SMART Letter #69
In Search of an Operating Model
April 4, 2002

            SMART Letter #69 -- April 4, 2002
           Copyright 2002 by David S. Isenberg
      -- "access of evil" -- -- 1-888-isen-com

>  In search of an operating model for the new network
>  Quote of Note: on
>  Maybe the Democrats will fix it ;-)
>  Quote of Note: Jagger & Richards on Copyright Law
>  Government policy never was "Hands-off"
>  Quote of Note: George W. Bush on Non-Transparent Regimes
>  Conferences on my Calendar
>  Copyright Notice, Administrivia

by David S. Isenberg

If you're looking for a practical operating model for the 
new network, the hints in the March 2002 issue of the 
Gilder Technology Report are hard to find. 

I am proud to count George Gilder among my most valued 
colleagues.  His book _Microcosm_ is a brilliant 
synthesis.  His _Life after Television_ borders on 
prescience.  From our first conversation George Gilder has 
been a loyal friend to me.  He was a prime mover in the 
drama that arose from my essay, "The Rise of the Stupid 
Network".  His willingness to tell big-muck AT&T executives 
where to shove it provided inspiration when the time came 
for me to do the same.  When I left AT&T, George gave me my 
first post-AT&T job, the co-authorship of the January 1998 
Gilder Technology Report.  Loyal to a fault, George has 
arranged a speaking role for me at every Telecosm meeting 
since the very first.

In addition, I find Gilder's ideological heterodoxy 
refreshing -- he appreciates accomplished iconoclasts from 
Bill Joy to Michael Milken.  That's smart use of spectrum.  
But I've always wondered how Gilder can support a 
democratic (little 'd') idea like The Stupid Network and 
still stay close to folks like Steve Forbes, Charles 
Keating and Richard Vigilante.  I wonder whether part of 
the answer is that George does not appreciate some of the 
implications of his own insights.  

The latest Gilder Technology Report (March 2002, VII, 3, 
subscription required) makes extended comments on "The 
Paradox of the Best Network" (which I co-wrote with David 
Weinberger based on the original insights of Roxane Googin, 
see, no subscription necessary).  

As is often the case when Gilder edits what Gilder writes, 
florid prose covers silty logic.  His hairpin turns of 
phrase (co-authored with Charles Burger and Bret Swanson) 
leave me unsure whether he's agreeing with us or taking 
issue.  What is he saying?  Is "dumbell Dave" an expression 
of fondness?  Do we have our "own coterie of techno-left 
geeks"?  Can a factual claim be false?  

But no matter.  George spelled our names right, so how bad 
can it be?  

I'm not the only reader who has trouble telling Gilder's 
warp from his woof.  Danny Hillis pulled on some of the 
loose threads in George's latest suit in a Harvard Business 
Review review (9/01) of _Telecosm_:  "Not only does Gilder 
predict that bandwidth will be plentiful and nearly free," 
observes Hillis, "but he also promotes the companies that 
deliver bandwidth as good investments. This may seem a bit 
paradoxical, as investors usually stay away from companies 
that provide an inexpensive commodity."  Note that Hillis 
wrote this before what Gilder now calls Global Double 
Crossing (GXX).

In recent writings, Gilder emphasizes speed of transport, 
its falling price, and positive elasticities that let 
commodity carriers "make it up in volume", as key to the 
Stupid Network's coming marketplace dominance.  Meanwhile, 
he gives less emphasis to one of his own earlier tenets, 
the separation of conduit and content, which is what makes 
a network stupid in the first place.  

