The Wall Street Journal ran a piece today by Andy Kessler, who is apparently a former hedge fund manager who wrote a book called “How we got here” about the 1970s and how they shaped today’s society (and who also has a significant telecoms and technology background, according to his online bio). The piece is available on his website too in case you’re unable to penetrate the WSJ paywall. Unfortunately, the piece is misguided in some places and downright inaccurate in others, and needs some form of detailed rebuttal. I’m sure others will also feel the need to respond, and hopefully better than I can here, but here are some thoughts on the piece. It’s also about time we straightened out the facts on Google Voice, because so many of the pieces that have been written on the topic don’t really seem to grasp what Google Voice is, so I’ll try to kill two birds with one stone here. (I’ve written one previous post on the topic of Google Voice here, if you’re interested).

I’m going to go through the piece in order for thoroughness. First, the opening paragraph:

Earlier this month, Apple rejected an application for the iPhone called Google Voice. The uproar set off a chain of events—Google’s CEO Eric Schmidt resigning from Apple’s board, and the Federal Communications Commission (FCC) investigating wireless open access and handset exclusivity—that may finally end the 135-year-old Alexander Graham Bell era. It’s about time.

First, it’s not clear that Eric Schmidt resigned from the Apple board over the rejection of the Google Voice app – the small matter of an FTC investigation may have been a factor. In addition, there’s the fact that the two companies compete in the email, browser and now operating system markets, which meant that Schmidt was having to recuse himself from more and more discussions on the board anyway. Secondly, the FCC is very specifically investigating this particular case, not wireless open access or handset exclusivity in general, as a result of the Google Voice incident.

I have no real beef with Kessler’s next paragraph:

With Google Voice, you have one Google phone number that callers use to reach you, and you pick up whichever phone—office, home or cellular—rings. You can screen calls, listen in before answering, record calls, read transcripts of your voicemails, and do free conference calls. Domestic calls and texting are free, and international calls to Europe are two cents a minute. In other words, a unified voice system, something a real phone company should have offered years ago.

Except perhaps to say that a “unified voice system” is a bit strong – this “system” is entirely dependent on the existing phone systems offered by the “real phone companies”. Having said that, Google (or, more accurately, Grand Central) certainly provided some useful innovations and created a great service, and I’m a (small-volume) user of the service myself.

Apple has an exclusive deal with AT&T in the U.S., stirring up rumors that AT&T was the one behind Apple rejecting Google Voice. How could AT&T not object? AT&T clings to the old business of charging for voice calls in minutes. It takes not much more than 10 kilobits per second of data to handle voice. In a world of megabit per-second connections, that’s nothing—hence Google’s proposal to offer voice calls for no cost and heap on features galore.

The first sentence is important: contrary to the headline of the piece (“Why AT&T Killed Google Voice”), there are only rumors at this point, and AT&T has flatly denied that it blocked the app. The FCC investigation is seeking to answer in part the question of who blocked it, so a bit more nuance is probably in order there. But the bigger objection to this paragraph is the assertion that voice is simply a form of data, an idea Kessler returns to again and again throughout the piece. That needs a bit of examination, because it’s misleading.

While there’s a sense in which that’s true – all communication is ultimately “data” – it’s only true in the technical sense if it’s carried that way. Which it isn’t, on today’s cellular networks and most public telephone networks. Other than where voice over IP is used, voice is circuit-switched, which means it ties up an entire (virtual) circuit from end to end for the duration of a call, making it unavailable for other purposes. Data, on the other hand, is typically packet-switched, meaning that a data “connection” in fact only uses up network bandwidth when packets are actually being sent back and forth, otherwise freeing up that bandwidth for the use of others. As such, voice networks and voice calls use network capacity in a very different way from data, with different equipment required and different economics associated with them. It is therefore at best a gross oversimplification to say that “voice is data” in the current mobile market. In time, yes, we’ll evolve to voice carried over the data network, and at that point the statement will be true, but we’re a long way from that point yet.

What this episode really uncovers is that AT&T is dying. AT&T is dragging down the rest of us by overcharging us for voice calls and stifling innovation in a mobile data market critical to the U.S. economy.

For the latest quarter, AT&T reported local voice revenue down 12%, long distance down 15%. With customers unplugging home phones and using flat-rate Internet services for long-distance calls (again, voice is just data), AT&T’s wireline operating income is down 36%. Even in the wireless segment, which grew 10% overall, per-customer voice revenue is down 7%.

I’m not sure this episode uncovers anything about AT&T’s health as a company at all. While I think AT&T may be a little over-reliant on the iPhone (see more on that here), its financial results continue to be impressive. Focusing on the wireline results isn’t really relevant in the context of a piece about the wireless market, but yes, wireless voice revenues per customer are declining, because, erm, average prices are coming down, which rather goes against the grain of the piece. And it’s not clear that whatever action was taken in regard to the Google Voice application in any way stifled innovation in the mobile data market. (on the topic of wireline versus wireless revenues, this recent piece on MSN Money was a lot more insightful, but that’s not really the point here).

Wireless data service is AT&T’s only bright spot, up a whopping 26% per customer. How so? As any parent of teenagers knows, text messages are 20 cents each, or $5,000 per megabyte. After the first month and a $320 bill, we all pony up $10 a month for unlimited texting plans. Same for Internet access. With my iPhone, I pay $30 a month for unlimited data service (actually, one gigabyte per month). Is it worth that? The à la carte price for other not-so-smart phones is $5 per megabyte (one-thousandth of a gigabyte) per month. So we buy monthly plans. Margins in AT&T’s Wireless segment are an embarrassingly high 25%.

