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Toshiba just began selling a smartphone that packs a 1GHz Qualcomm processor.

And the world’s largest chipmaker needs to be a player in this market. Smartphones like Apple’s
iPhone, the
Palm Pre, and T-Mobile’s
Google Android phone, the G1, are taking on many of the attributes of PCs and are increasingly adept at Web browsing, video streaming, and game playing–not unlike a personal computer.

The chipmaker’s strategy now is to shrink its global-standard x86 PC chip architecture to the point where it can run efficiently in smartphones. That’s where Moorestown comes in. Intel claims Moorestown will be suited for high-end smartphones by 2010 and that “Medfield” silicon will make it into standard cell phones by 2011.

The companies said their new “long-term relationship” will focus on developing new chip architectures and software and a new class of Intel-based mobile computing devices. The move is part of a major shift for Intel, which is a giant in PC chips but not a player in cell phones.

Among other aspects, the agreement covers mobile applications and wireless Internet access “in a user-friendly pocketable form factor.”

Under the agreement with TSMC, Intel will port its Atom processor technology to TSMC, which will serve solely as a manufacturer of Atom-related silicon–primarily chipsets.

For Intel, the deal adds momentum to its push into the small device/smartphone space. The Nokia announcement follows a pact announced with LG Electronics in February to collaborate on development of smartphones based on Intel’s future “Moorestown” silicon and Linux Moblin software.

In March, Intel also announced a deal with Taiwan Semiconductor Manufacturing Company (TSMC) to cooperate in the manufacture of Atom processors.

Intel’s need
The point of all of these announcements is to get Intel-architecture chips into cell phones, a giant worldwide market with well over a billion devices sold in 2008.

And what do those devices and technologies have in common? They’re all powered by chips based on the ARM design.

“We will explore new ideas in designs, materials and displays that will go far beyond devices and services on the market today,” Nokia said in a statement.

Updated at 8:20 a.m. PDT:
Added Intel-Nokia announcement and Intel discussion.

Intel and Nokia announced on Tuesday a wide-ranging deal covering chips, hardware, and software for mobile devices.

Texas Instruments and other chipmakers are also readying speedy processors for smartphones next year with two processing cores and enhanced video capabilities. And it was disclosed last week that an Nvidia chip will power Microsoft’s Zune HD.

The irony
Ironically, Intel manufactured an ARM-based chip series for many years called Xscale, which traces its heritage to a design called StrongARM. These chips were used in the Hewlett-Packard iPaq, a leading handheld for a number of years. But Intel sold this business to Marvell in 2006.

Why ARM? ARM’s approach to designing processors is the opposite of Intel’s: power efficiency is paramount, performance secondary. Smartphone chips need to operate within a tiny power envelope, typically well under 0.5 watts and must last all day on one battery charge. Current Intel Atom chips–while relatively fast–draw too much power and are hardly suitable for smartphones.

The Intel and Nokia effort includes collaboration in several open-source mobile Linux software projects. Intel will also acquire a Nokia HSPA/3G modem IP license for use in future products.

Neither Intel nor LG gave a date for availability of the LG device, but it is expected to appear soon after Moorestown is available. Intel is saying that Moorestown will be available in 2009 or 2010, though the second half of 2009 appears increasingly likely.

Chumby Industries, manufacturer of the eponymous huggable touch-screen Wi-Fi widget gadget, announced Monday that it has raised $12.5 million in Series B venture funding. The lead investor in the round was JK&B Capital, but existing investors Avalon Ventures, Masthead Venture Partners, and O’Reilly AlphaTech Ventures also contributed.

Oh. So much for the touch-screen penguins.

It’s also, aside from the touch screen, soft and squishy.

Formally, the new Chumby cash will be used to “accelerate growth of the company, and expand and broaden the Chumby Network to other screen-based Internet connected devices.” Does that mean they’ll make a Chumby kitten or a Chumby penguin?

(Credit:
Rafe Needleman/CNET Networks)

A friendly-looking device that you configure online, the Chumby cycles through a rotation of custom widgets from weather to Google Calendar to cult-hit shopping site Woot.com. Many of these come from the Chumby Network, a platform of user- and partner-created applications that can be added to the little gadgets.

