I've been spending time at VON. It gave me a chance to talk directly to people and to explain why we need a utility model for connectivity rather than the current telecommunications model. I've written a lot on this topic and plan to write more – it's time to consolidate the ideas into a single essay. This is an attempt to summarize what I've written so far without going into much detail. In doing so I'm going to repeat many of my standard sound bites. You can also see another take on this in my VON Magazine column with the same name – Connectivity is a Utility.
I do plan to write more but for now I want to collect some of what I've been saying to people. It's time we stopped coddling telecommunications because it is so special and needs protection from the marketplace – the stated purpose of the FCC translated into today's understanding.
Even when people buy into the idea of connectivity as a utility they don't see how it can happen. One avenue is aggregation – simply allow groups to buy capacity together. A city is only one kind of aggregation. The price/benefit of aggregation is so compelling that I don't see how those burdened with redundant infrastructure would be able to maintain their specialness.
One warning – I do make heavy use of metaphors and sound bites as a shorthand and aid for remembering the points. Groan if you must – it could be worse, I could use a lot more puns.
The key points:
- I need to start by addressing the emotional response to the word “Utility” because it is associated with socialism, monopolies, incompetence and worse. Just the opposite in this case.
- I'm presenting a capitalistic model based on aggregation with a municipal utility just being one aggregator without being exclusive. It is the FCC that is thwarting the marketplace – a connectivity utility is simply a way that users can choose to pool their buying power.
- Utility does not mean free- -it is simply a funding model that is far more efficient than one artificially constrained by the need to fund a corporate welfare regimen.
- This is a local utility, not the grand natural monopoly that provides services. It's a local utility that just provides a simple resource.
- (IP) connectivity is a very simple commodity and unlike most utilities, anyone can add value – you don't have to depend on a single source. I demonstrated this simplicity with home networking and we can remove impediments to simplicity as we improve the networking protocols in software. And we get the benefits of Moore's law.
- You don't need big capital investments up front because you can salvage existing infrastructure (such as copper) and mix and match. It is far more capital efficient than throw-away infrastructures like today's PONs (Passive Optical Networks) or asymmetric Cable TV plants. Letting users extend the network also adds to the efficiency.
- The cost is likely to be less than zero because it would provide a shared infrastructure and removing costs of services like telephony and provide common support for municipal services and computing. To put it more simply, such an infrastructure can save money by replacing high cost special purpose systems.
- The marketplace is not magic – we can observe the “invisible” hand in terms of the dynamic interaction of elements. In this case we have a utility that provides opportunity and creates capacity as demand grows! The old marketplace preselected the services and taxed all creativity – the little that it allowed. It had controlled capacity and used it to its advantage – and still does!
- Unlike traditional utilities, anyone can add value by extending the network! We must be careful about our traditional metaphors. Leaks in water or electric systems decrease their value. A leak in a connectivity network increases the value by making it more available!
- Adding users adds value to a network by creating communities. A utility means everyone adds value. But it's not just the number of people; it's the number of services and applications they create. Having schools and other municipal services readily available creates a lot of value. It will take time to get the full value as people learn to take advantage of the new opportunities. So far we've been limited by the carriers' constrictions. What happens when we can just assume connectivity …
- The concept of connectivity as a fungible commodity.
- Understanding packet connectivity and how a stable resilient system arises out of ungoverned network is fundamental. Those who attempt to regulate and set policy without understanding this are irresponsible or worse. If you don't understand how it works, learn first and then read on. Don't pretend that skill in manipulating regulations is an excuse for ignorance. Feel ashamed not superior!
- This is a topic I've written about separately – IP packets are all the same. You solve problems by adding capacity.
- As you add more capacity to can do more applications such a replacing all of telephony with simple applications at the edge. Same for video distribution.
- It is a new resource that allows everyone to create value.
- It undermines the whole scarcity-based regiment of the FCC.
- Wired vs wireless isn't very important – the new term is wire-indifferent. It's just about getting packets from point A to point B using whatever works and it needn't work perfectly. Assuring 100% reliability is far too expensive and not at all necessary as we've learned. Today it is we are forced to fixate on the path the packets take because it's all about billing for distinguished packets. Fungible connectivity is far more efficient, flexible, scalable, extensible etc.
- Encryption will be the norm and it will put the kibosh on all those who presume they can guess the meaning and intent of the bits within the network.
- The current approach, called the “Telecommunications Industry” has failed:
- From the beginning it's been considered a problematic industry that needed special protection to survive. These attempts have been increasingly dysfunctional and increasingly detached from reality. It's an egregious example of corporate welfare to the detriment of society.
