… and red all over?

Answer: The balance sheet of the New York Times.

I wish I could take credit for this zinger, but Jon Stewart and the Daily Show delivered this dig and many others when their cameras visited the Times last week. Carl Howe touched on how all media is struggling with changing distribution and business models in his post two weeks ago, but the decline of many of our biggest and best newspapers is the most devastating example of media’s brave new world.

Residents of Boston have had front row seats to this decline. The fate of the Boston Globe has been the focus of daily reporting in the Globe itself, the New York Times (which actually owns the Globe) and especially the Boston Herald (which is clearly enjoying the struggles of its longtime competitor). I’ve read all of these reports (online, ironically) and I have to say it’s pretty depressing stuff. One of the biggest sticking points has been the issue of guaranteed lifetime employment, which is emblematic of the belief that newspapers as an institution will survive forever, despite evidence to the contrary. (I’m not pointing fingers at either management or the union, but I think both parties were delusional to even discuss lifetime employment given current market conditions.)

Yesterday, however, there was finally something positive to report: the Globe and its union agreed to $10 million in wage and benefit cuts, “following three months of bitter labor talks that threatened to close the 137-year-old paper.” This is good news - for the city of Boston, for journalism in general, and for the employees and owners of the Globe who now at least live to fight another day. But the thing that stands out to me is the timing: the agreement was reached after three months of discussion, and that was only after both sides “retreated into nine months of silence,” despite ample evidence that immediate changes were necessary.

Contrast this with what is happening at college campuses across the country. I’m on the Board of Directors of the Heights - the student paper at Boston College, where many years ago I was an editor and columnist. (The Heights is independent, meaning it receives no school funding and has only nominal oversight by the University, so the directors – all former writers and editors, like myself – provide some modest financial and strategic oversight.) The Editor-in-Chief and Managing Editor called an emergency meeting of the board a couple months ago, because for the first time that anyone could remember, costs were outpacing revenues. Like any paper, the Heights sells advertising, and at both the national and local level, ad revenues were down. The editorial board made some simple projections and figured they could lose a lot of money if they didn’t make changes - so they immediately changed everything. They cut down the total number of pages, eliminated sections, moved some of the cut content to their website, renegotiated their printing contracts, and even struck an ad-revenue deal with Google. Without any outside prompting, the editorial board considered dozens of solutions, and then called the directors for advice and counsel.

That a little college paper run by twenty year-olds can respond faster and more appropriately to changing market conditions than a large company of seasoned professionals is actually not that surprising. In many ways, the editors and staff of college papers today have a big advantage over their counterparts at major metropolitan papers. They’ve grown up through – and are responsible for – the permanent displacement of numerous other entrenched communication tools (compact discs by digital music players, voice-centric landline phones by messaging-centric wireless devices, primetime television by timeshifting DVRs, and so on). Unlike the management and staff of the Globe, the editors and staff of the Heights can easily envision a world without printed papers. To them, the permanent displacement traditional newspapers is logical and likely, but not predestined. The editors and staff of the Heights want the paper to live on, not because of concerns about lifetime employment, but because they believe in the product. Instead of wasting time convincing themselves that “newspapers will never die,” they simply said “not on my watch” and worked hard to reverse the paper’s fortunes, if only temporarily. Sometimes it’s easier to save an institution when you don’t assume it will live on forever.

With the NFC market still as dormant as Jefferson Airplane (talked about for years, still kicking around and never sure when they’ll make another appearance), recent announcements about turning a mobile device into a credit card terminal using applications got me thinking. Will SMB’s lay the groundwork to mobile payments success? The two announcements I’m referring to are from a start-up named Innerfence and the well known developers of Quicken; Intuit. With both of these services, SMB’s will be equipped to type a credit card number, securely transmit the payment details for processing and email or SMS the receipt to a customer.

Initially, I began wondering whether SMB demand even existed for these merchant solutions. After speaking with fellow YG analyst Steve Hilton, the answer was yes and the discussion moved beyond SMB demand. Although these solutions have too many fees (interchange fees, monthly account fees, and setup fees) the fact that a field service worker does not invest in an expensive network connected payment terminal will force SMB’s to consider this solution. Assuming that these services fulfill all PCI compliance regulations, our discussion quickly evolved into one of consumer interest in this solution. While the merchants certainly would see the benefit of a portable credit card solution, would a consumer feel comfortable handling a credit card over to an electrician they found on Craigslist?

