AT&T's latest tactic for U-Verse: Free money!

AT&T is willing to buy U-Verse subscribers, at $200 a pop. Here's the deal, according to xchange Magazine: Sign up for a mid- or high-tier IPTV service package (starting at $59/month), keep it for at least a month, and get back $200. The most expensive of the three packages starts at $119/month, and in all three packages covered by this plan, subscribers get three set-top boxes, including one DVR, and additional set-top boxes are $5/month. Subscribers don't need to commit to any long-term contracts, or to bundles with phone or high-speed Internet. The program ends on January 31, 2009.

In other words, if you sign up for the lowest tier of service covered under this plan, you get a month of free service and $140 in your wallet. I don't think that AT&T expects everyone to throw out their current cable or satellite service in order to get the $200, but at least for a significant number of users, the $200 will cover their cable or satellite bills while they try AT&T's U-Verse service. Their hope is that a lot of those users will be sold on U-Verse, and will then drop their incumbent video service.

Given my suspicious nature, I've got to wonder why AT&T is offering this fairly incredible deal. I don't track subscriber counts anymore, but AT&T's subscriber growth must be slowing down dramatically. This plan will be an excellent way to boost the company's subscriber count by the end of the year. How many of those new subscribers will stick around after their first month is anyone's guess.

I can't see any of the major cable or satellite providers matching AT&T's deal, and I'm not sure that they have to. Comcast has for some time been running an unpublicized "hold at any cost" program to keep its subscribers from defecting to competitors, offering no-cost upgrades and free service. In the markets where Comcast and AT&T compete, I'd expect them to offer free service to those customers who ask to cancel in the face of AT&T's deal--"Keep your Comcast service for the next two months for free, and compare it with your AT&T service; we think that you'll prefer Comcast." Other operators are likely to do the same thing. The result will be lots of double-counted subscribers, but no one will really know how effective AT&T's promotion will be until well into next year, when we see how many of the subscribers bought by AT&T stay with them when the money runs out.

Stupidity through obscurity

Yes, I'm angry that Google has decided to block "Feldman Off Topic" by declaring it a "spam blog", when it's no such thing. I'm also angry that Google will neither explain why a blog has been categorized as spam, nor explain what to do to keep a blog from being so characterized. It's a lot like Google's vaunted PageRank algorithm: "We won't tell you how it works, in order to keep people from gaming the system, but trust us."

There's a term, "security through obscurity", that means that something is deemed to be secure either because its algorithms are themselves secret, or the product is so unpopular that no one would even bother breaking it. When these "obscure" security techniques do get exposed to critical examination, it's often found that they're not secure at all, and the primary purpose of "obscuring" them was to keep people from finding out just how badly they had been designed. I have a suspicion that Google's "spam blog" detector falls into this category.

Google seems to like open source and transparency when it suits them, and is all for obscurity when it doesn't.

Google has blocked my new blog

I've been notified that Google has blocked my new blog, "Feldman Off Topic", because its computers think that it's a spam blog. Regular readers of this blog will remember that Google also flagged this blog as spam, even though it had been in operation for more than three years and had been approved for AdSense long ago. It took three tries and more than two months to get Google to even review this blog manually, which they eventually did, and concluded that it contains no spam.

Now, Google has upped the stakes. They have locked Feldman Off Topic from public viewing, and I'm unable to post anything to the blog, even for future viewing when (or if) a human actually reads it. The company claims that it's their systems, using "fuzzy" logic (not the real fuzzy logic, just unexplainable rules) that make the decisions. Any traffic that might have been coming to that blog is shot, and possibly lost for good.

It would make much more sense for the company to make the initial process of creating a blog more rigorous, and to put more of an upfront review process in place, than to let people create blogs and then block them, willy-nilly, for no reason that the company can (or is willing to) explain. The only reason that it makes sense to have blogs in Blogger at this point is that it gets their postings better rankings in Google Search. Google denies that as well, but the results speak for themselves. Blogger's features and capabilities have long been trailing those of WordPress, Movable Type, TypePad and other platforms.

So, I stick with Blogger simply to get more eyeballs. That's a very big reason, but not the only reason, to use a blogging platform. When will someone at Google figure out that its blog spam detection algorithms suck?

