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Groupon filed with the SEC for an IPO, a move that suggests the company wants to quickly execute on the potential social-networking Wall Street Love Wave that LinkedIn showed us.  There’s always a question of whether the bullish view on social will sustain itself, though.  One might even argue that Groupon thinks it won’t, and thus is in a hurry to make its move.

Groupon is an interesting “social” company because it’s probably the least social of all the players who are tagged with that label.  In many ways, in fact, it’s much closer in terms of its paradigm to search because it’s value is driven by the buyer getting to the execute phase.  Social networking is good at building buzz but it’s far from clear that it is as influential in actually driving a buy.

This issue came out in a personal way when Google’s Schmidt reminisced about his tenure and offered the comment that he’d perhaps waited too long to try to grab Facebook and that Google didn’t “get social”.  It’s always harder for a company to jump outside its core competence, in no small part because VCs consider it a loss of focus and the Street thinks it’s an admission the company’s core market won’t sustain its growth expectations.  Schmidt might regret his move, but in the long term he might be right.

So here’s the thing.  If somebody erects a massive office building and sells ad space on a blank face, people will for a time buy space and plaster on their billboards because it might work.  The test for the endurance of the business model isn’t that initial success, it’s whether over time those who’ve tried the advertising mechanism find the return to be credible.  That’s often hard to prove (you can buy reports to show anything you like these days), so it can take some time for a model to prove itself, or to fail.  And Groupon, to circle back, is only marginally profitable even now.  Hurrying to an IPO might be a smart move.  Apart from everything else, the coupon model is way too easy for others to play with, including Google, Amazon, and even Apple.

In the mobile space, we’re heading for some dramatic changes, I believe.  Apple’s upcoming iCloud announcement and Microsoft’s emerging tablet strategy are combining to create the beginning of not only a new appliance war, but a new network services war and a new paradigm for the whole mobile ecosystem.  It seems pretty likely now that the LightSquared model of wholesale 4G is going to stand or fall not based on operators buying added capacity for areas they don’t serve directly, but by big players who decide to become MVNOs.

The MVNO model is at one level an accommodation to thinning margins.  Appliance players see it as a way of taking their installed base and monetizing the network services they consume—getting a piece of that pie in the long run.  But it’s also a possible way to create a service community for yourself.  It’s not impossible to build a cloud service success on a pure edge or OTT model, but it would be easier if you had the ability to offer hosted stuff to your base from within their wireless service.  Remember that wireless neutrality is far less restrictive than wireline (even assuming either one get past the court appeals now underway).

This model is probably why Microsoft sees Phone 7 and Windows 8 and tablet success to be so important.  They need an appliance success or they can’t be an MVNO success, which means they’d face the same kind of problem with mobile that the whole Windows Live thing was supposed to fix for them online.  Apple sees this opportunity, Google sees it, Microsoft sees it…it’s just a matter of who figures all the pieces out and gets there first.  I’d bet on Apple.

 

 

Nokia turned in some fairly abysmal numbers, putting itself in an admitted “zero-margin” space.  That shouldn’t come as a major surprise, but it does make it clear that there’s something fundamental going on in the communications space that’s overturning a lot of old thinking—or at least it should be overturning some.

The Nokia problem was created by the classical irresistible-force-versus-immovable-object phenomena.  The communications market has gone consumeristic, and with that change has come a radical acceleration in fads and changes and a radical devaluing of some of the more traditional assets like “quality”.  How long should your phone last, when within two years you’ll think it’s obsolete anyway?  The new consumerism hit hardest at the traditional Euro telco vendors, the guys who grew up selling products to their own and nearby national phone companies.  Nokia was one, and they’ve never accepted the changes in the market—probably because they couldn’t accept them culturally.

That raises, I think, one of the most significant questions of this age in networking.  Are we creating a new market simply because we have old players locked in place by culture, by “employee inertia” as one in our survey called it?  I’ve said, with some degree of “pith” that “large companies thrive on mediocrity because mediocrity is the only thing you can get enough of to build a large company.”  It’s starting to look like this semi-joke is all too true.  I’ve talked with executives in big network vendors and while they are individually aware of the challenges of the market and even of their special assets in meeting them, they seem powerless to mobilize anything to create positive results.  Are startups different because they’re small enough to create true entrepreneurship internally by being selective about hiring?  Or is it more complicated?

