by Dana Blankenhorn
Volume V, No. XLVII
For the Week of December 3, 2001

This Week's Clue: Citizens of Oceania

This Week's Clue: Citizens of Oceania

SSP (Shameless Self Promotion)

SP (Shameless Promotion)

Retrial of the Betamax Case

Market Test of the PC Experience

Where the VCs Are

Clued-in, Clueless

In George Orwell's "1984" the world is divided into three great empires. Citizens are constantly monitored, their thoughts are ruthlessly controlled, and great lies are swallowed whole because questioning means torture.

In the wake of September 11 it seems to many that the Bush Administration has moved toward creating that world. An alliance of Russia, China and the U.S. has been created, and each has been given absolute dominion over its citizens' lives, both online and off. 

That's the paranoid view. The rational side notes that 19 men, armed only with box cutters and a willingness to die (at least among the leaders) murdered 5,000 people, destroying lower Manhattan and (nearly) the heart of Washington, D.C. It also seems that one nut, armed only with some knowledge and access, has killed a half-dozen people and frightened 270 million more by mailing Anthrax to leaders of our "liberal establishment."

Multiply that threat by 1,000 or 10,000 or (in the case of the Anthrax case) 1 million (it isn't hard to do) and the kind of laissez-faire liberty of America's founders seems an unaffordable luxury. We have to get inside those conspiracies, wherever they are, and stop them before we're all killed.

This is a bipartisan demand. Tony Blair is no Republican and his proposals are, if anything, more draconian than the U.S. "Patriot Act" . Singapore has passed similar laws , India's law is in process and the new "cybercrime treaty" was heavily influenced by fears of terror . The fears are not irrational.

Yet the paranoid mind returns to its theme. Internet anonymity is being systematically destroyed. The C.I.A. has given up on supporting freedom in China, removing its support and thereby closing the Safeweb system . (It's no coincidence that China has responded by shutting down thousands of Internet bars ( ) and increasing monitoring of the rest.) Australia's Internet censorship has gone beyond servers to specific laws against users uploading thoughts the authorities disapprove of. (No sex please, we're Aussies.) 

The paranoid continues. The easiest way to maintain the control sought by governments against terror is to limit the number of people who must be constrained in order to control everyone else. The Internet we know of, with thousands of ISPs and free innovation, is thus being replaced, according to Lawrence Lessig (no paranoid he) , with a regime in which the biggest copyright owners, technology owners, and networks control everything.

The result is Orwell's world . Everyone is watched, all the time, online and offline. The government might stick a virus past your anti-viral software without your knowledge . You might be tried and convicted by a secret court . Liberty is a thing of the past .

Yet I remain hopeful. What protects Internet liberty best is the law of numbers. It's physically impossible to watch everyone, everywhere, all the time, and by doing that prevent things from happening. The Internet cannot abide the system delays plaguing our airports. The assumption must be made that most of us are honest, and surveillance must thus be limited only to real suspects. Otherwise we're all Hawtch-hawtchers, watching on bee-watcher watchering watch.  

The only laws we need fear are those that exercise prior restraint, the "West Coast Code" favored by monopolists. And the first mechanism we have for preventing that restraint is government, its levers democracy. The number of our real enemies is limited, and their Internet access is very limited. Those enemies will be defeated, and in the wake of our victory democracy will re-awaken. I predict it will re-awaken first on this medium. In fact, it already has. 

SSP (Shameless Self-Promotion)

It's here! Yes, the PDF version of "Living on the Internet" is finally available for purchase at eBooks.Com , hyperlinks and all. More outlets are being sought, and the November update will go to all buyers who notify me (and other interested members of this list) as soon as it's finished. (Whew!)

You can join the A-Clue.Com discussion at I-Strategy , our shared e-mail digest produced with Adventive.Com. You can also read me at ClickZ , BtoB, and Boardwatch. I'm also on the mast-head at Bottom Line Personal , a great print newsletter. Remember that it's journalism that keeps the Clues coming...

Shameless Promotion

E-mail marketing works, but only if it's based on a relationship and a database.

