by Dana Blankenhorn
Volume IV, No. XLVII
For the Week of November 20, 2000

This Week's Clue: Radio Days

This Week's Clue: Radio Days

SSP (Shameless Self Promotion)

Trouble in the Last Mile

The New Conventional Wisdom is Wrong 

The Gizmo Comdex

Clued-in, Clueless

The election of 1920 brought a huge change to the land. Station KDKA broadcast the results as they came in, transforming radio from a telephone-like medium to what it (and television) have remained to this day.

The biggest surprise for me at ISPCON  was in how radically, and rapidly, all this is changing. When two radio antennae are pointed at one another from the tops of buildings, and within a few miles of one another, they can blast gigabits of data each minute across the sky, much like two high-speed telephones. They can even replace the most expensive tool in the telephone industry's financial arsenal, the 45 MBPS DS-3 line. 

Bell companies have been renting DS-3 circuits for as much as $25,000 per month or more for years. But the two radio antennae may cost just $75,000, and that cost is declining. Once they are installed, the bandwidth can be rented at a huge profit to the antenna owner, and at a huge discount to what a Bell company could charge. (At ISPCON I learned that DS-3 circuits in some markets are already renting at $16,000 per month.) In this way, the very underpinning of Bell company profits is being undermined. 

At ISPCON I was actually on the hunt for another Bell-killer, a network of antennae running on lower frequencies (unlicensed frequencies at 2.4 GHz and 5.7 GHz) that can replace DSL or cable broadband. It's a system known as wireless broadband (the two big dishes are known as a wireless fiber). I found several offerings (although the Nokia RoofTop, thought to be the leader in the field, was notably absent). The biggest weakness in the Nokia design, called a "mesh," is that if an obstacle forces several of these antennae to converge their signals on one home in order to reach a base station (and thus the wider Internet), that "bottleneck" subscriber loses bandwidth and speed, becoming an unhappy camper. The solution I learned is fairly simple, namely wider-bandwidth radios, which can be installed where bottlenecks occur to keep everyone's speed up.

I learned there are obstacles, both financial and physical, to replacing wired networks with antennae. Wireless broadband equipment at each customer's home or office may cost $500, far more than the $200 a DSL or cable modem costs. Trees, power lines, and hills can block signals, and engineers must find a way around them, which costs time and money. Once the system is in place, however, an ISP is in a position to "own" the customer, taking all their phone and data traffic as well as their Internet traffic away from the Bell. 

But the important point in both these cases is the radios and antennae are improving rapidly, and their cost is dropping rapidly. This has profound implications for Internet commerce.

First, an ISP that uses wireless technology to bypass wires is riding Moore's Law against 30-year depreciation schedules. Moore's Law, the idea that computing power can double every 18 months (or prices for the same parts can be cut in half every 18 months) works for wireless networks as well as the PC on your desk. The Bells and cable companies can't write off their investments in wires and switches without going under - in the long run they can't win without government interference (which they're expert at getting). 

Second, wireless technology holds the promise of delivering broadband to a lot of developing markets you may not imagine could support high-speed Internet services, from China and India to Africa and Latin America. Defending the wires and hammering the upstarts, which lobbyists and policy makers might be inclined to do (in order to protect the huge investments in wired infrastructure) will, in the end, destroy America's technological advantage. If I have to pay $50/month for a circuit that's worth $10/month to subsidize the wired infrastructure, I'm at a disadvantage against any "underdeveloped" competitor who can simply buy new radios. 

The elements of American online leadership are simply stated. We have infrastructure and we have education. (We also have democracy, capitalism, and personal liberty.) But our universities are open, the Internet lets knowledge travel everywhere, and these 21st century radio days will destroy a big piece of our infrastructure advantage within the next five years.

Fortunes will be made in building the broadband wireless Web. Most will be made in the U.S. But this may be the last piece of the Internet boom that stays here. The next great Internet commerce innovations might truly come from anywhere. 

