by Dana Blankenhorn
  Volume VI, No. XXII

This Week's Clue: Legal Time, Telephony Time, Internet Time

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For the Week of June 3, 2002

A May 24 Appeals' Court decision illustrated exactly what I've been writing about here concerning how legal time frames, telephony time frames, and Internet time frames interact.

On the surface the decision by the nation's second-highest court is a rip-out-the-front-page disaster. Quoting extensively from the words of Supreme Court Justice Stephen Breyer (a Clinton appointee) in a previous case, the court endorsed the murder of major data CLECs by the Bell companies, saying the FCC erred in forcing the Bells to allow low-cost line-sharing and switch-sharing.

The court said requiring Bells to just make back costs in urban areas was subsidizing competitors, because universal service required that they pay higher costs to serve rural areas. The court also said line-sharing (required so DSL customers don't have to change phone lines, or buy new lines, to get broadband Internet service) was unnecessary because of competition from "cable (and to a lesser extent satellite)." The court required the FCC to re-visit its 1999 decision requiring the Bells (known now as ILECs) to share lines and switches with CLECs (such as Covad) based on this new reasoning.

On the surface it was a complete victory for the Bells. Their refusal to obey the 1999 FCC decision (reached after previous decisions were routinely violated) was seen by the court as self-defense. (The Bells had been paying huge fines for defiance as a "cost of doing business.") The idea that consumers should have just three choices for broadband access - a local Bell company, a cable company, and a satellite provider - was seen by the court as plenty of competition. (By the same reasoning Pepsi and Coke represent plenty of competition.)

But look again. This is not the final word. And while the lawyers were arguing the universe changed.

It's not the final word because the FCC now must act, with plenty of time for public comment, and if that act is different from what came before (which it will be) it will be appealed to court. A final order won't be enforceable for months, perhaps years.

Second, and more important, neither the courts nor the Bells understand how quickly change happens in the real world, and how different today's environment is from 1999, the time when the case was brought.

It's not just that an important word is missing from the court's discussion (wireless). It's also that CLECs have learned from the Bells' defiance that they can't live by DSL alone. Smart broadband ISPs long ago filed to become "voice" CLECs, with paperwork aimed at letting them provide phone service as well as data. The cost of software-based switches (known as soft-switches) has declined in the last three years, and their reliability has dramatically increased. (Moore's Law applies to soft-switches.)

Unlike the 5ESS switches the Bells own, which are subject to 30-year depreciation schedules, these new switches can be written-off in a few years. New services can be provided with soft switches using standard software languages like Java and C - no special technicians are necessary. Already, many apartment complexes and office buildings are abandoning the Bells for other phone providers, figuring they can offer tenants lower costs and more service, plus make a profit for themselves (taking money from the CLEC for their "concession," something they couldn't get from the monopoly phone company). The requirements that the Bells interconnect with these providers, and let customers keep their phone numbers, aren't touched by the decision.

Even telecom time is now moving faster than legal time. Since 1999 the Bells have won the right to sell long distance services, and the long distance carriers are now competing to offer local service (I just switched my local phone service to MCI), as are the cable operators. This means residential consumers can choose among three or four providers for what had been the Bells' monopoly cash cow, local access. As a result that cow is about to be milked dry, which is why the Bells are laying-off people and why their stock prices can't get out of neutral.

Smart ISPs have found a lot of different ways to compete besides waiting for a data CLEC to link their dial-up customers to DSL. Some are Web hosts, others are application providers. Hundreds are WISPs - Wireless ISPs. The legal decision provides a huge incentive for more to go in the WISP direction. The Bells are now stuck with 30-year depreciation schedules, fighting multiple challengers who can buy 802.11 gear every two-or-three years, improving what they offer each time.

So the Bells have the lawyers. So the Bells can buy the government - executive, legislative, and judicial. So what?

They're still doomed. Their profit margins are disappearing thanks to local competition. They can't make new investments because the old stuff is worthless. They're being forced to lay people off as thousands of ISP competitors bite off tiny pieces of their markets.

Moore's Law is irresistible. Internet Time trumps telephony time and legal time.