Let me try to make this absolutely clear, so even those of 
George Gilder's readers who are used to shrugging off 
turgid prose might hope to understand:

A network is stupid when it does not know what it is 
carrying.  The Internet is an example.  It is a network of 
multiple, diverse networks.  If an owner of one of the 
component networks of the Internet wants to add network-
specific features (like call-waiting, for example) to its 
own network, these features add no value to how the 
network-of-networks operates or to how its users use it.  
Features like call waiting can even be a pain in the 
posterior -- value-subtracted -- to dial-up Internet users.  
Adding intelligence to a network of diverse networks is 
very difficult -- you have to implement such intelligence 
differently in each of the component networks, and then you 
must make sure that all the component networks interact 
correctly.  It is much easier to add intelligence at the 
edge.  It is much easier if the network-of-networks is kept 

In other words, the network-of-networks architecture is 
only practical when network functionality is kept simple.  
(Note that servers are at the edge, not inside the network 
-- a server can be operated just fine without owning wires 
or switches.)

Stupidity was a deliberate design decision by the 
Internet's original architects (for example, see "End-to-
End Arguments in System Design" by J.H. Saltzer, D.P. Reed, 
D.D. Clark, 1984).  They were wise enough not to second-
guess how their network might be used.  For example, they 
resisted putting error checking in the middle of the 
network, which resulted in the separation between the 
Internet Protocol (IP), and the protocol that does error 
checking -- Transmission Control Protocol (TCP) -- denoted 
by the slash in TCP/IP.  TCP could have been implemented in 
the middle of the network, but it wasn't.  Instead, it is 
an end-to-end protocol, implemented at the edge, and it 
works just fine.  

If error checking has been entangled with IP in the middle 
of the network, recent improvements that increase the 
usefulness of the Internet would have been prohibitively 
difficult.  For example, consider Real-Time Protocol (RTP), 
which replaces TCP to make, e.g., Internet telephony 
possible.  We could invent and deploy another protocol 
tomorrow if we had a need for it -- and the core network 
doesn't have to know anything about any of them.  It just 
carries the bits.  

This design decision by the original Internet architects 
has very little to do with the latest optics or 
electronics.  It has nothing to do with broadband, lambdas, 
petaflops or optical switches.  Of course, whizzy 
technology helps a network do its job, but it is simply 
enabling -- it is not part of the core concept.  In 
principle, the network-of-networks was designed to operate 
via carrier pigeon or smoke signals -- it doesn't need 
yottapetateragigamega technology.  IP works on any 
transport medium.

On the other side of this very same coin, high-tech alone 
does not a Stupid Network make.  A 3-D high-res 
holographic-surround Hollywood movie delivered over a 
gigabyte pipe is still a Hollywood movie -- formula 
scripts, smokin' product placements, studio rake-offs, 
casting couches, Oscars, pay-per-view, copy protection, 
hind-brain content and all.  If we perseverate on 
technology, we'll get "TV on speed," as Lawrence Lessig 
puts it, not the intellectually stimulating, one-to-one 
world that Gilder once envisioned in his 1989 classic _Life 
After Television_.

The network-of-networks is still producing huge wealth, 
today's recession notwithstanding.  And the reason for this 
is that it is a Stupid Network, an end-to-end network.  The 
winner apps of the last decade -- email, web browsing, 
ecommerce, instant messaging, and half a dozen other huge 
conveniences that make each person with a net connection 
wealthier than they were a decade ago -- were not brought 
to market by the owners of the wires and switches.  
Furthermore, not a single one of these winner apps requires 
more than a few kilobits per second.  But each of these 
apps required a Stupid Network to get to us -- a network 
upon which innovators are free to innovate without 
permission from the network owner, a network that provides 
immediate -- unmediated -- market feedback, that is, 
without a network owner (or superfluous network 
functionality) standing between the producer and the end-

Because the network is stupid, its providers cannot compete 
on features.  They have to compete on price, speed and 
availability.  The separation of content from conduit makes 
"facilities-based competition" impossible.  Value gets 
added at the edge, which gives the network owner no 
advantage.  Thus, no network transport provider wins big 
(if at all) under any scenario we've thought of that has 
both competition and internetworking -- that's the Paradox 
of the Best Network.  