- Any market that allows three identical high capital infrastructures is fundamentally flawed. It's no different from having three different sewer systems, electrical distribution systems, road companies etc. The market has been mischaracterized as a service industry while the participants are asking to be treated all alike. Even with three players there is no effective competition. The carriers themselves argue for even treatment because the infrastructures are equivalent!
- The assumption that having three players assures competition does have some truth. I have a choice of Comcast, RCN and Verizon and speed of connectivity is increasing but only one percent of the capacity is available so far! That's because the marketplace architecture is flawed so competition is artificial and defined by the Regulatorium not a real marketplace! I can decide who I buy the identical video streams from (TV) but I can't choose the streams myself!
- Investors are at the mercy of the whims of regulators and cannot use objective reality as a guide when placing multi-billion dollars bets. It's hard to call them investments.
- We are held back by myths
- The network provides services. We know all we need is connectivity as provided by Internet packets and we can build services. The surprise has been how well voice and video worked – they seemed to require a special network.
- Interference. Because of the dumb idea of assigning each radio a single frequency (or, in music, a note) we can't tolerate two radios operating at once – they interfere. To be fair, back in the 1900 it seemed like a brilliant signaling system but it's as bad as assigning each instrument in an orchestra a single note in order to avoid interference. Because of this single frequency regimen and the lack of the concept of packet switching we treat the wireless space as if it were plots of land assigned to homesteaders. It isn't land; it's just a mathematic construct no different from giving exclusive ownership to particular numbers!
- QoS – Quality of Service. The idea that we must carefully manage the network. But there is a fundamental problem – there is no way to know which packet is more important. More important, perhaps, is that QoS is about doling out scarcity. If don't have the capacity QoS can't create more and uses up some of what we do have Providing capacity has worked very well and we don't even use more than a smidgen of what is already available! So we act as if we have to fight over the dregs.
- Video bits aren't special. It's a self-serving myth hidden within the QoS fallacy.
- Above and beyond the law. The FCC is there to mollycoddle a faux industry. It's mission is to protect the industry against the public interest!
- If we have signaling systems that don't exhibit the artifice of “interference” than the management of radios is a blatant and egregious violation of the First amendment in the US. Even if it were real the idea that we must prove there couldn't possibly be interference shows a lack of understanding and even contempt.
- Censorship. Need I say f***!
- Antitrust. Why is the owner of the pipe allowed to use it to its advantage? If there were no advantage conferred why would it want to own the pipe? Not only is this control used to limit our choices but it is also insidious in that the carriers have multibillion dollar stakes in assuring scarcity. It is a system that is fundamentally and inevitably and intrinsically corrupt. It's no different from trucking companies owning the highway and keeping all but one lane for themselves and refusing to build extra capacity even if there were plenty of space and little cost. It's Enron without having to hide the books.
- Broadcast is dead
- The video providers are all doing “on demand”. The back bone has enough capacity for this to extend all the way back to the studios. We can all get our own streams. The need to broadcast is a myth.
- Over the air broadcasting is an excuse for preserving frequency allocation and the associated business models but it doesn't make sense – we should be putting the effort into providing Internet connectivity. At just a few megabits it does everything we expect from broadcast but far far far more. And with a leaky utility we get all that without wires.
- Broadcasters are using the myths to hold “frequencies” hostage in order to get concessions like the “broadcast bit” and other ways to control their product forever. It's meta-corruption with myth layered upon myth leaving only those most skilled in the business of story telling in control.
- Television and Hollywood (Tellywood) depend on their special position. With abundant capacity we get symmetric distribution. That is very frightening to them because they lose their ability to maintain a stranglehold on distribution. Why shouldn't you watch your kid's soccer game when you are traveling? It's just a simple video stream? Why do you have to use channels – on the web you just go to any source including video? The whole television programming grid is just a result of artificial scarcity and makes no sense.
- We should spell it Tele/Communications to match TCP/IP. The / represents the architectural separation between elements of a marketplace. By decoupling we free each part to quickly innovate without crippling interdependencies which substitute dependency for self-determination and innovation.
- There is a serious problem of mission creep. Censorship is part of the problem. The carriers are increasingly taking on the role of content police in the US. It's a given in countries like China. The intent is to preserve old nonviable business models by acting as a gatekeeper rather than just a transport. Newspapers rely on advertising because they can't control the use of their content. The RIAA and Tellywood are trying to manage use and see their carriers as their allies in their fight against their users. I fear a “happy birthday” recognition system being built into the network.
- Billing! This is a big issue. Perhaps the only issue that matters to the incumbents and those who “invested” billions of dollars in the artificial constructs called “frequency bands”. As I pointed out above, the issue should be covering the costs, not a obsolete and distorting billing model.
