I could totally use.

  • AT&T Asks FCC to Change Its Mind Over Harbinger

    Updated: AT&T today filed a petition with the Federal Communications Commission asking it to reconsider some of the conditions associated with an order the agency issued last Friday allowing Harbinger Capital Partners to take over a satellite company and its spectrum assets. The move means the drama in the nation’s capital as AT&T and Verizon  gear up to fight plans by the New York private equity firm to build a competing 4G wireless network has begun.

    Update: AT&T emailed to make sure our readers know that the carrier is not against Harbinger building out its network, despite my interpretation. The spokeswoman wrote, “We have no issue with and did not oppose the Harbinger/SkyTerra transaction. Furthermore, we have no objection to the wholesale wireless network that Harbinger has committed to build.”

    The FCC approval of Harbinger’s buy of Skyterra helps the private equity firm consolidate spectrum, and sets in motion the PE firm’s plans to build a wholesale wireless network that would cover 260 million people by the end of 2015. But as part of the approval, the FCC set conditions that prohibit Harbinger and Skyterra from allowing AT&T and Verizon to use the spectrum without its approval, and that traffic from the nation’s two largest carriers cannot comprise more than 25 percent of the total network traffic.

    The conditions were put in place to ensure a competitive wholesale network that any buyer could access, but for now, those conditions are galvanizing AT&T’s lobbying efforts into high gear. My question is, if AT&T and Verizon are upset over the conditions designed to keep them off this network and from acquiring this spectrum, how will they react if the FCC takes steps to try to remove the satellite requirement associated with the spectrum that Harbinger now owns?

    Skyterra, and now Harbinger, own spectrum in the MSS band. Thanks to a 2003 FCC decision, companies that own spectrum in that band have the ability to use that spectrum to build out a combined terrestrial and satellite network. The satellite requirement has kept most of the MSS spectrum owners from building out an actual competitive mobile broadband network, but Harbinger apparently thinks the time is right.

    Perhaps it’s because the National Broadband Plan, in the section on the MSS spectrum, hints that the FCC could take a new look at the satellite gating requirement that has held the development of a combined satellite and terrestrial network back since the original order. Tim Farrar, an MSS analyst, certainly thinks that’s the case, although if we think AT&T is mad now, just wait until the FCC attempts any kind of changes to that original 2003 order. I just don’t think this is going to end well for Harbinger — or for folks eager to see an open, competitive wireless network.

    Image courtesy of NASA.

  • Why Google & Verizon Won’t Be BFFs Forever

    Google and Verizon have teamed up once again, with its CEOs penning a jointly authored opinion piece in today’s Wall Street Journal that praises certain aspects of the National Broadband Plan. The article, from Ivan Seidenberg of Verizon and Google’s Eric Schmidt, manages to gloss over areas where the two firms differ, and instead highlights the fact that both favor the plan’s proposals for faster speeds, its emphasis on universal access, as well as its push to move broadband deeper into the health, education and energy management fields.

    This isn’t the first time Verizon and the search giant have worked together. They also joined forces to file joint comments on network neutrality (although they filed separately as well). I’ve long thought that it was more interesting to see where the two firms differ (much of their agreement on the net neutrality issue was superficial, especially when it came to wireless networks ), so why are they so visible teaming up?

    It’s partly because neither firm wants to get the FCC even more involved in regulating them — Google is worried about the agency attempting to police Internet applications and Verizon, about its focus on anything above transmission itself. This debate in itself is enough to drive both firms closer, but there are other theories about their budding relationship.

    I’ll start with the We-Both-Have-Fiber theory. This one is almost silly in my mind, because it views Verizon as a company focused on delivering fat pipes to all as a some sort of beneficent gesture, rather than a clear-eyed business decision to get ahead of the competition when it comes to broadband speeds, while making sure it doesn’t have to share its pipes with others. Verizon has in fact slowed its fiber expansion, and notably, has a history of dumping the lines that it doesn’t want.

    This theory also implies that Google is a fiber provider, when in reality all it’s planning to do is wire up 50,000-500,000 people — not to become an ISP, but to hopefully show the FCC what an open competitive broadband market looks like. If the FCC or municipalities try to emulate the Google experiment or learn enough from it to build out their own networks, Verizon isn’t going to be too thrilled.

