Fractals of Change

Broadband for EVERYbody

We used to think it was enough to make broadband accessible everywhere. That's no longer good enough. We now need to make sure that everyone actually has broadband in his or her residence and business. Everyone! (voluntary cave dweller excepted). Our goal in Vermont is to combine stimulus money with private investment and state bonding authority to move us quickly not only to 100% broadband availability but 100% broadband penetration.

The electrical system of tomorrow, the health care system of tomorrow, and the education system of today all depend on universal broadband penetration. Oh yeah, communication, commerce, and entertainment all need broadband too. So does e-government (coming soon) and research.

The electrical system of tomorrow will be smart. That means demand, supply, capacity, and outage data flow unimpeded and in near realtime from meters to utilities and back to consumers and generators. Much of this data flow is machines communicating with other machines. Some information flow is back to consumers both large and small so they can control their energy bills by using electricity when it's abundant and cheap and shunning or selling it back to the grid when it's rare and expensive. Taking advantage of the smart grid requires a broadband connection.

Part of e-health is electronic health records. Better information means better, cheaper, and less mistake-prone care. But we can't replace paper records with electronic ones until we can be sure that very doctor's office and place of treatment is online with enough bandwidth for bandwidth-hungry objects like x-rays. In the case of home health care, the place of treatment is the home. A home health worker needs the same access to medical records and the same ability to update them that a doctor or a hospital does. The home of the future will have health monitoring devices when needed. Homes need to be online for the delivery of health care.

When I was in school a million years ago I was taught to do research in the Reader's Guide to Periodical Literature. That was then and this is now. Students need to know how to separate the wheat from the chaff on Google and wikipedia; their homework needs to be online just as mine was in the library. But a teacher can't responsibly give online homework to a class if even a small fraction of the students don't have the equipment and connections to get online when they go home. We can't reinvent pedagogy the way we need to until we know that all students have broadband connections – and that schools have scads of bandwidth

So everyone needs to be online. Geography can't be an obstacle but neither can poverty, lack of equipment, or lack of training.

The platform for SmartVermont – the Vermont we hope to build with stimulus money, State money and bonding authority, and private investment – is universal broadband penetration. The first application on that platform will be smart grid, e-health, and e-education. With lots of hard work, some luck, and our fair share of federal (our!) dollars, we can build that future for ourselves and our children.

PCs Under Fire

Smart reader Cletus White responded to my post predicting that netbooks will replace many PCs with this comment:

"Netbook, yes maybe...but I read your blog from a facebook link and responded here on the couch via my apple iPod touch (home wifi). It's not a netbook . It's an Internet appliance about the size of a playing card."

He's right; it's not just netbooks but all sorts of devices which are replacing PCs in our lives. During the day my Blackberry is now my take-along email machine, not my much heavier Toughbook which used to be my constant companion. Blackberry's good integration with Exchange makes this practical since I can reply, delete, and folder from the Blackberry and not have to redo any of it when I go back to my desk. Sent mail ends up in my sent mail folder no matter where I read it from.

Since the Exchange Web Client which runs in a browser (officially Office Outlook Web Access) is now very good (formerly it was awful) and since I'm online so much of the time, I don't use the standalone Outlook client on my PC to do my State of Vermont email when I'm out of the office; I do it all in a browser window. That's great in an Internet café where I don't have my own machine. More important to the future, since I'm just working in a browser, I don't really need the PC; I could be on a netbook or some other connected device.

Web sites are developing mobile-friendly versions of themselves and the iPhone shows how even websites authored for PCs can be reasonably accessible on smaller screens. During our recent trip to Greece, we used Kindle's onboard dictionary for word disputes (in English) and Google Search and wikipedia on Mary's connected iPhone for settling all other bets. Even if I had a cellular data plan for my PC on this trip (too complicated and expensive in Greece), using the iPhone was faster than booting up a computer; and, like a PC, the iPhone took advantage of WiFi in hotspots (We didn't get Skype working on it, though).

