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Monthly Archives: January 2013

Time Warner proves competition improves broadband speed and cost

Broadband speeds have lagged in the United States, offering slower speeds for higher prices compared to most first world countries.  The U.S. ranks 9th for speed and 21st for price. Broadband providers have claimed people are using too much bandwidth, leading to data caps, reduced speeds, and other limitations.

Time Warner Cable, one of the first companies to test data caps on customers, has miraculously increased speeds and cut prices for a least one customer.  Consumerist reports a Kansas City customer received an email increasing his broadband speed 50% and lowering his monthly bill by 30 percent.  While its great to see a company lowering prices and providing more functionality, the reasoning behind it reveals ulterior motives.  Specifically, Google launched its own fiber optic internet service in Kansas City, offering 1 gigabit of speed (compared to a national average of 6.6 megabits) for a slightly higher monthly rate and offering free 5 megabit internet (which is the standard paid version from most broadband providers).

I and others have argued the dismal state of U.S. broadband is due to a lack of competition. In most markets, consumers have at most two choices for their internet service. Even in major cities, customers are locked into one option (like myself) where if we are unhappy with our speed and price, we have no option to switch.  Once a competitor enters the space, in this case Google, Time Warner finds it now has to compete for customers. No longer can it offer poor service for a high price simply because it has a monopoly on customers.  Claims of data congestion or over usage seem much weaker. 

There is speculation on whether Google intends to roll out its fiber service nationally, as that would be extremely expensive. Others suspect Google is simply showing up broadband providers, forcing them to improve their service (and show its technologically feasible and affordable to do so).  I lean more to the latter opinion.  Google favors a world where people use the internet more and faster.  Further, Google wants to be able to offer more services using the internet, and faster speeds make that a possibilities – showing more ads along the way.  As consumers, even if we may be wary of Google controlling more of our internet experience, we should be happy to see someone challenging the incumbent players who have so limited our internet experience thus far.  Competition improves services and lowers prices. Hopefully we’ll see more of this.

Newegg saves money by standing up to patent bullies

Patent lawsuits have become the norm in almost every business, from technology start-ups to retail. Patent trolls, or non-practicing entities, makes tons of money by suing dozens of companies over often overly broad or extremely obvious patents.  Many companies settle these suits because of how expensive a drawn out lawsuit can be.

Online retailer Newegg took a stand, stating in 2007 to never settle with patent trolls.  This strategy has been deemed a success.

Soverain Software, a company without any products, happens to own patents cover basic functionality of online shopping carts (5,715,314, 5,909,492 and7,272,639), which they purchased from another company. They decided to sue a range of companies from Nordstrom’s to RadioShack.  Many settled. Some faced million dollar verdicts and ongoing royalty payments. Newegg, even after losing in district court (in East Texas, a common venue for patent trolls), appealed and has managed to invalidate these patents, meaning Soverain cannot sue more companies and cannot even collect on payments from other judgments in their favor. 

Newegg is so impressive because of their unwillingness to settle.  Newegg noticed that settling with one, only invited more to sue.  By showing themselves willing to fight back, especially if they can win, might deter other trolls.

Sadly, Newegg’s strategy, while successful this instance, isn’t enough to stop this strangle on innovation.  Start-ups and small companies do not have the legal team or money to burn to endure a drawn out lawsuit, which is often why especially small companies settle.  Newegg claims they still receive threats over patent lawsuits, including four companies claiming ownership over some part of the search box.  Until Congress and the courts can return some fairness to the system, innovation will be stifled and money will be wasted on lawyers and trolls.

Netflix’s Innovation: Giving Viewers Control Over Content

netflix-logoNetflix’s stock has soared this week on news of excellent earnings and growing subscribers.  More significant is the release of Netflix’s new original series “House of Cards.” The $100 million prestige soaked series, from Academy Award winners David Fincher and Kevin Spacey, launches its full 12 episode season in all markets on February 12th. Also important, “House of Cards” will be available on every platform Netflix supports.  Any Netflix subscriber can watch every episode of the season by Saturday morning.

Compared to legacy media models, this is revolutionary, while at the same time, so simple and obvious about how consumers want to consume media.

Between time-shifting DVRs and online piracy, viewers already have pretty significant control over their viewing experience. International viewers still have to choose between piracy or waiting months to watch foreign shows. American “Downton Abbey” fans waited for almost six months for season 3, even needing to avoid major plot spoilers because of the long delay. Legacy television continues relying on windows and restrictions, something consumers are less willing to accept.

Netflix’s model has long been about enablement.  “House of Cards” screenwriter Beau Willimon explained Netflix considered several ways to release the episodes:

Should we do a traditional [one episode per week]? Should we do it in chunks, like four episodes, then five episodes, then four episodes? And we eventually arrived at [offering] 13 all at once because that speaks to what Netflix has to offer that really no other network does. Its subscribers watch content when they want to watch it, how they want to watch it, in what chunks they want to watch it. And so it puts the decision in their hands.

Let consumers choose how they watch their shows. It’s a revolutionary idea. Remove restrictions and enable users.  It’s empowering and value-enhancing.  These sound like great ways to build a business.