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Summary:

When it comes to broadband economics, a new paradigm may be found in Amazon’s Kindle. The question now is to what degree will this trend accelerate as the first WiMAX and LTE networks come online?

Written by John Roese, Chief Technology Officer, Nortel Networks

A year or so ago, I began talking about how moving toward the 4G world of WiMAX and LTE (and UMB at that time) would enable a broad range of new devices to be connected economically to the mobile Internet. I speculated that the economics of 4G – at roughly 3X capacity (based on spectral efficiency improvements of OFDM-MIMO) and one-third of the price (based on system simplification) – would likely result in the cost of connectivity dropping by an order of magnitude.

I also speculated that if the cheapest cellular plans then available — which were just under $10 a month — were to emerge as the price point for connecting something to the new mobile Internet, then the cost of connectivity might actually end up being buried in the cost of a content subscription. If you consider that Netflix has just started charging $8.99 for unlimited downloads and Napster charges less than $15 for unlimited monthly music use, then it’s quite feasible to consider that a device that is purchased outright for a few hundred dollars could possibly charge $19.99 a month for unlimited always-on music access — or other content — in the 4G world.

But again, it was all speculation — that is, until Amazon released the Kindle e-book system. This device, which costs $399 to buy, also requires a monthly charge of $1 to $2 for ongoing content such as blogs and about $10 for content such as books, but there is no discrete bill or subscription for the 3.5G network access provided via Sprint’s network. You are essentially a cellular subscriber without any direct relationship with the operator. Is this the new paradigm? Are there other specialized devices coming? And to what degree will this trend accelerate as the first WiMAX and LTE networks come online now, and over the next few years?

Considering the list of devices and economic models that could be suitable for this model of burying the cost of connectivity within the cost of services, content or device, quite a few areas are ripe for this paradigm. Consider the following list:

  • Gaming Systems: Systems like the NintendoDS and Sony PSP already have Wi-Fi connectivity but they can also interact on a broader scale via network-based services that can command a monthly fee. Instead of only interacting for gaming with close proximity players, would a global community of gamers be of value in that connected interaction? Imagine taking a lightweight device with you to play World of Warcraft in a bus or on a subway. Since the MMORPGs are becoming as much about social networking as gaming, this might actually be something a few of the 10 million players would desire, and since they are already paying $15 a month, a few more dollars and the cost of a specialized device wouldn’t be that big of a stretch.
  • Music Players: As I write this, I am sitting on a plane with my MP3 player and, as such, am limited to what it holds; to update it I need to connect via my PC. The iPod touch (a nice MP3 player but with, at 16 gigs, insufficient capacity for my taste) has a Wi-Fi interface and can access iTunes via a hotspot. But in order to access connectivity and update content, I need to be at a hotspot and deliberately interact with the device. Better would be automatic access to the universe of existing and new music without even having to realize that a network is involved. An iPod with a CDMA interface like a Kindle, or a WiMAX or LTE interface, is by no means beyond the realm of technical possibility.
  • Media Players: Music is interesting, but the killer app for mobile multimedia entertainment is the device that has a significant screen, massive libraries of video and a long-enough battery life to watch more than one movie. All the parts exist today — they just haven’t yet come together. Mobile DVD players with screen sizes of up to 11 inches are widely available. And these devices have significant battery life (which is impressive given that they have motors spinning DVDs and operating lasers). As for content, the new all-you-can-eat subscriptions of Netflix and others have set a price for Internet-based multimedia. Finally, the connectivity exists via CDMA or UMTS 3G networks (à la Kindle) or WiMAX and LTE (much more suitable for video). If you combined these elements, what would you have? A mobile device that approximates the physical experience of TV, with access to tens of thousands of titles, and almost infinite content for, maybe, $20 per month.

What else could be in this class? An always-on, interactive automotive entertainment system? A patient monitoring system that allows cardiac patients (and their implanted heart monitors) to be in constant touch with their doctors? A home baby monitor that operates at unlimited range of the Internet?

