With gasoline at $3.00/gallon and climbing, we’ve got to think seriously about building some new nuclear-powered electricity generating stations.
I suspect that there are millions of us Americans who would drive electric vehicles to work if the economics make sense. The vehicle needs to have the necessary features, of course. It needs to be comfortable for at least two people, have a little room for cargo, be able to operate at freeway speeds, can be recharged in six hours or less, have air conditioning and a decent sound system, and be available at a price point that makes sense.
A good deal of the freight in our country could be hauled between cities on the railroads, using trains powered by electric locomotives.
All the public transportation in our cities could be electric trolleys and buses.
If the electricity for all those applications comes from nuclear power plants, then we will make a huge dent in our demand for oil. The objective is not to lower the price of oil by reducing our demand, it’s to substantially eliminate the need for oil in our economy all together. Instead of being dependent on good relations with the oil-rich countries of the Middle East, we can tell them to keep their oil and find someone else to terrorize.
It is possible to have a safe nuclear powered infrastructure. The French have been doing it for years. One of the keys is their standardized reactor/generator design which can be replicated over and over. You get continuous improvement in both safety and efficiency only when you can apply your learning across the whole installed base of technology. In fact, I would be in favor of licensing France’s reactor design so that we get a head start with a known model.
What about the waste? We have to stop letting a few folks dictate the strategic energy policy of the whole country. We seem to have built a safe storage facility in Yucca Mountain, and we have safe mechanisms for transport. If we put the power plants in the right places, we don’t have to run the shipping casks through populated areas to get to the storage facility. What about the potential for bad guys high jacking a shipment? Why don’t we deploy troops to guard the power plants and the shipment trains instead of protecting our oil interests in the Middle East?
The alternative is to keep competing with the Chinese for oil until we both suck the world dry and end up going to war over what’s left.
Yes, keep working on all the other alternative fuel sources: wind, hydro, fusion, solar, etc. And let’s get serious about conservation. Tell my neighbors, commercial and residential, to turn off all the damn lights that create light pollution and waste energy. Let’s figure out how to store energy on a massive scale so don’t have to match generator capacity to the peak demand. The guys who designed the Niagara Power Project figured out a neat way to do this.
In the mix, there is still a need for an electrical power source which functions when there is no wind, or it’s cloudy, yet doesn’t rely on oil as an energy source. Nuclear power fits that bill.
Opponents of nuclear power – cut back your electrical energy consumption by 80% and your fossil fuel consumption by 100% for a month or two. That’s what life would be like when the oil runs out. Then let’s talk about the best way to make lots more power.
Showing posts with label Technology. Show all posts
Showing posts with label Technology. Show all posts
Saturday, August 19, 2006
Monday, November 21, 2005
Subscription TV
The following was a response written to a comment on Mark Cuban's log: blog maverick
As we saw at CompuServe, technical capability/capacity and the uses of those capabilities/capacities ratcheted steadily upward over the years. When everyone was timesharing via line oriented text user interfaces on monochrome monitors (and teletypes!!), 300bps modems were sufficient. When higher speed modems appeared (especially 9600bps), some said "wow, we'll be able to print out those long reports to the local printer a lot faster now." But others said, you know, I think we can transmit color graphics and whole files with that much bandwidth. The same kind of thing happened when broadband came into the home. At first, it just seemed like a faster way to do old things the old way. But there was always something waiting in the wings that just needed the greater capacity. Music sharing became the killer app.
On demand HDTV over the internet is one of those applications we all see coming down the road, but only because we've seen primitive video over the internet already, and now want a more variety and more quality. Consumers see the internet as a vehicle to get whatever they want whenever they want, and are impatient for the world's video archive to be put online (sounds a little like Audionet, huh?)
Meanwhile, I think television could turn into a subscription medium. You don't just watch "Desperate Housewives," you subscribe to it. With that subscription, you purchase the right and ability to download and record the current episode when it is broadcast. It doesn't matter when you watch it, although the really hot shows will be broadcast during "prime time" so that its audience gets a chance to see it at the same time as all their friends (don't want to be the last one to see a really juicy episode).
For many other kinds of shows (think "American Chopper"), the broadcast time might be in the middle of the night. But no one cares because you're recording it to view later anyway.
The key is that the show is distributed via a one-to-many broadcast technology, either directly from satellite or from a local terrestrial station. I don't know enough about the comparative economics of the two, but suspect that satellite distribution is much cheaper, although the customer-end equipment is more expensive.
My satellite TV service, DISH, broadcasts something like 150 channels all the time. That means that in one day, they could broadcast 3,600 unique one hour programs. In a week, it would be 25,200 unique one hour programs. Right now, a lot of those slots are filled up with informercials and junk. Why not instead fill them with subscription feeds?
It could be very democratic. Create a website with a library of all the possible programs. At any given time, viewers could submit bids for the programs they want to see broadcast. Since each hour represents 150 hours of broadcast capacity (using the DISH network as an example), at say 30 mins prior to the top of the hour, the top 150 vote getters would be retrieved and queued up, and at the top of the hour, they would get broadcast. Any show not making the top 150 that hour would be in the running for the auction in the following hour. There might be a show that takes a month to collect enough bids to make it to the top 150. That's okay too.
Maybe you pay for every bid, or maybe you get 100 bids/month for your monthly subscription. Maybe you can only record a show you bid on, or maybe you can record any show that gets broadcast as long as you pay your monthly subscription.
What's the money trail? Boy, lots of possibilities here. One is that the broadcaster (satellite company), pulls off a slice of every subscription for their trouble, and then the show producers get paid directly based on the proportion of total downloads their show gets every month. The producers are free to bury ad spots and product placement in their feed if they want to try to make a little extra money. Viewers can decide whether the show is good enough to put up with this stuff.
Let's preserve the wires for time-critical and narrowly focused telecommunications, at least until the wire-based technology gains a couple of orders of magnitude of price/performance. We can push 'television' to satellites if we're willing to experiment with radically different revenue models.
As we saw at CompuServe, technical capability/capacity and the uses of those capabilities/capacities ratcheted steadily upward over the years. When everyone was timesharing via line oriented text user interfaces on monochrome monitors (and teletypes!!), 300bps modems were sufficient. When higher speed modems appeared (especially 9600bps), some said "wow, we'll be able to print out those long reports to the local printer a lot faster now." But others said, you know, I think we can transmit color graphics and whole files with that much bandwidth. The same kind of thing happened when broadband came into the home. At first, it just seemed like a faster way to do old things the old way. But there was always something waiting in the wings that just needed the greater capacity. Music sharing became the killer app.
On demand HDTV over the internet is one of those applications we all see coming down the road, but only because we've seen primitive video over the internet already, and now want a more variety and more quality. Consumers see the internet as a vehicle to get whatever they want whenever they want, and are impatient for the world's video archive to be put online (sounds a little like Audionet, huh?)
