SMART Letter #46a
October 11, 2000

!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #46a -- October 11, 2000 Copyright 2000 by David S. Isenberg -- "proud as a rooster at sunrise" -- -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Quote of Note: Ned Washington > Good News Journal > My First Fortune Article > Conferences on my Calendar, Copyright Notice, Administrivia -------- GOOD NEWS JOURNAL: Hindery resigns, Armstrong meets with comptrollers. The Wall Street Journal today made me feel like a rooster who's convinced that his crowing caused the sun to come up. There were two stories that reported favorable developments on issues discussed in yesterday's SMART Letter #46. The first WSJ story reported that Leo Hindery is resigning as Global Crossing's CEO. Good. Maybe Leo was learning, but the top slot of a major corporation is no place for on-the-job training. Today GBLX is trading at 20 and change. I finally bought some. George Gilder is right, in the longer-term the stock is safe. Lots safer than AT&T. Know any widows and orphans? Buy them 100 shares of GBLX today. Now if we can only teach Global visionary Winnick about selecting the right intellectual capital. The second WSJ story today reported that AT&T CEO C. Michael Armstrong finally agreed to meet with the comptrollers of New York City and New York State after they expressed grave concern with the short-term nature of some of AT&T's strategic options. Apparently the comptrollers' Sept 22 letter to Armstrong got them an appointment with the head flak at AT&T Investor Relations, so they wrote a second, stronger letter to Armstrong. Now Armstrong grudgingly agrees to meet the comptrollers to, "help clarify any myths or misrepresentations". I hope Mike clarifies the myths of Sisyphus, the Augean Stables and Medusa. Maybe he'll tell us which frog he plans to kiss next. Clearly, no clarification of the Icarus myth is necessary at this time. ------- MY FIRST FORTUNE ARTICLE Now on Newsstands Everywhere by David S. Isenberg I've always wanted to write for an F-named popular business magazine. But Alan Webber, Fast Company's co- founder, must still be pissed at me for complementing him on the great cover story about how failure is good for you (which was on the Forbes ASAP cover at the time). And Forbes publisher Rich Kaarlgard, who I schmooze every year at Telecosm, gave me a number to call last year, which I did -- the result was the skinny letter from Forbes personnel wishing me success in my writing career. So I was overjoyed when Fortune smiled on me with an invitation to contribute an opinion piece on broadband. Furthermore, in the process I was delighted with Andy Kupfer's mellow manner and light editorial hand. The resulting article, "Skeptic's Corner -- You Think It's DSL vs. Cable? Think Again", is now on newsstands everywhere. It has a blue cover that proclaims THE FUTURE OF THE INTERNET. I signed in blood that I would not reproduce it. In return, Fortune's legal department graciously allowed as how I could link to the article from my website -- so far, they've given me nothing to point at. However, even Time Warner (Fortune's publisher's parent) has not been able to repeal Fair Use. Yet. So here are a few select F.U. 'graphs: [Introductory paragraphs deleted -- SMART People already have clarified the myth of David (I) vs. Goliath, but go buy the magazine anyhow.] "DSL and cable modem services are too little, too late. They're retrofits of almost-obsolete copper networks. Cable companies developed cable modem technology because it works with the network they've already built. Telephone companies adopted DSL for the same reason. Yet both technologies have serious problems. Long strands of copper act like antennas, especially when transporting signals at the frequencies necessary to carry data at high speeds. Electromagnetic interference from adjacent wires- crosstalk-is a huge stumbling block to universal deployment of DSL. Compensating for crosstalk is a signal- processing burden that makes deployment spotty and costly. DSL demands that $150-an-hour technicians search like Diogenes for a circuit that is clean enough to carry the signal. Technicians must untangle-literally, not metaphorically-an undocumented legacy of twisted copper wires dating back to Alexander Graham Bell. That is why DSL often takes several customer-frustrating weeks to install. Two DSL users groups are suing their phone companies over such problems. "Cable modem service has an advantage over DSL. Cable networks are simpler and they can carry more information because cable was designed for broadcasting video signals. But this advantage comes with a price-500 or more households share each high-capacity connection. And as a direct consequence of this shared design, cable companies must upgrade the network of an entire neighborhood with two-way amplifiers before the first house can get the service. Cable modems have reliability problems, too. As I was writing this article, my cable modem inexplicably slowed to a crawl for an entire afternoon. "Today's network owners may be able to preserve their old business models for a time with cable modems and DSL. But eventually, these technologies will be superceded by the convergence of two radically faster, simpler, cheaper technologies-Ethernet and fiber optics. Ethernet is a simple, well-established computer networking technology invented