The price of freedom

The big news this week came Tuesday and Wednesday, with the mass hysteria that followed the decision by the US Court of Appeals to “kill off net neutrality”.

January 17, 2014

16 Min Read
The price of freedom

By The Informer

The big news this week came Tuesday and Wednesday, with the mass hysteria that followed the decision by the US Court of Appeals to “kill off net neutrality”.

Well, yes the federal court did effectively nullify several key provisions proposed by regulator the FCC preventing service providers from blocking lawful content, applications, services, or non-harmful devices, as well as lawful websites and applications that compete with their own services. The result has been outcry from all corners of the internet about the death of net neutrality and the warning that now just a handful of very rich, very powerful companies will have control of the internet.

But let’s hold our horses here. On a global level a multi-tiered internet has existed since forever. Carriers routinely throttle or block certain traffic types, or press users into an upgrade to enjoy certain types of services. Moreover, in many countries, like the UK, rules are being brought in to force ISPs to block access to certain websites and services by default. So what will change, if anything? And what’s really going on?

For the record, US carrier Verizon, which brought the case against the FCC, said that the ruling would not impact its users. “Today’s decision will not change consumers’ ability to access and use the internet as they do now. The court’s decision will allow more room for innovation, and consumers will have more choices to determine for themselves how they access and experience the internet.”

But there was also a significant win for the FCC. While it appears to have had its wings clipped when dealing with service providers currently classified as “information services” instead of “communications services” (as telcos currently are), the authority has more clout when it comes to dealing with “common carriers” and could just reclassify services providers as such. The court this week also held that section 706 of the Telecommunications Act of 1996 can serve as a source of authority for the FCC to regulate “broadband providers’ treatment of Internet traffic”. Some believe this means the FCC has actually won greater power, in that while it has to leave wiggle room for carriers and OTT service providers to strike their own deals for carriage, the authority can still require that such carriage agreements be “commercially reasonable” and non-discriminatory. There were also concerns raised by organisations like the Electronic Frontier Foundation (EFF) that all this net neutrality wrangling is just a Trojan Horse which will ultimately give the FCC greater regulatory powers. Indeed with price cap regulation authorised by section 706, the FCC could even end up with powers to set broadband access prices, call prices and as one pundit warned, perhaps even device prices.

But the Informer believes it’s far too early to call any shots on this one yet as the fallout will surely continue for some time to come.

So while the humans were lamenting the potential loss of their cat videos and pricier smut, the robots were busily testing their own internet. Scientists behind RoboEarth, an EU funded project four years in the making, have been testing their network out with a handful of service droids at a mock up of a hospital in Eindhoven University.

The idea is that both robots and humans can upload information about an environment to a centrally accessible cloud, like a hive mind, which all the other users can then pull information from. For the robots this means the first robot into the room can map it out, then that map is delivered to all the other robots going into that room. Once one robot has been trained to deliver certain prescriptions to one patient, others can have access to the same information. It’s like a common brain that avoids the need to teach each robot individually.

But of course there are the classic concerns about robots being given too much autonomy. After all, there are a growing number of naysayers warning about the vulnerability of the internet of things. Just this week security researchers at Proofpoint discovered a wide reaching hack attack that used several TVs and at least one internet-enabled fridge as the launch point.

This home appliance botnet, which apparently ran to over 100,000 devices largely made up of home routers and media servers, but also included TVs and the fridge, had been used to send out over 750,000 malicious emails attacking corporations around the world.

It’s a warning Google would do well to heed, having just splashed $3.2bn on Nest Labs, the cloud-enabled thermostat and smoke detector startup founded by iPod creator Tony Fadell.

Nest has developed a thermostat that uses a combination of light and air sensors to learn and adapt to its surroundings, saving users energy by optimising usage patterns for instance, by knowing when residents aren’t home. It can also be controlled through a conventional web browser and on mobile devices, which means it can also be taken over by nefarious hackers if proper safeguards aren’t put in place. Imagine the havoc you could wreak if you had remote control over shower temperature, central heating, or even the toilet flush. TV’s Big Brother would never be the same again – once producers gave the viewers control. Actually, there’s probably already a Japanese game show that follows this theme.

Still it’s good money for the Nesters. In January 2013 a GigaOM report valued the thermostat maker at around $800m based on annual shipments of about 40,000-50,000 units. Just two weeks ago All Things D said the company was reportedly worth over $2bn, and was seeking about $150m in extra funding.

But never mind the bots running the home, what about the bots building the home? Boffins at the University of Southern California are building a giant 3D printer that squirts out concrete and could be used to build a 2,500-square-foot house in just 24 hours. Of course, with concrete as the building material you really only have a choice of drab Soviet bloc architecture, except now it would probably be marketed as new Bauhaus or some such.

The Informer was much more taken with 3D printing using a different medium however, when he learned of a recent partnership between US candy maker Hershey and 3D Systems Corp. which will see the two collaborate to produce edible treats made with 3D printing. Imagine a desktop printer churning out peanut butter cups. Imagine sticking the peanut butter cup mixture into the house printing reservoir! It’s very Charlie and the Chocolate Factory.

