March 23, 2010

Strategic Message Management 101...

...As practiced by a seven-year-old.

Dolan and three friends are chatting at recess. One of the friends starts talking about "sex." One of the other friends tells a teacher. All four seven-year-olds are called to the Principal's office. The sex-talker claims it wasn't just him, that Dolan was talking sex too. The other two kids rebut him. The Principal asks Dolan what he may have said. Dolan's response, verbatim: "I said nothing inappropriate." Seven years old. Brilliant. (And, the cleverness of his quip aside, for what it's worth, I believe him).

March 11, 2010

Net Neutrality Revisited, Reviewed, Resolved(?)...

Over the five year history of this blog - what? - I have often ranted on the subject of network neutrality.

Let's recap with links to my previous posts on the topic:

- December 3, 2009
- May 25, 2009
- January 29, 2009
- December 12, 2007
- July 12, 2007
- July 31, 2007
- May 1, 2007
- February 21, 2007
- January 12, 2007
- November 27, 2006
- November 16, 2006
- May 11, 2006
- April 24, 2006
- March 26, 2006, and
- December 16, 2005.

Virtually all of my previous posts have been passionate interventions in favor of allowing people to attach a device of choice to a network of choice to consume services and/or content of choice. I remain utterly committed to this opportunity as a fundamental and free and open market-based right.

And, all of those earlier posts were in the context of my working for a mobile device manufacturer in North America and therefore focused on the unique market power enjoyed by U.S. mobile network operators. Fragmented spectrum planning and allocation and multiple incompatible, non-interoperable radio standards (the former if not the latter regulator-inspired) created a market-distorting opportunity for operators to utterly control the consumer channel. Not their fault, per se, but damn did they capitalize on it and, damn, don't they wish they could forever. Won't happen. "Open" will out, and sooner than some might think...

All of that said, what follows, in contrast with previous posts, is a much more sober, sedate review of the more fundamental question of network management (as opposed to "neutrality" - but it's essentially the same concept). A primer on the players, the landscape, the conflict, and (maybe) "the" or "a" probable solution.

And it ain't short... So...

The Landscape:

Network operators (Verizon, AT&T, Comcast, etc.) have invested billions of dollars in their networks and continue to invest billions more in order to upgrade their networks – fixed and wireless – to allow for steadily-increasing bandwidth demand driven by more and more multimedia feature-rich content and services. Many network operators also offer select service and content offerings to their subscribers, offerings that compete against a wide range of alternatives offered by third party providers that do not carry billions in network deployment and operation costs.

Internet search, messaging, content, productivity, social networking or other digital service or solution providers
(AKA “Internet players,” e.g. Google, Yahoo!, Facebook, Amazon, etc.) are driving more-and-more bandwidth-demanding “free” or advertisement or other revenue-generating services and solutions over these networks at “no cost,” perceived by some as an advantage over operator competitors that must deliver market-based and priced alternatives while carrying the additional burden of recouping billions invested in broadband networks. That said, certain Internet players have announced their intent to get into the broadband network game, at least to a limited extent (e.g. Google).

Hardware manufacturers – whether routers, thumb-modems, PCs, laptops, net-books, e-books, smart-phones, etc. – are producing and delivering a wider and wider array of devices capable of accessing fixed and wireless networks to consume richer and richer bandwidth-consuming services and content. In some cases, hardware manufacturers are marrying their devices to service or content offerings that ride “for free” over operator networks (e.g. Apple’s iPhone, iTunes and App Store), in others, the network cost is hidden/bundled into the hardware and/or content costs (e.g. Amazon’s Kindle)

Consumers pay for fixed and mobile broadband connectivity services from operators, often at a monthly all-you-can-eat subscription cost, in some cases varying according to bandwidth throughput/speed, in others according to tiered pricing schemes governed by bandwidth consumption. Consumers take advantage of an endless array of free bandwidth-consuming content and services, but also pay for select content outside of but “delivered free” over operator networks.

