A simple proposal for mobile roaming charges.

Update: this would work great if combined with an iPhone/Android App, that would do the selection of networks for you. Either the app maker or the European commission could have a matrix of all costs charged by host mobile networks for mobiles roaming on their network


The EU has finally succeeded in capping the roaming charges that customers have to pay when they use their mobile in another country. Ms. Reding’s proposal was quite simple: a cap on wholesale per minute charges and a cap on retail per minute charges. The caps for the coming years are:

Eurotariff maximum	Summer 2007	Summer 2008	Summer 2009
Mobile calls made abroad	49 cents	46 cents	43 cents
Mobile calls received abroad	24 cents	22 cents	19 cents

This is nice and an improvement to the current situation. However it will not lead to a competitive European market for roaming. For the market to become competitive it would be necessary:

1. The customers choice of roaming network will have a direct impact on the price paid by the customer.
2. When a destination network lowers its roaming charges this is immediately felt by the end-customer

In reality neither is the case:

Ad 1. When a customer uses a network abroad, it is often charged two tariffs; one low tariff for the preferential network and one high tariff for the 2-4 other mobile networks in the country. The preferential network often is a sister company of the users home mobile phone company. If a customer decides to use a different network than the preferential network, this will only result in higher charges, since the retail price has been fixed by the home network. The customers choice is limited by its home operator.

Ad 2. When a destination network decides to lower its roaming charges, out of the kindness of its own heart, this doesn’t oblige the home network to charge the customer a different retail price. As shown in the table, there is nothing wrong with charging 46 cents for making a call even if the destination network only charges 10 cents. Not only does the destination network receive less, it also hasn’t become more attractive for the consumer, so there is no way it can make up for its losses in margin by increasing volume.

A simple proposal to end this mess (so it will probably never happen)

Roaming in another country is technically and economically quite simple. There is this person who is not a customer of the destination network, but is a customer of another network, that wants to use the destination network to place a call. For the destination network setting up a call is the same as it does for its own customers, except for one thing: Authentication. It will have to authenticate the roaming caller on its network and see if it has a contractual relationship with the home network of the roaming caller. If it has such a contract, the roaming caller’s network can be billed and therefore the caller can place (or receive a call).

The ONLY thing a home network does for a destination network when one of the home network’s customers roams is to do the authentication and the billing. It doesn’t carry traffic. It is not involved in the routing of the traffic. It acts just like a credit card company. It authenticates that the customer can make the purchase (place or receive a call) and it bills the customer the price (in the process charging the shop a modest fee of a few percent). This is beneficial for the customer, it can buy (place a call anywhere) and it is beneficial for the shop owner (destination network) who knows it will get paid and doesn’t have any risk of the customer not paying.

When applied to roaming a better model would be to allow the home network to only charge a small fee for authentication and billing (2-5%) to the destination network. This way it’s billing and authentication costs are paid for and it’s adequately compensated for its troubles. (Visa has made quite a living on 2%-5% margins) The destination network would then be free to charge the consumer a charge it deems fit, whether it’s a receiving call, outgoing local call, international call etc. When it wants to lower its prices to attract more customers it can do so. The price conscious consumer will be able to switch.

Type of call	Network A	Network B
Local call	25 cents	15 cents
International call	40 cents	25 cents
Receiving call	20 cents	22 cents
SMS	10 cents	17 cents
Internet data	1 euro/Mbyte	20 cents/Mbyte

The effect for the consumer would be, that when arriving abroad he/she will be greeted by billboards and SMS-messages of the large networks explaining their tariffs for placing and receiving calls, sending and receiving SMS and even using mobile internet. There will be competition because the network that charges least is most likely to get the most customers.

A smart consumer will even change networks to get the lowest price for each action be it an outgoing local call, incoming call, international call, a call home etc. A smart customer will use Network B for local and international calls, but use A for SMS and receiving a call. (A very smart consumer would even compare the prices abroad to the prices of calling nationally. Think of it , if in France a network would only charge 3 cents per minute to call to a fixed line in Germany, a German might be cheaper off using a French network to call a German fixed line when being in Germany if in Germany this costs 8 cents a minute)

This will promote genuine competition between networks. All of them will want to get some of the revenue of the visiting customers. If there is a network C, it could decide to offer the lowest price for all types of calls and data. When MVNO’s would be allowed to offer roaming to visiting tourists and business people as well, prices certainly would drop. For MVNO’s it’s the simplest way of running a network. No contracts with individual end-users, no need for hand set subsidies, no risk of non-payment, contract disputes etc, just a contract with the home network is necessary.

From a regulatory point of view this idea would be great. It wouldn’t require any kind of regulation in a competitive market. The consumer is free to choose from multiple providers that can all independently set their prices. There is no need for a cap. It’s only necessary to be vigilant for market power and cartels, which is all in a days work. And they should watch out for home networks charging higher percentages, or destination networks posting wrong prices and/or weird schemes. It get’s better. By requiring the home network to only charge what the destination network is charging them, it becomes possible for citizens of the EU to enjoy low tariffs globally. When a Turkish operator is charging $1 per minute, that plus 5% will be the retail price for the end-user. If they have the option to choose multiple operators in Turkey, they can choose the operator that charges the least.

Would this scheme be implemented anytime soon? No of course not! It would promote competition and declining revenues and profit margins. One could expect the whole industry to be heavily against the idea. But it’s great thinking up such an idea.

Update October 29, 2007: Documents obtained by The Times show that the UK government is heavily opposed to getting the consumer a good deal in mobile roaming. The UK governement was giving the operators minute by minute updates on the state of the negotiations in the EU Council, including such remarks as "UK not happy bunnies" when the proposal was geared too much towards the consumers. All in all this shows that an idea like the one above will never see the light in real life.

How to compete with BT in the Openreach model?

