Wednesday, November 4, 2009

Apple Should Turn To Sprint/Clearwire

All the talk about Apple's next U.S. iPhone carrier once the AT&T exclusivity expires appears focused on Verizon Wireless.

There are some good reasons for this: VZW has the reputation of having the best network, partially for its consistency in CDMA/EVDO in combination with its 850 MHz band. With 89 million wireless customers, VZW is 9% larger than AT&T's 82 million wireless subscribers.

Before I get into my argument, I need to make the point that I don't know when AT&T's U.S. iPhone exclusivity ends. All indication is that it will take place no earlier than 2010, but no later than 2012. But really nobody outside Apple and AT&T knows.

Perhaps AT&T will pay for an extension to whatever the current or recent data were supposed to have been. And the rest of my argument is somewhat dependent on when this eventually takes place.

Let's assume that the AT&T exclusivity ends relatively soon, say June 2010. Apple would then have the choice to spread the iPhone to all U.S. carriers, or only some. Which one would be Apple's highest priority?

My contention is that it is in Apple's best interest to make Sprint/Clearwire its highest priority, if it could do so relatively soon, say by mid-2010.

The common suggestion that Apple should go with VZW is misguided: It's not that Apple needs VZW. It's that any carrier needs the iPhone. From this perspective, it can be said that it is the iPhone that makes any carrier. So therefore, the critical question becomes: What does Apple get out of the deal? It doesn't matter what the carrier gets out of the deal, because all carriers will take the deal.

Apple enjoys superior popularity with the iPhone today, but what will it need to do in order to lift the bar on keeping the iPhone "special?" Seeing as all the three main networks outside AT&T -- Sprint, VZW and T-Mobile -- offer service to the vast majority of U.S. households, the only remaining argument of greatest importance to Apple is technology.

What can Apple offer in terms of technology that would be truly special and differentiating? That's the question -- not how many legacy subscribers does a carrier have. People will follow Apple's lead; Apple doesn't need to follow the crowd, i.e., VZW's legacy customers.

Based on this premise of Apple's need to make technology its chief variable in selecting its next U.S. carrier partner, I believe the obvious answer is for Apple to make an iPhone for Sprint/Clearwire. Sprint owns approximately 50% of Clearwire, and the Sprint/Clearwire is a necessary combination because of backwards compatibility with EVDO.

Clearwire chose to build its nationwide 2.5-2.7 GHz network on the WiMax standard, which offers far greater speeds than any 3G technology such as EVDO. Clearwire's almost 200 MHz spectrum means that its capacity to support many users downloading/uploading data is vastly superior to all the other incumbent cellular providers.

What should be Apple's two most important goals with the iPhone working on a new network? capacity and latency:

1. Capacity: From downloading ever-richer applications to video/television/movies, Apple needs to demonstrate that its iPhone platform can deliver more bandwidth-intensive services than competitive devices.

2. Latency: This is critical for real-time communications such as voice and videoconferencing. VoIP services on smartphones are just starting now, but are suffering from generally poor quality as a result of unacceptable latency on today's HSPA and EVDO networks from AT&T, VZW and T-Mobile USA.

If these are the highest priorities for Apple, VZW doesn't give Apple what it needs until LTE makes its advent in handsets. Qualcomm has stated that it expects to sample its "God-chip" -- the 8960 -- in mid-2010. This is the LTE chip with full backwards compatibility to all GSM and CDMA lineages such as HSPA and EVDO.

That in turn means that LTE handsets with backwards compatibility can be launched around the middle of 2011. Budget one year's worth of technology/standards slippage, and we can realistically expect backwards-compatible LTE handsets to become mainstream around the middle of 2012.

What does this mean for Apple? VZW will not offer Apple a technology to differentiate itself against the competition until mid-2011 at the earliest, perhaps mid-2012. But Sprint/Clearwire does, already today!

Therefore, if the AT&T iPhone exclusivity ends meaningfully before mid-2011, Apple would be best served to launch its next version of the iPhone on Sprint/Clearwire.

Imagine the superior services a Sprint/Clearwire WiMax iPhone could offer: Flawless low-latency VoIP, liberating the consumer from traditional voice plans, videoconferencing, streaming television and laptop tethering without that pesky 5GB monthly cap. All of these things are either impossible or performed with subpar quality on AT&T today, and on VZW before it can offer backwards-compatible LTE handsets no earlier than mid-2011.

Sprint/Clearwire is already working with HTC to launch dual-mode WiMax/EVDO Android handsets in coming months. All of these advantages of WiMax performance in the cellular handset will soon be pointing their big guns full ablaze against the iPhone.

4G networks -- WiMax and LTE -- are nuclear weapons in the hands of operators fighting an escalating war for the next-generation services: VoIP and videoconferencing. Sprint/Clearwire will detonate the first bomb in this competitive quest in 2010, using the Android platform. If Apple has the ability to join the party, it needs to do so quickly, instead of following the popular suggestion of joining VZW's me-too EVDO network.

Final clarification: When the AT&T iPhone exclusivity ends, Apple may simply be able to launch the iPhone on all carriers, using all the applicable radio standards in different versions: WiMax, LTE, and 1.7 GHz HSPA+.

But if it chooses only one carrier -- for whichever reason -- and can do so meaningfully before backwards-compatible LTE handset chips become available, it needs to take advantage of Sprint/Clearwire's WiMax network in order to not slip behind competitors such as Android and potentially others such as Palm/WebOS and Blackberry.


Tuesday, November 3, 2009

Available Today: iPhone Experience From Verizon and Sprint, at HALF the Price!

It never ceases to amaze me how many real and prospective Apple iPhone users don't know they can get service for half the price, and in some ways improve the functionality.

The lowest pre-tax price at which you can obtain cellular service for your iPhone and laptop today is $130 per month -- $70 for the iPhone and $60 for the laptop.

You can cut that to $60, or more than half, by using the newest 32-gigabyte version of the Apple iPod Touch in combination with Novatel's MiFi device offered by Verizon Wireless and Sprint. In this latter configuration, the Novatel MiFi device provides for ubiquitous service to up to five simultaneous devices, including your iPod Touch and laptop(s).

What about voice service, you say? This is clearly the point at which this "synthetic iPhone" solution will not be acceptable to every single consumer. Using the iPod Touch, you can use any of numerous available VoIP programs such as Skype and Vonage, just to name a couple. Some of these providers have choices between pay-as-you-go a-la-carte pricing and monthly subscriptions. Unlike a traditional wireless circuit-switched carrier such as AT&T, these can take many forms and for many users cost well below $10 per month, depending on the usage pattern.

One objection against the iPod Touch + MiFi solution is that these are two devices instead of one. This is true, but considering that the combined size and weight of these two devices is almost identical to one regular iPhone, this is not a big deal. Furthermore, when you are in your own home and don't need to carry around the MiFi device, you benefit from the fact that the iPod Touch is thinner and lighter than the iPhone.

Surely there are other objections against the iPod Touch + MiFi combination as well, including battery life and multiple chargers.

However, the "synthetic iPod" also confers one other benefit except for giving the user service at half the price: No relationship with AT&T. I am the opposite of those malcontents who perpetually claim to "hate " AT&T, but for those who love their iPhone, but would pick any carrier except AT&T if given the choice, the fact is that the choice is already here!

This should be a huge selling point by Verizon Wireless, Sprint and Novatel -- but for some reason they have never pressed this important argument.

So there you have it: You can cut your iPhone monthly bill in half, and get your service on Verizon Wireless or Sprint, today, by using the iPod Touch + MiFi combo.

Monday, November 2, 2009

A Plan for Novatel's MiFi Comeback

Following Novatel’s (NVTL) 3Q report and 4Q guidance last Thursday evening, NVTL stock dropped over 25% on Friday. Investors had expected strong MiFi revenue growth for 4Q, but management stated that this was unlikely to happen, despite continued channel sell-through improvement. The culprit was simply an inventory build-up in 2Q and 3Q, presumably at Sprint and/or Verizon Wireless.