I return to my “flag-waver” theory.  A charismatic leader waving the Banner of Something Good can attract a band of followers.  But no matter how charismatic the leader is and how Good the Something may be, after the first couple dozen any new attractants are simply too far from the center to be moved by the fundamentals.  They’re following the crowd, and now it’s simply a mob.

Microsoft has a similar set of issues as it tries to trot out its answer to the Tablet Craze, Windows 8.  On the one hand, it wants to sell a new version of Windows to every human walking Planet Earth (and if other planets are inhabited, they’d be OK too).  That means that Windows 8 has to build on the Windows brand without creating angst because it won’t run on any current PCs or run any of the current (or past) Windows apps.  On the other hand, it has to compete with tablets based on iOS or Android, both of which have touch-specific GUIs and were designed to operate disk-less.  The more tablet-like Windows 8 is, the more likely it is that current apps won’t run effectively on a tablet-specific version, which means the more likely it is that there isn’t just one “Windows 8” but several, a rumor that Intel’s CEO spread earlier in May.

However Microsoft might fare in this space in the long run, and whether rumors Microsoft might buy ailing Nokia to grab a handset and tablet business for itself—or at least a nascent business—are true, there’s surely going to be a major competitive dust-off in the tablet market.  That will focus all eyes there, most of the money there, and further complicate the fortunes of the network vendors who have to support a service and usage evolution for their carrier customers when neither the vendors nor the customers can swing the marketing banner up to the vertical on their own.

 

VMware is buying enterprise social/collaboration player Socialcast, and the move is demonstrating a lot of interesting things about the future—of collaboration, virtualization, and of course VMware.  We may be on the cusp of some interesting changes.

“Collaboration” is the term we apply to communication between workers aimed at reaching some collective decision or combined work product.  Most collaboration today is still done face to face because the dynamic of real presence is the most effective in sharing information and reaching collective conclusions.  However, the combination of improved communications technology (at lower cost) and increased dispersal of team members has been driving interest in virtual forms of collaboration.  These have been further promoted by the rapid growth of smartphones and tablets that offer a wherever-you-are kind of link-up for workers.

It may also change if the basic notion of collaboration changes.  We interact with each other based on cultural habits, and when we try to make collaboration work remotely it’s logical to try to extend the communications interactions via telecom rather than to examine whether some different form of interaction would be smarter and more effectively extended over a network connection.  Social networking introduced a different model for casual human interplay, and from the first it looked like there might be some value in making that model work for business collaboration as well, which is what Socialcast does and what VMware wants.  My own work on this, which has been written up in ourNetwatcher journal several times, would tend to back up the social-network value proposition, though larger-scale experience is likely needed to be sure.

One might well ask what this has to do with virtualization, though.  VMware has been on an M&A tear, in fact, and much of what it’s grabbing has little to do with the core business.  It doesn’t take a rocket scientist to recognize that this likely means they see virtualization as running out of steam.  Our just-completed enterprise survey shows exactly that; the first signs of weakness for virtualization at the strategic level.  It’s not that it’s a bad idea, but that it’s not the Universal Constant.  Once you run out of places where it’s valuable, you’re less strategically interested in it.  That means you’re less interested in professional services to install and sustain it, and in companies that offer them.

Another limitation to virtualization is that it’s an accommodation and not a strategy.  We virtualize machines because we have apps written for single servers that don’t utilize those servers fully.  As I noted in some chip comments a week ago or so, the power of the CPU is outrunning the needs of a single application.  Where that happens, virtual machines make sense.  But remember that many systems are inherently multi-tasking and that many applications are written for those environments.

