SMART Letter #31
December 31, 1999



             SMART Letter #31 - December 31, 1999           

             Copyright 1999 by David S. Isenberg            

    -- "nothing clever to say"       -- -- 1-888-isen-com  




> Y2K Problem Problems

> Quote of Note: Tom Atlee on Why Y2K

> LEC of the Future Has Arrived: Metromedia Fiber Network

> Smart Comments from SMART People on NEW ECONOMY:

    Elliot Cook, Greg Kochanski, Arthur Einstein, 

    Scott Berry, David Conrad, Roger Marks

> Conferences on my Calendar, Copyright Notice, Administrivia



With hours until New Year's Eve 1999, the most trustworthy 

observers of the Year 2000 Problem don't know what's going to 

happen, or how bad it'll be. Here is what some of these 

people, who have been working on Y2K long, hard and directly, 

are saying as the roar of the falls grows louder:

  + Someone who's worked Y2K since 1998 inside a giant 

    NYC financial house told me, "We've fixed everything 

    we know about.  Now we're just waiting to see what 

    we missed."  

  + Charles Halpern, the chair of the Center for Y2K 

    and Society, says, "No one knows how many systems 

    will fail or what the global consequences will be."

  + And Ed Yourdon, who has studied the management of 

    software projects for three decades, says, "No matter 

    how experienced any of us might be . . . the truth is 

    that nobody really knows how this complex event will 

    play out." 

How intently we have observed over the last two years.   How 

little our knowledge has grown. 

One of the biggest Year 2000 Problem problems is that 

institutions have been doing perception management.  

Perception management is based on knowing what the 'right' 

percepts are, regardless of the uncertainty of the situation

or the attendant threats -- perception is reality.  

The US Government, for example, has, to date, succeeded at 

keeping people from doing anything too different (changing 

buying habits, etc.). In business, competitive pressure and 

business-as-usual momentum have motivated companies to divulge 

only bland warnings couched as reassurances.  So it is 

difficult to get hard information upon which to base 

reasonable expectations.  We're left with perceptions.

There's a lot of attention directed towards Muslim terrorists 

and Chinese spies these days.  In dangerous times, a scapegoat 

is an oft-selected object of public attention, especially a 

scapegoat that's 'different from us'.  Be aware, especially 

when 'the facts' reported by the (ever-so-objective) press 

seem to support a conclusion of guilt.  The principle of 

"Innocent until proven guilty" is not just a legalism; it is a 

personal responsibility, especially in these times.  

This morning the TV says that somebody was arrested on 

suspicion of being a friend of (and the same nationality as) 

somebody else who was arrested.  There is no specific threat,

the TV says.  This is scary.

It is clear there will be Y2K failures.  The billing period on 

my latest newspaper bill ends on 2/12/??. Amtrak trains will 

not roll over the rollover.  American Airlines has cancelled 

all New Years eve flights except for the one carrying FAA Head 

Jane Garvey.  (Isn't that special?)

Bill Clinton's Y2K czar John Koskinen says, "The power plants 

WE THINK have done their Y2K work.  We do not EXPECT there is 

any risk."  (Emphasis added.) In other words, he doesn't know 

either (but don't panic).

How bad will it be?  It depends on the tightness of the 

coupling between points of failure and the systems they're a 

part of.  (Charles Perrow wrote the book on complex, tightly 

coupled systems -- it's called 'Normal Accidents'.)  

In addition, it depends on the degree of public anxiety, 

anger, and perceived powerlessness.  I had a call from a 

reporter for a Florida daily who had it on good information 

that HBO sent Time Warner a letter warning that Y2K problems 

might interrupt the HBO feed.  Whether or not this happens, it 

raises an interesting scenario -- what if tens of millions of 

US males don't get their New Year's Day football fix?  It 

could be bad, indeed.

Longer-term Y2K problems are plausible.  Here are a couple of 

hypothetical vignettes:

  + Bhopal around the world:  Systems, perhaps non-critical

    systems, in power plants or refineries or chemical 

    plants (or water purification plants or sewage treatment

    systems or gas pipelines) malfunction.  They don't make 

    some components of these systems anymore, so each devises 

    a 'chewing gum and bailing wire' work-around. 

    Most such work-arounds succeed, but some fail in 

    mid-January, while others last until February . . . 

  + Rolling Stones tickets meets Mother's Day:  A big 

    bank's Visa bills go out in mid-January with a 

    glitch -- every body has been billed for 99 years 

    of interest and late fees.  Or maybe the New

    Year's Eve airline 'slowdown' lasts into 

    January 5 and 6.  Watch the phone system overload.

Or . . . ?

Or perhaps we'll get off easy.  At this point only time, and 

not much of it, will tell.  

