SMART Letter #75
Little Law, Big Result
August 5, 2002

             SMART Letter #75 -- August 5, 2002
            Copyright 2002 by David S. Isenberg
        - "curbs are in" -- -- 1-888-isen-com

>  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


  "Being kind to each other doesn't have to interfere with 
   being true to ourselves."

Dave Winer, Scripting News, July 24, 2002,

   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,  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 

  "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,
Poulsbo (Kitsap County), Washington 

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 for complete 

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  

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 

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 

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,  

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.,, 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.  

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, 

   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 prefer unveiled 
speech, we're likely to use more fables in near-term future 
SMART Letters. -- David I]

by David S. Isenberg

Your words survive the grave.
They grow better as they age.
You made the immortal chortle.


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

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.

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 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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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                       203-661-4798 
     -- The brains behind the Stupid Network --