Mr. Malone of the WSJ lays out aspects of societal and business change that the US faces in say the next 50 years. He throws terms out like ‘fat pipe’, ‘process patents’, ‘free internet’, etc. Our loyal Thridpipe readers already know all this because we have this electronic pulpit on high. We have been laying this prescription down since this blog was created. —

- Build up Brand America. Government agencies, including the USAID and United States Commercial Service, need to promote American brands, via the Web, hardware and software, to everywhere in the world where they are currently unknown or disliked. Voice of America needs to become a massive Internet portal to the American economy and media.

The U.S. International Trade Commission must actively pursue illegal international threats to our e-economy from hackers to scammers — such as bringing serious economic sanctions against nations that look the other way (or even support) these activities. We need to capture the dominant share of the minds of the next two billion, enforce an honest Web, and make America again synonymous with the best.

- Create a Fat Pipe. Many of the great fiber optic lines entering and leaving the U.S. were almost dark a decade ago, and that abundance created an opportunity that helped propel the creation of companies like Google. But Google’s recent announcement that it was going to install its own cable across the Pacific to Japan suggests that the age of cheap bandwidth is almost over. Late last year, a report by Nemertes Research predicted a bandwidth shortage by 2011.

The U.S. needs to have the fastest, cheapest and most reliable Internet access on the planet, both inside our borders and in our connections to the rest of the world. Like the railroads and the interstate highway system before it, we need a program of direct investment, subsidies and tax breaks to assure that Americans always have the world’s best Web access – and the rest of the world has the best access to us.

- Revamp Nafta. While the Democratic candidates are calling for the abolition, or crippling of the North American Free Trade Agreement, what we should be discussing is how to revamp it and other trade accords to reflect the newly emerging world of people-to-people, not just business-to-business, trade. We need to be prepared for a world where knowledge workers around the world are hired online by the minute – in other words, radically simplified employee contracts, payroll tax documentation and W-2s, and improved tax laws on home offices, part-time work, and self-employment.

But most of all, we must not impede this inevitable transformation by doing anything to limit free trade – even if that means reaching individual trade accords with countries regarding buying and selling on eBay, MySpace, Facebook and the like.

- Promote a Free Internet. The lights of intellectual freedom that have been created by the Internet are slowly going out all over the world – look at China’s recent blackout of Web videos of events in Tibet. We need to fight to keep the Internet open and accessible to everyone on the planet, and keep tyrants from censoring their people.

Short of that, we need to keep the U.S. an island of Web freedom, open to anyone who can reach our servers and sites. A good start would be to require U.S.-based companies to maintain free speech in all their international subsidiaries – no more Yahoos helping foreign governments locate dissidents.

- Reform patent laws. In an era characterized by “free” downloads as well as the proliferation of pirate content sites, the overly broad U.S. patent and copyright laws need to be reformed to reflect these new sensibilities. Today they stifle innovation. A good place to start would be a revamping, if the not the elimination, of “business method” patents, which even Justice Anthony Kennedy has suggested can suffer from “potential vagueness and suspect validity.” Meanwhile, patent approvals need to be made faster, tougher and cheaper.

- Make education more open. It is time for the rest of us to accept the reality that education in the U.S. is now a multi-platform (public, private, home) experience, and begin building Web-based curricular support for all three. It is in our national interest to make all schoolchildren well-educated and competitive in the modern economy.

Now we are not Malone clones. There have been articles we have vehemently disagreed with. But for once he is firing all the cylinders. Most definitely get rid of the ‘business process’ patents. They are a scourge. But we ought to go further. First roll back patent use to 17 years as was originally fostered. If you can’t turn a profit in that period of time you don’t deserve to keep the patent anyway. Patents and copyrights should also have innovation and sunset provisions. If a patent holder does not utilize the patent or license it for deployment within the first 4 years then the patent is invalidated. As well if a copyright is not longer a published work available for first release purchase or the death of the author then it becomes public domain. I love Elvis Presley recordings, but something is wrong when the estate is still in force collecting royalties.

There is also one that Malone missed. ‘Promote the Everyman’. Foster an environment that anyone who wants to compete can do so. The function of government should be to build that stadium of equal opportunity. The place to start is in revamping small claims court to include all the provisions of superior court as to court directed remedies. Today most small claims are only available for remedy of monetary damages. The problem is in many cases the damage stems from systemic abuse by corporations. The little guy has to be able to have their day in court. Abolish one way contracts and forced arbitration as a manner to receiving products & services. Eliminate legal extortion by making it a penalty of disbarment for a lawyer to blindly issue legal threats without ascertaing that there has been actual damages to his client.

