Archive for abril \30\+00:00 2009

O uso da Internet nas campanhas eleitorais deve ser livre? (Should the use of the Internet at the electoral campaigns in Brazil be free?)

abril 30, 2009

A partir da data de hoje estou moderando um debate sobre “Eleições na Internet” na Sala de Debates online do escritório político do Senador Jarbas Vasconcelos (PMDB/PE).

Não sei se é do conhecimento de todos, mas desde as eleições do ano passado para vereadores e prefeitos no Brasil, o Tribunal Superior Eleitoral restringiu a propaganda eleitoral às páginas dos candidatos.  Em tempos de Internet, com e-mails, blogs, tweets, e serviços como Orkut, Picasa, YouTube, será que esta restrição é algo que deve continuar?

Neste debate o argumento em disputa é: o uso da Internet nas campanhas eleitorais deve ser livre!  Para defender esta posição temos como convidado o Prof. Silvio Meira, do Centro de Informática da UFPE e do Centro de Estudos e Sistemas Avançados do Recife-CESAR, e para contrapor esta posição temos o Dr. Orson Lemos, Assessor-Chefe da Corregedoria do Tribunal Regional Eleitoral/PE.

Como o tema é da mais alta importância, convido a todos para dar seu voto e emitir, se desejar, um comentário.  A Sala de Debates está no site  ! 

Bom Debate!


Bretton Woods II and the RGE Monitor’s Newsletter (Bretton Woods II e a Newsletter do RGE Monitor)

abril 29, 2009

Eu costumo ler minhas newsletters econômicas e as guardo comigo para os trabalhos econômicos. No entanto, a de hoje do RGE Monitor, produzida pelo economista e Professor Nouriel Roubini, um dos poucos que anteciparam esta crise financeira que está aí, coloca um tema que já escrevi à respeito (ver o texto Bretton Woods II e a Fronteira Tecnológica Global- FTG 2.0), mas que até o momento não tinha visto ninguém discutindo como um dos fatores que contribuíram para a crise.

Eis que o Prof. Roubini resgata o tema e o coloca em discussão! Boa leitura!


RGE Monitor’s Newsletter

Greetings from RGE Monitor!

A few years back, before this crisis erupted, several economists were concerned about the sustainability of the large global imbalances fueled by the so-called Bretton Woods 2 (BW2) system. These economists recognized in the tendency of emerging (export-led) economies to manage their exchange rate systems the origin of large trade and current account surpluses that, via large foreign reserve accumulation, were financing the mirror of those surpluses, namely the large U.S. trade and current account deficits. These surpluses, primarily in several exports-led Asian economies, and also in oil producing countries, ballooned to extensive proportions in 2007 and 2008. The purchases of U.S. government bonds by these investors helped keep long-term interest rates low and led many investors to seek out high-yielding investments especially in some emerging markets.

Although we are not (yet) witnessing a U.S. dollar crisis, the Bretton Woods 2 system is still at the center of the debates on the origins of this crisis. Understanding the nature of this crisis is fundamental in order to understand what reforms need to be undertaken for this not to happen again, and to understand what the global economy will look like after this crisis. Although other factors played a part, it is hard to argue that the large global imbalances that arose in a few years ago had no role whatsoever in the current global synchronized recession. However, so far, global imbalances do not seem to be on even the long-term agenda of most of those trying to remake the global financial system.

Global imbalances are now starting to narrow though – and the current crisis is likely playing a role – as saving rates rise in the U.S. trade volumes fall on lower demand, expensive credit and weak commodity prices. The U.S. current account deficit has fallen from 6.6% at the end of 2005 to 3.7% at the end of 2008 and the IMF estimates that it will fall further to 2.8% of GDP in 2009. Many of the emerging economies that easily financed wide deficits are now being forced into consuming less given the lack of credit and in some cases currency devaluation that boosts the costs of imports. Meanwhile the fall in the price of oil and other commodities is shifting many oil exporters, some of the larger surplus nations, into deficit territory.

