SMART Letter #49
SMART REMARKS IV: QUADVESTITURE
November 17, 2000
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SMART Letter #49 -- November 17, 2000
Copyright 2000 by David S. Isenberg
isen.com -- "Generous to a Fault"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> Quote of Note: Judy Estrin on Worst of Both Worlds
> Quote of Note: C. Michael Armstrong on AT&T Restructuring
> A Smart Remark of My Own, by David S. Isenberg
> Smart Remarks from SMART People:
> Daniel Stern on monkeys swinging from twisted pairs
> "AT&T Solutions" comes to terms with quad-vestiture
> "Discouraged" on TeleDanmark's sex-vestiture
> Laurence May on national standards and dying dinosaurs
> Duane Bowker on cable modem reliability
> Toni Mack on politician-pleasing utilities
> Greg Kochanski on why I'm wrong about Lucent
> "Don't Use My Name" with two Lucent bad-news stories
> Jeff Cole on 'the investor is always right'
> Conferences on my Calendar, Copyright Notice, Administrivia
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QUOTE OF NOTE: Judy Estrin
"As we merge telecommunications and data communications,
if we're not careful we will wind up with the worst of
both worlds rather than the best of both."
Judy Estrin, former CTO Cisco, currently co-founder of Packet
Design, quoted in January 2001 issue of The Cook Report on
Internet.
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QUOTE OF NOTE: C. Michael Armstrong
"In the future, the most successful companies will be
those that have mastered three skills. First, they will
be extremely close to their customers. Second, they will
capture - rat her than be captured by - new technologies.
And third, they will move faster than their competitors
. . . but the truth is that [this is] hard to achieve in
a $65-billion company . . . and that's why we are
restructuring."
C. Michael Armstrong in The Rocky Mountain News, 11/13/00
[The_Innovator's_Dilemma (by Clayton Christensen, Harvard
Business School Press, 1997 -- just in case you're looking for
it, Mike) explains why a company can't be close to its
customers and simultaneously capture new (disruptive)
technologies. It also explains how new (disruptive)
technologies breed new competitors that are moving fast, but
in a brand new space that incumbents can't understand.
Furthermore, it explains why an incumbent's old customers
aren't going to tell it about this new space no matter how
close it gets to them. In Year 2000 a manager that doesn't
grok this is a bad manager. -- David I]
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A Smart Remark of My Own, by David S. Isenberg
The networking community has observed that what Einstein said
about a theory -- that it should be as simple as possible but
no simpler -- also applies to networks. Einstein's dictum
applies to writing too. A thought should be expressed in as
few words as possible, but no fewer. I'm honored to get
comments from SMART People that represent a wide range of
viewpoints. I try to make them clear and readable. Usually
this means taking out all the words that don't change the
meaning. It is hard work, but worth it. See below.
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Daniel Stern of UgandaConnect [dstern@uconnect.org] writes:
"Got a good belly laugh from your "undocumented legacy of
twisted copper wires dating back to Alexander Graham
Bell." In Africa they hang twisted pairs between the
banana trees. Monkeys love to swing on 'em, which is a
regular cause of line disruption.
"The Source, a new cybercafe in Jinja, is connected to
its ISP in Kampala by DSL over a leased line. The
Source put its network together on-the-cheap, bought
routers and a Portmaster on e-Bay. It is the first node
outside of Kampala. It is now working on connecting
schools in the area."
[My friend Iqbal Quadir has coined a phrase that bears
repeating -- B3B. B3B means the Bottom 3 Billion, the people
who have never made a phone call or logged on to the 'net.
I'm glad that Uganda Connect is working to connect the B3B,
and for entirely selfish reasons. The B3B business model is
that hooking up these people makes *my* network
(N+3,000,000,000)^2 more valuable. -- David I]
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"AT&T Solutions" tries to come to terms with AT&T's quad-
vestiture:
"[In a previous SMART Letter] when you predicted the end
of AT&T I actually got angry! I didn't think that the
management could be that stupid. A broadband base with
communications service sold on top of it -- what's so
complicated about that? Isn't that what we just had put
together! It was there and now it's gone. I used to work
for AT&T. I'm now working for another company with
AT&T's name. I can't fathom what just happened."
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"Discouraged in Denmark" sees AT&T's quad-vestiture and
writes:
"I'm working for TeleDanmark, the incumbent operator in
Denmark. Like AT&T, TeleDanmark is also in the midst of
splitting up into six business lines and a holding
company. The six business lines are Fixed lines, Mobile,
Internet, Directory service, IT services and CATV. This
split up happens after a fusion process that has been
going on for five years and just recently has been fully
implemented.
"Our CEO and he says that the reason for splitting up is
to act better in the market. But I speculate that it is
that the stock market gain more insight into the company
by splitting up. But I don't buy it -- we could have
given the same information in the old set-up. "
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Laurence May, [lt@may.org] writes:
"I am having fun watching the US make the same mistakes
it did in the past with our VCR protocols, our rejection
of GSM, our embracing of copper and cable, all to
protect the dying dinosaurs."
[Hmmmm. Maybe Einstein's dictum applies to standards too.
-- David I]
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SMART Person (indeed, one of the real doers when we were at
AT&T) Duane Bowker [dob@superlink.net] writes:
"I read with great amusement your "Myth of Five Nines"
and your recent remarks on poor cable modem performance.
I too have @home and Comcast cable modem service. The
transmission speed beats dial-up hands-down, but
availability has been bad. Lately, not only does it
miss "five nines" it's short of "nine fives" as well.
"@home has been having problems with their Domain Name
Servers (DNS). When you call them, they say "all of New
Jersey is having connection problems" (Try pinging their
DNS addresses...nobody's home @home!). They have no idea
when service will be back up, and they provide no
recompense for service unavailability. It's
"entertainment", it's permissive, and it's everything
you've come to expect from your friendly cable provider.
I thought when I got this service, I would discontinue
my dial-up ISP service but I just haven't been able to
because of poor @home availability."
[Duane, an incumbent's road to low cost is paved with
skimping. But since bits-is-bits these days, even for end-
users, multi-sourcing is a pretty good route to reliability. I
have two physically diverse ISPs because my Internet access is
mission critical. Competition simultaneously holds down the
price and makes end-user multi-sourcing possible. Sure it's
twice as expensive, but nevertheless seems like a good deal to
me! -- David I]
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Forbes reporter Toni Mack [mackt@att.net], responding to
"Talking Back to the News -- SMART Letter #48", writes:
"I used to cover electric utilities and their largely
successful efforts to avoid deregulation. In a
competitive industry, you succeed by pleasing customers.
In a regulated industry, you succeed by pleasing
regulators and politicians. Ma Bell was a utility,
remember? Ma Bell and the electrics wooed and groomed
politicians with exquisite finesse and success.
"Electric utilities, too, have cried 'Universal Service!
We do our job so well it would be foolish to allow
market forces to impinge upon this Perfect Machine. The
consumers (codespeak: voters) will get hurt.' These
utilities treat their largest consumers (businesses,
which don't vote) so poorly that George Gilder spied a
huge investment opportunity. His Powercosm newsletter
is the result.
"Businesses like wafer fabs can't afford split-second
electrical outages and so must turn to other suppliers
-- which do operate in a free market -- for high-quality
power. But every consumer, large or small, must endure
that abuse known in Orwellian terms as 'customer
service.'"
[You're right, Toni. Being a regulated utility played a huge
part in creating an AT&T culture that was not adapted to
competition. Nonetheless, it could've been worse -- in its
day Ma Bell was the very best national telephone utility in
the world. It wasn't overtly corrupt (had a culture of
honesty among employees), it was reasonably technology driven
(sustaining tech), and it gave the world Bell Labs (the
transistor, the satellite, the DSP, unix,
stereo recording, speech coding, and all that).
