Netheads vs. Bellheads: Disrespecting "the cloud"

I continue to believe there's a big difference between Netheads and Bellheads, but there's something I heard this morning that really points out a huge disconnect between those two worlds.

What started me thinking was a sponsor message this morning on National Public Radio that promised improvements in business by taking advantage of "the cloud." 

Mmmmm... what a lovely image. Light drifting shapes that appear and vanish all by themselves,  with no intervention or control by those of us who live on the Earth. Who made the clouds? Nature. Who controls the clouds? Thermal currents, winds, humidity, terrain. Some might even attribute clouds to the benevolent Hand of God.  Farmers and their crops depend on clouds. The utility businesses of our cities and towns rely on clouds to supply drinking water and light. 

Real clouds

But listen more carefully to the use of "the cloud" when it comes to computing.  Folks, the computing cloud is anything but light drifting shapes beyond the control of those of us on Earth.  In fact the computing cloud was built and continues to be maintained by some of the biggest and most important companies in the world. Each of those links between servers, between your computer or smartphone and "the cloud" were built at great expense by telecommunication companies, some of whom rose and fell during the dotcom boom of the late 1990s.

What does that mean in this world? It points out the difference between those who use the network (the Netheads) and those who built the network... the Bellheads. Google, Apple, and others are building by attaching devices and services to either end of The Cloud but have little responsibility for the creation and maintenance of The Cloud.

Google and Apple can't live and can't thrive without The Cloud. Will they someday compete with and even replace the companies that provide The Cloud? I have my doubts.  I think the Nethead business case falls apart when the realities of the enormous capital and operating costs (as well as the pressures of providing world-class quality-of-service) is factored in. 

 

Ireland Axes Mobile TV Plans

An article by the GSM Association published January 10, 2011 indicates the Irish regulator is withdrawing its plans to offer mobile broadcast. The article, quoted in its entirety below, says:

ComReg, the Irish telecoms watchdog, said it will “not be proceeding further” with a plan to offer a mobile broadcast licence covering five urban areas of the country, stating that following a consultation period, “it became apparent to ComReg that use of the identified spectrum to provide a Mobile TV service in Ireland was not the subject of particularly strong interest to potential operators, and interest in the proposed procedure to grant the authorisation diminished.” After seeing further information on interest from stakeholders, it received just one response, from Vodafone Ireland, which agreed with the decision not to go ahead with the plan. The regulator says that it will “keep under review the potential for the identification of spectrum which would enable the award of dedicated licences for mobile TV,” and that future, technology-neutral awards of UHF spectrum could be used for mobile broadcast services.

The decision further highlights the lack of success for mobile broadcast services on an international basis, having once been seen as a potential “big thing” for the industry. The most high-profile failure was Qualcomm’s MediaFLO venture, which is to be closed imminently having failed to become a viable service. While there have been a number of pilot and commercial mobile broadcast launches globally, these have not led to significant subscriber interest, and in South Korea, which has been something of a market leader, ecosystem participants have struggled to monetise services. According to a Juniper Research study, the number of mobile broadcast subscribers will not reach 10 million globally “until 2013 at the earliest,” at which point more than 180 million subscribers will be accessing multimedia services via 3G, 4G and Wi-Fi networks. Trials are also underway of mobile broadcast technology which is more closely related to mobile standards.

DVB-H cellphone

It's certainly not the only place that this business model has struggled.  Operators have shut down operations in Switzerland and returned spectrum in France while mobile TV operations in Hungary and Germany are at a standstill

What's significant about this? The "operator" mentioned in the GSMA article is not a broadcaster but cellphone company Vodafone Ireland, which responded with a bored, "whatever" when told they might not be able to provide mobile television service.  This spectrum was intended to be broadcast to cellphones using the same business model attempted by MediaFLO in the US.

Are they ever going to get it right? Maybe. It's worth noting that ComReg is considering "technology neutral awards of UHF spectrum." In other words, perhaps it's not going to be dedicated to the cellphone-centric DVB-H service. DVB-H is intended to be offered on a subscription basis by cellphone operators, a business model which, the article points out correctly, has "... struggled to monetise services."

It points up what I've been saying all along... the local broadcasters are in the best position to offer TV, mobile or fixed and the cellphone-based subscription model will continue to struggle if not die off altogether.

Google Voice a Threat to Mobile Operators. We Mean it This Time.

How many times have we heard this? “A new technology that is starting to gain acceptance signals the death knell of the incumbent telecommunication operators.” Let’s see. What was that technology again?

Wi-Fi.

Skype.

Vonage.

WiMAX.

