peter cowhey dean, school of international relations and pacific studies uc san diego...
TRANSCRIPT
Peter Cowhey
Dean, School of International Relations and Pacific Studies
UC San Diego
• Information and Telecommunications Technology Are Merging—This Creates A Brand New Market Dynamic
• Good Public Policy Will Facilitate the Growth of Modularity—The Key Characteristic of the New Technology Architecture
• Modularity Opens Both Global Opportunities and Big Challenges for Latin America
The Traditional Model for ICT: Leverage a Dominant Position
• The Leverage Model: Use a Large Advantage in Critical Part of the Value Chain to:– Take leadership position in adjacent markets– Raise profit margins to build corporate “war chest” and
research/investment funding to entrench leadership
• Traditional examples: AT&T before 1984, IBM in 1960s and 1970s, and Microsoft in 1990s
• New example: Google?
IBM Dominance
Results in dominance in:•Integrated hardware systems •Mainframe software•Integrated Services
Interfaces not transparent
Interfaces not transparent
Leverage: Superior performance in integrated processors yields highest MIPS integrated with systems software
Bundled packages of products for
enterprises
Microsoft Dominance
Results in dominance in:• Applications (Office)
• Enterprise Server software
• Collaborative software tools for enterprises
Interfaces not transparent
Interfaces not transparent
Leverage: DOS/Windows becomes the standard desktop environment
Then offer a package of related
applications and specialized software to large enterprises
AT&T Dominance Before 1984
Leverage: Control of Local Transmission Network
"leverage point"
Interface is transparent, but
rivals cannot rent local network on competitive price and performance
terms
Results in dominance in:• Long Distance
Services• Enterprise
services
Local Network
Can Google Do It Again?
Leverage: Dominance in search as an information utility:• Massive storage and
computing infrastructure• Large private
communications network• Syndicated ad network for
entire Web
Results in dominance in:• Enterprise Applications
markets• Productivity software• Social Networking • Media and Content
Why Google Won’t Dominate –Modular Revolution
• Technology plus policy have produced a new architecture for Information and Communication Technology (ICT) – Modular Architecture
• Modular: Standardized interfaces allow “mix and match” of ICT building blocks
How the Modular Revolution Evolved – Policy & 1st Two Stages
• “Carterfone” in 1950s establishes freedom to choose equipment as long there is “no harm to the network” and “transparent interfaces”
• IBM antitrust suits in 1950s establish that IBM and rivals have to design “plug and play” hardware and software
• Diversified supply base of specialist firms
Computing and terminals – the
“cheap revolution” in computing and
terminal equipment costs and
performance
• AT&T break up: Ability to build your own network or rent network capabilities from dominant firm
• Wireless markets: FCC affirms principle of “technology neutrality” as long as calls can be exchanged between different technology networks
• Limited version of net neutrality: Telecom carriers cannot discriminate on user access to content or value added services
Communications networks – growing
bandwidth at plunging prices
11
22
The Cheap Revolution
Scientific American, January 2001
Number of Years0 1 2 3 4 5
Per
form
ance
per
Do
llar
Sp
ent
Data Storage(bits per
square inch)(Doubling time 12 Months)
Optical Fiber(bits per second)
(Doubling time 9 Months)
Silicon Computer Chips(Number of Transistors)
(Doubling time 18 Months)
• Microsoft antitrust: transparent interfaces• Web browser becomes the common translation device
among operating systems• Web 2.0: Growth of modular code that be “recycled” by other
programmers
Software and Web Services
• FCC forbids cable and broadcast networks from withholding content from rival transmission networks
• Audio and visual merge with data via Web• Geographic markets merge via Web• Costs of creating high quality content drops dramatically
(special effects are radically cheaper)
Content (Digital Media) –
YouTube
How the Modular Revolution Evolved – Policy & 2nd Two Stages
33
44
Why Winners Don’t Take All in the New Era
Source: Gartner (August 2006)
Figure 1. Percentage of OS-Specific (Generally Windows) vs. OS-Agnostic Applications
Figure 3. Application Development Mix — New Applications
Figure 2. Number of OS-Specific (Generally Windows) vs. OS-Agnostic Applications in Our Model Organization (Installed Base)
Some Examples of Modularity and Market Evolution
• Apple’s “iPod”: makes its money on selling the terminal – the networked information is a commodity
• Salesforce.com: provides customers with on-demand computing that supports a powerful customer relations management platform – unlike Google, it simply rents the computing infrastructure
• Orkut (Brazil) vs. Facebook: Google has limited success in social networking
• Asian gaming market: Only one of top fifty networked games in East Asia are from U.S.
vs.
