(C) G. Sankary

A few years ago when we were first centering Yankee Group’s research on ubiquitous connectivity, or what we now call Anywhere, I said something that I now see was wrong. I claimed that the expansion of connectivity around the world would ultimately redefine good vacation experiences not as those that include free WiFi, but those that promise the absence of the opportunity to connect. Meaning we’d be so exhausted from our connected lives that the best vacation would be one in which we would be prevented from connecting — and happy about it.

Hah.

I have been on a family road trip for the past week. Writing today from Richmond, Virginia, I am here to tell you that the best way to vacation in 2010, at least in the U.S., requires the following:

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After many weeks of travel and visiting with our clients all over the globe, I finally found myself back in Boston last month, enjoying the beginning of summer in New England and working through a backlog of emails. One of those messages was from Maura Fitzgerald, partner at Version 2.0 Communications (v2), recapping the incredible party we had back in April at 28 Degrees in Boston.

The event, hosted by v2 and Atlas Ventures, was a celebration of innovation in the Massachusetts tech hub, and highlighted our book ANYWHERE as an example of Boston’s thought leadership in the technology space. She included some really great shots from the night, taken by Improper Bostonian photographer Katie Noble.

To kick off the night, I was joined by a panel of three of our book contributors to discuss the impact of mobility around the globe and in different industries. A special thanks to our guests for taking the time to speak and celebrate with us: Hamish Fraser, Director of Telemedicine, Partners in Health; David Rose, founder and CEO, Vitality; and Hilmi Ozguc, founder and former CEO, Maven Networks.

Panelists and book contributors Hamish Fraser, David Rose, and Hilmi Ozguc

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Wholesale network operations, or just ‘wholesale’ for short, has often been characterized as one of the least interesting components of a major telecommunications network. Since no network, no matter how large it is, has all the reach its owners and customers want all the time, every operator needs to regularly buy and sell capacity with every other operator. But what’s game-changing about that?

I joined the annual gathering of network executives focused on wholesale operations recently, International Telecoms Week in Washington, D.C.. There I saw first-hand the long-standing practice of wholesale “bilaterals”: simple tables set up in the basement of a large hotel (see below), where operators negotiate one-on-one (or, more typically, two-on-two) to insure their network reach and capacity. A bit weird if you haven’t seen it before, but it certainly doesn’t look like it’s any part of a cutting-edge change in the global network infrastructure.

Bilateral tables in the basement at ITW 2010

I’ve assumed for the last year or so that there aren’t that many interesting Anywhere issues within wholesale. But YG thought leaders Camille Mendler and Wally Swain have been telling me that Anywhere has big implications on wholesale. I was wrong, and they are right. Sally Davis at BT Wholesale first began to open my mind, as I mentioned in an earlier post. But here are two reasons, straight from ITW, why I now know she, Camille and Wally are all correct:

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I made a quick visit to Helsinki a few weeks ago; it’s a city I always enjoy. This time, besides the teeny-tiny sauna in my hotel room (a memorable treat after an early-morning run past stunning Finlandia Hall), I found something else that was hot: an exciting community of mobile entrepreneurs.

The Money Talks Forum, a unique partnership between the Finnish VC community and Technopolis, a real estate developer with incubator-style office space in Finland, Estonia, and Russia, has been held twice a year for the last four years. Entrepreneurs apply to make pitches to VCs, filling a full day with group presentations and speed-dating-style one-on-one meetings. I was invited by the Finnish Mobile Association to share some ideas from ANYWHERE to the group — but came away with lots of new ideas from entrepreneurs eager to show how what they’re doing ties directly with Yankee Group’s Anywhere vision. Some cool things I saw:

• WiFi exchange? Notava wants to help mobile operators off-load demanding connections, such as streaming video, to locally available WiFi hot-spots that are willing to dynamically sell excess capacity. Operators can also register their own capacity. While it can take 2-30 seconds to provision one of these trades, customers should never see the transfer of their activity to the other network; rather they should just see better bandwidth, seamlessly. Might not be a new idea, but with crushing mobile data loads, perhaps its time has come.
• Epuuk founders point out that the way to best use mobile screens for media is to look at what kinds of content are the same size as a mobile screen in their current format. Their conclusion: comic strips. The firm’s content delivery platform makes it fun to look at comics on a mobile screen. Right now they’re working with King Features content;  Epuuk founder Lauri Gorski said, “Letting us play with their Finnish market content is low-risk for them.” I liked their Zits demo; if only I could have understood the Finnish punch line…
• Zokem joins the rising scrum in mobile data analytics, including the likes of Localytics, Flurry, Umber Systems, and more. This outfit uses client-resident software to track activity — but rather than just understanding what users are doing with their mobiles, the company wants to use the mobile as the pathway to better understanding consumers’ entire lifestyles. Since I met Ludovic in Helsinki, the firm recently landed 2M euros in additional funding.

Many of the entrepreneurs I met at the event share a common prior experience: working at Nokia. The firm has been a wellspring of innovation in the mobile sector, but is now struggling to regain leadership ceded in part to Apple. Is that the reason for the exodus of talent into new ventures? One of the event attendees said, “When big trees get trimmed, it creates more sunlight for new growth at their feet.”

I’ve been travelling like a maniac lately. Maybe you know the ads that have been catching my eye as I trudge in and out of jetways around the world. A global bank’s poster campaign pairs arresting images of objects with simple words to label them. A moist, exotic frog on a jungle branch is first labeled “delicious,” then “scary;” a shiny pair of women’s stilettos is marked “beauty,” then “pain.” I admire the way the series finds new ways to point out how two very opposite ideas can be equally true.

So consider this pair of contradictions: “Technology changes everything” and “Technology can’t change anything.” They’re both true for the global networks many of us care so much about.

Technology changes everything: The advent of broadband and wireless communications is revolutionizing digital communications on a global scale in what I like to call the Anywhere revolution. Monolithic, monopolistic and single-purpose telecommunications systems are inexorably giving way to open, flexible networks serving disparate customers and their exploding, diversifying appetites. Exciting times, right?

Andy Grove: a model for Anywhere leadership?

And yet, technology can’t change anything: Technology is inanimate, devoid of a point of view or the ambition to do right or wrong, to make a profit or loss. It’s the people who deploy technology who are the ultimate agents of change in any technology revolution. Some of our Anywhere revolution’s change agents include: the academics who adopted the U.S. military’s TCP/IP protocol for inter-university file transfers; the rebels whose digital sharing websites cracked open the entire music industry; the passionate designers of powerful simplicity at Apple, who unlocked our appetites to use their creations. People are the agents of change in our networks… or not.

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Anywhere is a rapidly accelerating future in which all of us, as well as the things we care about, will be connected. In my on-going quest to find yet more things in our lives that have already become connected, one of my most recent discoveries is the connected beer tap.

Yes, it’s for real, and while some of you enjoy giggling at some of my other connected device finds, thinking them too marginal to add real economic value, this creative application of extended connectivity quickly turned into incremental dollars to the business that installed it.

A restauranteur in suburban Atlanta has introduced connectivity to a Wall of Beer, incorporating connected flow meters on the beer taps and a pair of NFC card readers next to the taps. You can see what the setup looks like in the photo here: pretty normal except for the card reader.

It’s fairly simple:  sensors added to the taps detect the flow of product, its pressure, as well as temperature and (optionally) CO2. That data goes to an on-site server. RFID card readers track members of the restaurant’s beer club. When a member goes to the beer wall, they can log into the system with a card, then dispense their own beer. The system notes which beer and how much was dispensed, and charges the member account accordingly.

What’s the point?  There are two reasons to do it, both of which affect the restaurant’s bottom line very quickly:

1. Customers like the self-service-but-premium experience. Guests can try small, 2-ounce tastes of beer without buying an entire mug… and they can do it themselves. The beer wall area in the restaurant is set up as a special VIP space, creating a feel of exclusivity. The unique experience, including congenial encounters with other patrons at the beer wall, has driven beer sales at the venue up steadily since its introduction. More beer drives more food… increasing total store revenue.
2. Tracking each ounce of beer from a keg dramatically reduces product loss. Over the years, restaurants have come to terms with turning just 75% of the contents of a beer keg into revenue. The remainder goes to spillage, over-serving, or theft (bartender giveaways). With tracking of every ounce dispensed, it’s nearly impossible for employees to cheat the system, and customers don’t over-serve themselves when they know they’re paying by the ounce. The result at this restaurant: keg utilization has shot up from 75% to an amazing 90%+. That’s a straight increase in profit per keg purchased.