I’m not sure wireless data service is the only bright spot, but again the analysis here is odd. What is the point Kessler is trying to make here? That it’s embarrassing AT&T’s wireless margins are 25%? This from a former hedge fund manager? Is he objecting to the fact that AT&T allows you to text all you want for $10 per month when individual messages are 20 cents (in fact, it’s $20 per month)? I can’t tell what he’s objecting to here.

The trick in any communications and media business is to own a pipe between you and your customers so you can charge what you like. Cellphone companies don’t have wired pipes, but by owning spectrum they do have a pipe and pricing power.

That’s an odd statement if ever there was one. The very definition of providing a communication service is giving customers a way to communicate, which has traditionally meant a phone line (whether wireline or mobile). There’s no trick here, and the idea that the only reason for having a pipe to your customers is to gouge them seems an odd summary of the last 135 years of telecoms history. Spectrum isn’t the pipe either – the cellular networks carriers build out to make use of the spectrum are the pipes (or perhaps we should say “series of tubes“?).

Aren’t there phone competitors to knock down the price? Hardly. Verizon Wireless, T-Mobile and others all joined AT&T in bidding huge amounts for wireless spectrum in FCC auctions, some $70-plus billion since the mid-1990s. That all gets passed along to you and me in the form of higher fees and friendly oligopolies that don’t much compete on price. Google Voice is the new competition.

So, the point is there is no competition because the government forced the wireless carriers to spend billions on spectrum? Isn’t this supposed to be a piece about how the government can solve problems in the mobile industry? It’s also not clear how the spectrum fees have created a “friendly oligopoly” (note singular noun – I’m pretty sure once there are several oligopolies it stops being an oligopoly) – scarce spectrum has created the present oligopoly in the wireless market in the US, as it has everywhere else. And no industry wants to engage in price competition, especially if it has large sunk and/or fixed costs, and most would prefer to compete on features (e.g. exclusive phones). If price competition is your goal, you’re fighting a losing battle, for everyone concerned.

But now we come to one of the biggest problems with all the stories about Google Voice – the idea that it is somehow competition for the mobile phone companies when it’s running on their devices. As it currently works, Google Voice works on the basis of hooking up your existing connections (wired, wireless, whatever) to its service, not creating new endpoints. While there are workarounds, the vast majority of users see this as a way of integrating their existing endpoints into a more unified service. Since the US uses an airtime system (i.e. charging for inbound and outbound calls) for billing for mobile voice usage, every domestic Google Voice call that connects to an AT&T iPhone generates exactly the same usage and therefore the same charging as a call originated through the standard iPhone interface. AT&T is still very much in the picture here, and still making money off those calls. All that’s changed is the interface. AT&T (and even Apple) might not like the fact that the system bypasses their interface, but AT&T still gets the money, so this isn’t competition for revenue, just the UI. Others such as Skype and Truphone, which actually provide an alternative client for making calls over VoIP from the iPhone, thereby bypassing the carrier, are the true competition for AT&T in this space, but their apps are still sitting in the iTunes app store.

By the way, Apple also has a pipe—call it a virtual pipe—to customers. Its iTunes music service (now up to one-quarter of all music sales, according to NPD Market Research) works exclusively with iPods and iPhones. The new Palm Pre, another exclusive deal, this time by Verizon Wireless, tricked iTunes into thinking it was an iPod. Apple quickly changed its software to lock the Pre out, and one would expect Apple locking out any Google phone from using iTunes.

I guess this is why the stretched analogy about the pipe was introduced earlier – to somehow equate AT&T’s and Apple’s business models. There’s another factual error here – a pretty glaring one – in that Sprint, and not Verizon, has the exclusive on the Palm Pre. There’s a strange reference to “any Google phone” here too – as if it’s a theoretical possibility rather than a reality in the form of a growing number of Android devices, which as far as I know haven’t attempted to connect to Apple’s proprietary store.

It wouldn’t be so bad if we were just overpaying for our mobile plans. Americans are used to that—see mail, milk and medicine. But it’s inexcusable that new, feature-rich and productive applications like Google Voice are being held back, just to prop up AT&T while we wait for it to transition away from its legacy of voice communications. How many productive apps beyond Google Voice are waiting in the wings?

I’m not sure Kessler has really introduced any evidence on the topic of overpaying for mobile plans, but we’ll let that slide – the examples used seem to have been chosen more for their alliterative potential than for any sensible reason, but we’ll let that slide too. On to the real point here – that blocking Google Voice is somehow propping up AT&T. How so? Are we really “waiting for AT&T to transition away from its legacy of voice communications”? In what way? Didn’t Kessler say earlier that wireless data was the fastest growing area of revenue for AT&T? Isn’t the iPhone primarily about data, rather than voice? Yes, Apple desperately needs to make the approval process for apps quicker and more transparent. But I’m not sure there are lots of apps “waiting in the wings” – what would they be waiting for? There are lists of rejected apps, but many were rejected for good reasons and most later found their way onto the iTunes store in a modified form. If you’re waiting, go ahead and submit your app and see what happens.

So now the FCC and its new Chairman Julius Genachowski are getting involved. Usually this means a set of convoluted rules to make up for past errors in allocating scarce resources that—in the name of “fairness”—end up creating a new mess.

