Don Dodge on The Next Big Thing

How Google is using Machine Learning and AI

Machine Learning will impact everything we do at Google. You can already see the results in Google products you use today. Artificial Intelligence, Machine Learning, Deep Learning, and Big Data are buzzwords we hear every day. What do these words mean? How will Machine Learning make my life better? Let’s take a look.

What is Machine Learning?Isn’t that Artificial Intelligence? Not exactly. Let’s spend a minute defining the terms. AI is a high level term used to describe any approach to make a computer smart. AI started out as a programmed set of rules that could quickly sort through mountains of data to find the desired answer. But, AI rules couldn’t learn or adapt to new data. You could add more “rules” to handle new data, but there was no “learning”. Machine Learning (ML) is a new type of Artificial Intelligence (AI) that lets computers learn without being explicitly programmed. ML is a set of classifiers and algorithms that can teach themselves to grow and adapt when exposed to new data. Machine Learning can learn. This is a BIG deal. Deep Learning (DL) is a particular technique within Machine Learning. It uses an Artificial Neural Network with many layers to learn optimal model parameters. DL creates an algorithm that will automatically decide which features work best to accomplish a task. Finally, Big Data is a term used to describe LOTS of seemingly unrelated data, that upon further analysis could become very useful.

“Machine learning is a core, transformative way by which we’re rethinking how we’re doing everything. We are thoughtfully applying it across all our products, be it search, ads, YouTube, or Play. And we’re in early days, but you will see us — in a systematic way — apply machine learning in all these areas.” Sundar Pichai, Google CEO

We are already seeing Machine Learning embedded in services like Gmail, Search, Maps, and even in what ads we see. Let’s look at some examples in Gmail. Priority Inbox automatically identifies your important incoming messages and separates them out from everything else. It learns over time what is important to you, and what isn’t. Smart Reply is another Inbox feature that suggests up to three responses based on the emails you get. For those emails that only need a quick response, it can take care of the thinking and save time spent typing. This is especially helpful on mobile phones. The responses get better over time as the system learns. 

Google Search and Google Maps employ Machine Learning too. When you start typing in the search box it automatically anticipates what you might be looking for and provides suggested search terms. The suggestions could be based on past searches, what is popular now, or where you are at the time. 

Google Assistant is a new example of Machine Learning on Android, helping you with everyday tasks. Click on the video below to see what it can do for you. Google Assistant makes it easy to buy movie tickets while on the go, to find a perfect restaurant for your family to grab a quick bite before the movie starts, and then help you navigate to the theater. Today, Google Assistant is available on the new Google Pixel phone. Older phones have an earlier version called Google Now.

 

Self Driving Cars are probably the most sophisticated example of Machine Learning in action. If you drive around Mountain View, California you will likely see a Google self-driving car. They have been on campus for several years, and have logged 700,000 miles of accident-free autonomous driving. Watch this video to see what the onboard computers “see” and how they react as they drive the car. It is truly amazing!

 

Machine Learning will radically transform and improve all kinds of applications. It is already seeping into things like; Security/threat detection, Fraud detection, Recommendation engines for eCommerce, NLP for legal documents, emails, patent searches, Video/voice/speech recognition, Health screening, Cancer detection, Fact checking, Weather or Financial models, and many more.

 In an effort to accelerate innovation, Google is making the core Machine Learning framework Tensor Flow available as Open Source. Google Cloud is also providing access to Machine Learning APIs for Natural Language Processing, Speech Recognition, Language Translation, and Vision/Image Recognition.

If you are interested in becoming a Google Partner to take advantage of these and other Google technologies, sign up here.

Next time I will take a look at Virtual Reality and Augmented Reality (AR/VR) and how it will change the world. Click the Follow button to be notified when my next post is available.

Disclosure: Thoughts and opinions expressed here are my own, and do not necessarily reflect those of my employer.

