SMART Letter #20
May 1, 1999



             SMART Letter #20 - May 1, 1999

            Copyright 1999 by David S. Isenberg

      At we accumulate intellectual capital

           the old fashioned way -- we LEARN it. -- -- 1-888-isen-com




>  Lead Essay: Tiny Telco Captures Krazia

>  Did You Know? (AT&T Headquarters)

>  Product Review: Polycom Soundpoint Pro

>  SMART Comments from SMART People:

      Joe Flower on being slammed

      Jock Gill on "Don't Know Why" politics

      Toni Mack on looking over her shoulder

      Art Kleiner on corporate purpose

>  Quote of Note: Yevgeny Yevtushenko

>  Conferences on my Calendar, Copyright Notice, Administrivia


TINY TELCO PLAYS GRAY MARKET: Internet Telephony Makes Little 

Niche in Big International Marketplace

By David S. Isenberg 

Internet telephony is illegal in Krazia, an actual country 

somewhere between France and India, but that didn't stop 

Roderick Beck from building an Internet telephone company 

there.  Today Beck's six-month old underground telco, with a 

node in New York and one in Kraziville (the capital) is 

handling over 20,000 minutes a day.  He recouped his initial 

$50,000 start-up costs in the first eight weeks.

Beck's interest in Internet telephony began when he was an 

AT&T employee working for AT&T's Chief Economist. Beck tracked 

telecom growth rates to counteract AT&T business unit 

tendencies to generate pessimistic industry estimates that 

would make the unit's own performance look good by comparison.  

In 1997, Beck brags, AT&T Chairman C. Michael Armstrong used 

his analysis to increase a key internal goal, making unit 

executives work harder for their annual bonus.

One of Beck's last AT&T assignments was to prepare a 

"competitive landscape" report.  As Beck worked, his eyes 

bulged at the international impact of Internet telephony. To 

understand the technology and give depth to his report, Beck 

tried out many Internet telephony products and services. 


The plan to start an Internet telco was hatched in a Greenwich 

Village coffeehouse, like many other revolutionary ideas.  His 

Cappuccino co-conspirator, named F.S., was Krazian.  F.S. was 

also an economist and an AT&T employee.  Beck, son of an 

English literature professor, describes himself as "not 

particularly action-oriented." He gravitates more towards 

Shakespeare and Joyce than skiing or baseball.  Until that 

day, his interest in Internet telephony seemed academic.  But 

F.S.'s Krazian ardor and caffeine-kicked persuasion convinced 

Beck, "to take a risk for once, to make a difference."

Beck and F.S. immersed themselves, spending evenings and 

weekends exploring equipment, standards and vendors.  They 

partnered with a major Internet telephony wholesaler, because 

it agreed to send them traffic and more. Its bulk-purchasing 

power let them buy Cisco equipment at a discount. It fronted 

an interest-free loan. It would monitor their network at its 

U.S.-based operations center, and it would send a monthly 

check for the minutes it delivered. In other words, Beck says, 

"the chemistry was right."


Over the next months, Beck and F.S. rented an office in 

Kraziville near the national Internet center, and recruited 

F.S.'s wife's cousin, an engineering student, to run it.


Then they established an account with KTT, the national 

telecom monopoly. They leased a KTT data feed from the 

Internet center, and ordered 60 lines from the Kraziville 

local exchange. So far, KTT has provided facilities with no 

questions.  "All they know is that we're a big customer," Beck 



They get Krazia-bound traffic from their wholesaler via their 

60 Hudson Street, New York, interconnection. Most of this is 

circuit-switched traffic from the biggest U.S. telcos, Beck 

says.  Fortunately, KTT connections to the Internet are over-

provisioned and very lightly loaded.  The quality is so good 

that, "customers don't know it is Internet telephony," he 

says. Most of the minutes the big telcos are sending originate 

as normal, high-priced international calls.

When they were ready to begin service, Beck told his AT&T boss 

that he had to quit, because he'd be competing against AT&T. 

His boss was sympathetic and AT&T was downsizing, so Beck left 

with a nice severance package, which he promptly rolled into 

his new telco.


Today the tiny telco is flourishing, but Beck and F.S. live in 

fear that KTT will crack down.  For this reason, they only 

terminate Krazian traffic. "If we were originating traffic, 

we'd be too visible," he says. "We'd be shut down."  Internet 

fax is legal in Krazia, though, and Beck and F.S. are quietly 

applying for a license to originate fax traffic.

Beck and F.S. also feel the paranoia that comes when 

competition, even though illegal, is intense.  "There must be 

ten or twelve other underground operators," says Beck. "You 

are always playing the pricing game.  There is no peace of 



Recently, Beck saw daily minutes drop from over 20,000 on 

Friday to about 6000 the following Monday. "Another 

underground operator had dropped prices, and the major telcos 

switched," he said.  In hasty conference, Beck and F.S. 

decided to cut their own prices too. Soon traffic was back, 

but margins had become irrevocably thinner.  "Ultimately, 

we'll be happy with 10%," Beck says. 

