Apple & Cars

So the latest rumor this week is that Apple is going to develop a car. They’re hiring automotive designers and engineers. Yes, it would be totally awesome if Apple came out with a car, and it kicked GM/Ford/Chrysler’s asses the same way the iPhone kicked Microsoft and Blackberry’s asses.

But can Apple fix any of the issues that currently face electric vehicles? Or will they just be a slightly different $100,000 Tesla, splitting the market that is not really that big in the first place?

Batteries

As I’ve discussed before, the batteries in the new iPhones rival the batteries in Tesla’s Model S in some aspects, but fall behind in others. The six critical battery parameters are:

  • Cycle life: number of full battery charge/discharge cycles to 80% of its original capacity
  • Volumetric Energy Density: number of watt-hours of energy the battery can store per unit volume, usually measured in watt-hours per liter (Wh/l)
  • Gravimetric Energy Density: number of watt-hours of energy the battery can store per unit of mass, usually measured in watt-hours per kilogram (Wh/kg)
  • Power: the ability of the battery to generate or accept power, measured using rate-capacity defined as the C-rate – 1C is charging or discharging the battery in one hour, 0.5C is two hours, 2C is 30 minutes, and 10C is 6 minutes
  • Safety: how much torture can the battery withstand before it becomes a danger to the people around it
  • Cost: the price per usable kWh of battery capacity for the vehicle

Assuming the 1,000 cycle life promise Apple made when it went to sealed batteries is still true, that would provide for a long lifetime (for a 200 mile EV, 1,000 cycles to 80% yields about 180,000 miles on the pack before it only gets about 160 miles per charge).

The iPhone 6 and 6 Plus battery’s energy densities are quite good – 250Wh/kg and 575 Wh/l. The battery cells in the Tesla Model S are around 250Wh/kg and 700Wh/l. This means Apple’s equivalent batteries would weight the same, but take up 22% more space – this is a difficult thing to overcome, so Apple would need to be very creative on how they can come up with more space to store the battery pack relative to Tesla’s battery pack.

The power output of the current iPhone batteries is unknown, rate capacity generally isn’t an issue for batteries in small consumer electronics. The iPhone and iPad batteries can usually recharge in about 1 to 2 hours, which indicates a C-rate of 1C. Batteries for EVs generally need a C-rate of 2C to support fast chargings and highway speeds in all conditions (rain, snow, headwinds, etc.).

Apple’s batteries are generally safe. The lithium polymer cells are a lot safer than the NCA chemistry used in the Tesla Model S.

Finally cost, Apple and Tesla produce roughly on the same scale now (see below) but Tesla has a much more aggressive ramp planned for battery production than Apple does. And the lead time on building new battery manufacturing capacity is pretty long.

Quantities, Oh God The Mass Quantities, of Batteries

Next I wanted to figure out how many kWh of batteries Apple sold in 2014. This is pretty difficult because Apple’s phone models have different cell sizes: 5/5S/5C varied between 5.45 and 5.96Wh, the 6 has 6.91Wh, the 6 Plus has 11.1Wh. So beyond that, the mix of how many phones sold is unknown, so thats another estimation we have to factor in.

Lets assume that for the first three quarters of 2014 (no iPhone 6/6 Plus), the average battery size per phone sold was 5.7Wh, and in the final quarter the average battery size was 6.5Wh. In the first three quarters they sold 118M iPhones, and in the insane fourth quarter they sold about 75M iPhones (mix of 5-series and 6-series phones). This results in 672 MWh of batteries sold in the first three quarters and 487 MWh of cells sold in the final quarter, for an iPhone total of 1,159 MWh of cells, or just over a gigawatt-hour of energy storage devices.

The iPad sold 63.35M units. We can judge from the average selling price of around $420, that a lot more iPad minis are being sold than traditional, larger iPads. If we assume that the mix is 4 mini iPads to 1 large iPad (either last gen or current gen), then the average battery capacity was 25Wh, which is a total of 1,583 MWh of batteries.

This brings us to an approximate total of 2.75 GWh of battery cells produced by Apple for just the iPad and iPhone line. This doesn’t include the batteries used in the iPod or in Mac laptops. Estimating the mixes and volumes of laptops and iPods is beyond my expertise at this moment.

Meanwhile, Tesla sold 31,600 or so cars. If the average unit battery capacity was 75kWh (3 85kWh units for every 2 60kWh units sold), that would yield about 2,370 MWh, or 2.37 gigawatt-hours. For comparison, the Gigafactory will be able to produce 35 GWh of batteries.

It is safe to say that Apple uses more batteries than Tesla in 2014. However, that may change in 2015, as Tesla will try to grow their overall production by 70%, increasing their total annual usage to about 4 gigawatt-hours. Apple, with iPad sales flattening or even declining, likely will not see a 45% increase in battery cell usage to keep up with Tesla.

(the logistics and supply chain people at Apple really do the Lord’s work, hats off to them)

Design & Engineering

I have no doubt Apple’s design team would have a field day with an Apple-mobile. I just hope its as practical as it is beautiful. One of the recent thoughts that has caught my attention is that the value in the car itself is changing. Thirty years ago, 0% of the value of a car came from the software. As the cars got better, engine computers became more advanced, and the infotainment systems in cars became more prevalent, the value of software has increased, from 10% to 40% over the next 10 years as cars learn how to drive themselves, manage their internal components, and become more “smart” in general.

