Disruptive Tendencies

Can't see the forest for the weeds (Board governance at start-ups)

Why is it that management teams in start-ups assume their Boards want to get down into the weeds every Board meeting and why do Directors buy into this approach and behave like weed inspectors? Board governance isn’t about inspecting everything that management is doing; it’s about holding management accountable for those things that are material.

Start-ups are high risk, but materiality should be those things that have the potential to impact valuation or derail a liquidity event. Sure, the product roadmap (aka Feature List eye charts) is important, but is it more important than GPL compliance?

What impacts valuation more than revenue? Yet how often do you see a Board congratulating management for “hitting their numbers” rather than asking whether these are the right numbers to be hitting? There’s no point in patting management on the back for a year in which a company grew 10%, if the market and their competitors are growing at >50% year over year.  Underperforming the market equates to declining market share, which will ultimately impact valuation, multiples, and liquidity opportunities, none of which deserve a pat on the back.

Rather than showing slides that show how the company is “performing to plan”, how about a slide showing how the company is “performing to market”?

It’s a fact of life today that companies leverage open-source software. There’s tremendous pressure to hit dates and add features, and many engineers will look to SourceForge, or similar, for code to help meet development timelines. Without a robust open source license tracking process, it’s very likely that, over time, one’s code base may not comply with all of the license obligations associated with the bits.

Non-compliance is material. Just ask Cisco, which had to publish the source code for its Linksys line when found to be in violation of its open source license obligations. Every licensing and M&A deal that I’ve done has required a representation, signed by an Officer, warranting compliance with copyright licenses. Sophisticated acquirers will require a 3^rd-party compliance assessment using a tool like Black Duck, and being “caught” during a due diligence will cripple any deal.

So rather than spending the R&D section discussing feature lists, shouldn’t Boards be focused on mitigating the risks of non-compliance with open-source license requirements? Why shouldn’t R&D be required to provide a slide, every meeting, summarizing the open-source licenses for code being used in shipping product?  Shouldn’t the CFO and CEO be required to sign-off that the company is in compliance, every quarter? Just as Financial Statements are provided and signed off on, so should GPL compliance, and as with annual audited financials, management should prepare and provide an audited 3^rd-party compliance report annually as well.

Non-compliance puts the company and its investors at risk and should be a firing offence, first time, no questions asked. It’s not the engineer that should be fired, unless he/she knowingly violated company policy (that is monitored and real and not “vapor”), rather it is any Officer of the company that was aware of non-compliance or who has oversight and ultimate accountability. This means, in most cases, the CEO.

Many start-ups take a very ad hoc approach to intellectual asset management (IAM), which is odd since it is an asset class that forms the essence of a company’s value. You may see a slide in a Board deck that lists patent applications, but rarely do you see any level of competitive analysis, either in terms of competitors’ patent positions, or potential infringers of one’s own patents. Significant money is spent on patents, without an understanding of the business objectives for so doing. As a result, many patents end up sitting in a filing cabinet or as a plaque on a wall and are never used to the company’s benefit.

So why is this material? Once again, it has the potential to impact valuation. Having been directly involved in a multi-hundred million dollar M&A transaction, where the justification of the 30X revenue multiple was based on IP portfolio strength, I can attest to the power of a coherent, well-documented IAM process. When this is supported by the knowledge of 3^rd-party IP in your space, as with a patent landscape analysis, you have a powerful justification for including IP in any discussion of valuation.

Furthermore, Directors and Officers have a duty of care with respect to the management of corporate assets. Recently, I read an article that suggests a corporate officer or director, who is aware of an infringement of some patents owned by his or her company and who fails to enforce these patents, may be held liable for breach of the duty of care with respect to the management of corporate assets. I’m not sure whether it’s ever happened, but it makes sense for Directors to expect more than a simple list of patents.

Rather than a slide documenting a company’s patents (which I can Google or BING anyways), how about an analysis of your IP and your competitors’? How about a discussion on enforcement of IP with some clear guidelines around it? How about pushing management about disciplines related to invention documentation? Are the engineering notebooks signed and dated? What about an international filing strategy? Which markets? Why?