Beck and F.S. are planning another node in Krazia's second 

largest city, and they are working with a moonlighting KTT 

employee to bring Internet telephony to a neighboring country.  

Meanwhile Beck has found a new day job at a New York 

investment bank -- he's an international telecom analyst.

[This article appeared in the May 1, 1999 issue of America's 

Network.  Copyright 1999 Advanstar Communications.]


DID YOU KNOW . . . that AT&T Headquarters in Basking Ridge has 

110 drinking fountains, 144 restrooms, 3,889 parking spaces, 

33,000 light fixtures, and one helipad?


PRODUCT REVIEW: Polycom Soundpoint Pro

By David S. Isenberg

The three-legged, flying saucer shaped Polycom speakerphone is 

is the de facto standard speakerphone in conference rooms 

these days.  Now Polycom has put their speakerphone technology 

into a desk set -- they sent me one a couple of months ago for 

my review. 

I like it, but only one and a half thumbs are up.  It retails 

for about US$250.  Is it worth it?  Well . . . it depends.

When the sound on the speakerphone is good, it is great.  It 

is excellent full-duplex sound.  The conversation flows almost 

as if you and your caller were in the same room.  As a result, 

I use the speakerphone for most of my calls.


But sometimes there is annoying feedback.  I've heard both 

low-end grumbling noise, and high-end squealing.  These get 

worse when I turn the volume up, which I must do sometimes.  

Polycom says that they've fixed these problems in a new 

software release, but I have not tried it.

To dial, you just start punching numbers, and the phone is 

smart enough to go off-hook, get dial tone, and then play the 

tones you dialed.  But it is disconcerting that it does this 

about three keystrokes into the dialing sequence.  It'd be 

better if I could key in the whole sequence on hook and hit 

'talk' (a la cell phone).  Alternatively, I'd like it to go 

off hook immediately, on the first keystroke.


The handset, on a standard coiled cord, is unremarkable.  For 

a phone this expensive, you'd think it'd come with a 900 MHz 

spread-spectrum handset. There's a headset jack in the back, 

but none of the headsets I have (I tried three) fit it.

It is smart enough to know to go off hook when you hit 

'redial.' But speed dialing is always a three-digit sequence.  

Furthermore, the 'speed dial' button sometimes jams -- the 

phone is too expensive for cheap glitches like this.  And 

remembering 99 numerical speed-dial codes? Fugedaboudit!

It has a two-line display and caller ID with a 99-number 

memory, but no memory for outgoing numbers. At this point in 

Moore's Law, I expect that a high-end phone should have the 

ability to cache outgoing numbers for review and re-dialing.


If somebody'd build a desk phone with my cell phone's features 

-- plus a speakerphone like this one -- now that'd be some 


Bottom line: If you need a very, very good desktop 

speakerphone, or if you need a three-line phone, or if you 

want a prestigious-looking piece of hardware on your desk, get 

the Polycom Soundpoint Pro. But there's still a lot of room 

for improvement.


SMART Comments from SMART People:

Joe Flower writes . . . 

        "I had to laugh about your Sprint experience - in 

   part because I had exactly the opposite experience. I had 

   no intention of becoming a Sprint customer, but I got 

   slammed . . . I had heard of slamming before, but the 

   experience left me amazed. In what other business can I 

   buy something without doing anything, without even 

   hearing about it, under terms that are completely of the 

   seller's choosing and then be billed for it in a way that 

   hides who I am supposedly buying from? . . . Result? 

   Sprint goes on my very short list of companies I will 

   never buy from if I have any alternative. Life is too 

   short to test out whether that was a fluke or a pattern."


Jock Gill writes . . .

     "I urge you to extend [thinking about "Know-Why"] a 

   bit more towards the political implications . . . The 

   problem with far too many of us today, [Democrats and 

   Republicans], is that we are clueless about "know-why".  

   We are reduced to the same old message from long ago when 

   we actually believed we did "know-why".  But today, our 

   story map, our sense of mission and vision, [is] in 

   tatters and [is] clearly not very useful in the world 

   around the corner. Kosovo is a prime example of the price 

   we pay for out dated missions and visions with no clear 

   know-why." [Jock Gill is a fuel cell advocate and a 

   member of the extended Clinton brain trust -- David I]


Toni Mack writes . . . 

   "[SMART Letter #19] struck home.  In the early 1980s, 

   when I was starting my career and long before I had any 

   clue (so to speak) about the communications revolution, I 

   looked around at the laid-off autoworkers and 

   steelworkers who had thought they had jobs for life and 

   got nervous.  I made a mental note always to watch out 

   for trends that could render my job obsolete.  So far I 

   haven't found it.  Even if, God forbid, this new 

   revolution sucked Forbes magazine under, there would 

   still be a need for content providers--especially for 

   those who can assemble and sort through a mess of 

   information and tell you the cogent points you need to 

   know, as you do.  But I'm still looking over my shoulder 

   and will until I no longer need or want to be employed." 

   [Toni writes for Forbes magazine -- David I]


Art Kleiner writes . . .