In the maybe-collaboration space, Apple has officially admitted that it’s going to announce what the media has been calling “iCloud”, and in fact Steve Jobs will carry the water for the new concept.  We still don’t know exactly what iCloud is, though.  Some are speculating it’s essentially a streaming music service that would compete with other offers in the space from Amazon and Google.  Others think it’s a successor to MobileMe, and others something in between.  I tend to fall into that middle group.  It would be unlike Apple to me-too a competitive offering, even if they sweetened it by adding in more record labels in support of the move.  We already have a lot of streaming music services.  Similarly it would be unlike them to make a big Jobs event about a re-launch of a service that’s generally seen as one of Apple’s big missteps.  So this has to be more.  If I had to guess, I’d say that Apple may be planning to blend social, media, and personal organizational aids into a single package built around some sort of social framework.

In the media space, Alcatel-Lucent has announced a tool that’s designed to help operators tune their delivery infrastructure to video needs.  AppGlide is a combination of analytic tools and a pair of probe options, one of which is on the client device as a player plugin and the other at the server end.  Operators may or may not be able or willing to use the player plugin, but if they do they can get specific information on how the video stream performed right to the point of consumption.  The goal is to track video performance and fix problems that might impact video viewing quality and abandonment rates, both of which could be very important to commercial OTT content providers like Netflix or Hulu or to advertisers.

The way that AppGlide is positioned seems to make it clear that Alcatel-Lucent is working hard to present its CDN strategy to operators and to help them differentiate operator-owned CDNs from the big commercial players.  The former step is very logical; operators in our survey have made it clear that they believe that an internal CDN is an essential part of their content monetization strategy.  I’m of the view that differentiating versus commercial CDNs is less an issue based on the same survey; operators think CDN operators have their own monetization goals that are competitive with those of the operators.  In any event, what I’m seeing in the operator world is an increased determination to deploy CDNs on their own, and that makes a vendor CDN strategy potentially important, even critical, if they hope to support operator content trends.

 

 

Cisco is said to be announcing a new white-label managed service offering that’s designed to be resold by network operators (presumably Cisco customers) to rebrand for the SMB space.  Cisco would provide the actual remote management resources.  The move is yet another interesting slant on how Cisco thinks it can help operators, make more money for itself, and perhaps pull through more equipment sales.  The question is whether it will work, and as you’ll see below we may have to wait for the precise details in order to tell.

It’s not that managed services is a bad idea, or that having vendors provide a white-label service or take a cut somehow from transactional services is untried.  Alcatel-Lucent, for example, has promoted its Open API program as a means of supporting developers across provider boundaries without special per-developer-per-provider relationships being needed.  It takes a cut of the fees associated with the APIs that the developers use.  And managed services are on the rise, particularly for SMBs who can’t possibly retain a skilled staff with there’s so much competition for network experts.  The problem is whether the operators see this as helping or competing.

Most operators have their own plans for managed services for SMBs, and many have already offered them.  They may well see Cisco’s offer as simply a way for Cisco to grab a piece of the revenue stream, a revenue stream the operator is fronting in retail terms.  Cisco is likely to say that the deal will reduce operator costs and improve time to market, but the real question will be whether the reduction in costs justify the reduction in revenue, and whether the selling issues with the service overcome the time-to-market benefits.

The challenge here is that everyone wants to make more money in a market where both services and products are commoditizing.  Services are a way to do that, but the buck starts (to play with words) with a single buyer.  Users don’t build networks to consume products or services, but to fulfill their needs.  Network vendors have been much worse than IT vendors at figuring out how to support the users’ value propositions in a way that’s also profitable for them.

Another network vendor news item today is that some financial analysts (Stifel, for example) are predicting Juniper’s having a soft quarter, and that part of the problem is some glitches with Junos.  Juniper, they say, has always touted the stability and singular version control of Junos as assets relative to Cisco’s IOS, and there are now reports of problems with stability after a recent release and of the need to supply a custom version to some operators.