This issue of consumer acceptance will plague the usage of these solutions. Although an SMB can launch a credit card transaction service for a nominal cost (Intuit charges $59.95 setup + $19.95 monthly fee and Innerfence charges $49.99 to download the mobile application and $25 monthly fee), a large amount of consumer education is required to ease concerns about the security of these services. Although handing someone your credit card at a restaurant and having them disappear for a few minutes or having a shopkeeper without a broadband or dial-up connection take a paper imprint of your credit card has risks, consumers are conditioned that this is acceptable. It will require years to change those beliefs in the minds of consumers and will limit the acceptance of portable credit card services for the SMB channel.

When we get to NFC, which Yankee Group’s soon to be released forecast expects only 13 million NFC enabled devices in North America by 2013, NFC processes will ease some of the consumer hesitancy in handing over a credit card to a cell-phone-wielding electrician. Having an electrician type your credit card digits into his cell phone feels a lot more risky than the electrician tapping his cell phone against your credit card. Consumers will be able to tap a device against a merchants phone to pay for a service and although it will not eliminate the security concerns, it will eliminate the need to manually type credit card details.

We’ve been talking for years about the ubiquitous Anywhere network, a network to connect all of us with digital IP connections, broadband capacity, and wireless ubiquity. But a footnote to that grand vision has always been the TV networks, which in most of the world still remains an analog dinosaur compared to the rest of our shiny digital ecosystem of computers, mobile phones, and iPods.

That changes here in the U.S. tomorrow night.

When Congress postponed the digital TV transition from February 17 to June 12, it did so because it worried that consumers weren’t aware of this coming change in TV broadcast systems, and that they hadn’t had a chance to get digital converter boxes for their old TVs. Well, just like income tax extensions, that postponement simply moved the deadline from winter to midnight on Friday, June 12. Now, consumers who don’t subscribe to cable TV and have a more than two-year-old analog TV have to do something to avoid a black screen on Saturday morning.

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To borrow an old Steve Ballmer chant, today’s Apple World Wide Developer Conference two-hour keynote was supposed to be about developers, developers, and developers. But media companies came to San Francisco to see the product announcements, which they got, and Steve Jobs, which they didn’t. Instead, they got to view a panoply of Apple executives presenting different parts of the announcements, which included:

• Consolidation of all Apple’s notebook computers under the Macbook Pro line. 15- and 17-inch Macbook Pros and Macbook Airs saw price cuts, while the aluminum Macbook gained Firewire outputs and “Pro” naming. And removeable batteries? Those are so 2008; all Apple notebooks and phones now only use sealed batteries that are both longer-lasting and more durable. But now that all notebooks are Macbook Pros, Apple now has just the white polycarbonite Macbook left below the $1,000 price point.
• Official announcement of Snow Leopard pricing, capabilities, and release dates. This next release of Apple’s OS X operating system is mostly an under-the-covers makeover to update and speed up Apple’s software foundation code (which wasn’t shabby to start with). But for anyone using Microsoft Exchange, Macs can now be if not first-class Exchange citizens, at least fully integrated into the Microsoft email world. Apple software mainstays Address Book, Calendar, and Mail now all interoperate with exchange. Snow Leopard will ship in September for $29 a copy (a change from Apple’s traditional $129 pricing) and will hit stores about a month before Windows 7.
• A more in-depth look at iPhone 3.0. This next release of the iPhone software will take iPhone applications to an entirely new level. The keynote announced capabilities like “Find my iPhone” which will map where your iPhone is and audibly identify it even if it’s silenced, and support for new peripherals ranging from blood glucose monitors to pressure sensors. But most impressive were new capabilities such as in-application purchasing, MMS, tethering, over-the-air movie purchasing. And of course, there are the 50,000 applications to provide you anything Apple doesn’t provide directly. iPhone 3.0 will be available June 17.
• New iPhone 3GS and iPhone 3G pricing. At around an hour and a half into the keynote, many viewers feared that no new iPhone would be announced. Fortunately, Phil Schiller proved them wrong by announcing the iPhone 3GS, which sports a faster processor, 7.2 Mbps HSDPA support, auto-focusing video camera, and voice control. The 32 GByte iPhone 3GS will sell for $299, the 16-GByte model for $199, and the iPhone 3G will drop to $99, all with two-year ATT commitment; pricing in other countries and with other carriers will vary by subsidy. The new iPhones go on sale on June 19.