The list is pretty broad. The reason is that the building blocks of these systems are now available and are only getting more real as we move towards 4G. All we need is connectivity, interface, and content that fit together in a system with an economic model that consumers can tolerate.

Any other ideas about what else could use these building blocks to revolutionize the hyperconnected world?

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By "John Roese, CTO Nortel Networks"
  1. [...] GigaOM placed an interesting blog post on Boradband’s Kindle ParadigmHere’s a brief overview [...]

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  2. When I saw the title of the post say “Boradband”, I thought it must be another firm in the broadband business. I guess not – it turns out to be just a typo.

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  3. This is why BluRay vs. HD DVD is a moot point, despite the hype. Bill Watkins, Seagate CEO points out that BluRay may win the battle but has lost the war to electronic distribution.

    http://www.neowin.net/forum/index.php?showtopic=612328
    storageeffect.com

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  4. [...] CTO John Roese dreams about the possibilities of a 4G world on GigaOm, and it makes Seagate’s CEO Bill Watkins’ comments on the Format Wars ring very true.  [...]

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  5. Another product that uses the system you describe is a GPS tracking system(like Lo-jack) that bundles the cellphone costs in to their mobile tracking system for $15/mo. They use T-Mobile as their provider, but their customers never deal with T-Mobile directly.
    http://www.zoombak.com/products/

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  6. [...] Bonus: John Roese describes “Broadband’s Kindle Paradigm” [...]

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  7. Thats all nice and dandy BUT, the first thing that we need is connectivity for those with no broadband option.

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  8. Charles Wilkes Tuesday, January 29, 2008

    But there is NO requirement for a monthly charge on my Kindle, and in fact I make none with mine. Instead I have downloaded free ebooks all with out-of-copyright status from several ebook vendors like MobiPocket and FeedBooks, etc. These are all the world’s classics in English by famous authors such as Charles Dickins, Mark Twain, Edgar Allen Poe, Robert Burns, etc., etc.

    And why would I want to pay Kindle for a blog all of which are free on the internet. Or the local newspapers which also offer internet delivery for free.

    Charles Wilkes, San Jose, Calif.

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  9. In a time when 3G connectivity is still in the minority, the Kindle Paradigm makes sense as a channel to drive sales of high margin content, but I can’t imagine a world where users don’t buy any form of connectivity directly. The “connectivity included” (as in “batteries included”) paradigm makes it difficult to deliver free, ad-supported content as margins are eaten away by connectivity costs. When you use free services today, it is not truly free: you’re paying for your connection. The paradigm you describe will invisibly raise the cost delivering free content, and will invariably block out some portion of innovation.

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  10. Kindle is a great device, and the way Amazon has handled the EVDO connectivity superb.

    http://tech-talk.biz/2008/01/04/amazon-kindle-an-amazing-device-with-many-hidden-features/

    Amazon has pioneered in a model that will be followed by others. We will see Application Service providers selling the connectivity as part of the Service. See article below

    http://tech-talk.biz/2008/01/28/transforming-telcos-telco-20/

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  11. Good post! One thing we should all note is that in the not too distant future, wireless Internet connectivity, at what we consider as ‘broadband speeds’ TODAY, is going to be pretty much free in most urban areas. This is not different from how radio and TV broadcasting is free now. That however is not the last word in wireless connectivity. There will always be a paid premium-connectivity option (higher speed, no ads, etc.). But the free connectivity will fuel a revolution in mobile computing and communication.

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  12. [...] A year or so ago, I began talking about how moving toward the 4G world of WiMAX and LTE (and UMB at that time) would enable a broad range of new devices to be connected economically to the mobile Internet. I speculated that the economics of 4G – at roughly 3X capacity (based on spectral efficiency improvements of OFDM-MIMO) and one-third of the price (based on system simplification) – would likely result in the cost of connectivity dropping by an order of magnitude. Read more … [...]

