SMART Letter #57
NO FIBER GLUT IN MY NEIGHBORHOOD
June 18, 2001
SMART Letter #57 -- June 18, 2001
Copyright 2001 by David S. Isenberg
isen.com -- "innovative as an orthodox undertaker"
email@example.com -- http://isen.com/ -- 1-888-isen-com
> There's No Fiber Glut in My Neighborhood!
> If It's Broke, Don't Fix It
> Smart Remarks from SMART People
> Mike Davey on Fiber Depreciation
> Steve Goldstein on interconnecting Customer-Owned Networks
> Robert Berger on Microsoft's plan for Info-Dominance
> Conferences on my Calendar
> Copyright Notice, Administrivia
THERE'S NO FIBER GLUT IN MY NEIGHBORHOOD!
The articles in today's Wall Street Journal ("How the Fiber
Barons Plunged the U.S. Into a Telecom Glut") and today's New
York Times ("Once Bright Future of Optical Fiber Dims") almost
sound as if they were written by the same person. Oh, woe, woe,
woe, the future of telecommunications is dark, dark indeed, the
reader is led to conclude.
These tales remind me of the Great Depression story of dairy
farmers dumping their milk in the gutters while people starved.
The problem is how to get all that bandwidth to us bandwidth-
starved regular folks. The people that need it will gladly pay
for it -- at the right price, of course. If it is really
available, of course. Last I checked, 100 million U.S.
households times 12 months was a multiplier of 1.2 billion. Last
I checked, people were still buying DSL and cable modems at
record rates, even though these half-fast decade-old technologies
have serious deployment and performance problems.
At AT&T, around the time when the Telecom Act of 1996 was being
debated, dealt, whelt and finally passed, there was talk of
"rational competition". Rational competition was genteel -- it
was small-club insider competition, incremental competition,
compete-and-then-have-a-round-of-golf competition. "Irrational
competition", by extension, was the kind of competition where
some companies actually lose and go out of business.
The problem is not fiber optic technology. It has nothing to do
with the fact that only 2.5% of the fiber is lit. The problem is
that the incumbent telcos can't keep up. Yesterday's leading-edge
technology is today's stranded asset. Yesterday the telecom
incumbents could charge $4.95 a month for Caller ID. Today, caller
ID is just ten free bytes of all-you-can-eat data. Yesterday Phil
Anschutz and Joe Nacchio built a brand new long distance network
that collapsed the price of long distance. Today metropolitan
fiber threatens to give every house more bandwidth than a Central
Office for a few hundred bucks a month -- or less.
"Slooooowww dowwwwwnnnn," the telcos say. The New York Times and
the Wall Street Journal put the story on Page One. What's good
for SBC and Verizon is good for the country. The United States
of America can't afford to let The Tried And True Telephone
The problem is hurtin-puppy investors. Not just the little
puppies, big dogs too. Markets move in boom-and-bust cycles,
according to what everybody thinks everybody else is buying -- or
selling. Level3's intrinsic value wasn't $130.00 a share in
March of 2000 and it isn't $6.00 today. Nortel is no more worth
80 than it is 8. "Owwwwwwww!" say the investors. They're
howling at the moon -- and at their congress-critter -- and at
any news reporter who'll listen.
When we were on the exuberant side of the cycle, it was good to
be irrational. It was like being in love -- you can't be in love
without being exuberant and irrational. Things were
moving towards the new, towards change, towards the future.
Small, potentially disruptive companies found it easy to get
funding -- perhaps a few too many got funded. Now that we're on
the irrationally depressed side of the cycle, it will be hard to
advance at a pace commensurate with technological progress. It
will be hard for small companies to get a foothold. It will be
hard for "irrational" innovation to take root. It is easier for
the big old dour established incumbents to hold back -- and control,
if not strangle -- the future. To hell with exuberance. The
incumbents will insist on genteel, even-keeled, predictable,
I hope that somebody tells Simon Romero at the New York Times
and Rebecca Blumenstein at the Wall Street Journal -- and their
editors -- that there ain't no fiber into my house yet.