Permission is just the first step. An audit of your database to eliminate extraneous names is the second step. Building interactive relationships with every name in that database should be your Job One, the main creator of value in your company.

You can take the first step on this journey with help from my friends at Whitehat Interactive - click here to begin.

Takes on the News

Retrial of the Betamax Case

Your VCR exists only because of the "Betamax case," a 5-4 Supreme Court decision holding that copying over-the-air TV shows represents "fair use," and not a copyright violation.

I have said before that the 1998 DMCA will overturn this decision, which might be considered technology's Roe vs. Wade in that it's commonly accepted as fact by most Americans. Now my theory is about to be tested in the form of a lawsuit against SONICblue, a digital video technology company responsible for ReplayTV .

The only real difference between the ReplayTV 4000 (or its cousin the TiVo) and a Betamax is that it's digital. This means the copies it makes are exact. They don't degrade the way videotapes do. The device won an Emmy Award just a few weeks ago.

Neither Replay nor TiVo has yet made a lot of money. People buy the sets but forego the accompanying monthly service fees. As a result there's no pile of cash to make up for the revenue lost when people flip through commercials or pass around digital copies of their favorite shows (which are also flipped-through sans ads).

The SONICblue case is a direct attack against the Betamax ruling, but as I said that was a 5-4 decision and new laws have been written since. If the Betamax decision is overturned, however, I predict people will demand Congress do something to restore the status quo. I further predict Congress will, or we'll get a new Congress. People may ignore attacks on "those computer people," but you start messing with their VCRs and they'll start messing with you.

Content producers need to create new business models people will accept, now, because their reign over our laws could be short-lived.

Market Test of the PC Experience

Gateway has developed a truly "clued-in" deal, a $99/month bundle that delivers not one but two PCs, wireless networking and an MP3 player.

The offer is important on several counts. First, the price is based on marketing research, not on costs. Second, this is all about client gear - there's no DSL or cable modem service included. And for that reason I believe this offer might fail.

The reason is that broadband remains the key upgrade. Add broadband to the Gateway bundle and you get a $150/month price point, much higher than most people will go for (especially those who seek to go "from zero to geek," as C|Net reported). Gateway tried to run an ISP service earlier but gave up, preferring to take AOL's money and become its re-seller. Now that mistake will come back to haunt it. (Ted, blame the cow.)

The best move for a PC maker might be to bundle with Direcway , the satellite broadband service. This would also let you put a variety of other consumer electronics into the bundle, not just PC-ware. My guess is Gateway is prevented from doing that by its contract with AOL. This is a great opportunity for someone else.

Where the VCs Are

If you're looking for venture capitalists (and there are still many of these folks in business) just put up a sign that says "802.11 Software." They will crawl out of the woodwork toward you, pens and deals in hand.

A new version of the standard, 802.11g, was recently approved by the IEEE . The result next year will be chip sets transmitting 11 Mbps of wireless data at around the 2.4 Ghz frequency range. In other words, anywhere there is a wired LAN, there will be the capability to make it wireless at very low cost.

The problem is, as we all know, 802.11 has no security, no proven authentication systems, and no method of recouping its costs, which include not just the cost of the wireless set-up but the Internet bandwidth sucked up by wireless users. This is where the VCs are looking for solutions, and this is where they will find them.

Companies based on solving the security, authentication, and bandwidth payment issues of 802.11 will be able to hit the ground running, demonstrate sales and profits quickly, and draw buy-outs within a year at huge premiums. This is the kind of business model VCs live for, this is what they're good at pursuing, and this is where they should be. Chances are, this is where they already are.

Clued-in, Clueless

Clued-in is Softbank for finally recognizing how Clueless it has been and throwing in the towel on most of its Internet investments. The next place I expect to hear from Son-san is one of those "where are they now" features.

Clueless is the U.S. Labor Department, which rejected complaints by former AOL volunteers because they were too busy. The excuse is hopelessly, ridiculously lame. If you don't want to bother a rich company that exports American technology, say so.

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