Bumps in the Internet Video Road?

Apple may be moving into the educational market in a different way, going after the enormous, highly politicized, and highly profitable textbook business.  The details of this move aren’t known at this point but there are some interesting questions about the whole textbook-ebook thing that bear review.  It might be something actually useful in education.

Leaving the question of what goes in a book aside, one of the issues with textbooks of all types is that they are highly inertial.  You don’t want to spend a bundle on books only to replace them every year, and yet there’s both a damage factor and obsolescence of content to consider.  The cost of books tends to induce schools to standardize more on material and to narrow the scope of what’s offered or made available for projects.  Imagine a school whose library and texts where all ebooks, all available to update as quickly as the editions could be changed electronically, all flexible in terms of who gets what, based on who needs it.  That’s probably the sort of vision Apple is looking at.

The challenges are formidable, though.  This sort of thing will not play well with the schoolbook publishing firms, all of whom are comfortably entrenched in their political games.  It’s also not going to be easy to answer the question of who supplies the devices to read the things.  In some schools, kids have laptops or tablets on a routine basis, and arguably that should be true more broadly, but the cost of the gear and the risk of theft or damage is very high when you’re talking about devices like this.  If Apple can’t figure out a way to create a populist educational book market, they risk creating an elitist tier of educational tools that not only won’t catch on but will likely create some back-pressure on the company.  Right now, Wall Street has high expectations for this announcement because they want to see if Apple innovation survived Steve Jobs’ passing.  We’ll find out soon.

Microsoft’s decision to put its subscription TV plan on hold might be linked both to issues of Apple innovation (fear of too much of it) and online business model problems, but most likely it’s what the rumors say it is—licensing.  Content owners are finally figuring out that many of them are being taken just like the access providers.  They make major investments that others leverage for cents on the dollar, so they believe, and the solution to that problem is to raise the rates to license material.  There’s a deeper issue here, though, which is that Microsoft likely fears that the whole of the entertainment ecosystem is in danger of destabilizing.  Too much free content kills the producers of content, the transporters of bits, and puts all the power in the appliance players.  Microsoft isn’t a winner in the appliance space yet; they’re still trying to get a phone and tablet strategy cobbled together.  If they spin out their story now, can they fully exploit the market they help to create?  I don’t think so, and I don’t think they see a clear path to success here either—yet.  Wait till the fall.

The Street is asking whether there are fundamental flaws in the whole carrier router model, and if there are I have to say that the FCC is in many ways at fault.  Genachowski is a VC at heart, one who wants novelty and dynamism in the industry more perhaps than health.  The FCC is rare among regulatory bodies in that it is charged to sustain a healthy industry and not just to protect consumer interest, but under Genachowski “the industry” has meant the OTTs.  It would be unfair to say that routers as a product class are being killed by regulatory stupidity, but it would be fair to say that the vision of the Internet as a high-speed, high-quality, traditional any-to-any grid has likely already been killed.  That, as I’ve said before, tends to push deployments down the OSI stack to the optical and Ethernet layer, because most traffic is going from an edge aggregation device like a BRAS to a cache or POP.  You don’t address anything, so you don’t need IP addressing.  We’re building an Internet a world wide and a metro deep, and that is eventually going to really hit the vendors hard, particularly those without RF or optical positions and without any service layer tools.

Router players have hardly been forthcoming on this trend despite the fact that their own product moves validate it.  That begs the question of whether they’re supporting a vision of market growth that’s already failing in the first step toward the future—the present.  It begs the question of whether their visions of enterprise trends in networking are any better.  It begs the question of whether new products that are supposed to ramp in 2012 are targeting any real opportunity.  My view is that we do have a very pervasive failure of market perception here, one that’s been developing for half a decade, and it’s about to bit us.  Is 2012 the year it does?  Could be.



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