Flesh eating wireless viruses, perfect duds, FCC and more on Cellular Carterfone

I was hoping to take a break from Carterfone. But then both me and Jason started reading the operators responses.

Hmm…

Stoppard has this line in ‘The Real Thing’ [Probably my favorite play] “Persuasive Nonsense. Sophistry in a phrase so neat that you can’t see the loose end that would unravel it. It’s flawless but wrong. A perfect dud. You can do that with words, bless ‘em.“

So we decided to unravel the crap the operators wrote. Full text is here

The argument is simple – the vigor and strength of the operators response (They even forced Motorola, Quallcomm and LG to support them) is the best indicator of how far the market is from being efficient and innovative. Otherwise – what are they afraid of ?

We outlined to remedies, which are easy tom implement and get the industry 90% of the way toward fixing the problems

1. The Commission should require each carrier to publish the existing CPE standards they use for certifying devices for use on their networks. Carriers must accept any CPE that meets those standards, and can reject any CPE that does not. Certifications will be handled by existing companies who specialize in handset certification.

1. The Commission should require each carrier to communicate to consumers what portion of their monthly bill is used to pay for service and what portion is used for the device. Furthermore, carriers should comply with Carterfone and offer a service-only plan.

Then we went on the address the specifc arguments the operators made – like protecting us from wireless viruses (Flesh eating?) or giving us free phones (Just pay us $50 for 48 month but its FREE) and more crap.

Next is to go in front of the FCC in person. Which should be fun

Ram

Pattern recognition and replication: Idani rowing

An 18 month old on a rowing machine ? Yes – after watching his daddy doing it, it was time to replicate the pattern…

R

Why handsets should be subsidized – but are not today

As I was working on the FCC petition, and especially after thinking through Tim Wu’s subtle (or not so subtle) points around handset ‘Subsidy’ I got to realize that we are looking at a serious case of the misleading rhetoric shaping the discussion.

When you buy a car, you have two options: Put down the whole $10K upfront. Or lease it, pay $1000K and then monthly payments for 24 months of $500. Your car is not ’subsidized’ by the car dealership – you just pay for it over time rather then upfront. And there is full disclosure how the lease payments were calculated.

Now when it comes to cell phones, operators some how managed to get us to think they are ’subsidizing’ the handsets. And that we should be nice and say monthly “Thank you for being so kind and subsidizing my handset ” as we are writing a check for $50 for their great “wireless service”

Handset are not subsidized today. Consumers are paying an arm and a leg for their handsets. And we don’t even know how much we pay for the service and how much for handset. The remedy, as we discussed in petition, is to have operators comply with Carterfone and have a “service only” no handset bundled monthly plan. Then we will know how much we really pay for handsets…

Handsets can be subsidized – for example – through advertisements. “We will give you this handset for free, but we have our ad engine incorporated” – That is subsidy. What we have from cellular operators today is not subsidy, but rather handset leasing.

R

Free My cell: Cellular Carterfone

Together with Jason of Brash we just filed our comments on the Cellular Carterfone.

You can view the RF&JD comments on Skype petition- or if you want a brief summary

1. Cellular handsets have become handheld computers, used for accessing information and other methods of communication in addition to voice calls. Cellular handsets have become small and powerful computers & Handsets have become our link to society and information:

2. The current cellular market is tightly controlled and oligopolistic, which results in inferior consumer offerings. We listed four examples: (i) Limiting handset features (Bluetooth/VZW, WiFi-E62, Hardly any WiFi-GSM handsets in the market. Only one Nokia N series in the market) (ii) Example 2: Slowing adoption of new consumer services such as visual voice mail (iii) Bundling handsets with service: consumers pay the same monthly service fee if they bring their own handset or get an operator ‘free’ handset and (iv) the Verizon Brew service which allows VZW to control information services and charge for content.