Perhaps a sign of times to come (and certainly partly a result of recession), Microsoft reported a 32% revenue decline in quarterly profits and the first ever decline in quarterly revenue since it went public twenty-three years ago. People aren't buying as many computers, of course; they're not upgrading as often. But this from the Wall Street Journal story on MSFT earnings:

"In addition to slumping PC sales, Microsoft faces a challenge from netbooks, the inexpensive laptop computers that are the only segment of the PC business enjoying growth. Microsoft hasn't been able to charge as much for the versions of Windows that are generally bundled with netbooks as it can for software included with other types of PCs."

Even worse for the future of Microsoft is that netbooks almost never come with Office and some, like the one I bought, don't have Windows on them at all.

Having learned from my prediction in 1984 that mainframes were on the verge of extinction, I know that PCs will be with us for years to come. But the future is a world where all sorts of appliances are used to get online and where applications and data usually live in the cloud with access through a browser. No one will consider it necessary to have a PC to go online. No one will be offline for very long.

It’s The Netbook, Stupid

Personal computers are an obstacle to broadband use. They're complicated, expensive, heavy, take forever to boot up – and unnecessary. Ironically I'm writing this post on a computer because I'm on a plane, one of the few places (besides rural America and developing nations) where broadband isn't available.

Mary was thinking about how to achieve Vermont's new goal of making broadband available to everyone including those who can't afford or don't know how to use computers. Suddenly we realized that computers are a problem, not a solution. If you know you're going to have good broadband, you don't need a computer to browse the web or communicate; you don't even need a computer to create documents, use spreadsheets, store and analyze data. We need to compute but we don't need a computer. The personal computer is an expensive, inconvenient, and inefficient way to all these things. Of course people like me are also hooked on computers.

So we bought a netbook. It took a while to find one with Linux instead of Windows; but that's what we wanted to experiment with. Vista has conclusively proven how much of a barrier an operating system can be. Linux is not only free but also non-obtrusive. Finally bought an ASUS Eee PC 900 with a builtin video camera, mic, and speakers (Skype ready), an 8.9" screen, and a 16 Gig harddrive (which I would have as soon done without). Didn't buy any applications, of course. $247.56 at Amazon with free shipping. (I know, I know, this is really a computer; even has Intel inside. But we're only using the browser and the explorer so it doesn't count as a computer).

Carefully I kept my nerdish self away when it came. Mary was up and on the Net using our home wifi in about ten minutes after opening the box. Mary's not a novice but she's also not a nerd. Looks good so far. I came back in when I heard the music and found her happily listening to Internet radio from India on the not-too-shabby speakers.

Here's our plan. Mary transitions off her HP to the netbook. She uses only online apps through the browser; she stores her data in the cloud (actually better for collaboration). Pictures live at Picasa or the like; videos in YouTube; white papers and spreadsheets in Google Docs (lots of Google here). Side benefits are her environment is available at whatever Internet café she uses to go online and backup is no longer an issue. In fact she was delighted to find after a small snafu with the word processor in Google apps, which made all the words disappear ,that every edit she'd made had resulted in an automatically archived version of the document.

If this works than maybe we don't worry about computers and software for the newly connected. A netbook'll actually be better – cheaper, easier install, easier to use, no software to buy, and probably replaces the landline phone with Skype video calls.

Yahoo 1, Google 0

Doesn't happen very often but Yahoo has bested Google in a battle over local advertising. There is also a little bit of good news for struggling newspapers in the story by Miguel Helft which is in today's New York Times:

Through the partnership, ad salespeople at newspapers pitch local businesses on advertising packages that let them reach visitors to the newspapers' Web sites and Yahoo users in the area. The newspapers also use Yahoo technology that lets them charge more for ads on their sites…

"In 2009, this partnership is not material," said Hilary Schneider, executive vice president for North America at Yahoo, who is one of the driving forces behind the alliance. "If you look at the long-term opportunity, it is material, and it continues to exceed our expectations."

