Wednesday, June 08, 2005

The Greater Toaster Syndrome - 3G

One of the most frequent reactions I have to new technology announcements is "I know you can, but should you?".

Unfortunately, marketing and momentum often trump common sense. We all know the famous Beta versus VHS example, in which Sony had the superior technology, but Matsushita and JVC managed to out market Sony with VHS.

But there is another problem with technology which comes from doing things because it is possible instead of because it is the best solution.

Let me give you an example.

Back in the early days of consumer computing, there was tremendous excitement about the use of television sets to receive data. The prevailing computing paradigm was centralized processing with terminals to access the host. With the main cost of the terminal being the display, some bright spark decided that since everybody had a TV, it would make sense to add a box to the TV to let it receive data. This was called videotext.

Controlling access to televisions was seen as so important that a veritable arms race ensued between governments to establish their system as the standard and therefore to take over the world. Canada had a system called Telidon based on something called NAPLPS (North American Protocol Level Presentation System), while Britain had Viewdata/Prestel. The French went off and developed Minitel. Singapore is still running their system, 20 years after everybody else gave up.

As a newly minted Trade Commissioner, I was assigned to help set-up the Telidon Marketing Secretariat and sent off to promote the adoption of Canada's standard.

There are actually two lessons I learnt from this experience. The first is never to get involved with technology promoted by a government. I don't think any other episode has so changed my opinion from mild socialism to free market economics.

The second lesson is the one I started this posting with. I call it The Greater Toaster Syndrome. It is the equivalent of sitting in your kitchen and feeling cold. You realize the toaster has a heating element, which you modify at great cost to produce enough heat to warm a room. What you end up with is a toaster that burns toast, costs too much, and makes a lousy furnace.

Telidon and the other systems were flawed because they misunderstood the way people actually lived and used their televisions. You are unlikely to throw the kids off the boob tube to start balancing your cheque book. And not many people had a phone line beside the TV that they were willing to tie up in order to access the host.

All this comes to mind because of the hype that currently exists around 3G telephony. If you believe everything that is being proposed, all other devices are about to become obsolete.

It is possible to make a phone that is also a computer, and play music, and play video, and play games, and receive radio, and act as a flashlight. With enough tinkering, you could probably turn it into a heart defibrillator and a Taser self-defense weapon as well. The point is that the resulting device is unlikely to do anything well.

There is always a danger of being accused of being some sort of Luddite, so the critical assessment of new technology risks getting flamed by the current crop of enthusiasts who have adopted the gizmo as their new religion.

My acid test question is, "nice to have, or need to have?". I hate investing in "nice to have" stuff because it goes away in tough times. Truly new "need to have" technology comes around infrequently at best, but when it does, it transforms the way people function. Think PC's, email, and cellular phones.

In cellular telephony, there was an assumption among the early operators that cellular was just wireline with mobility, for which a premium could be charged. All that changed when the Nordic countries started abandoning the concept of long distance, and charging all calls at the same rate regardless of location. What is the point of an area code when you are mobile?

The next big change came when the kids figured out that there was an embedded messaging system in GSM called SMS. Instead of talking as expected, they started "texting". Quite a few carrier revenue spreadsheets went up in flames when SMS took off.

Never underestimate inertia or group think though. When spectrum became available for 3G, and the fantasies of mobile Internet access at 2mb became common, financial bids were placed for spectrum licenses that guaranteed to bankrupt the industry. Not unexpectedly, one finds governments guiding technology in this fiasco. What Finance Minister could resist the idea of auctioning off spectrum (which no voter could see anyway), and balancing the budget at the same time?

While their customers are happily texting each other, the cellcos are trying to figure out why nobody is paying hundreds of dollars a month in data fees to download content and swap photographs.

3G has the potential to offer meaningful services, but that is not going to happen with conventional thinking. With the cellcos trying to hold onto access, devices, and content, in order to pay off their massive license debts, it is unlikely that anything innovative is going to emerge. It will take a cellco with sufficient humility to realize that good ideas come from the market, not internally.

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