Aside from sell-through catching up with inventories by 1Q, there are other more fundamental technology shift reasons why NVTL should see very strong MiFi growth throughout 2010:

1. There will be a WiMax/EVDO version of the MiFi for Clearwire (CLWR) / Sprint (S) / Cablecos. Given the dramatically lower cost per bit associated with Clearwire’s WiMax network, compared to EVDO, the monthly service price should come down, and the 5 GB/s monthly cap could be increased. When could this happen? Given the dual-mode nature of the device, and that WiMax is already, or will soon be, offered in numerous large cities such as Chicago, Philadelphia, Atlanta, Las Vegas, Dallas and Seattle, Portland and Baltimore by December 2009, a dual-mode WiMax/EVDO version of the MiFi is already overdue. It is reasonable to expect availability of this device by 1Q.

2. There will be an LTE/EVDO version of the MiFi for Verizon Wireless (VZ). The rationale is the same as for the WiMax version. In terms of widespread city deployment, it appears VZW is approximately one year behind Clearwire in deploying LTE vs. WiMax. LTE chips are not yet mature, so it is reasonable to expect such an LTE version of the MiFi late in 2010, probably 4Q.

In both the WiMax and LTE cases, the latency of these networks compared to EVDO is much lower, making these networks much more suitable for VoIP. There is an enormous itch by many people to switch to cheaper VoIP telephony, but quality concerns rightfully abound. Do you really want to save $50 per month if the quality of your phone conversations deteriorates from time to time? Probably not worth it for most people.

The key MiFi advantage in a low-latency WiMax and LTE world is that you can use as your handset terminal a WiFi-only device such as the Apple (AAPL) iPod Touch, on which you run your favorite VoIP service such as Skype (EBAY) or Vonage (VG). The stage is now set for a cottage industry of VoIP apps to take advantage of the ability to de-couple VoIP service from otherwise mandatory voice service offered by the large cellular carriers such as VZW, Sprint, T-Mobile USA and AT&T (T). Yet, at the same time, you also support your laptop – or several laptops – using the same MiFi connection, paying one unified price that is much lower than the current captive voice plan rates.

The good news for NVTL is that this mobile VoIP trick is possible already today, with the caveat of EVDO having potential quality issues for VoIP as a result primarily of latency. That said, NVTL can gain early-adopter business from this architecture today, and then grow it dramatically once the WiMax and LTE versions become available during 2010.

There is a third development we can expect from NVTL’s MiFi device in 2010, and that is the transition from 802.11g to 802.11n. In the past, 802.11n has meant unacceptable battery performance for mobile devices.

However, given new single-stream chips such as Atheros’ AligN 802.11n router chip, it is now possible to beef up the performance of the MiFi solution dramatically. The range of the MiFi today is suggested to be 33 feet. With 802.11n, even in single-stream configuration, both range and speed should increase dramatically. The 802.11n speed increase also goes hand-in-hand with the greater capabilities of WiMax and LTE when compared to EVDO.

What is the greatest threat to the NVTL story in coming quarters and years? Given that the market for this MiFi-type functionality should increase faster than almost any product category, the answer is pretty much only one: competition. At its core, the basic functionality of converting a licensed spectrum wireless broadband signal to WiFi is not rocket science. We should expect copycat devices not only from Huawei and Sierra Wireless (SWIR), but also from the handset operators such as RIM, HTC and others as they incorporate this functionality in coming years.

In the long run, the largest part of this MiFi-functionality market will be an integral part of the smartphone hardware/software. That said, in the meantime NVTL has managed to gain first-mover advantage with an unusually attractive and well-designed – indeed iconic – stand-alone product. NVTL should be able to use WiMax, LTE and 802.11n to leverage itself into one of the fastest-growing companies of 2010 as mobile VoIP takes off. With the shares now trading at a severe discount, it looks to me like this may be a superb investment proposition for the next 6-12 months.


Monday, October 26, 2009

First Look: The World's Thinnest/Lightest Laptop

Until you have seen the new Sony Vaio X laptop, you haven't seen anything at all. This just blows your mind away. It will be delivered to consumers November 20, and you can pre-order it from Sony now.

This laptop is the thinnest, lightest and most battery-efficient thing on record. When you pick it up, you're asking: Where is the battery? It's so light you have to be careful to not throw it up in the air by mistake. With the small battery, it's 1.6 lbs. With the bigger battery, I think it's 2 lbs or slightly more. The battery life is 2.5 hours with the small battery, and 12 hours with the big battery. And yes, both batteries are included, so for a long flight you're covered for 14.5 hours even without a power cord.

This is a 2 GHz Atom with 2 meg RAM and a 128 gig SSD. The color is "gold" which sounds bad, but doesn't look bad at all in reality. It's a pale gold bordering on silver, but at a minimum it just doesn't look bad at all. For connectivity, it has 802.11n by Atheros and Gigabit Ethernet -- an amazing feat on a device this thin.

The screen is 11.1 inches, which is a little smaller than my normal minimum acceptance of 12 inches. The keyboard is 17mm pitch, which is also smaller than a typical 12 inch laptop. Not ideal, but not terrible either -- compared to other ultra-light netbooks.

The device oozes quality. It seems strong as a rock, similar to the MacBook Air. Yet it weighs essentially half of the MacBook Air. It's not as rounded as the MacBook Air, but with these dimensions and weight, it still makes the MacBook Air seem like a total hog from ancient pre-history. The keyboard feels high-quality, despite being a shade too small.

The price is $1,500, or $300 less than the MacBook Air with a similar 128 gig SSD. As is typical of these prices, they don't include 3-year warranty ($200) and Microsoft Outlook/Office ($450).

The best competition I have seen against the Sony Vaio X are, at the low end: the MSI L2100, which has a 12 inch screen and sells for $400. No SSD or ultra-thin or ultra-light, but still as small as any comfortable laptop has been otherwise. The keyboard is very good. On the high end, the Toshiba R600 is nearly as thin and light as the Sony Vaio X for $3,500, but that includes an industry-first gigantic 512 gig SSD and a faster non-Atom Intel dual-core processor. The weight is 2.5 lbs, battery life 7.5 hours, and it includes a 3 year warranty -- had better be, at that price!

Bottom line: The Sony Vaio X is an outrageously compelling laptop, unlike anything else. It's so thin and light, that one feels transformed to a future science fiction world just by touching it and lifting it up. Some people may find it too small or lacking in CPU power to be a primary office computer, but for everyone else it is only a matter of whether they can spend $1,500 (or $2,150 equipped with 3 year warranty and Microsoft Office).

Wednesday, October 14, 2009

Microsoft's Debacle – and Google's Challenge

Microsoft’s (MSFT) recent debacle with its Sidekick device is the ugliest user experience we may have ever seen in wireless. The Sidekick device was the first one to backup and synchronize over the air (the “cloud”) to a central server starting already several years ago. The company behind the device was acquired by Microsoft 18 months ago, and after that point the Sidekick platform fell behind the competition – Blackberry (RIMM) and iPhone (AAPL) to begin with, and more recently also Palm/WebOS (PALM) and Google/Android (GOOG). Yet, the remaining Sidekick users appear to have lost all of their data as a result of Microsoft’s server failure.

What this saddest of technology sagas illustrates is that while cloud sync may be convenient, it is no replacement for making your own daily local backup on your own PC at home. Supplement, yes – replacement, no.

What that in mind, how will the typical consumer fare if he migrates from a Sidekick device to a Google/Android device made by HTC, Motorola (MOT) or Samsung, just to mention the manufacturers that will be in the market on T-Mobile and Sprint before Thanksgiving this year, according to their recent press releases? In particular, consider the following use case: An average consumer has a Microsoft Vista PC using Microsoft Outlook for his calendar and contacts database, or the equivalent on the Apple platform. He is not connected to an enterprise environment such as Microsoft Exchange. He may or may not be fine with any form of cloud sync for reasons of security and/or reliability, but in any case he just wants to do a local backup on his own PC, presumably using a simple USB cable.