Meanwhile, I think television could turn into a subscription medium. You don't just watch "Desperate Housewives," you subscribe to it. With that subscription, you purchase the right and ability to download and record the current episode when it is broadcast. It doesn't matter when you watch it, although the really hot shows will be broadcast during "prime time" so that its audience gets a chance to see it at the same time as all their friends (don't want to be the last one to see a really juicy episode).
For many other kinds of shows (think "American Chopper"), the broadcast time might be in the middle of the night. But no one cares because you're recording it to view later anyway.
The key is that the show is distributed via a one-to-many broadcast technology, either directly from satellite or from a local terrestrial station. I don't know enough about the comparative economics of the two, but suspect that satellite distribution is much cheaper, although the customer-end equipment is more expensive.
My satellite TV service, DISH, broadcasts something like 150 channels all the time. That means that in one day, they could broadcast 3,600 unique one hour programs. In a week, it would be 25,200 unique one hour programs. Right now, a lot of those slots are filled up with informercials and junk. Why not instead fill them with subscription feeds?
It could be very democratic. Create a website with a library of all the possible programs. At any given time, viewers could submit bids for the programs they want to see broadcast. Since each hour represents 150 hours of broadcast capacity (using the DISH network as an example), at say 30 mins prior to the top of the hour, the top 150 vote getters would be retrieved and queued up, and at the top of the hour, they would get broadcast. Any show not making the top 150 that hour would be in the running for the auction in the following hour. There might be a show that takes a month to collect enough bids to make it to the top 150. That's okay too.
Maybe you pay for every bid, or maybe you get 100 bids/month for your monthly subscription. Maybe you can only record a show you bid on, or maybe you can record any show that gets broadcast as long as you pay your monthly subscription.
What's the money trail? Boy, lots of possibilities here. One is that the broadcaster (satellite company), pulls off a slice of every subscription for their trouble, and then the show producers get paid directly based on the proportion of total downloads their show gets every month. The producers are free to bury ad spots and product placement in their feed if they want to try to make a little extra money. Viewers can decide whether the show is good enough to put up with this stuff.
Let's preserve the wires for time-critical and narrowly focused telecommunications, at least until the wire-based technology gains a couple of orders of magnitude of price/performance. We can push 'television' to satellites if we're willing to experiment with radically different revenue models.
Tuesday, September 13, 2005
Business Week: Tragedy and Telecom
"It turns out we have developed a budding broadband system that, in times of disaster, doesn't work as well, interrupts more easily, and comes back on line later than the good old copper-wire system." -- quoted from: Tragedy and Telecom - BusinessWeek Online - MSNBC.com
As the second-guessing and political maneuvering continues in the wake of the destruction of New Orlean by Hurricane Katrina, this question has been asked: "What role does the government play in specifying and ensuring the survivability of the public telecommunications infrastructure."
Interesting question, and the subject of the article cited above. The trouble is, the writer is ignorant on this topic. Most folks don't know the historical vision for the Internet, which is based on design goals set by the US Department of Defense, specifically the Defense Advanced Reseach Agency (DARPA). The first implementation of this technology was in fact called DARPANET.
You see, the goal was to build a network which could survive a nuclear war, a somewhat larger and more violent disaster than a hurricane. The traditional telephone network, called the Public Switched Telephone Network (PSTN) by telecom folks, is a hierarchical network loaded with single points of failure and capacity constraints. The DARPANET, and its successor, the Internet, is designed to be decentralized in its control function, and more adaptive in its tranmission capacity.
But regardless of the whether a network is based on PSTN or Internet technologies, the hard part is the so-called 'last mile' -- that last little bit connection to the end user. Both PSTN and Internet use copper wires and various wireless technologies for that last mile. Neither stand up well to hurricane force winds and flooding.
Because I live in a telecommuncations backwoods, my only choice for wired telephone communications is a copper pair from my house to an SBC central office about 5 miles away. Our service regularly goes out every time we get a hard rain. I've complained many times to MCI (who is our retail provider, buying the local service on a wholesale basis from SBC), and to the Public Utilities Commission of Ohio. They do some half-assed fix, like move me to another pair on the main cable, but the next time it rains real hard, we're out again. It turns out that for us, the cellular system is much more reliable, and cheaper, than the copper wire system. We may drop our wireline system altogether before long.
Most people notice the phone line wires that run along on poles, high above their heads, and think that should be a good place for wires in a flooding situation. That's partially true. The wires might be out of harm's way during a flood, but they're the most exposed option while the storm is actually taking place. You can bet that in New Orleans, miles and miles of overhead wiring has been destroyed.
So is buried cable better? Well yes, it's better protected from wind damage (including trees and poles falling through the wires), but in general is not designed to be underwater for days at a time. Additionally, the wired phone network includes lots of ground-level and below-ground-level electronics bays in environmental vaults and simple cabinets which may not survive well in a flooding situation. Oh, and then there are those big multi-million dollar exchange switches in every neighborhood, almost always on a street level floor. Again, I know that some of these pieces of equipment have been rendered inoperable in New Orleans.
So are the wireless systems really better? Well.... no. Cell towers and antennas are fragile things compared to hurricane force winds. There may be few cell towers functioning in New Orleans these days, or even standing for that matter.
Another key point regarding the design and engineering of telephone networks: Not everyone can use it at the same time. There are not enough lines in the telephone network for every telephone to be in use at the same time. In normal situations, only a fraction of the telephones are in use, and the phone company has learned the statistical profile of usage over the years. There are 1 million people in New Orleans, and 1 million people in Columbus OH, but there can't be 1 million individual phone calls taking place between those two cities -- there isn't anywhere close to enough capacity in the phone system to allow for that.
When a disaster strikes, there is an extraordinary demand for telephone services all at once. Regardless of how much of the phone system survives, there isn't enough capacity for everyone to get on and make a voice call. However, a data network, using the DARPANET/Internet technology, lends itself to getting message traffic through because it doesn't have to be real time, like a voice telephone call. I can send you an email, and it might take an hour or two to get through instead of the normal seconds, but it will get through if there is any path available. The day after Katrina, folks figured out that they could get text messages through from their cell phones even when there was no voice capacity available. This is because the text messaging uses Internet technology to move the messages around.
The Achilles Heel of all technology is the need for electricity. PSTN and Internet networks alike only operate while the switches and other devices are powered. The traditional Ma Bell PSTN phone companies have a major investment in backup power setups for their networks. They use batteries and generators, and can keep power flowing to their equipment for many hours. But that's hours. After that, the generators need to be refueled. You can be sure that there are a number of telecom facilities in New Orleans which survived the winds, rains and flooding without significant damage, but are down nonetheless because the backup generator has run out of fuel.