        "Your latest piece on "Know-Why" reminded me that, 

   in my opinion, all statements about corporate purpose 

   (including all the ones you name, plus return on 

   investment to shareholders) boil down to two purposes. 

   And as far as I can tell, all corporations have these two 


        "Purpose 1. To act on the world, and thus make it 

   better (according to their lights). Even a cigarette 

   company is trying, in the product it sells, to change the 

   world for the better. After all, if it weren't for 

   cancer, cigarettes would be one of the great civilizing 

   amenities. (If you doubt that, reread the Lord of the 

   Rings). Every company, deep in its heart, is trying to 

   make the world a better place.

        "When I tried to argue this case at NYU-ITP, [that's 

   New York University's excellent Interactive 

   Telecommunications Program, where Art teaches -- David I] 

   one of my students argued back to me, "Finding a need and 

   filling it is not making the world a better place." But I 

   disagree.  Her example was a marketer of drugs that 

   temporarily make people feel better but hurt them in the 

   end. Yet at the core of the human urge to act, is the 

   cognitive dissonance that allows people to tell 

   themselves, "No matter how harmful the product I sell is 

   reputed to be, it is still doing good."

        "The point being that if you want to reach someone 

   who works for a corporation, you cannot do so unless you 

   are attuned to the way in which they think they are 

   making a better world...

        "Purpose 2. To make life really great for the people 

   who are "members." In the years after World War II, the 

   "members" came to mean everyone who works for a company -

   - executives, managers, lower-level managers and 

   administrators, and union members. (The unions 

   effectively negotiated themselves into becoming members, 

   which is why managers hate them so much.) The definition 

   of "membership" is a bit circular, but there's no way 

   around it -- a member is someone working for the company 

   whose welfare cannot be ignored by the corporate 

   executive decision-makers.

        "The history of corporations since 1973 is a history 

   of redefining "membership." I think of this movement as 

   "Welchism," because Jack Welch is the best-known 

   redefiner of membership. A member of GE is no longer 

   "everyone at the company." It is now, "anyone who 

   maintains winning performance."

        "This is not necessarily a bad thing, at least if 

   you think of your company as a machine, but it's shocking 

   to people who assumed, throughout their careers, that 

   their welfare was important to the company. You can work 

   for a company all your life and still not be a member, 

   and you can parachute in (if you strike a good enough 

   deal) as a member from Day One. The difference between 

   these two roles will be felt, by you and everyone else, 

   in every moment of every day.

        "Why is return on investment to shareholders 

   important? Because shareholders, by withdrawing equity or 

   selling stock, can make life worse for the members -- who 

   typically own stock or have their positions and decisions 

   subject to approval by the board.

        "Every company balances these two purposes. At 

   heart, if you lose sight of the first purpose, all the 

   "membership" in the world won't make you feel good about 

   working there. And if you lose sight of the second 

   purpose, you will (rightfully) feel exploited by the 

   system you work for. If you lose sight of both purposes, 

   then you are effectively not working for a corporation at 

   all -- you are working to please a boss, who is in touch 

   with both of these purposes and is simply using you.  

   Your purpose is then to make the boss happy, but it has 

   nothing to do with the company, and probably more to do 

   with the ways you learned to get along while growing up."  

   [Art Kleiner is the author of "The Age of Heretics," one 

of the best books about corporations I have ever read.]


QUOTE OF NOTE: Yevgeny Yevtushenko

"[I]n my opinion, the only correct position is simultaneously 

pro-Serbian and pro-Albanian; that is, pro-human.  We must not 

confuse people with extremists . . . The endless procession of 

completely innocent Albanian refugees moving across the 

television screen appeals to the mercy of humanity.  But the 

burning houses of completely innocent Serbs appeal to it 

also." [From "History Returns to the Scene of the Crime," by 

Yevgeny Yevtushenko, New York Times, May 1, 1999.]




May 23-26, 1999, Washington DC. 7x24 EXCHANGE 1999 

Spring Conference. 7x24 is a non-profit consortium that 

is devoted to always-on facilities of all kinds.  Today

they're weighted towards electric power and financial

services industries, but they want and need more telecom

involvement.  It could be a great forum for us to

learn about reliability from individuals with similar

practices in different industries.  I'll be giving 

the keynote, on Tuesday, May 25, on "Reliability and

the Stupid Network."  For more information, contact

Joe Paladino, 212-575-2275,, website


May 26-28, 1999, Laguna Niguel CA.  VORTEX!!!  By invit-

ation only. (I won't be doing anything but causing prob-

lems in the peanut gallery.) If you have not been invited 

yet, and you can pay the hefty freight (see

write to Bob Metcalfe ( and tell him how 

SMART you are.  Maybe he'll invite you.  (It *will* be good!)

September 27-29, 1999, Lake Tahoe CA. George Gilder's

TELECOSM!  Save these dates . . . I'm putting a high-level

panel together on The Stupid Network.  For more information,




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Copyright 1999 by David S. Isenberg -- -- 1-888-isen-com


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Date last modified: 03May99