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There’s no way that any blogger in technology could not, today, offer a tribute to the greatest innovator that the technology industry has ever known.  Steve Jobs was a true giant in a world of pretenders, a man who understood the technology and buyer sides of the coin when others simply flipped it.  His genius was to drive the market and not just respond to it, which made him all the more a standout at a time when it’s hard to find companies who can even keep up with change.  Steve produced it, and loved that role.

Apple, and Steve, gave us the current market revolution.  By marrying portable power with ubiquitous broadband he ushered in a new era where the average teen can have, literally at their fingertips, computing power that dwarfs the world’s computational supply just a few years ago.  We’ve yet to see where this can take us, and I’m personally saddened that we’re not going to have Steve to help guide us in the journey.

The Carrier Cloud Forum at Interop this year is grappling with some of the issues that Steve Jobs created.  Appliances demand back-end services to support them, and the way those services are created and the identity of those who offer them may well be one of the major issues in networking.  I’ve noted that operators in my surveys have been steadily promoting the cloud services opportunity among the monetization projects they have been running, and it looks like it could be the top of the list this fall.  It’s not that the cloud offers operators the largest opportunity (mobile/behavioral services and content both outstrip it) but that cloud infrastructure is also what’s likely to host content services and mobile/behavioral services.  Appliances have coalesced all of the opportunities of the future into one delivery point—what the user is holding.  The cloud coalesces all the technology options into one, admittedly fuzzy, vision.

I think CCF demonstrates that we’re still shadowboxing with the issues, though.  The fundamental truths of cloud computing remain as they always have been.  SaaS displaces the most cost and therefore offers the greatest benefit to buyers and profit to sellers.  IaaS is the most flexible, but it presents both benefit-case and profit barriers to wide adoption.  All the “-aaS’s” will face a common issue of service- and application-level integration, which is something nobody is really looking at.  That integration will likely set the pace for the question of how clouds and networks get along, because the general solution at the service layer would produce a flexible solution at the service/network boundary.  We’re not looking for this in the cloud computing space but operators are looking at it in their own service-layer projects, which include both mobile/behavioral and content.  Can all of this stuff be combined?  Not so far.

 

 

 

Apple’s iPhone 5 proved to be media hype; the company actually released only the also-rumored iPhone 4S.  While Apple fans were quick to get behind the more limited announcement, Wall Street took Apple’s shares down in disappointment over the failure of the company to do something revolutionary.  The 4S looks exactly like an iPhone 4, and in one poll only about 10% of responders thought it was a significant advance. I think that the disappointment is unfair—understandable but still unfair, or at least unrealistic.  First of all, the 4S runs iOS5 and has a dual-core processor and thus arguably fits at least the basic profile expected for the iPhone 5.  The criticism comes down to “You didn’t make it bigger”, which really means “It still looks the same.”

As I said in an earlier blog, Apple can’t be expected to keep launching revolutionary updates to a static product set, nor can it be expected to launch a new revolutionary kind of consumer appliance every three or four years.  That’s its biggest problem, and one that really doesn’t have an easy solution.  Apple arguably launched the personal computer and then lost the lead to others.  Its iPhone is still the largest-selling smartphone model, but as in the PC space Apple has lost the total-unit crown to a commodity family, this one based on Android instead of MS-DOS and Windows.  Inevitably, it will lose the top device slot in smartphones, and the top spots in tablets, because Apple is not a commodity market player and clearly doesn’t want to be.  Nor does Wall Street want that, which may well be the strongest motivation of all.

The real question with Apple is, and has been, what it does with iCloud, and so far there are just a few hints.  One example is an iCloud service that shows you where your friends are (providing they’ve agreed to share location with you).  The question is whether this is just a scattershot app aimed at no trend in particular, or whether it’s an indication that Apple understands that the cloud has to be a big piece of what it sells now.  Apple arguably created the thin client appliance market, and now it has to accept the inevitable consequence of increased application hosting in “the cloud”.  Accept, and profit from it.

Sprint, who was hinted to have an exclusive on the iPhone 5, will have the 4S along with all of the other competitors, and in fact Apple says that the new model will launch in more markets faster than anything before.  For Sprint, the phone-sharing isn’t a good thing because it only puts the operator at parity with its major rivals, and that in my view isn’t enough to justify having made a major commitment to Apple to take a large order (rumored 30 million over four years) of phones.