The Internet of Things continues to extend its spectral tendrils into more devices, as Swedish car firm Volvo this week inked a content agreement with online music service Pandora that will see internet radio streamed to select vehicles starting in May this year.

At the end of 2012 Volvo combined with telecoms equipment supplier Ericsson (Only Abba are required to complete the Swedish brand power trio) to develop a connected cloud based on Ericsson’s Multiservice Delivery Platform to provide infotainment, apps and communication services to a range of Volvo’s new cars. This platform, called Sensus Connect, can be upgraded remotely and allows drivers to do everything from pay for their parking to using navigation services and other cloud-based information services (Wikipedia, Yelp, and the like).

In other musical news the Informer told you not to forget about Dre and with good reason. The good Doctor has struck a deal with US carrier AT&T to deliver an over the top music offering targeted at families.

With Beats Music, AT&T customers on a multiline account get unlimited streaming music and downloads for offline listening for up to five family members across ten devices, with personalisation options for each user. In addition to the personalisation technology, Beats Music claims to be unique because it has a team of human music experts curate hand-picked songs while streaming to deliver tracks catering to user preferences.

Yet there is a counter argument to personalisation, which comes from OTT movie company Netflix. In 2006 Netflix offered a $1m prize to any member of the public who could improve its movie recommendations impact by ten per cent. In 2009 a team of scientists delivered the goods and won the money. But Netflix never used the algorithm because personalisation was no longer important – the company had realised that personalisation worked contrary to novelty and users never discovered the ‘new’ content or other elements of the service. It’s what the Informer likes to call throwing enough at the wall and seeing what sticks.

The partnership is another crack at the mobile market by rapper turned entrepreneur Dr Dre, who saw his partnership with handset firm HTC hip when it should have hopped in September last year. The headphone maker, Beats by Dr Dre, bought back the remaining 25 per cent of its shares owned by the Taiwanese firm for $265m. The partnership was a poor deal for Dre and HTC. HTC bought 50.1 per cent of Beats in 2011 for $300m and sold half of that back in 2012 for $150m.

Unlimited streaming looks like a good shout if Apple’s recent pain as a pay-per-item vendor is anything to go by. The Californian company has agreed to pay $32.5m in refunds to consumers who claim the App Store processed sales of in-app purchases made by children without gaining parents’ consent.

The US Fair Trade Commission (FTC) brought the case against Apple, saying it had received tens of thousands of complaints from parents about unauthorised in-app purchases made by their children. One complainant reported that her daughter spent $2,600 in one app alone.

The FTC’s complaint alleges that Apple violated the FTC Act by failing to inform parents that by entering their password they were approving a single in-app purchase as well as 15 minutes of additional unlimited in-app purchases that their children could make without any further action from the parent. The Informer suspects that in many cases the parents are to blame, and the kids, as is often their wont, know their parents’ passwords. And to quote the ski instructor from South Park: if your kids know the password to a monetised account, you’re gonna have a bad time.

There was the jingle of coins, or Bitcoins to be exact, heading in the direction of the Feds also, as the alleged Dread Pirate Roberts, founder of the Silk Road, forfeited Bitcoins worth up to $28m in today’s money. But that not all, there’s also supposed to be another $130m worth of Bitcoins that were captured from the Pirate’s own personal stash up for grabs. The Feds have said they will convert these ill gotten gains into dollars and do with them whatever they do with money confiscated as the proceeds of crime. But there a good glug of hypocrisy here, surely. For if they want to turn the Bitcoins into dollars they will have to trade them on the very same marketplaces the US government not so long ago was attacking for being criminal havens encouraging illicit behaviour.

Whatever the case, it’s way more cash than UK operator O2 saw in its O2 Wallet service, which will be unceremoniously closed forever at the end of March after it’s evicted the moths. O2 wouldn’t say but one of those little moths whispered in the Informer’s ear that the company only had 30 users of the service when it announced its closure last week.

The firm will instead focus on its partnership with mobile payment technology provider Monitise, with which it announced a collaboration in July last year. O2 is also involved in Weve, a joint mobile marketing and commerce venture co-owned by EE, Vodafone and O2 UK.

It’s news that hasn’t put US operator AT&T off the space, having launched two solutions allowing businesses to process payments using a mobile device. The operator teamed up with payment processing services provider Vantiv to develop a mobile app that uses a card reader and allows businesses to swipe payment cards using a tablet or smartphone and a tablet based cloud solution that allows firms to process payments and access their business data on the move. Optional extras include a countertop receipt printer and an encrypted card reader.

There were several personnel shifts as Siemens, which apparently still has some stake in the comms sector, signed an agreement to offload much of what remains of its communications R&D operations to Nordic IT services firm Tieto. The Finnish company will take on the Network Directory Server (NDS); IP Multimedia Systems (IMS); Home Location Register (HLR) and Radio Access (RA) businesses from a unit called Siemens Convergence Creators.

As part of the deal, approximately 220 employees, working in four countries (Vienna in Austria, Zagreb in Croatia, Brno in Czech Republic, Bratislava and Zilina in Slovakia ) will transfer to Tieto as existing employees.

