Tuesday, June 14, 2005

Over to you...

Martin Geddes - Telepocalypse



3G guru Tomi Ahonen thinks that…
[By 2020] the “free” non-Mobile phone based “old-fashioned” internet has all but vanished.
What do you think? Sounds like he’s forecasting a complete victory for IMS and that a whole generation will suckle at the teat of the mobile carriers — regardless of the cost and Soviet economic outlook.
What do you think?
UPDATE: Tomi has written back in response, and rather than let his comment languish in obscurity in the comments section, I’ve upped it into the extended section of this post, deleted the original comment, and appended my further rambling observations.


Posted by: Tomi Ahonen at June 14, 2005 08:03 PM
Dear Telepocalypse,
Its funny you would pick up on that point on my 20 year forecast (which was focused on the future of the cellphone, not the internet or IT industry). But yes, I did say that by 2020 the “free” internet model will be extinguished and confined to the heaps of history.
This is no new point by me, and in fact strongly endorsed by many who bought my second bestseller - the world’s only book on the business of advanced cellular telecoms, m-Profits (global bestseller in October and December 2003). I clearly stated back then that this trend was inevitable. There are more users on the (paid) mobile internet. There is no built-in payment mechanism on the fixed (free) internet (ie you have to use a credit card etc) but there is built-in payment on the mobile internet. And the users on the mobile internet are totally agreeable to paying for content, while on the free internet the content owners are beggers.
Let me see? More users. A built-in payment mechanism? And the users are willing to pay? Of COURSE all best content migrates to the mobile internet as soon as the mainstream population gets “smart phones” that allow that use.
Note first on the “communist” model - it is the EXACT opposite of what I posted. The current free internet model is the closest thing to communist ideals - having all content and all applications free, shareware, etc. Just like in the defunct Soviet Union, if nobody pays for it, nobody maintains it. Services disappear and websites are often loaded with obsolete content.
Consider this. In Japan and Korea today, more users are on the mobile paid content internet than on fixed “free” internet. 84% of Japanese cellphone users already PAY for news content on their cellphones. 30% of Japanese use cellphone services while watching TV. And if you think blogging is the future, think again. MOBILE blogging is the future. In Korea already 5.6% of all cellphone users are active mobile bloggers. In America only about 1% of all fixed internet users are active bloggers.
No, it is not at all my point that a communistic view is approacing. The EXACT opposite. A robust, money and profits based, fully commercial internet is coming. Not through IPV6. No, it is already here, in the form of the advanced wireless internet. And that future exists only in Korea and Japan today.
So yes, by 2020 I am certain the last vestiges of the old fixed internet will be turned off, just like today nobody uses Gopher and nobody talks about the Arpanet. There are almost 2 billion cellphone users already today. They replace their phones every 24 months. In only a few years these all will be very advanced 3G and 3.5G smartphones with fast access, color screens etc. With built-in payment, of course the best content will also be there.
I know it is difficult for Americans to accept that the future of the cellphone is not run by American companies. Yes, the cellphone was invented in America, but Japan, Korea, Finland, Italy, Israel, Hong Kong etc are 5 years ahead of you. Visit those countries and see the future.
Or read one of my books. I recommend my latest, Communities Dominate Brands, available at Amazon.com and any major booksellers.
And visit our blogsite for more of this future at www.communities-dominate.blogs.com
Thank you and keep up the excellent work
Dominate !
Tomi Ahonen :-)

