February 2012

Cybersecurity experts: Major telecom providers are secure

The major telecom providers have done a good job securing their networks and don’t require further regulation by the government, experts testified. James Lewis, the director of the Center for Strategic and International Studies, said telecom companies have addressed cybersecurity on a level that other sectors have not. "The [telecom] sector is already heavily regulated and it is in the business interests of major telecommunication’s companies to provide reliable service," Lewis said during a hearing of the House Commerce Committee’s subcommittee on Communications and Technology. "Their business models makes them the only sector with the expertise and incentives to take cybersecurity seriously, but even then there are issues and problems were uncoordinated private action is inadequate and government intervention is needed," he added.

Facebook Governance Resembles Dictatorship, Gamco’s Haverty Says

Facebook’s governance structure resembles a dictatorship, requiring investors to surrender rights to founder Mark Zuckerberg, according to Gamco Investors Inc.’s Larry Haverty.

Zuckerberg, chief executive officer, now controls 56.9 percent of voting power at Facebook, the company said in a filing to raise $5 billion in the largest Internet initial public offering on record. He also has the right to appoint his own successor, a “disquieting factor,” said Haverty, a portfolio manager at Gamco. Facebook still is a company that a growth-stock investor “absolutely” wants to own, Haverty said. “I don’t know whether dictatorship is the right word, but it more or less defies every vestige of shareholder democracy known to man,” Haverty said today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “I don’t think it’s how business should be run.”

Step 1: give every kid a laptop. Step 2: learning begins?

As of 2012, One Laptop Per Child (OLPC) has doled out over two million computers across 42 countries, in places as diverse as the Solomon Islands (300 machines), Haiti (15,000), Mongolia (14,500), and Iraq (9,000). Its most widespread deployment to date (by percentage of population) is in Uruguay, where over 500,000 laptops have been given out to every single elementary school student—nearly one-seventh the population of the entire country.

In Uruguay, the first pilot deployment of Plan Ceibal began in 2007 in the town of Villa Cardal, a town of just over 1,000 people in the southern part of the country. According to a 2011 report from the Inter-American Development Bank, the plan also had "broad political support from the Presidency of the Republic," adding that "all subsequent electoral candidates promised to preserve and continue the plan." The IDB added that the initial investment was $100 million, or 17 percent of the national budget for primary education. The Uruguayan model has drawn plenty of praise from ed-tech scholars and observers. Many point to the fact that all schools now have Internet connectivity, free WiFi exists in at least some public spaces, and Internet access has entered the home—Uruguayan families only pay for the router itself. Of course, it helps that Uruguay is a small country to begin with—98 percent of its 3 million people are literate, living across an area slightly smaller than Washington state.

With Viacom deal, Amazon looks like a real competitor to Netflix

Amazon continues to ramp up the amount of video content it offers for free to its Amazon Prime subscribers.

A new deal with Viacom will bring the number of titles available as part of its Prime Instant Videos service to more than 15,000, or three times the amount of content it launched the service with. But the one thing that’s missing from the service is the ability to subscribe without linking the service to Amazon Prime, which gives customers free two-day shipping. While it’s a nice perk, especially to Amazon Prime subscribers like me who overuse the free shipping, not everyone is as interested in that part of the offering. That’s rumored to change, as Amazon could unbundle the video offering from the Prime subscription. If it ever does roll out a standalone service, Amazon’s quick addition of new content puts it in a position to be a real competitor to Netflix, which is slowly rebounding from last summer’s price increase and customer dissatisfaction around its plans to unbundle and rebrand its DVD-by-mail service. While Netflix’s domestic subscriptions have begun growing again after a down third quarter, the company is seeing increased competition from the likes of Amazon, Hulu Plus and will soon face a new streaming service from Redbox and Verizon.

Facebook’s Mobile Plan: Carrier Billing, Analytics For Apps Via Bango Deal?

Facebook is already using mobile devices for commercial services -- enabling people to buy Facebook Credits and charge them directly to their mobile bills. Now, it’s increasingly looking like that may just be the beginning: UK-based mobile billing and analytics specialist Bango announced that it had signed a deal to provide unspecified services to Facebook. This is a significant deal for Facebook on two separate fronts: It ties Facebook up with one of the bigger companies in the area of mobile billing and The other significant side of Bango’s business is in the area of analytics for mobile web sites as well as apps.

