Saturday, November 24, 2012

Why Wi-Fi does not have a future in the long run - an argument based on domestic power generators in India

I'll give the same argument here that I gave during a guest lecture by Ashish Wadhwani, Partner at IvyCap Ventures, in our Corporate Strategy class on 16-Nov-12.

Wi-Fi [including hotspots and tethering] is a temporary solution to the core problem of having a pervasive, low-cost, high-speed, always-available wireless network. Sooner or later, the world will have such networks, and these will most likely be provided by telecom service providers. Just like today we have nearly-universal, always-available, highly-reliable, and low-cost wireless networks for phone calls and SMSes [particularly in developed countries], we will eventually have networks with these desirable attributes for wireless data needs too.

Think about diesel- or kerosene-powered domestic power generators, widely used in homes in India. Why do people install these generators at their homes? It's because the electricity supply in India isn't reliable. Power outages are common and frequent, often unpredictably. Hence people purchase and install their own power generators to compensate for the lack of pervasive, nonstop, reliable power supply. Do people in Singapore also own and use domestic power generators? No, because the power supply there is clean, nonstop and overall reliable.

And sooner or later, this will be the case with India too. India will eventually have a power supply that will be clean, nonstop and overall reliable. You can bet that Indians will then stop feeling the need of having their own generators, and hence will stop buying them. A domestic power generator is a temporary solution to a bigger problem.

You can begin to see the parallels. For similar reasons, as wireless networks keep improving in every dimension, the stopgap solution that Wi-Fi fundamentally is will be needed less and less, as people will increasingly rely on seamless wireless networks provided by telecom companies. So instead of localized pockets of high-speed wireless provided by conversion of wireline broadband into Wi-Fi, there will be all-encompassing wireless networks. Whether 4G does this or 5G or 6G is not the question. The real issue is that this change will happen in the next couple of years.

Monday, November 12, 2012

Could Wikipedia 'affect', rather than 'reflect' the information present in reliable sources, and create a feedback loop?

Consider the term planned obsolescence. The New York Times, in May'11, said this of the term in the context of Brooks Stevens:

"A speech he gave at an advertising conference in 1954 was titled “planned obsolescence,” and while he didn’t coin the phrase, he is said to have popularized it. More significant, he had faith in the concept; for that he was reviled by some." - From the Pen of a Giant of Industrial Design, NYT, May'11

The current version of the Wikipedia article on this term does not cite any source for this claim [that the term was first popularized by Brooks Stevens]. Consider for a moment that the author of the NYT article, in May'11, was looking at this Wikipedia article before he wrote his story on Brooks Stevens, in order to both get a feel of the topic and also to smell test his article. And assume that based on his reading of the Wikipedia article of that time, he included the rather vague statement "he is said to have popularized it" in his article.

Because the current version of the Wikipedia article includes a notice at the top saying "This article needs additional citations for verification", it means that it is possible that someone will eventually pick up the May'11 NYT story as a reliable source, and will cite that story as a published evidence for the claim - in the Wikipedia article - that Stevens first popularized the term.

The set of events described above is entirely possible in real life. And if this happens, it will mean that unverified stuff on Wikipedia going into so-called reliable sources can eventually become verified, just because the so-called reliable source happens to publish it now.

Thursday, November 8, 2012

Google Maps for free is actually a good example of predatory pricing

Predatory pricing refers to pricing a product so low [or free] that you drive out existing competitors [who cannot bear the losses that you can], and also deter potential competitors from entering [again, because they cannot or do not want to bear losses].

France recently convicted Google Maps for unfair competition. I believe that Google giving away Google Maps for free is a perfect example of predatory pricing. If predatory pricing is illegal, then Google Maps cannot be allowed to be free. Note that I am not voicing an opinion on whether predatory pricing itself should be legal or illegal - I am only saying that assuming predatory pricing is illegal, Google Maps for free is illegal.

Why? Google most likely runs its Maps product at a significant loss - a comprehensive mapping service requires truckloads of software programming, energy, data centers, data collection, personnel, and so on. Naturally, this can only be proved if Google is forced to release its internal numbers about the cost and revenue of this product.

Sure, Google can argue that Maps provides Google with valuable data about its users, and that it is able to convert that data into some incremental revenue [and incremental profit] at its AdSense and AdWords products, but this conversion does not mean that the Maps product is itself profitable. Google probably cannot offer Google Maps profitably for free [currently].

Further, Google naturally can continue to bear losses at its Maps product because of its highly-profitable other businesses. Few companies have this luxury. In particular, smaller competitors who cannot provide a mapping product for free will naturally go out of business, because from a customer's perspective, a good product that is free is better than a good product that is paid.

Note that the inability of smaller mapping providers to offer a free mapping service does not result from any inefficiency in the way they run their businesses. Not does Google have a magic wand that allows it to sell Google Maps for free, and yet make profit, while others are unable to do so. Google is purposely making losses on Maps and it is doing so to attract customers away from other services.

Perfect predatory pricing.