Comments on my previous post and the whole debate about BBC iPlayer have got me thinking. According to Ian Wild of Plusnet, see his comments, the amount of money that a Wholesale Broadband Access (IPstream)-provider will need to pay for backhaul is £180 - £200 per Mbps per month. The use of PPPoA also makes that you can't keep local traffic local and keep it off the backhaul. This can get very expensive very fast, since traffic per customer will grow 50% per year, minimum. (To get an idea if you need to budget 100kbps traffic per customer for peak times at £20, next year it will be £30 and the year after it will be £45. (Unless the regulator regularly pushes the prices down). So this is a no-win-situation for the ISP's.

What I am wondering now: Under what conditions is BT charged in area's where there is no ULL available? Is Openreach charging BT the fee they would charge the Wholesale Broadband Access providers? If so, than why doesn't BT complain about the iPlayer seriously hurting margins? Or is it a ULL provider everywhere in the UK and doesn't it feel the pain on its backbone? Doesn't it need to pay the high backhaul charges. Or better yet part BT's backhaul is paid for by the rising charges for the backhaul of the WBA-providers.

Maybe somebody can explain things to me. There might very well be no conspiracy here. :-) And though it might explain the position of the likes of Tiscali, it still doesn't put them in the right. (It might put Ofcom on the spot!)

BBC's iPlayer as the posterchild for net neutrality

It's interesting to see how in the UK some of the lesser ISP's (Tiscali and their lot) have complained in the press about the public broadcasting behemoth BBC and its iPlayer. iPlayer is the BBC's attempt to copy the Dutch public broadcasters success of "Uitzending Gemist" (=missed my program!). It does this by using a Peer to Peer program Kontiki. The ISP's claim that this is at their expense. IPdev-Blog and Telebusilis have analyzed this in some detail.

Jeremy Penston of IPdev has analyzed very well why ISP's won't invest themselves in new networks and network expansions. The process in short is one of mutually assured destruction. If two companies build the same network, they create an over supply of network connections and bandwidth in the market. They will end up in a price war where neither can bail out and both will go bankrupt in the end. (even if one of them wins the first round, the loosing network can be revived from bankruptcy at marginal cost and start the second price war) The solution seems to be a regional or national public infrastructure. I agree with his ideas and hope to publish a paper along those lines soon.

However both Telebusilis and IPdev argue that the content creators should finance in one way or the other the build-out of extra capacity in the network. They argue it is not fair for the BBC to come up with a new service that taxes the networks of ISP's in Britain (up to 67pence per hour of viewing). I couldn't disagree more with them. I think it's only the ISP and it's customers that should do so. It's the end-user that creates the costs and it's there the costs should lie.

We live in great times, on a daily basis people al around the net invent new high bandwidth services to use over the internet. I'm watching my 3 day old cousin in a hospital on a high def webcam. You can watch live concerts at Fabchannel. People dress up in Second Life. In Twente security companies watch their customers premises using dedicated light paths. Every tv-channel and production company is looking into the on-demand opportunity. These new ideas have ever higher bandwidth demands.

In order to minimize the costs for content producers there are several strategies. Bill Norton of Equinix has made a very good analysis of the costs of video distribution over the internet. His analysis shows that using a Peer to Peer model (like the iPlayer) is the most cost effective version for the content provider. Or as Cringely paraphrases it:

Norton's analysis, which appears to me to be well thought-out, concludes that P2P is vastly cheaper than any of the other approaches. He concludes that distributing a 1.5 gigabyte movie over the Internet in high volume will cost $0.20 using the current transit model (a single huge distribution server), cost $0.24 using an edge-caching CDN like Akamai, cost $0.17 with a homemade CDN like I used last season to distribute NerdTV, or cost $0.0018 to distribute using P2P. That makes P2P 35 times cheaper than any of the alternate approaches. And (...) Norton further makes the point that none of these distribution models does anything to soften the blow on the ISP. CDNs in particular cost more -- that more being revenue to the CDN -- yet do nothing for the ISP.

Well the BBC could also do the calculations and came up with the advised solution. Which might actually be a better solution for ISP's as well mind you. This not often mentioned, but a well designed p2p-protocol keeps local traffic local. So if your neighbour wants to watch a movie that you so happen to have on your pc in an ideal world he would not need to burden the backhaul-links from your town to the main switch office, but keep everything local. This relieves the network of the ISP from heavy backhaul traffic. Just imagine if an entire town would be streaming from the servers of the BBC. At 1 megabit a town with 10.000 parallel streams would be hitting 10Gbit/s on the backhaul. This way the ISP can save on its backhaul and also on its interconnects with eg the BBC. (How perfect the world of p2p protocols is can be seen at IPdev here and here)

So why shouldn't the bandwidth hogs be paying for their bandwidth? The BBC has enough money and they do pay for satelite capacity, so why should they get away for free. Well, the BBC isn't they only one designing high bandwidth services, as said it's everybody. All those new services mentioned contribute to the networks creaking under heavy loads. Remote security cams, baby cams, people with no First Life. All of them break the network. Even normal surfing the web helps. The question about who pays than quickly becomes a question of who can we extort money most easy from. Well auntie Beeb is old and wealthy, so it might be easy to beat her up for her pension. It's much harder for a UK ISP to do the same from a Dutch hospital, or security company or a Japanese public broadcaster, though they might contribute as much to the demise of individual links as the BBC does. (Think of it as cars on the road, all the cars contribute to congestion, foreign and domestic, business or pleasure). So what you get is that the costs are disproportionally allocated to those companies that are easiest taxed.

Another reason against using a taxation of content providers is that the revenue stream will be so attractive to improve the competitiveness of the ISP that there is no reason to assume the money will go into network upgrades. They might just as well go in more advertising or lowering prices. Even better, there is no reason to expect the taxation to cease once the network has increased its capacity. Like so many taxes they tend to linger long after they´ve done their job. For the economist, it's kind of like a terminating monopoly and will require equal amounts of regulation.

