Results tagged “infrastructure” from Emerging Communications Blog

Chair:              Coming up next, the founder of Ashtonbrooke, Mr. Brough Turner will talk to us about a structural bypass, a simple, proven path to a real broadband.

Brough:           [laughs] beautiful networking and social network stuff, I wish I could get that kind of audience feedback because now I'm about to talk about fiber, policy issues, and so forth.  My focus is entirely on policy issues for fiber in major cities.  I put that around what I call "real broadband".  At the moment, and this changes every few years, but at the moment I would say real broadband is 100 Mbps symmetric Internet access.  How many people in the audience have 100 Mbps symmetric Internet access?  One.  No, to the Internet.  Where do you live?  Munich, there we go.

There are at least a dozen places in the developed world where you can get 100 Mbps Internet access to the Internet at a reasonable something.  It's interesting to look at some of these places.  Amsterdam is fairly new.  It has a lot of talk about it, but it's rather expensive and there is only about 3,000 people connected, so far.  We ought to go back and look at that five years from now and see what's happening.

If you look at Tokyo, they've had fiber connectivity for quite a few years now.  If you look at the fine print, there are actually deals where, at least for the first year, you can get down to $44.  Hong Kong is about $35.  Seoul, Korea are about $24.  Stockholm is $11 a month for 100 Mbps connectivity.  These are just a few of more than a dozen major cities in the developed world who have "real broadband" by my definition.  New York City is of course equally dense.  There is no such thing at all.  In fact, if you look at the major cities in the U.S., none of them have anything like that.

What's the issue here?  It's worth looking at some of these cities, particularly ones where the service has been available widely for more than five years to see how things have settled out.  If you compare Stockholm and Tokyo, it's interesting that Stockholm has a very, very vibrant market.   Tokyo has something that we in the U.S. would consider a vibrant market, also, but it's a lot less than what you see in Stockholm.  I think that's partly because of the layers at which things are operating.  That appears to be the pattern across a lot of cities around the world. 

Of course, in the U.S., we're operating up at complete managed service Internet access from a vertically integrated monopoly or a duopoly, or if you're super lucky, there is a third pipe.  We're stuck arguing about net neutrality.  I claim if you're arguing about net neutrality, you're wasting your time because you've already lost.  You're in a world that is completely wrong.  You want to be in one of these other worlds, at which point, you don't have to argue about net neutrality.

Put layers labels, in terms of the way people talk about the Internet.  Layer zero would be dark fiber.  Layer two would be a bit stream.  Layer three is what we get in the U.S., which is the Internet access. 

Can you understand the stuff in terms of what's going on?  Yes, local right of way is a real, natural monopoly.  There is typically only one right of way to any given piece of real estate in any place, any society that recognizes ownership of real estate.  There may be a second but it might - whatever it is, the right of way is either city, state, might be a condominium association, it might be a deeded right of way across a neighbor's property - in the lower right there.

There are also a bunch of issues.  If you go and put fiber in, particularly in the ground, which is typical for major metropolitan areas - not quite on the right there, that's Dhaka, Bangladesh, where they don't have 100 Mbps Internet access, but they do have 100 Mbps access in the first mile.  They just can't get out of the country.

These are things that have a big budget and I think you would have noticed; if you were here first thing yesterday in Malcolm's talk, he had a graph I noticed was rather similar to this.  The cost of actually putting in the fiber infrastructure is quite substantial.  You cannot make back money on that out of the triple play services unless you are a monopoly or a duopoly.  You have something, certainly more than 20% market share.

By definition, if you have a fiber network and you're going for facilities-based competition, you're going for a duopoly or possibly a third pipe.   You're not going for a competitive world; you're just where we already are.

Can we understand it in terms of what's happening?  Yes, these are elements that have a long, long life, decades life.  The cable, the poles and the conduits, and so forth, those are things that do not change regularly.  The moment you light up a dark fiber, you're in the space where Moore's Law applies.  The equipment you use to light the fiber has a functional lifetime - it might be ten or fifteen years, but it's functionally obsolete in three years, typically, because of Moore's Law.  There is something better. 

People may be willing to accept the same equipment for ten years, but there are other people who would benefit from upgrading the equipment in every eighteen months.   Laws, regulations, political processes tend to run in decades.  It makes sense, perhaps, to have structural separation at this layer. 

Structural separation for the communications layer and policy wonks, that's something which everybody talks about but it's functionally impossible in any place that has a political process because of vested interests.  You would like to have some kind of separation here, with public service, public company, a regulated monopoly, a condominium association - somebody owning a fiber infrastructure and everybody else above being competitive.

But, structural separation of the existing monopoly providers is politically impossible.  There is actually one case, when it really happened, which was the breakup of the Bell system in the U.S. in 1984.  That was a decades-long process and I would maintain that it only happened because the executives at the head of the Bell system were computer envious and they wanted to get into high tech.  They consented to the breakup of the Bell system so that AT&T could become a computer company.  It didn't work, but that was the idea.

Structural bypass is a name that I've coined for what has actually worked in quite a few cities.  The political pitch to the incumbent, which is the vested interests who are going to violently fight any municipal Internet access service or municipality that is offering triple play, or anything like that; we've seen it certainly in the U.S. - violent reaction to municipal Wi-Fi and the vested interests get law passed that prevent any city from competing with the incumbent.

If you argue that we're not going into the communications business, we're only making dark fiber available, no services, "We're not going to compete with you, Mr. Incumbent, in fact; anyone can lease our fiber, including you Mr. Incumbent," that's a path that has worked multiple times now.  It's the model that worked in Stockholm, which is at this point, probably the oldest of the success stories.

They founded a company called Stockhab in 1994.  It was the result of a three-year political process, where they stumbled towards finally agreeing on creating this.  Their answer to the incumbent at that time, named Telia, was "We're not competing with you; we're opening up infrastructure for anyone.  We're going to reduce the number of people who are digging up the streets, and stimulate the economy so Stockholm becomes a leader in the world." 

Also, they mandated a city-operated corporation, which was supposed to break even.  In fact, they did break even within five years.  Now, I believe the politicians have noticed that this is a money flow and of course, they're waiting for a profit as opposed to break even, but that's the way these things go.

Stockhab, fourteen or fourteen and a half years later has an enormous coverage for metropolitan Stockholm.  Greater Stockholm includes twenty-nine other cities or towns and goes out about 70 kilometers from actual downtown Stockholm.  I couldn't get a current map.  This is a map from 2001.  Everything in green was built before 2000.  Everything in other colors were built in 2001, 2002.  If I were able to get a current map, which I might yet come up with but not in time for today, it would basically be green across the entire area that's there.

What I would like to leave you with is a set of takeaways.  Again I caution, this is applicable to large cities looking at more than a dozen different cities in the world that have actually got Internet access at 100 Mbps symmetric.  It's because they've unbundled.  Typically, the most success has been unbundling at layer zero, at dark fiber. 

Net neutrality, if you're arguing about net neutrality you're doing something wrong.  You're just wasting your time because inherently, you are operating in an environment where you will never be able to catch up with a place like Stockholm because you are going to have two or three players.  You're going to be second rate forever.

Looking for facilities-based competition is no better than putting you in the same place where you will be fighting about net neutrality because you won't get more than two or three integrated pipes.

Structural separation at the dark fiber layer is, at this point, pretty well proven to be the most successful.  It doesn't mean we can't envy the Japanese for their bit stream access.  Structural separation at the dark fiber layer is the one that has been the most successful; not necessarily in the first year or two, but when you look back five to eight years later, that's what is most successful. 

It's politically impossible to divide up the existing incumbent, but structural bypass, which has now been used in a number of cities, starting in Stockholm, is something that works and is feasible.  If you want to argue about something in the U.S., realistically you want to look for a particular city and fight the fight in a major, urban area - say, one of the top fifty cities. 

Get this going.  Five to eight years later, that city will be so far ahead of the rest of the United States that people will pay attention.  I don't see any U.S. people paying attention to what's happening internationally.  I don't know what's wrong with us, [Laughs] but the success could be by doing something reasonable in even one U.S. city.  Five to eight years later, you could see some success.

That's the pitch.  Three minutes to spare, which means there could be some questions.  Thank you.

Audience 1:     Brough, I have one question.  You mentioned these European cities.  Why didn't you mention Tokyo Gas, [0:12:07.5 unclear] and those guys who really have 1 GB access?

Brough:           I wanted to pick a reference point that is available in more than a dozen places now, of major metropolitan areas.  There are a few places, like Tokyo and Hong Kong, where you can get 1 GB symmetric access.  I just wanted to pick a reference point that I could get prices for readily.

Audience 1:     It's $65 access.  I'm crying, in Munich, just having 100 Mbps.  [Audience - aaah]

Brough:           I wanted something with a large enough base that I could make a comparison across more than a dozen cities and where I could get data.  There is 1 GB symmetric Internet access available in a couple of cities, including Tokyo and Hong Kong.  I will say there are provisos on a lot of those things.  In Hong Kong, the access is not for "overseas" traffic.  There are some "gotcha's" in a few of these things.  The pattern is pretty clear.  The thing that is obvious is that dark fiber is best, bit stream is second best, and anything that is based on 2 or 3 is just hopeless.

Audience 2:     Hi, it's a little off topic, but why is there never any talk of this in the mobile world?  There is never really any talk about unbundling the access from these.  Nobody thinks of that happening and you really can't have any sort of real competition or ability to offer anything without that.

Brough:           There is no doubt that there is a whole separate - in fact, we have a bit of a discussion panel, tomorrow afternoon, that I'm moderating on Spectrum 2.0.  It's much less of a problem compared to the limited right of way that physically makes the fiber access be a monopoly or duopoly for the in the ground infrastructure.  In the case of spectrum, there is an enormous amount of spectrum.   A limited amount has been parceled out to a few operators, but we have had, at times, rampant competition in the mobile industry in the U.S., certainly in the initial roll out of voice.  We haven't had much competition for the last three or four years because you can look at the average price people will pay for SMS; it's actually gone up for the last two and a half years.  It proves we have a market structure fixed. 

I think the reason people don't argue as much about mobile is that there is some level of competition there, much more than in fixed.

Last Wednesday I had the pleasure of interviewing Sascha Meinrath (who will be one of the keynote speakers) via Skype. 2009-01-14-sascha-meinrath-96.mp3

The run time is 46 minutes.

Additionally the full transcript is below. To distinguish between us I've indented Sascha.


Transcript

Good morning, Sascha.  How are you?

I'm doing well.  Good morning to you. 

What time is it where you are?

Where we are, it is now about 10:30.  I've already had my first meetings of the day.  [Laughs]

Okay, well, it's 4:30 p.m. here, and I've got large mug of coffee so I'm all good for you.  So, I'm really excited to be speaking with you.  I see that you're the Research Director for the New America Foundation's Wireless Future Program.  Could you say a few words on what the Wireless Future Program is?

Sure, Wireless Future Program has been engaged, the past seven years, in telecommunications reform.  In particular, it's been particularly focused on spectrum, the public airwaves here, in the United States, and innovation in terms of how it's allocated and used, and who has access to it.  A lot of what we've pushed for are things like opening up spectrum to unlicensed devices and reallocating spectrum for public access, things of that sort.

I also head up what is going to become the Open Technology Initiative, here at New America Foundation, which will be looking at open architecture, open source, open API, kind of the open side of these technologies that are happening.  So everything from cell phones and open networks on cellular networks, to open source software and design.

Okay, the Open Technology Initiative sound pretty interesting, so let me make a note here to circle back on you, a little later, with questions on that.  So, looking here at the New America Foundation's Board of Directors, I see the Eric Schmidt, the CEO of Google is the Chairman.

Yes, and he's actually been with New America since before his days at Google.  He's been on our board for a number of years, now.  Recently, this past year, he stepped up and decided that he wanted to put a bit more time and energy behind the Foundation, and has stepped up as Chairman of the Board.  He got a lot of press for it.  What was not really talked about so much is that he's been part of this institution for quite a number of years.

[Laughs]  Okay, I'm just laughing because obviously I picked up the sort of Google sense, the Google significance to it and what it could mean, except you're saying he's been on the board for years, anyway.

A lot of people want to really read in that this means Google in some way has its fingers in the Foundation, and the reality is that's not really true.  He happens to now be chairman of our board, and CEO of Google.  The reality is that there are some areas where some of the work we're doing aligns with what Google wants to do, as well, and we're happy to work together and partner in those areas, but Google doesn't have any official space or place inside this organization.

Okay, thanks a lot for that clarification.  I'm going to jump right into the deep end here, where I really want to go.  You talk about a status quo in communications.  Could I ask you to describe that status quo?

Sure, let me exemplify it straight out of our own historical records here, in the United States, which in terms of licensure and who has access to much needed resources, and it could be rights-of-way access, but I'll focus on the public airwaves part of things.  Starting in the 1920's and into the 1930's, when the Federal Communications Commission, sort of the highest, most important space for telecommunications policy making in the United States, when they decided, back in 1934 and onwards, that we had to divvy-up the airwaves, it was based on the newest, most important, cutting edge, technology of the pre-WWII society.  Unfortunately, that kind of licensure regime has, effectively, continued to be in place, right up through and until today.

When people get licenses, they get a specific license and a specific location and at a specific power, which ends up being incredibly inefficient.  A lot of things have changed since the 1930's.  We have transistors, computers, and digital technology.  That is not really taken into account in terms of shifts in how we allocate the public airwaves.  What this has led to, then, is an artificial scarcity, which keeps certain incumbencies in place.  In fact, we have sort of an oligopoly on a lot of the airwaves, but it also keeps most of the populace out of being able to use the airwaves, for various uses. 

The status quo is very much about maintaining this oligopolistic system of maintaining artificial scarcity, of ensuring that the incumbents still have control over this medium, and that the actual owners of the public airwaves are kept out of this medium.  What it boils down to is that we're really fighting to ensure that new technologies and innovations, things like digital computers and digital technology, are taken into account when we're setting up our spectrum licensure.

Okay, did you see the comments that Lessig made, regarding the FCC, recently?  Are you able to pass any comment on them?

The knee-jerk reaction is often to jettison everything.  I think there is a lot of jettisoning that needs to take place.  We need to shift, dramatically, how we license things.  But, you can't just throw everything out without an alternative for how to take care of incredibly important areas of telecommunications policy.  If we were to jettison the FCC, we would end up being stagnant in ways that are even worse than the current situation.  I still have hope that a new FCC will be more proactive in instituting much needed reforms.  I'm still hopeful that a new staff will be much more aligned with the public interest coalitions that have been working here, in D.C., and pushing for reforms that really meet the needs of the general populace. 

I don't want to throw out the baby and the bath water.  [Laughter]  I really want to look at how we can have meaningful reforms and interventions into a system that is clearly broken.  Lessig was very correct in that.  Still, it has a lot of positive aspects to it. 

Okay, and this status quo, you've described it as inefficient, stagnant, overpriced, command-and-control.  That is fairly - that's not a light viewpoint.  You feel very strongly that a status quo that we have is not acceptable. 

It is completely unacceptable.  I speak as somebody who has served a couple of terms as a member of the board of directors for my local community radio station.  I've set up a low power, FM radio station.  I've fought, for half a decade, to get a license for our local community to have its own radio station. 

