OTT News – August 2017

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It’s been a busy time in the OTT market with players coming and going and the choices available to customers growing more complicated and confusing.  Here are some of the bigger recent events in the industry.

Continued Cord Cutting. The major cable providers lost 946,000 cable customers in the second quarter – the worst quarterly loss ever. This puts cord cutting at an annual loss rate of 2.7% of customer, up from only 1% a year ago. It’s obvious that cord cutting is picking up momentum, and the wide variety of OTT viewing has to be a contributor. Nielsen recently reported that 62% of homes now watch OTT content at least occasionally.

It’s getting harder for analysts to count cable customers. For example, Dish Networks is not reporting on the specific performance of its satellite service versus SlingTV. The losses for the quarter were also eased a bit by the fact that Charter began counting seasonal customers even when they go dormant, such as the snowbird in Florida who subscribe only in the winter but who keep the account active.

ESPN / Disney OTT Offering. Disney announced that it would be launching two new OTT offerings in 2019 – a standalone ESPN offering and a standalone Disney offering. Along with this announcement they announced they will be withdrawing Disney content from Netflix. The ESPN offering will not duplicate the cable version of the network and will not include things like the NFL and NBA. But it will include major league baseball, the NHL, major league soccer, grand slam tennis events and college sports. Analysts think this offering is mandatory since ESPN has lost 13 million subscribers since 2011 and advertising revenues dropped 8% last quarter.

The standalone Disney offering is also interesting in that the company has decided to take Netflix on head-to-head. Because of contractual arrangements Netflix will still have access to content produced by Disney such as the numerous shows produced by Disney’s Marvel Studios. But starting in 2019 Disney is going to make new content only available on their own platform. This prompted Netflix to purchase Millarworld, a major comics producer.

NBC Closing Seeso. NBCUniversal says that it will be ending the Seeso OTT offering later this year. This is an offering that consisted largely of NBC comedy and related entertainment such as Saturday Night Live and the Tonight with Jimmy Fallon.

This failure is a big warning to the many cable networks that have been contemplating using the strategy of shoving existing content online. Industry analysts say that simply taking linear content online is not a recipe for success. It seems that the platform is just as important as the concept and the bigger platforms like Netflix keep customers engaged and enabling them to move from show to show without leaving the platform. But it’s too easy for a customer to leave a limited-offering platform, thus diminishing the perceived value for customers to buy a subscription.

Facebook OTT Offering. Facebook has announced the launch of Watch, an OTT service that will include content from A&E, Univision, Major League Baseball and other content such as worldwide soccer. For now the new service is being launched overseas with some limited US trials, but is expected to hit the whole US market later this year.

The offering is being structured like YouTube to enable content creators to launch their own channels. Facebook is currently funding some content providers to seed content on the new service. They are hoping that within time the platform becomes self-sustaining and can be an alternative to the wildly popular YouTube. Facebook is counting on their ability to lure enough of their billion plus users to the new platform to make it a success. The company’s goal is to keep people on their platform for more than just social networking.

Apple. Apple will be entering the OTT world and announced that they will spend $1 billion to create programming content over the next year. This puts them into rarified company with Netflix that is spending $6 billion, Amazon at $4.5 billion and HBO at $2 billion. There is no news yet of the nature or timing of an Apple OTT offering.

The Death of 2.4 GHz WiFi?

Wi-FiIt’s been apparent for a few years that the 2.4 GHz band of WiFi is getting more crowded. The very thing that has made the spectrum so useful – the fact that it allows multiple users to share the spectrum at the same time – is now starting to make the spectrum unusable in a lot of situations.

Earlier this year Apple and Cisco issued a joint paper on best network practices for enterprises and said that “the use of the 2.4 GHz band is not considered suitable for use for any business and/or mission critical enterprise applications.” They recommend that businesses avoid the spectrum and instead use the 5 GHz spectrum band.

There are a number of problems with the spectrum. In 2014 the Wi-Fi Alliance said there were over 10 billion WiFi-enabled devices in the world with 2.3 billion new devices shipping each year. And big plans to use WiFi to connect IoT devices means that the number of new devices is going to continue to grow rapidly.

