Tag Archives: media

Telecom Watchlist / Industrial Evolution

There are clear innovations and implementations of current technology that can be safely called inevitable. One of these is ubiquitous wireless. We will be surrounded by secure broadband available by subscription, and compatible with wireless devices. Wireless devices compatible with broadband will include laptops, PDAs, phones, and electronics built into vehicles, etc.

If this is true, then some industries will join the buggy-whip industry:

Phone companies: why pay for phone service if your wireless phone is a tiny part of a cheap broadband service. Internet traffic incurred by telephone quality duplex audio is a drop in the bucket.

Cable providers: If I have access to streaming video straight from the media companies, why pay a cable company for anything? I might pay HBO for access to their channel, but there is no room for Comcast. The old line between broadcast and cable TV will be irrelevant.

Traditional and Satellite Radio: Internet radio is already catching on. When devices and wireless grow to maturity, there is no need for radio. Your music preferences will be targeted much more specifically than a set of 20 FM stations can satisfy, making the listening experience far better. The 2-way directionality of streaming radio (broadcasters know what IP addresses are listening, and when) make the value proposition for advertisers far better. Finally, the global nature of IP eliminates the problems of range and signal quality.

I don’t mean to sound gloomy, in fact, this is not a gloomy forecast. Leaving horse drawn buggies for cars was a major milestone in economic advancement. So too, leaving single-application wires for IP-based wireless broadband is going to be a great milestone. Communications technology is the lubricant of innovation and trade. I would expect global growth to accelerate into these advancements, and remain at a generally accelerated pace thereafter.

In this speculative possible state of the world, investors might benefit from:

underweight companies with revenues largely based on phone, cable, and radio

underweight traditional-radio advertising companies

overweight equities

overweight internet advertisers and IP-intelligence aggregators

overweight internet applications providers

What Does Ubiquitous Broadband Mean for the Telecoms and the Cable Industry?

Verizon prevented municipal WiFi networks in Pennsylvania based on ‘unfair competition.’ Verizon has a clear reason: municipal wireless broadband would obviate the phone lines. It would obviate cable companies, too.

Ubiquitous broadband – no matter who provides it – will mean that voice, video, and data services are available through the air. Traditional phone, radio, cable, and other media distribution is disintermediated. Storage servers and a pretty front-end indexed by search engines could handle all of recorded media. Interactive media on TCP/IP replaces and moves forward phones, video conferencing, etc.

What does it cost to serve wireless broadband? Because of the ease of offering secure access to wide geographic areas, competition will rapidly draw the price toward the cost. The total revenues of these firms are negligible compared to the cumulative revenues of phone companies, cable companies, cellular and DSL providers, and radio companies (including satellite).

The consolidation of industries and shrinking pie are bad enough, but the elimination of barriers to entry and the fall of the profit margin make the shift a major net detraction financially. The breadth of industries are waving investment warning flags. There may be winners as well as losers, but how long is it going to take you personally to migrate from your cable bill, phone bill, cellular bill, ISP bill, and satellite radio fee toward VoIP phone in your PDA and a media server in your PC at $50/month?

To make matters worse, the access fee might drop to free when the service bundles hosting and storage. If they get to track you, target advertising, and other applications, they could reasonably pay consumers to be in their network. In other words, the money is in the nodes not the lines between them.

The Myth of Negative Sentiment

Today’s article in Barrons: “The Myth of Negative Sentiment” took the position that negative sentiment in the investor community is a myth, and that the media is unnecessarily sugarcoating economic problems.

I think the article missed the point.

The sugarcoating is not for the investor crowd, it is for everyone else. Investors stand to do well as we move toward an “ownership society“, but the non-investor class is disenfranchised and falling further behind. I’m talking about the concentration of wealth and the distribution of consumption.

The article talks about how investors are heavily invested in equities rather than cash, and how this is a signal of investor optimism. This is true; it is because dividend and capital gains rates have been cut in half (or more) and interest rates on cash accounts are almost zero. Why hold cash when the yield curve is steep and tax rates are so favorable? After-tax investment returns look very promising.

But if you live paycheck-to-paycheck (Barron’s readers might not have any contact with these people…) then your prospects are grim. In the past, debtors could count on inflation to depreciate their past sins. But these days, deflation threatens to put them deeper in debt while giving the wealthy more buying power. Meanwhile social services are being cut and the lions share of tax breaks are going to people making capital gains and receiving dividend income. For them, the whole country is becomming a company town.

The issue is not negative sentiment on the part of investors, but rather social depression. And that is no myth.

Howard Rheingold: Smart Mobs

The big battle coming over the future of smart mobs concerns media cartels and government agencies are seeking to reimpose the regime of the broadcast era in which the customers of technology will be deprived of the power to create and left only with the power to consume. That power struggle is what the battles over file-sharing, copy protection, regulation of the radio spectrum are about. Are the populations of tomorrow going to be users, like the PC owners and website creators who turned technology to widespread innovation? Or will they be consumers, constrained from innovation and locked into the technology and business models of the most powerful entrenched interests?

Read HOWARD RHEINGOLD: SMART MOBS, a great article on EDGE.

Home Entertainment by Microsoft

Microsoft has announced Windows XP Media Center Edition, a version of the Windows operating system that turns a PC into a media center. The new product, formerly code-named Freestyle, is targeted at digital media enthusiasts, college dorm rooms and teen bedrooms. The interface will feature a Start button which brings up a screen to replace the standard Windows graphics with a simple design that provides quick access to various entertainment media and functions (see screenshot). It will not be available as a separate operating system, but will be packaged together with PCs that are specially designed to support its media features. These systems, planned for availability from HP, NEC, and Samsung will be priced in the $1,000 to $2,000 range, and will have extensive digital music, video, TV and DVD video playback capability, along with their own remote control. There are stories about the new system on MSNBC and BBC News.