These sorts of battles - it's very clear that media diversity has been thrown out of the window.  Local control of the media has been thrown out of the window over the last eight years.  These are reforms that need to be made.  We really need to re-empower the populace to take control over what is ours; the public airwaves are held in trust for us to use, and has been granted to corporations and entities that have made incredibly inefficient use of them. 

Government research - National Science Foundation here in the United States has conducted extensive research on actual spectrum usage.  What we found is that even though the allocations of space - this part for FM radio, that part for AM radio, this part for television broadcast - the allocations show a completely full spectrum.  When you look at the assignments, you find, "CBS gets this station, and WRFU gets that station".  These assignments show there is a lot of empty space, but then when you look at actual use, what's happening on the ground, you find that over ninety percent of the airwaves are vacant, in any specific location in any specific time.

You can imagine a resource that's being used less than ten percent efficiently, and that's what we have, today, with the public airwaves.  I look at that and I look at the scarcity, and I look at the desire to make better use of the public airwaves, by people all across the country, and I think that's egregiously unfair.

So, then, I would like to ask what alternatives do exist?

There are many alternatives.  One of the big ones we're pushing for is called "Opportunistic Spectrum Reuse".  People can think of this in terms of a Wi-Fi device that can scan and find an open channel.  Or, if you remember home telephones, radiotelephones, where you would hit the on button and it might scan a number of channels and choose the one that had the clearest signal.  These technologies have been around for quite some time. 

With the television white space and in the spaces that we used to - if you were flipping through your television, you would have snow on your screen; those spaces can be reutilized for broadband access and for all sorts of different purposes.  We've pushed very hard at the FCC to allow unused television spaces to be used by next generation hardware or software, etc.  This is a fundamental shift in how we license our spectrums, and basically says, "Look, as long as we're using less than ten percent of the space, let's reuse the unallocated space, the underutilized space, on an ad hoc basis, by next generation hardware, so people can do all sorts of new, innovative things with it".  That's a huge change. 

The second one that we've been fighting for, and have lost thus far, is what's called "Interference Temperature," which is that in the same was as a rock concert, people in the audience can whisper, or yell for that matter, and not be disruptive to the concert itself, we want to see very low powered usage on occupied channels.

The idea is if you're sitting next to a 100,000-watt television transmitter and you want to utilize a device to connect your laptop computer to your television, fifteen feet away, you should be allowed to do that in the same space.  Of course, the incumbents have said, "If you allow any of these things, it will destroy radio, or television," or whatever it is that they own or license.  Of course, time and time again, we've found that these claims of disruption have been blown way out of proportion.  The disruptions that have been promised have never come to pass.

Okay, Yochai Benkler's Wealth of Networks comes to mind.

Absolutely

So, do you have some more optimism, now that Kevin Martin has stepped down [at the FCC] and you have Julius stepping up [as chairman of the FCC]?

Yeah

Yes - more hope?

I have a lot more hope.  You know, I've worked with Julius first on the campaign, and with the transition teams, and he gets a lot of these new ideas, in terms of innovation and shifting our regulations and policies to take advantage of computers, digital technologies and other advancements that have happened in the past half century, frankly.  So I'm very hopeful that a newly constituted FCC, with him at the helm, or with somebody else at the helm, would be fantastically much more receptive to a lot of the ideas that we've been talking about for years, but it's faced a lot of resistance from regulators.

So, you see some traction coming?

Absolutely, it's very clear that they've pulled together an "A" team of thinkers and innovators to contemplate what are the new policies that we're going to be implementing or looking at, in the next few years.  That gives me a lot of hope because when you get the engineers in the same room, and they're talking off the record, there is a lot of eye-to-eye agreement on what needs to happen.  It's only once the PR spin, and what have you, gets thrown into the mix, that you end up with people on opposite sides of the table on these issues.

Okay, so what opportunities do you see?

Gosh, everything from reuse of underutilized spectrum, to rolling back some of the liberalization that has allowed for media conglomerization in unprecedented rates.  What we've seen, over the past five years - the destruction of local media, the "crisis" that's whelming in things like newspapers, here, in the United States is incredibly destructive to the health of our civil society.  That needs to be addressed. 

We need to look at everything, from how we allocate new spectrum, in terms of whether we should continue to pursue this auction system, which guarantees that corporations fight it out - whereas public interest is completely unable to afford even the licenses that are out there, or whether we look at things - everywhere from network neutrality, to how we view network management and how we view universal service fund reform, in terms of telephone versus Internet. 

All of these are issues that are going to be coming to the fore, over the next year or two, all of which are going to have to be addressed by the FCC.  Many of these have been pushed down the road by the current FCC, for the new FCC to have to deal with.

Okay, I know it's may be slightly off topic, but are you able to pass comment on 700 MHz, and your opinion of how that went?

Sure, 700 MHz was a mixed bag, to say the least.  What we have is a number of different allocations within the 700 -800 MHz range that have been auctioned off, some previously, a couple of years back, and then a huge auction that took place from January to March of 2008.  That second auction, the 2008 auction, raised close to twenty billion dollars.  The big winners were groups like Verizon, the same incumbents that have been incumbents [laughs] for quite some time now.

One of the elements that was a huge win was what's called the "Open Platform Conditions," which mandated that if you have the 20 MHz of space that Verizon won, for about 4.8 billion dollars, then you had to open up your network and you had to allow any device to be attached to this wireless network that consumers and users wanted to bring to that network.  Really, what it is, is a precedent to bring back what's called Carterphone.  On the wire line, here in the United States, there was a Supreme Court decision, in 1968, the Carterphone Decision, which mandated that you could attach what's called "foreign attachments" to any network.  What foreign attachments meant was everything from what became answering machines, to modems, which of course, is what allowed for the Internet to exist in the first place.  Without the Carterphone Decision, there would have been no Internet.

Unfortunately, in the wireless realm, we've never had a Carterphone kind of decision applied.  So, the Open Platform Mandate in the 700 MHz harkens back to this history of allowing foreign attachments, allowing devices to be attached to these networks, so long as they do not harm the network.  It is a giant leap forward, in terms of empowering customers and end users to start building next generation systems, technologies, applications, and services - all of that on a wireless medium as opposed to just the wire line medium.

On the other hand, also in the 700 MHz, you had the D Block, which was a block that was supposed to be utilized for public safety, and to create a national telecommunications infrastructure, with interoperable technologies, for public safety use.  That has been a stagnant disaster. 

I wrote an article about this for Government Technology Magazine, where I interviewed CIO's of places like New York, San Francisco, Houston, and major cities, that really desperately need an interoperable public safety network for disaster response.  They have been waiting for years for the FCC to figure out how to do this. 

In many ways, the D Block is an exemplar of how the FCC has had it's hands tied, in terms of having a mandate by Congress to have to auction this off, but also has been unable to really reinvent itself and institute innovative solutions to address the needs of public safety community, in this case, but the general populace, more generally speaking.

Okay, thanks a lot for your views there on 700 Mhz. I've got a very simple, and it could be a naïve question, but what I never understood with allowing this "foreign attachments" is that when I think of GSM, I can take my SIM card and put it in any device.  For the fancier sports cars out there, you have security systems, where you put in a SIM.  If you car is stolen, it rings you or a main center, automatically.  So, with SIM cards, you can put them into anything.  If I roam into the States, I can take any device I want and it attaches.  So, I never quite understood this because I didn't see anything different to what we have, today, except maybe on paper, it says it's okay.

You have to view it in regards of what are you allowed to do on these networks.  You can take your SIM card and move it around to any SIM-compatible, wireless telephone or similar device.  Chances are, that's actually not allowed by your terms of service with the providers, at least not in the United States, and probably internationally, for the most part.  Now, people do it en masse and it's sort of ignored.

Where you really start running into problems is when you say, "I have a data plan on my cell phone.  Why can't I use my cell phone to tether it to my laptop and get free Internet through that?  Why should I have to buy an EVDO card, or some other device for my laptop, when I'm already paying once for a data plan on my cell phone?" 

The reality is that the providers don't want you to share your data plan amongst other devices; they only want you to buy one data plan for your cell phone, one data plan for your laptop, etc.  This is where the Foreign Attachments Mandate is really important, in that you should be able to take your SIM card and not just be able to put it into your car, but to put it into any device that you want, that follows the standards of connectivity on a wireless, telephony network, and have that interoperate with that network.  You should be able to put a computer - you should be able to put - whatever it is, that should be interoperable with the cellular network, and utilize those devices as you, the consumer, the end user sees fit. 

These are places where we see the lock down that's really in place.  You can't really use any service or any application on the cellular telephony networks.  In fact, whereas that one car might use your SIM car, chances are that car's manufacturer has made some specific deal with that cellular network to allow for that usage to take place, is paying some fee or licensure, etc. 

All of this stuff really is incredibly disheartening for innovation and development of next generation applications and services.  It really stagnates that whole market sector.  When I look at all the different devices you could connect to the Internet, the wire line Internet versus the few devices you can actually connect to a cellular telephony network, I think the Carterphone versus non-Carterphone regimes really become clear.

Okay, so thanks for letting me know that.  You have said that we're at a critical juncture.

Absolutely

Do you want to describe that juncture?

Sure, there are three elements to what is creating this critical juncture.  The first is that new digital technologies are really maturing at an incredibly speedy rate, leading to all sorts of innovations and new uses.  The second is that there is an unprecedented consumer demand to make use of resources like the public airwaves, in ways we really haven't seen since the CB radio craze of the 1970's or in the 1920's, the amateur radio craze.  People really want to utilize wireless technologies in ways that are unprecedented.  The third is that we have this shift in regulatory structures and administrations.  The three of those, the regulatory shifts, the consumer demand, and the new technologies are sort of swirling together and creating this "perfect storm" that has the potential, at least, to shift the trajectory of telecommunications, of fundamental communications, for generations to come. 

Over the next year to three years, is really this moment in time that will determine what that trajectory looks like.  After that, things will really be a lot more locked down and will not be nearly as innovative an environment.  So, the battles that are being waged right now are absolutely, fundamentally important to the future of human communications.  The reality is; warts and all, what's decided here in the United States often reverberates internationally, globally. 

Okay, so you speak about fundamentally changing access to communications.  I'm obviously getting a sense of what you mean there, but do you wish to add a little more about what you mean about fundamentally changing access to communications?

Sure, I very much ascribe to the notion that communications is a fundamental human right.  Article Nineteen of the Universal Declaration of Human Rights, back in 1948, was very explicit in stating we, as a community of civil societies, understand that if you cannot communicate, one of your fundamental rights has been infringed upon. 

We stand at this moment in human history where it is possible to ensure that everyone has access to communication, where traditional barriers to entry into this communications are rapidly being torn down.  In much the same way as we have, as a society, as a human society determined that we're uninterested in world wars any longer, and we are interested in preventing famine and addressing massive health problems, etc., we need to be focusing on communications in much that same way.  When we are looking at the fundamentals of social and economic justice, on a global scale, we need to realize that from the very beginning it has been the case that communications has really determined the health and vibrancy of democratic society. 

I think that's really nice stuff and it's something I wouldn't mind talking to you a lot longer about associated topics, but if I just jump to TV white spaces - I'm surprised how many people still don't understand what's meant by TV white spaces.  Could you describe what's meant by TV white spaces, and then also say why the fairly recent FCC decision was important?

Sure, television white space, as in snow or what you see on the channels when you're flipping through a TV, where there is no signal, where there is no broadcast, what ends up happening in any city or town that has over-the-air television broadcast is you might have a channel, let's call it channel 3.  Channel 3 may be a broadcaster in that local community.  You cannot then have a station on channel 2 or channel 4.  You need to space between these broadcast channels so they don't overlap on one another, so they don't interfere with one another.

What this leads to is a very inefficient use of the television spectrum.  You might have channel 3 and then channel 5 and then channel 7.  What also ends up happening is your neighboring towns cannot use those same channels that you are using.  You can imagine that if you try to fill a piece of paper with circles, you will find there is a lot of empty space.  In much the same way that that happens, television licensure is the same way. 

They draw a circle and they say, "That's channel 3".  No matter how you stack these channels, you always end up with underutilized space.  You have space between channels within a community.  You have space between channels between communities.  All of this, when you look at it, translates to somewhere between a low of about twenty to thirty percent and a high of over eighty percent of television channels that are unutilized. 

What the Television White Space proceedings was, was look, "Rather than just allowing this space to go unutilized, let's start looking at ways we can use the blank channels for innovation, in terms of broadband service, in terms of emergency communications, in terms of all sorts of new uses of this space".  It's very elegant, in that communities that have been least served by television's broadcasters, all of a sudden have access to the most television white space. 

This has been a battle that's been going on for many years, dating back to 2002, but really picked up in 2004, with the FCC saying, "We're going to make a decision on this".  Of course, it took four years to actually achieve a decision, but the decision ended up being, "Yes, we should reutilize these unused spaces". 

Where as the National Association of Broadcasters, the incumbents, the status quo fought against this, tooth-and-nail.  It was a huge political battle to get this done.  A coalition of community organizations, public interest groups, consumer groups, and high tech firms all came out and said, "We support this, we want to see television white space utilized for new and innovative uses". 

The reason why this is important is because it sets this precedent of saying, "Look, if you're not utilizing part of the public airwaves, we should allow devices to use that same space on an opportunistic basis".  It sets a precedent for saying, "If we have this massively underutilized resource, we, the owners of the public spectrum, - it should be entirely legal for us to make use of what we own".

This, of course, scares the bejeezus out of incumbents that have poured billions of dollars into licensing space, on the assumption that they can then keep other people out of that space.  The benefits to the general populace are so enormous, that even the political power of those incumbents was not enough to prevent this decision at the FCC.

Okay, so again, this gives you hope.

My friends often say that I'm a hopeless optimist, but I'm also sort of a pragmatist and looking at the political realities and what's possible.  What I see is that there is a fundamental shift taking place.  It's a generational shift, it's a technological shift, it's a party shift, and it's a lot of things aligning to make more effective use of these sorts of resources. 

Whether it's looking at broadband stimulus, or whether it's looking at the universal service, whether it's looking at network neutrality and carriage, whether it's looking at spectrum allocation and licensure, there is a huge impetus for making more effective uses of these resources, resources that have been underutilized for years, if not decades.  Tie that then, to the notion of things like the U.S. used to lead the world in terms of use and deployment of Internet and broadband infrastructure.  We have systematically, year after year, since the turn of the millennia, fallen further and further behind a growing number of other countries. 

When we look at that, as a country, as a society, we realize that something needs to be changed, from the midst of a massive, multi-year, market failure, a catastrophic market failure.  The market fundamentalism that has driven telecommunications policy for the past eight years is now beginning to give way to a much more pragmatic, society friendly regime.

And that should be nicely timed with the new FCC chairman appointment. 

That is very much the hope.

So, we'll need to track this now.  At the start, you mentioned the Open Technology Initiative.  I'd like to ask what kind of projects the OTI is working on.

The Open Technology Initiative is working on a number of projects around open source, open architecture, and open API systems.  I work at a think-tank so a lot of what we do is looking at what are the differential assessments of open versus proprietary systems or architectures.  How will these affect people, generally, and to concretize that a bit more?

