The Wall Street Journal yesterday raised a few Anywhere eyebrows with this paragraph at the end of an article titled Firms Hitch Wagons to iPhone. The paragraph that caused this fuss was as follows:

And those that have been sanctioned by Apple are finding out too late that they have guessed wrong about the depth to which Apple is willing to help them. Makers of location-based software expected to benefit from the new iPhone’s global-positioning system. Yet they are finding out that Apple won’t support “applications designed or marketed for real-time route guidance.” The clause in the iPhone developer tool-kit agreement essentially voids months of work by TomTom NV and other navigation providers.

Could this be? Could Apple be an Anywhere spoilsport and refuse to allow location-based applications?

Now, being a registered developer, I have the software development kits (SDK) for both the Apple iPhone and Google Android [shameless research plug: Yankee Group clients should look for a Decision Note comparison of the two SDKs and how developers should choose between them to be published soon]. Unfortunately, the Apple SDK license terms are confidental so I can’t quote chapter and verse here (software license restrictions and end user license agreements are a rant for another post). However, I can provide my personal interpretation of Apple’s legaleze, which luckily isn’t too tricky. Full disclosure: I am not a lawyer, and this opinion should not be construed as legal advice. Always consult your own attorney on legal matters.

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My colleagues Dan Taylor, Jen Simpson and I just took a briefing with Kent Ertugrul, the CEO of Phorm. As many of our blog readers may know from reading The Economist (my favorite magazine), Phorm provides an interesting twist on online advertising. Phorm does two things that promise to overturn the advertising apple cart:

• Omniscience. Phorm’s traffic analysis servers, sitting on ISP premises, filter (nearly) all end-user web traffic and observe the keywords they are interested in. By “keywords” I mean the most frequently occurring words contained in pages served up by webservers users visit. For example, if you visit the front page of Talking Points Memo, Phorm will associate page keywords “Obama”, “McCain”, “527″ (and the other most frequently used words with that page) with a random unique identifier that represents you. It knows these things because it has read and indexed the page when you read it.
• Disintermediates search engines. As you would expect, because Phorm reads the content of nearly every web page (on port 80 aka normal unencrypted HTTP) the user visits, it has unparalleled visibility to the user’s activity. The system is also “opt-out,” meaning that if the ISP installs it, the user has to take an active step to not be included in the system. These two properties — drastically expanded visibility, and the fact that the user cannot escape unless they opt out — enables ISPs to go “over the top” of the heads of Google and other search engines. It has the effect of disintermediating them entirely by allowing Phorm to claim, “yeah, these other guys know what user 123 has been searching for, but we know about all of their interests, across all of the websites they visit.”

Richard Clayton of Cambridge University has published a highly technical analysis of Phorm’s system on the his website. It makes for excellent reading, and I recommend it highly. The comments are particularly entertaining; one reader notes wryly that “It seems the only way to full opt out of this is to change ISP.” Wikipedia also has an informative article that is, on the whole, fairly hostile to Phorm. To date, the biggest objection to Phorm has come from researchers and observers who feel that the fact that it reads and indexes (nearly) all pages you visit is an unwarranted invasion of privacy.

In the briefing, I learned quite a bit about Phorm’s goals from a corporate perspective. My queasiness about inspection of customer web sessions aside, it seems that continued badgering from the press and from UK observers has forced Phorm to add more privacy-preserving features. Certainly, the point of going “over the top” of Google and the other search engines means that Phorm tracking cookies are accessible by any website who wants to use it. It’s clearly very appealing to ISPs, who desperately want a slice of the Internet advertising pie.

The question is, how bad do they want it? It’s clear that researchers like Clayton are not happy with the way Phorm’s system works. The way the system is set up (forcible inspection of HTTP traffic, cookie forging) seems a lot like a wiretap to me (albeit one to which, according to Phorm, the user consents). Today, the system is trialing in the UK with three carriers, including BT and Virgin Media. What happens when Phorm expands to the US is the real question. I suspect the Electronic Frontier Foundation and the ACLU will be all over this like a fat kid on a Twinkie.

