SMART Letter #43
SMART PEOPLE LIP OFF
July 20, 2000
SMART Letter #43 -- July 20, 2000
Copyright 2000 by David S. Isenberg
isen.com -- "Other People's Words (OPW)"
email@example.com -- http://isen.com/ -- 1-888-isen-com
> Quote of Note: Global Crossing Ad Reveals
Continued Content-Conduit Confusion
> Smart Remarks from SMART People
> Miljenko Horvat on moving to Canada,
where the infrastructure is
> David P. Reed on McQuillan & Penzias
>"Ex-AT&T Believer/Employee" on vultures circling AT&T
>"Ed K" on AT&T internal politics
> Guy Ward on other dinosaur companies
>"Sue Tonym" on AT&T's stumbling basic execution
> Jeff Turner on Armstrong's "The sky isn't falling"
> Matt Oristano on Armstrong's "The sky isn't falling"
> Greg Pelton on Robert Young Pelton
> Gary Hughes-Fenchel on war as entertainment
> Jay R. Ashworth on Don Tapscott on Ronald Coase
> Russell Nelson on Don Tapscott on Ronald Coase
> Douglass Turner's view of WAP from Iceland
> Alan Schwartz on a Bell Atlantic management problem
> Adam Rosenberg on much, MUCH worse phone service
> Arthur Einstein's misguided prayer
> Peter Varhol makes David I explain independent events
> Scott Baker's continuing saga with Bell Atlantic DSL
> Peter Cochrane and Ian Dufour get the last word
on 'five nines'
> Conferences on my Calendar, Copyright Notice, Administrivia
QUOTE OF NOTE: from 2-page Global Crossing ad in Wall Street Journal,
June 29, 2000.
"Global Crossing. It's what happens when the most
advanced network on earth meets the world's richest
content. . . . A full range of services that meld
network and applications."
[This is more sad evidence of cable-guy Leo Hindery's muddle-headed
mixing of content and conduit at what used to be the world's most
promising new telco. Will Gary Winnick wake up before it's too late?]
SMART REMARKS FROM SMART PEOPLE:
Comments on SMART Letters #38, #39, #40 and #41
Miljenko Horvat [firstname.lastname@example.org] wrote to announce that
he is moving from New York to Vancouver, BC, where the infrastructure
is (fiber under the building). He says:
"the US is not totally losing us since we will keep
NewspapersDirect's Park Avenue address but it is
certainly true that when you go to Canada and see this
semi-socialist infrastructure, you are simply amazed.
. . . Even on the residential front, I truly have a
choice - I can pick from a few DSL providers, Rogers
[Note: I am not advocating semi-socialism (down, you jerky knee!).
And I *love* the marketplace! But social policy is as given as gravity,
and if we don't have good social policy (i.e., that encourages free markets)
then we'll get bad social policy made by giants who want their sub-optimal
(and sometimes even evil) monopoly protected. -- David I]
From David P. Reed [email@example.com] on Sustaining Technology's Last
Stand -- SMART Letter #38:
"McQuillan is a smart guy - I wish he'd take
firmer positions. He always seems to have stuff on the
one hand and on the other hand, staying safely above the
"Penzias, on the other hand, seems to get it. He
understands the fundamental tradeoff of overprovisioning
and delay. He sees why optimization of every last ounce
of capacity is silly, and why billing in complex ways to
micromanage resources that are ever cheaper is silly."
From "ex-AT&T believer/employee", name withheld by request, on AT&T
Circles the Drain -- SMART Letter #39:
"The vultures have already arrived to dine on AT&T's
carcass. These birds include:
...the whole Internet movement,
...RBOC entry into long distance,
...landline-LD as a dying business model,
...mobile wireless IP and WAP,
...AOL Instant Messenger (especially v5.0 with the
...NextGen IP telcos,
...new ISPs who undercut AT&T's data prices
[Yipes! -- David I],
"AT&T's bloated, redundant, risk-averse bureaucracy
understands it needs to do something soon but still has
momentum and hierarchy working against it.
"Meanwhile, employee morale spirals down. Vested, long-
time (10-15 year) employees are quitting en mass. There
are widespread but 'quiet' layoffs (10 people here, 10
people there). Entire departments are put "at risk".