This is what every consumer Blackberry user on a Windows OS has been doing for over 5 years. It works as simple as plugging in the cable and pressing “Synchronize” on the desktop utility. It synchronizes and backs up. You could have tens of thousands of calendar and contacts records, and it “just works” in a matter of a couple of minutes.

So does it work on Android phone? As it turns out, in every case except one, it does not. It fails this most basic requirement of security and reliability. Let’s go through the devices one by one:

T-Mobile USA offers two Android devices today, with a third on the way in a matter days or weeks. HTC makes the G1 and the MyTouch, and neither offers local sync to your non-Exchange Microsoft Outlook. If you trust Google to sync over the air, or if you have Microsoft Exchange, you’re fine. As far as Google’s cloud sync goes, how accurate is it for calendar and contacts? Does it still work if you have many tens of thousands of entries?

Hitting the T-Mobile USA stores supposedly on November 2 is the Motorola Cliq, announced on September 10. It works much the same way as the HTC devices, except it adds its own cloud sync software called MotoBlur. I asked several Motorola representatives at last week’s CTIA (Cellular Telecommunications Industry Association) trade show in San Diego , where Motorola focused almost exclusively on this device, and the answer I received was that this service only handles 2,500 entries. That makes it essentially useless certainly for me, and just about everyone I know.

In addition, they described a complicated procedure for uploading one’s contacts/calendar data from Outlook to the MotoBlur cloud service for the initial set-up. What about getting this data out of the MotoBlur service if I change my mind and want to move to an iPhone on AT&T, PalmPre on Sprint or Blackberry on Verizon, I asked? They told me once the data has been sucked into the MotoBlur service, I can’t get it out. Ouch.

Samsung announced its first Android device for the US market, to be available on Sprint November 1. I asked several Samsung reps at the CTIA event if it can sync locally with Microsoft Outlook, and they all told me that it can’t. Basically, same story as with the two HTC devices currently offered by T-Mobile USA. Fail, fail, fail, fail on all these four Android devices.

This brings us to the fifth and final Android device in the US market this month, having just become available on Sprint October 11 – the HTC Hero. Guess what? It actually comes bundled with software that accomplishes this vital task required by most consumers.

So there we have it: 4 out of these 5 current or imminent Android devices are unsuitable for the average US consumer who has a local PC contacts/calendar database such as Outlook, and wants to keep it that way. Cloud sync has been showed to be potentially unreliable (to say the least) and may not even handle larger databases for those of us who have many thousands – or tens of thousands – of entries.

This should be an easy problem for companies such as HTC, Motorola and their current and future carrier partners to fix. It doesn’t require a change to any device hardware, and doesn’t add any noticeable cost. Let’s hope they see the light, or they will find themselves with many unhappy customers, poor reviews and a high return rate.

In the meantime, products such as the iPhone and Blackberry look very good in comparison – at least when it comes to this most basic and essential functionality. I see a marketing slogan for one of these companies in the near future: “Security and Reliability.”

Why Government Regulation for Internet Service Providers Is Bad News

Our government has settled on a new formula for regulating industry, and they are applying it to one industry after another. While they haven’t yet made it to the restaurant business, at this pace we may not have to wait too many years for the following to happen: Every restaurant is mandated to only offer food in the form of an all-you-can-eat buffet. The government decides on what needs to be served on this buffet, at a minimum, in order to be compliant. No restaurant is allowed to deny a customer service, and all customers must be charged the same price. After all, eating is no longer one half of an exchange of private property, but a “right” entitling a consumer to his neighbor’s property.

What would happen to the restaurant industry if it were regulated this way? 300 lb people would pay the same as 100 lb dieting models, all while abusing the buffet’s contents. The restaurant owner, unable to discriminate or restrict, would have to raise the uniform price to reflect the heaviest consumer, at which point the price becomes unacceptable to the lighter consumer. Unable to reduce cost because of the requirement to provide a minimum level of content, the restaurant would under-invest in other areas such as kitchen and furniture; yet profitability would suffer despite the higher price. Eventually the government steps in to limit the price restaurant charges for the buffet. Cost then exceed revenue. Bankruptcy follows.

Crazy, you may say. Of course it is! But now apply the mad scenario of the government-regulated lunch buffet to two other industries: Internet Service Providers (ISPs) such as AT&T (T) and Verizon (VZ), and the health care industries, including insurance companies. Let’s take these two industries in turn.

Internet Service Providers (ISP): The drumbeat is on from the FCC and Congress to force companies such as AT&T and Verizon to “open” their pipes to positively anything that any user wants to do. Think the streets of San Francisco, where lawlessness and filth have become rampant. According last week’s AT&T management presentation at the CTIA in San Diego, 3% of its wireless users consume 40% of the bandwidth. Unless AT&T can charge these people more – the more you eat, the more you pay – its economics will collapse under its own weight. Casual users don’t want to pay for the investments necessary to keep a high level of service for those who use the most resources.

Charging people for usage can be a good thing, but for Internet bandwidth it can make for a tough consumer proposition. Most people have no clue how much they just consumed by clicking on a web page. I sure don’t. As a half-measure and compromise, AT&T and Verizon want to “traffic-shape” the consumption by having computers monitor user behavior and throttle down extreme usage scenarios. By doing so, they believe they can maintain flat-rate pricing for at least a bit longer, instead of having to charge per bit. This attempt at establishing order between those who take advantage of the all-you-can-eat buffet, and those who just eat “normal” or even little, is at a bare minimum a property right of the service provider.

Under many so-called “Net Neutrality” proposals, the government would deem such a “traffic-shaped” consumer offer illegal. You see where this is going: The government (FCC and Congress) passes a law proclaiming Internet-In-Your-Pocket a “right”, mandating a uniform level service that must be offered to all, and denied to none. Telcos and ISPs are then forced to invest to meet the demands of high-intensity users paying the same low flat rate as my grandma. Unable to raise prices, profitability falls, turns into losses, and bankruptcy follows. In the end, the government takes over AT&T, Verizon and all the others, offering a taxpayer-subsidized one-size-fits-all Internet that brings us to the level of Cuba’s consumer welfare. That’s the government-regulated lunch buffet applied to Internet service.

Then let’s apply the same principle to health care and related insurance. States and soon the Federal government impose mandates as to what a health insurance policy must cover: Thousands of details for all sorts of procedures, dramatically driving up cost. Because these are state rules, they almost automatically outlaw inter-state competition, in direct defiance of the commerce clause of the Constitution. While all normal insurance companies – car insurance comes to mind – price customers individually based on perceived risk and past behavior, the government forces health care insurance to charge only one price for customers, whether they appear super-healthy or a likely multi-million dollar liability. Put aside the emotion for a moment: As a businessman, would you ever knowingly agree to do business with a customer who you think is likely to lose you money? Of course not. That’s the fastest road to bankruptcy. Yet that’s the essence of the health care “reform” now making itself through Congress.

In the old days of The Cold War, we used to define Communism and Socialism as ownership of the means of production – banks, car companies, etc. The current plans to mandate a one-price lunch buffet for Internet access and health care insurance don’t directly confiscate the shares of the companies providing those services. Rather, the government seeks to use regulation to smother rational economic behavior, forcing the inevitable bankruptcies, surely swiftly followed by a massive bailout of all of those companies. Think Citibank (C), Chrysler and General Motors.

If there is a serious objective to maintain a free enterprise system, all efforts to regulate services and products must be rejected. All price controls must be rejected. And finally, the core principle at the heart of this country’s 220 year legacy – private property, which implies freedom of contract – must be vigorously defended. With the government attacking the Internet service provider market and the health care industry market with mandates and price controls, the opposite is now happening. If the US government now gets its way, profitability in these companies will be dealt a body blow, most certainly leading to lower stock prices on an inflation-adjusted basis.

Monday, August 10, 2009

Blackberry’s 26 Advantages over iPhone

We all have numerous good reasons to love our iPhone. It revolutionized the handheld business with its AppStore and ease of use interface. Apple (AAPL) will continue to gain ground, and further innovations to its iPhone product portfolio could accelerate its growth even further. The synergies with the Mac computers and the Apple Stores themselves, are real and material.

