Amazon has further complicated the already-complex world of streaming online video by announcing their own service, which is included in the free-shipping Prime membership. The service currently includes about 5,000 items (movies and TV). Obviously this isn’t good news for Netflix or even Apple, but it’s also a new step in the growing challenge faced by network operators. I commented on that in detail yesterday, so we won’t reprise that topic so soon!
Apple’s problems with its subscription policy may be headed for clarification, but if so it’s not taking a giant step as yet. An email attributed to Steve Jobs said that the policy of requiring subscription services (something that requires periodic payment, according to the app store policy statement) work only through Apple and pay 30% isn’t for software services but for publications. The problem is that’s not what the policies say, nor how Apple appears to be interpreting them. The company has been taking growing heat from developers now that a few additional apps have been tossed, including some that would appear to fit within Jobs’ description of a software service. Obviously they’ll have to do something to prevent developer defections, because some publications say there could be tens of thousands of apps already in the store that will be impacted by the new policies.
The underlying reality here is that everyone in the online game has to make money these days. Apple has brand awareness and coolness, and they’ve spent a lot of money and R&D to develop and maintain that. They want a return on their investment. So do app developers, and publishers of content, and portal sites and network operators. For over a decade we’ve been in an age where Internet eyeballs and customers were their own currency, but now we’re seeing a wave of demand for monetization. A good part of that, in my view, comes from the death of the “buy up startups to help the VC industry” mindset of the ‘90s and even into this decade. More and more startups have to go public to cash out their investors, and that means showing a profit, and the demand is particularly great for online dot-com players. Fifteen years ago, virtually no startups who managed a successful exit were profitable; the companies who bought them were getting technology or image.
Infonetics released its latest numbers on the carrier switch/router market, and they show Alcatel-Lucent has taken second place (after Cisco, still the clear leader), overtaking Juniper. The only reason we can gather for this shift from our survey data (which doesn’t include questions on market share) is that Alcatel-Lucent has sustained higher credibility in the wireless space as well as in access, optics, and the service layer. They can then pull through their network-layer assets. I noted when Cisco’s earnings came out this quarter that Cisco apparently was not leveraging its service-to-network opportunities well so far, and that may hamper Cisco’s turning around its share losses versus Alcatel-Lucent unless Cisco can address the issue. Of course, Alcatel-Lucent probably won’t stand still either.
The issue of cybersecurity and the “kill switch” on the Internet continues to raise blood pressure on both sides. Reworking of the cybersecurity bill to pull the explicit notion of a kill switch isn’t satisfying some who think any restrictions on the Internet constitute a control of free speech. The problem is that there are legitimate cybersecurity issues, and criminals or terrorists attacking critical websites could create situations where the government had to intervene in some way. The challenge is to create a framework that permits intervention but doesn’t open the door for the mechanism to be used to censor free speech. Normal judicial review may not be enough because the process could take too long—too long to get a warrant to act, and too long to appeal an unreasonable application of the authority. Logically, I think this should be an FCC issue because that agency is the federal expert on communications, but so far there doesn’t seem to be much movement on either side to support a compromise. It may be that the best strategy would be to do nothing and let the government convince ISPs to act voluntarily, if only because that seems the likely outcome if no specific approach can be agreed on by all parties. The debate is getting more polarized and ridiculous every day.
We now have an Institute for Civility in Government; maybe we need to expand its scope.