!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() ------------------------------------------------------------ SMART Letter #78 -- October 21, 2002 Copyright 2002 by David S. Isenberg isen.com - "the beginning of end-to-end" isen@isen.com -- http://isen.com/ -- 1-888-isen-com ------------------------------------------------------------ !@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*()!@#$%^&*() CONTENTS > Press Release > Letter to FCC Chairman Michael Powell > The isen.com trans-Pacific tour > Conferences on my Calendar > Copyright Notice, Administrivia ------- PRESS RELEASE TELECOM GROUP URGES FCC: LET TELCOS FAIL FAST LETTER TO CHAIRMAN CITES "NATURAL PROCESS" Washington, DC, October 21, 2002 - An influential group of Internet analysts and business executives today urged the Federal Communications Commission (FCC) to let failing telecom companies fail, and "fail fast." The 41 signatories, led by independent telecommunications analyst David S. Isenberg, said in a letter to FCC Chairman Michael Powell that Internet-based technologies are subsuming the value embodied in the traditional telecommunications networks. According to the group, "This is causing the immediate obsolescence of the vertically integrated, circuit-based telephony industry of 126 years vintage. [Telephone company] bonds used to purchase now- obsolete infrastructure assets have become (or are inexorably becoming) bad debt." The group urges the FCC to resist telephone company pressure tactics to prop up businesses that technological progress has made obsolete, in order that advances in newer, better forms of communication not be stifled. Calling the current telecom troubles "not a disaster, but a natural event," the letter says a "revolution in productivity and human benefit as big as the agricultural and industrial revolution" could result. "Too many business analysts are talking about bubbles and over-leveraged balance sheets as the root cause of current telecom troubles," said Isenberg. E.g., said Isenberg, commenting on the letter, "This confuses the symptoms with the disease. These things are just symptoms of the fact that Internet technology has made phone companies obsolete. If the government tries to treat the symptoms, the American economy will actually stay sick longer than if the natural process is allowed to run its course." The proper course, according to Isenberg, is to write off all circuit-based telephone assets to reflect their obsolete value, and re-capitalize the industry with as little government intervention as possible. "People will continue to use the existing telephone network for years to come, just as people still rode in horse-drawn carriages for years after the automobile was invented. But the government never subsidized buggy whip makers, and it should not subsidize telcos now." Included in the letter are four recommendations to the FCC: + Resist at all costs the telephone industry's calls for bailouts. The policy should be one of "fast failure." + Acknowledge that non-Internet communications equipment, while not yet extinct, is economically obsolete and forbear from actions that would artificially prolong its use. + Discourage attempts by incumbent telephone companies to thwart municipal, publicly-owned and other communications initiatives that don't fit the telephone company business model. + Accelerate FCC exploration of innovative spectrum use and aggressively expand unlicensed spectrum allocation. Isenberg said that this point of view has evolved over the last several years among the signers, and has been reinforced by market activity. "The results of the new Internet technology on the old are there for all to see in the industry stock prices. We just want people to think clearly about how to move forward for the greatest public benefit." Contact: David Isenberg Principal Prosultant(sm) Isen.com 1 908 875-0772 1 908 456 4006 isen@isen.com (Prosultant is a service mark of isen.com, LLC) Matt Oristano President Alda Inc 1 203 389 7407 matt@aldainc.biz David Weinberger Editor In Chief Journal of the Hyperlinked Organization 1 617 738 8323 self@evident.com ------- LETTER TO FCC CHAIRMAN MICHAEL POWELL The Hon. Michael Powell Chairman Federal Communications Commission Dear Mr. Chairman: We thank you for your leadership in FCC efforts to understand the causes of the current telecom debacle, and especially for convening the FCC's October 7, 2002, Telecom Recovery En Banc hearing. We were dismayed that several of the En Banc speakers confused causes with effects. We believe that balance sheet weakness, long-haul overcapacity, and even the recent speculative bubble, are effects, not causes. If we attempt to treat the symptoms, we risk missing the causes and prolonging the agony. We hold that the primary cause of current telecom troubles is that Internet-based end-to-end data networking has subsumed (and will subsume) the value that was formerly embodied in other communications networks. This, in turn, is causing the immediate obsolescence of the vertically integrated, circuit- based telephony industry of 127 years vintage. CLEC, IXC and ILEC bonds used to purchase now-obsolete infrastructure assets have become (or inexorably are becoming) bad debt. Weak last- mile competition prevents the most powerful technological advances from reaching all but a few customers; this is the largest cause of long-haul over-capacity. One En Banc participant, NYU Professor Larry White, had views that seem consistent with ours. He recommends that we let firms that are failing fail as quickly as possible. We believe that it would be harmful if government actions prevent, delay or interrupt this evolution. It must proceed if the United States is to continue to be a leading contributor to communications progress, and if its citizens are to benefit from the technologies that are now available and the applications that they enable. The telecom debacle