Mr. Malone is to be commended for this piece.

Read the whole article here.

The FCC in a new release of working papers has specifically run a discussion on the valuation of cost vs free transport and the Nash Equilibrium. –

One complicating factor is that allocating additional spectrum to unlicensed use may, under certain conditions, reduce consumer welfare. The economic problem is straightforward. Markets work best when the choices that economic actors make reflect the cost that their decisions impose on society. Economic agents typically incur the cost of their decisions by paying an appropriately informed market price. Due to the free entry condition inherent in unlicensed use (as traditionally conceived), there is no assurance that consumers will take into account the negative effect of their spectrum consumption decisions on the value other consumers place on using the same spectrum. Thus, rational users may “over-consume” freely available spectrum compared to the level that would promote both consumers’ and society’s interests. This welfare reducing outcome is referred to as the “Tragedy of the Commons.”

One solution involves treating spectrum allocated to unlicensed use as a “common pool resource” and utilizing a congestion etiquette to allocate spectrum to competing
users. Most existing etiquettes are based solely on engineering principles, as opposed to
market principles. This study defines four new potential congestion etiquettes, and examines the Nash equilibrium outcomes of each when spectrum users are allowed to choose between licensed and unlicensed options. We show that while each of the etiquettes improves the performance of the congestion-prone service, by reducing or eliminating the Tragedy of the Commons problem, …

But we have this from one of the Founding Fathers of the Internet age –

Bob Metcalfe thinks 1 Tbit/s Ethernet is inevitable, and he also believes the industry will have to tear down some standards to get there.

The “Father of Ethernet,” as he’s often called, will be delivering one of the keynotes at next week’s OFC/NFOEC show in San Diego, sketching what he believes will be the path to get to 1 Tbit/s speeds.

And in an exclusive LRTV interview, Metcalfe points out that the path might leave behind the equipment and even the fiber that’s been in the network for years.

“There comes a time when standards have to be overthrown,” he says. “We’re going down into sort of a dead end. I think that dead end is deep enough that we’ll get to 100 Gbit/s. The evidence is, to get to terabit Ethernet, we’ll have to break out of that dead end.”

Metcalfe, of course, has no problem with that kind of thinking.

“There’s now room to break loose of the stranglehold of standards and now move into some really fun new technologies,” he says.

But would anyone even need terabit Ethernet? It’s a question Metcalfe dismisses with his usual candor:

“We build it; they will come, I’m sure. It’s happened every time for 35 years.”

Understand where I am headed with this? There is a fundamental difference in viewpoints between readings. The FCC in the Nash analysis is a viewpoint in scarcity and how to manage it. Metcalfe on the other hand is a viewpoint in expanding bandwidth beyond which possibly the Nash Equilibrium problem does not apply. But regardless of your understanding of the technology involved you see here the classic matter of a governmental viewpoint of scarcity that must be managed vs a mindset that says that within bounds bandwidth will be cheap, and available. [Nobody escapes the laws of physics, STNG not withstanding. Sorry]

In the paper Modeling the Efficiency of Spectrum Designated to License Use and Unlicensed Operations apply the ‘tragedy of the commons’ and the Nash Equilibrium analysis to broadband spectrum usage. Reading through it, it appears to be a seminal piece of work. The Nash approach was predicated on a given set of choices with a known set of constraints to the player(s). So if I were a cable company like Time-Warner and not intent on spending another dime on technology. Looking at the Nash analysis as a means to maximize the income from the given customer reaction(s) would be a very valid way to approach things.

Yet here comes Metcalfe, ‘Its time to break out of impulse and go to warp’. Yes he is willing to ditch CDMA, ethernet, his brainchild to go for something faster and better. Fact he recognizes that it is the only way to get beyond 10Gbps in any practical manner. The goal is 1Tbps bandwidth for starters. Which brings us to our ‘nut’. Nash becomes almost of little consequence as the FCC paper would define it when given there is a unbound supply of bandwidth on a per subscriber basis. Will we get to 1Tbps wireless anytime soon? Probably not. Wireline sure. But is 1Gbps wireless possible? I don’t see why we could not get there in the next 10 years. Keeping in mind that the Auzzies have already developed a prototype 5Ghz chip for wireless.

But we won’t get there with an FCC that thinks, and acts in terms of ‘Tragedy of the Commons’ for that truly makes it a common tragedy for us all.

FCC working paper 42.
Metcalfe video clip.
If Only….