Tell them that I'll be happy to pay for it and invest in the
companies that are bringing it to me.
IF IT'S BROKE, DON'T FIX IT.
by David S. Isenberg
Some of the world's best network engineers believe that
the Internet is broken. You can show them half a billion
users and twenty years of double- and triple-digit
growth. You can show them email and ecommerce and eBay.
You can show them a million U.S. kids who rush home after
school to Instant Message (IM) their friends, or a
million Japanese kids who IM on the go. But it doesn't
matter. To some people -- really smart people -- the
Internet is broken and always has been.
In the 1960s, managers of the AT&T Bell System would not
cooperate with early work on packet switching, claiming
that it would never work.
Fast forward twenty-five years. Bob Metcalfe, who
invented Ethernet, declared in 1996 that the Internet
would crash under its own weight. He was concerned that
the Internet had no unified process for circuit
inventories, traffic forecasts, or outage reporting.
Famously, he ate his words -- and the paper they were
written on -- in 1997. To Bob's surprise, the Internet
continues to scale. Meanwhile, Bob's baby, Ethernet,
looks like the earthquake that will trigger the next
tsunami of uncontrolled Internet infrastructure growth.
Sven-Christer Nilsson, the former CEO of Ericsson, in
1998 allowed as how the Internet might be useful if it
had circuit-like latency and a way to bill by the minute.
Perhaps he's still waiting for the Internet to be useful.
Larry Roberts did some of the first work on the Internet
at MIT for the U.S. Government. Now his company, Caspian
Networks, aims to fix the Internet by making switches
that are aware of the content they're carrying. He says,
"Finally the Internet will get Quality of Service with
guaranteed rate service for voice and video plus minimum
rate guarantees for interactive data."
These guys are right. The Internet *is* broken. But
beware the fix!
Somehow Tom Evslin has escaped the expert's desire to fix
the Internet. Evslin helped build the original Microsoft
Network and honchoed AT&T's first public Internet
service. Today he heads Internet telephony wholesaler
ITXC. He says "The fact that the Internet doesn't
'understand' the content it carries is why it can support
applications its designers never envisioned."
Fixes aimed at increased efficiency, Evslin explains,
"will cost incalculably more in loss of future
flexibility and scalability. This isn't just theory;
we've seen how fast the Public Switched Telephone Network
(PSTN) has ossified, precisely because its applications
are embedded in its structure. At ITXC voice on the
Internet is how we make our living. But the Internet
wasn't designed for voice, and we didn't have to wait for
the Internet to be 'enhanced' for voice."
In other words, being broken is the Internet's main
strength. The very fact that it can be broken (or slow,
or traffic-jammed, or . . . ) and still do useful work is
the key to its usefulness, success and scalability lo
these last decades. 'Fixing' the Internet could kill it.
But, then again, maybe that's just what telephone
[This article either has appeared or will appear soon in
The Euronet and/or TelePress Latinoamerica. It is probably
copyright 2001 Advanstar Communications, and it is
(p)re-printed here with the permission of the author.]
Smart Remarks from SMART People
Mike Davey [firstname.lastname@example.org] responding to my claim
in SMART Letter #56 that fiber is a 20 year asset, writes:
"Level 3 believes fiber has a SIX to SEVEN year life.
And Level3 thinks this has tremendous implications for
those who believe otherwise."
Steve Goldstein [email@example.com] writes:
"I do not disagree with the story about customer-owned
networks [in SMART Letter #56] at all. But I keep wondering
how a process in St. Paul, for example, will be able to
communicate with processes in Tsukuba or Capetown or
Dortmund without something stable in the middle (analogous
to what used to be called the InternetCore). ISP
[confederation]s with global reach could provide this.
"Customer-owned networks that, like neurons, interconnect
dendritically with each other could probably provide
regional interconnectivity -- later rather than sooner.