The telephone companies and cable companies certainly do 
understand this.  They are busy trying to convince 
Congress, the courts, the FCC and the Public Utility 
Commissions of the various states to go Forward to the 
Past.  They want to make the network monolithic again so we 
can return to an era of low competition, high margins, slow 
innovation and stable "investment friendly" business 
models.  (Where were the calls for "investment friendly" 
regulations in 1999 and 2000?)  A monolithic network, even 
if it runs the Internet Protocol, and even if it runs at 
gigabits per second, is still a monolithic network.  

Of course the Best Network is better if it is faster and 
cheaper, but the transport technologies that make it faster 
and cheaper exacerbate The Paradox.  In a normal commodity 
marketplace, scarcity makes prices go up, and a smart 
player who warehouses the commodity in anticipation of 
scarcity can win.  But with the rampant technology 
improvements of the last decades, there's no scarcity 
except in access networks (where there's still monopoly).  
Roxane Googin believes that this will soon make ILEC stand 
for "I Let Equity Crash".

So how does a network provider make money in a network-of-
networks world?  One is left hanging on a Gilderesque faith 
in positive elasticities.  Network-owning insiders found 
positive elasticity to be a weak effect.  Creative 
accounting worked better.  As Greg Kochanski put it in 
SMART Letter #31, doing your own laundry is invisible to 
economic measurements, but if you do my laundry (and I pay 
you) while I do your laundry (and you pay me) then both 
contribute to economic growth (even though the same amount 
of work gets done).  The creative part comes when I book 
the revenue for ten years of your laundry in Year One, but 
I call my laundry payments to you an investment to be 
amortized over 20-years, and I take a loan on the inflated 
value of the dirty underwear you're washing.

Holy Marketplace, George!  We've all been fooled, except 
for Gary Winnick, Phil Anschutz and the like.  Nobody's 
making any honest money.  Further, once the rest of the 
crooks are discovered we might not have a network at all.  
Or we could revert to the era of Intelligent Networks, with 
one or two centralized source(s) of vertically integrated 
connectivity-plus-service, a direction that Mike Powell's 
FCC seems to favor.  But there's a third way -- to separate 
content from connectivity by technology and by law -- to 
run the former as a common good (and engine of wealth 
creation) and the latter as a marketplace.  If that's 
socialism, then so are the roads that support our 
automobile economy, and so is the U.S. Army, which fights 
as I write to ensure cheap oil will keep U.S. economic 
engines ticking.  

The latest Gilder Technology Review acknowledges that 
telecommunications service providers are history -- there 
are no wireline carriers (and only three service providers) 
on its Phoenix-like, Phase II list of Telecosm 
Technologies.  As Roxane Googin originally pointed out, 
their business model is badly broken, and there are no good 
new ones in sight.  Does the Holy Marketplace ever fail?  
Hmmm, lessee, what *did* happen lo these last five years?

Theodore Vail, in a different era, built a monopoly that 
gave the United States the best telephone system in the 
world.  The Bell System lasted 70+ years, which is longer 
than most companies, even big ones, even honest ones, last.  
A new consolidation of today's network infrastructure is no 
longer unthinkable.  Implementing it wisely will be a huge 
challenge, but as Vail demonstrated, it is possible to run 
a monopoly in which service to the public is the primary 
mission.  Are there more heterogeneous, multifaceted, 
organic approaches that could work?  I hope so.  I don't 
know.  But with the future of the network at stake, the 
question is worth exploring.

George likes to begin his standard stump speech by quoting 
Peter Drucker to the effect of, "Don't solve problems, 
pursue opportunities."  Well, the Stupid Network could 
still be a huge creator of wealth, and the opportunity to 
build it still exists.  The separation of content and 
conduit is still the critical, defining characteristic.  If 
there's a business model, let's find it.  If there's not, 
there's still no excuse not to build it.  Let's get to it. 


Gilder was talking about a dumb network long before I wrote 
about Stupid Networks.  He keeps jerking my chain about 
'dumb' versus 'stupid', and until now I've let it slide.  I 
concede that Gilder had the *concept* a decade before me, 
but the right *word* is 'stupid'.  This use of dumb comes 
from a mistaken notion -- that people who are 'dumb', i.e., 
who can't speak, are also mentally impaired.  But non-
speaking (dumb) people can be quite intelligent.  So saying 
'dumb' to mean low intelligence is just plain wrong.  The 
correct word is stupid.  And for networks, the right 
synonym is end-to-end, which implies that the middle of the 
network knows-not and does-not.  End-to-end was there even 
before Gilder articulated 'dumb'.  C'mon, George, let's get 
on to more important issues.  If you still want to use 
'dumb', fine, but from henceforth I'm mum.

  "Subject:  Show your customers that is 
   made in the USA."
Spam from, March 28, 2002.  

by David S. Isenberg

The Democrats aren't any better friends of the new network 
than the other party.  Half of the Tauzin-Dingell anti-
competition bill is Dingell (D-Mich.).  And Senator Fritz 
Hollings (D-SC) recently introduced a shameful anti-copying 
bill that would cripple computers, suffocate free speech 
and negate networks.  I'd be embarrassed to be associated 
with the party that Hollings and Dingell hail from.  

Yet, a website by the authors of the first site, does not deny that it speaks for all 
democrats.  A recent article by one of my 
coterie of techno-left geeks, Jock Gill (a pretty smart guy 
when you pry him away from his Washington buddies), ignores 
Dingell and Hollings, misses some big points, and distorts 
a few others.

The article is titled, "Overthrowing the telecom monopoly" 
(  Why overthrow it 
when it is tottering under its own weight?  Somebody please 
tell Jock that ILEC stands for "Incumbents Letting Equity 
Crash".  The question is what are we gonna replace the 
network with when the monopolies pancake?

Jock Gill says that poverty is a root cause of terrorism.  
Historian and author Robert D. Kaplan, who has studied the 
breadth and depth of the problem in the Balkans, in Africa 
and in the Middle East, refutes that.  The hijackers of 
September 11 were hardly members of the abject poverty set 
-- they came from professional, mostly Saudi Arabian 
families, and lived a middle-class life in Europe and the 
United States.  Kaplan says that terrorism is spawned by 
male youths with enough education to have rising 
expectations, whose culture is in transition from feudalism 
to modernism.  

How do you fix terrorism according to Jock Gill?  Foreign 
(sic) Aid.  How do you get Foreign Aid not to fail like it 
has for the last trillion dollars and the last 50 years?  
Convince developing nations to adopt better telecom 
policies.  Sure.  Gill asks, "How do we get emerging 
national economies to scuttle the top down, centrally-
controlled management of spectrum as a scarce resource that 
is owned?"  Lessee, we (sic) could tell them, "Do as we 
say, not as we do."  That'd convince them.

Gill does correctly apprehend the link between good 
telecommunications policy and economic growth, but if the 
U.S. does not have a good domestic telecom policy, how is 
it ever going to convince developing nations to get one?  
The United States stands on the verge of becoming a second-
rate technological power thanks in part to failed telecom 
policy, and the Democrats are as much to blame as the other 
guys.  Jock Gill should begin by taking the mote named 
Hollings out of his eye.  Then he needs to take the speck 
named Dingell out of his other eye.  Then maybe we can talk 
about telecom policy.  

QUOTE OF NOTE: Jagger & Richards
  "Oh no, doncha copy me no more.  The lines around my eyes 
   are protected by a copyright law" -- 
From "Doncha Bother Me" by Mick Jagger & Keith Richards, 
"Anthem", Rolling Stones, 1966.

by David S. Isenberg

Yankee founder Howard Anderson thinks that the best 
government broadband policy is "benign neglect" (see  
He correctly points out that adoption of residential 
broadband access (i.e., DSL & Cable data service) is NOT 
stalled, that 12% of United States homes now have some form 
of it, and that the growth rate is 50% per year or higher.  
Clearly the problem is not residential demand or slow 
adoption.  And I agree with Howard that network providers 
should not be seeking a steel-industry-style government 
dole at the expense of the greater economy.

