SMART Letter #71
Expedient Pricing Plan
May 3, 2002
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SMART Letter #71 -- May 3, 2002
Copyright 2002 by David S. Isenberg
isen.com -- "avoiding the pain of an original thought"
isen@isen.com -- http://isen.com/ -- 1-888-isen-com
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CONTENTS
> Expedient Pricing Plan for High-Speed Access
> Sometimes you get Shown the Light
> FCC NPRM 02-33: Forward to the Past
> Conferences on my Calendar
> Copyright Notice, Administrivia
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EXPEDIENT PRICING PLAN FOR HIGH-SPEED ACCESS
by David S. Isenberg
Wireless carrier E-xpedient Networks filed for bankruptcy
last fall. Bawling echoed up the drainpipe long after this
baby disappeared, because E-xpedient got one of the most
basic pieces of the broadband puzzle right -- the pricing
model!
E-xpedient was offering 100 megabit per second service in a
handful of cities, most recently Miami, when it went under.
It would put a pair of bi-directional transceivers on
rooftops of tall buildings to create a redundant wireless
ring. It was a reliable, cost-effective architecture, and
the company was executing well, but it ran into the
unavoidable fact that constructing networks and selling
connectivity the old-fashioned way precedes revenue growth
-- just as capital markets were closing. (I was hoping to
make a business alliance between E-xpedient and isen.com,
but alas, it was not to be.)
E-xpedient offered 100 megabit-per-second connectivity for
$100 a month! Who in their right mind would say no? But
there was a gotcha -- for $100 you could only download one
gigabyte per month. Theoretically, a customer could suck
down their monthly quota in two minutes. But practically
speaking, a gigabyte per month per person is a practical,
entry-level quota for today's normal Internet use. It
allows for a reasonable amount of email and Web surfing,
some streaming audio and maybe even a few mongo downloads.
Furthermore, high-speed connectivity has other advantages
besides raw capacity. The $100 plan was always-on, with
almost-instantaneous latency, and the option value of full
100-megabit capacity when needed.
E-xpedient's founder, Brian Andrew, explained to me months
ago that this allows users to start within their existing
comfort zone, at price points similar to DSL, Cable and
even dial-up. Then as entry-level customers' thruput grew
(as we'd expect), they could move into higher-priced tiers.
Andrew had hoped to capture 75 or 80% of the offices in a
building.
E-xpedient made moving up to a higher tier painless. When
customers exceeded their monthly bit budget, they'd get a
screen-pop to authorize the next tier via credit card.
Sixteen digits and an expiration date later, they'd be back
on the air. Go without service until the first of next
month, or buy more bits? It'd be a no-brainer.
SMART Person Matt Oristano, who founded SpeedChoice, a
wireless ISP that he sold to SPRINT when the selling was
good, observes that monthly bit budgets make sense not only
for the customer, but also for the business. He writes:
"Backbone bandwidth was our single greatest cost per
customer. Why [do most ISPs] tier by speed, when extra
speed by itself literally costs the . . . operator
nothing? About 10% of our customers accounted for 90%
of our bandwidth usage. About 1% accounted for 40%."
[Therefore,] the logical [pricing plan] is to surcharge
by the gigabyte for customers who download huge
quantities of data. And, lest cable operators cry that
this is too difficult, any Cisco router can be
interfaced with a back-office system to automatically
generate the surcharges. [We] wanted to give each
customer the best possible surfing experience, [and] we
were moving towards surcharging for download volume
. . . when Sprint interrupted us.
"Today we see cable ISPs moving towards distasteful
practices like contractually prohibiting their home
customers from using routers. Wouldn't tiered service
be a better option?"
Tiering by monthly thruput (in most cases) will
discriminate resellers of the service from casual home
networkers. This is much better than declaring hard-to-
enforce usage policies and then hiring spies to peer into
our homes (like Comcast is alleged to be doing). But it
will also discriminate against heavy audio and video users,
even innocent ones like home-movie buffs; this is not so
good. Nevertheless, tiered pricing seems like a reasonable
intermediate step between what we have now and a world in
which the cost of connectivity is negligible.
E-xpedient might be bankrupt, but broadband wireless
analyst Steve Stroh* says, "Don't count Brian Andrew out.
He'll be back."
---
*Steve Stroh is the perpetrator of the "Focus on
Broadband Wireless Internet Access" newsletter, an in-
depth review that gets it. The subscription fee
is worth every penny -- contact steve@strohpub.com.
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SOMETIMES YOU GET SHOWN THE LIGHT IN THE STRANGEST OF
PLACES (if you look at it right)
by David S. Isenberg
For a couple of years, people were saying, "Would you
believe that the hippest laptops are made by IBM?" with
genuine amazement in their voices.
Today some of the edgiest thinking on new uses of spectrum
can be found -- are you sitting down? -- at the FCC. Not
that The Commissioners are likely to do anything about it,
but at least the intellectual underpinnings are beginning
to form. Mike Powell may be Billy Tauzin's protégé, but
he's no dummy. He realizes that current wireless
regulation, based on 1932 ideas of channelized frequency
bands, is obsolete. He understands that we stand on the
verge of a whole new wireless regulatory regime.
And Bob Lucky, the chairman of the FCC's Technical Advisory
Council (TAC), is no dummy either. He knows the difference
between a stupid rule, a stupid company and a Stupid
Network.
The TAC meeting on April 26 bubbled with new thinking.