Kindle, Meet Kindle 2

Image via CrunchBaseThe Boy Genius Report strikes again, and comes up with a trove of photos of Amazon's still-unannounced Kindle 2. I'll let you go over to their report for the details, but it certainly has a cleaner design than the original model. The basic functionality of the original Kindle appears to be intact (it still has an EV-DO modem), but the SD card slot for expansion memory is gone.

I continue to have a number of problems with the current generation of e-readers, the new Kindle 2 included. First, it's essential that they be open to as many document formats as possible, so that as many publishers as possible can access them. Second, they've got to support many different methods for loading content, including USB, WiFi and Bluetooth at a minimum. 2G and 3G wireless modems are fine, but they should be an add-on, and support for multiple carriers should be available. With Bluetooth compatibility, most modern mobile phones can serve as a wireless modem for the e-reader.

There are two other things that I'd really like to see, but that await future technology. The first is a full 8 1/2" by 11" or A4 display, and the second is full color. The fundamental premise of most e-readers is that books are the only things that people want to read, hence a large screen size and color are unnecessary. I would love to have an e-reader that can show me a full, readable magazine page at a time. I'd be willing to compromise color for size. The Plastic Logic e-reader addresses most of my concerns (except color), but I'm withholding judgment until it goes into production.

Is Best Buy becoming the place to get mobile phones?

In mid-August, Best Buy and Apple announced that Best Buy would sell the 3G iPhone, starting September 7th. Now, The Boy Genius Report says that Best Buy will also get the Palm Treo Pro, RIM BlackBerry Pearl Flip 8220 and T-Mobile G1. Last May, Best Buy invested more than $2 billion to buy 50% of the Carphone Warehouse, the biggest seller of mobile phones in Europe. Go to any High Street (shopping area) in the UK, and you'll see one or more Carphone Warehouse stores there. They compete successfully with mobile operator-owned stores across Europe. Best Buy is tapping into the merchandising knowledge of Carphone Warehouse (with which it has had a joint marketing venture since 2006) to expand its mobile presence in the U.S., and it seems to be succeeding in its goal to become the place to go for hot new phones.

Another ridiculous Apple rumor, and how to stop them

Today, someone spread a rumor that Steve Jobs had a heart attack, and the price of Apple's stock briefly tanked until the company made a statement that Jobs is fine. Spreading false rumors is a time-tested way for short-sellers to drop the price of a stock without actually selling it. I don't know if Apple is on the "no short sales" list, but if it is, this may have been someone's way to get around the SEC rule.

The problem is the belief that if anything happens to Jobs, Apple is doomed. That's silly, of course--Apple has thousands of very talented people, and the product design, development and marketing process will continue. However, what Apple doesn't have in place is a visible line of succession, which makes the company vulnerable to rumors and manipulation. To squelch these rumors, Apple needs either to appoint a President as a clear successor to Steve Jobs, or to make Tim Cook, Apple's COO, a lot more visible. I don't know Cook, but from his background, he's an operations guy (which is what makes him a good COO). It would help Apple to make him more visible, or to promote someone from inside the organization to the President position. The key is to make it clear that Apple's design, engineering and marketing, as well as its future product planning, is in safe hands.

The one thing that's going to be very difficult to replace under any circumstances is Steve Jobs's ability to present, and sell, his products. There is virtually no one on the planet who is as good as him at making a presentation. (The ones who are couldn't run a major corporation.) Whether it's Tim Cook or a new President, they need to share stage time with Jobs at new product introductions, to show that they share his vision and have his confidence.

Any CEO can get hit by a bus--s**t happens. One of GE's great strengths over the years has been its ability to develop managers and deal with succession. When Jack Welch was preparing to retire, he had several highly-qualified and highly-visible candidates to replace him. (The highly-visible part can be a drawback; after Welch chose Jeff Immelt to replace him, most of the other candidates left GE to run other companies.) I think that it's time for Apple to deal with these recurring rumors by making its line of succession clear and visible.