    This leads me to the second popular theory — I call it The-Enemy-of-My-Enemy-Is-My-Friend theory — which views the Google-Verizon friendship as a counterbalance to that of AT&T-Apple. I think there’s something to this on both sides. For Google, the Apple universe is threatening because Apple is trying to vertically integrate the world of mobile computing from the device all the way up to the apps. Meanwhile, Google is trying for a more horizontally integrated world that looks like the PC universe, with various partners being able to pick and choose what they want.

    Verizon, having realized that it must open up some of its networks a bit and be less vertically integrated, will help push the vertically integrated model where it sees benefits to itself. Plus, since it doesn’t have a monopoly on the iPhone, with Google it has found an ally against AT&T, a rival on the wireless side and a foil on the wireline side whose slower DSL speeds can make Verizon’s FiOS business look good.

    Unlike the relationship between Eric Schmidt and Steve Jobs, which leads to paparazzi-style photos and coverage of the two meeting for coffee, the friendship between Schmidt and Verizon Wireless CEO Lowell McAdam is less remarked upon (although the Wall Street Journal took notice in December). However, while the two are friends in public and in the occasional FCC filing, the mutual interests of these two companies may be sorely tested when it comes time for the FCC to really dig into net neutrality, as well as when Congress and the FCC get into figuring out how to regulate the web.

    Related GigaOM Pro content (sub req’d):

    Google’s Mobile Strategy: Understanding the Nexus One

  • Yes, the Large Hadron Collider Matters

    CERN Scientists monitoring the LHC

    In the age-old quest for humankind to discover the secrets of the universe, humankind has progressed today as the Large Hadron Collider successfully smashed protons by zipping the subatomic particles around a 17-mile loop at speeds that were about 99 percent of the speed of light. The goal, nothing less than to figure out how the universe works and what holds it together. What does this have to do with broadband, cloud computing or wireless? Frankly, I have no idea, but I’m convinced that such efforts advance technology, and act to inspire future generations of engineers and scientists.

    Indeed, while it may not be apparent from my normal coverage, the LHC built by CERN represents why I spend my days writing about technology — not because I’m excited to play with the latest gadgets, but because I value the spirit of curiosity and discovery that leads scientists to spend $16 billion to build something that may (not will, but may) give us an inkling about how the universe works. And if it enables us to teleport, that’s cool, too. So if you’re interested (and how can you not be?), step away from the iPad coverage and check out these links:

  • Cue the “Mission Impossible” Theme for Harbinger’s LTE Plans

    Harbinger Capital Partner’s bold plan to build out an open 4G wireless network has more moving parts than the latest OK Go video, and would require a minimum of $6 billion for the terrestrial and satellite infrastructure alone. Based on the expenses and the difficulty of building a cellular network, I’m skeptical that a competitive LTE network will come out of the plan.

    Many of our commenters have pointed out the incredible expense involved in building out a terrestrial network, although Harbinger does already have requests for proposals out seeking bids. (If you have one, send it along, please). But beyond the difficulty (and $5 billion cost) of building out a terrestrial network that would cover 100 million people by the end of 2012, Harbinger would have to also fund a satellite expansion that could cost as much as $1 billion to build, launch and operate through 2013. And on top of all that it would have to fend off AT&T and Verizon’s fury at the plan, launch devices with satellite and LTE chips and finally, sign up subscribers. In other words, cue the theme song for “Mission Impossible.”

    Harbinger is attempting to build out this network using a block of the airwaves owned by SkyTerra and other companies that have spectrum in what’s known as the MSS band. Companies that own this spectrum want to use their holdings to build a combo satellite and terrestrial network, made possible by a 2003 FCC order that was enacted in the hopes of enabling satellite firms to offer some competition for wireless broadband. It’s been a tough slog for those firms, and the FCC order issued Friday night allowing Harbinger to take complete control over SkyTerra and consolidate some of the MSS spectrum was the first significant breakthrough since the original 2003 order.

    While my initial reaction was that this was a mere financial play designed to help Harbinger package up a nice chunk of spectrum and flip it for hedge-fund like profits, there’s that RFP for a network buildout that Harbinger has circulated, and two sources have named Huawei as a potential source of equipment and possibly financing. Huawei has not returned repeated calls for comment.

