We all know a media giant when we see one, but did you know they could fight?  Well in the UK over the past week, there has been a battle royal waging between two of the biggest.  In the red corner, Sir Richard Branson and his newly minted "Virgin Media" (born out of NTL/TeleWest's £950m purchase of Virgin Mobile) and  in the blue corner,  Rupert Murdoch's BSkyB which markets the SKY satellite service.  And in the middle of the ring, under the feet of both of them - poor down-trodden consumers.  Let me give you the background.  As one journalist commented, "The only thing missing in this drama is sex."  In case you are wondering - these are two vertically integrated schizophrenic media giants.  Both have their own exclusive distribution networks and both see their fortune coming from using those networks to sell to their consumers, services and 'content' - some of which they own outright and some of which they buy in from others on a wholesale basis....

Being a future facing animal, it is not my nature to spend much time looking back - even at the end of a year.  But as the festivities of Christmas fade and 2006 draws to a close before a new year dawns, I cannot resist reminding myself ... and maybe you ... of what I believe history will determine as being one of the most significant events of the past year.  I refer to YouTube and the way it burst on to center stage of the planet and in a short time, has literally changed the rules of .... well, almost everything.  At this time of year when I and millions of other Christians around that planet recall the birth of Jesus Christ as the son of God, it is worth reminding ourselves that, according to the Bible, we too were created in the "creators" image - presumably meaning that our primary raison d'être is also to be "creators".  You would hardly think that looking around this Christmas as we "consumers" celebrate by way of countless gifts (given and received) of CDs, DVDs, books and goodness knows what else.  I have long argued that for the latter part of the past century, the human race (at least in the developed world) has, through the limits of media distribution technology, been held captive in a cage of creative consumerism.  Well, YouTube plus the open access nature of the internet, coupled with the low-cost tools of Hollywood in all our hands, liberated us in the year 2006 AD.  Now anyone, and I mean anyone, who wants too create anything (and I mean anything) in video format can share it freely with the world.  Not only is this beginning to shatter a myriad conventional wisdoms, it is also shaking the foundations of hundreds of business models - all based on the use of yesteryear's technologies to maintain creative scarcity - with the prospect of exploiting consumer demand to generate 'wealth'.   There is nothing wrong with that - provided it is taking place freely in a free market - which is hardly the case today, but that's another story....

Last week I was fortunate to be one of the 120 'invitation only' guests of British Telecom to attend the 21st Century Global Summit held at their research establishment, Adastral Park (or as most of us still know it, Martlesham).   Described by the hosts as an "... exclusive summit for CxO level executives, leading innovators and luminaries from around the world  -  the premier event to discuss next generation products and services. The Summit is unique in bringing together media, telecommunication, financial services and global sourcing companies for the first time with the objective to share, learn and potentially collaborate in areas that will raise the bar in the industry."

A higher concentration of bright minds, inventive technologies and big budgets I cannot imagine.  Needless to say, BT outlined the aims and progress of its 21CN programme.  It is jaw-dropping in scale and scope and one cannot but admire the project management skills necessary to undertake this behomothic broadband project.   There is no doubt that BT has thought longer and deeper than most as to how to inhabit the new 'converged' territories.

But I left with a number of abiding memories and conclusions from those two days.  Let me share them with you.  When Her Majesty the Queen opened the BT Laboratories at Martlesham in 1975, few of us realised the impact these research laboratories and their brilliant teams of engineers would have on developing the seminal digital technologies of the second half of the 20th century (silicon [chip] + silica [fibre] + spread spectrum wireless) around the converging, nay colliding, industries of computing, telecoms and broadcasting.  I remember my first visit to Martlesham in the late 1980s and being awestruck at some of the brilliant innovations and but bewildered as they were assiduously patent-protected and then placed on the shelf to ensure they did not see the light of day before it suited BT and its slow, migratory, asset-milking march to the future.  ADSL was one of those technologies being developed when I was there - but the telecoms cartel had determined that ISDN was "step 1" and only after that, "step 2" .... ADSL.     Two decades later, BT is lifiting its foot to take "step 3" - 21CN.  Only I fear this will one will cause them to trip over!

Another over-riding impression from the 21st Century Summit was the near universal appreciation amongst those attending that something special and entirely new is afoot.  Call it "web 2.0", or "social networking", there was general unstated acknowledgement that the likes of YouTube are shaking the world ... the statistics speak for themselves - founded in February 2005 and within 18 months has become the 16th most visited site on the www; accounts for 29% of the US multimedia market; has over 2.5 billion video views in a month; helps unseat three-term veteran Sen. Joe Lieberman at the ballot box ... and is FREE!   Little wonder everyone at Adastra Park last week wanted to convey the impression that they understood what is going on and the impact and opportunity it held for their companies.  Each and every one of them, from their various perspectives, claimed to have a good handle on how to monetize this minefield.