This puts companies like Apple and Google ahead of the game, with their fleets of software engineers and development know-how. Ford, GM, and everyone else has to play catch-up. Can they offer sufficient amounts of money and incentives to lure developers away from places like Apple and Google, where they could invent and develop things to change the world, to Ford, where they will make another difficult-to-use in-car infotainment system.

One interesting aspect would be Apple deciding to take advantage of Tesla’s offer to release all their patents. They can use the same skateboard battery module design and powertrain to underpin the car, with a new design and Apple flair to the rest of the car.

Actually Manufacturing the Car

Tesla’s most recent quarterly conference call brought out the bears – they’re burning cash like crazy on capital expenditures in order to ramp up for an annual run rate of 2,000 cars a week (100,000 per year) as well as building the Gigafactory that could make cells for 500,000 cars a year in 2020, plus batteries for renewable energy storage.

However, all this spending – $5 billion on a battery factory and $2B or so more on its factories in California, is just petty cash for Apple. Apple currently has a $177B cash pile, of which $150B is net of debt. Apple could easily invest $5B in the facilities to build the batteries and the cars – its not a matter of whether they have the cash, its if its the right way to spend that money.

More Importantly, Supporting the Car

The genius bar is usually pretty good about customer service (I haven’t been in a while, knock on wood), even if the lines are horribly long. But how does that translate to getting your Apple EV fixed? Most Apple Stores are in malls, not a place you can drive your car into to get fixed. So what does Apple do? If they go with automotive franchises, they lose their exacting control over the process. Beyond that, they run into the same problem as Tesla with franchises – it’ll be multiple brands under one roof since they will be a small-time player to begin with, and its always more profitable for the dealer to sell a higher maintenance gasoline car compared to a low-maintenance Apple EV because dealers make their money on service, not on new car sales.

It would make a lot of sense for Apple to partner with Tesla on the supercharger network, and infuse a boatload of cash to expand it to support the number of Apple EVs made. Here there are a lot of brand synergies between Apple and Tesla.

But What’s the Sustainable Competitive Advantage?

Apple would only be thinking about becoming a car manufacturer (because eventually it will be more than one car – it’ll be a line of cars) unless it thought it could bring something to the table that all the other companies out there (Ford, GM, Toyota) can’t, and that it would have a long term sustainable advantage. They aren’t trying to be like Elon Musk, who just wants to advance EVs and save the planet from carbon poisoning.

Design? Apple has impeccable design under Jony Ive. The Model S has great design, but lacks luxury in many ways that show its newness to the car industry (the seats, the small visor), and those are being fixed, but it will take a while. Apple will likely have some of these issues out of the gate too, but they would likely be fixed within the first few iterations.

Batteries? Could Apple be working on engineering and developing its own batteries? Not likely. As I illustrated above, Apple ships a tremendous amount of batteries every year. Is it enough to rely on the battery industry at large to continue to innovate in the battery space? Maybe not, but battery research is remarkably difficult – the annual improvement rate is only 7-8% and big breakthroughs are very rare, even if the scientific papers stack up to the ceiling. If Apple has something up it sleve to differentiate itself like working, mass-producible solid-state batteries that offer 700Wh/kg and 1300Wh/l, it would be a coup in the portable consumer electronics and EV worlds – phones as thin as 15 playing cards, cars that can go 400 miles without recharging. But this is very unlikely (I really hope I’m wrong but I doubt it).

Integration? This is always where Apple shines. Apple isn’t generally the first to move (they weren’t first with contactless payments) but they are usually the first to get it right from top to bottom, in a way that the user can understand. The difficulty here is that cars are a mature industry, very mature. Its easy to say that just about every company could do in-car computers better, even Tesla. Apple will show everyone how its done. But after that, and people understand the new paradigms for how people interact with cars, then what? This knowledge and innovation diffuses throughout the industry and becomes general knowledge in the same way physical keyboards went away and capacitive touch screens became the norm.

Self Driving? The individual automakers aren’t doing all the heavy lifting individually, automotive suppliers like Bosch and startups like Mobile Eye are the ones coming up with the hardware and software to solve pieces of the autonomous driving puzzle. Apple could either redo that work or simply integrate parts from suppliers into a self driving system like Tesla is. It’s nothing terribly novel or unique.

Verdict

The problem to be solved with Electric Vehicles is batteries – weight, volume, range, cycle life and safety. All five dimensions need to be improved, plus the cost will need to come down dramatically before the general public adopts EVs over gasoline cars (especially in the current gas price climate).

What isn’t a problem is design or features. Sure, design can be improved and refined, but a better designed car won’t bring out customers in droves. An electric car fits very nicely with Apple’s sustainability goals – working to have a cleaner environment, but there won’t be that much of a market given the current limitations on batteries. This is the problem Fisker had – brilliant design but they didn’t solve the battery problem in a new or novel way – and now they’re out of business.

Its difficult from the outside at this early stage to determine why Apple would want to develop a car, along with the immense investment that would need to accompany development and production if it had honest aspirations of being a worldwide automotive manufacturer. For Apple to enter the market, there needs to be some long-term competitive advantage here. I just don’t see it right now – just designing a better looking or more user friendly EV doesn’t solve the major pain points consumers have right now.

The problems with EVs are battery range, recharging time, and battery weight and volume. And Apple isn’t more or less likely to be the company with a group of electrochemists that discover a breakthrough than any other company, large or small, doing battery research today. It is for primarily that reason that I think Apple would be a fool to enter the automotive space, specifically EVs, in the short term. As cars transform from machery we operate to automated consumer electronics on wheels, there is a space for Apple and others who want to move in that line of products, but that transition is 10-15 years away.