Employee benefits are shrinking; medical benefits are
much reduced, and legal, vision, prescription, etc. are
From "Ed K" on AT&T Circles the Drain -- SMART Letter #39:
"I, too, am ex-AT&T. I, too, was loyal to the death star,
putting in long hours on projects because I saw how they
could help the company in the long run. Then I saw my
recommendations ignored until, in one case, the infamous
McKinsey consultancy made the same recommendations I
made two years earlier -- these, of course, were
implemented with dispatch.
"Internal political considerations made it too risky for
upper management to listen to AT&T employees. Once I saw
someone actually stick their neck out against upper
management's wisdom, and the risk paid off. Then the
same upper management that had previously trashed the
idea jumped in to take credit for it.
"The rest of AT&T liked to criticize the Labs for
figuring out solutions to the 9th significant digit. But
no, the problem clearly was inept management."
From Guy Ward [firstname.lastname@example.org] on AT&T Circles the Drain -- SMART
"The analysis does not just apply to AT&T; other
dinosaur companies are in similar trouble.
"I just left [a European telecom equipment manufacturer]
after 15 years. Companies like [this] are faced with
falling margins across a broad range of
telecommunications equipment. They try to maintain
competitive position by scouring the world to gain
access to the new technologies have failed to develop
'This is not a fun time for funds managers -- 'safe'
investments in top companies may be more risky than
investments in dot coms."
From "Sue Tonym" on AT&T Circles the Drain -- SMART Letter #39:
"One thought on your painfully accurate column: It's not
just the grand strategy, it's the basic execution. I
had an atrocious customer service experience with AT&T.
As a result I dropped AT&T long distance.
"Now AT&T has the local cable monopoly, so I'm a
reluctant AT&T customer again. Last week one of the
local channels was screwed up, and my [spouse] called
AT&T customer service. The quality of the experience
resembled that with AT&T long distance. Guess who's
switching to a dish and DSL real soon now?
"While Armstrong and Nagel play with high strategy, they
are letting the fundamentals of operation and execution
rot -- keeping your existing customers happy is basic to
a subscriber business."
From Jeff Turner [email@example.com] in response to the challenge [in
SMART Letter #39] to relate C. Michael Armstrong's "The sky has not
fallen" quote to "The Innovator's Dilemma":
"It's a classic case of alternative, supposedly inferior
technologies (IP telephony, email, chat and voice chat,
instant messaging, etc.) beginning at the fringe, then
moving mainstream. It's only a matter of time before
alternative voice technologies begin to appeal to AT&T's
most lucrative customers. Then AT&T will be left with a
network of buggy whips on a packet autobahn.
"Soon there will be no need to pay for two separate
connections, one for high-speed data and and one for
telephony. Local and LD telephony will become less
valuable elements in a bundle, but AT&T won't be able to
raise prices on cable modem service because alternative
high-speed access will be available.
"The final kicker: no way can AT&T get near the cable
customer counts they told Wall Street last winter (and
reiterated [in early May]. They don't have automated
order processing & provisioning yet, and they don't have
enough installers to meet demand. (They do have demand,
although one can only wonder for how long.) So look for
further stock weakness and executive reshuffling after
they miss their numbers at the end of the year."
From Matt Oristano [firstname.lastname@example.org] in response to the challenge [in
SMART Letter #39] to relate C. Michael Armstrong's "The sky has not
fallen" quote to "The Innovator's Dilemma":
"I dutifully scanned my dog-eared copy of 'Dilemma', only
to find that almost every sentence in the book is
entirely and pungently relevant to Mr. Armstrong's
quote. I'd really like to know if he's read the book.
"Since your contests have entirely elastic rules, I'm
going to stretch them by suggesting more than one quote:
1. p xxiii: 'In their efforts to stay ahead by
developing competitively superior products, many
companies *don't realize the speed* at which they are
moving up market, over-satisfying the needs of their
original customers. . . . In doing so, they create a
vacuum at lower price points into which competitors
employing disruptive technologies can enter.'
"In other words, Mr. Armstrong, we don't need to hear a
pin drop, we don't need to use our 'golden ears'. Your
network quality has overshot the needs of the majority
of your customers, and is being attacked from below by
cheaper and more convenient alternatives.