The Big Problem for Juniper, in my view, isn’t the rumored version discipline problem with IOS but the fact it doesn’t have any solid mobile story.  In the operator survey I just completed, those vendors who had a strong mobile services slant in their products and experience gained in strategic influence uniformly.  Those who did not (including Juniper), lost.  What I think is happening this quarter is that operators are finally thinking about the future.  You can see that in Verizon’s public announcements on content and the cloud.  As they do, they’re less receptive to the usual “How many boxes can I put you down for?” sales positioning.  They may be reacting faster to changes in strategic influence instead.  Typically our rating in that area has been a leading indicator of change—a tell on next year’s behavior.  Might Juniper’s dip in influence be hitting already?  Cisco had an even larger credibility drop in the operator influence ratings, and its SEC filings are suggesting it’s having softness problems too.

If network vendors are asleep in the telco world, Apple’s happy to be wide awake.  The latest public rumors on next year’s iPhone model is that it’s multimodal in that it works on both CDMA and GSM as well as LTE, and also that it’s going to be “SIM-less” and can be soft-configured to work with any operator network.  That seems a pretty clear indication that Apple is looking to break the traditional link between handset providers and operators created to use service-plan subsidies to reduce phone prices and increase sales.  But Apple knows darn well that they can’t sell unsubsidized iPhones at higher prices and they don’t want to commoditize them either, so what are they up to?  I heard from a Silicon Valley contact that Apple was planning to introduce an iTunes-subsidized iPhone, or rather an iCloud-subsidized one.  The idea is that Apple would have a term membership in a subscription cloud music and video service that would include a reduced-price iPhone.

This is a major shift in market dynamic, if true.  The operators have had a lock on subsidies before, and if they’re losing that to a giant market machine like Apple, then they have good reason to be worried about vendor support for their transformation plans!

 

We’re continuing to see more developments in the cloud space that go beyond the obvious (the hype) and address some of the important issues.  One in particular is also demonstrating some important facts about the cloud and cloud services; it’s the “Database.com” offering from Salesforce.

Cloud databases have been an issue of increasing importance because they’re essential for the cloudsourcing of any team or company application and because they represent a new dimension in security risk for enterprises.  Amazon’s EBS was the proximate cause of that company’s recent cloud outage, so cloud databases also demonstrate the new dimension in vulnerability that this sort of distributed technology can bring.  Enterprises need a way of harmonizing cloud use with data security or they’re not going to the cloud with anything that’s important, and that would relegate the cloud to hosting websites or testing/piloting applications.

Database.com is first an attempt to integrate strong security into a cloud DBMS (an RDBMS to be specific).  It includes strong authentication at the API call level, meaning that every access attempt is verified, and by-row tabular security rights within the DBMS.  All of this is good stuff, and for many enterprise applications it will help relieve security fears.  But it’s not enough by itself.

No matter what any vendor says, mission-critical enterprise data isn’t likely to go into the cloud; the career risks for anyone making that decision are profound according to the results of our spring survey.  None of the enterprises we asked said they believed they would cloudsource a mission-critical DBMS.  So it would appear we’re at an impasse, right?

Not so fast.  Database.com is also an example of a database model, DBMS-as-a-service.  It’s always been possible to visualize “data” in multiple ways; as disks, as file systems, as DBMSs.  That multiplicity of vision translates into a multiplicity of models.  You can send disk commands to a database, or file-system commands, or you can send DBMS queries—SQL, for example.  When you send the low-level commands, you drag disk I/O over a connection to the cloud if you cloudsource the data, and when you send high-level commands you receive the results of a query and not the ten million records you might have spun through to get those results.

OK, fine, but this is still DBMS-in-the-cloud.  It is, unless you turn the tables.  Instead of looking at the DBMSaaS as something the cloud offers, how about if the enterprise offers it?  Suppose that in a hybrid cloud, the DBMSaaS queries were made by the cloud applications back into your data center?  That model is readily supported by modern back-end repository strategies and DBMS appliances.  With tabular joining in an RDBMS, it would be possible to create a database that was partly stored in the cloud but whose sensitive elements were back in the enterprise.

