SMART Letter #72
The New Cisco Kid
June 11, 2002

             SMART Letter #72 -- June 11, 2002
            Copyright 2002 by David S. Isenberg
  -- "a toy now, but watch out" -- -- 1-888-isen-com

>  Quote of Note: Robert Kahn
>  The Spectrum Commons Bill
>  Clayton Christensen, The New Cisco Kid?
>  Quote of Note: Lawrence Lessig
>  Quote of Note: George W. Bush
>  Conferences on my Calendar
>  Copyright Notice, Administrivia

QUOTE OF NOTE: Robert Kahn
  "The Internet is an architectural philosophy, rather 
   than a technology."  
Robert Kahn, quoted in The Washington Post, May 23, 2002 
(p. B1).


News flash?  On May 2, 2002, Congressman Ed Markey, the 
ranking member of the U.S. House Telecom Subcommittee, 
introduced what he calls "The Spectrum Commons Bill".  See  Why has 
this been such non-news lo these last six weeks?  

Section 113(j)(1)(C) of the bill says that the Secretary 
[of Commerce, I think], "shall, not later than January 1, 
2003, prepare, make publicly available, and submit to the 
President, the Congress, and the [Federal Communications] 
Commission a report that . . .

  "designates a 20-megahertz band of contiguous frequencies 
   located below 2 gigahertz, and a band of between 300 and 
   500 megahertz of contiguous frequencies above 2 
   gigahertz and below 6 gigahertz, for reallocation to the 
   public for unlicensed use."

Huge chunks of newly unlicensed spectrum!  That's news!

Markey's intent, as he expressed it at the Massachusetts 
Broadband Confrence that I attended on June 10, 2002, is 
that this newly liberated spectrum would be a toehold for 
post-1934 spectrum management policy, a place where new 
cognitive radios using new modulation and signal processing 
techniques could create new services and new markets.  

People more fluent in legi-speak than I should scrutinize 
HR 4641.  There's a lot of prescriptive language in the 
bill that runs counter to the twin ideas of (1) providing 
options, not solutions and (2) devolving control to the 
edge.  Furthermore, I note that even though he seems to 
"get it", Markey comes from the same party as Fritz 
"Disney" Hollings and John "Tauzin" Dingell.  (Not that the 
other party is a better friend of the New Network -- 
clearly it isn't.) 

However, at first blush, a proposal to create a couple of 
huge new chunks of unlicensed spectrum as a toehold for new 
forms of spectrum regulation is a giant step in the right 

QUOTE OF NOTE: Lawrence Lessig

  "The architecture [of the Internet] is analogous to the 
Lawrence Lessig, quoted in Reason, June 2002.

by David S. Isenberg

I came away with a cool, distant, detached feeling after 
reading Clayton Christensen's October 2001 paper, 
"Innovation in the Telecommunications Industry" (with Scott 
D. Anthony and Erik A. Roth)[1].  

When I read Christensen's 1997 book, _The Innovator's 
Dilemma_, I thought, "Hot!!!"  Christensen had assembled 
impressive data on market disruptions and had drawn 
important, perception-altering conclusions.  I was excited.  
I wrote a glowing review; Christensen wrote back saying, 
"Don't change a word."  I went up to Harvard and had lunch 
with him, and over several visits it felt like we were 
developing a warm collegial relationship.  _The Innovator's 
Dilemma_ has become (and remains) a cornerstone of my 

I was hoping Christensen would take his telecom work in a 
different direction.  I was hoping he would amplify on his 
Andy Grove anecdote, the one where, Christensen says, Grove 
exclaimed, "I get it!  It is not the technology that is 
disruptive, it is the way the new technology disrupts the 
old business model."  [Note: My own paraphrase from memory 
-- David I]  

It's the business model, SMART People.  Telephony is 
vertical, Internet horizontal.  Telephony integrated, 
Internet modular.  Telephony centralized, Internet creates 
its value at the edges.  Telephony financial returns do not 
distinguish network transport from application, but in an 
Internet world it is very, very, very difficult to make 
money providing pure network transport (see

Once, in response to Christensen's speculation that fiber 
optics is a sustaining technology, I tried to tell him how 
the same technology could be either disruptive or 
sustaining depending on the business model that employed 
it.  My example was that Internet telephony could be 
disruptive when it is a shrink-wrapped, end-to-end 
application, but sustaining when it is used PSTN-Gateway-
style by the telco to lower the cost of minutes.  But I 
came away feeling that my argument had not hit home. 

It was hard for me to believe that Christensen and I were 
on different wavelengths.  So I looked hard for that magic 
spark in "Innovation in the Telecommunications Industry", 
but I could not find it.  Maybe it was a timing problem, I 
thought -- the paper came out right after September 11, 
2001.   Maybe, I told myself, my shock at larger events had 
overshadowed it.  

But I just re-read it, and I still can't get excited.  And 
this time, I think I've figured out why.  