Board members have visibility into a company’s liabilities; monthly Balance Sheets show this, but what of off Balance Sheet liabilities? Many SmallCo’s are disadvantaged at the negotiating table and as such, sign deals with indemnification clauses that effectively “bet the company”. Any contract that includes clauses for liquidated damages or in which the company provides an uncapped indemnity, should require Board approval. At a minimum, it is the CFO’s responsibility to advise the Board as to the existence of these hidden, potential liabilities, but it is the Board’s responsibility to require this of the CFO.

Lastly, I’d like to point out that Directors and Officers have an obligation to all shareholders, regardless of share class. Most Board members are representatives of investors, and often have preferred rights of some kind. But it is incumbent on Directors to represent all classes of shareholders, including common stock holders, and not simply to represent their own stock class.

So what’s my dream Board meeting?

It’s one in which the company is measured, objectively, against those metrics that matter. It’s one that isn’t comprised of 100 eye charts describing the minutiae of the business, but which is focused on issues of materiality.

CEO/Sales: How fast did the business grow relative to the market and its competitors?

CEO/R&D: Are you monitoring open-source license compliance? Will you stake your job on it?

CEO/CTO:  How are you leveraging IP to limit competition, grow revenues, create value?

CEO/CFO: What “bet the company” contractual indemnifications exist? What contracts currently under review have “bet the company” clauses?

Ultimately, it’s the Board that needs to convey to the CEO that these are issues of paramount importance to the company, its Directors, investors and all shareholders and that he/she will be held accountable. Don’t take us down the garden path every meeting and don’t pull us down into the weeds. Show us that you have your finger on the pulse of those things that matter.

To paraphrase Peter Parker, “With great power comes great responsibility”, but that’s why CEOs make the big bucks.

That’s my .02!

Martin Suter

 

Microsoft: SteveB or Not SteveB

That is the question.

As I saw Apple reporting record numbers yesterday, I was reminded that nearly thirteen years ago, Microsoft invested $150m in Apple to help keep it afloat because it needed to maintain the semblance that it had “competitors”? Be careful what you wish for!

In July 1997, prior to the Microsoft investment, AAPL was trading at $4.375 (split-adjusted). Overnight, it was up to $258.00, a 58X gain in twelve and a half years. Had Microsoft held onto its shares, they would be worth $8.8b in the open market today, or 26% of the cash on its Balance Sheet as at Q3/2010.

When Microsoft made its investment, its shares were trading at $17.50, and today? They closed up overnight to $31.50, up almost 1.8X over the same period as Apple’s 58X gain. Apple’s market cap today is $234b to Microsoft’s $275b. How times have changed!

It’s interesting to look at other things that were going on around the same time as Microsoft was investing in Apple.

1997 was also the year that Microsoft entered the mobile device market, with the release of Windows CE. This gave them a ten-year head start on the iPhone and a twelve-year head-start on Android! It predated RIM’s IPO. And today? Windows Mobile market share is Palm-esque, and Microsoft is betting on Windows Phone Series 7 to rejuvenate its mobile business. But if branding and momentum are any indication, it seems like a real longshot.

I’ve sat through many Microsoft Executive Briefings, dating back to 1997. Over this period, I have heard it said that Microsoft spends “$1m/hour on research”. I have seen presentations from Microsoft Research staff describing and demonstrating technologies like ClearType (also announced in 1997), a sub-pixel rendering technology designed to improve readability of rendered type on screen.  The obvious application (and one described in the early presentations) was eReaders. In 2007, ten years later, Amazon released the Kindle, ostensibly revolutionizing the delivery of content and forever changing the economics of publishing. Where’s Microsoft at this inflection point? Nowhere to be found.

What other market disruptions has Microsoft missed? (In no particular order)

Search is an obvious one. While Microsoft (and others), was focused on search technology, Google was figuring out that “Search” was all about advertising and catalysed a massive disruption in the media space, billions of dollars in revenue for Google, and hundreds of billions of dollars in shareholder value.

Maps and location services is another one. While Microsoft was focused on producing and selling CDs of MapPoint (a model it still clings to today which it “offers” at $245 on-line), Google was out producing high-resolution street-level images and has catalysed another disruption in location-based services. Today, mobile location is front and center on the Droid platform (and on Droid devices), on iPhones, and incorporated into applications across both ecosystems.

