Telecosm - Ike Elliott

More Patent Insanity

GigaOm's Stacey Higginbotham posted yesterday about a new Amazon patent on displaying browser errors, such as the common 404 error pages that various web sites display.  (One of the most inventive 404 pages I've seen is here). 

The patent, which was granted on Tuesday this week by our all-knowing patent office, is just the latest example of why the USPTO is clueless.  Does anybody in the patent office know or care that there is an Internet Engineering Task Force that invented this stuff long before Amazon filed their patent in 2003?

...think I'll file a patent on blogging...

700 MHz Auction Update: A Mystery Bidder Has The Edge For C Block

The bidding in the 700 MHz spectrum auction continued through round 16 today, and after last week's slow start that had some predicting a disastrous auction, the bidding has now surpassed the $10B+ goal that the FCC set for the bidding.  The closely-watched 50-state C block license bidding has stalled at $4.3B in round 13, just below the $4.6B reserve price.  Assuming that two players have been steadily out-bidding each other, round by round, until now, tomorrow's round 17 could force one of the two to bid round 17's minimum of $4.7B to keep the other from winning.

The bidding is anonymous, so we don't know who holds the lead right now at $4.3B, but there are two theories as to where things stand:

• Conventional wisdom holds that Google wants to make sure the bidding reaches at least $4.6B in order to force the winner of the spectrum to adopt the openness standards mandated by the FCC, but would rather have somebody else win the spectrum.   An Information Week article speculates that somebody other than Google, like Verizon Wireless, holds the $4.3B bid and that Google will now be forced to bid $4.7B to force the openness standards, or lose the auction and lose the goal of an open wireless network.  But that Google doesn't really want to win the spectrum, so Google is stuck.
• Harold Feld provides an analysis of bidding for the 50-state C-block 700 MHz license here, and speculates that Google is sitting pretty with the $4.3B bid heading into round 17 of the bidding. Harold speculates that nobody will bid the reserve price and that Google will win the spectrum for less than the reserve price by standing pat with its $4.3B bid for now, then closing out the bidding by matching a reduced "minimum acceptable bid" at the close of the auction.

I think Mr. Feld is right on this one, and that Google actually does want to win the spectrum...but it could be wishful thinking.  We could have C Block winner as early as tomorrow.

Layoffs at Level 3

Andy Abramson pointed out on his VoIP Watch blog a couple days ago that Level 3 is engaged in more job cuts this month.  While I haven't heard anything official from the company, the word on the street is that they actually started the process last month, and it looks to me like the layoffs are part of a larger effort to achieve profitability in 2008. 

It is not unusual for a company that has acquired a half-dozen large competitors to reduce the size of their work force as the integration work proceeds, so Level 3 could be seen as simply following the standard integration script.  However, the company is apparently cutting some long-time contributors, such as Matt Spencer, an admired veteran operational executive whose going-away party was recently held at a local watering hole.  That's why I see the current round of cuts as part of a plan to reach profitability sooner rather than later - because the cuts are going deep enough that I am sure the company knows they are letting go of good talent that they would rather keep. 

I'm sure we will hear some official pronouncement about the layoffs in the upcoming February 7th earnings call.

Is Connectivity The Best Source Of Network Value?

Yesterday, I posted an open question about the source of network value.  Of course, I'm not the first to ponder this question, and thankfully so, because I get to lean on many great minds for the meat of today's post. 

A while back, Robert Metcalfe, the inventor of Ethernet protocol, coined the famous Metcalfe's Law, which says that "the value of a telecommunications network is proportional to the square of the number of users of the system."  This theory recognized that if the world had only one fax machine, then that machine may as well be a doorstop.  Two fax machines?  Now you're starting to have something a little more useful.  If that fax machine has a million other potential fax machines to talk to, then it is even more useful. 

It wasn't so easy for Mr. Metcalfe and his new law, because a bunch of people questioned his math, since he seemed to think that every user you add to the network is equally valuable.  Of course, in the real world, there are bunches of people you would just as soon weren't connected to the network.  So, the incremental value of adding somebody to the network is highly variable, and sometimes of no value at all.  Metcalfe himself conceded this point.

Andrew Odlyzko co-authored a paper that claimed that Metcalfe's Law was wrong, and that the true value of a network is closer to "n log(n)", rather than "n squared", where n is the number of users of the network.   It's a good paper, and it seems about right to me, at least for typical interactive network applications like phone calling and faxing. 

Other folks came up with other ways of measuring network value based on the number of users or connections, focused on different kinds of networks.  For example, David Sarnoff, an executive with RCA Television, believed that the value of a broadcast network grows linearly with the number of subscribers, and that makes sense because the incremental revenue generated when a new broadcast subscriber is added is limited to the subscription and advertising revenue you generate from that one subscriber. This effect is called Sarnoff's Law.

At the other extreme we have Reed's Law, named after David P. Reed, who said that the value of social networks is actually 2 to the nth power, where n is the number of subscribers.  As Reed put it in "The Law of the Pack" (Harvard Business Review, February 2001, pp 23-4):

"[E]ven Metcalfe's Law understates the value created by a group-forming network [GFN] as it grows. Let's say you have a GFN with n members. If you add up all the potential two-person groups, three-person groups, and so on that those members could form, the number of possible groups equals 2ⁿ. So the value of a GFN increases exponentially, in proportion to 2ⁿ. I call that Reed's Law. And its implications are profound."