Is this the death of BW2? Can export-led growth countries increase consumption? Or are we going to see large imbalances in the global economy come back when the recovery will be in full swing? And would a permanent correction of global imbalances be contractionary? If surplus economies continue along a business as usual path, trying to stoke export demand rather than increasing domestic spending to boost consumption, it could increase deflationary pressures.
Fiscal and current account surpluses and foreign exchange reserves can be used to increase government spending on infrastructure and public services and boost consumption and investment, which might help unwind the global imbalances. In fact, fiscal stimulus spending being undertaken during the current downturn by surplus countries like China and the Middle-East will help increase their own domestic demand and also boost the exports of deficit countries. Governments with comfortable fiscal/external surpluses, commodity revenues or foreign exchange reserves, such the Asia-Pacific, GCC and Latam economies, Canada, Norway, Germany and Russia, have rightly increased stimulus spending in spite of easing exports and commodity prices recently. However, there are criticisms that such spending still fall short and are rather steered towards export firms than domestic demand which will only exacerbate global deflationary pressures. On the other hand, stimulus spending by deficit countries such as the U.S. and UK will only accentuate pressure on global fiscal deficits and global imbalances.

Some are still concerned that the unwinding of imbalances might be disorderly leading to swift exchange rate moves. However, it is also possible that this might be a gradual process, aided by a beefed-up IMF and other multilateral institutions which will avert balance of payments crises if not sharp contractions in many emerging economies especially in Eastern Europe.

Some imbalances seem to be persistent though. China’s surplus does not seem to be shrinking very much, largely because the import contraction including goods for re-export and cheaper commodities is more severe than that of exports. And those of Germany and Japan are expected to continue to be quite large also.

The consumption share of China’s GDP has fallen since the year 2000 although Chinese government investment could provide a boost in 2009. The IMF suggests that China’s current account surplus will continue to rise- albeit at a slower pace – in 2009, nearing $500 billion from almost $430 billion in 2008. Such a large current account surplus implies still large reciprocal deficits in some of China’s trading partners, likely the U.S. and several European countries.

As we noted in our recently released outlook, there is a risk that China’s fiscal stimulus might exacerbate production overcapacities, creating further deflationary pressures unless China is able to stimulate domestic demand, especially private consumption. Moreover, there is related risk that China’s extension of investment and credit expansion could defer China’s transition to a global economy in which the U.S. consumer consumes less. As it currently stands, China’s almost $600 billion fiscal stimulus has less than 10% dedicated to social welfare programs. Expanding this expenditure through increasing government expenditure on health care, increasing pension payments and unemployment benefits, could have a significant effect on boosting consumption particularly as it could reduce some of the households’ structural pressures to save. In the longer term, some tax policy changes, including the requirement of state owned enterprises to pay dividends and introduction of a value added tax, might also be supportive of consumption based growth. As detailed in Nouriel Roubini’s account of his trip to China, Chinese leaders are cognizant of the need to rebalance growth, meaning China may be better placed to do so than some of the export and investment-led advanced economies or the Asian tigers whose growth models are in question in the midst of the global export collapse.

So far, despite several months of hot money capital outflows, China seems to have increased its share of the safest U.S. assets especially treasury bills. Given the global export weakness, China may be forced to maintain its quasi dollar peg, which will likely involve a resumption of U.S. dollar asset purchases. Yet, Chinese concerns about the long-term value of its U.S. assets have increased. China has been diversifying its assets on the margins, increasing the share of gold (from a very low share of total assets) and loaning its foreign exchange to resource exporters. The Chinese central bank governor has suggested that over time the IMF’s SDR has a certain attraction as a reserve currency given the instabilities that have stemmed from the U.S. dollar’s reserve currency role.
Take a look at: Will China Keep Buying U.S. Assets? Shifting to Short-term Liquid Assets and Can Chinese Growth Really Be Driven By Consumption?

The severe impact of the global recession and export contraction on Asia’s growth and manufacturing output and employment loss might pave way for Asia to re-think its export-led growth model and change its source of growth away from exports towards domestic consumption. However, this might require a lot more political will since this growth model has nevertheless helped Asia attain higher per capita income, stronger economic growth and significant poverty reduction. Moreover, the structural changes required to change the growth model (move production from low-end manufacturing to high-end labor-intensive manufacturing and services to boost employment and incomes, improve social safety net, pension and health care systems, invest in skill training and R&D, and enhance intermediation of savings and credit access for firms by developing financial markets) all involve short-term costs with results only in the long-term, something that political leaders might be unwilling to trade. [See Box1 – Can Asia Move From an Export-Led to Domestic Demand-Led Growth Model? in RGE Monitor’s Q1 Update to the 2009 Global Economic Outlook.] On the other hand, it might be argued that Asia might continue to follow an export-led model even in the future to sustain growth and poverty reduction and at the same time use the presently available vast resources to boost safety net and cushion the economy and workers from any future global export downturn.

