SMART Letter #59
Of Will and Way
August 31, 2001

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #59 -- August 31, 2001 Copyright 2001 by David S. Isenberg -- "no way!" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Of Will and Way > Quote of Note: Tom Nolle > Conference on my Calendar > Copyright Notice, Administrivia ------- Of Will and Way by David S. Isenberg The chasm between today's DSL and Cable Modem services (measured in kilobits) and what today's technology makes possible (measured in gigabits) is deepened and widened by the burst bubble formerly known as the New Economy. Gigabit Ethernet (GigE) technology offers hundreds of times more speed. And it is vastly simpler -- any computer-savvy high school kid can set up a LAN. And it is at least as affordable as current Internet access services. And it is available today (with 10- GigE tomorrow, and 100-GigE in a few years). The spigot of cheap capital was shut off too soon for many fledgling competitive telephone companies to find flight feathers. They made mistakes, to be sure, such as their struggle with DSL and early- generation fixed wireless. Meaningful GigE service, could offer hundreds of times more capability for about the same price (and nurture attendant discontinuous business opportunities). We could do GigE service today if technology were the only issue, but it still seems decades away. But the question hangs heavy in the air: "Who will offer this new service, and how will they make money?" Telephone companies in the U.S. see GigE coming and run the other way. A gigabit-per-second is enough bandwidth to support conventional telephone service for a town of 100,000 people. With GigE service, every customer could offer what the telcos do. In the last decades, telephone companies have seen their value drained by the onrush of new technology, especially the Internet. They do not want new bleeding. They're pretending that DSL is the only game in town. They go crying, "It's hard to implement, we need rate relief," to state PUCs. At a deeper level, telephone companies realize that they can't stop technology. Technology has not been their forte anyhow -- they passed the torch to the computer industry in the early 1980s. So the telcos are fighting in the courts, in congress, in the FCC, in state legislatures and public utility commissions, to stop progress, to effectively repeal the Telecom Act of 1996, to prohibit and freeze out competition wherever it might arise. Sadly, these efforts have been effective. Wherever technology threatens established business, telephone companies have allies. Big Music (the recording industry), Big Entertainment and Big Publishing are most threatened. They want to stop the easy sharing of music, printed matter, and (increasingly) movies and other video that the Internet affords. Similarly, Cable Companies own the current video entertainment paradigm; they are loathe to encourage a new, disruptive entertainment paradigm. Oh, did I say Big Government? The last thing Big Government wants is a popular network that behaves as if national borders do not exist. Right of Way (ROW) is the last barrier to telephone company disruption. ROW is the right to bring a wire or a fiber from the Internet backbone to my house, or to my workplace, or to a wireless access point on a pole in my neighborhood. Telephone companies have ROW and so do cable companies. Other entities that have ROW include the Power Company and the municipal government that owns the streets, and the independent water and/or sewer district that owns the pipes under the street (and deals with the liquids that flow through them). Technology and expertise are no longer barriers to services so fast that they would put telephone companies out of business. Capital markets will recover eventually, but municipalities and independent governmental districts have a secret financial weapon that still works in hard times -- tax-free municipal bonds! The key is ROW. Watch out for laws that keep municipalities, electric utilities and sewer and water districts (and other ROW owners) out of telecom -- eight states have such reactionary, anti-progress laws already. Expect telephone company disruption from your city or town or electric company or, perhaps, your independent sewer and water district. Where there is a will, there is Right of Way. ------- Quote of Note: Tom Nolle "The problem [with the Internet] is that it was devised by a bunch of hippie anarchists who didn't have a strong profit motive. But this is a business, not a government-sponsored network." Tom Nolle, CEO, CIMI Corporation, in "Taming the Wild Wild Web" by Michael Hiltzik, in the Los Angeles Times, July 26, 2001. [Note: Tom Nolle supports the Tauzin-Dingell bill that would free the ILECs from having to open their networks before offering inter-LATA broadband services. Is anybody surprised? -- David I] ------- CONFERENCES ON MY CALENDAR September 12-14, 2001. Lake Tahoe, CA. Telecosm. Apologies to those SMART people who I told "not this year" -- it turns out I *will* be going. I still do not know what I'll be doing at Telecosm, but it is sure to be quieter than in the last few years, perhaps more thoughtful, and certainly different. For information, see 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 []. ------- 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 -- **