SMART Letter #78
Let 'em Fail Fast, Mr. Chairman
October 21, 2002
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SMART Letter #78 -- October 21, 2002
Copyright 2002 by David S. Isenberg
isen.com - "the beginning of end-to-end"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> Press Release
> Letter to FCC Chairman Michael Powell
> The isen.com trans-Pacific tour
> Conferences on my Calendar
> Copyright Notice, Administrivia
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PRESS RELEASE
TELECOM GROUP URGES FCC: LET TELCOS FAIL FAST
LETTER TO CHAIRMAN CITES "NATURAL PROCESS"
Washington, DC, October 21, 2002 - An influential group of
Internet analysts and business executives today urged the
Federal Communications Commission (FCC) to let failing telecom
companies fail, and "fail fast."
The 41 signatories, led by independent telecommunications analyst
David S. Isenberg, said in a letter to FCC Chairman Michael Powell
that Internet-based technologies are subsuming the value embodied
in the traditional telecommunications networks. According to
the group, "This is causing the immediate obsolescence of the
vertically integrated, circuit-based telephony industry of 126
years vintage. [Telephone company] bonds used to purchase now-
obsolete infrastructure assets have become (or are inexorably
becoming) bad debt."
The group urges the FCC to resist telephone company pressure
tactics to prop up businesses that technological progress has
made obsolete, in order that advances in newer, better forms
of communication not be stifled. Calling the current telecom
troubles "not a disaster, but a natural event," the letter
says a "revolution in productivity and human benefit as big as
the agricultural and industrial revolution" could result.
"Too many business analysts are talking about bubbles and
over-leveraged balance sheets as the root cause of current
telecom troubles," said Isenberg.
E.g., said Isenberg, commenting on the letter, "This confuses
the symptoms with the disease. These things are just symptoms
of the fact that Internet technology has made phone companies
obsolete. If the government tries to treat the symptoms, the
American economy will actually stay sick longer than if the
natural process is allowed to run its course."
The proper course, according to Isenberg, is to write off all
circuit-based telephone assets to reflect their obsolete
value, and re-capitalize the industry with as little
government intervention as possible. "People will continue to
use the existing telephone network for years to come, just as
people still rode in horse-drawn carriages for years after the
automobile was invented. But the government never subsidized
buggy whip makers, and it should not subsidize telcos now."
Included in the letter are four recommendations to the FCC:
+ Resist at all costs the telephone industry's calls for
bailouts. The policy should be one of "fast failure."
+ Acknowledge that non-Internet communications equipment,
while not yet extinct, is economically obsolete and
forbear from actions that would artificially prolong
its use.
+ Discourage attempts by incumbent telephone companies
to thwart municipal, publicly-owned and other
communications initiatives that don't fit the
telephone company business model.
+ Accelerate FCC exploration of innovative spectrum use
and aggressively expand unlicensed spectrum allocation.
Isenberg said that this point of view has evolved over the
last several years among the signers, and has been reinforced
by market activity. "The results of the new Internet
technology on the old are there for all to see in the industry
stock prices. We just want people to think clearly about how
to move forward for the greatest public benefit."
Contact: David Isenberg
Principal Prosultant(sm)
Isen.com
1 908 875-0772
1 908 456 4006
isen@isen.com
(Prosultant is a service mark of isen.com, LLC)
Matt Oristano
President
Alda Inc
1 203 389 7407
matt@aldainc.biz
David Weinberger
Editor In Chief
Journal of the Hyperlinked Organization
1 617 738 8323
self@evident.com
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LETTER TO FCC CHAIRMAN MICHAEL POWELL
The Hon. Michael Powell
Chairman
Federal Communications Commission
Dear Mr. Chairman:
We thank you for your leadership in FCC efforts to understand
the causes of the current telecom debacle, and especially for
convening the FCC's October 7, 2002, Telecom Recovery En Banc
hearing.
We were dismayed that several of the En Banc speakers confused
causes with effects. We believe that balance sheet weakness,
long-haul overcapacity, and even the recent speculative
bubble, are effects, not causes. If we attempt to treat the
symptoms, we risk missing the causes and prolonging the
agony.
We hold that the primary cause of current telecom troubles is
that Internet-based end-to-end data networking has subsumed
(and will subsume) the value that was formerly embodied in
other communications networks. This, in turn, is causing the
immediate obsolescence of the vertically integrated, circuit-
based telephony industry of 127 years vintage. CLEC, IXC and
ILEC bonds used to purchase now-obsolete infrastructure assets
have become (or inexorably are becoming) bad debt. Weak last-
mile competition prevents the most powerful technological
advances from reaching all but a few customers; this is the
largest cause of long-haul over-capacity.
One En Banc participant, NYU Professor Larry White, had views
that seem consistent with ours. He recommends that we let
firms that are failing fail as quickly as possible. We
believe that it would be harmful if government actions
prevent, delay or interrupt this evolution. It must proceed
if the United States is to continue to be a leading
contributor to communications progress, and if its citizens
are to benefit from the technologies that are now available
and the applications that they enable.
The telecom debacle is not a cyclical phenomenon. The
telephone network's technological base, and the business model
under which this old technology thrived, are obsolete.
Recovery is not an option. We can only move forward; how far
and how fast will be determined by our continued freedom to
innovate. Let the United States learn by not duplicating the
Japanese banking experience in the telecom arena.
We need to see the current situation not as a disaster, but as
a natural event; part of a revolution in productivity and
human benefit as big as the agricultural and industrial
revolutions.
Given these views, we urge the FCC to:
+ Resist at all costs the telephone industry's calls for
bailouts. The policy should be one of "fast failure."
