The FCC Starts Wondering What Granddad's Beach Cottage Might Be Worth...

Is the FCC ready to look at renovating the beachfront property? The folks at the CommLaw Blog think so. They are daring to ask the question "What is more in the public's interest? Using the beachfront spectrum for more broadband internet or for free over-the-air broadcasting?." Their vehicle for gauging the public interest is in the economic value to society in the form of jobs, growth and innovation. By casting their net in this manner, the FCC appears to have front-loaded the argument in favor of the innovation bringing broadband over the buggy-whip driven local television broadcasts.

Once this debate gets outside the walls of the FCC, expect the hand-wringing, flag-waving and the tea-partying to begin. Although, yet again we will undoubtedly find some strange bedfellows. After all, what would be more libertarian and free market driven than letting the use of these airwaves find their highest value on the open market?

Comcast/NBC is Good for Net Neutrality Because It's Bad for Net Neutrality

The Comcast/NBC partnership is good for Net Neutrality. Why? Because it provides the clearest possible example to the greatest number of people of the dangers of a walled internet without the neutrality principle. Owning NBC, Comcast now has a clear incentive to charge other internet providers like ATT and Verizon for the right to provide access to NBC/Universal content over the internet or simply to provide better, faster or higher definition content to Comcast subscribers, providing a switching incentive.

The high visibility of the NBC/Universal content in the public's eye will ensure that this does not happen. Acting as Congress's agent for the public interest, the FCC or FTC in conjunction with the Department of Justice will not permit this merger to move forward without a binding agreement that non-Comcast users will receive both the same full access and equal treatment as Comcast customers. With these conditions in place, it will set a clear precedent for the first time for internet video content, echoing the FCC's Madison River decision which protected VoIP content.

Perhaps, the clearest precedent to the current case, though, lies in the FTC's handling of Time-Warner's 1995 acquisition of CNN. As a condition of the merger, the FTC required Time-Warner to carry a second 24 hour news channel in order to provide competition to its own CNN. Time Warner chose to carry a fledgling joint venture between Microsoft and NBC - MSNBC. Rupert Murdoch took issue with this choice, made over his equally young 24 hour news channel - Fox News. Several lawsuits later Time Warner settled and agreed to carry Fox News in the New York City market. This event ultimately led to the prominence and reach that Fox News has today.

Comcast customers currently have equal and non-discriminatory access to content from NBC, Disney, Viacom and countless other providers. This merger will not occur unless Comcast agrees to preserve this status quo, which will provide the highest profile real world affirmation of the doctrine of Net Neutrality to date.

It is Immoral to Allow Wealth to be the Deciding Factor in the Provision of Medicine

Two areas of policy that I don't ordinarily touch are Education and Healthcare. I just don't know enough about the economics or deep underlying theories to have as informed opinions as I would like. However, with Healthcare reform once again in our leaders' crosshairs, I'm going to go out on a limb. Any national health care policy should follow this first principle:


It is immoral to allow personal wealth to be the deciding factor in the provision of timely life-saving medicine.

I don't know what single-payer health care means. Socialized medicine and European-style health care are just phrases that are meant to provoke feeling rather than describe an actual policy approach. So I don't have a policy solution to recommend. Paying for medical insurance, however it's carved out of my income (by my employer, by myself, through tax rebates), seems reasonable enough to me economically. However, it is probably more expensive than it should be, and for many people in our country, simply unaffordable when compared to the more immediate needs of food and shelter. So as our leaders once again try to reform the health care system, I hope that first principles are always foremost in their minds. We can not make the availability of medicine dependent on the ability to pay for it, nor can we saddle people with an immense financial burden after the medicine is provided.

A Worthy Joust for Google?

Henry Blodget boldly writes the obituary for the latest Google competitor, the Wolfram Alpha Computational Engine, this morning in the Business Insider. Blodget is absolutely right as is this commentator that Google has too much of a head start and has enough of the search problem solved that any incremental improvement a competitor provides will quickly be incorporated in their own product.