Here's a table of the relative value of different network types according to these valuation laws:

Number of Subscribers	1	2	3	4	5	6	7	8	9	10	11	12
Sarnoff's Law	1	2	3	4	5	6	7	8	9	10	11	12
Odlyzko's Law	0	1	1	2	3	5	6	7	9	10	11	13
Metcalfe's Law	1	4	9	16	25	36	49	64	81	100	121	144
Reed's Law	2	4	8	16	32	64	128	256	512	1024	2048	4096

So, you can see how Reed's law starts assigning some pretty outlandish values at even small numbers of subscribers, which seems more than a little bit Internet Bubble 2.0-ish to me.  Reed makes the same mistake as Metcalfe makes, where he assumes that just because you CAN make a group on a network, doesn't mean that anybody really WANTS to. 

Still, the general idea that group collaboration might be somewhat more valuable to people than bilateral interactivity might be true, so it does lead to a hypothetical rank-ordering of network types by value:

1. Social networks (possibly as valuable as 2 to the nth power?)
2. Interactive networks (probably about as valuable as n log(n), but possibly as valuable as n squared)
3. Broadcast networks (value grows linearly with the number of subscribers).

If the above rank-ordering is true, and I wanted to invest in a network today, what kind of network deserves my investment?  An Internet backbone can support all three of the above application types, so that is kind of a slam dunk.  How about a Cable TV network?   Well if it can only support content broadcasting, then it won't be as valuable as a network that can also do Internet access and voice services, which is exactly why CableLabs developed the DOCSIS and PacketCable standards to extend the cable plant into additional, higher-value services.

Hmmm.  If the above rank-ordering is true, which expansion strategy is likley to create more value:

• Telcos offering broadcast television and pay-per-view services?
• Cable companies offering telephone services?
• Wireless phone companies offering content services?

Of course, there is a lot more to think about in this kind of question than a simple rank-ordering of application value.  More to come.

What Makes A Network Valuable?

In the coming days and weeks, I'll be posting a some thoughts on some of the following questions:

• What are the drivers of a network's value?
• Which drivers have the most value?
• What role does content play in the value of a network?
• What role do applications play in the value of a network?
• What role do mobility and/or wirelessness play in the value of a network.

I've been musing about these kinds of questions for years, and some of the comments I've received on some of my posts have got me thinking about it more, because it is apparent that there are a lot of different perspectives on this question of network value, and it drives investment strategy for just about everyone in telecom. 

For example, it's clear that Time Warner Cable sees value in bundling content with its network.   It's also clear that any of the major wireless carriers believe in bundling applications and content in their network services.  So, where is the value?  Is it in the network or in the applications, or in the content, or what?

Here are some candidate sources of value, with credit to Darren Loher, Robert Metcalfe, and Andrew Odlyzko, for the list of ideas: 

• The number of users of the network
• The connectivity (location and interconnects) of the network
• The accessibility of the network (mobility and wirelessness)
• The capacity of the network
• The reliability of the network
• The content available through the network
• The applications available on the network

I don't think anybody really has the final word on this question of network value, least of all myself, but I do think that exploring the topic on this blog could help clarify things for myself and possibly for others.  I'm looking forward to the thought experiment, and looking forward to your thoughts on the question as well.

Will Tiered Internet Pricing Lead to "Friends and Family of the 'Net" Deals?

A few weeks ago, Broadband Reports intercepted an internal Time Warner Cable memo about a tiered Internet pricing trial in Texas, which the company hoped would be effective in preventing bandwidth gluttons from eating more than their fair share of the Internet capacity on Time Warner's network. 

To recap earlier posts, cable networks are trying to deal with two problems:

1. Less than 5% of their users eat up something like 80% of the bandwidth on their networks, so in order to keep the other 95% of the customers happy, the cable companies need to either restrain the bandwidth hogs or add enough capacity to handle all of the traffic in the peak busy hour. 
2. The cable networks were designed with only one application in mind: web browsing.  This highly asymmetrical application has just a little data flowing in the upstream direction (requests for web pages and other content), and tons of data flowing in the downstream direction (rich media web pages, audio files, and video files).  The problem is that the Internet supports lots of other applications that don't conform to the asymmetrical expectations of the cable companies, including the hated peer-to-peer file sharing applications used by most of bandwidth hogs (see #1).

So, short of adding capacity or re-designing their networks, the cable companies are trying different things to combat these problems. 

• Comcast has engaged in stealth "traffic shaping" to delay traffic of certain peer-to-peer applications, to the horror of net neutrality purists, and it has provoked an FCC investigation.
• Seeing Comcast's travails, Time Warner is trying a more straightforward approach:  if you want to use more bandwidth then you have to pay more for the service.

Brough Turner has an interesting post, suggesting that Time Warner take it a step further and borrow old marketing ideas from the phone network: 

• Charge less for on-net to on-net traffic (to help avoid Internet Transit costs)
• Give discounts for usage outside of the peak usage periods

The essence of all of these ideas is similar:  if ISPs aligned their retail offers more closely with their wholesale costs, then economic theory would work its magic and everybody should end up happy, except for the freeloaders who wanted other subscribers to subsidize their massive Internet usage.

My first choice would be for the cable companies to add a lot more bandwidth and correct the asymmetric assumptions in their network design.  I'm not holding my breath for that, though!  Short of a network fix, I'm in favor of tiered pricing, if it helps reduce the congestion on my Comcast Internet connection in the evenings.  And, while I think that Comcast should have a right to manage its network within the parameters of its terms of use agreements, I think the tiered pricing approach is a lot cleaner and arouses less suspicion.

