Of Will and Way -- SMART Letter #59 (fwd)

Eugene Leitl Eugene.Leitl@lrz.uni-muenchen.de
Fri, 31 Aug 2001 16:10:51 +0200 (MET DST)

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---------- Forwarded message ----------
Date: Fri, 31 Aug 2001 09:59:09 -0400
From: David S. Isenberg <isen@isen.com>
To: Eugene.Leitl@lrz.uni-muenchen.de
Subject: Of Will and Way -- SMART Letter #59

To: eugene.leitl@lrz.uni-muenchen.de
              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

>  Of Will and Way
>  Quote of Note: Tom Nolle
>  Conference on my Calendar
>  Copyright Notice, Administrivia

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

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.

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]


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

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

COPYRIGHT NOTICE: Redistribution of this document, or any
part of it, is permitted for non-commercial purposes,
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Copyright 2001 by David S. Isenberg
isen@isen.com -- http://www.isen.com/ -- 1-888-isen-com

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David S. Isenberg                      isen@isen.com
isen.com, inc.                         888-isen-com
http://isen.com/                       908-654-0772
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