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Can Amazon’s Project Kuiper satellite compete?

You might be forgiven for thinking that Amazon’s Project Kuiper doesn’t have much hope of competing with SpaceX in the low Earth orbit satellite broadband business.

Amazon is preparing to launch hundreds of low earth orbit satellites to host its planned Project Kuiper network.

Its rival, SpaceX, which operates the Starlink LEO satellite broadband network has been in business for six months.

By the time Project Kuiper is operational, Starlink will have had the market to itself for four years.

Starlink has first mover advantage

That’s a significant first mover advantage. In sales terms it means SpaceX can pick all the low-hanging fruit.

When Amazon starts to sell its service, many, even most, people who need or want satellite broadband will have committed to Starlink. That commitment is stronger than choosing a terrestrial broadband service.

Satellite broadband users need to buy an expensive base station before they can connect. While Starlink subsidises the cost of its base station hardware, New Zealand customer still have to pay $1040 upfront.

That amounts to a commitment bond. Customers who might otherwise consider switching to Project Kuiper will want to recover the value of their initial Starlink hardware investment before moving.

The upfront hardware has the effect of making LEO satellite broadband customers ‘sticky’.

That will be a challenge for Amazon.

Amazon customer relations

Amazon has one clear advantage over SpaceX. It has existing customer relationships to leverage.

In 2022, there are more than 200 million people worldwide signed to Amazon Prime. This includes the company’s online video and music services. Bundling these services with satellite broadband could catapult Project Kuiper towards breakeven.

Likewise, Amazon has relationships through AWS with millions of enterprise customers. Many of these will be candidates for satellite broadband.

There is a second potential advantage: Project Kuiper plans to use smaller, cheaper satellites than Starlink. Satellite broadband users tend to send far less data than they receive. So Amazon will combine the up and down antennae into a single unit.

This should translate into cost savings that may be passed onto customers.

We don’t know anything about Amazon’s user terminal yet, but the company says it will be smaller and lighter than the Starlink unit. It hints that it will be cheaper.

Based on available information, it looks as if Starlink and Project Kuiper will offer the same speeds and latency.

Life will be harder for the other companies planning similar LEO satellite broadband networks. They are further behind Amazon and won’t have the existing relationships to break into an established market.

 

 

Download Weekly – IT spending boom, Amazon’s LEOs

New Zealand tech spending is set to climb ten percent in 2022 – Amazon moves on LEO satellite network plans. 

Gartner: IT spending to hit NZ$15.9 billion this year

Gartner’s latest forecast for the New Zealand information technology sector projects spending to reach NZ$15.9 billion in 2022. That’s up almost ten (9.7) percent on last year.

IT Services will be the largest spending category, accounting for $4.6 billion. It will up ten percent from $4.2 billion in 2021.

Until last year, Communications Services was the largest sector, but it has experienced low growth relative to the wider IT sector in recent years. Gartner forecasts a 2.4 percent rise in 2022 taking the total to $4.3 billion.

Software will be the fastest growing sector. Gartner forecasts spending will increase 15 percent to $3.7 billion.

In 2021, New Zealand spending on information technology climbed 9.7 percent which was in line with worldwide growth of 9.5 percent. This year spending here will rise by the same amount, 9.7 percent, while growth in the worldwide spend will fall back to four percent.

Gartner says the war in Ukraine is not expected to have a direct impact on worldwide IT spending. The areas of activity that are seeing the clearest international growth include analytics, cloud computing, security and creating a seamless customer experience.

New Zealand IT Spending Forecast (Millions of New Zealand Dollars)

 

2021 Spending

2021

Growth (%)

2022 Spending

2022

Growth (%)

Data Center Systems

579

1.2%

629

8.6%

Software

3,171

16.0%

3,650

15.1%

Devices

2,473

26.3%

2,842

14.9%

IT Services

4,176

7.0%

4,592

10.0%

Communications Services

4,161

1.2%

4,260

2.4%

Overall IT

14,561

9.65%

15,973

9.7%

Source: Gartner (April 2022)


Amazon readies Project Kuiper LEO satellite launches

Amazon has signed agreements with three aerospace companies as prepares to launch its constellation of 3236 LEO satellites.