Three words were on everyone's lips .... "convergence", "content" and "open".  I am not sure that the assembled executives really grasped the implosive impact of these three technology-driven trends.  One of many vigorous conversations I had was with the CEO of a major public company who did not seem to see that 'open' is almost the antithesis of 'content' (i.e. something contained and closed inside something).  So many of these major corporations just do not have business models that are pliable enough to cope with a world of mashing and peer-to-peer 'conversation'.   It's a shame really, because for a century, it was these very values that made the telephone such a 'must-have' and such a world-changing success.   No 'content' - just conversations, and with no content, no differentiation between 'consumers' and 'creators'.  I pointed out to him that all the world wanted to do was to use the low-cost digital technologies of abundance that anyone can purchase over the web or from their local WalMart, to 'converse' in a richer and more multi-faceted manner than the scarcity of the telephone network would ever permit.  I not sure he got it I am afraid.

And I am not sure BT gets it either!  At one major plenary session on the second day, I hear two senior BT managers make the following statements, without blinking an eyelid or without realising what they were implying.  Nobody in the audience picked it up either, but it is there for posterity on the hard-disks of the film crew that video-recorded the entire proceedings.

Al-Noor Ramji, Chief Executive Officer BT EXact and Group CIO stated, "At the end of the day, we (BT) are a telco... and by that I mean, we are fundamentally an infrastructure company".

Five minutes later on the same panel:

Neil Rogers, Managing Director 21CN says, "We are fundamentally a services company"

Of course, they are both absolutely right - and that's the problem.  (Just like that horse in my last blog entry!)   BT, like so many telcos faced with these shifting tectonic telecom plates, find themselves with assets supporting one, and earnings expectations based on the other.  It reminds me of the anecdote of an Irishman who, when a lost stranger asked him the way, answered: 'Well, if I were you I sure wouldn't start from here.'

But BT, like many incumbent telcos, have literally hundreds of brilliant businesses and thousands of highly talented individuals within the group.  It would be a shame if, by trying to hold them all together, it all fell apart.

Oh, and did you see the front page of Monday's Financial Times?   "Sell-off U-turn by Telecom Italia".  The story went on, "Telecom Italia is considering a radical restructuring of its operations in a move that could see the Italian market leader sell all or part of its network and mobile telephony arms to concentrate on broadband and media services".  Sounds pretty drastic, eh?   
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For several years I have been speaking openly about the coming bloodbath in the telecoms sector.  I have argued that this will be brought about by the inevitable collision between the disruptive digital technologies of abundance and the obsolete business model of the telecoms sector, based as it is, on 'allocation of scarcity'.  Only decades of special interest pleading and lobbying by the massive and powerful vested interests in the telecoms sector have managed artifically to extend the life of a sector which, in a free and open market, would have been transformed years ago.

Well, last week marked a milestone!   "Blood from a Phone" was the headline in the respected LEX Column in the Financial Times on August 11th.  The story of course, was the news from Deutsche Telekom that it was significantly downgrading its forecast - profits down by 10 per cent for the current year and earnings 'stagnant' in 2007.   The shares immediately traded 7 per cent lower.  One of the 'sweet' side-stories here was the fact that back in April 2006, the private equity giant, The Blackstone Group, had splashed out €2.7bn (£1.9bn) on a 4.5 per cent slice of DT.  At the time, DT's CEO, Kai-Uwe Ricke had commented, "We are very pleased to have gained in Blackstone a shareholder with demonstrated expertise in the telecommunications sector".   Some espertise!  By August 11th, Blackstone's 'demonstrated expertise' in telecoms had delivered a €550m loss - and worse than that, when Blackstone acquired the stock, they undertook to hold onto the shares for at least two years.  Maybe I should not single out Blackstone as most of the major private equity groups are loaded to the gunnels with conventional telecoms and cable stocks which I remain confident in predicting, are facing a bloodbath of biblical proportions.  We ain't seen nothing yet!

But the irony was enhanced last Friday by the fact that on the same day, the UK communications sector regulator, Ofcom published the results of an extensive survey in a report entitled, "The Communications Market 2006".  While the likes of Deutsche, British and France Telecom are all busily buried in trying to cobble together triple or quadruple-play packages or capture 'content' which can be downloaded by the world for a pretty penny, reading between the lines of the Ofcom report, you can see that there is a new generation in the real world which is in quite a different space.  The report's summary states, "2005 saw rapid growth in the reach and usage of social networking websites (such as MySpace, Friends Reunited and Bebo), which allow users to create online profiles and connect with friends or others with similar interests. Our research shows that over 40% of adults with internet access have used these sites; that figure rises to seventy per cent among 16-24 year-olds, with over half in this age group using them at least weekly."  Moreover, the research found that under 24 year olds are watching seven hours less TV a week than the average viewer and 1.5hrs less than they did in 2004 and nearly twenty per cent are prolific bloggers!