Tomi
Wow! That was quick! Thanks for the reply. But I beg to differ in several — but not all — aspects. Critically, I see the world through a connectivity/service divide, rather than a fixed/mobile one.
It is possible we are using the word “Internet” to mean wholly different things. I see it merely as a service-agnostic connectivity layer. Do you really believe that in 20 years we’ll still need the permission of a cellco to get the features we want on a handset, be able to run the applications we desire, and send whatever data we need without being price discriminated to death? I think not; which implies there’s an ability to make unmediated connections between peers, who can choose to communicate any messages of their choosing. That’s the Internet in anything but name. Granted, it will have to evolve from the current one which is a lab experiment that escaped before the trials were finished.
The “free internet” model you refer to must be one solely at the service/content layer; the connectivity is happily paid-for by the users on a capitalist basis. When you use the term I believe it refers to both service and connectivity, with implicit cross-subsidy. My contention is that this model will unravel.
The power of billing is indeed a strong attractor. But that the power of commercial providers of connectivity — and their consequent ability to bill — will be preserved across the next twenty years seems suspect on several counts. Services will be billed for, but by whom is a more open question.
In the early days of mobile connectivity, with paging, the connectivity was the vast bulk of the value being delivered. The service — of storing and forwarding small strings of text — required little IT infrastructure or intellectual effort. Thousands of cell towers and trenches needed a lot of work.
By the time of 2G cellular, little had changed. The network was optimised for one simple duplex audio-stream application. The great majority of the value still came from the connectivity provision, effectively rented on a call-by-call basis.
Now we’re seeing two things happen that are turning the tide. I’m calling the apogee of the model you describe.
Firstly, the value of the services is starting to rival and exceed that of the connectivity. The connectivity is becoming ever-cheaper because of technological progress; the services represent both a claim on human intellect and entrepreneurialism — which doesn’t follow Moore’s law — as well as access to certain well-defended economic assets (e.g. the eBay marketplace) which can charge high rents.
The service providers are therefore unlikely to be willing to be fleeced by the carriers who in turn wish to turn themselves into banks with huge free cash floats bearing zero interest. That doesn’t mean the handset won’t be a payment token – it will – but that the carrier is not dead certain to be the mediator of those payments.
Indeed, we may start to see “reverse-subsidy”: services like Skype, with whom you have a billing relationship, will partner with connectivity providers like Boeing Connexion. $30 for unlimited Wi-Fi on you flight, but use your Skype account and only pay $5/hour for Skype access. Companies like Yahoo! will likewise aggregate large numbers of services and do deals with telcos and hotspot aggregators to hide the access charges in the service fees. Superficially this looks the same, but the locus of power has moved a huge distance.
The second driving force is that the connectivity you describe as arriving in 2020 and beyond is likely to be delivered in radically different ways. The 5km haul to the nearest tower is going to be replaced with 30m hauls to your nearest Wi-Fi (or technology successor) access point — at least when you’re in the “home” and “work” domains. By 2025 we can expect mobile mesh networks to be common in the “other” domain, again reducing the power of network operators. (Check out Microsoft’s R&D in this space as a precursor for how Windows PC will effectively create a “WinNet” — access fee to B Gates Esq., Redmond, WA. How long till we see MotoMesh and NokiaConnect as rival public networks?)
This is simply a matter of physics and economics — faster speeds are easier over shorter ranges; free unlicensed spectrum is noisier and only allows shorter range anyway; and broadband in the home and office is becoming a norm already, providing a ready-made back-haul. Thus the connectivity becomes fragmented in its supply. Those who build and operate networks are not guaranteed to be the ones who assemble the cross-network provisioning or do the billing and retailing. Concurrently, we are likely to see a significant growth in municipal or sub-divisional open access networks; personally I believe self-interest in rising property prices will drive people to vote and demand these.
We’re already seeing horizontal layers emerge where companies focus on simply doing one or two layers of the stack well: Boingo and Wayport doing provisioning across networks, plus retail; cellcos offering more and more MVNOs, and being left to do only network build-out and provisioning. I do not believe that attempts of cellular operators will be able to achieve a “reverse takeover” of all these landline connections that are used for local mobile connectivity.
There are also some external forces at work that argue against the cellcos being your bank: companies with whom you have an even stronger financial and customer intimacy bonding (e.g. Tesco in the UK); banks, who are unlikely to be passive in watching their payments business get eaten away from underneath; and governments, who may come to heavily regulate money-taking by telcos (and already do; see California regs on third-party charges on telephone bills).
I also think the power of the operators will be eroded by the “Skyping” and “Craigslisting” of the Net. Most of the value to users comes from interaction with close friends and family – not from glugging media content. Once you’ve paid for connectivity, the service element is trivial; so trivial you can give it away for free – like Skype. Even the “meeting places” that are left – many of which used to have entry fees – may get replaced by nearly-free alternatives. Thus the power of billing is again weakened; the story is really of a vast consumer surplus being generated from mostly peer-to-peer interaction. Because by definition this isn’t monetized, wheras much of the media content is, one can be distracted into watching only the money and assuming that’s what is driving the user behavior. Instead, you need to watch the gleam in their eyes as they use tools like Skype.
If you drop the price of “idea capital” by three, six or nine orders of magnitude, even a few motivated commies can keep a lot of people fed!
Your comment on mobile blogging is entirely correct. Indeed, it’s unfortunate that “word blogging” and “event blogging” have got confused; we can use a pen for writing and drawing, but they’re distinct activities. (I can’t do the latter at all!) Mobile blogging fits Douglas Galbi’s presence model of “being there”. It lets you share the experience, unlike MMS which merely allows a technocratic sending of a picture.
As a British national and resident who lived in Kansas City for a while (“an island city surrounded by nothing but hundreds of miles of land”), I’m cautious of extrapolating from isolated cultural groups.
In summary, I think the forces that are separating service and connectivity for fixed access, and severing the cross-subsidy, will also apply to mobile access. The same crises will unfold, only slower. The answer will be new ownership and financing models for connectivity. And yes, that connectivity will be global, service-agnostic, and cheap – just like the Internet. Even if the cellcos manage to sustain the role of billing agent – which is uncertain — it doesn’t automatically follow that they will be able to cross-subsidise connectivity. And if they can’t, the business outlook for mobile operators is as sick are wireline’s is today, certainly over the periods you were asked to foresee.
And yes, I’m going to keep reading your blog (already well established in my reading), commend it to my readers, and look forward to posting some reviews of your books in the future.
Subserviently and long-windedly,
Martin

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