And on and on and on. Now, in the article CNN Money by David Goldman, Google: Your Next Phone Carrier  breathlessly predicts Google will become a mobile operator by using its voice over IP application. Based on what evidence? The article cites the fact that Google might be buying dark fiber, might become an ISP and once bid on some wireless spectrum. But the key information is here:

“Google already allows people to bypass their mobile carrier's service. Google Voice lets customers send free text messages, and the new version of Android ("Gingerbread") supports VoIP Internet calling, allowing users to make calls over over Wi-Fi networks.”

Wow! It’s wireless Skype all over again, which has had exactly zero effect on the mobile operators. And hasn’t really cut the legs out from under the wireline companies, either.  And, really, all this talk ignores some of the most important facts out there: 

• Wi-Fi isn’t a wide area network. Isn’t now. Won't ever be. Tried a couple of times and crashed (remember municipal wi-fi networks?”). Even Google’s own experiments in San Francisco have tanked.
• If you’re going to have mobile access, you will have to use a mobile network. 4G doesn’t yet have enough footprint and will end up being controlled by the mobile operators anyway. 
• It’s not easy to build a mobile network. The vaunted Verizon Wireless has achieved its current network coverage after more than 20 years of buildout. AT&T has also had 20 years and Sprint 15. People are still complaining about coverage.

A couple of scenarios:

“I’m going to replace my AT&T/Verizon Wireless/Sprint/T-Mobile with the Google network.” Assuming a deployment twice as fast as those companies were able to accomplish, it would be 2021 before there would be similar coverage. And, as rich as Google is, it still doesn’t have the financial resources of the telcos. Come back in 10 years. Oh, wait. It’ll be at least two years before they can complete the paperwork with the FCC and obtain nationwide spectrum. And all those communities who are already sick of putting up cell towers? They don’t want more. 

“Google Voice will replace the mobile operators because the price is zero.” OK, where are you going to get mobile access? From a mobile operator who is charging you a for a voice plan whether or not you use it. Or you could go with a data-only plan using a 3G/4G dongle for your laptop. Great: 1) you’re still tethered to a laptop, which is tough to use at the bar when you want your buddies to come down and 2) you’re still using AT&T/Verizon Wireless/Sprint/T-Mobile and paying $60 a month… about the same as a basic voice plan.

“I’ll use Google Voice on Wi-Fi.” Great idea. But where? Home, Starbucks, McDonalds, home, someone else’s home and… where else? Wi-Fi’s not a mobile network (something I’ve been saying since 2003). Terrible coverage. Not useful where you want to make calls.

What it really means: Nothing. Is Google going to become a serious mobile operator using its Android phones, some spectrum somewhere or Wi-Fi? Probably not. Skype didn’t. Vonage didn’t. Once again, Nethead domination of the telecommunication space will remain a fantasy. Bellheads, ultimately will be responsible for paying for, building, and maintaining very complex, very expensive networks. And consumers will keep paying – and paying a lot – for access to those networks.

Mobile Payments vulnerable to hackers?

The excitement has been building in the community of mobile banking, payment technologies and near-field communication (NFC) after major announcements a couple weeks ago supporting mobile payments.

However, that excitement must be tempered by warnings about hackers attempting to get at personal information in smartphones… phones that don’t yet support mobile payments! What will happen when they try to attack phones that are also linked directly to your bank account, credit card or – God forbid – your Starbucks card?

Well, you’ll probably lose some money. But there’s one important thing that will prevent those losses, and this remedy has nothing to do with technology or smartphones or NFC.   Get a pencil and write this down, because it’s important: “Don’t be stupid.” 

Here’s what the hackers are doing to get your banking information, according to the FBI’s Internet Crime Complaint Center (also called “IC3,” which sounds so much better than “complaint center”)

“[C]riminals set up an automated dialing system to text or call people in a particular region or area code (or sometimes they use stolen customer phone numbers from banks or credit unions). The victims receive messages like: “There’s a problem with your account,” or “Your ATM card needs to be reactivated,” and are directed to a phone number or website asking for personal information. Armed with that information, criminals can steal from victims’ bank accounts, charge purchases on their charge cards, create a phony ATM card, etc. 

Sometimes, if a victim logs onto one of the phony websites with a smartphone, they could also end up downloading malicious software that could give criminals access to anything on the phone. With the growth of mobile banking and the ability to conduct financial transactions online… attacks may become even more attractive and lucrative for cyber criminals.

IC3 gives a couple examples of how these scams have been working recently: 

Account holders at one particular credit union, after receiving a text about an account problem, called the phone number in the text, gave out their personal information, and had money withdrawn from their bank accounts within 10 minutes of their calls.