3. Enforcing the FCC’s existing broadband guidelines in the cellular handset market will benefit consumers and create new business opportunities. Three examples we gave: Free handsets and richer consumer offering with lower monthly service fees, First responders can get new specialized equipment or (iii) New types of Medical monitoring devices that can be developed

4. Remedy: The FCC should insist on cellular operator compliance and remove any special treatment for the wireless indsurty. This is about LESS regulation and less protection. Its about enforcing existing FCC open communication guidelines. First Enforce Carterfone principles: Devices can be offered by third parties and can not be blocked, and (ii) Operators should offer “service only” plans that do not bundle a handset with the service. Second Apply wired & broadband Net neutrality principles to Wireles.

There is only one Internet and one public IP network. Some nodes might be wired, some nodes might be wireless through the cellular network, some might be wireless through WiFi and some might use both or different networks. Same open rules and principles should apply – regardless if and end point is connected through GSM, CDMA, 80211G, 802.3 of any other technology acronym we cant pronounce.

If you want to support the Skype petition – click here to file comments with the FCC directly (it is quite easy – would not take more then a minute. Put ‘RM-11361’ in field 1. Document type is ‘Comment’ and you can type your thoughts in the bottom. Pretty straight forward)

Clarification – I was not paid to file this by Skype, Nokia or anybody else. I believe it is very important for consumers and the industry. And yes – I might be involved in one of the opportunities that will be created if FCC follows through (that is if C will not ban me from doing another startup)

Idanese – English dictionary

While both of Idan’s grandmothers have detected many more words during their visits than we have (in both English and Hebrew), here are the ones we hear consistently:

“No” – luckily, less frequent than it used to be! Accompanied by definite head shaking from side to side. This is a kid who knows what he wants! (But sometimes just saying “no” is half the fun, and he’ll then reach out to accept whatever he just refused…)

“Uo-Oh” Appropriately and frequently used

“Shoes” – we’d think this was a strange addition to his vocabulary if it wasn’t one of our friends’ daughters first words.

“Mih” – music. Said while pointing to the CD player. And not just any music – he has his favorites, of course, which unfortunately by definition now skip all the time because he’s tried putting them in the CD player on his own so many times.

“Doh” – dog! Said with a BIG smile and enthusiastic pointing whenever we pass one on the street, or when Idan sees one out the window, or even when he hears one barking in the distance. More ammunition for Ram’s campaign…

“Mama” – finally, seems pretty consistent. We’ve confused him by saying both “Mom” and “Ima,” but he seems to have settled on “Mama” for now.

“Baba” – also sometimes “Dada” (again probably not helped by our interchangeable use of Aba and Daddy).

“Car” – fairly consistent, although he’ll let a lot of them go by without comment (unlike dogs).

He entertains us with a constant stream of sentences, and words that we haven’t yet managed to attach to a particular meaning based on usage, but which he says very clearly and emphatically (he is doing his best to teach us, but we’re slow learners).

He loves bringing us books to read, especially ones with moving parts (puzzle pieces, pop-ups, and anything else he can destroy – um, we mean, play with). And he loves dancing as much as ever – we just took a great video that we’ll upload soon. He’s also a great climber, and will slide down not only the small slide in our backyard, but also the much bigger one in the playground all on his own.

He also still holds the world record for ability to soak any bib or shirt with drool in no time flat. And is a voracious eater – but luckily very active so, aside from his Buddha belly, it doesn’t seem to stick on him.

That’s the update! (C) 20007 C

China’s shadow, immigration policy and how to steal the best brains.

I have just gone through Reed Hundt’s “In China’s shadow” power point book summary. Fun, easy to follow and very interesting. It’s not just interesting – it is probably one of the most important issues for determining if in 100 years the US will still be the World’s leader.

Which made me think about immigration policy. What if the US (In an act that none of us can imagine how it will pass through Congress) decided to offer Green Cards to any Chinese citizen who wants to immigrate to the US and has a MS or PhD degree in biotech, computer science or environmental studies?

Will they come? I bet a significant number will. Because it goes back to the exact core value of the US – and what China cannot offer – a free and open society (Yes my dear Yale/Berkeley friends – I know – mostly – but still quite better then the Communist party in China).