Even this may be a model of an even deeper and more important issue.  Enterprises say that basic platforms (IaaS) in the cloud are, at reasonable levels of utilization and with reasonable availability enhancements, about 75% more costly than internal servers.  That says that the basic business model for IaaS can’t be successful in securing wide penetration of cloud computing into mission-critical apps even if you solve security and availability concerns.  But services can be offered from cloud infrastructure, and efficiency in both the resources needed for the service and the way the service can be linked to enterprise computing/business activity can be more compelling.  Outsource firm Virtela, who has already created an interesting umbrella VPN service as a kind of VNO across multiple operators, is also launching a cloud service set based on the same framework.  The idea is to take applications like security in the mobile space or application acceleration and make them into “services” of the cloud.  These are more easily introduced than competing architectures for mission-critical apps, and enterprises in our survey seem to think that sort of thing is the right way to go.

So do carriers, of course.  Verizon is clearly looking at this same model, as well as BT.  KT, while making some waves by promising IaaS services that are more cost-effective than Amazon’s, is also planning higher-level cloud-based services, and we’re told that they believe there’s more money in the services space than in basic IaaS.

All of this, of course, gets us back to the notion of “SOA clouds” and the need to think of applications as being cloud-optimized.  The SOA architecture facilitates the consumption of application components in service form, delivered either through RESTful interfaces or more rigorous SOAP connections (which is how Database.com works, by the way).  Microsoft and IBM have both been working with their customers to move thinking in this direction, and the results are becoming clear by the number of enterprises who now think more in SOA terms than in terms of virtualization for their clouds.

 

TMF’s Management World conference continues to show itself as a kind of cross-section of market and technology issues for the NGN.  This particular body, unlike most standards bodies, has long been almost a business, a marketing powerhouse that’s jealously guarded and effectively promoted its prerogatives.  The question is whether it can now overcome some of its other long-standing characteristics to step out and lead the service wars.

Operator OSS/BSS processes have always been visualized as “service creation” because services were in the past organized behaviors of networked devices.  Management was effectively a coercion of cooperation to create something, and once that “something” was created the processes could be considered to have shifted into “maintenance” mode.  There was a distinctive service provisioning process, with distinct phases, and OSS/BSS tracked it and billed it and planned it…you get the picture.

The TMF, the archetypal management body, has never accepted a model of management other than “provisioning”, and much of the work they’ve done with eTOM and SID and the other standards they’ve pushed is actually obsolete in the current world.  Today, you need to visualize a service as a web page, a kind of script that joins functional elements (RESTful URLs).  They actually have that notion in the relatively-new NGOSS Contract work, but it’s goal isn’t to create a web-page-like service script, but to create a management script.  What they’re missing, I think, is the fact that this scripting process has to organize both.  There is no way to create web-modeled services for the NGN without scripting functionality and management in parallel.

Operators “know” this to a degree, but not to a consistent degree.  What I’ve found is that if you make a pitch on the value of service logic and service management integration to a high-level technical architect with a focus on content monetization or mobile behavior support, that person gets it.  Make the same pitch to the OSS/BSS types and you’ve made an enemy for life.  The whole of the OSS/BSS community is locked in the past on this particular issue.  I’ve had some recent online dialogs on “NGN”, and there are some involved who are clearly pining away for the days of TDM voice even though there is no question we are NEVER going back there.  Change is always resisted, and that’s the issue now with the service layer.  The TMF is more a barrier to the future now than a vehicle to secure it, and yet for operators who still pray for relief from service-layer confusion through standards, it’s pretty much the only hope.  This TMW session is showing that some in the TMF realize they have to step up, but others are still donning their green eye shades, climbing up on high stools, and doing provisioning ledgers while calling it “NGOSS”.

Cisco and Microsoft are also demonstration intertia, and its risks.  It’s clear that investors/activists are going to put the pressure on both companies, and because it appears that neither is making the transition from their traditional days as a market leader to a new day when they can also lead—but with a different core competency set.  Only IBM of all the tech companies I know has ever proved it could undergo a number of market-driven technology transformations and still be a major player.  Can Ballmer and Chambers prove their companies, under their leadership, can?