For all of its novelty and potential for disruption, adopting the Phorm platform value proposition is a risky one for ISPs. The issue is not about whether Phorm gathers the right kinds of consent from end-users, anonymizes data it collects, or offers appropriate data protection tools for end-users. Phorm may (or may not) be doing all of the right things; that isn’t the point. The issue is, regardless of what Phorm does, whether opponents can muster enough opposition to poison the reputations of ISP customers who adopt it. Examples from other emotionally-charged consumer fights around genetically modified organisms (GMOs) and environmental issues suggests that aggrieved consumers, when riled up, have rather sharp elbows. “Spying on their customers!” would be one charge. “Big brother” would be another.

Phorm’s response, in our briefing, was essentially, “once consumers understand our system and its benefits, they will like it.” Let’s assume for the sake of argument they are right. It would still be an uphill battle, though, because business models predicated in part on user education usually fail. My vendor customers in the consumer security business know this all too well!

All of this leads me to conclude that ISPs who adopt Phorm would be putting a cyanide capsule in their mouths. The worst-case scenario is suicide-by-public-relations. Enough jostling from consumers and — crack — there’d be the sudden, familiar whiff of almonds in the air.

2.0 is all about comparative advantage and nothing more. Adam Smith would be proud.

In this whole 2.0 world, I just can’t keep things straight. Was I born at 1.0 or 0.1? And where am I today? Am I in my 3.0s or just 1.9.2? Because I’d say that it looks like my 4.0s or my 5.0s are on the horizon, and I definitely feel like I’ve learned lessons from my 2.0s. And what will version 2.1.7b be like when we get there?

Unless I’m in the world of technology…which feels the need to 2.0 everything. Whatever you were doing is 1.0 and whatever you will be doing is 2.0. So according to the recent Advertising 2.0 conference, I’m destined to do tomorrow what I’ve been doing for years, which is going to conferences and looking for cellular signal. Or looking for a way to cram a day’s worth of work into the 30 minutes between sessions.

The biggest take-away from Advertising 2.0 is that, no matter what happens, the best that digital advertising can do is to grow its comparative advantage against other media. This is a difficult concept to grasp, but it’s very important. Everyone looks at Google, and they think that digital advertising is the land of milk and honey where riches abound.

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Lost in the noise around the iPhone 3G launch at Apple’s Worldwide Developer Conference is the quiet announcement of OS X 10.6, code-named “Snow Leopard.” AppleInsider reports that Safari 4, the follow-on to the version of Safari in Leopard, will have a feature that allows users to “save a web site” as a stand-alone browser instance. That is, in essence, what we called a “single site browser” back in February of this year.

In our April 4 research note From Anywhere to Somewhere: Single-Site Browsers Keep Users Safer (available to Yankee Group subscribers), we recommended that Apple integrate SSB features into the core browser. We wrote that “creating individual, isolated browser instances for web sites should be as natural and intuitive as creating bookmarks.” I’m pleased to see that Apple will be doing exactly that.

Although I can’t claim with any certainty that our research had any effect on Apple’s product roadmap, it’s nice to see them doing this. And it’s good to get one right every now and then.

At Yankee Group, we’ve been researching and predicting the future for a while now. Sometimes we get it right, and sometimes not so much. Our biggest Big Bet is the one we’re making around Anywhere — the notion that the global connectivity revolution will introduce dramatic changes in the way we live and work.

A key part of our Big Bet is around something very tiny. Made from plastic and glass and silicon, mobile phones are getting smarter every day. Even better, the increase in flat-rate data plans means that the mobile internet usage is going to explode. This broad macro trend — increased mobile internet usage — has profound implications for security, and in particular for mobile identity. If you take your phone, keys and credit cards with you, it seems to me that you will want to take your identity along too.

