SMART Letter #69
In Search of an Operating Model
April 4, 2002
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SMART Letter #69 -- April 4, 2002
Copyright 2002 by David S. Isenberg
isen.com -- "access of evil"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> In search of an operating model for the new network
> Quote of Note: register.com on permacession.us
> Maybe the Democrats will fix it ;-)
> Quote of Note: Jagger & Richards on Copyright Law
> Government policy never was "Hands-off"
> Quote of Note: George W. Bush on Non-Transparent Regimes
> Conferences on my Calendar
> Copyright Notice, Administrivia
IN SEARCH OF AN OPERATING MODEL FOR THE NEW NETWORK
by David S. Isenberg
If you're looking for a practical operating model for the
new network, the hints in the March 2002 issue of the
Gilder Technology Report are hard to find.
I am proud to count George Gilder among my most valued
colleagues. His book _Microcosm_ is a brilliant
synthesis. His _Life after Television_ borders on
prescience. From our first conversation George Gilder has
been a loyal friend to me. He was a prime mover in the
drama that arose from my essay, "The Rise of the Stupid
Network". His willingness to tell big-muck AT&T executives
where to shove it provided inspiration when the time came
for me to do the same. When I left AT&T, George gave me my
first post-AT&T job, the co-authorship of the January 1998
Gilder Technology Report. Loyal to a fault, George has
arranged a speaking role for me at every Telecosm meeting
since the very first.
In addition, I find Gilder's ideological heterodoxy
refreshing -- he appreciates accomplished iconoclasts from
Bill Joy to Michael Milken. That's smart use of spectrum.
But I've always wondered how Gilder can support a
democratic (little 'd') idea like The Stupid Network and
still stay close to folks like Steve Forbes, Charles
Keating and Richard Vigilante. I wonder whether part of
the answer is that George does not appreciate some of the
implications of his own insights.
The latest Gilder Technology Report (March 2002, VII, 3,
subscription required) makes extended comments on "The
Paradox of the Best Network" (which I co-wrote with David
Weinberger based on the original insights of Roxane Googin,
see http://netparadox.com, no subscription necessary).
As is often the case when Gilder edits what Gilder writes,
florid prose covers silty logic. His hairpin turns of
phrase (co-authored with Charles Burger and Bret Swanson)
leave me unsure whether he's agreeing with us or taking
issue. What is he saying? Is "dumbell Dave" an expression
of fondness? Do we have our "own coterie of techno-left
geeks"? Can a factual claim be false?
But no matter. George spelled our names right, so how bad
can it be?
I'm not the only reader who has trouble telling Gilder's
warp from his woof. Danny Hillis pulled on some of the
loose threads in George's latest suit in a Harvard Business
Review review (9/01) of _Telecosm_: "Not only does Gilder
predict that bandwidth will be plentiful and nearly free,"
observes Hillis, "but he also promotes the companies that
deliver bandwidth as good investments. This may seem a bit
paradoxical, as investors usually stay away from companies
that provide an inexpensive commodity." Note that Hillis
wrote this before what Gilder now calls Global Double
Crossing (GXX).
In recent writings, Gilder emphasizes speed of transport,
its falling price, and positive elasticities that let
commodity carriers "make it up in volume", as key to the
Stupid Network's coming marketplace dominance. Meanwhile,
he gives less emphasis to one of his own earlier tenets,
the separation of conduit and content, which is what makes
a network stupid in the first place.
Let me try to make this absolutely clear, so even those of
George Gilder's readers who are used to shrugging off
turgid prose might hope to understand:
A network is stupid when it does not know what it is
carrying. The Internet is an example. It is a network of
multiple, diverse networks. If an owner of one of the
component networks of the Internet wants to add network-
specific features (like call-waiting, for example) to its
own network, these features add no value to how the
network-of-networks operates or to how its users use it.
Features like call waiting can even be a pain in the
posterior -- value-subtracted -- to dial-up Internet users.
Adding intelligence to a network of diverse networks is
very difficult -- you have to implement such intelligence
differently in each of the component networks, and then you
must make sure that all the component networks interact
correctly. It is much easier to add intelligence at the
edge. It is much easier if the network-of-networks is kept
stupid.
In other words, the network-of-networks architecture is
only practical when network functionality is kept simple.
(Note that servers are at the edge, not inside the network
-- a server can be operated just fine without owning wires
or switches.)
Stupidity was a deliberate design decision by the
Internet's original architects (for example, see "End-to-
End Arguments in System Design" by J.H. Saltzer, D.P. Reed,
D.D. Clark, 1984). They were wise enough not to second-
guess how their network might be used. For example, they
resisted putting error checking in the middle of the
network, which resulted in the separation between the
Internet Protocol (IP), and the protocol that does error
checking -- Transmission Control Protocol (TCP) -- denoted
by the slash in TCP/IP. TCP could have been implemented in
the middle of the network, but it wasn't. Instead, it is
an end-to-end protocol, implemented at the edge, and it
works just fine.