A third reason is that imposing a `Save the ISP`-tax is detrimental to innovation. Think of it, would you want to father the new Skype if the bandwidth tax bill ends up on your doorstep? Ofcourse not. That would be ridiculous.

By now people will be confused. It must be expensive to get a new network that can handle this amount of traffic they think. But again they are wrong. You can get a nationwide fiber to the home network for roughly 35 euro per house per month (or an investment of between 1000 and 2000 euro). For most countries that is signficantly less than their investments in roads and it is equal to what it would cost now to build an electricity network from scratch. Yes there are upfront costs, but it would last 50 years, allow for all kinds of innovations etc. If the market doesn't provide this, you have a market imperfection that might require limited government intervention in the civil engineering part of the physical network, if the benefits outweigh the costs eg. Stokab in Sweden. But there are billionaires around willing to do cherry picking in FTTH networks (Dik Wessels with Reggefiber). And there are even smart incumbents upgrading there networks to VDSL2 (KPN, Deutsche Telekom) or FTTH (Verizon) and new entrants (Free). Though we are still a bit away from universal 1 gigabit home connections for 35 a month.

35 euro per month buys you the fiber network (less if we fix it partially with government money). Interestingly it doesn't matter whether you use this at 1 mbit/s or 100 mbit/s or even a gigabit. It all costs exactly the same. Different speeds of your ADSL line eg 8mbit or 1mbit are only a way of price differentiation, but have nothing to do with sending more bits over the network being more expensive. It doesn't get you the traffic yet. International and interregional traffic costs money. The way this is dealt with in many countries is with monthly traffic caps eg of 40 Gigabyte and if you use more you pay more or there is an acceptable use policy. The way this could be fixed in the future is that you have a gigabit line to your house and a terabyte of traffic per month of interregional/international traffic (local traffic is free). If you go over, you pay more.

Now we arrive at the problem with high bandwidth applications like P2P applications or babycams. The way Joost and BBC's iPlayer work is that they exchange traffic even when users use it. Users actually have no way of knowing or limiting the amount of traffic it uses. With a babycam you could calculate it, but it's not intuitive. This should be fixed. A user should know how much costs they are incurring by using innovative appplicatons. They can then limit their usage according to their needs. It will also push ISP's to increase the monthly traffic cap to offer their customers more than the competitor. ISP's can now extract the money from their customers based on the amount of bits and not on the type of application or which granny to beat up. If a customer wants to use more they pay the ISP and they get the bits, regardless what they use them for.

Alright this seems too easy. Networks get paid for by the customer and it seems like content providers are getting a free ride on the network innovation train. The content providers have all this income from advertising and they should share... shouldn't they? There are several arguments against this. First of all, it's highly questionable if there really is so much money in advertising. The total turnover of the Dutch advertising industry is 6 billion and this supports Ten TV-channels, around 10 national newspapers and a couple of hundred magazines, thousands of websites etc. Some of it doesn't even support content, like billboards and classifieds systems like Monsterboard. (In comparison the mobile telecoms sector makes 6 billion a year too with 4 networks) Secondly efficiency in distribution leaves room for innovation elsewhere. Just like containers revolutionized shipping and realized China's position factory of the world. So too will new networks and p2p decrease transaction costs and revolutionize the delivery of content. This will lead to globalisation of the content market and the infrastructure will lead enable all kinds of innovations from babycams to immersive content. If there are excess profits to be made in the content market by advertising and pay-per-view models, there will be new entrants into the market, the breadth and hopefully the quality of the content will go up. This will redistribute the wealth in the market to such an extent that the big advantage of content owners over ISP's that some see will disappear. Efficient markets hate long term excessive profits for an entire industry. Though one compnay may prosper because of enormous economies of scale and network effects.

Therefore the conclusion is:
New applications will demand more and more bandwidth. Their combined usage will compound to the problem. This will push ISP's to deliver more bandwidth and traffic. Users will be paying for this one way or another. If the market doesn't provide for bandwidth, government should. ISP's taxing those who design applications that use high bandwidth is not a solution, it would be a disaster. We need innovation both in content as in applications and services In order to relieve backhaul local traffic should stay local and local interconnection should be possible between ISP's and private networks, see NDIX for a great example (yes I once worked there).

Wishlist for Google Apps Enterprise

This is a wishlist of stuff I would like to have in my company to make my life easier. It's all about how we deal with information in organisations. There is so much information in companies. Most of it is tacit knowledge. This kind of knowledge is locked away in peoples minds, mailboxes, bookmark lists, rss-readers, implicit references in memo's, discussions, interactions. In the end it comes down to google's mission, to make the worlds information accessible. Microsoft gave us the office tools to make information, but failed us badly in making it accessible. I've written it with an eye to Google, because they seem best postioned to deliver us some of these advances, but hey anybody can try and realize this dream be they Microsoft, Zimbra or Open Office.

My Google Wishlist:

- Google Reader with Google Apps for enterprises. This way it should be possible both to see what feeds your coworkers subscribe to, what is hot on those lists, share the most important articles with your coworkers etc. And for good measure it should include a company Digg/delicious function.
- desktop and company wide search
- Google Reader Enterprise version with sharing, searching, mining, statistics on what is most read, shared, dugg etc.
- in-company social network like pages to replace those tired phonebooks with myspace/orkut like pages. This can also provide clues on the projects we're in and therefore a web of relevance
- Google proxy sniffer (might be a privacy/security concern) that analyzes via the proxy what webpages are read most and therefore are important for our company.
- Google Wiki - Well they own Jotspot already, give it back to us and let every company grow it's own wiki or else we'll use socialtext, confluence and centraldesktop
- Google Grandcentral to be finally able to manage our internal telephone system including IM and let that be well integrated into our Calendar function, so that when somebody calls us, the system knows what to do and reach us properly
- Google Blackberry functions. For the love of me I don't understand why the Crackberry can only function in such a limited way for incompany use... make it useful. let me access all my company information on it, not just my mail, but also my intranet
- Google IM... Buy Jabber.com and build the best incompany IM system, that can interact with other incompany IM systems just like e-mail systems can interact, without the need for a third party to be in the middle
- GMail/Calender etc Enterprise, without the need to host it at Google, but to be able to do this in company or at a third party. The apps are cool, but big companies never want to give everything to Google. They just want to give it to Suresh of Accenture in Bangalore.
- Google Spreadsheets that can actually integrate the data of the spreadsheet with the real world out there. So if I make a spreadsheet showing sales per region, I can push one button and get a map overview projected on Google Earth, integrate it with stats from the national bureau of statistics, or hook it up with data from Google Finance. Or that can actually animate the information in the spreadsheet just like the Gapminder software they bought of Prof. Hans Rosling. (Google him, he's brilliant)
- Google Document Management System, that actually allows us to manage documents in the way we want instead of in the way the idiots of hummingbird and documenta want us to do things. I don't want to fill in a gazillion fields to store one document. I want to make it, store it, retrieve it and share it, without everything becoming too hard.
- Google company blogs
- Google subscription manager. Companies have many subscriptions to magazines and newspapers which allow the access to archives. However employees never have the list of usernames and passwords. Help us manage this.

Sounds like a rather nice businessplan for the Google Apps division.

Why the economics of Second Life fail

Chris Anderson, editor of Wired and writer of the Long Tail wrote critically about Second Life and wondered if he was too critical. My reaction to it can be seen below. I have visited Second Life, and I like the creativity that is displayed in it. I just don't think it can compete well with a combination of Real Life and other internet applications (WWW, IM, Wiki etc.). The reason for this as outlined below is that it lacks the proper economic basis of actually improving upon existing technologies and applications.

Chris, I don't think your being too harsh. James Au in his 'seductive long tail argument' sums it up quite nicely, a comparison should be done on the basis of: "length of engagement in SL, versus other ad mediums; quality of engagement, in terms of brand immersion and recognition; quality of potential participant, considering Resident demographics as content creators, bloggers, early adopters, etc." and "All that to one side, it is still nevertheless true that SL developers have yet to create an unambiguously compelling and unique example of real world advertising that is massive or effective enough to convince honest skeptics. (As I believe Chris and Frank ultimately to be.)" James believes that your opinions should be debunked and that a compelling case would prove him right. I however believe that the fundamentals are stacked even higher against Second Life than your articles already show.

There are certain rules that govern why a new technology becomes popular or not. These rules are deeply rooted in economics. The main rule is:

- It makes some part of your life easier/better (Optimizing of utility functions).

It does this by:

• Lowering transaction costs for performing a certain function (Looking up train timetables has a much lower transaction cost than looking it up in a timetable book or calling a number)
• It grants you more control over your choices. Though you might spend an equal or higher amount of time and money doing what you were doing before, it allows to reach a more optimal solution than you could before the introduction of the technology. (Travel sites, housing sites etc all tend to swamp you with options, but many people like that compared to the old situation)
• You receive a higher level of service compared to the old situation.
• It achieves some kind of network effect. Adding more users to the network increases the individual and total utility function of the nodes in the network at a higher than linear rate.
• A new niche emerges big enough to cater to your needs (look at the long tail).

All in all it's about lowering costs and changing utility functions.

Now what happens if we look at Second Life and similar online worlds and measure them along this yardstick of making your life better, lowering costs and changing utility functions.

• The main thing Second Life is good at is bringing people from different parts of the world together and let them interact in a relatively natural way, like in First Life.
• A second thing it is good at is quickly building 3 dimensional representions of objects and allowing people to see and interact with them.

Now compare SL to some of the other applications we use the net for and we see why it is not a big a hit as some people would hope it would be for advertising and other applications.

• For finding information and weighing different options etc, the plain old Web 2.0 is better and quicker. You go to Google and from there its two clicks away to the right destination. As various studies have shown... people are not willing to wait more than a couple of seconds to find the information they are looking for. In Second Life Just getting somewhere, orientating, interacting etc takes minutes. So if you want to find information, disseminate it the Web wins. Same thing goes for buying real stuff.
• For communicating Second Life is bound by proximity in the Second Life world. It's almost like the real world in that regard. So in many situations it gets beaten by instant messaging, email, telephone etc. as a way of communication. It does have a bonus when it comes to chatting up complete strangers by allowing only a limited amount of people to step up to you (whereas on a chatsystem women often get swamped) So as a virtual bar it has some positive sides. - If one wants to interact with customers in Second Life, it is not unlike opening up a store on the main street and it should be run as such. 24 hours a day people should be attending to the shop. You need the right people there, they should be knowledgeable etc. There are no Coca Cola information stores on the main street, because it would be too costly for Coca Cola to do so and there doesn't seem to be a benefit, compared to their current way of doing business. Second Life might lower these costs by allowing you to open up one store and reach the world, but the question is what exactly would be the added bonus for Coca Cola, Fannie Mae, Home Depot etc of having a virtual store/information boutique that needs to be manned 24x7 compared to a combination of Website, information phone line (or IM on a site) and if they have such a thing a physical store. That question is very hard to answer.
• As an advertising medium Second Life can house billboards. The advertiser hopes its as busy as Times Square or as well visited as Wired.com. The numbers are not such that this seems to be a very attractive proposition. Not too many eyeballs and not always the right demographic, plus like in Real Life people need to bump into it. The more Second Life grows the smaller the chance of bumping into the advertising (the reverse of network effects) So Real Life and Google Ads are probably a better way of spending the advertising budget for many.
• Second Life can also be an advertising medium by realising a 3d representation of your products. However a website can often have the exact same possiblities, plus the added bonus of being able to control the look and feel of the experience.
• Advertising through immersive mediums in Second Life (scavenger hunt, adventure type) is limited by the environment of Second Life itself and the amount of users it has. It's probably more effective and efficient building that world in Flash, without having to deal with all the side effects Second Life might have.