While policies to increase domestic demand might boost Asian imports and reduce current account surpluses, shrinking exports recently have in fact led imports to shrink at a faster pace than exports (given high import content of exports) thus keeping up the trade and current account surpluses in many Asian countries. Letting the exchange rate appreciate will also be challenging for Asia and will largely depend on China’s currency stance. In fact, many Asian countries started favoring an undervalued currency or at least stopped allowing appreciation recently as exports weakened and to maintain competitiveness vis-a-vis China. Asia’ stance will also be governed by the losses that the central banks will have to realize on their U.S. treasury holdings by letting their currencies appreciate. Moreover, any change in Asia’s growth model will be governed by the medium to long-term factors such as the pace of rise in the U.S. savings rate and whether it’s structural or cyclical in nature, and also the trends in global commodity, shipping and Asian labor costs going forward.

It is a different story with commodity exporters who as a whole are set to shift from surplus to deficit territory in 2009 given robust spending and much lower revenues. Unlike China, oil exporters were already contributing more to rebalancing in the last few years, with much of the incremental increase in revenues being spent or rather absorbed at home by massive projects and increased consumption. In fact, rather than generating surpluses, the current risks are that the economies of many oil exporters in the CIS, Africa and even some in the GCC could contract in 2009 on given the weaker hydrocarbon and non-hydrocarbon sector outlook.

Facilitated by past savings, many of these countries including Saudi Arabia, the UAE and Russia are conducting expansionary fiscal policies this year and will run significant fiscal deficits at an oil price below $50 a barrel. Moreover countries like the UAE, Saudi Arabia and others are expected to run current account deficits, financed by the sale of past savings. Meanwhile with many sovereign wealth funds and other government capital been deployed at home, there may be fewer foreign purchases. See Will Petrostates Have to Scale Back their Spending Sprees?

The eurozone’s largely balanced external position covers ample intra-EMU imbalances among eurozone countries. Current account dispersion reached from +8.4% in the Netherlands and 7% in Germany to –13.4% in Cyprus as of 2008. The European Commission notes that while large current account balances by themselves could merely be the expression of rational private sector choices, a comparison of real exchange rates (REER) with their benchmark “equilibrium” current accounts shows the existence of sizable real exchange rate misalignments. See Adjustment in EMU: Are Stabilizing or Diverging Forces At Work?

Decompositions of this kind gave rise to claims that Germany, in particular in its role as EMU’s ‘center’ economy, is engaging in beggar-thy-neighbor behavior by setting in motion a real competitive devaluation of its currency through falling unit labor costs. This makes a rebalancing of high deficit countries all the more challenging. Since a nominal devaluation is not an option within the EMU, high-deficit countries have no option but to deflate in real terms either through relatively higher productivity or consumption restraint against an already ambitious German benchmark. Take a look at: Spain Running A Current Account Deficit of 10% of GDP: Is a Sudden Stop A Real Possibility? And The Credit Crunch In the Eurozone: Is The Corporate Sector The Eurozone’s Weak Spot?

As reported in RGE’s Global Economic Outlook (January 2009), Germany is not exposed to over-indebted households and non-financial corporates to the same extent as Spain, Ireland or even France. However, as the current downturn makes painfully clear, balanced financial accounts provide no shield against an over-reliance on external conditions or undiversified specialization patterns. Bundesbank president Axel Weber recently made clear that Germany should try to break its dependence on exports as the mainstay of its economic growth, whereas Chancellor Angela Merkel argues that a strong industrial base and external competitiveness are valuable assets, especially for an ageing and shrinking population. In fact, “[export-reliance] is not something we even want to change.” Check out: Germany As Export Champion: Sign of Strength or Sign of Weakness?

Ultimately, the BW2 system of global imbalances has had far-reaching effects beyond the U.S. and Asia. Like the U.S., emerging markets in Eastern Europe were able to fund large current-account deficits in the recent era of cheap financing. In May 2007, Nouriel Roubini wrote: “The currency and economic policies of China and East Asia have contributed – among many other factors – to unsustainable global current account imbalances whose rebalancing now risks becoming disorderly rather than orderly.” This is certainly the case in Central and Eastern Europe (CEE), where current account deficits have been the norm and where the unwinding of such imbalances is raising concern that it could contribute to a regional financial crisis along the lines of 1997 in Asia.

