A Zero for NetZero, a Hope for Microsoft

The media is having a bit of a problem coming to terms with the NetZero proposal for “free” wireless broadband, and what’s sad is that their writers’ block is for the wrong reason.  They want to say “everything is free” because that will get a lot of reader attention, but they’re skeptical that NetZero is really free at all.  One year, 200 megs per month, max and you’re shut off.  Some point out that this is based on Clearwire WiMAX so it’s not going to work with most devices (you’ll need to buy a gadget/dongle).  All fluff.

First, this is clearly a marketing ploy and it’s one based on the fact that WiMAX isn’t exactly setting the world on fire.  The “other 4G” as it could fairly be called, WiMAX was a decent strategy for the five-year-ago period when it was being conceptualized.  Then, having a hundred meg or so to divide up in a large mobile cell seemed reasonable; the average wireline broadband user had a couple of megabits of bandwidth to play with.  You could plot large cells with more people, and you have a less expensive service that would be a good alternative to something like a WiFi hotspot.  But WiFi got faster and faster, people wanted to watch HD movies, and the rest is history.

So of course is NetZero with this plan.  The insurance industry have something they call “adverse selection”.  The notion of insurance is one of pooling risk; a bunch of people buy a policy to insure against something that’s not very likely to happen within the group, but is catastrophic for those to whom it does happen.  The collective premiums fund the losses of the unlucky few and a profit for the insurance company.  But suppose everyone could figure out whether they’d be one of the unlucky?  Only those people would buy the insurance, the premiums wouldn’t begin to pay the losses, and you’d be history as an insurance company.  That’s the issue here.  Free wireless broadband is really appealing to people with little money to spend on broadband.  So a bunch of people will jump on this, collectively consuming a lot of capacity, and few of them will ever convert to a paid plan.  If they were willing to pay, after all, they can get a competitive plan from “real” wireless providers already.

So is this a way to get somebody to buy a WiMAX dongle, hoping that it will then rope that person into WiMAX forever?  Good luck with that one, NetZero!

In the cloud world, it’s interesting to see that Microsoft is gradually exposing some sense in its marketing of Azure, even as from a pricing and positioning perspective it still seems locked in the notion that Azure is an EC2 competitor.  This is a classic example of letting yourself get positioned by counterpunching.  PaaS, which is what Azure is, is a far more logical cloud architecture for the mainstream of cloud demand.  Because more software is included in the cloud, the unit cost and support for the user is less.  Because the platform of the cloud can easily incorporate cloud-friendly development features, you can build cloud-specific apps more easily than you could with IaaS platforms that look like naked iron.  Where does this come across in Microsoft’s material?

Their latest is a rather nice note in MSDN Magazine on Node.js, which is a joint Java activity with Joyent, a startup who recently got a nice round of financing.  Node.js is a server-side javascript interpreter that’s optimized for HTML and I/O handling and that is easily incorporated into modern web applications to extend a basic web server with back-end application power.  Yes, you can install Node.js on an IaaS machine, but if you can get it as part of a platform why not cede the software support/maintenance to your PaaS provider?  The forum Microsoft picked here is the problem; yes you need developers to develop applications, but you need senior management support to pay the developers while they’re doing it.  Microsoft needed to position Azure better for the decision-maker.  The good news for them is that it’s not too late, though the big pressure point for cloud change is not too far off.

What’s that pressure point?  A new EC2 or a better IaaS price, or what?  None of the above.  The big pressure for cloud evolution is tablets and smartphones.  Your app is an icon that’s a gateway to a cloud service.  Siri is a voice-based search engine that instead of giving you a list of possible results, gives you a result that’s probably contextually correct.  As you move to mobile devices, you change the use of the web from research assistant to personal valet.  That’s a cloud mission not a website mission.  Can you build “contextual clouds” using IaaS?  Sure, same as you could with bare metal.  It would be much easier to do that with a platform that had actual features to facilitate those kinds of apps, which is PaaS.  Azure might still be Microsoft’s secret weapon.


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