Set-Top Boxes and “owning the living room” Also in 1997, Microsoft acquired WebTV for $503m, predating the launch of Tivo. But while Microsoft apparently struggled with the thought of an appliance that wasn’t Windows-based PC (and encumbered by its emphasis on 3^rd-party OEMs to build on its platform), WebTV evolved to MSN TV (anyone remember this?!?) and has completely disappeared today.

SaaS is one to which Microsoft paid lip service throughout the late ‘90’s with its .NET push. But while it was evangelizing .NET (and SOAP, XML, web services), it was acquiring companies like Navision and Axapta (in 2002 for $1.4b) to expand its CRM and ERP offerings. But was it web-based like Saleforce.com which was founded in 1999 and which didn’t go public until mid-2004? Once again, Microsoft didn’t want to jeopardise Windows Server licenses, so it failed to embrace a market disruption despite having ample warning that it was coming.

Media Players created a seismic event and a brand new market that Microsoft completely missed. While it was focused on defending the tight integration of Windows Media Player in anti-trust lawsuits (in a vain attempt to preserve its “Windows” franchise), Apple came out with iTunes on Windows. More importantly, however, was that Apple also created the iPod, the Trojan Horse that enabled the iPhone.

Developers and App Stores: Microsoft has known since the early battles for OS supremacy (against MAC and OS2), that the selection of a platform is driven by application support. Even with a 30-year history of supporting software developers with incredibly rich tools to build 3^rd-party apps, Microsoft never provided a route to market for developers as Apple has done with the App Store. Apple also figured out how to monetise content and through the creation of a distribution system (iTunes Store), got people comfortable with micro-payments. What’s the difference between .99 for a song or an app? Ultimately, not a thing.

Obviously, there are other examples too. Microsoft completely underestimated the impact of open-source software, missing Linux, Apache, MySQL, etc. It evangelised tablets, but from a Windows bias. It would seem that Apple (and soon others) will trump Microsoft here as well.

It is fair to say, that Microsoft is losing on all fronts.

While it was focused on fighting the DOJ battle, it may ultimately have lost the war. Some, including “the late Nobel economist Milton Friedman believed that the antitrust case against Microsoft set a dangerous precedent that foreshadowed increasing government regulation of what was formerly an industry that was relatively free of government intrusion and that future technological progress in the industry will be impeded as a result.”

I have to agree. The government’s action against Microsoft was ill-advised, in that it is irrelevant that Microsoft may have had a monopoly on the desktop OS. The market isn’t stagnant. Some, like Apple with iTunes and Google with a toolbar, found ways to work within the constraints of a “Windows monopoly”, and still thrive. Others, like Salesforce.com just changed the rules.

Microsoft once had mojo but, for the past decade, has behaved like a neutered puppy. Where it was once aggressive and nimble, today it is passive and slow.

When Bill Gates relinquished the CEO reins to Steve Ballmer in January 2000, Microsoft’s stock was at around $56. With Steve B at the helm, the company has delivered a -44% return, despite being a cash flow machine and having a Balance Sheet that is (was) second to none.

 

If a patient’s ECG flatlined like Microsoft’s stock price, someone would call for the crash cart, get out the defibrillator and try to shock the patient back to normal rhythm. Where’s the crash cart in Redmond?

With a record of having missed so many opportunities to create new markets, where does the buck stop?

SteveB or not SteveB? That is the question.

That’s my .02!

Martin Suter

Mobile Cellular Penetration

I came across a rich set of data visualisation tools earlier today on Google Labs that allow one to run queries against publicly available data sets. Some of these will look familiar to fans of Dr. Hans Rosling, whose TED appearances are the stuff of legend. One of the data sets available is Mobile cellular subscriptions.

Last year, at CTIA, Ivan Seidenberg, CEO of Verizon Communications, talked about 500% penetration as being possible. He meant this largely in the context of an emerging M2M market, but even absent that, it's interesting to look at some representative countries.

I've gone ahead and plotted several below, but you can click through and select your own. (Feel free to share any insights from mining the data in the Comments section below).

