TrainTech: Bullets Along the Yangtze

In the Hutong
Listening to Russell Train talk green
1842 hrs.

Just a little over half a year after linking Lhasa into China’s vast rail network and the announcement of plans to build a land bridge linking Beijing and New Delhi, China Rail has linked Shanghai with Nanjing and Hangzhou by bullet trains.

America’s Model Won’t Work Here

In an age of low-cost airlines, a lot of Americans and Europeans look at rail travel as something very low tech, if not somewhat quaint. The very thought of linking the words “rail” and “tech” is a bit of an oxymoron.

China, on the other hand, is coming up against a realization that there are simply too many people traveling and commuting in China to build a long-distance transportation system on roads and airways alone. Rail is going to play as important a role in China as it did in the past, but that in order for it to do so it must become as close a substitution for the automobile AND the long-distance bus (within 500 kilometers) and for the airlines (on longer journeys.)

That means greater speed, higher efficiency, and greater comfort and safety, which in turn means better people and the integration of a range of critical technologies.

In Other Words, China’s Trains Need to Go High Tech

Greater speed means faster transit times, and faster turnaround times at each terminus.

Higher efficiency means full trains, fully utilized rails and minimal energy use per passenger seat-kilometer, not to mention lower-costs overall.

Greater comfort and safety means competing favorably on both categories with air travel.

This will require powerful trains that demand less maintenance, well constructed railroads, better-designed and built train stations (Chinese railroad stations are generally awful – try pulling a wheeled carryon from the front door of Beijing West Station to your compartment on the car, and you’ll get what I mean,) cutting-edge signaling systems, and trains that are much more energy efficient than they are today.

In other words, China’s railroads are going to move – are going to have to move – out of the 19th century and into the 21st, all without driving the cost of basic rail service above what your average Chinese can pay for a ticket. That means efficiencies, and that means better trained people and an investment in a long sequence of technically sophisticated but fundamentally simple upgrades to China’s infrastructure.

The size of the investment and the effort required will be huge, and the opportunities for all companies in the rail system supply chain are significant. I’m not sure I’d want to be in the business of fabricating rail cars: China will clearly take on as much of the fabrication and assembly of rolling stock as possible.

But rolling stock design, interior design, station design, energy-efficient drive trains, entertainment systems, marketing, fare collection, food concessions, parking concessions, communications system, signaling systems, and a host of other products and functions that are going to be essential to China’s Rail Renaissance will have to purchased – in full or in part – from companies outside the core of China’s traditional and plodding state-owned rail industry.

My friend Bob and I were talking last week about an investment opportunity we looked at a year ago in building digital movie theaters in railway stations. Sounds like a tiny opportunity, huh? Sure – until you realize that these ersatz cinemas are grossing in excess of US$25,000 per screen per month at RMB10 per person showing second-run films. Cash flow-positive in 90 days, and basically the last 8 months of the year is pure profit.

Get On Board

Shawn Beilfuss at Asia Logistics Wrap notes that China’s government will be investing US$8 billion a year on railroads by 2010. Note that this figure does not include private investment, concessions, and other forms of non-governmental inputs. In other words, the opportunity represented by rail travel in China is at bare minimums equal to – if not much greater – than that of the Beijing Olympics in the same time frame. (One hopes the money is invested more wisely than in Shanghai’s MagLev white elephant.)

Only trains don’t generate the buzz like the Olympics. Or, as The Grouch said to me as I wrote this, “nobody cares about Chinese railroads because they don’t move Wall Street. The Olympics move Wall Street.”

And that, folks, is the real problem. If you spend all your time in China chasing PR opportunities, you miss your chance to actually build prosperous, profitable businesses.

Risk: Why I Now Get It

Against the Gods: The Remarkable Story of Risk, by Peter L. Bernstein, Wiley, 1998, 383 pages

This is one of those books that I put on my Amazon wish list something like five years ago, ordered about two years ago, and finally got a chance to get through it thanks to some abnormally regular travel over the last couple of months. Picking up a book about the world of finance is not something I normally do, if for no other reason than I buy books to learn about stuff rather than as a homeopathic cure for insomnia.