A POSTSCRIPT. Sometimes telephony time bites back. That's how I spent May 28. I had tried to switch my voice service from BellSouth to MCI, without considering the fact that my DSL service on that line is with Earthlink. Before the voice service could be switched, my Earthlink DSL line was pulled, by the people who work on "enhanced services." But, when I called BellSouth begging "switch me back," I was told I hadn't been switched at all. Earthlink also told me I was still OK -- the records hadn't been updated. So I lost a whole morning on the phone, and I lost a whole day of work, trying to get three sets of customer service reps (and someone in a switching center) onto the same page, in the vain hope that (in the end) I could get back to where everyone thought I was.


SSP (Shameless Self-Promotion)

I'll be covering Supercomm for Boardwatch from June 3-6. Hope to see you there.

You can show how Clued-in you are by downloading the animated .gif file on the upper-left side of our home page , and copying it onto your own Web site. It shows you want your business partners to get a Clue too. (Clicking directly on the graphic leads to our subscription page.)

Want a really good read? You'll find it in "Boom, Bust & Beyond: The Best of Dana Blankenhorn," now available for purchase at DanaBlankenhorn.Com. You can also order my novel, "The Time Mirror," at the same location.

I still write for Boardwatch and BtoB. You can find my old ClickZ columns here (write and demand they hire me back.) If you need some writing, editing, or consulting help don't hesitate to call on me.

The Print on Demand version of "Living on the Internet" is also available for purchase at BookSurge.Com, for $29.99. And you can get the PDF version for just $7.99 (such a deal). The March update to the book is coming, and it's easy to get on the list via e-mail.

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


Shameless Promotion

The Great Jerry Pournelle said it best. If you don't know what you're doing find someone who does and pay them what they're worth.

This is as true for Web site design as for anything else. Since 1997 I've been doing myself, as a labor of love. While I love the labor, there are some things I'm just no good at.

Fortunately I not only found someone who is good at those things, named Bill Stocking, but I'm able to pay him something less than he's worth, because he's priceless. If you're not a Web site designer and you want better results give him a call.

Bill's also the person who re-designed this newsletter and he did it with only a few hours notice. Oh, and one more thing. His customer service is excellent. He'll see you through.


Takes on the News

Web Commerce: The Next Generation

I had the honor of introducing Ralph Wilson to an all-day seminar at Emory University last week. It was quite amazing - I hadn't seen that much gray hair since the last time I looked in the mirror.

But this may be an important Clue to the next turn in e-commerce. The fact is that the Internet isn't for early-adopters anymore. It's a mainstream technology that everyone (and I mean everyone) is incorporating into their daily lives.

So it's not Internet marketing anymore - it's marketing. And it's not Internet commerce anymore - it's commerce. It's the bread-and-butter, meat-and-potatoes, must-be-at-the-top-of-the-todo-list of everyone in every American business.

Believe it or not Internet commerce is still growing, fast. Publishers have moved (practically 100%) to the Internet, and hang the cost (lost readers, lost subscription revenue). Many now demand registration of all readers, and some actually use that information wisely. A few even require pre-qualification through their online subscription blanks, and forbid viewership (or at least require payment from) those who aren't in the defined market.

As I wrote last week, Internet technology is continuing to fuel a rapid rise in U.S. productivity, despite the fact we're not buying hardware, software or networks. The fact is, however, that we're learning how to use this stuff. We've having to use this stuff because we've had to get rid of people and we still must put out the same amount of product as we did before. (Amazing how the knowledge of imminent death will concentrate the mind.)

So Internet "acceptable use" policies are slowly becoming acceptable to users at more and more companies. People are thinking clearly about how much they should be traveling, and how much they can do online instead. The need comes first, then the search for the function, then the implementation. (That's the way it's supposed to be.)

Here are some of the common sense rules being applied in this "next generation" of e-commerce:

  • There are no boundaries. You can use direct mail to sell a Web site's services, you can go the other way. You must integrate the Web and e-mail into all your marketing and (most important) your customer contact processes.
  • You don't sell what you can't stock. Your Web site offers only what the rest of the company can deliver, under the same terms and conditions. It's the fast, easy way to take orders and provide customer service.
  • What the Internet does inside your company is as important as what it does outside. Integrating Web pages, e-mail distributions, and Instant Messaging into daily corporate life is doing more to propel productivity than anything happening on the "public" Internet.
  • The old Internet rules still apply. Give first, then take. (If you don't like the cyber-examples, think of Costco's free samples.) Answer the d$@*^% e-mail, and quickly. Close the communication loop. Use customer-centric design.
  • The old real-world virtues also apply. Deliver what you promise. Understand that your brand is what you can do for them (not what they can do for you). Have values and ethics. Take care of your customers first.

