September 28, 2009

broadcast bankruptcies: the solution to the spectrum crunch?

Do the serial bankruptcies of multiple television broadcasters hold the answer to the broadband spectrum shortage? With almost 100 television stations now in bankruptcy and giant Sinclair Broadcasting warning its 30 stations may be there soon, the banks and hedge funds that own the broadcasters’ debt will soon be the proud owners of beachfront spectrum. It’s hard to imagine they’ll be content to sit on that beach.

I’ve written before about the impact the digital conversion has on television broadcasters. Nothing touched by IP (Internet Protocol) has ever remained the same. With television revenues in a freefall and the new digital capacity yet to produce meaningful income, just how long will the hedge funds and international bankers be willing to sit idle and watch as their new asset ponders its future?

These accidental broadcasters surely have done back-of-the-napkin analysis on how much spectrum they own (or are about to own) and how much it is worth in the hands of the wireless industry. When Sinclair Broadcasting’s 30 stations are worth less than $300 million on Wall Street, and the 100 bankrupt stations, by definition, have no market cap, it must be awfully tempting to look at the $100 billion the wireless industry paid in the last FCC auction and begin to wonder “what if?”

What if…the new owners just sold the spectrum directly to a wireless carrier? Or perhaps ran their own auction? The beauty of digital television is that in most markets the major broadcast outlets can be squeezed into one or two license allocations. This would assure continued access for the 10 percent of homes without cable or satellite connections while making the newly vacated spectrum available for sale.

What if…the new broadcast owners could themselves provide mobile services based on the new ATSC-M/H standard for delivering video to handheld devices? It is not hard to imagine “mobile Hulu” or a subscription service for time-shifting current programs for a fee. But, of course, the broadcaster will need someone with a subscriber billing arrangement to realize on that opportunity. That brings us back to the mobile carriers.

What if…the local broadcasters offered their excess spectrum on a “carrier’s carrier” basis? They wouldn’t have to worry about subscriber relationships, just lease access to their capacity to wireless carriers the same way they lease access to their towers for wireless antennas.

What if…a consortium of banks and hedge funds decided to pool their assets to create a nationwide footprint for any of the above options? Delivering national coverage of major population centers would mean the whole is greater than the sum of the parts. The valuation multiple of such a footprint would justify the major effort this would require.

Of course, there are some pesky legal and political details that these “what ifs” could trigger. Current rules control the ability to sell or repurpose spectrum. The must carry rules that require a cable system to show the local station are rooted in its over-the-air delivery. The FCC’s ownership rules limit how many outlets one entity can own in a market; rules that probably would be inadvertently breeched as debt holders become equity holders in multiple properties. And since many of the hedge funds are registered offshore they could run afoul of the FCC’s foreign ownership rules. One would hope,however, that the FCC and Congress would look kindly on such innovation since the result would be a two-fer that it helps solve the spectrum crunch while maintaining the viability of local television.

I bet these “what ifs” are more than napkin jottings at the major international banks and hedge funds. If they aren’t, they sure should be. Money managers aren’t long term broadcasters; their need to find a return on their capital just might mean that broadcasting’s bankruptcies could end up being a solution to the spectrum crunch.

September 9, 2009

3.5 billion phones - 5000 days

Two seemingly unrelated facts are converging to define our future. The first is the unprecedented growth in wireless communications with over 3.5 billion people connected. The second is the realization that the Web is only 5,000 days old and still in its infancy. To date these two trends have flirted with each other; the next 5,000 days will see each one defining the other.

It took from the beginning of time until 2001 for one billion people to be interconnected. Thanks to the mobile phone the second billion took only four years. The third billion came even faster two years later. We are now over half way to the 4th billion person connected to a wireless network.

The acceleration of human connectivity is mind-boggling. It took thousands of generations before the first billion people were connected. Think about it: during this period nomadic tribes put down roots; the Greek and Roman empires rose and fell; the Earth was discovered to be round, then explored, and then left behind to explore the universe. Tens of thousands of years of history transpired before one billion inhabitants of planet earth were connected. Then, in an historical nanosecond, the number doubled and then tripled. And the march of wireless connectivity continues; if it takes you two minutes to read this article 2,000 additional people will have become wirelessly connected.