- The naïve model is that one pays as one goes as if there were a simple mapping of cost to value. Anyone in business knows that there is no simple mapping. That's just a story. If you buy a car for “inventory” the dealer still makes money by rebates based on volume. Sometimes the money comes from service after the sale. You have to amortize fixed costs over your anticipated sales. Accounting is about models not about taxes. Taxes represent just one accounting.
- The Telcos skill is billing. It used to be 40% of costs but thanks to the Internet and connectivity there are few other costs beyond putting capital into building another copy of the competitors infrastructure. It's necessary to build all the private paths in order to do billing. Users that add capacity are treated as abusers and thieves because they are thwarting billing.
- And so we die
- The current infrastructure forces us to create artifices like the E911 system which works very well by the standards of the 1960's but is dangerously brittle. It fails when things aren't just right and it doesn't allow new services like medical monitoring.
- Without a utility model we have to be in the right place and the right time and be paying for phone service in order to get any help. It has to be billable rather than available.
- When things fail we can't repair the systems because they must be configured just right. With connectivity anyone can extend the service and we can all use it.
- The brittle architecture is internalized in our emergency systems with relationships built into the hardware. This means we cannot respond. Once we get past the need to perpetuate the mythologies that underlie today's telecommunications industry we will be free to discover how to take advantage of dynamic systems.
- The Universal Service Fund and its relatives add to the expense of telephony while subsidizing obsolete and inefficient systems. A connectivity utility is far less expensive. It's easy to extend connectivity to rural areas. The real problem is understanding connectivity, not building expensive infrastructures! We force people to make phone calls to get help rather than facilitating connectivity both before and after an emergency! You have to dial a phone but the EMT isn't connected to the necessary information!
- Getting there.
- Aggregation. This is the key idea. We have policies that prohibit consumers from buying in bulk, cities from providing their own connectivity. If we allowed and, better, encouraged aggregation then groups can buy connectivity for their homes and share it. The city is a powerful buying unit and can make it available and use it for their own purposes. That alone would be sufficient to threaten the industry. If one connectivity provider (be it using existing build outs or new ones) makes their real capacity available it would be hard to sustain the pricing model of telecommunications.
- Understanding. Dispelling the myths that protect telecom is part of the story. Those responsible for city infrastructure also need to understand what they can do with connectivity. It's not just boutique Wi-Fi deployments. It's about basic infrastructure and cost savings and public safety and community information and education and … after all, why have community access channels when we can just make the content available? Why can't schools assume video connectivity and leverage teachers and educational resources? Why build police and firefighting communications systems that are redundant and rigid? Even better when people begin to really understand web, data and related protocols!
- FTC. The FTC and other organizations can wake up and start treating telecom as a real industry not just accept that it is so very special.
I'll start with the last point because it's the most absurd. When I simply mention the word “utility” the instinctive reaction is that I'm asking for another governmental welfare system. While I can understand the concern I welcome the criticism because it gives me a chance to point out what should be glaringly obvious – the current system is socialism at its worst.
In the US the FCC was created during the great depression – a time when capitalism was seen as having failed us. It was created to nurture and protect an industry that seemed to be outside the normal marketplace. Whereas the oil industry was subject to anti-trust the phone companies took the opposite tack – they invited regulation and formed an alliance with the government. ATT's PR portrayed it a great benevolence as the lavished money on PR and touted their crown jewel – Bell Labs. Bell Labs did some nice stuff but it's not an accident it's so well known. It was an essential part of a PR engine. Inevitably the relationship became corrupt and the courts forced ATT to break up but it left the fundamental corruption – the Regulatorium in place. It corrected the symptom but not the problem.
The Internet has demonstrated the power of using fungible packets for connectivity. To send a message over the Internet you just chop it up into little packets and send them on the way. Unlike the phone network you aren't forced to pay for insurance in the form of reliable delivery. You can decide whether it is more important to have timely delivery or certain delivery. This means you can take advantage of commodity packets. You only create applications that work on this infrastructure.
The big surprise, perhaps, is that telephony works at all. It happened because we didn't put in special mechanisms and thus kept the price low while providing abundant capacity. The purpose-built phone network simply could not compete. It's similar to the railroads with their special rights of way trying to compete with a shared highway system. There's no contest. The contrast is more extreme in that the labor and energy advantages that the railroads have in carrying bulk traffic don't have a counterpart in connectivity.
I use the word “connectivity” rather than “the Internet” because the value lies in allowing us to make connections between end points. The Internet is just a particular implementation of the basic concept. It doesn't matter how we make the connections.