One of the things we're looking at is the different architectures of wireless telephony systems and the hardware that runs on that.  That might be a comparison between the openness of a BlackBerry versus a Google phone, versus an iPhone versus an Openmoko phone, and the pros and cons of each endeavor.  Or, for example, we might be looking at something that's very big yet has not been looked at here in the United States - our healthcare system and portability of patient records, and interoperability of medical equipment.  We might be looking at things like how can we make more efficient use of the public airwaves, and open those up? 

It's really this intersection of technology and policy.  It's an area where, in D.C., you pretty much can't walk three feet without bumping into a lawyer.  We've realized that legal help is fundamentally important to being effective here, in D.C.  In the same way that's true, we need technologists to help us understand what's coming down the pipes, and what's happening with new technologies and the intersections of these new technologies, with the policies and regulations that we're passing. 

This might be looking at what are ISP's doing, in terms of throttling user services and applications?  A classic example would be Comcast, which is a major cable provider, really blocked BitTorrent, file-sharing protocol.  Comcast claimed they were not, and we needed technologists to step in and document exactly what Comcast was doing.  They eventually capitulated [laughs] and agreed, in fact, "Yes, fine, you caught us.  We are blocking BitTorrent, and we will stop now". 

It might also be that we're looking at various ways in which fair-use rights, in terms of copyright, are being curtailed in next generation operating systems.  Windows 7 is the new one that's coming down the pipes, and may have a lot of digital rights management that doesn't just protect copyright holders, but actually infringes upon our constitutionally, guaranteed fair-use rights as a populace.

These are all areas where, until you really take a deep dive into the technologies themselves, it's very difficult to understand the impacts that these technologies have on regulations and policies that are being put in place.

It might be - well, I won't say might be.  It is off topic, but you mentioned an OS, so the geek in me can't help but ask; are you saying Windows 7 will have something worse than what Mac now has, as well, in a new Mac - HDCP.

Yes, it's unclear exactly what Windows is going to do, but from I've heard, they are aligning themselves closer and closer with the Motion Picture Association of America, the RIAA, other major copyright holders, and these copyright holders have often been so incredibly concerned about things like piracy, and protecting their copyright, that they have had no compunctions about stepping all over our fair-use rights. 

I look at that combine that is developing, where most people that buy a computer are still buying a computer with a Windows operating system, and often don't have any other choice but to buy their computer with a Window operating system.  For me, when I look at Section Eight of the Constitution, which defines copyright, and also defines fair use as an important caveat, the notion that I buy a computer that comes with an operating system that infringes upon my constitutionally protected rights is of deep concern.  As we've seen, Vista had a lot of this in place already.  As we've seen this sort of rollback of our fair-use rights, I think it's fundamentally important to understand the technologies, to understand what these technologies are doing, and to fight against this diminution of these rights that are inherent in the United States.

Okay, so you're not a big fan of the personal computer becoming a glorified DVD player, with a play button, a pause button, and a pay button.  [Laughs]

Exactly, in fact, I'm a huge proponent of empowering end users to find, for themselves, what they view as fair use, and to utilize these as tools for whatever means or needs that they have.  We are allowed, as consumers who buy CD's DVD's, etc., to make copies for our own use.  If you have a technology that prevents you from doing that because of fear that you will share those files or media with other people, the notion that you would infringe upon your rights, in order to protect you from doing something that's illegal; it's like making cars that can only go 25 mph because of the fear that you might speed.  It's a ridiculous way to treat a tool that should be open.  You can kill somebody with a hammer; we don't make hammers illegal because they're a useful tool.  When you take a computer and gut it so it can't be used for anything illegal, you take a computer and make it into a relatively useless tool. 

Again, I love this topic because my favorite book is Yochai Benkler's Wealth of Networks, and it's certainly interesting times we're living in and what's going to take place over the next two to five or six years, i's going to determine a generation or two down the line.

But, jumping back to wireless - what do you actually think is next in spectrum policy reform?

What do I expect next?

Yeah

I think that there will be a big battle, over network neutrality, in Congress.  I expect that Senator Dorgan is going to drop a new network neutrality bill, probably in early February.  That will be on a lot of peoples' agendas.  I think that at the FCC, we will be, first and foremost, looking at how do we transition into this new regime.  I think a lot of the battles there are going to be much more about educating a new staff that's being brought in.  I think through 2009, I see things like digital rights management growing in import.  I think that is one of these areas that really have not been explored to the extent it needs to be explored.  I think that we will be battling over what it means to have universal broadband access and whether we should, as a country, prioritize that or not.  Obviously, I'm hopeful that we will prioritize it but there are a lot of groups and organizations that really want to ensure that a universal service fund enriches the incumbents without necessarily creating a competitive marketplace.

Okay, you had mentioned, again at the start, opportunistic spectrum access.  How do you think that will change things?

It has the potential to allow consumers to buy equipment that, in effect, makes everyone a broadcaster.  You can imagine a much more vibrant public sphere, in terms of media production and dissemination.  It means an increased flow of communications and information.  It means that the large barrier to entry, in terms of not too many people being able to afford either to buy or build their own radio station or television station, but can webcast, can podcast, can videocast, and can do all these things that are possible with new technologies.  But, they often lack the capacity, in terms of the broadband capacity, to do really innovative stuff such as live broadcasting and all these other media.  That is going to be coming to the fore in the near future.  We will have to address this as a society.  Much the same way that we provide parks, schools, and roads to the general populace, do we also say everyone needs to have access to broadband connectivity, as well?

Okay, I have one final question for you.  I would like to know - it's kind of two questions.  What do you see as the future of telecommunications infrastructure?  What will it look like and how will we get from where we are today, to there?

The future is absolutely going to be a hybrid infrastructure.  You will have fiber connectivity.  You want the fiber because it has capacity and reliability, but it will also be this hybrid with a wireless communication system, which will provide cost efficiencies and mobility.  Together, they will hopefully look like a seamless roaming between these different media - wireline and wireless - seamless roaming across multiple, different systems and networks.  They might go from EVDO to cellular, to Wi-Fi, to a wire line plug-in, depending on what's most effective for your needs.  All of this is predicated upon an open networking system where interoperability is paramount and where users are empowered to jump amongst multiple, different networks.  That's really, where these battles are going to be fought.  The telco incumbents really want to be sure that their users stay on their network and really don't like the notion of freeing up users to jump to whatever is most effective for end users. 

If I were to point to the future of communications, it is in this tension between end-user empowerment, edge-to-edge networking and command-and-control infrastructures that attempt to lock down users and networks and keep you on a specific network. 

Okay, would you ultimately like to see a day come where we have glass between us, or what we might call "super-high broadband" and peer-to-peer?

Yes, absolutely - I would love to see a day come where we are no longer having to worry about whether we have capacity or whether we have a mobility, not just to connect from anywhere, but to connect in the most efficient and effective manner.  Cell phones as an example, there is no reason, if you and I are in the same building, that we should have to be routed through a central tower.  The only reason why that architecture has been put in place is because in the United States, I get charged on the way up that tower and you get charged on the way down from that tower.  The network owner gets to charge twice for that call, even though for you and I, we would have better, faster and cheaper communications if our devices were connected directly to one another. 

I would like to cut out middlemen whenever possible.  I'd like to cut out hierarchies that are unnecessary for effective communications, whenever possible.  I would like to cut out tolling, adding expense for no other reason than you control the network, whenever possible.  Those battles between a distributed, peer-to-peer infrastructure, an opportunistic infrastructure and a command-and-control tolled infrastructure are really where the near future - the next half decade - the battles are all going to be fought.

Well, Sascha, I can say this; I hope you come to the eComm Conference every year.

Absolutely, it sounds like a great event.  I'm very much looking forward to attending.

Okay, so I very much look forward to the keynote that you're giving there and I wholeheartedly say thank you very much for your time and sharing your expertise.

You're very welcome, my pleasure.

Okay, have a great day, and thank you again.

You too - take care.

Bye

Last Sunday I had the pleasure having a Sunday interview via Skype with Malcolm Matson.

2009-01-11-malcolm-matson-96.mp3

The run time is 1 hour and 7 minutes.

Additionally the full transcript is below. To distinguish between us I've indented Malcolm.

(It's interesting to compare what Brough Turner had to say at eComm 2008, the audio of which can be found here)

Transcript

You have solid telecom credentials, would you agree?  There you go.  There's an easy first question, yes or no? [laughter]

Well, if you ask an average citizen of the street, he would say yes.  If you ask a member of the elite telco community, they would say, "No, this guy is an absolute heretic".  In fact, I'm an entrepreneur.  I grew up in the fast-moving consumer goods industry, FMCG.  It was purely sort of an accident that in 1982, I think it was, in the U.K., and it was information technology.  I was able to have an opportunity to sort of tinker and think about what I like to talk about as FMCI, fast-moving consumer information. 

That brought me into the sort of telecom sector and domain, but I came to it with the innocence and ignorance of a child, which I believe has been the greatest strength.  Because everybody else in the industry had grown up with and was deeply meshed and trapped by the sort of dogma and conventional wisdom, which I think that is still very largely at play and certainly haunts the public policy makers and regulators.  So, I've thought radically but I think I've thought right over the last twenty-five years [laughter]. 

So, you're still being a radical, then?

Yes, but the difference is that twenty-five years ago I was a radical and a heretic.  I shall never forget once, speaking on a conference.  The president of Alcatel, as I'm doing now, wearing headphones to have an interpreter tell him what I was saying, this man - he'd never seen this guy Matson standing on the podium.  When I finished, he banged the table and said, "The conference organizers should be ashamed because of having people like this speaking at conferences like this, if they had their way, they will ruin our industry". 

It's never been my aim to ruin the telecom's industry, but on the other hand, I think history should teach us that it's very dangerous and not in the interest of our society if we are dedicated to preserving an industry.  Where would we be today if we had been absolutely hell bent on preserving the typewriter industry or the canal industry, or the horse and buggy industry?  Progress is always as a result of unforeseen disruptive technology that is the savior for many people, opens the eyes, and creates new industries, but it also creates the death of others. 

So, do you think VoIP is a new, exciting industry [tongue-in-cheek]?

[Laughs] We all like to put these tags on things, but back in 1982, 1983, as a result of thinking from first principles, I began to realize that anything - voice, video, Mozart's 40th Symphony, or a fifty-trillion dollar bond note could be communicated, stored, and manipulated as a string of ones and naughts.  From the very beginning, I couldn't see that either regulating or dealing with content, dependent on how those ones and naughts decoded, regulating and dealing with them separately, depending on whether it decoded as voice or as video.  It just didn't make sense to me. 

Yet, because the preceding industries of television, radio, telephony were all discreet analog industries and all had, even by the 1980's, gotten very strong voices and lobbying voices, were able to persuade politicians to create public policy and regulation, as it were, to perpetuate and extend their shelf life against their view of the world.

Their view of the world - I mean, the telephone company's view of the world - telephony was somehow different from anything else.  It's just bits, as far as I'm concerned.  You know, the fact that we're all now talking about VoIP - they're bits, I couldn't care less.  I don't see VoIP as anything different to anybody else, and neither does anybody else, interestingly, other than the telcos, who have built a business model around the old notion of telephony and the old business models that underpin telephony, and are getting killed.

It was just that a lot of people still seem to view VoIP, using your canal analogy, still view it as the train industry.  I can't help but view plain VoIP as the canal industry.  You know, some people are still heralding VoIP as the new thing. 

If you're thinking about voice, I personally believe that voice is one element, component, or facet that can be present in a communication or conversation between two people.  But, I suspect that more and more conversations will not be simply voice conversations.  They will be voice underpinning or enriching other content that we share at the same time.  As I say, I think VoIP is an understandable expression but it's an obsession that has risen up to be a topical issue because it is basically eating the telcos' lunch.

Back to the telecom credential thing, you were the founder of Colt Telecom, were you not?

Yes

So, come on, Malcolm, is that not fairly prestigious?

Lee, you are talking to the founder of the highest capitalized loss-making company, probably in the history of mankind.  [Laughter]

Exactly, so Colt was fantastic? [Laughter]

No, it wasn't fantastic.  I would say it wasn't.  It grew to be capitalized on the London Stock Market and I don't know how many billion pounds.  I think at the height, in 1999, it was the fifth largest company on the London Stock Exchange, but the fifth largest company without ever making any profit. 

Did you sell high?

I sold very early on.  Let me tell you the story about Colt.  Basically, Colt was the spark of imagination that I had after I began to understand what was happening with this digital revolution.  I formed Colt in conjunction with the Corporation of London, which is the city council and municipality. 

Bear in mind that the Corporation of London covers not the whole of London, but the financial sector of London.  The purpose behind Colt, the vision behind Colt was that it should be a dark fiber network serving this area, which was the financial sector.  I had to have an apartment there, but there are only ten thousand people who live there.  Most of the people inside this small square mile are very sophisticated, global financial institutions and banks. 

Under the unique legislation in the U.K., which persisted for ten years, thanks to the foresight and brilliance of Margaret Thatcher, but actually got neutered because the politicians took their eyes off it and BT kept its eyes on it.  It was to be a dark fiber network.

The business model I put together was that Colt should invest in putting in dark fiber to these buildings, period.  City Bank, or Daiwa Bank, or Deutsche Bank, into whose building the fiber went, could choose to use that fiber either to send bits to other banks in and around the city or to have their global network provider, B.T or AT&T, or whoever it is, to manage the active layer on that dark fiber. 

The business model was to be a passive piece of real estate.  It looked extremely attractive and like an extremely interesting business.  It was to be low risk, low return.  This wasn't a sexy, high return business.  This was a boring utility piece of real estate.

I couldn't get it funded and eventually went back to Harvard Business School, where I did my MBA.  I went into the Baker Library, did a bit of digging around, and found that there was a company called Boston Teleport, which was doing something a little bit similar.  I spoke to the guy who running it, Paul Chisholm, and he said, "We have two shareholders, Merrill Lynch and Fidelity Capital". 

Within two or three weeks, I was sitting down face-to-face, on the opposite side of the table with Ned Johnson, III, who is one of the richest men in America, whose father founded Fidelity.  He was interested in this.  I was sketching out on the back of a napkin what I was planning to do.  He said, "How much do you need?"  I said, "We're showing thirty million pounds for the first...," and he said, "You've got it".  [Laughs]

I was elated.  I got on a plane, flew back to London.  It reminded me of the time when Alexander Graham Bell went to Western Union and said, "Hey, I've got this thing called the telephone.  Would you like to use it," and they said, "No, it doesn't really fit with our business plan".  He wandered off and bumped into J.P. Morgan.  I thought, "Gosh, this is my J.P. Morgan moment.  This is it, wonderful.  I will come back, we'll build Colt, and it will be demonstrated to the world that in the new world you don't have a vertically integrated service-provider model.  You have the bottom passive layer.  You have a contract to somebody to light it in the middle and all the applications run on the top of it".  This is basically the model of the Internet.

Anyway, within two months he called me back to Boston and said, "I want to introduce you to Jim Hines".  Jim Hines was a big, bruising, ex-Vice President of AT&T, who immediately came and said, "What the heck do we want to be a boring utility for?  Crickey, all the value is at the top of this in offering services". 