“We are pleased to receive this financing, which will enable us to execute our vision and grow distribution of the Chumby Network,” Stephen Tomlin, founder and CEO of Chumby Industries, said in a statement. “As the next step of our strategy, we will focus on establishing relationships to broaden distribution to other screen-based devices such as digital photo frames and LCD TVs.”

But Windows 7 is different.

When I used Windows Vista, one of my biggest complaints was the almost constant annoyance from User Account Control. It was everywhere. “Do you really want to open this application?” “Do you really want to download this program?” “Do you really want to sit that way? It might hurt your back.” It ruined my experience.

Bruce Temkin, the study’s author, wrote that while PC manufacturers have some work to do to enhance the consumer’s experience, Windows also contributed to the low marks.

There are countless other areas where Windows 7 provides an improved experience over Windows Vista. But those three examples illustrate something we can’t lose sight of: using Windows 7 is more enjoyable than using its predecessors.

In a recent study from Forrester Research, analysts found that Dell and Hewlett-Packard provided customer experiences that were well below par, while Apple came out on top.

“I do think Microsoft’s software has a bit to do with it,” Temkin wrote. “Consumers don’t distinguish problems with the operating system from problems with the PC manufacturer. Bottom line, the Windows ecosystem needs an extreme customer experience makeover.”

And isn’t that all Dell and HP really need? If Temkin is right and most consumers cannot distinguish between the software and the hardware, won’t an improved Windows help enhance their overall experience? And won’t that, in turn, help PC manufacturers score higher on the survey?

The Windows 7 experience

Check out Don’s Digital Home podcast, Twitter stream, and FriendFeed.

How much higher is the question. Improving a consumer’s experience goes beyond installing better software. The hardware needs to follow suit. Though the specs in most PCs are on-par with competing products from Apple, PC manufacturers need to be aware that part of Apple’s appeal is in the design of the product. And although HP and Dell have tried to improve the design of their PCs, Macs are still the most attractive computers on the market.

Windows 7’s taskbar is a game-changer. When you roll your mouse over an icon in the taskbar, thumbnails of every open instance of the application will be displayed. If you’re unsure which window you want to open, you can hover your mouse over a specific thumbnail and it will be brought to the front in full size. It’s a simple addition, but it makes finding open windows much easier. More importantly, it enhances the consumer experience.

I agree with Temkin. But I also believe that Windows 7 is the single Windows OS that can improve the consumer’s experience.

Aside from compatibility issues, one of my biggest complaints with
Windows Vista was its design. Microsoft tried to be too fancy with the look and feel of the OS instead of focusing more on its ease of use. It wasn’t an improvement over XP and it ruined my experience.

But in Windows 7, the UAC popped up just once or twice over the course of a week. The annoyance was gone. And, once again, it improved my experience.

Whenever you perform a clean install of an operating system, it’s fast. Windows XP was snappy when I installed it on my machine and so was Vista. But after using Windows 7 and comparing it to a clean install of Vista, I found that Windows 7 booted faster than Vista. It also opened applications quicker than its predecessor. The difference wasn’t major, but it was noticeable. So noticeable, in fact, that I think consumers will be happy with what they find.

According to the study, which asked 4,500 U.S. consumers to rate the usefulness and enjoyability of products, Dell received a “poor” rating in overall customer experience. The company mustered a “very poor” when it came to the customer’s enjoyment using Dell products. HP’s experience was rated as “poor,” while Apple led the way for computer manufacturers with an overall “good” experience.

But as these companies try to figure out how to turn things around, it’s Windows, that very OS that’s currently bringing them down, that will help them break out of their decline.

A network administrator for the city of San Francisco has been arrested on charges of taking control of the city’s computer network and locking administrators out, according to the San Francisco Chronicle.

Terry Childs, 43, was due to be arraigned on Tuesday after his arrest Sunday. He remains in jail on $5 million bail.

Childs, who has worked for the city for five years, is accused of tampering with the new Fiber Wide Area Network after allegedly being disciplined for poor performance. He is accused of electronically spying on his supervisors and their attempt to fire him, according to authorities.

Officials told the newspaper they were making some headway into regaining access to the system, but they fear that Childs has rigged a system to remotely destroy data.

Meanwhile, the network is up and running despite the fact that administrators have limited to no access.

commentary

I’ve been saying for some time that open source is not a price tag, or at least is much more than that. In criticizing Oracle’s “lite”/express approach to competing with MySQL years ago, I insisted that “free, as in price, is just one part of the open source puzzle. But it’s not necessarily the most important one.”