Meanwhile, troubled Canadian handset maker BlackBerry counted the appointment of Eric Johnson as president of global sales as the fourth former SAP executive to join since John Chen took over as CEO.

Chen joined BlackBerry in November 2013 from Sybase, an SAP company (acquired in 2010), where he served as chairman and CEO and has been pillaging SAP execs ever since. Along with Johnson, Chen has recruited former president of SAP’s mobile services business John Sims as president for global enterprise services, James Mackey as EVP for corporate development and strategic planning and Mark Wilson as senior VP of marketing. The latter two have previously worked at SAP and Sybase respectively. Ex-HTC and Sony exec Ron Louks also joined the firm as president for devices and emerging solutions.

Over at Yahoo it looks like Marissa Mayer pulled the lever that tipped Chief Operating Officer Henrique de Castro’s chair into the shark tank. De Castro exited quick sharp on Thursday without ceremony.

De Castro joined CEO Marissa Mayer as her first high profile appointment, just three months after her own in October 2012. Both previously worked at Google. But trouble was rumoured to be brewing early as September last year, with sources claiming that de Castro was under pressure to deliver better results.

In 3Q13, the firm saw its quarterly GAAP revenue drop five per cent year on year to $1.14bn, its GAAP income from operations fell 39 per cent year on year to $93m. Net earnings fell 91 per cent from $3.16bn to $297m. Ouch.

From personnel news to personnel rumours: Last weekend the Informer’s father showed him a big spread in one of the British national newspapers profiling Ericsson CEO Hans Vestberg. A telecoms CEO looking for mainstream profile suggests someone on the job hunt, the Informer thought. Then this week it was reported by Bloomberg that Vestberg was being whisperingly connected to the top and vacant job at Microsoft. Not so says one Ericsson insider and the firm is enjoying all the attention, apparently.

There were internal troubles at the Canadian 700MHz auction, as WindMobile pulled out of the running, due to a lack of internal support by key shareholder Vimpelcom. It seems to the Informer that there’s always internal troubles where VimpelCom is involved. But nevertheless, as Wind’s main shareholder, the company refused to support a bid for spectrum due to a conflict it is having with the government over Ottawa’s foreign investment rules, which have prevented it from taking full control of the Canadian operator.

Amusingly, a deal to provide mobile coverage in the Channel Tunnel was also nearly scuppered, until that is the contract was offered to the French. A spokesman for Eurotunnel told the Informer that the proposal to offer the contract to French carriers was “one of the key turning points” in sealing deals with UK operators EE and Vodafone.

There are two separate lines that make up the Channel Tunnel – one going UK to France and the other running the other direction. French carriers secured a service provision deal for the France – UK leg, while UK operators were expected to provide coverage in the other direction.

Last week, EE and Vodafone signed ten-year contracts with Eurotunnel to provide 2G and 3G services to their subscribers while travelling on the undersea rail line. The services are expected to launch in March 2014. However, Eurotunnel announced deals with French operators BouyguesTelecom, Orange and SFR as long ago as March 2012, and those services were live by July 2012.

“The French wanted to get in really quickly, they were pushing us as much as anything else because they wanted to have the connectivity in time for the Olympics,” Eurotunnel’s spokesman said. “For them, because their customers came from the other side of the tunnel, giving their customers connectivity on the way was a good piece of marketing.”

Vodafone Carrier Services was also putting the squeeze on, but this time on smaller, independent IPX providers. The company said it intends to shake up the IPX (IP Exchange) market this year, with a view to taking third party providers out of the picture, according to the division’s CEO Brian Fitzpatrick.

Fitzpatrick told the Informer that Vodafone will have one of, if not the largest IPX infrastructure in the world and with operators playing at this scale, he said, “the industry doesn’t need third party IPX.” Providers of such services includ Aicent, Sybase 365, Syniverse, TNS, xConnect and a number of others and Fitzpatrick makes no bones about the fact that Vodafone’s world view does not have space for them.

Space is also running short for the once much loved SMS, if the stats are anything to go by. Global spend on traditional operator messaging services, including SMS and MMS, declined for the first time ever in 2013, according to research firm Strategy Analytics. The figures suggest mobile operators are beginning to see the effect of adoption of OTT and alternative instant messaging services.

The research firm reported that while the volume of SMS messages remained flat in 2013, operator messaging services revenue decline by four per cent during the year. The firm added that the rise in OTT messaging services, such as WhatsApp and WeChat, will cause a 20 per cent decline in global operator messaging revenue by 2017. The situation is expected to be particularly stark in North America and Western Europe where spend on SMS and MMS services is expected to decline by 38 per cent and 28 per cent respectively by 2017. That’s not good news for operators as SMS has had such a profound effect on the industry.

And one person whose influence on the mobile industry cannot be denied is Rob Conway, former CEO of the GSMA, who passed away late last week after a brief battle with cancer. Conway was CEO and member of the GSMA board until September, 2011 and led the organisation for 12 years over a period of growth from when there were just 500 million mobile connections globally until a time where there were six billion. He more recently joined Vimpelcom as chief of international affairs.

Until next time, take care,

The Informer

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