SMART Letter #56
ERA OF CUSTOMER-OWNED NETWORKS
June 7, 2001
SMART Letter #56 -- June 7, 2001
Copyright 2001 by David S. Isenberg
isen.com -- "changing its name to Chrysler"
email@example.com -- http://isen.com/ -- 1-888-isen-com
> Quote of Note -- William Kennard
> The Era of Customer-Owned Networks
> Quote of Note -- Henning Schulzrinne
> Microsoft Does IP Telephony
> Quote of Note -- Jonathan Rosenberg
> If It's Funny It Must Be True, by Scatt Oddams
> Quote of Note -- Merle Haggard
> Shameless Plug for The Moritz Dispatch
> Conferences on my Calendar
> Copyright Notice, Administrivia
QUOTE OF NOTE -- William Kennard
"H.R. 1542 is bullshit!"
Former FCC Chair William E Kennard at Vortex, May 23,
2001. One man's bullshit is another entity's pork.
H.R. 1542, a proposed law now before the U.S. Congress,
is blatant pork for Incumbent Local Exchange Carriers
(ILECs). It would let ILECs do long-distance broadband
services without opening their networks. In other words,
it would repeal the keystone of the Telecom Act of 1996.
Kennard succinctly expressed how the innovators I know
feel about this bill.
Officially, Vortex is off-the-record, so after Kennard's
speech, I buttonholed him in the hall and asked if I could
quote him. He graciously agreed, and added, "I spent too
much of my life on the Telecom Act to see it destroyed
[by H.R. 1542]"
Fortunately, H.R. 1542 will be significantly slowed by
the Jim Jeffords-induced change of power in the U.S. Senate.
But don't relax; the ILECs will be back for another snort
in the trough! -- David I
THE ERA OF CUSTOMER-OWNED NETWORKS
by David S. Isenberg
Here's one way to interpret the telecom turmoil in the
stock market: The carrier-services era is ending and
we're at the beginning of an era of customer-owned
Q: How do you make money with customer-owned networks?
A: The same way you make money with LANs.
Service providers (and the companies that provide
their equipment) will need to defend-to-the-death any
monopoly status they might now have, or suffer radical
metamorphosis, or die -- and perhaps all three.
We're beginning to relate differently to our
connectivity. We're beginning to decide ourselves
what equipment will light our network, how fast it
will run, where the fiber goes, how much route
redundancy we want (and are willing to pay for), and
what gateways, points of presence and service
providers our network will connect to. And just as we
own desktops and laptops and palmtops and wrist-tops,
soon we will own personal networks and home networks
and chunks of metropolitan networks and long-haul
networks. When they dig up the street, we'll be able
to look into the trench and say, "That's my fiber."
We'll look at the spectrum and say, "That's my color."
(It's becoming easier to be green.)
The act of digging up the streets is becoming passé,
if not obsolete. Corning MCS-Road cable packs up to
144 fibers in a 7mm diameter cable. You "install" it
by cutting an 8cm slit in the pavement with a circular
saw. You kick in the cable, tamp a rubber strip on
top and seal the slit with goo. It is up to eight
times faster and five times cheaper per route mile
than trenching according to Corning.
"Impossible!" the Bellheads rant. "This cable is so
close to the surface that it'll get cut every few
months," they say. Why, we'd need protocols designed
to deliver reliable service over unreliable physical
media! (Hint: begins with I.) Plus we'd need
physical routing redundancy (and automatic fail-over).
So two feeds might only be four times faster and 2.5
times cheaper. I'm crying all the way to the High
Bandwidth Bank for Savings.
There are already eight conduits and who-knows-how-much
864-fiber cable buried next to the Garden State Parkway,
about a kilometer from isen.com headquarters.
Corning's MCS-Road seems like the perfect off-ramp to
get that fiber ovah heah.
144 fibers can carry up to 230 terabits per second
using today's technology. That's enough throughput for
three 64-kilobit voice circuits for every human on earth.
(SMART People will check my arithmetic.)
But hey, if I had an MCS-Road cable coming down my
street, I'd light it cheaply at, say, 100 megabits per
second in each direction. Why get greedy when there's
more than enough for everybody?