Challenges and Opportunities forLatin America
• Modularity is the potential of the digital technology frontier, but it requires– Smart competition policy to be effective– Support for technology innovation
• Latin American communications/media infrastructure is low bandwidth and high priced by global standards
• Latin America does not invest enough in innovation capabilities – people and research facilities
Opportunities
• The rise of modularity and decline of leveraging opens many global opportunities
• The costs for being a global media and content provider are declining rapidly
• The ability to innovate specialized global applications for consumers and enterprises is disseminating rapidly
Four Examples to Consider
• Web 2.0 applications driven by ad revenues—but Latin America is spending only about $1 out of every $30 on digital ads while North America is spending $1 out of every $6
• Networked medical innovations• Environmental policy depends on good data—
breakthroughs on networks of air monitoring sensors• The implications of high end research networks for
economic growth and modernization
The Real Digital Divide: Latin America and the Digital Advertising Market (by format, category and region) (Page 1 of 2)
Format Category Region 2006 2007 2008 2009 2010
Digital
Paid Listing
LA 101 134 173 215 259
APAC 2,041 2,648 3,383 4,172 4,989
EMEA 3,266 4,241 5,376 6,492 7,530
North America 6,748 8,312 10,097 11,748 13,306
Paid Listing Total 12,156 15,335 19,029 22,627 26,084
Display ads
LA 81 104 127 154 179
APAC 1,632 2,042 2,483 2,983 3,451
EMEA 2,611 3,270 3,946 4,642 5,209
North America 5,396 6,410 7,412 8,400 9,204
Display ads Total 9,720 11,825 13,969 16,180 18,043
Local search (incl. Internet YP)
LA 51 70 92 117 145
APAC 1,038 1,385 1,791 2,270 2,786
EMEA 1,662 2,218 2,847 3,532 4,205
North America 3,433 4,347 5,347 6,392 7,431
Local search (incl. Internet YP) Total
6,185 8,019 10,076 12,311 14,567
Classified
LA 40 52 66 81 97
APAC 810 1,034 1,287 1,576 1,875
EMEA 1,295 1,656 2,046 2,453 2,831
North America 2,677 3,246 3,842 4,439 5,002
Classified Total 4,822 5,989 7,241 8,550 9,806
CGM ads
LA 11 17 28 44 68
APAC 213 337 537 845 1,302
EMEA 340 540 853 1,315 1,965
North America 703 1,058 1,602 2,379 3,472
CGM ads Total 1,266 1,953 3,020 4,582 6,807
Mobile advertising
LA 9 19 31 47 64
APAC 187 373 606 908 1,242
EMEA 299 597 962 1,413 1,874
North America 618 1,170 1,808 2,556 3,311
Mobile advertising Total 1,112 2,158 3,407 4,924 6,491
Digital Total 35,262 45,279 56,741 69,173 81,798
Source: PwC, analyst reports
$ Millions
The Real Digital Divide: Latin America and the Digital Advertising Market (by format, category and region) (Page 2 of 2)
Format Category Region 2006 2007 2008 2009 2010
Physical
TV network advertising
LA 7,751 8,259 9,348 9,875 11,299
APAC 33,434 35,377 39,457 41,200 44,862
EMEA 41,733 44,057 47,387 50,081 53,751
North America 75,000 77,619 84,528 86,420 92,163
TV network advertising Total 157,918 165,312 180,720 187,576 202,075
Newspaper Advertising
LA 3,821 4,097 4,371 4,646 4,920
APAC 23,700 24,832 27,138 28,009 29,636
EMEA 38,846 40,138 41,502 42,918 44,369
North America 47,575 47,827 48,321 48,347 49,016
Newspaper Advertising Total 113,942 116,894 121,332 123,920 127,941
Magazine Advertising
LA 1,127 1,219 1,311 1,402 1,498
APAC 6,698 7,054 7,493 7,772 8,121
EMEA 21,164 22,000 22,940 23,890 24,838
North America 25,307 26,601 28,125 29,289 30,084
Magazine Advertising Total 54,296 56,874 59,869 62,353 64,541
Radio and out-of-home advertising
LA 264 285 309 332 356
APAC 5,403 5,715 6,161 6,369 6,767
EMEA 8,385 9,055 9,767 10,454 10,454
North America 7,121 7,681 8,322 8,982 9,763
Out of home ads Total 21,173 22,736 24,559 26,137 27,340
Physical Total 347,329 361,816 386,480 399,986 421,897
Source: PwC, analyst reports
$ Millions
Diabetes Phone
• In May 2004, LG and HealthPia introduced a World’s First Diabetes Phone in Korea under KTF Wireless Service.
• More than 700 Customers are currently using the Diabetes Phone in Korea with a high satisfaction.
Breakthroughs on Environmental Air Monitoring Systems through “Laboratories on a Chip”
Source: Greg McRae, MIT and ANL
Cement SensorCement Sensor
An Innovation Vision for the Future: Towards Gigapixel Displays
Source: Jason Leigh, EVL, UIC
Augmented Reality
SuperHD StreamingVideo Gigapixel
Wall Paper
1 GigaPixel x 3 Bytes/pixel x 8 bits/byte x 30 frames/sec ~ 1 Terabit/sec!
Predicting Bandwidth Utilization and Innovation
• The research networks lead “high end” commercial use by about 7 years
• The research networks lead “high end” consumer use by about 12 to 15 years
• The leading edge use for pictures and sound today is illegal sharing of movies and music
• The leading edge tomorrow will be interactive visual and data applications for work and personal uses
The Rise of New Network Uses
Source: Krishna Nathanson, IBM, 2006
Global ICT Spending by Technology ($US Billions)
Source: WITSA's 2004, Digital Planet: The Global Information Economy.
200720062005200420032002200120001999
1,800
1,500
1,200
900
600
300
0
Hardware Software Services Communications