PS: I am not a Nash basher. His work “Nash equilibrium and welfare optimality” as part of game theory has been recognized in the financial sector as the underpinning of Quant Theory. His body of work is on par with Smith’s “…Wealth of Nations”. A wonderful movie was made of Nash’s life by Ron Howard, “A Beautiful Mind’. available on DVD.

Looking at the news feeds today I ran across this little ditty compliments of Tom’s Hardware, from Gartner –

Market research firm advised its clients not to wait until a recession is officially announced to cut their spending. Instead, “action is required” now, the company said, as “economic factors in the United States have deteriorated” to justify the preparation of cost cutting.

“Last October we published research recommending that organizations should prepare two IT budgets for 2008, the first reflecting guidance already provided by senior decision makers and a second ‘backup’ budget assuming the need to cut costs in response to the arrival of a business slowdown,” said Ken McGee, vice-president and Gartner Fellow. “Since that time the factors we based the research on - such as GDP growth projections and expert predictions for the likelihood of a recession - have worsened to a degree that convinces us it is now time for clients to prepare for cutting IT costs.”

Don’t have the source link, sorry. But we had this advise from the same Gartner in 2005 –

Gartner urges caution before downloading Firefox The Web browser may not be an unstoppable juggernaut

Matthew Broersma
February 10, 2005 (TechWorld.com) — Companies should think twice before jumping on the Firefox bandwagon, according to research firm Gartner Inc. The open-source browser has been gaining market share steadily over the past few months, helped by industry support and user enthusiasm, but Firefox isn’t the unstoppable juggernaut it might seem.

Browser switching is taking place at the level of individual users, rather than organizations, and some of the factors that make Firefox more appealing than Internet Explorer are likely to go away as the browser gets to be more popular, according to Gartner analysts Ray Valdes, David Mitchell Smith and Whit Andrews.
“The growth in usage of Firefox is driven by factors that are not inherently sustainable,” they warned in a study released last week.
…

Being kind, I will say — “kind of like stating the obvious isn’t it?” Taking a peek at ThridPipe’s stats we have roughly the following breakdown - IE 45%, Firefox 35%, All Others - 20%. Ooooh, looks like Gartner missed that one. Fact is Gartner usually misses more than it catches a trend. The reason of course is that every industry is different and even in recessions some industries are in growth mode.

My number one recommendation is know your industry. It drives not only your IT needs but your projections on income. Save your money and pass on the Gartner subscription.

We picked up on some discussion from InfoQ on topics related to Software as a Service. We believe that Saas will be part of the underpinning that pushes ThirdPipe transport. Saas is to Visicalc as ThirdPipe is to the Apple II. Its the demand engine that pushes the ThirdPipe supply chain forward. Listen in to a few clips then we’ll regroup –

Services that are built largely from other services are a reality, and offer many clear advantages. [For instance] … by leveraging service options like Amazon’s EC2 and S3, a very small company can build a simple, narrowly focused service and can cost-effectively sell it to a mass audience.

The types of services that could be used in the creation of new services span the spectrum, from base infrastructure services to complementary high-level application services that can be composed or mashed up.

Example services include: compute and storage services; DB and message-based queuing services; identity management services; log analysis and analytic services; monitoring and health management services, payment processing services; e-commerce services like storefronts or catalogs; mapping services; advertisement services; in addition to the more well-known business application services like CRM and accounting.

And…

Eric Norlin adds:

I believe that Greg is right on the money with the idea that the very process of building a “software company” is being altered by the service-based architectures being provided by “saas infrastructure enablers.”

And…

Larry Price argues:

EC2 and S3 are amazing and cool and Werner Vogels is a rock star for having lead the team that created them; but until there is a common portability standard and multiple suppliers, the market for virtual infrastructure services is not mature.

What is part of this proposal is the development of a derivatives market in business processes. A MashUp at this level on top of virtual services is not much different that its financial cousins on Wall Street — CDO’s, CDS’s and Options. It has some of the same dangers as well –

• Subprime meltdown = S3 outage.
• Bank reserves = Capacity planning (Or the lack of as we are finding in the financial world)
• CogHead failure = Hedge fund bankruptcy*

The Larry Price quip hints at the problem, but not far enough. It was tough enough that a MashUp would go Google Maps - in-house infrastructure. But when the MashUp goes purely virtual the level of complexity in meeting 9’s quality of service requrements (if needed) become almost impossible to calculate. Not only that but for every service provider added the level of portability of the application diminishes. My ability to move my Db off of S3 to BlueCloud is reduced for every additional API that I add to my overarching app beyond simply the Db API call.