I stand by that claim, and received confirmation from Untangle this week.

Untangle is an open-source network gateway company. It started out as a proprietary software company, but turned to open source for growth. This doesn’t always work well for companies, largely because many get the model and/or culture wrong.

Untangle, however, has done it right, and the downloads have followed. From 145 in June of 2007 to 41,419 in April of 2008, interest in Untangle has rocketed with its adoption of open-source licensing.

Is this just because its code is free now, and not because it’s open source? A quick look at the data suggests that “free” isn’t selling Untangle. Open source is.

First off, consider that Untangle already offered a free download of (proprietary) software for trial purposes and also sold appliances with their network gateway software already installed and configured. Though the company leveraged open source in its code base (some 30 projects) to get to a finished product faster, it didn’t release its code under an open-source license.

In other words, it was already using “free” (as in price) software as part of its model, both to entice would-be buyers and to improve its development. But it needed more than a great product: It also needed to more efficiently find new buyers for that product.

Enter open source.

In June of 2007, five years after the company started development and two years after it started to sell its product, Untangle open sourced the vast majority of its software. Here’s what happened:

Untangle's active deployments skyrocket with open source

(Credit:
Untangle)

The graph shows the POPS or activations of live instances of Untangle’s gateway servers running each month. These are real deployments: The blue line represents boxed appliance sales that have gone live. Meaning money coming in the door. Lots and lots of money.

How much? 300 percent over the bad old days of proprietary.

Free proprietary is only marginally better than expensive proprietary. Open source makes for a better way to distribute software. Period. You can take that to the bank. Just like Untangle did.

Minneapolis is quickly becoming the new poster child for the municipal Wi-Fi movement.

The city is expected to have the majority of its 59-square-mile network finished by the end of this month, and already experts are pointing to the nearly completed network as a model other cities should follow.

Over the past year, citywide wireless networks have gotten a bum rap. Halfway through 2007, EarthLink, which had been leading the charge with big contract wins to build and run networks in San Francisco, Houston, and Philadelphia, started unraveling its Wi-Fi strategy.

By September, the company had pulled out of proposed networks in San Francisco and Houston. And in early February, EarthLink put its citywide Wi-Fi business up for sale.

The rise and fall of the movement has been well-documented by the press. Many critics have said citywide Wi-Fi is dead. I’m inclined to believe the movement is still alive. But the business models used in future deployments will be very different than those the industry has seen from EarthLink and others that have failed to deploy successful Wi-Fi networks.

Currently, Minneapolis’ approach seems to have the most legs. In this model, the city government and public-safety agencies act as anchor tenants guaranteeing the service provider, USI Wireless, a contract. In 2006, the city agreed to pay USI Wireless $1.25 million a year for 10 years to build and operate its network.

But USI Wireless is not relying entirely on the city to fund the network. The company is also offering service to residents and small businesses.

Having an anchor tenant, like the city, helps guarantee a hefty stream of revenue, but the residential consumer market also provides USI Wireless with an opportunity to grow its business and increase profits.

“For large to midsize cities, Minneapolis will become the standard model,” said Craig Settles, an independent wireless-technology consultant.

Minneapolis city officials recognized the value of having a citywide Wi-Fi network. But during the planning stage, they were unwilling to front the money to build the network. So they looked for a company in the private sector to build and operate the network for them.

“From the beginning, we were focused on the institutional benefits of having a citywide Wi-Fi network,” said Lynn Willenbring, CIO for Minneapolis. “But we recognized quickly that we could not create a viable business case for the network operator with just our business. The vendor needs to make a profit. So it’s important for them to sell to residential and business users too.”

The network asset already proved its worth last year. A portion of the newly constructed network had already been completed on August 1, 2007, when the I-35W Bridge collapsed, allowing the city to use Wi-Fi as part of its emergency response effort.

The network is also getting good response from consumers. So far, more than 8,000 residents have signed up for USI Wireless’ service, which is being offered at three different speeds: 1-megabit-per-second downloads for $20 per month, 3 Mbps downloads for $30 per month, and 6 Mbps downloads for $35 per month. The service will compete with DSL service offered from Qwest Communications and cable modem service from Comcast.