A new blog

As you may know, I've been writing this blog since 2005. Recently, I began posting some articles related to the economy and politics, and my readership sank. When I went back to technology topics, my readership rebounded. Clearly, you want me to stay on topic. However, there's so much going on in the world that frustrates and alarms me that I can't keep my mouth shut. Hence, I've created a new blog, called "Feldman Off Topic", for the things that I can't write about in The Feldman File. I hope that you enjoy it, or at least find some interesting ideas.

NBC @Home: One last Olympics post

Yes, the Olympics are over, but the technology background stories are still coming out, so here's a summary of some of the interesting facts:

• For the first time, all of the video was shot digitally and sent to U.S. viewers over a Gigabit network provided by Cisco.
  
• Video was ingested into an Omneon MediaGrid SAN in Beijing, and then only those portions that were needed for editing into on-air content were mirrored to a MediaGrid in the U.S. via Omneon's ProCast Content Distribution Network.
  
• All of the on-air content shown on NBC Universal's cable networks and Telemundo stations was edited in the U.S. The commentators for all of the events shown on these cable networks were located in the U.S., not China. Most of them were working in Studio 8H, the studio normally used for "Saturday Night Live," watching the events on HD monitors.
  
• Virtually all of the highlights clips and packages were produced at NBC headquarters in New York.
• There are more details in the current issue of TV Technology Magazine, available online.

It's now possible to foresee an Olympics where the vast majority of production and post-production occurs at the network's headquarters, not on site (assuming, of course, that the host country's broadcaster provides plenty of high-quality feeds.) Of course, there aren't very many events on the scale of the Olympics, but no matter the size of the event, the fewer people and less equipment that you need to send to a location, the better.

A great Android article

There's a fairly long article on Gizmodo by John Mahoney about Android that's worth reading. To boil it down to its essence, Mahoney's argument is that Android will succeed because 1) It's truly open, 2) It's not tied to a metaphor that just doesn't work well, such as porting the Windows UI to phones, and 3) It will (or at least should) be upgraded on a regular cycle, much like Ubuntu Linux. By comparison, the iPhone has a great UI, but it's limited by what Apple will and won't allow developers to do.

How well Google realizes Android's potential will be determined to a great extent by how open the platform remains: If service providers exercise their abilities to limit the functionality of Android applications, much of the appeal of the platform will be lost.

The big crush is coming

Notice that I said "crush", not "crash", although given what's been happening today, we may get one of those as well. No, what I'm talking about is the crushing together of multiple camera product categories. I've recently written about the new Canon 5D Mark II, which is a pro still camera with what appears to be very good HD video capabilities. Earlier, I wrote about the marked improvements in camera phones, and how those phones are making a lot of point & shoot cameras obsolete. I've also written about the growth of the point & shoot YouTube camcorder category, best exemplified by Pure Digital's Flip Video Ultra and Mino under-$200 camcorders.

So here's what I think is going on:

• Prosumer camcorders are going away, to be replaced by digital SLRs that have HD video capabilities. Why? Interchangeable lenses, for one thing. There's no prosumer camcorder that you can buy today with interchangeable lenses for less than $5,000, but the new Canon 5D Mark II will sell for less than $3,000 without a lens when it ships. The video capabilities on Nikon's new D90 (list price under $1,000) may leave a lot to be desired, but the problem is fixable. Panasonic will be in the market with an AVCHD-compatible version of its new G1, also for around $1,000, early next year. Sony, if it can get over its burning fear of competing with itself, should have a product in the market before too long as well. In short, price and interchangeable lenses will kill the prosumer camcorder as we know it.
  
• Camera phones will kill the market for point & shoot cameras. Samsung's new Pixon just hit the market with an 8 megapixel camera (as well as video capabilities), and there are 10 and 12 Megapixel models on their way. I've never been a big fan of camera phones, but both image quality and user interfaces are improving dramatically. Of course, the "hottest" phones, the 3G iPhone and the new G1, both have pretty schlocky cameras. Who cares? They may have a role to play, but for now, people are buying them for their smartphone capabilities, not their cameras.
  
• The Flip Video class of point & shoot camcorders will continue to eat everyone's lunch in the under-$1,000 camcorder market, for two reasons: Price and simplicity.

