Dana Blankenhorn

Monopoly, Market Advantage, and Mouthpieces

The long-running scam on which this blog was originally based was the AT&T monopoly.

Since the 1984 Bell break-up, AT&T has been recreating itself, like the brooms of the Sorcerer’s Apprentice sequence in Fantasia. What were originally 7 regional Bell companies merged into 2 regional Bells, then those two bought the long-distance operators with big market share in the Internet core. AT&T is descended from Southwestern Bell, one of the original 7, and changed names when it bought the long-distance operation.

AT&T has spent most of its corporate life grifting off government. It won huge subsidies to create “universal service” over a century ago, and it eventually won the end of price regulation on the service. It continued its grifting on the Internet. A “universal service fund,” derided as a “Gore Tax” by opponents, was a subsidy, crafted mainly for AT&T, aimed at delivering broadband service to rural areas and urban ghettoes.

The Core and the Edge

Think of this as Volume 18, Number 12 of the newsletter I have written weekly since March, 1997. Enjoy.

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The IN in the word Internet stands for interactive. (Right, Sir Tim Berners-Lee, whose 1989 paper set the terms for today's World Wide Web.)

The assumption of its designers was that the Internet would be a two-way network, that as many bits would flow in one direction as the other. Peering, the original financial agreement underlying today's Internet, is based on this assumption.

The Internet, in other words, was not designed to be TV. It was not designed to be a passive medium, as something you watch, or read, or listen to. We already had such media. The Internet was designed to be something you interacted with.

That's not how things are working out in our time. The Internet is becoming TV, is becoming something you watch, or read, or listen to. The bits are mostly flowing in one direction, from the core to the edge of the network. Most of the technical standards underlying consumer Internet traffic, like DSL and DOCSIS, are designed to let bits flow faster downstream than upstream, on the assumption that more bits would do that.

Google is Not at War

I have always been annoyed by the lazy "great game" tech analysis of reporters who would rather be covering politics than business.

An example is found in a recent TechCrunch piece on Google. Headlined "Google's Six-Front War," it focuses on the areas of business where Google is now concentrating its energy under co-founder (and now CEO) Larry Page.

VC Ben Horowitz started this nonsensical meme, calling Page a "war time CEO" in contrast to the "peace time" leadership of predecessor Eric Schmidt.

There are two things that are true here. First, Page is paring down the company's development focus. Second, he's focusing the company's energy on areas where it is in direct competition with other big companies. Microsoft in browsers, Apple in mobile, Facebook in social networking, etc.

This is natural. This is good. Page is wasting fewer development hours, he's aiming to monetize his infrastructure advantages in various ways, he's working to compete.

Free the WiFi

There are two reasons to share things via open source. So they won't become worthless, and so they can become more valuable.

The Sega game machine is an example of the former principle.  Had Sega been able to donate the code when they killed the product, it could have had an after-life. As it was, owners now have bricks.

WiFi is an example of the latter principle.  The Electronic Frontier Foundation now says it wants the WiFi protocol “opened,”  allowing free sharing of unused bandwidth.

Peter Eckersley calls fears of privacy and security that have made people lock their WiFi routers a “tragedy of the commons” and suggests the launch of an Open Wireless Movement to fight back.

I wrote something very similar two years ago, from Chengdu, where I was able to post stories only because of open wireless connections in a Chinese condo project. My hosts let us use a great apartment, but it had no computer, no Internet. Without the open connections of nearby units, which admittedly were on intermittently and didn't provide a ton of bandwidth, I would have been gone from the Web all that week. As it was, I delivered some of the most popular things I ever did write at ZDNet.

OpenStack Becomes Telecom Lifeline

The announcement that AT&T is building itself an open source cloud stack based on OpenStack should be no surprise to regular readers here.

As I noted Friday in writing about CenturyLink (the former Qwest, the former US West), telcos see OpenStack as their best move against Amazon, Google, and the obsolescence that comes with being a 19th century technology platform.

This is great news for OpenStack, bringing with it a bunch of really committed programmers, backed by heavy corporate sponsors. But it's also a challenge to Rackspace, the main sponsor.

That's because telcos remain Clueless, and always will be. Like newspaper owners, telco executives think they control monopolies, even when they don't.

So there will be two temptations among the "CenturyLink," "AT&T" and (let's call it) "Verizon" programming teams moving toward OpenStack:

1. The temptation to tweak the software in order to maintain customer control.
2. The temptation to fork the software and run off with the code.

These sound like the same temptation, but they're not. If you tweak the software you're keeping up with the latest releases. If you fork it, you're creating a new branch of the software tree entirely.

What Should Microsoft Do Now?