Christensen has become an incumbent in his space.  Like all 
good businessmen, he's listening to his best customers.  
He's trying to help big companies like Cisco (which he now 
calls innovators) figure out which technologies to hitch 
their wagons to.  He's serving up business ideas that are 
increasingly aimed at the established market for such 
ideas.  He's trying (unconsciously or not) to lose the 
disruptive fringe of business ideas that threaten his best 
customers, those down-market toy ideas that seem irrelevant
to his clients today but that could grow up to nuke the 
Ciscos of the world tomorrow.  

Helping Cisco and company find new winner technologies is a
low stakes game.  It's *not*the*technology*, SMART People; 
it is the business models enabled -- or disrupted -- by any 
given technology.  

The subtitle of the paper, "Separating Hype from Reality", 
is a strong clue.  Reality is a word I rarely use without 
thinking.  Whose reality?

Cisco seems to have worked itself into its own dilemma by 
its explicit choice of Lucent and Nortel as competitors.  
If Cisco succeeds, it becomes a voice company, catering to 
incumbent telcos.  Of course, Cisco says that voice will be 
free (meaning that voice will no longer be billed by the 
minute), and of course it is right.  But I don't think 
Cisco understands that if telephony as we know it is 
destroyed, Cisco itself goes down the tubes with it.  So I 
conclude that Cisco wants a little disruption, but not too 
much.  Cisco may want to be the disruptive innovator, but 
by choosing Lucent and Nortel as competitors, Cisco has 
opted into a business model based on sustaining, old 
marketplace values.

Speaking of "Whose reality?", I recently spoke at Cisco, 
and the symptoms of patrimonial bureaucracy were so thick 
you could cut them with Occam's Razor.  I was taken aback 
so abruptly I did not have time to dust off the corporate 
culture part of my presentation.  I failed to get the 
Stupid Network Message or the Corporate Culture Message 
across effectively enough.  Cisco's corporate culture, as I 
saw it, was so strong that it threatens to hobble the 
company even before the real disruption begins.  A strong 
distortion field, of which its people may not be fully 
aware, defines Cisco's reality.  

[Note that I don't say this about Microsoft, which appears 
to know *exactly* what it's doing, the master, not slave of 
its culture.]

Once I understood that the authors of "Innovation in the 
Telecommunications Industry" were vested participants in 
Cisco's reality, the paper made sense as a window into that 

The paper has four sections; below I dig briefly at the 
soft spots in each one.

Section One presents a series of putative litmus tests that 
a corporate middle manager might use to guesstimate the 
success potential of a new ahem-disruptive technology.  The 
litmus paper turns red, e.g., if the new technology has the 
potential to attract customers away from the mainstream 
market and if there are not barriers to adoption.  

We need Harvard Business School for this?  It ain't so easy 
to tell if a new technology has the potential to take 
customers out of the mainstream market.  Just ask Western 
Union about the telephone, or Keuffel & Esser about the 
hand-held calculator, or DEC about the PC.  

Furthermore, there are *always* barriers to adoption of 
any new technology -- and these seem even higher when an 
incumbent looks at them.  As AT&T once said about the 
Internet, it'll never work, and even if it would work we 
would not allow it.  Such barriers.

One of my teachers once said something that applies to the
proposed litmus tests: "Nice tiger soup recipe, now all you 
have to do is catch a tiger."  The litmus test analogy is a 
vast oversimplification -- in reality (whose reality?) you 
need to hire a Harvard Business School consultant to tell 
you what color the litmus paper is.  And he could be wrong.

Section One also introduces three other descriptors of 
technology's effects on business: Distraction, Displacement 
and Discontinuity.  Introducing more than the customer can
absorb is what Christensen calls "overshoot".  These four new
categories are overshoot.  The dichotomy introduced in _The 
Innovator's Dilemma_, sustaining versus disruptive, was 
quite powerful.  In fact, it is often more than people can 
understand; I have grown tired of hearing people describe 
their sustaining technology as disruptive.  It is not clear 
to me that there is a telecom-specific advantage (or a 
decisive general one) in introducing a more elaborated
four-fold taxonomy.  

Section Two declares that while telephony has been 
relatively immune to disruption  the enterprise data-
networking marketplace, has been rife with disruption.  
(Why have you seen my new Cisco router?  It is positively

It an old saw that innovation starts in the enterprise and
moves into "the network" -- I've heard it for almost 20 
years.  (PBX features became Centrex features, which became 
CLASS features, etc.)  Actually, the Internet changes this.  
For the first time we are seeing "residential" or "consumer" 
(yuck!) applications, e.g., instant messaging, move from 
the home to the office.  Because technology is so cheap and 
so available, and because the Internet is end-to-end, new 
innovative, even disruptive applications can appear 
anywhere, e.g., a teenager's bedroom, and move anywhere, 
e.g., an equities trading floor.

Section Two draws a distinction between telephony's one-to-
one property and the Internet's any-to-any.  Clearly, any-
to-any is an important property for group forming (find 
Reed's Law with Google).  But any-to-any would not be easy 
without the Internet's end-to-end property.  If you had to 
ask permission of a centralized service provider to connect 
your "any" to my "any" it would be as hard as (oh, let's 
pick a random example) multi-party teleconferencing.  But 
because we have end-to-end, any-to-any has fewer barriers.  