The advantages of the iPhone are mostly immediately visible. Its differentiating characteristics are extroverted, shouting them right into your face. For the casual observer, these iPhone advantages are very compelling when comparing it to its main rival to date, the Blackberry. However, Blackberry also has numerous advantages, almost all of which are “behind the scenes” and therefore often beyond the comprehension or attention span of most consumers to fully analyze before a purchase decision is made.

One is tempted to draw a political analogy – the flamboyant candidate with the eloquent rhetoric, versus the “boring” candidate focusing on the substance of the intellectual argument. The analogy fails in part as far as the iPhone is concerned, because its “superficial” advantages are real. However, the analogy holds as far as the Blackberry is concerned, because its advantages require a more serious intellectual analysis by the consumer in order to be fully appreciated. For this reason, it is possible that Research In Motion (RIMM) is underestimated as a force in the consumer market as well as the stock market.

Seeing as we already know the strong advantages of the iPhone, ranging from the class-leading AppStore to its beautiful and easy-to-use interface, it is about time that someone lists the advantages of the Blackberry when compared to the iPhone. Below are the top 26:

1. Blackberry can be used on almost every carrier in the world (over 475 of them). In the US, the iPhone is available on AT&T (T) only.

2. Blackberry is available in five form factors – small keyboard, large keyboard, no keyboard, flip phone, and candy-bar.

3. Most Blackberries have keyboards, so you can actually type fast and with no errors. Helps while driving, walking, carrying something in your other hand – all the time. iPhone: well…

4. Blackberry uses standardized (=inexpensive and available everywhere in the world) MicroUSB connector for synchronization/charging. iPhone has a much larger proprietary 30-pin connector.

5. Some carriers such as Verizon (VZ) and Sprint (S) offer unlimited international Blackberry data roaming for $40/month or less. iPhone does not. This could save you literally tens of thousands of dollars when you are abroad.

6. If your Blackberry is on T-Mobile USA, it also offers unlimited WiFi calling from anywhere in the world. This is with your existing number – in and out – so no new special number, procedure, etc. iPhone cannot do this (because it is only on AT&T; only T-Mobile USA offers this), and it can save you well over $100 per day when you’re abroad. Think $1 per minute savings, and you’re on the phone two hours per day. That’s $120/day.

7. Blackberry has expandable memory. iPhone is fixed and sold at 8, 16 or 32 gig only.

8. Blackberry has removable and expandable battery. iPhone is fixed.

9. Blackberry allows programs to multitask. iPhone has limited multitasking.

10. The newest Blackberry screen resolution is 480x360. iPhone is 480x320.

11. Blackberry allows communicating peer-to-peer via PIN identifier, circumventing the email system. No such iPhone equivalent.

12. Skype (EBAY) on the Blackberry? Yes, from anywhere to anywhere. Skype on iPhone? Only if you’re on WiFi.

13. Sling on the Blackberry? Yes, it’s free. Sling on iPhone? $30.

14. Google (GOOG) Voice on the Blackberry? Yes, it’s free. Google Voice on iPhone? Verboten.

15. Blackberry can be synchronized to multiple computers simultaneously, if you have multiple computers.

16. Multiple Blackberries can receive the same email feeds simultaneously, if you have multiple Blackberries.

17. Blackberry can sort the address book entries by company name, so you can scroll down a long list of names you don’t remember, but you just want to see who works for which company. Aside from sorting, the iPhone can take several seconds to search your address book, particularly if you have several thousand address book entries.

18. Blackberry isn’t slowed down by having, say, 10,000 or 100,000 address book entries. Try using an iPhone with 10,000 address book entries.

19. All major instant messengers are available on Blackberry.

20. Blackberry is available with multiple browsers from multiple suppliers. iPhone is available only with its standard Safari browser.

21. Blackberry synchronizes with iTunes – and every other media management program.

22. Blackberry models with 480 pixel resolution and WiFi offer PrimeTime2Go, an $8/month TV service that works as a DVR.

23. Blackberry fits as many emails in the inbox as there is memory available (typically many tens of thousands). iPhone is limited to 200 emails. Yes, iPhone has a remote look-up capability, but that doesn’t do you any good when you’re on an airplane or are otherwise out of coverage.

24. Price: Unlimited iPhone voice/data service, including unlimited SMS, is $150/month. Blackberry can be had for much less. For example, unlimited Blackberry service is offered on Sprint for $100/month, T-Mobile USA $125/month, MetroPCS $50/month, although AT&T/Verizon match the iPhone at $150/month.

25. Prepaid “no contract” flexibility: The AT&T web site says the iPhone is sold with a 2-year contract only, although once upon a time it offered a “contract-free” iPhone if you paid close to $899 up-front for the iPhone itself. In contrast, you can get prepaid no-contract Blackberry service on any old or new T-Mobile USA Blackberry handset for $65/month (600 minutes, unlimited Blackberry/Internet, but no SMS), or you can get truly unlimited-everything prepaid $50/month service from MetroPCS, if its handset selection and coverage areas are acceptable to you. That’s ONE THIRD the cost of the iPhone, and there is no contract.

26. Blackberry is an encrypted military-grade security platform, with 100% market share at FBI, CIA, White House, Congress, Department of Defense, major consultancies and major investment banks. In contrast, iPhone has security vulnerabilities. Please see this document for details as to why the Blackberry is the only platform approved for use in our national security agencies. It compares against the iPhone and Microsoft Mobile platforms (.pdf).

Disclosures: Long RIMM, AAPL and GOOG

Blackberry Price Study: Comparing Cellular Carriers

This is a comparison of prices between the five major cellular carriers. It focuses on one specific scenario: Unlimited-everything service for a Blackberry, purchased by a regular individual consumer – not an enterprise. I have divided the comparison into three parts:

1. Unlimited US domestic voice+SMS+email/Internet on the Blackberry handheld.
2. Having your Blackberry serve as a modem for your laptop.
3. Blackberry data roaming outside the US.

Let’s start with the cost of Unlimited Domestic Service:

Verizon (VZ): $150/month, consisting of unlimited voice $100, unlimited Blackberry/Internet $30 and unlimited SMS $20.

AT&T (T): $150/month, consisting of unlimited voice $100, unlimited Blackberry/Internet $30 and unlimited SMS $20. In other words, identical to Verizon.

Sprint (S): $100/month, which happens to be the simple all-in price for everything, and also includes GPS and TV.

T-Mobile: The baseline scenario is $125/month, consisting of $100 for unlimited voice+SMS, and $25 for unlimited Blackberry/Internet. However, if you qualify for the $50 unlimited voice loyalty plan, the total is only $85, because you add $35 for unlimited Blackberry/Internet/SMS. These plans also include unlimited calling over
WiFi, a technology not available from any other US carrier.

MetroPCS (PCS): $50/month, which happens to be the simple all-in price for everything.

Using Blackberry as a modem for a laptop/PC:

Verizon: Adds $30 per month for a BIS account; $15 for a BES account. 5 gig/month soft cap.

AT&T: Adds $30 per month. 5 gig/month soft cap.

Sprint: Used to be $30 per month with the customary 5 gig/month soft cap, but was recently discontinued in favor of no such service at all.

T-Mobile: Free on EDGE devices, which is going to be slow. However, for people who intend to use it only rarely as a back-up to other connectivity, it could be a good option. Free is good! Once T-Mobile launches its first HSPA (“3G”) Blackberry soon, expect some form of paid plan to follow.

MetroPCS: Not applicable.

What about Blackberry data roaming while abroad?

Verizon: Unlimited monthly use adds $35, in the form of a $65 plan replacing the $30 domestic-only plan. You can change the plan forth and back at any time.

AT&T: As an individual/residential account, no unlimited plan is available. You have to pay $25 for 20 meg, or a higher amount for a larger plan. The fatal flaw with this approach is that you don’t know how much data you are consuming, so you can easily exceed the 20 meg (or whichever larger number you purchase) without knowing, racking up hundreds or thousands of dollars in a matter of days. If you convert your account to a business/enterprise account, there is a $65/month plan available, replacing the domestic-only $30 plan, but you have to subscribe for a full year, making the incremental cost effectively a $420/year plan.