I

Average penetration worldwide was 60% in 2008. Interestingly, Iran was bang on the average. It will be interesting to track the slope of its curve recently, especially as the phone has been a device being widely used by reformers in the country.

Korea and Japan are an interesting lines. They were both faster out of the gate, but the US has caught up, at least in terms of penetration (my friend and Koreaphile, Allen Kupetz will remind me that their data rates and breadth of uses, including mobile payments/e-wallets far exceed the US).

Norwegians were early adopters too. I remember being blown away in 1992, when my cab driver in Oslo had a cell phone. Today, can you imagine a cabbie not talking on their cell phone constantly in any big city?

The last two that I plotted were the UAE and Saudi Arabia, both of which have achieved far greater than 100% penetration. I had an inkling of this in 2001 when I was living in Dubai. Several Emiratis in our office were already carrying two phones, but again, it wasn't something that I could imagine doing. Clearly it's become the norm.

It is interesting to think about the implications of the mobile Internet in regions of the world, like the Middle East and Africa, where landline penetration lagged developed countries and until recently, Internet cafes were the primary place to access the Internet. Clearly, the game is changing. And while the Internet can be used for evil, I prefer to think of it as having removed all impedance to knowledge acquisition. Is another period of Enlightenment too much to hope for?

That's my .02! What's yours?

Martin Suter
 (martin.suter at iplicensing.net)

IP Licensing for the Technology Entrepreneur

Intellectual Property licensing is a complex subject with many moving parts. Unfortunately, it is rarely covered in modern business school curricula. The net result is that managers, C-level execs and Board members seldom approach IP licensing strategically, either in terms of monetisation or in the connection between license terms, and their potential impact on valuation and exit opportunities.

This set of slides attempts to simplify many of these issues for the business strategist - Board members, C-level execs, and senior managers. I have used subsets of this presentation to groups of Executive MBA students, corporate counsel and IP professionals and generally use them as a launching pad for a broader discussion. (To discuss speaking opportunities, please contact martin.suter at iplicensing.net).

These slides draw on my experience, as I have been fortunate to have been mentored by some very capable attorneys over the years (such as Cliff Chillemi, in-house counsel at MeshNetworks, and Jill Riola, Co-Chair, IP Group at Carlton Fields), and worked with top IAM strategists (people like John Cronin from ipCapital Group and Paul Germeraad from Intellectual Assets, Inc.). I have also sat across the table from many very capable negotiators representing companies like Dow Chemical, Microsoft and Motorola and had to justify IP licensing recommendations to VC investors across North America.

Feel free to share and comment.

That's my .02!

Martin Suter

(martin.suter at iplicensing.net)

Of Churn, ARPU and the value of a Net Add

Yesterday, Colin Gibbs, at GigaOM, wrote a great blog: Q4 Wireless Scorecard: It's Good to be King, in which he provides a breakdown of key figures from the major US wireless operators. Extracting and consolidating this information is incredibly useful, and props to GigaOM for so doing, but a deeper dive seemed to be in order.

There's a lot of confusion around concepts like "churn", "ARPU", and "Net Adds", and more importantly, how do these translate into the value of a subscriber? Churn is simply the rate of turnover within a subscriber base. An easy calculation to perform is to derive the average number of months a subscriber will remain with an operator. Simply divide 100% by the churn percentage, to arrive at this number. The lower the churn rate, the longer each subscriber will generate revenue and cash flow for the operator.

 

 

Of note, is the huge variation in Average Subscriber months that churn percentage makes. Why is this important? Well, the average customer term dictates the expected revenue that will be derived by each subscriber over their lifetime. Of course, the greater this number is, the more profitable a customer will likely be, as customer acquisition costs (marketing, handset subsidies, etc,) are able to be amortized over longer periods of cash flow.

It's also interesting to look at ARPU, a number that is often pointed to as being indicative of profitability. But this is a simplistic view of the subscriber, in that the value of a customer is much more a function of churn than it is ARPU. GigaOm provides the ARPU per user broken out by carrier:

 

There is some variation across wireless operators, but still within a fairly tight range. However, when you take ARPU and multiply it by Average Subscriber months, the picture starts to change dramatically.