The technology won’t be applicable in exactly this setup everywhere; there are 16 states in the U.S. that currently don’t allow self-service alcohol. But the flow sensors in beer taps can still be used to track behind-the-bar dispensing to reduce loss per keg.

In case you missed the lessons here, pushing connectivity — in the form of wired and wireless sensors plus NFC readers — further out into the business of this restaurant has increased both top-line revenues and bottom-line profit. Costs included an up-front installation fee and a variable monthly expense for the SaaS-based system. Payback took about 14 months.

The big point: extending the network in your business can reduce its inefficiencies, because the network brings detailed, real-time information about activity at the edge of the business to wherever the right decisions about it can be made. An Anywhere restaurant is a more profitable one.

Thanks to Jerry Bucher at Draftserve for walking me through the solution. He says the restauranteurs they show this to are starting to understand that the entire industry could be revolutionized by what his firm calls “point-of-pour’ technology.  I’m going to call it Anywhere Beer. And I like it.

(Want to know more? Get in touch with him at jerry.bucher@draftserv.com.)

A lot of the iPad analysis I’ve seen in recent weeks fixates on where it fits in our current world: where, or how, it inserts itself as a new type of connected device between a laptop and a smartphone. Playing with Yankee Group’s unit, which so far on balance I do love, I get the question. Today I’m fumbling like an arthritic grandmother just to figure out how to modify a Powerpoint deck we loaded onto it, so that I can use it to drive a projector for a speech in a few hours. Right now I’d give up two fingers for a real #*&@ keyboard on the thing. Ultimately, I’d like to figure out if and how I can leave my laptop behind on more roadtrips, but I definitely don’t have that nailed yet.

What does the recent debut of the iPad mean for dedicated e-readers as a category, and the potential proliferation of more kinds of connected devices? Last week in California I asked Phil Lubell, Sony Electronics VP for Digital Reading, how the Sony Daily Reader has been doing since its debut last fall. “The holiday season was a great breakout for the product category in general, and Sony’s e-readers played a big role in that. We saw sales volumes about four times as high as the same period in 2008,” he said.

Is he worried about the iPad’s impact on his opportunity to sell more e-readers? Not in public, at least: “More players in an early market is a good thing. And the biggest obstacle to more sales isn’t competition — it’s content. Availability of content is the most compelling factor in buying one of these devices. The device plays just a part in the overall experience.”

What’s the Sony party line on the multi-media and app-happy iPad versus e-readers, intended to do one thing reasonably well? “You could think of the iPad as the Swiss Army knife of these devices. But we know from some users that they want a single-purpose device. They want these things so they can escape from a lot of other things in their lives for a time. They say, ‘I like how I can’t do anything but read on my e-reader.’ ” Yes, but… the nearest recent model for how that will play out might be the new role of digital cameras, in a world where most consumers have a decent camera function on their mobile phone. Some of us, for many instances, will still prefer a dedicated device for the task. Overall the total market for single-purpose devices will be real — but diminished.

Sony's Dash: a 'personal internet viewer'

On the same trip I met with the always thoughtful Steve Tomlin, founder and CEO of chumby industries*. What’s new at chumby? Actually, what’s new with chumby is what’s new with Sony — the Sony Dash, just released this week. The Dash uses chumby’s media streaming capabilities to offer functionality similar to the chumby, but in a slightly larger form factor with a gorgeous screen big enough to show more than one widget at a time. And I want one. See a video about it on the Sony site here.

What was chumby’s role in the Sony product? “We worked with Sony in the conception of the Dash, as well as the software design and execution. Specifically, chumby industries provided our Flash-based presentation layer for content, along with access to a set of chumby industries’ applications. And we ported to the Dash of a number of other parts of the overall chumby technology platform,” Steve explained.

“The question I ask about things like the iPad is, ‘What is this device to me when I’m not using it?’”, he continued. The iPad is an awesome digital picture frame in passive mode… but I take his point; it could do more, which is where he sees opportunity. “I think the iPad has awakened CE manufacturers, but just a bit. Now there’s a lot of feverish thinking about Android tablets. They’re still in pretty narrow silos.”

