Thursday, November 13, 2008

Corporate Evolution

President-elect Obama has apparently pledged to appoint a National CIO. Considering the impact technology is having on our society, this is a wonderful idea, and overdue.

A website has even been created to allow you to vote on what you believe are the most critical technology issues this CIO should address.

I happen to agree with, and voted for, the current #1 choice : Ensure the internet is accessible and network neutral.

The cable and phone companies have a unique opportunity. They get to engineer their own demise.

Both sell broadband to their customers. For my cable company, it means they have doubled the revenue they get from me each month. And DSL customers are providing more money to their phone companies.

These companies love this. Each is using the increased broadband coming into your home to try and put the other out of business. Cable companies are selling phones using VoIP, and my phone company is wiring their customers with FIOS (fiber) as fast as they can and then selling television through it.

But us darn consumers are messing both of them up.

I make some of my calls out with Gizmo. Others use Skype and other free or very inexpensive VoIP phone systems. Combined with my cell phone, I'm starting to question my need to have conventional phone service. At the very least, I may cut down to a bare bones basic phone system for emergencies. Younger consumers, or those braver than I, are eliminating home phones entirely. Cell only voters actually became an problem with polling during the recent election.

Let's consider television. Monday night television watching is a dilemma. Three of my favorite programs are all at 8 PM. I end up watching Big Bang Theory, taping (well DVR'ing anyway, Chuck. That leaves Terminator. I can watch that online.

I could watch the other two also online when I want, not when the networks choose to show them.

So, if I can watch online and when I want, why pay money for cables huge pipe of a hundred or more flowing programs? Some people love channel surfing to find something that fits their mood for then and there. But others like me, like to have a library of unwatched but carefully chosen programs and watch them when they can.

Let's assume phone is $50 a month, TV cable is $50 a month and broadband (no matter who you get it from) is $50 a month. That means before the internet, you paid $100 a month. Now with the internet, you pay $150 a month.

By getting your TV and phone over broadband, you could drop your expenditure to $50 a month.

This puts your phone and cable companies in a cage death match. One will continue with you as their customer, the other will not. And the winner will not be getting double the money from you as they do now (if they are also your broadband provider). And neither will be providing you the service they did 20 years ago-neither cable TV or telephone, but simply broadband.

Being able to profit with the technology that is putting you out of business would be enviable for some. Horse carriage manufacturers would have loved to have become the car manufacturers, but they didn't. Pullman, maker of passenger train cars wishes they could have become Boeing, but they didn't.

Surviving as smaller broadband providers isn't good enough for the phone companies and cable companies. And I guess they do have a duty to their stockholders to fight.

How are they fighting? By being able to say who gets to send content up and down their connections to you and charging those who do send you content a toll charge. They'd love to be able to demand a cut from Apple for very tune you bought through iTunes, or 1% of what you of your purchases from Amazon. And more to the point, they'd love to limit the packets containing voice calls to be from their own phone service only, and TV content to be what they are selling you only.

They say it is only fair. It is their lines. Except for one thing...

You pay for those lines, making them your lines.

Any money they get from Apple or Amazon etc. would be passed along to you. They be getting you to pay for the product twice.

It would be like the guy who charges you to put in your driveway, coming back to say a year later that he was imposing a fee on all delivery men who came up your driveway. Or that you could only park Toyotas in the driveway since he had made a deal with Toyota.

The good news is the Obama Administration-to-be seems favorable to net neutrality.Before them, I was rooting for broadband through the power lines. It would allow the power company to provide your internet and it wouldn't cut into one of their core businesses, but rather be a new revenue stream for them. They could jump on it wholeheartedly instead of with the gloom Cable and Phone companies have knowing their success in broadband is creating self-inflicted wounds to their core business.

Update 11-22-2008: A study from Knowledge Networks' MultiMedia Mentor finds 11 percent of 18-34-year-old adults now watches TV online at least once a week.

Bob DeFelice, vice president for client service at Knowledge Networks, said in a statement that this segment of the key 18-34-year-old demographic group appears to be expanding. "As more and more of the 18-34 population moves in this direction," he said, "understanding this group's media preferences and habits will grow in importance to marketers. And we know that a 'platform-agnostic' approach -- one in which content is accessible many places, at the user's demand -- will be an essential ingredient of reaching young adults."

This is the kind of hand writing on the wall the cable companies are freaking out about.

Reported at IMDB.com



Update 12-04-2008: The always good Gigaom today suggests three reasons government should meddle in broadband : Education Access, Medical Care Improvements and Telecommuting.

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