I argued with him and said, "That's crazy because as soon as you start offering services you're going to be competing with your customers".  I couldn't persuade him so I exercised a put option.  I got out reasonably well.  I probably made a higher return on the investment than anybody else ever has.  I had to wait for ten years and watch this share price - it was subsequently IPO'd.  I watched the share price go through the roof, all the time predicting that it was heading for disaster.  I can't show it to you now, but I have this lovely article from the front page of the London Times, saying, "Colt's founder forecasts disaster for this company," literally within days of the 1999 crash. [Laughs]  Within days, the whole dot com meltdown had impacted the telcos and so forth.

Yes, I suppose in a sense, everybody looks and says, "Malcolm is the founder of Colt," and they see the fact that this company...

Colt was seen as one of the first new players, a great disrupter, and it was the first company to lay pan-European fiber.

It was the first all-fiber network in Europe, absolutely. [Laughs]  What it did was blindly use the old business model.  If I could buy back Colt now, I would do and I would take it apart and it would be a much more profitable and interesting business.  I forecast that this was going the wrong way, and it still is going the wrong way.  Colt is still a basket-case company.  I mean, it's going to have real problems.

What you have is the infrastructure; the passive layer is stuff that has a twenty year or twenty-five year life cycle.  There isn't a lot of technology change in ducts.  There is not a lot of technology change in fiber.  The technology change and advance is in terms of the active equipment that you hang on the fiber. 

So, if you stay at that bottom level there, it's a very high capital investment but it's a very low return.  As I say, it's the same principle as in the real estate business.  Just because land securities or a major property developer can finance the building of a shopping mall, he doesn't say to himself, "Oh gosh, now why don't I put my Sock Shop in there, and my own coffee shop in there".  [Laughter] That's [14:53.8 over speak] retails in there separately.  They can take the risk of the fads and fashions of content. 

I like that analogy.

It's interesting.  The time has come.  One of the problems, Lee, I've found that because the telco industry is probably the largest global cartel that mankind has ever known, it's not surprising if you're in the communications business, very early on the telephone companies around the world got together and said, "Hey, Mr. Foreigner, you lay the lines in your country.  I'll lay the lines in my country.  Let's not compete by laying lines in each other's country.  You hand me the calls halfway across the sea.  I'll hand you my calls halfway across the sea.  We'll charge an arm and a leg to the end users and then we'll get together twice a year in Geneva and we'll split the spoils".  That's basically, what was done. 

The accounting standard of rules for sharing the revenues from international traffic is a major issue that is hidden from most peoples' eyes.  For a lot of third world countries, it's the greatest source of foreign currency that they earn.

So, what we've seen over the years is governments listening to their telecom's operators because apart from anything else, they're a) major employers but b) they generate massive tax revenues.  Unfortunately, we've neutered the free advance of disruptive technology in the hands of end users.  Never try to, as it were, use public policy or regulation as the stimulus and the catalyst for innovation.  Just go out and do it.  Exemplars are what change the minds of politicians, ultimately.

I don't know whether you're aware of the railway having, one I constantly use,  if you look at railway history, the Stocktons of Darlington Railway in the U.K. was what...

I know nothing of the history of railway so please tell me.

It's what started it off.  Basically, railways were things on which little trucks ran, pulled by horses and donkeys.  They brought coal out of the coal mines on tracks.  That's what a railway was.  Suddenly, there was this great invention of the steam engine.

The conventional wisdom was why would you want to go five miles an hour?  You get the coal out of the mine.  Why would anybody want to go faster than five miles an hour?  It wasn't until the steam engine, until Stephenson created the Darlington Railway and put a few carriages on there, invited some MP's up and some entrepreneurs to sort of feel the wind in their hair that suddenly their imaginations started saying, "We could do..." 

The rest is history, as they say.  Whole new industries of shipbuilding, leisure, and tourism were created.  One of the biggest benefits of the railways was that in the U.K. the quality of the population's teeth were suddenly improved because fresh milk, with its calcium, was able to get to city centers in a way it could never have done if it was going by horse-drawn carriage.

There wasn't anybody sitting around in the office of rail regulation saying, "We need to deploy this because it's the solution to the dental problems of the nation".  This was an unforeseen, unimagined consequence.  I believe that's what we're being starved of at the moment, the unforeseen, unimaginable consequences of allowing high bandwidth, zero marginal cost, peer-to-peer connectivity in the local environment. 

Whether we like it or not, most of us live in physical cities, communities, villages, rural areas.  We live in towns.  Most of our lives are circumscribed by a rich network and matrix of communication as we love, live, leisure and learn in relationships, in the context of where we physically live.  When we can enrich those by all sorts of new, unimaginable peer-to-peer connectivity with high bandwidth...

So, we've kind of jumped from the founder of Colt Telecom to the amazing credentials.  Now you seem to be jumping to where your mind is nowadays.  That's another new world you're speaking about.  Is that correct?

No, it's not correct.  No. 

[Laughs] It's not correct?  You seem to be talking about not the big Internet, but doing stuff locally.

Absolutely, this is what Colt was to have been.  The whole point of Colt was to have been an open, local, public access network.  It was to provide a pipe, a big, fat, bit pipe into all the buildings in the city, and then to allow the people inside the buildings to use that pipe, to connect with whomever they wanted, whether it was directly, to the building next door, or to somebody on the other side of that city who was offering a service to connect you to the rest of the world, over the Internet. 

It's the same way, Lee, as your home or your office, you have an open access network.  You have a network, whether it's wireless or CAT5 cable, whereby the PC's and the printers and the hubs and so forth communicate with each other at the direction of you.  You can send stuff from one PC to another PC, to the printer, to the scanner, or wherever it is, as you like.  There is no charge for that.  It's not a service that's been provided to you by anybody.

I enjoy that in my home.  I enjoy that in my private domain.  I have my cell phone and my laptop and I can sync those.  There is nobody providing me a service to sync them.  I just actually have the two.  I own, finance, or borrow the cable, or I have access to a piece of license-exempt spectrum, 2.4 GHz, which allows these two to communicate with each other. 

When I get onto the Internet at the other end, once I'm on the Internet, we have exactly that environment of net neutrality.  By net neutrality, I think I mean what most people mean by it.  I mean it's a passive, open, unmetered connectivity.  It's a direct P2P connectivity anywhere across that domain, across the Internet.  It's a symmetrical connectivity on the Internet and the primary value of it resides with the people using it.

There are some big boys out there, like the telcos, who are desperately trying to change that.  They're trying to change it to get it into line with what persists still, in the final domain, which is the city or the local domain, the "local Net" as I call it.  Unfortunately, there we don't have a Net neutral environment.  We have a network that is closed, controlled, metered.  There is no local, P2P connectivity.  I can't send bits between my home, my hospital, or my school, or my neighbor, directly over infrastructure in the same way I can in my office.

yeah, but can I begin jumping in here just to clarify.  You can use the Internet to go where you wish to go.  You just said it was a passive infrastructure and that anybody can use it.  So, if you want to sync PC's at distance, just use the Internet?

Once you get onto it.  But, suppose I'm sitting in my home.  I'm an old person, a seventy-eight year old person. 

You're seventy eight, wow. [tongue-in-cheek]

If I was seventy-eight.

[Laughs] Wow, Malcolm, I didn't know you were that old.  [Laughter] Okay, just kidding around with you.

Suppose I'm an old-age pensioner, sitting in my home.  I want to have a high definition ability to chat with my doctor, my daughter, my church minister, or whoever it is.  I want to do it in real time and I don't want to have to be charged per minute by doing it.  I can't do that at the moment, because the only way I have connectivity is over an asymmetrical piece of copper.  Even if I wanted to connect over the Internet, there are potential latency problems that I may have.  In any case, why should bits that want to travel one hundred yards have to clog up the Internet?  That's half the problem.  If we can cache and keep, in the local domain in the same way that I do on my - thank goodness all the A4 pages I sent to my printer don't need to be sent over the Internet.  If we all had to do that, gosh, we'd be loading the Internet with even more capacity.  Why not keep; in the local domain, and a domain that is not an arbitrary one, it's a real one.... 

For example, let's take Amsterdam.  It's putting in an OPLAN, an open, public, local access network, into all four hundred thousand of its social housing units.  They reckon that they will have, immediately, a fifty million Euro plus saving each year.  Old people will be able to stay in their homes that much longer.  Why shouldn't they have the benefit of that?

What do you mean by stay in their homes a little bit longer?

At the moment, the only way an old person...

Internet shopping, or what do you mean?

No, no - care.  At the moment, the only way an old person...

Oh, stay in their own private home, instead of

Correct, before they need to go into care.

[Laughs] Okay, it's not Internet shopping.  We're stopping old people leaving their house.

[Laughter] No, sorry, it's just explained to me why everybody looks to me with a glazed look when I make that statement.  [Laughter] At the moment, you have these alarm systems and so forth that cost an arm and a leg per month to do.  It relies upon the person pressing the button saying, "I need help". 

Of course, this isn't a Big Brother thing; this is somebody who might want to do it.  Somebody can say, "I've got a problem," and have a face-to-face.  I think some of these Hewlett Packard and Cisco and others are beginning to demonstrate how video communication and conversation, if the bandwidth is there, can be very, very different to the old sort of video conferencing, out of sync and scraggy pictures we used to have a little while ago. 

If bits don't have to get onto the Internet, why clog up the Internet doing so?  The other thing, of course, is that if you have such a network, and this is the frightening thing from the telcos' point of view, at the moment, they operate in terms of the Internet connectivity on a divide and rule basis.  You're at number two Park Road.  "Mr. Dryburgh, we'll contract for your ADSL connectivity".  The next door will have a separate contract, and the next will have another contract, and so forth.  What if we were on this fiber bus, as a city or a community and there was a single terabyte fiber connectivity for the whole city, to the Internet?

Okay, but then this is what Amsterdam is doing, and France as well.  I mean, this is just community-owned fiber you're speaking about here.

I'm actually talking about - we'll come to that in a minute.  I'm talking about what happens if we have massive high bandwidth - what I'm basically saying is that the service provider model, as we know it, is dead.  There is no earthly reason why we should have ISP's or telcos, as we know them, in this digital world.

Moving onto the point that you just made, a point that I suppose over that last few years I've increasingly come to appreciate and believe, is that the fiber that serves a community or city, just as the fiber or coax that serves me in my home network, you really want to finance that in a way that aligns the owners' interests with the users. 

To that extent, I believe, and this is what I'm working with now, on cities that are saying, "Well, we don't want this to be state-owned, but we want it to be owned by a corporate vehicle that is not a conventional profit-making company, but is one whereby the primary value and benefit out of the investment goes to the users on it".  That could be by some community bond or by some cooperative ownership or a company like the Network Rail Company in the U.K., a not-for-profit company.

What you don't want is somebody owning the fiber who is trying to maximize the return on that investment.  To the extent that a city is reliant on that person, it's going to be less competitive, in the years ahead, with a city on the other side of the world that is trying to attract inward investment and e-knowledge workers and new entrepreneurial activity.  It will be more accessible because the bits are cheaper to go there because there is not a massive pricing of access based upon having to serve an independent shareholding group.  I'm not sure I've expressed that clearly.

What we do see in Sweden and other places are communities organizing themselves.  I think we're going to see the birth of a new industry in the next five or ten years, with companies who do that in collaboration with communities and public authorities.

I thought KPN had some kind of collaboration going in such a fashion?

KPN is the most interesting example.  I'm not sure whether KPN - KPN understands it's probably better than any incumbent telco in the world.  They have more local access fiber, not laid by KPN initially, but by Volker Vessels, the big construction company.  They've done it in association with a lot of the housing associations in the Netherlands. 

It's unclear, as yet, how it's going to end up, in my view.  I'm not sure whether KPN's view of the world, at the end of the day, is that there is a business in being a tollbooth, extracting money from content providers and traffic that passes across the Internet, or the local network, or whether it's just going to say, "The ownership, funding, and the financing of the fiber and wireless is as independent from the services we provide as the way we finance the roads is of the trucks, cars, and goods that are carried in the trucks and the cars".

So, you're wanting to see a hundred percent separation between applications like telephony, SMS, and underlying infrastructures?  That's what you ultimately wish to see.

I'm saying it's inevitable, as inevitable as the wheel.  What I want to see is this inevitability happen sooner rather than later because it will bring great benefit and open up new opportunities for new businesses and new business models. 

People will start shouting back, "Hey, what about quality of service?"  I know I'm talking to you over the public Internet, at the moment, using Skype, and that seems fine to me, but people will starting shouting, "This could be an emergency call," and the call could have dropped or the quality call was bad, or your ISP was down and don't have any real service level agreement, except to get it back up within for two days.

Of course they will do, yes.

So, you don't think we need certain voice quality guaranties and so forth?

You could argue the same thing about refrigerators.  You could argue the same thing [laughter].  At the end of the day, business opportunities for making sure that the bits travel without drop off, across the local network, of course we're going to be worried about it.  It can't.  We know all too well that this isn't delivered absolutely on a guaranteed basis from some huge, central authority sitting at the middle, in the same way that all this idea of security by having some central government authority monitoring all my bits, or keeping a database.  That's not going to work.  It's just special pleading.  Of course, people are going to say that. 

As you say, I don't even have to argue it.  Here am I; we've had a perfectly good, higher quality conversation over the last hour or however long we've been talking, that I could have ever possibly had.  Who is responsible for this?  I don't know; the guys who made the headphones and my microphone have obviously got the quality quite good there. [Laughter]  The USB plug that goes into my laptop seems to be good quality.  I haven't had any problem there.  The laptop is made by Samsung.  That seems to be all right.  I've got a bit of cable from there that I can see going to a Drytek router.  That seems to be all right.  The one that goes to the wall seems all right.  It's going across some cruddy, old copper wire.  Blimey, heaven knows how they've managed to keep going during our conversation, but still, they have. 

Okay, you know, the telecoms industry is stated as being up to a 3.4 trillion dollar a year industry.  Eighty percent of that revenue comes from telephony.  So, if you're saying that telephony will break away from the underlying infrastructure - personally, I don't think telephony will keep existing, but let's imagine that it does as an application.  The big question is telecoms' infrastructure is incredibly expensive.  I mean, Google couldn't even afford a build out in the States that was noteworthy, in terms of telecom network.  The infrastructure is massive, in terms of cost.  I've been looking at figures of how much networks cost. 

First of all, most people live in cities. 

Listen, if you take telephony out of the picture, what's happening, as we all know is that telephony is paying for the underlying infrastructure.  What I don't get is where you think money may move and the infrastructure may break away from the services, but all it means is that people get charged a lot more for access.  How do you marry up the cost of the infrastructure and maintaining it?

This is myth.  Look at the facts, Lee.  You go to one of the major guys who are leading the building of - if you look at the current cost of putting in a brand new fiber network in a fairly urban environment, you're going to build a new fiber network around ...

What we understand here is access network costs a lot more than the core networks.  We're taking it ...