Some might say it is time to rethink our national communications policy. But even that’s obsolete. I’d start with a simple idea. There is no such thing as voice or text or music or TV shows or video. They are all just data.

The FCC is getting involved, in a very limited and specific way – by investigating the case of the Google Voice application in particular. It’s not clear under what authority they’re doing this, but since it’s just a fact-finding mission at this point that doesn’t matter all that much. Since it is just fact-finding, talk of convoluted rules seems a little premature too.

I’m also not sure how “rethinking our national communications policy” can be obsolete – doesn’t that by definition mean replacing whatever may be obsolete about the whole thing? And for all the reasons I explained above, it’s utterly over-simplifying and hugely erroneous to simply treat all voice as data today – the vast majority of voice is not data – it’s voice, with all the quality, cost, infrastructure and other implications that has. But more to the point: data, broadly speaking, isn’t regulated. Voice is. Unless you want to move to an unregulated voice market (which the carriers would love, by the way) or a heavily regulated data market, that’s an unworkable proposition.

Now, on to the specific proposals.

We need a national data policy, and here are four suggestions:

• End phone exclusivity. Any device should work on any network. Data flows freely.

Any device can’t literally work on any network, especially since we have both GSM and CDMA networks (and now also WiMAX networks) in the US. But it is already possible to take any unlocked GSM phone and attach it to the T-Mobile or AT&T networks. Verizon has also built a model for allowing devices to be attached to its network in response to the open access provisions attached to the 700MHz spectrum it acquired (thank you, Google). But that’s a separate issue from exclusivity. Exclusivity certainly has its pros and cons – it allows devices to reach market at lower prices because the carriers are willing to make concessions in return. But it means that, as a consumer, you have to pair networks and devices you otherwise wouldn’t. But this is one of the prices we pay for a relatively unregulated market – we don’t always get what we want, but we do get a lot of good stuff. We have to take the rough with the smooth.

• Transition away from “owning” airwaves. As we’ve seen with license-free bandwidth via Wi-Fi networking, we can share the airwaves without interfering with each other. Let new carriers emerge based on quality of service rather than spectrum owned. Cellphone coverage from huge cell towers will naturally migrate seamlessly into offices and even homes via Wi-Fi networking. No more dropped calls in the bathroom.

I love that Kessler uses WiFi as an example of interference-free networking. Anyone who’s tried to use WiFi in the presence of lots of other WiFi networks (e.g. in any relatively densely populated neighborhood) knows how untrue that is. Carriers have spectrum so they can provide predictable service and be able to make reasonable business plans. Would anyone roll out expensive 3G or 4G networks if they weren’t very sure they’d still have the spectrum to light them up when they were finished? WiFi is terribly suited for replacing cellular networks, which seems to be what Kessler is suggesting, even if it may be useful for extending coverage indoors (although femtocells seem to be the preferred solution for that problem in the US, without any regulatory intervention). And unless you have WiFi in your bathroom, I’m afraid there’s still a chance of dropped calls there.

• End municipal exclusivity deals for cable companies. TV channels are like voice pipes, part of an era that is about to pass. A little competition for cable will help the transition to paying for shows instead of overpaying for little-watched networks. Competition brings de facto network neutrality and open access (if you don’t like one service blocking apps, use another), thus one less set of artificial rules to be gamed.

A rather dramatic change of speed from Google Voice on the iPhone, but I’ll go with it. This has already happened, both at the municipal level and nationally through legislation. Competition for cable is coming both from the telcos (ironically) which are rolling out fiber-based networks, and through online-based offerings such as Hulu, iTunes (ironically) and Amazon. Interestingly, Kessler then employs the argument that competition provides de facto net neutrality, when he doesn’t seem to think the same argument applies with mobile networks (where there is significantly more competition and more choice than there is ever likely to be in local TV provision).

• Encourage faster and faster data connections to our homes and phones. It should more than double every two years. To homes, five megabits today should be 10 megabits in 2011, 25 megabits in 2013 and 100 megabits in 2017. These data-connection speeds are technically doable today, with obsolete voice and video policy holding it back.

I’m not sure how government “encourages” things – it can really only mandate them or ban them. The doubling Kessler talks about has actually happened over the last 15 years without any help from government (speeds available to many consumers have gone from 30kbit/s in 1995 to almost 30Mbit/s today). The highest speeds aren’t uniformly available yet, but they are spreading rapidly and available to more and more households – again, without regulation. Voice policy has nothing to do with the deployment of broadband. And video policy is one of the major drivers behind the rollout of these networks, since the telcos are aggressively rolling out TV services over their new faster networks.

Technology doesn’t wait around, so it’s all going to happen anyway, but it will take longer under today’s rules. A weak economy is not the time to stifle change.

Data is toxic to old communications and media pipes. Instead, data gains value as it hops around in the packets that make up the Internet structure. New services like Twitter don’t need to file with the FCC.

And new features for apps like Google Voice are only limited by the imagination. Mother-in-law location alerts? Video messaging? Whatever. The FCC better not treat AT&T and Verizon like Citigroup, GM and the Post Office. Cellphone operators aren’t too big to fail. Rather, the telecom sector is too important to be allowed to hold back the rest of us.

“It’s all going to happen anyway” is the best possible summary of why a heavy-handed government intervention is the wrong approach. We’ve never justified government intervention on the basis of simply speeding up something that is happening already and there are good reasons for that.