It's interesting that the most aggressive moves have come from Nikon, a company with no camcorder market share to protect, and Pure Digital, a company that made throwaway digital cameras until a couple of years ago. (Not to mention Nokia, a company with no camera business, and Samsung, with a fairly recent entry into the camera market.) When you have no existing market share to protect, you can do radical things that fundamentally change the market. I expect CES next January and NAB next April, as well as the cameras and camcorders that we carry around in the future, to look quite a bit different, thanks to these companies.

DirecTV Gets AT&T Contract

The waiting game is over: According to this report from Reuters, DirecTV will replace Dish as the supplier of AT&T's satellite video service, effective January 31, 2009. Existing Dish/AT&T customers will continue to receive service after that date, but my assumption is that they'll deal directly with Dish, rather than AT&T, if they want to make any changes. As you may recall, it was less than a year ago that AT&T decided to drop DirecTV's service in favor of Dish, but at the same time, left the door open to reconsider its decision.

AT&T's decision isn't a surprise, but it nonetheless puts additional pressure on Dish, which has been losing money and subscribers. However, it does free Dish to compete more aggressively against both AT&T's satellite and U-Verse services, which it may have felt constrained to do so long as there was a chance that the company would retain its partnership with AT&T.

Here comes the G1

Yesterday, T-Mobile and Google launched the G1, previously known as the HTC Dream, the first Android-compatible mobile phone. Comparisons with the 3G iPhone were immediate and obvious; the G1 is about the same height and width as the iPhone, but it's about twice as thick. It will sell for a little less, $179 vs. $199 for the 3G iPhone, and like the iPhone is available only on a two-year plan. The G1 has several more buttons than the iPhone, the most important of which are part of a slide-out QWERTY keyboard, which, of course, the iPhone doesn't have.

As you'd expect, the G1 is very Google-centric; you have to have a Gmail account in order to use the phone, and all the other Google services are front-and-center. It has a lot of location-centric, GPS-based features--even more than the iPhone, and unlike the iPhone, turn-by-turn navigation applications will be possible. And, developers can add applications to the G1 without review or approval by Google or T-Mobile, so it's a far more open platform than the iPhone.

There is a "but", however, and as this video from Engadget shows, in this case the "but" is that the iPhone is just much better integrated, and operates much more smoothly, than the G1. However, that's to be expected, since Google's Android is designed to operate on a wide variety of devices, some of which Google will have very little control over, while the iPhone and the version of OS X that the iPhone runs are engineered together. Android is a "generalist" system, while the iPhone is very tightly integrated.

I'll withhold my final verdict until I can play with the G1 myself, but from everything I've seen, it's not as refined as either the iPhone or the most recent BlackBerry models, but nevertheless, it's a very good first effort.

Want a Scarlet today? Buy a Canon 5D Mark II

I previously wrote about the restart of Red's Scarlet project, apparently to turn it into a still and video Digital SLR. The Scarlet, of course, was supposed to cost $3,000, and Red fanboys everywhere have been waiting breathlessly. Well, the first HD video from Canon's new 5D Mark II has shown up (thanks to our friends from Gizmodo), and it looks awfully good. The 5D can be had from Ritz, a reputable dealer, for under $2,700 without lens, or for about $3,500 with a lens. The video referenced by Gizmodo used 11 different lenses, so this was anything but a simple production. Nevertheless, pro photographers, the market targeted by Canon, buy lenses all the time, and still lenses cost a small fraction of the cost of video lenses. This is why Red made its move.

There's still plenty of market opportunity for Red, but as Jim Jannard said, the market has changed (dramatically), and the Scarlet, with its fixed lens and video-only orientation, simply wouldn't have cut it when it reached the market next year.

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• Vincent Laforet spends a weekend with a pre-production Canon 5D Mark II; shoots a commercial and loves it

Adobe Creative Suite 4 is on its way

I watched today's announcement of Adobe's Creative Suite 4 online, and frankly, Apple can announce nothing better than Adobe (or most companies) can make a "big" announcement. From the very beginning, Adobe was on the defensive, with managers saying that "this is much more than a point upgrade." From what I saw, the need to upgrade depends almost entirely on whether or not you have to have the new features in the products that you use most. For some people, an upgrade is almost mandatory: Premiere Pro, for example, now supports both Red and AVCHD formats. If you need to edit video in either of those formats, it clearly makes sense to upgrade. On the other hand, if you're perfectly comfortable with what you can do with Illustrator or Photoshop right now, you might want to spend your money on other things.