is not a cyclical phenomenon. The telephone network's technological base, and the business model under which this old technology thrived, are obsolete. Recovery is not an option. We can only move forward; how far and how fast will be determined by our continued freedom to innovate. Let the United States learn by not duplicating the Japanese banking experience in the telecom arena. We need to see the current situation not as a disaster, but as a natural event; part of a revolution in productivity and human benefit as big as the agricultural and industrial revolutions. Given these views, we urge the FCC to: + Resist at all costs the telephone industry's calls for bailouts. The policy should be one of "fast failure." + Acknowledge that non-Internet communications equipment, while not yet extinct, is economically obsolete and forbear from actions that would artificially prolong its use. + Discourage attempts by incumbent telephone companies to thwart municipal, publicly-owned and other communications initiatives that don't fit the telephone company business model. + Accelerate FCC exploration of innovative spectrum use and aggressively expand unlicensed spectrum allocation. Mr. Chairman, we note with gratitude your impatience with antique regulatory structures, and your attempts to embrace new technology. Also, we acknowledge the burden inherent in the FCC's duty to ensure the continuity of communications, especially basic dial-tone continuity, in the face of such changes; we are prepared to lend assistance as the FCC grapples with this issue. Notwithstanding, we urge you to continue against the inevitable onslaught of those seeking to preserve an impossible status quo. Sincerely, Izumi Aizu, Asia Network Research Jay Batson, CEO, Pingtel Robert J. Berger, President, Internet Bandwidth Development, LLC Dan Berninger, pulver.com Scott Berry, telecommunications consultant, Darien CT Michael Bialek, President, InfoComm Inc. Scott Bradner, Harvard University Richard Campbell, Worcester Polytechnic Institute Douglass Carmichael, individual, dougcarmichael.com Judi Clark, individual, ManyMedia.com Anders Comstedt, Managing Director, Stokab Gordon Cook, publisher, The Cook Report on Internet Timothy Denton, Internet attorney, tmdenton.com Greg Elin, independent software developer Tom Evslin, CEO & Chairman, ITXC David J. Farber, Moore Professor, University of Pennsylvania Bob Frankston, individual, frankston.com Dewayne Hendricks, CEO, Dandin Group Roxane Googin, editor, High Technology Observer Charles W.K. Gritton, President, Broadsword Technologies, Inc. David S. Isenberg, Principal Prosultant(sm), isen.com, LLC Johna Till Johnson, President, Nemertes Research Peter Kaminski, individual, peterkaminski.com Shumpei Kumon, Executive Director, GLOCOM Bruce Kushnick, Executive Director, New Networks Institute Andrew Maffei, individual, Falmouth MA Jerry Michalski, sociate.com David Newman, President, Network Test Inc. Matthew Oristano, former CEO, SpeedChoice, People's Choice TV Mark Petrovic, individual, Pasadena CA Jeff Pulver, founder, pulver.com Frank R. Robles, CEO, Neopolitan Networks, Inc. Charles Rybeck, Managing Director, Benchmarking Partners Paul Saffo, individual, pls@well.com Doc Searls, Senior Editor, Linux Journal Clay Shirky, telecommunications consultant, shirky.com Porter Stansberry, publisher, Agora Inc. Ted Stout, CEO and founder, The ROI Institute Brough Turner, CTO and co-founder, NMS Communications David Weinberger, co-author, Cluetrain Manifesto Kevin Werbach, technology analyst, Supernova Group LLC ------- THE ISEN.COM TRANS-PACIFIC TOUR [Note: Even though the route is now stable and the timing is probably stable, not all of these dates or engagements are confirmed at press time. I'd like to meet as many SMART People as possible enroute -- if you're free to visit (and especially if you have something constructive for me to help with!) please send email -- David I] + WED 13 NOV TO SUN 17 NOV: India (schedule starts in Madras, but mostly TBD) + TUE 19 NOV TO SAT 23 NOV: Tokyo (Glocom conference on 21 Nov, other events TBD). + MON 25 NOV AND TUE 26 NOV: Singapore, talk at Nanyang Technological University. + WED 27 NOV AND THU 28 NOV: Melbourne, talk at Monash University + FRI 29 NOV: Wellington NZ: CityLink. + SAT 30 NOV TO SUNDAY DEC 8: New Zealand, TBD. ------- CONFERENCES ON MY CALENDAR 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. October 23, 2002, Berkeley CA. University of California at Berkeley. I'll be speaking to John Zysman's and Steve Weber's class, "Governance of the e-conomy" and guests from the Berkeley Roundtable on the International Economy. Contact Genevieve Taylor [genktay@uclink.berkeley.edu] for more information. November 8, 2002, New York. (Note the correct date is *not* Nov. 7!) Marconi Foundation Award Conference. Tim Berners-Lee will get the Marconi Award. I'll be speaking about the intelligence at the edge that makes the World Wide Web possible on a panel led by fiber optic pioneer Charles Kao; My co-panelists will include Andrew Viterbi, Rashimi Doshi, Len Kleinrock and Tim Berners-Lee. For more information, contact Darcy Gerbarg, 212-854-7676, djg46@columbia.edu. November 11, 2002 to December 8, 2002 -- isen.com trans- Pacific Tour. See above. December 9 - 10, Palo Alto CA. Supernova, a Kevin Werbach, Jeff Pulver collaboration starring Sergey Brin of Google, Doc Searls, Clay Shirky, and yours truly. http://www.pulver.com/supernova or contact Kevin Werbach, kwerb@werbach.com. ------- 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 isen@isen.com -- http://isen.com/ -- 1-888-isen-com ------- [There are two ways to join the SMART List, which gets you the SMART Letter by email, weeks before it goes up on the isen.com web site. The PREFERRED METHOD is to click on http://isen.com/SMARTreqScript.html and supply the info as indicated. 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