Google's 700 MHz Auction Strategy Still A Mystery

The first four rounds of the 700 MHz spectrum auction are over, and about $3.7B in bids have been received for the various spectrum slices.  Some think the bidding is below expectations, and there are signs that demand is lower than anticipated by the FCC.  Also, it is now clear that Google is not following the script that some predicted. 

Where is the demand?  Of the 1099 spectrum parcels being auctioned,  178 of them haven't received any bids whatsoever.  The D block has only received an opening bid of $472M in the opening round, and has not received any additional bids. 

Last summer, Google CEO Eric Schmidt committed to FCC Chairman Kevin Martin that Google would bid $4.6B in the auction if the FCC adopted open standards for the C block, and the FCC did that, so we know the auction is going quite a bit higher if Google keeps its word.  The winner of the C block only has to abide by the open standards if the spectrum nets at least $4.6B, so some had thought that Google would just cut to the chase and bid $4.6B for the C block at the outset, then drop out of the bidding and let somebody else win the spectrum, content in the knowledge that somebody would have to operate an open network.

Instead, the pattern apparent from the early bidding shows that Google and all of the rest of the bidders are biding their time.  In each bidding round, a single bidder has matched the FCC's minimum bid for the C block for that round.  We don't know the identity of that bidder, since the bidding is anonymous.

Is the auction really a disappointment?  Too soon to say.  Greg Rose thinks that the auction is going as expected and bidding will be strong.  Others think that the bidding is low.  All I know is this: it ain't over til it's over.

EBRO ELMO AND THE TRAILER HOME

Some good friends of mine from Pomroy, Ohio - the Ohio side of the Ohio River - took a sightseeing train ride over the river and up through the mountains.  Somewhere over by Beckley, they left the train, rented a car and drove back through some of the ridges and hollers of the APP.  They sent me an e-mail disparaging the hill people and made some reference to Deliverance and the inbred yokels they saw sitting on the remains of an old coal tipple.

I took exception to their characterizations; after all, they were from a back woodsy part of Ohio.  The following is a compendium of my 3-message response of fun fiction built loosely around my relatives from “West – By God – Virginia”.

Subject: EBRO ELMO AND THE TRAILER HOME

Watch it, I think that I have some blood relatives, all 2nd cousins, from Hinton, but I can't remember for certain.

I know that cousin Ebro Elmo, "Double E" as we called him, or was that his shoe size - he rarely wore shoes - went to a reunion over there looking for a date.  He got “deliveranced,” so Aunt Hulda (German for “loveable”) said, and never was the same - a tenor, instead of a baritone, as I recall.  EE played banjo, the juice harp and dabbled on the jug with Lester Flatts' touring company before he was 14, but lost his virtuosity sometime about that time.  The Faber/Morrison nasal tone just wasn't there on the vocals any more; a real shame since he still had all his teeth and no really noticeable scars. My hearing of him ended with the news of his full retirement as an oiler on "Big Bertha" at age 47 when he went to Virginia Beach with the family home on wheels. Funny what comes back to you when there is a mention of "Almost Heaven."

D Block Controversy Creates Call For Stopping The 700 MHz Auction

Allegations of auction manipulation are roiling the FCC's 700 MHz spectrum auction.  Harold Feld is calling for the auction to be halted, based on a convoluted tale of pre-auction shenanigans surrounding the D block, one of the slices of spectrum being auctioned.  The auction was kicked off yesterday and was expected to last several weeks.

I invite you to read Harold's post for all of the gory details.  At the risk of oversimplifying, I'll try to summarize the concern here. 

First, some backbround.  The D block is a strange slice of the 700 MHz spectrum, designed to be shared between a "public safety network" for emergency services, and a presumably for-profit wireless network operator.  The FCC selected a non-profit named Public Safety Spectrum Trust (creating the ironically secretive acronym, PSST) to oversee the build-out and management of the public safety part of the network.  PSST selected a company named Cyren Call to help them negotiate deals with, and then manage, the relationship with the winner of the D block spectrum license.

Now, the controversy.  Apparently, before the auction, the guy who runs Cyren Call told one of the likely D block bidders, Frontline Wireless, that it would cost them $500M to access the public safety part of the D block spectrum for ten years.  Allegedly, this sounded like too much money to Frontline Wireless, so Frontline decided to close up shop instead of bid on the spectrum.

Feld's concern is that Cyren Call either

1. Told all the D block bidders about the high prices they intended to charge and thereby ripped off the federal government by depressing the prices bidders were willing to pay for the spectrum, or
2. Told only some of the D block bidders about the high prices they intended to charge and thereby influenced only some of the bidders to withdraw, thereby tampering with the auction.

If the allegations are true, it does seem to me that Cyren Call's leader, a guy named Morgan O'Brien, may have been out of line in his pre-auction discussions.  However, calling for stopping the auction seems kind of over-the-top to me.  There's a lot of supposition in the allegations and it could turn out that key parts of the story aren't factual...and then we would have stopped the auction for nothing. 

On the other hand, the bidding in all of the various spectrum blocks is interlinked, meaning that bidders might bid on multiple blocks in hopes of winning one of them, and going in, a bidder won't know for sure which block they will end up with, if any.  So, influencing bidders in the D block prior to the auction might have a ripple effect on the bidders for other blocks, like the highly sought-after C block.