There's only one answer to question: How could we have kept Katrina from causing so much pain and suffering? That answer is: Don't live there. Hurricanes are big nasty storms that concentrate incredible amounts of energy. If you chose to live in a place that's prone to hurricanes and also below sea level, eventually an incredibly bad thing is going to happen. We humans pick out precarious places to live, and when the inevitable disaster happens, want to blame someone else for our own stupid decision. But that's another discussion for another time.
So I wholeheartedly disagree with this writer. The telecommunications infrastructure of New Orleans will indeed need to be rebuilt after this disaster if we are going to reoccupy this city (another questionable decision). We know the residents are going to want their Internet access, so maybe the right thing to do is rebuilt the internet system only, and not bother to spend (waste) the money required to restore the PSTN network.
If we're going to rebuild a whole major American city, let's make it a city of the future, not one of the past.
As the second-guessing and political maneuvering continues in the wake of the destruction of New Orlean by Hurricane Katrina, this question has been asked: "What role does the government play in specifying and ensuring the survivability of the public telecommunications infrastructure."
Interesting question, and the subject of the article cited above. The trouble is, the writer is ignorant on this topic. Most folks don't know the historical vision for the Internet, which is based on design goals set by the US Department of Defense, specifically the Defense Advanced Reseach Agency (DARPA). The first implementation of this technology was in fact called DARPANET.
You see, the goal was to build a network which could survive a nuclear war, a somewhat larger and more violent disaster than a hurricane. The traditional telephone network, called the Public Switched Telephone Network (PSTN) by telecom folks, is a hierarchical network loaded with single points of failure and capacity constraints. The DARPANET, and its successor, the Internet, is designed to be decentralized in its control function, and more adaptive in its tranmission capacity.
But regardless of the whether a network is based on PSTN or Internet technologies, the hard part is the so-called 'last mile' -- that last little bit connection to the end user. Both PSTN and Internet use copper wires and various wireless technologies for that last mile. Neither stand up well to hurricane force winds and flooding.
Because I live in a telecommuncations backwoods, my only choice for wired telephone communications is a copper pair from my house to an SBC central office about 5 miles away. Our service regularly goes out every time we get a hard rain. I've complained many times to MCI (who is our retail provider, buying the local service on a wholesale basis from SBC), and to the Public Utilities Commission of Ohio. They do some half-assed fix, like move me to another pair on the main cable, but the next time it rains real hard, we're out again. It turns out that for us, the cellular system is much more reliable, and cheaper, than the copper wire system. We may drop our wireline system altogether before long.
Most people notice the phone line wires that run along on poles, high above their heads, and think that should be a good place for wires in a flooding situation. That's partially true. The wires might be out of harm's way during a flood, but they're the most exposed option while the storm is actually taking place. You can bet that in New Orleans, miles and miles of overhead wiring has been destroyed.
So is buried cable better? Well yes, it's better protected from wind damage (including trees and poles falling through the wires), but in general is not designed to be underwater for days at a time. Additionally, the wired phone network includes lots of ground-level and below-ground-level electronics bays in environmental vaults and simple cabinets which may not survive well in a flooding situation. Oh, and then there are those big multi-million dollar exchange switches in every neighborhood, almost always on a street level floor. Again, I know that some of these pieces of equipment have been rendered inoperable in New Orleans.
So are the wireless systems really better? Well.... no. Cell towers and antennas are fragile things compared to hurricane force winds. There may be few cell towers functioning in New Orleans these days, or even standing for that matter.
Another key point regarding the design and engineering of telephone networks: Not everyone can use it at the same time. There are not enough lines in the telephone network for every telephone to be in use at the same time. In normal situations, only a fraction of the telephones are in use, and the phone company has learned the statistical profile of usage over the years. There are 1 million people in New Orleans, and 1 million people in Columbus OH, but there can't be 1 million individual phone calls taking place between those two cities -- there isn't anywhere close to enough capacity in the phone system to allow for that.
When a disaster strikes, there is an extraordinary demand for telephone services all at once. Regardless of how much of the phone system survives, there isn't enough capacity for everyone to get on and make a voice call. However, a data network, using the DARPANET/Internet technology, lends itself to getting message traffic through because it doesn't have to be real time, like a voice telephone call. I can send you an email, and it might take an hour or two to get through instead of the normal seconds, but it will get through if there is any path available. The day after Katrina, folks figured out that they could get text messages through from their cell phones even when there was no voice capacity available. This is because the text messaging uses Internet technology to move the messages around.
The Achilles Heel of all technology is the need for electricity. PSTN and Internet networks alike only operate while the switches and other devices are powered. The traditional Ma Bell PSTN phone companies have a major investment in backup power setups for their networks. They use batteries and generators, and can keep power flowing to their equipment for many hours. But that's hours. After that, the generators need to be refueled. You can be sure that there are a number of telecom facilities in New Orleans which survived the winds, rains and flooding without significant damage, but are down nonetheless because the backup generator has run out of fuel.
There's only one answer to question: How could we have kept Katrina from causing so much pain and suffering? That answer is: Don't live there. Hurricanes are big nasty storms that concentrate incredible amounts of energy. If you chose to live in a place that's prone to hurricanes and also below sea level, eventually an incredibly bad thing is going to happen. We humans pick out precarious places to live, and when the inevitable disaster happens, want to blame someone else for our own stupid decision. But that's another discussion for another time.
So I wholeheartedly disagree with this writer. The telecommunications infrastructure of New Orleans will indeed need to be rebuilt after this disaster if we are going to reoccupy this city (another questionable decision). We know the residents are going to want their Internet access, so maybe the right thing to do is rebuilt the internet system only, and not bother to spend (waste) the money required to restore the PSTN network.
If we're going to rebuild a whole major American city, let's make it a city of the future, not one of the past.
Monday, June 20, 2005
Is Music Sharing a Bad Thing?
I recently watched a series of panel discussions from the recent Consumer Electronics Association meetings about intellectual property
An interesting position was taken by Gary Shapiro, the CEO of the CEA: There is really no such thing as "Intellectual Property," at least that this kind of creative material is not "property" as defined in the law of our land. He took this position, in my opinion, primarily so he could go on to say that creative material, such as music and films, cannot be "stolen" in the same way that real property can be stolen. After all, one can loan a CD to a friend, who can rip the whole contents to their disk, then return the CD to the owner. The owner of the CD gets his property back (the physical CD), after all. Taking Shapiro's position, no harm has been done.
I don't believe that Shapiro actually thinks this way, but rather that he is taking a polarizing position in the debate in an attempt to: a) support the position of his association members; b) incite a dialog.