Happy New Year,

David I

[Big chunks of the above essay appeared on the 

website.  MetaMarkets is the home of, the world's 

first on-line mutual fund.]



   "Our system has been designed to make Y2K 

    disruptions inevitable.  We do not have the

    institutionalized collective capacity to see 

    what's happening to us, to reflect on that, and 

    to take coherent, appropriate action together.  

    Our governance, market, media and academic systems 

    are too booby-trapped with special interests, fixed 

    ideas, missing feedback loops, and weird mass 

    psychologies to actually generate much collective 


Tom Atlee, via email 9 Dec 99


LEC OF THE FUTURE HAS ARRIVED Metromedia Fiber Network's dark 

fiber changes the way people use bandwidth. 

By David S. Isenberg


Stephen Garofalo's life suddenly synched to the communications 

age when he read George Gilder's "The Coming of the 

Fibersphere," (Forbes ASAP, Dec. 7, 1992). At the time, 

Garofalo had spent 25 years at the head of his family's 

electrical contracting business, but he saw his future in 

Gilder's vision of dark fiber, dumb bandwidth, all-optical 

networks and virtually free communications. He realized that 

he could use his electrical contractor's experience with 

cables, ducts, risers and rights-of-way to build the 

infrastructure of the communications revolution. 

So Garofalo founded National Fiber Network in 1993 to bring 

dark fiber to the local loop. In 1997, it became Metromedia 

Fiber Network (MMFN) when media giant Metromedia bought two-

thirds of the company. The deal catapulted Garofalo into the 

ranks of the Forbes 400 richest Americans. 

Garofalo's idea was to install massive quantities of fiber-to-

the-basement in cities. He would sell rights to use this dark 

fiber by the fiber-mile to all comers on 5-, 10- and 20-year 

contracts. He would not light the fiber. He would not meter 

minutes or traffic. He would let his customers decide how to 

light it and what to carry on it. 


Garofalo explains the economics of dark fiber in a street-wise 

voice shaped more by his Brooklyn upbringing than by his 

recent riches. "Selling dark fiber is like selling customers a 

fifty-story building for the price of the first floor," he 

says. Then, referring to recent dramatic advances in optical 

transmission technologies, he says "If you need more room, you 

add more lights and switches and move upstairs." 

The economics hinge on the fact that glass is not a precious 

commodity. Almost all of the costs of laying fiber are in 

acquiring right-of-way and doing construction. Bottom-line 

costs hardly change whether MMFN pulls two fibers or a dozen 

864-fiber cables. 

Once MMFN figures out its initial routing plan in a city, it 

pulls an irrationally exuberant number of fibers. Plus, it 

installs more empty conduits for future fibers than it can 

imagine ever needing. Once this infrastructure is in the 

ground, the cost of each fiber is close to zero. Customers are 

delighted to buy fibers that are priced far below their cost 

of new construction. 

MMFN's ultimate goal is to eliminate the tariff system so the 

newly abundant marketplace determines the price of 

communications. MMFN's business model is simple; it must sell 

as many fibers as it can. MMFN wants its customers to run out 

of capacity so they have to buy more. Dark fibers, like 

airline seats, won't make money if they' re left empty. 

Some 70% of MMFN's customers are telecom carriers. The more 

carriers there are in a given market, the better. Thus, MMFN 

favors unrestricted competition, low end-user prices and 

widespread broadband access. Its ultimate goal is to eliminate 

the tariff system so the positive elasticities of the newly 

abundant marketplace determine the price of communications. 

Garofalo denies that MMFN's recent deal with Bell Atlantic, 

worth about 20% of MMFN, will change the model. "It is not 

exclusive. We are going to remain carrier-neutral," says 

Garofalo. "If [another large carrier] wants to partner with us 

tomorrow, we can do that too." MMFN will use the infusion of 

Bell Atlantic capital to double its previously announced 

expansion plans so it can be a first-mover in more cities. 


Data-intensive enterprises are MMFN's other big customer 

segment. These include financial service firms, the medical 

sector, and increasingly manufacturing, government and the 

public sector. Nick Tanzi, a senior MMFN VP, observes that 

unmetered bandwidth changes enterprise traffic patterns. 

"There used to be an 80-20 rule of networking; 80% on the LAN 

and 20% on the WAN. That's blown away," Tanzi says. 