Google will find its match some day, and as the comment states it might be mobile, but I doubt it. Google has won the HTML platform search, which means that any web page that renders in a browser, including mobile browsers will still most easily be searched using Google. Search will not be all about HTML and browsers forever. The next web platform is where the innovator that beats Google will arise - the television. Specifically, the internet is coming to your TV, through devices like Tivo, Roku and the game consoles; through cable and satellite set top boxes; and through the TVs themselves. The TV UI does not automatically seem suited for browser based HTML documents. Rather the norm is likely to be a combination of transparent menus, scrolling tickers, sidebars, headers and footers. HTML pages may still be viewed as in the web, or there may be a completely new paradigm. This is where the Google competitor will have their day.

That said, Wolfram Alpha, does not index HTML web pages, it gathers, consolidates, organizes and displays information. So Blodget does not have this one precisely correct. While a Google competitor will not emerge in the HTML/Browser-verse, a better organizer of knowledge, that organizes information from multiple sources including web pages could. Wolfram Alpha is a step in that direction.

Is it News or is it Paper?

Lively post this morning on Tech Crunch about the coming debut of paper sized e-readers, including a new Kindle, and whether these devices will save newspapers. Internet journalists have their long knives out more than ever for print journalists. It has become axiomatic in online media that the ink-stained wretch is a dinosaur and should slowly slink back to their caves to be done in once and for all by the irresistible force of evolution and the withering gale of creative destruction.

Ok, so lets take it from the top. News as printed on paper, updated no later then 2:00 AM, distributed in the morning, with no updates until the next day, and no reader comments until at least the next day can not compete with news as published to a web site, which can be updated in real time, distributed world-wide immediately with insightful commentary from readers available for addition mere moments after publication. Thus the argument continues, replacing paper with a portable screen, no matter what size can not save the newspaper. Whither then the news?

Instant news of course has been around for 80 years. Radio and TV did not kill the newspaper. The internet may indeed kill the newspaper but like radio and TV before it, it will not kill the value of reading information vs. viewing or hearing information. The gathering, editing and distribution of written information is still a viable economic good and public good. The vast scope of the web saturates us with information. It becomes commoditized and cheapened. We access it all at our fingertips and become our own editors, filtering the data and making editorial judgments as to the importance of one story over another. The editor who used to feed us the story is looking for work. Is this what we really want? Of course not. We still rely on journalists and editors to gather and filter the information for us. Who has time to do it all themselves? As the market for printed paper slides down to the long tail, the same forces that made the great newspaper and magazine brands prevail, will make winners out of many online news sources. The brands of The NY Times, The Washington Post, The Wall Street Journal, Time and Newsweek can continue to have value and even prevail without a paper publication, and eventually they will be able to get readers to pay for their online distribution. It may take the deaths of many competitors before it happens, but good journalism will find a price and then can still be sold - even on the internet.

The Three Goals of the Web

With the internet economy clearly in only the strong survive mode, I think it is helpful to review the internet business model at its most basic. Those executing this plan well will make money and survive. Those executing it poorly will fail.

1) Get people to your site.

2) Keep people on your site.

3) Get paid for the people who visit.

The first two items require capital expenditure and labor in the form of ads, SEO, page design and content creation.

The revenues generated by #3 need to exceed the expenses incurred by #1 and #2 or you will fail. There are three ways to generate this revenue.

1) People buying something.

2) People leaving the site by a paid channel..

3) People watching something with an ad.

The third way is the hardest to achieve, but the most ideal in terms of revenue generation. If your content is so good that people will stay and view ads, advertisers may pay you regardless of the click action. This means you do not have to pepper the site with paid exits nor do you have to worry about surfing away. As long as people get to your site, you get paid regardless of whether they buy something or leave.. This model is the equivalent of TV advertising. Most internet sites don't harvest enough attention span to survive on this model. Sites with video content and the better magazine sites may be an exception.