No one questions that when an artist creates a piece of work, such as a song, he/she has the right to determine how it will be sold, to whom it will be sold, and what the price will be. When a buyer decides the price is too much for a product, the buyer does not have the option to steal the art instead. It's buy it or leave it.
Music sharing really is stealing. It is taking a piece of art from the owner, who offers it to the public for a price, and making original-quality copies available to all who choose to download it. Both the uploaders and downloaders are stealing, and most know it.
But the real issue being debated is who has liability then a theft occurs, and who has responsibility for fixing the problem.
Clearly, the person who takes possession of the property is one of the people liable. Does that mean the artist should sue all the free downloaders? Some say that this is at least misdemeanor theft, and the downloader should be arrested. After all, if you go into a Wal-Mart and shoplift the CD, it's a misdimeanor -- why should downloading carry a greater penalty? So the severity of the penalty is being debated, but reasonable folks seem to agree that it theft nonetheless.
What about the author of the software that enables the file sharing? Is Grokster or BitTorrent liable? Some would say yes, they are profiting from a criminal act. The litmus test suggested by the RIAA is that if the significant fraction of the use of the technology is to enable illegal acts, then the P2P technology creator should be liable. Others note that gunmakers are not held liable for crimes committed with their products. The P2P network guys are very careful to say they don't provide a service, only a software product.
What about the folks who make the technology that plays the stolen art? Should they have responsibility for creating protection mechanisms so only properly licensed art can be viewed/played? The CEA emphatically says no, and I tend to agree. Car manufacturers are not required to secure the trunk of a car so that personal items placed in the trunk cannot be stolen. If someone steals your golf clubs from the trunk of you Z4, you can't hold BMW liable. The car makers don't even have to put a lock on the trunk. Their prospective buyers might not choose to purchase that car because of it, but the golf club manufacturer doesn't get a vote.
And finally, what responsibility does the artist have for protecting their property? Seems to me that this is where a great deal of the burden needs to be placed. Let's say CDs had been designed to be perfectly copy protected, and that no device on the planet could ever duplicate a CD or rip songs from the CD which could be played on anything else. Would the artist put a stack of his perfectly protected CDs in the main concourse of Grand Central Station with a basket that says "$5 each" and expect more that a very small minority of people to actually pay? Of course not, the artist and the retailers are expected to take reasonable steps to prevent theft. They do so with the physical media but have been greedy and negligent in demanding the same kind of security for the digital versions of their property.
So where I've come down on this thing is that the movement from analog LPs to digital CDs, the artists and the record companies have been lazy about demanding tighter security, preferring to get to market quickly with CDs and not wanting to invest anything in tighter security, and are now suffering the consequences.
If we want to stop this problem, the artists need to withhold their material from the market until the technology guys figure out a better system of security. How many have the stamina to do this?
Of course, the outcome of such a boycott might be that other artists might figure how to make money in spite of the lack of security.
It's a little like the shoplifting problem -- retailers can stop shoplifting by locking all their merchandise behind glass doors. But they tolerate a little theft because buyers have shown that they only purchase items they can touch and feel, and it's too labor intensive for the retailer to have an employee follow every shopper around unlocking doors (which most shoppers would find too intrusive anyway). To be sure, the retailers continue to seek new ways to prevent shoplifting without harming the shopping experience for the legitimate customers. The same kind of balance will be found with digital media.
Additional thoughts: (20 Jul 05):
The Supreme Court has decided that Grokster et al could be held liable for copyright infringment if it is found that: a) their business model is predicated on enabling users to commit infringment; and, b) if the P2P network makes no effort to dissuade their users from infringing.
People who think the P2P network should be held blameless cite to the wisdom of the Betamax case, in which the Supreme Court decided that Sony was not a de facto participant in copyright infringement simply because they made a device which could be used to perform infringment. It was recognized that there was substantial non-infringing uses for the device (e.g. time-shifting), and that tipped the balance. The decision did NOT change the fact that unauthorized duplication and distribution of protected materials is illegal, only that Sony could not be held liable.
Here is the exact language from the Supreme Court decision on Grokster:
"One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, IS LIABLE for the resulting act of infringement by third parties using the device, regardless of the device's lawful uses."
Justice Souter wrote additionally in his separate opinion: "The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringment." ... "StreamCast's executives monitored the number of songs by certain commercial artists available on their networks, and an internal communication indicates that they aimed to have a larger number of copyrighted songs available on their networks that other file-sharing networks. The point, of course, would be to attract users of a mind to infringe..." "Finally, there is no evidence that either company made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files."
So the Supreme Court didn't "find Grokster guilty." What it said was that the trial court applied an improper standard in this case, then clarified what the standard should be. The case was remanded to the trial court, and the decision as to whether Grokster et al are actually guilty will be decided by the trial court, using this new standard. It doesn't look good for Grokster give the evidence, but anything can happen in a jury trial (e.g. OJ Simpson and Michael Jackson).
An interesting position was taken by Gary Shapiro, the CEO of the CEA: There is really no such thing as "Intellectual Property," at least that this kind of creative material is not "property" as defined in the law of our land. He took this position, in my opinion, primarily so he could go on to say that creative material, such as music and films, cannot be "stolen" in the same way that real property can be stolen. After all, one can loan a CD to a friend, who can rip the whole contents to their disk, then return the CD to the owner. The owner of the CD gets his property back (the physical CD), after all. Taking Shapiro's position, no harm has been done.
I don't believe that Shapiro actually thinks this way, but rather that he is taking a polarizing position in the debate in an attempt to: a) support the position of his association members; b) incite a dialog.
No one questions that when an artist creates a piece of work, such as a song, he/she has the right to determine how it will be sold, to whom it will be sold, and what the price will be. When a buyer decides the price is too much for a product, the buyer does not have the option to steal the art instead. It's buy it or leave it.
Music sharing really is stealing. It is taking a piece of art from the owner, who offers it to the public for a price, and making original-quality copies available to all who choose to download it. Both the uploaders and downloaders are stealing, and most know it.
But the real issue being debated is who has liability then a theft occurs, and who has responsibility for fixing the problem.
Clearly, the person who takes possession of the property is one of the people liable. Does that mean the artist should sue all the free downloaders? Some say that this is at least misdemeanor theft, and the downloader should be arrested. After all, if you go into a Wal-Mart and shoplift the CD, it's a misdimeanor -- why should downloading carry a greater penalty? So the severity of the penalty is being debated, but reasonable folks seem to agree that it theft nonetheless.
What about the author of the software that enables the file sharing? Is Grokster or BitTorrent liable? Some would say yes, they are profiting from a criminal act. The litmus test suggested by the RIAA is that if the significant fraction of the use of the technology is to enable illegal acts, then the P2P technology creator should be liable. Others note that gunmakers are not held liable for crimes committed with their products. The P2P network guys are very careful to say they don't provide a service, only a software product.