The change can surprise even the most experienced network 

managers. An amazing 70% of MMFN's enterprise customers come 

back for more fibers in their first year of service. (Note 

that the original contract is based on the IT staff's most 

educated long-term traffic projections.) "Stuff gets put on 

the net that used to stay on people's hard drives," Tanzi 


Howard Finkelstein, MMFN's president, explains that a DS3 from 

the telco costs $3,000 a month, and a comparable MMFN fiber 

costs about $5,000. But the fiber can be lit at OC-12 - 14 

times faster than DS3 - for $500 more per month (assuming 10-

year depreciation). This works out to about $400 per DS3 per 

month. But OC-12 is already yesterday's technology - OC-48, 

OC-192 and OC-768 will drop the cost of a DS3 equivalent to a 

few bucks a month. With prices like these, and the addictive 

positive elasticities that they engender, it won't be too long 

before DS3 seems unbearably slow.

[The above article appeared in the December 1, 1999 issue of 

America's Network.  Copyright 1999 Advanstar Communications.]


Smart Comments from SMART People on NEW ECONOMY 

(SMART Letter #29):

Elliot Cook ( writes:


   "Roach says that productivity is defined by 'work done 

    per unit time'.  How about productivity being defined 

    as 'results produced per unit time'.  The 'foot-

    pounds' effort is not the issue in a world of 

    information.  Isn't the correct measurement 

    'results [measured in inflation adjusted dollars of 

    profit] produced per unit time'.  What explains the 

    increase in adjusted dollars output/employee and the 

    consequent constant downsizing in the face of 

    increasing revenues and profits?  That's the whole 

    idea.  Said another way; it's output (not input)."

Greg Kochanski ( writes:


   "Using the week as the measuring rod only makes sense 

    for workaholics.  Sure, working more hours lets you do 

    more stuff -- you just cease to have a life outside of 

    work.  Most people don't work because they love it, 

    they work to get paid, and they find their enjoyment 

    outside of work.  For them, there is a very real 

    cost to working more hours: lost time with the kids, 

    cold dinner, no chance to read mysteries, you name it."

And Greg Kochanski makes this observation regarding how old 

economic measures can miss certain economic activity:


   "[One spurious effect on] GNP happens when you take in 

    my laundry, and I take in yours. That boosts the GNP 

    (after all, we pay each other), but we both do exactly 

    the same work we did before."

Arthur Einstein ( responds to issues of 

commoditization and customer loyalty as follows:


   "In this world of a gazillion data points, customers 

    also follow trust.  This may simply look like inertia, 

    but smart marketers put a lot of effort into 

    retention.  Where products and services are 

    undifferentiated, service, experience and relationship 

    are the differentiators."

Arthur Einstein also addresses the IPO-as-Marketing-Event 

concept that Holland Carney laid out at New Economy:


    "Unfortunately, the IPO only happens once.  But a 

    Superbowl commercial can go on forever.  Apple 

    introduced the Mac in 1984 with a spot that ran once, 

    but Jobs and Chiat Day and Regis McKenna had the wit 

    and skill to make that commercial a year-long PR 

    event.  It has never been done better."

Scott Berry ( observes:


   "We're seeing two overlapping productivity effects 

    [that interact] to mask what's really going on. First,

    productivity is indeed skyrocketing.  How anybody can 

    doubt this is beyond me. But second, and 

    counterbalancing the productivity increase, is that 

    competition is getting more intense. When information 

    is nearly ubiquitous, and large corporations are on 

    the same level playing field with garage start-ups, 

    the effort required to achieve each inch of advantage 

    rises sharply. Hence the 70 and 80 hour work weeks, 

    the phone calls during dinner, the Sunday brunch 

    business meetings. 


   "We're left with an increase in 'output' per hour, 

    accompanied by an increased need to work more hours. 

    Thus it's easy for "old school" economists to say 

    there's no "macro-visible" productivity increase, 

    while the "new economists" don't understand why people 

    can't see a productivity explosion. The effect for the 

    average person is more variety, cheaper products, 

    faster growing companies, richer entrepreneurs, and--

    unfortunately--a longer work week."

And Scott Berry also says:


   "I think you hit the mark about IPO 'branding'. One 

    of the major reasons my wife and I bought Qualcomm 

    phones is that we're large -- and very happy -- 

    shareholders. Being an investor encourages one to 

    delve deeper into a company's products to learn just 

    why they're better. If they don't have a sustainable 

    advantage, they're not a good investment nor a good 


David Conrad ( makes the 

following observations about Eric Raymond and the Open 

Source Movement:

   "As ISC [the Internet Software Consortium] was 'open 

    source' long before the term even existed, I felt I 

    should comment:

   "A problem with Open Source apps is that there are a 

    lot of fingers attached to the eyeballs Eric likes to 

    talk about and (arguably unqualified) people like to 

    kibitz.  An analogy would be a scientific peer review 

    system that lets the peers reviewing an article modify 

    the article reviewed.