But author Peter Bernstein, a lifelong “quant” with superb credentials, rises above both his profession and the subject matter with the grace of a historian-storyteller, and makes the history of risk and risk management so powerfully engaging I found myself searching online for the back stories of some of his characters. In fact, at one point, I told Gizmo that as a result of the book, for the first time in my life I was interested in mathematics beyond simple spreadsheet functions.

Against the Gods is that good, and a command of the meaning of “risk” is probably no more important anywhere in the world than right here in China, where we live with uncertainty every day, regardless of your profession. Reading through the book and occasionally staring out my hotel room window at Mt. Fuji in the distance late in December, I realized that in China we are so accustomed to doing business amid great uncertainty that we come to take it for granted.

Which, I guess, is fine if you’re simply turning up the “squelch” knob on your mental radio to drown out the ongoing static and to keep yourself sane. Unfortunately, if you keep drowning out that static you wind up numbed to how bloody risky it is to do business of any kind here. That’s not good, especially if you’re putting your money into China, and arguably even more so if you’ve been charged to watch somebody else’s. Read Tim Clissold’s Mr. China, and you get what I mean.

Meantime, I’ve developed a taste for books about the history of the finance industry, and my order to Amazon last night included a couple of titles along those lines.

The First Sign of the Goopocalypse: With Great Remorse

In the Hutong
Doing uber-geek stuff
2120 hrs

So while I was offline for my weekly Shabbatical, The Google Boyz apparently admitted to their global peer group in Davos that the decision to censor Google in China was a “net negative.”

Wimps.

While Sergei and Larry swear they are not going to let perception change their business strategy, anybody in my business understands that perception is reality. While it may be ignored in the short term, as time passes Google is going to have to deal with their damaged reputation outside of China.

Inside of China, meanwhile, Google is being taken to the cleaners by Baidu.

Despite significant investments in China and recruiting some of the country’s best and brightest, at some point in the future Google will need to dispassionately review what it is costing them to do business here in reputation and greenbacks, and what it is earning them in market share and real business.

I still think that reckoning is coming later this year, and despite Google’s protests to the contrary, such a public admission on the part of its founders suggests they are already on the path.

WaPo: Blackmailing by Journalists is Seen as Frequent

In the Hutong
Spitting Mad
1428 hours

Edward Cody has done a genuine public service in his article in today’s Washington Post that calls attention to the problem of journalists (and I use the term with great license) in China who demand payment for their services – and their non-services.

The focus of the article is on a case where a Shenzhen reporter was blackmailing a local health clinic, threatening to write a damaging article if the clinic didn’t pay off. It alludes to the bigger problem – that Chinese journalists are used to supplementing their income with a stream of revenue from the subjects of their stories.

The Business of Black Journalism

For foreign businesses, especially those in the tech space, here is how the vicious cycle typically works:

1. You or your PR people want an article written about your new product, the Frodo SuperWidget 3000. You contact somewhere between 30 and 50 journalists, invite them to a press conference, hand them a bag with a press kit and an envelope for their taxi money. If you and your PR people are smart, there is just enough cash in the envelope to cover the reasonable cost of a taxi, maybe RMB 100. If, on the other hand, your PR people are either lazy, stupid, or incompetent, there will be several hundred RMB or more in the bag. That’s not taxi money, that’s a payoff.

2. The next week, one of the enterprising reporters from the press conference says he’ll do a cover story on the Frodo SuperWidget 3000, but he needs you to buy a full-page ad in each of the next 10 issues.

3. Some time later, the same reporter says he’d like to do a follow up story, and, because you don’t have anything new in the pipeline, you figure it would be good to do a follow-on. You’re concerned, of course – you can’t afford to cough up for more advertising. He says no problem, but since he’s going to be spending extra time on this, it would be helpful if you could cover his lost income at the paper. You come up with RMB 1,000, a veritable bargain, and the story comes out, and it’s superb. This continues for six months.

4. At the end of six months, the reporter calls you and says that his editor is furious that he’s been writing so much about the Frodo SuperWidget 3000 and nothing about the Gandalf XP88, a superior competing product. The editor is demanding an article comparing the two, and your machine is going to suffer. However, a modest payment of RMB 10,000 that the reporter can split with his editor will make the story go away. Hmm. A thousand bucks? Hell, you pay the agency more to write a single press release. Sure, that sounds fine.