Data isn’t toxic to old pipes – it’s what’s keeping them relevant – old copper lines had new life breathed into them by DSL, and are being supplemented or replaced with fiber connections which are designed to deliver lots and lots of data (yes, including video and even voice). Data doesn’t have any inherent value: it all depends what the content is. And today’s model has consumers or advertisers paying for content on the one hand and ever bigger pipes to stream it through on the other.  Those pipes are provided by telcos, who don’t find them toxic in the slightest. And those new apps? Mother-in-law location alerts? Check. Video messages? Check. The telcos don’t need bailing out – you were arguing, Mr Kessler, just a few paragraphs ago about how high their margins are.

Look, I’m sympathetic to many of the points which are buried in the piece – above all, I don’t like the fact that the Google Voice app was blocked on the iPhone – I’d have used it on mine, and I think it was shortsighted of the AT&T/Apple combo to block it. But I don’t believe that justifies government intervention. It should spur me to either: use the web version (www.google.com/voice), which is what I have done, or find a carrier / device combo that will support it. I don’t believe the US mobile market is perfect as it stands: texting prices for individual messages are probably too high, mobile broadband is patchy, AT&T’s network coverage sometimes stinks, etc. etc. But I don’t believe any of this justifies the kind of intervention Andy Kessler talks about in his piece. Rather, I think “It’s all going to happen anyway” and players like Google can only help it on its way.

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There’s been a lot of buzz recently about Google Voice, which is finally sending out invites to the many who have registered to participate in the private beta it’s running. But one thing has struck me about Google Voice during all this hubbub: it’s so 20th century!

Sure – Google Voice offers a variety of attractive features, like forwarding calls to various phones, visual voicemail, voicemail transcription and so on. But these have been available to some extent for years. Find-me, follow-me services and simul-ring services have been available on PSTN and VoIP systems for quite some time. Visual voicemail is becoming increasingly prevalent on high-end smartphones, and voicemail transcription services are common with VoIP offerings and will become increasingly so elsewhere. The web interface for all of this is somewhat innovative, but not ultimately hugely different from VoIP offerings in the market already.

The striking thing, though, is that all this is delivered over the PSTN, and in fact relies on circuit switched telephony to work. Google Voice doesn’t provide you with a phone or even a VoIP client – it is entirely a service for connecting your existing landline or mobile phones together. Yes, there’s some VoIP in the back end tying it all together, but this is the telephony version of Google News – a nice modern-looking front end enabled in the backend by a bunch of legacy services. This is ironic, since Google has had a VoIP client for quite a few years now in the form of Google Talk and the chat function buried in Gmail. But it’s completely unintegrated with Google Voice and the two seem to be developing entirely separately.

One of the key barriers to large uptake of Google Voice is the absence of number portability: the ability to switch an existing number to the service. Without that, you’ll have to notify everyone of your new number, and remind them constantly when they keep forgetting (and pray like heck that the service works out, or you’ll be telling them all to switch back). Number portability, which some have suggested may be coming to Google Voice soon, would solve that problem. But it also raises a unique issue: with regular number portability, you’re shutting off your old phone entirely, but with Google Voice you’ll still need a number to route the calls too, since it doesn’t provide an endpoint of its own. I’m not sure most carriers are set up to allow you to port a number off their network while maintaining the phone line: in essence they’ll have to issue a new number, which they may not want to do, and which their customer service reps may not know how to do (or want to do). What then? Will Google have a massive customer service issue on its hands when it launches portability? And all this with a service that has no real revenue stream at this point?

Perhaps they’ll solve that issue long-term by adding a VoIP client so that it provides its own endpoint and you can indeed cancel the service you had previously, but then it’s become something rather different – a VoIP client, something people have resisted for all sorts of reasons (some of them quite good). And I really don’t think they want to go the ATA / primary line replacement service – not least because that gets you into taxes and fees territory. And I’m not even going to get into how they make money here when there’s no real opportunity for advertising.

Overall, though, Google Voice in many ways feels very last century – a service that merely forwards calls between various old fashioned phones with a zippy interface. It’s getting lots of buzz, but as I noted earlier this week in a tweet, any closed beta from a well known company will do that (think of Gmail). I’m not convinced this is the telco killer some are making it out to be, even with the new mobile apps.

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A couple of experiences recently have reminded me of the importance of taking a fresh look at things from time to time – of taking oneself out of the everyday experience and attempting to look at situations from a different viewpoint in order to see the bigger picture and reorient oneself.

A personal experience (feel free to skip)

Our fridge broke down over the Memorial Day weekend – not the first time, but in fact the third in the last few months. Clearly time to replace it. But in the moment it was just stressful and frustrating: we have a tiny portable fridge that sits near my home office but it wasn’t anywhere near large enough to store all the food we had in our large fridge, and because the problem developed over a couple of days we had to throw out a lot of food and then deal with the inconvenience of living out of this small fridge in the basement while we figured out an alternative solution. To add to the frustration, it turns out that it’s very hard to buy a new fridge and get quick delivery – most stores will only do it in 15 days or so, which was clearly not going to work for us. So in a 3-hour window in our busy Memorial Day plans we had to hop in the car and go on a fruitless search for a new fridge – we didn’t find one, and so were in a bad mood for the rest of the day.