Bio: Don Dodge works on the Google Cloud Technology Partner team. Don is a veteran of five start-ups including Forte Software, AltaVista, Napster, Bowstreet, and Groove Networks. Prior to Google, Don was Director of Business Development for Microsoft’s Emerging Business Team. You can follow Don on Medium, on Twitter @DonDodge or on Facebook

11 Billion videos served - Profits ???

Comscore says Americans watched 11 Billion videos in April. Nearly 75% of Americans with Internet access watched at least one video. The "average" user watched 82 videos. Average length was 3 minutes. Hmm...I guess I am way below average.

John Paczkowski at AllThingsD says most of those 11 billion videos were unmonetized.

Mark Cuban says Hulu is making more money at video than YouTube. Although Hulu is tiny by comparison, they are better able to monetize their traffic...and use YouTube as a traffic generator.

 

Google / YouTube streamed over 4 Billion videos. Hulu wasn't even in the top 10. This is a case where bigger isn't better. My guess is that 5th place Viacom made way more profit on their videos than YouTube made streaming 20 times as many videos. Google CEO Eric Schmidt admitted in a recent interview that they haven't yet figured out how to effectively monetize YouTube.

Video is incredibly expensive to host on servers and stream out to users. YouTube is loading 10 hours of video every minute of every day. Imagine how much storage and bandwidth it takes to handle that. The costs are staggering. The revenues? Not so much.

Andrew Chen asks "where are all the video startups on this list?" Simple answer Andrew, the online video business is way too expensive for any startup to compete on volume. Every company on this list is a huge media company because the costs of creating, hosting, streaming, and audience building is enormously expensive. Well beyond the means of any startup. However, there is a place for clever startups like Hip Mojo. Small is beautiful...and profitable.

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Will advertising revenues drop in a recession? Who will win and who will lose?

In business it is commonly understood that advertising is the first thing to be cut in a business downturn or recession. Henry Blodget, former Wall Street Internet stock analyst, believes we are headed for a deeper recession and that advertising, even web advertising, will be hurt. My take? Advertising in general will fall, but CPC Internet advertising will increase.

Display advertising will be hurt

Newspapers will be the first to feel the pain. Newspapers are already getting hammered and it is only going to get worse. TV and Radio will also feel the pain, but to a lesser degree. Advertising mediums like these don't have good feedback mechanisms. It is really hard to accurately calculate how effective an advertising campaign has been. You pay your money up front and hope for the best.

Web based CPM advertising will be hurt too

Web based display ads and banner ads are the online equivalent of print display ads. The costs are substantially lower, but the results are still hard to measure. Cost Per Mil (CPM) ads are not well targeted like search advertising. There is also no user interaction like there is on Cost Per Click (CPC) ads. Big web sites like Yahoo, AOL, Cnet, Marketwatch, and others get most of their revenue from display/banner ads. Advertisers are likely to cut back first on print ads, and later on web based display ads.

CPC advertising could actually increase

With CPC ads you pay nothing unless someone clicks on your advertisement. This is a huge advantage for advertisers who really want to increase sales but can't afford to gamble on a display ad. CPC ads are easily justifiable and trackable. In a recession, with declining sales, there is enormous pressure to do anything possible to get sales moving. CPC advertising, principally on search engines, will be very appealing to advertisers.

A recession could accelerate the trend to web based CPC advertising.

The trend towards Internet advertising has been growing for years. Still, less than 10% of all advertising dollars are spent on the Internet, up from about 6% a few years ago. The trend will continue and probably accelerate with a recession. This is great news for search engines like Google, Microsoft Live Search, and Yahoo Search.

The Yahoo problem

Yahoo is a huge web destination with great traffic numbers. The problem is that most of their traffic (over 80% last time I checked) is generic, untargeted page views. Meaning, their traffic is to a Yahoo home page, Yahoo email, or some other generic content page. This traffic is hard to monetize effectively because it is not targeted. Search traffic is easy to target and commands very high advertising rates because it is so tightly targeted and effective.