5. A month or two later, another reporter from the same publication calls you and asks you to comment about a horrendously negative article both about your company and the “miserable” poor performance of the Frodo Superwidget 3000. In the course of the discussion, he suggests it might be possible to postpone the article, and in the meantime he sends you a copy. It’s nasty, but with just enough truth to keep him out of the courts. He calls your PR agency with an offer: RMB 15,000 and the article goes away. After much internal discussion, you figure it’s a bargain to avoid having to clean up afterward. You pay it.

Sauve qui peut

Now, you’re toast. By this point, word is getting around the industry that not only will you pay for positive stories, you’ll pay to keep negative stuff out of the news as well. Every bottom-feeder with a journalists name card that covers your industry is starting to call.

There’s only one way to avoid this:

Repeat after me:

“No matter what my PR people, my PR agency, or anyone else tells me, OUR COMPANY WILL NEVER PAY FOR COVERAGE, either directly or indirectly.”

Say it.

Live it.

Stick to it.

Or be prepared to spend ever-increasing sums of money buying off the jackals.

The Next Four Game-Changing Mobile Technologies

Edwards, Cliff and Moon Ihlwan, “Upward Mobility: Ultrafast networks and whizzy features are about to turn your cellphone into – well, your right arm,” BusinessWeek, December 4, 2006

I always worry about technology when I read about it in BusinessWeek, because I feel like this is one of those signals that a given innovation has hit its apogee on the hype meter.

In this case, however, I give the two authors credit for isolating four potential technologies that look set to significantly extend the number of things for which you can use a mobile phone. Well worth a read.

Dumping all of these cool features into a phone might sound like a good business plan to The Boys in Espoo, but frankly, I’d be happy if the big manufacturers could come up with user interfaces that actually made the features already on the phones more usable.

The iPhone is Not for China

In the Hutong
Writing a speech for tonight
1213 hrs.

I wasn’t going to write something about the iPhone in China.

I figured everybody looked at Apple’s much-anticipated little addition to the market for what Motorola’s Ed Zander calls “the device formerly known as the cell phone” and understood that iPhone was aimed squarely at the US, and maybe Japan and Europe.

I was wrong.

Apple Reality Distortion Field + China Hype = ?

In the lead article in his most recent newsletter Inside China Dispatch: Your Free Guide to Profiting from the China Miracle Taiwan-born/California raised hedge fund huckster Robert Hsu proves once again that a) China hype is alive and well, and b) having Chinese ancestry does not give you automatic insight into into doing business in the PRC.

The title of Mr. Hsu’s article is “Apple’s iPhone – the New Killer App in China.” He calls iPhone “the ULTIMATE China-friendly gizmo” (emphasis his.) He says this because the phone is central to the China technology experience, not the computer.

Fawlty Logic

This, ladies and gentlemen, is the perfect example of how an otherwise intelligent person can make a huge, expensive mistake in China.

Let’s take apart his logic:

Argument: Chinese love their cell phones
+
Argument: Chinese use their cell phones more than their computers
+
Argument: The iPhone is a cell phone that does computer-like things
=
Conclusion: The iPhone is going to be so big in China that Apple’s share price should double.

All of his arguments are correct. But his conclusion is dead wrong, for the simple reason that Mr. Hsu has either intentionally overlooked some important facts about the Chinese mobile phone market (which would make him despicable, so I will not accuse him of this), or he simply does not have the knowledge to make this call (pardon the pun.)

iPhone stays Home

Consider the following about the Apple and iPhone situation in China, and tell me whether you think iPhone is the “kiler app” for China, or whether Mr. Hsu is blowing bubbles.

Let’s start with the basics:

1. Asia is not iPhone’s priority market, and China is not even on the radar. Jobs himself noted that “Asia” won’t even see a launch of the iPhone until sometime in 2008. I think it’s a little early to assume that China will even see iPhone in that time frame, given that Japan and possibly Hong Kong, Singapore, and Australia look like better candidates for launches than China.

2. No iTunes in China: iPhone relies heavily on the iTunes music store and software ecosystem to deliver a major portion of its value to the user. Apple has not launched iTunes in China, has announced no plans to do so, and faces an extremely hesitant music industry given the looseness of IPR enforcement here (which of course is stupid on the industry’s part, but that’s a topic for another post.)