The drying-up of capital inflows, amid the global financial turmoil, is necessitating a sharp adjustment in Eastern Europe’s external imbalances. These imbalances rival, and in some cases exceed, those in pre-crisis Asia – i.e. current account deficits in Southeast Asia from 1995-97 fell within the 3.0-8.5% of GDP range, while those in CEE were well over 10% of GDP in Romania, Bulgaria and the Baltics in 2008. A correction in the region’s imbalances is already underway via currency depreciation (in countries with flexible exchange rates) and via a sharp drop in domestic demand. Thus far, the IMF has stepped in with financial assistance in three EU newcomers – Hungary, Latvia and Romania – to smooth out the sharp drop-off in capital inflows and to avert a disorderly unwinding of external imbalances. These countries are unlikely to be the last to knock on the IMF’s door.

Fed study puts ideal interest rate at -5% (Estudo do Federal Reserve coloca taxa de juros ideal a -5%)

abril 28, 2009

Eu comentava esta possibilidade no dia de ontem, em reunião aqui no Recife no Porto Digital!

Matéria do Financial Times!


Fed study puts ideal interest rate at -5%
By Krishna Guha in Washington

Published: April 27 2009 03:00 | Last updated: April 27 2009 03:00

The ideal interest rate for the US economy in current conditions would be minus 5 per cent, according to internal analysis prepared for the Federal Reserve’s last policy meeting.

The analysis was based on a so-called Taylor-rule approach that estimates an appropriate interest rate based on unemployment and inflation.

A central bank cannot cut interest rates below zero. However, the staff research suggests the Fed should maintain unconventional policies that provide stimulus roughly equivalent to an interest rate of minus 5 per cent.

Fed staff separately estimated what size and type of unconventional operations, including asset purchases, might provide this level of stimulus. They suggested that the Fed should expand its asset purchases by even more than the $1,150bn (€885bn, £788bn) increase policymakers authorised at the last meeting, which included $300bn of Treasury purchases.

The assessment that the US central bank needs to provide stimulus equivalent to a substantially negative interest rate is unlikely to have changed ahead of this week’s policy meeting.

The Fed is not likely to embark on any substantial new programmes at this meeting, in large part because it will not have downgraded its economic forecasts since the last meeting. Indeed, Fed officials may see the risks to the economy as a little more balanced than they were in March, though policymakers probably still see these risks as overall weighted to the downside.

This could set the stage for a more detailed discussion of the framework that will ultimately govern the Fed’s exit strategy.

There is, though, a small but intriguing possibility that the Fed could follow the Bank of Canada in setting out an explicit timeframe over which it expects to keep short-term rates at virtually zero.

While this novel strategy is likely to at least provoke debate within the US central bank, which has shown itself willing to adopt measures first deployed elsewhere, many policymakers would probably be wary of adopting the Canadian approach, following their own unsatisfactory experience in providing guidance on interest rates after the dotcom bubble burst.

Others may feel the Canadian approach would be ineffective as it may not be seen as credibly binding the central bank’s future decisions.

Still, many Fed officials expect they may well keep rates near zero for another 18 months to two years and some might see value in making this more explicit.

Ben Bernanke, chairman, sees the massive expansion of bank reserves caused by the Fed’s unconventional operations as already providing a way to assure the market that the Fed will not be in a position to raise rates for quite some time to come.

The last meeting saw the Fed buy long-term treasuries for the first time in decades. The large initial impact of the move on markets is no longer visible, but officials think the policy was reasonably successful.

Previous staff analysis suggested the $300bn purchase would reduce the yield on 10-year treasuries by 25-35 basis points, and officials think the rate today is about this much lower than it would have been if they had not started buying.

Further purchases are possible, particularly if the Fed again downgrades its economic forecasts. The staff analysis comparing unconventional operations to interest rate cuts suggests more might be needed anyway.

However, policymakers are likely to watch how financial conditions respond to the already-authorised interventions before deciding whether to step up much further.

Online advertising expenditure ‘rising despite economic downturn’ (Gasto de propaganda online subindo apesar da baixa econômica)

abril 28, 2009

Post do blog!

Online advertising expenditure ‘rising despite economic downturn’
Monday 27th April 2009
Online advertising expenditure 'rising despite economic downturn'

The amount of money spent on web-based direct marketing is set to rise over the course of this year, according to new figures.