The second way is the easiest to achieve, and the least ideal in terms of revenue vs. cost. If you can't make money by selling something and you can't make money just on ads viewed, then you need to make money whenever someone leaves your site. This means that they better not close their browser, enter a new address, or click a bookmark. They need to leave by clicking on your page. The eternal problem is that you can't get users to your page without some kind of quality unpaid content. Therefore you need to find the magic balance between paid and unpaid to make your site attractive and yet try to make sure that the bulk of the exits are paid. Search engines of all stripes use this model. The problem is the margins are so small and a small miscalculation in the mix of expenditure to attract people, the quality of the content and the paid exits will spell failure. The pure play here is the domain park. All click exits are paid and the cost of entry is buying a domain name that people will type or mistype into their browser off the top of their head. But domain parks suck and only pure arbitrageurs are really interested in that game.

The first way is just the old brick and mortar model. Build a better mousetrap, hire a better mousetrap marketing team, or sell all the best mousetraps in one place and people will pay you while they are on your site. The problem with this model is that the building and marketing require huge capital expenditures with high risk of failure. Selling other's products on the other hand is cheap to start but the revenues are only good at volume. The barriers to entry are so low that this business either gets diluted in the long tail or dominated by the volume players like Amazon. Companies that have overcome these obstacles and succeeded include Netflix and Zynga.

Making a little money on the internet is easy, making lots of money on the internet is hard and making money while creating something durable, beneficial and lasting is really hard. But first you have to remember the basics:

Get Them + Keep Them < Get Paid

Is Page Rank Part of a Nutritious, Well-Balanced Internet?

An interesting post in the Insider, highlights an issue with Google that I believe will not go away. The rules behind Google's Page Rank are completely non-transparent and must be ferreted out by SEO deep-divers, who spend their careers trying to reverse engineer the page rank system. Where the rules are known, as the media companies are claiming, the SEO arbitrageurs and secondary content providers get precedence over paid content.

In a free market, Google would clearly be incentivized to adapt its product - search results - to the demands of the market. However, their effective monopoly means they do not have to respond to market demand. This is a thorny situation. I have spoken with some search experts who believe that an open Page Rank algorthim would destroy the internet and the highest ranked content for any subject would be the most precisely sculpted to meet the Page Rank rules and neither the most useful nor relevant. The most professional paid content with the biggest marketing budgets behind it, would then bubble up to the first page and the Wikipedias et al, would be relegated to the second tier. The fear is that the the fundamental openess, democracy and neutrality of the internet would be destroyed.

I do not wish to see the internet destroyed and the long tail of content remain perpetually in the margins. However, unless a big external disruptor arises soon, I do feel that that the time is coming when the all-powerful Page Rank will come under stricter scrutiny, especially given the current administration's predilection for transparency.

The Anti-Trust Clouds Gather Around Google

I have been making predictions in private that Google is likely to come under Justice department scrutiny for anti-trust in the next year or two. Regardless of their intentions Google has achieved a de facto monopoly on search and search advertising and those with monopoly power generally are driven to use it. Even if they are not yet violating anti-trust laws, they are dictating the rules of the game for a massive sector of the economy. A couple of pieces this morning highlight the gathering clouds:

NY Times: Lawsuit Says Google Was Unfair To Rival Site - NYTimes.com
Bloomberg: Antitrust Pick Varney Saw Google as Next Microsoft

I don't believe in Google's guilt or innocence under Anti-trust Law at this point in time - just that there are red flags in their market position and behavior. Additionally one can argue that they are a "good" monopoly as ATT was seen to be in the mid-20th century. Nevertheless, we have a history of letting monopolies flourish in this country up until they start preventing innovation. With innovation cycles becoming faster and faster, Google and their shareholders should enjoy their dominance while they can.

Astonishingly Bad Best Buy Experience

So I live in Colorado and have a data center in Northern Virginia. I need to upgrade a Dell server to 8 GB of memory in a hurry - overnight shipping won't do. Dell provides me with the exact Kingston memory part number I need. All I need to do is find a store near the data center that has it and I can get it delivered to the facility - by courier if necessary.

I call the Best Buy in Sterling. Press "3" to talk to a Sales Associate. Wait about 10 rings and get an answer. I explain that I need Kingston part number KTD-WS667/2G. He checks the system and says we are sold out - I have nothing here for KVR-WT....

No, I say that is KTD-WS667/2G. He says we just had a sale on it and I think we are sold out. No I can't find that part number in the system. We have nothing matching KLS-66 etc.

