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SMART Letter #20 - May 1, 1999
Copyright 1999 by David S. Isenberg
At isen.com we accumulate intellectual capital
the old fashioned way -- we LEARN it.
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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CONTENTS
> Lead Essay: Tiny Telco Captures Krazia
> Did You Know? (AT&T Headquarters)
> Product Review: Polycom Soundpoint Pro
> SMART Comments from SMART People:
Joe Flower on being slammed
Jock Gill on "Don't Know Why" politics
Toni Mack on looking over her shoulder
Art Kleiner on corporate purpose
> Quote of Note: Yevgeny Yevtushenko
> Conferences on my Calendar, Copyright Notice, Administrivia
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TINY TELCO PLAYS GRAY MARKET: Internet Telephony Makes Little
Niche in Big International Marketplace
By David S. Isenberg
Internet telephony is illegal in Krazia, an actual country
somewhere between France and India, but that didn't stop
Roderick Beck from building an Internet telephone company
there. Today Beck's six-month old underground telco, with a
node in New York and one in Kraziville (the capital) is
handling over 20,000 minutes a day. He recouped his initial
$50,000 start-up costs in the first eight weeks.
Beck's interest in Internet telephony began when he was an
AT&T employee working for AT&T's Chief Economist. Beck tracked
telecom growth rates to counteract AT&T business unit
tendencies to generate pessimistic industry estimates that
would make the unit's own performance look good by comparison.
In 1997, Beck brags, AT&T Chairman C. Michael Armstrong used
his analysis to increase a key internal goal, making unit
executives work harder for their annual bonus.
One of Beck's last AT&T assignments was to prepare a
"competitive landscape" report. As Beck worked, his eyes
bulged at the international impact of Internet telephony. To
understand the technology and give depth to his report, Beck
tried out many Internet telephony products and services.
FROM ANALYSIS TO ACTION
The plan to start an Internet telco was hatched in a Greenwich
Village coffeehouse, like many other revolutionary ideas. His
Cappuccino co-conspirator, named F.S., was Krazian. F.S. was
also an economist and an AT&T employee. Beck, son of an
English literature professor, describes himself as "not
particularly action-oriented." He gravitates more towards
Shakespeare and Joyce than skiing or baseball. Until that
day, his interest in Internet telephony seemed academic. But
F.S.'s Krazian ardor and caffeine-kicked persuasion convinced
Beck, "to take a risk for once, to make a difference."
Beck and F.S. immersed themselves, spending evenings and
weekends exploring equipment, standards and vendors. They
partnered with a major Internet telephony wholesaler, because
it agreed to send them traffic and more. Its bulk-purchasing
power let them buy Cisco equipment at a discount. It fronted
an interest-free loan. It would monitor their network at its
U.S.-based operations center, and it would send a monthly
check for the minutes it delivered. In other words, Beck says,
"the chemistry was right."
NO QUESTIONS ASKED
Over the next months, Beck and F.S. rented an office in
Kraziville near the national Internet center, and recruited
F.S.'s wife's cousin, an engineering student, to run it.
Then they established an account with KTT, the national
telecom monopoly. They leased a KTT data feed from the
Internet center, and ordered 60 lines from the Kraziville
local exchange. So far, KTT has provided facilities with no
questions. "All they know is that we're a big customer," Beck
says.
They get Krazia-bound traffic from their wholesaler via their
60 Hudson Street, New York, interconnection. Most of this is
circuit-switched traffic from the biggest U.S. telcos, Beck
says. Fortunately, KTT connections to the Internet are over-
provisioned and very lightly loaded. The quality is so good
that, "customers don't know it is Internet telephony," he
says. Most of the minutes the big telcos are sending originate
as normal, high-priced international calls.
When they were ready to begin service, Beck told his AT&T boss
that he had to quit, because he'd be competing against AT&T.
His boss was sympathetic and AT&T was downsizing, so Beck left
with a nice severance package, which he promptly rolled into
his new telco.
LIVING IN FEAR
Today the tiny telco is flourishing, but Beck and F.S. live in
fear that KTT will crack down. For this reason, they only
terminate Krazian traffic. "If we were originating traffic,
we'd be too visible," he says. "We'd be shut down." Internet
fax is legal in Krazia, though, and Beck and F.S. are quietly
applying for a license to originate fax traffic.
Beck and F.S. also feel the paranoia that comes when
competition, even though illegal, is intense. "There must be
ten or twelve other underground operators," says Beck. "You
are always playing the pricing game. There is no peace of
mind."
Recently, Beck saw daily minutes drop from over 20,000 on
Friday to about 6000 the following Monday. "Another
underground operator had dropped prices, and the major telcos
switched," he said. In hasty conference, Beck and F.S.
decided to cut their own prices too. Soon traffic was back,
but margins had become irrevocably thinner. "Ultimately,
we'll be happy with 10%," Beck says.
Beck and F.S. are planning another node in Krazia's second
largest city, and they are working with a moonlighting KTT
employee to bring Internet telephony to a neighboring country.
Meanwhile Beck has found a new day job at a New York
investment bank -- he's an international telecom analyst.
[This article appeared in the May 1, 1999 issue of America's
Network. Copyright 1999 Advanstar Communications.]
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DID YOU KNOW . . . that AT&T Headquarters in Basking Ridge has
110 drinking fountains, 144 restrooms, 3,889 parking spaces,
33,000 light fixtures, and one helipad?
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PRODUCT REVIEW: Polycom Soundpoint Pro
By David S. Isenberg
The three-legged, flying saucer shaped Polycom speakerphone is
is the de facto standard speakerphone in conference rooms
these days. Now Polycom has put their speakerphone technology
into a desk set -- they sent me one a couple of months ago for
my review.
I like it, but only one and a half thumbs are up. It retails
for about US$250. Is it worth it? Well . . . it depends.
When the sound on the speakerphone is good, it is great. It
is excellent full-duplex sound. The conversation flows almost
as if you and your caller were in the same room. As a result,
I use the speakerphone for most of my calls.
But sometimes there is annoying feedback. I've heard both
low-end grumbling noise, and high-end squealing. These get
worse when I turn the volume up, which I must do sometimes.
Polycom says that they've fixed these problems in a new
software release, but I have not tried it.
To dial, you just start punching numbers, and the phone is
smart enough to go off-hook, get dial tone, and then play the
tones you dialed. But it is disconcerting that it does this
about three keystrokes into the dialing sequence. It'd be
better if I could key in the whole sequence on hook and hit
'talk' (a la cell phone). Alternatively, I'd like it to go
off hook immediately, on the first keystroke.
The handset, on a standard coiled cord, is unremarkable. For
a phone this expensive, you'd think it'd come with a 900 MHz
spread-spectrum handset. There's a headset jack in the back,
but none of the headsets I have (I tried three) fit it.
It is smart enough to know to go off hook when you hit
'redial.' But speed dialing is always a three-digit sequence.
Furthermore, the 'speed dial' button sometimes jams -- the
phone is too expensive for cheap glitches like this. And
remembering 99 numerical speed-dial codes? Fugedaboudit!
It has a two-line display and caller ID with a 99-number
memory, but no memory for outgoing numbers. At this point in
Moore's Law, I expect that a high-end phone should have the
ability to cache outgoing numbers for review and re-dialing.
If somebody'd build a desk phone with my cell phone's features
-- plus a speakerphone like this one -- now that'd be some
machine!
Bottom line: If you need a very, very good desktop
speakerphone, or if you need a three-line phone, or if you
want a prestigious-looking piece of hardware on your desk, get
the Polycom Soundpoint Pro. But there's still a lot of room
for improvement.
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SMART Comments from SMART People:
Joe Flower writes . . .
"I had to laugh about your Sprint experience - in
part because I had exactly the opposite experience. I had
no intention of becoming a Sprint customer, but I got
slammed . . . I had heard of slamming before, but the
experience left me amazed. In what other business can I
buy something without doing anything, without even
hearing about it, under terms that are completely of the
seller's choosing and then be billed for it in a way that
hides who I am supposedly buying from? . . . Result?
Sprint goes on my very short list of companies I will
never buy from if I have any alternative. Life is too
short to test out whether that was a fluke or a pattern."
Jock Gill writes . . .
"I urge you to extend [thinking about "Know-Why"] a
bit more towards the political implications . . . The
problem with far too many of us today, [Democrats and
Republicans], is that we are clueless about "know-why".
We are reduced to the same old message from long ago when
we actually believed we did "know-why". But today, our
story map, our sense of mission and vision, [is] in
tatters and [is] clearly not very useful in the world
around the corner. Kosovo is a prime example of the price
we pay for out dated missions and visions with no clear
know-why." [Jock Gill is a fuel cell advocate and a
member of the extended Clinton brain trust -- David I]
Toni Mack writes . . .
"[SMART Letter #19] struck home. In the early 1980s,
when I was starting my career and long before I had any
clue (so to speak) about the communications revolution, I
looked around at the laid-off autoworkers and
steelworkers who had thought they had jobs for life and
got nervous. I made a mental note always to watch out
for trends that could render my job obsolete. So far I
haven't found it. Even if, God forbid, this new
revolution sucked Forbes magazine under, there would
still be a need for content providers--especially for
those who can assemble and sort through a mess of
information and tell you the cogent points you need to
know, as you do. But I'm still looking over my shoulder
and will until I no longer need or want to be employed."
[Toni writes for Forbes magazine -- David I]
Art Kleiner writes . . .