If Ballmer steps down, or if Chambers does, the result changes only the band on the hat on the head of the executive processes for both companies.  There’s thousands of people in each of these firms, and for the most part they’re blundering along on a course that’s traditional for them—just like an OSS/BSS guy.  Imagine an inspirational flag-waver in a group of ten people—the group will follow the leader.  Imagine now that same flag-waver in a crowd of ten thousand.  They’re not following the leader any more, they’re ebbing and flowing on their own inertia.  The truth is that if investors want Microsoft or Cisco to change, the fastest way to make that happen is to get the current flag-waver, who’s being followed by at least those close at hand, to move the mountain in another direction.  That truth is probably recognized by both CEOs, but the fact is that they don’t know what to do.

Cisco is having a confidence crisis; its latest SEC filings suggest it won’t be showing much growth at all for at least one and probably several more quarters.  Microsoft is staring down the muzzle of the tablet canon, seemingly mesmerized by the risk it poses but helpless to move aside.  Both could, by inaction, bring about the very kind of radical market change that would hurt an incumbent the most.  They each have a flagship role in setting the perception for the industry they dominate.  While others can take market share from both these giants, they can’t take the flag.  Nobody will ever lead PCs again as Microsoft did, nor will there ever be another Cisco.  The markets overall will be poorer for their loss, if we lose them.

 

Amazon and Barnes & Noble are obviously engaging in a war over the ebook market, and there are new dimensions to the battle emerging every week.  In the latest move, B&N announced a new gray-scale Nook that’s conceptually between the older dual-screen eInk Nook and the color model that’s grabbed attention as a poor man’s Android tablet.  Amazon countered with an ad-subsidized model of its 3G Kindle.  I’ve already noted the rumors that Amazon will launch a line of 7- and 10-inch color tablet/readers in the fall.

One dimension of this is easy to understand; Amazon’s own sales data shows that ebooks now outsell printed books.  For Amazon that’s a clear indication that you want to be in the ebook space, but it’s even more a wake-up call for B&N.  They have a chain of bookstores, after all, and they not only have to transition to an ebook format in a reader world, they’ve got to figure out how to utilize their retail presence.  They’re ramping up their in-store specials, adding hands-on groupie meetings among new Kindle users, etc.  But for both companies the key is not just having the “best” reader but having the most readershare.  Your reader customers are yours alone to exploit; PC and tablet readers can be installed on any device and so don’t lock your customers into your own format.

For both B&N and Amazon, the Android devices are a risk because these can be “rooted” or pulled out of their native restricted mode to run a general version of Android.  That, for example, lets you install Amazon’s Android reader on a B&N Color Nook.  But both companies think this is a minor risk; the big problem is just getting their little devices into everyone’s hands.  The lower-end Nook, which has touch-screen overall and not just in a ribbon at the bottom, is a formidable challenge for Amazon; Kindle navigation was harder even before this in my view, and the new Nook makes even a low-end reader very “tablet-like”.

Microsoft’s Skype deal has pushed the issue of service-enablement via an appliance to the forefront in areas outside the ebook market.  Microsoft just said that the Mango version of Phone 7 will have Skype calling, and while it’s not yet clear if that capability will be left in place by partner operators, those I’ve talked with say it will.  We’re moving away from an ARPU model driven by voice anyway, they say.  If tiered data pricing generates the same ARPU, so what if voice becomes a part of the data picture?  It only cuts down on what you have to capitalize.

The network is what enables this, of course, but that’s not enough to make “the network” the value leader in the new ecosystem.  The average user of an ebook reader has no idea what network service gets the books onto the reader, and that’s even in today’s relatively early market phase where nerd count per hundred users is higher.  In the future, people really will see a kind of “service aether” that pervades their world and somehow links their desires to fulfillment.  That’s the market everyone is fighting for, and Amazon, Apple, B&N, and Microsoft are only showing us little chunks of it.

That the lower-layer delivery process isn’t where the action is has been demonstrated by Cox’s announcement that it’s abandoning its notion of being a wireless carrier on its own and opting into a relationship with Sprint.  Don’t be surprised if players like Amazon and B&N end up being MVNOs themselves, and for sure don’t be surprised if Apple makes that move; the rumor they’re looking into branding a service of their own is already circulating.  At some point, that kind of move may be necessary to insure Apple can control the whole value chain, and of course that would also be true for Google and the rest.