Federal Standards Body Focuses On Big Data, Cloud

The National Institute of Standards and Technology's IT Laboratory, which works on IT standards and metrics as well as federal cybersecurity programs, will be placing a new focus on big data and mobility technologies this year and will continue its work on cybersecurity and cloud computing, according to IT Lab Director Chuck Romine.

Romine, who took over for retiring IT Lab director Cita Furlani last fall, told InformationWeek that NIST will be increasing its work on standards, interoperability, reliability, and usability of big data technologies. Government and the private sector continue to amass huge data sets to help facilitate everything from more targeted marketing to improved government oversight. "NIST can have a lot of impact on the big data question," Romine said, noting that the agency has been involved for years in analysis of how the federal government and private sector can better harness the power of large quantities of data. In 2009, for example, NIST helped publish a report called "Harnessing the Power of Digital Data." The "inexorable push to mobility," as Romine called it, is another one of NIST's new priorities, he said. That work includes, among other things, developing new standards for wireless network technologies. The other new project that Romine is working on is a strategic planning process in which he plans to engage other agencies and the private sector to help decide which technologies to focus on going forward. Despite these new areas of focus, however, Romine said he will carry over many of the priorities of his predecessor Furlani, who he said left things in good shape at the agency.

Apple Gets the Credit (And the Cash) for Growth of Mobile Computing Revenue

What would the mobile computing industry (defined for this purpose as smartphones and tablets) be without Apple, had the company not entered it in June of 2007 with the iPhone? Less lucrative, that’s what.

Charting the industry’s performance over the past five years, Morgan Keegan analyst Tavis McCourt figures its revenue in the fourth quarter of 2011 — $71.4 billion — is about twice what it was in the fourth quarter of 2007 — $37.9 billion. But remove Apple from the picture, and that revenue declines — dramatically. Turns out that without Apple, the mobile computing industry’s revenue in the fourth quarter of 2011 would be about what it was in the fourth quarter of 2007. What seems to be happening is that the bulk of the industry’s revenue growth is accruing to Apple, and because the company has the highest margins around, that’s where most of the profit is ending up, as well.

Sprint Loss Widens After IPhone Demand Boosts Subsidy Costs

Sprint Nextel, the third- largest U.S. wireless carrier, reported a wider fourth-quarter loss after demand for Apple’s iPhone boosted costs to subsidize the device.

The net loss expanded to $1.3 billion, or 43 cents a share, from $929 million, or 31 cents, a year earlier, Sprint said in a statement. The company said it had one-time costs of 8 cents a share from revaluing assets. Analysts predicted a loss of 38 cents, the average of estimates compiled by Bloomberg. Sprint sold 1.8 million iPhones in the period, the first quarter of sales for the device the carrier is betting on to lure users and rebound from five years of losses. Sprint and larger rivals AT&T Inc. and Verizon Wireless buy iPhones from Apple and then sell them at a loss to get consumers to sign up for multiyear contracts.

The iPhone is a nightmare for carriers

The iPhone may be great for consumers, but takes a nasty toll on wireless carriers' bottom line.

The price of Apple's iconic smartphone is heavily discounted by carriers. Those subsidies almost single-handedly devastate profit margins for Verizon, AT&T and Sprint. Since Apple's iPhone debuted on Verizon's network in February 2011, Verizon's "EBITDA service margin" -- a closely watched metric that carriers use to measure their core profit as a percentage of their sales -- has tumbled. Between 2009 and 2010, Verizon averaged EBITDA service margin of 46.4% per quarter. In the first quarter that the iPhone went on sale, that fell to 43.7%. Last quarter, when Verizon sold a record 4.2 million iPhones, its margin plunged to 42.2%. AT&T and Sprint suffered an even worse fate. Those swings are a big problem in an industry where tiny, fractional changes in margin can cause investors to either throw temper tantrums or ticker-tape parades.

Apple's $90 billion run

On Oct. 4, the day before Steve Jobs passed away, Apple shares closed at $372.50 and its market cap stood at $347 billion. Four months later, the stock is up nearly $100 and it's market cap is $437 billion. To put that $90 billion gain in perspective, it's nine tenths the value analysts have placed on Facebook in advance of its initial public offering. Some believe that Facebook is being overvalued, but it's hard to argue that Apple is.

Benton

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