"Your latest piece on "Know-Why" reminded me that,
in my opinion, all statements about corporate purpose
(including all the ones you name, plus return on
investment to shareholders) boil down to two purposes.
And as far as I can tell, all corporations have these two
purposes:
"Purpose 1. To act on the world, and thus make it
better (according to their lights). Even a cigarette
company is trying, in the product it sells, to change the
world for the better. After all, if it weren't for
cancer, cigarettes would be one of the great civilizing
amenities. (If you doubt that, reread the Lord of the
Rings). Every company, deep in its heart, is trying to
make the world a better place.
"When I tried to argue this case at NYU-ITP, [that's
New York University's excellent Interactive
Telecommunications Program, where Art teaches -- David I]
one of my students argued back to me, "Finding a need and
filling it is not making the world a better place." But I
disagree. Her example was a marketer of drugs that
temporarily make people feel better but hurt them in the
end. Yet at the core of the human urge to act, is the
cognitive dissonance that allows people to tell
themselves, "No matter how harmful the product I sell is
reputed to be, it is still doing good."
"The point being that if you want to reach someone
who works for a corporation, you cannot do so unless you
are attuned to the way in which they think they are
making a better world...
"Purpose 2. To make life really great for the people
who are "members." In the years after World War II, the
"members" came to mean everyone who works for a company -
- executives, managers, lower-level managers and
administrators, and union members. (The unions
effectively negotiated themselves into becoming members,
which is why managers hate them so much.) The definition
of "membership" is a bit circular, but there's no way
around it -- a member is someone working for the company
whose welfare cannot be ignored by the corporate
executive decision-makers.
"The history of corporations since 1973 is a history
of redefining "membership." I think of this movement as
"Welchism," because Jack Welch is the best-known
redefiner of membership. A member of GE is no longer
"everyone at the company." It is now, "anyone who
maintains winning performance."
"This is not necessarily a bad thing, at least if
you think of your company as a machine, but it's shocking
to people who assumed, throughout their careers, that
their welfare was important to the company. You can work
for a company all your life and still not be a member,
and you can parachute in (if you strike a good enough
deal) as a member from Day One. The difference between
these two roles will be felt, by you and everyone else,
in every moment of every day.
"Why is return on investment to shareholders
important? Because shareholders, by withdrawing equity or
selling stock, can make life worse for the members -- who
typically own stock or have their positions and decisions
subject to approval by the board.
"Every company balances these two purposes. At
heart, if you lose sight of the first purpose, all the
"membership" in the world won't make you feel good about
working there. And if you lose sight of the second
purpose, you will (rightfully) feel exploited by the
system you work for. If you lose sight of both purposes,
then you are effectively not working for a corporation at
all -- you are working to please a boss, who is in touch
with both of these purposes and is simply using you.
Your purpose is then to make the boss happy, but it has
nothing to do with the company, and probably more to do
with the ways you learned to get along while growing up."
[Art Kleiner is the author of "The Age of Heretics," one
of the best books about corporations I have ever read.]
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QUOTE OF NOTE: Yevgeny Yevtushenko
"[I]n my opinion, the only correct position is simultaneously
pro-Serbian and pro-Albanian; that is, pro-human. We must not
confuse people with extremists . . . The endless procession of
completely innocent Albanian refugees moving across the
television screen appeals to the mercy of humanity. But the
burning houses of completely innocent Serbs appeal to it
also." [From "History Returns to the Scene of the Crime," by
Yevgeny Yevtushenko, New York Times, May 1, 1999.]
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CONFERENCES ON MY CALENDAR
May 23-26, 1999, Washington DC. 7x24 EXCHANGE 1999
Spring Conference. 7x24 is a non-profit consortium that
is devoted to always-on facilities of all kinds. Today
they're weighted towards electric power and financial
services industries, but they want and need more telecom
involvement. It could be a great forum for us to
learn about reliability from individuals with similar
practices in different industries. I'll be giving
the keynote, on Tuesday, May 25, on "Reliability and
the Stupid Network." For more information, contact
Joe Paladino, 212-575-2275, axiomny@aol.com, website
forthcoming.
May 26-28, 1999, Laguna Niguel CA. VORTEX!!! By invit-
ation only. (I won't be doing anything but causing prob-
lems in the peanut gallery.) If you have not been invited
yet, and you can pay the hefty freight (see www.vortex99.com)
write to Bob Metcalfe (metcalfe@idg.net) and tell him how
SMART you are. Maybe he'll invite you. (It *will* be good!)
September 27-29, 1999, Lake Tahoe CA. George Gilder's
TELECOSM! Save these dates . . . I'm putting a high-level
panel together on The Stupid Network. For more information,
watch http://www.forbes.com/conf/Telecosm99/index.html
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COPYRIGHT NOTICE:
Redistribution of this document, or any part of it, is
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the two lines below are reproduced with it:
Copyright 1999 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com
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Date last modified: 03May99