 

While this doesn't show profitability per subscriber, it is easy to eyeball this and determine that customer acquisition and support costs erode profitability significantly for several of the operators, even without taking into account the fixed costs associated with spectrum and CAPEX to build out their networks or migrate to new technologies.

Lastly, Net Adds is an important metric to help determine the long-term viability of a company. Think of each Net Add as "X months of Future Revenue" (or cash flow), where X is calculated from the churn %. The numbers shown are the absolute numbers. A percentage view is quite different, with Leap Wireless Net Adds equal to 6% of its Total Subscribers, while Verizon and AT&T Net Adds equal 2.41% and 1.07% of their Total Subscribers respectively.

 

So what happens when you add it all up? Well, in absolute terms, the Lifetime Expected Revenue of the Net Adds in Q4/2009 looks like this, which may support the ROI that Verizon is seeing from its huge marketing and advertising push in late-2009.

Growth is a result of a virtuous cycle. Low churn rates drive lifetime subscriber revenue, much more so than does ARPU. Higher revenue per subscriber means more to invest in sales, marketing and new technologies like 4G. Once an operator starts churning its install base, profitability takes a huge hit, as does its ability to invest in customer acquisition and new technologies. It's a downward spiral that is very difficult/expensive to reverse. Clearly, this illustrates why the big keep getting bigger and why the AT&T and Verizon marketing battle is with us to stay.

That's my .02!

Martin Suter

Space Juxtaposition

Catching up on the news this morning, I scanned the MSNBC homepage for interesting stories. “Iran Sends Mouse, Worms, Turtles into Space” caught my eye, especially as it was juxtaposed with another story, “US Grieves Over Cancelled Program”. Iranian President Ahmadinejad is quoted as saying that the “Scientific arena is where we could defeat the West’s domination.”

Now, I don’t equate the launching of a 10’ rocket with the Apollo program or the space shuttle, but it seems that they are kicking ass in ambition. While Iran aspires to, and works towards, putting man into orbit within the next 10 years (it has already put a communications satellite into orbit), America is getting ready to mothball the shuttle fleet this year and has just cancelled the Constellation program, “effectively cancelling a five-year, $9 billion effort to build new Orion spacecraft and Ares rockets”, which “were slated to replace NASA’s three aging space shuttles.”

Is it possible that Iran (?!?) will have a heavy launch vehicle capable of putting man into orbit before the US gets its act together and replaces the shuttle fleet?

And it’s not just Iran. Our traditional space race competitor, Russia, will soon be the only means we have of getting our own astronauts to the International space station ("Can we catch a ride? We'll give you gas money."). India has successfully inserted a spacecraft into lunar orbit, has a manned program underway, has allocated budget and will launch a manned mission by 2014-2015. China has put men into orbit, and has laid out its plans to put a man on the moon by 2020.

I was in grade school when the Apollo program was underway. It was a race to be the first, to be the best, and to show the world what America is capable of achieving. We had political will. There was national pride. We accomplished that which no other country has yet to achieve. We were leaders. We swaggered when we walked.

And today? I fear that we’re not even laggards. Our mojo is gone. It's not that others have passed us, it that we've pulled ourselves out of the race. While other countries see manned space flight as a primary ambition, we yawn collectively and couldn’t care less. Maybe we’ll start caring when Iran has its own astronauts in orbit or when Russia/India/China puts astronauts back on the moon. But by then, we’ll be left in their dust – moon dust. That’s my .02!

Martin Suter

martin.suter at iplicensing.net

Homeland Insecurity Redux

So a Nigerian Islamist, named Umar Farouk Abdulmutallab, who was on multiple Watch Lists, tries unsuccessfully to detonate an explosive on a plane. How do we react?

Three hour waits in order to pat down women, children, and business people. Carry-ons limited to one piece only. No peeing in the last hour of a flight. No blankets. Nothing in one’s lap.

Hysterical and absurd are but two adjectives that come to mind.

Over a year ago, I blogged about how ludicrous it is for the DHS (from a policy perspective) and the TSA (from an implementation perspective) to treat every traveler as equal risks to safety and security (Homeland Insecurity?).