Hmmm, I say, you keep mentioning the wrong number, maybe you have a different number in your system or something - why don't you Google it so you can see which one I am talking about - I am looking at the Google results for it right here.

Ok, he says...Google returns nothing. Well, I'm looking at results here, I say. Maybe it's my Proxy he says, I'll try the Kingston site.

Cool, so I repeat the part number. That's K as in Ken, T as in Tony, D as in Dave, etc.

Well I can't find anything under WLR-KS67 at all, he says.

By now I am sure that either:

a) He is a complete moron.
b) He is completely f***ing with me.
c) I somehow got lost in Idiocracy.

I politely say, well I guess you don't have it, I'll try one of the other Best Buy stores.

So I call each of the closest Best Buy stores in turn pressing "3" to speak to an associate each time. No answer whatsoever. One just goes click after 20 rings and leaves me in oblivion. At this point, I am convinced that this guy is answering the phone for all the local stores and won't even pick up the 303 area code he sees coming in on Caller ID.

Wow. I'm speechless. But as this post attests, not wordless...

Extra, Extra! Future Wireless Technology Promises Amazing Mobile Speeds!

This morning, the Denver Post picks up a Washington Post story and headlines - WiMax technology promises faster wireless service. Why is this important? The news about the Clearwire/Sprint/Intel/Google/Comcast/Time Warner/Bright House deal started its life last week in the Wall Street Journal and quickly moved to the tech blogs like GigaOm and TechCrunch. For the remainder of the week and through the weekend it bounced around the tech and policy blogs with everyone revising opinions and emphasizing different angles. On Monday morning it is now a headline in a big city daily, with the bulk of the tech and policy implications cleansed and the story promising users all the neat things they will be able to do within two years as the service rolls out.

Clearly, the fact that this story has such legs is a big win for the stakeholders. A few weeks ago, Sprint and Clearwire were getting the media raspberry for playing coy on the rollout of the then titled Xohm service at CTIA. LTE was all the news with ATT and Verizon promising LTE networks coming soon. Now with CTIA in the rearview mirror, WiMax is dominating the wireless news and garnering prominent mentions in the mainstream media. The goal for the WiMax Gang of Six of course, is to have people asking, "That's great, when can I get it?" That goal appears to be well on its way. While perhaps not the best technology available, WiMax now is off life support and breathing while LTE and other 4G tech is still riding around on Big Wheels. I'm guessing the gang planned their timing this way.

The Brick and Byte Play

In comparison shopping land, we like to throw some big numbers around. Stuff like the market for online transactions reached $175 billion in 2007 and is expected to reach $335 billion by 2012. The shopping comparison game is simple - we provide a service that makes it easy for consumers to compare prices and decide where they want to buy. When they click through to the retailer after conducting the research on our site, they are more likely to buy from that retailer than the consumer who has not done the price research first, say by simply searching for the product in Google or Yahoo. The retailers gladly pay us back for sending these pre-qualified shoppers their direction and we earn our cut of the $175 billion.

How many of us, though, research online and purchase offline? Plenty according to an Accenture study. 67% in fact. In other words 2/3 of us are more likely to conduct research on sites like Pronto and then purchase the product in a retail store. So how to get a slice of that bigger pie and provide ever more useful searching for you? Start including local results in the search results.

Disclosure: I, of course, work for Pronto and yes, I know, local is the new global so we are not alone here. Dig around though, and see the future. Brick and mortar is becoming brick and byte.

Ways to Limit Free Speech on the Web by Promoting Free Speech

Paul Kapustka formerly of GigaOm now with his own cutting blog, Sidecut Reports, has an excellent post up regarding some fake "news" created as a PR effort by internet providers to suggest that there is a grass roots movement against network neutrality on free speech grounds.

He was particularly bemused that mainstream media outlets picked up on it as news rather than the flogging it actually was. However, it is worth noting here that the free speech implications of the network neutrality debate are particularly pointed. At only one time in our history have we let our government restrict speech in public communications and that was for over the air broadcasting. In particular, the FCC believed that over the air broadcasting a) was in the public interest to promote and b) utilized a scarce resource (wireless spectrum). As such, they believed that they had to create strict rules on what broadcasters could and could not say in order to ensure that the scarce airwaves were used to their maximum public benefit. Without the scarcity of the airwaves, all things that wanted to get published to the airwaves, in theory, would have been.