Another place where the ecosystem may be changing is in the OTT-TV space.  The Netflix success is showing everyone that OTT video can be sold, and that implies that TV Everywhere can both undermine Netflix and others with “free-ness” and also present a potential incremental revenue opportunity.  If the right to multi-screen content is tied to the fact that you have a TV delivery of that same content, then advertisers are less worried about the credibility of online ads as a substitute for commercials.  This kind of deal also lets the network operators who deliver the stuff insure they get some profit for their infrastructure investment.  Thus, it may be more important to watch TV Everywhere than Netflix.

That’s particularly true in the appliance sense.  Imagine if Apple were a “TV Everywhere” broker for its i-Stuff?  The mind boggles at the changes this could bring.

 

The FCC just announced that US broadband is failing to meet the requirements set in the Telecom Act, which isn’t exactly a surprise given that’s what it’s been saying all along.  What’s infuriating about the release is the blatant manipulation that’s inside.  For example, they headline that over 20 million Americans are “denied access to jobs”.  Yeah?  Well, it’s not that simple.

There are over 26 million people who are in un-served areas, or about 9.2 million households.  These are typically deeply rural populations. But this data, which the FCC headlines, is based on census-tract information; the county-level analysis of data cuts this value in half.  So which is right?  Obviously the one with the most dramatic results.  Also, how many of these 26 million are even of working age?  The FCC doesn’t attempt to figure that out.

Then there’s the question of whether lack of broadband, or the Internet, denies one access to jobs.  I’ve tried diligently, correlating FCC data on broadband availability with data on economic activity, to uncover a correlation between employment and the Internet, and the only one I’ve found is that where people are unemployed in large numbers they’re less likely to pay for broadband.  Surprised?  In cases where broadband programs have empowered areas not previously empowered, I’ve been unable to find any sign of an increase in employment or economic activity.

The FCC’s data also shows that while about a third of households don’t have broadband, only about 9% don’t have broadband because they can’t get it.  The remainder have elected not to take it.  Further, the data shows that the population is generally clustered around the low-end options in terms of price.  That correlates with reports that where superspeed broadband is offered by cable or telco providers, the uptake on the service is minimal.

We need to face reality here.  There is a strong public policy drive to say that the Internet is a fundamental right.  OK, that’s fine with me if you arrive at the decision based on rational and truthful processes, but we’re not doing that.  A third of all traffic is Netflix.  Most of the time spent on the Internet is spent on social networks.  This isn’t the picture of an Internet being used to pull people out of marginal employment or to raise standards of healthcare.  It’s a picture of one that’s keeping the kids occupied, keeping the parents entertained.  The cost of providing rural broadband can be ten or more times that of providing broadband to urban areas.  Some of the rural users have moved into the wild by choice; do they get subsidies to give them urban comforts in their rural setting?  How about giving some trees or wildlife to urban dwellers, then?

Verizon has taken yet another “leadership” step in defining how operators see their revenue futures.  The company has indicated it would be likely acquiring small software companies to create SaaS offerings hosted on the Verizon cloud.  I don’t think that the significance of this move is being appreciated, and so I want to open this week by explaining it.

Everyone has been infatuated by the notion of cloud computing as anointing the small and destroying the strong—it’s been a kind of populist theme that’s evolved in parallel with the whole Internet revolution.  The problem is that it’s not a practical vision of the market.  The big money in cloud computing comes from two sources—PaaS-based offloading of SOA app components from enterprise data centers for backup and overflow work, and SaaS opportunities to SMBs and even some enterprises.   The big money’s still out there, and Verizon wants it.

