SMART Letter #56
June 7, 2001

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() SMART Letter #56 -- June 7, 2001 Copyright 2001 by David S. Isenberg -- "changing its name to Chrysler" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Quote of Note -- William Kennard > The Era of Customer-Owned Networks > Quote of Note -- Henning Schulzrinne > Microsoft Does IP Telephony > Quote of Note -- Jonathan Rosenberg > If It's Funny It Must Be True, by Scatt Oddams > Quote of Note -- Merle Haggard > Shameless Plug for The Moritz Dispatch > Conferences on my Calendar > Copyright Notice, Administrivia ------- QUOTE OF NOTE -- William Kennard "H.R. 1542 is bullshit!" Former FCC Chair William E Kennard at Vortex, May 23, 2001. One man's bullshit is another entity's pork. H.R. 1542, a proposed law now before the U.S. Congress, is blatant pork for Incumbent Local Exchange Carriers (ILECs). It would let ILECs do long-distance broadband services without opening their networks. In other words, it would repeal the keystone of the Telecom Act of 1996. Kennard succinctly expressed how the innovators I know feel about this bill. Officially, Vortex is off-the-record, so after Kennard's speech, I buttonholed him in the hall and asked if I could quote him. He graciously agreed, and added, "I spent too much of my life on the Telecom Act to see it destroyed [by H.R. 1542]" Fortunately, H.R. 1542 will be significantly slowed by the Jim Jeffords-induced change of power in the U.S. Senate. But don't relax; the ILECs will be back for another snort in the trough! -- David I ------- THE ERA OF CUSTOMER-OWNED NETWORKS by David S. Isenberg Here's one way to interpret the telecom turmoil in the stock market: The carrier-services era is ending and we're at the beginning of an era of customer-owned networks. Q: How do you make money with customer-owned networks? A: The same way you make money with LANs. Service providers (and the companies that provide their equipment) will need to defend-to-the-death any monopoly status they might now have, or suffer radical metamorphosis, or die -- and perhaps all three. We're beginning to relate differently to our connectivity. We're beginning to decide ourselves what equipment will light our network, how fast it will run, where the fiber goes, how much route redundancy we want (and are willing to pay for), and what gateways, points of presence and service providers our network will connect to. And just as we own desktops and laptops and palmtops and wrist-tops, soon we will own personal networks and home networks and chunks of metropolitan networks and long-haul networks. When they dig up the street, we'll be able to look into the trench and say, "That's my fiber." We'll look at the spectrum and say, "That's my color." (It's becoming easier to be green.) The act of digging up the streets is becoming passé, if not obsolete. Corning MCS-Road cable packs up to 144 fibers in a 7mm diameter cable. You "install" it by cutting an 8cm slit in the pavement with a circular saw. You kick in the cable, tamp a rubber strip on top and seal the slit with goo. It is up to eight times faster and five times cheaper per route mile than trenching according to Corning. "Impossible!" the Bellheads rant. "This cable is so close to the surface that it'll get cut every few months," they say. Why, we'd need protocols designed to deliver reliable service over unreliable physical media! (Hint: begins with I.) Plus we'd need physical routing redundancy (and automatic fail-over). So two feeds might only be four times faster and 2.5 times cheaper. I'm crying all the way to the High Bandwidth Bank for Savings. There are already eight conduits and who-knows-how-much 864-fiber cable buried next to the Garden State Parkway, about a kilometer from headquarters. Corning's MCS-Road seems like the perfect off-ramp to get that fiber ovah heah. 144 fibers can carry up to 230 terabits per second using today's technology. That's enough throughput for three 64-kilobit voice circuits for every human on earth. (SMART People will check my arithmetic.) But hey, if I had an MCS-Road cable coming down my street, I'd light it cheaply at, say, 100 megabits per second in each direction. Why get greedy when there's more than enough for everybody? The Corning MCS (Micro-Cabling System) product line expands beyond MCS-Road. It includes two different ways to pull cables through drains and sewers, plus cheap and easy splicing, interconnect and repair systems. Get more details at I don't understand why