What this tells you is that human beings are relational beings and as such, thrive on  'conversing' - interacting, chatting and communicating with other people, whether by voice alone, or by sharing video and other creative output which can enhance a relationship with other people despite physical spatial separation.  That's why the telephone was such a success!   Alexander Graham Bell did not invent a world of 'audio content download' - indeed, in the world of telephony, there is no differentiation between content 'consumers' and content 'creators' - we all just converse.  Now, thanks to the low cost availability of technology which for ages was the exlcusive domain of Hollywood, Fleet Street, Abbey Road and the BBC, we can now have our conversations enriched and enhanced in new ways which make conventional 'broadcast' models look old hat.

This human thirst for 'conversation' rather than 'content' will prove unquenchable and despite all the cries of pain and special pleading from the likes of Deutsche Telekom, public policy makers and governments would be wise not to try and put the digital genie back in the bottle.  About three years ago I was meeting with Rt Hon Patricia Hewett, MP, the then UK Minister responsible for telecoms (now Secretary of State for Health).  I made what must have been a provocative statement.  "Tony Blair's dream of a broadband Britain and all it heralds is incompatible with the well being of the telecoms sector as currently structured and operated - you can have one or the other.  Trying to achieve both will result in Britain losing both".

What the next generation appears to be craving is an 'open access' deployment of commuications infrastructure - an open INTERnet reached from an open LOCALnet (OPLAN) - and leave the rest to them.  I have no doubt that the creative genius of humans, liberated from being subserviant to the broadcast pinch-points of the past (film,TV, radio, press), will discover new ways of generating 'conversational' material which is the creative match of anything around today.

...and don't forget to sell those telecom shares - you won't again get the price that you can today!   And if you think I am just following the latest conventional wisdom - take a look at this earlier forecast of mine - that could have made you money too!
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(The ‘punch line’ of this blog entry – is read this! )

I have long proclaimed that in the emerging world of abundant connectivity that the digital technologies combine to deliver - that any business model that differentiates between “content creators” and “content consumers” will ultimately be doomed.  I have possibly hung on to this mantra rather longer than I should because of the appealing alliteration.  However I have made a new resolution now that I am finally and fully convinced of the absurdity as well as the immorality of persisting with laws which attempt to differentiate on the same basis.  I refer of course to the laws of copyright underpinned by the notion of intellectual property.  Indeed, I am going to attempt to go one step further and desist altogether from using the term “content” to that rich matrix of sound, video, script, data which, as sentient beings we take in and give out in the course of our daily lives.  I am not sure where the term “content” came from as applied to what we sense from media with our ears, eyes and imaginations.  The word ‘content’ if my memory of schoolboy latin remains accurate, comes from the past participle of the verb, continere – ‘to contain’.
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A couple of months ago, UK's leading ISP (and the incumbent telco), British Telecom  began pulling the plug on around 4,000 of its broadband punters because of "excessive usage".   BT claimed that these net users  - making up less than 0.2 per cent of the company's 2.3m ADSL  users - were consistently using up more than 100 gig each a month.   According to BT, these "exceptionally heavy users" were in "consistent breach of their "fair usage policy" and have failed to respond to requests to contact BT to discuss the matter"!
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It is now several years ago that I first heard Peter Cochrane (member of the Foundation’s Council of Reference) make reference to C2B ….the potential for “consumer-to-business” services.   Interestingly, during the dot.com boom, there was talk aplenty about “B2C” and “B2B” but nobody, as far as I can recall, talked about C2B - that is to say “individual end users” at the periphery of the net, developing and providing services for “corporates” at the center.  At the time, he illustrated the argument with the legendry cult movie, “405”  - made by a couple of Californian teenagers.  “Why” argued Peter “would anyone want to pay through the nose for a Madison Avenue advertising  agency to make your TV commercial, with talent like this available?”...

“But when you give to the needy, do not let your left hand know what your right hand is doing”

As ever, great words of wisdom from the word of God!  And it looks as if Bell Globe media,  Canada’s premier multi-media company with ownership interests in Canada’s leading media including: CTV Inc., the number-one private broadcaster, and The Globe and Mail, the leading national daily newspaper is certainly not letting the left hand know what the right is doing. ...