How Minneapolis model differs
Minneapolis’ model differs from that of other cities, which have been less successful in deploying citywide Wi-Fi. EarthLink, the biggest company in the municipal Wi-Fi market, won several high-profile contracts by focusing exclusively on offering residential service. The company also promised free access or reduced access in certain cities like Philadelphia and San Francisco to help bridge the digital divide.

EarthLink did not require city governments or agencies to become customers of its networks. Instead, EarthLink negotiated deals in which it would actually give away service to city agencies in exchange for using city-owned infrastructure like utility poles.

Tempe, Ariz., is another example of a city that did not buy network services, but instead expected to use the network free of charge in exchange for providing access to utility poles. Less than two years after its Wi-Fi network went live, the project is basically dead. Tempe contracted with a network operator called Kite Networks, a division of Richardson, Texas-based Gobility. At the end of 2007, the company cut off service, because it couldn’t make any money.

A ComputerWorld article published last month quoted Dave Heck, CIO for the city of Tempe, blaming the failure of the network on Kite Networks for not marketing the service aggressively enough. At its peak, the company was only able to sign up 800 subscribers to the service in a city with 160,000 residents.

“Their rates have been half the cost of wired Internet services, and they could have gotten subscribers if they marketed it right, but they didn’t market it well,” he was quoted as saying in the article.

But if Tempe had agreed to become a customer of the network, maybe the service would have survived.

Philadelphia’s network is nearly 80 percent built. But with EarthLink now out of the citywide Wi-Fi business, the project’s future is uncertain. The city is unlikely to finish building the network with taxpayer dollars and it also won’t likely run the network. Terry Phillis, CIO for Philadelphia, told the Associated Press earlier this month that selling the network would be the best thing for everyone. But Phillis acknowledged that finding a buyer wouldn’t be easy.

But if Philadelphia revised its Wi-Fi contract and promised to buy a certain amount of services from the network provider, it could make the deal more palatable to potential buyers.

“If they aren’t willing to support the network as a customer, then the whole thing falls apart,” Settles said. “And they’ve missed a great opportunity.”

The reason cities need to become customers of these networks is simple: Marketing services and selling them to residential customers is expensive. And broadband competition is fierce. Even though many communities would like to have a third provider to help drive down costs, it’s difficult for a business to justify the cost of building a new network to be the low-priced competitor.

An anchor tenant, like a city, offers new entrants a guaranteed source of revenue to build their networks without being forced to spend huge amounts of capital right away to acquire residential customers. The more money a city spends with the network operator, the fewer residential customers it needs to make a profit.

DSL provider Covad Communications, which agreed earlier this month to get involved in the stalled Silicon Valley regional Wi-Fi network, sees government customers as important. But it also believes it can make money on Wi-Fi by offering a service it can extend to its existing customer base. The company is building a pilot network in San Carlos, Calif., to see if it could make money with the Wi-Fi service. Initially, it plans to target business customers first, but it sees municipalities and city agencies as potential customers as well.

Tale of a happy customer
“The municipal market is appealing to us,” said Alan Howe, vice president of wireless strategy at Covad. “We won’t be focusing on that market initially. But the city of San Carlos is already a customer, so it’s nice to have one happy customer in the market.”

Like other proposed Wi-Fi projects, the Silicon Valley network hit rough times in 2007. A lack of funding forced Azulstar, the start-up that was going to build and operate the network, to bow out of the project before it was even able to build out the two pilot networks.

The grand plan for the regional Wi-Fi network looked dead. But Cisco, which had been involved in the project from its earliest days, approached its customer Covad and persuaded the company to build a test network.

Covad sees citywide as a way to potentially expand its business. Today, the company wholesales DSL service and sells T1 and DSL service to businesses and some government agencies. It also offers fixed wireless broadband service using proprietary pre-WiMax technology that uses a combination of licensed and unlicensed spectrum. Wi-Fi would allow the company to expand its services to small and home-based businesses. It also would allow the company to provide mobile applications for its larger customers.

For now, the San Carlos project is simply a test. Howe wouldn’t say whether the company plans to expand the network within San Carlos or to other cities in the region.

“It’s really too soon to speculate on what will happen after the trial,” Howe said. “There could be an opportunity to expand beyond the test site, assuming it makes sense for us from a business perspective. But we don’t know yet what we will do.”