    There’s also a source in the FCC who is adamant that Harbinger can’t flip the spectrum without triggering another review by the agency. Plus Harbinger has to meet stringent conditions related to the buildout, which means that if it wanted to flip the spectrum, it would still have to meet its first milestone of covering 100 million people by Dec. 31, 2012. I’m not completely sold on the flip-proof nature of the FCC conditions after seeing the FCC offer repeated waivers to satellite companies having troubles meeting deadlines or requirements imposed by the original ATC order from 2003. And Harbinger has a track record of betting on spectrum, such as with its investment in Sprint (it holds 75 million shares that it values at $274.5 million ) and its investments in other satellite companies.

    But even if we take Harbinger’s plan at face value, the private equity firm needs to raise about $6 billion to simply build out the network, with additional money dedicated to operating it. Maybe its execs can call Craig McCaw for advice.

    SkyTerra, meanwhile, would need to launch two satellites, and Harbinger has made multiple arrangements with TerreStar and Inmarsat to pay them for leasing their spectrum. Tim Farrar, a satellite analyst with TMF Associates, says those costs total about $1 billion —$336 million to pay Inmarsat and adjust its equipment for the new combined network, $115 million a year to Inmarsat to lease its spectrum and $24 million as a payment to TerreStar. Harbinger holds a 31 percent stake in TerreStar.

    These initial costs are daunting, but Harbinger has already invested at least $2 billion so far in TerreStar and SkyTerra, and is in a high-risk, high-reward business. But the risks are just as big as the costs. First, there’s the issue of finding a partner to build out the network. I, as well as Farrar, have fingered T-Mobile as the likeliest source because the FCC has forbidden AT&T and Verizon from gaining access to more than 25 percent of the MSS spectrum, and because Clearwire-Sprint has such large spectrum holdings. Although perhaps the Harbinger stake in Sprint could be an attempt to influence the cellular operator to provide access to its 3G network.

    And that lack of a 3G network could be a big deal. Harbinger says it plans to build out its LTE network pretty quickly (it has to in order to meet the FCC milestones), but until it does, subscribers to its service will only have terrestrial coverage in major markets. Elsewhere they would presumably have satellite coverage. And when it comes to satellite broadband speeds, they’re pretty weak. Plus you can’t use satellite service inside buildings. So unless Harbinger finds a 3G partner, phones or data access in areas where there’s no terrestrial LTE network will suck.

    Interestingly, TerreStar has a 3G partnership with AT&T, but I still doubt that model because the service is expensive, the device is clunky and the speeds are slow. However, that brings us to one of the final hurdles Harbinger will have to jump: the angry Bells. AT&T and Verizon both issued statements saying they found the FCC’s decision in this case troubling. I’m waiting to hear back from AT&T as to what TerreStar’s role in the Harbinger network might mean for its partnership with Ma Bell. TerreStar declined to comment, citing a confidentiality agreement it signed in January with the private equity firm.

    Clearly there’s a lot going on here, but building out a new nationwide network has never been easy. We’ll see if Harbinger’s plan for faster mobile broadband with a satellite backup is the real thing or merely another fat pipe dream.

    Image courtesy of NASA

  • Sweden Predicts the Future of Broadband and It May Scare You

    Last December I covered a Swedish telecom regulator’s report on the effect open networks have on competition and broadband innovation. At the time I could only read the abstract, but was fascinated enough to hope that it would be translated into English. That day has come.

    You may remember Sweden from reports last week listing it as the country most ready to prosper from its information and communications infrastructure. Even though it’s on top, the country is still wrestling with the same worries we have about open access, net neutrality and ensuring private investment in a resource that directly affects the public welfare: broadband. If you don’t have time to read the whole 162-page report, skip to page 90, where the regulators pull out a crystal ball to imagine four potential paths the Internet could take in Sweden — and then imagine something similar happening here in the U.S.:

    1. The Best Effort Network: This future embraces net neutrality and the demands by content providers and activists for a best-effort web, but “uncertainty about the potential to make a return on infrastructure investments could slow the pace of rollout and thus the transformation to new access technologies.”
    2. The Utopia Network: Somehow ISPs and content providers figure out how to set very specific rules over how traffic is prioritized and by whom. That level of certainty allows ISPs to make investments and ensures that new business models can emerge.
    3. The Cable Television Web: This Internet doesn’t refer to actual cable providers, but to the business model of selling premium content and services. This scenario is one where ISPs have figured out that they can build out managed services and charge based on delivering their own products at high quality. Other players and even consumers may end up with the scraps, unless they sign deals with the ISPs, as we’ve written about here.
    4. The Surveillance Web: This is the ISP-as-spy vision of the future. Because ISPs have to be responsible for what traverses their network, they are will become closed and less tolerant of experimentation, and innovation will flounder.

    Image courtesy of Flickr user Panoramas

  • Vodafone to Verizon: Pay, Buy or Merge – Your Call!

    Verizon Wireless is the child of a joint venture between Verizon Communications and Vodafone, but it appears that the parent on the other side of the Atlantic wants to change the custody arrangement. The Financial Times reported this weekend that Vodafone, which owns a 45 percent stake in the venture, is putting pressure on Verizon Communications to pony up some cash — the result of which could lead to a merger between the two.

    Up until 2005, Verizon Wireless paid a cash dividend to Vodafone shareholders; then it stopped, saying it needed to pay down debt. But with the debt repayments scheduled to end soon, Vodafone is putting the pressure on. The British communications firm, says it wants cash rather than the paper gain associated with the increase in value of its Verizon Wireless stake. Vodafone has been angling for a return of the dividend for a while, but the Financial Times offers up analyst commentary showing that because of faltering performance at Verizon Communications, Vodafone may now hold the upper hand in this battle. The FT reports:

    Verizon Communications paid a dividend worth $5.3bn in 2009 and Bernstein analysts said that problems at the US group’s fixed-line phone business meant that it will need to tap Verizon Wireless’ cash so as to maintain its shareholder remuneration.

    Craig Moffett and Robin Bienenstock, who cover US and European telecoms companies respectively for Bernstein, said in a research note: “For Verizon, time is running out. Vittorio Colao holds the cards. And he seems to know it.”

    This leaves the parent companies with three options: Verizon Wireless resumes its dividend payments, Vodafone and Verizon Communications merge or Vodafone sells its stake in Verizon Wireless. The analysts above think a dividend is coming, especially since Verizon Communications maintains that it could pay out its own dividend in 2010 and 2011 without any help from the Verizon Wireless unit. Vodafone may make Verizon Communications put its money where its mouth is.

    Image courtesy of Flickr user Henrique Vicente

  • PE Firm Plans Open LTE Network to Challenge AT&T and Verizon

    A New York private equity firm plans to build a multibillion-dollar 4G wireless network that will cover most of the country by 2015. The ambitious plan by Harbinger Capital Partners relies on deploying a Long Term Evolution network over spectrum owned by a few satellite companies — and would create an open wholesale wireless network available to retail companies, PC manufacturers or anyone who wants to offer mobile broadband.

    Last November I wrote that certain satellite companies were visiting Washington hoping to somehow cash in on the 100 MHz of spectrum they collectively have. After reading the FCC order and Harbinger’s plans filed with the FCC on Friday night, it looks like those satellite firms may have found a way thanks to the FCC’s faith in mobile broadband as a means of promoting innovation and competition.

    A Competitive Threat

    The new network will rely initially on 23 MHz spectrum owned by SkyTerra, which is owned by Harbinger, and could later include spectrum from Terrestar Networks, another satellite firm in which Harbinger holds a stake. The Harbinger network could help ensure competition among the major wireless carriers thanks to the conditions the FCC has placed on the spectrum that the private equity firm plans to use as part an agreement to let Harbinger take control of SkyTerra  — namely that SkyTerra has to be a wholesaler, and that traffic from the largest and second-largest wireless carriers in the U.S. cannot comprise more than 25 percent of the traffic over the SkyTerra/Harbinger network. This means AT&T and Verizon could not buy up huge chunks of the network or spectrum to keep others off of it.