So where does this rant bring us. Second Life's usability for making things better is mainly limited to those situations where we want people to interact in a bar like fashion, but without being in the same physical location. A virtual book signing might work, but a well moderated chat session on Amazon might be alot more effective as it could let people join easier, without making avatars etc and still allow for it to be streamed and stored on Youtube and people could actually receive a signed copy of the book they bought. (BTW why doesn't Amazon have interactive sessions with writers? Or did I miss something)

A big advertising campaign however is probably much more effective when using flash and other such technologies on your own site combined with a proper on and offline campaign.
It's hard to see what kind of bonus SL has when it comes to working in project groups compared to an adequate set up of videoconferencing, group wiki's, IM etc.

All in all, the conclusion of my rant is: Economics doesn't support virtual worlds as a replacement for the web and the real world.

Yahoo's Earnings seen from Jim Collins' Good to Great

I reacted over at Giga-Om to this story:

Interesting numbers from Yahoo! I’ve been reading Good to Great by Jim Collins at the moment and it seems that Yahoo is showing all the signs of an also ran company. (have a look at http://jimcollins.com)

First, it didn’t have a level 5 leader, who selfishly looked at the best interest of the company. They may have ousted him, but one hopes the current management team is up to snuff.

Second, the question is whether they have the right people on board and in the right place. They’re hiring seems to be erratic and not really best of breed in the business.

Third, and really bad from my point of view. They don’t confront the facts. Fact is, Google is a better ad company than Yahoo will ever be. Google places its ads better, through better technology and because of that has commanded the biggest share of eyeballs. Yahoo has nothing to offer to potential advertisers on the technology front.

Fourth Yahoo doesn’t know what it wants to be: Is it the best content company in the business, or is it the best search company in the business? Well, it cannot be the last one. Google has taken that and outspends Yahoo in keeping that goal. Google has a clear focus, though it should dabble less and spend more time in achieving in coherently achieving the goal. Yahoo should focus on its content business, which in the US is the best it can ever be. Yahoo should make it their business to make sure that whenever somebody is looking for something that Yahoo does Google first points to Yahoo for the content, to such an extent that the user will go to Yahoo without even looking at Google (Yahoo financials is a great example)

Fifth, Yahoo should cut all the crap it isn’t willing to deal with. Sell the advertising business to Microsoft, they’re dumb enough to pay top dollar for it. Then move to Google’s Adsense and squeeze every ad dollar out of it. Advertisers would love it.

Sixth, keep focus, keep discipline, keep adding great content, keep focus, discipline, add more great content.

MS and at&t urge anti-trust measures against Google-Doubleclick

Slashdot reports that Microsoft and at&t are afraid that the Google-Doubleclick deal will hurt the competitiveness of the markte place. I really wonder about it and I think it's mostly sour grapes and net neutrality that is playing here. A short rant/analysis from me was the result. I'll post it here as well. There is more to it, but I don't have the time to do a full analysis.

=========
Interesting that AT&T joined in. They are moving against Google to support their Net Neutrality position. But let us look at how much money there really is in this market and then see whether an almighty Google might actually be able to hurt AT&T. Google currently makes 10 billion a year from 281 million broadband users worldwide. That's is $35/broadband user/year or $2.90 a month. Just look at the price of AT&T's offering and you can see that Google's ARPU is no more than a few percent of AT&T's ARPU (Average Return per User). Google's ARPU is supporting various content offers through this businessmodel, more than 40% of the ARPU flows to the content owner. So at the moment AT&T can beat up Google for a maximum of $2 per month per customer.

So how big could Google's ARPU grow? In a country like The Netherlands 5.7 billion a year is spent on advertising to about 7 million households. This makes 67/household/month (and this number isn't growing too much) This is the total advertising expenditure on the national market and includes all major media: Newspapers, television, direct mail, cinema, magazines, billboards, internet etc etc etc. If Google can get part of that on a global scale, it amounts to a major amount of money. But now look at it from ARPU point of view. It would be hard for Google to get more then 10-15% of this market space ($6-$10/household/month) because they would have to replace all the existing ways of doing advertising and these are still powerful and sustain many content business models)

If a telco can his hands on google's revenues, they might be able to knock a few dollars of the price of a broadband connection. But $6-$10 isn't going to pay for the line and the costly upgrades. Just go and look up the financial information of telco's to see how big they are and how much money they spend on a yearly basis. Google is dwarfed by that. (Broadband reports said that telco's would spend $41 billion on network upgrades just this year, Google made only $10 billion last year) Odlyzko was right when he said: "Content isn't King" and we can add to that "Advertising will never be king".

So when AT&T says that Google is making money over their networks. We are talking about change compared to what AT&T is charging its customers.

Will Google get a dominant position? Only if they offer content providers the most money for showing a banner and advertisers the greatest amount of clickthroughs. That is why Microsoft and Yahoo are loosing out. The offer less adviews per day, that generate less clickthroughs per thousand adviews and pay less per click and offer advertisers less conversions. Why would you use them? Nobody in the equation is getting better by using Microsoft and Yahoo not the content provider and not the advertiser.

Now lets hope Google pays some attention to my pitch for Adsense for Charity The idea is that anyone using Adsense can designate a percentage of their Adsense revenues for good causes or open source projects. Even if we are only talking about a very small percentage of Adsense users doing this, we still would be talking about millions of dollars per year) So please help out in spreading this idea, by linking to it or spreading it onwards.
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Adsense for Charity (English version of Frankwatching article)

Frank Janssen of Frankwatching.com gave me the opportunity to pitch my idea for Google Adsense for Charity at his site. I hope his readers will help me generate more attention for this idea and come up with ideas to get this idea higher up Google’s to-do-list. As said in previous posts, the origins of this idea lie in me looking at the enormous amount of $8 on my Adsense account and wondering if there was something better to do with it, instead of waiting 8 years for the first check. I have also found out that the idea is not unique. Two weeks before I blogged about it, Michael Yarmolinsky of Crohnsforum.com alsoasked Google for this possibility. Google’s first reaction to me has been that they will have a look at it.