“C’mon…When was the last time a 70 year old fat lady tried to hijack a plane? Or a 45 year old high tech executive father of two? Or a high school student?...We live in a world where it is somehow deemed more acceptable to humiliate old fat ladies than it is to say out loud what we all know: radical Islamists are the threat, not my 14 year old son or the old lady next door, or me.”

“We lack the resources to treat everyone as a potential risk.”

Let me see if I’ve got this right…As someone who took over 150 flights last year, who has been screened by DHS multiple times, and who clearly is not an Islamist, I now need to arrive 2-3 hours ahead of my flight. I need to check my roll aboard, which will require that I wait at the other end for at least an hour to get my luggage. Do you think the airlines and airports are staffing up to deal with a 100% increase in checked luggage? Do you think they’re staffing up on the Customer Service side to deal with the inevitable surge in lost luggage? Do you think they’re budgeting for compensation claims due to baggage delays? Not a chance.

The joy of traveling was already largely gone, but now, thanks to the over-reaction by the DHS and TSA, it has totally disappeared.

Why should I be subject to the inconveniences, delays and costs associated with these absurd new procedures? Am I deemed a threat?

Why should you be subject to the inconveniences, delays and costs associated with these absurd new procedures? Are you deemed a threat?

Put some wood behind the arrow, but aim it at the bullseye, not at me and not at you.

Umar Farouk Abdulmutallab and his ilk are the ones who should be subject to the inconveniences, delays and costs, because they are the threat.

Not you or I.

That’s my .02!

Martin Suter

martin.suter at iplicensing.net

Tiger, Inc., A Failure in Corporate Governance

The near total implosion experienced by Tiger, Inc. these past 10 days, is almost unprecedented. "Almost", because, while not illegal, in many ways, it’s analogous to the collapse of Bernie Madoff’s empire. As with Bernie, people had “invested” in Tiger, cheering him on in his quest for greatness, paying him to represent their brand, only to find that all of the “equity” that had been carefully built up, was but a mirage.

Why does it matter? Of the ~$1 billion that Tiger is purported to have made since being launched into the public consciousness in 1996, less than 10% of it has been earned swinging a club and sinking putts. Ninety percent has been earned by Tiger, Inc., the sale and promotion of the man and the myth.

So what of it?

It’s hard to imagine that those in the inner circle of Tiger, Inc. weren’t aware of his high-risk behavior. Steve Williams, he who puts a smackdown on photographers, has been by Tiger’s side since 1999. I’m guessing that, during this time, he has spent at least 2000 nights on the road with his boss. Clearly, Steve has bought into the “What goes on in Vegas, stays in Vegas” mantra.

Mark Steinberg, Tiger’s agent and head of IMG’s Golf Division, is probably more responsible than anyone for 100% of Tiger, Inc. revenue. Is it possible that he wasn’t aware of Tiger’s behavior, or were he, Steve and others afraid to intervene and put their own livelihoods at risk? But if they were complicit, they would have contributed to the fraud, and must share responsibility for the fall of Tiger. As Solomon Burke sings in None of Us Are Free, “If you don’t say it’s wrong, then that says it’s right”.

I understand that Tiger must surround himself by people who he trusts implicitly, and clearly those near him can keep a confidence. But he also needs to surround himself with people whom he can trust to keep him grounded. People criticized Michael Vick for surrounding himself with his friends from the ‘hood, who shared with him a tendency towards illegal and high-risk behavior. People criticized Mike Tyson for surrounding himself with an entourage that fed his massive ego. Why are those in Tiger, Inc., if they were aware of his behavior, any different?

If I was Elin, I would feel betrayed, not only by my husband, but by those in the inner circle who attended the wedding, ate at my table, and played with my kids. Elin needs to assume the role of CEO of Tiger, Inc., although it’s not clear that she has any desire to do so. She should completely restructure Tiger, Inc., replacing everyone in the inner circle that has been part of the failure in governance and rebuilding both her personal relationship and the business anew.

“Sorry Steve, but somebody else needs to be on the bag next season.”

“Sorry IMG, we’ll take it from here.”