What about the elusive Steve Jobs? Despite much speculation that he’d magically appear for one more thing, he wasn’t seen at the event. And while demonstration flubs may have run more rampant that they would have in the typical Steve Jobs show, it didn’t matter in the end; the Apple team announced the products, showcased the features, and got the job done well, if not in Steve’s inimitable style. And that may have been exactly the message Jobs intended to convey.

I am currently at 30,000 feet flying to San Francisco aboard Virgin America. At the same time my PC is powered up, my laptop has Wifi (pretty fast, too), and I am posting blogs, checking e-mail, tweeting, and soon will be watching Hulu.

The inclusion of in-seat power and enough room to somewhat comfortable use my PC even though the person in front of me is compelled to be at full resting position. My first experience with in-flight Wifi is an important one. As I fly to San Francisco, Apple will be presenting WWDC. Clearly, this is an important event that I need to stay on top of and in-flight Wifi means I can be updated on the event in the air, im or skype with clients or reporters, and blog all while on the go.

Now, there may be some who are opposed to Wifi because air is the last bastion of privacy we seem to have left. But progress cannot be stopped. After my first experience with in flight Wifi, I know my impressions of its importance have changed dramatically. Being able to get three or four extra hours of work done and being up to date when I land is really useful. It also lets me catch up on all those Family Guy episodes I have missed the last few weeks.

Many firms look at the console primarily as a gaming device. Here at Yankee Group we prefer to view the console as a multimedia gateway providing access to a world of entertainment. Before E3 I posted survey data highlighting the trend towards non gamers using the console to access multimedia content. After E3 it is important to review the announcements in that context.

The winner: Microsoft. I am surprisingly forced to continue my recently commenced Microsoft love-fest. First, the Zune HD impressed me. Then I found quite a bit of joy using Bing (Love the homepage photos despite the name). Finally, the E3 announcements really intrigued me. Microsoft wins because it is extending the console far beyond gaming. The incorporation of Facebook and Twitter are important steps in that direction. Replacing the Xbox movie store with Zune’s store could help foster interest in that device as well.  Notwithstanding Natal, which is not very Anywhere, but rather fascinating nonetheless Microsoft laid out a clear vision for the Xbox and that vision involves much more than gaming. If MSFT had only announced Hulu on the Xbox they would have been unstoppable.

Place: Sony. There is a pretty substantial drop between Microsoft and Sony. As the Playstation team talked about the addition of more games to the device they did little to discuss how they were incorporating more content (and new business models such as free streaming) but they did discuss those matters a bit. The combination of the PS3 and the PSP continue to be an underutilized asset for Sony but that could change with the PSP Go and the new Sony Store. Thus, if Sony can make this store better than the original connect store that didn’t even synch with the Walkman they could present a powerful connectivity message. But until they deliver on the promise, Microsoft remains ahead.

Show: Nintendo. Nintendo wants to reach out beyond the primary gamer in a different way than Sony or Microsoft.  Nintendo wants to reach out to more females as evidenced by their announcements. Lacking was a focus on bringing more multimedia content to the console and bridging the DSi and the Wii into an ecosystem similar to that promised by the PS3 and the PSP. Until such a time when Nintendo wants to reach out beyond casual gaming they remain woefully behind the competition in making the console a multimedia hub.

I, like many others have often asked if Microsoft should get out of the Zune business. Their first generation hardware was little more than a rebranded Toshiba Gigabeat and the second generation offered a less than gasp inducing improved navigation button.

While the hardware had been less than impressive the software has evolved into a social networking platform. Zune has focused on community with an attractive and immersive interface that aids in discovery of new content. If you have not yet had the opportunity to use the software I recommend giving it a try. You can create a profile without being a Zune pass member, which is not for everyone.