What I worry about, though, is that the bidding has already started, so the various bidders have already started to show their hands.  Even though the bidding is anonymous, if the auction were to be stopped now and then started over in the future, the parties might be armed with knowledge that they wouldn't otherwise have, and that in itself could winnow out some bidders even before the auction was restarted in the future, and that could depress potential auction proceeds.

So, as troubling as the allegations are, from where I sit right now, I think there is more to be lost than gained by stopping the auction at this point.  I reserve the right to change my mind as facts emerge.

Wounded Sprint Wields VoP Patents In Fight For Survival

On the same day that Sprint announced a house-cleaning in its senior executive ranks, the struggling carrier announced the next phase of their "Voice over Packet" patent war.  Sprint won the first phase of the patent battle with a victory over Vonage last year, resulting in a $69.5M damage award to Sprint.

Sprint is suing Broadvox, NuVox, Big River Telephone, and Paetec for "ongoing infringement" of their VoP patents.  The lawsuit comes just a week after Verizon announced a VoIP patent lawsuit against Cox Communications. 

Encouraged by their wins against Vonage last year, the Verizon and Sprint patent trolls are going back to the bridge to waylay more VoIP travellers. 

I'm guessing that this new batch of patent targets are largely using off-the-shelf VoIP vendor solutions, and that several of these vendor contracts will contain indemnification clauses that obligate the vendor to defend against intellectual property lawsuits.  It will be interesting to see how this plays out!

VoIP Doesn't Sell

Rant On.

Garrett Smith says that nobody wants "SIP Trunking," echoing past posts here that for the most part, people don't buy technology, they buy solutions. 

Case in point:  at the end of 2006, there were on the order of 12 million U.S. subscribers to phone services that used voice over IP technology.  Over 8.3 million of them subscribed to cable phone services, none of which are marketed as "VoIP" service.  For example, Comcast markets their service as "Comcast Digital Voice."  That means that at the end of 2006, about 70% of all U.S. subscribers using VoIP technology bought a service that did not market itself as a VoIP service.  If you took the same measurement at the end of 2007, you would find that the percentage is even higher now.

So, all you "VoIP service providers" that still believe people are buying the "cool factor" of a new technology, I'm here to tell you that the technology isn't new any more, and that the technology is not why people are buying. 

All you "VoIP service providers" who think you can take shortcuts with emergency calling services, I'm here to tell you that you are playing with fire and dissing your customers.

All you "VoIP service providers" that still believe that VoIP's "enhanced service" status exempts you from access charges and gets you an arbitrage cost advantage over traditional telecom players, I'm here to tell you to get over it.  If your business is based on arbitrage, you have no business.  With a single stroke of the pen, a government bureaucrat sinks your ship.

If you are attempting to reach the mass market, and if I can find the word VoIP on your home page, I'm calling you out:

• Broadvoice, double-dinged because you have VoIP and SIP on the home page.
• Packet8
• VoIP.com
• Even Vonage, "A Better Way to VoIP"

There are many, many more, and that is part of the problem.  If you are on this list, then you aren't crossing the chasm to the mainstream market.  Instead, you are scrapping for the most cost-conscious market segment, the early adopters who are mostly concerned about saving money, and you are spending too much money trying to steal these customers from each other.   

There's a reason why SunRocket closed their doors last summer, and why Netzero shut down their VoIP service late last year.  No, its not because of some big telco conspiracy.  It's because these businesses had a hard time making any money.

Instead of trying to ride an arbitrage-driven, short-cut path to wealth on a technology buzz that is long since over, try doing the hard work of pleasing each and every one of your individual customers by providing solutions and service that they adore.  And, while you are at it, don't try to snow them with technical jargon they don't understand and don't want to hear.

Rant off.

More on Verizon's VoIP Lawsuit Against Cox

In yesterday's post about Verizon's latest VoIP patent lawsuit against Cox Communications, I wondered aloud if it means that Cox now has a second shot at invalidating the patents that Vonage supposedly infringed, and wondered if Vonage might have a chance to recoup some of the damages paid in their settlement with Verizon, if the Verizon patents are invalidated. 

I've done a little checking around, and will share what I have learned, but first need to caveat all of this by saying I am not a lawyer, so don't take this as a legal opinion...and if you, the reader, are a lawyer, or if you just know about this stuff, please feel free to comment here and correct me.  Also, just for the record, I'm not involved in this case in any way.

From what I am learning, even if a patent has been successfully asserted against an infringer, if that patent is used to sue a second infringer, then the second infringer still has a shot at invalidating the patent.  So, Cox has a chance to invalidate Verizon's patent.  The bar is kind of high now, because Vonage has already tried and failed, but that doesn't mean that Cox can't succeed where Vonage failed.

So, supposing Cox does manage to invalidate the patents that Vonage supposedly infringed, does that mean that Vonage can ask for a refund of the damages they paid to Verizon in their settlement of their lawsuit?  What I am learning, and it makes sense to me, is that it all depends on the settlement contract that Verizon and Vonage signed.  If Vonage has a clause in that contract that says they get a refund if the patent is invalidated, then Vonage should be getting a refund.  If there is no such clause in the contract, then no such refund should be expected, even if the patents in question are later found to be invalid. 

Again, I'm not a lawyer, so take this as what is is...an engineer's perspective on a curious issue.  If you are a lawyer, please weigh in with your comments!

IMS: The Last Big Telco Architecture

I have a guest post over on the IP Convergence TV portal today, musing about the IP Multimedia Subsystem (IMS), and speculating on the future for this controversial convergence architecture for service provider networks.  Is IMS doomed, or is there a market for it?  Find out, over on IP Convergence TV!