    Harbinger’s plans to build out a mobile broadband network stretch all the way back to a 2003 order allowing satellite companies owning spectrum in the L and S bands to build out terrestrial networks in conjunction with their satellite networks. The idea was to offer an alternative to the cellular carriers, but the stringent satellite requirement (that the cell companies lobbied hard for) has proved tough. It’s expensive to launch and build satellites (plus build out a terrestrial network), and any phones working on such a system are pretty clunky. Another strike is unless the satellite companies found a willing terrestrial partner, the initial satellite mobile broadband speeds were too slow.

    However, the FCC has given appears ready to give the satellite spectrum holders a break by relaxing the satellite aspect of the network buildout allowing Harbinger to consolidate so much spectrum in exchange for guarantees about how fast the terrestrial network will be built out. Plus the FCC will enforce the conditions outlined above to ensure that the SkyTerra/Harbinger network is a real alternative to the cellular carriers.

    Harbinger’s LTE Buildout Plans

    The planned network would launch before the third quarter of 2011 and cover 9 million people, with trials set initially for Denver and Phoenix. The next milestone is that 100 million people have to be covered by the end of 2012, 145 million by the end of 2013 and at least 260 million people in the United States by the end of 2015. Harbinger said in its statements to the FCC that all major markets will be installed by the end of the second quarter of 2013.

    However, the 36,000 base stations that Harbinger plans to use, along with the tower sites, backhaul and other gear associated with a terrestrial network will require billions of dollars. Analyst Chris King at Stifel Nicolaus estimates that Verizon’s LTE network will cost about $5 billion to deploy, and Verizon already has some of its network elements in place. Clearwire has also spent billions on its network, with analyst estimates ranging from $3 billion to about $6 billion.

    Harbinger didn’t talk about it’s capital-raising plans, but a spokesman emailed me the following statement:

    Harbinger is in discussions with a number of companies, which we cannot disclose, that provide a variety of services and solutions, but have not finalized anything with any potential partners.

    SkyTerra and Terrestar have been searching without success for partners to help build their terrestrial networks for years, with Intel once being floated as a potential candidate.

    For those spectrum nerds out there, Harbinger says it has access to the following hertz:

    At the outset, the network will have no less than 23 MHz of spectrum, consisting of 8 MHz of 1.4 GHz terrestrial spectrum, access to 5 MHz of 1.6 GHz terrestrial spectrum and 10 MHz of MSS/ATC L-band spectrum. Through a cooperation agreement with Inmarsat and associated waivers of the Commission’s ATC rules, by 2013 Harbinger will have access to an additional 30 MHz of ATC spectrum.

    By 2011, when the SkyTerra network would launch, the nation will have 4G network coverage from Verizon, Clearwire, MetroPCS and AT&T. Clearwire’s cable partners and Sprint seem to be getting some real traction with their customers as resellers of the Clearwire service, an indication that consumers don’t care what mobile broadband provider they buy from, as long as they can get access to the mobile web.

    So in looking at that list and realizing the AT&T and Verizon can’t play, and that Clearwire-Sprint has plenty of spectrum to deploy, the most logical partners for Harbinger’s expansion are likely T-Mobile or Leap. My friend Tim Farrar, a satellite industry analyst who saw the Harbinger action coming weeks ago, thinks Harbinger will hit up T-Mobile. I think he’s right.

    Images courtesy of NASA

  • The Digital Divide Will Ensure a Broadband Ghetto

    If you live in New York City or in any of the heavily populated and wealthy areas of the Northeast, you likely have access to some of the fastest broadband speeds available in the country. If you live in a suburb of Austin, Texas, however, you’re offered speeds some six times slower for about half the price. And as the technologies race ahead for network access, ISPs with fiber to the home and cable-provided Docsis 3.0 service are going to surpass the speeds that providers using old-school copper and even wireless can offer.

    Which means that while some people will be living in the 21st century, great chunks of the country will be subsisting on the 2010 version of dial-up. Don’t believe me? Verizon has tested a tech that requires software upgrades to deliver a 10 Gbps connection that’s shared among 32 homes. Meanwhile, technologies such as the next generation from AT&T are going to require swapping out gear at the node and inside your home so the companies still using copper can squeak up to speeds that most analysts doubt will even reach 100 Mbps. That means a hundred-fold disparity in connection speeds. Holy cow.