Customers at a bank received a text saying they needed to reactivate their ATM card. Some called the phone number in the text and were prompted to provide their ATM card number, PIN, and expiration date. Thousands of fraudulent withdrawals followed.

So if you get a message requesting personal information, the smartest thing would be to not give away your personal information. See? No technology involved other than the Human Brain.  YOUR human brain.

And thank goodness that the FBI is looking out for us and sounding a warning. However, could they find agents that are a little better at naming these scams? The FBI is calling them “Smishing” and “Vishing” for SMS phishing and Voicemail phishing. “Smishing?” Really, FBI? Surely you can do better than that.

Should this keep us from using mobile payments? Personally, I don't think so. We can't protect everybody from themselves. If you're the kind of person who gives your ATM personal identification number to strangers, well, everybody needs to learn that lesson. Some people will just have to pay more for tuition than others. 

But even if you never give out banking information and don't follow unknown web links, you could still misplace your phone in a taxi, restaurant, or anywhere else, just the same as you could lose your leather wallet full of cash and credit cards.  In that case, you might, indeed be able to rely on technology: Make a phone call to your bank and you can shut down all financial functions automatically. 

By the way, here are some other tips from IC3

• Don’t respond to text messages or automated voice messages from unknown or blocked numbers on your mobile phone. 
• Treat your mobile phone like you would your computer…don’t download anything unless you trust the source.
• When buying online, use a legitimate payment service and always use a credit card because charges can be disputed if you don’t receive what you ordered or find unauthorized charges on your card. 
• Check each seller’s rating and feedback along with the dates the feedback was posted. Be wary of a seller with a 100 percent positive feedback score, with a low number of feedback postings, or with all feedback posted around the same date. 
• Don’t respond to unsolicited e-mails (or texts or phone calls, for that matter) requesting personal information, and never click on links or attachments contained within unsolicited e-mails. If you want to go to a merchant’s website, type their URL directly into your browser’s address bar.

Two Worlds: Netheads and Bellheads creating our future.

In a previous post, I alluded to what I consider to be two different worlds in the mobile payments space. In reality, those two worlds are facing off in almost everything mobile.  I call people from those two worlds "Bellheads" and "Netheads."

Bellheads, as you might guess, are people who work for the phone companies. Call them what you like... telcos, telecom carriers, incumbents. Their business has always been to connect two phones and make one of them ring. And, of course, keep meticulous records so they can charge for every minute of use. All of the US telephone companies and cellular operators are run by Bellheads

Netheads, on the other hand, come from Silicon Valley and are wrap their businesses around computers and communication via the Internet. You know the Netheads by name: Apple, Google, Microsoft, Dell, Yahoo!

Bellheads are network builders. Netheads are network users.

Bellheads want the meter running for everything. Netheads prefer unlimited bandwidth.

Even though they'd been eying each other warily for years, the real collision came in 2007 with the release of the iPhone when the Netheads showed the Bellheads their best. And, because of their success, the Netheads got to dictate some of their own terms.

However, despite the fantastic hardware and all the App Store applications, there's still one place where the Bellheads have the upper hand: Capitol Hill.  Their influence is strong, they are savvy and they know how to make legislation and FCC rulings go the right way.

"Inevitable:" New way to describe Mobile DTV in the US. 40% of population to have MDTV before 2012

I've been party to discussions on several public forums and in person regarding mobile digital TV (MDTV).  Many of them seem to pit people from the cellular world against the broadcast world.  The arguments from the cellular side, if I could be so bold to summarize are: "you will fail if you don't make the end user pay for every bit that goes through your network." 

The broadcast-based proponents are saying, "the free-to-air/advertiser supported business model has been pretty successful for nearly a century. MDTV is just a little more of the same."

Who knows? The cellular guys could be absolutely right. But that doesn't seem to actually make a difference to the broadcasters, who seem to be pressing on, regardless.  The latest news is from the Mobile Content Venture (MCV) is a commitment to turn on 40 MDTV stations in 20 markets by the end of 2011. The announcement promised:

"...a commitment to upgrade TV stations in 20 DMAs in order to deliver live video to portable devices.  By late 2011, the venture will deliver mobile video service in markets representing more than 40% of the US population.  The service will initially consist of at least two ad-supported free-to-consumer [emphasis added] channels in each market. Additional channels and markets are expected to be added over time.

In 2011, MCV expects to offer the mobile video service in the following markets: New York, Los Angeles, Chicago, Philadelphia, San Francisco, Dallas, Washington D.C., Atlanta, Houston, Detroit, Tampa, Phoenix, Minneapolis, Orlando, Portland, Cincinnati, Greenville, West Palm Beach, Birmingham, and Knoxville.