Connectivity is an ingredient or fuel. Just like flour is used to make bread not just cake. But today's system prices all services as if we want cake. We can't afford the bread. But connectivity is much more – we can't even map the value directly to the bits on the network any more than we can ascribe each meter of driving to a particular purpose. If I'm traveling through your town you don't get any direct benefit except as part of a society that facilitates commerce. It's a public good.
Even when people recognize the value of connectivity they try to fit it into the old mold. They sell the Internet as a service rather than as a basic resource. It's like putting in road systems by taxing each home according to the amount of road it chooses to buy. Not only does this leave us with fragments of a system, the pricing is based on the value of getting the car out of the driveway and no further. Pedestrians and less expensive vehicles are priced out of this marketplace.
At the risk of a metaphor too far -- it's like having the oil companies own the cars and lease them to you with per-passenger charging and a surcharge if you carry anything valuable.
Just because people are used to cable modems they associated Internet connectivity with Cable TV. Instead of providing connectivity they create a municipal service in the image of a cable company and become one – you are supposed to buy the cities cable content and telephony services and in return you get Internet access. Instead of providing access we simply get another cable company that has is considered to be above marketplace forces.
We do see municipal Wi-Fi systems but they are typically required to pay their way by charging subscribers. This provides access to those who want to pay but we can't assume connectivity while having to worry about preventing unbillable usage. What happens to those traveling by? It might be the fire fighters from the next town who find themselves disconnected.
The reason for doing this the old way is simple – ignorance. It's hard to explain the value of connectivity to those who do understand the concepts and want phone companies and television companies. It's just like the days when we had light companies rather than electrical utilities. The light company would even provide you with light bulbs. Fortunately people understand the value of electricity beyond its use for light otherwise we'd have to pay for separate distribution systems for motor electricity, refrigerator power (with the light bulb inside being connected to the light grid) and so on.
It's no different from today's situation with connectivity. Today, as in the 1930's this electronic stuff is considered magical in a way that oil and electric power are not. So we must cost-justify on the basis of each service. We can only buy trees but not forests. A forest has an ecology that doesn't exist if you plant an occasional tree here and there. This is a fundamental misunderstanding that's endemic.
The value of connectivity comes from the community not individuals in isolation. It doesn't even exist in isolation and can't be justified without seeing the larger vision. We must educate people to see the vision, not just the artifacts.
Alas, we're up against a Regulatorium that seems invincible. But it's an artifice based on lies, mythology and fear of change. It's welfare at its worse. The focus on the details of which tree gets placed where makes us utterly incapable of allowing an abundant forest to grow and thrive.
To those who fear a loss of control connectivity is frightening. It gives people too much freedom and that allows for immorality. The Constitution be damned, we have to be serious because our freedoms are under threat! Free speech is a luxury only free people can have and we won't be free if we allow freedom. Huh? But isn't that the current policy.
I've focused on the understandable example of wired connections. Without the wire the arguments become even more absurd. The very idea that I call single frequency single hop shouting is in violation of the US Constitution. We know how to signal without creating any interference and we only need a very lower power signal that can reach a nearby access point. Yet the FCC gets away with requiring that one prove there cannot possibly be interference. The fundamentalist interpretation of the US constitution says that the first amendment doesn't apply to new technologies. Perhaps if we required lawyers understand technology and the idea of testing against reality they wouldn't be beholden to precedent as if the renaissance never happened.
It's no surprise that the telecommunications industry is fighting to stay alive. At VON one panelist whined that the current telecommunications industry is an umpteen billion dollar industry that feeds families and others and we shouldn't just throw it away. This is a strange argument from an industry that is losing workers while preventing the creation of new jobs. It's a reminder that the current system is indeed anti-market corporate welfare.
Psychologically it's easy to see how we've gone from a model akin to using tolls to pay for highways to seeing the purpose of highways as getting us to tollbooths or, more colorfully, we have trollways.
We can't afford to dissipate our resources on an industry that has no purpose other than creating billable events. We must be able to let everyone add value. We need real emergency services not an E911 system that is no more than a transparent ploy to disadvantage competition if we must die for the lack of effective alternatives.
A utility model is a business model. We aggregate our buying power to fund a common or public good. A municipal utility is only one aggregation – we can have buying groups of any sort and they are synergistic!
We need a marketplace and not a welfare system for a dead industry that serves little purpose other than selling us what we could do for ourselves and then fighting to prevent us from going beyond what it is capable of because there is a lot of money in false scarcity.
Those who buy diamonds are co-conspirators with companies that want to preserve scarcity. It's game.
Telecommunications is too important to be treated as just a game. We still play Milton Bradley's Monopoly but we don't confuse it with reality. Telecommunications is just another board game and we can't afford to play!
