Everything Changed will Change Again

In the last week we’ve seen web attacks, password and private data theft, and in all a lot of things that raise the fair question of whether the Internet is becoming the wild west.  It has been for some time, of course; what’s happening online now is simply a continuation of a set of problems that the Internet as a community refuses to solve and that the governments of the world are unwilling to confront.

Ultimately we’ll have to deal with the issues of security and privacy that the Internet is presenting us, even though those issues have become more divisive for our having delayed so long to address them.  The question is how much worse the problems will have to get before the public marshals support for change.  We are, I think, only a couple of years of neglect away from doing real harm to the basic principles of the Internet—the openness and the lack of a tie to a specific business model.  It would be tragically ironic if we lost those benefits largely because of the unenlightened way we’re pursuing them.

We may see some changes at least in the US in 2011, and there are also signs that Europe may be taking some steps.  I could offer as proof all manner of arcane regulatory comments and trends, but more convincing is the sudden decision by Google to be much more accommodating to the telcos, and even to ally itself with Verizon in proposals for neutrality.  Google is also obviously planning its own transition to a broader business model than advertising, recognizing that only paid services can expand its total addressable market fast enough to sustain its stock price.  Google knows that it’s one thing to offer free best-efforts delivery of content and another to offer paid delivery—in the latter case you’ll have to provide some assurance things will work, but more significantly you’ll have to share the revenue.

Speaking of changes, it’s interesting to see that the Comcast vision of the future of video seems to be emerging.  First, Comcast has forced Level 3 to pay more to enable delivery of Netflix to Comcast’s customers.  Second, Comcast has been running an experiment in socially-linked video as a means of further differentiating its TV Everywhere online offerings.  But just as the biggest proof point for regulatory changes was indirect via Google, the biggest proof point for a Comcast change may be Verizon’s Seidenberg and his comments on a future Verizon model.  Verizon seems to be saying that they’re prepared to be much more “granular” in their video offerings and in their broadband pricing.  On the surface that would seem to be undermining their own FiOS model, but what it’s really doing is exploiting the fact that OTT competition in video hurts the down-market competitors more than up-market Verizon.  If Comcast is one of those, then Comcast has to embrace a bit of the technology of cord-cutting to avoid losing to the business model the technology represents.

TV is changing, but I wonder if the changes are as radical as some say; certainly my own research doesn’t bear that out.  Does the average household watch 13 hours of TV per week as one study shows?  I don’t know of any typical household where that would be true, do you?  It is true that people are spending more time online.  It is true that online time is pulling some viewers away from TV, but so far as I can tell this is what I’ll call “settle-for” viewers.  There’s nothing on they like.  They used to settle for something they sort-of-liked, but now they check Facebook instead.  That’s not destructive to TV viewing; wait till they skip their favorite shows to do something online before you start to worry.  Thus, Comcast’s experiments with “social viewing” may be at least on one potentially valuable path.  We’ll probably see many more experiments like that in 2011.  Meanwhile, reports that things like Netflix are going to kill channelized video are, to quote Time Warner’s CEO, like thinking “the Albanian Army is going to take over the world”.  The establishment has time to work some magic for sure.

Microsoft is also trying to change, and according to the latest rumors from the WSJ it will be launching not only a new line of tablets at CES but also a preview of Windows 8.  The challenge for Microsoft in the tablet space is formidable because tablets are seen today as a kind of fat smartphone without voice instead of being a laptop without a keyboard.  For Microsoft, any tablet win that promotes that simple model is a loss for Microsoft.  It’s not a big player in the smartphone space, it’s not a recognized consumer cloud powerhouse, and a tablet strategy would almost have to be synthesized from both these fundamental elements.

But why Windows 8?  The problem that’s been reported is that Windows 7 is too gadget-intense for a tablet GUI where real estate is limited.  The buttons become too small to manage.  Some have pointed to the fact that when netbooks with Win 7 appeared, they often ran into trouble with applications whose window sizing strategy assumed a specific display form factor, and so cut off the bottom of menus and other windows when displayed on a netbook.  But just having a new version of Windows doesn’t establish a new GUI; developers would still have to embrace the change, and Microsoft would be breaking the momentum of Windows 7 at a time when that momentum may be critical for Microsoft.  How long would it be before users realized Microsoft was going to churn OSs every couple of years, and jumped ship to the thin-client-and-cloud approach.  Which would take us back to the tablet as the ultimate thin client.

Everything is circular, I guess.

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