It would also be interesting to research what the cascade effects were of the S3 failure. I think Amazon should at least issue a white paper to the industry as a whole as to what the multiplier effect was. We need to know in order to be able to assess risk. Were I a VC partner I would want to know that before I plunk my money down on a purely virtual venture.

It will become quite clear to the Saas providers that a series of unified APIs based on service set will be required. They will resist at first as differentiation provides lock in. But long term the unification will occur. Committes will be formed for Db, GIS, Presentation, QoS Metrics, etc. But in the end a portable set of APIs will come to be. The development community should demand it now before we move too far down the Saas road map.

Linky
*CogHead is solvent, I am referring to the hedge risk in the underlying ’stock’. In this case S3 service.

In what was an interesting article by Michael Malone, prinicpally about TJ Rodgers. Rodgers is an iconoclastic figure in the silicon enclaves of Calif. But the article has a fundamental flaw. In fact so fundamental as to call into question the authors understanding of things irregardless of his reputation. So what’s your beef Dog? Here –

A decade later, one of the scientists who worked with Noyce and Hoerni, Gordon Moore, by then co-founder of Intel, realized that this miniaturization/mass-production technique was advancing at a rate never seen before in human endeavor. This formulation was the famous Moore’s Law, which defines the modern world.

Most of us now understand, and appreciate, Moore’s Law, but in the semiconductor industry they live it every day. And T.J. is one of the best of them. And what he saw in SunPower was the impending arrival of Moore’s Law to the alternative power world … and more than anyone, he knew what that meant.

Even the nontechnical folks have probably heard of Moore’s Law. But what is it ? Here it is from the first reference ever offered by Moore — “The complexity for minimum component costs has increased at a rate of roughly a factor of two per year … Certainly over the short term this rate can be expected to continue, if not to increase. Over the longer term, the rate of increase is a bit more uncertain, although there is no reason to believe it will not remain nearly constant for at least 10 years.” Moore later modifed the rule to a doubling of transitor density every 2 years.

Mr. Malone’s expertise as offered in the ABC article.

Michael S. Malone is one of the nation’s best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation’s first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world’s largest-circulation business-tech magazine,

So what’s the disconnect? In a nut shell applicability. Moore’s law applied to the rate that which engineers could place transistors onto a silicon substrate. Initially the assumption that Moore made was that the rate was sustainable for at least 10 years. Later it was found that the limiting factor is in quantum physics. There is a physical limit to how small the electrical paths may become before electrons start jumping paths.

But that is a far cry from the limitations of solar power. The limitation is not under control of the engineers in this case but for lack of anyone else — God. That limitation is the power density of sunlight falling on the earth’s surface. Depending on who you quote its somewhere around 1.4Kw/m2 maximum. So that is your physical cap right off the bat. The second is the nature of sunlight and its effects on materials. You don’t get 100% efficient conversion, there is loss for conversion to heat.

Is there any part of this article that is applicable? Yes. Conversion efficiency and improvements in production cost. Applying IC fabrication techniques can improve the materials that should improve the conversion factor. Applying those same technologies to fabrication will reduce costs, which NanoSolar is actually doing. But you will not get a doubling in conversion efficiency every 2 years. The fundamentals are different.

But the base fact is one may not simply take Moore’s law and its near exponential growth in transistor density and make an inference that the same will be made in solar power production is erroneous and bad reporting if not bad science.

ABC article.
Solar density.

For those that read with interest the Bosses observations on the Comcast reply. Here is the whole sordid response. Linky.

Somehow I just can’t get it out of my head that if I was a Comcast subscriber that this might seem appropriate –

Blogs macht frei

As much as the Boss points out some very good points on a paperless shift. Nor do I think the shift will stop, its too convenient and faster. Reality points a very different picture on the industry as a whole:

• Growth of Lexmark, HP Print, Canon, Sharp and Brother are are running between 4-6% a year.
• Growth of cartridge supplies are running about 8% a year on a unit basis.
• Print software management services is a hot button in major corporations to manage costs. That because print volume is up.

Even the biggest complaint about print — that it is static — is going to disappear with developments that eInk is working. Plastic ‘paper’ will be the best of all worlds — reusable, data containment, human favorable format.

A shift to online is to be expected but I don’t expect print (not necessarily paper) to disappear anytime this century. But hey, its just one guys opinion.