What about the folks who make the technology that plays the stolen art? Should they have responsibility for creating protection mechanisms so only properly licensed art can be viewed/played? The CEA emphatically says no, and I tend to agree. Car manufacturers are not required to secure the trunk of a car so that personal items placed in the trunk cannot be stolen. If someone steals your golf clubs from the trunk of you Z4, you can't hold BMW liable. The car makers don't even have to put a lock on the trunk. Their prospective buyers might not choose to purchase that car because of it, but the golf club manufacturer doesn't get a vote.
And finally, what responsibility does the artist have for protecting their property? Seems to me that this is where a great deal of the burden needs to be placed. Let's say CDs had been designed to be perfectly copy protected, and that no device on the planet could ever duplicate a CD or rip songs from the CD which could be played on anything else. Would the artist put a stack of his perfectly protected CDs in the main concourse of Grand Central Station with a basket that says "$5 each" and expect more that a very small minority of people to actually pay? Of course not, the artist and the retailers are expected to take reasonable steps to prevent theft. They do so with the physical media but have been greedy and negligent in demanding the same kind of security for the digital versions of their property.
So where I've come down on this thing is that the movement from analog LPs to digital CDs, the artists and the record companies have been lazy about demanding tighter security, preferring to get to market quickly with CDs and not wanting to invest anything in tighter security, and are now suffering the consequences.
If we want to stop this problem, the artists need to withhold their material from the market until the technology guys figure out a better system of security. How many have the stamina to do this?
Of course, the outcome of such a boycott might be that other artists might figure how to make money in spite of the lack of security.
It's a little like the shoplifting problem -- retailers can stop shoplifting by locking all their merchandise behind glass doors. But they tolerate a little theft because buyers have shown that they only purchase items they can touch and feel, and it's too labor intensive for the retailer to have an employee follow every shopper around unlocking doors (which most shoppers would find too intrusive anyway). To be sure, the retailers continue to seek new ways to prevent shoplifting without harming the shopping experience for the legitimate customers. The same kind of balance will be found with digital media.
Additional thoughts: (20 Jul 05):
The Supreme Court has decided that Grokster et al could be held liable for copyright infringment if it is found that: a) their business model is predicated on enabling users to commit infringment; and, b) if the P2P network makes no effort to dissuade their users from infringing.
People who think the P2P network should be held blameless cite to the wisdom of the Betamax case, in which the Supreme Court decided that Sony was not a de facto participant in copyright infringement simply because they made a device which could be used to perform infringment. It was recognized that there was substantial non-infringing uses for the device (e.g. time-shifting), and that tipped the balance. The decision did NOT change the fact that unauthorized duplication and distribution of protected materials is illegal, only that Sony could not be held liable.
Here is the exact language from the Supreme Court decision on Grokster:
"One who distributes a device with the object of promoting its use to infringe copyright, as shown by clear expression or other affirmative steps taken to foster infringement, going beyond mere distribution with knowledge of third-party action, IS LIABLE for the resulting act of infringement by third parties using the device, regardless of the device's lawful uses."
Justice Souter wrote additionally in his separate opinion: "The record is replete with evidence that from the moment Grokster and StreamCast began to distribute their free software, each one clearly voiced the objective that recipients use it to download copyrighted works, and each took active steps to encourage infringment." ... "StreamCast's executives monitored the number of songs by certain commercial artists available on their networks, and an internal communication indicates that they aimed to have a larger number of copyrighted songs available on their networks that other file-sharing networks. The point, of course, would be to attract users of a mind to infringe..." "Finally, there is no evidence that either company made an effort to filter copyrighted material from users' downloads or otherwise impede the sharing of copyrighted files."
So the Supreme Court didn't "find Grokster guilty." What it said was that the trial court applied an improper standard in this case, then clarified what the standard should be. The case was remanded to the trial court, and the decision as to whether Grokster et al are actually guilty will be decided by the trial court, using this new standard. It doesn't look good for Grokster give the evidence, but anything can happen in a jury trial (e.g. OJ Simpson and Michael Jackson).
Thursday, June 9, 2005
What Happened to CompuServe?
A friend of mine on a consulting assignment asked me about the sequence of events which transformed CompuServe from a subsidiary of H&R Block to a part of both AOL and Worldcom. I figured it was worth posting in my blog...
The process started with HRB coming to the conclusion that they wanted to sell their 80% interest in CompuServe (soon after the 20% was sold on the open market). Through their investment bankers, they shopped it to a number of potential buyers, including AOL, LBO specialists and even AT&T. None of the offers were acceptable to HRB, as most required HRB to take a stock they didn't trust as currency (e.g. AOL), or required seller debt financing, or the price was just not what they were looking for.
Eventually John Sidgmore of Worldcom figured out a structure that made everyone happy (we had known Sidgmore for a number of years, from the days when he joined UUNET, whose first network was an IP-over-X.25 implementation running over our network).
At the time UUNET was the major dialup network provider to both AOL and MSN, and Sidgmore knew Steve Case well. The imaginative deal he proposed was accepted by all parties, and was executed like this:
Step 1: WCOM bought all of the outstanding shares of CSRV using WCOM stock as the currency. The value of the WCOM stock was approx $1.2 billion, and HRB sold all of it within a day or two, pocketing the cash (Had HRB held the stock for another 18 months, it would have turned into $3.5 billion. But then if they had held it for 3 years, it would have been worthless...) At this point, HRB is completely out of CompuServe, and Worldcom owns 100% of CompuServe.
Step 2: WCOM sells CompuServe Interactive Services and various pieces of the intellectual property and infrastructure to AOL. WCOM actually has to throw some cash into the deal -- about $100 million as I recall -- but gets back a long-term dial services agreement from AOL for zillions of hours. AOL gives their network subsidiary, ANS, to WCOM in this transaction. WCOM and AOL agree to a complex infrastructure cooperation agreement which defines who owns what (e.g. AOL owned the CompuServe mainframes, but WCOM owned the source code and use licenses for the CompuServe operating system -- my idea by the way, to make sure neither party could hold the other hostage). At this point, CompuServe Network Services (renamed Worldcom Advanced Networks) and UUNET are sister companies within Worldcom, both reporting to Sidgmore. ANS became part of UUNET.