In the end, we bought a new fridge the following day and it was delivered on Wednesday. What little food we’d saved survived and was quickly rehoused, the freezer kept going well enough to preserve most of that food, and so by the end of Wednesday we were back to normal, more or less. At that point, perspective was easy to come by – things had not been so bad and we’d survived. Yes, it was frustrating, and yes, it was expensive – a hundred dollars’ worth of food and several hundred dollars’ of refrigerator later. But in the moment itself it was so hard to get away from the stress and frustration of what to do with all this food, where we were going to get a new refrigerator, whether we should settle for something less than ideal in the interests of getting the situation resolved quickly etc. In the moment, perspective was hard to come by, and we felt overwhelmed. After the fact, it was easier to see things in the proper light and feel less aggravated about the whole thing.

Perspective is hard to come by when we’re up to our elbows in rotten food

The long and the short of it is that when you’re up to your elbows in rotting food, it’s really hard to get a proper sense of perspective. And our working lives (and our personal lives too) are so often that way – we get tangled up in the minutiae of what we have to get done and all our time is taken up checking boxes and meeting deadlines, with very little time for something completely different. In some jobs, that might be OK – but in the vast majority of our lives, we all need to take a little time occasionally to reassess things, to get some fresh perspective, and to make sure we’re on the right track in a big picture sense, not just on deadline.

Google Wave is the perfect example

I’m writing this – at least in draft – on the evening of the day when Google Wave was announced to the world. Although it won’t launch officially for a few more months, it’s already generating huge buzz and promises to be a revolutionary communications platform. But it would never have come about without a couple of important examples of taking a fresh look. Firstly, Google has enshrined in its working practices the principle of 20% time – giving each employee an opportunity to work on something other than their day job for 1 day in 5. This pulls people out of the weeds and allows them to get a bit of perspective on bigger-picture things they could be working on.

But in addition, in this particular case, Google took a team of people who had come up with an idea – 5 years ago, in fact – and allowed them to go off and attempt to reinvent the communications experience. These were, in fact, not Google’s Gmail team or Google Talk team, but the people who created the product that eventually became Google Maps. They weren’t so entrenched in the minutiae of getting email to load faster or search to work better or putting more emoticon options in the IM product that they couldn’t see the whole thing needed an overhaul. They were physically separated from Google’s main campus in Mountain View by being located in Australia, of all places. And they came up with something truly revolutionary. I don’t think they could have done that without taking a step back and getting a fresh perspective – without looking through new eyes, in effect.

Establishing a process for gaining perspective regularly

Taking a fresh look and getting a fresh perspective is important to all of us and to our work and wellbeing. We need to step back from the coalface and see if we’re digging in the right place, or count our blessings and attempt to put our small troubles in appropriate perspective. It’s important for innovation, but it’s also important for our emotional health and our sense of satisfaction and enjoyment of what we do, to double check we’re on the right track or to make a course correction if we’re not. I haven’t yet developed a good discipline for doing this in either my work or personal life, but I’m going to be spending some time figuring out how to do it. I think it will come down to establishing a regular time to reflect and consider how things are going – to take inventory of both my work and personal life on a frequent basis. I’d love to hear any suggestions anyone else might have on how they’ve achieved this too.

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Scott Cleland of Precursor has posted a very interesting analysis of Google’s usage of bandwidth and the associated costs. He claims that Google is underpaying for its bandwidth by a factor of 21 based on a variety of calculations and estimates. The analysis is sound up to a point but it then makes the mistake of conflating two things that are really separate and don’t make much sense being treated the same. I posted a comment on his blog but since it hasn’t appeared (neither have any others) I’ve posted it here too.

In essence I think Scott’s doing a solid job of representing his clients – the telcos – but he also repeats a trope that began, I think, with Ed Whitacre – that Google is somehow using telco bandwidth for free when it should be paying for it. I use an analogy below to critique the analysis because this stuff is complex enough to benefit from it. Let me use another here to critique this idea that Google somehow ought to be paying its fair share. Say a store in a certain area suddenly starts doing great business, and customers are flocking to it on the local bus system. Would it be reasonable for the bus company to start charging the store to recoup some of its costs when all its customers are already paying the prices it has decided to charge in order to ride the bus? No. If it is unable to fund its costs from the prices currently being paid then it needs to charge more or seek ways to reduce its costs. The store isn’t the problem – in fact it’s doing good by creating more demand for the company’s services.

The telcos have no business asking Google to fund the costs of consumer broadband connections any more than the bus company has any right to ask the store owner to subsidise bus tickets. With that, I’ll leave you to the comment I posted on Scott’s blog.

Scott,

You’ve done some very interesting and useful analysis here. Thank you for sharing it with us.

However, one criticism is that you conflate two things and treat them as if they were the same and part of the same category: namely, consumer broadband spending and service provider bandwidth spending. These two things happen at opposite ends of the internet value chain and are entirely separate.

In chart VI of your report you act as if consumer broadband and dial-up internet access spending and Google’s spending on bandwidth were the only chunks of money being spent on bandwidth/broadband in the US. This is, of course, not true. Google’s spending should properly be put in the context of overall service provider spending on bandwidth, not treated as part of consumer internet access spending.

Measuring Google’s spending as a proportion of consumer internet access spending is meaningless – it’s like asking how much it costs the Yankees to drive their players to the stadium as a fraction of how much it costs all the fans to get to the stadium. You’ll get a number of out that but it won’t mean anything.