This ladies and gentlemen is a prognostication. For the astute it could help them align their business goals. For others a opportunity of a different sort. And for still others this will fall on deaf ears. The point ladies and gentlemen is that the credit markets are at a roiling boil and that is not a good thing. A few data points if I may

“So the bottom line is that what the payroll data have missed is the fact that over the past six months, 520,000 self-employed individuals have fallen by the wayside (more than were lost in the entire 2001 recession). This may also be why it is that claims are suppressed – having never paid into the unemployment insurance program, these people are not necessarily entitled to any benefits. The population- and payroll-concept adjusted data show that employment fell 400,000 in November-December combined (because Thanksgiving landed so late in 2007, both months have to be looked at together, whether it be for jobs or retail sales). So we think the view that job growth is hanging in is, just in plain simple language, wrong.”

Look for unemployment to rise to 6% (or more) in the coming quarters. This will of course put a damper on consumer spending.

Self Employment is dropping sharply. The suspected cause in my view - ‘A’ level firms pulling back on contracted labor and doing more in house.

Goldman Sachs CFO David Viniar warned yesterday that some key mortgage bond insurers could collapse. Viniar, speaking at a CSFB conference, said credit markets are trading as if we are in a “worst recession”; and there is a “total disconnect between the equities market and the credit market.” (The Bill King Report)

There was a convention this week in Las Vegas of the American Securitization Forum. I talked to good friend Michael Lewitt who attended the conference, and he said the mood was simply dismal. The credit markets have gone from bad to worse. There’s almost no trading being done in the $2 trillion Collateralized Debt Obligation (CDO) markets. Perfectly good bank loans are trading at discounts of between 10-20% to par, in addition to much higher and wider spreads. There are a lot of opportunities for intrepid investors who can distinguish solid value, as funds, banks, and pensions are having to unload loans without regard to value. It is a buyer’s market. Let’s take a look at a few graphs from www.markit.com.

Which presages a tightening of credit across the board. We are already seeing this in the consumer credit card debit side. BoA jacking up rates on my customers cards to 28% in expectation that they will encounter a run of CC debt defaults. Finally this –

…Cue lawyers. I was recently sent a link to a conference that will be held in New York next month. It is basically for people who are interested in litigation over the subprime and credit mess.

Look at some of the topics: “Look inside the mortgage industry, its underwriting, risk analysis procedures and loan approval technology…Get up-to-date on who is suing whom and the status of the recent wave of securities complaints … Learn the key elements necessary for proving or disproving fraud and negligent misrepresentation … Find out what to look for when it
comes to disclosures, disclaimers and limitations on standing … Learn the role played by
rating agencies, insurers and the feds … Acquire the skills necessary to successfully
prosecute or defend mortgage-backed securities suits.”

Simply means that those hedge funds that lost loads of cash are lawyering up. So are the ratings agencies. But distractions hamper business.

So this affects the ThirdPipe world how?

• Frivolous activity usually falls by the wayside in a downturn. And we are in one my friends. Folks liike Sprint will probably roll out Xohm much more slowly, having to depend on current income to finance further expanion rather than using what was cheap debt. Xohm frivolous? Well considering that their core business is still cell calls, yes.
• AAA rated firms would actually see their loan rates drop as lenders look to quality as a cover for their cash. Anyone below an A rating will see their loan rates rise sharply. That increased cost of funds will cause many companies to reevaluate their internal IRR for what were funded projects for the year. Many project leaders will be sorely disappointed if not unemployed.
• Based on the observations above strong balance sheets will put Google, Verizon and AT&T at a better advantage than folks like Time Warner, Sprint and Yahoo.
• The VC folks will have a major uptick in show-n-tell coming thru their front door. With debt financing either unavailable or too expensive to make an idea fly, many will return to the VC route to get their darlings off the ground.
• A major opening for Open Source. As project leaders react to VP’s announcing 20% cuts in programs, the price differential between using FOSS vs Proprietary solutions will be critical. Fact in many cases it could make the difference between a program continuing or folding altogether.
• Consumers in a belt tightening mood will opt for UMPCs like the Asus eePC or Everex Cloudbook at $399 vs a Dell latitude or HP Pavilion at $599.
• Accelerated device level consolidation. Consumers will move to shrink their data streams and financial outgo. Why continue with separate devices when a smartphone could do? Of why shell out $499 for a smartphone when a eePC w/Wimax at $499 could do that an more?

The world of ThirdPIpe will roll forward. But speed with which it proceeds may slow. The majors may garner a tactical advantage. Consumers will be looking for value not glitz.