This may be the point at which Adobe users decide to upgrade individual applications, rather than an entire suite. I've loyally gone from individual apps to Creative Suite to CS2 to CS3 over the years, but the apps that I use the most are Acrobat and Dreamweaver, with Illustrator following behind and Photoshop even further back. All of them work fine for me. I've been testing Dreamweaver CS4 for some time, but I can jump back to CS3 if I have to.

If you haven't bought into the Adobe platform at all, a suite may very well make sense, if you're going to use two or more applications. I believe, however, that there's not all that many creative professionals that haven't already bought into Adobe. Students can buy in at greatly reduced prices. And no, this announcement isn't going to cause a mad dash to Microsoft's creative applications, although some people might take the money that they'd spend to upgrade their Adobe apps and buy Expression Studio ($699 list for five applications).

Rather than purchase an upgrade as a knee-jerk reaction, check out the new features in the Adobe applications carefully. In this tight economy, you might do better to save your money and wait for CS5.

CSIRO: Losing while winning

Image via WikipediaAs you may know, Australia's Commonwealth and Scientific Industrial Research Organisation, or CSIRO, has been suing Buffalo Technology over Buffalo's claimed infringement of a patent related to Wi-Fi, and CSIRO managed to get a permanent injunction against the sale of Buffalo's Wi-Fi products in the U.S. from a Federal District Court. Last week, the Court of Appeals for the Federal Circuit (the Federal Circuit generally handles patent-related cases) upheld the District Court's decision, but it punched a huge hole in CSIRO's ability to sue anyone else for infringement. According to the Appellate Court's decision (PDF link), there was more than sufficient prior art to demonstrate that CSIRO's patent should be invalidated, but Buffalo's counsel made mistakes in the original trial that, in essence, forced the Appellate Court to rule in CSIRO's favor. In its decision, the Court of Appeals walked through the arguments that need to be made in order to invalidate CSIRO's patent.

CSIRO once claimed that 100 companies are infringing its patent. According to Wi-Fi Planet, Apple, Dell and Intel, among others, are suing to invalidate CSIRO's patent. With this decision as a guideline, it's only a matter of time before they do so. (Disclaimer: I'm not a lawyer, and most certainly not a patent attorney, so this is only my opinion.)

Vapor, in a shade of Scarlet

Well, so much for the Red Scarlet, the $3,000 3K video camera scheduled for release next Spring. Here's a quote from Jim Jannard, the founder of Red: "We have changed everything about Scarlet because the market has changed and we have discovered a lot of things in the process. We have a new vision. Wipe you (sic) minds of the past announced Scarlet. Forget the design and forget the price. It is all different now. We think you will be surprised. Glad we didn't take any deposits... :-) ."

Red has recently been talking about introducing its own digital SLR (DSLR) still camera. With the recent introduction of digital SLRs from Nikon and Canon that can shoot HD video, the functions of still and video cameras are blurring, especially for press photographers who are increasingly called upon to shoot video for websites. There's a real opportunity to release a DSLR that does stills and video equally well, so Red had the choice of building two cameras (the Scarlet and a DSLR), or building one. They've apparently chosen to build one, which will be the redesigned Scarlet.

This only reinforces what I've said in the past: Don't believe anything about a product until you can buy it. The milled aluminum mockup that they showed at NAB is probably being melted down as I write this.

Something's coming from Adobe and Google

I'll be following two big announcements tomorrow. First, Adobe will launch Creative Suite 4 at events around the world. In this column, I normally write about Flash Video, but the applications in Creative Suite, including Photoshop, Dreamweaver and Acrobat, are Adobe's true bread and butter. I've been using betas of Dreamweaver and Fireworks CS4 for some time; both products, which came from Macromedia in the Adobe-Macromedia merger, now look and feel more like Adobe applications. Whether that's better or worse depends on whether you prefer the old or new user interfaces. To my eye, the functionality of the CS4 applications has been modestly upgraded, at best. We'll know more tomorrow.

