Jon Taplin's Blog

So True

From this week’s New Yorker, the amazing Roz Chwast.

Broadband Future

Google’s announcement yesterday that it was going to finance some ultra-High Speed Broadband test markets only highlights the dizzying ascent of video online. The average broadband user spends about 760 minutes a month watching online video. Clearly the world of IP TV is almost here, but Google’s move is a rather cynical inside the beltway ploy that will not bring the High Band Future any closer.

In 2008 Google started bidding on wireless spectrum against the incumbent carriers. It had no intention of running a wireless network, but rather wanted the telcos to know it could make the auction very expensive for them if they didn’t open their networks to a Google Phone service. This is a similar ploy to get open access to the Verizon, Comcast, Time Warner and AT&T networks at some sort of wholesale rate without having to spend the billions to put fiber in the ground.

The irony of course is that Verizon already has fiber to the home in much of its markets and could easily open up the pipe to the speeds Google is talking about (60-100 MBPS). It could also deploy the kind of symmetrical Interactive TV and Telemedicine services Google is highlighting. The other three incumbents (AT&T, Comcast, and Time Warner) will have to spend billions to catch up for different reasons. Comcast and Time Warner are both running Hybrid-Fiber Coax systems that are good for downstream broadband, but have very limited upstream capability. And AT&T thought it could deploy an IP TV network keeping it’s old copper connectivity for it’s U-Verse system. It’s a joke and they are going to have to put fiber all the way to the home in the next five years, but they just don’t want to tell Wall Street. As for their wireless system, the problems of I Phone users highlight the huge capex expense ahead of them. I’ve been told by a former FCC manager that last year AT&T had less than 3% of their cell phone towers with fiber backhaul! No wonder the system keeps dropping calls and can’t handle the wireless data traffic.

Fourteen years ago I founded a IP Video on Demand company with a couple of friends (and financed by a couple of our correspondents) called Intertainer based on the idea of “I want what I want, when I want it”–that we were moving from a push media universe (broadcasting) to a pull media universe (on demand). Like all pioneers we were early and had to fight off the oligopolies (we won an anti trust suit against Sony, Time Warner and Universal) and now we just license our patents to companies like Microsoft, Apple and Comcast. But I’m still convinced that our 1996 vision of the future–a world of truly interactive on demand media in high definition–still is on track.

Cars are Scary

In the early days of motoring, the car was a bit scary. You had to crank it to start the engine and the constant backfiring scared both the horses and the ladies. Toyota’s troubles are a vision of our motoring future. It appears the computer revolution has made the car scary again.

With each model year, vehicles are morphing into powerful, computerized machines that substitute electronic brains for the brawn of heavy bodies or gas-guzzling large displacement engines. The downside of this 30-year evolution is that for many people, cars are becoming scary again. The new, electro-digital automobiles are difficult for laymen to comprehend or repair. Their failures can be impossible for even experts to diagnose.

We can deal with computer crashes at our desk, because we aren’t moving at 60 MPH. The notion that were sitting on top of some sort of Wintel operating system as we speed down the freeway is a bit unnerving.

Apple I Pad

Apple’s stock is down almost 4% this morning in a classic “buy on the rumor, sell on the news” trader’s strategy. I’m happy to buy some of those day trader’s $199 stock. Anyone who doubts the utility of this device is just not thinking very clearly. I can say with some confidence that it is going to revolutionize academic publishing as well as the way journalism is delivered. Most of us who write books about the media are constrained by our ability to explicate a passage about say, Citizen Kane, by the inclusion of a still picture from the film. The ability to include a 30 second clip of the part of the movie you are critiquing is going to change the nature of most non-fiction E Books.

In a couple of years, the I Pad will be the device students bring to college.

Cyber War

The Obama Administration understands that Cyber War is closer than we think. The problem is that we’ve outsourced the manufacture of so much of our technology, we can’t really trust anything.

As advanced systems like aircraft, missiles and radars have become dependent on their computing capabilities, the specter of subversion causing weapons to fail in times of crisis, or secretly corrupting crucial data, has come to haunt military planners. The problem has grown more severe as most American semiconductor manufacturing plants have moved offshore.

Only one-fifth of all computer chips are now made in the United States, and just one-quarter of the chips based on the most advanced technologies are built here, I.B.M.executives say. That has led the Pentagon and the National Security Agency to expand significantly the number of American plants authorized to manufacture chips for the Pentagon’s Trusted Foundry program.