Yahoo is mobilizing the local sales forces, which are one of the remaining assets of devastated local papers, to make online ads part of the package they sell to local customers. This is a good service to the businesses buying the ads, which are generally not sophisticated enough to buy targeted online advertising themselves and which also do need to coordinate their print and online buying. The newspapers get more revenue and get to use Yahoo technology for better targeting on their own web sites; Yahoo gets good local advertising for its sites.

Google took the opposite approach. It tried to use its self-help advertising engine to sell remainder space in newspapers; but abandoned this effort after two years in January. Google has been hugely successful, of course, by taking orders for do-it-yourself advertising on the web. But it turns out that there is still a market for ads which need to be sold by salespeople who understand the customers, their needs, and the local markets.

Google's approach was to compete with the existing local sales force at newspapers; Yahoo's approach is to use the experience and contacts of these salespeople. Preliminary indications are that Yahoo got this one right.

Kindle for Authors

Kindle ought to be the answer to an author's dream But, for now, it is an almost insurmountable marketing challenge. Read on to learn what I'm trying

No expensive software or hardware is needed to create a Kindle book. Assuming you can write to begin with, you can create a book with Microsoft Word or similar tools (HTML is best but .doc works) and easily upload it for Kindle publication; the details are here on Amazon. Two or three days later your book's in the Kindle store. Amazon pays you a 35% royalty on the suggested retail price (which you set).

You can get a book out fast. You can address topics as timely as last week's installment of TARP. And no publisher or agent is going to tell you "no" or "rewrite and I'll think about it".

What's not to like? Well, for starters, no one is going to know that your book is there.

Amazon does some marketing to Kindle owners and highlights new books on Kindle – but, understandably, these seem to be books which already are hits or are from hit authors. If you're already a hit author, your publisher is worrying about all of this and not you. So, as is almost always the case for unfamous authors, you've got to do your own marketing.

Unfortunately for authors, readers, and even Amazon, there doesn't seem to be a practical way to market Kindle titles which are not on the best-seller list. You can be found by a diligent searcher; your title can certainly be located by someone who is looking for it or for books by you; but you don't have any good way to snare new readers.

Physical books can be advertised and promoted in various ways; all of which are expensive for new authors but some at least verge on the practical. Display and clickthrough advertising can both work because anyone who can read is a prospect for a physical book. But so far there are only an estimated half million Kindles out in the world so, even if you do a very good job of reaching people who are interested specifically in the art of tulip growing as you've explained it in your book, most of your tulip growing readers aren't prospects for a book on Kindle and won't be for some time to come. So you can't sell Kindle-only books through vertical marketing.

What you really want to do is reach those people who own Kindles. After all, there only 230,000 titles available for Kindle; the categories are thin; Kindle fans have to be content starved. They can instantly download a free preview of your book and fall in love with your prose – if they only knew your book existed. That's where it would be good to have help from Amazon – even if you have to pay for it; but none seems to be available. So far I haven't gotten any responses from Amazon to questions on how to market a Kindle title even though my book hackoff.com: an historic murder mystery set in the Internet bubble and rubble was an early Kindle title and is also carried in hardcover by Amazon.

One opportunity, of course, is to promote your book on your own blog (see example in the paragraph above in case you missed it). Probably all your readers don't have Kindles but at least the ad is free. But you can do better than that. If you write interesting posts about Kindle, then Google will send Kindle owners to your blog to read your posts (and the promotion for your book).

I stumbled into this by accident, not by thinking. Since Kindle 2 was released, there's been a surge of traffic to Fractals of Change from people doing searches for "Kindle web browsing" and "Kindle Internet". I posted on both of these topics over a year ago but the posts still appear near the top of the first page of search results for these terms. Clearly these readers are interested in Kindle and presumably its content. It took me a week to realize that I ought to put an ad for the Kindle edition of hackoff.com at the top of the right sidebar of this blog even though I was already thinking about how to promote the Kindle edition. Duh! Too soon to know how effective it is.