3. No Apple Store in China: Unless Apple starts opening Apple Stores in China, don’t count on iPhone being much more than an extreme niche product. When you look around the retail environment in China, it is rife with the kind if problems that drove Steve Jobs to open Apple Stores: retail salespeople are hard-pressed to learn enough about their product to make a good effort to sell them. The iPhone is going to need some selling, especially given that it would sell at a very high price, and as mobile manufacturers are discovering, the only way to sell high-end phones in China is to exercise as much control over the retail experience as possible. A lot of Motorola’s success is coming from branded stores, mini-stores, and counters where MOTO actually trains the sales staff. Frankly, a lot of Lenovo’s success in China has come from it’s own branded stores for much the same reason. No Apple stores, no success for iPhone in China.

4. No Handwriting Input: The iPhone doesn’t have a stylus or any other way of inputting non-roman text without using a roman keyboard. Don’t think that’s important? Go ask the guys selling PDAs in China if Chinese care for QWERTY input. They would give you the same answer that the sales figures do: Chinese prefer handwriting to QWERTY by a huge margin. In fact, well over half of the smartphones sold in China use handwriting recognition as the primary input, and the bestselling PDA in the market – Motorola’s MOTOMING, with a 50% market share – is handwriting input . RIM is running up against this problem with Blackberry, and to their credit they’re taking the issue seriously. But Steve Jobs hates the stylus. Gee, Steve. Maybe the whole world isn’t EXACTLY like you.

5. Carriers don’t like closed systems: Carriers in China don’t want to sell phones, but they damned sure want to specify a range of software and branded services on the handset as a part of their way of building a competitive barrier against the operator down the block. This is not insurmountable, but it’s going to take some effort for Apple to overcome this prejudice.

6. Try Selling a locked high-end phone in China: Steve Jobs has been emphatic about not selling any unlocked versions of the iPhone. Chinese users expect to be able to buy unlocked phones, popping SIM cards in and out at will depending on what number they’re using. This is especially the case for the kinds of people who can afford to buy an iPhone: we want to be able to pull out our China Mobile SIM card when we land in, say, Hong Kong, Singapore, Sydney, Manila, or wherever and insert a local SIM card. A locked phone here means significantly reduced functionality.

7. No Third Party Software or services: Chinese love being able to customize their phones and add or drop different games or other applications from operator-based download services or use value-added service providers. In a market like China where carriers depend on these services for a growing chunk of their income, neither operators nor subscribers are going to be terribly pleased with this restriction.

8. The Case of the Missing Features: Even if you assume the iPhone would sell for the same price in China and in the U.S. (no small assumption given the “China premium” I seem to wind up paying on the Apple gear I buy here), the phone would be unlocked and unsubsidized. If you take off the subsidy Cingular is surely placing on the phone in return for the two year contract, you’re looking at $699799 for the 8gb iPhone in China. Now, price is not a problem for Chinese users accustomed to paying up to RMB 6,000 for a handset, but by 2008 they’ll expect a few things on board that Apple doesn’t seem ready to deliver: the ability to shoot video, to use location-based services (i.e., GPS), broadcast or satellite TV, barcode and business-card readers, and the like.

I could easily go on and get more granular, but you get the point.

Steve Jobs, Irresistible Force or Immovable Object?

Now, none of the above represents an insurmountable obstacle: if Apple were to decide tomorrow that China was important to its future, every single one of the issues above could be overcome by some simple decisions at Apple in Cupertino. Of course, that would take some time, and by signaling it’s direction, Apple is ensuring that by the time it gets around to Asia generally and China specifically, it’s competitors will be ready and waiting. All of which means that Apple would have a lot more trouble turning China into a pot of gold than Mr. Hsu suggests.

Keep in mind that I say all of this as an unashamed Apple evangelist: I own three iPods and five Macs. I’m writing this on a MacBookPro and will post it on .Mac, the official host of Silicon Hutong and The Peking Review. I’ve owned Macs continuously for two decades, and my company’s entire IT budget this year – save an HP printer – will go straight to Apple. But it is precisely as a Mac partisan that I understand most clearly that Apple tends to treat China as a source of supply far more than a market to nurture and support. I keep hoping that this will change, and I am pollyannically optimistic that it will.

In the meantime, however, to paraphrase Doc Searles, the iPhone as it stands represents little more than a great opportunity for Motorola and Nokia in China.