If error checking has been entangled with IP in the middle
of the network, recent improvements that increase the
usefulness of the Internet would have been prohibitively
difficult. For example, consider Real-Time Protocol (RTP),
which replaces TCP to make, e.g., Internet telephony
possible. We could invent and deploy another protocol
tomorrow if we had a need for it -- and the core network
doesn't have to know anything about any of them. It just
carries the bits.
This design decision by the original Internet architects
has very little to do with the latest optics or
electronics. It has nothing to do with broadband, lambdas,
petaflops or optical switches. Of course, whizzy
technology helps a network do its job, but it is simply
enabling -- it is not part of the core concept. In
principle, the network-of-networks was designed to operate
via carrier pigeon or smoke signals -- it doesn't need
yottapetateragigamega technology. IP works on any
transport medium.
On the other side of this very same coin, high-tech alone
does not a Stupid Network make. A 3-D high-res
holographic-surround Hollywood movie delivered over a
gigabyte pipe is still a Hollywood movie -- formula
scripts, smokin' product placements, studio rake-offs,
casting couches, Oscars, pay-per-view, copy protection,
hind-brain content and all. If we perseverate on
technology, we'll get "TV on speed," as Lawrence Lessig
puts it, not the intellectually stimulating, one-to-one
world that Gilder once envisioned in his 1989 classic _Life
After Television_.
The network-of-networks is still producing huge wealth,
today's recession notwithstanding. And the reason for this
is that it is a Stupid Network, an end-to-end network. The
winner apps of the last decade -- email, web browsing,
ecommerce, instant messaging, and half a dozen other huge
conveniences that make each person with a net connection
wealthier than they were a decade ago -- were not brought
to market by the owners of the wires and switches.
Furthermore, not a single one of these winner apps requires
more than a few kilobits per second. But each of these
apps required a Stupid Network to get to us -- a network
upon which innovators are free to innovate without
permission from the network owner, a network that provides
immediate -- unmediated -- market feedback, that is,
without a network owner (or superfluous network
functionality) standing between the producer and the end-
user.
Because the network is stupid, its providers cannot compete
on features. They have to compete on price, speed and
availability. The separation of content from conduit makes
"facilities-based competition" impossible. Value gets
added at the edge, which gives the network owner no
advantage. Thus, no network transport provider wins big
(if at all) under any scenario we've thought of that has
both competition and internetworking -- that's the Paradox
of the Best Network.
The telephone companies and cable companies certainly do
understand this. They are busy trying to convince
Congress, the courts, the FCC and the Public Utility
Commissions of the various states to go Forward to the
Past. They want to make the network monolithic again so we
can return to an era of low competition, high margins, slow
innovation and stable "investment friendly" business
models. (Where were the calls for "investment friendly"
regulations in 1999 and 2000?) A monolithic network, even
if it runs the Internet Protocol, and even if it runs at
gigabits per second, is still a monolithic network.
Of course the Best Network is better if it is faster and
cheaper, but the transport technologies that make it faster
and cheaper exacerbate The Paradox. In a normal commodity
marketplace, scarcity makes prices go up, and a smart
player who warehouses the commodity in anticipation of
scarcity can win. But with the rampant technology
improvements of the last decades, there's no scarcity
except in access networks (where there's still monopoly).
Roxane Googin believes that this will soon make ILEC stand
for "I Let Equity Crash".
So how does a network provider make money in a network-of-
networks world? One is left hanging on a Gilderesque faith
in positive elasticities. Network-owning insiders found
positive elasticity to be a weak effect. Creative
accounting worked better. As Greg Kochanski put it in
SMART Letter #31, doing your own laundry is invisible to
economic measurements, but if you do my laundry (and I pay
you) while I do your laundry (and you pay me) then both
contribute to economic growth (even though the same amount
of work gets done). The creative part comes when I book
the revenue for ten years of your laundry in Year One, but
I call my laundry payments to you an investment to be
amortized over 20-years, and I take a loan on the inflated
value of the dirty underwear you're washing.
Holy Marketplace, George! We've all been fooled, except
for Gary Winnick, Phil Anschutz and the like. Nobody's
making any honest money. Further, once the rest of the
crooks are discovered we might not have a network at all.