The second self-help marketing attempt I'm making is through an Amazon marketing program called BXGY (Buy X Get Y). You can attempt to buy placement for your title with some other presumably better-selling title so people who look at that one will also see yours and get a two-fer offer with some savings. This one isn't for the faint of heart. The minimum cost is $1000 for a month long promotion. So what I tried is pairing my book with best-selling Kindle titles that I think appeal to the same readers. It doesn't say anywhere I can find on the Amazon site whether you can actually do this pairing with Kindle titles and I'm only interested in a Kindle-pairing because I only want to pay to reach Kindle owners. Even if it works, you don't get back direct results from Amazon and have to guess how much the pairing affected sales during the month you paid for.

Will let you aspiring e-authors know if Amazon actually accepts the pairing request and, if so, how it seems to have done. Also would be glad for any hints from readers on how to promote a Kindle title.

When Angels Fear to Tread

It's the lack of exits that's a problem amid the deadly clamp of panic throughout the economy - a far cry from the irrational exuberance that drives entrepreneurs (and their investors) and which brings us trouble and fraud as well as greatness and "slumdog millionaires".

No matter how much we bailout the auto industry, there'll be less jobs making cars next year than there are this year – in fact cutting jobs is a condition of the bailout funds. There are going to be less bankers a year from now, too. New jobs will come from new industries, not from the ones on life support. So it is essential that there be some source of funds for entrepreneurs so that they can do what they do best (when they succeed) – create good jobs for future markets.

Tom Friedman suggested bailout money for VCs; Fred Wilson articulately pointed out that only the incompetent VC firms would take the money and that skilled VCS actually do have money and can raise more. Entrepreneurs pointed out in comments on Fred's post that there IS a shortage of money from entrepreneur's POV. In a comment on my post on the subject, Fred suggested tax breaks for angels.

Angels are motivated by fear and greed just like everyone else – angel investors, that is, who, in better times, are a source of funds for entrepreneurs launching the businesses of their dreams. Angels (I've occasionally been one) are just as perverse as all other investors; we're more likely to invest at market tops when everybody else is and less likely to invest in scary times like the present even though there's greater opportunity now.

There is a way to get angel money flowing again but it's not by subsidizing angels – even with tax breaks. Angels are claustrophobic; don't like going into investments without exits.

Angels generally step aside (but don't get cashed out) when a company gets its second round of financing. Often VCs step in with money, advice, and contacts for the next round of a company's growth. The angels and VCs (and entrepreneurs) generally get some reward when the company is either bought or goes public. But companies aren't getting bought or going public right now.

The result is a logjam. The VCs are concentrating their time and attention on companies which would have – in better times – been long out of their portfolios. It's true, as Fred said, that the good VCs can raise more money; but they can't clone themselves. Fred can only serve on so many boards at a time. That means that venture funds can't take responsibility from angel investors at the rate they used to – they have last years' hatchlings still in the nest.

An angel looking at a potential new investment not only confronts the risk of failure – that's always been there – but also the risk that he or she will be in an active role with the company – and perhaps its only source of capital –for a long time to come. We angels, like the VCS, still have the companies that we previously incubated in the nest. So we're not looking for new investments either. We're scared and there are no exits.

Only greed (the dream of an outsized return) can conquer fear. Tax breaks don't do it; you need to have some gain before you can use them.

An opinion piece in the Wall Street Journal today by Tom Hayes and Michael Malone entitled "Entrepreneurs Can Lead Us Out of the Crisis" suggests not only tax breaks for angels and entrepreneurs but also eliminating Sarbanes-Oxley to make it easier to be a public company. This has the virtue of appealing to greed (the IPO dream) and opening up exits; but even I'd agree that, in the dotcom generation, companies went public much too soon – eventually to the detriment of the companies as well as their investors.

