SMART Letter #75
Little Law, Big Result
August 5, 2002
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SMART Letter #75 -- August 5, 2002
Copyright 2002 by David S. Isenberg
isen.com - "curbs are in"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> Quote of Note: Dave Winer on Truth and Kindness
> Little Law, Big Result, by William G. "Skip" Malette, II
> Quote of Note: Jack Valenti on Home Recording (1982)
> Too Weak To Explain: Eli Noam Gets It Wrong
> Quote of Note: Paul Weyrich on Infiltration and Spying
> A Fable for Our Time, by Aesop
> For Ogden Nash's 100th Birthday
> Conferences on my Calendar
> Copyright Notice, Administrivia
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QUOTE OF NOTE: Dave Winer
"Being kind to each other doesn't have to interfere with
being true to ourselves."
Dave Winer, Scripting News, July 24, 2002,
http://makeashorterlink.com/?V2E113B51
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LITTLE LAW, BIG RESULT
by William G. "Skip" Malette, II
[Washington State has some of the most progressive open
fiber deployment initiatives in the United States. (See,
for example, the Grant County fiber-to-the-home project,
http://www.gcpud.org/zipp.) Until I got this letter from
Skip Malette, I was unaware of the law upon which all this
progress turns that puts Washington State enroute to
becoming a model for the world. Skip's letter is so well
written that I'm publishing it almost verbatim. -- David I]
"I'm currently a member of the telecommunications
committee of our local county Economic Development
Council. From this position I have been a first hand
witness to the likely emplacement of fiber to the home
in this county. In case you are not aware, let me give
you the background.
"Two years ago the Washington State legislature put into
a law a provision to allow Public Utility Districts and
Rural Port Districts to build fiber infrastructure as
wholesale providers. As a result the state association
of PUDs formed a non-profit organization to build and
maintain a statewide backbone to link all the PUDs
together. This backbone, known as NOANET, also provides
a link the Internet at the primary interconnect in
downtown Seattle. Most of the PUDs are electric
utilities and can justify running fiber to the home as
part of their operational needs. The biggest PUD in
this effort is in Grant County and has done most of the
pioneering effort. Several smaller county PUDs have
followed Grant's lead and have begun allowing various
service providers to use the FTTH to provide customers a
choice of services including telephone, TV, and one
whopping Internet service.
"Needless to say, this effort follows both 'The Rise of
the Stupid Network' and 'The Paradox of the Best
Network.'
"Here in Kitsap County our PUD is primarily a water
utility but they have decided to enter the fray with
their own backbone through the county which is
interconnected to NOANET. The unique nature of Kitsap's
system is the requirement that the "last mile" is funded
and, literally, and owned by the property owner. I find
this to be a better model simply because control of the
network moves completely to the end user. The mechanism
to put the "last mile" into place is a thing called a
Local Utility District which is formed through mutual
agreement of property owners in a defined area,
literally neighborhood by neighborhood. This is paid
for through a special assessment on the property taxes
and can be paid off over time, as much as 20 years in
some cases. An additional wrinkle is to add a
management and retail organization above this, something
akin to a co-op. In this way the property owners can
retail to themselves and keep recurring costs very low.
"The committee has been comprised of a broad range of
interests, including telcos, cable providers, elected
officials, and general citizens. It has been very
interesting to witness the spins on the part of the
incumbent providers. Kitsap County has also been in the
unusual and counter-productive position of having 3
telcos, 2 cable providers, 3 calling areas, and 3 area
codes. The ILECs are Sprint, Qwest, and CenturyTel.
Talk about a weakening telco picture!
"Anyway, just wanted to make sure you were aware of the
efforts in this state and how it fits your view. IP,
Stupid, Utility, Intelligence at the edge.
"Spread the word. We need the visibility. The more
people watching the less likely the incumbents will want
to do something dumb."
Skip Malette, digiscout@attbi.com
Poulsbo (Kitsap County), Washington
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QUOTE OF NOTE: Jack Valenti
"I say to you that the VCR is to the American film
producer and the American public as the Boston strangler
is to the woman home alone."
Testimony of Jack Valenti, President of the Motion Picture
Association of America, before the U.S. House of
Representatives Subcommittee on Courts, Civil Liberties and
the Administration of Justice, Monday, April 12, 1982, see
http://www.cryptome.org/hrcw-hear.htm for complete
transcript.
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TOO WEAK TO EXPLAIN
by David S. Isenberg
There's an epidemic of weak explanations. "The dog ate my
homework," has been supplanted by, "In the corporate world,
sometimes things aren't exactly black and white when it
comes to accounting procedures."
Now comes Columbia economics professor Eli Noam's piece
about the telecom crisis, "Too Weak to Compete" in the
Financial Times, July 19, 2002
(http://makeashorterlink.com/?E10C24951).
Noam wrote:
"The problem is not low demand but low prices, based on
oversupply . . . A related factor was that while the
cost of building a network is high, the incremental
costs of serving a customer are low."