Unfortunately, in order to compete in the cutthroat digital audio player space a company must have a killer experience and cutting edge hardware (Which is why the new Sony Walkman is likely to again be subjugated to also-ran status). Microsoft may finally have cracked the code with the just announced Zune HD.

The Zune HD will mimic the iPod Touch insomuch as it will have a fully integrated web browser (IE) and WiFi (a Zune staple). But the Zune will also feature technology the current iPod Touch lacks such as – an OLED screen and an HD radio tuner with tagging.

The HD radio piece is a rather interesting one as Zune will be the first portable HD radio on the market. More importantly than being the first, combining HD radio, song tagging, and a subscription service create a powerful message for Zune. A Zune pass subscriber can tag a song on the radio and when in WiFi range download it for free and listen to it ad infinitum. This differentiates the service from streaming players like Last.fm or Napster and makes connectivity and the subscription service more valuable.

If Microsoft can allow restrictionless sharing of music between Zune subscribers (the infamous activity once referred to as squirting) while bringing the social interface of Zune from the web to the device they may finally gain bigger market traction.

Could a large screen and multimedia features position the device as a gaming console as well? The incorporation of the Zune store on Xbox makes it clear Microsoft would like to tap that audience in some fashion. If Microsoft can follow the Sony model of combining the power of the PSP and the PS3 with Zune and Xbox 360 a whole new audience of buyers may beckon.

This is a huge step forward for Zune but we must do a reality check. The DAP space is mature and growth has slowed significantly. Yankee Group survey data shows many iPhone users have begun to use their handset as the primary way to listen to music. It is expected users of other smartphone platforms will exhibit similar behavior on a smaller scale. Thus, the  evolution of Zune towards a multimedia platform will be necessary for it to compete and Zune HD is an important step in that direction. Zune HD will have its work cut out for it as it continues to face stiff competition with the iPod Touch, multimedia handsets, and MIDs. However, if the platform, service, and experience prove successful perhaps the outlandish notions of a Zune phone may not seem so unreasonable.

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The original Kindle: A flawed consumer device, saved by ubiquitous connectivity

The blogosphere today is abuzz about the New York Times article claiming that New big-screen eBook readers may help save the newspaper business. Techcrunch claims it is a hopeless search for a non-existent lifeline for the news, not the paper business. ZDNet claims that it really is a Trojan Horse to tackle the margin-rich textbook business. Wow, I had no idea. Next time you see a college textbook mogul let me know.

I own an original Kindle. Its ergonomic flaws have been documented by many, including the too-large next and previous page buttons, the lack of a place to hold the device, and the poor fit and finish of the device itself. Compared with its main competitor, the Sony Reader Digital Book, the original Kindle feels cheap and poorly designed.

But regardless of its drawbacks, I use my Kindle quite a bit and promote it as a worthwhile consumer device in my Anywhere presentations. Why? Because connectivity is its killer app. I typically describe as “a flawed consumer device saved by ubiquitous connectivity.”

Let me explain.

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For Geoffrey Chaucer’s pilgrims, arriving in the cathedral city of Canterbury in Kent ended a journey through the garden of England. But for Professor Shyqyri Haxha, Canterbury marks the beginning of a trip to far wilder parts.

Until December 2008, Dr. Haxha was a lecturer in telecommunications at the Canterbury-based University of Kent. Today, he is CEO of Post and Telecommunications Kosovo (PTK).

So what strategy is the new executive pursuing in one of Europe’s poorest and youngest economies, I asked?

His number one goal: connecting all Kosovo’s schools to the Internet with fiber - and he’s aiming to do it before year end.

Surprisingly, Dr. Haxha already has the funds; PTK is cash rich. He hopes that an upcoming RFP for the estimated €80 million project draws qualified bidders unafraid to work in this corner of Europe.

Land-locked Kosovo remains an uncomfortable hangover of war in the Balkans. Under UN administration for a decade, this disputed region of 1.8 million inhabitants declared the Republic of Kosovo in February 2008.

That status is still not widely accepted. Indeed, neighboring Serbia views Kosovo as part of its sovereign territory.