The paper misses the primary importance of end-to-end 
completely, but this is not surprising -- Cisco's reality 
includes both intelligent networks, where the network owner 
participates in value creation, and stupid networks, where 
value is created at the edge.  It has to fudge this key

In Section Three, the authors attempt to eat their own dog 
food.  They try to predict the potential of several "in-
process 'disruptions'" using the methodology they have
laid out in Sections One and Two.  It is an admirable 
attempt, but it seems so riddled with blind spots, I bet it 
will be hilarious reading in a couple of years.  I 
fearlessly predict that it will fare no better than the 
predictions of other pundits and prognosticators.  (Yes, 
gentle reader, including those of this very author, but I 
ain't selling no 4-D Litmus Harvard Snake Oil to no Cisco.)  

The Litmus please!  The disruptive winner, according to 
Section 3 -- the IP/PBX!  What a coincidence -- Cisco just 
happens to have a strong position in IP/PBXes.  It acquired 
its IP/PBX technology from Selsius, which fielded a product 
that looked and worked a lot like a business telephone.  
What new properties (besides easier moves, adds and drops) 
will it bring to the market that were not there before?  
(Or, as the authors admit, "Some may argue that this is 
really not a new growth opportunity.")  Wouldn't we rather 
call it (in the authors own term) a displacement?  Or maybe 
even a *sustaining*technology*?  

Voice over IP (VOIP) has already arrived as a sustaining 
technology that almost all telcos now use to lower the cost 
of minutes.  If VOIP turns disruptive, we won't be able to 
describe it in telco terms like "PBX".  It might arrive 
more like a kind of instant messaging or a new way to blog 
or a Game Cube capability.  (Can you spell SIP?)  If the 
old Clayton Christensen is right, Cisco won't respond to 
the disruptive potential of VOIP until VOIP in its new, 
disruptive form, has destroyed or transformed a substantial 
portion of Cisco's established marketplace.

Notwithstanding the blind spots of the other three 
sections, Section Four contains some good (if Cisco-
flavored) scenario thinking about the evolution (or 
revolution) of the telecom space.  In this section, the 
authors back off and consider alternative outcomes.  They 
may not have the right outcomes, or even the right 
variables, but they make a valiant attempt to do difficult 
work -- to consider forces shaping the industry and project 
a few alternative outcomes.

However, why should I destroy the mood of this essay by 
giving Section Four a pass?  The box called, "Ubiquitous 
Broadband: A Boon or the Return of Theodore Vail?" is 
entirely too centrist.  It asks whether the U.S. Government 
will subsidize last mile connectivity.  But it fails to 
consider the different ways in which such subsidization 
might occur, or even if subsidization is the best form of 
government intervention.  Indeed, the question is loaded.  
Theodore Vail fathered an era in which the United States 
had the best telephone system in the world -- to juxtapose 
this against "boon" is an injustice.  I can only hope that 
the next United States national network, whatever form it 
might take, will provide the same kind of world leadership.  
Unfortunately, under current policy it is more likely that 
the U.S. Network will follow the path of U.S. Automobiles, 
U.S. Steel, and U.S. Consumer (yuck!) Electronics.

In summary, I'm disappointed.  "Innovation in the 
Telecommunications Industry", has very little of the 
parsimonious explanatory power of _The Innovator's 
Dilemma_.  It was a well-meaning attempt by some smart people 
to draw conclusions and make predictions on the basis of 
incomplete data and culturally larded explanations.  _The 
Innovator's Dilemma_ rose above consultant-speak and biz-
babble.  "Innovation in the Telecommunications Industry" 
does not.  I am afraid that the disruption in 
telecommunications is going to come from other sectors than 
the ones the authors are looking at.  If Cisco drives that 
disruption, I'll eat these words.

[1] You can read "Innovation in the Telecommunications 
Industry" at
If you do, I'd like to hear your opinion!

QUOTE OF NOTE: George W. Bush
  "I read the report put out by the bureaucracy."  
George W. Bush speaking about a U.S. EPA report released in 
May 2002 calling for mandatory reduction of greenhouse gas 
emissions, quoted in the New York Times, 6/4/02.  


June 12, 2001, New York.  CIBC Telecom Food Chain 
Conference.  I'll be delivering the morning keynote tomorrow 
-- 7:45 A.M. (sharp!) at the Plaza at the SE corner of 
Central Park.

October 8-10, 2002, Atlanta GA.  Fall VON.  I'll be giving 
an Industry Perspective talk.  Time and date to be 
determined.  See

October 15-17, 2002, New Orleans LA.  Fiber to the Home 
Council Annual Conference.  I'll be giving a keynote (on 
why neither telco nor cable TV co will bring us fiber to the 
home).  Nothing on the website yet, but keep checking for information.  This FTTH
Council is doing excellent work.

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