In all, the Apple event was a disappointment to many, and perhaps a critical one for Cook’s first announcement.  What it does do is tee up things for Google, who now has an opportunity to do something more profound, both in terms of Android and in terms of the cloud.  The question is “Can Google do any better?” and I think that in the near term the answer may be “No!”  There are too many balls to juggle.

Android handset vendors, to be sure, can create something that has all of the features that the iPhone 5 was supposed to have; HTC has arguably done most of that already.  But an Android arms race by the Android Little People won’t change the game much.  Android already holds the lead in installed handsets, and no single vendor will challenge Apple for the brand lead.

Except maybe MMI.  The problem Google has is that its MMI deal is drawing more scrutiny, and doing something really dramatic in Android now might spook regulators further.  Without MMI they don’t have their own hardware arm anyway.  So this raises a question.  Did Apple deliberately hold back on the iPhone 5 knowing that this might not be the best time to launch given the economic risk, and knowing that Google might be helped more than hurt by a convincing new Apple victory in smartphones?  Stranger things have happened.

 

Europe continues to move toward a more radical telecom regulatory posture, with EU Commissioner Neelie Kroes proposing that the unbundled copper rates for operators who fail to develop credible FTTH plans be reduced.  The goal is to provide an incentive to move beyond the basic copper infrastructure, and making copper less profitable would seem a logical path to that goal.  It’s not that simple, unfortunately.

Our model says that virtually every EU country could in fact deploy FTTH profitably, providing one defines “profitably” as meaning “meets the company’s IRR guidelines”.  The challenge is that the telcos, as privatized entities, have an obligation to their shareholders to enhance profit and not just sustain it, and there are other ways that investment would bring a higher return.  In point of fact, revenue per bit for residential broadband has plummeted worldwide, and in the majority of countries the subscribers are unwilling to pay for top-tier broadband even where it’s available.  So from a pure bottom-line perspective, this may be bad juju.

The second issue is the public policy goal.  As I’ve noted before, I’ve been unable to come up with a convincing case for broadband serving any specific public good.  That’s not to say that people don’t like it, but they like ice cream too and we don’t promote its consumption at a government level.  As a technology consultant, I’m all for stuff that makes technology grow because it makes my own business grow, but I’m also one to insist on proof for claims, and I’m not finding it here.

I believe that there is a global trend toward the “Australian Solution” to broadband, which is a form of nationalization of the access network to move the problem of infrastructure modernization out of a for-profit business.  Again, I’m all for what people want in a democracy, but I wonder whether everyone is aware of the consequences.  If fiber isn’t going to be profitable to deploy then it will have to be subsidized, and that’s an increased tax burden at a time of global economic turmoil.  Can government create regulations that will sponsor innovation?  Remember, we used to have regulated monopolies and government-owned telecom in Europe and we abandoned these because the network wasn’t being modernized.  So now we abandon the privatized mechanisms for the same reason?  That’s an awful lot like situation ethics, and I think the EU needs to justify this more than it has.

Speaking of public policy, Verizon has kept its promise and filed suit to block the FCC’s neutrality order.  It appears as though the order is going to be the subject of more than one lawsuit, and ironically neither the pro- nor the anti-neutrality camps are happy with it and so both are appealing.  I’m of the view that’s probably a good thing because there are parts of the order that are fatally short-sighted and parts that are smart.  Everyone disagrees on which are which, of course.

The smart side is that it should be illegal for an ISP to either block traffic on the Internet or interfere with it, and I think everyone agrees with that part.  Where I think the order goes awry is in the prioritization regulation.  “No paid prioritization” is in my view a very bad thing because it forces QoS-sensitive IP services to go off the Internet, and given the almost universal movement toward convergence IP services are about all we’ll have anywhere.  Rather than have telcos hire a thousand lawyers to figure out how to dodge this with “managed services” outside the Internet, why not simply say “anyone can get priority handling for a fee”, and then let anyone who wants it do the paying?  The argument that the Internet would get worse overall might be slightly true, but if it is the truth would be that it HAD to; that revenues were too low to sustain investment.  Only where there’s no competition would any sort of price regulation be needed, I think.