Corning is keeping its MCS products such a freakin' secret. [Note: I have absolutely no business relationship with Corning's MCS unit. My only business tie to Corning is that I was a paid speaker at a Corning CLEC conference this spring. At that conference, I can't remember a single mention of MCS from anybody there -- Corning employee or otherwise -- except me.] Even traditional, trenched, underground urban fiber construction costs are falling below $1000 per fiber/mile. (Note: not a route-mile or a cable-mile, but a fiber-mile.) Some people say **WAY** below, but let's use the higher figure. Fiber is a 20-year asset, so figure $5.00 per month per mile of dedicated fiber -- cost. Price, of course, would be set in the marketplace (if there's sufficient competition to call it a marketplace). Some people who know more than I do say that fiber is but 5% of the cost of access. OK, so maybe it costs $100/month to get a lit, connected fiber into my home. If they charge $200, that'd be a good profit even by telco standards. Some of the non-fiber costs of connectivity include lasers, routers, and radios. Such hardware scales steeply with time and volume. Yet other costs, such as real estate, building entry, reliable power, Internet connections, and networking expertise -- especially networking expertise -- don't scale as steeply, but there are economies of scale nevertheless. [Wait! Here comes the Verizon FTTH crew now!!! Sure, boys, put my 100 megabit jack right there next to my 802.11 hub. Nah, I am hallucinating again. Who slipped the Love Drug into my Kool-Aid?] Verizon isn't going to bring fiber to my house. The ILECs will destroy their core business with fiber. Newer companies will do it. Dropping costs will make it inevitable. Assuming a free market, of course. The cost of expertise is falling slowest. Technologies of network simplicity are the antidote. My flying instructor taught me, "A superior pilot uses his superior judgment so that his superior flying skills are never needed." By analogy, superior networking experts will use their superior network design skills to design networks that don't need superior network engineers to build and operate them. So I think that technologies of network simplicity will advance. Even the Incumbent Local Exchange Carriers (ILECs) want to lower their operations costs. (Whether they'll do what it takes is another question.) Local Area Networks point the way towards radical simplicity. LANs were not designed for esoterically trained telco technicians to optimize scarce infrastructure. Instead, LANs were designed for computer owners to hook up their equipment easily, by themselves. As a result, today the LAN, specifically Ethernet, is the front-runner connectivity model for customer-owned networks. LANs are extending their reach beyond buildings, beyond neighborhoods and campuses, beyond cities. They are driving erosion of the telecom priesthood's prerogative to charge scarcity-based rates for mysterious, arcane services. Telecommunications carriers that can learn a new diet will survive. Carnivorous high-fat diets of vertically integrated services will have to yield to the lean cuisine of pure connectivity. Today's stock market debacle is driven, in part, by genuine deflation in the telecom sector. We're doing more with less. Telco stocks stayed too high for too long given the free-fall of telecom infrastructure prices. Now the air is escaping from the long-haul service balloon. It is five years after Qwest laid the first super-abundant trans-continental fiber-optic route, and four years after The_Death_of_Distance (Frances Cairncross, Harvard Business School, Cambridge MA, 1997) appeared. Ultimately, all connectivity is local. The LAN is pushing out from the building to the metropolitan area. This will take time, but the LAN's disruptive expansion will hollow out and then puncture the ILEC's business model. ILECs will not give up power lightly. They will lobby for new laws. They are experts at using the courts, and state public utility commissions, and the FCC to further their agenda. Their imperative is to delay or derail the commoditization of connectivity. If they succeed, the momentum of the inexorable Communications Revolution will shift to other countries where public policy is more sharply focused on the linkage of communications and economy. If this happens, the U.S. economy will not be a pretty picture. Where there is fiber in the metro area, there is perforce way too much fiber. (Everybody buries more fiber than