Category: Technology

Convenience isn’t worth forsaking innovation (and liberty).

I normally enjoy John Dvorak’s curmudgeonly writing, but I’m afraid he might be serious with this article.

In this week’s complaint session, I’d like to complain about the little things. And I mean that literally. Little bitty things like proprietary PC connectors. I honestly believe that Congress should pass a law on PC connectors, keeping the number of designs to an absolute minimum. By law, product makers should have to choose between, say, two types of connectors, ensuring that devices work only with those two designs. I’m not kidding.

I agree with the complaint. I know Danielle would agree, given that she’s going through a re-organization of our junk, and we have boxes of orphan cables and connectors. But a law? No, thanks, even though here his call for legislation appears in the same type of context where people incorrectly use literally.

But he continues:

Why, for example, do we have so many variations of USB cables? One side is always the same—the side that attaches to the PC. It’s always a standard rectangular USB connector, and it plugs into any computer you like. But on the other end, the connector is always different. There are large, square connectors. Small, rectangular connectors. Trapezoidal connectors. I-have-no-idea-what-that-is connectors. And God knows how many others. Needless to say, you can never find the right cable when you need it. You end up accumulating so many of them, they’re inevitably scattered around the house. And when that Apple iPod connector goes missing, you can’t update your iPod.

What is the point of all this? I’ve complained about it before, pointing out that camera companies don’t even use the same connectors from camera to camera. Why not? Are they saving 2 cents per connector? Or what? It doesn’t have to be this way. This is USB we’re talking about, a ubiquitous 4-pin standard—not the wiring harness on a 1958 Studebaker. Seriously, we need legislation. This is costing us money for no good reason.

Again, I agree with the complaint, but now I think he might be serious. He gives Toshiba and Nokia as examples of companies that approach this well by putting the company name on the connector/power cord. Dell also does this, although it’s harder to confuse a laptop power supply than it is a router power supply. Still, not every company is dumb. We should applaud and encourage that.

But he continues:

Look, if there’s a law that forces a company to tell you what’s in a can of peaches (“Contains: Peaches, sugar, water”), then there can be a law that forces companies to label their power supplies. Can’t there? The construction industry abides by a book full of rules and regulations when they build out of wood. Can’t we consider mandating some aspects of technology design? Can’t we make a connector that everyone is required by law to adopt and use? Folks, the USB connector has only four pins! How many variations do we really need? Four pins! Now don’t get me started on the subject of batteries.

We do not need legislation. The next time someone needs to use an electronic device and the necessary cord or connector has gone missing, contact the maker of that electronic device and tell them you will no longer buy their products until they start labeling their cords and use standard connectors. Then follow through. It’ll change.

We don’t want to get into a situation where Congress legislates the use of Firewire cables, thus negating the development of the better USB 2.0 standard.

Avoiding Capitalism Because Winners Aren’t Pre-determined

Is this the type of “research” our government listens to?

The influential research firm Carmel Group, whose analysis helped kill the 2003 merger of EchoStar Communications Corp. (ECHO) and DirecTV Group Inc. (DTV), will release a new report Tuesday that outlines arguments against merging satellite radio companies Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc., The New York Post reported in its Tuesday editions.

Sponsored by the National Association of Broadcasters, which has already come out against the deal, the 11-page independent white paper includes a point-by-point rebuttal to the six main arguments put forth by Sirius and XM in favor of a merger.

I like having research back up my opinions as much as anyone, but this is shameless. I shouldn’t worry, though, because I’m sure the National Association of Broadcasters is looking out for customers and only customers, whether those customers choose to purchase the free broadcasts of its members or the non-free broadcasts of its competitors non-members. The FCC will probably fall for it, which is why Sirius’ stock price is down so much.

Catching Up to What It Should’ve Offered at Launch.

“Complete My Album” is so obvious that it should’ve happened much earlier.

Apple introduced the “Complete My Album” feature Thursday on its iTunes Store. It now gives a full credit of 99 cents for every track the user previously purchased and applies it toward the purchase of the complete album.

For instance, most albums on iTunes cost $9.99 so a customer who already bought three tracks can download the rest of the album for $7.02.

Previously, users who bought singles and later opted to buy the album had to pay the full price of the album and ended up with duplicates of those songs.