Along with utility culture and the politician-pleasing that
goes with it, I think there are several factors that now
combine, Perfect-Storm-wise, to sink AT&T. These include
competition, Patrimonial Bureaucracy (which you find full-
bloom in the private sector too), disruptive technology, bad
management, lack of entrepreneurial talent, inability to
keep/attract technical talent given the Internet startup boom,
a high cost basis, inability to manage for the longer term (a
fix rather than replace ethic), de- (or more like re-)
regulation, an obsolete value proposition & business model,
and corporate old age. -- David I]
Toni replies:
"I know you're fond of your old Ma, even though you've
cut the apron-springs. But I think AT&T was not the
coulda-been-worse type because our politicians are not
the coulda-been-worse corrupt, overtly bribe-taking
types that the Third World suffers."
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Greg Kochanski [gpk@bell-labs.com], reacting to "More News
Back-Talk -- SMART Letter #48b", writes:
"Well, I hate to tell you, but you don't really have an
inside view of Lucent anymore. You describe a reasonable
extrapolation from AT&T days, and it's partially right,
but you appear to speak with more knowledge than you
have.
"[You describe Tachion's switch, but] have you looked at
Lucent's PathStar? IP out the back, any kind of card you
want to plug into the front, sounds just like Tachion's
box.
[Admission: No I have not taken an analytic look at the Lucent
Pathstar switch. Then I said, "I mean, fundamentally, it's an
impossible problem to solve at a company like Lucent; you
can't get there [i.e., function as one integrated company]
from here." -- David I Kochanski responds:]
"Other than the fact that Lucent *did* get there from
here, the company now has the concept of a product
manager. Once the project starts flying, it's free to
add whatever features it wants, without getting anyone's
approval. There's politics, and getting a project off
the ground is still non-trivial, but I (and you) know
some people on the PathStar project, and it really isn't
much like you describe.
"Negotiate features between business units? Jeez! What
cave did you crawl out of? The trouble with *sultants
is that they truly believe that they are the only ones
who have received enlightenment. While I can't say that
our management is exactly enlightened, the company *has*
learned some basic lessons in the last few years.
[Touché! Ouch. Then, when I say, "Break it up, spin it out,
sell it off, reorganize it, reinvent yourself, get smaller,
get leaner," Kochanski responds:]
"And, do you expect the spun-off fractions to cooperate?
Not likely. You don't seem to be consistent between
problems and solutions. This advice seems (to be blunt)
standard brainless Wall Street drivel, and I'd expected
better from you. It's easy to say, because everyone is
saying it, but who actually knows if it's right?
"We're both old enough to remember when everyone thought
Japan was on the top of the heap. Large consortia
(kiretsu) were going to be the business model of the
future; companies would cooperate with their partners.
Size was power. Government guidance of technological
development and research was the way to go. The
bureaucrats of MITI could somehow see the future and
guide Japan more efficiently than the chaotic, bumbling,
short-sighted American market. Remember?
"Lots of pundits said it. Unfortunately, they were all
wrong. What makes you think you're more likely to be
right than they were? Certainly, we do things
differently now. However, there are billions of ways to
organize an economy, and we've only tried about two or
three since we invented the computer. Why should #4 of
1,000,000,000 be the right one? Most likely, it's just
the fad of the moment. Everyone believes it because,
well, everyone else believes it.
[Then I say that an integrated sales force is still a reason
for Lucent to remain a company. Kochanski observes:]
"Research is the other area where problems from all the
business units come together. Research, of course, is
unpopular these days. Why solve hard problems, when you
can get a gigabuck for an e-commerce platform that uses
no technology invented less than 15 years ago?"
[Good point about Research. Good point about business fads,
too. But fad or not, small is demonstrably more beautiful.
The cost of failure is lower. Bad ideas die sooner. Good
ideas have a better chance to survive on their merits.
Disruptive technology gets a chance to displace old markets
and technologies without the ball-and-chain of internal
resistance. Small companies create more jobs. Et cetera.
