From: Norman J. Jacknis (norm@jacknis.com)
Date: Mon Sep 10 2001 - 22:49:37 EDT
Well, we've had our seminars on DSL, but I thought you might find this of interest.
Regards,
Norm
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DSL is "Cosmetics for the Corpse," Says Gilder
Wayne Hanson, Sep 10 2001 9:32AM
Updated: September 2001
Progress and Freedom Foundation's 2001 Aspen Summit
Quotes
"Peter Drucker says don't solve problems, because problems orient you to the past. Governments are always focusing on the past and become increasingly embroiled in regulation." -- George Gilder
"What is less secure than the telephone, except for the U.S. mail? -- Tom Siebel
"I am bemused by gloom and doom - you can no longer write a business plan in 90 days with four people with a high school education and raise several billion dollars? How bad can it get?" -- Tom Siebel
"I have not signed the recent petition on Internet taxation. Supposedly such taxation would level the playing field with brick and mortar operations - I have a fundamental problem with that argument. When I go on Main Street, I am driving on city streets, being protected by government security. The building is insured by various government entities. Thus, when I buy on Main Street, I am actually receiving government services. When I buy online, I am not getting any service from government." -- Colorado Gov. Bill Owens
"We get 'privatized risk and socialized benefits.' Competitors use your broadband facilities at rent-controlled rates, without investing a dime and without deploying new technology." -- Tom Tauke
"We need to remove regulatory underbrush that impedes competitors. Many of these are at the local level, not at the FCC. some PUCs are reviewing their areas and publishing info about those local areas that are favorable to broadband deployment and those that provide barriers." -- Kevin Martin
"I'm here not on behalf of digging up the streets. I'm here on behalf of God's pathway - the spectrum." -- Tom Wheeler
"We are building the stadium before we have invented the sport." -- Don Upson
"We talk about the need for new laws on privacy, but we don't enforce the laws we have." -- Orson Swindle
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George Gilder
Calling DSL "Cosmetics for the Corpse," George Gilder said that: "In the world of constantly changing technology, you have to go forward, out of twisted pair and into the future of fiber optics... Fiber has a capacity and bit error rate immensely superior to copper. My best advice," he explained, "is to flee the copper cage."
Gilder, speaking recently at the Progress and Freedom Foundation'sAspen Summit 2001, made some pointed remarks about communications lawyers and the irrationality of trying to enforce laws that require companies to share their assets with competitors, then moved on to the advantages of fiber. "There are incredible gains thru wavelength division multiplexing," he explained. "Most of industry is rebelling, because they get some revenues related to the copper cage, so they resist the opportunities of the optical networks. "Today, it is practical to put 1,000 wavelengths on a single fiber thread," said Gilder. "But you don't use a single thread - 864 in a bundle is typical. On a single fiber cable, you can carry as much information as the entire Internet carried in a month last year."
Gilder said too much attention is put on problems, when new opportunities offer the real advances. "Peter Drucker says don't solve problems," he explained, "because problems orient you to the past. Governments are always focusing on the past and become increasingly embroiled in regulation."
Colorado Gov. Bill Owens
You are now in a state that has the best business environment in the country. Highest percentage of tech workers per 1,000.; Colorado has the best educated workforce (per US Dept. of Education). In '92, Colorado placed tax and revenue restriction on all governments - they cannot grow faster than the private sector except by a vote of people. Government can only grow at the rate of population and inflation growth. That law was controversial in its time - there were many dire predictions about the impact. The actual result has been that government grows at a controlled rate, it is more accountable, there is more leveraging of technology. The Colorado Institute of Technology will double the number of tech grads in Colorado in next five years. Technology summer schools for juniors and seniors - in some cases they are paid to attend at the same rate as a McDonalds worker.
