We’re all bankers now

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I must be going potty. Reason: I find myself in agreement with Simon Heffer, the carpet-chewing Torygraph columnist. He’s not impressed by the way the government has overridden the intelligent and measured stance taken by Mervyn King, Governor of the Bank of England, towards Northern Rock.

Taxpayers have now become bankers. At a stroke, the fundamentals of the capitalist creed on which many of us thought our economy was based are compromised. There is no price on risk, except that paid by the state with our money.

Many in the financial world have what we might call a conservative interpretation of the idea of lender of last resort, and so do I.

I think it was shared by the Governor of the Bank of England, Mervyn King. It was that the Bank will lend at an appropriately stiff interest rate to any solvent financial institution that has a temporary liquidity problem, so it can right itself.

This is roughly what Mr King said, and did, last week, when Northern Rock was given a cash lifeline. The Governor could, or should, have done no more.

He is not a political figure, and it would have been most improper for him to act as one. It would also have been most improper of him to extend the role of lender of last resort to an extreme that imperilled the very notion of capitalism. That is the sort of thing idiot politicians do and, by God, have they gone and done it.

Fearing, quite absurdly, a collapse in our banking system, with Weimar-style queues littering our high streets at almost every bank and building society, the Chancellor of the Exchequer decided to issue his blank cheque to the bankers of Britain.

They now, as I see it, have carte blanche to take the most awesome risks with the money of their depositors, knowing that if they goof badly, the taxpayer will compensate their aggrieved customers.

The funny thing was that as I watched the TV news the other night, with all that footage of people queueing outside Northern Rock branches, I was almost tempted to buy shares in the bank, on the grounds that they were bound to go back up. Which of course they will now do.

Needless to say, I did nothing about this startling insight. Sigh. Story of my life: I also knew that Google shares were grossly undervalued at $85 when the company floated on the stock market.

Jeff Randall has written an instructive piece on ” Ten lessons we can learn from the Rock that rolled downhill”.

Jobs: why no 3G

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Ah, I see. It’s the battery life.

Apple chief executive Steve Jobs slammed 3G phones for having limited battery life as he launched the iPhone in the UK through an exclusive deal with network operator O2.

O2 is thought to have signed an unprecedented agreement passing around 10pc of all revenues from the iPhone to Apple, whose tough commercial terms some other mobile networks baulked at.

One of those was Vodafone, whose chief executive Arun Sarin has pointed out that the first version of the iPhone will not run on 3G mobile networks, thus offering only the slower web browsing speeds of 2.5G unless customers are in a wi-fi hotspot. Mr Jobs, however, said Apple had decided against incorporating 3G for now because it drained battery life. “The 3G chipsets work well apart from power. They’re real power hogs. Most phones now have battery lives of two to three hours,” he added.

“Our phone has eight hours of talktime life. That’s really important when you start to use the internet and want to use the phone to listen to music. We’ve got to see the battery lives for 3G get back up into the five-plus hour range. Hopefully we’ll see that late next year.”

Translation: It will give us an opportunity to force all those early adopters to upgrade after the Christmas rush.

Beware of flying balls

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A sign at Brancaster on the Norfolk coast on Sunday last. Note warning about “flying golf balls”. The beautiful links course behind the sign is that of the Royal West Norfolk club. It was laid out in 1892 and hasn’t changed much since — which is another way of saying that it was pretty good from the beginning. “Few things are more terrifying than the first hole at Brancaster on a cold, raw, windy morning,” wrote Bernard Darwin in The Golf Courses of the British Isles (1910), “when our wrists are stiff and our beautiful steely-shafted driver feels like a poker. There is a bunker – really a very big, deep bunker – right in front of our noses.”

Regulatory teeth

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This may seem a strange image with which to illustrate a post on the Microsoft judgment, but bear with me. As my mother used to say when confiscating pocket-money for some misdemeanour, “it isn’t the money, it’s the principle”. I can’t imagine that even a $613 million fine will make much of a dent in a company that has a market cap of $300 billion and is sitting on nearly $50 billion in cash and marketable securities.