All this sounds pedantic and simple. I told that to Ralph's seminar-ians. (Since he's a minister and opens his shows with a prayer, the pun seemed fitting.) But the difference between those who get something from a seminar and those who don't comes later, when it's time to actually apply the lessons. (It comes now, in other words.) I can talk until you're blue in the face, but if you don't find your passion, give before you take, and apply what I'm teaching you won't get much from me. You won't get much from anyone else, either.

Overall, this recession has been a wonderful, important experience for American business. It has uncovered corruption, forced the inefficient to the sidelines, and concentrated everyone's mind wonderfully on the necessity of re-invention and productivity. It has yet to do all its work, and it has yet to run its complete course. It's painful, but market discipline is the only way we learn.


What's Wrong With Kids.US?

I've been wracking my brain trying to find something wrong with the move to create a "" domain for children 12 and under.

Esther Dyson is terribly upset about the proposal. "Good grief! Why don't they get it?" she wrote to Dave Farber's "Interesting People" list. Sure, the claims being made for the legislation are silly, but generally I see it as harmless.

Under the bill, tight content control would be maintained over any site with a address. They wouldn't be allowed to link outside the area, and they couldn't have chats or IM sessions, except under strict controls. The domain would be overseen by Neulevel, which was given control of .us (and is otherwise doing a horrible job of it, letting in cyber-squatters - but that's another story).

Yes, schools and libraries might easily filter out everything but, at least in childrens' sections, but so what? Those kids wouldn't really be getting "Internet" access - they'd be getting their own little sand pit. Best of all, they'd know it, and so would everyone else. Given the complete g-rated restrictions (assuming Neulevel enforces them) of the domain, no one targeting anyone over 12 would have any interest in it. The idea would create a form of the ill-fated "JuniorNet" service on the Internet, for anyone who wanted it.

Now, does Neulevel have the cojones to properly enforce the rules, and rule-out, say, overt religious proselytizing (hellfire can be as frightening and abusive to little kids as pedophilia). I don't know. But I don't see anything wrong with letting them try. If they fail, give the job to someone else.

The real story here is how the two-letter national domains are starting to come out from under the umbrella of ICANN and become truly national playpens, subject to national (read local) standards. It's happening in Australia, in England, and now here. That's why those two-letter domains were created, to give nations a way to control their own national resources (as opposed to ICANN). Any government that seeks to prohibit nationals from accessing anything outside their own two-letter domain will, in fact, be closing themselves off from the Internet. But that's their problem, not ours.


An Untold Virus Story

The story you're not reading in the major media is the success of various klez virus variants in clogging the Net's arteries.

The story hit the media recently when the State Department was victimized, and sent e-mails to its whole address list apologizing. But that's not the story. Firewalls can stop this thing from giving you a problem, even before anti-virals spot a new variant, but that's not the story, either.

The story is how many copies of this thing are going around, and the impact that has on everyone who pays for bandwidth. I'm still getting dozens of copies of klez each day, months after the initial infection, mainly due to the e-mail "address spoofing" and subject line spoofing that is the virus' calling card. Then there's the productivity loss - each copy I mouse-over must be manually deleted in a multi-step process required by my anti-viral, even though the firewall has already rendered the copies harmless.

A comparison of the financial impact of klez vs. the spam flood would be interesting and instructive. Is anyone in the media listening?


Clued-in, Clueless

Clued-in the Federal Trade Commission, which indicated at a recent ClickZ conference it could go after spams sent with misleading subject lines, invalid opt-out offers, and the sale bulk e-mail addresses on CD under the FTC Act, without having to wait for specific anti-spam legislation.

Clueless is Amazon.Com, which crossed the line from semi-spam (sending former customers e-mails without explicit permission) to full-on spamming for "prospecting" purposes. As proof I offer into evidence an e-mail from "," sent on behalf of such companies as Target, J. Crew, and Toys R Us, to, a non-existent address that has never sent e-mail to anyone. The spam (yes, I will say the word spam now in relation to Amazon, without apology) reached me after defaulting to my Webmaster's box.


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