More on A WSJ Letter to the Editor They Wouldn'tCare toPublish (which I mostly agree with)

[Dave Farber <dave () farber net>]

------ Forwarded Message
From: Bob Frankston <rmfxixB () bobf Frankston com>
Date: Tue, 07 Jan 2003 21:04:13 -0500
To: dave () farber net, "'ip'" <ip () v2 listbox com>
Cc: jweber () spri com, Jeff Pulver <Jeff () Pulver com>, David S Isenberg
<isen () isen com>, Daniel Berninger <dan () Pulver com>, David Reed
<dpreed () reed com>
Subject: RE: [IP] More on A WSJ Letter to the Editor They Wouldn'tCare
toPublish (which I mostly agree with)

[Dave -- I hate repeating myself but I guess I have to ... though each time
I try to tune the remarks to the particular issue. This version is a little
different since Voice over IP is now coming into its own. I realize that my
metaphors might seem provocative but it's more a reflection of the extreme
distortions that already exist than any exaggeration. Dan Gillmor's
observations about the inconsistencies in the Telco whinings demonstrate
this. It also got a bit longer than I planned but that is necessary since
those who don't "get" connectivity need to have the concepts made explicit.]
 
The real tragedy is that the larger issues are lost in the sound and fury
over artificial minutia. We have a simple problem -- one company owns the
facilities that are used by it and its competition to build service. There
is no such thing as real prices and costs in the absence of a marketplace.
The FCC and Congress recognizes this and attempts to apply complex models in
order to set prices and rules in lieu of a marketplace. If there were no
alternative this would be a noble effort -- flawed but noble.
 
I think Joseph agrees with this but then says "Competition is best spurred
by investment in new technology rather than in arbitrage schemes. Things
would be simpler, and probably better for the industry and the public (if
not for all the competitors) if interconnection standards were specified and
enforced and all governmental restrictions preventing competition removed,
including the UNE program."
 
I agree with the sentiment.
 
The problem is that this isn't viable as long as the "standards" are
premised on a flawed model of telecommunications. We also don't need a new
boondoggle with protected monopolies buying new fancy equipment when the
existing facilities are used at less than 1% of capacity. There will be a
need for new equipment once we give pent up demand an opportunity to assert
itself.
 
We don't have to settle for just rearranging regulations when we can have a
real marketplace. The key is to first understand what connectivity
<http://www.satn.org/about/separateconnectivity.htm>  is. Rather than
locking the providers into a narrow definition of a standard we should give
them free reign well beyond what is possible even with faux deregulation.
But this is only possible if their incentive is to provide connectivity
rather than preserving their current highly profitable value-based
offerings.
 
DSL provides a great example of problem. In an effort to assure competition
we have defined standards in terms of an outdated implementation of
signaling over copper. DSL can very quickly evolve to delivery many times
the current capacity without distances limits at a lower price. In fact, why
do we still use analog signaling over copper at all? And, though we can
repurpose existing copper, why do I see new copper being installed rather
than fiber?
 
What we need is a marketplace for connectivity.
 
We do not want nor need "broadband policy". It's just repeat of the ISDN
debacle -- innovation was forced to build upon POTS because the incumbents
controlled the definition of ISDN.
 
I already using Vonage <http://www.vonage.com>  and FWD
<http://www.pulver.com/fwd>  and it works just fine without any special
protocols (and without a telecommunications industry). More on this at
http://www.satn.org/archive/2003_01_05_archive.html#90150387
<http://www.satn.org/archive/2003_01_05_archive.html#90150387> . I want to
emphasize that VoIP is not about any particular protocol nor standard. I can
use the bit stream however I want. The use of such standards is optional and
that's the real strength of connectivity and the end-to-end argument.
 
Aside from putting a lie to the existence of the telecommunications
industry, VoIP is also a dramatic demonstration of why the carriers must not
be allowed to define broadband. They complain about how there are no
applications that really demand broadband and they keep trying to come up
with just-so stories that seem to demand lots of bits. It's like trying to
define the uses of PC's in 1975. Yet VoIP doesn't need much speed, just
connectivity and we can have connectivity everywhere very quickly. We sort
of do with modems and it is only a small step to stop second-guessing the CO
Codecs and simply treat the two ends as a form of DSL even if it were not
much faster than the modems (maybe 10x?).
 
The real problems with VoIP are the very interface standards Joseph is
asking for. Any bridging to the PSTN requires meeting a complex set of
regulatory burdens that are based on a 1930's models of telecommunications.
It's like requiring all email carry a $.35 stamp (or whatever it is, I just
have my computer print the stamps the few times I have to send paper mail -
it will soon be $10 as the idea of sending email by paper becomes retro). An
IP-based implementation would be far superior to the current E911. It could
have a heartbeat to detect broken connections and automatically alert
multiple observers and needs very little capacity -- just connectivity. We
also have the problem of the e-rate which is threatened by VoIP even though
its purpose is to fund such technologies.
 