The album price reduction is good for only 180 days after the initial purchase of individual tracks.

Indeed, I’ve thought this to myself many times when purchasing singles. The advantage of iTunes is being able to sample individual songs before buying a full album. If I buy a song and then I like the album, I want to not pay for the same digital download again. The primary goal of technology should be to make life easier/better for customers. When doing this, the company can succeed, as well. Bravo to Apple for catching on in another area.

Please tell us if you steal from us.

With a recent update through its Automatic Update feature, Microsoft proves that it’s incompetently evil, at most. At issue, it released Windows Genuine Advantage Notification (KB905474). The description is as follows:

The Windows Genuine Advantage Notification tool notifies you if your copy of Windows is not genuine. If your system is found to be a non-genuine, the tool will help you obtain a licensed copy of Windows.

Good grief. I know my copy of Windows is genuine. I do not need notification. I purchased every computer I own, and they still have the original operating system included when I turned them on for the first time. I’m honest; I don’t need this surveillance. Thanks for the trust, though.

If I happened to be the type of person who would install a pirated non-genuine copy of Windows, does Microsoft really believe that I would utilize its help in obtaining a license?

The idea is preposterous. Yet, there is the option from Microsoft, treating me like I’m incompetent or stupid. Yes, it has a significant portion of the market for several key software product types. So what? There are options to avoid Microsoft brought about by its own incompetence at innovating and/or adapting to the market’s demands.

Post Script: None of this applies to the Xbox 360. I love my Xbox 360.

Is previous monopoly power to blame?

I have no opinion on this ruling’s merits, but I am mildly concerned.

A federal judge [last week] dealt a potentially fatal blow to Vonage Holdings, the Internet-phone service that offers one of the few alternatives to traditional carriers, by ordering it to stop using a technology that connects its network to the public telephone system.

U.S. District Judge Claude Hilton approved the request by Verizon Communications for a permanent injunction two weeks after a jury in Alexandria found that three of its patents had been infringed by Vonage, including one for the technology allowing the Internet company’s 2.2 million customers to call regular phones.

I don’t have the intellectual hissy fit that many libertarians have about intellectual property protections. I think they’re necessary and appropriate in capitalism. Intellectual property has subjective but identifiable value, much like other forms of property. If Verizon innovated a technology, to an extent, it should be able to reap the benefits of that.

That said, I’m a Vonage customer. I like its service. I refuse to pay Verizon’s prices, which I deem absurdly high. If Verizon wins through the appeals process and decides against licensing its technology to Vonage in favor of forcing voice-over-Internet protocol companies out of business, I will not become a Verizon customer. I suspect many VoIP customers feel the same. I have a cell phone, which will be enough. Frustrating, but enough.

If it ultimately wins, this should be an opportunity for Verizon to figure out that it can earn an additional revenue stream if it doesn’t kill the golden goose. The mere existence of VoIP should tell it that it’s been passed. Will it listen?

That’s very 2005.

I don’t think I’d brag quite so much if I’d lagged so far behind the market.

NBC Universal will join Rupert Murdoch’s News Corporation Inc. to provide content — such as Fox’s “24” and NBC’s “Heroes” — for distribution beginning this summer on AOL, Yahoo, Microsoft Corp.’s MSN and News Corp.’s MySpace sites, the companies said today.

Also included in the new free, ad-supported service will be movies from Universal Pictures and News Corp.’s 20th Century Fox studios, such as “Borat” and “Little Miss Sunshine.”

“This is a game-changer for Internet video,” said News Corp. President Peter Chernin. “We’ll have access to just about the entire U.S. Internet audience at launch. And for the first time, consumers will get what they want — professionally produced video delivered on the sites where they live.”

What does it even mean to “have access to just about the entire U.S. Internet audience at launch”? YouTube has that same access, although it had to build a brand name that established media companies already possess. YouTube didn’t take long to overcome its disadvantage, so there’s obviously more to this product than just access.

If implemented correctly, I don’t see a reason for this to fail. Content is king. However, proper implementation (providing extensive user control) is a major assumption. Like the music industry sitting around for half a decade while peer-to-peer networks exploded, companies with video content will probably enact a plan based in fear (think extensive DRM) and arrogance.