And while most of the devices sold today can work with both the 2.4 GHz and the 5 GHz spectrum, a huge percentage of devices are set to default to several channels of the 2.4 GHz spectrum. This is done so that the devices will work with older WiFi routers, but it ends up creating a huge pile of demand in only part of the spectrum. Many devices can be reset to other channels or to 5 GHz, but the average user doesn’t know how to make the change.

There is no doubt that the spectrum can get full. I was in St. Petersburg, Florida this past weekend and at one point I saw over twenty WiFi networks, all contending for the spectrum. The standard allows that each user on each of these networks will get a little slice of available bandwidth, which leads to the degradation of everyone using it in a local neighborhood. And in addition to those many networks I am sure there were many other devices trying to use the spectrum. The WiFi spectrum band is also filled with uses by Bluetooth devices, signals from video cameras and is one of the primary bands of interference emitted by microwave ovens.

We are an increasingly wireless society. It was only a decade or so ago where people were still wiring new homes with Category 5 cable so that the whole house could get broadband. But we’ve basically dropped the wires in favor of connecting everything through a few channels of WiFi. For those that in crowded areas like apartments, dorms, or within businesses, the sheer number of WiFi devices within a small area can be overwhelming.

I’m not sure there is any really good long-term solution. Right now there is a lot less contention in the 5 GHz band, but one can imagine that in less than a decade that it will also be just as full as the 2.5 GHz spectrum today. We just started using the 5 GHz spectrum in our home network and saw a noticeable improvement. But soon everybody will be using it as much as the 2.4 GHz spectrum. Certainly the FCC can put bandaids on WiFi by opening up new swaths of spectrum for public use. But each new band of spectrum used is going to quickly get filled.

The FCC is very aware of the issues with 2.4 GHz spectrum and several of the Commissioners are pushing for the use of 5.9 GHz spectrum as a new option for public spectrum. But this spectrum which has been called dedicated short-range communications service (DSRC) was set aside in 1999 for use by smart vehicles to communicate with each other to avoid collisions. Until recently the spectrum has barely been used, but with the rapid growth of driverless cars we are finally going to see a big demand for the spectrum – and one that we don’t want to muck up with other devices. I, for one, do not want my self-driving car to have to be competing for spectrum with smartphones and IoT sensors in order to make sure I don’t hit another car.

The FCC has a big challenge in front of them now because as busy as WiFi is today it could be vastly more in demand decades from now. At some point we may have to face the fact that there is just not enough spectrum that can be used openly by everybody – but when that happens we could stop seeing the amazing growth of technologies and developments that have been enabled by free public spectrum.

Too Many Gadgets?

ibm_chip1It seems that we have reached a point where the typical consumer thinks there are too many gadgets in his (or her) life and the average person is becoming less interested in buying new ones. A poll conducted earlier this year by Accenture showed that consumer demand for personal electronics is greatly reduced compared to recent years.

The drive to have personal electronics was spurred by the smartphone revolution, which has outperformed sales compared to almost any other product in history. But there have also recently been other personal electronics products like the Fitbit and health wearables that have done very.

But it looks like the shine might be coming off of the personal electronics industry. The Accenture survey showed that fewer people are considering buying every category of personal electronics. For example, the poll showed that only 13% of respondents were considering buying a new smartphone in 2016. That is far below the levels seen in recent years where a significant percentage of smartphone users upgraded their phone every 2 or 3 years.

And the survey also showed weak demand for wearables like Fitbit, for virtual reality, for drones and for the Internet of Things. If this poll is true, then all of these industries are going to underperform compared to expectations. We are certainly seeing this in the real world. Apple stock just stumbled due to falling demand for the iPhone. Samsung and the other smartphone makers went through the same thing last year.

The poll didn’t ask why this was so, but just measured consumer demand. I can think of several reasons why demand is down. First is cost. None of these personal electronics are particularly cheap and it’s unrealistic for the market to expect that all of these electronics will sell as wildly as is predicted by industry insiders. If you listen to the hype each year at places like CES you would expect that everyone in America will soon be buying drones and piles of IoT devices for their homes.

I think another primary reason for the decline is performance. My wife has a sports device to track her running. It works great for what she wants from it and there is no particular reason for her to upgrade it. And every runner she knows has one. Once the market for runners and walkers is saturated there is only so much that can be expected in demand for a device with such a specific function. There is just not much difference between the newer sports wearables and ones sold just a few years ago.