Or we could revert to the era of Intelligent Networks, with
one or two centralized source(s) of vertically integrated
connectivity-plus-service, a direction that Mike Powell's
FCC seems to favor. But there's a third way -- to separate
content from connectivity by technology and by law -- to
run the former as a common good (and engine of wealth
creation) and the latter as a marketplace. If that's
socialism, then so are the roads that support our
automobile economy, and so is the U.S. Army, which fights
as I write to ensure cheap oil will keep U.S. economic
engines ticking.
The latest Gilder Technology Review acknowledges that
telecommunications service providers are history -- there
are no wireline carriers (and only three service providers)
on its Phoenix-like, Phase II list of Telecosm
Technologies. As Roxane Googin originally pointed out,
their business model is badly broken, and there are no good
new ones in sight. Does the Holy Marketplace ever fail?
Hmmm, lessee, what *did* happen lo these last five years?
Theodore Vail, in a different era, built a monopoly that
gave the United States the best telephone system in the
world. The Bell System lasted 70+ years, which is longer
than most companies, even big ones, even honest ones, last.
A new consolidation of today's network infrastructure is no
longer unthinkable. Implementing it wisely will be a huge
challenge, but as Vail demonstrated, it is possible to run
a monopoly in which service to the public is the primary
mission. Are there more heterogeneous, multifaceted,
organic approaches that could work? I hope so. I don't
know. But with the future of the network at stake, the
question is worth exploring.
George likes to begin his standard stump speech by quoting
Peter Drucker to the effect of, "Don't solve problems,
pursue opportunities." Well, the Stupid Network could
still be a huge creator of wealth, and the opportunity to
build it still exists. The separation of content and
conduit is still the critical, defining characteristic. If
there's a business model, let's find it. If there's not,
there's still no excuse not to build it. Let's get to it.
POSTSCRIPT: DUMB VS. STUPID
Gilder was talking about a dumb network long before I wrote
about Stupid Networks. He keeps jerking my chain about
'dumb' versus 'stupid', and until now I've let it slide. I
concede that Gilder had the *concept* a decade before me,
but the right *word* is 'stupid'. This use of dumb comes
from a mistaken notion -- that people who are 'dumb', i.e.,
who can't speak, are also mentally impaired. But non-
speaking (dumb) people can be quite intelligent. So saying
'dumb' to mean low intelligence is just plain wrong. The
correct word is stupid. And for networks, the right
synonym is end-to-end, which implies that the middle of the
network knows-not and does-not. End-to-end was there even
before Gilder articulated 'dumb'. C'mon, George, let's get
on to more important issues. If you still want to use
'dumb', fine, but from henceforth I'm mum.
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QUOTE OF NOTE: Register.com
"Subject: Show your customers that permacession.us is
made in the USA."
Spam from Register.com, March 28, 2002.
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MAYBE THE DEMOCRATS WILL FIX IT ;-)
by David S. Isenberg
The Democrats aren't any better friends of the new network
than the other party. Half of the Tauzin-Dingell anti-
competition bill is Dingell (D-Mich.). And Senator Fritz
Hollings (D-SC) recently introduced a shameful anti-copying
bill that would cripple computers, suffocate free speech
and negate networks. I'd be embarrassed to be associated
with the party that Hollings and Dingell hail from.
Yet democrats.com, a website by the authors of the first
whitehouse.gov site, does not deny that it speaks for all
democrats. A recent democrats.com article by one of my
coterie of techno-left geeks, Jock Gill (a pretty smart guy
when you pry him away from his Washington buddies), ignores
Dingell and Hollings, misses some big points, and distorts
a few others.
The article is titled, "Overthrowing the telecom monopoly"
(http://democrats.com/view.cfm?id=6420). Why overthrow it
when it is tottering under its own weight? Somebody please
tell Jock that ILEC stands for "Incumbents Letting Equity
Crash". The question is what are we gonna replace the
network with when the monopolies pancake?
Jock Gill says that poverty is a root cause of terrorism.
Historian and author Robert D. Kaplan, who has studied the
breadth and depth of the problem in the Balkans, in Africa
and in the Middle East, refutes that. The hijackers of
September 11 were hardly members of the abject poverty set
-- they came from professional, mostly Saudi Arabian
families, and lived a middle-class life in Europe and the
United States. Kaplan says that terrorism is spawned by
male youths with enough education to have rising
expectations, whose culture is in transition from feudalism
to modernism.
How do you fix terrorism according to Jock Gill? Foreign
(sic) Aid. How do you get Foreign Aid not to fail like it
has for the last trillion dollars and the last 50 years?
Convince developing nations to adopt better telecom
policies. Sure. Gill asks, "How do we get emerging
national economies to scuttle the top down, centrally-
controlled management of spectrum as a scarce resource that
is owned?" Lessee, we (sic) could tell them, "Do as we
say, not as we do." That'd convince them.