The Corning MCS (Micro-Cabling System) product line expands
beyond MCS-Road. It includes two different ways to pull
cables through drains and sewers, plus cheap and easy
splicing, interconnect and repair systems.
Get more details at
I don't understand why Corning is keeping its MCS
products such a freakin' secret.
[Note: I have absolutely no business relationship with
Corning's MCS unit. My only business tie to Corning
is that I was a paid speaker at a Corning CLEC
conference this spring. At that conference, I can't
remember a single mention of MCS from anybody there --
Corning employee or otherwise -- except me.]
Even traditional, trenched, underground urban fiber
construction costs are falling below $1000 per
fiber/mile. (Note: not a route-mile or a cable-mile,
but a fiber-mile.) Some people say **WAY** below, but
let's use the higher figure. Fiber is a 20-year
asset, so figure $5.00 per month per mile of dedicated
fiber -- cost. Price, of course, would be set in the
marketplace (if there's sufficient competition to call
it a marketplace).
Some people who know more than I do say that fiber is
but 5% of the cost of access. OK, so maybe it costs
$100/month to get a lit, connected fiber into my home.
If they charge $200, that'd be a good profit even by
Some of the non-fiber costs of connectivity include
lasers, routers, and radios. Such hardware scales
steeply with time and volume. Yet other costs, such as
real estate, building entry, reliable power, Internet
connections, and networking expertise -- especially
networking expertise -- don't scale as steeply, but
there are economies of scale nevertheless.
[Wait! Here comes the Verizon FTTH crew now!!! Sure,
boys, put my 100 megabit jack right there next to my
802.11 hub. Nah, I am hallucinating again. Who slipped
the Love Drug into my Kool-Aid?]
Verizon isn't going to bring fiber to my house. The
ILECs will destroy their core business with fiber.
Newer companies will do it. Dropping costs will make
it inevitable. Assuming a free market, of course.
The cost of expertise is falling slowest.
Technologies of network simplicity are the antidote.
My flying instructor taught me, "A superior pilot uses
his superior judgment so that his superior flying
skills are never needed." By analogy, superior
networking experts will use their superior network
design skills to design networks that don't need
superior network engineers to build and operate them.
So I think that technologies of network simplicity
will advance. Even the Incumbent Local Exchange
Carriers (ILECs) want to lower their operations costs.
(Whether they'll do what it takes is another
Local Area Networks point the way towards radical
simplicity. LANs were not designed for esoterically
trained telco technicians to optimize scarce
infrastructure. Instead, LANs were designed for
computer owners to hook up their equipment easily, by
themselves. As a result, today the LAN, specifically
Ethernet, is the front-runner connectivity model for
LANs are extending their reach beyond buildings,
beyond neighborhoods and campuses, beyond cities.
They are driving erosion of the telecom priesthood's
prerogative to charge scarcity-based rates for
mysterious, arcane services.
Telecommunications carriers that can learn a new diet
will survive. Carnivorous high-fat diets of
vertically integrated services will have to yield to
the lean cuisine of pure connectivity.
Today's stock market debacle is driven, in part, by
genuine deflation in the telecom sector. We're doing
more with less. Telco stocks stayed too high for too
long given the free-fall of telecom infrastructure
prices. Now the air is escaping from the long-haul
service balloon. It is five years after Qwest laid
the first super-abundant trans-continental fiber-optic
route, and four years after The_Death_of_Distance
(Frances Cairncross, Harvard Business School,
Cambridge MA, 1997) appeared.
Ultimately, all connectivity is local. The LAN is
pushing out from the building to the metropolitan
area. This will take time, but the LAN's disruptive
expansion will hollow out and then puncture the ILEC's
ILECs will not give up power lightly. They will lobby
for new laws. They are experts at using the courts,
and state public utility commissions, and the FCC to
further their agenda. Their imperative is to delay or
derail the commoditization of connectivity. If they
succeed, the momentum of the inexorable Communications
Revolution will shift to other countries where public
policy is more sharply focused on the linkage of
communications and economy. If this happens, the U.S.
economy will not be a pretty picture.
Where there is fiber in the metro area, there is
perforce way too much fiber. (Everybody buries more
fiber than they need -- when you can buy a 1000x
option on future growth for just a few percent of the
cost of construction, you do it.) Once the fiber is
deployed, its owners are motivated to turn it into a
performing asset. This puts more fiber on the market,
which drives prices down further.
It is already practical and cost-effective for
organizations (e.g., the New York Public Library) to
own their own fiber-based communications networks.
Large and small businesses will follow. Before too
long it will be practical for an individual in a
fibered-up city to say, "Give me a fiber (or a
wavelength) to my ISP, my telco gateway, my bank, my
employer, the movie exchange, and the points of
presence for my three closest friends.
Meanwhile, where there's no fiber, the cost of
connectivity will remain relatively high. Here,
customer-owned wireless router-radios, a la Rooftop
Networks (see "Self-Organizing Network -- SMART Letter
#28, http://isen.com/archives/991008), form the
network infrastructure. These devices are both access
devices and network infrastructure. Most of the time
they're relaying packets for somebody else. As Tim
Shepard pointed out in his famous MIT Ph.D. thesis, as
the radios get closer to each other, transmit power
drops, receive sensitivity improves, overall
throughput goes up, redundancy (reliability) goes up,
and all the elements get cheaper. It's a kind of
Moore's Law of unwired space. Rooftop (now Nokia
RoofTop) is still a player here, along with startups
like SkyPilot and UltraDevices. I'm on the advisory
board of UltraDevices because I am optimistic about
the way the unlicensed unwired space is supporting
innovative commoditized network infrastructure. (3G -
- whazzat? My 2G phone can hardly do voice.)
Customer-owned networks will bring business changes
that won't be easy to understand. We saw the PC
getting cheaper and more capable in the 1980s, but
only Microsoft understood that the commoditization of
hardware meant a value shift to software.
Now we see the commoditization of connectivity. We do
not know who will benefit or how, though we can make
some educated guesses. I'm guessing that the value of
the network will accrue to purveyors of high-value
services at its edge. Can you spell MICROSOFT?
Nor do we know who will pay for this infrastructure.
We know (and the markets reflect) that telcos are
having a hard time of it. Notwithstanding, we know
that broadband connectivity to internetworking is
massively useful. If we need it (and the technology
exists to build it) it will come, just as sewers and
running water and paved streets arrived. Furthermore,
maybe it won't come to the United States first --
especially if United States policy does not give it
Paul Saffo, the futurist, (there are not many people
that deserve this title) says that we tend to
overestimate the short-term impact of technological
change and underestimate its long-term impact. In a
decade, I suspect that we will look back and wonder
what took us so long.
QUOTE OF NOTE: Henning Schulzrinne
"The first challenge is to keep complexity in check."
Henning Schulzrinne at Jeff Pulver's SIP Summit, May
1, 2001, describing the challenges of designing
Session Initiation Protocol (SIP). Henning is one of
the prime movers behind SIP, which will vastly
expand the ways we use stupid networks to do
people-to-people communications. To understand SIP,
think 'HTTP for communications.' -- David I
MICROSOFT DOES TELEPHONY
Microsoft Windows Messenger announced June 4, 2001
by David S. Isenberg
This month I wrote a white paper for Microsoft, "A
Brief, Opinionated History and Prospectus of Internet
Telephony and Messaging." Find it at
Microsoft understands the movement of intelligence to
the edge. It's embracing SIP and a lot more. Microsoft
is going to do end-to-end Internet telephony, and they're
going to do it right -- technically, that is. In fact,
the demo I experienced was very cool.
What I didn't say in the white paper (and didn't
discuss with the Microsoft folks I worked with) is
that I think that Microsoft is going to suck the value
out of the telephone companies. When Steve Ballmer
says that the future of Microsoft is subscription-
based services, I think telecom. This won't happen
overnight -- it could be a ten-year process. One of
Microsoft's core competencies is sticktuitiveness. I
think Microsoft has what it takes to pull this off.
This is a Good Thing and a Bad Thing. It is a Good
Thing because . . . well, you know all the bad things
they say about the Microsoft monopoly? Well, the
ILECs are much, much, much, much worse. They deserve
to have their bubbles popped. (How do they keep
getting away with it while Microsoft takes all the
heat?) If Microsoft can stick it to the ILECs, good.
But it'll be a Bad Thing if Microsoft prices its
communications platform (or use thereof) anywhere near
what we're paying for communications services today.
Microsoft will not only have to be better, it will
have to come in orders of magnitude cheaper. I hope
Microsoft has solid, robust competition. I'm hoping
that other platforms on other operating systems become
well enough established that I feel like I have other
Furthermore, I'm hoping that Microsoft stands by its
promises of interoperability. I have had some
discussions with Microsoft people on this subject that
are probably covered by my Non-Disclosure Agreement
with them. I'll just say that these discussions, coupled
with what I'm reading about Microsoft in public sources,
did not leave me feeling warm and fuzzy.
But my bottom line -- near-term -- is that Windows
Messenger promises vastly expanded communications capabilities,
which is something neither the ILECs nor any other entity
on the horizon will ever bring to my desktop. We'll soon
be doing radically new things on our desktops that make
mere phones look vestigial and obsolete. That'll be a
Good Thing, perhaps even a new chapter in the Annals of
QUOTE OF NOTE -- Jonathan Rosenberg
"Most of the communications applications have not yet
Jonathan Rosenberg, one of the architects of SIP, at
Jeff Pulver's SIP Summit, May 1, 2001.
IF IT'S FUNNY IT MUST BE TRUE -- by Scatt Oddams
[Note: Scatt Oddams, my cartoonist friend from the old
days at AT&T, has offered to do a regular column in
the SMART Letter. We'll see whether it *really*
becomes regular -- Scatt can be such a flake
sometimes! -- David I]
Hey, David! I just did my first comic strip in years!
Also, you gotta see the toon on the ICANN shenanigans
OK, picture==words*1000, gotta go -- Scatt
QUOTE OF NOTE: Merle Haggard
"[Music is] a hard game to enter at my age . . . I'd
like to have it like it used to be, but there's
censorship going on . . . California music was born
from the people that came out here in the Depression,
the _Grapes_of_Wrath_ people that Steinbeck wrote
about. They wound up out here and built houses and
beer joints. So what you got here is barroom music
from a bunch of sincere, hardworking old boys like
Merle Haggard and Buck Owens and Wynn Stewart and
Skeets McDonald and people like that who were
appreciated by those knock-down, drag-out dancing,
oil-field working, cotton-picking people. They've
never seen people like that in Nashville. They only
hear about them in songs."
Country music legend Merle Haggard, quoted in the
Edmonton Alberta Journal, April 27, 2001.
SHAMELESS PLUG for the MORITZ DISPATCH
Speaking of shame, it has been six weeks since I've put
out a SMART Letter. Meanwhile, my friend Scott Moritz,
the telecom reporter at TheStreet.com, has put out some 38
MORITZ DISPATCHes with the latest news (and solid,
unbeholden analysis) on Lucent, Alcatel, Juniper, Ciena,
Cisco, AT&T and all those other companies we hate and love.
Has Cisco hit bottom? Should you trade T for AWE? It's in
there. You can get The MORITZ DISPATCH by email for free
by asking Scott.Moritz@thestreet.com.
CONFERENCES ON MY CALENDAR
July 1-2, 2001, London UK. World Technology Summit and Awards.
I will be giving a keynote speech on the usual topic(s).
Twenty-four awards will be made for technologic contributions in
almost every human endeavo(u)r. Find out more at
October 18-20, 2001, Sarasota FL. Prudential Securities technology
investor's conference. Gilder and other notables will be there.
I'll be Moderator. In other words, I'll be trying to get the
participants to hold down the hype, jargon, positioning and techno-
babble so the individual investors in the audience will understand.
Some might argue that this'd be like the pot calling the kettle . . .
For information, contact Joel Srodes, firstname.lastname@example.org
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Copyright 2001 by David S. Isenberg
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