Sprint: Unlimited monthly use adds $40. You can change the plan forth and back at any time.

T-Mobile: Monthly email and web browser-only use adds $20. You can change the plan forth and back at any time. Keep in mind that this plan covers ONLY email and web browsing on your Blackberry. All of your other applications are not covered. In most countries, use of those other applications cost $15 per meg, which of course is impossible to measure, so just as in the case with AT&T, you can easily rack up hundreds or thousands of dollars in a matter of days, without knowing.

MetroPCS: Not applicable.

What are the main conclusions?

For regular domestic handset use, AT&T and Verizon are the most expensive, with MetroPCS being the cheapest. Sprint and T-Mobile are in the middle.
For using the Blackberry as modem for your PC, power users are best served by AT&T and Verizon. Infrequent or emergency users are best served by T-Mobile. Sprint fails this test.

For using the Blackberry abroad, for the purpose of using data (not voice) services, Sprint and Verizon are the only acceptable choices. T-Mobile and AT&T fail this test miserably, because their customers can very easily rack up dramatically large bills without knowing. This conclusion is of course ironic, because T-Mobile and AT&T are the GSM operators who led in this area only as little as a year ago.

Special award to T-Mobile: As a result of UMA technology (GSM tunneling through WiFi), a T-Mobile Blackberry can be used for making and receiving calls for free, while on WiFi abroad. This saves $1-$5 per minute, depending on the country. All other circuit-switched calling on US carriers, while roaming abroad, is prohibitively expensive.

Bottom line: There is no one Blackberry solution that is optimal, because all US operators each have flaws in their pricing structures. Different users have different priorities. What is clear is that while Sprint and Verizon were behind as little as a year ago, they have now caught up, and at least in the area of international data roaming, they are now the ONLY acceptable choices, by a very wide margin.

One major caveat: This study is only about price. It does not take into consideration coverage discrepancies (what’s great coverage for one person, is another person’s disaster) or handset choices, such as the fact that Verizon and Sprint Blackberries lack WiFi.

Disclosure: Long RIMM.

Tuesday, August 4, 2009

Euthanasia for Clunkers: The So-Called 'Healthcare Bill'

“Maybe you're better off not having the surgery, but taking the painkiller.”

-- President Obama (June 24, 2009) – on the topic of health care for elderly people

If the government can’t handle a $1 billion program that’s as simple as giving a $4,500 check to those who trade in an old car, how can it be trusted to administer a $1 trillion program where your life is on the line? Of course it can’t. The Cash For Clunkers program was a 136 page bill in Congress, and the Euthanasia For Clunkers program (the so-called “health care bill”) is around 1,000 pages just for starters. Its main purpose is to kill whatever remaining aspects of private health care, in favor of a Washington DC politbureau which will decide what health care you will, or will not, obtain.

As with every single government program, this massive socialist scheme will naturally generate a vast bureaucracy, cost many times more than what is being promised today, and deliver abysmal services. This is really so obvious that it shouldn’t be necessary to argue the point, but in the age of the Obama Marxist takeover of America, it has become necessary to explain these basics.

We already have numerous government health care programs – so many, in fact, that the government directly accounts for one third of health care expense in America already. If you include indirect spending and control, the number could be closer to two thirds. Some of the larger government bureaucracies include Medicare (for the elderly) and Medicaid (for the poor). Then we have a long list of other special programs for other groups in society: Indian reservations, the military, Congress and children, among others. The elderly and the poor already being covered, the only remaining purpose of Obama’s multi-trillion-dollar government bureaucracy is to cover those of us who already have health care, as well as one new group of approximately 10 million illegal invaders, people who in most cases ran across the border in direct defiance of US law.

In order for the government to take over the health care system, and to cover approximately 10 million illegals, while at the same time not increasing the number of doctors, nurses or hospitals by a single person or unit, someone else needs to get less health care. Who will have to surrender more than taxes in order to balance this equation? Most likely, all of us will pay to some extent, but the elderly will be the prime target. In Obama’s Marxist philosophy, they have out-lived their useful lives and seeing that as in his mind property rights don’t exist, the elderly in particular can have everything taken away from them by the state. After all, “we” ARE the state, in the view of the Marxist. And you can’t sue yourself.

The already-existing government programs, such as Medicare and Medicaid, are already bankrupt and huge failures. 21% of state budgets go to Medicaid alone. Anyone serious about health care reform would start by getting rid of programs that don’t work. If we abolished these huge government bureaucracies that drain private industry, this country would be a lot more competitive with the faster-growing economies around the world. Instead, with Medicare and Medicaid being total failures, Obama and Pelosi are proposing a new and even huger bureaucracy to serve as a super-umbrella-bureaucracy over all the failures. It is rewarding failure with power. Mr. and Mrs. Government Bureaucrat, you’ve failed in everything that you do. You’ve squandered tens of trillions of dollars. Now, let’s give you a gigantic increase in power!

If Obama and Pelosi get their way with the Euthanasia For Clunkers bill, expect all of us, but particularly the elderly, to await that “thumbs up, thumbs down” scene from the movie Gladiator. Need a pace maker? Thumbs down, take a pill. Need hip surgery? Thumbs down, take a pill.

Obama has said as much; perhaps we should listen for a change. When politicians promise nothing but sweetness, light and jingles, it’s time to question and be suspicious. But when politicians basically tell you that they will stick it to you, then it’s time to ring the alarm bell, just like Winston Churchill did in the 1930s. Remember that paperhanger in Austria who moved to Munich and wrote the book “Mein Kampf” in the 1920s? Perhaps we should have listened a bit earlier, no?

There is one, albeit dubious, benefit with the Euthanasia For Clunkers bill, and that’s in the form of “shovel-ready” government stimulus. What do I mean? In order to administer any of these programs, including Cash For Clunkers, there is the need to construct new government offices to house tens of thousands of bureaucrats. It will surely increase employment in the government, with tens of thousands of people being hired to investigate all aspects of your life, so that you minimize your health care expense. What do you eat? We have to change your diet. How much do you exercise? Stop when the dog stops. What do you drive? Make all motorcycles illegal or tax them like tobacco. So the building of these new government bureaucracy facilities will indeed stimulate the construction industry. But the same thing could have been said about Auschwitz.

Tuesday, June 30, 2009

The EU Stabs Apple In The Back

First Qualcomm (QCOM), now Apple (AAPL). Remember the GSM vs CDMA phone standards wars some 15+ years ago? The European Union [EU] at that time turned against Qualcomm in favor of the Nokia (NOK)-Ericsson (ERIC)-Alcatel (ALU)-Siemens (SI) backed GSM standard, mandating it in Europe and therefore limiting what would have been an even greater potential for Qualcomm.

Fast forward some 15+ years, and they’re baaack! The EU is now mandating that all cell phones be compatible with 3rd-party MicroUSB chargers by January 1, 2012. I first wrote about this subject on SeekingAlpha on December 24, 2008, and this development is now reaching its final stages of lawmaking in Europe.

This new EU mandate isn’t a big deal at all for essentially every cell phone maker in the world, including Nokia, SonyEricsson (SNE), RIM (RIMM), Samsung, LG, HTC and Motorola (MOT), because they are in most cases already well underway of implementing the MicroUSB standard in all of their products. Just walk into your neighborhood AT&T (T), Verizon Wireless (VZ), Sprint (S) or T-Mobile USA store, and look for yourself – we will probably approach 90% MicroUSB exiting this year.

For Apple, however, this represents an ugly inconvenience. The iPhone uses Apple’s proprietary 30 pin connector, and there is a vast jungle of devices and docks built around this engineering decision. Therefore, it isn’t so easy for Apple to “just switch” to MicroUSB as it was for all the other cell phone makers. Apple at this point has two options:

1. Simply rid itself of its 30-pin connector in favor of MicroUSB. Most people seem to suggest that this is as unlikely as an Obama budget cut. Apple wouldn’t want to jettison its accessory ecosystem.
2. Add a MicroUSB connector elsewhere on the device, presumably on top or on one of the sides. This appears more likely. It does, however, impose cost and an engineering problem with all sorts of ramifications, including aesthetics. Apple would do this kicking and screaming.

