Monthly Archives: May 2010

The Re-birth of the Tablet

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Last year I bought a Kindle e-book reader and wrote about its strengths and weaknesses. With the release of Apple’s iPad last month, people keep asking me whether I wish I had waited for that instead. The short answer is, no, but now a fellow gadget-aficionado, Tony (aka @thewordpressguy) has drawn my attention to another new device, the TEGA tablet, and has asked me for an opinion*. I am yet to get my hands on either device, but I won’t let that stop me expressing a view!

The history of tablet computers is showing every sign of repeating the pattern of mp3 players. The first mp3 player pre-dated the iPod by about 5 years, but it was not until Apple entered the market that they really began to take off. Two key factors behind Apple’s success were design and the iTunes store. Having owned a Creative Nomad Jukebox and an iRiver H340 before getting an iPod, I experienced first-hand how much better the user-interface of the iPod was than everything that came before (even if it lagged at times in its technical specifications). The iTunes store was even more important. While early-adopting enthusiasts like me may have had the motivation and patience to convert all of my CDs to mp3 format, this would not be true of most people. The iTunes store provided a simple and reasonably-priced way for people to get content onto their iPods. The rest is history.

Just like iPods, tablets have been around for some time before Apple entered the fray. The term was popularised by Microsoft in 2001, but tablets were around in one form or another well before that (you could even include Apple’s less than successful Newton). Just like the iPod, the iPad is no doubt a superbly-designed piece of hardware, with an intelligent user-interface (I am extrapolating from my experience with the iPhone as well as taking into account the plethora of articles I have read about the iPad). Combine that with the App store, which is to the iPad and iPhone what the iTunes store was to the iPod, and the success of the iPad looks assured.

While the iPod came to dominate the mp3 player market, the iPad may stimulate the emergence of a broader range of alternative tablets, much as the Google Android phone is showing signs of being a serious alternative to the iPhone. Based on Tony’s assessment of the TEGA, it could well be an early example of this phenomenon. While it does not offer Apple design, it does have a few other things instead, such as USB, card-reader ports (rather than having to rely on external adapters as the iPad does) and a built in 3G modem which allows you to pop in your own sim card (so no more 3G dongles). What may hold even greater appeal for some is that it is operating-system agnostic: while most people would buy it with Windows 7 installed, it will also ship with Linux.

The release of the TEGA is an interesting development and I am sure there will be more iPad alternatives to come, but that brings me back to the original question. Do I have Kindle-regret? Would an iPad, a TEGA or something else be better?

I do not. The Kindle certainly has its shortcomings, some of which I discussed in my original review, but here’s what it gives me that the alternatives do not:

  • electronic-ink display – while the page-turning flicker may be annoying to some, I continue to find it a very easy medium to read, particularly in bright light
  • battery life – with 3G turned off (except for when I am making a purchase), I get two weeks or more between charges. The iPad offers an impressive 10 hours, so the gap is closing, but the Kindle retains the lead for now. Clocking in at only 2.5 hours, the TEGA remains a laggard on this score and it cannot be a serious contender until this improves.
  • price –  compared to prices of portable computers only a few years ago, with prices starting at US$499 the iPad looks cheap. But at US$259, the Kindle is a lot cheaper. Of course, it cannot do what the iPad can do, but if you are after an e-book reader (as I was) that may not matter. The TEGA is closer to US$1,000 (A$1,187.98) and at that price looks expensive.
  • continuous partial attention – on a computer I cannot help flicking from email to twitter to following links, so perhaps I suffer from a touch of CPA. What this means is that a single-purpose device like the Kindle is ideal for me and offers a better, less-interrupted reading experience. It may seem absurd to some to want to impose restrictions on a device, but in this case it is an advantage for me.

As a bit of a gadget-obsessive, I may well succumb to the lure of an iPad one day (perhaps 2.0), or indeed a descendant of the TEGA or something similar. For now though, I will happily continue reading on the Kindle.

* In the interest of full disclosure, I should point out that if enough fellow-bloggers post on the topic of the TEGA, Tony will have the option of purchasing a heavily-discounted unit.

Cash rates and mortgage rates

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At 2.30pm this afternoon, the Reserve Bank of Australia (RBA) will announce whether or not they will be changing the official cash rate. The bank began increasing the cash rate just over a year ago and since then it has risen by 1.25% to its current level of 4.25%. Most observers in the financial markets expect the RBA to lift the rate another 0.25% today, pointing to last week’s inflation figures as one of the key factors. One of the RBA’s stated objectives it to attempt to maintain “an inflation rate of 2–3 per cent, on average, over the cycle”. That phrase “over the cycle” gives the bank a fair amount of wriggle room, nevertheless it will certainly be concerned that the inflation rate for the March 2010 quarter was 0.9% (or 3.6% on an annualized basis). The RBA uses a number of smoother measures of inflation that aim to strip out some of the volatility in the headline inflation numbers. One of these, the “trimmed mean”, is widely considered to be one of the bank’s favourite smoothed measures and the March quarter reading has now nudged outside the 2-3% target band.

Australian Inflation (2003-2010)

However, the point of this post is not to speculate on the likelihood of another rate hike, but to respond to a query from a reader about the link between the RBA official cash rate and mortgage rates.