Where is the opportunity?

Ad targeting technology that targets ads to the user, not the content they are looking at, will be a huge winner. Imagine if Yahoo, or any other big content site, could better target their advertising to users. They could go charge much higher prices for their CPM ads, and convert lots of generic page views into advertising dollars.

There are lots of companies working on this from lots of different angles. Quantcast is doing deep click stream analysis and layering on demographic data for better targeting. MatchMine is taking a different approach. By analyzing the content you like, and recommending more content like it, they build a profile to help you get better content, and help advertisers target their ads.

Behavioral targeting for advertising is already a hot area, and likely to get even hotter. Especially if an economic recession hits the advertising world.

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Does Google have its head in the clouds?

Yesterday the New York Times said "Google Ready To Rumble With Microsoft", referring to Google's foray into online Office Apps. Today a survey from NPD says 73% of PC users have never heard of Google Apps, and another 21% have heard of them but never used them. Just one half of one percent said they use web based apps instead of desktop software.

Google CEO Eric Schmidt was asked by the New York Times if he really believed that 90% of all computing would be done in the cloud. Schmidt's response?

“In our view, yes,” Mr. Schmidt says. “It’s a 90-10 thing.” Inside the cloud resides “almost everything you do in a company, almost everything a knowledge worker does.”

The NPD survey supports what Microsoft's Jeff Raikes said in response to Google's claim;

“It’s, of course, totally inaccurate compared with where the market is today and where the market is headed,”

It is fair to say that Google has its head in the clouds. (pun intended) That is a fine place to be if you are a web search company, but that is not where office productivity software is now, or will be anytime in the near future. Google's arrogance will be its undoing. Their total reliance on internal Google engineers while ignoring customer feedback, and their lack of experience in direct sales and customer support, will not work in the business software world.

Duncan Riley at TechCrunch is singing the Google song. He proclaims "Majority of Americans on Google Docs" and says "...given the online alternatives there is little doubt that the number making the switch to online apps will continue to grow."

Joe Wilcox at eWeek takes the other view with the provocative headline "R.I.P.- The Web 2.0 Office Suite" The eWeek article included this pie chart of survey responses.

 

The eWeek article goes on to say; "The scant adoption makes some sense of Microsoft's Office Live Workspace, which went into broad beta last week. The service clearly is designed to be an adjunct to Office desktop software rather than a Web-based alternative. If NPD's numbers are indicative of real-world usage, Microsoft hasn't much to worry from Google Docs and Spreadsheets or other online alternatives. Maybe too many people make too much about the Web 2.0 threat to Office. "

Mary Jo Foley of ZDnet gets it right when she says;

To me, the way that Microsoft is addressing the so-far small number of users who want Web-based productivity software is disruptive. Microsoft isn’t listening to the venture capitalists and A-list bloggers who are ridiculing the Redmondians for not discontinuing immediately any more client-based Office development and turning Office into a Web-based product.

Instead, Microsoft is doing what the majority of productivity-suite users currently want, by adding a Web-collaboration element to Office with Office Live Workspace. At the same time, Microsoft also is sowing the seeds for a Web-based consumer office suite with the Notes and Lists components of Office Live Workspace. If and when there’s enough customer demand for such a product, Microsoft won’t be starting from scratch to build a Web-based suite.

Not rushing headlong into a bubble-licious market doesn’t equal denial. Sometimes resisting peer/pundit pressure can be pretty disruptive, too….

As I said yesterday, Microsoft has played the role of market disrupter before against IBM and the mainframe software crowd. Microsoft has adapted to many market shifts and disruptions over the past 20 years.

Microsoft has a long history in enterprise software and office productivity applications. Microsoft has done a great job listening to customers and even anticipating their needs. The recent announcements from Office Live and the investments in massive data centers signal where Microsoft is going.