    We’ve addressed this in stories, when FCC chairman Julius Genchowski came to visit our offices and even in conversations with service providers. It’s the key reason the U.S. isn’t competitive with other countries when it comes to the rapid deployment of next-generation networking technology. So we think it’s a big issue. The FCC even thinks it’s a big issue. Google thinks it’s a big enough issue that’s it’s going to spend hundreds of millions of dollars to build a shared, experimental fiber-to-the-home network — and embarrass the ISPs and the government in the process.

    To quote the Google blog: “After all, you shouldn’t have to jump into frozen lakes and shark tanks to get ultra high-speed broadband.” Oh, but that’s what people are willing to do because the ISPs are so focused on the short-term bottom line to spend billions (yes billions) on big pipes. When I talk to many ISPs, the No. 1 reason they give me for the lack of investment in faster infrastructure is that users don’t want it. There’s no killer app driving demand.

    I’d buy that if ISPs were investing in research to find those killer apps, or weren’t actively seeking to whittle down connection speeds with tiered pricing plans or caps. But consumers are finding killer apps of a sort — only those killer apps interfere with the pay-TV side of the equation for cable guys and telcos that have invested in IPTV infrastructures. But even if the idea of another we-have-more-HD-channels-fight thrills you, the truth of the matter is that competition in broadband speeds will bring about the connected home.

    No longer will just your computer always be on; your thermostat, your television, your appliances and your links to loved ones will be, too — and possibly throughout every room of your home. But that’s not going to happen for those without fat pipes. Which is why I and others found the National Broadband plan so disappointing. While it gets a lot of things right when it comes to boosting broadband adoption, it doesn’t really help drive innovation or ensure competition.

    And the plan’s authors are aware of this. They offer the salve of data as a means to possibly protect consumers from overcharging and to shame providers into offering better service, but that’s going to require an activist FCC like the current commissioners are, and in a few years, who knows if that will be the case. And I am as excited about faster mobile broadband as anyone (maybe more), but mobile data isn’t going to replace wireline broadband — nor should we be content with those speeds.

    I understand that having spent $19 billion building out a fiber network, Verizon would be justifiably upset over sharing its fiber with competitors. We also currently have a huge variety in our network providers that makes sharing lines difficult from both a technical and regulatory perspective. However, the type of open-shared network that Google is proposing is the fastest ways to get the U.S. big broadband quickly.

    Since the FCC can’t get it done through the Broadband Plan (it isn’t even trying) and Congress decided not to get it done with the stimulus money (a few fiber projects were approved), then it’s up to the FCC and Congress to make it easier for cities to deploy their own fiber networks which can then be opened up to competition.  That means making it possible to change the laws in the 18 states that make it difficult for municipalities to own fiber networks or offer competitive communications services, but will likely evolve as a states rights battle.

    Right now, Google and consumer demand is our best hope for better broadband, which isn’t making me feel too great about the future. Anyone have a freezing lake I can dive into?

    Related GigaOM Pro Content: Who Will Profit From Broadband Innovation? (sub. req’d)

    Image courtesy of Flickr user Tycho Moon

  • Nokia Nabs Novarra for Better Browsing on Low-end Phones

    Nokia said today that it has agreed to purchase Novarra — a Chicago company that attempts to deliver a faster browsing experience for feature phones — for an undisclosed amount. I covered Novarra two years ago in a story about the rush of companies attempting to deliver a build once/run anywhere web site or widget for mobile phones (yes, this was back in the widget days). I said at the time that:

    On of the more interesting approaches is being taken by Chicago-based Novarra, an eight-year-old company that is working with carriers including Vodafone, U.S. Cellular and 3 Hong Kong to deliver the web to any phone, even low-end handsets. Novarra offers an appliance for carriers or a service that essentially offloads 80 percent of the data processing associated with downloading a web site to servers run by the carrier or Novarra. This cuts down on the amount of data traveling over the carrier network, and makes load times faster. Content providers such as Yahoo also use it to deliver lighter applications for mobile phones. Novarra powers Yahoo’s oneSearch via mobile.

    I also shared Novarra’s stats that showed carriers using the technology reported a between $5 and $15 increase in average revenue per user, which is nothing to scoff at. There are still only 400 million smartphones among about 4.6 billion total mobile subscribers, which means anything that delivers a better browsing on feature phones is still of interest, despite the digerati’s fascination with Android and the iPhone.