Gill does correctly apprehend the link between good
telecommunications policy and economic growth, but if the
U.S. does not have a good domestic telecom policy, how is
it ever going to convince developing nations to get one?
The United States stands on the verge of becoming a second-
rate technological power thanks in part to failed telecom
policy, and the Democrats are as much to blame as the other
guys. Jock Gill should begin by taking the mote named
Hollings out of his eye. Then he needs to take the speck
named Dingell out of his other eye. Then maybe we can talk
about telecom policy.
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QUOTE OF NOTE: Jagger & Richards
"Oh no, doncha copy me no more. The lines around my eyes
are protected by a copyright law" --
From "Doncha Bother Me" by Mick Jagger & Keith Richards,
"Anthem", Rolling Stones, 1966.
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"HANDS OFF" IS NOT THE ANSWER EITHER
by David S. Isenberg
Yankee founder Howard Anderson thinks that the best
government broadband policy is "benign neglect" (see
http://nwfusion.com/columnists/2002/0401faceoffno.html).
He correctly points out that adoption of residential
broadband access (i.e., DSL & Cable data service) is NOT
stalled, that 12% of United States homes now have some form
of it, and that the growth rate is 50% per year or higher.
Clearly the problem is not residential demand or slow
adoption. And I agree with Howard that network providers
should not be seeking a steel-industry-style government
dole at the expense of the greater economy.
So what's the problem?
The problem is at least threefold.
First, we're not starting from zero. One of the reasons
the United States became an Internet leader in the first
place is that the United States did not neglect to fund
government research on networking. Then U.S. government
policy made a sharp distinction between basic and enhanced
telecom services; early ISPs were helped immeasurably
because Internet access was classified as an enhanced
service. That's benign, but it is not neglect. Also, the
United States has a policy of unmeasured local telecom
service -- the absence of per-minute charges was another
positive policy that enhanced and advanced United States
Internet leadership.
Second, current so-called broadband access offerings are
crippled compromises. We have a few hundred kilobits when
todya's technology could provide a more reliable gigabit
for a smaller price. And we have one provider to "choose"
from when we should have five. If we neglect the fact that
we're buying access from an unholy duopoly the result will
not be benign.
Third, the vertically-integrated telco model leads forward
to the past. The Stupid Network is the proven way to
innovation and economic growth. But you can't make money
running a Stupid Network -- see http://netparadox.com. So
whadaya gonna do? Who ya gonna call? Benign neglect will
lead to retrograde ILEC-driven policy.
We need to move forward -- with wisdom, guided by the
interests of end-users and a desire for economic growth. I
wish for a marketplace solution, but history has saddled us
with a highly regulated situation. We have to start where
we are, which is not a benign place, nor does it call for
our neglect.
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QUOTE OF NOTE: George W. Bush
"I worry about a regime that is closed and not
transparent."
George W. Bush, quoted in the New York Times, 2/20/02,
Page 1. He was speaking about North Korea, doncha know.
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CONFERENCES ON MY CALENDAR
April 8-11, 2002. Seattle. VON (Voice on the Net).
On April 10, at 9:35AM, I'll be leading a panel on
"Financing Disruption" that was inspired by SMART Letters
#64 and #65. The panel will feature CIBC analyst Stephen
Kamman, an extremely rare public appearance by Roxane
Googin, Internet architect David P. Reed, and yours truly.
My bottom line is that voice is a diminishingly tiny deal on
The Stupid Network, but it still accounts for a
disproportionate share of revenues. Come for the Googin-
Kamman-Reed show, but stay to get the latest on SIP, the
technology that will disrupt telco voice whether or not we
get Fiber-to-the-X. More info at http://pulver.com/von.
April 18, 2002. Sioux Falls SD. MIDnet/GPN Spring
Networking Conference. If you've never been to Sioux Falls,
you're in for a middle-American data-networking treat.
Sioux Falls is a major node on the network, home to
Citibank's credit card operations, to LodgeNet, the second
largest U.S. provider of entertainment and information
services to hotels and motels, and to Northwestern
Corporation, a multi-glomerate as solid as the Midwest that
(far as I can tell) doesn't use fancy accounting and still
makes honest money. MIDnet is a small non-profit
organization that promotes networking in the Midwest
thought grants, meetings like this one, and other means.
GPN, the Great Plains Network, is the meeting's co-sponsor.
GPN operates a regional internetwork and provides
connectivity to Internet2. For more info, see
http://www.midnetinc.org/conferences.html.
May 21-23, 2002. Boston. Connectivity 2002. A pulver.com
celebration of networks so abundant that they will carry
everything effortlessly. For more information see
http://pulver.com/connectivity2002 or contact Daniel
Berninger, 631-547-0800.
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Copyright 2002 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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