We investors have to give up the dream of a QUICK outsized return. We can dream but we have to dream the patient dream. We probably even have to wait for companies to be profitable before we can make any money. That's OK; we can live with that as long as we can have the dream.

Turns out there is something government can do, however, to get investor juices flowing again: invest in infrastructure that creates opportunity rather than subsidizing zombie companies which are blocking the way. When the Erie Canal was built (funded by private investors buying government bonds), private money flowed to boat people and businesses all along the canal. Same kind of thing when the railroads with built with healthy doses of land grants and other subsidies – fortunately government DIDN'T elect to subsidize the canal boats which the railroads put out of business. DARPA (government) had a lot to do with inventing and funding the Internet; the Internet enabled and encouraged a wave of privately funded innovation.

I wish more of the bailout were focused on infrastructure – especially new enabling infrastructure. If transmission lines actually do get built, "alternative" power'll flourish with much less government intervention than is planned. The government does have a role in building those power lines. If the United States can become an e-nation with every citizen having access to a highspeed persistent connection whether at home or on the road, that infrastructure of connectivity will light the exuberance lights for a new generation of connected services. Government's role there is to create telecommunications competition we don't have today and to subsidize the last five or ten percent of connections as we did with rural electrification and telefonication because the network as a whole gains value when it is universal.

We investors and entrepreneurs have to relearn patience. Fair enough. We'll come back into the game once we can't stand to be on the sidelines any longer and when we see a future – almost no matter how distant – in which there is an exit.

A VC Says No to VC bailout

"Thanks but no thanks" is Fred Wilson's prompt response to Tom Friedman's column suggesting that $20 billion in bailout funds be made available to the top 20 VC funds so that they can invest in the future rather than the past of failed banks and auto manufacturers. Fred says:

"…the top 20 firms in the venture capital business are the least in need of a bailout of any group I've ever thought about. These firms, the Sequoias and Benchmarks and Accels and Kleiner Perkins [Fred modestly didn't add his own Union Square Ventures but could have] etc etc can raise a fund anytime they want. Accel raised a ton of money last fall in the midst of the worst global financial meltdown in my lifetime…

"The worst firms, on the other hand, will gladly accept government money. And that is what is going to happen with all of these government efforts to pour more money into the "innovation sector". That money will go to bad investors and weak entrepreneurs and management teams for the most part. It's a problem of adverse selection."

If anything, Fred is understating the danger in flooding the venture market with government money. It's a corollary of Gresham's law that bad investment drives out good. Suppose you're thinking about investing in software or green tech or something else…. and suppose you know the government's about to dump a lot of dumb money in the field, well then you don't invest because someone who's good at grants but probably not good at software or green tech or whatever is likely to wipe out the market for whatever you were going to invest in. If you're going to invest at all, you try to figure out who's going to get the government money and you put your money there. In other words, the smart money ends up front running the dumb money. Not good.

Of course the damage from government "investment" isn't limited to venture funding. Governments around the world have carefully been "investing in" the very banks which should get out of business and out of the way of better run and smaller (and less dangerous) banks. The better and smaller banks can't get investor money in this climate because the investor money would be competing with government money. Same, of course, in the manufacturing sector.

There is one part of Fred's post where he and I do have a slightly different POV: "… the venture capital business, thankfully, does not need any more capital. It's got too much money in it, not too little. Just ask the limited partners who have been overfunding the venture capital business for the past 15-20 years what they think." From an entrepreneur's POV, we like the VCs to be what they consider over-funded – more chance for entrepreneurs to get funded themselves on better terms than otherwise even though we then run the risk that our competitors will get funded as well. But neither as an entrepreneur nor as a limited partner in VC firms would I want to see government money poured or even dribbled in at the top. "Thanks, Tom Friedman, but no thanks."

 

    

Internet Services Worth Paying For

Can you charge for your new Internet service? You're always up against the expectation that Internet services are free. Moreover, you won't grow as fast if you charge as you will if you give something away. On the other hand, a service has to be very large and have lots and lots of hits (or be dominant in certain niches) before advertising'll pay the freight. Capital is currently at least tough to get and much, much harder without a revenue plan (but not impossible, see twitter).