Regulators, generally-speaking, have universally expressed concern about the question of network management / network neutrality, have encouraged public debate, expressed strong desire for universal and affordable broadband, have in some cases adopted general statements endorsing the concepts of openness and competition, reinforcing the application of existing regulations and authority in doing so, but have not acted to otherwise intervene in the absence of any perceived “market failure.” Further generally speaking, all parties in the debate – operators, Internet players, manufacturers and consumers - are wary of regulatory solutions, and, in any event, at natural odds in terms of their positions on regulatory matters.

The Conflict:

Operators rightly expect the right to recoup their investments in their network deployments, operations, and ongoing upgrades. As broadband access has to some extent commoditized in recent years, with consumer access prices falling, operators have sought to introduce and promote alternative service- or content-oriented solutions in order to maintain their competitive position and growth-oriented businesses. Operators have also increasingly consolidated broadband holdings – e.g. marrying fixed, wireless and Internet services - to deliver increased scale and efficiencies via bundled services. Nevertheless, operators continue to perceive an unlevel playing field with so-called Internet “free riders,” and have become increasingly vocal over the last five years in demanding some level of parity, usually in the context of schemes that would charge heavy bandwidth-consuming Internet players for the usage of operator networks. Such schemes have also contemplated higher quality or greater throughput bandwidth as part of the benefit to such Internet players.

From the Internet player perspective, it’s been highlighted that the bandwidth consumption that operators are concerned about is consumer-driven consumption that operators are already charging for, and, operators can certainly adjust their consumer pricing schemes to ensure that higher-bandwidth using consumers are appropriately charged for their usage, perhaps according to data units (megabytes, gigabytes, etc.), and perhaps in the context of broadband packages that also offer higher-speed throughput to the more bandwidth-hungry consumers. It’s also been argued that, from a service/content competitiveness standpoint, operators enjoy a significant time-to-market advantage in terms of having built branded consumer relationships, a quantifiable return on their network investments. Finally, it’s been noted that just as the operators made significant investments in building networks, so too did Internet players invest significantly in developing and market-proving service and content solutions (everything from web-based search to email and messaging to calendaring to video sharing, etc.) that have become everyday mainstays of the consumer experience, including “me too” competitive alternatives provided by operators.

Manufacturers, with the exception of Apple, with its marriage of bandwidth-consuming hardware-content/services (music and applications), have thus far been largely bystanders in the debate. That said, Google might soon match and perhaps eclipse Apple via its slightly different but generally similar approach, particularly in the mobile broadband space where it has sponsored an operating system (Android) and related application ecosystem and is also selling a branded device direct to consumers. Both Apple and Google would likely adhere to similar arguments such as presented in the operator paragraph above.

Consumers are in perhaps the most precarious position. Should operators choose to adjust pricing schemes, consumers face the threat of potentially higher broadband charges in the future, after years of having watched them drop. In the unlikely event that operators settle some arrangement with Internet players to share network management and upgrade costs, consumers may face fee-based versions of services and content they have come to expect for free for almost a decade. Should bandwidth tiering models be part of any or either solution, some subset – likely a sizable one – of the consumer population may find itself relegated to some sort of latter-day, low speed, quality-challenged Internet ghetto. Any and all of these solutions would almost certainly adversely impact further broadband penetration, digital innovation, online commerce, and the future of true social benefits in terms of education, health and digital democracy in general.

(Aside: This dialogue has focused on “consumers” defined as individual subscribers to broadband services and consumers of services and content. Operators also offer direct broadband services to businesses, an increasing source of high-value revenues, as bundling of fixed, wireless, Internet, hosted and cloud-based services becomes more attractive to enterprises from both cost and efficiency perspectives. The Internet ghetto concern is a real one in this context as well. Should operators focus on serving higher quality, higher bandwidth services to higher paying enterprise customers, the individual consumer experience and related Internet consumer content and services ecosystem could, again, suffer in what could effectively become a “second class” Internet).

As for the regulators, lacking a concrete demonstration of true market failure, they are unlikely to act other than rhetorically, which is not necessarily a bad thing.

Solutions (Not):

Let’s start with what doesn’t make sense – various regulatory approaches:

For well over a decade, there has been debate around and fairly consistent policy, legislative, regulatory, commercial and consumer rejection of any “Internet tax.” Players across the ecosystem – government, businesses, consumers – all share a desire to see the online experience and related innovation continue to grow and evolve. An Internet tax is not the answer and would not guarantee any “subsidy” to operators in any event.

