Northern Light’s Analyst Views

At the beginning of April news hit the fan that Time Warner Cable (TWC) was introducing tiered pricing to its broadband Internet customers. In short tiered pricing, also referred to as, among other things,  metered broadband, broadband caps, or pay-by-the-byte, means the more one downloads the more one pays. TWC’s official statement on the matter noted that, “As a facilities based provider, we’ve built a network that must be maintained and upgraded. We have increasing variable costs and we have to continue to invest in the network itself.” The company also alluded to the idea that without proper maintenance the network could begin to experience ‘Internet brownouts’ within the next few years. The new pricing plans would, TWC contends, more fairly place the burden of cost (needed to maintain the network and avert brownouts) on the shoulders of those taxing the network most while offering savings to its other customers. (TWC points out that 30 percent of its subscribers use less than 1GB per month.)

Not all thought the plans as fair as TWC; after a public outcry the plans have, for the moment anyway, been shelved. Time Warner Cable Chief Executive Officer Glenn Britt said, “While we continue to believe that Consumption Based Billing may be the best pricing plan for consumers, we want to do everything we can to inform our customers of our plans and have the benefit of their views as part of our testing process.”

In backing down TWC was not responding only to a few vocal bloggers. On this issue, while the blogosphere was ignited, voices also came from politicians claiming that the actions would kill jobs and stifle innovation as well as analysts who questioned the necessity of change in billing structure.

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While IT is going through something of a Green revolution, reports indicate that the numbers of green IT initiatives and the amount invested in them is on the rise, eco-warriors may be somewhat saddened by the impetus.

According to a Forrester report, “Green IT is as much about the greenback as it is about reducing the environmental impact of operating IT and the business. In fact, 67 percent of IT professionals say that financial motivation - not environmental motivation - is their driving force behind the pursuit of greener IT.” Another report, produced by the Info-Tech Research Group, states much the same: “Businesses around the world are realizing that addressing environmental concerns can also benefit the bottom line. They aren’t jumping on the bandwagon in an effort to save the planet, though this sentiment is certainly expressed in many cases. Rather, businesses see an opportunity.”

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It’s been over a year since President Bush established the Comprehensive National Cybersecurity Initiative (CNCI) in January of 2008. If you have not heard much from the CNCI you are not alone, their activities have been conducted largely under wraps. According to the blog of the Federation of American Scientists, “‘A chief concern’ about the Initiative, the Senate Armed Services Committee declared last year, ‘is that virtually everything about [it] is highly classified, and most of the information that is not classified is categorized as ‘For Official Use Only’.” Information should be coming soon however: on February 9^th President Obama initiated a 60 day inter-agency review.

While a more complete picture may emerge next month it already appears that cybersecurity is an assumed weakness for the U.S.; and that much of the challenge is coming from within.

Beckstrom complained that the NCSC had been appropriated only five weeks worth of funding for the entire year, and while the office did manage to provide some critical services for the US government, the NSA was simply uncooperative in efforts to prevent or respond to cyberattacks.

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In introducing its January 27th report, A Plan to Extend Super-Fast Broadband Connections to All Americans, the Century Foundation states: “Few doubt that broadband communications are increasingly vital to our social and economic well-being . . . Broadband communications are the future, yet the U.S. government has no national broadband policy, and does not treat broadband as a form of infrastructure and does not regard broadband as an ‘essential’ service.” Under the Obama administration change may be in the air.

When President Obama, in his inaugural address, noted building out infrastructure he was not referring just to roads and bridges, but to a technological infrastructure as well: “We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.” Many expect this technological infrastructure to pave the way to higher levels of broadband adoption and penetration; allowing the U.S. to gain ground lost to other nations. (The country labeled as the birthplace of the Internet has slipped from number four to number 15 in broadband penetration according to the Organisation for Economic Cooperation and Development.) In addition the expectation is that increased broadband distribution will more than return on the $6 billion (the House version) to $7 billion (the Senate version) investment the government broadband stimulus package is calling for.

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Last week the Pew Internet and American Life Project released a report on the adult usage of social network sites. Though still for the young, these sites are seeing an increase of usage from adults and large-scale growth in general. Elsewhere BusinessWeek, the Financial Times, and Forrester Research addressed the implications of the rise of social networking on the Internet.