Let's say the core network.  Over the last twenty years, we've had masses of fiber running up and down our countries and across the oceans.  Ninety percent of it isn't lit.  There is unquestionably no shortage of capacity of fiber outside of the local access network.  The problem is it's in the hands of an industry that's business model is based upon creating scarcity and creating value out of selling access to scarcity.  But there is no scarcity.  So, what they have to do is to pretend that there is scarcity. 

So, all these tales about the Internet falling over, due to the sudden rise in YouTube and so on, you don't agree with?

That's absolute crap. Absolute crap . All I can tell you, and I talk to physicists; you take one, tiny strand of fiber; nobody has yet found the upper limit of it.  In other words if you were to light all the spectrum colors in there, you have infinite capacity.  Obviously, you have to invest in the kit to put on to access that capacity in the fiber, but one of the things we're beginning to see happen is that Moore's Law is going to hit the DWDM kit in the same way it did the silicon chip.  We're going to find we're going to be able to access, out of that strand of dark fiber, twice as much bandwidth for half the cost, every eighteen months, for the next two to four decades.  There is absolutely none, no shortage of capacity out there.  The only people who are saying it are people on whose business model it depends. 

You and I knew when we went to school in the second grade that anything that is infinite supply, in a free market, is worth zip.  What's the value of sand in the Sahara Desert - nothing.  If you have a business model based upon selling sand in the Sahara Desert, you're in trouble, and they are in trouble.
Let me just give you the figures I was telling you about local network.  The current costs for building an average, new build, in an urban environment, fiber to the home not to the cabinet, brand new, is about seven hundred Euros. 

Per user?

Yes, per termination.  Of that, about four percent is the cost of the fiber, thirteen percent is connectivity products, seven percent is engineering, ten percent is project management, thirty to forty percent is installation, twenty-five percent is civil engineering, and five percent to the financing.  Twenty-five percent for civil engineering is a huge killer.

This is CAPEX only.  What about OPEX?

Hold on, let's just get it with a CAPEX first.  We're talking about seven hundred Euros.  How much do you pay, per year, for the line rental of your copper telephone line?

Well, I don't have a telephone line and I had a naked-DSL before.  It depends on the country, but if you take the country I'm currently in, I think it's about thirty Euros a month for connectivity, for cable.  I have fiber in the house; I just haven't paid for it.

You say connectivity; that includes the DSL connectivity, doesn't it?

Well, it includes the cable because I decided to go with cable since it's cheaper.

I would use a hundred or hundred twenty Euros a year. 

So, like thirty times twelve, so three hundred sixty Euros a year for connectivity.

That's got some active equipment on it.  I'm just talking about the line rental, the basic, physical, copper line rental that the average person is paying.

Yeah, but with cable lines...

They've got a telephone line.

Why do I need to have a telephone line?

You don't need to, but I'm trying to prove to you that it costs nothing.

In the U.K., where they don't offer a naked-DSL unfortunately, then I think British Telecom charges about eleven British Pounds per month, just for that piece of copper, without any service, no DSL.  Okay, now I've got you.

It's about a hundred twenty Pounds.  All I'm saying is that money is on the table.  Everybody is paying that money already, for access to a copper, local connectivity. 

Sorry, I forget; it seems pretty old-fashioned paying for a copper but I forgot most people are doing it. 

Forget the copper.  That money is on the table.  That money is already being paid out.  That money is more than enough to finance, if you convert it.  What I'm saying is that a seven hundred Euro investment, over a twenty-year period, doesn't require anything like a hundred twenty a year. 

Any talk about how this is an impossible thing to finance - it isn't impossible.  The figures work out easy.  The problem is, of course, how do you go to a home and get them, as it were, instead of paying the hundred twenty pounds to BT or to France Telecom, for the copper, what is the strategy for getting that money to go to support the financing of a fiber.

What's the OPEX cost?  I'm wondering if it's high.

Again, interestingly, no - the question of OPEX is slightly more difficult.  Obviously, for the large enterprises connected on that network, they will have their own operator but for the mass of residential and SMEs, there will be a contract let by that OPLAN, that passive network-owning company, I believe, as has been the plan in Amsterdam.  There will be a five to seven year contract to a company to provide the active layer.

I think one of the problems at the moment is that this is a brand new business.  There isn't a lot of experience and precedence there.  The trick is going to be to make sure the contract is let on a basis that recognizes there will be increase and upgraded quality and bandwidth, at a reduced cost.  That benefit has to be shared equitably between the contractor providing it and the network users.  That's the business.  I don't know who is going to own that business.  Is it going to be Cisco, or BT?

But the question is; what I'm trying to get at is, the operating expenditure, more than the original CAPEX; is it more than seven hundred Euros a year?  Is it ten percent of it?  Is it the same?

No, it's fractions of that.  You only need to realize that the reason, the primary reason why BT and all the other major telcos are investing in fiber to anywhere, fiber in the core network, is because it has a massive reduction in OPEX, a massive reduction compared to maintaining and running the copper network.

The interesting thing is, as I say, if you actually price up the active equipment, the network could go out and buy the active equipment and it would cost you very little.  The problem is if you do that, what you have installed is going to be out of date next year or the year after because you're going to be able to buy something twice ...

Okay, so the OPEX is a fraction of the CAPEX.  What you're trying to say is that you're paying "x" amount in line rental.  If we could find a model to convert those payments away from the telecom operator, we could fund something that is a much better value to end users.  So, end users would still be paying the same amount of money but deriving a lot more value.  You think you would speed up splitting away infrastructure from telephony, SMS, and other applications, i.e. the two services become separated from infrastructure.  Do I understand correctly?

Yes, in other words the entity that would be providing this connectivity would have nothing to do with what ran over it.

Is it not nice that game players get "x" network characteristics, people who are just doing FTP uploads get other network characteristics?  This seems kind of anti free market, that everybody gets given the same type of network, with the same ping times, same latency. 

No, they don't.  As I said to you, if you are a major corporation or you're somebody like yourself and you want to have the network lit at a particular active layer, a particular speed, or capacity, you could opt for that.  There is no reason at all.

So, it's not the communist network, then?  [Laughs]

No, it's less a communist network than it is now.  You could have everything you like, as long as it's ADSL. [Laughter]  Bear in mind, you and I are unusual animals.  For most people, all they want is a very fast and increasingly they want a symmetrical connectivity to the Internet.  That's what they think. 

However, there are a lot of other people in the community that want to have the ability for peer-to-peer.  I would argue that the average person will discover the value and opportunity of peer-to-peer, and certainly, local peer-to-peer.  Where we have these open access, local networks in place, we see kids doing unbelievable local peer-to-peer video activity. 

Like sharing their Blu-ray disc images with each other, within five minutes - fantastic!

Absolutely, there is another industry that is going to rethink itself.  [Laughter]  I think another thing we need to recognize is that there may be a lot of people who want to communicate with the houses, the homes, or the offices, other than the people inside the homes, and the offices themselves.  For instance, I am told, from talking with colleagues who are involved in the energy and power sector, that if you could have real time telemetry and remote control, at zero marginal cost, i.e., you're not paying for the bits for doing it, of a home heating system and you could then link this in with knowledge of what's happening with the coming ambient weather temperature and so forth, you might be able to start selling comfort rather than electricity.

I like the idea of buying comfort.

You might be able to say, "I'll contract to have my home at 68 degrees Fahrenheit, day in and day out," or "68 degrees in March and 49 degrees in July," or whatever it is.  If you could do that, that contract would have a massive impact upon the cost of energy.  The problem with energy, of all the utilities, is you have to manage the load and everything from the center.  If you could actually do it because you have real live, zero cost access to knowledge at the periphery, it changes the pattern of the world.

The need for high bandwidth, net neutrality in the local access loop in the community, is something that is wanted by a lot of people other than just the people living there.

What happens, for instance, in terms of security and all sorts of other things, if you could make the locks on the doors intelligent?  All this is not some special service linked to the infrastructure.  At the moment, you can go around suggesting they have webcams all over the place, but they're sitting on dedicated infrastructure. 

If you could have this open access fiber bathing and pervasive throughout the city or community, many people now, as I do, believe it will be transformational socially as well as economically.  That's my day job. [Laughs]

It sounds like a great day job.  I really look forward to the talk you're going to give at this conference.  I just wish to ask you a couple of things, straight away. I consider telecoms "my industry".  I mean, It's always been the love of mine.  So, want to put this question to you and feel free to answer it from any direction you like, and briefly, if possible.  What do you see as the future of the telecommunications industry?  Pass some comment on the future of the telecommunications industry, please.

Most of the telecoms' incumbent operators and the sort of parasitic, competitive local exchange carriers (CLECs), I think, are heading for a precipice.  Now, when I talk to the senior management in most of these companies, they don't like acknowledging it.  They understand it though.  They can see the evaporation of revenues, just uncontrollable. 

For the last ten or fifteen years, they have hung onto the old business model.  They thought they could make sure the terrain in front of them was level and as much like where they'd come from as possible, by resorting to influencing public policy and capturing the regulators, which they seem to have done in most countries, fairly successfully.  [Laughter]

What we're talking about here, Lee, are fundamental dynamics of physics.  They just are running out of space.  They know that they are getting very close to the cliff. 

So, if I'm being cynical about it, I would say that most CEO's, if they find they can no longer cudgel their governments and regulators into giving them some privileged access to this technology or imposing regulations that favor them, what they're doing is they're getting out.  They're resigning.  [unclear name] of BT; brilliant.  Let's get out before we hit the wall.

Many of these companies are going to hit the wall in one form or another.  When they hit the wall, what I mean is, and we have to remember this, that the management and shareholders get crucified.  The assets don't go away.  The knowledge and experience that exists within the company, great knowledge, and experience of telecoms and how it works at an operational level doesn't go away.

What I believe we will see is a rapid, after one or two Stockton and Darlington's we will see a rapid restructuring of the industry.  We will see the old, vertically integrated "we can do everything" telco disappear.  It will fragment into a hundred, a dozen, or a few pieces.  There will be local networks.  There will be a very interesting business providing global connectivity, on a highly competitive basis.  There is going to be the business of lighting and managing these networks.  Again, some of these telcos are going to be able to move into that space very well.  There are going to be some services for major enterprises and global ...

So, are you are not a fan of the Telco 2.0 double-sided business model that is going to save the day?  [Laughter]  I don't mean to pit you against others who are in our friendship group, but everybody has different opinions.  That's what makes the beauty of the whole thing.  So, comment on a double-sided business model, if you can.

In case somebody is listening, summarize what you mean by that so we're talking about the same thing.

Well, it's a fact that instead of just trying to sell downstream to consumers, i.e. you charge them for telephony, you give away telephony -  I don't personally think telephony will exist long term, but since everybody understands it, we'll keep using it - you give away telephony free of charge to the consumer but then you start making money upstream by enabling sellers, the likes of Google and so on, enabling connectivity between businesses and consumers. 

It's like Google; Google gives search away free of charge and that gains them a massive number of users.  Then, they make money by selling upstream to advertisers.  Maybe there are ways of selling packaging and postage.  When somebody sells you a movie over the Internet, it doesn't get subtracted from your monthly allowance [broadband cap].  So, it's other parties are paying the bills behind the scenes.

Martin and I have had discussions on it.  Obviously, being cynical, Telco 2.0 depends financially and utterly on people going to listen to it, who can afford to pay the tickets from the industry that is being given the message.  Undoubtedly, that double-sided model is a glimmer of hope if you're a telco wanting to think "We can extend the cliff a bit further and we can make it last a bit longer," I would certainly grasp onto that.  As far as I'm concerned, it's simply an idea to smooth the future a bit.

The idea that there is a non-disruptive, smooth, migratory way from where we are to the future, I think, is an illusion.  It will be messy.  It will be all sorts of ups and downs and so forth.  I don't think the vertically integrated service provider model is sustainable in the digital world.

I know you've been focusing on infrastructure so maybe it's a bit unfair to ask you this, but how do you see the opportunities, in terms of telecom innovation, if I even call it telecom?  That's a question; should we even be using the world telecom or communications anymore?  I don't know.

Interestingly, the two words I personally like using when talking with individuals is connectivity and conversation.  People want to converse.  That's not just talk, but communicate or converse.  I think telecoms - I wrote an article about ten years ago, "Telecoms Is Dead; Long Live Telecoms".  We're not going to get away from that phrase, but you asked the question about the applications. 

Where is the excitement?  I know you've been focusing on infrastructure. 

The excitement is when I meet a twelve, thirteen, fourteen, fifteen year old and I know that when they have a abundant bandwidth and capacity and cheap digital processing kit in their hands, they will dream them up.  It's not for me or you to do it, anymore than it is "Oh, let's invent the wheel so that".  It will happen.

I always remember Ken Olsen, when he was the head of Digital Equipment.  Do you remember he came out with that famous statement, "It's inconceivable that every home will want a computer"?  It was inconceivable.  It's inconceivable today, what all these new applications and services will be.  All we know is that when we all got low cost PC's, there was an explosion of applications and new uses that we never could have thought of.

I may dream up one or two, and if I have some good ideas - as I say to people, I don't believe in intellectual property.  I believe if I have a good idea I must either get out and exploit it faster than you or I must keep my mouth shut.  So, I'm going to keep my mouth shut.  [Laughs]

Okay, you do that.  [Laughter]  We'll be popping over and seeing what you're doing. 

I have been, literally for twenty-five years, frustrated and angry, I suppose, at what I see as these rich and abundant fruits that society will be able to derive from these technologies being held back because it's been channeled through some preordained sectors.  I have been wrong.  Looking back on it, my biggest error and insight was to see that there was going to be this inevitable bifurcation between the bits and the pieces, the hardware, and the stuff that runs over it and that they were going to be as separate in the digital world as they were in the analog world. 

If I was wrong on anything, it was in my expectation that it would become apparent to one and all, this year and next year, but the power of vested interests is extremely strong.  I shall ever forget, just before that BT conference I was having a conversation with the then Minister of Secretary of State at the Department of Trade and Industry, who was responsible for telecoms.  I was saying to her, in a one-to-one conversation with Patricia Hewett (MP), that what we need is an exemplar.  We need an example of the other way of doing things in terms of the local access network.  Once one can see that, kick the tires, and look at it, I'm convinced people will say, "Oh I see now.  If you'd have told me that that was what you were talking about you would have persuaded me a long time ago".  You're going to do the same, Lee.

Are you going to have that exemplar in the go by eComm, do you think?

I don't know.  This is why I'm cautious.  I've always been wrong about the timing.  When she said to me, "That's great, Malcolm, what can I do to help?"  I said, "What you can do to help is nothing".  She said, "What?"  I said, "Guarantee to me that you will do nothing".  She said, "What do you mean?"  I said, "Guarantee to me that when British Telecom or GEC or somebody else knocks on the door of Number 10, and the then Prime Minister Tony Blair answers and says, 'What do you want," and the vested interest says, 'Stop this; it's ruining our business.  If this thing goes ahead, we're going to be out of business all together.'  I want you to guarantee that Tony Blair will say, 'Push off, I'm not interfering with the free market and enterprise.'"  She said, "We can't.  I couldn't do that, could I?"  BT is a very major company in the British scheme of things.  It employs sixty thousand people. 