Of course he is right, but only in the sense that, "The
automobile accident was caused by carelessness, excessive
speed, squealing tires and crushing metal." An explanation
gets interesting only when it gets underneath superficial
causes.
Noam attributes oversupply to overinvestment. He fails to
see the exponential technological advances behind the
oversupply that let a telco purchase twice as much network
per investment dollar as it did last year.
Noam continues:
"Technological and economic obsolescence will gradually
take capacity out of circulation. But disinvestments
take time. For Texas office space, it took more than a
decade to dissipate the excess supply."
Office space is not like network capacity. Office space
does not double every year. It might make sense for a real
estate company to take spare capacity out of circulation,
but a telephone company, even one without competition, will
incorporate new technology to lower operating expenses and
offer new services. More network capacity comes with these
activities, even as networks become cheaper to build; it is
better than free. Supply will continue to grow.
Noam continues:
"The main strategy will therefore be to raise prices
above competitive levels, reducing competition and the
commodification that lowers profitability and future
investments . . . government will become engaged in the
process. Historically, government has often been
recruited as an enforcer of cartels to stabilise vital
industries whose competitive equilibrium was not
sustainable."
Commodification is another story -- it is largely due to
the end-to-end nature of the Internet (see, for example,
The Paradox of the Best Network, http://netparadox.com).
And there are other solutions to the overcapacity problem.
The most attractive solution would be to stimulate demand,
to decide as a society that connectedness was more
conducive to economic growth than regulation, to loose the
fetters of intellectual property regulations so that new
winner apps could sprout overnight and grow to become life
necessities tomorrow. Would network traffic grow as fast
as capacity? We don't know, but if we do not try, we risk
never knowing.
A second approach would be to establish a new regulatory
regime that stabilizes only those parts of a service for
which a natural monopoly exists, such as dark fiber
ownership, and then throws the doors open to all
competitors who wish to use such right of way in the course
of their business. (Where this has been tried in its pure
form, e.g., http://www.stokab.se, it has created vibrant
competition, lower prices and better service for end users,
and the underlying utility operates at a profit.)
There would be other approaches too, none of them
necessarily easy or straightforward, if there were a will.
Noam concludes:
"The traditional system of regulated market power will
return. This scenario, unfortunately, will look more
like the old telecoms than the new, but we must face
reality rather than engage in denial."
Without technology's recent (and continuing) advances,
Noam's approach would be reasonable. But the remedy for
this year's disappointment is not "forward to the past."
So-called reality has changed; today the incumbent telcos
facing imminent death, and their economic apologists, are
the ones in denial.
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QUOTE OF NOTE: Paul Weyrich
"There is suddenly a great concern that what was passed
in the wake of 9-11 were things that had little to do
with catching terrorists but a lot to do with increasing
the strength of government to infiltrate and spy on
conservative organizations."
Paul Weyrich, president of the culturally conservative Free
Congress Foundation, quoted in Yahoo News, "Ashcroft's
Terrorism Policies Dismay Some Conservatives," July 24,
2002. http://makeashorterlink.com/?S1A026C51
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A FABLE FOR OUR TIMES
by Aesop
A quarrel arose between the Horse and the Stag. The Horse
came to a Hunter to ask his help in taking revenge on the
Stag. The Hunter agreed, but said, "If you desire to
conquer the Stag, you must permit me to place this piece of
iron between your jaws so that I might guide you with these
reins. Also, you must allow me to place this saddle upon
your back so I can ride you as we chase the enemy." The
Horse agreed, and the Hunter saddled and bridled him.
The Hunter and the Horse soon defeated the Stag, and the
Horse said to the Hunter, "Now get off and remove these
things from my mouth and my back."
"Not so fast, friend," said the Hunter. I have you under
bit and spur and prefer to keep you as you are."
[In the Harvard Classics version of Aesop's Fables, the
Introduction says that Aesop's name, "is associated with
the special use of the fable for political purposes at a
time when the reign of tyrants in Greece made unveiled
speech dangerous." While we at isen.com prefer unveiled
speech, we're likely to use more fables in near-term future
SMART Letters. -- David I]
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FOR OGDEN NASH'S 100TH BIRTHDAY (19 AUG 2002)
by David S. Isenberg
Your words survive the grave.
They grow better as they age.
You made the immortal chortle.
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CONFERENCES ON MY CALENDAR
October 8-10, 2002, Atlanta GA. Fall VON. I'll be giving
an Industry Perspective talk at 10:45 AM on Thursday,
October 10, 2002. See http://www.von.com/
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
http://www.ftthcouncil.org for information.
October 22, 2002, Boulder CO. University of Colorado at
Boulder. I'll be speaking to Dale Hatfield's graduate
telecom seminar and guests, 4:00 to 5:20 PM. Contact
CourtneyCowgill@Earthlink.net for details.
November 7, 2002, New York. Marconi Foundation Award
Conference. Tim Berners-Lee will get the Marconi Award.
I'll be speaking about the infrastructure that makes the
World Wide Web possible. More details soon.
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Copyright 2002 by David S. Isenberg
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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