Those who argue that P2P file sharing creates scarcity on the internet and thus limits the freedom of speech are playing right into the public interest/scarcity trap that gave the FCC the right to regulate speech in the 1940s to the present day. And that, my friends, would be killing the goose that laid the golden egg.

Network Solutions Wants to Make Sure that Nothing Unfortunate Happens to Your Domain

Network Solutions has hit on an ingenious business strategy. If you ask them if a domain name is available and it is, they'll hold it for 4 days so you can only purchase it from them. No need for any pesky shopping around - you can't. If you want it, you need to fork over $34 instead of cruising over to GoDaddy or some other site and paying $10.

They say this practice combats folks who capitalize on Domain Name Front Running or finding lists of domains that were recently queried and buying them in advance, so they can extract a higher cost in resale. In an extraordinary act of Chutzpah, Network Solutions insists that its practice prevents such front running by keeping a customer's recent query from being purchased by another party who could then charge them a premium or otherwise keep them from purchasing the name.

Now correct me if I'm wrong, people, but Network Solutions is holding the name so that they can charge a premium over other providers. That is the definition of Domain Name Front Running. Thank goodness they are protecting me from the bad guys.

Not surprisingly, I'm not the only one who's noticed and they are subject to a class action suit. Now to wait four days to register our wedding site with GoDaddy. Glad I didn't just order all the Save the Date cards with the domain name printed on them after checking first on Network Solutions to see if it was available or anything and then getting the bright idea to shop somewhere else. Really that would have been quite foolish.

All Along It Really Has Been All About the Eyeballs

When I moved from working in the internet B2B space to the internet B2C space in the summer of 2006, I quickly grasped what I had only partially comprehended previously - that the "free" consumer internet economy is entirely based on people clicking through sponsored search listings, banner ads and other paid placements. I quickly concluded that were two types of people in the world - those that clicked on sponsored listings and those that didn't. Recent market research directly illustrates that point. 6% of internet users generate 50% of the ad clicks. Furthermore, those clickers constitute the demographic least likely to complete an online purchase.

The more finally honed this research becomes over time, the more internet advertisers will learn that the inputs don't equal the outputs in the click ad model. In fact, the whole business is much like the greater fool theory in which the existing players profit off the willingness of new players to enter and profit themselves. If ever, new entrants start to decline or find new and inventive ways to drive traffic to their sites and capitalize on their presence, then the click market as a whole will begin to dry up and the master click arbitrager at the top will need to innovate or die.

All this brings me to the idea of internet advertising as a whole and its relationship to television advertising. Why has television advertising been wildly successful and internet advertising not so much as reported above? For instance, an advertiser will pay a lot more for 30 seconds on network television, while relying on old fashioned methods to determine the impact they've had on the viewer and the subsequent return on investment, where as web ads come a lot cheaper but offer far more information regarding their actual utility to the advertiser. What web advertisers are coming to realize as television advertisers did as well generations ago is that it is all about the eyeballs after all, which is of course what we all said at the dawn of the internet anyway. As clicks come to be devalued as junk, the cost of spot based advertising will rise. Thus companies with something to sell online will compete to have their ads displayed in as many prominent locations on the web as possible and not be nearly as concerned as making sure that the click through is monetized. In fact, they may not even pay for the click at all.

Spot based advertising on the web of course has a much higher value than it does in old media, as we know so much more about you from the scripts running on the site while you are there. The effectiveness of the campaign will be far more easy to characterize for the advertiser then it ever was on TV. And as old and new media inevitably converge, web ads are becoming more and more like their television predecessors. The circle is complete.

Smokin' Third Pipe

GigaOm reports today that Stelera Wireless is offering high speed rural broadband services over the AWS-1 spectrum it picked up at auction in 2006.

Rural Texas Gets Superfast Wireless Broadband - GigaOM

Stelera currently owns all the AWS-1 rural licenses here in Colorado, so we are particularly interested to see how their rollout progresses. The success of offerings such as these will go a long way toward delivering the long promised third broadband pipe.