I have not signed the recent petition on Internet taxation. Supposedly such taxation would level the playing field with brick and mortar operations - I have a fundamental problem with that argument. When I go on Main Street, I am driving on city streets, being protected by government security. The building is insured by various government entities. Thus, when I buy on Main Street, I am actually receiving government services. When I buy online, I am not getting any service from government. The only impact on my government is that UPS or FedEx drive on our roads. I don't see the nexus between service received and tax paid here. I also object to taxation without representation - when my state or federal government taxes me, I have some input. When I buy on the Net, I don't have the opportunity to influence it. I do understand the political reality of government leaders wanting more revenue. Because of the Net, governments all across Colorado are receiving more revenue on software and hardware products, personal
income tax, etc.
Tom Siebel
I am bemused by gloom and doom - you can no longer write a business plan in 90 days with four people with a high school education and raise several billion dollars - how bad can it get? What is the probability that the industry is not in its infancy? Zero. We had overcapacity of IT companies and now it is working itself out; let's look at the big picture. We aren't at war; we don't have hyperinflation. Looks to us like there is a buyers' strike; one person's expenses are another's revenue - no need to whine about it. The powers that be will end up labeling this a global economic recession. So what? That is what economies do. Europe looks to be in a similar situation - looks like Q3 will be worse than Q2 and Q4 may be worse than Q3. May turn around by Q3 of next year. But it's not the end of the world. This is just a down time and then we'll get on with it.
You could buy a car any way you want as long as you went to the dealership during their hours of operation. Life was pretty simple, there was a way to go to market and it was predictable and controllable. Then the Internet comes to life and we have amazon, yahoo, etc. All of a sudden, this is how people are going to buy cars, do their banking, do their 401K. There is a big panic about rushing to get the Web site up. What is going on now is the recognition that we are moving to a different way of doing business, which is any channel the customer wants - not just for convenience. Some still want to go to retail, some to the call center, some to the Web. Multi-channel eBusiness allows customer to randomly trans-navigate the channels as they do business. It isn't just that we are pushing people to the Internet, but we are deploying integrated systems that allow our customers to choose the way they will do business. Need to do it seamlessly, so we don't have to keep redefining who you are and the fact that we hav
e been a customer before.
Government lag is 3-5 years for adoption of tech, as seen in minicomputer, relational database, PCs, e-mail, ERP, CRM, Internet. CRM is a $6.6 billion business, growing over 50 percent. Organizations that are adopting it are convinced it is essential for customers. It offers significant cost savings, because of the number of internal systems that can be replaced.
A farmer in Montana gets in a truck and drives to the extension office and stands in line and fills out paperwork for a loan. What is the probability that this is the way we will do business with the department of agriculture in the future? Zero. The agriculture office will still be there, but there will also be a call center for info on feed service, he will communicate over the Internet, thru the cell phone in the pickup truck; and field service people will still be there. But everything will be connected and integrated as the farmer randomly transnavigates the various systems. This is not a U.S. phenomenon, it is a global trend. Why will the government deploy these systems? It is an imperative - the citizenry will mandate it
Q&A
Q - what went wrong with companies that tried to get into the government market and failed? Is it because govt is too slow?
A - many times startups form initiatives before the market is there. Lots of reasons why they have failed - and we haven't begun to see the end of that - is you have to be there at the right time; the decision process is rational in government; the procurement process is a little arcane, but that doesn't mean it's irrational. You just learn to deal with it
Q- what fundamental policy decisions should accelerate?
A- We don't need more money; we don't need subsidies. We just need leadership both in the states and in Washington. I personally believe it is the only ingredient that is missing.
Q- what are potential eBusiness uses of broadband?
A -We absolutely depend on it. Look at the private sector. The fundamental thing driving this is mass customization. All of these deployments will consume a lot of broadband due to efforts of people and organizations like you, plus Moore's law, I can be very complacent about whether or not it's going to be there. I don't give it a minute's thought, because I am convinced that you will get the job done and you will get the infrastructure handled.
Q - Regulation of Internet on privacy?
A - We are the world's leading provider of these systems. I am absolutely convinced that the technology will be there to solve the problem. What is less secure than the telephone, except for the US mail? Doesn't see privacy as a big impediment.
Tom Tauke
We are at an "Inflection Point" (Andy Grove's term) - behind us is a decade of extraordinary growth. Looking ahead we see promise of new productivity growth, wealth creation, Web applications, stimulated by the spread of broadband connections. The key is getting people connected. Today, we are at an impasse, and we risk derailing or delaying the promise of broadband. We risk missing the opportunity presented by the inflection point. Things we have learned: computers made society rich, networked computers made society richer; more and faster networks will make society richer still. DSL isn't the end game; it's just the beginning. It makes next generation IT innovation and productivity possible and creates fundamental change at the core of the economy. Broadband investment has incredible potential. Project $500 billion annually in economic benefits. Will be driven by new investment in new technology and connections. Enormous potential can be realized. But less than 10 percent of households have broadband, and
seeing slowdown in broadband deployment, in part because of regulatory problems. Distance learning is just part of the potential in education. Ability of broadband to change economic development patterns across the country are enormous. What is missing is a national broadband policy - we are bogged down in the courts, in regulatory bodies (what does 1996 act mean for broadband?). If there is anything that deters investors, it is uncertainty. Without a national policy, we have voice regulation being applied to broadband and cable de-regulation being applied to broadband.
We get "privatized risk and socialized benefits" (Gilder) - competitors use your broadband facilities at rent-controlled rates, without investing a dime and without deploying new technology.
A plan for rational regulation
Retain regulation of voice telephony
Preserve line-sharing over copper loops
Treat competitive carriers as wholesale customers
Assure competitive carriers access to their customer over any infrastructure at commercially reasonable rates
Status quo for competitive carriers over all-copper facilities - I am not arguing for the level playing field
Copper-Fiber Hybrid - New Investment
For all copper - we assume rules are the same as today
Where we have copper/fiber hybrid, we suggest competitive carriers have three options: Interconnect at remote terminal; use copper or purchase fiber bandwidth at commercially reasonable rates; or Resale of telco service, voice or DSL.
All-Fiber loop - two options for competitive carriers: Purchase bandwidth on that fiber or resale of telco services as currently provided.
Result: Accessible broadband
Assure access to customers for wholesale customer/competitive carriers
Open Access for ISPs and content providers
More affordable access for residential consumers and small businesses
Access to New Mass Market for broadband apps and equipment makers
Benefits:
Stimulates major new investment in broadband
Ensure faster critical mass of broadband users for new apps, content and services
Jump-start economic recovery
Bring benefits of broadband to America
Have deployed 8 million miles of fiber - the most of any carrier - have deployed DSL systems, which hasn't been smooth to date. But if we make all of this investment and it can be taken by someone else who doesn't have to make the investment, then we won't see the return on that dollar.
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Panel Discussion: How to Jumpstart Broadband Deployment
Randolph (Randy) May - PFF - moderator
Hon. Kathleen Abernathy, Commissioner, FCC
Larry Clinton, VP of Large Company Affairs, USTA
Hon. Ray Gifford, Chairman, Colorado PUC
Hon. Kevin Martin, Commissioner, FCC
Gerry Salemme, Sr. VP Ext Affairs, XO Communications
Tom Wheeler, President & CEO, CTIA
Michael Willner, CEO. Insight Communications
Willner
Saw convergence of broadband and TV networks from our experience in UK. Very often the interests of our customers, our employees, Washington, and Wall Street are in conflict. Need to be sure that Wall Street is confident that the environment in which we operate is stable. Have had more stable environment since '96 act. By end of this year, more than 75 percent of country will have access to broadband thru cable companies. Actually takeup rate is slower than we'd like to see. Cable access - only 10 percent, but our competitor DSL is passing 48 percent. Internet didn't already contain content for broadband, so we created content, which makes broadband over cable networks a cable service.
Salemme
Real question is how do we jumpstart broadband competition?
Clinton
Took position that we are behind other countries and any delays will cost billions of dollars - dereg of cable in the 80's caused expansion, innovation, true competition. Most of broadband is deregulated: cable, satellite. Bottom line is that dereg of all broadband will lead to increased deployment.