Step 3: However, during one their acquisitions, WCOM had picked up a little IP networking company called GridNet, based in Atlanta. Management of GridNet was assigned to WAN (the former CNS). I found out that GridNet had been given responsibility for managing another little network company in Memphis, and I don't even remember their name, but great folks. I made the recommendation that this company be shut down, but instead it was absorbed into a group managed by Robert Hudspeth, who I believe had been responsible for Memphis guys in the company that WCOM had acquired to bring the Memphis guys into WCOM (beginning to understand what a complex world WCOM was?). Anyway, it was at this point that we began using the GridNet technology to consolidate dial points on the old CompuServe network. We made it so that you could call their modems using a CNS phone number, and by reading the DNIS (Caller ID), their modem system would route the call to a "reverse gateway" which would present the CompuServe LOGOUT interface.
Step 4: Sidgmore decided to take a Darwinian approach to determining whether CNS should continue to survive: he directed us to give our entire customer list to UUNET Sales, and they immediately began going to our customers and cherry picking the folks whose usage profiles matched UUNET technology (IP orientation, coverage matchup with the UUNET network, no fancy billing). The trend was clear, UUNET was going to drive the price of dialup network down to a point where CNS would be losing money, because we were still saddled with about $250 million/year in non-WCOM telephone expense, primarily via AT&T and MCI. Ultimately, the CNS management team decides that the only sensible thing to do was roll in under UUNET and stop the war. The CNS leadership reported to Mark Spagnolo, the UUNET CEO. The CNS integration with GridNet ceases, and GridNet is shut down.
Step 5: WCOM buys MCI. The SEC and FTC require MCI to divest their IP network, but interestingly allows them to keep Tymnet. Vint Cerf, to whom Tymnet reported, initiated conversations with us about merging the CNS and Tymnet networks. What we found was that the Tymnet network was a generation of technology behind the CNS network, and that besides, the CNS network had features DESIGNED to allow users to move from Tymnet to CNS with a minimum of hassle, but not visa versa. That conversion was just starting when I left.
Step 6. Meanwhile, the technology we developed to facilitate reaching the CNS network over GridNet access was applied to begin moving the CNS network to UUNET. This conversion is still going on -- there are still CompuServe nodes running in the middle of the MCI network. One of the reasons is the POS authorization network service. It is my understanding that MCI now provides 100% of the dialup POS authorization service in this country (one of the significant competitors was Tymnet!).
Step 7: WCOM self-destructs. Bernie is fired, Sidgmore dies, Spagnolo leaves, and the former MCI executive team rises to the top (other than Mike Cappellas, who is hired after Compaq is acquired by HP). UUNET disappears as an organization, and ultimately as a brand as what had been competing and redundant internal divisions (e.g. both MCI and WCOM had substantial technology headquarters) were reorganized under an MCI-like structure with MCI leadership.
Gradually, the old CompuServe team is disbanding and moving on to a next life. It was the ride of a lifetime.
The Columbus Dispatch did a story on Sept 6, 2009 about the history of CompuServe. It has been captured here if you wish you read it.
The process started with HRB coming to the conclusion that they wanted to sell their 80% interest in CompuServe (soon after the 20% was sold on the open market). Through their investment bankers, they shopped it to a number of potential buyers, including AOL, LBO specialists and even AT&T. None of the offers were acceptable to HRB, as most required HRB to take a stock they didn't trust as currency (e.g. AOL), or required seller debt financing, or the price was just not what they were looking for.
Eventually John Sidgmore of Worldcom figured out a structure that made everyone happy (we had known Sidgmore for a number of years, from the days when he joined UUNET, whose first network was an IP-over-X.25 implementation running over our network).
At the time UUNET was the major dialup network provider to both AOL and MSN, and Sidgmore knew Steve Case well. The imaginative deal he proposed was accepted by all parties, and was executed like this:
Step 1: WCOM bought all of the outstanding shares of CSRV using WCOM stock as the currency. The value of the WCOM stock was approx $1.2 billion, and HRB sold all of it within a day or two, pocketing the cash (Had HRB held the stock for another 18 months, it would have turned into $3.5 billion. But then if they had held it for 3 years, it would have been worthless...) At this point, HRB is completely out of CompuServe, and Worldcom owns 100% of CompuServe.
Step 2: WCOM sells CompuServe Interactive Services and various pieces of the intellectual property and infrastructure to AOL. WCOM actually has to throw some cash into the deal -- about $100 million as I recall -- but gets back a long-term dial services agreement from AOL for zillions of hours. AOL gives their network subsidiary, ANS, to WCOM in this transaction. WCOM and AOL agree to a complex infrastructure cooperation agreement which defines who owns what (e.g. AOL owned the CompuServe mainframes, but WCOM owned the source code and use licenses for the CompuServe operating system -- my idea by the way, to make sure neither party could hold the other hostage). At this point, CompuServe Network Services (renamed Worldcom Advanced Networks) and UUNET are sister companies within Worldcom, both reporting to Sidgmore. ANS became part of UUNET.
Step 3: However, during one their acquisitions, WCOM had picked up a little IP networking company called GridNet, based in Atlanta. Management of GridNet was assigned to WAN (the former CNS). I found out that GridNet had been given responsibility for managing another little network company in Memphis, and I don't even remember their name, but great folks. I made the recommendation that this company be shut down, but instead it was absorbed into a group managed by Robert Hudspeth, who I believe had been responsible for Memphis guys in the company that WCOM had acquired to bring the Memphis guys into WCOM (beginning to understand what a complex world WCOM was?). Anyway, it was at this point that we began using the GridNet technology to consolidate dial points on the old CompuServe network. We made it so that you could call their modems using a CNS phone number, and by reading the DNIS (Caller ID), their modem system would route the call to a "reverse gateway" which would present the CompuServe LOGOUT interface.
Step 4: Sidgmore decided to take a Darwinian approach to determining whether CNS should continue to survive: he directed us to give our entire customer list to UUNET Sales, and they immediately began going to our customers and cherry picking the folks whose usage profiles matched UUNET technology (IP orientation, coverage matchup with the UUNET network, no fancy billing). The trend was clear, UUNET was going to drive the price of dialup network down to a point where CNS would be losing money, because we were still saddled with about $250 million/year in non-WCOM telephone expense, primarily via AT&T and MCI. Ultimately, the CNS management team decides that the only sensible thing to do was roll in under UUNET and stop the war. The CNS leadership reported to Mark Spagnolo, the UUNET CEO. The CNS integration with GridNet ceases, and GridNet is shut down.
Step 5: WCOM buys MCI. The SEC and FTC require MCI to divest their IP network, but interestingly allows them to keep Tymnet. Vint Cerf, to whom Tymnet reported, initiated conversations with us about merging the CNS and Tymnet networks. What we found was that the Tymnet network was a generation of technology behind the CNS network, and that besides, the CNS network had features DESIGNED to allow users to move from Tymnet to CNS with a minimum of hassle, but not visa versa. That conversion was just starting when I left.