Maybe the old UUCP model would even o'erleap oceans, though
I cannot envision how self-organized grand scale macro-connects
would provide service of sufficient quality for many needs.
So I keep coming back to the need for ISPs of global reach
and the accompanying control infrastructure (e.g., DNS,
inter-provider MPLS, etc.)."
Robert Berger [firstname.lastname@example.org] writes:
"In your MICROSOFT DOES TELEPHONY [SMART Letter #56] I think
you are giving Microsoft too much slack. Right after I read
the SMART Letter #56, I got DaveNet from Dave Winer.
"Dave Winer is one of the leaders of P2P software development,
a field that is now being co-opted by Microsoft as part of
Hailstorm / Passport. In the past, Dave has always given
Microsoft the benefit of the doubt. I suspect that Dave has
now been 'embraced and extended' by Microsoft. In the latest
DaveNet, he called for the 'corporate death penalty' (beyond
just a breakup) for Microsoft.
"Also see Clay Shirky's overview of Hailstorm and Passport at
It is another explanation of how Microsoft is attempting
to extend its monopoly over our own data and take control
over much of the Internet.
"Yes, its true that the ILECs are monopolists that should
be taken down, but Microsoft is attempting is to be THE
gatekeeper of personal information and content on the
Internet. They must be stopped before they can't be stopped.
"Microsoft excels at the ability to smooth talk the innocent,
then squash them when they are no longer needed. Microsoft
is willing to do anything to win. You might want to read
"Barbarians Led by Bill Gates: Microsoft from the Inside"
Jennifer Edstrom, who worked at Microsoft and is the
daughter of Microsoft's main PR person. One of the main
things that I found in the book was documentation that
Microsoft purposefully obfuscates its APIs, file
formats and other interfaces to make it more difficult to
interoperate with (and also force upgrades between versions).
"Even better is "The Microsoft File :
The Secret Case against Bill Gates"
Wendy Goldman Rohm.This gives a good historical background
on how Gates initialized his monopoly through backstabbing
and ultimately sucker punching IBM and their other competitors.
The 'common wisdom' is that Microsoft competitors can't just
compete and that Microsoft wins fair and square. But the real
story is that Microsoft was able to consolodate its monopoly
by dirty tricks during the transition from Windows 2 - Windows
3 by using OS/2 as a smoke screen.
"During the early OS/2 time period Microsoft was saying
publicly that Windows was being wound down and OS/2 was
the future, getting all the other independent systems
vendors to put their energy into developing their next
gen products for OS/2. In reality Microsoft was doing
minimal development on OS/2 (guaranteeing it would be
late to non-existent). At the same time Microsoft was
developing Windows 3.0 and Office apps for Windows 3.0.
They then were able to announce Windows 3.0 with a
complete set of Office apps, diss OS/2 and watch their
competitors go down the drain since they had no
development efforts in the pipe for Windows 3.
"Today all Microsoft has to do is stall attempts at
government control until it has achieved enough
ownership/gatekeeping momentum to shape public perception.
Then we truely enter a dark ages of not just computing, but
of entertainment, news, and public discourse, all mediated
"That is why MS should not be cut any slack for having
"cool" technology or "just following the American Dream of
success" or "winning fair and square". They are out to win
and squash anyone who gets in their way."
[Note: Robert Berger is co-founder of UltraDevices and
I am on the UltraDevices Advisory Board. There's no question
in my mind that Microsoft is a ferocious, winner-take-all
er, um, [compet-, pred-]itor. Microsoft is not nice to its enemies,
or to companies with technologies it wishes it had. And the
recently-reported browser capability that lets Microsoft "improve"
websites by marking them up without the owner/author's permission
is chillingly scary. But I still think that one Microsoft will
bring the future faster than half a dozen telcos. -- David I]
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. Gilder Fellers 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 [email@example.com].
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
firstname.lastname@example.org -- http://www.isen.com/ -- 1-888-isen-com
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