2. p 84: 'The most vexing managerial aspect of this
problem of asymmetry, where the easiest path to
profit is up, and the most deadly attacks come from
below, is that 'good' management - working harder and
smarter and being more visionary - doesn't solve the
"AT&T's managers are facing technologies that most of
them thought were toys a few years ago. And they still
believe that the key to selling more long distance at
the highest price is to have the most exquisitely
wonderfully best long distance network in the world.
3. p 110: 'The conclusion that a single organization
might simply be incapable of competently pursuing
disruptive technology, while remaining competitive in
mainstream markets, bothers some 'can-do' managers
[who] maintain their competitive intensity in the
mainstream, while simultaneously trying to pursue
disruptive technology. The evidence is strong that
such efforts rarely succeed; position in one market
will suffer unless two separate organizations,
embedded within the appropriate value networks,
pursue their separate customers.'
"This is what Armstrong is trying to say he's doing,
using "separate" organizations. But AT&T Wireless has
disruptive issues of its own borne of ignoring CDMA, and
the Net2Phone deal is grasping at straws. If Net2Phone
eats AT&T's lunch and erases the main AT&T business of
selling long distance, Armstrong will want to BE
Net2Phone, not have an off-balance-sheet stake in it.
4. p. 54: ' . . . when the slopes [of improvement curves
of old and new technologies] differ, new technologies
that are initially performance-competitive only
within emerging or commercially remote value networks
may migrate into other networks, providing a vehicle
for innovators in new networks to attack established
"I was struck by Armstrong's quote about how *surprised*
everyone was that these new technologies are taking
market share. The steeper upward slope of the disruptive
technology always surprises the sustaining manager, who
looked at it once a long time ago and wrote it off as
From Greg Pelton [email@example.com] on You Can't See *That* on TV --
SMART Letter #40:
"Robert Young Pelton is real. He's my cousin. He gets
into trouble, gets out and likes it. He's just really
[Another SMART Person told me, in person, "Robert Young Pelton is a
liar. I've been a reporter. No way. He's lying." Then when I
inquired further he wrote, "To be fair, he's more a stretcher and an
embellisher (in other words, a bullshitter) than an outright fraud."]
From Gary Hughes-Fenchel[firstname.lastname@example.org] on You Can't See *That* on
TV -- SMART Letter #40:
"Pelton is a bit late with the notion that the future of
war is entertainment. I was born in '54; it is my belief
that television is largely responsible for the way the
Vietnam war was prosecuted (for better or for worse)."
[I didn't fall off the pumpkin truck yesterday either, and in my view,
we're getting better at it. I'm waiting for the next war, where
there's a ground camera looking up at the smart bomb's camera as it
falls to earth. To optimize ratings, the multinational multimedia
companies will show one view on the network of Nation #1 and the other
on the network of Nation #2. The cyber-elite will be able to choose
its view, but it'll probably be watching its own favorite channel: the
market. -- David I]
From Jay R. Ashworth [email@example.com], who comments on my summary of
Don Tapscott's summary of Ronald Coase's work in You Can't See *That*
on TV -- SMART Letter #40:
"Don Tapscott says the major driving factor behind the
continued coherence of corporations is that there is
less friction in transactions inside a corporation than
in those *between* corporations. "I don't think so.
Liability, and by extrapolation reputation, is a bigger
factor. Consumers are more likely to do business with
you if you're General Electric than if you're Joe's
Stoves and Caskets because they perceive you to be more
From Russell Nelson [firstname.lastname@example.org], who also comments on my
summary of Tapscott's summary of Coase in You Can't See *That* on TV --
SMART Letter #40:
"Strictly speaking, Coase won the Nobel Prise for the
Coase Theorem. The Coase Theorem recognizes that every
externality has two parties, and that sometimes the most
efficient solution is for the party creating the
externality to pay the other party to change. Moreover,
IF *transaction costs are zero* (which they never are in
the real world -- it would be like friction vanishing)
the free market will always come up with the most
efficient solution regardless of the starting state.
"That's a sublime theorem. It totally changed the field
of economics, and was definitely worthy of a Nobel
Prize. Nowadays ordinary mortals like myself can say
'Well duh', but isn't that true of every great
"I've been teaching myself economics for four or five
years now. The overwhelming conclusion is that you need
a stupid network -- that central planning cannot work
well. The communication and decision problems kill you.
By the time you ship in all the information, make the
decision, then ship it out again, all your inputs have
"You want to hear my prediction? That QoS will NEVER work
as anyone is currently architecting it. QoS is not a
protocol problem. It is not a technical problem, even.