Step 6. Meanwhile, the technology we developed to facilitate reaching the CNS network over GridNet access was applied to begin moving the CNS network to UUNET. This conversion is still going on -- there are still CompuServe nodes running in the middle of the MCI network. One of the reasons is the POS authorization network service. It is my understanding that MCI now provides 100% of the dialup POS authorization service in this country (one of the significant competitors was Tymnet!).
Step 7: WCOM self-destructs. Bernie is fired, Sidgmore dies, Spagnolo leaves, and the former MCI executive team rises to the top (other than Mike Cappellas, who is hired after Compaq is acquired by HP). UUNET disappears as an organization, and ultimately as a brand as what had been competing and redundant internal divisions (e.g. both MCI and WCOM had substantial technology headquarters) were reorganized under an MCI-like structure with MCI leadership.
Gradually, the old CompuServe team is disbanding and moving on to a next life. It was the ride of a lifetime.
The Columbus Dispatch did a story on Sept 6, 2009 about the history of CompuServe. It has been captured here if you wish you read it.
Saturday, February 5, 2005
The Third Wave
Originally published February 5, 2005
We're almost at the tipping point when the tried-and-true circuit switched telephone network gets replaced by packet technologies. While there are a few significant technical hurdles to be worked out, it could be the regulatory issues that get in the way. That's another way of saying that the folks in the telecom world who currently have all the power and money have not yet been satisfied that they will remain in power after the technological change.
Almost all of the technologies issues have been solved except one: variable packet latency. Here's the best way I've come up with describe what this means...
"Movies" on film are captured as a sequence of still frames. Film is typically shot at 24 frames per second (fps). As long as the projector showing the film plays it back at 24 fps, we accept it as a continuously moving image. But if the projector slowed down, or stopped for just a fraction of a second, it would break the illusion.
The same thing goes on with digital music devices, such as a CD player or an iPod. The music is sampled and stored in digital frames, and must be played back at the original sampling rate to sound natural. We have probably all experienced a CD skipping (in spite of read-ahead caching and error retry logic).
The circuit switched telephone network works much like the pathway between the music recording studio and your iPod. The sounds entering the phone network are sampled (at 8KHz) and converted to digital packets that are sent to the other end of the call. There it is converted back into analog sound so you can hear. One of the design criteria for the telephone network was that these 8KHz x 8 bit samples (hence the 64Kbps 'bearer' channel) get pushed through the network with a minimum of delay, and no varience in the interval between sample arrival times. Because of this, voice conversations through the telephone network has achieved ever increasing fidelity (e.g. the Sprint "Pin Drop" ad campaign).
But that audio quality has a cost. A wireline telephone call has 64Kbps of network capacity assigned in each direction (full duplex), even if neither party is speaking. There are some techniques to lessen the waste, but they can cause degregation in the audio quality. When you rip a CD to MP3 files, you make the same kinds of choices: high fidelity and big file, or a small file and less fidelity.
The issue with voice calls over a packet network isn't so much about the bandwidth required as it is the variability of packet arrival times. After all, many people have internet connections in their homes that exceed 100Kbps, much more than is needed to maintain circuit switched quality. But herein lies the fundamental difference between a circuit switched network and a packet network. As noted above, a circuit switched network guarantees constant packet arrival times by reserving 100% of the capacity needed for the duration of the call. A packet network consumes bandwidth only when it has a packet to transmit/forward. Each switch in the packet network waits for a packet to arrive, makes forwarding decisions, and retransmits the packet. This takes time, and the amount of time it takes can vary based on things like the number of other packets that it has to deal with at that moment in time.
When the packets are full of computer-to-computer communications, they can be delayed or even lost, and the software on each each (eg the TCP in TCP/IP) can recover without any loss. But if those packets contain sampled voice from a telephone call, variances and losses are like bad splices in that movie that's been shown 1,000 times. It doesn't take very much of this to be annoying.
But this problem will be solved. Quality of Sevice (QoS) protocols and algorithms along with faster switches and transmission media will be applied so that the latency variability can be kept below our threshhold of detectability.
The biggest obstacle will be about the power and money.
The breakup of AT&T and the emergence of competitive telephone companies started an evolutionary change (I'll write about evolution in another entry) that has not yet completely played out. Economists talk about "natural monopolies" when describing industries in which the cost of the infrastructure is so expensive that once a single company makes the investment, there is no economic reason for additional companies to jump into the fray. The traditional examples are utilities like the water/sewer services and the telephone service. In many countries, these agencies are operated by the national government.
When MCI won the regulatory battle to gain permission to compete with AT&T for long distance service, it invalidated the argument that telephone service was a natural monopoly, and eventually led to decision to break up AT&T. But there was a nasty problem to be solved. In exchange for its monopoly status AT&T was ordered to sell its services at "cost + a reasonable profit", and it was up to the regulators to approve the rates AT&T could charge. But AT&T argued, reasonably, that it cost a lot of money to run telephones out to the rural areas of the country, and if they charged those people the true cost, none would have a phone. So the FCC (which was set up on the model of the ICC, which was created to reign in the railroad barons) said AT&T could charge a premium for long distance service, which was viewed as a luxury, and use that premium to subsidize the cost of rural telephone service.
In the breakup of AT&T, the long distance service was separated from the local service company. To make sure the local companies still had the money to provide local service in rural areas, the FCC allowed the local companies to charge a "common carrier access fee" to the long distance companies. This was the mechanism used to transfer the long distance premium to the local phone companies.
When the data networks, like Tymnet, Telenet and CompuServe, started showing up in the early 1980s, the local companies felt they should be treated like a long-distance carrier and be required to pay the same access fee. Arguments were made to the FCC, led by CompuServe, and an exception was granted for data networks that remains in force.
As long as the data network carries only data, the phone companies could begrudgenly tolerate this. But with Voice over IP (VoIP) technology quickly gaining ground, the local companies again have a reasonable argument for ending the exemption. The trouble is that the telephone industry is reconsolidating.
When a regulated industry is cut loose to full competition, it seems a predictable cycle takes place. First there are many many little startups which appear to compete for a piece of the pie. Most don't make it, and the industry settles down to maybe ten players who are viable at the existing price levels. A problem with these capital intensive industries is that they have high fixed costs, but yet must maintain some growth capacity to take away market share from the others. The more companies who are competing, the more aggregate surplus there is in the industry. That surplus leads to price competition as the ten companies try to fill their "empty seats" -- as is the case with the airline industry. Only a few of those companies will have the capital available to survive a protracted price war, and the industy will probably resolve down to an oligopoly of three very large players. It happened that way with the auto industry (which was never regulated but is definitely capital intensive), and you can see it heading that way with the airlines.