I don't know what's going to come out of the woodwork to sort of hinder this in the short term.  All I know, Lee, is in the long term it's inevitable.  I hope I'm here to help make it happen.  I hope I'm here to see it happen.  There are some very good signs.  I would say, in conclusion, if you're going to look at one place and keep an eye on one place, if it emerges anywhere ahead of where I'm trying to do some things, I suspect Singapore may be a very interesting place to watch.

Okay, so if we swing from Number 10 in the U.K., all the way across that pond, do you want to make any recommendations if you were advising Obama and his appointment of Chairman of the FCC?

He probably doesn't know my phone number, but I'd be happy to go and give him a hand.

I know somebody who knows him, so I could pass it on?  [Laughs]

What you should do - what I would say is don't look in the conventional areas.  I did hear Lawrence Lesig's name mentioned.  That wouldn't be a bad thing but you have to have somebody who is pretty strong, understands the fundamentals of it, and is prepared to 'sacrifice' what might appear as some pretty big beasts, in the short term, for the sake of the long-term future and wellbeing of the American people, and indeed, the free world.

I am always tempted to say that the current financial crisis is a good thing in all this because it is really causing people to think, "Hang on; there is something different about the future".  I look forward to Barak Obama's appointment.  I don't know who it is.  Whoever it is; give them my phone number.  I'm very happy to help, [Laughs] but I really do believe it needs some radical rethinking. 

Interestingly, when Powell was at the FCC, he got it.  But, he was moved on.  Some of his statements, in his last few days at the FCC, were visionary and unbelievable in talking about the segregation between infrastructure and services.  But as I say, George Bush moved him on and we went to a new era.

What would you say the biggest issue facing incumbent telecom players is, today?

The biggest issue, I think, is have they left the decision to late as to what their business is?  Are they going to release infrastructure in order to climb up the value chain, into the service application area or are they going to forget the service application area and fall back into focusing on the infrastructure? 

The other thing they're faced with, because most incumbent telcos currently are nationalized or national carriers, most cities have, as their local incumbent, a national carrier.  They're going to have to also face this issue that the city of Chicago is going to want to have a better local connectivity than the city of Detroit, or the city of Lubljana is going to want to have a better local connectivity than the city of Sombor, in order to compete.  There is a growing awareness; this is where we came in at the beginning, there is a growing awareness between a new breed of local, political leader that the open quality of connectivity in a town is going to be the fourth utility.  It's going to be one of the key determinates of that town or community's ability to compete in a global market, for attracting inward investment, in an ever increasingly e-economy.

Okay, that's interesting, actually.  I wish I had asked you that at the beginning because there are a lot of things I would have like to pick up on there.  There are other Sundays.  We've had a few calls now, but we haven't bothered recording them.  So, listen, it's been great having a Sunday cup of tea with you.  I'm going to get the kettle on and make another one.  Thanks for letting me record our casual chat, today.

When I've got time, I try to be open.  I like to share as much as I can and to listen as much as I can.  I look forward to the conference.  I'm sure that will be a great time for conversation. 

I'm sure it will be.  Hey, listen, take care, and have a good Sunday.  Thank you very much.

At the start of 2008 I had the pleasure of doing a pre-conference interview with good friend Martin Geddes. We had sat down together for a 15 minute chat. But before we knew it, we had chatted away for over an hour, which we were only forced to terminate only because the batteries of the recorder died. Due to time constraints, only part of the interview was ever published. But since the content quality was so high I put it on my to do list to publish it in full at a later date. I'm glad to say I finally got around to have a new and full transcription done!

(Note: other "Martin media" was his appearance twice on video during the 2008 conference, once for his keynote and once for the wireless innovation panel)

2008-01-12-martin-geddes-full-interview-96.mp3

The run time is 1 hour and 4 minutes.

In the huge transcript below, I've blockquoted Martin to distinguish the pair of us from each other.

So tell me about your Telco 2.0 initiative? What is the Telco 2.0 initiative?

The telecom industry is in a state of flux and it's following a path that other industries have followed in the past. If you look at the physical logistics industry, containership came along and it broke apart the vertical integrated break box system. Instead you got this big steel packet that's been moved around; it became very modular horizontalized industry. The financial services use to be very vertically integrated. The same company that you went to, to go buy a mortgage from, you spent the next twenty years paying that same company and they had a loan on their books. That was it. Now, the moment you've taken out your mortgage, they go and resell that debt on the mortgage market. There are all kinds of specialists who package up and resell it. Telco 2.0 is about moving to a world where vertical integration in the telecommunications industry is coming to an end. You're seeing new industry structures emerge. It's how to remain profitable and alive in that environment.

When you say vertically integrated, my mind instantly jumps to applications. Are you saying that telephony and SMS, these are what I understand to be vertical products, are you meaning by vertical the industry as a whole in some kind of business fashion, or are you meaning applications when you spoke there?

There are many parts of this puzzle. So you are right; there is a question like the macro organization of the industries. Once upon a time AT&T also had Bell Labs. AT&T controlled local and long distance and the technology side.

There's also the vertical integration in what we call the applications stack. Between the application itself, the session control or whatever goes underneath the application to enable it; what pages you have, HTTP; you know they are separate things on the web. Then you have the core transport, the protocols like TCP and IP. Then you have the low level stuff like Ethernet and physical infrastructure. There's a question of integration in that.

There's also a separate question of virtual integration. That was kind of the technology integration. Did the application at the top have to care about what kind of network it was running over?  Is there stuff in the middle hiding that away from it? 

There's also a separate thing which is the commercial integrations. You mentioned telephony and SMS. What's interesting about them is that when you make a phone call or send a text message, it isn't just what goes over some dedicated network specifically for telephony or text messaging. Also, the money flows in the counter direction.

When you send a text message, you go and get charged 10p for sending that message. It's the combination of technical vertical integration and commercial vertical integration that makes different patterns for different types of system for distributing data to users. Let me give you some examples of that.

Take something like a content delivery network that your iTunes, Apple - you want to go and deliver movies over the Internet to end users. The end users will then download it over their standard Internet connection. It's a very low amount of technical integration between the movie and the ISP client. They don't need to know about each other.

But there's a content delivery network somewhere in the middle that Apple is paying that content delivery provider to cache and deliver that movie. So there's money flowing back and forth. It's based on the volume of movies. There's some degree of commercial integration. So you can move the levers back and forth and look at different parts of the puzzle of delivering voice and video and other forms of data. You can get varying degrees of technical and commercial integration.

It seems somewhat complex to say the absolute least. Would you agree with this?

It is complex [laughter], but what's interesting about it is that we currently have this utter total fixation on the broadband ISP product, which is one where the applications have access to no means of transferring money based on who's going to pay for delivering this movie. There's no API for payments to an ISP. I'm happy to go and get the user to download this movie from this website and please, I'll pay for its delivery. Don't count these bytes against the user's monthly usage cap. This is what the application provider would like.

So you've got this total fixation with the broadband ISP product, which has the benefit of separating the applications from their delivery, but also loses in that process the commercial richness of the telephony and the SMS. That's a problem. Although it's complex, the model of different kinds of vertical integration be it technical or commercial, it's very important because the future of the Internet and the future of broadband is largely about putting back into it some of the rich commercial models from other delivery distribution systems like the PSTN fixed telephony system, but without all the technical limitations of old legacy systems.

Surely, if you pay for connectivity, you decide how many Gigs you want, what speed you want, you purchase connectivity as a product, surely it should not be bound in any way to the application. An application you may pay for, you may not pay for, but these are separate things?

There are a number of subtleties to that question. One of which is basic connectivity, what do we really mean?  There are really two parts to that. One of which is getting the pure access part, which is how do I get from my mobile device to the cell tower, or from my device in my home up to the central office?  It's renting that copper pair or that co-axe cable, the fiber that gets me to the place where telco things start to happen.

Then separately from that there's a question of getting the data across the world to where ever it needs to go. What we're seeing is that the access component is relatively steady over time.

Steady in what fashion?

In terms of how people are going to pay for this. Here in the UK, you pay 12 pounds a month to BT for your line rental. That's the access component and separately you pay for an ISP plan; for 17.99 pounds a month you go and get Tesco Broadband [a no frills service]. Now for you the broadband service is at the top.

So, what we're going to see is that the users don't like having to think about how many megabytes and megabits they need. So if you want to go and access the new BBC iPlayer online, and you're on Tesco value broadband, you've only got a one Gigabyte usage limit in the month. The average user is not going to want to start thinking about the bit rate to this streaming video. All they want to know is "Either I'm buying some product, which comes postage and packing included, or it's some ad funded thing from YouTube and Google is paying for the whole delivery of this thing."  What they don't want to do is have to think about megabytes and megabits themselves.

Also, they don't want to have to provision a new set of access every place they go to. So when you go to your parents at Christmas and you spend all Christmas trying to recover from the turkey and pie in the bedroom; to surf the web [laughter] rather than interrupt the relatives, you don't really want all your usage at your parents house to be counted against your parent's ISP plan because they might be on Tesco value broadband and not on the super business class version that you prefer.

So we have to work out how to go and package the access, the data service itself, and the application devices in new and different ways to sell the user exactly the thing they value and no more or no less.

I think one of the best example at the moment is Amazon's Kindle product. You buy this device. It's got EVDO or whatever it is, built in as a network access. It does exactly what it says on the tin; this device will deliver your ebooks. You don't have to think about megabytes and megabits. You don't have to think about where it's provisioned. You don't have to think about hot spots and "Gee, I get the WiFi here and only have cellular there."   It just does it. It's been packaged up perfectly.

So bundling connectivity with a device, a specific device, I can see how it has value. Look at SMS. It's something which is bound to a device and connectivity and it just works. Do you know what the value of the SMS market was last year?

It's about one hundred billion dollars a year.  The figures obviously for 2007 aren't all out yet, but it was pushing one hundred billion dollars, which is bigger than movies and music and the game software industry all put together. There's something special about it, clearly. For the few gigabytes worth of traffic that all the SMS adds up to be, it's a relatively small amount, the users are paying very, very large amounts of money; only if you view that purely from our technical viewpoint. What it's telling us is a couple of things.

One of them is that when you break apart a product into smaller pieces and sell it, by the sachet rather than buy the big bulk bottle, you get much higher margins. When you buy something wholesale, it's generally bought in huge amounts at very low margins. By the time you're selling it in a tiny sachet, the margins go up.

Another thing is that SMS is a distribution system for messages and data. Each of these distribution systems has a large number of attributes, one or two of which are what kind of technical data can it carry and how can you make payments through it? But it has a whole lot of other attributes as well. For example, the difference between SMS and the Internet is that SMS is based on phone numbers; phone numbers are attached to countries. So if you are running the Eurovision song contest and you want people to vote for songs, but they can't vote for the song from their own country, with SMS it's easy to filter out those votes; if Germans vote for the German entries, ignore it.

With Internet you can't, with high certainty, know which country or jurisdiction an IP address is attached to. It's easy to fake it as well. So there is tons of cheating, if you try to do Internet voting for the Eurovision song contest. So it's only by understanding the full suite of attributes that these distribution systems have and their cultural context and their expectations? 

Like Telex, it has particular laws. It has legal force in the way that other forms of communication maybe don't. You have fax and it became a legal form of communication ten or fifteen years ago, even though it existed for longer. You have to look at the whole context of each of these systems.

The clever thing you can do as a telco application provider is to blend together these different systems, to create in effect, new communications media. I think an impressive example at the moment is something like The Sky Anytime box, where it downloads ...

You just mentioned Sky but that is British only?

Sky is a multinational satellite broadcaster but I don't know if this box is available outside of the UK market. This box is their way a telly takes content from the satellite; it caches it on the hard drive inside the box. You can also plug into broadband and download content over broadband. It's a clever little box, they can push down to you what you might want to watch. It merges together broadcast and broadband. Of course, you can have your DVD player underneath the telly as well. There are multiple ways of delivering bits to the user. Sky has blended together the best of several different distribution systems into a new one.

To passive consumers, this is an interactive thing [the Internet]. I am getting slightly scared in case we end up with glorified CD players hanging off the end of networks.

What's the lesson from that Sky example? Or Netflicks. Netflicks is using the Internet as a signalling mechanism and the postal service as the bearer. The postal service is a very efficient way of transferring tens of hundreds of gigabytes worth of data.

I think the important lesson is when you take this to where the cash is; the money is in voice, there's been this fixation with Voice Over IP for a number of years and actually maybe - this is heresy - but maybe the good old-fashioned phone system is really good at transferring voice [laughter]. Time-division multiplexing?  It does constant bit rate voice very well. You have to throw an awful lot of technology at a problem that doesn't exist to try to persuade anyone to move over to Voice Over IP.

Anyone understanding the full context and capabilities of each of these systems should start to think, "Hey, actually maybe what the Internet is good at is allowing new forms of signalling to evolve faster than SS7 or whatever might otherwise allow. Even those things in principle could evolve."

Well it allows niche signalling systems instead some large monolithic controlled block.

Why don't we focus on enabling the IP parts to the thing it does well, which is, "Hey how do we enable the rendezvous in front of this phone call?  How do we send signals and presence data and the picture of where I'm at or vacation information wherever it might be, to help people make phone calls at the right time, is getting it to both of them. " 

Then, stop worrying about trying to do Voice Over IP until the technology is upper duper mature and people decide that we can't possibly afford to maintain two networks, which is quite a long way away still. Let the phone network do what it does well, which is phone calls.

So, for 2008, you're promoting TDM? [laughter]

Oh, yes. [laughter] TDM ... the future is in...

In TDM. We bypassed it and now we realize we should have just stuck on it. [laughter]

Embrace, extend, extinquish - yes - as Bill Gates would tell you.

I cannot help, and there's so many topics you've cast up and so many things I want to ask as usual, but immediately on that point what do you feel will be of BT21CN then?  Because with British Telecom's 21st century network they are going to switch off their TDM in say 2011.

21CN is a really big thing. There are lots of different parts to that project. If we're just focusing on the voice network part itself, I'm not privy to how they start paying their suppliers for the TDM equipment, and what the situation would have been with end of life-ing support for their equipment and the like and spare parts.

Well, BT is on record as saying they're going to be saving one billion a year in OPEX.

So by spending a large number of billions you have CAPEX you get OPEX savings. I am not privy to the figures. But, what I would be tempted to do was look at how long it's been from inception to delivery for 21CN.

How it was sitting now, I went to the BT website and it said 21CN will be turned on at this road in Edinburgh in 2011. It's the beginning of 2008 and in my book, that's an awful long time to be planning a technology project over in this environment.

You could have built a wrapper around the existing voice network, offering web services and other capabilities, and started to enable lots of the quote "advanced services" that the 21CN would offer years earlier if you had wanted to.

Maybe this [BT21CN] is a longer term approach. Maybe it [not doing BT21CN] would have given you incremental services whereas with BT21CN it is going to give you something which is going to be suitable longer term. You can do more with it because it's an entirely new network, a very fast network.

You can see the allure of moving to an all IP network, but you also have to understand the high risk of having any project that has a five to ten year implementation timescales. Because remember that whatever protocol and architecture that you are choosing at the outset might be obsolete by the time you get to the end. Look at SIP, which was the obvious clear winner out of all the IP signal protocols, even that has its problems. It's got it's architectural mistakes.  It's got incompatibilities. It's been an absolute nightmare to get everyone to have the same understanding of what this particular SIP message...

