For the Week of March 3, 2003
Note: Today is the sixth anniversary of the birth of A-Clue.com, as A Clue...to Internet Commerce. Six years is a long, long time, but I hope this lives a lot more.
Pessimists like Dave Burstein of DSL Prime are predicting the death of the competitive ISP industry, thanks to a February 20 FCC decision . It eliminates broadband line-sharing requirements in three years, hands authority on voice line-sharing back to the states, and lets the Four Bells maintain monopolies on all new builds.
The media pitched the story as a loss by chairman Michael Powell to his rival, fellow Republican Kevin Martin , but that's inside baseball. The proof of the pudding is in the eating, not the baking. The decision, in fact, pleased no one. Bells predicted their own demise. Forbes joined Burstein in saying broadband competition is dead.
In a steady state technology universe, this might all be true. But (in case this is the first time you're reading a-clue.com) this is not a steady state technology universe.
The commission offered the Bells a monopoly on new fiber builds. So will they build new fiber? No, they will not . The excuse is they don't get an automatic monopoly on fiber-based voice calls. The real reason is they can't get the money.
Why is that?
Running trucks to string fiber in neighborhoods can cost thousands of dollars per home passed, money that must be written-off over 20-30 years through bonds. But technology isn't stable enough to guarantee a return on that investment. Next year's fiber offerings might be more effective, and cheaper, for one thing.
More important, last-mile fiber can easily be replaced by radios. There's now 350 MHz of unlicensed, free wireless spectrum available around the country. Using 802.11 equipment available today, a wireless ISP (WISP) can offer the full equivalent of DSL service for roughly $500/home, using equipment he can fully write-off in three years and replace with new gear that has more capacity. Businesses and consumers buy their own CPE (customer premise equipment) for $300, and they can upgrade service by simply buying new equipment. (They can also buy it, over time, as part of a one-year service agreement.) The economics are identical to those of cellular, only will full, free competition.
Once a competitive, long-distance fiber node is tapped, and multiplexed, a WISP can serve tens of thousands of customers. The key word in the previous sentence is competitive (although multiplexed is also important). The only real, natural monopoly left in the telecom market lies in the process of stepping-down from the 10 Gbps of a fiber backhaul to the 11-54 Mbps maximum speed of a wireless radio. For the last few years Bells have been strangling WISPs by charging out the wazoo for the needed T-3 and T-1 lines. If companies like Covad invest in providing this "middleware" backhaul capacity to WISPs, they can thrive in the new market. (Yes, they have to switch from a retailing to a wholesale model, but they can make money this new way.)
Update. Level Three says stepping-down fiber speeds is their business. If so, please start focusing on the WISP opportunity. And understand you're just one fiber owner. What's most needed is an honest broker of competitive fiber capacity.
Capacity is now the game, not telephony. For the life of me I don't get all this talk back-and-forth over voice service. Voice is a low bit-rate data service. You can squeeze the equivalent of 7 voice calls into a 56 Kbps dial-up signal. When we're talking broadband this is small cheese. All the talk, by all the parties, about voice ignores this key point. The voice network is dead, or dying. Just give us all ENUM domains and every phone number becomes an Internet address. Just click toward the party you wish to reach, click on your Voice Over IP (VOIP) software, and pick up the handset.
There's a second advantage to wireless broadband over fiber, one that hasn't been remarked-upon enough. Fiber only provides a connection where the wire ends. Radios, on the other hand, don't care about walls. When a WISP's customers are automatically signed-on to a Boingo-like service, through their ISP, "war-driving" is transformed from a problem to an opportunity. Dual-mode cellular and WiFi phones and PDAs will be available by the end of this year . Money could flow soon afterward.
So the Bells are being told to run fiber, and promised a monopoly, while WISPs are being offered nothing but the chance to compete. To those living in a steady state technology universe, who think progress comes in a government meeting room, the Four Bells will win in the end.
But do you want to put your money on 1,000 entrepreneurs (with more to come) who have chip support from Intel and others, or on 4 monopolists? Or let me put this another way. Are you betting on 30-year depreciation schedules, controlled by the government, or on Moore's Law?
SSP (Shameless Self-Promotion)
The reviews (well, some of them) are in. "Dana, it is GOOD," raves Pete duPont, lawyer, futurist and once a candidate for President. "This is some really powerful 'stuff.' I think you've got a winner," says Drew Kaplan of DAK Catalog fame.
Find out what the excitement is about. Buy The Blankenhorn Effect at Amazon.Com , then go back and say nice things. You can use the ASIN number, 1553953673, and recommend it to readers of other, similar books. You can also save on shipping when you buy the book at Amazon, over the cost of buying it elsewhere.