Project Kuiper is Amazon’s plan to deliver fast, affordable broadband to rural areas underserved by existing networks. A document on Amazon’s website suggests the network will focus on customers in the US.

The network is running about four years behind its rival SpaceX and its Starlink service. That started commercial operations last year and now serves customers in rural New Zealand.

Although there are plans for other LEO networks, they will be even further behind. SpaceX has its own launch capacity and an ability to launch more often than any other space company.

Project Kuiper has earmarked almost all remaining non-SpaceX launch capacity for the next three or four years leaving any rival with limited options to get satellites into orbit. One potential LEO operator, OneWeb, has a launch agreement with SpaceX.

Amazon says it will have two prototype satellites in orbit later this year. It will talk about operational dates after testing its technology.


Aussie regulator examines mobile tower sell-offs

Later this year The Australian Competition and Consumer Commission will hold two consultations on that country’s mobile tower market. The watchdog will examine how a change of tower ownership alters access questions. While Australia is further along the path of tower sell-offs than New Zealand, the ACCC’s move hints at issues the Commerce Commission may consider examining in the future.


Trustpower retail business to join Mercury Energy in May

In a statement to the NZX, Trustpower says it has now met all the substantial conditions for the sale of its retail operation including the telecoms business to Mercury Energy. It expects settlement to take place on May 1. The retail operation has around 234,000 customers.


Worldwide telecom capex boom is slowing

Dell’Oro Group’s latest report says there are signs the boom in telecommunications capex for both wireless and fixed line networks is coming to an end. Last year saw a nine percent year on year growth compared with the previous year. In 2022 the report forecasts capex will increase three percent before “tapering off” in 2023 and 2024.


In other news…

IDC reports spending on compute and storage infrastructure products for cloud infrastructure, including dedicated and shared environments, increased 13.5 percent year over year in the fourth quarter of 2021.

It doesn’t sound plausible, but US investment bank Piper Sandler says 72 percent of US teens own Apple AirPods. The same report claims 87 percent own iPhones and 30 percent have an Apple Watch. It may pay to take that company’s research with a pinch of salt.

 


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Dealing with a monopsony

America’s regulators watching big tech firms have shifted their focus from monopoly to monopsony.

Monopolies remain a problem. They are when a single company dominates a market from a sales point of view.

Customers have no choice who to buy from. That can lead to monopolies abusing their power and charging high prices.

One buyer to rule them all

A monopsony is where there is a single buyer. Their customers have no choice who they can sell to. Monopsonists can decide what they pay for a product or service.

In the case of technology, monopsonic transactions tend to be at the wholesale level.

Apple is, in effect, the only buyer of apps for iPhones or iPads. Any company wanting to reach customers has to go through Apple’s App Store.

That’s not the whole story. An app developer can try selling direct to customers, it won’t get far.

A similar monopsony exists with Google’s Play Store. While there are alternative stores selling Android apps, Google dominates.

Amazon monopsony

In the same way, Amazon has the ability to decide what it pays to companies wanting to sell products through its online store.

Google and Facebook have control over publishers who want to sell online advertising.

As always with these cases, the powers are not absolute. Sellers have alternatives, but they are rarely practical. A company not selling iOS apps through the App Store will sell a fraction of what its rivals selling through the App Store might achieve.

It’s a new approach for American regulators looking at the tech sector.

There’s a counter argument from the tech giants.

App Store wealth

Take Apple, its App Store has created untold wealth for many software developers who might otherwise have struggled to find customers.

At the same time, it creates value for consumers. People can buy apps from Apple’s store confident that they meet basic standards. Having a central point of sales simplifies buying and finding suitable apps. And there’s a case to be made this process means that apps are more affordable than they might otherwise be.

Developers complain about a lack of flexibility, Apple’s rules can seem rigid and, at times, arbitrary.

The other complaint is that Apple takes a hefty 30 percent cut from every transaction. There is no question this creates a huge revenue stream for Apple. In 2020 the store took $64 billion.

Yet this is in line with the margins software developers offered retail sales back when software was sold in boxes on store shelves. And at that time there was a distributor cut on top of the sales margin.

Alexa, Amazon’s smart speaker, not winning friends

If you got an Amazon Echo smart speaker this Christmas, there’s a good chance you lost interest in the device and the Alexa voice technology before the holidays ended.