Broadband & Title II

The core problem at the center of today’s broadband debate: laying down fiber, or even hybrid fiber/coax or 75Mbps DSL, to everyone’s house is extremely capital intensive. It leads to mono/duopoly conditions because the more competitors in the market equals more ways you split revenue pie equals marginal investment is less attractive.

So what do we do? We can heavily regulate these monopolies/duopoly (Title II) but that doesn’t fix the lack of competition. Prices will still be high because you only have one or two companies providing “Broadband” (25/3) in a given geographical area. There is no incentive to price compete when there will never be new entrants & no substitute products (wireless broadband wont cut it). So we’ll be stuck with high priced broadband that doesn’t block Netflix, that’s OK for now, but doesn’t address long term competitive issues.

We could let local PUC/Corporation Commissions regulate price for broadband, same way they do investor-owned utilities. But lets step back and look at this from a least-regulation position. Mono/duopolies shouldn’t be allowed to do whatever they want. So lets try and get rid of the fact they’re monopolies in the first place.

How do we increase competition? Government can’t force laborers to work cheaper to install the fiber, nor can they make the materials cheaper, so capital costs remain high. If we force companies like Comcast or Verizon (I-ISPs) to open up their lines to competitors (C-ISPs), it will never be an even field. Comcast or Verizon will always slant things to benefit them, in pricing or response time to fix issues, and run C-ISPs out of business. You think Comcast treats their own customers bad now? Imagine being a customer of a C-ISP using Comcast’s pipes.

We need a company to lay fiber that will resell transport but not compete with its customers (the C-ISPs). A municipal agency (govt) that owns the fiber and maintains it would be a good option. Better than your city/county maintaining roads because its a dedicated agency and the money coming in from the C-ISPs stays in the agency for upgrades and improvements (the digital highway trust fund cannot be raided to pay for other things). Limited scope by govt charter, regulated by the state to prevent scope creep. One mission, one goal of building 21st century roads. The agency has a fee structure for (flat + per Mbit + per Mbit/sec) companies who want to sell access. Companies are free to add value (alarm systems, television, phone, etc.). The net neutrality issues go away because of the high degree of competition – if company A slows down Netflix, switch to B, C, D or E.

If we put this plan in motion, existing ISPs try to run other companies out of business. We need regulatory help to prevent that. The optics get difficult, “XXXX is responsible for your higher bills!” they’ll say, but ultimately its to prevent anti-competitive behavior by the large incumbents. Without it, incumbents will wage a price war longer than the government and the competitive ISPs can sustain, which would spell doom for the entire program.

Leaving AT&T – for either Verizon or T-Mobile

So I’ve decided that after 17 years, I’ve had it with AT&T and their now slower-than-Sprint LTE speeds in Las Vegas. So when the iPhone 6s comes out this fall, I’m jumping ship. So who should I switch to? Verizon is the gold standard for cellular networks, but it also has the golden price tag. But, with T-Mobile’s fastest data speeds and John Legere’s promises that they’ll have coverage nearly equal to Verizon by the end of 2015, they’ve become a contender. Like all things, it comes down to money. AT&T has decided that they’re going to increase their dividend by 4c/year per share, while cutting CapEx (how much they spend on capital expenditures, from new towers and equipment to spectrum acquisitions).

On top of the price for service and a single line for T-Mobile (or adding a second line to my fiancee’s Verizon plan), there is also the cost of upgrading to a new phone every year. Previously with AT&T, I was able to use other family member’s upgrades. But that wont be happening in either case.

Figuring out which plan is cheapest for me is way more difficult than it should be. I’ve got at least four scenarios: with Verizon, either traditional subsidy with paying to upgrade the phone every 12 months (paying for a device in full every other year), their Edge program which now requires 75% of the device to be paid off before I can trade it in for a new one; T-Mobile Jump/installment plan or purchasing the device outright. Purchasing the device outright on Verizon is a horrible deal – they still charge you the full $40/mo (which includes a roughly $15-25/mo subsidy that you aren’t using) even though you bought your phone.

T-Mobile

Going with T-Mobile’s Jump plan, its $27.08/mo for the device and $10 for the mandatory Jump insurance ($175 deductible). Already we’re up to $37.08/mo. You also have to pay $99 upfront for the 64GB device, as well as the sales tax on the full amount ($60), so we’re up to $160 in up-front costs and $37.08 per month. With the $60mo data plan, the total annual cost is $1,324.96. With the Jump plan I get to trade my phone in for a new one (plus $160) every 12 months.

Buying the device outright, the base price of the 64GB iPhone is $750 plus tax, about $810 in my area. I upgrade my phone every year, so that’s 12 months of usage and depreciation. If I can sell my year-old phone for about $4001, that leaves me on the hook for at least $410. To make things more equal between the Jump plan and this option, lets add in AppleCare+ on the purchased iPhone, $99 to cover the phone against accidental damage ($79 deductible). With the $60mo data plan, the total annual cost comes to $1,229, or $95.96 less than the Jump plan, plus a much lower deductible in case something were to go wrong.

Verizon

Verizon’s subsidy plan means paying $323 up front for the 64GB device every other year (on subsidy) and $810 ($750 + tax) up front every other year (not upgrade eligible), but being able to sell the phone every year for around $400. Purchasing AppleCare+ would be an extra $99 per year. This works out to an average of $166.50 per year for the hardware. The monthly line access would be $40, and the marginal cost over my fiancee’s data plan is $30, so the total cost runs about $1,105.50 per year (higher in some years, lower in others).