The idea
It would be great if it would be possible to select in Google Adsense that (part of) the revenue will be sent to charity. This way it will become easy to contribute to open source projects or other good causes. This will increase the income of those charities. It will also become possible for accounts that generate little revenue to send the money that is there to a charity. (And yeah, Microsoft and Yahoo can also implement this idea, but unfortunately for them most of the money is at Google at this moment)

Possible ways to implement the idea.
- Account-owners can specify that all the revenues of their Adsense-account will be sent to one (or more) charities. At the end of each month the revenues of the account will be transferred to the charity, regardless of whether they have reached the limit of $100.

-Account-owners can specify that x% of their revenue will be sent to charity. At the end of each month this percentage will be sent to charity.

-Account-owners can sent a fixed amount per month to a charity, if this amount is generated by the account. The remainder is sent to the account-owner (if it’s over $100)

What charities?

I personally don’t care. They may be American, medical, Unicef, Open Source, the Bill and Melinda Gates Foundation, just as long as they do good. But Google probably will opt for a practical solution.

Advantages for the account-owner

The advantages for account-owners are in ease and simplicity. If an account-owner would have to do everything himself, he/she would first have to cash the check and then transfer the money (internationally). That’s a lot of work for small amounts of money. It also gives the account-owner a good feeling, that the money that used to be locked in into a small revenue generating account is put to good use.

Advantages for Google

Google will be able to improve on it’s “don’t be evil”-image. It will help charities (maybe open source projects. Google will profit from this in good PR and maybe better open source software. It will also keep away discussions about small amounts of Adsense income that are locked into an account. Another advantage is that it will make Adsense more attractive for a larger group of websites, which in turn will improve the reach of Adense and it’s attractiveness to advertisers. Keeping score of payments to charities online will only help here. There might be a small issue with Google loosing some interest on the money, but this is probably small compared to the goodwill. There are hardly any costs for executing this idea. Google will only have to screen charities.

How much money are we talking about?

Google had $10 billion in revenue this year. Almost all revenue is generated by advertisements. Google pays out about 40%. That is $4 billion. I assume that this idea is a long tail idea and it’s aimed at the end of the tail. The end of the tail is the last 0.5% of the revenue or $20 million a year. 99.5% gets paid to people that have an Adsense-account. But even if it was only 0.1% or less, it’s still an interesting amount of money.

Status

Google has replied to my suggestion, that they will look into it. This is great, but I would prefer hearing that they will implement it. The sooner, the more money there is for charity.

What can readers do?

Spread the word! Blog about it! Send it on to a Google manager you know! And help me find better ways to get attention to this idea. All your comments and ideas are welcome.

Reaction from Google to the charity suggestion

Well, Stephanie from the Adsense team replied to my idea and she forwarded it on. Let's hope we'll get a feature allowing to donate (a part of) the earnings of a page to charity (or open source). I'm still thinking about new ways how this could work out, like being able to donate part of the money to open source projects as a thank you for the tools. By enabling people to donate directly without them having to do anything for it, it is more likely that more people will donate (part) of their earnings with Adsense to some worthy cause.

Google's e-mail:
Hi,

Thanks for your thoughts on enabling publishers to donate AdSense earnings
to charity. I'm happy to pass along your comments to our engineering and
product teams.

Suggestions and ideas like yours directly contribute to making AdSense
better, and we appreciate your perspective. Please also feel free to
submit any future suggestions through our online form:
http://www.google.com/adsense_features_email.

Sincerely,

Stephanie
The Google AdSense Team

World Health Statistics, but cool!

Frankwatching pointed me to this great presentation at this years Ted conference by professor Hans Rosling of the Karolinska instute in Sweden. He gives a great talk on the misinterpretation of the third world, but the best thing is: He has cool graphics. He for instance shows how internet disseminated in the world, through letting balloons go up on a scale and you can see the great differences. Have a look at his presentation here, or play with the data online at Google.

http://www.ted.com/tedtalks/tedtalksplayer.cfm?key=hans_rosling
http://tools.google.com/gapminder
http://www.gapminder.org/Projects/FlowerPower/FlowerPowerPoint.ppt
He also has an organisation around it: http://www.gapminder.org
This is also very much a pointer, why governments should open up statistical data.

Appeal to Google! Use Google Adsense for Good!

Please join me in this idea! I sent the Google Adsense people the following suggestion/feature request. The Google ads that you see around the page don't generate much income and well, I don't really care about it, they're partially a service to let you find interesting companies and partially a way for me to keep track of statistics (before Google Analytics came around). It's a bit of a long tail idea, where many small sites help generate a big amount of money for charity. I hope some people in the blogosphere help to give this idea some thrust and also encourage Google to allow people to easily let a charity become the beneficiary of the revenue the Google Ads generate. Below you find my mail to the Adsense people.

"Hi, I would like to suggest that you add the option to allow people donate the money they generate with Adsense directly to a charity of their choice. I currently have made the whopping amount of 8 dollars with my blog, with the current speed I'll get paid my first check in 12.5 years. And really I don't care that much about that money, but if I could opt to send the money to a cancer or handicapped people charity, I would love to do that. The little bits of many little blogs will probably add up to a nice sum for the charities involved.

I understand that it might be difficult to give a full range of charities but even if you would use only American ones, I would still send that little 8 dollars a year there. Your financial department might not like the idea of not generating the interest over all that unclaimed money, but that's small fries compared to the good it might do.

I'll also post this on my blog http://lunaticthought.blogspot.com and hope other people join in."

Reaction on Creative Commons, Photojournalism and economics

I reacted on an article by Sion Touhig. He is an accomplished photojournalist. His article on The Register highlights many of the changes that are taking place in photojournalism. He is blaming those changes partially on the Creative Commons. Though I agree with him that there are changes in that business, I disagree with him on the causes. The Creative Commons isn't a deciding factor there, though it might be a contributing factor.