If you can convince some more published reviewers to read The Blankenhorn Effect and recommend it to their readers, please send me a name and address. In exchange, you'll get the PDF version of my second book, The Blankenhorn Effect: Boom, Bust & Beyond. This is a collection of columns from a-clue.com, organized chronologically and by subject, with additional commentary from yours truly.
I presently write for MediaPost , BtoB Boardroom and Mobile Radio Technology . You can follow the continuing story of The Blankenhorn Effect on my Moore's Lore blog . I also contribute to NowEurope and GreaterDemocracy .
You have my permission to forward this newsletter widely. And if you have trouble subscribing let me know . Remember: it's journalism that keeps the Clues coming...
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Takes on the News
Mr. Google, Tear Down This Wall!
It's very possible that Dave Winer has the best track on the Google-Blogger deal. If so this is no big deal. Google just wanted something it could add to its bundle for corporate accounts, the Blogger software is Java-based, and Blogger was probably the cheapest piece of real estate on the blogging board, given founder Ev Williams' six-person staff. Google can make a profit on the deal by simply using it against Overture, it's easy money.
Google already indexes many blogs, along with other Web pages, so the idea of indexing blogs as an inducement doesn't make sense. What does make sense, however, is Google adding a "blog" tab to its main menu, alongside the News tab. Some in the media business already fear the impact .
Besides giving the busiest blogs more credibility, such a move makes sense from the point of view of saving Google News. Most newspapers will, by year-end, have become cul de sacs, available only to registered users or (in many cases) paying customers. With a blog tag alongside news (or inside news) you can get dozens of unique angles on any story, plus whatever wires are available, as opposed to what you get today, just dozens of copies of the same wire service copy.
And what's the difference between a blogger and a "professional" reporter, anyway? The difference is the professional is a paid employee of someone else, while the blogger is self-employed. As blogging gains a business model, top bloggers will themselves become professionals. (Andrew Sullivan makes a full-time living from blogging, he says, so why can't others?) Blogging can also deliver insight on news stories before most newspapers can deliver news stories, given the time it takes to edit and publish.
So, Mr. Google, do yourself a favor. Tear down this wall between news and blogging. Force the papers to compete and demonstrate, once and for, how little they really offer.
The Washington Post Sucks
This may seem a bit off-topic, but someone has to say it, and I just did.
The Washington Post under Katherine Graham was a great national newspaper. It rose to prominence with the Watergate scandal, but it kept up its leadership throughout the 1980s and early 1990s. Now, under her son Donald, the Post has become just another big local monopolist, and not a very good one at that.
The paper retains a superior, holier-than-thou attitude even when printing garbage, like its recent piece on blogging. It bought a great worldwide news service, Newsbytes, and ran it completely into the ground, eventually folding it into its strictly local TechNews. Its editorial page has become as shrill and right wing as that of the Washington Times. It hasn't broken a story of any importance in years.
No wonder The New York Times chose to dump it from the International Herald Tribune. No wonder the fading Time Magazine still has it all-over the Post's Newsweek. The only hit they have are a couple of their smart-mouthed sportswriters, and that's strictly on the writers' own initiative. (Disney is raking in the profits from them anyway.)
Some time in the next few years the Post will go on the block, and will be sold to a larger, smarter owner. Everyone will act surprised. Don't be.
Insiders Make Everything Vulnerable
The key Clue from the Citibank ATM encryption case has nothing to do with cryptography, academic freedom, or prior restraint. It is the dirty little secret of security. We are mostly vulnerable to inside jobs, not attack from outside.
Two Cambridge researchers found that bank employees could easily guess a customer's four-digit PIN and draw down their account in 15 attempts, not the 5,000 the banks claimed. The published this in "New Scientist," and a South African lawyer immediately wanted to use the results in a case against Citibank, which his clients claimed withdrew their funds without their knowledge.
A judge gagged the researchers last Monday but the cat was out of the bag, and the last few years should have let it slip for everyone. Maintaining the ethics of everyone in business, from the top on down, is the best security. This is true in government as well, where turncoat CIA agents deliver secrets to our enemies.
Who watches the watchers? And who watches the watchers watching? This is why transparency, open government, and a system of checks and balances work, why all the Homeland Security in the world makes you less, not more secure. Everyone must know someone may catch them, and someone must always be trying to.
Honesty from insiders must be more than a demand. It must be enforceable. The more inside you are, the more demands should be placed on you and the more enforcement there should be. Take no one's word for it. Trust, but verify.
Clued-in (don't laugh) is Wil Wheaton. If you can write, and you have the guts to offer it up, you can blog. You can blog well, you can attract an audience, and you can build a new career. Anyone can.
Clueless (sadly) is the updated Cluetrain Manifesto . If advertising didn't work, how did we get all this other stuff in our homes that doesn't work?
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