Stick a Fork in the 700 MHz C Block Bidding

It looks like the bidding for the national C Block is complete and the regional bidders have won. Round 34 is complete and no new bids were entered for any of the crucial regions encompassing the 50 states since round 30 meaning that any bidders three waivers were used up. Whether one bidder won them all or they were split is unknown, but the Open Access rules for which Google and others heavily lobbied will go into effect as the block did crest its 4.6 billion dollar minimum.

There is a small chance given the complex auction rules that another bidder in the A or B blocks has bid enough since round 30 to qualify to enter another bid for one of the C Block regions but that possibility seems far fetched. Saul Hansell of the NY Times Bits Blog, Erick Schonfeld of TechCrunch and Tim Farrar of TMF Associates have all offered expert analysis leading up to this point.

700 MHz Auction Drama

Saul Hansell of the NY Times Bits Technology Blog offers an insightful take on the current status of the 700 MHz auction - Spectrum Auction Teeters on the Brink of Success - Bits - Technology - New York Times Blog. Someone is sitting on a 4.3 billion dollar bid for the nationwide C Block and they need to bid tomorrow or they risk being out of the auction. If the total doesn't hit 4.6 billion by the end of the auction, then the FCC will have to re-auction this block off in the future.

73 Bids Sail Out

FCC auction #73 for the 700 MHz Spectrum to be vacated by the broadcasters in 2009 opened today. The days two opening rounds of bids netted 2.4 billion of an estimated 10 billion bound for the US Treasury. Notably, there was a 472 million dollar bid on the D Block, which any provider must give over to the government for use as public safety frequency during an emergency. With Frontline Wireless bowing out, many had speculated that this spectrum would go unbid.

The largest bid of the day was over 1 billion for 8 combined areas of the C Block covering all 50 states. Google led a coalition of organizations who lobbied for open device access in this band. The auction could last weeks. Stay tuned for further updates.

Ask.com Promises Not to Tell

I found this NY Times headline interesting this morning partially because it arrived so late in the game.

Ask.com Puts a Bet on Privacy - New York Times

Why shouldn't privacy be a market differentiator? Why did it take so long for someone to market it? Lately Ask (disclosure, I work for a separate IAC business) has been trying the spaghetti approach to marketing, throwing it up against the wall and seeing what sticks. My feeling is that they have done a nice job with their marketing. Even the tremendous failure of the "algorithm" campaign got them headlines proving the old adage that there's no such thing as bad publicity. I think privacy is good tool to pull out of the box out this point in time. On the heels of the Facebook beacon fiasco and growing legislative and regulatory scrutiny privacy is in the game.

Internet consumers may start to realize that they transact in their privacy every day. Every time I perform a Google search, I am selling a bit of my privacy on the market in exchange for the information that Google provides. In effect, Ask is telling us they are going to charge us less for each search. If they can get this point across to enough of the marketplace then they may get another few points of market share.

Google Asks "Who's Going to Win the Spectrum Auction?" Could it Be...the US Treasury.

It's official. Google is in.

Official Google Blog: Who's going to win the spectrum auction? Consumers.

Google would like to be your telco. Well its not actually clear what they want to do, but if they do succeed in winning their chosen swaths of Spectrum in the 700 MHz auction, they will be able to offer an array of mobile services that could easily googleize our mobile existence to the same extent or more that our static web existence has. A tremendous opportunity that we will have to wait until 2009 to see.

In his post Chris Sacca points out that the big winner in all this is the consumer. A mantra that Google has been repeating over and over again during their push for open access and one that the FCC certainly doesn't mind hearing. Remember they are charged with acting in the "public interest." The biggest winner from Google joining the game, though, is of course the US Treasury. With Google's giant coffers, they can drive up the price on lots they don't buy and competitors can drive up the price on the lots that they do. As we know so well, Google does no evil, so there's no way they would kick up the price on certain lots out of spite or competitive zeal. Nevertheless, their big stake can have the effect of driving prices up in lots where they do compete.

It's official. The FCC gave concessions to Google on open access and the ROI is on the way.