Software plus Services as opposed to Software as a Service. Microsoft is giving customers the best of both worlds; powerful desktop software, complimented by web based services. It may not make headlines with the Web 2.0 crowd, but it is the best path for customers who want the best of both worlds.

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Google vs. Microsoft = Microsoft vs IBM 30 years ago

This battle of the titans has been brewing for 5 years or more. It is inevitable. Not because of animosity between the companies, but because of underlying business and technology trends driven by new customers and technology advances. There are lots of examples of this happening in many different industries. Think Toyota vs. Ford 30 years ago, or Microsoft vs. IBM.

The New York Times has a story today "Google Gets Ready To Rumble With Microsoft". The NYT interviews Google CEO Eric Schmidt, and one quote sums up the Google view that the future of computing is web based applications and services hosted in "the cloud" on the web.

To explain, Mr. Schmidt steps up to a white board. He draws a rectangle and rattles off a list of things that can be done in the Web-based cloud, and he notes that this list is expanding as Internet connection speeds become faster and Internet software improves. In a sliver of the rectangle, about 10 percent, he marks off what can’t be done in the cloud, like high-end graphics processing. So, in Google’s thinking, will 90 percent of computing eventually reside in the cloud?

“In our view, yes,” Mr. Schmidt says. “It’s a 90-10 thing.” Inside the cloud resides “almost everything you do in a company, almost everything a knowledge worker does.”

Jeff Raikes, President of Microsoft's Business Division, responds by saying;

“It’s, of course, totally inaccurate compared with where the market is today and where the market is headed,” says Jeff Raikes, president of Microsoft’s business division, which includes the Office products. TO Mr. Raikes, the company’s third-longest-serving executive, after Mr. Gates and Mr. Ballmer, the Google challenge is an attack on Microsoft that is both misguided and arrogant. “The focus is on competitive self-interest; it’s on trying to undermine Microsoft, rather than what customers want to do,” he says.

Henry Blodget, former Wall Street analyst and currently of Silicon Alley Insider, casts the debate as the classic "Innovators Dilemma", made famous by Harvard's Clayton Christensen. Henry distills the essence of 'The Innovators Dilemma" and the situation between Google and Microsoft in a few short paragraphs;

Disruptive technologies do not destroy existing market leaders overnight. They do not get adopted by the entire market at the same time. They do not initially seem to be "better" products (in fact, in the early going, they are often distinctly "worse.") They are not initially a viable option for mainstream users. They do not win head-to-head feature tests. Initially, they do not even seem to be a threat.

Disruptive technologies begin by providing a cheaper, more convenient, simpler solution that meets the needs of the low-end of the market.  Low-end users don't need all the features in the Incumbent's product, so they rapidly adopt the  simpler solution. Meanwhile, the Incumbent canvasses its mainstream customers, reassures itself that they want the feature-rich products, and dismisses the Disruptor as a niche player in an undesirable market segment.

But then the Disruptor improves its products, adding more features while keeping the convenience and low cost. Now the product appeals to more mainstream users, who adopt it not because it's "better" but because it's simpler and cheaper. Seeing this, the Incumbent continues adding ever more features and functionality to its core product to try to maintain its value proposition for higher end customers. And so on. Eventually, the Incumbent's product overshoots the needs of the mass market, the Disruptor grabs the mainstream customers, and, lo and behold, the technology has been "disrupted."

It is important to remember that Microsoft has played the role of "Disruptor" in the past, and learned a lot along the way. Jeff Raikes and Ray Ozzie totally get it. The people in charge of Office and Live get it. .

Microsoft has a carefully planned strategy to provide customers with the best of both worlds; packaged software for applications that require lots of graphics and computing power, complimented by web based services for easy access and group collaboration. Microsoft calls this "Software plus Services", and it is important because the user experience is seamless and synchronized no matter where you are. Microsoft has invested billions in huge data centers to support this vision.