Gates Urges Kinder Capitalism, Google Does It

In a speech in Davos, Switzerland today, Microsoft Chairman Bill Gates will call for a kinder form of capitalism that will prioritize helping the world's poor, as reported on the front page of the Wall Street Journal this morning.  He says "We don't need some dramatic big new tax or requirement.  What we need is the recognition of the creativity here that some of the leaders are exercising."   

Gates has put his money where his mouth is, contributing over $33B of his own money to a charitable foundation that is focused on global health and development programs, and I applaud him for that.  Warren Buffet has also committed $31B, the bulk of his fortune, to the Bill and Melinda Gates Foundation.  Good stuff, but Gates is now calling for something different, something more than wealthy individuals contributing their fortunes to relieve suffering and reduce inequities.

Gates now wants corporations to grow a conscience, to add one more priority to the standard list of corporate priorities.  I agree with that...as chairman of a non-profit corporation, Global Hope, I often ask companies for donations and assistance, and one of the frequent answers I get goes something like this:  "As a public corporation, we don't believe we should be making decisions to spend our shareholders' money on charitable contributions, instead leaving charitable giving up to individual shareholders." 

I think that attitude is a cop-out, a failure to recognize the responsibility that goes along with the great concentration of wealth represented by many corporations. 

The good news is that the US is the most giving nation in the world, contributing about $300B a year to charity.  The problem is that typically less than 5% of the giving makes it outside of the US, where the greatest needs are. 

Not all corporations are ignoring the world's needs.  One of the best examples is Google, which has create a $2B corporate foundation for charitable work.  Google.org has allocated funds toward predicting and preventing disease pandemics, empowering the poor with information about public services, and investing in small and medium sized businesses in the developing world.

To be sure, Microsoft is not ignoring its corporate responsibility, either, donating $68M in cash and over $300M in software in 2006.   But, on a percentage of revenue basis, Google is doing far more and taking a more creative approach with its charitable work.

Ike's bottom line:  corporations need to wake up and realize that they need to intervene on behalf of the world's poor, and need to direct a lot more of their creative energy in that direction.  I believe that long-term human advancement, and corporate prosperity, depend on it.

Buffett On Risk

I've been thinking about the market turmoil we have seen since October, and especially since the beginning of '08, and I don't know about you, but I get kind of angry at the banks that took so much risk in the sub-prime mortgage markets.  I ran across this quote in the blogosphere, on Nyquist Capital's blog, and I think it captures my current mood perfectly:

After all, you only find out who is swimming naked when the tide goes out. At Berkshire, we retain our risks and depend on no one. And whatever the world’s problems, our checks will clear.   - Warren Buffett, 2001 Berkshire Hathaway’s Chairman’s letter

I wish more of these banks had the foresight to anticipate that the tide would eventually go out.

Verizon Sues Cox For VoIP Patent Infringement

Like a shark in a feeding frenzy, Verizon tasted blood last year when they won a VoIP patent lawsuit against Vonage, and now they are back for more.  Verizon has filed a patent lawsuit against one of their cable rivals, Cox, in Virginia, claiming that Cox is infringing eight Verizon patents.  Four of the patents in the Cox lawsuit were also in the Vonage lawsuit.  Phone+ has the details, here.

All of the big US cable service providers use the CableLabs PacketCable architecture for VoIP service, including Cox, Comcast, Time Warner, and others.  So, it is conceivable that if Cox is found to be infringing by using that CableLabs architecture, then Verizon would go after all of the rest of their cable voice competitors for license fees and damages.

I think that Verizon will find a tougher fight with Cox than they had with Verizon.  The engineers at CableLabs are real subject matter experts on the development of VoIP protocol standards, and will likely supply Cox with lots of prior art to use in the case.

Does this mean that Cox now has a second shot at invalidating the patents that Vonage supposedly infringed?  And, what does that mean for Vonage, if they have already paid damages on a patent that is later revoked? I'll check with some patent lawyer friends and report back. 

Google Set To Win In 700 MHz Auction

The FCC's long-awaited 700 MHz spectrum auction begins tomorrow, and the blogosphere is alive with predictions about Google's chances of winning spectrum.  Some think Google is bidding to lose, some aren't sure, and some are convinced Google is in it to win.  I have already gone out on a limb and predicted that Google will bid to win and will actually win spectrum.

Yesterday, Brough Turner added his voice to "Google-bidding-to-win" camp, with a thoughtful post on his blog.  I was particularly interested to read Brough's thoughts about what Google would do with a spectrum license once they had won it:

"First pick the latest mass market technology for mobile broadband access, probably mobile WiMAX, and set up a program to foster numerous independent wireless ISPs (WISPs) rolling out services on Google's frequencies.  In the 1990s, the US had thousands of ISPs providing dial up access over traditional phone lines.  The goal here would be to duplicate that entrepreneurial flurry for both fixed and mobile wireless access."

Sounds like a great way to accelerate coverage development, so long as they don't sub-license to too many ISPs in the same geography! 

There's more on Brough's post, I encourage you to have a look.

Another Theory For Why Vonage Pulled Their WiFi Phones - Patent Violation

Garrett Smith opined this morning that Vonage pulled their WiFi phones because they didn't work well, and that theory sounded very plausible to me since my experiences with VoIP over WiFi have been inconsistent at best.  However, reading the comments on Garrett's blog this evening, Jim Smith offered an equally plausible theory: Vonage pulled the WiFi phones because they violated Verizon's patent "6,359,880 - Public wireless/cordless internet gateway," one of the same patents that Verizon used to sue Vonage in the now-famous law suit. 