Verizon’s Edge plan is a worse deal. While you don’t pay anything up front other than tax ($60), the monthly device payment is $38.40 (phone payment and insurance) and the monthly line access is $15/mo (on 10GB+ plans) and the marginal cost over my fiancee’s data plan is $30. The total cost so far is $1,060.80. But in order to upgrade, you have to trade in the phone and 75% of the device cost has to be paid to Verizon. After 12 months I’ll only have 50% paid off, so I have to cough up another $187.50 to trade in my phone and get the new one, bringing the total annual cost to $1,248.30, $142.80 more than the subsidized plan.

Summary

The benefits of going with Verizon here are obvious – being on a multi-line plan is cheaper than two individual line plans. The Edge program is a bad deal, but not by staggering margins. My fiancee might stay on the Edge program since her Android phones only make it about 18 months before becoming very slow and annoying, which fits the current Edge rules very well. As long as she can manage to not damage her phone too badly.

The biggest variable is the resale value of the iPhone after 12 months. If its only worth $300, then the Jump/Edge plans start to look much more attractive because the carrier is taking the resale hit, not the consumer. I think its OK as long as I stick with Apple devices since they seem to have higher resale values than Android devices.

Barring any substantial improvement from AT&T (not likely since they are cutting Capex), I’ll likely be leaving for Verizon when the iPhone 6s comes out. I’ll have to pay AT&T an ETF but I’m OK with that.


  1. right now, Gazelle is low-balling me at $345, so I figure 10 more months of use plus factoring in their low-ball price is around $350-400 

Next Batteries

I decided to pick out four up-and-coming battery companies to highlight the companies that are trying to break in to the battery industry with breakthrough innovations. Keep in mind – they can get all the way to cell commercialization, but to compete in the EV market they will go up against the highly integrated cells Gigafactory Tesla is building on cost, a very tall order.

Li-S

Lithium Sulfur cells have an excellent energy to weight ratio, but have struggled with energy to volume ratio and cycle life. The upside is that Li-S is a relatively safe chemistry, so car companies will be able to reduce the amount of safety equipment integrated into the battery pack, increasing the percentage of pack weight and volume dedicated to battery cells.

Sion Power: Recently broke a record for longest unmanned aerial flight of an all-electric UAV (14 days) using solar power and their 350Wh/kg batteries to store energy during the night.

Oxis Energy: Recently announced 300 Wh/kg, in a 25Ah cell. I’m guessing their Wh/l figure is quite low, but they are working on increasing that aspect as well as getting to 400Wh/kg by 2016 and 500Wh/kg by 2018. Their EV cell target is a 95Ah cell with 450Wh/l and 400Wh/kg.

Lithium Solid State

Solid State batteries have been a holy grail for batteries for a while now because they can be form-fitted to fit spaces. They have high volumetric density and cycle life, but have issues with Li-Ion conductivity through the solid electrolyte (low power, slow changing current).

Sakti3: On a recent episode of Autoline, the founder and CEO of the company stated they had achieved over 1,100 Wh/l in a battery cell. No mention of weight of the cell, but she expressed her optimism that they could be in consumer electronics in two years (late 2016).

Solid Energy: Recently demonstrated a cell with 1,337 Wh/l. Expresses confidence that they will be commercially available in 2016.

Broadband in America – We’re doing it wrong

For the last six months or so, the focus has been on Netflix and net neutrality. Should ISPs be allowed to rig their high speed networks, through various means like traffic shaping, peering and interconnection decisions, etc., to purposefully disadvantage or advantage an internet-based service or experience. The majority of the users on the internet seem to think that no, they shouldn’t. But corporations and corporate apologists seem to think that without giving high-speed internet monopolies or duopolies the freedom to do whatever they want will mean an end to broadband investment, and a loss of competitiveness as a whole.

First its important to note why regulation is so heavy-handed in this market. Its all about competition, or lack there of. The barriers to entry for building out a wireline or wireless high speed data infrastructure are immense. And those high barriers to entry mean there is a lack of competition. And that lack of competition means that the competitors who are established in the existing market environment need to be regulated to ensure that the consumer is protected, especially with a product especially as important as internet access.

The current broadband situation in America isn’t great, its not even good. We have more than one problem, even if the Netflix/Comcast issue is the most salient issue right now. Our issues are…

  • Speed: our speeds are slower than most other developed countries around the world, and even some developing countries have faster, cheaper internet in their cities than we do in the US
  • Usage Caps: most large ISPs that offer fast speeds have or will soon have data caps to prevent users from downloading a lot of data (read: protect their expensive TV packages from over-the-top competition)
  • Open access: companies like Comcast and Verizon have decided not to increase their network interconnect capacity with certain companies to keep Netflix traffic slow. Level3, a tier 1 ISP, even illustrated the habit of ISPs creating congestion to incent data providers to enter paid-peering arrangements.
  • Strategy Taxes/Internal conflicts-of-interest: companies that provide internet access have their own vested interests (television, phone) so they have internal conflicts of interest to providing an open, unfettered, fast internet experience
  • Lack of competition: it costs a lot of money to build a broadband network from scratch, so there is not a lot of incentive to enter a market to create an additional competitor, especially if a regional or nationwide competitor can create a price war locally until you run out of cash and go bankrupt.