Research featured in the European Interactive Advertising Association’s (EIAA’s) Internet Ad Barometer found that 70 per cent of marketers claim their budgets are rising this year.

It was also found that money used for online promotions is generally being reallocated from platforms including TV, newspapers and magazines.

Alison Fennah, executive director of the EIAA, said online is “coming into its own” as firms increase their focus on return on investment.

She added: “Market conditions are tough, yet online is continuing to innovate and emerging formats such as mobile advertising and online video advertising look set to become big players in the next few years as brands see the benefit of cross-platform marketing campaigns.”

The publication of the report has come after figures from ZenithOptimedia found that the value of advertising budgets is set to fall by 6.9 per cent.ADNFCR-898-ID-19141127-ADNFCR

Interactive advertising expected to explode (Propaganda interativa é esperada explodir)

abril 28, 2009

Post do blog!

Interactive advertising expected to explode

Written on
April 27th 2009
by Edward Barrera  |

hispeed.jpgADOTAS — Paid search clicks might be down so far this year, but pockets of good news for online advertising seems to be popping up here and there.

While U.S. retailers’ online sales rose 11 percent on average compared to the same period a year ago, Citi Investment Research projects that US retail e-commerce sales will grow 4.4 percent in 2009 to $141 billion—and jump to 16.5 percent growth in 2010. Video advertising is predicted to generate $1 Billion by 2011, and according to Forrester Research, overall Interactive advertising is heading for growth over the next seven years.

Market Vox says that Forrester predicts interactive online advertising, display, email, mobile, search, and social media, will experience a 17 percent compound annual growth rate, totaling almost $55 billion in spending over the next seven years.

Five key online advertising channels will see the following upswing:

social media – 34 percent.
mobile – 27 percent.
display – 17 percent.
search – 15 percent.
email – 11 percent.

Now obviously social media and mobile marketing have the largest growth because there is so much room for it to grow, and the opposite reason could be given for search and email because they have owned the market for so long. (Though I am surprised at the display number).

As for search, according to Internet Retailer, during the first quarter of 2009, the average volume of paid search clicks was down 9 percent compared with Q1 2008. According to research from NetElixir, an online advertising management firm, the average cost per click was down 7 percent year over year. On the bright side, the average click-through rate was up though 7.5 percent in first quarter of 2009 versus Q1 2008, and the average search ad conversion rate was up 5 percent.

Microsoft seeks partnership with Yahoo (Microsoft busca parceria com Yahoo)

abril 27, 2009

É preciso prestar mais atenção aos movimentos da Microsoft. O que está sendo reportado abaixo (vindo hoje do é mais um sinal de que algo está sendo preaprado.


Microsoft seeks partnership with Yahoo



Published: Monday, 27 Apr 2009

Yahoo and Microsoft are in talks again, but this time it‘s a partnership deal on the table rather than a proposed acquisition, according to reports.

The chief Executive of Yahoo, Ms Carol Bartz and the Chief Executive of Microsoft, Mr. Steve Ballmer had a face-to-face meeting last week, as part of the negotiations begun in the past few weeks.

The report cites a variety of sources, saying that the talks between Ballmer and Bartz and other Executives on both sides are preliminary and wide ranging. The proposed tie-up involves looking at the various commercial opportunities that a search and advertising partnership would present.

The talks may come as a surprise to some, given that Microsoft seems to have been pushing ahead with its own search plans under the Kumo codename.

According to the report, the firm poached Yahoo‘s head of Engineering for the Search and Advertising Technology Group, Qi Lu, to lead its own search and online advertising efforts.

A tie-up between the two would make sense, given Google‘s continued dominance in the search and online advertising markets.

Google currently has around 60 per cent of the market, with Yahoo some way off in second place with 20 per cent and Microsoft even further behind.

Bartz has repeatedly sent out signals that she would not be pressured into selling off parts of Yahoo‘s business.

Commentators had generally agreed that the firm shows more direction and purpose with Bartz in charge, although it still has problems, and could be amenable to a deal, given the ground it still has to make up to challenge Google.

The SSRN Blog (O Blog da SSRN)

abril 26, 2009

A Social Science Research Network- SSRN agora tem um blog:

Vida longa à SSRN!