Kevin Martin
There is no silver bullet to solve the problems. Need additional financial incentives and removing barriers. Sen. Rockefeller's bill provides incentives for broadband deployment. More fundamental reform is needed, however. Govts see telecom reform as a source of revenue. Govt at every level need to remove taxes that deter deployment. Commission needs to focus on what is needed for facilities-based competitiveness. Such a framework would not favor any particular part of the market. We need to remove regulatory underbrush that impedes competitors. Many of these are at the local level, not at the FCC. Apparently, some PUCs are reviewing their areas and publishing info about those local areas that are favorable to broadband deployment and those that provide barriers.
Wheeler
"I'm here not on behalf of digging up the streets. I'm here on behalf of God's pathway - the spectrum". Last week in AK, taking part in turning on live 700+ wireless high speed network, taking advantage of wireless and offering lower cost to consumers. Policy constraints - we have become used to the concept of subsidies in order to expand services. Subsidies not the only solution. Have built policies around the extension of subsidies instead of the extinction of subsidies. In addition, we have to deal with the idea that there is a shortage of spectrum. There are policies in place that keep spectrum from being used as efficiently as possible.
Gifford
We have a public choice buffet here that is unbelievable. It is irresistible to all players. Should focus on how we minimize the public choice theory we have confronting us. On the administrative regulation side, it was created to weaken private arrangements. Our favorite answer to every question is maybe. When you say maybe, it keeps you relevant and also many of these issues are very difficult and categorical answers are very scary. You have some player in your office saying that 'if you make this decision, you kill me, I'm out of business.' What we need, though, are categorical answers. Who is best suited to give those answers. We at the state level have no abiding desire to regulate broadband, although we must, based on state statute. States may be better suited to give these categorical answers than the FCC. May not want to make one big national mistake. Let the states make smaller mistakes. End up with the paradox that we as regulators have difficulty giving categorical answers but that is what industr
y needs.
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Panel Discussion: eCommerce in a Global Economy: Is the Framework Breaking Down?
Chris Caine - VP, IBM Governmental Programs
Roger Cochetti - Sr VP, Policy, VeriSign
Ira Magaziner - President, SJS Advisors
Orson Swindle - Commissioner, FTC
Don Upson - Secretary of Technology, Commonwealth of Virginia
Caine
Public policy sets the market rules and thus is important to all of us. Public policy can either create a clear, dynamic environment that encourages investment, or a more rigid, static, less clear environment. Much discussion has been U.S.-centric and on this panel we are going to look more globally. Do we have a framework? Yes, it was launched in '97 when Clinton & Gore announced policy, which was the work led by Ira Magaziner. How extensive is it? Is it global? How effective is it?
Some of Framework principles:
1. Private sector should lead
2. Governments should avoid undue restriction on eCommerce
3. Govts should recognize the unique qualities of the Internet
4. ECommerce should be facilitated on global basis
Up until the close of last year, U.S. policy has been a model for others around the world. Worldwide eCommerce revenue has been tremendous and exponential and the potential is still tremendous, despite current softness. What is missing from the story? GOVERNMENT. There has been a huge digital divide between the private and public sectors. Government's own transformation has been missing until recently. Project eGov spending increasing from $1.5 billion to over $6 billion between 2000 and 2005. (Showed chart of countries with their target for complete or near-complete electronic service delivery in government. Many are targeted in 2001, the U.S. in 2003) Next phase of global eBusiness will be quite different - and will include public sector participation and more worldwide interaction. Is the Framework breaking down or is it coming of age? Will it be suitable for the future?
Ira Magaziner
One of the things that allowed our success was that we were allowed to create a bipartisan consensus. Thanks to a number of people here, including Jeff Eisenach, we were able to achieve very strong bipartisan majorities. Internet and eCommerce are different than other issues. The best thing you can do is to let it grow up in a free and distributed manner. Let government move in only when necessary - became the accepted mode to start from. We knew that was something we would constantly have to revisit. The "retaining wall" we built would have to be maintained.