Influx of hundred of thousands of new, educated people into the work force? That’s great for the economy. You can almost do the back-of-envelope calculation: one million immigrants over a few years. Each buying a house. Getting high paid jobs (Which otherwise might have been outsourced to them in China). Not a bad deal.

And China – they will either have to make China more competitive for this highly skilled labor – make China more free and open so the US is not such a big carrot anymore. But wait – that’s what the US has been trying to push China to do for the last ten years…

Yeh – I know – nobody can get elected with this kind of policy. Yet it’s worth playing with the idea.

Ram

Disrupting the wireless industry, part 2: business model

So what would the the business look like for a venture that tries to become the Next Gen mobile service provider?

First – what it will not be. Today the cellular business is around (i) a bundled monthly service fee (ii) subsidized handset. Get this handset for free, and pay us $50/month for voice+wireless+handset. No *real* differentiator between the operators (Voice+sms is pretty much what most people use) and diffrentiation between handsets is mostly around industrial design. As a result, customer acquisition costs are in the $200-$300 range. So the math looks like: operators pay $250 to get you as a customer, give you a handset and collect $50 for 18 months so $900 Life Time customer value.

The key to the existing business is maintaining the $50/month revenues. If we take it away (original blog post: WiFi+GSM handset, VOIP over WiFi. 75% of usage on WiFi @ home or office, GSM used as backup where customers bring their own SIM) i.e. no more $50/month. Can we build a business?

Yes we can. But it is a different business – with a much smaller ARPU per user – and as a result smaller (if any) handset subsidy.

What are the revenue sources:

The first one – from a chronological perspective – will be ‘mini services’ : Very similar to Skype on the PC: $5 per 500 SMS or international termination. Or $5/month for transcribing voice messages a la Spinvox. Content – ringtones, games and screen savers are counted here as well. How much will be the total user spending per month – probably not more then $15-$30 spent across a few different services. The spending is capped by the PC world – where most of the services are free. So consumers’ mental model for WiFi enabled devices is more of the Internet model rather then the cellular model.

The second source of revenues is from the ‘Audience’ model. Or as some prefer to think about it – advertisement. Once a critical mass of users is built, then the community can be monetized. Its a long process to get there – and its not clear how big it can actually be. the case can easily be made that if you apply the web model, and take into account that unlike the PC – the handset is with us 24/7 – then we are looking at a factor more than the PC. Bring on video ads, click to call and click to act, and woo… you can dream of $20-$50 per month in ad revenues. Ads on mobile will happen. But how much will it be worth – very hard to predict. Because the key factor is what will consumers be willing to tolerate and find useful. On a limited screen and on a highly personal device. This is not something that can be assessed by doing colorful complicated spreadsheets that will make your McKinsey EM proud. The audience model can probably become the dominant source of revenues – but its too early to say if we are looking at $50 or $5 a month opportunity.
Bottom line: Some money on the device, some money on ‘Mini Services’ and as the community builds more and more revenues will come from monetizing the community – the PC audience model. What will be the mix ? We will find out in a few years…
To make any such business profitable, the key obstacle is the customer acquisition costs. If you have to spend $250 to get the customer who will then get you $20/month – its a non starter. The business just does not make sense. And that is the real challenge: is it possible to create a customer experience and services which are so compelling, so exciting and so valuable that they become viral? Can we get away from the spend marketing-dollars-superbowl-ads-brain-wash-brand-building as the only way to get consumers to use the device? What is the consumer offering that users will be willing to pay $200 to buy this handset because it is so ‘cool’ and so valuable to them?

Ram

Technology, individual killing power and reflections on Viriginia Tech

Was talking to B earlier this week when he commented that incidents like the Virginia Tech massacre are almost “an inevitable byproduct of modern free society.”I tend to agree, but would like to think it through

Technology has radically changed our way of life  and human society in the last few hundred years. It has  also changed how war  is conducted. And it has  greatly changed what might be called “individual killing power” If a few hundred years ago a lunatic might have killed one or two individuals before the mob will run him over and kill him, nowadays we have the wimp with two guns butchering over thirty people. Not to mention 9/11 and how 10 individuals killed  over three thousand. And about ten years ago in Israel a Palestinian derailed a bus  and killed tens of people by pulling on the steering wheel.  The individual’s  killing power has greatly increased – and will continue to increase as technology advances throughout our life.