On the business side there is another delicate balance. Microsoft Office is a $15 Billion dollar business. Balancing that business with advertising supported web services, or monthly subscriptions, will happen gradually over time.

Another important thing to remember is that this isn't a "winner take all" scenario. This is a huge market and there is room for different solutions and business models. Look at IBM. They are still a very large and successful company 30 years after they were "disrupted" by Microsoft.

Ultimately the customers decide who wins. Great companies adapt to changes in the marketplace. Lazy companies cling to their "tried and true" business models in the face of disruptive forces. Microsoft is a great company...so is Google. Both will be successful in their own way...and the customer wins either way. That is the American way!

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Googlepedia - Knol is Google's knowledge base

Nick Carr used the moniker Googlepedia which I think in one word sums up the essence of Google's Knol announcement. This makes a lot of sense for Google. Over 70% of Wikipedia's page views originate from a Google search. And, Wikipedia is the number one search result for LOTs of queries. As Nick Carr pointed out, this trend is increasing. Wikipedia is the trusted source for unbiased, up to date, information on almost any subject.

Danny Sullivan at SearchEngineLand got a look at the Knol service, see the screen shot below, and says this about Knol;

Google Knol is designed to allow anyone to create a page on any topic, which others can comment on, rate, and contribute to if the primary author allows. The service is in a private test beta. You can't apply to be part of it, nor can the pubic see the pages that have been made. Google also stressed to me that what's shown in the screenshots it provided might change and that the service might not launch at all.

 

Udi Manber, Google VP of Engineering wrote a blog today about Knol, and describes it this way;

The key idea behind the knol project is to highlight authors. Books have authors' names right on the cover, news articles have bylines, scientific articles always have authors -- but somehow the web evolved without a strong standard to keep authors names highlighted. We believe that knowing who wrote what will significantly help users make better use of web content. At the heart, a knol is just a web page; we use the word "knol" as the name of the project and as an instance of an article interchangeably. It is well-organized, nicely presented, and has a distinct look and feel, but it is still just a web page. Google will provide easy-to-use tools for writing, editing, and so on, and it will provide free hosting of the content. Writers only need to write; we'll do the rest.
A knol on a particular topic is meant to be the first thing someone who searches for this topic for the first time will want to read. The goal is for knols to cover all topics, from scientific concepts, to medical information, from geographical and historical, to entertainment, from product information, to how-to-fix-it instructions. Google will not serve as an editor in any way, and will not bless any content. All editorial responsibilities and control will rest with the authors. We hope that knols will include the opinions and points of view of the authors who will put their reputation on the line. Anyone will be free to write. For many topics, there will likely be competing knols on the same subject. Competition of ideas is a good thing.

From everything I have read Knol sounds like the best of Wikipedia and About.com, with great opportunities for quality traffic and advertising. Good move.

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Search engines are the Start page for the Internet

Google released its 2007 Zeitgeist list of most popular search terms. What is interesting about the list is how obvious the search terms are. Meaning, why would anyone enter these search terms, since in most cases the search term is itself the URL. Why not just type in the URL directly?

The answer is that search engines are the Start Page for the Internet. My guess is that most people have a search engine as their default home page on their browser.

There is another more subtle answer. Search engines are better at finding relevant content than the destination sites themselves. For example, if you were searching for a specific story on CNN or a specific topic on Wikipedia, would you go to that site and enter the search term on their internal search engine? Or would you just enter the term into your default web search engine? I have found that the major search engines are better at finding content than the destination sites themselves.

HitWise says that 70% of Wikipedia's traffic comes from Google searches. I know on this blog about 75% of the page views come from search engines, mostly Google.

Your regular traffic goes up when you advertise - Here is another odd fact about search engines. Search Engine Marketing people at many companies have told me that their organic search traffic goes up when they buy keyword advertising. They are perplexed as to why...and have considered reducing their advertising. I tell them to increase it. Here is why.