Neither should Internet players be required by regulation to contribute some fixed-rate fee, nor percentage of online revenues, nor some amount based on some formula related to bandwidth usage tied to branded services and/or content, either directly to operators or into some universal kitty from which operators would share proportionately in order to maintain and upgrade their networks. Such an arrangement would be market distorting and would discourage rather than encourage online activity. Indeed, it could well drive Internet players away from serving up the wealth of content we experience today, and/or preclude innovative new content and service offerings in the future.

Similarly, any regulatory approach that would preclude operators from tiering their pricing according to throughput speed and/or bandwidth consumption should not be considered. While some instrument of oversight to prevent an abuse of market power might be necessary (but arguably already exists under existing regulatory authority), precluding market-based pricing would discourage operators from further investment in and innovation around their networks and would ultimately lead to higher costs for all broadband consumers.

In terms of Universal Service in the context of broadband, while regulators should continue to encourage and enforce a pro-competitive marketplace and ubiquitous and affordable broadband, they should continue to allow market-based forces to drive deployment and competition to drive pricing. I am not certain that regulators should entertain “funding” basic universal broadband, as the U.S. FCC has recently signaled it may contemplate.

Finally, so as not to leave out the hardware players, in some markets there are taxes on hardware capable of reproducing content that date back to the early days of photocopying and cassettes that apply today, for instance, to handheld music playing devices, with tax revenues shared with creative societies. While it is unclear that any such tax on devices capable of Internet access has yet been suggested, it would be an awkward and market-distorting solution, driving up device cost, driving down device consumption and online activity in general. And, again, there would be no guarantee that any “subsidy” would ever reach an operator in any event.

Solutions (Maybe):

What emerges from the above brief and certainly not-all-inclusive review is a sense that the solution, whatever it may be, should be market- not regulatory-driven. What also becomes apparent is that there is some likelihood that in the short-term, consumers may well face higher broadband costs.

Assuming that operators will not succeed in creating a mechanism to charge Internet players for consumer consumption of bandwidth related to their services, and notwithstanding the concerns expressed above about the precarious position of the consumer in the mix, the market-based solution most likely to succeed will include operators refining and deploying “metered” (as opposed to flat rate) pricing schemes that tier broadband according to consumer throughput speed and/or bandwidth usage and/or the “nature” of such usage. This would not preclude all-you-can-eat-fast-and-you-can-get broadband – indeed, that would likely be the highest service tier offered. And, of course, appropriate regulatory oversight will be necessary (and such oversight may well require oversight of its own) and such authority arguably already exists.

Given that a good number of consumers would be impacted with higher broadband costs, a more important role for government might be to work with industry – operators and Internet players alike - just as it did in the context of the conversion from analog to digital television. A comprehensive and integrated educational/marketing program could be geared to help consumers understand that their consumption of megabytes and gigabytes is akin to their consumption of kilowatts of electricity, gallons of water, or cubic feet of natural gas.


The solution suggested as most viable above should not be mis-interpreted as driving a public perception of network operators as utilities or bit pipes. Rather, it is an opportunity for a leveling of the playing field. Consumers would be able to determine from their detailed bills which element of their monthly charge is a “utility” charge (standard access, for instance – ala basic cable, to use a new analogy) and which elements are “content” charges (sticking with the cable analogy, akin to pay-per-view, but in this case, heavy duty bandwidth/data/content consumption).

In terms of the monthly “content” bill (which could ultimately become a separate bill altogether, indeed, an entirely new aggregator industry might be born and/or opportunities might emerge for banks, credit card companies or other financial intermediaries to take a stake in the game), a new transparency would emerge for consumers, creating market and pricing pressures that would ensure competition – quality and pricing - between Internet players and operators alike, and across service and content offerings.

Indeed, introducing yet another analogy, operators might implement affinity and/or points programs for heavy data-using consumers, ala airline frequent flier miles, extending status, rewards, rebates and a richer branded relationship with such customers. Here is yet another example of operators being able to derive quantifiable return on their network investment and billing control point that distinguishes them from Internet players (there is no reason to imagine, however, that as airlines have partnered with resorts, hotels, car rental agencies, etc. that operators and Internet players might also integrate broadband/content/services package offerings to consumers).