And performance is now a bit issue with smartphones. There is not much difference any more between one generation and another. The new smartphones look the same, feel the same and do about the same things and the old ones. And this is more the fault of the slowing of Moore’s law than anything else.

Since the early 70s chip makers like Intel have released a new chip about every two years that crammed about twice as many transistors into the same chip space. This is the primary reason why each new generation of the iPhone has been a noticeable improvement over the previous model. Each new chip has meant a big leap upward in speed, energy-efficiency and performance of the smartphone.

But in the 10-K filed with the Securities and Exchange Commission at the end of 2015 Intel disclosed that the pace at which it will launch new chips is going to be slower in the future. Intel’s latest mass-production chips for smartphones now have a gap between components of 14 nanometers. Physics is going to limit that ultimate gap to perhaps 4 or 5 nanometers at the smallest due to the size of the molecules of the chip materials. There isn’t very much more room for improvement.

This is not to say that there won’t continue to be improvements in computers – but soon the improvements are not going to come from more compact chips. There are amazing new breakthroughs coming in other areas. IBM has a new chip that works in 3 dimensions that has a lot of promise for supercomputers. There are computers becoming faster by using light instead of electricity. And there is a lot of promise from quantum computing. But all of these improvements, at least for now, are likely to help larger computers and don’t lend themselves to the cheap mass-produced chips that drive personal electronics.

And none of this means that the market for personal electronics is dead. There are still huge numbers of all of these devices being sold. But when you use the performance of Apple over the past decade as the way to measure success in the electronics world it’s likely that nothing is ever going to measure up to that yardstick.

This is a cautionary tale for any carrier that is considering selling home automation, energy management or security. There is a decent living to be made in all of these areas, but don’t get sucked into the hype that every home in America is going to want all of these devices and services within the next few years. Because it appears that is definitely not true.

Should the FCC Regulate OTT Video?

FCC_New_LogoA funny thing happened on the way to make it easier for OTT video providers to get content. Some of the biggest potential providers of online content like Amazon, Apple, and Microsoft have told the FCC that they don’t think that online video companies ought to be regulated as cable companies.

Of course, these couple of large companies don’t represent everybody who is interested in providing online video, and so they are just another faction to deal with for the issue. For example, FilmOn X recently got a court order allowing them to buy video as a regulated video provider and in the past Aereo had asked for the same thing.

A lot of the issue boils down to companies that want to put local networks online or else deliver them in some non-traditional way as was being done by FilmOnX or Aereo. These kind of providers are seeking to get the ability to force the local network stations to negotiate local retransmission agreements with them. Under current law the stations are not required to do so and are, in fact, refusing to do so.

The FCC is in a tough spot here because they don’t have a full quiver of tools at their disposal. The FCC’s hands are very much tied by the various sets of cable laws that have been passed by Congress over the years – the rules that define who is and is not a cable company, and more importantly, the rules and obligations of being a cable company. It will be interesting to see how much the FCC thinks it can stretch those rules to fit the situation of online programming, which was never anticipated in the rules.

I can certainly understand why the large companies mentioned above don’t want to be cable companies, because there are pages and pages of rules about what that means; the FCC is unlikely to be able to grant a company just a few of those rules without also requiring ones that these companies don’t want.

For example, the current cable law defines required tiers of service. Cable companies must have at least a basic and an expanded basic tier, and those are very narrowly defined. A basic tier includes all of the ‘must-carry’ local networks and the expanded basic carries all of the things we think of as cable channels.

I think what the FCC has in mind is a set of rules that require programmers to negotiate in good faith with online companies that want to buy their content. Certainly any company that wants to put content online today is completely at the mercy of programmers saying yes or no to giving them the content they want to carry. And there is nothing from stopping the programmers from changing their mind if they see an OTT company being more successful than they like.

So I would think that even Amazon, Apple, and Microsoft would like the ability to force the programmers to negotiate with them, but they obviously don’t want other FCC rules that they think will come along with that ability. Of course, these are very large companies with deep pockets and one has to imagine that they get a fairly decent hearing when they talk to programmers. The FCC’s real concern is not these giant companies, but companies smaller than them who don’t have any ability to force the programmers to even talk to them. I think the FCC believes that if online content is to be successful that there ought to be widespread competition and innovation online, not just content provided by a few giant tech companies along with other huge companies like Verizon.