Back to Our Protagonist

Again, I find it hard to believe that Mr. Hsu would knowingly discount any of the above, so I must believe that he is in fact unaware of the facts. One can certainly understand why. A quick perusal of his newsletter has him making investment recommendations in mobile phones (China Mobile), commodities (China Aluminum), precious metals (gold), energy, and education.

That’s a hell of a lot of ground to cover, and as most people in the research business in China will tell you, covering one industry here with any accuracy is hard enough these days. I wonder how anyone can cover a half dozen all at once from here in Beijing, much less from a base of operations 6,500 miles away from the action.

China: The Vietnam War for American Internet Businesses

In the Hutong
Dreaming of genuine broadband
1356 hrs

Accell Investments partner Jim Breyer interviewing Chris Larsen, founder and CEO of Prosper at the Stanford Entrepreneurial Thought Leaders lecture series.

Jim asks Chris about going international. Chris says only if it doesn’t take your eye off the ball at home.

Then Jim pops in with a bald statement.

“I hate to make blanket statements, but I will. Every single major Internet acquisition by a U.S. company in China has thus far failed. Now, that’s a remarkable statistic. There are some great US companies in the Internet business, and every one of them fails.”

Yep. That about sums it up.

What neither Jim no Chris dive bother to dive into is “why?”

Here is a simple yet frightening insight: after all of the American wealth destroyed in China’s Internet sector, these very smart guys running very successful businesses poke through the wreckage and have no idea what lessons to learn from the failures to date.

Do any of the Sand Hill crowd? Do any of the venture capitalists, private equity boys, or hedge fund heroes coming into this market have any better idea?

Hmm.

Book project, anyone?

Pottytech: Pimped-Out Commodes

In the Hutong
Waiting for Sundown
1438 hrs.

While I try to avoid topics of prurient interest, from time to time a topic comes along that begs to be addressed, if for no other reason than nobody else is watching.

During my recent soujourns in Japan, I was treated to many of that country’s interesting cultural delights, including singing ice cream servers at Coldstone Creamery, the world’s finest convenience stores, and the perpetual bowing. But the one that vexed me the most was Japan’s love of the mechanized commode.

Now, if you’re like me, there is something a little strange about Japanese potties – the little buttons and switches mystify me, and when I hear a series of mechanical noises upon seating myself, I always feel like I should be wearing a G-suit and a crash helmet. It’s a little bit freaky, and I tend not to linger over my normal reading material, choosing instead to conclude operations quickly and move along. I’m sure I’d get used to it after a while, but I guess the insight I take away is that in some parts of my life, I’m still a bit of a luddite.

(I say “a bit” because there are a few technological advances I prefer, including working plumbing, and a seat as opposed to a porcelain bombing target in the floor.)

So when a friend forwarded a link to a story out of Atlanta about a national plumbing products comany trying to “get hip” to Generation Y by giving away a “home entertainment toilet,” I immediately took issue.

Quite apart from the potential circulatory, orthopedic, and familial-harmony issues arising from spending long periods of time on a standard-issue commode, in my opinion this is an inappropriate use of technology and is poorly thought-out marketing. On the marketing side, a plumbing products company has no fear of losing market-share or mind-share to a substitutable product – why worry about being hip when, after all, you have a captive audience. Is there some sort of trend back in the U.S. that kids are giving up on commode use for some other means of waste disposal? I kind of doubt it.

So no points to the insecure executives in the toilet industry.

As far as the technology, frankly, technology is the answer when it elegantly solves a problem, or it makes a difficult process simpler. On that score, the Japanese are light-years ahead: electronically warmed seats that are comfy to sit on are a wonderful thing, and the remarkable way they integrate the bidet function into the commode is a much smarter use of technology, despite my own heebie-jeebies about using it.

If you’re like me, entertainment in the loo is not the challenge. There are other problems that demand a superior technology solution. One example that jumps readily to mind is the pathetic state of bathroom fans, especially here in China. When someone can use technology to come up with an inexpensive air circulation solution with the sucking power of a small turbojet, he or she will have done a true service.

Edelman Gives Up on Tracking Chinese Blogs

In the Hutong
Starting Spring Cleaning early
1816 hrs.