You mean it's not the session initiation protocol, but the subject to interpretation protocol?

Yes, absolutely [laughter]. And as a result, the chances of SIP itself being exposed to the application developer and being in the interoperability layer, probably isn't going to happen.

Then how do you expose it to the application developers?

I think that these things, if not IMS is all about 'they're good at certain things' and you need to understand what they're good at. What is SIP or IMS good at?  Well, it's good at provisioning, doing signalling to say, "Hey, Tom over here has paid a certain amount of money to have a certain kind of traffic be hauled over this network", over some kind of virtual overlay or whatever they are going to do on top of it. It could be a full capacity reserve pipe we're going to pretend runs over this network. Or, it's going to be something that's prioritized; it's going to be best effort or whatever. It's [IMS] good at managing that, provisioning of virtual circuit.

What it isn't necessarily good at is trying to have a common understanding of what some presence message might mean in the future, because it's all contextual to the user. You go on-hook or off-hook even. Even something as trivial as that, having a common understanding of that would be, you might say, if people have speakerphones, or they go three-way calling;  you add these new features in and suddenly what does that old message mean in this new context?  It might not mean the same thing as it used to. Even if technically you get these networks to inter-operate, it doesn't necessarily mean they're inter-operating it in the users mind.

So let the signalling protocols do what they're good at which is help the telco be a logistics provider; a personalized logistics provider for data. That's what telcos are. They haul data around from point 'A' to point 'B', but they do it using a number of means so it could be broadband, could be content delivery network, or edge caching which is where you broadcast something out like Sky, cache it at the edge of the network and then you can redistribute it to other people who on the edge of the network.

You can do this with Sky?

Whether the Sky box has peer-to-peer redistribution, I'll need to go and have a look, but certainly edge caching is a capability that some of these set top boxes have.

What the telco does, just like a logistics provider for atoms blends together rail, sea, land and air transport, telco blends together all these different types of delivery. In voice you have prioritized networks versus best effort versus full circuit switched and packages them up with the application and the device, but it doesn't get involved in the applications themselves.

All they are doing is helping these people get the data from 'A' to 'B', which isn't being just a dumb pipe. It's a lot more complicated than being a dumb pipe. Because you have to slice and dice up that pipe, enable competing and contending uses of the pipe to be prioritized against each other to be able to have much finer grained provisioning of the pipe.

For example, when you're at home and you're accessing your employer's internal sites over VPN, surely your employer should be paying to have all that VPN traffic being hauled. You shouldn't be saying, "Well, I'm paying 20 pounds a month for my broadband. Maybe I'll expense 5 pounds a month to my employer." No, they should be paying for it, even if you haven't got broadband at home at all, as a retail ISP for yourself, you should have to have access to your employer's stuff [via broadband].

Is this not like beginning to say that if you buy a kettle, that somebody else should be paying for the electricity that goes into the kettle and maybe somebody should pay for the electricity going into the washing machine?  Shouldn't connectivity, the ability to haul bits - bandwidth - into the home, shouldn't that be treat just as electricity coming into the home?

It's interesting.

We're falling into the net neutrality thing here.

There are some specific things about the power industry and electricity distribution, which are interesting. This contrasts with the postal system. When you have something delivered over postal system, you can either buy a stamp or you can go and get a prepaid envelope or you can just put it in the postal system and have it run off and not pay postage at all and somebody else then has to go and pay penalty postage at the other end. There are all kinds of different ways of deciding who pays for the thing being posted. It could be the person at either end.

Electricity distribution, a bit like broadband, doesn't offer these different payment mechanisms. There are good reasons for this. It could be tied to technological issues. It could the history of the medium itself. In some ways it could be a good thing that appliance has to account for its own usage.

I'm thinking accounting for CO2 production or something. If some old appliance that you have in the house is rated to use 1kWh a month and suddenly it's using three because its fuse is burning out or something, and de-provisions itself from the network, that would be a good.

But, there are actually good reasons why the power network doesn't have this capability. If you take a slightly different example, like the great blackout in the Northern US a few years ago, that was partly caused because they were trying to move to a more horizontal industry structure. They forgot that power distribution was vertically integrated for a really good reason, which was that no matter what you're abstraction was in terms of energy trading, the reality was that you had currents flowing through wires. When you have too much current going through wire it gets hot and it starts to sag. If it sags too far it touches the wire below and they short out and your power system fails. That's what happened. The power line network literally melted because too much power started to go in the induction loop pattern and it all went wrong.

So, you needed someone end to end to be able to manage the whole vertically integrated distributed system. There are historical reasons, not technical reasons why some of these networks don't develop sort of modular layered interfaces.

Sounds to me like you would like to apply a signalling system to the electrical system, by analogy and have our kettles and so forth signal their usage etcetera, and put toll booths in there.

What we're leaning towards, the whole network neutrality debate. Should your power company be able to say "Well, you're British, you live off tea. Without tea you'd perish. So, we're going to charge you lots of money for kettles. But perhaps this house heating, well the Brits are pretty used to living in the cold and damp. They won't notice much if their houses are still cold and damp. We won't charge them very much for heating the house by electrical power." 

If you only had a choice of one supplier, then that would be a bad thing. Because it would allow them to price discriminate amongst all the different uses you have and basically reclaim all the value of electricity for themselves. In a competitive market, it would be a good thing. Now it seems utterly bizarre to think of having to provision a device before you plug it into the power socket, but if you really wanted to manage your power usage better, or be able to go and compare a Bosch refrigerator. On the refrigerator there's the little EU mandated power efficiency chart. It turns out that basically all the refrigerators in the row all say "A", because in the six years since they started or ten years that they started to scheme, refrigerators have all got much more efficient. They all got to the top of the scale. There's nothing best on list tells me, really. . .

But they may never have got there had they not put this A-to-F label on there...

Imagine for a moment, I could go and buy a refrigerator and it came with twenty years of service and electricity included. I could see the full price, the lifetime price of that appliance there in front of me. I don't need to go and say, "That one is 700 pounds but it uses 22 kWh a year and this one..."  The whole thing would be bundled there in front of me.

It would be a good thing and a bad thing in the white goods appliance market, you could argue. But at least have the option. If the power socket was able to say, "Ah, the power going for this device is provisioned to this other account."

But for that to happen you have to have a very rich wholesale market in electricity for the refrigerator maker, to have a refrigerator work regardless of which power company you happen to have chosen as your retail provider for power, so you'd have to various intermediaries and a new market structure.

So then how do you stop them reclaiming all the value?

As long as there's competition at the retail end, so you have a choice...

But that's a major thing; "as long as there's competition."  Most of my American buddies are claiming there isn't competition, there's a duolopy in the US.

And they are right. There's a duolopy in the US. There are some pros and cons of that model. You ask the people who are in the lucky areas where Verizon FIOS has been deployed because the Verizon model said this is a zip code with a nice high income of people who pay their bills and would quite like to have lots of premium direct TV. Well it works to some degree. But unfortunately I think that it will also greatly inhibit the growth of the necessary economic models that will be needed in the future; particularly growth of rich wholesale markets in access and connectivity.

What will inhibit it?

The vertical industry structure you see in the USA; where AT&T and Verizon and a few other companies, dominate the market and you have very limited retails choice; you have choice of either one or two broadband ISP's.

Now the UK market has a thriving, vibrant wholesale market, France has a thriving wholesale market, as a foundation from which to grow new wholesale products, which would enable new kinds of connected appliance to be offered.

So you go out and you buy the Apple TV box and plug it in, you don't have to think about which broadband plan you're on, is it the right broadband plan and fast enough and enough megabytes and gigabytes per month?  It's Apple and it's the iTunes service that has to worry about getting the content onto the box and paying for it.

As long as you don't have a bottleneck in that little access loop stopping retail competition, then the network neutrality debate, this whole bogeyman is like a shadow on the floor. But, the shadow is actually something you want, which is a rich wholesale market.

The idea that Google will be charged extra for delivering YouTube videos, here's the secret, it's a good thing when Google could offer YouTube videos and you could sit there and watch them all day, every day in standard definition, high definition resolution or whatever you want, and Google is footing the bill for you. Today this isn't the case.

Martin, these things you mentioned in the start, sound to me are a double-edged sword. What could happen, excuse my instant pessimism, is that you'll get the same Google video quality but the telco will charge you 5 pence or 10 cents every time you watch a video.

The worst bogeyman fear with network neutrality is Google charging you; your ISP will be charging you to go into something you value highly. That isn't going to happen, it's not going to happen.

Why are you so sure please?

If there's going to be any charges, the charges are going to be to those upstream parties like Google [as opposed to downstream to the consumer]. It's going to be to the people like Microsoft for delivering your ...

It may just give you what you have today, that is the fear; that's where the anger, the sentiment is, which you may even be detecting from me.

But, it's [network neutrality] trying to treat the symptoms caused by a lack of competition in the access bottleneck. You can't cure cancer by giving people more morphine. It doesn't work that way. It seems to take the pain away, but you'll still die. 

In the US market, you need to understand the infrastructure is not part of the telecom industry, basically. The infrastructure is part of a multi-utility access business. Their job is to synchronize up the replacement of the gas pipe with a length of new fiber; all the replacement of older street lamps and the digging up of the road with deployment of the new fiber down the road and you do drops off the side. It's to take the cost out of the thing.

It's advertised over a twenty, thirty or whatever years. The plastic pipe itself might be there for 100 years. It's financed differently, maybe under different ownership structures that are designed to create open access and neutrality. If you want neutrality, neutrality needs to be a different layer [laughter]. It's not the IP layer. It's not layer three. Neutrality has to happen at layer zero and one. When you've got the rights of way and the conduits and the access ducts and maybe the physical fiber or copper, that's where the neutrality needs to occur. They picked the wrong place to go fight a battle. The good news is that if you started initiating network neutrality legislation, I don't think anyone could actually write anything down that would be meaningful and enforceable. So it's largely hot air.

Network neutrality means to me to sell me something called Internet, let me shunt bits backwards and forwards, and don't discriminate those bits in terms of pricing. Is that not something simple?

Let us understand this right. You'd have broadband service providers, people who are selling access to a broadband pipe, and within that today, most of their money comes from offering the Internet product through ISP. Now, within that product, there's clearly a problem today, which is that some or many users have been misled as to what they're being sold. They've been told unlimited, asterisk. What the asterisk says is not unlimited. They've been told Internet access and in practice they're finding that certain protocols and certain destinations are being throttled. It's the mismatch between what the consumers been told and what the reality is, that's the problem; not that less traffic should have been going on.

The evidence of that is that there are ISP's like PlusNet in the UK, who are brutally honest with their customers. They have whole web pages dedicated to saying, "Here's how we're going about shaping our traffic today."  They publish all their current traffic stats on their website day by day. They tell you when you buy the thing, "Hey, we traffic shape and we love it."

If the user buys it, they have their eyes open. They know what's happening; where is the problem? It's between consenting adults?  The problem occurs, much in the market. People's ISP contracts have this clause that "we can do whatever we like whenever we like without telling you about it."  That's wrong.

There's a consumer protection issue there. That was like Michael Powell's "Fourth Freedom", freedom to know what's in the plan. That isn't currently being enforced. You could call it net neutrality, the neutrality of the network, but can you have a very un-neutral ISP plan if you want to, like PlusNet's. It's absolutely fine as long as the user knows about it; is told about it before they buy it.

What it also ignores is that outside of the ISP product, you look at all the other products that the broadband service provider could be offering, all these other wholesale products to say, "We will give you universal access to all government self-service websites..."

Also, if a doctor goes to any person's house and plugs in a different little modem into the phone socket, they will be provisioned to have broadband access while they're at that patient's house, regardless of whether grandma has actually got broadband herself.

So there could be all kinds of other products and services that the broadband service provider offers, which the neutrality thing is irrelevant to. The government or the National Health Service goes out and buys these business-to-business products. Where's the problem? You have professionals buying off professionals. They should know exactly what they're buying and know how to buy it.

You informed me that you've recently published under STL Partners; telco2.net - I think is the best place to look for the STL Partners work, am I right there?  You've recently published a future of broadband report?

We've just finished a six month study on the future of broadband, the future business models of broadband. To do that we did an online survey, which over eight-hundred people responded. We've talked to dozens and dozens of people. We did a lot of in-depth research. We have been comparing the broadband industry to other industries like container shipping, and the power distribution industry. We've been trying to learn the lessons, what we can, from these other industries and answer what does it mean for broadband?

Our conclusions are very much what I've been describing, that is, broadband is part of a multi-network, data logistics business. It doesn't exist in isolation. You have to be able blend together multiple different distribution systems. If you're offering an IPTV, for example some kind of enhanced TV service, you ought to have voting. Then that voting might be done by SMS and actually, if in your little set up box you captured a person's mobile phone number, and authenticate it, they may not even necessarily need to send the message directly from their mobile phone. There are all kinds of different ways of blending together these different systems.

Does that not mean that you're saying broadband providers should start going out and buying postal offices and courier vans and jiffy bags?

Yes, it's the digital equivalent to these. What they need to have is they need to get involved in content delivery networks so there is bulk content, that is not time sensitive. It needs to be cached somewhere in the network. Today, companies like Akamai put their caches in a more centralized locations, but you don't find these caches inside of every DSLAM inside every central office. They cache stuff at the edge of the networks, on your PC, in the set up box, in the home hub, and these go on to bridge different systems so it would be able to have BT Vision box where you can take freeview broadcast TV and cache that. You would be able to take broadband and broadcast and these other systems and be able to meld them together into new things.

They also need to deal with we may call the customs aspect of being a logistics provider. So when shipping sea containers around the world, you have these weight bills and manifests and you have to pay customs dues and stuff like that. The digital equivalent of that is being able to deal with authentication and provisioning for all these different networks and connectivity.

Another part of it is you take the postal analogies. You walk to the post office and at the back of the post office are all the counters where you go and post things. But normally, there are racks and racks or wrapping paper and letters and pens and all kinds of other things you need associated to the postal delivery. That's the value of the services. So on top of the basic logistics business, there are a number of value added services.

In the physical world you have insurance as an example of a value added service. In the digital world examples of value added services would be advert insertion, or quick checking;  so the telco knows where you live because they have a copper cable that goes to the front door, they have been receiving payment from you for a certain period and they know if it good debt or bad debt. Recently the biggest credit checking company in the UK is BT; they did more credit checks than anyone else. Yet, if you're running an application over a BT DSL line, you have no means at the moment of interacting with that very private and personal data.

So there are all these value added services - location, presence and other examples where the telco or broadband service provider is a supplier to people who are building these applications at the top of the network. They are doing things which are natural by products of running the network, a logistics business. They're not toll keepers getting in the way of people actually trying to build their application and deliver it. They're suppliers of the things that these people voluntarily draw on and pay for because they add value to their business, not because the telco's getting in the way.

So is it your position on net neutrality that it's a moot point?  Is that my understanding? 