Mankind has always been defined by the networks that connect us. The new mobile networks are continuing that tradition by redirecting the patterns of our lives and redefining the flow of information. The last generation of networks (the railroad, telegraph and telephone) drew everyone together in a centralized society. These were switch-based networks where a boxcar or a phone call was transported to a central point before being dispatched to its destination. Economic activity mimicked this central hub topology as raw materials were transported to a central site for processing before being shipped out again. Not surprisingly, the creation and consumption of information followed the same path of being transported to editors and publishers, reformatted and redistributed.

As the mobile network embraces IP technology it, like distributed networks in general, functions in precisely the opposite manner: away from centralized routing, to activity at the edge of the network. And just like previous history, economic, social and information activities bend to the network force. This time that force is away from the center.

This brings us to the 5,000-day-old Web, a concept first surfaced by Kevin Kelly of Wired. What is important in this concept is not the calendar count (it begins with Netscape), but the relatively short period during which the Web has become such a pervasive force affecting our lives. Five thousand days is 13.7 years; think how our lives have changed since 1994 – anyone buy a ticket from a travel agent lately?

The question Kelly asks is, “What will happen in the next 5,000 days?” The answer is that a mobile-connected world is going to change the Web yet again.

The last 18 months have opened the window on the real mobile Web. Previously the relationship between the Web and mobility was a shotgun marriage; the parties knew they had to get together, but the union was forced. Changes in hardware, networks and carrier attitude, however, have stimulated a new generation of mobile Web applications that are more than middleware-assisted displays of reformatted Web pages. This ability to access the real Web at any point changes the nature of both the Web and the mobile experience.

As the new distributed networks have flung activity to the edge of the network mobility is moving that activity to its logical end point: the individual. Nineteenth and 20th Century hubs were cities and switches; 21st Century hubs will be at the ultimate edge, the person.

Location-based activity is an early indicator of the kind of personalization that results when Web activity is moved to the individual. But changing the functionality of the Web based on knowledge of the user’s location is just the beginning. Because information is affected by where it is created and consumed, moving those activities will change the character of the information. During its first 5,000 days Web information creation and consumption was centralized and tethered in a structure reflecting the old networks: the information had to be brought to or accessed from a physical place (whether a desktop or a jack in the wall) in order to be useful.

The functionality of the Web is transformed, however, when the information is created and consumed en situ. The other day on the Washington Metro I watched as a young woman asked a stranger if she could take a picture of the other woman’s haircut using her mobile phone. I don’t know what she did with those photos, but imagine that she uploaded them from the Metro car to a Web site that then distributed the photos to her friends. That young woman suddenly became a publisher of information, her P2P mobile-to-mobile transmission not only broke the old paradigm of centralized publishing, but also redefined the Web as a path rather than a place.

If pictures of haircuts do not exactly seem transformational, consider how fishermen in Kerala, India use their personal mobile hub, even while at sea, to coordinate supply with the demand for their product. Before becoming part of the 3.5 billion wireless users these fishermen often returned with a catch that exceeded demand, forcing down income and wasting the unpurchased catch. Decentralizing access to market information through a simple phone call, however, has increased the fishermen’s productivity and benefitted the entire village, raising the per capita GDP by 2%. Now imagine how remote access to a Web-based market could even further enhance the fishermen’s position by improving the efficiency of the fish market not just in Kerala, but up and down the Indian coast.

Such stories suggest the transformational potential of distributing communication power to the ultimate edge: the hands of individuals. When that power fully hits the Web neither mobile nor the Web will ever be the same. Information is of the greatest value at the point where is it created and consumed. Going to a physical place to create or consume information diminishes its productivity. The ability to have personalized input into the Web from wherever the individual hub may be and then to similarly extract information to a personal hub wherever the individual is located is a new experience in human history and will have impacts we can only now imagine.

The fishermen of Kerala, India and the young lady on the Washington Metro are just the early indicators of what happens when 3.5 billion mobile information creation and consumption devices collide with the nascent World Wide Web. Mobility is going to make the first 5,000 days of the Web seem much like the old carnival barker’s come on: “You ain’t seen nothin’ yet!”

September 2, 2009

scarcity in the time of abundance

There is an increasing drumbeat from the print media about moving Web-based content behind a pay wall to protect it from Internet predators linking to it.

That seems like a retreat. After a few years of trying to figure out journalism in the Internet era of abundance, publishers appear to be pulling back to the tried and true, “I control what’s news, now pay me for it.” It’s a shame, and hardly the kind of vision that the great publishing pioneers exhibited when they were confronted by an earlier electronic information network.

