Sunday, July 09, 2006

Clueless dotcom business models

Imagine that you are an investor in a startup planning to spend $4bn to develop an infrastructure. The startup is entering the market over a decade later than the incumbent who gives their product away for free. In this situation the security of your encryption codes should probably not be your first concern.

If there was no GPS system available for civilian use Gallileo would be a fantastic idea: establish a system of global positioning satelites and charge device manufacturers a fee for making use of it.

With GPS in place and the signal being made available for free the only value in Gallileo is either insurance against the US withdrawing service for the system or to provide positioning data that is somehow 'better'.

It may be logical for the European Union to invest $4 billion to ensure that they are not dependent on the US for such a critical infrastructure. It is utterly illogical for me as a private individual to do the same to protect the value of by in car GPS unit.

The value of Gallileo lies in the ability to claim a seat at the negotiating table if there is a realistic possibility of turning the signal off. There is a small probability that the result of the discussion would be a situation where more information was available on Gallileo than GPS but it is not very significant. If this does happen it is most likely to be a temporary annoyance I can live with. There is a much higher probability of either my machine breaking or the Gallileo project folding like Iridium and Telestra.

The investors in Gallileo must know this as well. What is it that we do not know? The only way Gallileo makes sense is if makers of GPS units are required to license the Gallileo technology to sell them in Europe.

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