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Weekly Column

The Buck Stops Where?: Not with the CEO at HP it seems, he's out of the loop

Status: [CLOSED]
By Robert X. Cringely

Life is tough right now in the corporate offices of Hewlett-Packard, where tracking boardroom news leaks has led to a broad range of resignations, firings, possible criminal indictments, and public relations implosions. HP was always a pragmatic engineering-driven company, and behavior like this is about as far as you can get from the HP Way. I knew both Bill Hewlett and Dave Packard and neither would have stood for this nonsense, primarily because it makes no business sense at all. But I should have seen it coming.

In the summer of 2005 I was approached by HP to make a film for the dedication of the restored garage on Addison Avenue in Palo Alto where the company was founded back in 1939. Compiled mainly from library footage including high definition green screen interviews shot with Hewlett and Packard, the idea was to reinforce in the wake of Carly Fiorina's downfall as CEO that the HP Way was still fully in force, that the company was committed to excellence. Imagine something like the last 10 minutes of The Natural, complete with the Randy Newman musical score.

"Then you'll have to get the new guy (CEO Mark Hurd) to say that," I told the folks from HP. "You'll have to get him to appear in the film telling employees and customers that the company is returning to its core values."

They wouldn't do it.

The folks from HP charged with doing this film had no idea whether or not the new CEO (who was about to start firing thousands of people) actually embraced the HP Way. Nor were they going to risk asking him. All of which makes me wonder how deep has been the company's real commitment to these values.

Not very deep, it seems, based on the current boardroom soap opera. Hurd may have been in the center of it for all I know, but based on the behavior I cite above, he could just as easily have been kept in the dark. And if he was kept in the dark, you have to wonder how effective a CEO can be leading a company he can't even communicate with.

Oh, and I didn't get the job making the film.

"Unlimited" Broadband
How much Internet service is "unlimited" Internet service? If you are a user of Verizon Wireless's Broadband Access wireless Internet service, "unlimited" means five gigabytes per month or less. The company is quite specific in its advertisements that the service is for unlimited e-mail, web surfing, and corporate intranet use, but not for downloading music or videos or running servers.

That sounds fair, I guess, but what happens if you go over your five gigs per month (a figure that is not published anywhere)? You get a letter saying that you've gone over your "unlimited" allotment and had better cut back or risk being booted from the system. Even then you aren't told that you've gone over five gigs, just that you've been using too much.

If you continue to use too much bandwidth, your account will be cancelled and you will be charged the $175 early termination fee.

Now here's the part of this story I find especially interesting: Verizon doesn't look at packets or protocols to determine if you are improperly using bandwidth, they just look at total bytes transferred. If you go over five gigs THEY ASSUME YOU ARE BREAKING THE RULES and cancel your account. There is no way to appeal this decision, even if all you were doing was precisely within Verizon's own definition of "unlimited." Verizon's position is that using more than five gigs per month is IMPOSSIBLE without violating their terms of service.

Though I haven't been booted from the Verizon network, I am a user of their wireless Internet product, which I find much easier than searching for airport hotspots. But I tend to use Verizon's service as it was intended, which is while I am on the road for a few days per month, not continuously. Nor am I a big downloader of music or videos, but I do get a lot of e-mail and I wondered how my usage fit Verizon's hardened assumptions.

So I ran a two-day experiment. I installed a bandwidth monitor (it is in this week's links) on my Windows notebook and forced myself to use that machine exclusively for two days. The monitor reports bandwidth usage on a per-day basis, so I divided five gigabytes by 30 days and came up with a target of 166 megabytes per day. And my two-day average was... 187 megabytes.

I told you I get a lot of e-mail.

So if I were to use my "unlimited" Verizon account for more than the few days per month I presently do, the company would no doubt cancel my account.

Here is what's wrong with Verizon's policy. First, Verizon isn't being honest. If they'd just say that "unlimited" really means five gigs, people would have a target to stay under. Second, as I proved above, it is possible -- even easy -- to go over the limits Verizon sees as impossible to exceed without downloading the wrong kinds of material. Third, if Verizon is going to call the service "unlimited," they are going to have to allow customers some way to appeal bad decisions by Verizon's security department. The problem here is that the folks who turn you off aren't the folks who answer your tech questions. In fact, the people who cancel your account are in the security department and don't know how to answer your questions, they just know how to accuse their customers of downloading pornography.

If Verizon customers knew there was a limit and the client application gave them some idea how close to that limit they were getting, then people could easily cut back, saving both the system and their customer status. But that's not the way it is done. Maybe Verizon doesn't want us to know that they really have no idea whether or not you are downloading music or videos. Whatever the reason, it is heavy-handed. If the entire point is to not compromise the sacred marketing word "unlimited" in Verizon ads, well that's just dumb.

Why Zune?
Finally, some people would say that Microsoft's decision to launch its Zune music player against Apple's iPod is dumb too, but I am not among that group of people. On the face of it, smart people are asking why Microsoft would sell a product that isn't likely to EVER be profitable? Microsoft can't afford not to do it.

Zune goes on sale November 14 for $249, the same price as a 30 gig iPod. But Zune has WiFi and a larger screen than the iPod, so it has to be costing more to make and delivering less (if any) profit to Redmond. As I wrote two weeks ago, Apple does iTunes to sell iPods, so Microsoft is going to have a hard time turning that model on its head and making its profit from selling music. Ain't gonna happen.

Microsoft has to compete with the iPod near-monopoly as well as all those new iPod models, many of which are substantially cheaper than Zune. And if, as reported, Zune is incompatible with Microsoft's own "Plays for Sure" DRM technology, well that hurts Microsoft content partners, too.

So why are they even going ahead with the thing, a product Microsoft admits it is selling at a loss and on which it expects to lose money for at least a couple years?

The whole point of Zune is to stay in the game and to position Microsoft for future success. Remember, it takes Microsoft three tries to get almost anything right, so maybe this time they are actually counting on that. But if Zune is an eventual financial success for Redmond, it won't be through hardware OR music sales, but probably through location-based marketing.

Here's the thinking of the folks in Microsoft's xBox division that is doing the Zune. Remember, these aren't normal Microsoft people. They believe we'll all carry some mobile device and it will eventually be only ONE mobile device, so there will be a consolidation of features among phones, cameras, media players, and navigation devices. We're seeing this already.

Advertising will support a lot of content over time. You folks don't want to pay for NerdTV, for example, so why should you want to pay for music? It's the broadcast radio/TV model that worked well for 80 years. But this time the effect will be amplified by social networking and GPS location information. A device that is always on and knows where it is can be a powerful advertising device -- so powerful that it might be worth giving away for free.

Is Apple even the competition in this model? Microsoft doesn't think so. Microsoft sees Google as the competition and possibly Amazon. But if Microsoft can direct the advertising and control the transactions, heck they'll own the market, which could be VERY important if people stop buying desktop computers.

But before any of this can happen -- and this is very important -- Microsoft needs to get a lot of devices out there. Hence the Zune. They can't afford not to do it.

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