So here's my reaction.
I understand your frustration on this subject, but I don't agree with your analysis. First off, the creative commons licenses rely on copyright as much as you do with the licenses you give on your pictures. It's the same laws, just different terms. Second its not the amateurs that have changed the rule of the game. That's just extra.

However, you still would have written this piece if the creative commons hadn't existed. Even if every picture on the net was copyrighted and we could actually enforce that copyright globally, you would find that prices would go down significantly. There are several reasons for this:
- With the advent of digital camera's, cheap webhosting, storage and connectivity, the cost of making and distributing content have dropped on a per picture basis.
- The cost of finding a picture have dropped even more significantly. Where it used to be that you were big in a region or country, now you're big in the world. Your pictures are probably published in more publications now than a few years ago, just because the news desk in Leeuwarden, The Netherlands can actually get access to them and choose them over the lesser quality picture of the same even of a Dutch colleague, which puts him out of business (and vice versa)
- The publishing industry is changing massively. Your pictures were paid for by advertisements in the paper. Those advertisements have gone to the net. Because the income is gone not every newspaper can afford sending someone to afghanistan anymore.
- (this one is counter intuitive) Where it used to be that only western media could afford to send a crew down to a trouble spot, now everybody can. Prices have gone down significantly, because the news crews can do more with less people (2 people and even one). If none of the other factors would have changed, you would have seen a multitude of news crews in Darfur and Afghanistan, much like on the beach of Somalia ages ago. However their content is more easily disseminated and the money to send them their has gone. But to put another light on it. Wasn't it a bit weird to have 100 photographers show up for the same events in the same country, making the same pictures?
- (Another counter intuitive one) If none of the other factors would have changed, citizen journalism and creative commons would have resulted in more money for real photojournalism in stead of less. Instead of paying enormous amounts for simple pictures that come a dime a dozen, the media would have used cheap citizen pictures. That would have left budgets higher for the heavy stuff, like sending people to Darfur or the Amazon.

So the conclusion is: You're working in an industry that was able to support an enormous amount of overcapacity because of advertising and the high transaction costs involved in finding and disseminating pictures. Now you find that those three factors have changed. It's cheap to make, cheap to dissemminate and there is no money to support enormous amounts of journalists.

BTW do you know that your posts and all those bloggers are putting people in other industries out of work? Many professional analysts (especially in the ICT industry) find that they are put out of work by people on the internet doing a better job than they could do. On TheRegister Rob Enderle an ICT-analyst wrote: "But the big firms are under heavy financial strain from the Internet. More and more IT shops are coming to the conclusion that they don’t need to buy research from a large firm because they can get the same data, or sometimes even better data, off of the web."

Your analysis, though flawed, is more accurate than some professional economists in the organisation I'm working for could come up with. I have therefore passed it on to one of my colleagues, who might cite it in an upcoming report. By writing this, you too have contributed to a change in the economy. You've made it harder for analysts to make a buck. However thanks for the free input. Do remember that if you wouldn't have written it, we might have asked someone to do research on the effects of the internet for the various roles in media. You've provided us with a first hand account of the answer.

Een projectvoorstel voor een Leraar-on-demand

De laatste tijd ben ik bezig geweest met een idee om een leraar-on-demand systeem voor het middelbaar onderwijs te bouwen. Een bericht over de Universiteit Wageningen heeft me een oppepper gegeven en hierbij zet ik het projectvoorstel online.

Voorstel

Kern van het voorstel is om het enthousiasme van leraren, oud-leraren en anderen zodanig te vangen dat deze beschikbaar komt voor alle leerlingen op het middelbaar onderwijs. Het voorstel bevat daarvoor drie deelvoorstellen die afzonderlijk al tot een versterking van het middelbaar onderwijs kunnen zorgen, maar gezamenlijk zijn ze een combinatie die het onderwijs naar een hoger niveau kunnen brengen.

Eerste deelproject: Voor elke leermethode, elk scholingsniveau en elk studiejaar, worden een of twee enthousiaste leraren een jaar lang tijdens hun lessen gevolgd met een camera. Deze lesuren worden bewerkt en in hapklare filmpjes per onderwerp op het internet aangeboden. Gedurende en na dit jaar kunnen leerlingen van alle Nederlandse scholen profiteren van de uitleg van deze enthousiaste leraren. Hiermee kunnen ze de gaten in hun geheugen vullen en het enthousiasme voor het vak krijgen dat ze met een uur les en zelfstudie niet of minder hadden gehad.

Tweede deelproject: Er wordt een website ingericht waar leraren onderling additionele uitleg, opgaven, verdiepingsstof, tips, lesmethoden etc. kunnen uitwisselen. Hierdoor kunnen leraren leren van elkaars ideeën, deze aanvullen en verbeteren. Het resultaat is dat het algemene niveau van het onderwijs door de leraren omhoog gaat en dat goede ideeën niet beperkt blijven tot een kleine groep, maar verspreid worden over alle leraren in een bepaald vak.

Derde deelproject: Het derde deelproject is een website waar leerlingen additionele uitleg, opgaven, verdiepingsstof, tips etc. kunnen bestuderen. Deze website is gekoppeld aan de inhoud van het eerste deelproject en wordt (mede) gevoed door de content die gemaakt wordt op de website van de leraren.

Vragen aan de lezer:
Graag hoor ik uw mening over de volgende vragen.

- Wat zijn vergelijkbare initatieven die een deel of de gehele functionaliteit al bieden?
- Kloppen de uitgangspunten?
- Welke verbeterpunten zijn er nog voor het projectplan?
- Wie zouden dit plan tot uitvoering kunnen brengen in Nederland?
- Welke partijen moeten dit plan ondersteunen om dit tot uitvoer te kunnen brengen? Hoe moeten deze partijen benaderd worden?
- Wie zou dit plan kunnen/moeten financieren om het tot een succes te maken?
- Wat zijn de reeële kosten van dit plan?
- Gaat dit echt voordelen opleveren voor de BV Nederland?
- Waarom zou het een verspilling van tijd, geld en moeite zijn om tijd erin te steken om dit plan te proberen te realiseren?