Despite the increases, semiconductor industry executives and Pentagon officials say, the United States lacks the ability to fulfill the capacity requirements needed to manufacture computer chips for classified systems.

Don’t you feel like were trapped in an early James Bond Movie?

In the future, and possibly already hidden in existing weapons, clandestine additions to electronic circuitry could open secret back doors that would let the makers in when the users were depending on the technology to function. Hidden kill switches could be included to make it possible to disable computer-controlled military equipment from a distance. Such switches could be used by an adversary or as a safeguard if the technology fell into enemy hands.

A Trojan horse kill switch may already have been used. A 2007 Israeli Air Force attack on a suspected partly constructed Syrian nuclear reactor led to speculation about why the Syrian air defense system did not respond to the Israeli aircraft. Accounts of the event initially indicated that sophisticated jamming technology was used to blind the radars. Last December, however, a report in an American technical publication, IEEE Spectrum, cited a European industry source in raising the possibility that the Israelis might have used a built-in kill switch to shut down the radars.

China & The Rules of the Game

China is going to have to learn to play by the rules of the game of capitalism. In Beijing, the base of State Capitalism, practiced at a level never seen before, the Chinese leaders act as if they have no idea who is behind the epic string of hacker attacks on the most secret intellectual property of America’s technology and national security infrastructure (click chart above to enlarge). They also feign ignorance when it is pointed out that some of the largest DVD and CD factories producing millions of pirated U.S. movies and music, are owned by elements of the People’s Liberation Army. Continue reading ‘China & The Rules of the Game’

Social Democracy & The New Frugality

I’ve been talking about “the New Frugality” for a while and Friday’s consumer credit stats bear out my thesis, that something profound has changed in our desire to live within our means.

Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amount on records going back nearly seven decades.

I don’t think we will ever return to the point where the average household will live with a debt to income ration of 160% as they did in 2006. So this will mean a transition towards an economy in which consumer spending plays a smaller part in GDP, kind of like Germany or France. Continue reading ‘Social Democracy & The New Frugality’

Google, The Impaler

I have come to the conclusion that Google has evolved into what economists call a “natural monopoly”.

When this situation occurs it is always cheaper for one large firm to supply the market than multiple smaller firms, In fact, absent government intervention such markets will naturally evolve into a monopoly. An early market entrant who takes advantage of the cost structure and can expand rapidly can exclude smaller firms from entering and can drive or buy out other firms. A natural monopoly suffers from the same inefficiencies as any other monopoly. Left to its own devices a profit seeking natural monopoly will produce where marginal revenue equals marginal costs. Regulation of natural monopolies is problematic.

This morning a Google competitor lays out some of the hard ball tactics of the “do no evil” company with 72% search market share.

One way that Google exploits this control is by imposing covert “penalties” that can strike legitimate and useful Web sites, removing them entirely from its search results or placing them so far down the rankings that they will in all likelihood never be found. For three years, my company’s vertical search and price-comparison site, Foundem, was effectively “disappeared” from the Internet in this way. Continue reading ‘Google, The Impaler’

Rethinking Obama

Like many progressives, I’ve been critical of Obama on Afghanistan, the health care debate and financial reform. But I’ve also been critical of the institution that is federal politics, with its arcane Senate rules that allow for essential minority “negative” control. So during the holiday break, I’ve come to reconsider the ‘art of the possible” in Washington, DC, and put my energies towards this new political unit I call the City State. Continue reading ‘Rethinking Obama’

Hacked Predator Video

Pentagon Incompetence Beyond Words.

Insurgents in Iraq have hacked into live video feeds from Predator drones, a key weapon in a Pentagon spy system that serves as the military’s eyes in the sky for surveillance and intelligence collection…

Shiite fighters in Iraq used off-the-shelf software programs such as SkyGrabber — available for as little as $25.95 on the Internet — to regularly capture drone video feeds, the Wall Street Journal reported Thursday. The hacking was possible because the remotely flown planes have an unprotected communications link.

The Defense Department has addressed the issue, first discovered a year ago, by working to encrypt all its drone video feeds from Iraq, Afghanistan and Pakistan, the defense official said.

“Gee, do you think we ought to encrypt the predator video feed?”  Joseph Heller ( Catch-22) could have written this story.

FUBAR.