Today the programmers have most of the power in the industry. They are making a huge amount of money from the mega-subscription models where all of their content is forced upon US cable companies. And they have no reason to become more reasonable because most of them are seeing gigantic growth in selling content overseas, so they have no real reason to upset the cart in the US market.

If online content is to become a vibrant alternative and not just be expensive packages foisted on the public by a small group of huge corporations, then something has to change. I just don’t know how much the FCC can do realistically considering how they are hamstrung by the current cable laws.

A Few Lessons from Big Companies

Text-messageI spend a lot of time reading about corporations and I think there are some lessons to learn from them that are relevant to small companies.

Selling Product versus Building Relationships. There are many  large companies that sell products without developing relationships with their customers. In our industry the large cable and telcos come to mind. They are all rated among the worst of all corporations in delivering customer service and they even antagonize many of their customers. This works fine for them until they get competition, and then the customers who don’t like them quickly jump ship to the new competitor.

But there are large businesses that go out of their way to build customer relationships because they believe that loyal customers are their most important asset. Consider car manufacturers. They realized a long time ago that they were not going to be good at customer service, so they created a network of dealers who are local businesses with ties in each community and these dealers have built trust over generations. And there are many other companies that deliver great customer service. Tech firms like Amazon, Apple, and Google have been consistently rated among the top ten in customer satisfaction for the last few years – showing that tech firms can put an emphasis on customers and still thrive.

My most successful clients build relationships with their customers and as a result have built a loyal customer base. Many of them are or were monopolies, and there was a time when most of my clients could not tell me who their ten largest customers were. But I rarely see that today and small telcos and cable companies have learned to build loyalty through building relationships.

Growing Fast versus Growing Deliberately. Many large companies need to grow fast to be successful. Once you have taken venture capital money or gone public then the pressure is on to grow profits quickly. But growing too fast almost always changes a company in negative ways. It’s really common to see companies go into the growth mode and then forget who they are. Most tech companies, for example, started with a small core of people who worked hard as a team to develop the core company. But when it’s time to grow, and companies hire mountains of new people it’s nearly impossible to maintain the original culture that made the company a great place to work.

Growth can be just as hard for small companies. It can be as hard economically and culturally for a small company to grow from 5,000 to 10,000 customers as it is for a large company to add millions. Small companies are often unprepared for the extra work involved with growth and find that they overwork and overstress their staff during a growth cycle. Growth creates a dilemma for small companies. If you hire the people needed to staff the growth period your company will be overstaffed when growth stops.

And so a lesson about growth can be learned from large companies. They will often staff growth through temporary employees, contractors, and consultants rather than take on people that they may not need later. Companies of any size are hesitant about hiring employees that they might not need a year from now.

High-Tech versus High-Touch. A lot of large businesses are trying to feign a good customer service experience by electronically ‘touching’ their customers often. I recall last year when Comcast introduced a texting system to communicate with customers. After they sent me half a dozen text messages in the same week, I disconnected the texting function because I really didn’t want to hear from them that often. But there are large companies who are convinced that if they electronically reach out to customers often that they are engaging in relationship building and proactive customer service.

And perhaps they are with some customers. But I am more appreciative of a business where I can talk to a person when it’s needed. Not that I mind electronic communications. I like to know that AT&T has auto-billed me and I like knowing when charges hit my credit cards. But I don’t want to be bothered by a business when they aren’t passing on information I want or need.

The important point here is that you have to touch your customers sometime and whether you reach out electronically or in person it’s better than no-touch and not talking to your customers. I know telecom companies that call every customer at least once a year to ask them if they like the service and if everything is okay. Such calls are welcomed by most customers and this is a great tool for businesses to build relationships. But just be prepared that if you ask your customers how you are doing that you need to be ready to deal with negative feedback. That is how to build happy customers.

To Encrypt or Not to Encrypt

SpyVsSpyWe are seeing a major policy tug-of-war about privacy on the Internet. On one side are law enforcement and national security agencies that want to be able to monitor everything that happens on the web. On the other side are those that value privacy the most. This is not a new debate and has been going on since the 90s.

Encryption has been around for a while, but it’s generally believed that agencies like the NSA have cracked most existing encryption schemes and are able to readily decipher communications between most parties on the web.