If you're going to be able to charge for your service, you have to make the case that your service is worth paying for.

An easy case is online backup. I happily pay Mozy for this service because I wouldn't want my backup vendor to be monetizing our relationship in any other way than payment from me. If Google offered me free backup, I'd respectfully decline; I don't want the contents of my hard disk to be part of anyone's index. Generalizing, you can charge for a service if there's a very high expectation for privacy. I pay for Paytrust, an online bill management service, for the same reason. (However, I wouldn't recommend them because it seems like owner Intuit is letting them languish and service is deteriorating).

Although it seems counterintuitive, some directories are worth paying to get into even if you're not selling anything. In the old world, you have to pay to stay OUT of 411 and the white pages because your landline provider is making money by selling your access information. I'd pay to be in a directory if I can have control over who has access to my information. The SIP directory maintained by FreeWorldDialup (in which I'm an investor) requires paid registration for maintaining a listing after a 30 day grace period. This was a tough transition for FWD which was launched in the days when everything was free and only eyeballs mattered.

Some services can charge simply because they're demonstrably better than their free competitors. TypePad, on which this blog is hosted, is an example; it charges a minimum of $4.95/month to host a blog. Competitor blogger, owner by Google, is free. But TypePad hosted blogs look more professional (IMHO) so bloggers pay to be hosted here – those to whom it's worth paying for the difference. Six Apart, the company which owns TypePad, has apparently decided it's better to have fewer blogs and get paid for all of them. That's probably why they're still in business and still independent.

FeedBlitz (in which I'm also an investor) used to offer a free service (as well as a paid upgrade) for sending blog posts or other RSS feeds to email, IM, and twitter. As of the beginning of this year, the minimum monthly fee charged to new publishers using the service is $1.49 after an initial free month. The service is still free to those who subscribe to publications. Founder Phil Hollows explains the change:

"FeedBlitz has grown from serving zero to nearly 7 million active subscriptions. From zero to nearly 73,000 publishers. From zero to over 216,000 lists. FeedBlitz has grown into the leading independent automated email marketing service, routinely and reliably delivering over 60 million automated messages a month directly to subscriber inboxes…

"FeedBlitz needs, then, to keep up and ahead - indeed, you expect us to keep up and ahead - as we scale up to handle hundreds of thousands of publishers, to continue to add features and capabilities, and to be there for you in the future. To fulfill your expectations, FeedBlitz needs to generate commensurate revenues to fund both current services and future plans.

"The FeedBlitz business model has ensured our survival and funded our growth so far. Still, to build for the future, starting on January 1st, 2009, we're updating it.."

FeedBlitz competitors have sprung up from time to time. They usually fold. There is a free much less rich service available from FeedBurner, now owned by Google (and currently somewhat neglected by them). FeedBlitz' future, much like that of TypePad, is to serve those publishers who need a service worth paying for. The publisher count'll grow slower than it did when FeedBlitz was free; but new volumes'll bring new revenue. Important to its publisher-customers, FeedBlitz isn't at the mercy of a new round of funding to keep adding both capabilities and capacity.

So can you charge for your new Internet service? Well, it has to be a service demonstrably worth paying for. And you still can't create a twitter-like hit based on a paid model. If you have a free competitor, than you have to be much, much better and you have to explain why you're better. Services sold to support other services and content – as TypePad and FeedBlitz are – have an easier time selling a paid model; but services sold to individuals can succeed on a paid model as well.

Ten Telecom Tsunamis

The telecom industry five years from now will be unrecognizable. The creative destruction of the Internet broadly writ will be even greater than it has been in the last decade. The major telcos, the major television networks, and the major cablecos – if they still exist at all – will have very different revenue models than they have today. That's the good scenario. In the bad scenario the old business models are bailed out or saved by regulation to the detriment of consumers and society in general.