In short, a market-based solution – with light regulatory oversight (an ever-shining spotlight) – will ultimately be the best solution, even if it entails potentially higher consumer pricing in the short term. The market is far more flexible than any artificially managed regime – the above imaginings of creative developments as a result of market-based mechanisms only begins to scratch the surface of what may ultimately evolve.

March 02, 2010

One Year Later Part II (as posted to FB 3/2/10)


Nokia in the U.S. - What happened?

The debate continues to rage over why and how Nokia lost its way in the North American market, where it once reigned supreme and now can boast at best single digit or low double digit market share, and that built on low end and feature (not necessarily "smart") phones. Needless to say, there's no one single answer, but one thing can be certain, mis-steps and missed opportunities were global, not North American.

Not long ago, over the holiday break, I read a NYT piece titled "Can Nokia Recapture its Glory Days" ( A sobering read, particularly for those of us whose blood still runs a tad Nokia Blue. Moreover, a frustrating read, particularly for those of us who know the U.S. market intimately and have not-insignificant insight into Nokia's history here.

When the Times quoted a Nokia executive saying “We made wrong decisions in the American market,” and then the Times explained that "For instance, Nokia was slow to make the change to so-called clamshell phones, sticking with ‘monoblock’ models even as consumers abandoned them," I bristled, just a bit. While such decisions may have impacted first and hardest in the American market, they were not made in some North American vacuum. Indeed, I recall strident warnings from Nokia North America to global product gatekeepers in the early 2000's, advising that form factor and user-interface developments in the U.S. - ranging from flip to fold to thin to QWERTY to touch – would soon set global trends. Largely unheeded, such warnings were perhaps not strident enough...

Nevertheless, I was heartened to read another Nokia executive quoted: “We have not lost our ability to innovate; we have not lost our ability to truly understand the consumer and make intuitive solutions for them." I believe this.

But, as I read on, my frustration returned when Nokia's success-challenged "Comes With Music" and "a smartphone for next year that will update the company’s aging Symbian operating system" were referenced by the Times. While the reference was global, from a U.S. perspective, the former is an extremely long shot at best, and the latter, well, and globally, in an industry increasingly defined by real hand-held computers, Symbian is increasingly qualified as a high-end feature-phone OS, not a mobile computer OS.

And then I read that a crucial development in 2010 will be a bigger push for North American market share with Nokia working more closely with carriers and bringing out more smartphones. “We have not invested enough there...It’s a necessity for us.”

Okay. Sure. True. But, c'mon, it may be time to update the talking points - this one's getting a bit dusty. In fact, it's not really been a matter of not enough investment, rather, perhaps, mis-directed investment. The Times article rightly stated "according to both Nokia executives and industry experts, the company didn’t want to produce phones specifically tailored for American consumer tastes, and it resisted demands from the major carriers to come up with phones based around their brands and individual specifications." But, when I say "rightly," I mean 'rightly' as in, like, five years ago. Since then, outside of the brief period of Multimedia heresy and success in 2007, Nokia North America has been doing its utmost - granted, somewhat constrained by an organizational structure that favors scale-obsessed global product cookie-cutters - to build anything a U.S. carrier might want, tailored in any way they might desire, yet has simply not achieved sustainable success.

Should Nokia continue blithely down this same path in the U.S. - against competitors like LG and Samsung who have mastered the carrier kowtow, relative newcomers like Apple who've upended the carrier dominance model with device and services solutions, and the likes of Google which aims to do the same with both its Android OS and HTC-built Nexus married to its wealth of online solutions - it will very likely mean continued failure in the U.S.