Minneapolis and Covad’s San Carlos project are still in their early days. So it’s hard to say that they have found the secret to success in citywide Wi-Fi. But these projects should be watched closely. And if they do prove successful, I’m sure other cities will copy them.

“We’re very proud that people are looking to our network as an example of a success story,” Minneapolis’ CIO Willenbring said. “When we started looking at this, we looked at what was going on in other cities to learn from their mistakes. And we crafted a business model that we think makes everyone a winner.”

Maybe it’s the proverbial exception that doesn’t prove the rule. But the publication of new statistics pointing to a slowdown in venture funding for Web 2.0 companies comes at a particularly antsy time in Silicon Valley.

Earlier Tuesday, Dow Jones VentureSource issued a good news-bad news status report on Web 2.0 companies. While funding in Silicon Valley last year grew 25 percent, the numbers don’t look so hot when you consider that Web 2.0 deal flow doubled every year between 2002 and 2006. What’s more, you need to subtract the $300 million that Facebook raised from Microsoft and others to get a more accurate picture.

So what gives?

In part, says Gina Chan, the research manager at Dow Jones VentureSource, chalk it up to current events. There’s obviously a lot more caution among investors when it comes to writing checks. And the drumbeat of financial distress stories - Bear Stearns one day, a Carlyle the next - has spooked a lot of folks.

“The VCs rely on investment banks to help raise liquidity and help them through the liquidity event,” Chan said. “This is going to affect what’s been happening. Venture capitalists still have money to put in these companies. Whether they’ll continue to put their money in remains to be seen. The majority (of Web 2.0 companies) remain dependent on online advertising, and with a slump in the economy, that could take a hard hit.”

Pregnant words, because there is also trouble on that front. Another research company, eMarketer, on Tuesday lowered its forecast for 2008 online ad spending in the U.S. to $25.8 billion from the previous $27.5 billion it had forecast last fall. Something else to consider. In the competition for dollars, Web 2.0 isn’t the hot sector any longer. That title goes to clean tech, which pulled in $3 billion in venture funding last year, up 43 percent from 2006. What with the price of a barrel of crude well about $100, that investment trend will only continue.

What will all this mean for the future of Web 2.0? Truth be told, I hate that term, but we’re stuck with it until Tim O’Reilly or some other bright bulb comes up with a better moniker. Back to the funding question, this isn’t a repeat of the bubble bust (or at least, not yet). Entrepreneurs will still do their thing, though one questions how many more widgets or social networks the world needs. It’s tough to deny the impact of bigger macro-economic forces. While Web 2.0 has taken root, I wonder whether we’ve seen its high water mark.

But enough of me ruminating. What do you think? Take a turn with that question in the discussion forum below.

The breakthrough sci-fi role-playing-game is back in Mass Effect 2. Lead Commander Shepard through the galaxy once again as you interact with different alien races. Mass Effect 2 is set to blast off in early 2010 for the PC and
Xbox 360.

AT& T officials referred questions about the service to Apple. Apple officials could not immediately be reached for comment

AT& T may be getting ready to add multimedia messaging service for the
iPhone, according to a new report.

There are third party add-ins that make MMS service available for iPhone users in the U.K.

The iPhone Atlas quotes an internal AT& T memo saying the telephone company will include the feature, which allows transmission of text, pictures, and potentially video to other MMS-enabled phones.

Wow. I continue to believe that the industry is able to take care of Microsoft by itself. Ms. Kroes and the European Commission are fighting yesterday’s battle, while open source and SaaS are already winning today’s battle against Microsoft, step by step.

I don’t believe in victory by government fiat. I believe that markets–that competitors–are more than capable of toppling Microsoft’s lard-laden dominance of 20th-century markets. Open source doesn’t need the European Commission’s help. I won’t say “no” to Ms. Kroes taking a few billion from Microsoft’s bank account, but we don’t need it to win.

commentary

European Union regulators may fine Microsoft Corp. for failing to comply with a 2004 antitrust order to charge “reasonable” fees for patent licenses on operating system software, three people familiar with the matter said. The fine may be announced as soon as February 27, said the people, who declined to be identified because the decision isn’t public. Microsoft said in a January 24 U.S. regulatory filing that the penalty may be as much as 1.5 billion euros ($2.2 billion).

I read this article on European Commission chief Neelie Kroes last night, and Tuesday morning woke up to news that the European Union is set to levy even more fines against Microsoft. Why? According to Bloomberg News: