SMART Letter #37
April 12, 2000

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------         SMART Letter #37 - April 12, 2000 Copyright 2000 by David S. Isenberg -- "keeping the edge sharp" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > PC Forum -- The Meatspace of Cyberspace > Smart Remarks from SMART People "RantMan" on an impending wreck at Global Crossing John Kawakami on the Independent Media Center Barbara Esbin, a dissenting opinion on Open Access > Conferences on my Calendar, Copyright Notice, Administrivia ------- PC FORUM 2000 -- THE MEATSPACE OF CYBERSPACE by David S. Isenberg The people who move and shake cyberspace meet at PC Forum. This persistent community is convened by Esther Dyson, a big- science brat like me with science-brat sensibilities about what the big questions are, and science-brat impudence to ask them. It's also a well-oiled machine, a superb logistics job executed with a sense of mission by the talented people that Esther has gathered into EDventure. The event is best described in superlatives. TeraBeam's PC Forum launch made it intensely personal for me this year. I have never launched a product, at PC Forum or anywhere else. I have been advising TeraBeam for several months, so as wonderful as PC Forum might have been, the rest of the show was decidedly secondary. TeraBeam has developed point-to-multipoint gigabit laser technology and intends to offer broadband last-mile service. Laser communications is completely unregulated and unlicensed -- this, by itself makes TeraBeam disruptive to the 18, 24, 28 & 38 GHz technologies. It doesn't have to pay kilobucks per pop in an FCC auction. It just sets up its equipment and transmits. I generally don't follow stock prices, but the spelling of the symbols to sell (or short) should be obvious to the skilled practitioner. Despite TeraBeam's rocket-science (well, satellite-science) development efforts, it has maintained super-stealth mode for some three years. The founder, Greg Amadon, knows his stuff -- he did two other little-bang startups, and he's learned the pitfalls. In the months I've worked with Greg, he's forbidden me to breathe the TeraBeam name, say the word "laser" or even tell people that this new company I worked with was located in Seattle. As far as I know, he never discussed it with anybody, even venture capitalists, without putting them under a Non- Disclosure Agreement. I think that Greg was one of the first people to realize that the start-up scene was shifting from a VC's market to an entrepreneur's market. Last week TeraBeam came out of the garage to a three-gun salute. Not only did TeraBeam debut at PC Forum, but George Gilder devoted the March issue of Gilder Technology Report to TeraBeam (TeraBeam Era) and TeraBeam wooed Dan Hesse away from AT&T Wireless, where Hesse left a reported $50 million in options on the table. (I can claim a small role in each of these.) I was the only non-TeraBeam employee at its off-site PC Forum success celebration -- that event ranks right up there with losing my virginity, making landfall on the Maine coast, getting my Ph.D., getting married, and flying my first solo in an airplane. So, y'know, *what* PC Forum? . . . Actually, it was pretty good. My personal favorite new thing (after TeraBeam) was SpotLife's "Point, Click, Broadcast" service. SpotLife makes it easy for every Joe and Jill PC User to become a home TV station. You can get the SpotLife broadcast client software free with a Logitech eyeball camera. Viewers can catch Spot-casts on their Real Player. It's about ease-of-use. The home-broadcaster signs up for a persistent URL on SpotLife's website (e.g. where their broadcasts will appear. Then he or she can put a hot link on their own website that says, e.g. "Isenberg debates C. Mike Armstrong HERE 2PM Friday." When there is no Spot-cast, the user's Spotlife website displays a user-made banner announcing the next broadcast time, pointing to the user's website, or whatever. The business model is cool -- the first 25 spectators are free, #26 goes into a queue unless you buy premium service, which is very reasonably priced for, say, 26-50. I can't wait to try it. If it is as simple as it looks, it will set a high water mark for simplicity that other apps would do well to emulate. SpotLife service begins in April. In the main hall of PC Forum, the sessions were never boring. As usual, there was a token Perfesser and a Hollywood icon. Whoopie Goldberg held the Hollywood slot. Whew! Does she get it! She's smart and articulate and witty and diplomatic (but no bullshit!). She could be the CEO of a big company; she is as inspiring a leader as I have experienced. She's testimony to the saw that if you've got black skin you have to be 10 times as good to make it. Did I say 10? It's an underestimate; she's GOOD. First Whoopie made us all feel good about who we were. Then she made us feel great about how we're changing the world. Then she flattered us about how all our money hasn't changed who we are. Then she slipped in a little reminder about the other 99% of people who are less fortunate than we