   "Another problem is uncontrolled 'creeping 

    featurism' . . . unless you have a benevolent dictator 

    (Linus Torvalds for the Linux kernel, the Apache Core 

    group for Apache, Eric Allman for Sendmail, ISC for 

    BIND, etc.).

   "The difference between 'Open Source' and a 

    'Chaordic software organization' is a matter of 

    reward.  I suspect Eric Raymond would argue that the 

    reward opensourcers are after is recognition instead 

    of dollars -- they don't care about the intellectual 

    property they are developing.  Bill Joy doesn't see 

    this as compensation.

   "Linux is Chaordic to some extent, in that 'Linux' 

    is primarily the kernel.  The rest of the goop that 

    folks like Redhat sell are distributions.  Linus sets 

    the standard for the Linux kernel.  Redhat (Caldera, 

    etc.) adds value to that kernel in its own way."

And where SMART Letter #29 ranted, "Why did the Open Source 

Movement get so enthusiastic about re-doing unix? . . . Why 

doesn't it do an Open Source Java-like system?" David Conrad 



   "Don't confuse press hype with reality -- open 

    source movement is all about collaborative 

    development/peer review of source code, not a 

    particular software product.  (L)Unix is just the one 

    that gets all the press, but BIND is open source, so 

    is Apache, Sendmail, etc.


   "Re: Java, see  I'd argue 

    that Java-like systems are far more dependent on 

    centralization and hierarchy.  In fact, one big 

    selling point is that you don't have all those people 

    mucking about with their own systems like they do with 


Roger Marks <> writes:

   "You cite Eric Raymond's concern that 'business has not 

    figured out how to do effective peer review.' One area 

    where business _has_ successfully made use of peer 

    review is the development of technical standards. In 

    my group (I chair IEEE 802.16, which develops 

    standards for fixed broadband wireless access 

    <>), we openly invite 

    contributions on a topic, web-publish the written 

    responses, and then put the presenters on the floor in 

    a meeting. The peer review is handled by debate and 

    voting, both in meetings and by email. 


   "It's very difficult to slip a questionable idea 

    past the group, especially since most of the 

    participants have a direct stake in getting it right. 

    I am convinced that this kind of review is what has 

    made IEEE 802's local area network standards the 

    foundation of so much of the world's information 

    technology business. 


   "This process stands in contrast with the 

    consortium-dictated specifications that have become so 

    trendy. One fundamental problem with those is that 

    they tend to minimize the peer review and go straight 

    to manufacturing. It's a much riskier procedure."

[As an antidote to Roger Marks' belief that the standards 

process is somehow pure, I suggest that he read 'Information 

Rules' by Carl Shapiro and Hal Varian -- twice.  Or as SMART 

Person Don Norman says, "If you do read 'Information Rules', 

then please read the Cluetrain Manifesto afterwards to get 

that bad taste out of your mouth."  I'll review 'Information 

Rules' in the next SMART Letter.]



March 9-10, 2000.  Washington DC. Legg Mason Investor Workshop 

on "Investment Precursors (tm) in Telecom, Internet, and 

Electronic Commerce."  I'll be on a 'technology visionarys' 

panel with SMART People Bob Lucky and Michael Powell.  The 

other two panelists, Royce Holland and James Crowe, haven't 

gotten with it and signed up for the SMART Letter yet.  For 

more information, contact the Legg Mason Precursor Group at 


TELECOSM ASIA (originally March 12-15) has been POSTPONED. As 

soon as I have more information, I'll post it here.  

March 20-23, 2000.  Orlando FL. IBC "Unified Communications 

Conference." It's not just "Unified Messaging" anymore!  I 

think I'm giving the keynote at 8:45 AM on March 21st.  

Nothing on the web yet, but watch or 

contact Anne Bacon Blair, 508-481-6400 


May 7-12, 2000.  Birmingham UK.  World Telecommunications 

Congress.  I am an invited speaker for the session entitled, 

"What's your network IQ?"  Answer: Too high.  For info, see

May 23-26, 2000. Laguna Niguel CA.  VORTEX.  Metcalfe has 

invited me to speak this year!  Cool, but what I really want 

to do is run a session on "The Network We Really Want to Have, 

and Why We're Not Building It."  Nothing on the web yet.  Stay 


June 7-10, 2000. Toronto ON. TED CITY.  My only role here is 

as a paying member of the audience, but I think that Richard 

Saul Wurman does a real job with his TED conferences -- every 

one I have been to has had deep lasting impact.  You can't 

shoehorn yourself into his regular Monterrey CA stand in 

February, but there are still a few spaces for June, and I 

would like SMART People to be there if they can.  


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


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David S. Isenberg      , inc.            888-isen-com (inside US)          908-654-0772 (from abroad) 


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