With that background in mind, I’m pleased to give YG blog readers a quick preview of a report I just finished today called Sizing the Mobile Identity Opportunity that puts numbers around how big mobile identity might be. Based on a model derived from our consumer data and mobile forecasts, the numbers, which I believe are conservative, are eye-popping. Assuming our forecasted mobile usage trends continue as we expect, by 2012 US mobile subscribers could generate over 360 billion identity events per year. By “identity event,”  I mean the act of authenticating to an online service or website. Applying the Law of Large Numbers to a miniscule fee per event yields another big number in the hundreds of millions of dollars. These are dollars that mobile operators and identity management vendors could leave on the table unless they capitalize on the opportunity.

This report won’t be available for several weeks. It usually takes a little while for our Editorial services group to bang out the dings in my dented prose, and for our peer reviewers (which in this case will include several outside organizations) to weigh in. More about this soon!

Analysts like myself are Cassandras of the modern age; our predictions and insights are often not believed.

Cassandra’s gift of prophecy emerged after snakes in the employ of the god Apollo licked her ears clean so she could hear the future.

I have to rely on other methods.

Perhaps you expect me to say that the tools of my trade include C-level interactions, the crafting of S and J curves as well as time-series analysis of ARPU trends. And of course they do.

But in recent times, the analytical prism which also guides my assertions is a 52-year-old veteran of pan-European broadcasting - and where Abba launched its global career.

That’s right, it’s the Eurovision Song Contest.

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Dateline: Cairo, Egypt. I’m here to speak on Africa’s wireless future at ITU Telecom Africa 2008 – but as with many conferences, it’s the hallway chatter that’s the most interesting. Today I was talking with Carsten Clemens of Nokia Siemens Networks about the increasing divergence in mobile connectivity economics. For the next billion subscribers who want phones, the costs rise (as they are more rural thus less efficient to serve), while their ability to spend is dramatically lower. That’s not news; operators and their vendor partners around the world are working to lower costs to make mobile service a reality in many new markets.

But what I heard about from Carsten was an innovation that’s as much about a new business model as it is about lower system costs. In trial in Tanzania now is an extremely simple wireless base station with subscriber management run from a PC, with an equally simple antenna, all run from a solar-powered battery. The system can be managed by a village entrepreneur, someone perhaps who also sells drinks, soap packets and newspapers. The entrepreneur can set and collect a flat fee for intra-village calls, managed entirely by his setup. And a larger operator who supports him can benefit from unleashing pent-up demand for in-bound calls to the village from absentee workers, extended family, and others who previously had no way to reach the villagers by phone. “It’s still low ARPU,” said Carsten, ”but it can be attractive in these markets, especially if the operator sets it up in a franchise model, and an entrepreneur can add more villages to the systems he runs. It’s already working in a similar fashion in India.”

Downside: no data support yet. But compared to existing rural mobile setups that still require towers that cost $100K or more, this is breakthrough thinking — not so much in the use of low-cost equipment, but in the approach to revenue-sharing that creates incentives that suit the way developing-market villages work.

I visited Tanzania several years ago; here are some eager school girls I met. Their country is stunning. But it will be no less so when they have the same opportunities to connect to the world that I do.

