SMART Letter #50
December 26, 2000

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #50 -- December 26, 2000 Copyright 2000 by David S. Isenberg -- "supreme stupidity" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CHAIRMAN POWELL'S FCC -- by David S. Isenberg I'm no fan of President-apparent Bush. I say 'President-apparent' because 'President-elect' is too healing. Gore is no prize though. I was in the room in 1995 when Al karate chopped the podium to emphasize that the Clinton Administration would veto any Communications Act that allowed monopolies to grow stronger. Yeah, right. Tell it to SBC/PacTel/Ameritech and BellAtlantic/NYNEX/GTE. Here's a view of the election I like: As Saint Stupid says, "If it's funny it's true." Which brings us back to W's Washington. Fortunately, some potential Bush appointees get it. Mike Powell, for example. Mike, son of Colin, is an FCC Commissioner, a former member of Joel Klein's anti-trust staff, and a SMART Person. People say that Mike Powell will be W's FCC Chairman. This is good news. Powell gets that it's not "Communications as Usual" these days. He gets that there's something huge and unprecedented happening here, and what it is ain't exactly clear. Powell knows that technology changes are driving waves of creative destruction, and he believes that legislative and regulatory changes should be in response to them. (Contrast former FCC Chair Reed Hundt, who was handy with a political hammer so he saw technology as yet another nail.) People who I trust -- such as Dale Hatfield and Dave Farber who worked with Powell at the FCC -- like Mike Powell. So I'm looking forward to a Powell FCC that materially appreciates what technology is doing, and what it can do. Clearly Mike Powell values the role of new, small companies in wealth creation. In a recent speech (see Mike Powell spoke of innovation and entrepreneurship as "engines of prosperity." And he said that the FCC, "must foster competitive markets, unencumbered by intrusions and distortions from inapt regulations". But tellingly, Powell also spoke of Clayton Christensen's "disrupting technologies" (sic) and Joseph Schumpeter's concept of creative destruction in the same breath. Perhaps it escaped Powell that Christensen radically extends Shumpeter's thinking. Christensen says, "The vertical axis [in a Shumpeter-style S-curve diagram] for a disruptive innovation, by definition, must measure *different* attributes of performance than those relevant in established value networks." Christensen tells of a meeting with Andy Grove in which Grove interrupted Christensen to exclaim, "I get it! It's not the *technology* that's disruptive, it is how the technology disrupts the *business*model*!" Christensen's book goes on to point out that even incumbents can engage in creative destruction when the net effect is to sustain their core business model. Christensen has studied hundreds of technology introductions, and found that incumbent companies are expert at bringing new technology to market if it sustains the existing value proposition, but they are horrible at bringing disruptive technology to market. For example, if we were depending on incumbent disk drive makers to bring us hard disks for laptops, we'd probably still be waiting. Fortunately, regulatory barriers in the computer industry are thinner and more permeable than they are in communications. When Republicans say "pro-business" they're usually talking about big, established businesses (ka-ching!), rather than tiny emerging ones. I hope that Republican Mike Powell understands that progress in telecommunications will not come from the pro-Cretaceous wing of his party. I hope that Mike Powell gets that the Communications Revolution is not just about competition, but about new ways that competition happens. (Supermarkets compete, but there's no revolution there.) The kind of aggressive regulatory forbearance (*and* action) we need from Powell's FCC is the kind that will allow not only new technologies, but new business models too. It would be a frictionless slide for FCC Chairman Powell to play poker with the big boys. It'd be far more difficult for him to preside over their disempowerment. Powell has pledged to remove the encumbrance of inapt regulation -- but from who?. It is a good sign that Powell favors certain new technologies that make new kinds of competition possible. These include deregulated -- and even unlicensed -- forms of radio transmission, and unbundled -- and perhaps even publicly accessible -- rights of way for fiber. The era of Customer Owned Networks is arriving. Once upon a time it was unthinkable for companies to own computers. Computers were too big and expensive. Then, speaking of engines of prosperity, suddenly companies, and then individuals, owned them. We are entering an age in which corporate, and even individual, ownership of networks is becoming practical. But there is a difference -- there was no pre-existing regulatory infrastructure for the age of computers to be born into. Forbear aggressively if you dare, Mr. Powell. Mike Powell's FCC could usher an era in which the engines of networked prosperity are supercharged. Alternatively, he could preside over rampant trampling of small creatures pursuant to dinosaur fights. Here's hoping that FCC Chairman Powell does the right thing. ------- CONFERENCES ON MY CALENDAR February 24 - March 2, 2001, Kuala Lumpur, Malaysia. APRICOT is the Asia Pacific Regional Internet Conference on Operating Technologies, and I'll be giving one of the keynotes. The Asian Internet is on the steepest part of the S-curve these days! For information, see ------- COPYRIGHT NOTICE: Redistribution of this document, or any part of it, is permitted for non-commercial purposes, provided that the two lines below are reproduced with it: Copyright 2000 by David S. Isenberg -- -- 1-888-isen-com ------- [to subscribe to the SMART Letter, please send a brief, PERSONAL statement to (put "SMART" in the Subject field) saying who you are, what you do, maybe who you work for, maybe how you see your work connecting to mine, and why you are interested in joining the SMART List.] [to unsubscribe to the SMART List, send a brief unsubscribe message to] [for past SMART Letters, see] [Policy on reader contributions: Write to me. I won't quote you without your explicitly stated permission. If you're writing to me for inclusion in the SMART Letter, *please* say so. I'll probably edit your writing for brevity and clarity. If you ask for anonymity, you'll get it. ] ** David S. Isenberg, inc. 888-isen-com 908-654-0772 ** -- The brains behind the Stupid Network -- **