AT&T is moving in this area too, and one interesting development there is that the company is working on the issue of asset creation/exploitation and not just the issue of APIs or cloud architecture.  They’re looking at how to take legacy assets in the OSS/BSS space and make them available as APIs for integration into higher-level services (by developers and, we’re told, by internal service architects).  They also want to integrate their smart appliances into their content services, not only as elements in a multi-screen strategy but as controlling tools to manage media and the experience.  Finally, they hope to formulate a general-purpose HTML5-based architecture for their proto-smart-device GUI so that applications will run across the full range of stuff that’s rolling out.

Amazon, meanwhile, is apparently getting into the tablet business, or so says PC Magazine and some other sources.  My own view is that Amazon is going to compete with the Barnes & Noble Color Nook, a product that I’ve gotten myself and find enormously interesting, powerful, and helpful.  The issue here isn’t becoming a tablet player, it’s defending the ebook space against a competitor who’s using a tablet feature set to enhance e-reader value.  Every Nook that’s sold is a B&N camel’s nose under the ebook opportunity tent.  Amazon can’t sell Kindle books to that market, and of course B&N profits from the lock.  So Amazon has to become a player in what I’ll call the “t-reader” space, a space that is almost a tablet but that lacks the ability to host competing e-reader software and so still locks the consumer in as a traditional e-reader would.

Amazon needs to make sure that they don’t lose customers to the Color Nook because they need to be sure that they don’t let B&N create a legion of book-hungry semi-tablet enthusiasts that can’t get Kindle without rooting their Nooks.  The question is whether they can do something at this point, when the B&N device is out there and competing effectively, without giving away too much and hurting their profits even if they win the t-reader race.

Some data from Nielson suggests that tablet users are perhaps more focused on social media than on streaming video.  The data shows that while e-readers outnumber tablets by an enormous margin, people are relatively unlikely to be e-reading while watching TV, but are rather likely (presuming they have a tablet) to be using a tablet.  It doesn’t take rocket science to figure out that if reading a book is difficult while the TV is on, reading an e-reader is likewise.  However, it’s probably even more difficult to watch a video on a tablet while watching TV, which means that all these tablet-TV crossovers are really doing Facebook or Twitter.  The larger form factor makes social network access easier.

This doesn’t mean that video streaming to tablets is without adherents.  Verizon is going to provide free hotspot services to offload traffic from its 3G/4G network, and that trend is accelerating worldwide.  WiFi is a great strategy for pulling cellular traffic out of expensive 3/4G facilities in locations where users are likely to settle for a while.  I’ve been calling the tablet user a “migratory” rather than mobile user because most tablet use will come in sites where users can sit and focus—home, work, or hospitality.  Some providers and some tablet players believe that there’s a strong tablet opportunity in WiFi alone, in fact.

Truth be told, we don’t know what the consumer will do with tablets—exactly—because the consumer doesn’t know.  That’s the big challenge of the mobile broadband revolution.  We’re building what I’ve previously called a “Life Fabric” that links us to services through appliances and ubiquitous broadband.  It’s like building an interstate highway system at a time when interstate travel was difficult or impossible.  What will it be used for?  We probably would think that hauling of goods would be the big application, but in fact it was just personal mobility.  We’ll probably get some surprises out of the evolving mobile broadband space too.

On the enterprise side, Alcatel-Lucent released a study that says that 74% of workers believed their productivity could be improved via UC/UCC tools, but that two-thirds of this group don’t have the tools they need.  I’m a bit skeptical of this kind of study for a couple of reasons.  First, my own thirty-year history in market research suggests strongly that people aren’t very good at conceptualizing the value of something they don’t have.  Everybody thinks something is holding them back from grasping the productivity brass ring.  Second, both my own research and other dispassionate university studies I’ve looked at show that most “collaboration” that takes place in business is pairwise (two-party) and there’s been no evidence that video or much of anything else really facilitates this sort of collaboration better than what we already have.

There is one exception to this.  Most companies do have a problem with collaboration created by the fact that the parties involved aren’t in a stable location, and also are not equipped with a consistent set of tools and access to data.  That’s where tablets could come in, but tablet empowerment is independent of UC/UCC in that the application of collaboration doesn’t change, only the appliance you collaborate through.  Like consumer use of tablets, though, business use is a work in progress and we’ll probably have to see how the space matures.