Now, at this point, I should highlght that I don't claim to have any insight into Nokia's current global or U.S strategies, and I do wish them all the best in terms of the substance and execution of whatever that strategy may be. But with that said, if I may be so bold, if it were me, for whatever it may be worth, and with a very pure focus on Nokia in the U.S. only:

-- I'd stop following past, global, defensive or someone elses' rules and blueprints. It is time for risk and reinvention.
-- I'd outsource mainstream product for North American operators - find a manufacturing partner in Asia, maintain oversight of design and quality, but otherwise deliver Nokia-branded product 100%+ to U.S. operator demand, preference and spec.
-- I'd build such outsourced product on Android. Make a land grab where there is land to be grabbed.
-- I'd white label any Ovi services that any North American carrier might want. They're already losing control to third-party content, services and app stores - why not give them a solution instead of another headache? (And, frankly, Ovi by Nokia is effectively DOA in the U.S. anyway, at least in any near-term way).
-- Meanwhile, I'd dedicate Nokia's significant San Diego-based resources to design and produce an optimized-for-North America handset, specifically not borrowing from some global roadmap.
-- If Maemo (or now MeeGo, as married to Intel's Moblin) is truly stable - and we'll see what the N900 experience ultimately proves - I'd build that single, optimized-for-North America product on that OS.
-- And I'd sell that product direct to consumers, partnering with big box and other retail, as well as online. (Note: While this strategy might seem akin to Google's, it was in fact a strategic recommendation I made to Nokia executive management when I left a year ago). Oh, and if a carrier also happens to want the device, super, let 'em have it - but don't dither about heeding their customization demands - that's what the outsourced product is about.
-- I'd break the Nokia mold and invest in some noticeable branded marketing and advertisement in the U.S., specifically around that open market North American-optimized device and its related experiences.
-- Working with channel partners, I'd deploy innovative new retail models - device installment plans, for instance - to ameliorate the lack of subsidy.
-- And, I'd sell the device at, near or even below cost - a conscious land grab (yet another) in the mobile computer space.

I've no doubt that there are many who could poke solid holes in any element of such a strategy. Please do. Have at it. But be careful about arguing that it's just a matter of time for the current Nokia U.S. strategy to succeed. That's another tired talking point - it's been a few years now. Not only has it not succeeded, it's simply outdated in terms of the market’s evolution. I'd be equally wary of proclamations that the strategy has evolved -"just you wait and see" - that talking point's a bit tired now too. It's time for proof, taste, pudding.

In short, I believe, in order to succeed in the U.S. - and ultimately globally - it's time for Nokia to refresh, renew, re-engineer, replace, revive, and (re)discover. I wish them great luck and god-speed.

One Year Later (as posted to FB 2/26/10)

This month, I mark the one-year anniversary of my departure from Nokia. Over my twelve-year tenure with the company, focused in the Americas and primarily the U.S., I graduated from leading U.S. government and industry affairs to driving Americas-wide strategy; from managing North American corporate communications to spearheading the North American Multimedia Business Group and Americas-wide Go-to-Market. And, over my twelve years with the company, I watched Nokia's star rise spectacularly in the U.S. going into the turn of the Millennium, and have since witnessed a steady decline, notwithstanding brief spurts of inspirational success, such as experienced by the NSeries products in 2007.

Things have changed. Indeed, the mobile and Internet convergence environments continue to evolve at a more and more rapid pace. To that point, leading up to and in the wake of last week's Mobile World Congress in Barcelona, there has been a great deal of hooplah about who will drive the mobile future. Has the U.S. left Europe in its innovative dust? Have Apple and Google upended operator control points? Has the oft-foretold and now-consummated marriage of mobility and the Internet forever changed the landscape?

Hmmm. I guess we'll have to wait and see. In the interim, no matter however it turns out, and for whatever it may be worth, I'd like to highlight that:

Nokia Multimedia had it right, and First, but...

...what in retrospect (mine) may have been a perhaps premature Nokia re-organization at the end of 2007 may well have undermined Nokia's high-end mobile computer momentum, displacing the company at a terribly critical inflection point in the marketplace.

Read this: Buh-Bye Wireless Guys. Daniel Lyons' recent piece in Newsweek may be a bit off here and there, but it more or less hits the mark. In short, he suggests that "the computer guys in Silicon Valley" cottoned on to the unique monopoly dominance being exercised by U.S. wireless carriers and wondered "why aren't we doing that?"

He's right. Apple and Google are flipping the apple(google)cart, and, notwithstanding recent Barcelona announcements of carrier alliances to establish interoperable application platforms, stores, whatever, to better compete with Apple, Google, etc. (link), the game has been changed. Utterly.