It has been suggested that there is a third way for Apple to comply with this new law. That would be to offer a 30-pin to MicroUSB adapter. This has the obvious advantage of not dealing with the painful two alternatives listed above. However, it has two deficiencies: (1) One more thing to carry and (2) It’s not clear whether this would comply with the EU mandate. I think it would be unlikely to comply, because it would be against the spirit of standardization and would require a piece of equipment that would largely negate the purpose of the law. The EU would also seize the opportunity to make life difficult for Apple by interpreting the EU ambition in this way, thereby further favoring their home area companies such as Nokia.

For Apple, “The European Problem” also becomes a global problem, because Apple doesn’t want to design two different iPhones – one for Europe and one for the US. Apple will eventually add more models, but this is an unnecessary degree of duplication it will not want to engineer.

Qualcomm more than survived the EU’s attempts to make life difficult for it, many years ago. Likewise, Apple will more than survive this attempt as well. That said, this represents a road bump in Apple’s product road map, of which I have not heard much to date. It’s over a year into the future, and whatever Apple decides to do, I don’t expect an implementation until June 2010 at the earliest.

There are many political ironies in this story. First and foremost, this is part of an industrial policy in the EU. We are being told day in and day out that industrial policy is such a good thing, despite that it’s been proven to be one of the greatest disasters of mankind. Now, Washington DC gets a taste of its own self-defeating medicine.

Another irony is that Apple, of course, is a product of as much of an industrial policy-free entrepreneurial environment as it gets. If Apple had been run out of Washington DC, it would have looked like the US Post Office competing with FedEx. Instead, Apple has proven itself to be perhaps the greatest innovator of its kind, yielding more success than imagined years ago precisely because of the lack of any
government mandates deciding its business. Walk into any Apple Store, Mr and Mrs America, and you will find that Apple offers its own insurance policy for some $99 per year (“AppleCare”), which is completely privately funded and completely unregulated. And customers love it.

Saturday, June 6, 2009

Palm Pre review - June 6, 2009

Anton’s Palm Pre review

I played with the Palm Pre for a few hours today, at two different Sprint Stores. My review below is not a comprehensive review (go to and equivalent for that), but it does point out my observations and comparisons.

First, what are the positives?

1. Unlike iPhone, it uses the same standard MicroUSB as the newest Blackberries and for that matter all other new handhelds. This is the standard for the next decade and means a lot of simplicity and savings.
2. The screen is beautiful and it seems to render web pages very well, better than Blackberry version 4.6 anyway (soon-to-be-released 5.0 is another thing). It seems similar to iPhone in the web browsing department.
3. The user interface uses “cards” that is in my opinion better than the iPhone. It is the most elegant operating system on the market today. Extremely impressive, extraordinarily elegant interface. This blows the iPhone out of the water and sets a new bar.
4. The address book seems clearly better than the juvenile and generally limited one in the iPhone, which is only good if you have perhaps 100 or 200 entries. The Pre address book seems capable of handling 20,000 or more entries, such as sorting the entries well (“company name, followed by last name and first name”) seemingly similar to the Blackberry.
5. True multitasking, just like Blackberry, Google/Android and Microsoft – and unlike iPhone.
6. Sprint has a great “everything you can eat” plan for $100/month and it includes the great SprintTV service. In addition, Sprint is the only carrier that can give you a combo EVDO/WiMax modem for your laptop/PC/computer.
7. Over-the-air updates, unlike the iPhone and as of yet all-but-two Blackberries (8350 and 9530).
What are the negatives?

1. The sliding keyboard means it is difficult (impossible?) to use a protective cover of any kind – rubber, silicone, plastic, whatever. Somehow I expect a lot of complaints from people dropping it on the ground and scratching it.
2. The keyboard sure beats iPhone, but it’s not nearly as good as a Blackberry 8300 model and up. It is extremely small and has a nasty edge to it.
3. No GSM/HSPA for international travel, unlike the vital Blackberry models sold at Verizon and Sprint.
4. The battery is small, and is likely to generate inferior performance compared to the Blackberry 8800 models and up.
5. It doesn’t allow for secure communications (PIN-to-PIN) and truly encrypted emails. In other words, just as with the iPhone, Microsoft and Google, it can’t compete with the Blackberry in the area of security. As with all the other non-Blackberry platforms, you won’t be seeing this phone used by the Department of Defense, CIA, FBI, White House, Congress, investment banks and consultancies anytime soon.
6. There is no expandable memory, compared to Blackberry where 8900 models and up can handle 32 gig.
7. It can’t record video, unlike the Blackberry.
8. It can’t be used as a modem for your laptop/PC/computer, unlike the Blackberry.

Bottom line: This is a very attractive phone. In my opinion, it beats the current iPhone (launched July 2008 and expiring June 8, 2009) in every single category except two (no GSM and limited AppStore selection as of yet). The “cards” interface is revolutionary – in a positive way! I have no doubt that Palm will take significant market share with this device, and for good reason. That said, I don’t see why a Blackberry user should switch, especially given that all current Blackberries refresh between July 2009 and November, providing superior hardware with a much-improved browser. By the time we find out the level of maturity of this new Pre platform, the outstanding new Blackberries will be in the market. Now that both Palm Pre and Blackberry synchronize with iTunes, the rationale for getting an iPhone is a lot weaker. Blackberry’s AppWorld is on a path to match Apple’s AppStore, and the Palm Pre shouldn’t be too far behind in coming months. That said, Apple will be introducing new products on June 8, 2009, and that could in turn change the game soon enough.

Wednesday, April 22, 2009

Should We Have Saved LA?

We learned two things from the release of the legal memos supporting the EITs (Enhanced Interrogation Techniques):

1. We didn’t come even close to torturing anyone. The kid-glove treatment detailed in these memos is far surpassed by our own military training, especially in our special forces such as the Navy SEALs. Our special forces not only have to look at a bug – they have to eat it.

2. The EITs yielded tangible results, specifically the uncovering of a plot that would probably have killed thousands of people in downtown Los Angeles. Surely more such examples from the relevant 2002-06 period are likely to be revealed in the future.

The latter revelation puts the Obama administration in a very dangerous position, if any journalist would bother to ask him or his amazingly and constantly clueless Press Secretary Robert Gibbs. The President has stated repeatedly and consistently over the years that he would never have approved these interrogations, and one of his first acts as President was to indeed ban them. At least from the President, there has been no lack of clarity on this policy position.

In light of the fact that Obama opposed the methods that saved thousands of lives in this one planned attack on LA alone, this yields a very radical conclusion: Obama is effectively saying that he doesn’t regret that his policy would have killed thousands of innocent civilians working in downtown LA. Even after the fact – when we know with the hindsight of history – that this was the outcome of his proposed policy, he says that it would still have been the right thing to do.

This is shocking. Would someone be angry with George Bush if he had deliberately and knowingly agreed to let 9/11 happen, just in order to avoid inconveniencing a blood-thirsty terrorist who was already responsible for killing 3,000 US civilians? You bet! Hopefully 100% of Americans would have been outraged and called for the impeachment of George Bush, if that had been his policy.

Yet this is now not only the new policy by the Obama administration, but also a confession about what it was willing to sacrifice in the months and years following 9/11. Thousands of innocent civilians working in downtown LA, just for starters. Why isn’t there dramatic outrage about this?

Even for Obama himself, who had proven to be politically cunning in a new and unique way, this is a forfeit of dramatic proportions. Unlike the economic debates, where one economics professor’s word against the next economics professor, can be complicated and confusing to a majority of the electorate, this is relatively easy to understand – and that’s just the historical part!

Going forward, this is a ticking time bomb for Obama in more ways than one. He is now making the same mistake John McCain made in the 2008 election: agreeing to fight with one hand behind his back. McCain – for no good reason whatsoever – decided to campaign with a lot less than half the money of his opponent. In this case, Obama has told us that he is now fighting with less than half of the intelligence he could otherwise have. Why less than half? We know this because the CIA says that it obtained more than half of its critical intelligence on the relevant subjects from the EITs.