Logic isn’t the answer here, though, because the law isn’t logical (as anyone who knows a lawyer probably realizes).  The question here is one of law and not of fact; does the FCC have the authority to do this in the first place?  I don’t think so, and so the question may be whether the Court of Appeals tosses the whole thing or just sections.  Congress might also step in, and if there’s a change of administration in the next election, the next FCC might elect not to fight an appeal or even reverse itself.  Unlike courts, the FCC is not bound by precedent.

 

Apple is expected to launch it’s iPhone5 this week, and like all Apple events this one is generating more than its share of speculation.  It’s like a red carpet event for the Apple aficionados, but rather than focus on that I’d prefer to look at the industry implications of what’s rumored to be happening.

First, the cloud.  Amazon stole some considerable thunder from Apple with their Silk split-browser model because they exploited a true cloud computing service to enhance a customer’s service.  That’s the service layer model of the future.  There are some indications that Apple will do more than just spin a “content hosting and sharing” model of the iCloud, including inter-iPhone messaging, but it’s not clear that these offerings are going to be positioned as part of the cloud at all, which I think would be a further mistake on Apple’s part.  Amazon is a retailer, not a search giant, and thus a whole new kind of competition for Apple.  They need to take these guys seriously.

The most significant thing about the announcement may be the pricing of the old models, which some say will drop to under a hundred bucks.  If that’s the case, then the iPhone becomes accessible for most who buy smartphones, and that could wreak havoc on the Android space.  It may put further pressure on Google too, which brings me to a point regarding our giant friend and its goal of buying MMI.

I’ve heard consistently from my own sources that Google’s interest in MMI was NOT primarily for patents, though patents were one of the factors.  Google, so say my contacts, was aware that by not being a retail phone and tablet player it was risking its Android positioning to third parties and creating a situation where Apple could in fact step in and stomp on Android growth by simply down-pricing (particularly older models, which is exactly what’s now being suggested).  It’s my view that Amazon’s Kindle Fire and the ebook wars that Fire is likely to spawn create a problem for Google because neither Amazon nor B&N is linked to the mainstream Android evolution, but to forks.  Samsung is didding with the Android GUI too, so might everyone now fork the open-source version of Android and leave Google as a bystander in its own mobile OS?  The only alternative is to field their own set of devices.

Speaking of clouds, France Telecom has again said that the cloud is of critical importance to it and that it’s looking hard at the union of IT and networking needed to create it.  This fits with our general survey results; operators are increasingly seeing the cloud as the thing that hosts the service layer and the thing that hosts specific cloud-computing services.  The question is how the two get combined.

Oracle may have a handle on it, and in its OpenWorld event this week it’s expected to launch a “big data” Hadoop-based cloud-distributable data engine.  Hadoop is becoming an attractive model for at least some applications of cloud-distributed data, and it’s interesting to speculate that it might even become a standard strategy for hybridization.  Oracle is also launching a “NoSQL” database, and one question here will be the extent to which Hadoop-like distributability is limited to NoSQL models.  Most enterprises are in my view way too dependent on SQL to dismiss it even for cloud distribution.

Juniper has its own cloud announcement today, “Junosphere Lab.”  The company launched its Junosphere notion with a classroom strategy that I think tossed away a pretty good concept on a weak first application.  The lab app isn’t all that much better.  Operators tell me that they really want a strong approach to multi-provider federation that they’re more in control of than the “umbrella” Open API Service of competitor Alcatel-Lucent.  Junosphere could be a place where federation of service-layer (and even connection-layer) elements is hosted and even a place were operators host some service-layer features.  Junosphere Lab steps closer to that mission but it’s not there yet, and we wonder if that’s because Juniper hasn’t advanced its own service-layer stuff far enough to support the broader mission the operators want.  At any rate, the Junosphere stuff is a good idea if it’s used right, and Juniper, you need to stop dipping your toes into the applications and do something worthy of the concept—just like the service layer.