She and Tiger should work directly with sponsors that have been deceived and which, frankly, have now seen their brands tainted by association. Tiger needs to worry about being a husband, a father and winning majors and less about Tiger, Inc.

As much of a train wreck as John Daly appears to be, at least he doesn’t pretend otherwise. He parks his motor home out front of Hooters, chugs beer, poses for pictures and signs autographs. Seems that while he’s out front, Tiger’s sneaking his girl out the back door. Jack Nicklaus, a heavy smoker, refused to smoke on the golf course and hated seeing a picture of himself with a cigarette. While he would admit to human failings, he understood that he was a role model and adapted his behavior accordingly.

Why do we care about Tiger’s private life? I don’t, and frankly have read things that I had no desire to ever know.  This isn’t about Tiger’s private life, it’s about deception and a massive breach of the public, paternal and marital trust.

Tiger may end up being the winningest golfer and even surpass Nicklaus as the golfer with the most major championships, but Tiger can no longer ever become the “greatest” golfer. Great is who you are, not what you’ve accomplished. Great is how your friends and family describe you when you are gone, not how many trophies are on the mantle. As much as he would like it to be different, the narrative about his life is forever tarnished. Can you imagine reading a Tiger obit someday that fails to describe this past week in detail?

As the Accenture ad says with Tiger standing in the deep stuff, “It matters what you do next.”

Do right, Tiger.

That’s my .02!

Martin Suter

(martin.suter at iplicensing.net)

 

Spectrum is Like Beachfront

(Originally posted at http://www.von.com/blogs/guest/2009/12/spectrum-is-like-beachfront.aspx)

Plato is credited with having noted that, “Beauty is in the eye of the beholder.” This is certainly true in any discussion about spectrum. As with beachfront property, the thing about spectrum is that they’re not making any more of it. Recently, Blair Levin, who heads the FCC’s broadband program, acknowledged, “There’s not enough of it,” referring to spectrum. It was also noted that “several Tier I carriers are arguing for more licensed spectrum to keep pace with customers’ bandwidth demands, especially for mobile broadband.”

The FCC’s 700MHz auction raised $19.6 billion, with $16 billion coming from just 2 operators: Verizon and AT&T (National coverage maps). While I’m sure the FCC would love to run more multibillion-dollar spectrum auctions, is it really necessary to do so?

There are lots of moving parts in delivering a mobile broadband service, but it’s interesting to look at them holistically.

Different frequencies have very different propagation characteristics. It has been said that the best thing about 700MHz spectrum is its propagation characteristics. It has also been said that the worst thing about 700MHz spectrum is its propagation characteristics. It goes forever, has good in-building penetration, but these attributes present challenges from a frequency re-use perspective. Great for coverage. Not so great for capacity.

Conversely, the propagation characteristics in the 2GHz and 5GHz ranges are very different. These have limited range and poor in-building penetration, but these attributes are advantageous from a frequency re-use perspective. Poor for wide-area coverage. Great for capacity.

With the explosion in mobile broadband, the question today is whether the delivery of wireless broadband is a coverage play or a capacity play? And if capacity, what does the network look like?

Cell size and capacity have an inverse relationship. Macrocells, by design, are built to cover wide areas. However, the radios, spectrum and backhaul are all shared elements. The more users you have within a cell competing for these resources, the lower the throughput to each user. To increase capacity over an area, mobile operators pack in more, smaller cells (micro and picocells, and at the extreme low end of the spectrum, femtocells are being contemplated).

Andy Germano, vice chairman of the Femto Forum, said it very well recently when referring to the deployment of 4G networks: “Rather than go from big to small, they can go from small to big,” referring to cellular topology.

We know that, even today, it is challenging to keep up with the data capacity demands being driven by smart phones and other mobile devices. This is due to three factors: user demand for bandwidth, spectrum availability and cellular topology.

AT&T has been at the forefront of addressing the issue of adding data capacity to deliver a superior user experience for its iPhone subscribers by embracing Wi-Fi and unlicensed spectrum. Recently, at SUPERCOMM, John Stankey, president and CEO of AT&T Operations, stated:

“I don’t think a single macro wireless network is sustainable over time, given the pace of spectrum availability and what’s actually out there in terms of fixed spectrum. I think the reality is that there will be macro and micro networks. We’re starting down that path at AT&T, focusing on how we make Wi-Fi and licensed spectrum a more seamless experience for customers.”