    Plus, Nokia has long had a huge presence in the developing world, which it may be losing to cheaper handset providers. Building another path to revenue in countries where phones are the primary source for access to the web just makes sense, especially since Nokia can’t seem to pull itself together to compete with the high-end smartphones.

  • Phorm Pops Up Again, This Time in Brazil

    Phorm, the controversial startup that delivers targeted ads based on a person’s web surfing, has signed deals with five Internet Service Providers in Brazil. After customer and regulatory outrage in the UK over the idea that ISPs would monitor a person’s web surfing habits through deep packet inspection in order to deliver advertising (and especially that Phorm and BT would trial this intrusive technology without telling subscribers), Phorm went quiet.

    Well, apparently it went to South America and has signed up Estadão, iG, Oi, Terra and UOL — all Brazilian ISPs. It also said in a release today that it’s pre-booked $5.6 million in revenue over an unspecified time frame.  However, I wonder if the landscape regarding both web privacy and deep packet inspection has shifted  since 2008, when much of the controversy erupted over Phorm in the UK and a similar startup known as NebuAd here in the U.S..

    ISPs are using deep packet inspection technologies already, and are poised to use them more in both wireless and wireline networks for usage-based pricing (GigaOM Pro sub req’d), possibly based on the type of applications people are using. At the same time, people are sharing ever more information via services like Foursquare or even Twitter, information that can be mined for advertising.

    I still find the idea of my ISP knowing which web sites I’m visiting creepy, although Google and many other targeted advertising shops clearly know, judging by the Tea children’s clothing ads I see on Tom’s Hardware and Slashdot (I’m guessing most of you don’t see those). Plus, as ISPs are threatened with net neutrality and dumb pipe status, expect them to implement more of these revenue-generating schemes, and justify them by bemoaning the loss of their profits thanks to government regulation.

    Image courtesy of Flickr user Alancleaver_2000

  • Microsoft’s Data Centers Take a Page From Henry Ford

    Microsoft recently outlined its plan for data centers as it begins its expansion into cloud services with its Azure platform, and the software company’s emphasis on commodity gear and modular components hearkens back to Henry Ford’s first production line. Much like Ford said that customers could have “any color so long as it’s black,” Microsoft’s Kevin Timmons, general manager of data center services, is encouraging mass production and commodity parts  in order to cut deployment times and costs.

    Timmons, who I interviewed two weeks ago week at Microsoft headquarters, said the company has hundreds of thousands of servers, and its vision is to deploy them wherever needed in a few weeks time. And on Tuesday he outlined how Microsoft plans to do this with little environmental impact:

    Our plan for the future is to have essentially everything but the concrete pad pre-manufactured and then assembled on site: the IT, mechanical and electrical components are all part of Pre-Assembled Components that we call an “ITPAC.” We actually think of the ITPACs not as containers in a traditional sense but as integrated air-handling and IT units.

    The units will be assembled entirely from commercially available recyclable components such as steel and aluminum and the cooling requirements for the ITPACs will be met by more efficient means, such as a single water hose with residential levels of pressure to control ambient temperatures. The servers will be stacked in rows, sandwiched between air intake and output vents.

    The mission is to support Microsoft’s Azure cloud computing service that went live formally this year (for those interested in cloud computing or data centers, check out our Structure 10 conference in June). Timmons envisions setting up tiny contained data centers in countries where those in power need to ensure the information stored on the Azure cloud stays within the country’s geographic boundaries.

    That means tiny data centers in the middle of Africa or giant ones such as the one in Chicago. Check out the video below for more details, or download the presentation on the topic. What’s cool is that because Microsoft wants this sort of modular data center approach to be as cheap as possible, it’s sharing its infrastructure plans with the world in hopes that other firms embrace them, bringing greater economies of scale to the components Redmond will need.


    Get Microsoft Silverlight

    Related GigaOM Pro research (sub req’d): Microsoft Azure: What It Is, What It Costs and Who Should Care

    Image courtesy of Flickr user Danacea

  • Sweden Rocks and the U.S. Drops in Tech Productivity Study

    The U.S. has dropped in the rankings of countries that are well equipped to use their information and communications technology infrastructure as an economic advantage, while Sweden now tops that list, according to a survey issued today by the The World Economic Forum. For 2009-2010, the U.S. ranked fifth after coming in third during the 2008-2009 period. The study, dubbed the Network Readiness Index, measures several aspects of a society’s ability to use and innovate with information and network technology.