I would suggest calculating how much Google pays for bandwidth as a portion of all the spending by service providers on bandwidth used to serve US consumers. Your numbers might be just as stark, but at least then you’d be measuring the right thing.

The study attempts to push a theory that AT&T under Ed Whitacre but also others among the broadband providers have attempted to push for some time, which is that consumers and Google and others should all just pay their “fair share” of the costs of the Internet. However, this simply isn’t the way free markets work: the fact is that there is a value chain and different players pay for different parts (as they do in any other free market).

Google pays less than it otherwise might because it has so many peering arrangements (entered into voluntarily by the various parties to them) which it doesn’t pay anything for. That’s the way the system works, and large broadband providers benefit from it too. AT&T, Verizon, Qwest and the cable companies are perfectly free to develop their own business models to compete with Google and are entirely within their rights to sign whatever agreements they want to. No-one is forcing them into anything. They can also charge their customers less or more if they think that will solve the problem. The real issue here is that bandwidth use is skyrocketing and broadband providers don’t want to pass the costs on to their customers, but those customers are causing the increase in costs and should rightfully pay for it.

I’m not a stooge for Google or the broadband providers (though the broadband providers are clients of mine) but I think this analysis needs some tweaks before it becomes really meaningful. Thanks again for some very interesting groundwork though.

Note: I’ve heard Scott argue against net neutrality at a couple of industry events and I think he actually makes some really good arguments (although I think there – as here – he sometimes overplays his hand). I have a lot of respect for the work he does and I’m grateful for the analysis he’s done here too.

Note 2: Google has posted its own critique / response here.

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Google is famous for its “uncluttered design” especially as regards the Google home (search) page. Well, yes, we’ll give them that. Not hard to be better than Yahoo! in this regard given that Yahoo! was a directory first and a search engine second, and in between had become a bloated all things to all people portal.

But there are some things Google really doesn’t do well, or at least could do much better in relation to design, and also in relation to the features of some of its core products. Here are ten of them, from a purely personal perspective as a user of these products:

Gmail

1. OK – they finally gave us themes this past week. But why the heck did it take so long? And why were users limited to third party browser add-ons to achieve this effect? How hard could it be? But more importantly than themes (I’m using Shiny these days, by the way), is the design itself. So this one is more of a past peeve than a current one, but is reflective of how long it takes Google to get some of the basics in place. And I still can’t pick the colors of individual theme elements myself – I have to go with a complete package (pretty though they are).

2. Why should it take me two clicks (or more often one click, a scroll and a click) to file a message in a folder (sorry, under a “tag”)? I have the list of tags in my left navbar anyway – why not just let me drag the message there, as I can in any desktop email program and in Yahoo! Mail and Hotmail (or Live Mail, or whatever it’s called these days)? Are you worried that the extra page weight will slow the app down? Let me choose! You already give me an option to use the “Older version” and an option to use the HTML only version on a slow connection.

3. Why can’t I decide once and for all what font I want to write in, and have multiple signatures? Have you just assumed that if I’m serious about this stuff I’ll use a desktop client via IMAP? Why would I do that? The way you’ve implemented IMAP with tags and folders it screws up my list of folders every time I try to do it – I get three different trash folders and no easy way to manage archiving items… Again, how hard could it be to implement basic email templating and a signature picklist?

Google Maps

4. Why is it that you can remember locations I’ve typed in to the search bar and auto-suggest them when I’m typing but I can’t easily retrieve that list later? And then your “My Maps” feature is entirely separate? Can’t you integrate the two, and let me easily view all the locations I’ve previously either typed in or saved under My Maps in one easy list? You might allow me to sort that list by geography, or history, or by various tags I might have applied (if you let me do that). The way things are now, I’m forced to remember some element of an address to get it to pop up again in the auto-suggest list.

5. Secondly, why can’t you do a simple integration between Google Maps on the desktop and Google Maps for Mobile? I’ve been wondering this ever since I started using Google Maps on my BlackBerry and it’s still a bugbear on my iPhone. Why not allow me to access both my “My Maps” locations and recently searched locations from my desktop on my phone, and vice versa? I’m happy to log into my account in order to do this. Your friends at Yahoo! figured out how to do it long ago and it really can’t be that hard. After all, how likely am I to have my desktop/laptop PC open in front of me with a wireless connection to the Internet as I’m trying to follow those directions I looked up, compared with how likely I am to have my phone with me? And how about a “send to mobile” option so I could send myself an SMS with a link that will open in the Maps app or a browser on whatever mobile device I’m using?

Google Reader

6. My main frustration with Google Reader is that I have a lot of my own direct subscriptions but also several subscriptions to other people’s shared items. Because there’s a fair amount of overlap in coverage areas between these various feeds, I often find that an item that is in one of my direct subscriptions also shows up in one or more of the shared items feeds. It’s possible that I’ll sometimes see the same item directly, again in the TechMeme feed, and then two more times in shared items. Although the TechMeme one is hard to solve without a bit more cleverness, it should be straightforward to implement a filter to allow me to just see the item once (with appropriate annotations to indicate it was also in shared items – perhaps along the lines of FriendFeed’s recently added Related Items feature which I really like). I’m fine with it appearing in each of the appropriate folders so I come across it sooner rather than later, but once I’ve read it once, mark it as read everywhere else too. Please?