This Obama forfeit now means that in the event of another terrorist attack, the rage and blame will show up at 1600 Pennsylvania Avenue immediately, and for good reason. Unlike 9/11, which was a game-changer that had been building up comparatively quietly since the mid-1990s, after 9/11 we now know a lot about the motives of our opponents. They have shown what they will do for a starter, and they say they want to eradicate our entire country, preferably with the heavy hammer of nuclear bombs. Obama’s answer? Let’s not inconvenience the masterminds of these terrorist acts by showing a caterpillar bug to them, so that they could get scared and help us prevent mass murder of innocent American civilians, perhaps to the tune of millions.

Interestingly, CIA Director Leon Panetta has a different take on all of this, when compared to his boss Obama. Panetta advised against releasing these memos, partially because the act to do so was plain outright unnecessary. Even more interestingly, in his confirmation hearings Panatta introduced an exception to this no-EIT policy: Basically, if we have to do it, we will do it. Apply EITs, that is. So if this is the policy, then there really hasn’t been any change in policy, has it? Yes, if Panetta had his way, but that’s not the policy as of January 22 of this year! Obama banned EITs, and with no exceptions. Then again, that’s not to say that Obama couldn’t approve any exceptions as he goes along. Gee, my head is spinning already. Isn’t it sad when the only hope for the government to save innocent lives rests on a hope that it will act inconsistently with its current policy?

Panetta’s desired exception policy has one particular deficiency: He says would like to apply EITs only if they are “necessary.” How will we possibly know if they are necessary? If there is the proverbial ticking time-bomb, is he really saying that we will somehow already know about it, and that’s precisely imminent – but not know enough to diffuse it? That seems like an almost impossibly unique scenario. Isn’t it more likely that we simply capture a really bad guy and we ought do simply squeeze anything and everything out of him, no matter whether we know that there is a ticking time bomb somewhere out there or not? It appears from Panetta’s language that this wouldn’t be good enough. And certainly Obama hasn’t left an exception even for the ticking time bomb, at least not in the executive order he signed, which constitutes the current policy.

The fact that we have now revealed what we did, and thereby identified the outer boundaries of what we have been willing to do, means that it will be all that much harder to get information from any captured terrorist in the future. Let’s say that Obama changes his policy, or that another President reverses the policy – what will this mean for EITs? For one thing, we couldn’t just go back to the EITs as stated in the 2002-05 memos. We would have to apply far harsher methods, because the terrorists now know we were unwilling to hurt them in the past. In other words, the release of these memos only made certain that we will have no choice in the future but to graduate from these almost laughable kid-glove methods, to something that looks and sounds a lot more like actual torture. The irony…

In the meantime, in LA they now know something new about the guy they elected: In Obama’s opinion, he would rather have sacrificed thousands of you in a catastrophic 9/11 attack, than – God forbid! – having the mastermind of 9/11 share a room with a bug. This is comical in its simplicity, but revealingly serious. Regrets, anyone?

Finally, one argument often voiced needs to be killed, once and for all. It is often said by Obama and his supporters that our EIT policy served to recruit more terrorists, and was therefore counterproductive. While in theory we can never know for sure, because you can’t prove what would have happened, or will happen, if you did or do something different, we can know one thing for sure: The EITs became – per definition! – sources of rumor and debate well after 9/11. You could argue it happened five years later, in 2006. So all of these other things, including the first WTC bombing 1993, the attacks in Saudi Arabia, Tanzania and Kenya, as well as the USS Cole, Danny Pearl, the other beheadings and of course 9/11 itself, all happened before it became known that we showed a bug – or waterboarded, or smacked around – a small handful of the worst terrorists in the history of the human race. And after that time? Not a single significant terrorist attack on US soil. With the new policies, we will see how long that lasts. Obama now owns any terrorist attack that we hope doesn’t happen. And he has chosen to fight for us with one hand behind his back. That’s a dangerous political gamble.

Tuesday, March 17, 2009

iPhone 3.0 event today

Event ended a moment ago. Bottom line: a yawn. RIMM, PALM and others can sleep safely tonight.

Here are two of the highlights:
1. In one of the demos, the guy on stage was unable to spell correctly while typing on an iPhone. And he was an American, presumably educated, and an experienced iPhone user.
2. They highlighted a new app where the theme is "virtual play date for dogs" in which you can buy virtual sweaters (!) for dogs (!!) for some $0.99 each. Then watch these cartoon dogs "play" with each other. It is becoming easier every day to understand why over 60 million Americans voted for Obama. In related news: George Washington, John Adams, Thomas Jefferson and James Madison are rolling over in their graves.

General George Patton would have sent these people to the front.

One more thing: The iPhone will soon be getting copy/paste. Welcome to a feature the Blackberry has had since inception 10 years ago, 1999.

All these things available this Summer (when the 3rd generation iPhone is launched) as a software upgrade to the previous iPhones and iPod Touches. Presumably, this will be right about the time of the launch of the Palm Pre, as well as many new Blackberries, perhaps operating on OS 5.0. Then add a long list of Google/Android devices by September/October.

Wednesday, January 28, 2009

Apple's Advantage Over the Blackberry: Way More Memory

With the Blackberry app store launching by the end of March 2009, a dramatic new problem will emerge with full force: Where is the application memory to run these new applications? In order to understand the magnitude of this problem, we have to look at the mother of all app store pioneers: Apple (AAPL) and the iPhone.

Ask almost any iPhone user what excites them about the iPhone, and almost all of them answer immediately that it's the app store, with many thousands of apps available. Many iPhone users have page after page after page worth of applications that they have downloaded. It seems like iPhone users install dozens and dozens of applications, and I don't see any signs of abatement. We may be entering a situation where most iPhone users love their platform so much because they have hundreds of applications running.

The Blackberry app store is being launched for the obvious reason that it's becoming the critical tool in the competitive tool kit. Without a vibrant developer community, it's very difficult to compete. The analogy with the PC world is pretty strong, and possibly even stronger given that location-based services generate so many more application possibilities that aren't as meaningful in the PC world. Here is the problem: An iPhone has 8 gig or 16 gig worth of memory, compared to a Blackberry, which has 64, 96, 128 or 256 meg worth of app memory, depending on the model. Yes, I know these numbers are not perfectly "apples to blackberries" (no pun intended), because Blackberry has an expansion card slot and the iPhone doesn't, and so forth. But keep in mind that the Blackberry's expansion memory is for multimedia (pictures, music, etc) storage, not for running apps or even containing things such as the address book that synchronizes with Outlook. One can also argue that an iPhone typically contains a lot more multimedia than most Blackberries, but Blackberries also synch with iTunes for DRM-free content, so that gap should narrow as awareness of this ability grows.

Those caveats aside, the SMALLEST iPhone (8 gig) has 32x the application memory of the LARGEST Blackberry (256 meg for the 8900 model). The manner in which most users will feel this dramatic 32x difference is in the ability to install new apps. Clearly, while some Blackberry apps have tended to carry a small memory footprint, one of the attractions of the iPhone is that those apps are very rich in their appearance and functionality, so in order to compete, Blackberry apps may have to become larger in order to be competitive.

What does this mean? It looks like this clash of Blackberry's app store vs the very small app memory will mean many unsatisfied users who will be lighting up the customer service switchboards like a Christmas Tree. Many people aren't likely to understand why they can't download/install/run all of these new apps, and their devices could start to freeze up, and their old emails and instant messaging conversation could be wiped to free up memory.

This is both a challenge and an opportunity for RIM (RIMM). The challenge will be all the unhappy customers calling to complain about the lack of ability of their current devices. The opportunity will be to start selling new Blackberries with an app footprint equal to, or greater than, the iPhone. Such a "forced upgrade cycle" is not free, and it is unclear how consumers will react to this. Either way, for Blackberry to go from 256 meg or less worth of app memory in its devices, to 16 gig and more – a 64x increase – will mark Blackberry's most important generational shift in the company's history.