Recently, Michael D. Steinbach, assistant director of the FBI’s Counterterrorism Division, testified to Congress that the FBI has no problem with encryption as long as the government still has access to the underlying data. He thinks that encryption between people is a good thing to keep personal data from being intercepted by bad guys on the web, but he still thinks that there are law enforcement and national security concerns that are more important than individual privacy concerns. The real concern is that encryption will allow criminals and terrorists to go ‘dark’ and evade detection or monitoring.

But the revelation that the NSA is spying on everybody has really upset the technology community that run the Internet. The  vision of the Internet was to be a place for the free exchange of information and many technologists believe that widespread surveillance squelches that. And very few people like the idea that the government knows your every secret. And so we see companies that are working to find ways to make communications private from snooping—including from the government.

Apple is the largest company to take a stance and they have initiated end-to-end encryption on the iPhone. The way they have done this only the sender and receiver of a communication can unlock a given message and Apple is not maintaining any way to crack the encryption themselves. This means that Apple is unable to reveal what is inside customer communications even if served with a court order. I am guessing that one day this is going to be put to a legal test and I can picture laws being passed that stop companies like Apple from doing this. And I am sure Apple will fight back, so ultimately this might have to be determined by the Supreme Court.

But there are other groups working on a privacy solution that even laws might not be able to touch very easily. One such company is Ethereum. This is a crowd-funded group in Europe who is building upon the early work with bit coins to build a decentralized communications system where there is nobody in charge because there is no centralized network hub – there is no company like Apple at the core of such a network. In such a hubless network it’s much harder for the government, or even companies like Google and Facebook to spy on you.

This requires the establishment of peer-to-peer networks that is a very different way of structuring the web. Today the basic web structure is based upon software sitting at specific servers. Things are routed today because there is a massive database of DNS addresses that list where everything can be found.

But Ethereum is taking a totally different approach. They have built apps that find space on millions of customers’ computers and servers. Thus, they are located everywhere, and yet at no specific place. Ethereum is using this distributed network and building upon the block-chain technology that underlays bit coin trading. The block-chain technology is so decentralized and so secure that nobody but the sender and receiver can know what is inside a communications chain.

Ethereum isn’t really a company, but rather a collective of programmers that intend to disband once they have established the safer communication methods. And they are not the only ones doing this, just one of the more visible groups. This creates a huge dilemma for law enforcement. There is a huge amount of web traffic dedicated to nefarious purposes like drug trafficking and child pornography, without even considering terrorists groups. Governments have had some limited success in shutting down platforms like Silk Road, but the systems Ethereum and others are building don’t have a centralized hub or a place where the system can be stopped.

I have no doubt that the government will find ways to crack into these systems eventually, but for now it seems like the privacy advocates are one step ahead of them, much in the same way that hackers are one step ahead of the web security companies.

I don’t know how I feel about this. Certainly nobody benefits by enabling huge rings of criminals and terrorists. And yet I get angry thinking that the government is tracking everything I am doing online. I’ve read all of the sci-fi books that explore the terrible consequences of government abuse due to surveillance and it’s not pretty. I am sure that I am like most people in that I really have nothing to hide. But it still makes me very uneasy to think that we are all being watched all of the time.

Selling Our Personal Data

SpyVsSpyRecently, the CEO of Apple, Tim Cook, has been making speeches in multiple forums that contrasts Apple’s privacy practices to those of other large consumer-based companies like Google, Facebook, and Yahoo. Cook says that his company is selling superior products and that they are not in the business of gathering or selling information about their customers.

Certainly he can’t say that Apple doesn’t use customer information, because they do. I have a Macbook and there are tons of ways that Apple uses my data to make my experience better. If I travel, the Mac will display the right time and local weather, for example. And various Apple software products will get to know me and make customized suggestions for me over time. But Cook’s point is that Apple doesn’t sell that data to others.

Of course, the companies that Cook is comparing himself to do not sell electronics like Apple but rather software. Probably the closest analog to Apple is Samsung and they can’t make the same claim as Apple. Late last year it was discovered that Samsung smart TVs were capable of listening to customer conversations all of the time. It’s not clear that Samsung gathers data directly from its smart phones, but they have chosen Android and one can imagine that part of that arrangement is to let Google gather data from Samsung smartphones.

