SMART Letter #59
Of Will and Way
August 31, 2001
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SMART Letter #59 -- August 31, 2001
Copyright 2001 by David S. Isenberg
isen.com -- "no way!"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> Of Will and Way
> Quote of Note: Tom Nolle
> Conference on my Calendar
> Copyright Notice, Administrivia
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Of Will and Way
by David S. Isenberg
The chasm between today's DSL and Cable Modem services (measured in
kilobits) and what today's technology makes possible (measured in
gigabits) is deepened and widened by the burst bubble formerly known as
the New Economy. Gigabit Ethernet (GigE) technology offers hundreds of
times more speed. And it is vastly simpler -- any computer-savvy high
school kid can set up a LAN. And it is at least as affordable as
current Internet access services. And it is available today (with 10-
GigE tomorrow, and 100-GigE in a few years).
The spigot of cheap capital was shut off too soon for many fledgling
competitive telephone companies to find flight feathers. They made
mistakes, to be sure, such as their struggle with DSL and early-
generation fixed wireless. Meaningful GigE service, could offer
hundreds of times more capability for about the same price (and nurture
attendant discontinuous business opportunities). We could do GigE
service today if technology were the only issue, but it still seems
decades away. But the question hangs heavy in the air: "Who will offer
this new service, and how will they make money?"
Telephone companies in the U.S. see GigE coming and run the other way.
A gigabit-per-second is enough bandwidth to support conventional
telephone service for a town of 100,000 people. With GigE service,
every customer could offer what the telcos do. In the last decades,
telephone companies have seen their value drained by the onrush of new
technology, especially the Internet. They do not want new bleeding.
They're pretending that DSL is the only game in town. They go crying,
"It's hard to implement, we need rate relief," to state PUCs.
At a deeper level, telephone companies realize that they can't stop
technology. Technology has not been their forte anyhow -- they passed
the torch to the computer industry in the early 1980s. So the telcos
are fighting in the courts, in congress, in the FCC, in state
legislatures and public utility commissions, to stop progress, to
effectively repeal the Telecom Act of 1996, to prohibit and freeze out
competition wherever it might arise. Sadly, these efforts have been
effective.
Wherever technology threatens established business, telephone companies
have allies. Big Music (the recording industry), Big Entertainment and
Big Publishing are most threatened. They want to stop the easy sharing
of music, printed matter, and (increasingly) movies and other video
that the Internet affords. Similarly, Cable Companies own the current
video entertainment paradigm; they are loathe to encourage a new,
disruptive entertainment paradigm. Oh, did I say Big Government? The
last thing Big Government wants is a popular network that behaves as if
national borders do not exist.
Right of Way (ROW) is the last barrier to telephone company disruption.
ROW is the right to bring a wire or a fiber from the Internet backbone
to my house, or to my workplace, or to a wireless access point on a
pole in my neighborhood. Telephone companies have ROW and so do cable
companies. Other entities that have ROW include the Power Company and
the municipal government that owns the streets, and the independent
water and/or sewer district that owns the pipes under the street (and
deals with the liquids that flow through them).
Technology and expertise are no longer barriers to services so fast
that they would put telephone companies out of business. Capital
markets will recover eventually, but municipalities and independent
governmental districts have a secret financial weapon that still works
in hard times -- tax-free municipal bonds!
The key is ROW. Watch out for laws that keep municipalities, electric
utilities and sewer and water districts (and other ROW owners) out of
telecom -- eight states have such reactionary, anti-progress laws
already. Expect telephone company disruption from your city or town or
electric company or, perhaps, your independent sewer and water
district. Where there is a will, there is Right of Way.
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Quote of Note: Tom Nolle
"The problem [with the Internet] is that it was devised
by a bunch of hippie anarchists who didn't have a
strong profit motive. But this is a business, not a
government-sponsored network."
Tom Nolle, CEO, CIMI Corporation, in "Taming the Wild Wild Web" by
Michael Hiltzik, in the Los Angeles Times, July 26, 2001. [Note: Tom
Nolle supports the Tauzin-Dingell bill that would free the ILECs from
having to open their networks before offering inter-LATA broadband
services. Is anybody surprised? -- David I]
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CONFERENCES ON MY CALENDAR
September 12-14, 2001. Lake Tahoe, CA. Telecosm. Apologies to those
SMART people who I told "not this year" -- it turns out I *will* be
going. I still do not know what I'll be doing at Telecosm, but it is
sure to be quieter than in the last few years, perhaps more thoughtful,
and certainly different. For information, see
http://www.forbes.com/conf/telecosm/agenda1.shtml
October 18-20, 2001. Sarasota FL. Gilder Fellers technology
investor's conference. Gilder and other notables will be
there. I'll be Moderator. In other words, I'll be trying to get the
participants to hold down the hype, jargon,
positioning and techno-babble so the individual investors in
the audience will understand. Some might argue that this'd be like the
pot calling the kettle . . . For information, contact Joel Srodes
[joel_srodes@prusec.com].
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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 2001 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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