they need -- when you can buy a 1000x option on future growth for just a few percent of the cost of construction, you do it.) Once the fiber is deployed, its owners are motivated to turn it into a performing asset. This puts more fiber on the market, which drives prices down further. It is already practical and cost-effective for organizations (e.g., the New York Public Library) to own their own fiber-based communications networks. Large and small businesses will follow. Before too long it will be practical for an individual in a fibered-up city to say, "Give me a fiber (or a wavelength) to my ISP, my telco gateway, my bank, my employer, the movie exchange, and the points of presence for my three closest friends. Meanwhile, where there's no fiber, the cost of connectivity will remain relatively high. Here, customer-owned wireless router-radios, a la Rooftop Networks (see "Self-Organizing Network -- SMART Letter #28,, form the network infrastructure. These devices are both access devices and network infrastructure. Most of the time they're relaying packets for somebody else. As Tim Shepard pointed out in his famous MIT Ph.D. thesis, as the radios get closer to each other, transmit power drops, receive sensitivity improves, overall throughput goes up, redundancy (reliability) goes up, and all the elements get cheaper. It's a kind of Moore's Law of unwired space. Rooftop (now Nokia RoofTop) is still a player here, along with startups like SkyPilot and UltraDevices. I'm on the advisory board of UltraDevices because I am optimistic about the way the unlicensed unwired space is supporting innovative commoditized network infrastructure. (3G - - whazzat? My 2G phone can hardly do voice.) Customer-owned networks will bring business changes that won't be easy to understand. We saw the PC getting cheaper and more capable in the 1980s, but only Microsoft understood that the commoditization of hardware meant a value shift to software. Now we see the commoditization of connectivity. We do not know who will benefit or how, though we can make some educated guesses. I'm guessing that the value of the network will accrue to purveyors of high-value services at its edge. Can you spell MICROSOFT? Nor do we know who will pay for this infrastructure. We know (and the markets reflect) that telcos are having a hard time of it. Notwithstanding, we know that broadband connectivity to internetworking is massively useful. If we need it (and the technology exists to build it) it will come, just as sewers and running water and paved streets arrived. Furthermore, maybe it won't come to the United States first -- especially if United States policy does not give it priority. Paul Saffo, the futurist, (there are not many people that deserve this title) says that we tend to overestimate the short-term impact of technological change and underestimate its long-term impact. In a decade, I suspect that we will look back and wonder what took us so long. ------- QUOTE OF NOTE: Henning Schulzrinne "The first challenge is to keep complexity in check." Henning Schulzrinne at Jeff Pulver's SIP Summit, May 1, 2001, describing the challenges of designing Session Initiation Protocol (SIP). Henning is one of the prime movers behind SIP, which will vastly expand the ways we use stupid networks to do people-to-people communications. To understand SIP, think 'HTTP for communications.' -- David I ------- MICROSOFT DOES TELEPHONY Microsoft Windows Messenger announced June 4, 2001 by David S. Isenberg This month I wrote a white paper for Microsoft, "A Brief, Opinionated History and Prospectus of Internet Telephony and Messaging." Find it at Microsoft understands the movement of intelligence to the edge. It's embracing SIP and a lot more. Microsoft is going to do end-to-end Internet telephony, and they're going to do it right -- technically, that is. In fact, the demo I experienced was very cool. What I didn't say in the white paper (and didn't discuss with the Microsoft folks I worked with) is that I think that Microsoft is going to suck the value out of the telephone companies. When Steve Ballmer says that the future of Microsoft is subscription- based services, I think telecom. This won't happen overnight -- it could be a ten-year process. One of Microsoft's core competencies is sticktuitiveness. I think Microsoft has what it takes to pull this off. This is a Good Thing and a Bad Thing. It is a Good Thing because . . . well, you know all the bad things they say about the Microsoft monopoly? Well, the ILECs are