Companies like Facebook and Google have a hard time not using your data, because that is really the only way they can generate value. It’s wonderful to have millions of loyal users on your platform, but both companies make most of their money from advertising. Certainly Google’s search engine advertising doesn’t require any data from users and that revenue is driven from the companies who want their products to be at the top of the list in a search. But Google and Facebook also sells web advertising, and the name of that game is to know the user in order to direct the most relevant ads to each customer.

I think if using our information stopped with advertising that most people would be fundamentally comfortable with having these companies invade their privacy. I know I find it eerie when I do a Google search and for the next three days I see ads that are related to for something I searched for. But I can personally live with that, because most of the time Google is wasting their time on me and I wasn’t looking to shop. I find it funny that I will look up the latest information about smart cars and then get flooded with car ads (because I exclusively drive Ford trucks and I buy one every twenty years, whether I need a new one or not).

The real rub is that these companies do a lot more than build advertising profiles on us. They know all sorts of other personal data about us and they associate that data with our name. While I am not bothered by getting car ads for vehicles I am never going to buy, I frequently hear about people getting bombarded with ads or even mailings and phone calls about far more personal topics like rehab centers or the latest diabetes treatments. That is going over the line in my opinion.

The invasion of our privacy seems to be going even further. Facebook, for example, is the world leader in facial recognition technology and they are building a huge database of every time you show up in somebody’s picture. They not only know about you, but they are learning where you go and who you associate with. That is a bit unnerving.

But to me the real scary thing is that these companies then sell this data to others. And there is no telling how that data is used. Even should the large companies have some sense of morality and responsibility (and many believe they do not), the companies that buy this data can do anything with it they please. It’s very easy these days to buy a data dump about other people, and that kind of information can be a powerful tool in the hands of an ex-spouse, an employer, or a scammer.

The problem that we all face is that it’s too easy to use the services that watch us. Google has a spectacular set of software products. And for my generation there are a ton of friends and relatives on Facebook. If you don’t want to be spied on you have to make a very conscious effort to wall yourself off from these sorts of data-gathering web activities, and that is hard to do. And no matter what you do online, your ISP or the government might be gathering all of this data anyway.

These large companies sometimes hide behind the fact that they mostly sell ‘metadata’ which is data that has been scrubbed to hide the identify of individuals. But numerous articles point out that with data mining it’s only necessary to know a few facts about you in order to pull out facts about you from metadata files.

We may come to a day when there is massive pushback against these companies that are collecting, using, and selling our personal data. It will probably take a string of tragedies and disasters for this to become a worry for the average person. And if that happens, then either the large companies will stop spying on us or somebody who promises not to will take their place. But it is extremely profitable today for the big companies to spy on people, and until there is more pain than profit from using our data, one has to imagine that this is going to continue.

The Demand for Energy Monitoring Services

Goneywell LyricThe energy monitoring business is getting interesting to watch. I looked a few years ago and found dozens of companies offering some kind of energy monitoring services. On top of that, within the last year a lot of large companies like Apple, Google (Nest), Samsung, Verizon, ADT, and Wal-Mart have entered the market. I have a number of smaller ISPs clients that offer the service in rural markets, but that is quite an array of big names to compete against.

Let me start by defining what I mean by energy monitoring, specifically. The traditional kind of monitor is a whole-house monitor. This is a device that is installed near to your electric meter and it records your energy usage over time. These devices let you see both usage and cost at different times of the day, which gives you the ability to look around your home during the times of expensive usage to see what is costing you the most money. These devices normally need to be installed by an electrician because they are on the main power feed of the home. People who use them say that they help them to curtail electricity usage.

The next step up in energy management is to install a smart thermostat. Since heating and cooling are generally a major bill for many households, a smart thermostat can help you use energy wisely. For example, you can program your system to supply less heating or cooling at different times as appropriate, like when you are sleeping. And you can tie these into a burglar alarm system to curtail electricity when you are not home.

The final step in sophistication for home monitoring is to put additional monitors on specific high-energy appliances such as a washer/dryer, pool pump, dehumidifier, hot water heater, etc. These device-specific monitors can help you save money on the devices that use the most juice in your house.