MCV looks like some heavy hitters to me.  It's a joint venture of  12 major broadcasters and network owned-and-operated (O&O) stations that includes Fox, ION Television, NBC and Pearl Mobile DTV, LLC. The Pearl member companies include: Belo Corp., Cox Media Group, E.W. Scripps Co., Gannett Broadcasting, Hearst Television Inc., Media General Inc., Meredith Corp., Post-Newsweek Stations Inc. and Raycom Media.

In an article in TVNewsCheck.com, author Harry A. Jessel quotes Salil Dalvi, co-general manager of MCV:

"A free service would speed consumer acceptance and encourage the manufacture of devices able to receive the service, Dalvi said. “We recognize that this is a product that is going to have zero subscribers, zero users on day one.

“One of the key elements of the ecosystem is to get going with devices,” said Dalvi. “The best catalyst for doing that was to make content available at no direct cost to the consumer other than the device itself… so that [they] have that opportunity…to sample the product and get accustomed to consuming the content on the platform.”

What does this mean? Exactly what I've been saying here: Consumers are ready for the ad-supported free-to-air business model and broadcasters (and advertisers and program producers) all understand how it works. All the same people who've been working together for years continue working together in exactly the same way they're accustomed to.

Just as important as consumers getting a taste of the service is the clear signal to semiconductor and consumer products vendors to start making a variety of equipment. And with players like FOX and NBC, those vendors will start noticing.

Back from the dead... NFC shows up in cell operators' plans

I had all but given up on near-field communication (NFC) for financial transactions in the US. It's extremely popular in Japan, but I've been pessimistic about the ability of diverse companies to put aside their competitive differences and pull together behind a single standard.

And yet, here's news from two different fronts that suggests that a technology I've been trying to champion for the past four years may actually be gaining a foothold. In one corner is Google. In the other corner is a consortium of rivals from the cellular and financial industries.

First, there's this New York Times article by Claire Cain Miller about Google's new phone including an NFC chip. Google's CEO, Eric Schmidt, was quoted in the article saying:

Phones will know when someone walks into a store and can provide relevant information, he said. The technology reduces the risk of fraud, he said, because the person and their phone must be present at the point of payment, and could be connected to a person’s credit card number.

“This could replace your credit card,” he said. “The reason this N.F.C. chip is so interesting is because the credit card industry thinks the loss rate is going to be much better, they’re just more secure.”

Sounds a lot like something I'd said a couple weeks ago.

Isis

Second, there's ISIS, a consortium of AT&T, Verizon Wireless (it's hard to picture them in the same room) and T-Mobile along with Discover Card said:

Isis is working with Discover Financial Services' payment network ... to develop an extensive mobile payment infrastructure for the joint venture.  Barclaycard US, part of Barclays PLC, is expected to be the first issuer on the network, offering multiple mobile payment products to meet the needs of every customer.

Realistically, what does this mean? Unless your favorite color is purple, don't hold your breath while you wait for ISIS to allow you to make payments from your cellphone.  Here's what will need to happen before the first card swipe (or phone tap) happens:

•  Develop and distribute NFC-compatible card terminals to millions of retail locations (somehow, convincing those retailers that they need to purchase the new terminals, with are exactly like existing credit card readers, but also have a touch-and-go capability)
• Arrange with credit card companies, retailers, banks and other financial institutions to accept this new technology
• Convince cell phone vendors that there are enough compatible card terminals at retailers to spark demand for the phone
• Convince wireless subscribers to buy an NFC-equipped smartphone
• Convince owners of NFC-equipped smartphones that they are safe and secure enough to use them as a credit or debit card

That looks daunting, almost impossible. Yet, I'm really optimistic about mobile payments, much more than I have been for several years.  First of all, these three mobile operators have access to about 200 million US mobile users. That covers it from the telco side.  Plus, Google, and its incredibly successful Android smartphone operating system are pushing from the other direction. If the mobile operators don't get there first, they're going to have to cede yet another battle to the Internet companies.

But if these diverse groups are willing to cooperate on the telco side and compete with the Internet world, I'm suddenly full of hope that you'll see this soon. My guess is that it will be routine within five years... call it 2015.

Go back and read my pessimistic post about the leather wallet vs. the smartphone from only two weeks ago. That vision is not likely to happen without NFC, and NFC wasn't likely to happen in the US before these announcements.

(But what do we know about ISIS? Well, according to Wikipedia, Isis is "also known as the goddess of simplicity, protector of the dead and goddess of children from whom all beginnings arose." She also had a baby with her brother Osiris, which would pretty well disqualify her from, say, being a Supreme Court justice or holding any other public office.