I might be too old, though. I’ll stick with Netflix and DVR.

Competition Over Central Planning

Over at Cafe Hayek, Russ Roberts has an excellent commentary on FCC Chairman Kevin Martin’s concerns about a Sirius-XM merger. I agree with Mr. Roberts entirely, and as a Sirius subscriber, I’ll pay more if I can get the same quality Sirius service I have now and Major League Baseball.

One bit of Mr. Roberts’ post struck an interesting thought:

Five years ago there was no satellite radio. When one company came along (I don’t know who was first, Sirius or XM), should the FCC have shut them down for daring to monopolize the market? So why is it now that there’s two going back to one we have a potential calamity that the government has to worry about?

That’s an excellent question. Sirius was formed first, but XM was the first to broadcast. For those who think the government has a legitimate function in regulating this way, the government should’ve mandated that the two companies begin broadcasting on the same day. That would’ve been the only fair way to have them compete on equal footing. It can artificially decide that two is the magic number of satellite radio providers. It should be able to dictate business conditions, too. No?

It’s the 48th inning. Everyone’s exhausted. Keep playing!

Steven Pearlstein offers a few reasons why the government should block the proposed merger between Sirius and XM. Mostly, it’s boilerplate fear of big business and its assumed power to dominate people’s lives. I think I yawned once or twice while reading it. He wrote the perfect summation against his argument in his conclusion. It only takes a moment of looking beyond the words.

What we have here, folks, is a case of two money-losing companies locked in what has become ruinous competition, from which they hope to escape by merging. It may be that, given the economics of the business, there is room for only one to survive and prosper. But if satellite radio is such a “natural monopoly,” consumers will be better off if the companies are forced to duke it out until one prevails and the other dies. The antitrust laws were designed to foster competition, not to foreclose it by bailing out competitors that overpaid for talent, over-invested in plant and equipment or over-promised results to their investors.

How do we know consumers will be better off if the two companies continue to bloody each other? We can assume it, but it’s just an assumption. Sort of like the assumption that the FCC made that the public interest would be best served by allowing two, and only two, competitors to purchase a satellite radio license. How do we know what will be best in the future?

The explanation generally revolves around some imagined significant harm that will result from a monopoly. Only history doesn’t always show such harm. Would we have a viable, efficient economy with the same power if regulators had stopped steel or oil consolidation? Evidence suggests that those industries continually improved their manufacturing methods, increasing efficiency and lowering prices. We should not act in response to potential harm. If the merged company actually exhibits monopoly behavior, then intervention may be warranted. Until then, it’s wise to realize that the threat of intervention acts as an incentive against monopoly behavior.

More to the case at hand, perhaps it’s better to let one of the two surrender and preserve assets for productive use than to make them fight each other until one company is toast.

“You see yourself as some sort of humanitarian, don’t you?”¹

Now that I’ve had a day or so to digest the proposed Sirius–XM merger, I have a few more coherent thoughts about it. As a Sirius investor, I think this is ultimately the right deal. I know that CEO Mel Karmazin is offering the usual talk of synergies and cost savings. This is standard fare for such transactions. I have no doubt a combined company will realize some of that, but I’m not silly enough to assume it’ll be grandiose or immediate. Any significant benefit from this is years away, at least. I’m okay with that because I’ve invested for the long term. Most of the time I only know the general Sirius share price. When my shareholder ballot arrives, I’ll check “yes” with realistic expectations.

As a customer, I’m thrilled by this deal. As I mentioned, the ability to receive Howard Stern and Major League Baseball on one subscription is irresistible. I find Sirius’ radio programming better (particularly the original MTV VJs on The Big ’80s), and I’m a devoted Howard Stern fan. Those two items are year-round. That’s why I subscribe to Sirius. But the absence of Major League Baseball broadcasts is a huge frustration. This merger would solve that, even if the combined company offers a “cafeteria-style” selection of programming, as I’ve read. I can live with that. I don’t really care to have Oprah, Bob Dylan, Opie and Anthony, Nascar, or Martha Stewart. Give me Howard Stern and the Phillies for a reasonable price, and I’ll be a subscriber. To get me, it’s that simple.