At Bloomberg, Priya Anand writes:

Each holiday season since 2015, Amazon.com has counted on selling a lot of its Alexa voice-controlled smart speakers. For almost as long, it has known that the devices have had trouble holding customers’ attention even into January. 
According to internal data, there have been years when 15 to 25 percent of new Alexa users were no longer active in their second week with the device.
Only two-thirds of Echo owners use their device every week. That figure drops to around a half for the number of Echo Dot owners who use their device every week.

Smart speaker growth phase is over

While Amazon smart speaker sales have been strong in recent years, the same internal data suggest the growth phase is over. Amazon estimates speaker sales will grow at 1.2 percent over the next few years.

There are two reasons smart speakers have not been the smash hit product that companies like Amazon expected.

First, people worry about their privacy with always-on speakers listening to every conversation.

This is not a vague, unfounded suspicion. Stories have emerged of Amazon employees listening to private conversations between people close to smart speakers.

Amazon’s high profile missteps in this area that confirm people’s fears.

Meanwhile it feels creepy to have a computer eavesdrop on a conversation only to suggest a range of Amazon products based on what was said.

Surveillance capitalism is less welcome than Amazon assumes.

Less useful than buyers expect

The second reason people turn away from smart speakers is they aren’t as useful as the companies pushing the technology would have you think.

Everyone who has dabbled with smart speakers1 will have noticed devices wrongly interpreting speech as commands. The technology is clever, but it is far from foolproof.

Moreover, people don’t do much with their smart speakers. Many play music and do nothing else. Amazon’s Echo speakers are not always the best devices for doing that. They can be unreliable, your experience may be different.

Others might set a timer while they boil eggs or tell the speaker to turn on the lights.

Early days

Yes, it is early days. And yes, other smart speaker brands follow different paths.

Take, say, Apple’s HomePod Mini. It is not likely to suggest grocery purchases because it overheard you rowing with your significant other.

Part of the problem is the smart speaker hardware format. Computers, phones and tablets come with screens and input methods, including keyboards and touch, that let you explore possibilities.

Exploration is a tiresome process with a smart speaker.

Did you know?

Amazon tried getting Alexa to suggest functions to owners: “Did you know you can do this with Alexa?”

For many users the initial reaction was “how do I turn the suggestions off?”

There are cases where these constant, nagging suggestions have caused users to unplug the device.

Big plans for Alexa

Amazon had big plans for Alexa. It still does. Or would do if customers would only do what they are told.

Smart speakers are at the stealth end of surveillance capitalism. They record what people say, collect information, build more complex profiles, then channel lucrative sales leads back to Amazon to help the company sell more and more products.

Or as the company might express that: Alexa helps deepen relationships with customers.

More than a speaker

Alexa is about more than smart speakers. It comes pre-installed on other devices. Many new headphones and earbuds come with technology to enable Alexa or its rival voice systems.

At Stacy on IoT, Kevin C. Tofel reports Amazon planned to flood the market with low-cost speakers at a loss, then make money when people use the device to buy from the company.

That’s an established business model. Amazon is rich enough to lose a bundle on seeding speakers that never stay in use long enough to channel shoppers to its online checkouts.

The fact that when that happens, Alexa then nags the customer to leave a review on the Amazon website will accelerate Echo speaker unplugging.

Who wins most from Alexa?

Like the suggestions mentioned earlier, this is all about benefiting Amazon, not the customer.

We know Amazon’s model works, but it puts sales at the centre of its operations, not customer needs.

Over time this gets tiresome.

A different business model

In contrast Apple operates a different business model. For a start, it doesn’t lose money every time someone buys a speaker.

Apple’s goal is to sell hardware and wrap you further into its walled garden where you can buy lucrative value-added services.

Amazon has the resources and motivation to fix these smart speaker problems, yet it is hard to know where it can go in the short term. It finds abusing that business model is far too tempting and that tests customers’ patience with the technology.

Privacy

Alexa is one part of Amazon’s assault on privacy. The company’s Ring home surveillance system and the Halo wearable band are as intrusive. They are the thin end of the wedge. Amazon plans to sell drones and autonomous surveillance robots.

These tools would be bad enough if their sole purpose was to build a fuller profile and sell you Amazon products and services.