    In the nine years since the study began, the issues have changed from providing access to technology to how governments, businesses and consumers can use technology in innovative ways to benefit their societies. While the spread of connectivity — especially in the third and developing world — is fantastic, the emphasis on taking connectivity further is near and dear to our hearts at GigaOM.

    “It is not good enough for organizations to use technology to reduce costs—they have to be able to use ICT to enhance innovation in all aspects of what they do. Governments have to move beyond providing online services (traditional e-government boundaries) to provide more effective governance to their citizens. While individual citizens will increase their use of the Internet, ICT has to be deployed to create cohesive and harmonious societies.”

    I talked a bit about U.S. municipalities going beyond government services in my Google fiber story today, and Mathew’s post on Crowdcast hit on ways businesses can use technology to improve their metrics and processes. But the U.S. is still unable to regain the No. 1 standing it last had in 2005. Although the U.S. has good infrastructure and education, the relatively low penetration of mobile phones (we rank 72 with an 86 percent subscription rate) high corporate tax rates, poor legislation and burdensome regulations bring the U.S. down.

    Meanwhile, the top countries tend to fare better in overall network quality and individual and government use. Despite its high taxes, Sweden compensates by having a strong regulatory framework to protect intellectual property and laws that promote competition in information and communication technology. It also has a robust physical communications network.

  • The Deadline Is Tomorrow But Google Fiber Is Already Changing Towns

    Tomorrow is the last day municipalities can submit their applications to be the location for Google’s experimental fiber-to-the-home network that will deliver 1 gigabit per second to homes. While not many are aware of how fast a Gigabit connection could be or what it could be used for (our commenters think 3-D television is a good use, the smart grid is a possibility and I’m partial to the idea of an always-on home, which I submitted), it’s pretty clear that a lot of municipalities want it anyway.

    Aside from some of the crazy stunts that mayors and towns have pulled in order to attract Google’s attention (swimming in frozen lakes! swimming with sharks!), I thought the greatest thing to come out of this is how towns are reaching out to their citizens using social media. Christopher Swanson, the project manager for getting Google Fiber to Duluth, Minn., says “Social media has been the most important part of our engagement. We did postcards and all kinds of things, but what has brought in the most involvement has been social media.” He credits social media with getting about 30 percent of citizens on board with the town’s fiber application.

    My hometown of Austin, Texas, has set up a web site, sends out tweets and has created a Facebook page that has more than  5,000 fans. Elsewhere, the effort to engage citizens has encouraged city officials to use social media tools and citizens to in turn engage with their governments. I hope that lasts, because that’s potentially farther-reaching than the initial fiber effort.

    That said, however, some of the engagement is a bit creepy. Check out the City of Asheville’s pandering of their students to Google. The elementary-school kids chanting, “I love you, Google” is great for the Google brand, but hard to watch. We’ve already discussed what it might cost Google to build out the network, which would serve between 50,000 and 500,000, and have outlined other areas of the world that have gigabit connections already.

    So while there may only be just one Google testbed network announced some time this year, the benefits could accrue to municipalities through a more connected and engaged citizenry and hopefully through showing the U.S. what it means to have a truly open fiber network that could boost competition for broadband connectivity. From Austin’s FAQs on the topic:

    Moreover, Google plans to open the network to competitive service providers. This means you may choose to buy your service from a completely different company – possibly a local Austin service provider. You old-timers will remember the dialup modem days, when we used to be able to choose from a long list of Internet service providers. The Google open network would restore that choice, but this time running at gigabit speed.

    This openness is the answer to the lack of competition when it comes to broadband access in the U.S. today, not more data or wireless networks as the National Broadband Plan is trying to offer as a salve. So as we count down to the application deadline, and the eventual network buildout, I’m hoping the entire process makes its mark on cities even if they don’t win.

    Related GigaOM Pro content:

    Google Buzz, Fiber and Their Place in the Smart Grid (sub. req’d)