However, the information announced so far is insufficient. The FCC and Department of Justice will have questions. First, Sirius and XM must convince the government that their market is not satellite radio, but audio entertainment. (I’d cite a reference for the term audio entertainment, but I don’t remember where I read it. I’ll give credit if I stumble upon it again.)

My audio choices at work are a perfect example. During a typical day, I’ll listen to Stern in the morning through my Sirius subscription. When that’s done, I’ll move on to my iPod and whatever music appeals to me at the time. Or maybe an audiobook. Then I might switch over to an internet radio station. On my commute home, I usually listen to terrestrial radio. When I get home, I have cable television, Netflix, and Xbox 360.

Every one of these things competes for my time and money. I can afford various subscriptions for those that require one, but if the programming on any one of them becomes stale or the price exceeds what I think it’s worth, I’ll cancel it. That’s the fate that HBO faces from my household as soon as The Sopranos is done. It’s barely $10 per month, but it isn’t worth it to me. I’m capable of making the decision better than the federal government, regardless of the implied public trust built into the artificial market created by government satellite licensing.

The short-term implications of this deal are also apparent, both as an investor and a subscriber. Sirius and XM work on separate signals, so each company’s hardware is incompatible with the other. I’ve been thinking about upgrading my Sirius receiver since the unit I have is several years out-of-date. But I don’t want to spend $300+ on a new receiver with all the features I want if I’ll have to dump it in a year when (if) the merger wraps up. I’ve seen no concrete answers on this, only that the companies are working this out. That’s wonderful, but current subscribers are left out in the interim if they want to upgrade.

As for potential subscribers, what incentive will they have to sign up now? The rational decision is obviously to wait this out until the executives offer answers. That will hurt both companies financially until they decide. That makes me nervous realistic about any short-term bump in the share price from this deal. The downward pressure on revenue and subscriber growth, which is what this industry needs least right now, is evident. The only responsible choice is for customers and potential customers to get answers soon. Essentially, I want the Heroes approach to answering questions, not the Lost approach.

I understand the hurdles this merger will face. In the end I think the government should get out of the way let it proceed. It will benefit customers when viewed with the correct understanding of the combined company’s market competition. I applaud the deal with guarded enthusiasm.

Full disclosure: Several times in the past, I subscribed to XM. For a brief time, I owned XM shares. For what it’s worth.

¹ The title of this entry is a quote from Heroes. Sylar said it to Mr. Bennett. I think we might be able to ask the same thing of the federal government as it reviews this deal.

Anecdote Against Anti-Capitalism

Remember stories like this through all the lies we’ll hear in the next few years about the trouble with capitalism and how it’s a tool of the rich.

The free-for-all is a boon to the millions of Americans who want to trade in their bulky analog sets. Thanks to the likes of Westinghouse, which undercut the prices of premier brands by 20% to 40%, LCDs are no longer a luxury item. Nearly one-third of the 30 million TVs sold in North America in 2006 had LCDs, and by yearend they’re expected to account for half of all TV sales. The average 27-in. LCD set now retails for less than $650, compared with $1,000 in early 2006, says iSuppli, while 40-in. models have plunged to about $1,600, down from $3,000 during the same period.
…

For many in the industry, though, the competition is brutal. Prices for LCD sets are falling so rapidly that retailers who place orders too far in advance risk getting stuck with expensive inventory. Circuit City Stores Inc. (CC) cited plummeting prices in its Feb. 8 announcement that it will shutter nearly 70 outlets. The Asian companies that make the LCD panels that go into the TVs are getting slammed, too. Korea’s LG.Philips LCD Co. (LPL) attributed a $186 million loss in the fourth quarter to the 40% drop in display prices last year. With panel prices expected to fall 20% in 2007, the world’s dozen or so makers of displays are scrambling to sell at almost any price just to generate the cash to survive. “The cuts have stressed everybody in the supply chain,” says Paul Semenza, the vice-president for display research at iSuppli.

No doubt this type of example will fuel people like Sebastian Mallaby into pushing for a bigger safety net, propped up through higher taxes. That would be a bad lesson. Instead, notice how those who want an LCD television can now get more for less. Some who couldn’t afford such a TV last year will now be able to purchase one. This is progress, and it can apply to any field when unrestrained by nonsensical falsehoods. The flaw is never with capitalism, only with how it’s implemented or who does the implementing.