So back to the beach.

There’s 80MHz of free, unlicensed spectrum, at 2.4GHz, being used today to augment data capacity by a leading licensed spectrum owner. Very interesting, but it’s still a small and pretty crowded stretch of beach. However, there’s 450MHz of spectrum, in the 5GHz bands, that is a beautiful stretch of beach – much less crowded, and ideal for small cells and frequency re-use, i.e. high-capacity locations.

Great stretch of beach, but how do I get there from here? Wi-Fi (802.11b/g) supports 2.4GHz and there are no 802.11a devices. The answer is 802.11n. Devices, such as the new Apple iPod Touch, are shipping with chipsets that support .11n and both frequency bands. Although the 5GHz radios are currently disabled, it is not unreasonable to expect that any upcoming versions of the iPhone, and other Wi-Fi enabled devices, will offer dual-band capabilities.

So, we will see 4G services rolled out at 700MHz, which will bring LTE to a big chunk of the country. But instead of waiting years (and paying billions) for more licensed spectrum to add capacity, I would say to Mr. Levin, “There’s a beautiful stretch of public beach up at this end, just waiting to be used.”

That’s my .02!

Martin Suter

Martin Suter is vice president of business development at BelAir Networks, the global market share leader in service provider Wi-Fi, enabling 3G data offload for wireless carriers, quad-play for cable operators, and managed WLAN business services. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.

Wi-Fi: Moving the Dial

(Originally posted at http://www.von.com/blogs/guest/2009/11/wi-fi-moving-the-dial.aspx

One of the most common questions I get when talking with wireless and wireline operators around the world, is how to monetize Wi-Fi services. Indeed, as subscribers are coming to expect Wi-Fi services for free, whether at Starbucks or with their iPhones, it is a complicated question.

In fact, many were skeptical when Cablevision, a BelAir Networks customer, announced its plans to launch “Optimum Wi-Fi” and to give away the service to its residential broadband subscribers as subscriber-retention play.

A key difference, over previous models, is that Cablevision focused its Optimum Wi-Fi deployments in “shopping centers, on main streets and train platforms, in parks, marinas, and at sports fields - the places you go everyday.” They’re delivering the service where their customers eat, shop and congregate – not striving for ubiquitous coverage.

And has this strategy been successful?

When Cablevision reported its numbers earlier this month, Q3 profit tripled, revenues grew 5 percent, ARPU is up 6 percent, net new adds were up 4 percent for broadband, and the stock jumped 3.2 percent on the results.

Craig Moffett, senior analyst at Sanford Bernstein, said free Wi-Fi is one reason why Cablevision customers haven't switched to Verizon. "Perhaps it's time to start giving Cablevision's free Wi-Fi network some of the credit," Moffett said in a research note. "For all of its vaunted capabilities in wireless, free wireless broadband is something that Verizon Wireless simply can't match."

Can you build a business case on free Wi-Fi? I’d say let the numbers speak for themselves.

That’s my .02!

Martin Suter is vice president of business development at BelAir Networks, a provider of broadband mesh solutions for Wi-Fi, WiMAX, 4.9 GHz Public Safety and 5.9 GHz ITS networks. Previously, Martin was the CEO at Cohda Wireless, where he raised the company’s profile and negotiated a licensing deal with a Fortune 100 vendor in its core franchise. Prior to Cohda, he was vice president of business development at MeshNetworks Inc., a classic tech transfer/disruptive technology success story that achieved a major liquidity event for its investors in Q4/2004 with its acquisition by Motorola. Martin also was responsible for building several high profile alliances with and for leading technology companies, including Fujitsu, Microsoft, Netscape, Sun Microsystems, and Teradata. Additionally, Martin has successfully negotiated technology transfer, distribution and/or licensing deals with companies like 3Com, BioChem Pharma, Dow Chemical, Exodus, Fujitsu, IBM, Microsoft, Motorola, Netscape and Sun.