are. (Did I say 99? That's an underestimate.) Then she made us laugh. Then she slammed Hollywood. Then she slipped in another little tiny reminder about taking care of our employees should our company need to downsize. Then she marveled at the technology. (The TeraBeam team told me that Whoopie said, "I want one!" when she saw TeraBeam. She wanted to make her website *fast* for the Oscars.) Then she talked about intellectual capital. Now I am not exactly sure if Whoopie used the words "Intellectual Capital" or not. The concept is best represented in sports (well, "intellectual" isn't the right word, maybe it is human capital, or talent capital . . . if "capital" is the right word) and in entertainment. In these endeavors, there is only one Jordan, only one Mantle, only one Brando, only one Fonda (whoops, ahem, only one Henry Fonda). Whoopie explained how, "Denzel wants to make a movie, Danny Glover wants to make a movie, Winnona Ryder wants to make a movie." Whoopie wants to make a movie too. But they can't under the Hollywood system -- the studio-quo has type-molded and type-cast these people. A talent is a terrible thing. The solution: Cut out the middleman. Go right to the people with money and ask them for $2.5 million to make a movie. Whoopie did this in real time, right from the podium. Probably 700 people in the room could have written a check on that amount then and there. Do you believe Whoopie could make a great movie? I do. But I don't think it would make money under the current distribution system -- however, wait 'til the Internet becomes good enough for HDTV over IP! Go Whoopie! This idea that an artist could find money without a studio intermediary -- and find an audience without a studio intermediary -- should threaten Hollywood. But Richard Bressler, the CEO of Time Warner New Media and a key AOL merger honcho, either was in deep denial or just doesn't get it. Despite Esther Dyson's probing questions, he didn't seem to notice that a musician doesn't need a big contract with a distribution dinosaur anymore. Where music is today, video entertainment will be tomorrow. And music is just getting started. [By the way, in Asia last month I saw something that promises to separate music from its physical package (and the atom- mongers of the recording industry) even more. The Creative Labs Nomad IV is a music appliance a bit bigger than a Discman. It can hold about 150 hours of MP3 music -- like maybe a year's worth of listening -- on its 6-gig disk drive. It comes with PC software to rip, encode and download audio CDs. There are other similar products, probably cheaper, maybe more open, coming from Korea, too. Let's see the music industry put the air back in *this* balloon.] Lawrence Lessig held PC Forum's Perfesser slot this year. He's the former Special Master in the Microsoft anti-trust trial. Today his chief concern is AT&T's pending monopoly of the broadband Internet. Lessig, giving credit where due, cited the "end-to-end architecture" concept first articulated in 1981 by Jerome Saltzer, David P. Reed, and David Clark, as the key to the Internet boom. When end-to-end is embodied in the code, the code itself assumes the force of law. Here, I think he means natural law, as in "186,000 miles per second: not just a good idea, its the law!" Without this built-in end-to-end principle, Lessig points out the Internet would be just another piece of infrastructure. The Phone Company holds such "Soviet-style" control over its network, says Lessig, that "any rational innovator would go elsewhere. (The end-to-end concept preceded the Stupid Network by some 16 years; David Reed, one of its co-authors, has been a SMART Person since SMART Letter #1.) Then Lessig started using the "S" word. "The Internet is *Stupid*," he said. "The intelligence is at the edge." He said it again and again -- "Stupid . . . Stupid . . . Stupid . . ." I was beaming. Somebody leaned over and patted me on the back. That was a Harvard law professor up there using my word! [If you haven't read my essay "Rise of the Stupid Network", you need to get Stupid at It's bad!] The Stupid Network theme popped up again. George Bell (CEO Excite@Home) tried to make the case for a network that bundled content and transport. By the end of his panel the other panelists had pushed Bell into the tiniest little corner -- the best he could say was that the content'n'conduit model is "OK for right now". (But is Excite@Home making money right now? Nobody asked.) "Coupling business and path is a great business if you can hold onto it," said panelist Danny Hillis (who just turned in his mouse ears). "In the end [Excite@Home] will lose because the Internet has this biological vitality." Even George Conrades (CEO Akamai) explained that Akamai's routing and caching magic works from the edge. [Akamai's potential to addict the net to proprietary routing scares me, though.] Jim Crowe (CEO Level3) jumped in. "When technology moves this fast, you can't depend on centralized planning," he said. "It's easier to bullshit a congressman than it is to bullshit the marketplace," Hillis agreed. Somebody (Hillis?) said, "Nobody goes to a certain movie because they're loyal to the theatre owner." It's the best single-sentence summary of the content-conduit issue I've heard. OK. Time to stop. But I fear that I did not do PC Forum justice. There were other great products, panels, people. Larry Tessler raved about the web-based office suite, ThinkFree -- I missed it. Dave Winer and Tim O'Reilly ran a session on the screwed up, anti-innovative patent situation -- missed it too, but had a delightful cab ride to the airport with Winer. Marjorie Scardino, CEO Pearson Group) was impressive, but her view of education as a top-down, teacher- to-student, fact-absorption process just doesn't jibe with the facts (as I religiously believe them) about learning around the water-cooler, about faith in the student being the teacher's most valuable teaching act, etc. I enjoyed seeing Kevin O'Connor, CEO DoubleClick, squirm and grimace as he publicly took his medicine on the privacy panel. The "my next career is a philanthropist" panel, aka "now that I've learned how to make all this money, you mean I have to learn how to give it all away?" panel, was, in my case, strictly of academic interest. Then there were the great breakfasts, dinners and poolside chats, the old friends, the chance meetings, and the new relationships portending potential partnership. Oh, I have to mention that Daphne Kis, Esther Dyson's conference maven, booked a couple of great bands that struck exactly the right balance between conversation-facilitating background ambiance and truly tasty music. And the food was uniformly sensational! The PC Forum gang has their infrastructure act together! My only complaint: they ran out of softshell crabs before I made it back for seconds. Boo hoo. Kevin Werbach once remarked that Esther Dyson had a dirty little secret; paper newsletters still work. Clearly she has a second secret -- there's still no cyberspace like meat-space. --- [An earlier version of these PC Forum notes appeared on the discussion board. I serve on the Metamarkets Think Tank with Nicholas Negroponte, Peter Sprague, Nolan Bushnell and Reuven Brenner. In March, the performance of, Metamarkets' first mutual fund, really stank. Past performance is no indication of future results.] ------- Smart Remarks from SMART People From "RantMan": Is Leo Hindery going to ruin Global Crossing, the coolest international telco alive (and one of my favorite investments)? "I don't want to be anyone's dumb pipes," says Hindery in an article in The Standard (3/27/00). "If all you do is racks and servers, that's dumb. What we're doing is melding the network and the content." Oh, please! Leo's going to take the company that had a business plan based on almost unlimited bandwidth, the first real 21st century global telco, and turn it into... a cable company??? Will Global Crossing now change to do what a cable company does, i.e., control access to content that is bought at too high a price, limit people's bandwidth, and stifle the growth of connectivity? Watch. First the Global Crossing corporate megacustomers will say "Thanks but no thanks for the cool content, we'll just buy a mess of bandwidth," Then Leo will say, "We're selling the bandwidth too cheap. Let's jack the cost way up and then bundle the content with it, and discount the cost for people who buy the bundle." Sound familiar? Sound depressing? Next, we'll hear how he's going to be an ASP / E- commerce baron, and put a portal at the end of each fiber that customers have to go through to get an open channel. Ugh. Oh, well, looks like the revolution will be postponed a bit, while we wait for Leo's "just doesn't get it" content-is-king generation to retire. How did it come to this? Frankly, his reputation is, shall we say, somewhat over-burnished. When TCI tried to become a telco, he rescued it by bringing it back to its cable TV roots. There's no evidence that he understands any business other than cable. His "financial magician" part also doesn't ring true, as many insiders know the real financial genius at TCI was Malone. Message to Gary Winnick: You've hired a hammer. Guess what he thinks all your problems look like. Please smarten up before the shareholders get nailed. --- From John Kawakami <>: I recently started working with a ragtag group called the Independent Media Center (IMC) This summer, during the Democratic National Convention in Los Angeles, the IMC will run a network of LANs connecting video and audio workstations, maybe a small studio, and a web server with a free publishing platform. The IMC has two goals: Goal #1 is to generate an alternative view of the convention by covering demonstrations, doing interviews with knowledgeable (but non-official) sources, and providing independent commentary to give a perspective that is decidedly different from the "Official Story" of the mainstream media. Goal #2 is to disseminate video production know-how and experience to people who don't have it. The software that the IMC is writing could become a useful tool for small-group media publishing. I'm hoping to work on that part of the project