Nice theory, but there are more details to consider.  The appeals court in the Verizon/Vonage fight vacated the lower court's decision that Vonage was infringing the '880 patent, and said it would have to be retried.  So far, Vonage hasn't really been found to infringe that one.  It was the other two patents, 6,104,711 and 6,282,574, that had the claims that even the appeals court upheld as being infringed by Vonage, and neither of those patents describe VoIP over WiFi. 

So, it could be that Vonage is not taking chances and trying hard not to infringe the '880 patent, or it could be that Vonage made a settlement deal with Verizon and agreed not to do things that might infringe the '880 patent.  At this point, though, I think it is more likely that Vonage simply stopped selling the WiFi VoIP phones because they weren't working well. 

WiFi VoIP Takes Another Hit

Yesterday, Russell Shaw reported the mysterious disappearance of WiFi VoIP phones from the Vonage product line, and asked for opinons as to why you can't find the phones on the Vonage web site or at retail outlets.

Garrett Smith speculated this morning that Vonage has dropped WiFi VoIP phones from their product line because they realized that they create an atrocious customer experience. 

I'm with Garrett on this one.  I posted on this blog back in November, and again last week, that WiFi VoIP solutions just don't work well.  Add that to the fact that Vonage must be doing some urgent soul-searching about their customer churn rate, which was 3% per month last quarter, and I have no doubt that Vonage is doing some triage to try to improve their customer experience and reduce their churn rate.

I've found that using a standard 900 MHz cordless phone, with the cordless base station connected to a SIP Analog Telephone Adapter works great for wireless VoIP service around the house, and has much more reliable performance than a WiFi VoIP phone.  I currently use a Sipura ATA with a Panasonic cordless phone.  My advice: if you are looking for a wireless VoIP solution for home use, get a cordless phone and an ATA instead of going for a WiFi VoIP phone. 

Of course, if you are a Vonage subscriber, then the WiFi VoIP phone isn't even an option any more.

Learning To Surf In Retirement

The Wall Street Journal's tech blog reports that a British study of technical competency by age group is shattering the stereotype that young people are tech wizards.

"To combat the notion that young people need to be connected to the Internet more than older people, the study cites a survey that shows people over 65 spend four hours a week more online than 18 to 24 year olds."

I know that's true of my mother-in-law...she has achieved full guru status in retirement. 

Which social network has a lock on the coveted over-65 demographic?

Thank You, Telecosm Readers

The Telecosm blog hit another milestone this week, exceeding 200 subscribers for the first time, after about 3 months in operation.

 

Thank you for reading and commenting on the Telecosm blog!

Ike

Time Warner Cable Commits The Sin of Bundling Gluttony

When I read how one of the last media properties to resist online distribution of their content, HBO, has now launched a broadband download service, a big red light started flashing in my brain, because it comes with a catch:  you have to be a digital cable subscriber to the HBO cable channel, and you must use your cable provider for Internet access, in order to get the HBO broadband download service.  Of course, HBO is owned by Time Warner Cable, so Time Warner has no interest in unbundling their content from their purpose-built hybrid-fiber-coax headend-based video distribution plant. 

By restricting users of HBO Broadband to digital cable subscribers using a cable-owned Internet access, Time Warner is committing the sin of "bundling gluttony," and their customers will take note and resent it.  Time Warner is just resisting an inevitable unbundling of content and distribution.  There is a ton of content out there that isn't owned by the cable companies, and, as water always finds its way downhill, this "unaffiliated" content will seek out the most efficient and ubiquitous distribution service.  If Internet Protocol isn't already the most efficient or ubiquitous, it will be, someday. 

Any more, when I get a bundling offer from any service provider, my internal "marketing alarm" goes off and I get suspicious that the service provider has a lot more to gain than I do if I take the offer.  And what is the worst kind of bundle?  It's the kind that mixes layers in the network stack, like this latest HBO bundle does.  Okay, so if I want The Sopranos on my PC, I can't get it if I buy my Internet access from Verizon?  And, even if I buy Internet access from Time Warner Cable, then I still can't get The Sopranos on my PC if I don't buy the digital cable package with HBO from Time Warner, too.

It's enough to drive a man to illegal file-sharing.

Please, please, just let me choose my Internet access, and let me make a separate choice about what kind of content I want to buy. 

The Juice Behind Social Networking

I have been a reluctant "social networker" for a while now.  A couple months ago I confessed that I use Facebook, but don't really spend much time with it, and am not nearly as enthralled with it as some of my friends.   I have found LinkedIn to be pretty handy for some practical functions, like keeping track of trusted colleagues, and for recruiting for clients.  But really, I'm not addicted to social networks.

That's why I found today's "Media Metrics" post by Adam Thierer on the Technology Liberation Front to be interesting...it showed me just a little bit of why Facebook is commanding an astronomical valuation right now.   Check out this chart:

(click the image to enlarge it)

That's right, social networks are supposed to drive about $2.7B in advertising spending by 2011, just three years from now.  Of course, that's still just a fraction of Facebook's $15B valuation, but it does show that there is gold in them thar social networking hills.

I encourage you to check out the rest of Adam's post...lots of good data about the growth (or shrinkage) of advertising spending by media sector. 