So what's the problem?

The problem is at least threefold.

First, we're not starting from zero.  One of the reasons 
the United States became an Internet leader in the first 
place is that the United States did not neglect to fund 
government research on networking.  Then U.S. government 
policy made a sharp distinction between basic and enhanced 
telecom services; early ISPs were helped immeasurably 
because Internet access was classified as an enhanced 
service.  That's benign, but it is not neglect.  Also, the 
United States has a policy of unmeasured local telecom 
service -- the absence of per-minute charges was another 
positive policy that enhanced and advanced United States 
Internet leadership.

Second, current so-called broadband access offerings are 
crippled compromises.  We have a few hundred kilobits when 
todya's technology could provide a more reliable gigabit 
for a smaller price.  And we have one provider to "choose" 
from when we should have five.  If we neglect the fact that 
we're buying access from an unholy duopoly the result will 
not be benign.

Third, the vertically-integrated telco model leads forward 
to the past.  The Stupid Network is the proven way to 
innovation and economic growth.  But you can't make money 
running a Stupid Network -- see  So 
whadaya gonna do?  Who ya gonna call?  Benign neglect will 
lead to retrograde ILEC-driven policy.  

We need to move forward -- with wisdom, guided by the 
interests of end-users and a desire for economic growth.  I 
wish for a marketplace solution, but history has saddled us 
with a highly regulated situation.  We have to start where 
we are, which is not a benign place, nor does it call for 
our neglect.

QUOTE OF NOTE:  George W. Bush
  "I worry about a regime that is closed and not 
George W. Bush, quoted in the New York Times, 2/20/02, 
Page 1.  He was speaking about North Korea, doncha know.


April 8-11, 2002.  Seattle.  VON (Voice on the Net).  
On April 10, at 9:35AM, I'll be leading a panel on 
"Financing Disruption" that was inspired by SMART Letters 
#64 and #65.  The panel will feature CIBC analyst Stephen 
Kamman, an extremely rare public appearance by Roxane 
Googin, Internet architect David P. Reed, and yours truly.
My bottom line is that voice is a diminishingly tiny deal on 
The Stupid Network, but it still accounts for a 
disproportionate share of revenues.  Come for the Googin-
Kamman-Reed show, but stay to get the latest on SIP, the
technology that will disrupt telco voice whether or not we
get Fiber-to-the-X.  More info at

April 18, 2002.  Sioux Falls SD.  MIDnet/GPN Spring 
Networking Conference.  If you've never been to Sioux Falls, 
you're in for a middle-American data-networking treat.  
Sioux Falls is a major node on the network, home to 
Citibank's credit card operations, to LodgeNet, the second 
largest U.S. provider of entertainment and information 
services to hotels and motels, and to Northwestern 
Corporation, a multi-glomerate as solid as the Midwest that 
(far as I can tell) doesn't use fancy accounting and still 
makes honest money.  MIDnet is a small non-profit 
organization that promotes networking in the Midwest 
thought grants, meetings like this one, and other means.  
GPN, the Great Plains Network, is the meeting's co-sponsor.  
GPN operates a regional internetwork and provides 
connectivity to Internet2.  For more info, see

May 21-23, 2002.  Boston.  Connectivity 2002.  A 
celebration of networks so abundant that they will carry 
everything effortlessly.  For more information see or contact Daniel 
Berninger, 631-547-0800.

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 2002 by David S. Isenberg -- -- 1-888-isen-com 

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David S. Isenberg            , inc.                         888-isen-com                       908-654-0772 
     -- The brains behind the Stupid Network --