Free advertising -  A large portion of people don't like to click on ads. I have observed many people searching for things. They will glance at the ads on the right side bar, see something they like, and re-enter it into the search bar, rather than click on the ad. Why? They trust the search engine more than the ad. It is deeper than that. They trust the search engine to give them more useful information than the advertisement.

People are frustrated with search? I hear this all the time from the lesser known search engine people. They believe they have the answer, and can deliver better results. The facts say otherwise. The reality is that people are quite skilled at entering search keywords and finding what they want. They are not frustrated...and search traffic is increasing every month.

Search is big business. Each 1% of search engine market share is worth $1 Billion. But, even 1% is incredibly difficult to achieve. Google's market share is at 64% in the US and has been growing every quarter. Yahoo has 22%, Live has 7% and Ask has 5%. That is 98% for the top 4 search engines. AOL has at least 1% so that leaves less than 1% for the other hundreds of search engines to fight over. Not very good odds for a startup.

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Why Google is bidding in the 700MHz wireless spectrum auction

Google is bidding to ensure that the 700MHz wireless spectrum will be open to any application or hardware from any company. The Wall Street Journal confirmed today that Google will indeed bid. Om Malik asks "Will Google Play To Win?"  My guess is no...they will bid $4.6 Billion.

Why $4.6 Billion? The rules of the spectrum auction require the winning bidder to allow any device or application to access the network at "wholesale" rates, provided the winning bid meets the reserve price of $4.6 Billion. Google has already committed to bidding at least $4.6B, so that means the reserve will be met and the open rules will prevail.

Last week I wrote a story explaining what 700MHz spectrum is, and why it is so important to have it open to any company who wants to innovate. As it stands today the major carriers (Verizon, Sprint, T-Mobile) own the spectrum, make the rules, and set the prices. There has been very little innovation in wireless applications because the carriers control the economics.

Wall Street financial analysts were going crazy over the news that Google will bid. They believe Google knows nothing about the business and it will be a huge distraction. The stock (GOOG) dropped sharply by $29.00 from the opening price,  but ended the day down $4.00 at $693.00.

Typical Wall Street. They missed the point entirely. Google isn't in this to win. If they do happen to win, they will probably bring in a Telecom partner to build out the network.

Hats off to Google. The real winners in all of this are consumers who will enjoy more choice and innovation.

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Who owns your data on Google, Facebook, Netflix?

The blogosphere is raging about Facebook's use of "my data". Doc Searls is promoting the idea of VRM (Vendor Relationship Mgmt) and says "Time to write our own rules".

The bargain you made in exchange for free services. Consumers sometimes forget the bargain they made in exchange for the free services. Sometimes it means your personal information can be sold or marketed. Other times it means your content is not really yours anymore. Sometimes it means you get to pay for additional services once you are hooked. Or maybe that the rules change over time and the service is unreliable. Most times things work out OK and consumers don’t complain too much.

Free services always come with strings attached, limitations, service outages, advertising, etc. Facebook seems to be attracting all the attention now, but do people realize what Google is doing with “your data”? Your search history…your click stream data…the sites you have visited? Do they understand what information DoubleClick has collected on “your data”?

Dave Winer says "I want control of my data" and states in part;

I want Netflix and Yahoo to give me an XML version of my movie ratings, for me to decide what to do with. I've been asking for this for a couple of years, I still don't have it. This is information I created. I want to keep a copy. I want to make sure that Netflix knows about all my Yahoo ratings and vice versa. I'd like to give a copy to Facebook (assuming they agree to not disclose it) and maybe to Amazon, so they can recommend products I might want to purchase (again keeping it to themselves). I want to begin a negotiation with various vendors, where I give them something of value, and they give me back something of value.

Being able to export your Netflix ratings or Facebook friends list is mildly interesting, but inconsequential when compared to what is happening with your real important data. Maybe Doc Searls, Dave Winer, and the rest of the blog cognoscenti should focus their cannons in a different direction?