Samuel F.B. Morse tapped out his immortal telegraph message, “What hath God wrought!” in 1844. Within four years, six New York City newspapers banded together in an Associated Press to send reporters to the field and share the stories they wired back. It changed the business of journalism. Instead of being content to cover purely local stories, newspapers now stood astride a flood of new information from around the nation and, with the laying of the trans-Atlantic cable, from across the sea which they sifted and sorted for their readers.

Making sense of volumes of information has always been the job of newspapers. Yet as the Internet opens the news floodgates even wider today’s publishers seem to be walking away from the transformational opportunity presented by the growing torrent of information. Today’s network doesn’t merely replace the delivery boy; it changes the nature of news. The Internet is the 21st Century’s equivalent of the telegraph’s quantum increase in information. As did the newspaper giants of old, it is an opportunity to recast the nature of journalism.

Full disclosure: I am co-founder of, 110 targeted and filtered news briefs that are delivered to 2.7 million subscribers in more than 60 industry verticals and topical horizontals.

The company is based on the fact that while the Internet continues to expand the amount of information that’s available and accelerate the speed of decision-making, the reader’s time to assimilate information remains constant. What I can’t figure out is why, while aggregating the news, filtering it by topic, and presenting it for quick consumption has always been the role of the news editor, traditional publishers have retreated behind walled gardens rather than applying their aggregation and editing skills to this new opportunity.

Perhaps it is a reflection of the fact that the old media’s principal asset was never news it was scarcity. Not everyone could buy newsprint by the boxcar or ink in 55-gallon drums. This limited the number of outlets that could be easily monetized. However, the world of media scarcity no longer exists. Today, everyone pays for the digital equivalent of newsprint when he or she pays for Internet access.

Today, however, the digital world is based on “unscarcity.” In this new environment distribution is essentially cost-free, and so anyone can be a publisher. Earlier in the life of the Web, blogs resembled Hyde Park Corner, soapboxes for anyone with a voice. Today many blogs have become thoughtful sources of information in specialized areas that are largely ignored by the print media and thoughtful sources of ideas from those who don’t buy boxcars of newsprint. Yes, some are a less-than-attractive throwbacks to journalism’s roots as gossipmongers and political propagandists, but this multiplicity of voices is the network-driven revolution in journalism. Abundance is where the future is; not retreating into old media model castles as the walls crumble and the moats evaporate.

Clinging to the comfy economics of scarcity by moving content behind pay walls won’t bring yesterday back. Interestingly, the yesterday of the telegraph network revolution was one of taking advantage of the new abundance of information. Competitors even shared newswire reports that they repackaged in order to monetize the information. Somewhere along the way (perhaps it was with the rise of one-paper towns in the second half of the last century), the creativity that repackaged commodity information into a profitable enterprise disappeared and the exploitation of scarcity took over.

We now live in a world where the fact that the electronic media make it is possible to know a piece of information means that it is necessary to know that information. There is a need to apply the traditional editor’s role to the expanding torrent of information on the Web. The old scarcity media model was based on the editor’s ability to define what news was. The new “unscarcity” media model means that the editor no longer decides what is news, but helps the consumer deal with a flood of information.

This is a cultural shift for the news business, not just an economic shift; but like the days when the telegraph changed the business, it is a shift that represents opportunities. While publishers argue that, “Quality journalism isn’t cheap” (which is true) the answer isn’t, “I’ll shut down online access unless users pay.” We heard Hollywood cry that the VCR would be the end of the movies; then it adapted and now reaps huge revenue from home video. The same opportunity exists for publishers who see their business as meeting the needs of information consumers rather than locking up the information they now have.

It’s about re-aggregating that which technology has disaggregated and dispersed. Some of these new products may even charge for their particular services. Fortunately, not all publishers are sequestering their content behind pay walls. The Guardian in the UK keeps its online content accessible while experimenting with a subscription-based “club” where users have access to additional information. The Pittsburgh Post-Gazette is blending new content with social networking in a blog-like subscription service. The Financial Times is using free online content to identify and attract those who use the FT frequently; they allow linkers 10 free accesses per month before charging.

“Unscarcity” has redefined the media business. Instead of longing for the return of the Good Old Days of “It’s my content and you’ll pay for the privilege of knowing it,” the horizon is full of opportunities for media leaders who seize upon virtually cost-free distribution, welcome the plethora of voices that creates, and bring their editorial skills to a world deluged with information that needs to be quickly sorted and delivered on the reader’s terms. The name of the game is how to make money out of abundance, not how to maintain scarcity.