Political limbo makes life tricky for Kosovo’s telecom operators. Kosovo still lacks a national dialling code from the ITU, the UN agency governing allocations.

Instead, Kosovo routes international traffic via Cable & Wireless-controlled Monaco Telecom. It’s an arrangement that doesn’t come cheap. Monaco Telecom keeps about 40% of the value of each telephony minute.

Then there’s the issue of piracy. Kosovo is dotted with clandestine cell sites where rogue operators are effectively stealing voice minutes.

Not just locally-generated, but also international roaming traffic is up for grabs: Half a million Albanians holiday in Kosovo every year (PTK hopes to win a piece of this action by taking a 30% stake in Albania’s 4th mobile license).

As a drawn-out NGN backbone upgrade with Alcatel Lucent concludes, PTK’s legitimate competition is hotting up. Telekom Slovenije has ploughed almost €200 million into newcomer Ipko Net.

Now the government is looking to privatize PTK - currently Kosovo’s most profitable company - but how this will be done is unclear.

So with all this on his plate, why is Dr. Haxha prioritizing fiber to schools? Dr. Haxha asserts that he’s serving his primary customer: More than half of Kosovo’s population is under 25. It’s Europe’s youngest.

But education is poorly resourced, and investing in infrastructure that can help upskill the young offers a very direct way to improve Kosovo’s social and economic conditions.

Nevertheless, the choice of fiber access is surprising, particularly since neighboring FYR Macedonia chose WiFi mesh for a similar USAID-funded project.

But Dr. Haxha is resolute: “Fiber offers a future for the long term.” He’s also sending 40 engineers for training at his former university.

In a prior Yankee Group feasibility study for a nationwide WiFi/WiMAX network in the Balkans, we concluded that device affordability (eg: laptop, smartphone) was a major stumbling block, irrespective of connectivity platform.

Equipment subsidization for individuals and groups is often a necessity, as Dianne Northfield and I argued in a report outlining the ‘motive ingredients’ needed to effect connectivity-driven social transformation. And perhaps Nicholas Negroponte could also help Kosovo, as per Yankee Group CEO Emily Green’s recent discussion with the One Laptop Per Child chairman.

Because his wife and children remain in the UK, Dr. Haxha still pays BT for a copper-based home broadband line. That gives him a personal stake in the current discussions about Digital Britain.

His view on the broadband investment case? “Any economy needs fiber if it’s going to speed ahead.”

I’m visiting the world’s third fastest broadband country after South Korea and Japan. That’s right, I’m in Romania.

Here, a government stimulus package did not create a high-speed broadband infrastructure. Instead, groups of tech-savvy neighbors just started stringing fiber optic cabling between buildings and trees. They became micro-ISPs by default.

Today, Romania’s 800-odd reƫea de bloc and reƫea de cartier (apartment block and neighborhood networks) are consolidating, but the patchwork of home-grown fiber remains.

Perhaps it is not pretty to look at, as these pictures suggest. But so what? Almost half of Romania’s existing fixed broadband subscribers now enjoy connectivity at speeds vastly exceeding 5Mbps, according Akamai traffic statistics. The problem is that broadband penetration doesn’t extend far from main urban areas.

Considering the Pirate Bay debacle, it’s also worth noting that Romania’s neighborhood fiber networks were built explicitly for peer-to-peer file sharing. That’s partly why many Romanian broadband packages are tiered by geographic access.

For about $15 a month you’ll get a local (neighborhood) bandwidth speed of 100Mbps, a metropolitan (city) speed of 50Mbps and an ‘Internet’ (national & international) speed of 10Mbps.

True, cable companies RCS&RDS and UPC and are trying to curb Romania’s considerable torrent habits. They are buying up the micro-ISPs and integrating mobile and TV propositions. But Romania’s unique genesis has bred a content-thirsty consumer irrespective of fixed or mobile platform.

This will drive a tripling of Romania’s broadband penetration between now and 2012, according to Yankee Group’s global Anywhere Index of broadband lines.

Let regulators try to prescribe how high-speed broadband infrastructures are built and managed. But Romania’s continuing journey proves that there is indeed no one route to - or from - Rome.