Yet Amazon is sloppy about security. That should not come as a surprise. The company doesn’t value privacy, hence it doesn’t waste resources on protecting something it considers worthless.

Compromised

Criminals regularly break into Amazon Ring cameras. It would be prudent to consider the possibility the other surveillance products are either compromised or soon will be.

Amazon works hard to lobby against privacy legislation around the world. It has vast resources to pour into this campaign.

All of which goes to explain why Amazon persists with Alexa and its Echo smart speakers despite losing money on sales and customers turning away from the technology.

*Normally a blog post like this attracts plenty of “I’m happy with…” comments from readers. Feel free to add yours. *


  1. The same logic applies to phone or PC-based versions of the technology. That would be Apple’s Siri or Google Assistant. Microsoft no longer pushes Cortana but that now turns up in the company’s enterprise products and services. ↩︎

Amazon’s anti-privacy campaign is a business plan

Writing at Privacy News Online, Glyn Moody says online retailer Amazon has successfully lobbied against privacy protections.

Moody sourced some of his material from a Reuters report: Amazon wages secret war on Americans’ privacy, documents show.

The company plans to use its Alexa speakers and other surveillance technologies to collect vast amounts of data on millions of customers. Amazon also uses fear to bully policymakers and the press in order to shut down resistance to its intrusive data gathering.

... they were shocked by the quantity and granularity of the information Amazon held about them. For example, one reporter found that Amazon held more than 90,000 recordings that Alexa devices had made of family members since 2017.

Alexa devices were also able to access data from iPhones and other non-Amazon systems, including one reporter’s iPhone calendar entries, complete with the names of the people he was to contact.

This exposes the central problem with Amazon’s Alexa systems: most people – even relatively savvy ones – don’t realize how much personal data the devices gather.

Key to addressing the data protection issues this raises is to make people aware, and to give them the choice as to whether to allow that information to be gathered constantly. The Reuters investigation reveals that the main thrust of Amazon’s lobbying activities was stopping that happening.

It’s a damning and worrying story.

There are already 64 million people in the US using Amazon speakers. The company sells them at a loss because the data they gather is so valuable. The idea is to capture an ever increasing amount of personal data on customers to build complete profiles of what they might want and think.

For now that is all about selling to them through Amazon’s retail operation, although there is potential to do so much more with this kind of data.

When the internet disappears 

Kate Lindsay writes about The internet that disappears. at Embedded. She says all that talk about the internet being forever is wrong.

Instead: “…It’s on more of like a 10-year cycle. It’s constantly upgrading and migrating in ways that are incompatible with past content, leaving broken links and error pages in its wake. In other instances, the sites simply shutter, or become so layered over that finding your own footprint is impossible…“.

This squares with my experience.

I have written close to a thousand stories for the New Zealand Herald over the years. Many of them are lost to posterity. That’s not the whole truth, I have copies on my hard drive. But readers won’t see them. They’ve gone.

It’s worse at other sites I’ve written for. Although, it can be uneven. I sometimes stumble across stories I wrote 40 years ago before the internet was even a thing.

And there are examples like this published at the Sydney Morning Herald 14 years ago: Keeping in synch. That link may not last much longer. As an aside, I wrote this when I had been back living and working in New Zealand for four years. The SMH kept my column going for ages after I move to Auckland.

Some of the disappearing internet is deliberate. I’ve done this myself.

Over the last year I culled some out of date stories on this site. Not because there was anything wrong with them, they were about topics that are no longer relevant, about technologies or products that have gone to the great recycle bin in the sky. Who cares today about Evernote‘s plan to reduce its free service and push users to paid plans?

Again the original copy sites in my laptop’s storage and in my cloud back-ups, but it’s not available for the world to marvel at.

In hindsight I wish I had never culled the material. It’s not on a par with destroying or rewriting history, but it is a crime against something.

The other way this affects me is with link rot. That’s when I link to a story elsewhere from this site only for the link to vanish. About once a month I check for broken links. There are always some. A few more linked stories have disappeared.

I’m guilty of this myself. There are links elsewhere online to the stories I’ve culled.

There’s a lot of advice from search engine optimisation types for publishers, in a modest way I’m the publisher of this site, to cull old material. Apparently it detracts from the more up to date material. I’ve no idea if this is true, but it could explain why so much vanishes without a trace.