Most SMART People are already familiar with ideas of ultra-
wide-band (UWB) transmission, of multi-hop radios, of smart
antennas that can use phase information to point themselves
at the signal source, and of transmitters that can adjust
radiated power to required power.
Vanu Bose is not only thinking, he's doing. His company,
Vanu, Inc., builds software-defined radios. Vanu's base
station is really stupid. It captures the broadest band of
signals it can from several antennas designed to cover the
spectrum, then it modulates this analog signal onto Gigbit
Ethernet with no further analysis, and backhauls it to one
or more centralized computer farms.
The computation center can apply whatever logic makes
sense. Rush hour? Process the signal so that as many
antennas as possible point at the road. Later in the
evening? Point the array away from the road, towards the
suburbs. Emergency? Tie the FBI's digital modulation to
the local fire department's FM. And so on.
Too many people think of software-defined radios in terms
of mobile handsets. It's only one corner of the space. UC
Berkeley's EE Guru, Professor Bob Broderson, observes that
software defined handsets have impractical power
requirements given today's battery technology. Vanu Bose
agrees, which is why he is focusing on base stations and
centralized post-processing first. There's a lot of
mileage in that idea. It's the shared infrastructure --
and the willingness not to impose inflexible "optimized"
processing on the signal until absolutely necessary --
stupid.
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FCC NPRM 02-33: FORWARD TO THE PAST
by David S. Isenberg
[The cluefullness that I witnessed at the FCC Technical
Advisory Committee Meeting is not necessarily diagnostic of
the entire FCC. The FCC's NPRM 02-33 "tentatively" defines
broadband access to be an information service. Wrong!
The FCC mindset seems to suck you in, and once you're in,
no matter how hard you swim, you can't get out. It feels
like the classic good-intentions-gone-bad panic dream.
This must be what Peter Drucker was talking about when he
said, "Don't solve problems, pursue opportunities."
Delusional state or not, my visit to the FCC last week
inspired me to submit the comment below.
To file a comment on NPRM 02-33, "Appropriate Framework for
Broadband Access to the Internet over Wireline Facilities,"
follow the form below and mail it to ecfs@fcc.gov by close
of business TODAY, May 3, 2002.]
ECFS - E-mail Filing
02-33
5/2/02
David S. Isenberg
none
none
CO
203-661-4798
Email Comment
isen@isen.com
I am writing to oppose the reasoning behind NPRM 02-33,
"Appropriate Framework for Broadband Access to the Internet
over Wireline Facilities", because I am afraid that
treating broadband Internet access as an information
service (as proposed by NPRM 02-33) would deprive United
States citizens of the single most important feature of the
Internet that has made it such a runaway success over the
last decade.
Let me introduce myself. I have a Ph.D. in Biology from
the California Institute of Technology, where I studied
human speech. I spent 12 years, 1985-1998, at AT&T Bell
Labs, where I served as Distinguished Member of Technical
Staff. Today, I make my living as an independent
commentator on telecommunications. While I serve on
numerous advisory boards and have numerous clients, I am
beholden to no commercial interests. I am writing as a
concerned citizen of the United States, and I am writing
with hope that recent great advances in communications
technology -- and, more importantly, in network
architecture -- will become available to all.
In my understanding, "access" involves connecting my
computer (and other digital communications devices) to the
Internet. "Information" is quite different -- information
is in the ones and zeros that enter my computer to be
processed by it. Information can flow into my devices over
a variety of "access" -- over a wire, over a cable, over an
optical fiber, or through the air (either as radio-
frequency energy, or as light-wave energy). That is, the
same sequence of ones and zeros can enter my computer by
any of these access methods. So to equate "access" with
"information", as does NPRM 02-33, is simply incorrect.
It was not always so. The telephone network was developed
to deliver one kind of information -- the human voice. It
was engineered for voice, and it gave access to voice.
Everything else that it carried (e.g., touch tones, modem
signals, signaling information to set up telephone calls)
was either an exception, or an adjunct to voice telephony.
The wire that came into the house could not be
distinguished from the service it provided. It was the
same for television and radio -- each had its own dedicated
infrastructure (be it a wire or a frequency band) to carry
a specific type of information.
The great advance of the Internet was that its fundamental
architecture separated "access" from "information". Any
one of the various forms of access to the Internet puts one
in touch with an infinite array of information.
Furthermore, providers of this information (information
service providers) do not own special infrastructure -- all
they need is a server and any of the several methods of
Internet access. As a result, the Internet is wide-open to
innovation, and we have applications and services like
email, Web browsing (in all its manifestations), ecommerce,
Internet telephony, streaming audio and video, chat and
instant messaging.
Not a single one of these information (and communications)
services was brought to market by a telephone company or a
television company or a cable operator or a broadcast radio
network. No, access is a fundamentally different business
from "information service". To equate "broadband access"
and "information service" -- as NPRM 02-33 proposes --
would be a horrendous step backwards.
Without separation, "broadband access" as an "information
service" is likely to resemble the failed Interactive TV
experiments of the early 1990s. TV-on-speed is not "the
Internet" -- and vice versa.
David S. Isenberg
[Electronic comments submitted to the FCC must have
"signed" full name at bottom of text -- David I]
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CONFERENCE ON MY CALENDAR
May 21-23, 2002. Boston. Connectivity 2002. A pulver.com
celebration of networks so abundant that they will carry
everything effortlessly. For more information see
http://pulver.com/connectivity2002 or contact Daniel
Berninger, 631-547-0800.
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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
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