Saturday, November 06, 2004


Nolle on Smart Networks: "Screw the customer."

I held down one end of the annual Great Debate at NGN (Next Generation Networks) last Wednesday. The topic was "Are Smart Networks a Stupid Idea?" Opposing me was the estimable Tom Nolle, who has been saying that the Internet needs a haircut, a shower and a job if it to be an economic success for the last five years or so.

Eric Krapf picks up the story (in NGN Daily Report, Nov 3, 2004):
Industry debates are fun when they get down and dirty, and consultants David Isenberg and Tom Nolle didn't disappoint when they squared off in the NGN 2004 Great Debate, which posed the question, "Are Smart Networks A Dumb Idea?" Both men deployed their utmost rhetorical tones and stagy gestures as they argued their cases.

Isenberg, of course, coined the term "Stupid Network." He and Nolle stood at separate podiums on either side of the same stage, but they addressed each other from different planets. This was best demonstrated when Isenberg asked audience members for a show of hands: How many are employed at large companies? When about a third of the audience raised 'em high, Isenberg asked them to keep their hands up if they felt that, in these large companies, they were "working up to their creative potential." His point being that the Internet's "stupid" core is what allows for innovation and creativity at the edges, which Isenberg suggested is the domain of the small, entrepreneurial technologist--while the big carriers, with their stifling legacy of top-down-ordered "smart networks," allow people to stagnate.

Nolle's response: Raise your hands again if you work for a large organization. Now keep your hands up if you value the ability to "pay your bills and feed your families."

That was the heart of Nolle's argument: "Economics really do matter," he said. "We thought that technology triumphed over dollars. And it doesn't."

Nolle echoed the argument that venture capitalist Rod Randall made yesterday: Stupid networks don't make money and thus can't be sustained. Nolle clearly doesn't believe, as Dave Passmore suggested yesterday, that the incumbent local exchange carriers (ILECs) are in danger of entering a "death spiral" as they face declining revenues in their traditional lines of business. Instead, Nolle sees the ILECs as the only carriers with a hope of survival, as their scale, assets and incumbency give them better margins, even with declining revenues, than any competitor could dream of.

From my vantage point, Isenberg scored his most effective points when he focused on the original "Stupid Network" arguments that time has borne out, namely that applications we now take for granted, like email, likely would never have emerged from a telco "smart network," because of the painfully large amounts of time and money that those organizations typically spent before introducing any new application. I have a tough time imagining AT&T or the RBOCs fostering the Internet, left to their own devices (which tended to have 20-year amortization periods).

On the other hand, Nolle is right when he points out the lack of a real business case for a lot of these innovations. Isenberg had tried to make the argument that customers demand the new applications that the Internet is enabling; Nolle's response was to stride over to moderator Dave Passmore and offer him $20 for his car. His point: Just because you want something and you want to pay a certain price for it, doesn't mean you can or should get it at that price. Or, as Nolle more bluntly put it: "Screw what the customer wants, unless you can have a meeting of the minds with the guy who has to produce it."

Isenberg's retort: "When you say, Screw the customer, I think that pretty much sums up the Smart Networks point of view."

Sorry, I didn't mean to wimp out with an "On the one hand...On the other hand…" writeup of this debate. But I also don't think it's my job to decide who was right and who was wrong.

You're smart; you'll figure it out.

1. The network service providers must be compensated somehow or else soon, we will have no network. An ecosystem where all the money are made on the upper layer but not below cannot be self-sustaining.

So when they complain "it cannot make money", it should be read as "i dont get as much money as before" or "i have to work much harder to make money".

2. When people talks about smarter network, it isn't neccessary in conflict with stupid network. :-) Network that get smarter and better in doing its (dumb) job of moving bits is a good thing. Network that get smarter in knowing what others is doing above is a bad one. We just need to know who is saying what?
This is *exactly* the issue I raised at WTF2004: who's gonna pay for the stupid network? I tried to get people into a breakout session, but .... nobody seemed to want to tackle this really hard question.
On the industry aspect, the role of a pure ISP (ie, the middleman that provides IP connectivity only by procuring infrastructure from a telco) is already dead by 1996 to 1997 when the telco woke up to the idea of Internet.

Pure ISPs started disappearing, either moving up layer (like AOL) or down the layer to build infrastructure. They are been squeeze by both side afterall, with a cost squeezed by telcos and revenue squeezed by telcos.

Will such business model comes back? Maybe it will come back as a provider who can roam across multiple infrastructure - 2.5G, 3G, Wifi, cable, DSL etc) but not likely in the near future given the FCC policy direction US has taken to drive infrastructure growth by removing "open access".

So the question is who is going to build a dumb network - the telcos is; The question is how to convience the telcos that building a dumb network is in their best (business) interest...
Are stupid Networks a smart idea?

If you start from the assumption that "Economics really do matter" and you come to the conclusion that the "Smart networks" at least feed a lot of people, while the "Dumb Network" as far as today didn't make any millionaire, well we could think that the Stupid Networks Is NOT a good idea at all.

Bur then, when they invented the textile machines, since they created a drastic change in the society, and of course reduced millions of people on the verge of starving, one could have come to the conclusion that Progress is not in the interest of the Economy and even more, not in the interest of the society.

In principle a computer can steal thousand of jobs, so that it probably would have been better not to invent it.

And we could go on for hours.

But we ALL know that Progress is something almost as definitive as birth and death.

We are born, we progress and we die.

Patrizia from a World on IP
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