 

One of the recurring claims in the modern world of networking is that broadband and the Internet create jobs, improve overall health, education, etc.  The latest manifestation of that focuses on FTTH, and it was a recurring theme at BBWF.  The question is important because broadband in many areas depends on public-policy subsidization, and without some clear public benefit that kind of thing is increasingly difficult to promote.  So what’s the truth?

Let’s start with a lesson in causality versus correlation.  I heard this morning that kids who go to bed and get up early are less likely to be obese.  The statistical relationship here is clear, but it’s not clear that there is a causal effect.  That means that by making your kid go to bed and get up early, you’re not likely to make them less obese.  Sedentary habits and obesity may have a common cause, not be causally linked in themselves.

A lot of the studies I’ve seen on broadband and FTTH have that same issue.  Somebody will point out that homes with high-speed broadband have higher incomes, or have kids with better College Board scores.  The latest point is that households with FTTH are more likely to start a home business.  All of this to prove that broadband is good for us.  It may well be, but these stories don’t prove it.

People with high incomes are more likely to have broadband, and to have fast broadband, because they have more money to spend.  Their kids are better educated because the parents are, and can afford to send them.  People with FTTH likely live in high-income suburbs because that’s who’s targeted by ISPs for FTTH; you need a high ROI.  Those same people, with better skills and education, are more likely to start their own businesses.

Digging through data on broadband deployment and income from the FCC and the BEA, Census Bureau, etc. I cannot find any correlation between any surveyed aspect of broadband and a growth in jobs, an improvement in skills, a brighter or better-educated set of children.  I believe from my own Internet use that for those who are inclined to use the information resources available online, the Internet and broadband are enormously powerful tools.  But I also believe that using similar data in a public library were and are powerful means of gaining insight and knowledge.  Availability doesn’t imply consumption, though.  I’ve seen dozens of cases—including this debate—where available online information has been either ignored or the researchers weren’t aware it existed—yet it was there.

The great majority of broadband is used for entertainment, and that’s the truth.  That’s where the capacity goes, why the service is purchased.  People watch stupid pet tricks, chat with their friends or look at social-network updates.  They are, for the most part, no more likely to learn new skills or start new businesses based on broadband than they were based on the availability of libraries.

But that doesn’t mean that you can’t subsidize it.  We don’t make 911 calls most of the time and yet we have universal service rules because everyone might need to make one.  And entertainment isn’t something for the rich or the geographically fortunate only.  Which is what bothers me here.  It’s not enough that we get an answer that we want, or get the right answer.  We have to get the answer in the form we want it.  We have to believe something that’s certainly not provable and likely isn’t even true, to base our decisions on, rather than just to accept reality.

Accepting reality may be something Nokia and Siemens are finally prepared to do with NSN.  The two parent companies are both kicking in new capital, refreshing the leadership suite, and generally working harder to make the joint venture a success.  That’s good because NSN is the most up-and-coming of all of the non-Asian telecom equipment players.  It’s a company that has seen its strategic influence rise noticeably over the last year, that has improved its positioning and articulation, and that offers its parents (frankly) better growth prospects than the parents themselves could hope for.

 

 

Sometimes, often in fact, really important events go unrecognized when they happen but loom large in retrospect.  I think we have one this week, and it’s Huawei’s U2Net vision.  Yes, to an extent, this is a marketecture, but it’s a marketecture from a company that is first a skyrocket in terms of strategic influence and second a company whose messaging hasn’t always been the equal to its capabilities.

U2Net means “Ubiquitous Ultra-Broadband Network”, and it includes an edge-to-core vision of a network that’s designed to support the enormous elasticity in connectivity and traffic that will characterize the future needs of consumer broadband.  In itself, you may think that’s hardly new; Alcatel-Lucent has had its “High-Leverage Network” for some time and NSN has just been promoting its “Liquid” concept of elasticity and flexibility.  But what U2Net does is mark a transition for Huawei, a transition from point-product competition on price to systemic competition on vision.

I’ve noted before that Huawei has come a long way, both in terms of objective capabilities and in terms of customer perception.  In emerging markets in particular, they have created teams that stand with the very best in the industry and that offer not only attractive pricing but strong support and insightful commentary.  In fact, operators in emerging markets rate Huawei sales as number one or number two in quality of insight in nearly three-quarters of all the places we survey.  That is a big jump from a year ago.