The installed Blackberry base is now approximately 20 million. Ask yourself: How many of these will use the Blackberry app store as the excuse to go to another platform such as iPhone, Android and Palm, versus how many will upgrade to another Blackberry containing some 64x more memory than your current Blackberry?

Thursday, January 22, 2009

How We Solved the Gas Price Problem

American memories are apparently becoming shorter and shorter. Various misguided references to the alleged causes and cures of The Great Depression aside, people don't remember that we once upon a time, less than 100 years ago, didn't have a Federal Income Tax, that drugs were legal (and then alcohol prohibited), and that inflation and interest rates were double-digits less than 30 full years ago.

Among the most recent things to be completely forgotten are the high gas prices, peaking in July 2008 with nationwide averages over $4 per gallon and people in California paying $5 on occasion. Politicians and pundits blamed this on "speculators" and called for the government to "do something." Toyota (TM) Priuses were selling at MSRP or higher.

Less than six months thereafter, gas prices had fallen by over 50%, and Toyota Priuses now come with $750 rebates to make them move. Never before did gasoline prices fall so far, so fast. Not even close.

What was the government program that fixed this economic problem? The answer is none at all. The government didn't lift a finger to solve this problem. It let the market do its magic, curing the issue with its own natural self-healing mechanism first described in Adam Smith's The Wealth of Nations [1776]. Sure, there was a lot of huffing and puffing about what people suggested the government should do, but in the end the government did nothing. The problem just went away. No government intervention solved the problem.

Think about it: The one recent problem which the government left to the free market to solve, got solved in record-short time. Contrast this to the ever-ballooning demands for the government to "do something" about the financial and economic crisis. The demands from almost all ends of the political spectra suggest that we drop all economic common sense and instead spend money we don't have.

Think about it again: We got into this mess by borrowing too much, spending too much, and making too many loans. What's being proposed? Let's spend even more, borrow much more, and make even more loans. It's like an alcoholic trying to cure a whiskey bottle's hangover by drinking a whole case worth of whiskey the next morning. If there ever were a more self-evident disaster outcome guaranteed, I can't think of one.

The free market cured the high gas problem in less than six months without the government lifting a finger or spending a dollar. Likewise, the free market would cure the imprudent debt bubble by allowing it to be pierced, seeing prices falling, wages falling and allowing bankruptcies and foreclosures to clean up the imprudent investments into orderly liquidation. Adjusting wages to demand, would guarantee full employment as with any other market price.

In a free market, the current recession would probably be cured within a year or two, and it would allow the government to cut expenses instead of increasing them. Only by dramatically cutting the size of our government, so that we can eliminate the deficit and start paying back the debt, can we restore sanity to our financial and monetary equation, which includes saving the value of the dollar.

As it stands, we are on a path that will put us in Germany's World War I surrender rail car and its 1918-20 aftermath. We will be left with a debt burden so great that the only way out will be massive inflation, as we essentially default on government bonds. Germany was left with a huge war debt after World War I, but because the debt was not denominated in British Pounds or French Francs, Germany simply inflated itself out of its obligations, causing dramatic mis-allocation of resources, societal chaos, the rise of Hitler and the bloodiest war (World War II) in its wake.

In our case today, the debt-explosion path that we will apparently be pursuing, will most likely also mean a massive inflation when we eventually print the money to pay off the bond buyers (read: The Chinese). China has one of the soundest economies in the world today, with low or nonexistent public and private debt, and high growth, but it has invested its surpluses largely in U.S. government bonds. Whoops! All that the Chinese worked for during the last decade, will go up in smoke. And in the wake of the Chinese losing their savings invested in U.S. government debt – another war? We are clearly playing with fire, taking on all this debt to finance unprecedented levels of government spending.

Monday, January 19, 2009

Obama's Alternative Inauguration Speech

My fellow Americans, change has arrived in Washington. Not as much in the area of foreign policy and homeland defense, because I realize that my predecessor and distant cousin Dick Cheney had it right in the hours and days following 9/11 when he set this great Republic on a war footing to defeat the enemy and protect the homeland. Seeing as I would rather not have another 9/11 – or worse – on my watch, the change will come primarily in the area of economic policy, where my predecessor presided over many failures and set a dangerous course for this country, particularly in the last year.

My new administration promises a clean break with the failed policies of the past. In the last eight years, government spending grew to new heights, from $2 trillion per year to over $4 trillion this year. This stratospheric rise in the growth of the US government’s burden on the people is nothing less than a crime against our beloved constitution and the intent of the Fathers of the 1776 Declaration of Independence. In recent times, the US government has failed to impose on itself any of the restraints that have made this country so special for so long.

To the contrary, the US government is now engaged in a long list of activities and spending not authorized by our most fundamental governing document. Working with Congress, I will seek to restore the US government to its constitutional limits in my first year in office. What this means in practice is a rapid shut-down of all government departments except the Departments of Justice, Defense and Homeland Security. This means that all these other unconstitutional creations of the 20th century, such as the Departments of Education, Energy, Commerce, Health and Human Affairs, Interior will all cease operations in this glorious year of 2009.

The Federal government’s budget deficit, which the first time exceeds $1 trillion, will also be eliminated this year. Yet, I will also abolish all of the destructive and unjust taxes that have mushroomed over the last 95 years in particular: the income tax, the death tax, the capital gains tax, the corporate tax and the dividend tax. These tax cuts will once again make the US economy competitive with the countries around the world where economic growth and liberty has recently exceeded our own.

My first budget, which I intend to deliver to Congress already this afternoon in the hope of a speedy approval, will authorize total Federal expenses of less than $1 trillion over the next year, which is an amount ten times greater than President John F. Kennedy’s 1961 budget. This will fund an efficient Federal judiciary, our military defense, and the ongoing war against terrorism.

What the new budget will not do, because it is being returned to its constitutional limitations, is to send checks – to anybody or anything. If you or your company has an addiction to receiving money from the government, this will be the year when you sober up. It will not matter whether you are rich, poor or in-between – the time of government spending money on you are now over. Every single government program providing services or sending out checks, will come to an end. You and your company will live in the freedom of keeping what you earn and receive in voluntary help from your friends, family and any charitable institutions, but the mirror image of this blessing of freedom is that government will not support anybody or anything. I am breaking the back on welfare state dependency and entitlement by going cold turkey on all recipients, large and small.

This restoration of the constitutional legitimacy of the US government will be funded by a simple flat tax on US adults: At $1 trillion in total annual Federal expenses, a number which may end up even lower, it represents a flat $5,000 tax on each of our 200 million US adults. There will no longer be any need to file an income tax return, keeping any receipts, paying a tax preparer, or equivalent. This flat $5,000 tax will be due in monthly installments of $417, equivalent of $13.70 per day.

I expect the impact on the economy from this simple flax tax to be profound. People will be able to work as much as they want, and invest in any way they want, knowing that every incremental dollar they earn will be theirs to keep. All of the lost productivity resulting from tax-avoidance and the administration associated with corporate payrolls, will remain with us only in the form of an unpleasant memory, similar to the memories of living behind the Iron Curtain and Berlin Wall before 1989. Small business will be able to form without any bureaucratic hassle. The entrepreneurial spirit will be unshackled from all red tape, bureaucracy and tax disincentives.

My plan to cut over 75% of all Federal government expenses, and fund the remainder with a flat $5,000 tax, will also help cure political corruption in Washington DC. Lobbyists come to us because we have money to spend, and they seek to maximize their share of the pie. My cold turkey approach to restoring the US government to its constitutionally legitimate size will make almost all lobbyists obsolete: If the size of the pie is zero, there is nothing for which you can lobby.

So in closing, I can say with confidence that the 75% or greater reduction in size of the US government will bring about a rebirth of the era of freedom, rugged individualism and self-reliance. It will allow the US government to focus on its constitutionally narrow purpose of securing the property rights of our individual citizens, and to protect our country from those who seek to do us harm. This focus will enable us to perform these duties better. With this, I salute our constitution, our Founders and our Declaration of Independence. Now let’s get on with it. Thank you, and God Bless America.