Edelman continues to provide superior comic relief, and proof that despite the impeding end of PR as we know it (EOPRAWKI) traditional public relations firms are not going gently into that good night.

Nearly eight months ago, Edelman announced through Steve Rubel’s Micro Persuasion blog that, because two thirds of the blogosphere spoke a different language than English – and that already 15% of the global discussion is in Chinese – Edelman saw it as critical that their global PR teams be able to listen to the conversations not only in English but in other local languages. They were teaming up with Technorati to fast-track the development of localized Technorati monitors in German, Italian, French, Korean, and Chinese.

After all, Rubel said, Edelman recognized that the world is flat.

Following effusive self-congratulation and huge hype around the initiative, we heard little for six months.

Now, on the eve of New Years, Rubel notes that, basically, China and Korea are too hard, so they are de-emphasizing (read “forgetting”) Korea and China, and focusing on Europe. Yeah, those double-bit character sets are a bitch, huh Steve?

More proof, if any were needed, that China is not for dilettantes, and the corporate communications crafts are no exception.

And more proof that Sam Flemming‘s CIC data is the only partner to go to when you want to track blogs, message boards, and BBS posts in China. (Edelman/Technorati 0, CIC Data 1).

None of this comes as a particular surprise. Edelman’s tail-twixt-hind-legs retreat from China’s blogosphere echoes for me their embarrassing screw-up with Wal*Mart and the failure of one of their teams when pitching to one of my clients to even identify a single blog of importance to my client. Richard Edelman and Steve Rubel talk a superior game.

But it’s all spin.

Why China is the Make or Break Market for the Digital Home

In the Hutong
Going through my latest Amazon order
1454 hrs.

Ron Enderle of ECT news did his year-ender piece “The Three Big Tech Battles of 2007,” informing us that the big battles this year will be for our the digital home, our pockets, and our laps. No rocket science, there, but I give him credit for filing the story at 0400 on New Year’s Day.

One thing Ron wrote that got me thinking was how the biggest obstacles to digital homes are not the widely varying approaches of the equipment manufacturers, but “the Recording Industry Association of America (RIAA), and the Motion Picture Association of America (MPAA) and the content owners that are so concerned iwth piracy they have almost made it impossible to create a solution that offers an experience that the market will find compelling.”

He’s right, of course, but in contemplating that conundrum my eyes were drawn to a single word in that sentence, repeated twice: “America.”

It would seem, therefore, that if you were a consumer electronics company and you wanted to build your digital home business, you’d go someplace where the RIAA and the MPAA are regarded for what they are – preachy lawyers hiding behind the fig leaf of an antiquated legal system, defending content owners who keep clicking their heels and wishing themselves back in 1985.

In other words, you’d come to China.

Not because China doesn’t have a copyright protection system – the recent judgement handed to Sohu is proof that copyright protection is actually starting to take effect – but because the system has not yet ossified to the point where it will be allowed to obstruct the development of an innovative electronics business.

So if the Digital Home has a chance to make it anywhere, I’d say it’s right here in China. Where else do you have an immense and rapidly growing base of consumers with:

1. A demonstrated preference for in-home and personal entertainment systems;
2. Ready access to a wide variety of recorded content delivered on media without any form of digital rights management;
3. A significant percentage of new home-owners home electronics system purchases;
4. A mobile culture that will support mobile viewing devices;
5. Some of the worst TV and radio options in the northern Hemisphere;
6. Few decent cinemas;
7. Tiny record stores with limited options; and
8. Plenty of time on their hands?

In other words, apart from wealthy college students in the US, China is your market.

So my prediction for 2007 – watch for the digital home wars to come alive in China, driven by the global players and by local companies pushing EVD as part of the solution.

Links

In the Hutong
Enjoying my use of the TortiseNet
1331 hrs.

Apologies – I’m being lazier about links than I usually am. The net is still so bloody slow it just doesn’t make sense to wrestle with it.

Give me a holler if you need a link to anything.

Asian Telecommunications is Broken

In the Hutong
Enjoying a journey back in time to the days of dial-up speeds
1313 hrs

In the wake of The Great Asian Internet Blackout of 2006, all of us living in the world’s most populous continent have discovered a fact known previously only to the cognoscienti of long-haul telecommunications: the Asian Internet is a dangerously fragile thing.