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  13. how about a device that did all these things (games, music, video), plus browsing. It would just need a big touchscreen. It would do all of these things better than any other mobile device because of the touchscreen interface and big screen.

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  14. [...] I also speculated that if the cheapest cellular plans then available – which were just under $10 a month – were to emerge as the price point for connecting something to the new mobile Internet, then the cost of connectivity might actually end up being buried in the cost of a content subscription. Read more… [...]

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  15. [...] is a very interesting post over at GigaOM about what this new model could mean for the broadband paradigm. With the economics of WiMAX-like [...]

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  16. Dimitrios Matsoulis Friday, February 1, 2008

    It is the golden opportunity for cellphone operators to seduce customers indirectly to their networks without even asking for money. Of course general wireless internet access is not going to stay still. Interesting article.
    http://electronrun.wordpress.com/

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  17. Hallelujah to Jim_in_VA for pointing out the real advantages of WiMax. So far, the really interesting stuff with WiMax so far is all overseas, and in greenfield deployment of WiMax. Countries like India are using WiMax for broadband access where there currently isn’t even any analog cell or digital phone service, let alone Internet.

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  18. [...] Bonus: John Roese describes “Broadband’s Kindle Paradigm” [...]

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  19. [...] it, I had a breakfast meeting this week with John Roese, chief technology officer of Nortel and one of the most astute people I know in the broadband [...]

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  20. [...] it, I had a breakfast meeting this week with John Roese, chief technology officer of Nortel and one of the most astute people I know in the broadband [...]

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  21. [...] it, I had a breakfast meeting this week with John Roese, chief technology officer of Nortel and one of the most astute people I know in the broadband [...]

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  22. There is another huge potential application: IP video surveillance for mobile platform. Mobile users can monitor or even control their home from cell phone anywhere and anytimem, share the visual event right on cell phone.

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  23. [...] and minimizing cost. After all, consumers buying wireless Internet devices (such as, say, the Kindle) aren’t interested in which network it runs on, only that their device is [...]

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  24. [...] could be if it were built into devices that aren’t phones or computers. Amazon’s pricing of the broadband service into the cost of downloads could also be life-changing for carriers evaluating different business [...]

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  25. [...] such data plans, and last year, John Roese, the former chief technology officer of Nortel Networks, offered several ways this may pan out. As the paradigm shifts and networks change, perhaps analysts worried about the health of a carrier [...]

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  26. [...] to make this vision a reality, Lurie says, AT&T needs different pricing models for various classes of devices. He also thinks many of these devices will have access to both a 3G and Wi-Fi radio, and will be [...]

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  27. [...] boost their business by offering wireless access for emerging devices, such as electric meters or e-readers, I decided to check with the nation’s four largest carriers to see what they consider to be [...]

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  28. [...] source for the radios and network access that are essential to getting devices online. For every Kindle out there connecting back to the web, Qualcomm and Verizon hope there are hundreds of other devices, from smart meters provided by [...]

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  29. [...] has also said it hopes to get its 4G wireless embedded into consumer devices, a strategy being aggressively pursued by cellular carriers looking to expand their business in an [...]

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  30. [...] has certified more than 1,000 devices, with most of those used in industrial settings. But now, as adding network connectivity to consumer devices becomes a must-have feature, AT&T is stepping up its efforts. It’s starting to sell [...]

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  31. [...] to sell access on their wholesale networks for consumer devices. That changed, however, when Sprint decided to support Amazon’s Kindle. Suddenly (thanks in large part to the marketing push made by Amazon) carriers (and consumers) [...]

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  32. [...] launch of its Nexus One. And its importance will only grow in the next few years as connectivity expands beyond phones and laptops into consumer electronics, health care apps and the automotive world, to name just a [...]

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  33. [...] connectivity: buying service monthly from a cell phone company such as for a data card, or a device maker pricing the cost of wireless into the goods it sells as Amazon does on the Kindle. But buying additional subscriptions for a smarter photo [...]

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