7. Then let me filter out stuff I’m not interested in. I subscribe to Engadget Mobile, but what if I’m bored about all the stories about the G1 phone? Why can’t I request that Google Reader automatically mark all stories as read in that feed if they mention the G1? Give me filters with some granularity to do this effectively so I can automatically discard things I know I’m not interested in.

8. Then add filters to move items into a special priority folder if they mention keywords I’m particularly interested in, so I can read those before I trawl through the rest.

9. Lastly, let me find features a lot more quickly and easily. Several times now I’ve had to go to a Google web search (ironically) to figure out how to get a Google Reader Shared Items widget for my blog. I shouldn’t have to do this. First, you call it a “clip” instead of a widget, which means I can’t find it using your Help search function. Not helpful. But then you bury it in a totally unintuitive section of the Reader settings. Instead of simply putting that option on the Shared Items page, where it belongs, I have to go and look under Tags and Folders. Now, there’s a reason for that – I might theoretically want to get widgets (sorry, clips) for specific tags or folders as well so you want that feature option there – fair enough. But put two links then – one under shared items (which is the logical place) and one under Tags and Folders.

Google Calendar

10. Again, it’s a question of helping me find features / functions by putting them in a logical place. I want to be able to set whether or not Google Calendar automatically creates a reminder for new calendar items, and if so what the characteristics are. So where do I go? Settings, right? But no, it’s not there. There’s no sign of it there. So I go into a calendar item and find the reminder section. Is there a link there to tell me where to change this setting? No. So I go to the Help function and it tells me that to change this setting I need to click on the tiny arrow next to the name of a specific calendar in the left navbar and then select Notifications (not Reminders, but Notifications, despite the fact that in individual appointments they’re referred to as reminders). Then I can finally set default settings. Why on earth is this so hard to find? Why not just have it under settings where any sane person will look for it? I realize that people might want to set this differently for their different calendars, but this is the default behavior even if you only have one calendar. And what if I want the same behavior for all my calendars? Couldn’t you at least have a link under Settings?

Some caveats

First, I sound like a grumpy old man. I’m not old or grumpy, as it happens, but these are things that repeatedly irk me when I use Google products.

Secondly, as will have become clear from the above, I still use Google products a great deal – Google Reader is my default feed reader, Google Maps is my default mapping provider, and Gmail is where I get my personal email. I also use Google Calendar to track some personal calendar items. So they have me hooked regardless of these shortcomings. Clearly, they’re doing a lot right.

Lastly, some of these will come down to personal preferences – some people may love the way these things work at the moment and some will agree with me. But my plea is partly for more choices – let me choose, and if in doubt provide a link in two different places so I can find something quickly instead of having to hunt around your Help function (or worse, a web search) to find what I’m looking for.

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I’ve been meaning to do another post on net neutrality based on a fair amount of recent activity on various blogs but haven’t had time. To cut down on the number of open tabs in my browser, I’m just going to dump the links here and let you read them yourselves:

• Vint Cerf for Google on reasonable approaches to managing networks
• A “history lesson” from Verizon
• Joost CEO Mike Volpi on net neutrality and Adam Smith

I’m not convinced any of these companies has 100% the right approach but I’m glad we’re finally discussing it in a reasonable manner rather than simply posturing or suing one another about this…

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I just re-read this recent post from the Google Public Policy Blog, and I still think it’s a lot of pie-in-the-sky nonsense. It really feels as though whoever wrote it either doesn’t know enough about the subject or has dumbed it down for readers to the extent that it makes no sense. Although the example cited is apparently real, the model described is far more complicated than it at first seems, and the chances of it being implemented on any large scale are virtually zero.

When I first saw the headline, “What if you could own your broadband connection?” I assumed that it was going to be about Google’s plans for wireless services – a little late perhaps given that they failed to secure any licences in the 700MHz auction, but it would have been interesting as an academic exercise. But no, it turns out they’re talking about fiber connections:

It may sound strange, and it’s certainly not what we’re used to. Today we have a “carrier-centered” model; phone and cable companies spend billions to build, operate, and own the “last-mile” connection — the copper, cable, or fiber wires that come into your house. Individual consumers then pay for particular services, like phone service or Internet access.

In turn, we tend to think about broadband deployment in carrier-centric ways. If we want to see super-fast fiber connections rolled out to consumers, the main question appears to be whether carriers have appropriate incentives to invest.

But there’s no law of nature that says this is the only possible model. Many businesses, governments, universities, and other entities already own their own fiber connections, rather than leasing access to lines. It may also be possible to find ways for consumers to purchase their own last-mile strands of fiber.

Here, as anywhere, there would be certain advantages that come with ownership over renting. No one necessarily needs to own skis or a car, but many of us do. If you owned your own fiber, you’d be able to connect it to a service provider of your own choosing. Over time, you might save money, and it could make your house more valuable to have a fiber “tail.”

I think the examples used are disingenuous – fiber cables owned by businesses or universities are often for private networks, whereas the whole point of a broadband connection is connecting to the public Internet. Even where Internet access is “owned” by someone other than the carrier, that makes no sense until you put equipment at both ends which allows the cable to be more than just a piece of hardware. And you need a carrier willing to both connect to the business end and to provide you with the appropriate equipment at your end to make that cable work. And of course, the cable itself just connects you to the carrier, which still connects you to the Internet, so they still own the vital connection even if you own the piece of string between your place and theirs. You therefore have no more real ownership over the key piece of the puzzle than you do today.