Here's a list of ten major drivers of change:

Universality

The driver of all drivers will be universal very broadband Internet access. Five years from now we'll all (except for those who choose to live off the net) have a minimum of 25megabit per second download speed (and that'll be the low end) when we're standing still. We'll be connected – perhaps at a slightly lower rate – when we're moving around, especially in our cars but also in planes and trains and on foot. That means that the next generation of communication services whether they be voice, entertainment, power management, information, health or something else can and will all be built assuming this universal connectivity. See here for why government should help accomplish universality sooner rather than later.

End of the Billable Minute

We won't pay for voice calls by the minutes any more than we pay for email by the word. This trend is already well underway, of course, with flat-fee VoIP based services, "free" VoIP-VoIP calls, and unlimited minute plans; but last mile monopolies have managed to keep minutes billable on many international and most mobile calls. Universal IP connectivity for both residential and mobile users will complete the bypass of these last mile bottlenecks. There'll be no incremental charges for voice, just monthly connectivity plans for bits of any sort. Gory details on why we still have billable minutes are here.

End of Copper POTs

The recession is accelerating the abandonment of landline phone service currently running at better than 10% per year. Without a major breakthrough (which could happen), copper-based DSL won't be good enough for the bandwidths we'll all need in a year or two. Line loss along with displacement of voice calls to VoIP (see above) will shrink revenue earned by the copper network, which has served us long and well, so that the carriers can no longer afford to maintain it even though it will still have many users left. That may be a mess. More here.

End of the Channel

The channel is a left over concept from the days of over-the-air TV. It's convenient for marketing reasons but not technically necessary for cable and satellite companies to deliver a set of channels; they could offer single shows or series ala carte. Today they choose not to except for events they can get a good premium for – pay-per-view. But The Internet is essentially ala carte and the Internet will deliver our entertainment, business model tbd. There may be bundles of content available both to facilitate choice and for economic reasons but children will ask "Daddy, what's a channel?" It's likely that the cablecos will convert most of their bandwidth to support generic very high speed Internet access instead of carving it up for channels.

End of Over-The-Air TV

As we know from the recent flap over the now-postponed switch to digital TV, there are people who still watch TV over the air. But the number keeps shrinking and, as more and more of that same content is available on the Internet and more and more people have sufficient connectivity (see above) to receive that content from the Internet, the economics of over-the-air TV will become prohibitive even though the broadcasters don't have to pay for the spectrum they use. It's not that the local stations'll disappear (at least I don't think they will); they just won't have antennas attached to them. The stations may be able to get a boost by subleasing the spectrum they used to use for over-the-air for generic Internet access. We'll probably end up paying people $40 each for boxes to attach their old tv sets to the Internet.

Open Spectrum

After a rocky start, the white space experiment which the FCC decreed this year will be an enormous success. This open spectrum will be extremely valuable both for fixed and mobile Internet connectivity. More open spectrum will be needed and will become available as TV goes off the air (see above). Why open spectrum is so important is here.

Bandwidth Demand

The price of providing bandwidth either over the air or through a fiber goes down roughly with Moore's law. Every year and a half the amount of bandwidth that can be provided at a given cost doubles. This trend'll continue as we all demand more bandwidth partly in order to receive all the entertainment we used to get from dedicated networks and partly for new applications. Today's five meg connections will soon be as useless as yesterday's dialup as new bandwidth-hungry Internet uses are invented and become essential and as websites are built on the assumption of higher and higher bandwidth availability. See here for more on the bandwidth required to receive "television".

Online GPSes

It'll be no more than a couple of years until every car-mounted GPS is online whenever the car is turned on. We'll get and contribute automatically to crowd-based weather and traffic reports. We'll know how long the lines are at a local attraction before we get off the Interstate – and we'll buy our tickets before we get there. The billboards will literally be inside the car. This post is about an early GPS with connectivity.