Reaction to Susan Crawford's post on Telstra

Susan Crawford wrote a great entry on Telstra on her blog. I replied and changed my reply a bit. In short. There are parties trying to compete with Telstra in Australia. Telstra, the incumbent telco, is a very mean dog to fight with. They are as anti-competitive as it comes. Telstra's plans to roll out a new network, but threatens they will only do this if they are allowed a regulatory holiday (Just like Deutsche Telekom). The competing parties will still need access to Telstra's copper for the last couple of hundred meters.

I first thought that Telstra was going to do FTTH, but they are going the VDSL2+ route if I interpret this article by Stephen Bartholemeusz correctly, however the economics remain the same. Stephen has the right conclusions, except one: there is no reason to assume that wireless will ever be a real competitor to broadband. An addition it will be, but not a replacement. But he is right there is no reason to assume that Telstra's competitors will be able to build a viable network to compete wit Telstra's. This discussion is however not unique to Australia, but also appears in Germany, The Netherlands, the UK and everywhere else where VDSL2+ is rolled out. LLU just isn't possible with VDSL2+. You need to be 450meters away from the customer and that is just too much fiber for normal companies to pay.

The fundamental problem behind Net Neutrality, behind regulation etc. is: Who is going to pay for the (ftth-)network. The economics of a ftth-network are such that one set of fibers provides infinite bandwidth. Economics predicts in dynamic models that if two people invest in a large sunk costs, low marginal costs business that are indistinguishable from eachother, that the result will be a race to the bottom. The parties will sell at marginal costs and not at full costs. The result will be with fiber that one network is doomed to go bankrupt. However since the network can easily be bought and reused by someone else, the buyer can run it for minimal costs from bankruptcy. A good example was 360networks, who invested 875 million in trans-atlantic fiber. They went bankrupt and were bought for 18 million and have operational costs of 10 million. Now imagine how their competitors in transatlantic fiber felt. They must have been gutted, because all of the sudden somebody on the market had only paid 18 million and all of them paid 875 million. Well we know where that ended.

The trouble for Australia is, that it will cost a couple of billion to build a nation spanning fiber network. 3 billion for FTTN and 3-4 times as much probably for FTTH. With two networks chances are one of them will go bankrupt. If that network is bought by an outsider, that outsider will have a better base to compete on. (40x cheaper for the buyer of 360 networks) This will probably kill off the other competitor too in the "long run". Unless both parties agree to a cease fire, but that is a cartel and it would mean that the new entrant can reap enormous profits from the network.

Some might say: That is capitalism at its best and in the end the consumers will have two networks working at marginal costs. How great. They forget that somebody needs to invest in those networks. That somebody is quite often a pension fund. Those are the loosing parties. Many pensioners paid for the current bandwidth glut. Smart investors know that and therefore don't invest in ftth, because if you get a competitor, well it's mutually assured destruction.

So what to do. You can roll out a fiber network for 1500dollar/subscriber maximum. On top of that network you can build Wimax, UMTS, Wifi and anything else you like. All for 32 dollars a month/subscriber. That network pays itself back in ten years with 10% interest. But, there is an enormous but, it would mean governments accepting that layer one is not the layer there will be any competition at. It is just bad business to compete at layer one.

So regulate it and demand wholesale broadband access. Create chinese walls or even split it. It's cynical, but its true.

Thoughts on Wetpaint

Frank of Frankwatching read what I wrote previously on Socialtext and Jotspot and asked me what my opinion was on Wetpaint. He runs a very popular Dutch blog on digital trends, like blogs, wiki's and Web 2.0. He named Wetpaint his favorite wiki a while ago because of its usability. So I went to their site and sandbox and it is amazing how userfriendly it is. The boys/girls from Jotspot, Socialtext and the Wikipedia can learn something from it! However it is more for use on the internet then on the corporate intranet, since it comes in short there. It also seems they don't want to be in that arena, but try to make it easy for people to have their own wiki's on various subjects and make money from ads on those pages. So here are my thoughts on Wetpaint.

The Good
- Easy user interface. You can explain this to anyone. Wysiwyg done right
- The user interface for uploading pictures is exactly how people would expect it. It works with a popup box that lets you select the picture from your harddisk, upload it and put it in the page.
- Usage of tags can provide valuable meta-information. This is great with large wiki's
- The 'Page Toolbox' gives a good overview of what you can do with a page eg: send, print, edit etc.
- Excellent user page that shows who the user is, with user provided information, their edits etc. This was the one thing I really missed in both Jotspot and Socialtext.
- Nice design of the site and it seems it can be skinned and changed to fit the content. I saw one site on the tv-series Lost that really caught a vibe.

The Bad
- The editing box is too small. It should be page size to encourage people to enter text. If you want to share knowledge you don't want people to feel guilty that they use up more space.
- There are no tables in the wiki. Tables are practical and you can't do without in a corporate environment
- There is no possibility to send e-mail to a page, thereby immediately loosing my vote for the corporate environment. In the corporate environment an e-mail to a page can cut down the e-mail clutter and will be instant sharing of the contents of that mail with the entire company instead of three co-workers.
- It can only be used as a hosted service and there is no possibility to shield it off from the rest of the world. This is logical in their business model, but they could beat a lot of the standard wiki's by offering it in different ways.
- There is no possibility to edit HTML. Now I'm all for ease of use and shielding the normal user from the technical details. However, when there are powerusers, you want to give them the possibility to use the powers they have to improve what they are entering into the wiki. So where I criticized Socialtext for needing to go to advanced (HTML)-mode, I am critiquing these guys for not having one. It should be this way: you should never need it, but should be able to use it.