Manufacturing: More Output With Fewer Workers (Manufatura: Mais Produto com menos Trabalhadores)

abril 26, 2009

Mais um oportuno post de hoje do blog do Prof. Mark Perry!


Manufacturing: More Output With Fewer Workers


Don Boudreaux in the Pittsburgh Tribune-Review:

Many of you protectionists hyperventilate about America’s alleged loss of manufacturing prowess. Are you aware that your worries on this front arise solely because you confuse manufacturing jobs with manufacturing output? Manufacturing jobs, as a percentage of all jobs in America, are indeed declining (see top chart above). And you hysterically interpret this fact as somehow proving that foreign producers are undermining America’s economy.

But are you aware that America’s manufacturing output today is near its all-time high (see middle chart above)? Are you aware also that America is by far the world’s largest exporter of manufactured goods?

Are you aware that the reason manufacturing jobs are declining as a share of all jobs has far more to do with increased productivity of American industry — that is, increased strength of American industry — than it has to do with increased foreign trade (see bottom chart above)? Manufacturing jobs are being lost to technology and improved efficiencies. Do you think that this trend is undesirable?

MP: The middle chart above shows U.S. Manufacturing Output (Gross Value) from
The Federal Reserve, and U.S. Manufacturing Payroll Employment from the BLS (via Economagic), monthly from 1972 through March 2009. In the last 37 years, manufacturing output in real dollars has more than doubled, while manufacturing employment has dropped by about 35%, resulting in an almost tripling of the amount of manufacturing output per manufacturing worker in the U.S., from less than $80,000 in 1972 to almost $240,000 per worker today (bottom chart).

Apple and the iPhone

abril 25, 2009

Comparação entre Microsoft e Apple que o Prof. Mark Perry colocou no seu blog hoje!

Saturday, April 25, 2009

Apple and the iPhone


1. Apple (+40%) vs. S&P 500 (-40%) over the last two years (see chart above).

2. Market Capitalization: Microsoft vs. Apple 1990-2009 (see chart above), via Scott Grannis, who writes, “As recently as a little over 9 years ago Microsoft had a market cap of $586 billion, while Apple’s was a mere $17 billion. MSFT investors have since lost $421 billion, while AAPL investors have gained $95 billion. In my first post on this subject last October, I suggested AAPL could surpass MSFT’s market cap within a few years. One reader said it would happen in less than a year. He has a good chance of being right.”
3. Of the major companies that announced their earnings yesterday, two of them, AT&T and Apple, beat Wall Street estimates largely thanks to a single product: The iPhone. We’re approaching the two year birthday of the device, and it still remains one of the hottest items out there. Ladies and gentleman, the state of the iPhone is strong.
All told, Apple has sold 21 million iPhones since its launch. Perhaps just a drop in the bucket compared to overall Nokia sales, but remember, Apple was not in the mobile business at all before 2007. And aside from just sales figures, in the past two years, it has revolutionized the industry. That is, of course, a cliche. But in this case, it’s true.
Apple’s already has over 35,000 apps — and in a few short hours, there will have been one billion apps downloaded in just 9 months (including the one below).
Source: TechCrunch

Down the tubes (Para dentro dos tubos)

abril 24, 2009

Como o próprio sub-título desta matéria de The Economist diz, a Internet Television está migrando do computador para a sala de estar. A competição é dura, e os atuais incumbentes estão fazendo tudo o que podem, entrincheirando-se, para não assumir o óbvio: as tecnologias vão invadir os tubos de tv das salas de estar!

Down the tubes

Apr 24th 2009

Internet television moves from the computer to the living room


IN THE land of free enterprise and the home of discount shopping, there can sometimes be an appalling lack of competition. High-speed access to the internet is one. Cable television is another. The reason is that in America cable-television companies, which provide a lot of the high-speed access, do not want their customers to cancel their contracts and watch television over the internet instead. Yet a growing number of people are poised to do just that.

At your correspondent’s home-from-home in Japan, he can get broadband at 160 megabits a second from his local cable company for Y6,000 ($60) a month. Compare that with broadband prices demanded by cable companies in America. As they slowly roll out the latest version of their transmission technology, called DOCSIS 3, Comcast and Cablevision want up to $140 a month for a stingy 50 megabits a second. Meanwhile, Time Warner Cable remains in the dark ages with its Road Runner service dribbling out three megabits a second (if you are lucky) for $35 a month.