The reason this is all important for the market and not just (obviously) for Huawei is that issues and features are the only defense against price-based competition, and you lose them when you lose the issues to the price leader.  It’s very obvious that within a year, Huawei will be able to articulate its story at the strategy level with at least the refinement of the market leaders in strategic influence.  Alcatel-Lucent has held the top spot in that particular race for the last five years, but we think that they’ll be nearly tied with Huawei in our fall results and that Huawei will pull ahead in some areas in the spring of next year at the current pace of advance.

What has happened here is that all the major network players have wasted five years, pure and simple.  With buyers demanding more support for their monetization goals, the classic vendors have simply ignored the pressure and pushed boxes, and box-pushing cedes strategic differentiation because it cedes any sense of context in the sale.  There’s no such thing as a strategic box, and box-level features are hard to argue when networking is a cooperative ecosystem.

We’re also seeing signs of enterprise movement for Huawei.  While they’re not in our survey results there at any statistically significant level yet, they have appeared for the first time outside of China in (you guessed it) an emerging market.  The focus of the enterprise pitch is the cloud, and I think Huawei has picked that focus because emerging markets are disproportionately likely to be consumers of public cloud services and so it’s likely that larger businesses with current IT deployments will need to hybridize.  The cloud is a bridge between an established position with network operators and an emerging one with the enterprise.

For five years now, Huawei’s competitors have wallowed in complacency.  Now it’s time to be afraid.

 

Well, Amazon finally announced its tablet.  The event itself might have offered some clues because Apple would have done this in the Superdome and Amazon had something that looked more like a high-school auditorium.

Bezos set the tone for the launch with a long praise-fest for the Kindle and the ebook and e-ink concept.  Then he jumped to talking about the Kindle Touch, which is an e-ink product that’s an advance from the current Kindle but much more like Barnes & Noble’s newest Nook model, a cross between a tablet and an e-reader but much more the latter than the former.  This new product has a $99 buck price point (for WiFi; $149 for 3G), which undercuts the new Nook.  The product senses touch via IR rather than capacitance and so I wonder how it will work for those who like (or need to use) a stylus.  With a pre-cached dictionary and Wikipedia capability, I think this device is aimed a lot at the student reader.  For the truly cheap of heart, there’s a $79 version that omits the touch-screen capability.  This, it’s safe to say, is the new mainstream Kindle product, the basic e-reader.

But it’s obvious that Bezos couldn’t stop there.  Ten thousand or more media and PC analysts would have stormed his castle and burned him alive, likely.  After blowing Android Kisses a while, then touting new media and app stores and Amazon Prime and even EC2, he finally got to the point.  The future is media and cloud service offerings!  It’s Kindle Fire.  It’s not a tablet, but a Media Cloud Appliance!

Let’s come back to earth for a moment for the specs.  Fire will have a dual-core processor and a seven-inch screen, making it a less-than-iPad right there, and the announcement is likely to be disappointing to many who had expected them to field an iPad-like product for about the same price as the HP TouchPad sold at in the after-the-market-exit fire sale.  Yes, that would have been wonderful, but as my readers know I’ve never believed for a minute that was Amazon’s intent, and clearly it was not.

Fire is based on a customized (by Amazon) older version of Android, the latest to be available as open-source, and like the Color Nook there’s an overlay GUI on it that harmonizes the look and feel with something a reader-focused buyer would want.  But it’s really a bit more than books, it’s CONTENT, but it’s also a bit less than a real tablet, or the iPad in particular.  A seven-inch form factor is one big difference.  The smaller screen is essential for a reader-focused tablet; people don’t want to really read books on something the size of a cocktail table book.  But it limits the entertainment value of the device and its value as a generalized Internet portal.

The price point for the Fire is within a dollar of the level ($199 versus $200) I blogged this week as the likely floor price for a subsidized tablet/reader.  My model says that you can make money overall at that price because of the ebook sales (and Prime membership sales) you’ll then get as a follow-on.  But at that price the subsidy of follow-on sales is critical, and so that shapes the nature of the Fire.  No matter what others (including Amazon) might say, it’s a “Nook-alike”; more of a B&N competitor than an Apple competitor.

