Transcript Latin America and the Next Revolution in Information and

Peter Cowhey
Dean, School of International Relations and Pacific Studies
UC San Diego
[email protected]
• 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
Leverage:
Superior performance in
integrated processors
yields highest MIPS
integrated with systems
software
Interfaces not
transparent
Bundled packages
of products for
enterprises
Results in
dominance in:
• Integrated
hardware systems
• Mainframe
software
• Integrated
Services
Microsoft Dominance
Leverage:
DOS/Windows becomes
the standard desktop
environment
Interfaces not
transparent
Then offer a package
of related
applications and
specialized software
to large enterprises
Results in
dominance in:
• Applications
(Office)
• Enterprise Server
software
• Collaborative
software tools for
enterprises
AT&T Dominance Before 1984
Leverage:
Control of Local
Transmission Network
Interface is
transparent, but
rivals cannot rent
local network on
competitive price
and performance
terms
Local
Network
"leverage point"
Results in
dominance in:
• Long Distance
Services
• Enterprise
services
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
1 Computing and
terminals – the
“cheap revolution”
in computing and
terminal equipment
costs and
performance
2
Communications
networks – growing
bandwidth at
plunging prices
• “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
• 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
The Cheap Revolution
Performance per Dollar Spent
Optical Fiber
(bits per second)
(Doubling time 9 Months)
Data Storage
(bits per
square inch)
(Doubling
time 12
Months)
Silicon Computer Chips
(Number of Transistors)
(Doubling time 18 Months)
0
Scientific American, January 2001
1
2
3
Number of Years
4
5
How the Modular Revolution
Evolved – Policy & 2nd Two Stages
3
Software and Web
Services
• 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
4
Content
(Digital Media) –
YouTube
• 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)
Why Winners Don’t Take All in the New
Era
Figure 1. Percentage of OS-Specific (Generally Windows)
vs. OS-Agnostic Applications
Figure 2. Number of OS-Specific (Generally Windows)
vs. OS-Agnostic Applications in Our Model Organization
(Installed Base)
Figure 3. Application Development Mix — New Applications
Source: Gartner (August 2006)
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 ondemand 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 for
Latin 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)
$ Millions
Format
Category
Region
Paid Listing
LA
APAC
EMEA
North America
Paid Listing Total
Display ads
LA
APAC
EMEA
North America
Display ads Total
Local search (incl. Internet YP)
Digital
LA
APAC
EMEA
North America
Local search (incl. Internet YP)
Total
Classified
LA
APAC
EMEA
North America
Classified Total
CGM ads
LA
APAC
EMEA
North America
CGM ads Total
Mobile advertising
Mobile advertising Total
Digital Total
Source: PwC, analyst reports
LA
APAC
EMEA
North America
2006
2007
2008
2009
2010
101
2,041
3,266
6,748
12,156
81
1,632
2,611
5,396
9,720
51
1,038
1,662
3,433
134
2,648
4,241
8,312
15,335
104
2,042
3,270
6,410
11,825
70
1,385
2,218
4,347
173
3,383
5,376
10,097
19,029
127
2,483
3,946
7,412
13,969
92
1,791
2,847
5,347
215
4,172
6,492
11,748
22,627
154
2,983
4,642
8,400
16,180
117
2,270
3,532
6,392
259
4,989
7,530
13,306
26,084
179
3,451
5,209
9,204
18,043
145
2,786
4,205
7,431
6,185
8,019
10,076
12,311
14,567
40
810
1,295
2,677
52
1,034
1,656
3,246
66
1,287
2,046
3,842
81
1,576
2,453
4,439
97
1,875
2,831
5,002
4,822
5,989
7,241
8,550
9,806
11
213
340
703
1,266
9
187
299
618
1,112
17
337
540
1,058
1,953
19
373
597
1,170
2,158
28
537
853
1,602
3,020
31
606
962
1,808
3,407
44
845
1,315
2,379
4,582
47
908
1,413
2,556
4,924
68
1,302
1,965
3,472
6,807
64
1,242
1,874
3,311
6,491
35,262
45,279
56,741
69,173
81,798
The Real Digital Divide: Latin America and the
Digital Advertising Market (by format, category
and region) (Page 2 of 2)
$ Millions
Format
Category
Region
2006
2007
2008
2009
2010
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
LA
TV network advertising
North America
TV network advertising Total
LA
Newspaper Advertising
Physical Total
Source: PwC, analyst reports
92,163
202,075
4,097
4,371
4,646
4,920
24,832
27,138
28,009
29,636
EMEA
38,846
40,138
41,502
42,918
44,369
47,575
47,827
48,321
48,347
49,016
113,942
116,894
121,332
123,920
127,941
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
54,296
56,874
59,869
62,353
64,541
LA
Out of home ads Total
86,420
187,576
3,821
Magazine Advertising Total
Radio and out-of-home
advertising
84,528
180,720
23,700
Newspaper Advertising Total
Magazine Advertising
77,619
165,312
APAC
North America
Physical
75,000
157,918
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
21,173
22,736
24,559
26,137
27,340
347,329
361,816
386,480
399,986
421,897
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”
Cement Sensor
Source: Greg McRae, MIT and ANL
An Innovation Vision for the Future:
Towards Gigapixel Displays
SuperHD
StreamingVideo
Gigapixel
Wall Paper
Augmented
Reality
1 GigaPixel x 3 Bytes/pixel x 8 bits/byte x 30 frames/sec ~ 1 Terabit/sec!
Source: Jason Leigh, EVL, UIC
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)
1,800
1,500
1,200
900
600
300
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Hardware
Software
Source: WITSA's 2004, Digital Planet: The Global Information Economy.
Services
Communications