+ Acknowledge that non-Internet communications equipment,
while not yet extinct, is economically obsolete and
forbear from actions that would artificially prolong
its use.
+ Discourage attempts by incumbent telephone companies
to thwart municipal, publicly-owned and other
communications initiatives that don't fit the
telephone company business model.
+ Accelerate FCC exploration of innovative spectrum use
and aggressively expand unlicensed spectrum allocation.
Mr. Chairman, we note with gratitude your impatience with
antique regulatory structures, and your attempts to embrace
new technology. Also, we acknowledge the burden inherent in
the FCC's duty to ensure the continuity of communications,
especially basic dial-tone continuity, in the face of such
changes; we are prepared to lend assistance as the FCC
grapples with this issue. Notwithstanding, we urge you to
continue against the inevitable onslaught of those seeking to
preserve an impossible status quo.
Sincerely,
Izumi Aizu, Asia Network Research
Jay Batson, CEO, Pingtel
Robert J. Berger, President, Internet Bandwidth Development, LLC
Dan Berninger, pulver.com
Scott Berry, telecommunications consultant, Darien CT
Michael Bialek, President, InfoComm Inc.
Scott Bradner, Harvard University
Richard Campbell, Worcester Polytechnic Institute
Douglass Carmichael, individual, dougcarmichael.com
Judi Clark, individual, ManyMedia.com
Anders Comstedt, Managing Director, Stokab
Gordon Cook, publisher, The Cook Report on Internet
Timothy Denton, Internet attorney, tmdenton.com
Greg Elin, independent software developer
Tom Evslin, CEO & Chairman, ITXC
David J. Farber, Moore Professor, University of Pennsylvania
Bob Frankston, individual, frankston.com
Dewayne Hendricks, CEO, Dandin Group
Roxane Googin, editor, High Technology Observer
Charles W.K. Gritton, President, Broadsword Technologies, Inc.
David S. Isenberg, Principal Prosultant(sm), isen.com, LLC
Johna Till Johnson, President, Nemertes Research
Peter Kaminski, individual, peterkaminski.com
Shumpei Kumon, Executive Director, GLOCOM
Bruce Kushnick, Executive Director, New Networks Institute
Andrew Maffei, individual, Falmouth MA
Jerry Michalski, sociate.com
David Newman, President, Network Test Inc.
Matthew Oristano, former CEO, SpeedChoice, People's Choice TV
Mark Petrovic, individual, Pasadena CA
Jeff Pulver, founder, pulver.com
Frank R. Robles, CEO, Neopolitan Networks, Inc.
Charles Rybeck, Managing Director, Benchmarking Partners
Paul Saffo, individual, pls@well.com
Doc Searls, Senior Editor, Linux Journal
Clay Shirky, telecommunications consultant, shirky.com
Porter Stansberry, publisher, Agora Inc.
Ted Stout, CEO and founder, The ROI Institute
Brough Turner, CTO and co-founder, NMS Communications
David Weinberger, co-author, Cluetrain Manifesto
Kevin Werbach, technology analyst, Supernova Group LLC
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THE ISEN.COM TRANS-PACIFIC TOUR
[Note: Even though the route is now stable and the timing
is probably stable, not all of these dates or engagements
are confirmed at press time. I'd like to meet as many
SMART People as possible enroute -- if you're free to visit
(and especially if you have something constructive for me
to help with!) please send email -- David I]
+ WED 13 NOV TO SUN 17 NOV: India (schedule starts in
Madras, but mostly TBD)
+ TUE 19 NOV TO SAT 23 NOV: Tokyo (Glocom conference on
21 Nov, other events TBD).
+ MON 25 NOV AND TUE 26 NOV: Singapore, talk at Nanyang
Technological University.
+ WED 27 NOV AND THU 28 NOV: Melbourne, talk at Monash
University
+ FRI 29 NOV: Wellington NZ: CityLink.
+ SAT 30 NOV TO SUNDAY DEC 8: New Zealand, TBD.
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CONFERENCES ON MY CALENDAR
October 22, 2002, Boulder CO. University of Colorado at
Boulder. I'll be speaking to Dale Hatfield's graduate
telecom seminar and guests, 4:00 to 5:20 PM. Contact
CourtneyCowgill@Earthlink.net for details.
October 23, 2002, Berkeley CA. University of California at
Berkeley. I'll be speaking to John Zysman's and Steve
Weber's class, "Governance of the e-conomy" and guests from
the Berkeley Roundtable on the International Economy.
Contact Genevieve Taylor [genktay@uclink.berkeley.edu] for
more information.
November 8, 2002, New York. (Note the correct date is
*not* Nov. 7!) Marconi Foundation Award Conference. Tim
Berners-Lee will get the Marconi Award. I'll be speaking
about the intelligence at the edge that makes the World
Wide Web possible on a panel led by fiber optic pioneer
Charles Kao; My co-panelists will include Andrew Viterbi,
Rashimi Doshi, Len Kleinrock and Tim Berners-Lee. For more
information, contact Darcy Gerbarg, 212-854-7676,
djg46@columbia.edu.
November 11, 2002 to December 8, 2002 -- isen.com trans-
Pacific Tour. See above.
December 9 - 10, Palo Alto CA. Supernova, a Kevin Werbach,
Jeff Pulver collaboration starring Sergey Brin of Google,
Doc Searls, Clay Shirky, and yours truly.
http://www.pulver.com/supernova or
contact Kevin Werbach, kwerb@werbach.com.
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part of it, is permitted for non-commercial purposes,
provided that the two lines below are reproduced with it:
Copyright 2002 by David S. Isenberg
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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