Not only does all this sound and fury make it seems as if the the
Regulatorium were dealing with reality, it creates more problems that need
to be addressed while frustrating real competition. It's like the fireman
who sets fires in order to do heroic rescues. The fires may be unintentional
but they are also unnecessary.
 
We have an industry whose ROI is determined more by managing the regulatory
process than technology and the technology itself is supposedly mysterious
and unknowable. Today's Boston Globe had a nice column on Galileo
<http://www.boston.com/dailyglobe2/007/science/We_wish_he_had_been_more_hero
ic+.shtml> . He may not have really said "'And yet it moves." but I identify
with the feeling. Many of those most involved in policy do not have the
technical expertise, or even believe they can have it, to evaluate the
concept of connectivity. It is simply dismissed as a fantasy like perpetual
motion or the idea that we Earth orbits the Sun. And that's the crux of the
problem. The policy makers demand more policy rather than real reform.
 
The incumbent companies themselves actually recognize that connectivity is
happening but their response is to try to find a new way to stay in a high
value service marketplace. They should learn from Sears which, after years
of trying to come to terms with a new marketplace, had to buy Lands End.
Actually, we should learn from Sears and recognize that coddling them only
delays in the inevitable.
 
So I have repeat my standard advice -- we must have a marketplace in
connectivity and a remedy period in which the (incumbent?) service providers
must have no ownership stake in the transport business.
 
What is different new is recognizing that VoIP is a demonstration of why
broadband is so very dangerous. The incumbents are defining broadband as a
high speed delivery system just like television. VoIP shows that low speed
constant connectivity is where the real value is. It is easy to
incrementally add speed as the market develops so there is no reason to even
worry about it. At least, once the providers are incented to provide
connectivity even if it means voice services are priced at a real market
price of $0.00/minute above the cost of connectivity. At least that's what I
pay for calls not bridged to the PSTN.
 
What we should wonder about is why my cable modem IP connection is less
reliable than my voice or video services over the same wire and why my DSL
service is slow because I am "too far" from the CO (though my two lines have
different rated speeds!). If I have the IP I can do the video and audio
myself. It doesn't work the other way and as long my connectivity provider
has any stake in the video or audio content then we have a problem.
 
Arguing about the price of copper is an expensive diversion and foretells
the more desperate efforts as we reach a critical point and VoIP simply
becomes the norm. At least, that's my two cents {do I need to point out what
US pennies are made from?}
 
 
Bob Frankston 
http://www.Frankston.com <http://www.frankston.com/>

From: owner-ip () v2 listbox com [mailto:owner-ip () v2 listbox com] On Behalf Of
Dave Farber
Sent: Tuesday, January 07, 2003 17:58
To: ip


------ Forwarded Message
From: "Joseph H. Weber" <jweber () spri com>
Date: Tue, 07 Jan 2003 17:49:49 -0500
To: dave () farber net
Subject: Re: [IP] A WSJ Letter to the Editor They Wouldn't Care toPublish
(which I mostly agree with)

Dave,

Thre's always a lot more heat than light in the discussions of these issues.
The costing standard - based on the theoreticl costs of building a new
network, requires so many assumptions that the results are almost
meaningless. It's plainly not an objective "fact" if those who benefit from
low prices can always "prove" that the costs are low, while those who
benefit from hight prices can always "prove" the opposite. All we can be
sure of is that (1) the actual costs on the books of the telephone companies
are much higher than the prices usually specified for unbndled network
elements (UNEs) and (2) the most popular and controversial of the UNEs, the
so-called UNE-P, is a combination of loop, switching and transmission that
is functionally indistinguishable from resold service. Furthermore, the
legislative standard for pricing of resold services in the 1996 Act (retail
minus avoided cost) leads to much higher prices than is ordinarily charged
for UNE-Ps.  Thus the current arrangement has two markedly different prices
for the same service, and they can't both be right. This is but one example
of the kinds of problems this regulatory regime exhibits.

Everybody gives lip service to increased competition, but the devil is in
the details here. If competition merely means that one company is riding on
the facilities of another, with little opportunity for technolgical and
service innovastion, is that really what we want? If competitors cannot
economically supply services on their own to certain market segments,
perhpas those market segments should not be artificially made "competitive."
Nobody is arguing about the need for easy interconnection, which is of
course necessary, but the requirement that one company allow another to use
its facilities probably goes too far. I realize that this is in the 1996
Act, but it's well known that was a Christmas tree. I have always thought
that the requirement to interconnect at any "technically feasible point" is
a pernicious prescription that can and will lead to all kinds of problems,
technical and economic.

Competition is best spurred by investment in new technology rather than in
arbitrage schemes. Things would be simpler, and probably better for the
indsutry and the public (if not for all the competitors) if interconnection
standards were specified and enforced and all governmentqal restrictions
preventing competition removed, including the UNE program. The result would
be a lot less time spent arguing before commissions and courts, and a lot
more rapid movement toward a real competitive environment.

Joe Weber
Strategic Policy Research
Bethesda, MD

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