In Australia, most home owners have “variable rate” mortgages, so their interest rates can go up and down over the life of the mortgage. It is possible to lock in “fixed rates”, although typically the fixed rate periods only last from between 1 to 5 years. In contrast, the most common mortgage product in the United States is a 30 year fixed rate mortgage, which certainly takes away a significant element of risk for borrowers. An indication of just how significant this risk can be is evident in the fact that the US “sub-prime” mortgages at the heart of the global financial crisis were not fixed rate mortgages and big increases in interest rates tipped many borrowers into default.

The United States aside, variable rate mortgages are very common around the world. What is rather unique to Australia is the way in which rates can vary. In most countries, variable rates are set relative to a standard published benchmark. Since the point of a variable rate is to allow lenders to increase (or decrease) what they charge borrowers as their own short-term borrowing costs change, these benchmarks are typically short-term market rates such as surveyed inter-bank lending rates (typically a 1 month or 3 month rate) or perhaps the official central bank cash rate. These central bank rates apply to very short-term borrowings, typically applying for somewhere between one day and one week (for example, the RBA cash rate is an overnight rate), but have the advantage of not moving around too often. A mortgage-lender might then quote their mortgage rate as, say, 2% over the benchmark rate.

In Australia, things are a little different. The standard variable rate is a so-called “discretionary variable rate”. Put simply, this means that the rate can be whatever the lender wants it to be. Try explaining that to anyone from another country and they would be horrified (I can speak from experience here), but in Australia we seem to have become accustomed to giving all this discretion to our lenders. The usual justification for this approach is that competitive pressure would stop a bank abusing the power inherent in that word “discretionary” and in practice all the banks move their rates in line with the RBA cash rate anyway.

Of course, since the onset of the global financial crisis put pressure on funding costs for banks, this link between the official cash rate and mortgage rates has broken down. Back when the RBA was cutting rates, banks were cutting mortgage rates by less than the RBA cut and, on the way back up, they have been hiking in bigger increments than the RBA*. Some have even increased rates “out of cycle” (i.e. independently of the RBA cash rate movements). Once upon a time, the then Treasurer Peter Costello said that any bank not passing on an RBA cut in full was a “bastard”. Things are different now and if the RBA does indeed increase rates today and you have a mortgage, do not be too surprised if your mortgage rate goes up by even more. If you don’t have a mortgage, try not to gloat. It is unseemly.

* UPDATE: as noted in the comments below, the RBA has estimated that mortgage rates have increased by around 1.3-1.4% more than the official cash rate.

Gigabang for your buck

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This week Fairfax reported on Australia’s broadband pricing “war” in an article appearing in both the Sydney Morning Herald and the Age. The publisher thoughtfully spared online readers the egregious chart that it foisted on readers of the paper editions. Judging from this junk (to use the official adjective for low-quality charts), these newspapers should stick to journalism and steer clear of graphics.

The chart in question was brought to my attention by Mule Stable regular @zebra, who also kindly scanned it (and devised the headline of this post), allowing me to reproduce it here. It shows the pricing of a number of broadband internet plans offered by the four largest internet service providers (ISPs) in Australia.

Terribly designed chart showing prices vs download limits

Chart from print edition of The Age (29 April 2010)

It is a busy chart, made difficult to read by a number of ill-advised design decisions:

  • the horizontal axis reads from right to left rather than the conventional left to right
  • although labeled “Price vs Download”, price is on the horizontal axis, again violating convention*
  • repeating the ISP label for every point adds unnecessarily to the busy-ness of the chart and it also makes the legend redundant
  • labeling each point with the download limit (although not the price), adds more unnecessary ink

These conventions are arbitrary: we could just as well have developed a tradition in the West of reading from right to left, for example. But once a convention is in place, you have to have a very good reason to break with it. Otherwise, you end up making your chart harder for readers to interpret for no good reason.

But perhaps the biggest weakness in the chart is the labeling of the ISPs. Each has its own colour, but this is not enough for the eye to naturally group them together, which makes it hard to track the pricing trend provider by provider. This is easily addressed by connecting the points for each ISP with lines. Once this is done and the other short-comings are also addressed, a couple of anomalies in the data leap out immediately. Compared to their other plans, the Optus 100GB plan and the TPG 150GB appear dramatically over-priced, costing more than other plans that offer more data.

Improved chart of ISP plans $ v GBImproved version: Price vs Download limit

Of course, this phenomenon was there in the original chart, but it was hidden. So much so, that the journalist does not appear to have noticed at all as it went unremarked in the article. This is a good example of the power of good charting technique.

There are a number of possible explanations for the anomalous data points. They could simply be errors, although it is certainly not impossible (or perhaps even unlikely) that ISPs have illogical pricing policies. A more likely explanation is that the data includes apples and oranges: the higher-priced plans may be bundles offering additional services such as VOIP that are not included in the other more basic plans. Perhaps if Fairfax had done a better job on the chart in the first place, the journalist may have been prompted to answer this question for us.

* Typically “dependent variables” (the y of “y versus x”) appear on the vertical axis and “independent variables” on the horizontal axis.