The various companies in the energy monitoring business offer a wide array of services. Some simply sell the smart devices, which are often linked to your smartphone, and then monitoring and modifying usage is up to the homeowner. But a number of these businesses are now selling monitoring services where they will look at your usage for you and make recommendations on how you can save money. Again, there is a wide range of both services offered and prices charged and there is not yet any standard way today of selling energy management services.

I saw the results of a nationwide survey published a few months ago by Parks Associates of Dallas, Texas. This survey asked people a wide range of questions energy management services. One of the most interesting results of the survey was the number of households willing to pay for monitoring services. The survey showed that 25% of households were interested in an overall energy monitoring service. 22% of households said that they were interested in an appliance monitoring service of the biggest electricity users in the home. And 26% said specifically that they were interested in a heating/air conditioning monitoring service.

Those are huge potential penetration rates for such a new industry and one would expect those to grow over time as more people attest to the benefits of watching and controlling energy consumption. However, the survey was not all good news; over 50% of homes interested in the services said that they would not be willing to spend more than $2.99 per month for all three services.

Our firm has given surveys to households for years and so we understand that when it comes to price-related questions that what people say is often different than what they do, and ideally people want things for almost nothing. But not many of the big companies going after this business are going to find a revenue that low to be attractive.

To put into perspective, according to a National Home Builder’s Association study, the average monthly electric bill in the US in 2013 was $110 per month. The estimates are that the bills in 2015 are probably slightly lower than that figure. If energy monitoring can help people save between 10-20% on their electric bills, which is the claim often made, then that average savings is $11 to $22 per month. On top of that there is a savings on the heating bills for people that heat with something other than electricity. The real question is how much are people willing to pay for those savings?

Of course, electric rates vary widely by state, which is a factor both of the cost per kilowatt hour, and also of how the electricity is used. For example, as one might expect due to the summer heat, the highest electric bills are in the southeast while the lowest are in the northwest, which has milder weather, as well as a lot of hydroelectric generation.

If you are thinking about getting into this business you need to not only look at what your local Wal-Mart is offering, but also make sure you understand what people in your area pay for electricity and heating.

Europe Attacking Our Tech Companies

european unionIt’s clear that the European Union is attacking American technology companies. Evidence is everywhere. Consider the following examples or recent crackdowns against US technology in Europe:

  • Last year stringent rules were imposed on Google and other search engines to allow people to remove negative things from searches – these rules are being called the “right to be forgotten”.
  • The European Union is getting ready to file a massive anti-trust case against Google for the way that it favors its own search engine over others. The estimates are that the fines they are seeking could be as high as $6 billion.
  • Last year the EU voted in favor of making Google divest into multiple companies.
  • Numerous countries in Europe have blocked services from Uber.
  • The EU is going after Apple’s fledgling music business saying that they have the market power to persuade labels to abandon ad-sponsored sites like Spotify.
  • A decade ago there were several major antitrust cases filed against Microsoft.

There are numerous reasons for the antipathy that Europe seems to have towards American companies. President Obama said in an interview last month that the negativity was largely driven by economic competition and that Europe wants to find a way to support its own burgeoning tech companies over the behemoth tech companies like Google, Facebook, and Microsoft. He thinks a lot of the complaints by the EU are due to lobbying by European tech companies. He said that “oftentimes what is portrayed as high-minded positions on issues sometimes is designed to carve out their (European) commercial interests.”

But the president also admitted that some of the reaction to American tech companies is in reaction to the European history of suppression of freedom by dictators. For example, Germany just spent decades merging with East Germany and their history of oppression from the Stasi, the secret police. This makes some of these countries very sensitive to the recent revelations of the extent of the spying by the NSA. This one revelation might eventually be the beginning of the end of the open Internet as numerous countries are now building countrywide firewalls to shield them from such spying. It’s natural that this mistrust carries over to companies like Google and Facebook, which clearly have a business model based upon profiling people.

Another reason for going after American companies is tax revenues. The American tech companies have become adroit at claiming revenues in jurisdictions where they pay little or no taxes. Of course, this means that they avoid claiming profits in European countries which have fairly high tax rates. (This also means they avoid paying taxes in the US as well).