Now, in a frictionless economy driven by network effects,
small companies that succeed rapidly become large, winner-
take-all companies. If that's a fad, then so's capitalism. --
David I]
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"Don't use my name," inspired by "More News Back-Talk -- SMART
Letter #48b", tells two Lucent-hasn't-changed-its-stripes
stories:
"[Story One:] We're installing two Lucent products for
our current client -- the 5ESS and an operations system
(OS). We spend half our time mediating among Lucent
organizations including OS development, switch
development and the local sales team. They send nasty
emails back and forth blaming each other for the
emergency of the day. Or maybe the OS group calls me
asking for information from the switch group.
"The second story is a little more amusing. As part of
our work we had to sign a contract with the OS side of
Lucent. After we signed it took them three weeks just
to find out who is the person authorized to sign for
Lucent."
------
John Kawakami (johnk@cyberjava.com) sends this update on the
Independent Media Center:
"[Re: Talking back to the news -- SMART Letter #48,] see
http://www.indymedia.org. The Independent Media Center
has grown considerably since I wrote you earlier this
year. We had around six sites then, and now we have over
30. To me, the IMC is a crossroads of humanism,
software engineering, cultural creation, and direct
democracy.
"We're carving out a new space, something between
'journalism' and 'propaganda'. (Or to put it in
commercial terms: "reusable content" and
'advertisement'.) We're trying to deconstruct the role
of 'journalism' in society and bring the necessity of
ethics to the foreground of the new media landscape.
"My 'moral compass' is my (relatively limited)
understanding of the natural sciences, math, history,
statistics, logic, etc., which is critical to deal with
the flood of information we're covering. We need basic
liberal education more than ever.
"But liberal education has to become more global.
Xenophobia and racist thinking impede relationships in
the "global village". Simply participating in the global
village doesn't make someone "global", anymore than
taking a trip to India makes you an Indian
"Maybe the web will help this process happen from the
bottom up, through pen-pals and small business relations
created across borders. But now companies (like Coca
Cola and McDonalds) are the ones bringing culture across
borders as they seek out new markets. Their idea of
globalization is that people can be bent to conform to a
standard global diet. A hundred years of this, and we
might have a global culture based entirely on business.
"The issue then, is reclamation. In order to reclaim
culture, e.g., to reclaim psychological netspace from
the big .coms; this year, it's reflected in the
Naderites desire to reclaim politics from corporate
takeover."
[I am ambivalent about John's invocation of Nader & his
followers. Yes, seatbelts and airbags are a good idea. No,
the auto companies wouldn't have done seatbelts and airbags
without Nader's pressure. But the whole movement towards
Washington-mandated auto engineering (directly attributable to
Nader) killed an awful lot of innovation. Nobody can do back
yard automotive innovation anymore, so in a sense Nader made
the corporations stronger. There is **NO** route for
disruptive technology to enter the automotive marketplace
anymore.
I think the problem is deeper -- one aspect is that today's
notions of corporate governance and ownership are screwy. If
corporations were owned by people with faces who lived in our
communities, rather than by pension funds and mutual funds
(supposedly owned by *us*, but really run by moral-maze
managers and faceless committees), we'd have a leg up. But
that's a fantasy -- I don't know how to get there from here. -
- David I]
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Jeff Cole [AdviceColumn@excite.com] Talks Back to the news in
SMART Letter #48b:
"In the era of "24X7 stock watch" the average Joe and
Jane can now view their stock portfolio constantly in
real time. Now everyone is not only an investor but also
an analyst. All of this has culminated into 'The
investor is always right' and no longer 'the customer is
always right'."
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CONFERENCES ON MY CALENDAR
November 28-29, 2000. Montreal, Quebec, Canada. THE
NETWORKED NATION: CANARIE's 6th Advanced Networks Workshop.
I'll be speaking, and so will Francois Menard, Paul Hoffert
and other (mostly Canadian) folks who are honing Canada's
leading edge. SMART People will remember that last year the
word from CANARIE was Ethernet (see CANARIE Sings -- SMART
Letter #30, December 9, 1999). Months later the Ethernet
story hit The New York Times and Business Communications
Review. This year I hope to learn about grids -- watch this
space.
http://www.canarie.ca/advnet/workshop_2000/workshopinfo.html
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Copyright 2000 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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