Lyons credits (in my liberal interpretation) the Silicon Valley types for having figured out that wireless broadband is no different than any other broadband and, as such, consumers will want, deserve and demand to attach a device of choice to a network of choice to consume content and services of choice. And, well, unlocked, liberated, mobile devices that are open to non-carrier applications, content and services are a key solution. I mean, c'mon, after all, who really wants to be locked in to a carrier and carrier services and content for two years just to get a subsidized phone? Would you buy your PC from Comcast or Fios and get locked into some latter-day Internet walled-garden offering? Of course not.

But - and this is my first key point - Nokia was there first. Nokia perceived and understood the evolving market environment and was executing around it excellently (and ahead of the market) going into 2007. Indeed, Nokia's Multimedia Business Group was dedicated to capitalizing on this emerging reality with its ground-breaking NSeries devices and related (pre-Ovi) services at the time. To wit: the Nokia N95, introduced in 2007, was a truly global phenomenon - yes, even in North America. A bit clunky perhaps, particularly lined up against the elegance of the iPhone, yet far more feature-rich than any device at the time.

But then came the re-org, which was well-intended, to be sure. Nokia had three devices business groups - Mobile Phones (mainstream volume), Enterprise (struggling to break into Blackberry's realm) and Multimedia (ascendant value) - and rightfully sought to re-unite the disparate businesses to leverage and rationalize globally scalable solutions. Intent aside, in the wake of the re-org, the vanguard and value-oriented NSeries devices somewhat derailed as Nokia responded to near-term financial market pressures and ever-exercised carrier muscle, particularly in the U.S., focusing instead on volume-oriented mid-range feature and entry phones, particularly in emerging markets. Meanwhile, Nokia's fledgling, new-born services group, striving to drive newly-launched-but-quasi-'me-too' Ovi services, floundered as Nokia's commitment to iconic high-end multimedia devices seemingly flagged.

The result, well, in an increasingly competitive market, complicated by disruptive plays by muscling interlopers like Apple and Google, having one's volume cake and eating one's value torte proved and has proven to be a bit more challenging than Nokia may have imagined. Ditto, I fear, may be the case in terms of expectations that all of those emerging market Nokia consumers will build lasting branded and upgradable relationships with Nokia devices and services at the expense of a growing field of competitors, much less operators desperately trying to maintain their something-more-than-bitpipe relevance.

Reality check: I wouldn't want to suggest that the Nokia 2007 re-org was solely responsible for Nokia's global predicament today. Indeed, there were a number of crucial mis-steps in the early- to mid-2000's that equally contributed to the current challenges, and particularly led to the Nokia miasma in the U.S. - I'll address this in a separate thread.

In any event, now, in the midst of all of this, Nokia is struggling to regain it's thought- and market leadership. But, this struggle is in the context of a global marketplace which certainly perceives, and may actually be feeling momentum to have shifted, and significantly... Witness "The Observer's" piece out of Barcelona last week, straight from the world's most prestigious global wireless trade show - How the Smartphone Made Europe Look Stupid - in which it is rather harshly suggested that the European mobile giants that pioneered the mobile industry are now stumbling behind U.S. and Asian rivals, mere "flyover states" in the greater global wireless nation.

There is some truth to this. And, for what it's worth, I believe that the general direction that Apple and Google are now driving is the right one - strategically focused to capitalize on proven market success - notwithstanding certain "control" issues. But, I'm also highlighting that Nokia was there, right, and first.

Whatever the case, this isn't just new players in the game, or the game-field having changed - this is an entirely new game. And as for "control issues?" Yeah, sure, success, for awhile - whether operator or Apple or Google. Indeed, the semi-closed ecosystem approach is exactly the way to prove the market for true mobile multimedia. But, ultimately, this is about consumers (also known as human beings) - like it or not, at some point, choice, preference, lifestyle, liberty, individualism (Hail Jaron Lanier) will out in the end, regardless of who's driving or otherwise credited for having driven the change. For now though, it would appear that Apple and Google are best positioned to be the guardians of the cloud when that day comes.