It is an economic problem, and ONLY an economic solution
can fix it.
"The key thing to understand is that QoS does not
manufacture new network resources -- it merely denies
access to some."
From Douglass Turner [email@example.com] on WAP:
"I spent eight mostly joyous years doing R&D within the
cozy reality distortion field of Apple Computer. I am
currently based in Scandinavia (Reykjavik, Iceland)
where I am witnessing first hand the mobile phone
"Some fun facts from the mobile phone scene in Europe:
* Every month more the one billion (1,000,000,000) SMS
messages are sent. SMS is the neccessary precursor to
WAP that educates the public to the idea of using a
mobile device for data in addition to voice. It is
also easy to architect Internet services to use
either/or/both WAP and SMS.
* Essentially every young male in his twenties in
Scandinavia has a mobile phone. If you are young and
breathing in this part of the world you (or one of
your crew ) has a mobile phone permanently fused to
one of your hands.
"It is quite a treat to snoop on the distinctly non-
American mobile phone phenomenon. It is spooky to go
back to the Valley and see how utterly broken the mobile
phone scene is (and will remain so for *years*). Weird.
"As an expatriate and former Silicon Valley American, I
have my own ideas on how things will play out and would
like to hear what other SMART-ies have to say on the
subject. There are some serious dumb/smart network and
net/bell head issues that need to be resolved here.
[Yeah, wait 'til the automobile-dependent U.S. public starts surfing
the web and retrieving its email from behind the wheel. It'll make the
tobacco companies look like good guys. -- David I]
From Alan Schwartz [AlanSchwartz@PolicyFutures.com] on The Myth of Five
Nines -- SMART Letter #41:
"My little network reliability story discloses a
management problem. This week my phone service went out
on Monday. This is my primary home number and my DSL
line. Nuttin. I call Bell Atlantic. They say they can
have somebody there on Wednesday. I say I bet a crew in
the area messed up my line, as it is not likely that in
the middle of a sunny Monday my service should go out.
They say there is no way to tell where crews are, as
they are dispatched by phone number not address. I
express incredulity, as I assume Bell Atlantic has
access to reverse directories -- after all they ARE the
phone company. I hang up.
"I walk around back and down the alley behind my house. I
find a crew with a raised cherry picker working on the
cable. I tell them my problem. Within 15 minutes my
service is restored. I feel lucky I found them; and I am
peeved at Bell Atlantic.
1. Without my intervention I would have been out of
luck for 2 days.
2. I saved Bell Atlantic from sending out another crew.
Why is this so hard?"
From Adam Rosenberg [firstname.lastname@example.org] on The Myth of Five Nines --
SMART Letter #41:
"The telephone reliability issue is, I believe, much,
MUCH worse than just the problems you discussed.
"When the UNIX/C silliness spread to the telephone world
in 1986, Holmdel [NJ] switched from an EPLX-based 1A-ESS
to a UNIX/C-based 5E. What started then was a rash of
mis-dials, incorrect dials, and memory leaks which has
persisted to this day. . . . Today I take for granted
that I will have to dial a call a second time once in a
"In Texas we have "metro" numbers. Somebody's phone
number will be "metro 972-123-4567" which means I have
to dial it without the leading one from some area codes
and with the leading one elsewhere. I don't always know
which numbers are metro numbers. That means I must re-
try many 972 or 214 or 817 numbers. Ack!
['Easy to use as a telephone' my ass! -- David I]
"At least when the line is dead, it's dead. But the
creeping meatballism of misconnects, no-connects, and
software-generated wrong numbers would be more terrible
if, as you say, one is having a heart attack."
From Arthur Einstein [AWEII@aol.com] on The Myth of Five Nines -- SMART
"God, I'm glad you are good enough to 'be fair' to Bell
Atlantic. We've had way more service calls than you
have. The lines are so noisy my 56k modem usually gets
24k. Every night I pray for a monopoly to come along
and get my phone service back on track."
[Be very careful what you pray for, Einstein! She might interrupt Her
dice game to grant your wish! -- David I]
From Bill Morrison [email@example.com] on The Myth of Five Nines -
- SMART Letter #41:
"MediaOne took 3 truck rolls to install my cable modem +
phone service and three more to fix it. Local number
portability (LNP) issues are alive & well."