But it does redefine that competition by adding in the video content dimension that Amazon has and B&N lacks.  That makes it a kind of reader-plus or tablet-minus.  You can see that Amazon isn’t trying to say Fire is an iPad, but they’re trying to say that the Fire is a better content device than a generalized tablet, and obviously a much better e-reader.

One innovative feature of their Silk browser is the split architecture; there’s EC2 back-end processing linked to a Fire front-end.  This may be the first example we’ve seen of a cloud service backing up a tablet experience at the GUI level, and it’s also certainly a model of how the cloud hosts what I’ve always said was a “service-layer” function.  Certainly it cements the relationship between the cloud as an IT model and the service layer.  Fire cements the role of Amazon’s EC2 in the web-front-end application model, even expands it a bit.  EC2 is used to enhance the viewing experience by pre-processing stuff that would normally be done on the client, but it seems likely that the role of enhancing the experience could easily be expanded to the functional level under the same model.  Along the way, this pre-processing might reduce communications load.

I think it’s clear that this isn’t a direct challenge to Apple, but it may just be a formidable indirect one.  Fire is a clear partnership between content, appliance, and cloud services.  That’s what I think Apple has been aiming for with iCloud and has not yet achieved.  Why?  Because clouds are fuzzy and hard to market.  Apple had the disadvantage of having a stable of appliances in place before they fielded their cloud approach, and so pretty much had to let the cloud stand on its own.  To make it less complex they’ve kind of dumbed it down.  Amazon can make Fire the face of the cloud, which is what I think they intend to do.  That is a serious challenge to B&N but it’s also a challenge to Apple because the Amazon store retail model is much broader and more successful than Apple’s stores.  Retail is more directly suitable to profit-building than ad subsidies too, so Fire may threaten the Hulu and Netflix models as well.

Fire will disappoint many, as I’ve said, but it may also have a longer-term, and greater, impact on the industry than it would have had it simply gone head-to-head with Apple.

We’re on the eve of Amazon’s tablet, and rather than speculate now in advance of the announcement, I’ll wait until tomorrow to talk about the device and how it might impact the tablet space.  What I propose to do today is chat about the tablet space at a higher level, and in particular about the new world the tablet and smartphone are creating.

If you look at entertainment through human history for a moment, you’ll see that it’s COLLECTIVE in nature.  People sat in the Coliseum; a crowd.  They go to movies and theaters and shows and concerts.  Even television, according to research, is most often a shared event.  One might ask why that is, and there are two primary drivers.  First, people are naturally sociable and like to share experiences.  Second, many experiences are simply too expensive or impractical to have as individuals.

What mobile broadband has done is to permit socialization without physical collection.  We are building a generation that’s as comfortable with virtual as with actual, a generation that doesn’t need to be in close proximity in a physical sense to be “together”.  Our appliances are getting sophisticated enough to allow us to build relationships (to a point, obviously) though them.  The question is to what “point” virtual can replace actual.

So here’s my point.  I think that mobile broadband is creating the opportunity to virtually collectivize our lives.  That virtual collectivization will be appealing for people who usually are able to meet but can’t for some period do so.  It will be appealing to a smaller group of people who really do prefer to keep the real world at arm’s length.  But it won’t totally transform our entertainment expectations.  The crowds that fill concerts today are the leading edge of the mobile/social revolution, and yet they’re still in the concert.  What they are doing is not changing their overall behavior to preference virtuality, but simply putting the ability to have a virtual social relationship in their repertoire of stuff they can do at a given time.  It displaces the stuff that’s at a lower priority, so somebody who at last resort watched TV at home with the folks has a next-to-last-resort that’s better.

What mobile broadband will change most is the connective tissue of our social interactions, not the form or nature of the interactions themselves.  I can sell a gang of friends a social service that will help them meet for a bite or a drink more easily than one that will perpetually link them virtually, because they WANT to get together.  They were settling for the virtual part.  Tablets and smartphones will become, to quote a commercial for cotton, the “fabric of our lives” but not the focus of them.  Amazon’s tablet will transform reading, but ebook readers transformed it more, and while both impact “books” they don’t impact reading per se.  What will make Amazon’s tablet a revolution in a true sense is whether it offers something that really enables the social connection, and that’s the same thing that would make iPads transformational in a true and persistent sense.  Nobody has that quite locked town at the moment in my view.