Selling broadband connections to the web is the most profitable business for cable companies. They also have better—and cheaper—technology than the phone companies and mobile carriers for doing so. It costs only around $100 a home for the cable companies to upgrade their networks to the latest DOCSIS 3 standard—and that includes providing each customer with a new high-speed modem.

Wiring a neighbourhood with optical fibre—as phone companies like Verizon are doing—costs more than $1,500 a home. In the few places where it can supply the service, Verizon charges $165 a month for 50 megabits a second. In short, the cable companies could easily use their cost advantage to grab a bigger chunk of the lucrative broadband market.

But they are not doing so because they are afraid of the consequences. Cable-television companies make money by selling packages of channels. The average American household pays $700 a year for over 100 channels of cable television but watches no more than 15. Most would welcome the chance to buy only those channels they want to watch, rather than pay for expensive packages of programming they are largely not interested in.

They would prefer greater variety, too—something the internet offers in abundance. A surprising amount of video is available free from websites like Hulu and YouTube, or for a modest fee from iTunes, Netflix Watch Instantly and Amazon Video on Demand. Prices can be as little as a dollar for a television episode or as much as $24 for a new release of a film in high-definition. But the best thing about watching television over the internet is you pay only for what you want—and a lot of the programming is free if you are prepared to wait for a day or so after it has been broadcast.

Consumers’ new-found freedom to choose has struck fear into the hearts of the cable companies. They have been trying to slow internet television’s steady march into the living room by rolling out DOCSIS 3 at a snail’s pace and then stinging customers for its services. Another favourite trick has been to cap the amount of data that can be downloaded, or to charge extortionately by the megabyte.

Yet the measures to suffocate internet television being taken by the cable companies may already be too late. A torrent of innovative start-ups, not seen since the dotcom mania of a decade ago, is flooding the market with technology for supplying internet television to the living room.

Even television makers are getting into the act. The latest digital sets from LG, Panasonic, Samsung, Sharp, Sony and Vizio come with Ethernet sockets ready to be connected to the internet, so they can download video from YouTube, Netflix, Amazon and the like.

The video-game industry is also cashing in on the internet-television boom. Microsoft’s Xbox 360 can now stream films and television shows from Netflix. Likewise, you can rent films and television episodes using a Sony PS3 game console. Nintendo and Sony have also done deals with YouTube to gain access to its huge repository of web video. Meanwhile, set-top boxes such as Apple TV, Roku, TiVo and Vudu are all jockeying to become the television set’s primary gateway to the internet.

Eventually, all these external services will be built into the television set’s motherboard. In the meantime, the specialised boxes do a better job of finding and fetching video from the internet.

At present, the slickest is unquestionably the $149 box from Vudu, which can access over 7,000 films (three times more than Apple TV) as well as zillions of television shows, YouTube offerings and podcasts. With its roomy 250 gigabyte hard-drive, it can even provide high-definition films in full 1080p glory, just like a Blu-ray disc player.

At $100, the Roku box lacks a hard-drive but is simplicity itself to set up and use, while offering a treasure trove of content thanks to arrangements with Netflix and Amazon. The $229 Apple TV box is, in effect, an over-sized iPod that connects the television set to the internet to provide access to 2,500 films and 30,000 television episodes for a fee.

An interesting newcomer is the SageTV HD Theater. This works like a TiVo video recorder with an integrated programme guide, but minus the subscription fee. Plugged into a television, the little Sage box plays high-definition videos, photos or music stored on a computer, or downloaded directly from YouTube, Hulu or dozens of other sources of free content. Your correspondent has finally laid his hands on one, and will be testing it over the next week or two.

He is also building an open-source web-television box of his own, based on a Shuttle PC. The tiny computer is to be loaded with the Ubuntu version of the free Linux operating system and will run an open-source application called Boxee. Although it is still under development, Boxee has unnerved lots of internet-television providers. Hulu has even demanded that its content be removed from Boxee’s offerings. But the open-source community that has taken Boxee to its heart is far too smart to let Hulu spoil the fun.

The interesting thing about Boxee is the way it combines the social networking of a Twitter with the power of a browser like Firefox to funnel internet content recommended by friends to your television screen. As it does so, it bypasses aggregators like Hulu that seek to make money from inserting advertising slots into content downloaded from their sites. Your correspondent thinks Boxee will be one of the most disruptive things to happen to television in ages—and not before time.

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