When the Internet was developed by DARPA some 40 years ago, it was created on the back of a highly developed continental telecommunications infrastructure that offered a wide range of possible ways to get data from one point to another. Internet protocols were designed to rout around damaged or jammed lines, finding the next best alternative until the chunk of data got through.

What is becoming apparent to me as a non-engineer is that when you use those approaches on a network topography that is less about interlocking webs of connections and more about a small number of really long wires, those mechanisms are seriously prone to failure. In other words, long-haul connectivity is still a massive vulnerability in the world’s data networks.

Last week’s incident was a clear signal that something is broken and needs to be fixed, and I’m not just talking about a handful of fiber optic cables in the Philippine Sea.

Asia’s Internet connections need a level of redundancy that a dozen years of frantic fiber-laying has been unable to provide. That’s not acceptable – the Internet is no longer an academic convenience or a kid’s toy – it is now a critical part of government, commerce, and telecommunications, and this level of vulnerability is not going to be tolerated.

It will not, however, be cheap to fix.

The questions that lay before all of us are a) how does this get fixed, b) how much will it cost, c) who will fix it, and d) who will pay for it.

I have no idea about the first three, but I’m pretty sure the answer to “d” will be “all of us.”

In the meantime, finding a solution is about to become a critical, consuming question (and a contingent liability) for companies like China Netcom, PCCW, China Telecom, Hutchinson, NTT, Chunghwa Telecom, SKT, and all of the major carriers in the region.

Update: Just saw Art Hutchinson’s post on the Mapping Strategy blog that notes how this whole incident underscores the strategic vulnerability of the PRC’s Internet to a wily information warfare campaign. A single minesweeper could take out China’s Internet. Boy, talk about an Achilles heel…

The Year of Living Nervously

Back in the Hutong
Trying to melt the snow with a Jedi mind trick
1224 hrs.

My rare quiet moments in Japan over the last couple of weeks were wrapped up simultaneously zoning out in front of the Discovery Channel (the only decent English-language programming the otherwise-fine Westin Tokyo offered its guests) and contemplating the year to come.

While watching a Discovery program on the testing of the Airbus A380 WhaleJet in the throes of auld lange syne, it occurred to me that 2006 was a pivotal year for two of the largest technology-driven firms in the world. Airbus and Microsoft both spent the year wrestling with make-or-break-the-business mega-projects (the A380 and Windows Vista, respectively) upon which the lives of people around the world will depend in the coming year.

Given the severe challenges of such extraordinarily complex projects, the very public missteps in their creation, the fact that both are coming to market behind schedule and over-budget, and the extreme pressure these circumstances have placed on the management of both firms, the unspoken question hanging above both products is whether they were, in the end, rushed out before they were ready.

Microsoft: Losing Customers since 1999

For Vista users, the question is probably academic. Microsoft has a long history of making early adopters its de-facto beta-testing force. I think we’ve all sort of reached the point where we expect Microsoft operating systems to ship with problems.

On the other hand, more than any other time in Microsoft’s recent history, Vista is being released to a growing crowd of skeptics. Genuine alternatives exist for servers (any of a dozen flavors of Linux, Xserve, etc.) and for desktops (OS X Tiger/Leopard, Ubuntu and its cousins) that together make up the most severe challenge Microsoft has faced since it launched Windows two decades ago.

No, Microsoft will not stop being the market leader overnight – there are just too many enterprises held captive by Windows-loyal system administrators and CTOs, and too many people who use computers who are willing to accept a mediocre desktop experience. But today, more than ever, there are a growing number of people who are ready to walk away.

Airbus: White Elephant with Wings

You just don’t have the kind of leeway with large passenger jet aircraft that you do with computer operating systems – the testing had better be done and all of the problems discovered and solved BEFORE the first consumer boards the plane.

Whether Airbus has actually managed to do all of that is literally a life-or-death question, for passengers and aircrews certainly but also for the company. Call me an optimist, I would bet that we’re not going to see these flying behemoths falling from the sky. What I wonder, however, is whether or not the A380 will be a commercial success, or whether they will wind up parked, wing-to-wing, at the various aircraft graveyards at desert airports around the American southwest, discarded for smaller planes less technically impressive but more commercially appropriate.

Make no mistake – 2007 will be a year of living nervously for both companies.