Do we have to accept it ? Do we have to block it ?

A few thoughts

1. Curtailing individual freedom: Happens all the time.  And in different dimensions: “No, you can not own a machine gun and RPG even if you want to defend yourself and bear arms”.  And we are being searched when boarding a flight.  And individuals with criminal record can not buy guns. There is a line curtailing our positive and negative freedoms. And one of the criteria used to decide where to draw the line is evaluating how deadly the weapons or activities are. 

2. As technology changes, so does individual killing power and therefore the line curtailing individual freedom should change. Its not a static line, but rather a line that is continuously moving.  We can not expect to have the same individual freedoms we had two hundred years ago. And in the future, some freedoms will even be more limited.  This line touches on our freedom in many dimensions – not only positive rights like owning guns but also negative rights like online surveys and electronic surveillance: If somebody has been spending hours googling “Building home made chemical weapons” and shopping for the materials online. Wouldn’t it be good if the FBI stopped by to talk to the guy? Maybe he is just an avid chemistry buff. And maybe they will stop by to talk to him just before he goes to board the NY subway with his home made bomb. 

3. Role of Psychiatric evaluations:  One of the possible dimensions of limiting our freedom to “bear arms” has to do with Psychological evaluations.  What would the psychiatrists who evaluated Cho have said if he was asked after the evaluation if he would you allow Cho to buy a gun?  What would he have said if his evaluation  of Cho also included reading his school papers? We are already curtailing individual freedom to bear arms based on previous criminal activity. Is Criminal the only dimension? Should Psychiatric evaluations be used ?  Required ? 

This is not meant to disregard the cirtical role of inidvidual rights and the need to minimize goverment power over us. These are the two huge considerations that we need to balance. And these are the foundation of a free democratic society. My point is that the balance is not a static thing done once – but rather something that needs to be re-evaluated as inidividual killing power progresses.

Ram 

In support of CarterFon (more re Skype petition)

I have written and talked before about how important I think it is to apply the carterfon to Wireless. And that the real battle for NetNeutrality is the wireless one.

So in the last week I sat down and started writing an FCC filing in support of the Skype petition. A few other industry executives offered to help or co-sign. Which is great – especially considering that so many of the individuals in the industry are dependent on having good relationships with mobile operators for their employment.

f you have been part of the mobile industry and would like to help write it, email me.

Ram

‘Google not doing a mobile phone’ & Clintonian truth

There were quite a few blog entries in the last month about the Google Phone project that Andy Rubin is leading. Sim Simeonov wrote one (and then took it off his blog), and others have followed.

Then came the denial from google “”We’re not doing a mobile phone,” Alan Eustace, senior vice president of engineering and research, said in an interview… “I’d like to find something that is broader, rather than do yet another mobile device.”

Lets read between the lines:

“Not doing a mobile phone:” ‘Doing’ GOOG is a software company. They are not doing any phones. But they are writing a Linux based Services & MMI layer for mobile phones. Which is why Alan added “something that is broader, rather than do yet another mobile device”

And the first instance is not a “phone” but a “RIM like device. And Clinton didn’t have “Sex” with that women…

This is GREAT that Google is doing this. And if they end up bringing the source back to the community (which is what the rumors are whispering in the valley) that would be great. If they will have the guts to take it directly to customers, bypass the operators and offer WiVOIP they will transform the mobile industry. What is sad is how they are handling it. They could easily have said “We are working on software solution for mobile phones that will drastically improve the user experience and enrich the services consumer enjoy and handsets with this software will be in the market in early 2008. Thats all we can say at this point” There is no reason to play these Clintonian word games. Just like Politics – by not standing up to what they are doing, and instead playing word games with the industry, they are hurting the core values of what they stand for and their brand. Pity.

R