myself. The projected budget is around $50k, and the money hunt has started. If you know of any sympathetic pocketbooks that would sign over a check with no strings attached, please send them our way. --- From Barbara Esbin, <> formerly with the FCC Cable Bureau, now an attorney with Dow, Lohnes & Albertson, Washington, DC: I found your remarks about the networks we ought to have, but don't (in SMART Letter #35), provocative. I must respond to a few points . . . You appear to be advocating common carrier regulation for cable in the near term. I disagree that the automatic corollary to two-way interactive cable service should be the imposition of mandated interconnection, unbundling and resale . . . Regulation is a poor substitute for competition as a means of bringing the best services at the best prices to consumers. (Which really is the point, isn't it?) As to Canada, which you describe as 'the scene of a vibrant, competitive broadband revolution,' I think it is not quite 'vibrant' yet. When last I checked, only one small cable system was providing access to more than one ISP . . . I think the jury is still out on whether that highly regulatory approach will bear fruit. I also emphatically do not believe, as you imply, that the current cable model of exclusive arrangements with ISPs does any violence to the wide-open nature of Internet content because, at the end of the day, the 'creative kids, . . . ' etc. can still put their stuff on the Internet, and be freely accessed by people using cable modems. [This is a key place where Barbara and I disagree. If, as the AT&T letter of 12/6/99 says, factors like " . . . speed, system usage, caching services . . . " are governed by "private commercial arrangements," then the creative kid and Disney are the two parties that must fight it out in the market. And you know who will lose. Disney video content will be cached at the head end or given its own private OC- 192, while the kid's videos will need to be sucked through some tiny straw-like pipe. Maybe this is "free access", but we'll be sucking real hard to get it. -- David I] [Barbara continues . . . ] "I remain steady in my belief that the way you get to 'multi-provider, multi-access' broadband is not through regulating the one technology that appears to have energized all the others -- cable modem service -- and has particularly energized the ILECs (to deploy DSL services) -- but rather, let them all fight it out in the market. "This point was reinforced by Supreme Court Justice Breyer, who described the costs of sharing unbundled network elements in terms of diminished incentives to invest in and maintain facilities, and to do research and development. "Breyer wrote, 'Increased sharing by itself does not automatically mean increased competition. It is in the unshared, not in the shared, portions of the enterprise that meaningful competition would likely emerge. Rules that force firms to share every resource or element of a business would create, not competition, but pervasive regulation, for the regulators, not the marketplace, would set the relevant terms.' "Please ponder this side of the debate . . ." [One part of Barbara's argument can be empirically tested -- is private investment in broadband infrastructure (per capita, or as a percentage of the GNP, or by any other fair metric) higher in the U.S. than it is in Canada, Sweden and other "highly regulated" countries? Anybody? I have other deep disagreements with Barbara, but I am glad that she took the time and effort to write her dissenting opinion so articulately and send it to us. The outcome of this debate will shape the future of the Internet, so it is important to understand all sides. The SMART Letter is far from done with this topic! What's your opinion? -- David I] ------- CONFERENCES ON MY CALENDAR 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. It looks like I'll be co-kibitzing the VC panel with Bob Metcalfe, then talking about something (tbd) for a few minutes after that. For more info, see May 27, 2000. San Diego CA. Porter Stansberry's Pirate Investor Conference. Avast me hearties! Stansberry's a bucko tar who can sail to windward. Don Luskin (CEO MetaMarkets) will be aboard too! Sign the log at (, or call 800-433-1528. Pre-registration $99, or register at the gangplank for $149. 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. September 13-15, 2000. Lake Tahoe CA. TELECOSM. Featuring George Gilder, Clayton Christensen, yours truly, and a cast of geniuses, troublemakers, and people who got rich by listening to George. This thing sells out, folks -- a word to the SMART. September 22-24, 2000. Woods Hole MA. An equinoctial weekend of active questioning, big-hook fishing and collegial thinking for SMART People here beside the rising tide. Details soon. Mark your calendars now. ------- 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 2000 by David S. Isenberg -- -- 1-888-isen-com ------- [to subscribe to the SMART Letter, please 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 unsubscribe to 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 -- **