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Open vs Closed Networks, the future of 700 MHz wireless spectrum

There is a big battle brewing over control of the 700 MHz wireless spectrum that the US government will auction off in January. The winner of the battle will determine if cell phone wireless networks remain closed, or will be opened up to anyone like the Internet. This is a high stakes game, probably costing $7 to 10 Billion. However, US wireless carriers collected $95 Billion in revenues.

The Wall Street Journal reports that Google is seriously considering making a bid and building out a wireless network. Microsoft has declined to bid, and instead will work with carriers and manufacturers by providing Windows Mobile operating system.

What is special about this spectrum? The 700 Mhz wireless spectrum was formerly used by UHF TV stations, so it is very powerful and capable of transmitting long distances, even through walls and barriers. Most of us grew up in the cable TV generation so you may not remember when TV was broadcast over the air and picked up by an antenna at your house. Back then the  VHF channels (1-13) were used by the major networks and affiliates, and UHF channels (14-69) were used by public TV and smaller private stations. With the advent of cable TV, and now full digital TV in 2009, the 700 Mhz UHF spectrum is no longer used. The auction will be for the spectrum used by channels 52 through 69.

More powerful and cheaper to deploy - The 700MHz spectrum is more powerful than the current cell phone spectrum and can go through walls much easier. It is cheaper to deploy because the spectrum is more powerful so it requires fewer transmitters and towers, making it 50% to 70% less expensive to build out a nationwide network.

Open versus Closed? Everyone has a different definition of open, but what it boils down to here is the difference between the Internet (open) and the cell phone network (closed). 

Cell phone networks are closed. Verizon, Sprint, or AT&T control the networks. They decide which hardware manufacturers (Motorola, Nokia, Samsung, etc) can work on their network, and which applications (maps, games, music, etc) can be used on their network. The wireless carriers control their "walled garden", make all the rules, and collect most of the money.

The Internet is open to anyone who wants to launch a business and will carry any content; web pages, video, music, etc.

It is pretty obvious why there are millions of businesses and applications on the Internet and very few on cell phone networks.

Open doesn't mean free - The Internet backbone is owned by the major land line telecommunications companies. They own the fiber optic lines and networks, and some of the Network Access Points (NAP's). They sell usage of their bandwidth to Internet Service Providers (ISP's) like AOL, NetZero, and others. The ISPs in turn charge you each month for Internet access.

Who pays for the Internet? Both consumers and businesses pay in both directions, downloading and uploading. Most consumers pay a flat rate per month, around $50, for unlimited use, mostly downloading. Businesses pay more based on bandwidth usage, both uploading and downloading. Web based businesses pay a LOT more based on their bandwidth usage. You can imagine a business like YouTube serving millions of video streams pays a lot for the bandwidth they use. So consumers are paying a flat rate for what they download and businesses are paying for bandwidth in both directions.

Why aren't cell phone networks open like the Internet? In some European and Asian countries the cell networks are open. In those cases the governments made the spectrum available for free or at very reduced rates, and mandated that the networks be open to any business.

What is the FCC doing? The US government (FCC) is trying to have it both ways. They want to collect billions of dollars by auctioning off the spectrum, but they also want some of it to remain "open". The rules of the spectrum auction require the winning bidder to allow any device or application to access the network at "wholesale" rates, provided the winning bid meets the reserve price of $4.6 Billion. Google has already committed to bidding at least $4.6B, so that means the reserve will be met and the open rules will prevail.

Who will win? Everyone. Consumers win because they will have lots of choices. Entrepreneurs in hardware, software, and e-commerce win because they will be able to launch all kinds of new products and services. The winning bidder will win because they will own the future of the wireless business. That winning bidder could even be one of the "closed" network owners. Think about how they will juggle two very different business models; walled garden versus open networks. It will be interesting to see how the losing bidders respond to the open alternative. Competition always brings out the best.

The auction will be held on January 28, 2008. It could be a historic date for the wireless communications industry.