For some reason – maybe it's the fact that Microsoft now sells at the P/E of a medium-sized bank – the company is getting all sorts of advice.

Some of the dumbest advice comes from ReadWriteWeb, which thinks Microsoft Needs to Open Source Something Big But What?

Wrong question. Open source is not some magic elixir. It's a specific tool with a specific purpose. When you want collaboration you offer up the code. In the mid-2000s, this meant code you just wanted to shove over the side. More recently it's been important projects you needed others to commit to in order for them to succeed.

Valuing Clicks

Think of this as Volume 12, Number 39 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Let's go back to Internet Commerce a moment or two. That's what A-Clue.Com was created to cover in 1997.

A click's value is easy to state but very hard to calculate.

It's worth what you can get for it.

The corollary is also true.

It costs what it costs.

In absolute terms this means a page view is worth the advertising (or commerce revenue) you can generate from it, less the cost of getting the page view and serving the page.

V= A - C

These values vary tremendously by site, and ignorance of the underlying equation leads to ferocious misunderstanding wherever e-commerce is discussed.

One Word for Broadband Stimulus

Congress is looking at putting anywhere from $6-9 billion into broadband as part of the stimulus bill.

Not what advocates like Free Press want. (They were looking at more like $44 billion.) But a lot more than I was thinking of, namely, zero.

This is not to say I hate broadband. I love me some broadband, the broader the better. I just happen to think that competition is a better tool for getting it than any subsidy.

Which leads to  one word, the one word by which I will measure whether this is money down a rathole or something significant.

Internet.

The Duopoly Destroying American Competitiveness

For the third time in almost as many years a lightning strike knocked out my Internet service the other day.

It killed the modem, my router, and even destroyed the Ethernet connection inside my PC. Third time in three years.

If I had a real choice I'd dump Comcast in a heartbeat. Would have done it after the last two strikes too.

But like most Americans, I can't. The Bush Administration's FCC and Justice Department have succeeded in turning Internet access into a duopoly, phone and cable. Independent ISPs are gone. This is precisely the opposite of what the Telecommunications Act of 1996 intended. In fact, that act was voided by GOP fiat. This, to my mind, is one of the worst of a litany of crimes for which this Administration will pay at the bar of history, and for which the rest of us will pay for the rest of our lives.

While other nations have competitive Internet markets, a wide choice of providers, and the right of consumers to vote with their mice for the best possible price and conditions, American Internet users have been Sovietized. And it's getting worse. The monopolists are now trying to limit the amount of traffic you can move, and the government (of course) is seeking to monitor what we say online a la China.

But it's the practical aspects of all this which really drive me crazy.

Ending the Duopoly

One interesting fact, told on CNBC this morning, is that while most people are very pessimistic about the current economy most think things will get better in the next year or so.

They will. That's because the present trends are pretty easy to reverse, and once reversed should stay that way. Simply placing a priority on the War Against Oil should enable U.S. demand to fall fairly dramatically. Insulation, grid improvements, and smaller cars driven somewhat less will force oil prices down in the fairly near term, if we are serious about it.

The same is true for the other big economic problem we have, the one no one really talks about. The telecom duopoly. Throughout this decade, just as the Bush Junta has given oil producers a stranglehold over our economy, so he has allowed telecom monopolists to be given the same stranglehold. This was done deliberately, to gain more control over the American people. With "one throat to choke" it's easy to get your demands for data satisfied, assuming you pay the bills. So a policy of fewer Internet providers was in the authoritarians' best interest.

It has been good for the telecoms'. As I've noted here many times, the price of "broadband" has remained stable for a decade, and its definition has not stretched one bit. This despite the improvements in equipment and technology of Moore's Law -- we now have efficient fiber switches, and fibers which can handle hundreds of streams of data at once.

The new way the monopolists seek to screw us is with bandwidth "caps," which have come into effect on all the major networks -- Comcast, Cox, and AT&T, in amazingly short order. This is indeed designed, as Om Malik notes, to force you into keeping your cable TV. While the nominal cost of cable broadband is $50/month it's only available with a viewing package in most areas, and that can come to $80/month or more, even if you're not using pay per view or a service like HBO. The phone company does the same thing. Their broadband also costs $50/month, but they nick you for another $50 (or more) for the phone line, and then add a long distance plan.

The result is that Americans are now paying about $120-150/month for 1.5 Mbps downloads which can only get video clips, while Europeans and Asians pay a fraction of that for lines which can do far more. Innovation is being throttled. It's hard to telecommute on such slow lines, especially if you're in a business where the movement of large files is commonplace. So winning the war against the telecom duopoly is a component in winning the War Against Oil.

Now, here's how we win it.