And there, precisely, is my big bitch about the beginnings of the connected device explosion — which we predicted in our book ANYWHERE. We appear to be falling victim as an industry to interpolation in our product thinking. And it’s dangerously myopic — both for consumers who’ll struggle to figure out where more of these things fit in their lives, and for the manufacturers, who risk scarce capital on new products with razor-thin margins and fleeting life cycles.

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As a fan of all things connected — and I do mean, getting all things in our lives connected, as that’s a foundational element of Yankee Group’s Anywhere vision — I have mixed feelings about the recent spate of network operator announcements in the marketplace about M2M (machine-to-machine connectivity) business strategies. If you don’t know what I’m talking about, see this Sprint announcement, or this one from Verizon Wireless and Vodafone, or this one from Orange Business Services.

On the plus side, it’s all good, because the wireless network operators must commit to M2M. While that industry has been full of dedicated evangelists tirelessly (and correctly) touting the benefits of bringing connectivity to all a business’s assets to reduce labor and latency in its activities, the wireless industry contributed more lip service than actual effort to that vision in the past decade. But just in the last few quarters, M2M suddenly represents a critical solution to a common problem many wireless networks face: continued revenue growth. The explosion of mobile data consumption by smartphones is directly linked to a pricing strategy that doesn’t give them linear growth in revenue from current mobile subscribers. And the flat-lining of the growth in mobile subscribers in maturing markets means trouble ahead, and soon. So: connect not just people, but things, too.

Welcome aboard. As wireless operators get serious about the fact that a greater diversity of connected devices in the world can benefit from their network infrastructure, it will actually help spawn that diversity. The operators create divisions with skilled, committed leaders like AT&T’s Glenn Lurie and Sprint’s Danny Bowman chartered to drive revenue from these new sources. These execs force their firms to create offers that are more appropriate for devices other than phones, and develop partnerships with other tech firms that can add to their networks’ IQ in supporting M2M applications.

But–I see some risks ahead.

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As much as the job of research is to ask questions that you honestly don’t know the answer to, and to stay open to what the data wants to tell you, I’m still fond of saying that at Yankee Group, we’re not Switzerland. That is, we aren’t staying out of the war, watching from the sidelines. We’ve picked a side — the side that believes that the global communications network will inevitably mushroom in reach, capacity, and intelligence. We want that future, because we believe in the net goodness it will bring — for our clients involved in the network, sure, but for society at large as well.

Yesterday was a big day for the Anywhere Network. Why, you ask? Perhaps you think it’s because U.S. courts may be shortening the FCC’s leash on network neutrality. Reasonable people can disagree, but personally I do believe that the potential threat of the U.S. government creating regulation or legislation to proactively ensure neutrality in the network has supressed near-term network investment. So a fence limiting the FCC’s reach could indeed be a good thing for the network in this part of the world.

Or perhaps you think I’m excited because AT&T announced a $1 billion commitment for network expansion. That’s certainly good — more network capacity is part of our premise around these parts. I love Bob Metcalfe’s term — he says we need ‘squanderable abundance’.

But no, the correct answer is neither. Yesterday was a big day because Yankee Group gets to double down on our focus on the Anywhere Network. OK, so our numbers aren’t as big as AT&T’s. But we’re ramping up our own commitment, to ensure that we’re doing everything we can to understand the nature of the Anywhere Revolution — particularly for those firms with the most immediate threats and opportunities.

Tom Leighton at Akamai told a group here in Boston last week that he expects Internet traffic to grow by over 500 times by 2015.  The story of the network, past and present, really is a numbers game. So we’ll focus on getting to the rest of the numbers behind these issues. The work is underway already; watch this space for our first specific product expansion announcement, coming soon. Following that, we’re working on new offerings related to the emergence of 4G networks and towards better understanding the nature of network user demand.

[These new activities will require an expansion of staffing here; if you know energetic, positive people who are super-smart and could jump into these topics with us, let us know. Some openings are posted already; others to come.]

Want to tell us where we should be aiming? Look for an opportunity to do so on our website shortly; in the meantime, feel free to email me directly or respond to this post.

Onwards and upwards!