Then there are all the technical issues involved with maintaining and fixing such a cable. Even if you can get a service provider to hook you up to the Internet, you still own the last mile, and would be responsible for fixing it if something went wrong. Your service goes out – how do you figure out where it’s broken? If it’s someone digging up the road, how do they know who to notify before they do so? And how do you exercise any authority over them to get them to fix it quickly? What if something else goes wrong? Who’s going to fix it for you? Certainly not the local service provider you’ve deliberately bypassed…

I could go on and on – only three commenters have bothered so far on the post itself, so it seems most people haven’t taken it too seriously. But this feels like another one of those occasions on which someone has over-simplified a complex situation in a way that says, “now why in the world do we do this the way we do? Look how easy it would be to do it differently – and better! More freedom! More control for customers!” and so on. It’s also a favorite tool of politicians selling quick fixes to intractable problems usually caused by other politicians…

Ironically, I think there’s a lot more potential for the kind of model the Google blogger is talking about in the wireless sphere. There, no cables are necessary so ownership is a non-issue. It really is about simply having the right hardware at your end and a provider willing to hook you up at the other. With multiple wireless providers being able to serve the same area without digging up the streets there’s potential for real competition with none of the hassles associated with a wired local access network. You’re still going to need a service provider to hook you up unless you’re willing to become an Internet node in your own right. But there is at least the potential for greater competition and more choices for consumers.

Google, of course, merely participated in the 700MHz to try to force the existing carriers to create this kind of model, backing out of the bidding themselves when they thought they’d achieved their aims (possibly erroneously). Perhaps if they’d stayed in they’d have been able to make this kind of model a reality.

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A couple of days ago I posted on Google’s evil scale and although the post was mostly meant to be light-hearted, I also suggested that, at some point, Google was bound to start behaving like a big company, and that this was likely to be triggered by increasing criticism of the company by journalists and activists. It appears that Michael Arrington at Techcrunch agrees with me. He wrote the following today under the heading of “Will 2008 be Google’s end of innocence?“:

2008 may be the year that Google’s innocence ends, as media and governments start to cast a less forgiving eye at the behavior of the company that controls 60% of the search market and perhaps as much as half of all online advertising revenue.

…

There’s no getting past the fact that Google has out-competed everyone in the search game, and is justly collecting the economic rewards of that effort. But society loves to tear down their heroes just as quickly as they supported them as underdogs.

This may be the year that things change for the ten-year-old Google. Their days of innocence may be over – perhaps Yahoo, or Firefox, are the apples that they should not have bitten into.

As I mentioned a couple of days ago, at some point Google will cross over from innovative upstart to established incumbent, and many other changes will follow. I tend to agree with the assertion Arrington makes here: I think when that happens, which is a shift that will happen in people’s minds as much as in the corridors of the Googleplex, Google will find itself facing many more challenges than it currently does. And how it weathers that shift will be the indicator of whether Google is likely to be the next Altavista or Mapquest (companies which once dominated but then declined) or the next Microsoft (a company which, for all its faults has nonetheless remained tremendously dominant and very successful).

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I found this pretty entertaining – I guess it’s a little dated at this point but still very relevant in light of the ongoing debate about Google’s position on Chinese censorship. The attention to detail here is impressive – it’s been created to look just like the corporate pages at Google (although all the links point back to the creators at Lot49.com. The introduction, written as if a Google press release, follows:

At the 2006 World Economic Forum in Davos, Switzerland, CEO Eric Schmidt discussed Google’s decision to censor its search results. During his speech, he mentioned that we used an “evil scale” to weigh our actions. Applying that scale, we concluded that to withdraw from China would be “worse evil” than participating in censorship.

Having received a number of queries about our evil scale, we present an explanation here. Our scale divides evil into 15 degrees because we like hexidecimal and because it’s convenient for representing shades of gray online. Also, we find that the shift from numeric to alphabetic characters is useful in separating bad things from those that are really terrible.

We determined that removing certain information from search results on Google.cn rates a 6 on our scale. Withdrawing from China qualifies as an 8. Disorganized information helps no one. In fact, it is a detriment to society. When all messages are equally probable, entropy is maximized: H(M) = log | M |. We are committed to fighting entropy by organizing the world’s information. Working with Chinese censors will help us achieve our goal.

I wonder how Google feels about this stuff. They don’t yet have the reputation of other large corporations like Microsoft and AT&T for being overly sensitive about criticism of their products and policies, but you do wonder whether they will eventually move in that direction. It’s tough for any big company that strongly believes in its own mission and attitude to take criticism. So far Eric, Larry and Sergey seem to be fairly level-headed about it – let’s hope they stay that way.

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I just tried to sign up for Google’s new FriendConnect service. I filled in all the details and clicked “Submit” and then up came this page:

It appears Google is using one beta service (Google Spreadsheets – specifically, the feature which allows you to use forms to create spreadsheets for databases) to register for another (FriendConnect). As a result, “something bad happened.” This probably isn’t best practice for a hotly-anticipated new service from Google, much as I understand the urge to eat one’s own dogfood, as it were. Wouldn’t a standard web form with a more robust backend have done the trick?

At any rate, I’m looking forward to trying out the service if and when I can get it working. Looks like an interesting approach to “socializing” non-social networks, but a lot will come down to how it works in practice. I’m also looking forward to trying the other similar initiatives that were somewhat suspiciously all launched within a few days of each other (MySpace Data Availability and Facebook Connect).

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