(Update 10:14 p.m. Pacific Time, September 22, 2008) Adobe has posted details of the new CS4 bundles on its website, prior to the announcement events tomorrow. As with CS3, there are seven bundles: Standard and Premium versions of the Web, Design and (Video) Production bundles, plus a Master Collection that includes everything. There are no bargains, either: Unless you were one of the few people who purchased 3.3 versions of the bundles, upgrades start at $499 for the Standard bundle versions, $599 for the Premium versions, and $899 for the Master Collection. If you're starting from scratch, the Standard bundles are $1,399, the Premium bundles are $1,699, and the Master Collection is $2,499. (All prices are in US dollars).

Image via CrunchBase
The bigger announcement, at least in terms of press interest, will be the T-Mobile/Google annoumcement of the first Android phone, the HTC Dream, and of the imminent completion of T-Mobile's 3G mobile service rollout throughout the U.S. Android phones will compete with iPhones and Windows Mobile-based smartphones at the top of the mobile phone food chain, and the Dream is rumored to sell for the same $199 price (on a two-year plan) as the base 3G iPhone. The Dream will have a slide-out QWERTY keyboard, which promises to make it easier to use for power emailers than the iPhone (yet most likely still at a disadvantage vis-a-vis the BlackBerry.) All of the applications in Google's Android store will be free, at least initially, and anyone can post applications (the countdown to the first Android malware has already begun.)

I've been playing with the Android development system on my PC for some time, but I'm reserving judgment on how the Dream performs until I get a chance to try it. I used to be a T-Mobile customer, and if the Dream lives up to the hype, I may well switch back. Again, more tomorrow.

Off Topic: Fallout from the Bailout

Bits and pieces of the proposed U.S. financial bailout are trickling out. It appears that the U.S. Treasury will spend $700 billion ($2,000 for every man, woman and child in the U.S.) to buy Collateralized Debt Obligations, or CDOs. CDOs were created when banks and other lenders mixed together lots of subprime mortgages and other debt, and magically created AAA-rated investment vehicles. Well, now you're going to own $2,000 worth of them.

I'm not complaining that the government is moving to shore up the economic system, but I am very concerned about the process. Can we forget the Patriot Act, an abomination with bipartisan support that was proposed after 9/11 by the same Bush Administration that's proposing this emergency action? Or, how about the secret Bush Administration briefings to Congress that warned of dire consequences if we didn't go to war with Iraq, the briefings that were later found to be almost entirely false? When these particular boys "cry wolf," I'm inclined to apply a pretty thorough smell test. In rushing to try to get a law passed this week, I hope that we don't end up with something that we're very sorry about in the future.

Whatever the eventual bailout plan looks like, will it help the man on the street, the man on the 80th floor, or (I hope) both of them to some degree? In my opinion, the plan has to do everything it can to keep people in their homes. Whether through cutting interest rates, extending payments or even forgiving a portion of some homeowners' debts, it's far better for people to stay in their homes rather than either abandon them or be forced out by foreclosure. Lived-in homes are maintained, and they help to preserve the property values of surrounding homes. It only takes a trip to a city such as Stockton, California's foreclosure capital, to see the carnage wrought on neighborhoods by foreclosures. There, you'll see block after block of abandoned homes that have been raided for their copper plumbing and wiring, with overgrown yards being used as dumping grounds. Many of these homes, still fairly new, are so badly damaged that it would be cheaper to tear them down and build something new than to repair them.

The investors who purchased the CDOs had no interest in preventing foreclosures; in many cases, they didn't (and still don't) even know which mortgages they held. If the government consolidates these mortgages in one place, with the goal of getting the mortgages to reliably pay something, and with getting already abandoned homes rehabilitated and generating income again, everyone will benefit, and this bailout will be worthwhile. If, however, the government shows the same lack of concern that the investors currently holding the CDOs have shown, the citizens of the U.S. are going to end up paying, and paying very dearly, for the hubris of Wall Street.