SSP (Shameless Self-Promotion)

We're now a syndicate! I've begun self-syndicating the columns and items of A-Clue.Com to Web sites and print publications. The base rate for a Web site is just $100/week - which includes the weekly Clue column, the separate news features, and our most popular feature, Clued-in and Clueless. Your site will be able to publish this content each Monday, the formal date of publication. Drop me a line  for more information. I've also launched a weekly column at WorkZ, aimed at the needs of small business. I hope you check it out.

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Also, please pass this along to friends and urge them to join our list. And don't forget our new e-mail address . My Clues come from daily writing for ClickZ. I write monthly for Crain's B2B, and Boardwatch. I've just started writing regularly for WorkZ  and my monthly column will launch next year in Publish Magazine. I have written for Internet Content and Advertising Age  as well. Yes, I'm very busy, but you can still buy my book.

Remember that it's journalism that keeps the Clues coming...

Takes on the News

Trouble in the Last Mile

The boom-bust cycle of the Internet gold rush may be taking out efforts to build competition for FedEx and UPS in the "last mile" of product delivery.

One of the most innovative attempts in this area, Streamline, was forced to close recently, CNNfn reports . >From the beginning Streamline was devoted to more than groceries, promising to get film deliveries and dry cleaning into a special box on the customer's porch. They simply ran out of time and money.

CNET also detailed the problems Webvan has had in San Francisco . While their average order size is still healthy, they're having big trouble meeting delivery schedules in the Bay Area, and their warehouse there is underutilized. I insist many of their problems could be dealt with through better merchandising (selling menus rather than just groceries, expanding into other product categories, selling memberships with the best delivery times) but what great merchandiser wants to go to an outfit whose stock is worth just $1/share?

This race against time will end next summer and could end very sadly, with West Coast operations snapped up by Safeway and East Coast operations snapped up by Publix. This would guarantee an end to competition and innovation, at least until the next boom.

The New Conventional Wisdom is Wrong

The herd mentality of the Internet media always makes me laugh. It's all in the moment. There's no long view.

Last year the assumption was that "dot-coms" would rule the world. Now the assumption is they're all dead and should immediately surrender or, at least, take the .com off their corporate names .

Many more companies will be taken out as Internet boom turns to Internet bust but it should be remembered that both are a function of Internet markets, not Internet commerce. Internet commerce rolls merrily on, as it did before. Nearly all those who bought online last Christmas plan to do so again, despite the problems .

If most in the media looked at George Seurat's "Sunday in the Park" the same way they look at the Internet industry, all they would see would be a bunch of dots! (Use the image viewer at the end of the above link to magnify the image.) The truth is, and always has been, far more complex. Traditional retailers do have an opportunity to pick up market share right now, but most lack fulfillment capability or the will to install it. The big gainers will be traditional catalog houses like LLBean and Landsend, but these companies lack the imagination to change retailing as the Web can.

The game, in other words, is still afoot.

The Gizmo Comdex

Last week's Comdex show in Las Vegas drew notice for its crowds and its miles of aisles. But these obscured a larger truth that threatens to squeeze it to nothingness over the next few years.

Comdex is a retailing convention in a world where retailing is less important. Most computers aren't sold through "sales channels," in the traditional sense of the word. They're sold directly to server farms, or they're sold online, or they're sold through consumer electronics houses.

Comdex was always based on the Wintel monopoly that required the replacement and upgrading of PCs and applications every few years. This year's show was filled with gizmos (Pocket PCs, video cameras, Palm accessories) that just don't pack the list prices necessary to keep growth going. Comdex has also become a more risk-averse culture. The easiest way to see that was to look at the hordes of attendees swarming the casinos. In past years the big gambles were taken on the show floor. Now it's all a game.

The real news this year was much simpler. Comdex has just about killed CES.

Clued-in, Clueless

Clued-in is Alan Meckler . He has a long-term strategy, based on content and e-mail, he pursues is relentlessly, and he not only posts his e-mail address in public but answers promptly.

Clueless is ABC, not for firing Matt Drudge , but for having hired him in the first place. (I still want my hat back.) Self-promotion is no substitute for journalistic rigor.

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