Juniper announced a new mobile workforce strategy called “Simply Connected” which is one of the best marketing pushes the company has done in ages.  What they’re doing is linking switching, wireless, their Pulse client, and security into one purpose-built package.  The target here is the growing number of enterprises who realize that the tablet/smartphone connective-tissue argument I’ve just made applies rather well to workers.  Here we have social relationships that have a non-social motivation, and thus relationships that are often better served in virtual form.  We also have people who are tasked with cooperating when they’re collaterally tasked with doing stuff that’s almost certain to take them in different physical directions even as they try to virtually connect.  The concept of a kind of social bundle for mobility is a good one, and it’s particularly good because of Junos Pulse, which is a client-side agent software component that gives tablets or smartphones an anchor in a management and security sense even if the devices come from multiple vendors and enter the corporate net in part through casual use of personal devices by workers.

This is the classical model of solution selling, and we think that Juniper needs to do more of this sort of thing.  Like most vendors these days, they tend to atomize themselves into little product silos that sing their own individual songs.  I’ve recently spent some time with enterprises and service providers outside the US and I can tell you that there’s a gap between even what VENDORS call a “solution” and what buyers consider a problem.  Ethernet networking isn’t a solution; IP networking isn’t either, and security flunks the problem-linkup test too.  It’s not that nobody is tasked to do those specific things, but rather that those things are simply ways of dealing with the way technology is applied to solving a problem.  To get control of the deal, to maximize the sales and buyer connection, you have to focus on what that PROBLEM is from the buyer perspective.  Do more of this, Juniper, and most important of all, make sure that this kind of thinking permeates your strategy and product planning and not just your marketing.

 

We’ve been seeing some interesting developments in the media space, though they’ve been a bit overshadowed in a news sense by more dramatic technology announcements.  Media and media-related consumer behavior is important because it’s the driver of many new business models (too many, I think) and also because it’s the major driver of change in network services and technology.

One interesting item is that more people are abandoning TV news in favor of online news, except for weather, traffic, and some local events.  I can understand this at one level; national news is increasingly more like a variety show than a news program.  Mobile and online news sources are obviously growing, but Pew research shows that they’re more often used as a source of information about shopping than for “news” in a strict sense.  However, apps that provide weather and traffic information could be an issue at some point for TV news programs.

The reason this could be important is that any form of live programming is an enormous stimulus to channelized delivery.  In fact, any regular consumption of TV programming, especially popular material, that’s streamed is going to create disproportionate demand for capacity.  And guess what; bits cost.

Our research continues to demonstrate that even in 20 years, channelized television will still account for over half of all material viewed.  The reason is simple; economics.  The real question is how we’ll transition to a more personalized experience for the other half of the material.  Every on-demand HD show streamed to a viewer (using 7 Mbps per show as our metric) requires a level of quality capacity equal to five T1 lines that would have cost a thousand dollars a month only 20 years ago.  The same show in linear form consumes no bandwidth at all.  So the question is whether loss of news credibility for channelized TV creates wider reliance on streaming.  Answer: Yes, among the under-32 age groups where channelized entertainment is too sedentary to fit into their behavior patterns.  Elsewhere, our research says decisively “No!”  But it could hurt local station economics because news advertising is one of their largest sources of revenue.  Thus, it’s the changing money-flow that we have to worry about here before we start speculating on revolutionary technology changes.

Dish networks wants to join with Blockbuster to make its own run at the VoD space, combining satellite delivery for channelized material (still the option with the lowest costs) with the mail-me-the-DVD and streaming choices for on-demand.  They sense Netflix vulnerability after the “misstep” the company had with splitting off its streaming and DVD rental businesses.  They’re right, but wrong at the same time.