in the mid-1970s at Xerox PARC, birthplace of the graphical computer interface and the mouse. Ethernet is widely used to connect computers in offices. The first installations couldn't span distances longer than a few hundred feet, but these limitations loosened as the technology improved. Today, Ethernet networks can have links of 50 kilometers or longer. Ethernet got faster, too. It began at DSL-like speeds, but soon jumped to 10 million bits per second, then to 100 million bits, and now, to a billion bits per second. A 10-billion bit version of Ethernet is in trial, and stories of 100- billion bit per second Ethernet are beginning to filter out of Silicon Valley labs. "Fiber optic communications technology is advancing as explosively as Ethernet. The peak-hour telephone traffic of the United States can be squeezed onto a single glass fiber using off-the-shelf equipment. Technology in the lab today could provide ten times that capacity. Furthermore, fiber optic cables hold as many as 1000 fibers. Such cables are about as thick as the cables of copper telephone wires that hang from every pole. With a 1000- fiber cable coming down the street, there could be one fiber for every house. The mythical last-mile bottleneck, the last bastion of the old business model, would be shattered. "The faster versions of Ethernet work hand-in-glove with fiber optics. Ethernet over fiber can connect homes to the Internet at speeds hundreds of times faster than DSL or cable modems and tens of thousands of times faster than dial-up modems. Lest you think that building a new network would be too expensive, the gear needed for 100 megabit Ethernet service costs about the same as the equipment needed for broadband service over telephone or cable networks-several hundred dollars a connection, according to the Dell'Oro Group, a Silicon Valley market research firm. Companies in places with fiber-friendly policies are already installing fiber-optic Ethernet service at (or even below) the cost of retrofitting old networks for DSL or cable modem service. In Canada, for example, the phone company must allow competitors (and even some customers) to install fiber on its right of way. Such places have determined that plentiful bandwidth is as critical to their economy as running water, sewers, roads, and electricity. [very important paragraph deleted here -- whadaya waiting for, go buy the magazine! It's all about the future of the Internet -- SMART People *love* this stuff!] "The fiber-optic future will arrive first in Montreal, Stockholm, and several fiber-friendly United States cities, such as Palo Alto, Calif. In Stockholm, residential customers can buy a 10-million bit per second Internet connection for about US $25 a month. In Palo Alto, the service (still in trial) costs $70 a month. When the rest of the network matures, customers with this new Internet service will be able to switch from website to website as fast as changing TV channels. They'll be able to make high-quality phone calls and get TV-quality video over the Internet -- and even broadcast their own video. "Don't expect old-style phone companies to bring us this kind of Internet service. They will not allow their cash cow to be slaughtered. And don't expect cable-TV companies (like AT&T and Time Warner, the parent of Fortune's publisher) to bring this kind of Internet service either. The owners of the old video entertainment business will not willingly provide the infrastructure to destroy it. "But new network service providers that are not tied to past technologies and obsolete business models-like Cogent and Telseon and Yipes in the U.S. (disclaimer: I'm on the advisory board of Yipes), like VDN in Canada and Bredbandsbolaget in Sweden-will see the opportunity in the new "deliver-the-bits" technology. In the US, the economies of fiber-friendly cities will leap ahead, creating another dimension to the digital divide. Old industries that we love to hate-cable companies, telephone companies, even the movie and record industries-could fade to insignificance or be changed forever. The communications revolution is just beginning." ------- QUOTE OF NOTE -- Ned Washington "When your heart is in your dream no request is too extreme." from "When you wish upon a star" lyrics by Ned Washington, music by Leigh Harline ------- CONFERENCES ON MY CALENDAR October 31, 2000. New York City. Merrill Lynch TechBrains, featuring some of my all-time heros like Gordon Bell, Clayton Christensen, Phil Neches and Don Norman. I'll beat the drum for IP-Ethernet-Optics from 1:35 to 2:15. To get in, contact Vanessa Brown, 212-236-7072, and tell her the name of your Merrill Lynch representative. November 5-9, 2000. Rose Hall, Jamaica. Porter Stansberry's Pirate Investor's Ball, featuring Eric Raymond, Tom Petzinger, Porter's impressive research director David Lashmet, and yours truly. Porter is a big-picture guy, a cross between George Gilder and Tony Robbins, with a nose for leading edge values in infotech and biotech. Contact Andrea Shaw,, 410-223-2648. November 13-15, 2000. Hong Kong. Jeff Pulver's VON Asia. VON stands for Voice on the 'Net. It's the premiere Internet Telephony show in the U.S. and Europe; this is the first Asian VON. I'll be doing a panel, subject TBD. (I've suggested to Jeff that it be called XON with X unknown.) For more, see ------- 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 -- **