From Peter Varhol [firstname.lastname@example.org] on The Myth of Five Nines -
- SMART Letter #41:
"Your quote: 'If I buy three services on three different
physical layers from three different service providers,
and if each service is two 'nines', then I should have a
six 'nines' probability that one service will always be
"Statistically, your conclusion doesn't necessarily
follow from your premise -- not without further
[Peter raises a good point -- I am assuming that the three different
ISPs are statistically independent. That is, they share no common
mechanisms. Common mechanisms can have the same weak point(s), so
they're prone to common failure modes. When "network effects" take
hold, and Microsoft or Cisco or a given transmission medium gains
dominance that approaches 'monopolistic', then systems become liable to
disastrous common failure modes. In such cases, failures are not
independent, so the probabilities of failure are not multiplicative.
I am making a straw-man assumption that one can buy three modes of
access, e.g., dial-up, DSL and mobile wireless, and access three
different ISPs who use different equipment with different IP stacks and
connect to three different backbones. In this ideal case, the failure
of any given system is a truly independent event.
This, in a nutshell, is why real, multi-party competition is critical
to network reliability! -- David I]
From Scott Baker [email@example.com] on The Myth of Five Nines --
SMART Letter #41:
"You're right about DSL problems. Now that I finally have
my [Bell Atlantic] DSL service up and running, there are
such incredibly long delays between the fast responses
that it is no better than a regular 56Kb modem! It
goes to sleep between bursts of activity. Bursts are
very fast (over 449kbps according to one test site) but
in between there are no bytes sending or receiving at
all. I've taken to running multiple sessions in my
browser so I can do something in one while waiting for a
page to come up in another. For this I pay $49/month?!"
Peter Cochrane [firstname.lastname@example.org], the Chief Technologist of
British Telecom, and a SMART Person, gets the last word on The Myth of
Five Nines -- SMART Letter #41:
"I liked this one! You hit a few hot buttons for sure -
and wireless is universally crap! One point of
clarification: The 99.999% is averaged over all time for
all customers. I wrote a piece a few weeks ago on the
dangers of averages...and you picked up on exactly some
of the points I made...and worse...failures ain't random
as people like to assume ...they are chaotic clustered,
correlated, and causal...
"In my own case I have had this phone line for 16 years
and never had an outage of any kind! I hit 99.999 with
ease! However - I agree - it depends where you live.
In a subsequent email, Peter wrote:
"You prompted me to look this up! The 99.999 refers to
the up time of the switches and major network fabric and
does not usually include the local loop! The USA has a
significantly poorer performance in the local loop
because the majority of the plant is overhead, whilst in
Europe it is mostly underground.
Then in his next email, Peter wrote:
"It is a general design objective that the network should
have an up time of 99.999 - I'll have to look up the
reference . . . "
In his next email, Peter enlists the help of BT employee Ian Dufour,
"Tricky. The net is no help but a trawl through a few
"Valdar's 1990 SPC (Stored Program Control) book (Ch 18)
says, 'The stated requirement for availability of
electromechanical systems was that they should not be
out of service for more than 2 - 4 hours in 20 - 40
years (the exact figure depending on administration and
"As it happens 2 hours in 20 years is 6 mins a year. And
Five Nines is 315 seconds or 5.25 mins a year. So the
origin is almost certainly in the mists of Strowger
time! It doesn't look like it was CCITT/ITU but it does
look like it was switch based.
"(We know local loops never achieved that level - they
were typically 1 fault every 10 years but the outage
time was much longer.)"
CONFERENCES ON MY CALENDAR
September 13-15, 2000. Lake Tahoe CA. TELECOSM. Featuring
George Gilder, Clayton Christensen, yours truly, and a cast of
geniuses, troublemakers, and people who got rich by listening
to George. This thing sells out, folks -- a word to the SMART.
November 5-9, 2000. Rose Hall, Jamaica. Porter Stansberry's
Pirate Investor's Ball, featuring Eric Raymond, Tom Petzinger,
Porter's impressive research director David Lashmet, and yours
truly. Porter is a big-picture guy, a cross between George
Gilder and Tony Robbins, with a nose for leading edge values in
infotech and biotech. Contact Andrea Shaw,
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Copyright 2000 by David S. Isenberg
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