Intel plays gentle giant in euro-broadband push
Intel loves broadband. No it really, really loves broadband. In the US, Craig Barrett, Intel CEO is lobbying the Bush administration to promote a national policy to accelerate broadband rollouts across the country.
In Europe, the chip giant is taking it more gently. It wants a quick broadband rollout on this continent too: it strongly backs local loop unbundling and it's helping out with service providers and content providers behind the scenes, with work on standards, and promotion of best practices.
Intel is encouraging system builders to embed broadband modems into PCs, it's working with the set-top box makers, and finally it's spreading its co-op marketing largesse among broadband players.
But there's no lobbying of government and no overt criticism of regulators or go-slow incumbent telcos, certainly not from the lips of Gordon Graylish, director of the Communications Group, Intel EMEA.
In a presentation at IDF Europe today, Graylish, an affable Canadian based in the UK, ran us through Intel's euro-adapted broadband world-view
First some stats. Abou. 3.3 million homes in EMEA (Europe, Middle East, Africa) had broadband connections in 2001, and this will grow to 38 million in Western Europe alone in 2005, according to a Forrester survey cited by Intel. Today, around six per cent of Western European homes have broadband Internet access, and this will grow to 41 per cent by 2006.
The figures sound good, right? They're not good enough for Intel. You may have noticed that the consumer PC sector, accounting for maybe 30-35 per cent of all sales is sluggish (with the sole exception of brick-like notebook PCs). Consumer buying cycles are lengthening, and newbies are no longer coming in in droves. In short the market appears to be saturated.
A certain vein of pessimism runs through some observers who bemoan the lack of killer apps. What reason is there to upgrade, they say.
Intel, the technology optimist, thinks, no knows there are plenty of killer apps to get the consumers excited. But not yet. First, the computer hardware industry needs broadband.
The combination of always on connections, big bandwidth and fast access is the killer app-enabler for the home.
Broadband changes the way people use their PCs. They download more music, watch videos on the PCs, and with the help of some Wi-Fi kit, and a notebook or three, you've got the entire family accessing the Internet from wherever they may be in the home. And this gives them an excellent reason to upgrade their computers - a PC with more headroom, as Intel puts it, is needed to run the streaming video, the CD-ripping, the music downloads at satisfactory speeds.
But not yet, not for many people. Broadband prices are still too high and the roll-out pace is too low. It's beginning to get there - once subscription prices fall below €40 a month, consumer take-up grows exponentially, Graylish notes.
The money shot
The telcos responsible for broadband infrastructure can now see where and how they can make money. At same time many are strapped by their vast outlays for 3G licenses. Which means that they need to develop new revenu-generating opportunities fast. They have an incentive to accelerate deployment and to drop prices - substantially, as Graylish says.
But where will the new money-making application opportunities come from? Graylish tots up a few - banking; music; gaming; video; imaging; and security. But he cheerfully admits that he doesn't have a clue what the real killer apps will be. The technology industry is, he reckons, pretty good at the big picture, "but it's terrible at product specifics".
First comes the broadband, then comes the change of use, and then comes the wealth of content. Content will drive broadband usage, according to Graylish, who appears to believe that the naked, very cheap broadband-only services beginning to make their way to the market, will have only a limited appeal.
Content is king. Great content on fast networks means many more sales of top-of-the line P4 PCs. Great content may also mean pirated content and Intel is currently in a political spat in the US with the movie industry which is seeking to hobble the ability of PCs to play movies.
Graylish says Intel is a "strong supporter of IP. But I believe they (music and movie companies) are absolutely misinformed".
Stopping people from playing music on PCs will do their cause no good; technology does not stand still, and content producers should not try to stop it, he says. Instead, the companies should work on producing new revenue models, probably hitting different points in the value chain, to reflect the new realities.
Graylish draws an analogy with the music radio stations of the 1930s, which led many record companies to call for their closure. Until they figured out ways of making the radio pay for them. Likewise, he notes the antipathy of the movie industry towards video rentals, and its attempts to rein people in, until noticing that more money could be earned from this sector than from movie theaters.
Intel doesn't think it will lose out to consumer electronics appliances. It recognises the convergence between the PC and the consumer electronics worlds, brought together by broadband and, we infer, peripherals such as digital cameras and digital video cameras hooking up to PCs.
Intel is working hard in the standards backrooms to ensure that this coming interconnected world will be seamless, most probably through 802.11 technologies.
However, Intel reckons the PC will retain top dog slot in the always on, big bandwith home. The PC, after all, has a "unique capability because of its openness to morph to change," according to what it's owner wants it to be, Graylish says. You want it to be a home theater, you want it to be a DVD player, then that's what it will be. ®