The Netflix problem is the classical parasitic problem.  People want to watch stuff they like.  In any streaming service or mail-delivery option, the consumer grabs the material they like best in the first month, and from there on things go downhill.  The only salvation is an avalanche of fresh content, and that can come only from television because movies aren’t made in enough volume.  But if streaming cannibalizes TV ad revenues, then the TV networks who are producing the content have no incentive to push their material through the streaming channels; they have the opposite incentive.  Netflix is facing higher costs and reduced chances of renewal as its material ages, and so they’ve just done a major Latin American expansion.  Fresh eyeballs are as good as fresh material.  The only reason Dish can even think about this sort of thing without revealing a mental impairment is that they can’t really do VoD from a bird in the sky.  A crippled strategy is better than none.

Netflix’s deal with DreamWorks is being touted by some streaming fans as proof positive that the streaming model will Eat the World, but I think these guys are also showing some signs of impairment.  The deal doesn’t kick off for two more years, and when it does it’s first for the DVD delivery mode for most material, with limited streaming releases later on.  So why the hype?  If you were Netflix’s CEO, wouldn’t you want to show off something positive after a very bad week?

What this shows is that content is still king, and that content ownership and the ability to produce new material is the one irreplaceable asset in this confusing market.  That bodes well for Comcast and other distribution giants who own media assets, and bad for the streaming up-and-comings, who almost universally do not.

 

Well, Meg Whitman now has the responsibility for making the right move at HP, and frankly I’m not encouraged by some of her early comments.  The only thing that seems to be on the table, of all the changes that brought down Leo Apokether’s reign there, is the fate of the PC business.  That may well be the only thing that was a smart move.  What HP has to avoid above all is business as usual, and the second-greatest risk is looking indecisive.  With one chance to get it right, Whitman seems to be getting it wrong.

PCs haven’t been a great business for years now, simply because consumerism has driven down the prices and tipped the scales of innovation to the software side.  The hardware platforms are all basically the same, no matter what Mac aficionados think; it’s the operating system and software that matters.  Even there, price pressures are formidable.  Now, with the onrush of tablets, we’re seeing the web-client dimension of PC use vanish, and with it likely even more of the profits.

HP’s problem was that it didn’t see the tablet shift coming, not that it needed to be more of a software player.  The thing that HP needed was a cloud vision, a vision of a future of network-connected appliances that could marshal a lot of power and knowledge and focus it on something a user was carrying around in a pocket, briefcase, or purse.  Yes, software is an element of that, but it’s not all of it.  I’ve learned by talking to users worldwide that everyone understands the pieces of the cloud, it’s the cloud as a conceptual whole that they don’t quite get.  It’s the notion of a new ecosystem with new relationships, new value focus points, etc.  HP might have shown us that conceptual whole, by dumping PCs and focusing on the cloud.  Instead they dumped PCs and dumped the cloud too, and Whitman is proposing to rethink the dumping PCs part.  Maybe she thinks that’s best now because it’s too late to get the cloud back, but it’s not going to work.

There’s a lesson here in the networking side.  The cloud is a symbol of the new age of communications-connected intelligence, the age that empowers every client because it’s connected to every possible service.  This is an age that networking has created, and one that’s not generating value to networking in proportion to its contribution.  That’s because network executives have been just as blind, dare we say as dumb, as HP was.  The cloud should have been their vision, but they were simply not agile enough to grasp it.  They recognized, as HP did, that somehow software was involved in the solution, but they never realized that just as “hardware” encompasses both mainframes and smartphones, doorknobs and drawer pulls, “software” means too many things to be a useful goal.  “Serviceware” or “cloudware” was what was needed, and that’s middleware software built on the cloud model.

Another tie here is that HP is now terribly wounded, perhaps even fatally, and this pulls a major competitor off the field in terms of data center competition.  HP might have been a leader here, and that’s going to be very hard to achieve in the current situation.  Autonomy is the wrong software; rethinking PC spin-off the wrong decision.  Nobody could benefit here as much as Cisco, who has been punching out at competitors with edgy marketing because they need to recover their own position.  The problem is that Cisco, to succeed, still has to face the reality that HP didn’t face and that Cisco has yet to really address—the cloud.  There is no enterprise on this planet, no network operator, that isn’t a potential buyer or seller of cloud services.  I’ve seen this proven in major markets and emerging markets.  The cloud is the symbol of the new IT, the new network.  You stand or fall—in the cloud.