Finally, there might be an even more fundamental reason for the apparent European distrust and dislike of American technology. In this article published by Business Insider UK there is a look at the fundamental differences between the way that Europeans and Americans view entrepreneurship, technology, and uncertainty avoidance. The article shows the results of a survey and study done by the European Commission looking at how citizens in various countries look at certain issues. I think there has been a natural assumption that since both places are democratic and share a lot of first world values that we naturally think the same about technology. But the study shows some major differences between Europe as a whole and the US. Interestingly, England is very similar to the US in attitudes and perhaps our Yankee ingenuity and willingness to take risks is really part of our British heritage.

Here are some of the findings of that study:

  • Over 90% of Americans think that individualism is more important than compliance with expected social values. In Europe only a little less than 60% of people value individuality first. And in some places like Russia and Denmark less than 30% valued individualism more than compliance with social expectations.
  • When asked to agree or disagree with the statement, “entrepreneurs exploit other people’s work”, only 28% of Americans agreed with that statement (and the American dream is largely to own your own business), while the results in Europe spanned from only 40% agreeing in France, to 50% in the Netherlands, and over 70% in parts of southern and eastern Europe.
  • The US has a much lower threshold of uncertainty avoidance (unwillingness to take a chance on new ideas and new technologies). In the US only a little over 40% of people view themselves as risk adverse while in Europe it’s over 70%.

This means that to some extent the European Union is representing the will of its people when they crack down on US technology firms, which are viewed negatively as entrepreneurial and high risk. These kind of cultural gaps are very hard to bridge and US companies might have problems in Europe for decades – if they’re even resolvable at all.

Are Smartphones Bad for Us?

SONY DSCI saw that last week was the eighth anniversary of the day when Steve Jobs introduced the iPhone at MacWorld in San Francisco. Smartphones are so ubiquitous today that it feels like it’s been longer than eight years and it’s already hard to imagine a world without smartphones. Certainly something may come along to be even more amazing, but this so far is the transformational technology of the century.

The iPhone certainly transformed Apple. In 2006, the year before the iPhone was introduced they had revenues of $19 billion with the largest product being the iPod at $7.7 billion. Last year Apple had revenues of $182.8 billion with the iPhone producing revenues of $102 billion. iPods were still at a surprising $2.3 billion (who still buys iPods?).

There were smart phones around before the iPhone from companies like Palm and Blackberry. But the packaging of the iPhone caught the eye of the average cellphone user and the smartphone industry exploded. One of my friends bought an iPhone on the day they came out and I remember being very unimpressed. I asked him what it did that was new and the only thing he could come up with FaceTime – but he didn’t know anybody else who had an iPhone at the time and we couldn’t try it. The original iPhone didn’t have many apps, but that void was quickly filled.

Now that smartphone usage is ubiquitous in the US, we are starting to see studies looking at the impact of using them. Not all of these studies are good news.

Researcher Andrew Lepp at Kent State University looked at how smartphones affect college students. Lepp’s study found that frequent smartphone usage can be linked to increased anxiety, lower grades and generally less happiness. Students who are able to put down their phones are happier and have higher grades. Lepp’s study also showed, unsurprisingly that students with the highest smartphone usage have worse cardiovascular health – meaning they are in worse physical shape.

Researchers at Michigan State found that work-related smartphone use after 9 PM adversely affects a person’s performance the following day. They found that not taking a break from work results in mental fatigue and lack of engagement the next day. Researchers at Florida State found similar results and postulated that the smartphone backlighting interferes with melatonin, a chemical that regulates falling asleep and staying asleep.

The statistics from various surveys on smartphone usage are eye-opening:

  • 80% of all smartphone users check their phone within 15 minutes of waking.
  • Smartphone users with Facebook check Facebook an average of 14 times per day.
  • A scary 24% of users check their smartphone while driving.
  • 39% of smartphone users use their smartphones in the bathroom (I have no idea what this means).

My own theory is that smartphones do so many different functions they can feed into many different versions of addictive behavior. People can use a smartphone and get addicted to playing games, or addicted to texting their friends, or addicted to using FaceTime, or addicted to reading sports scores and stories.

It’s not like addiction to technology is new. We all remember people who got addicted to early computer games. Perhaps there is still somebody today in their basement addictively playing Pong. There are many stories of people before smartphones who texted thousands of times per day. These early studies don’t surprise me and I am sure that many more studies will describe even more woes that can be added to the list of how technology can be bad for us.

Okay, I admit I use my smartphone in the bathroom – it’s a good chance to catch up on tech news. But that’s it. I swear!