Yesterday I spoke at Symantec’s Worldwide Sales Conference. The speaking gig itself — a panel on consumer security — was a blast. Byron Achohido (USA Today reporter) moderated. My co-panelists included a representative from the Cato Institute, a Symantec researcher, and a top security architects from Amazon — a person I’d heard of, but had never met. The panel was a lot of fun, and there were few surprises. What was surprising was what I found at the airport today on my way out this morning. Let’s go to the videotape. I arrived at Las Vegas airport around 11AM. After getting through security and to my gate, I began the usual squinty-eyed scan for power outlets — a vulture-like circling motion that I’ve come to recognize in other fellow travelers. Once I found and commandeered a suitable power source, I flipped open the lid of my notebook and looked for a wireless signal. Lo and behold, I discovered that rarest and most delightful of finds: free public wi-fi. When an Anywhere Consumer has a few minutes free and finds something nifty there’s only one thing to do: Twitter the good news, of course! But first, I skimmed the last few days’  worth of tweets using my RSS reader. Then I logged on to the Twitter website directly and sent the following tweet to my ~80 followers: “So Wifi is free at McCarron, which is cool.” One of my former colleagues responded, not more than 5 minutes later, with this: “Free WiFi at McCarran due to strong views McCarren CIO Sam Ingalls.” Fifteen minutes after that a crony at another analyst firm sends me a direct tweet (SMSed to my mobile phone) saying he wished he’d known I was at the Symantec event, because he was there too. To top it all off: I peered closely at my Finder window and noted that Bonjour was telling me that there were at least five other Macs in the immediate vicinity, one of which was named “Book of Power.” What’s remarkable about all this? Nothing, really. Just another day in the life of Ubiquitous Connectivity. But reflecting a bit on the whole thing, I’ve concluded that:

• Free services like Twitter, and McCarren’s wi-fi network — foster novel kinds of spontaneous social interaction.
• The  underlying network protocols — in this case, HTTP (web), SMS (Twitter), Bonjour (local network discovery), 802.11 (wireless) — are less important than the experiences they foster. With apologies to James Carville, it’s the application, stupid!
• Communities like Twitter flourish precisely because of their decentralization, and they illustrate how “circles of friends” provide an important alternative to centrally-managed hierarchies (such as those created by IT departments).

Perhaps the most important lesson is also the most obvious: never mind the technology. Left unchecked, you can waste a lot of time on Twitter.

The Justice Department has officially approved the merger of Sirius and XM - an unsurprising end result (Yankee Group predicted as such shortly after the announcement in 2007) to the merger that some expected to experience turblence since it was announced in February 2007. Claims that officials would be forced to endure hours of Britney Spears music if they failed to approve the deal remain unsubstantiated.

While the official merger leads to many expected questions: how will existing hardware be handled, what types of new packaging will be offered, will Howard Stern ever find new employers desperate enough to pay him $500M - its real impact is not on the satellite market and its 17M+ subscribers at all.

One of the primary arguments for the merger was that the Internet, digital audio players, and other emerging technologies not of the satellite radio variety represented viable alternatives and threats. Additionally, the DOJ is taking it on the word  of Sirius and XM that synergies in the merged satellite radio monopoly will lead to greater consumer choice and improved pricing - not a throttling of subscribers.

The acceptance of this argument will impact other regulated industries by presenting legal grounds for viewing emerging technology as via alternatives. Such a precedent could allow actions that otherwise may have been viewed as monopolistic behavior. Will DirecTV and Dish now be allowed to merge if they so choose? Will cable companies be allowed to gobble up more markets? Arguably, the internet poses a legitimate alternative to pay TV so old rules may no longer apply in the SiriuX world.

The long term implications of the merger will not be seen until the next controversial acquisition or merger is presented before congress. At that time, Congress will be forced to defend how monopolies can exist in one market but cannot in another. In the interim, technology continues to re-write the rules for what constitiutes a monopoly.

A certain whiff from the boys’ locker room has invaded the air. It’s hard to think otherwise when telcos persist in talking up the physical endowment of their infrastructure.

Step up for a dose of Febreze: End users - and particularly enterprises - don’t care about core and access technicalities, how many football pitches your datacenter assets cover, or the number of petabytes transiting your next-generation network.

What they demand is proof on how such infrastructure supports them. But if juvenile posturings rule our industry we fail our customers and we lose money.

The danger signs are here. In a recent Yankee Group survey on managed IT and communications services, a shocking 25% of large European enterprises told us they’d taken outsourced network management services back in house. Third party applications management and desktop management suffered similar fates. The reason: Service providers failed to deliver on promised quality or cost savings.

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