much, much, much, much worse. They deserve to have their bubbles popped. (How do they keep getting away with it while Microsoft takes all the heat?) If Microsoft can stick it to the ILECs, good. But it'll be a Bad Thing if Microsoft prices its communications platform (or use thereof) anywhere near what we're paying for communications services today. Microsoft will not only have to be better, it will have to come in orders of magnitude cheaper. I hope Microsoft has solid, robust competition. I'm hoping that other platforms on other operating systems become well enough established that I feel like I have other viable choices! Furthermore, I'm hoping that Microsoft stands by its promises of interoperability. I have had some discussions with Microsoft people on this subject that are probably covered by my Non-Disclosure Agreement with them. I'll just say that these discussions, coupled with what I'm reading about Microsoft in public sources, did not leave me feeling warm and fuzzy. But my bottom line -- near-term -- is that Windows Messenger promises vastly expanded communications capabilities, which is something neither the ILECs nor any other entity on the horizon will ever bring to my desktop. We'll soon be doing radically new things on our desktops that make mere phones look vestigial and obsolete. That'll be a Good Thing, perhaps even a new chapter in the Annals of Disruptive Technology. -------- QUOTE OF NOTE -- Jonathan Rosenberg "Most of the communications applications have not yet been discovered." Jonathan Rosenberg, one of the architects of SIP, at Jeff Pulver's SIP Summit, May 1, 2001. ------- IF IT'S FUNNY IT MUST BE TRUE -- by Scatt Oddams [Note: Scatt Oddams, my cartoonist friend from the old days at AT&T, has offered to do a regular column in the SMART Letter. We'll see whether it *really* becomes regular -- Scatt can be such a flake sometimes! -- David I] Hey, David! I just did my first comic strip in years! Check out Also, you gotta see the toon on the ICANN shenanigans at OK, picture==words*1000, gotta go -- Scatt ------- QUOTE OF NOTE: Merle Haggard "[Music is] a hard game to enter at my age . . . I'd like to have it like it used to be, but there's censorship going on . . . California music was born from the people that came out here in the Depression, the _Grapes_of_Wrath_ people that Steinbeck wrote about. They wound up out here and built houses and beer joints. So what you got here is barroom music from a bunch of sincere, hardworking old boys like Merle Haggard and Buck Owens and Wynn Stewart and Skeets McDonald and people like that who were appreciated by those knock-down, drag-out dancing, oil-field working, cotton-picking people. They've never seen people like that in Nashville. They only hear about them in songs." Country music legend Merle Haggard, quoted in the Edmonton Alberta Journal, April 27, 2001. ------- SHAMELESS PLUG for the MORITZ DISPATCH Speaking of shame, it has been six weeks since I've put out a SMART Letter. Meanwhile, my friend Scott Moritz, the telecom reporter at, has put out some 38 MORITZ DISPATCHes with the latest news (and solid, unbeholden analysis) on Lucent, Alcatel, Juniper, Ciena, Cisco, AT&T and all those other companies we hate and love. Has Cisco hit bottom? Should you trade T for AWE? It's in there. You can get The MORITZ DISPATCH by email for free by asking ------- CONFERENCES ON MY CALENDAR July 1-2, 2001, London UK. World Technology Summit and Awards. I will be giving a keynote speech on the usual topic(s). Twenty-four awards will be made for technologic contributions in almost every human endeavo(u)r. Find out more at October 18-20, 2001, Sarasota FL. Prudential Securities technology investor's conference. Gilder and other notables will be there. I'll be Moderator. In other words, I'll be trying to get the participants to hold down the hype, jargon, positioning and techno- babble so the individual investors in the audience will understand. Some might argue that this'd be like the pot calling the kettle . . . For information, contact Joel Srodes, ------- 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 2001 by David S. Isenberg -- -- 1-888-isen-com ------- [There are two ways to join the SMART List, which gets you the SMART Letter by email, weeks before it goes up on the web site. The PREFERRED METHOD is to click on and supply the info as indicated. The alternative method is to 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 quit 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 -- **