Latency Intolerance

Latency is the time between when we send something on the Internet and the time when we receive a response. Interactive voice demands low latency; so do modern web pages which build themselves on your screen through a series of interactions. High altitude (geostationary) satellites cannot provide low latency because of speed-of-light limitations so they will not be a significant provider of Internet connectivity. Local Internet providers also have routing problems to and from the Internet backbone which contribute to latency. Some measure of expected latency'll become part of the marketing description of an Internet connectivity service. More on latency and satellite here.

Smart Grid

Electricity will begin to replace imported oil and gas for home heating and transportation and some other applications during the next five years. Our total electric consumption will go up. But the fossil fuel required to create that electricity will go down as the demand for electricity goes up. A smart grid which lets us better use baseline power from hydro, nuclear, wind, and solar will accomplish that near miracle. See The Smart Grid Should be Stupid.

Kindle’ll Win Because Content is King

Stephen King's novella UR will be available exclusively on Kindle for at least a while as part of the introduction of Kindle 2. Mainstream content by famous authors is unlikely to stay exclusive to the device, but this marketing approach gives a hint of what's to come. Many of us will "need" Kindles either because the content we want is available on them first or because Kindle – and perhaps a set of Kindle-compatible readers – are the only place we can get certain content. Physical books won't die away – especially because they can produced without huge inventory cost using print on demand (POD).

This is partly wishful thinking on my part. I'm hoping that Kindle and devices like it will become an alternate road to publication for new authors and will diminish the gatekeeper function of mainstream publishers. Hits, in most cases, will still require clever marketing, celebrity, and/or luck. Chris Anderson has written famously about how Amazon's "endless shelf" supports the long tail of books which would otherwise be out of print and out of distribution because they didn't make the sales cut for brick and mortar book stores. It makes sense that Kindle and the like will support an even longer tail – books which never would have been published at all except that they can be published and distributed at almost no cost (except the writing!) because they're only published electronically.

Some reference books will simply change to a subscription model so they can be kept ever-current. Cruising guides come to mind because we need to be able to access them even when we're not online but also would like them to be up-to-date.

Extremely topical books will come out first or perhaps exclusively for e-readers since they're need in a hurry but quickly become obsolete.

And books like UR which are lunched with hit power will trade short-term exclusivity for launch publicity. You gotta have a Kindle if you want to be first on your block to read UR.

Perhaps because of production and cost bottlenecks, Amazon is not now aiming the Kindle at the long tail of book publishing. There are many less books, just 230,000, available in the Kindle store than there are in Amazon's marketplace for traditional books. My blog Fractals of Change and my book hackoff.com: an historical murder mystery set in the Internet bubble and rubble are both available on Kindle. I could only make the novel available for Kindle because it already was carried on Amazon as a "real" book; I'm not quite sure how the blog was chosen. Amazon solicits me for marketing and co-promotion opportunities for the traditional book but I haven't yet found out how to do direct marketing to Kindle owners (just asked Amazon). My short story "The Interpreter's Tale" is available as an e-book for downloading from Amazon to a computer but not for Kindle. At some point Amazon'll make this all come together but it hasn't happened yet.

Amazon will eventually have to decide whether it is a device provider or a content reseller. As a device provider, it makes sense to keep the price of the now scarce Kindle high at $359. But a content reseller would want to take razor and blades approach and make the reader cheap or even license the technology liberally to increase the audience for downloads. Tough decision because success would then depend on being the place where author's "publish" and readers search. There isn't much cost to publishing in multiple places. In the physical book world, Amazon has managed to create and expand a position as THE place to find the book you want. For authors today, if your book is going to be carried in only one place, you want that to be Amazon.

My bet is that Amazon will eventually decide to expand the market and take the price of the reader down – especially if it sells in high enough quantities at today's price to lower the cost of manufacture. But this is NOT what Amazon elected to do in yesterday's announcement; they followed the practice of the electronics industry by using lower component costs to increase capability rather than to lower price.