 

This and That

Several years ago, I started writing my childhood memories of my young life on "The Place", our family farm out on Elk Twomile Creek in Kanawha County, northwest of Charleston, West Virginia.  These stories are always the memories of a child, not history.  The following is one such memory and I shall add others from time to time.  Eventually I will add my retrospect pieces which will fill in a few real blanks of the saga.

Elk Twomile Road was a 1 1/2 lanes, sometimes two lanes wide, dirt track with many ruts and mud holes when I first remember being on it on foot or in the car.  Passing cars had to slow to a stop with one side of the vehicle hanging barely on the edge of the creek bank or against the hillside cut while the other cautiously eased by.  Granddad Shell was a big Faber man, as the entire family was reputed to be.  Grandma Ercel was a tiny wisp of a woman and she claimed that she could stand erect under Shell’s outstretched arm.  A car did not make it past another down the road above the Adams place one day when Granddad approached in his own car.  The road was blocked.  Old Model A Fords were probably not much heavier then a Honda 4-Runner, but they still had some weight.  The story is that Granddad got out, put one leg down over the hillside, grabbed the bumper and single-handedly heaved the car back up on to the road.

Twice a year, spring and fall, the county would send a big yellow road grader up the holler to knock off the high spots and fill in the low.  The newly smoothed road would hold until the next rain.  Sometimes a county truck would pass the farm and add gravel here and there, but the road was still mostly mud or dust depending on the weather.  When I was about 8 (1948), the county undertook a major road rebuilding project in the holler.  The huge Euclid dump trucks with wheels about a mile high, earth moving pans and graders and dozers with blades higher then a car were glorious and the greatest spectator sport in memory for the older folks and just plain eye-popping to us kids.  We would go climb on the equipment when the workers left for the day.  The old road was cut into the hillside about 40 or 50 feet above the creek that bounded our bottom land.  The road crew drilled for days and then would blast rock out of the hillside and all over the place.  A young worker from the construction company would come down to the house and accompany Mom and us kids up or down the fields into a far reach of the farm when they did their blasting in case a rock might fall in the yard or on the house; it never did, but the noise and dust cloud was dramatic.

Is Comcast Shareholder Unrest Justified?

Chieftain Captial Management called for Comcast CEO Brian Roberts to be ousted this week, calling his leadership over the past ten years a "Comcastrophe."   Cool play on words, but Roberts isn't going anywhere, and for a whole bunch of reasons:

• The Roberts family controls a third of the voting shares, making it hard to dismiss him.
• Some think that Mr. Roberts is doing a fine job, as evidenced by an Institutional Investor Magazine poll that just named him the best Cable & Satellite CEO in the industry for the fourth straight year.

So, we have some pretty widely divergent views here...is Roberts a comcastrophe, or one of the best CEOs in the land?

Chieftain has the following specific complaints:

• The company spent $80B on acquisitions at unreasonable valuations
• Capital expenditures have ballooned
• Free cash flow forecasts have been consistently reduced
• Returns on invested capital have been anemic
• The dual-class voting structure is inconsistent with 21st century governance standards

Chieftain has good reason to complain about the above list. However, it isn't just Comcast that is suffering.  The entire cable world is under attack, from telcos, satellite providers, and regulators.  If Chieftain couldn't read the tea leaves and figure out the ahead of time that the cable industry would end up in this bind, why should they blame Roberts for that?

If anything, Cable needs to accelerate capital spending to aggressively respond to competitive threats from Verizon and AT&T, who are deep into fiber optic deployments and are now competing with the core video distribution business that has been a cable mainstay.   Cable has been slow to respond, so far.  After all, by the time Comcast comes out with their crazy-fast 160 Mbps DOCSIS 3.0 service, it will have been about two years since the first FIOS subscribers were turned up.  Not exactly a rapid response to the competition. 

That's the history of the cable industry, though.  Every year from 1999 onward, I thought that surely this would be the year for Cable VoIP to make serious inroads into the telco monopolies.  And, every year til about 2005, I was sorely disappointed at the slow progress of the trials. 

Cable just seems to take a very careful approach to rolling out new technologies, and as a result, they are missing the early end of the market demand for higher speed broadband. 

So, Chieftain is fighting a losing battle in trying to get rid of Mr. Roberts, and the immediate future isn't likely to make Chieftain any happier, as the cable industry spends more money to respond to the competition, and the financial strain will show in the quarterly reports.  I don't think changing the CEO is going to change anything about that forecast.  

There IS a Software Prior Art Database for Patent Research

On the topic of creating a database of prior art, I just heard from an old friend and colleague who is an intellectual property lawyer, and he pointed out that there is already a prior art database for software: www.spi.org, a software prior art database developed for just the purpose Daniel Berninger mentioned in his post today, as is Greg Aharonian's source code database found at www.bustpatents.com.   Thanks!

A "Prior Art Database" for Software Patents?

Daniel Berninger has a good patent post over on GigaOm today, talking about some of the history behind the technology that Verizon patented and used to sue Vonage.  Daniel worked for VoIP innovator VocalTec back then, so he knows that Verizon learned much from VocalTec, and then patented it.  The truth is that the ITU H.323 standard, developed in the early 1990s, incorporated much of the technology that Verizon patented, and was well developed well ahead of the Verizon patent.

Daniel suggests that Vonage lost the Verizon lawsuit because it couldn't find enough evidence of prior art, and suggests that a potential remedy is for software engineers to contribute their code and design documents to a prior art database so that future lawsuits can be appropriately rejected.   

