From: Norm Jacknis (firstname.lastname@example.org)
Date: Tue Dec 18 2001 - 22:23:14 EST
Patterns of Progress: Understand what lies ahead for the Internet by looking
to networks of the past
BY MOHANBIR SAWHNEY
"HISTORY IS THE TRUE WITNESS of times, the light of truth, the life of
memory, the teacher of life...."
With these eloquent words, Greek orator Cicero reminded us of the importance
of grounding our view of the future in lessons from the past. As we ponder
the future of the Internet, we can learn a lot about where the Internet is
headed from the evolution of other networks. A look at the history of the
telegraph, telephone, utilities, railroads, broadcasting and highways
reveals fascinating patterns that have played out time and again. Here are
some of those lessons from history.
Gloom Leads to Boom
And boom leads to bust. The human mind tends to extrapolate the past
linearly into the future. But network adoption follows an S-shaped curve.
Our linear thinking creates a systematic forecasting bias. In the early
stages of network evolution, forecasts tend to be pessimistic because the
potential of the network is not well understood. However, as the network
starts to grow, predictions become overly enthusiastic. This, in turn, sets
up a bust when the growth starts to slow.
In 1844, Samuel Morse could not convince the U.S. Congress to fund
long-distance telegraph lines, as lawmakers failed to realize the commercial
potential of the telegraph. By the time the first trans-Atlantic cable was
laid in 1858, the pendulum had swung to the other extreme. The media and
industry experts were declaring that the telegraph would embrace the whole
world, bringing with it peace and prosperity. Similarly, in 1877 Western
Union refused to purchase the Bell patents, seeing no future in them; it
later tried to set up a competing company, only to be challenged in the
courts and forced out of business.
The Internet and the wireless industry show a similar pattern. In 1996, when
the Internet was in its early days, Morgan Stanley issued a report that
predicted the worldwide Internet user population at 150 million by the year
2000. The actual number turned out to be 400 million. Similarly, in the
cellular industry, experts in 1990 predicted that the U.S. cellular
subscriber base might reach 25 million by 2000. They were off by a factor of
four, with the actual number being close to 109 million.
Now, the pendulum seems to be swinging dutifully in the opposite direction.
Consider the forecasts of U.S. Internet advertising spending made by
eMarketer. In 1998, eMarketer predicted that Internet advertising would
reach $8 billion-a number it revised to $15 billion in a forecast made
during December 2000. Now, these forecasts look wildly optimistic. In 2001,
Internet advertising grew only to $7.6 billion, and eMarketer now predicts a
2002 number closer to $10 billion. Meanwhile, in the wireless industry,
after years of underprediction, forecasts of wireless users now range from
optimistic to euphoric. If history is any guide, the real numbers will be
far lower than the most pessimistic of these forecasts.
Evolution Trumps Revolution
Mature network industries are surprisingly resilient when challenged by new
technologies. Newspapers, radios and TVs have challenged each other in
succession but have ended up coexisting, morphing themselves to capture new
niches. Airlines, railroads and motor transportation also coexist, catering
to increasingly specialized customer needs. Not only do mature networks
adapt and morph, they also improve faster than expected. Meanwhile, new
network technologies arrive later than expected. These factors reduce the
market potential for new network technologies.
Consider these examples from the communications industry. In 1986, ISDN
service was heralded as a revolutionary technology, offering speeds nearly
10 times faster than the 14.4Kbps most modems then offered. By the time a
few million customers had signed up for ISDN, modem technology allowed
56.6Kbps speeds. Within a few years, DSL technology had increased
residential access speeds by another order of magnitude. Proponents of
high-definition TV underestimated the advancements in digital cable and
digital satellite networks, and overestimated the rate at which they could
get broadcasters to offer high-definition programming.
Seen from the lens of the past, the future of third-generation (3G) wireless
networks seems quite blurry. The 3G standard promises multimedia services at
speeds up to 2Mbps. Now several years in development, its potential markets
are rapidly being captured by adaptation of the existing second-generation
networks. One example is wireless LAN technology based on the 802.11
specification family, which allows short-range wireless communications at
between 1Mbps and 2Mbps.
Simple Innovations Create Radical Value
The human mind has a taste for remembering important milestones and
glorifying a few people. We know that Gutenberg invented the printing press,
and Edison the lightbulb. But in focusing on the great technological
breakthroughs, we often fail to note myriad small inventions that unlock
their practical value. And we focus so much attention on the highly touted
killer apps that we often ignore the real killer apps that have more humble
The telephone and the radio both started as modest attempts to improve
telegraphic transmissions. The radio had been around for more than a quarter
of a century when AT&T started WEAF-the first advertiser-supported
station-in New York City in 1922, thus jump-starting the commercial radio
industry. Similarly, alternating current, invented by Nikola Tesla in 1888
and ignored by Edison, enabled the transmission of electricity over long
distances and without sparks. This simple innovation eliminated the risk of
fire and made the mass production and distribution of electricity
The Internet seems to be following a similar path. Despite all the fanfare
about interactive applications and e-commerce, the killer app for the
Internet is the same today as it was two decades ago-person-to-person
communication. Although Web traffic is 20 times the volume of e-mail
traffic, it is e-mail that delivers the highest value to consumers and
businesses. And in the wireless data business, short-messaging service-used
to send messages of up to 160 characters to mobile phone customers-is the
unheralded killer app, not the fancy mobile commerce, news and entertainment
applications that service providers love to talk about. The lesson is that
value hides in the strangest of places, and killer apps sneak up on you from
directions you least expect.
In our impatience to see the future, we often tend to forget the valuable
lessons in the past. As radio commentator Paul Harvey said, "In times like
these, it helps to recall that there have always been times like these."
Mark Twain expressed a similar thought when he observed, "Time does not
repeat itself, but it sure does rhyme."
What lessons have you learned online? Write us at email@example.com. Mohanbir
Sawhney is the McCormick Tribune professor of e-commerce and technology at
Northwestern University's Kellogg School of Management. He can be reached at
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