As noted, social networking sites are still the home of the younger generations but the rise of usage among adults is dramatic; 65 percent of American teens report having a profile on an online social network compared to just 35 percent of American adult Internet users. However, the percent of adult users is four times what it was just three years ago. It is important to point out that, “While media coverage and policy attention focus heavily on how children and young adults use social network sites, adults still make up the bulk of the users of these websites. Adults make up a larger portion of the U.S. population than teens, which is why the 35 percent number represents a larger number of users than the 65 percent of online teens who also use online social networks.” Looking at the full spectrum of users, not just ‘Teens vs. ‘Adults’ though, the Pew report concludes that, “At its core, use of online social networks is still a phenomenon of the young.” This is the case as, “younger online adults are much more likely than their older counterparts to use social networks, with 75 percent of adults 18-24 using these networks, compared to just 7 percent of adults 65 and older.”

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Last month Forrester published “The Hour of the Vendor Strategist: Three Mega Business Trends Will Reshape the Tech Sector.” As one may guess, much of the shaping will be done by the present state of the economy. Amidst the doom and gloom, however, “Forrester encourages forward-thinking tech vendors to see the silver lining in today’s dark economic clouds.” For those who avoid, “channeling all their strategic thinking into dealing with the recession’s short-term effects,” a tech landscape that will be entirely redrawn by 2015 may prove fertile ground; even in the relatively near-term. Contributing to the remapping of the landscape are: globalization 2.0, invisible IT, and the consumerization of IT.

The current state of the economy, and other factors including its longstanding position as a frontrunner, has kept the attention on the Western economy. However, Forrester suggests that this has already begun to change: “Throughout the 20th century, the Western economies, led by the US, dominated the world markets. No more.” The “explosive” growth of the economies of Brazil, Russia, India, and China are poised to take the front seat. With their growing economies and tech sectors, the Eastern economies, “will challenge Western tech multinationals to localize their whole value chains,” says Forrester. Furthermore, Globalization 2.0 will lead to an explosion in workforce diversity; companies will, “engage in a talent war as they outbid each other to hire multicultural senior managers who can orchestrate cross-regional teams and partner ecosystems.” Finally, “The days of the West as the epicenter of global innovation are numbered.” Also numbered are the days of IT as it is known today.

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Though there is debate over exactly how fast it is and how many people have access to it, broadband adoption is growing. Bandwidth intensive content available online, such as streaming audio and video, has increased consumer desire for it. Businesses are now finding high speed access to the Internet a necessity. The growth in social networking and the sharing of photos and moving images which often accompanies it has increased the need for both upstream and downstream rates to increase.

Some reports suggest that if it continues this demand and use will crash the system if the underlying infrastructure goes unchanged. Whether or not things are changing enough to satisfy the advocates of such reports, changes are taking place. There is more than one way to bring the Internet in all its glory to the masses, and recent reports have looked at which, if any, will seize the day.

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According to reports last quarter, the verdict on Web 2.0 in the enterprise is still out. Both the McKinsey Quarterly (Building the Web 2.0 Enterprise, August 2008) and InformationWeek (2008 InformationWeek 500, September 2008) indicate that the initial flurry of activity around Web 2.0 technologies in the enterprise led to adoption but that the technologies are now being called upon to prove themselves.

Companies that are perceiving success with this new crop of tools are forging ahead and implementing them at an increasing rate: “This year’s survey reveals continuing investments in Web 2.0. Companies that are deriving business value from these tools are now shifting from using them experimentally to adopting them as part of a broader business practice,” states McKinsey. And at least according to InformationWeek the companies that are charging ahead are the successful ones; there is substantially more adoption of, and work being done with, Web 2.0 in the top 100 companies than in the lower 400.

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Earlier this month, Google entered the browser market with its release of Chrome. Immediately there was word in the press about the start of a new ‘browser war’. The allusion is to the Microsoft vs. Netscape battle of years ago. Though the heavy hand which Microsoft used against Netscape landed them in court, they were clearly the victor. Now, however, the arena is a bit different: Internet Explorer has been losing market share (though a new release, which offers much of what Chrome does, might stall that some); Firefox, the open source competitor to Internet Explorer, has been gaining users (though Chrome might steal some of that); and more significantly, the role of the browser has itself shifted.

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Akamai, a Cambridge MA based provider of Internet technology and services, released its second quarter 2008 State of the Internet report. “This report will include data gathered across Akamai’s global server network about attack traffic and broadband adoption, as well as trends seen in this data over time. It will also aggregate publicly available news and information about notable events seen throughout the quarter, including denial of service attacks, Web site hacks, and network events.” In general the report paints a picture of an Internet that is growing and rising to the challenges this presents.

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