Debt of gratitude to Bill Mauldin of www.frontlinethoughts.com for the data sourcing for this article.

Yes quite a claim. But take a look at the image below. That thin film layer will have more impact on technology and hence our world equivalent to the microprocessor.

Awww come on Dog, you have to be kidding me. Nope. Couple of examples –

• Print. As a substitute for pulp paper. Remember the image can be static till rewritten. No longer do you go down to Staples an buy boxes of paper. You buy a box of film and reuse it thousands of times. The ‘printer’ no longer uses ink so there are no consumables to buy. The printer also can be your scanner as well. What can be written to the substrate can also be read off to your compute device. Talk about green technology!
• Displays. No more LCD with a 1″ thick frame. The display is paper thin. So a 1/4″ backer frame for stiffness is all that is needed. A display could be wrap around like Dell displayed at CES. Nor would glass yields be an issue for display sizes.
• DTV. Imagine coming home from Home Depot with what looks like a roll of wallpaper. You unroll it and paste it to the wall. You glue a transducer to the bottom corner that is fed to your HTS. You just installed your 120″ color display. Its a future I grant, the technology is not quite up to snuff for the refresh rates. But the theory is sound.
• Advertising. Couple EInk technology with WiMax. Signage technology right out of Minority Report. Speed signs that post the applicable rates adjusting for night and day. Much more sophiscated and user customizable automobile instrumentation in the dash.

The kind of technology is transformative in nature. Besides cost and refresh rates the lack of color has been a restricting factor to widespread adoption. Well Cool Gadgets reports that this technical hurdle has been broached. EInk, has cooked a deal with LG, a large compute display mfr to codevelop the technology.

This is the stuff that rocks the world.

The folks at WetMachine as doing a usual bang up job on observations on the 700mhz auction to date. For example –

For me, having stacked much on the Great Google Prophecy, I will cheerfully admit to being too close to things to judge objectively. But here are two tidbits of food for thought.

1) Google CEO Eric Schmidt made the evolution of the wireless net a centerpiece of his speech at Davos. How likely is it that Google CEO would hype the importance of wireless if they were not planing to win licenses?

2) Most analysts predicted Google would come in, bid the reserve price for C Block, and leave. They haven’t. So far, no one has bid the reserve price for C Block. Instead, the price has crept up gradually. Now it could be that Google will only bid high if it must, for fear of getting stuck with licenses it doesn’t want. But if that is the case, why show up at all? “To save face with the FCC?” Yes, but we will know after the auction when the identities of bidders and round by round information is revealed if Google never bid. So the “save face” excuse doesn’t really hold water. Rather, it seems likely that they are bidding like everyone else, i.e., like bidders that want to win.

I point out in a comment –

Assuming that this is like a bicycle race with the guy right behind the leader holding back before the sprint, Google better plan on meeting the reserve price at a minimum. FCC has the right to reject if all the bids are below the reserve. Not only that but somebody like Verizon could snipe a last minute bid and throw off Google’s game plan.

What I have seen of auctions in the corporate world are two strategies. 1) Do like what is happening now, inch up to it. 2) Stake to the reserve price and see who gets wet feet. Now the latter strategy requires the bidder to have properly assessed that even at the reserve there is a known ROI exceeding the reserve that none of the competitors have fathomed.

When I say ‘homework’, its the financial analysis to back up a bidders price to bid. For the Telco’s it would be rational for them to consider it as the subscription price for a given number of customers. Their problem of course being cannibalization of existing infrastructure. Or worse having won the bid have no takers for the services offered on the band over say continued use cellular with LTE.

Google on the other hand has a totally different problem. How do they structure an Adsense revenue out of this that makes financial sense. Or alternately a subscription model they have no previous experience with. Either way, Google has to discern a high water price less ~20% as their top bid. The problem? Is that high water price more than the reserve price for the ‘C’ block?

Having implemented well over a 100 IT auctions, the bidder who stakes a high price at the mid point of the auction has typically improved their success in winning by about 50%. It scares off the low ballers straight away leaving the field open for the 2-3 serious bidders. But even then your competitors have to scurry. They assume naturally your bid contains information they have not discerned. If their OODA loop is slower then yours then any additional information they may glean from internal sources maybe too late to affect the conclusion of the auction. I have seen this happen all too often with HP, Xerox, Lenovo. Their decision matrices are too encumbered in divisional drag to over come the likes of a Dell or Google. A similar case can be levied against the Telcos.

We are approaching the midpoint of the auction very shortly. It will be interesting to see the plays.