AT&T is gone except as a brand name. AT&T Wireless is owned by Cingular (which is owned by SBC and BellSouth), and the rest of AT&T was just purchased by SBC. Quest, or someone else, is likely to buy MCI, which is what's left of the old MCI and Worldcom. All this consolidation is confusing the long-distance, local, and internet economics, and therefore the degree to which each component should be regulated. Do land-line common carrier access charges make any sense when many people in rural areas can get VoIP service via their cable TV vendor?
One would have to predict that we entering a time when local phone companies, long distance companies, and cable TV companies all get thrown into a big Cuisinart, and then poured out into three viable companies. Anyone want to guess what the names will be?
We're almost at the tipping point when the tried-and-true circuit switched telephone network gets replaced by packet technologies. While there are a few significant technical hurdles to be worked out, it could be the regulatory issues that get in the way. That's another way of saying that the folks in the telecom world who currently have all the power and money have not yet been satisfied that they will remain in power after the technological change.
Almost all of the technologies issues have been solved except one: variable packet latency. Here's the best way I've come up with describe what this means...
"Movies" on film are captured as a sequence of still frames. Film is typically shot at 24 frames per second (fps). As long as the projector showing the film plays it back at 24 fps, we accept it as a continuously moving image. But if the projector slowed down, or stopped for just a fraction of a second, it would break the illusion.
The same thing goes on with digital music devices, such as a CD player or an iPod. The music is sampled and stored in digital frames, and must be played back at the original sampling rate to sound natural. We have probably all experienced a CD skipping (in spite of read-ahead caching and error retry logic).
The circuit switched telephone network works much like the pathway between the music recording studio and your iPod. The sounds entering the phone network are sampled (at 8KHz) and converted to digital packets that are sent to the other end of the call. There it is converted back into analog sound so you can hear. One of the design criteria for the telephone network was that these 8KHz x 8 bit samples (hence the 64Kbps 'bearer' channel) get pushed through the network with a minimum of delay, and no varience in the interval between sample arrival times. Because of this, voice conversations through the telephone network has achieved ever increasing fidelity (e.g. the Sprint "Pin Drop" ad campaign).
But that audio quality has a cost. A wireline telephone call has 64Kbps of network capacity assigned in each direction (full duplex), even if neither party is speaking. There are some techniques to lessen the waste, but they can cause degregation in the audio quality. When you rip a CD to MP3 files, you make the same kinds of choices: high fidelity and big file, or a small file and less fidelity.
The issue with voice calls over a packet network isn't so much about the bandwidth required as it is the variability of packet arrival times. After all, many people have internet connections in their homes that exceed 100Kbps, much more than is needed to maintain circuit switched quality. But herein lies the fundamental difference between a circuit switched network and a packet network. As noted above, a circuit switched network guarantees constant packet arrival times by reserving 100% of the capacity needed for the duration of the call. A packet network consumes bandwidth only when it has a packet to transmit/forward. Each switch in the packet network waits for a packet to arrive, makes forwarding decisions, and retransmits the packet. This takes time, and the amount of time it takes can vary based on things like the number of other packets that it has to deal with at that moment in time.
When the packets are full of computer-to-computer communications, they can be delayed or even lost, and the software on each each (eg the TCP in TCP/IP) can recover without any loss. But if those packets contain sampled voice from a telephone call, variances and losses are like bad splices in that movie that's been shown 1,000 times. It doesn't take very much of this to be annoying.
But this problem will be solved. Quality of Sevice (QoS) protocols and algorithms along with faster switches and transmission media will be applied so that the latency variability can be kept below our threshhold of detectability.
The biggest obstacle will be about the power and money.
The breakup of AT&T and the emergence of competitive telephone companies started an evolutionary change (I'll write about evolution in another entry) that has not yet completely played out. Economists talk about "natural monopolies" when describing industries in which the cost of the infrastructure is so expensive that once a single company makes the investment, there is no economic reason for additional companies to jump into the fray. The traditional examples are utilities like the water/sewer services and the telephone service. In many countries, these agencies are operated by the national government.
When MCI won the regulatory battle to gain permission to compete with AT&T for long distance service, it invalidated the argument that telephone service was a natural monopoly, and eventually led to decision to break up AT&T. But there was a nasty problem to be solved. In exchange for its monopoly status AT&T was ordered to sell its services at "cost + a reasonable profit", and it was up to the regulators to approve the rates AT&T could charge. But AT&T argued, reasonably, that it cost a lot of money to run telephones out to the rural areas of the country, and if they charged those people the true cost, none would have a phone. So the FCC (which was set up on the model of the ICC, which was created to reign in the railroad barons) said AT&T could charge a premium for long distance service, which was viewed as a luxury, and use that premium to subsidize the cost of rural telephone service.
In the breakup of AT&T, the long distance service was separated from the local service company. To make sure the local companies still had the money to provide local service in rural areas, the FCC allowed the local companies to charge a "common carrier access fee" to the long distance companies. This was the mechanism used to transfer the long distance premium to the local phone companies.
When the data networks, like Tymnet, Telenet and CompuServe, started showing up in the early 1980s, the local companies felt they should be treated like a long-distance carrier and be required to pay the same access fee. Arguments were made to the FCC, led by CompuServe, and an exception was granted for data networks that remains in force.
As long as the data network carries only data, the phone companies could begrudgenly tolerate this. But with Voice over IP (VoIP) technology quickly gaining ground, the local companies again have a reasonable argument for ending the exemption. The trouble is that the telephone industry is reconsolidating.
When a regulated industry is cut loose to full competition, it seems a predictable cycle takes place. First there are many many little startups which appear to compete for a piece of the pie. Most don't make it, and the industry settles down to maybe ten players who are viable at the existing price levels. A problem with these capital intensive industries is that they have high fixed costs, but yet must maintain some growth capacity to take away market share from the others. The more companies who are competing, the more aggregate surplus there is in the industry. That surplus leads to price competition as the ten companies try to fill their "empty seats" -- as is the case with the airline industry. Only a few of those companies will have the capital available to survive a protracted price war, and the industy will probably resolve down to an oligopoly of three very large players. It happened that way with the auto industry (which was never regulated but is definitely capital intensive), and you can see it heading that way with the airlines.
AT&T is gone except as a brand name. AT&T Wireless is owned by Cingular (which is owned by SBC and BellSouth), and the rest of AT&T was just purchased by SBC. Quest, or someone else, is likely to buy MCI, which is what's left of the old MCI and Worldcom. All this consolidation is confusing the long-distance, local, and internet economics, and therefore the degree to which each component should be regulated. Do land-line common carrier access charges make any sense when many people in rural areas can get VoIP service via their cable TV vendor?
One would have to predict that we entering a time when local phone companies, long distance companies, and cable TV companies all get thrown into a big Cuisinart, and then poured out into three viable companies. Anyone want to guess what the names will be?
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