Taking the competition to the next level

A few posts ago, I wrote about the difficulty that IPTV operators are having with differentiating their services from cable, satellite, and (in some markets) over-the-air broadcasters. Triple-play packages (landline telephone, high-speed Internet and video) are old news in most markets, and cable operators are using VoIP to compete head-to-head with the telcos. Quadruple-play packages, adding mobile service, are less common, and are more difficult for non-telcos to compete with. In order to get access to mobile services, cable and satellite operators usually have to resell services from a telco, which puts them at a pricing disadvantage.

In most places, even when you buy a triple- or quadruple-play package, you get a bundle of services that don't talk to each other. Consumers purchase on the basis of price and features; brand loyalty doesn't exist. In this situation, you can get a runaway "race to the bottom", as is happening in several countries in Western Europe, with France being the best example. There, operators are piling on more and more features while maintaining the price at 30 Euros a month. Packages that would sell in the U.S. for $99 a month or more are going for the equivalent of under $45 at current exchange rates.

The real opportunity is in what I call silo-busting--tearing down the walls between services in order to unlock consumer value and provide the opportunity to increase prices (or at least maintain prices in the face of competition.) Telcos are just now starting to let consumers get Caller ID on their television when the phone rings. Instead of running to the phone when it rings, your television can tell you who's calling, so that you can make the decision of whether or not to take the call. If that service has value to you, and the competition doesn't offer it, you're more likely to stay with your service provider. Let's take it to the next step: Add a speakerphone to the set-top box's remote control, and you can take the call without picking up the phone. Now the television and the phone service are tightly linked. That adds value and increases differentiation.

Let's take a quad-play example: PCCW in Hong Kong enables consumers to look up movie showtimes and buy tickets, right from their televisions. The tickets are sent to their mobile phones in the form of a barcode. At the theater, the barcode is scanned for admission. PCCW can do this because they control all the elements. They're now the biggest seller of movie tickets in Hong Kong. They not only generate transaction fees every time they sell a movie ticket, they offer a desirable service that their competitors can't match.

Or consider a location-based service that ties the television and mobile phones together: A parent can see where her children are by plotting the position of their GPS-enabled mobile phones on a map on her television. It's a service that non-telco competitors can't match, and it's of considerable value to a section of the market.

The last point has to do with paying for these new services. In highly price-competitive markets, there's a fear that telcos won't be able to increase their prices, and these new services will simply get sucked into consumer expectations. Most video providers, whether IPTV, cable or satellite, package their services into tiers: For the basic price, you get a basic tier. If you want more channels, you have to buy another tier at a higher price. If you want premium channels, you pay even more. Consumers are familar and comfortable with this model. The integrated (or converged) services that I'm proposing can be priced into service tiers, just like video programming. Service providers can offer a basic service at a low price to retain subscribers, and offer unique services on tiers to bring in more revenue.

In short, I believe that the real key to unlocking value is to integrate services through applications. As consumers see the power of tying these services together, they'll migrate to the service providers that let them do the most, not just to the providers that are the cheapest.

Watching the dominoes fall

Last night, I was watching the Wall Street bloodbath in real-time: Lehman Brothers racing toward bankruptcy, Bank of America buying Merrill Lynch for a wildly inflated price compared to the market, and AIG playing "chicken" with the Federal Reserve and U.S. Treasury to try to raise $40 billion before the rating agencies lowered its ratings and effectively made it impossible for AIG to borrow any more money. Today, the Dow fell more than 500 points, but given everything that happened over the weekend, that wasn't the worst possible outcome.

So what happens next? Market traders expect Washington Mutual and Wachovia Bank to be the next to go, based on their exposure to subprime mortgages, thus leaving JPMorgan Chase and Bank of America as the two "superbanks"...or so it appears. What the market seems to be discounting is exposure to credit card debt. The same consumers who can neither refinance their home loans nor get new home loans are drawing ever more heavily on high-interest, high-fee credit card debt. Both Bank of America (through its acquisition of MBNA) and JPMorgan Chase are deeply exposed to credit card debt, as are Citicorp, Capital One and others.

It's far too early to call any financial institution or executive "smart"...there are way too many dominoes left on the table in precarious positions.