While this prior art database may be helpful on a purely practical level, if it had existed it still may not have prevented Vonage from losing.  I, for one, believe that the prior art that would have exploded the Verizon patents is out there and that Vonage just didn't hire the right expert witnesses to help them find it.

What's more, the existence of a prior art database won't solve all that is wrong with the current patent system. (To be fair, Daniel never claimed it would solve everything).  For example, even with a prior art database, the patent office would still have a huge backlog of software applications, and no rational plan for catching up.

Brough Turner recently found a research paper by a professor who found that a similar problem in the US patent system was solved about 100 years ago only when the problematic category of patents was eliminated.  This path holds the most promise, in my view.

So, without patents, would software then have no intellectual property protection?  Of course not!  I'd be kicked out of the "software engineer's club" for suggesting it.

Instead, I'd like to see software rely on copyright as its primary form of intellectual property protection, as suggested by Tim Lee.  Then, the "prior art database" becomes the copyright database, which already exists and is searchable, online. 

I see the prior art database idea as an innovative and straightforward attempt to address the symptoms of a greater problem, and I congratulate Daniel on recognizing the problem and trying to address it.  However, I hope we don't settle for treating the symptoms...we also need to try to correct the root cause of the problem. 

The End Of The All-You-Can-Eat Buffet?

Broadband Reports has intercepted an internal memo from Time Warner Cable, disclosing an upcoming trial of a system that will charge extra fees to the top 5% of their bandwidth users.  Other cable operators have considered or attempted these kinds of overage charges as a way to limit the bandwidth hogs and preserve bandwidth for the 95% of the subscriber base, but the tactic has yet to stick.

Harold Feld, on the Wet Machine blog, likes the idea of overage charges, but worries that it will negatively impact the online economy at a time when the US economy needs a jump start. 

This Time Warner trial is another approach to solving the problem of a small number of subscribers hogging bandwidth and ruining the user experiences for the majority of cable subscribers.  Comcast tried to deal with the problem by delaying peer-to-peer traffic using traffic-shaping techniques. I agree with Harold that the Time Warner approach is more honest than the stealth "traffic shaping" employed by Comcast to limit peer-to-peer BitTorrent traffic.   

The core issue for cable operators, though, is that their DOCSIS plant is highly asymmetrical, with much more download bandwidth than upload bandwidth.  Even the new DOCSIS 3.0 standard, which promises maximum download speeds of 160 Mbps, won't help the upload bandwidth congestion problem much, at least at first, because in an effort to accelerate the DOCSIS 3.0 rollout, CableLabs is only certifying the expanded bandwidth in the download direction in its first tests.  Expanded upstream bandwidth won't be available to DOCSIS 3.0 subscribers until 2009. 

The 11th Thing You Need To Know About The Future Of Broadband

Martin Geddes posted a thought-provoking article over on GigaOm a few hours ago, entitled "Ten Things You Need To Know About the Future Of Broadband."  Martin starts it off with a quote from the speech that Level 3 CEO Jim Crowe gave last week at an invesment conference, and goes on to make several interesting points, prognosticating about the growth of the wholesale market and how voice services will be increasingly bundled into other application subscriptions.  A good read, and on target on several points, in my opinion.

There is an area where I would like to suggest an "11th Thing" be added to the list. and it builds on Martin's 2nd point:

"Broadband is just one of many distribution systems for data. Others include broadcast, physical media, circuit voice, SMS, content delivery networks, and edge caches (which capture and retransmit broadcast content, e.g. networked DVRs). The successful broadband services provider of the future will be able to mix and match multiple delivery systems, just as logistics companies blend road, sea, rail and air."

I think the way that Martin has characterized broadband's future exhibits a little "layering confusion".  In fact, broadband networks of the wireline and wireless varieties are substituting for application-specific networks over time, and that trend will continue.  Some examples:

1. Circuit voice networks are being replaced over time with VoIP applications on a shared broadband network.
2. SMS currently runs on purpose-built wireless networks such as GSM, but SMS may eventually run on a hybrid wireline/wireless broadband network running IMS (and using Session Initiation Protocol).
3. We are witnessing the start of the replacement of purpose-built broadcast networks with generalized broadband networks with IPTV and Content Delivery Networks.
4. Content Delivery Networks themselves leverage the public Internet by creating a system of edge cache servers on that network.

So, in my view, an important part of the vision for the future of broadband is that all content eventually collapses onto a least-common denominator broadband network, and many of the rest of the "distribution systems for data" become applications on the common broadband network.  That least-common denominator network may not necessarily be the Internet, though in many cases it will be.  The Internet itself, though, rides a common backbone (today largely based on MPLS), and that backbone is the rebar that holds all of the applications together on a shared resource.

How The Patent Backlog Was Built

Rome wasn't built in a day, and neither was the backlog of 1,112,517 patents at the US Patent and Trademark office.  The backlog is not a new problem...people were grousing about it years ago. 

Here's how the patent backlog was built:

(click on it to enlarge the image.  Source, USPTO web site)

I don't think it is any coincidence that the knee in the patent backlog curve happens to line up with the advent of software patentability.  It's clear that the USPTO hasn't been able to hire and retain enough patent examiners to keep up with demand since then, according to a General Accounting Office report published this fall.  The USPTO has put together a five year plan to try to address the issue, but nobody is sure if it will work, since it is clear that the plan for the past five years hasn't worked. 

Maybe it is time to address the root cause, and reverse the decision to make software patentable?