Main piece - should be commercial code, not government regulation, that should govern the process. Got WTO to keep its hands off. Got Tax Freedom Act to keep moratorium on taxation. Achieved acceptance of self-regulation on things like self-regulation of privacy. Preferred mode was to have single purpose orgs to carry out the coordination and set the rules of the road where necessary. Some of the organizations we looked to have been making process (ICANN is preferable and making progress). Where we need help - we had looked toward the Global Business Dialogue - private sector dialogue among stakeholders. Govt could participate. That has moved forward but has not had the impact we had hoped for. Need to see if this will become a viable method or whether we need to do something else. In conclusion, private sector should lead and the Internet is different. Needs a flexible set of mechanisms in order to progress.
Roger Cochetti
Internet and eCommerce still experiencing dramatic growth. Rate of growth in the U.S. has slowed down, but if you look at Web sites going up or users coming on board, some parts of Europe show the trends that the US saw in 98-99. PFF has been an engine for private sector leadership. It takes people thinking about what to do and how to put the pieces together. Govt regulation by its nature is different- slower, less flexible, Internet industry doesn't have the luxury of NOT pursuing solutions for regulatory limits and needs. Education is #1. Proposition that has motivated private-sector leadership is that an educated user is the best defense against problems on the Internet. Without it, everything else becomes more difficult and with it, leadership becomes a downhill effort.
Tools - help individuals to customize environment and change rules to meet changing markets and circumstances. Industry self-regulation - We have passed the point where the majority of users and Web sites are American. Now only about 1/3 of users are American and the majority of Web sites are not American. Industry leadership shifting with that trend. Industry's performance and leadership has been "lumpy" but there has been progress:
1. ICANN has been a success story, but we are in a process of maturation.
2. Consumer protection - industry and non-commercial interests have combined to develop standards and codes of conduct that protect and help consumers.
3. Content - another area of good success
4. Privacy - some success - have some codes of conduct and seals that help
5. Spam - an area of less than stellar performance - industry self management has not progressed as well as it could Moving forward on these becomes a challenge but we are organized to step up. Increasingly international leadership as we move forward. We are seeing a renaissance of technology tools that will empower users further in their Internet experiences
Don Upson
Strong positive acknowledgements of Ira's framework as one of the most important information technology documents.
Based on our experience in Virginia, I don't believe the framework was ever fully engaged. Didn't capture the imagination of the American people and engage our elected officials. Also, model is not correct, based on Virginia's experience. Framework pushes the choices to the user. Why do we act like the federal government is the most important part of government? States are the new economy sector of government. We are trying to put in place the best online government services, not just to make a citizen happy to renew their drivers license but also to impact their quality of life. Electronic Government at its core is not about just services online. Consumers more interested in issues like privacy and their jobs and whether or not their children will have a chance to participate in this new economy and are concerned about their communities. Our mantra in Virginia is 'every citizen, every community, every business, everywhere'. A little over a year ago, I realized we were successful. We were getting response fr
om communities all over the state and I worried that we couldn't deliver. We have come to believe we can. We went thru an evolution and iteration from Web sites online, forms online, then services and now the electronic community initiative. It is about transforming existing businesses to a 21st century model. Part of me thinks we are building the stadium before we have invented the sport. We need to remember that we are trying to connect to communities. We need to flip the model from a focus on federal and large portals to a focus on the part of government that is closest to the citizen.
Orson Swindle
Bringing eCommerce to main street. Brings to mind any number of debates we are having. Americans are resistant to changing anything, so we need to handle that. The Internet is just a tool and another way of doing business. We have a lot of consumer discomfort with the new technology. Privacy, security, identity theft, spam, and many related issues fuel us with many of these issues on an ongoing basis at the FTC. Public policy comes in many forms and one is dialogue. If we keep the dialogue going, we will come out the other end with a good solution... not a perfect solution, but a good solution. We can talk about this, we can have education... educate the public, who have a vital role to play in making this new way of doing business. Some would say that those who don't conform will fail and I don't agree. I shop on amazon.com but I also like to go into the local bookstore. It's not all or nothing. We can promote through public policy forums. We need to enforce existing laws. Sometimes we talk about the need f
or new laws on privacy, but we don't enforce the laws we have.
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