Don’t you hate it when real life moves faster than you do? If you write a regular blog or column, you may know this feeling: you get something started, it gets paused for some reason, but when you return to it, things have changed.

That’s the case with my entry today. Back in January I finally had a chance to talk with  someone I’d wanted to interview last year for ANYWHERE, our book on the expansion of global connectivity: Jeff Epstein, the CEO of satellite venture Terrestar. The firm has been on an aggressive timetable towards commercial launch later this year of a combined satellite/mobile communications service in partnership with AT&T.

I know what you’re thinking: the last twenty years of communications has been littered with failed satellite ventures.  I wanted to get Jeff’s thoughts on whether satellite communications might play a bigger role in the expansion of digital connectivity going forward. But just as I was wrapping up the manuscript, he was a little busy… getting their first bird up in the air from French Guyana.

Jeff and I finally talked in January. But I didn’t get my notes organized before the book launch and everything else hit my schedule. Then this week an interesting announcement appeared, mostly about a competitor of Terrestar, that caught my eye and forced me to bring the stalled blog post back up to the top of my to-do list.

So here’s a two-part blog post: first, some of my interview with Jeff in January, and second, some thoughts on the implications of this week’s announcements by competitor SkyTerra.

What’s life been like since your satellite launch last year?

Terrestar's first satellite before launch

You found us at a very interesting time six months ago. We spent many years and millions of dollars to get to that point on July 1, planning to launch the world’s largest communications satellite. We got it launched, which was nerve-wracking…but that really started the most-nerve-wracking  part. Obviously the satellite is an integral part of our offer, but there are many other pieces that have to make all this work. We have been in test mode on numerous events ever since in order to get to commercial readiness later this year.

You’ve since perfected the spectrum, and landed an important partnership with AT&T.

Right. The first piece of our AT&T relationship was for reciprocal roaming – agreeing that our subscribers could roam on their 3G network, and their subs could roam on our satellite network. Then we added a distribution agreement with AT&T, which is extremely significant because it spells out our first customers and the  go-to-market strategy to win them.

We decided with AT&T that we’d phase our acquisition of customers. Our first focus in partnership with them will be on government and small businesses; not consumer-focused just yet. Right now, first quarter, it’s first responders and businesses. We’re calling the converged offering SAM, or “Satellite Augmented Mobility.”  We anticipate we’ll see first customers with AT&T this quarter. We’re making progress on the network integration work — and we also announced our first handset, one that combines satellite and 3G wireless network radios in one unit.

Terrestar's Genus handset

It doesn’t look like a sat phone at all. It looks like a BlackBerry.

Exactly. It means that with one device, a subscriber can have secure coverage anywhere in North America. The phone is unsubsidized; the pricing is $799, plus $24.99 month to add the satellite roaming service, plus 65 cents minute for satellite time and $5/MByte for data.  It will provide a significant cost savings, about a 50% reduction over other satellite solutions. With the lower cost and a competitively sized and featured handset, it’s a big breakthrough.

What’s the biggest reason that your satellite is different from those that have gone — and failed — before?

The big thing that’s different with our initiative is the size and makeup of the devices on the ground. With such a large, powerful satellite as ours, you flip the physics. You don’t need a large user terminal to reach the satellite, since the satellite itself is so powerful: you can have a much, much smaller handset that uses it.  When people think of it now, they think of a guy on a mountaintop holding a suitcase phone. But we are proving with our very first handset that 2-way communications with our satellite doesn’t require a lot of real estate in the access device. And you can dumb that down and make a data-only satellite module that requires less space and power than the handset does. It becomes very small and you can put it anywhere.

So beyond the first applications for what you call satellite-augmented mobility, what else do you think is an opportunity for the satellite?

Given our higher power, and the smaller size and power requirements on the device,  we can do things differently than what’s out there currently. In the machine-to-machine space (M2M), there are a whole host of apps and services that could use the satellite pipe now that the access point can be so lightweight. A lot of players already see satellite as a valuable path for critical communications – it can be redundant, resilient, and still offers them the data speeds they need.

You’ve come along way, but you’re not out of the woods. What remaining challenges are ahead?