Pretty much yes, because I've never managed to see a really meaningful definition of net neutrality. I've seen lots of high level superficial definitions, but when it comes to applying those ideas in practice, they're far too woolly and vague. It's just a name for a fear, not a name for a viable policy that any one regulation can adopt.

Have any networks ever been neutral? So when you download something over the Internet from Korea, some piece of content you want to download, and you think, "My goodness, it seems to be going down really fast." You download from outer Mongolia, you think, "Gee, it's going down really slowly." That's because of the really big fat pipe that goes to Korea and the really thin pipe that goes into outer Mongolia. That reflects the relative demand for those areas. You could then say, "It doesn't seem very neutral."  We're discriminating against the outer Mongolians. Well what is your the duty?  What is neutral?  What experience is supposed to be neutral that you're delivering to everyone?

If YouTube suddenly explodes in popularity and it is generating tons of transit costs to ISP's, are they suddenly under obligation to maintain a certain ping time and bandwidth through to YouTube when I go to the website?  What is this neutral thing [laughter], tell me?  Do we have to have regulators imbedded every router on the Internet saying, "I'm very sorry, but you can't route that that packet that way. The ping time is too long. It's not neutral." [laughter] The World of Warcraft players won't be happy.

The fear is being very well defined, the net neutrality fear; if you go to a website which isn't on your telco content partners, like their video partner or their news partner, if you go to a news site that isn't on their partner list, you're going to be charged for reading the news on that site. Is this not a well-placed fear?

If you lived in a market where there absolutely no choice as to which ISP you had, or there was very little choice such as the US, I guess it's possible that the Internet super highway man might then come along and rob you of your valuables as you go past and insist on an extra charge to let you pass.

But actually, what we want to see emerge is a rich wholesale market where Google could come along and say, "Hey, you want to watch YouTube or watch YouTube all day in standard or high definition without any charges and you don't have to worry about going over your fair usage limit or your set cap limit. It's all on us [laughter], keep on watching those adverts, keep on clicking on those little contextual ads. Here's the problem. The current ISP model tries to charge everyone the same amount for a very broad spread of actual usage. But you can't remedy that by going back to metered usage because people hate having a clock put on, and they don't understand megabytes and megabits stuff. You can't traffic shape your way around the problem because the users don't really understand advanced network policy enforcement; obviously there are a small segment of users who do. Some gaming users might be more than happy to be on an ISP that tries to prioritize certain real time flows or holds back peer to peer because they want to have priority in the network for the games.

But by and large, none of those things work out. So, the way to solve it is to take the voice and video traffic, take it out of the ISP product but to do it in a way that is beneficial to the user. The user actually wants it to happen. An example would be that you could watch YouTube videos until your eyeballs fall out because you know that it isn't costing you a dime. You can make phone calls from your mobile device to your work colleagues through your exchange server, to your prospective date through match.com and all these separate voice enabled applications just work and it's all charged back to the appropriate person; back to your employer or back to match.com.

Net neutrality fear is that a bogeymen will come a long a rob you. But the bogeyman really is just a shadow of something we actually want, which is a rich wholesale market.

You said at the start, that there isn't such a rich market in the United States. So their net neutrality fear is therefore very real then?

It's real in that there is a gap between what's being sold at retail by an ISP and what you're actually getting, that Comcast could suddenly come and decide that "we don't want to have this peer-to-peer traffic even though we sold you Internet access." But the solution to that is to restructure the industry so that users have retail competition. They have lots less people trying to compete for their business and if one of them turns out to be a two-faced liar, then you just don't renew with them, you go with somebody else.

That's not going to happen within the current US industry structure. The consequence is that probably the US will fall behind as an industry leader.

Have you given any consideration to open wirelessm, in the 700 MHz type stuff? 

It's very hard to make a call on some of these things because there are certain benefits to vertical integration. It helps to pull more money into the infrastructure layer. You cross-subsidize infrastructure from your overpriced application services because you can control what runs over the network. The problem is then you end up with a very stagnant set of services in the network because everything is gate-keepered by telco. Telco's idea of progress is not the same as everyone else's idea of progress.

So, superficially, open access is pretty attractive. But, it's really unclear how this tension between the commons of the network and the need for innovation and the need to be able to ration out a fixed amount of space is going be worked out. I'm really keen to see the experiment and I think the experiment should be well-run; there should be enough spectrum given enough open access rules. There are a number of different models, potentially. Something like WiFi, which was a bit of a free for as long as the power levels not too high, some were it's open access bits or wholesale; business to business types of transactions going on.

Lets see the experiment run because I don't think anyone is sufficiently clever to understand all the variables involved and how it will work out. Let's see the experiment run many times over in different places and learn from it. At the moment nobody really knows what the outcome will be.

I noticed that you were the only keynote speaker who still hasn't put a final title on his keynote [for 2008]. You haven't submitted any talk text. What are you going to speak about?  You hinted it was different distribution models?

What we've studying is how telecoms is just one of many distribution systems of data and how telco's can turn themselves into being logistic service providers for data. I've been doing a six month study on that.

I was procrastinating about what to talk about because I've also been thinking about the future of telephony, voice and personal messaging. Another option, which I won't talk about, was just how telephony and phone calls are just one layer in a nice, rich, thick five layer sandwich. The sandwich, the pyramid of these things, goes from the top where you have communities. There are a small number of communities which are made up of relationships, which are people. Below relationships you have conversations going on. You don't talk to someone for twenty years if you really don't have a relationship with them.

Yeah, communications are required to have a relationship, right.

The conversation is made up of things like phone calls. I think below phone calls is an interesting extra layer - rendezvous. Although some phone calls are being used to try and help organize the real phone call. There we find the real conversation. Not all the conversation occurs through telephony. Some of it occurs face to face. Some of it occurs through other media like email.

People are often phoning up to say, "I'll be there in five minutes, I'm just running a little bit late. I'm on the train."  There are all kinds of manual transfers of location and presence data, which are being done through telephony, but they aren't phone conversations in that sense. Today's telephony product is very broken in terms of helping people to meet up at convenient times. If I want a call with you, I can't just send through into your requested call list, like your missed calls on your mobile, "Martin would like to have a call with you. At your convenient time, call Martin back."  If I'm unavailable the message temporarily disappears on your phone. If you're on another call, it doesn't try to invite you to call me at the same time.

There's an opportunity to fix the whole rendezvous process. There's an option to fix the conversational process as well. For example, dictating your name, address and credit card number and security code during a conversation with a call center is very inconvenient and painful, whereas, you'd like to just press "1" to release that information.

I think there's a lot of opportunity in terms of money to be made in fixing the problems of telephony. But, in a fifteen minute keynote you couldn't talk about so much. I think I ought to focus on what the phone company becomes which is the logistics service provider for enabling the transport of personal communications data and generally get out of the way of running the phone business.

But you try to milk the existing phone business for all it's worth and help integrate it with all these other revenue generating businesses like ecommerce or vcommerce.

So, why are you coming to the inaugural Emerging Communications 2008 Conference, eComm, March 12-14, 2008, at the Computer History Museum, Mountain View, California?  Why are you coming along?  Why are you putting your ass on a plane in order to do a long haul flight to go over there?

I'll tell you, it isn't for the frequent flyer miles. It's because there's been quite a lot of talk recently about how VoIP has become boring and dull, there's no money in voice and voice is going to be free. That's rubbish and nonsense. It's a complete misunderstanding of the size of the opportunity and how voice and telephony and personal communications are the anchor in which the whole of the telecommunications industry revolves. Despite the fixation on media and entertainment, which seems to drag people off to false alleys all the time.

There's actually a huge amount of opportunity for telcos to turn themselves into platforms that are suppliers of personalization and rendezvous and authentication and payment, credit checking and all kinds of other data than enable conversations to occur. There would be a lot of money in doing this. It's part of the big picture of being the logistics service provider, which would help actually deliver stuff, but don't get in the way of whatever is in the packet.

It's also to share some ideas that we've had within the Telco 2.0 space and our understanding of two-sided business models and some of the key issues and concepts around that.

Plus, look at the speaker line-up. It's such a concentration of the top people in the industry. It was just irresistible to come.

When you said that voice or VoIP is not exciting, why do you say this?

That's what many of people are saying. I think it's because they've got trapped in the idea that the value is all in the media itself. It's in the Voice Over IP. Actually, the value is somewhere else. The value is in avoiding wasted phone calls, people making phone calls and getting to voice mail when they shouldn't get into voicemail.

They've [VoIP crowd]  focused on competing with the existing telephony system on the thing it does best, which is transferring media and not the things it does really badly, which is location, presence, all these other things.

I think voice is going to be an integral part of almost every online application in the future. There will always be other people to talk to. There will always be support and service to talk to. It's a massive opportunity.

Are you saying that voice will become an adjunct to other things of value?

Yes, but it will be done different ways. Not everything will be synchronise voice. There will be a lot more voice messaging going on. People want personal touch. They want to have a sense of the other person they are communicating with, because they hear their voice. But, people won't always necessarily want to have synchronise voice.

But today's voice mail, which is completely disjoined from all the other online activities you engage in, isn't the answer. If I want to send you a voice message without your phone ringing, and do it with and instant online application, how do I set it up so that it delivers at the right time?  If you are off on holiday half way around the world, it doesn't arrive at 3:00 a.m. and wake you up saying, "Beep, beep", and you open your phone, when it's not something urgent. 

I think voice will be a story of the evolution of the web in the next ten years. It probably isn't so much around semantic web all this other geek-friendly stuff. It's around the touchy-feely side of how do you label relationships, conversations, and human touch?  There ought to be a lot more of a woman's touch around some of these conferences; understanding the less logistic side of communications.

When you spoke of that pyramid with communications at the top, actually communities at the top, and relationships underneath and communications underneath that; can you relate that pyramid to social networking sites and telecommunications companies?

Social networking sites are the top three layers of the pyramid then there are communities, they are formed of relationships, and then there are conversations. You can find people, get model groups of people and you can send messages to people.

Phone companies are the bottom three layers of the pyramid, which overlap. They enable conversations. They enable calls, and they enable rendezvous. The rendezvous is that you're setting up a mutually convenient time. I text message you and say, "Call me when you're ready."  It's part of enabling the rendezvous.

These two people over lap, but they aren't necessarily conflicts. So should Facebook spend lots of money enabling voice in their applications? No because we already have mobile phones and desk phones and voice capabilities. The PC is a terrible telephone. Why make it into a telephone?  It's not. So how do you capture someone's mobile number or some other identifier for them and integrate their mobile voicemail with the Facebook voice messaging?  That's the problem it's going to solve.

How do you enable someone to make a phone call within Facebook to somebody else in a way that they can see that the other person is available and wants to talk at the moment and is in a certain context and location?

So in summary where do you see the opportunity in voice?

There is a number of parts. One of which is simply enabling new forms of minutes; new applications which will carry voice and don't necessarily do it using phone numbers or traditional means of telephony. Another one we might call vcommerce which is all the ways consumers interact with enterprises; so it's communications enabling business processes like delivering a parcel to your house and making sure the guy only comes when you are home. Some of it is around vcommerce type activities where you register your credit card number with your phone company or bank details and when you interact with the call center, there is non of this "Habla espanol?"  They know I speak English. It's in my telephony profile.

There is plenty money in enabling these experiences, there is plenty money in eliminating the waste in today's telephony.  Every time I spend minutes looking up someone's number, dialing them and finding it's voice mail, a minute of my time is worth more than the ten pence it cost me to make that call. Actually, a minute of my time, during the day, at billable rates is a lot more than the 10 pence call. If you can save me wasting that minute, trying to phone someone who isn't there, that's worth a lot more than the phone call is worth.

It seems that many people are still living off the ten-year old VoIP as an exciting thing when we don't care so much about the cost per minute of your call anymore, especially with a crash of TDM prices. You seem to be saying let's stop worrying or thinking it's an evolution to try and drive cost of calls down. The electrical path, the physical connectivity costs are nothing. It's really the cost at the social level. The cost of human time and attention seems to be where you're saying the cost is. This is where communications must aim at solving these wastages of human time and attention?

the rendezvous layer, the driver has been the increasing cost of human labor and time, compared to the cost of the phone call. Above the phone call layer, there is the conversation layer. It's mostly enabling better conversations between users and merchants.

I like this very much. You're saying it's not five nines of reliability that matter, unless you're calling emergency services. When you call to say, "I'm at the supermarket; do you want ketchup," you don't really care about five-nines of circuits, I assume is what you're saying?  What you care about is five-nines of successful communications, which mean you don't want to wake your baby up when you call about ketchup. Is this what you're saying?

Yes, at the moment my kids are off with my in-laws. They're two hours ahead of us. I'm not quite sure exactly when the kids are having their afternoon nap. They might still be on British time or on Eastern European time. The last thing I want to do is phone up my wife on the mobile when she's just trying to put one of the kids down to bed for their afternoon nap. What I do want to do is ask her to call me at some point in next half hour because I'm free now. I don't send a text message because that will make the phone go "beep, beep" and will suddenly make the child who is trying to fall asleep go, "What was that noise?" 

So I want better telephony. I want the phone company to help me realize that. To let me have spy holes as to what's going on at the other end of this line, before I press the green button, to make a phone call.

What is the opportunity space?  Is this a large financial opportunity space that you see?

Yes - have I modeled exactly how you do it?  If I had worked out exactly how to make money from it, I wouldn't tell you [laughter]. I'm pretty sure that there is a lot of money in it. Because everyone has been looking under the wrong stone for the last ten years. They've all been looking at how do we arbitrage the metered-minute model. It's just irrelevant. Almost all of the voice 2.0 start-up companies have been centered around this, with a few notable exceptions. It's the exceptions that are the ones that are going to be the seeds in the new business model of save users time, give them convenience.

Who do you think is best leveraged to seize these opportunities, this new land-grab?  Do you think it's the likes of Google or do you feel telcos also are going to play a major role in achieving this land-grab of the financial opportunity space?

A few telcos that open up in terms of application platforms will be successful. They'll be successful because they've turned themselves into logistic service providers for everyone else, not because they can stand in the way [laughter] of people delivering applications they want to deliver. I don't think we've really seen yet, the new raft of communications companies of the future. There are a few I've seen that I've been impressed with, like VoiceSage, who help enable communication business processes, how to integrate telco capabilities with general business processes.

But for the most part, I think these companies have yet to come into existence. The current social networking sites are based around entrapment of the users and trying to capture their personal data, resell it, and do it in the ways that I don't think users will allow them to monetize, ultimately. I think we're still in the early phase.

Social change requires a user attitude change. The Internet mass-market phenomenon is twelve years old, thirteen years old. Despite all the hype, it's still early days. Things don't actually change that fast. People's behavious don't change that fast. I think we've yet to really see the communications companies of the future, but hey come to eComm to start finding them. 

On that note, and especially as you're looking so tired, after sitting here for an hour and a half, chatting with myself, which we all very much appreciate. It's always a nice time to speak with you, Martin. I very much look forward, and I'm sure other people do also, to the half an hour keynote at eComm. I very much look forward to seeing you in Mountain View, California, Martin. Thank you very much for your time.

Thank you, Lee.

(Martin is also on schedule for the 2009 event to give a keynote entitled 'Where is the Money in Voice 2.0?')