I can’t even get worked up about seeing Microsoft finally coming unstuck (though it couldn’t have happened to a nicer company), because in a way the caravan has moved on. The company’s monopoly hold on the PC desktop is still a reality, of course, but it’s a wasting asset in a networked world. The most interesting implication of the European court’s decision is what it might mean for other companies — Apple and Google, to name but two. Just as sharks are encouraged by the sight of blood, the sweeping legal success regulators have enjoyed in the Microsoft case may have whetted their appetite for more. Apple’s grip on the music-download market provides one obvious target (especially in view of the widespread European concern for ‘interoperability’). And Google’s stranglehold on “all the world’s information” will eventually put it squarely in the crosshairs of the European regulatory system. Stay tuned.

The text of the Court of First Instance judgment is here, btw.

More: I forgot to mention Intel as another possible target for Euro-regulators. And this week the European Commission is opening hearings on a complaint that the iTunes store violates competition rules by charging Britons more than other Europeans for downloads.

Jobs descends from clouds, launches UK iPhone, departs

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No surprises here, then.

Apple has announced that its long-awaited iPhone will go on sale to British customers on November 9.

The handset, which will be available exclusively to O2 customers, will cost £269 – more than the $399 (£200) that it costs in the US.

The iPhone will sell for £269.

Users will have to sign an 18-month contract priced at either £35, £45, or £55 depending on the call package.

Steve Jobs, Apple’s CEO, appeared in person at the company’s flagship Regent Street store in London for the announcement.

Still no 3G, I see. I’ve used one, courtesy of my friend Hap. It’s neat and hooked up easily to my home WiFi. But in the open it’s still a 2.5G phone.

You can have any gadget you like so long as it’s an iPod

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This morning’s Observer column, which has items about Apple, YouTube and Facebook. Sample:

The release of the new iPod range provided an insight into the company’s technical strategy. At the top of the line is the iPod Touch, which looks, feels and operates like the new phone – except that it doesn’t make or receive calls. It is, as one wag put it, ‘a de-phoned iPhone’. A better way to put it is that the iPhone is an iPod that makes calls. The music player is at the heart of Apple’s technological strategy, which leads to the thought that the company’s next laptop will be an iPod masquerading as a tablet…

The real value of Fair Use

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From InformationWeek…

Fair use exceptions to U.S. copyright laws account for more than $4.5 trillion in annual revenue for the United States, according to a report issued on Wednesday by the Computer and Communications Industry Association.

“Much of the unprecedented economic growth of the past 10 years can actually be credited to the doctrine of fair use, as the Internet itself depends on the ability to use content in a limited and nonlicensed manner,” CCIA president and CEO Ed Black said in a statement. “To stay on the edge of innovation and productivity, we must keep fair use as one of the cornerstones for creativity, innovation, and, as today’s study indicates, an engine for growth for our country.”

By one measure — “value added,” which the report defines as “an industry’s gross output minus its purchased intermediate inputs” — the fair use economy is greater than the copyright economy.

Recent studies indicate that the value added to the U.S. economy by copyright industries amounts to $1.3 trillion, said Black. The value added to the U.S. economy by the fair use amounts to $2.2 trillion.

The fair use economy’s “value added” is thus almost 70% larger than that of the copyright industries…

The report is here.

Later: Alas, it’s not as good as it seems. Nick Carr has a good critical swipe at it:

There’s a little problem, though. Even by the woeful standards of the bespoke research industry, this study is a crock. It’s not just bad; it’s absurd. What the authors have done is to define the “fair-use economy” so broadly that it encompasses any business with even the most tangential relationship to the free use of copyrighted materials. Here’s an example of the tortured logic by which they force-fit vast, multifaceted industries into the “fair use” category: Because “recent advances in processing speed and software functionality are being used to take advantage of the richer multi-media experience now available from the web,” then the entire “computer and peripheral equipment manufacturing industry” qualifies as a “fair-use industry.” As does the entire “audio & video equipment manufacturing” business. And the entire software publishing industry. And the entire telecommunications industry. And – hey, why not? – the entire insurance industry. Stock markets and commodity exchanges? Sure, throw them in, too…

I’ve always thought that a more insightful comparison is between the economic value of the information technology industry and that of the media industry. In terms of size and economic importance the former dwarfs the latter — which is why it’s absurd for legislators to agree to measures that would allow the latter to determine the pace and nature of innovation in computing and networking. Fair Use is no doubt significant in economic terms, but its real importance is cultural. Unless our societies have free exchange of ideas, they’re dead.