How can we solve all five of these problems? New rules for Net Neutrality, or regulating ISPs as Common Carriers under Title II don’t solve all the problems. We’re still left with the monopoly/duopoly with companies we have now. They’ll begin work immediately to lobby for loopholes in the rules or legislation, while working to undermine the enforcement through lawsuits, and finally by getting people friendly to them in the regulator’s chair to keep the rules from being enforced.

It turns out our approach to internet access its entirely wrong-headed. Infrastructure should only be built once and from there, upgraded over time to meet demand. Otherwise we’re just wasting money. Let the market compete on top of the infrastructure, not by building separate infrastructure networks and selling proprietary access to that network.

But we can’t just throw it all out and start over.

Infrastructure

The internet is most often referred to in analogy as a highway network. Billions of miles of fiber optic cable criss-cross the globe carrying your request to watch that funny cat video for the 100th time.

There is robust, healthy competition at the “Tier 1″ level – that is, the worldwide backbones that carry traffic all over the world. But when it comes to your metropolitan area, that last few miles of connectivity are often dominated by one or two competitive ISPs1, in the same way your local roads are maintained by your local municipal agency (whether its a city or county).

This infrastructure is expensive. Its expensive to build – which is why we have so few options in the first place. Its expensive to maintain – everyone keeps using more and more data, and it costs money to add capacity to the network. So why are we building redundant infrastructure in many places?

Does it make sense to build two power grids to provide some fig leaf of “choice” for consumers, while the fixed costs of building and maintaining two separate power grids are factored into everyone’s monthly bill? Does it make sense for your community to build two sets of roads for the same purpose2.

But with our current state of broadband, its not as straightforward as that since the cable and phone networks were originally built for other purposes, and were re-purposed for internet access. Phone lines are inherently more handicapped than their coax sibling – DSL speeds are pretty much always slower than cable. But phone lines are more ubiquitous, usually required by regulation. Cable companies can pick and choose who they serve – if you’re not sufficiently urban or suburban, I hope you like DSL and Dish/DirecTV!

Wireless-only options are a very distant third place in the broadband game, encumbered by very low monthly data transfer caps, high cost, and questionable signal strength3.

So we are left with different kinds of monopolies in the two different situations – in exurban and rural areas, DSL is your only option because you are unserved by cable; elsewhere cable ISPs can offer much faster speeds than DSL can manage and its really a not much of a competition4.

Even in the best case (fast cable and fiber-to-the-home from the phone company), we’re left with duopolies that have similar products (triple play bundle of TV, phone and Internet). This means that, in the case of Verizon and Comcast, they have no incentive to help Netflix or future over-the-top video providers eat away at their revenue for entertainment services. Which means we still lack a competitive environment, as long as the ISPs have something else to sell you that could easily be provided over the internet in general?5

Loop Unbundling

One option for solving the problems would be to force loop unbundling on the cable and phone companies, requiring them to lease their own lines at competitive rates6. This would allow other companies to sell internet service over the hosting company’s coax or fiber-optic network. These companies would be responsible for their own transport out of the network to whatever Tier 1 ISPs they purchase transport from, and all of the technical support, billing and usage information, etc.

Loop unbundling works well in Europe, but their business environments are drastically different than ours in the US (PDF), and I fear that between the relentless lobbying budgets of the cable and phone industry, the bad-faith dealings and legal shenanigans that would occur against those who want to come in and resell transport, it would not be a profitable business. In the same way we see cable and phone companies working hard to prevent municipal broadband, we would see an even more rigorous offensive campaign against loop unbundling before, during and after its implementation.

Heavy Regulation

Another option would be heavy regulation of internet service provided by wireline companies. This regulation has been happening at the national level with the FCC, but maybe that’s the wrong place for it. The best option may be with the local and state agencies like Corporation Commissions or Public Utilities Commissions. In the same way electricity rates or phone companies are regulated by a PUC or Corp Comm., so would the internet access. The Department of Energy in DC doesn’t regulate your electricity rates, so why does the FCC want to regulate broadband with the goal of making it more affordable and ubiquitous? The local solution may be much more effective because local officials are much more responsive to citizen complaints. If everyone is complaining that Netflix is running slow on Comcast, or that Verizon is intentionally letting its copper-based infrastructure degrade, the PUC may be in a better position to force Verizon or Comcast to deal with it than a gridlocked FCC or Congress.

This would put some burden on the telecommunications companies because its more government they have to deal with. In my case with my ISP (Cox), they seem very receptive and integrated with the local community7, so I don’t believe that for companies like Cox it would put an undue burden on them, but for large companies stuck in that unaccountable monopoly mindset like AT&T, Verizon and Comcast, it would be more difficult.

Municipal Broadband Networks

One option that has had mixed results so far is municipal broadband networks, where the local government agency owns and runs the ISP. Unfortunately, approximately 20 states have legislation that prevents or has halted the growth of these types of networks. The FCC is looking into creating regulation that would overrule states’ abilities to pass laws against them.

The existing companies have one legitimate issue with municipal broadband networks as competitors – these private companies have invested billions and billions of dollars in infrastructure and they don’t want the government to offer a subsidized competitor with the community’s tax dollars making up for the financial losses. However, that is not an excuse for the banning or restriction of municipal broadband networks. The community’s side is that broadband is (in their opinion) more expensive than it should be – see Chattanooga’s successful $70/mo Gigabit internet service – and nationwide ISPs are unresponsive or just don’t see the return on investment needed to build out or improve service. Ultimately, the benefits of municipal broadband networks is that, as taxpayer-owned agencies, they are ultimately responsible to the people they serve through the feedback look of their board of directors being locally elected officials. Short-circuiting the dysfunction in the marketplace and in Washington DC through local elections.

Municipal broadband networks aren’t always successful though, either through internal mismanagement or being undercut by a national competitor (who can sustain losses in one region) for a long enough period of time to lead to financial ruin for the publicly funded network.

Building a True 21st Century Broadband Network

The goal would be to build a network that combines the advantages of the methods described above, while trying to do this as cheaply as possible and without building a redundant network.

Eminent domain

Eminent domain is essentially creating the municipal broadband network while removing the threat of a private broadband company attempting to undercut and destroy the effort8. Customers can continue to use their existing ISP under a temporary management agreement until the necessary infrastructure upgrades can be made to support Loop Unbundling.

Network Migration & Loop Unbundling

Eventually, all devices on the network (Internet, TV, Phone) will need to be IP or have a set-top-box for incompatible devices. This would be the most difficult aspect – you would need either affordable devices that can authenticate themselves to the network and then broadcast the subscribed set of channels over the customer’s home coax, or you would need even cheaper boxes for people to hook up to individual TVs and output the broadcast signal over RCA, S-Video or HDMI to the TV.

Management

The new network would be managed by a regional “Broadband District” for a metropolitan area. That BD would issue bonds to purchase the physical infrastructure from the cable company or phone company (whoever has the best infrastructure) by force at market value under eminent domain. Once the network migration is complete, it would be opened up to anyone who wanted to run their own ISP.

Eventually the goal would be to use the local fiber loop purchased by the government agency to provide everyone fiber to the home, and then allow everyone to have a competitive list of broadband providers to choose from.

Successful Business Models

The unbundled nature of the network would provide for real competition, ranging from little value-add (here is your internet service, have a nice day) to high value-add (on-location tech support, home networking, security, phone, TV, whatever else they can think of) at various prices.

Companies like Google or Facebook could offer subsidized service that, in exchange for your browsing habits, phone records, TV watching habits, dignity, and whatever shreds of privacy you have left, give you a discount on service.

For economically disadvantaged areas, instead of providing fiber to the household or multi-tenant building, offer WiFi services and prepaid broadband cards for a fixed amount of data transfer (1GB, 5GB, 10GB) sharable amongst a number of devices. This way, even those with only a basic smartphone could still use the internet for essential tasks like applying for jobs or requesting benefits.

Conclusion

First, we need to remove redundant investment. We don’t have competing road networks, power grids, or water systems9. Why do we have these expensive, redundant last-mile communication networks? Because of some historical legacy? Time to ditch them and have one broadband infrastructure for all Americans.

Next, we need to figure out where competition works – clearly its not working in its current state as prices climb and the US lags in broadband penetration. Letting companies compete over a shared infrastructure will work – it works every day as companies compete with each other while driving over our shared roads, utilizing the power grid and water and sewer networks.

Finally, costs need to be managed as we convert the proprietary networks of today to the open networks of tomorrow. We can’t have gold-plated equipment blowing up the budget. Any agency willing to do this would need to be responsible and disciplined in its conversion to eventually opening the network up to other companies to compete on.


  1. I moved recently, and actually lost my phone company – when I moved in, Centurylink wasn’t able to provide DSL at my house, so my only option is Cox 

  2. By this, I mean having two driveways, two street addresses, two non-interconnecting local streets that both connect to the highway network 

  3. Masayoshi Son’s fevered dream of using Sprint’s 2.5GHz spectrum to compete with wireline home broadband is laughable – its a simple matter of physics, even 120MHz of shared wireless communication at QAM64 isn’t able to compete with 200MHz of coax bandwidth operating up to QAM4096 (the DOCSIS 3.1 spec) to offer 10Gbit speeds to your home 

  4. My Cable ISP’s two main tiers are now 50Mbps and 100Mbps, while the fastest the DSL company can go in most locations its 10Mbps 

  5. Cable and phone companies have started to get into the home automation and alarm markets lately, does that mean that AT&T should be able to handicap their internet traffic from ADT and alarm.com to harm competition? 

  6. Which probably would not be competitive, but what are you going to do? Sue them and their lawyer army in court? How profitable is that? Its just cheaper to put up with their uncompetitive rates. 

  7. Even though they raise my cable and internet bills by 10% a year, 3-5x the rate of inflation 

  8. This isn’t socialism or communism — as long as the assets are purchased in the public interest (to provide faster internet at cheaper prices) for fair market value 

  9. Even in the great free market of Texas, there are multiple energy companies, but only one energy transmission company – why? Because infrastructure is expensive! 

Apple WATCH battery math update

One the things I mentioned during my Apple WATCH post was the estimated battery capacities. Well, thanks to iFixit, the iPhone’s battery characteristics have been revealed and using the same type of batteries in the WATCH would stand to improve on my estimates somewhat. Here are the figures for the iPhone 6 and 6 Plus batteries

So what does this mean for the watch? That the battery capacity would be slightly higher than my original estimates of 1.9Wh or 520 mAh at 3.6V. Its more likely that the battery will end up around 600 mAh or 2.1Wh at 575Wh/L.

Tesla Model S AWD, Autopilot and Model 3…

Model S AWD

The Model S AWD models are impressive. We knew they were coming for a while now – there is a space in the frunk that would be perfect housing for the motor for the front wheels. The performance is the headline here – 691 HP (combined) and 3.2 seconds for the 0-60 time launches the Model S AWD into supercar territory. But its not a supercar that just sits in the garage and looks nice – its a great daily driver, highly efficient, very low total cost of ownership per mile relatively speaking, and very user friendly. Beyond that, the way the two electric motors are tuned to work together help improve the overall efficiency of the car, allowing it to, despite the added weight of a second motor, increase the electric range from 265 to 275 miles for the performance model and a whopping 30 mile increase from 265 to 295 for the non-performance 85kWh model (numbers provided are Tesla estimates, EPA numbers are presuming to be pending certification before deliveries in December).

Autopilot

The new Autopilot functionality of the Model S seems eminently more practical than the hyped up Google self-driving car of the last few years. The great news is that instead of having to wait until 2018 or 2020, we can get highway autopilot several years earlier than expected.

The sensors include sonar around the car (forming a bubble around the car) as well as a forward-looking radar and camera system. These allow for active safety systems – automatically braking the car if an obstacle in front is detected, preventing you from steering into a car in your blind spot, etc. These features have existed in cars for a few years now. Beyond the active safety systems is the new Autopilot software.

Autopilot is a very fitting name for this feature, as it mimics overall idea of autopilot on a airliner – the pilots control everything until the plane is at a comfortable cruising altitude and can be turned over to an automated system. Same with cars – if your commute is a long drive on a highway, once you’re on the highway, you can manage the car with just the turn signal. Cameras read the speed limit signs, slow for cars in front of you, and perform actions to keep you safe.

Though after watching the official Tesla video and reading the press release, I wasn’t quite sure what features are being delivered today and what will be made available in future over-the-air updates to the autopilot software. What’s important is that the hardware necessary for autopilot is being delivered today. Software improvements can come in time, but its prohibitively expensive to go back and retrofit this hardware on existing cars (Tesla has stated they won’t retrofit, so you’d have to buy a new Tesla and trade in your old one). As Tesla adds features to the autopilot software over time (the ability of the car to park itself in a garage without you in it), the car will evolve to the self-driving ideal, though it won’t make it all the way there.

The only negative is I don’t think there are enough sensors – that in the future, rear facing radar sensors or cameras will be added to the package to help the car switch lanes when there are high differences in the rate of speed between the two lanes. And making sure the sensors are redundant enough to withstand a failure.

Model 3

One of the interesthing things about the new AWD cars is that the smaller electric motors (188 and 221 HP) seem to be a perfect fit for a Model 3-sized car – one for the standard model, and one for a “performance” Model 3. Tesla should be able to re-use the motors with small adjustments in the firmware to optimize it for single-axle drive.

Beyond this, we’re able to get a better idea of the specs of the Model 3. One thing Elon has stated is that the Model 3 will be about 80% of the size and weight of the Model S. The Model S originally (2012) had a curb weight of 4,450 lbs. However recent statements have indicated they’ve taken “hundreds” of pounds out of the car, I’d estimate the current curb weight for the single-motor model is around 4,200 lbs. A 20% reduction would put the car around 3,400 lbs. A 188 HP motor should be able to propel the car with respectable (certainly not supercar) 0-60 MPH times. By comparison, my Chevy Volt has a curb weight of 3,700 lbs and only a 160 HP motor. While 188 HP might not sound like a lot, the fact that its electric and instant torque will compensate for the relatively small HP rating compared to gasoline engines.

The battery for the future Model S will end up around 45kWh using these smaller motors, reduced vehicle weight and improved efficiencies (an improvement from 300 Wh/mile in a RWD Model S to 225 Wh/mi for the base Model 3). This reduction in pack capacity, combined with the reduced costs of the pack through the Gigafactory increase the chances that Tesla will be able to hit the $35,000 price with a base 200-mile model. The conservative estimate for packs out of the Gigafactory is $196/kWh (down 30% from Tesla’s early 2014 baseline of around $280/kWh), and the aggressive estimate is around $168/kWh (down 40%), which would put the pack price between $7,600 and $8,800. This is 22-25% of the price tag of the overall vehicle, which should leave plenty of room for the rest of the car (50%, or $17,500) and a gross margin of 25%. A longer range 60kWh version could be made available with the beefier 221 HP motor for a range of just over 250 miles. The only issue with a battery pack that small is how fast (or slow) it can be supercharged.

The Apple Watch & Batteries

One of the things not mentioned at today’s Apple Keynote was the battery life of the APPLE WATCH. It was implied that it would be recharged every night, there was nothing specific about the hardware itself.

Battery life is determined by three things – size of battery, power intensity of the CPU/SOC and the power consumption of the display.

We will assume the display is using the most efficient display possible – IGZO or aSi. This will minimize the power draw from the display as much as possible.

The CPU/SOC is likely minimized as much as it can for the first generation product. This is where Apple will need to innovate – integrating more and more functions from discrete chips in the APPLE WATCH package into one piece of silicon that can be fabricated at a small process (which as of right now is 20nm from TSMC).

Batteries, however, don’t progress as quickly as everything else. They improve at about 8% per year, and thats in a good year. It’s why we’re not all driving electric cars right now. Electrochemistry is difficult.

Specifically, the issue with the batteries for the APPLE WATCH is the volumetric energy density. Apple needs a battery that has a high volumetric energy density (measured in Wh per liter) so that they can cram as much watt-hours as they can inside a specific volume. This is different that EV companies, which are typically looking for high gravimetric energy density (Wh per kg).