We want to see the chipsets that support the satellite band come out in volumes. We’re continuing to work on capital. The major capital intensiveness is behind us; we’ve raised $1.2B already. But it cost us $150M to launch the satellite, and we had to pay to have a second backup satellite as well as part of our license requirements. Those are done, and they are big items that are entry barriers for other companies. Really our costs going forward are chipset development, satellite maintenance, things like that. We have a very lean operation, just 100 employees who are mostly overworked and underpaid. A goal in next month or two is to get some more funding.

What worries you at this stage?

One thing I’ve learned in the satellite industry is that someone else’s anomaly today could be mine tomorrow. Lots of interesting things happen when you put something 22,000 miles up in space.  How do you know, for instance, that an asteroid is not going to hit your satellite? (The simple answer is, space is a very big place.)

For sure, the communications satellite industry doesn’t have the best history. So there are lots of naysayers. Now they’re saying we’ll never get 10,000 subscribers, let alone a million. That’s probably one of my bigger fears.  One of the other things we joke about is, what happens if it takes off? I worry about our QoS [quality of service]: it has to be like cellular.

You could argue that’s a low bar…

Talk a little about the ancillary wireless spectrum you were awarded as part of your license from the FCC.

It’s called ATC — the Ancillary Terrestrial Component.  That’s our land-based wireless license.  We have 20 Mhz of ubiquitous pristine 2.0 Ghz spectrum. Initially our vision was that Terrestar would build the satellite network as well as a companion terrestrial 4G network to go with it. That’s what the ATC award was for. Then the economic crisis hit, making it tough to fund that additional buildout ourselves.  Instead, we secured AT&T as our roaming partner to provide our terrestrial network.

But there is a tremendous opportunity now with the ATC wireless spectrum. In just the past 6 months, existing wireless network constraints and the explosion of mobile data demand mean that existing mobile operators desperately need spectrum in some places. They are in crisis, and they and the FCC are both scrambling to satisfy demand. Written into our license from the FCC  was permission to use the ATC spectrum on the ground if we satisfy certain criteria. We can use our spectrum to satisfy our satellite business, but can also re-use on the ground in other applications.

That’s huge. Could the re-use of the ATC spectrum could be a bigger business for Terrestar than the satellite opportunity?

We have the best of both worlds. The ATC components are extremely valuable. We have perfected the satellite spectrum and we have done what we need to do to keep it. That’s been a very expensive endeavor. The big return for investors may be the ATC piece of it. We can make a business out of it, and we will be looking to monetize that.

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Me again. Last week’s announcement by Harbinger Capital, the new owners of Terrestar’s competitor SkyTerra, is a interesting story in the context of Jeff’s comments about Terrestar’s ATC. Harbinger plans to invest their own capital (i.e., that of their investors) in the buildout of a 4G LTE network using SkyTerra’s equivalent companion wireless spectrum. Harbinger is also a part owner of Terrestar as well, and there was some inference that some Terrestar spectrum will be included in this 4G buildout. The idea is to create a wholesale 4G network — one whose capacity could be provide to other operators who need it.

Can Harbinger, or anyone else, raise the enormous capital required for an endeavor of this size? Many of the comments in reaction to the story so far have followed that line of thinking, debating both the amount of capital that would be required ($5 billion? $15 billion) and whether it could be found.  And if Terrestar, with a more contemporary satellite technology than SkyTerra, and just as juicy ground-based wireless spectrum to offer up, has capital challenges, why would Harbinger’s experience be different?

Another way to look at this announcement is that we now have a fourth public commitment to a 4G network in the US: starting with Clearwire launching in 2009, Verizon committed to launching its LTE network beginning in late 2010, AT&T talking 2011/2012. As long as the FCC appears ready to allow this use of the spectrum, and there is any viable possibility that the funds could be found, it will minimally serve to keep Verizon and AT&T on their current pace.

And there’s some evidence to suggest this will in fact do the trick — as one of the immediate reactions of the two largest wireless network operators in the U.S. was to complain to the FCC, since their ability to use that capacity will be constrained to just a fraction of what could be available. Meaning that they can’t count on solving their current capacity problems with someone else’s network than their own.

Score two more points for the evolution of the Anywhere Network — one for the looming potential of truly seamless satellite/mobile integration, and a second for forcing the forward movement of the entire mobile sector towards expanded, IP-based bandwidth.