Right now, some of the best batteries are about 700 Wh/l (for this application, NCM Li-Polymer from SK Innovation at 200Wh/kg and ~700Wh/l). If we assume the battery inside the WATCH is 30mm x 25mm x 5mm, or 3750 cubic millimeters, thats 0.00375 liters. If Apple used the best battery technology possible, they would have about 2.7Wh of storage (730mAh at 3.6V). That figure seems high, so I’m guessing they’re using something less substantial (probably in the 500 Wh/l range) around 1.9Wh, or 520mAh. 

The difficulty Apple faces when it comes to battery development is that it is largely on its own – most battery companies are working hard to increase the gravimetric energy density and the cycle life of batteries. For example. Li-S batteries, while the gravimetric energy density may increase to from 200 to 400Wh/kg, the volumetric energy density is only in the range of 425Wh/l. Lighter batteries do Apple no good – they need more space-efficient batteries.

This is why my hopes are dim for amazing battery life on the APPLE WATCH anytime soon. It will take several generations of hardware integration and software optimization before the product matures. But this is no different than the original iPhone, with its slow 2G data speeds, adequate battery life and no apps.

CenturyLink’s Gigabit Service is a PR move, not a solution

Initially announced in October 2013, Centurylink Las Vegas announced they were bringing Gigabit internet speeds to the Las Vegas area (FTTP, or fiber to the premises). All the politicians were happy to announce what a great thing it was for our city to make us part of the “21st Century”.

The problem though, is that its simply “Fiber to the Press Release“, a token effort designed to keep competitors away (like Google Fiber or a municipal fiber effort). The problem is that there are no build-out deadlines, rather they’re simply upgrading their infrastructure to the richest, most profitable customers, further enhancing the digital divide between the haves and have-nots.

Centurylink has announced approximately 40 subdivisions (about 20 initially in December 2013, and 20 more in spring 2014, plus a recent announcement of availability to select businesses) that will be enhanced with FTTP, which is approximately 5,000 single-family homes using a generous estimate of 125 homes per subdivision. At this rate of 5,000 single family homes per year, it will take CenturyLink 80-100 years to provide fiber to the home for all 400,000 to 500,000 single-family homes in southern Nevada, and thats even making the assumption that all new subdivisions built moving forward are built with FTTP.

There is no reasonable mind that thinks 80-100 years is an acceptable time frame to wire up a city with Gigabit Internet. The politicians or the PUC of Nevada need to force Centurylink to move faster in wiring up homes with gigabit speeds.

Chamberlain MyQ Garage Quick Review

I don’t know if its me getting older (being 33 is hard, kids!), but lately I’ve had a harder time remembering if I’ve closed the garage door or not when leaving the house. I’ve wanted to have a wifi connected garage door opener, but I didn’t want to replace my perfectly good garage door opener I have now.

So one day when my girlfriend told me she didn’t remember if she closed the garage door, I reached my limit and decided that I was going to go online and find some sort of sensor to tell me if the garage was open or not. What I found were some Raspberry Pi or Arduino sensors – not really what I was looking for. I wanted something a bit more professional. I ended up coming across the Chamberlain MyQ Garage Door controller. It was expensive at $129 (a brand new MyQ-Enabled Chamberlain garage door opener is $200), but after spending my lunch hour driving home and back to work, I was ready to pay that.

The first thing I had to do was check compatibility – does the garage door have the photosensors to prevent the garage from closing on someone or something, and is it using a compatible frequency and code. I happen to have a compatible Chamberlain LiftMaster, as well as an open 120V outlet near the garage door opener, so I was ready to order and go!

Installing it was easy, except for the part where they didn’t tell you what size drill bit to drill the pilot holes for the screw anchors (5/32″). I guess thats something they expect you to know, and this DIY-newbie didn’t know that.

20140319-111932.jpg

All you needed to do was install the WiFi hub on the ceiling, plug it in, and then secure the door sensor properly on the garage door. With those two things accomplished, the rest can be done from your phone via Bluetooth 4.0. Once you pair your phone, you can share your WiFi credentials from your iPhone to the WiFi hub to get it connected and online, and from there, you can use the MyQ app to create your account, link the hub to the account, and program the hub to talk to the garage door opener. It tries various garage door opening commands, and it knows when it succeeds because it has the sensor on the garage door itself.

MyQ Garage Status

The only issue I had with the entire online process was that it took about a half hour to get the verification email for the new MyQ account. So I had to wait for the email to activation the account before I was done with everything.

But now I can see the status of my garage door, as well as open and close it remotely.

Update 3/22: 
Chamberlain reached out to me to explain the PIN access. First you have to set a PIN code under the Account settings in the app. Then you have to set your security level – you can have it never prompt for a PIN code or 1) on app start, 2) accessing the account, or 3) when you perform an action on a door or gate. Personally, I think a PIN code should be mandatory and that it should prompt you on open/close actions. I’m used to my Chevy Volt OnStar application that requires me to enter a PIN code (which is validated on the server side) to lock/unlock doors, or to remote start the car. It seems like a good way to protect the car from unauthorized actions.

Pros:
Ease of use – being able to transfer my WiFi password over BT to the hub (instead of having to type me 25 character password) made it super easy to get the unit online.
Convenience – being able to check and close the garage door remotely will be very useful the one day I forget to close it

Cons:
Cost – at $129, its 65% of the cost of buying a replacement garage door opener that is MyQ enabled out of the box
Instructions – the instructions are written for someone who is a bit more handy than I (though I am getting better, installed some new bathroom hardware a few weeks ago)