Tokyo Forum; November 21, 2002

Wireless: the Thin Edge of the Wedge

David Isenberg (President, isen.com)

This is a summary of Mr. Isenberg's presentation at the Tokyo Forum on November 21, 2002.

The End-to-End Principle

Although I am not an expert on mobile or wireless, I am coming at the problem from the point of view of networks. My question for the last decade has been what makes the best network. And I believe that wireless technology is in the position right now to be "the thin edge of the wedge," the piece of metal that goes into the wood, that gets driven in just a little bit until the wood splits apart.

Now, I think the best model we have for the best network is the Internet. And it has been driven by several factors. Moore's Law has made it possible for very sophisticated communications protocols to be run in rather simple, rather cheap terminals. You don't need to put communications applications in the middle of the network anymore. Furthermore, transmission capability, the ability to send bits down the glass fiber or down the copper wire all through the air has increased even faster than Moore's Law.

But that is not the most important factor in what makes the best network. The most important factor is something called, "the end-to-end principle." These other things, transmission capability and Moore's Law, are simply enabling characteristics. But the end-to-end principle is really the key success factor in the best network. And we will get to how the end-to-end principle applies to wireless networks shortly.

Internetworking, the ability to go from a network of one kind to a network of a completely different kind, to a network of a third kind, means that you can not value too greatly things that are specific to a single kind of network. The job of the internetworking protocol is to simply connect networks and to ignore the network specific differences. So in the old way of doing telephony you had a signaling system that in the course of a call it touched every node of every network. That allowed at any node the owner of the network to add "cool features" so that their network would become more valuable than the competitive network. But in contrast, under the end-to-end principle, you ignore the network specific factors, including theses valuable "cool features". You just go from one side to the other. "Cool features," in fact, almost any kind of facilities-based competition, becomes meaningless in an Internet world.

Telco Style Intelligent Network Inhibits Innovation

The telephone company style intelligent network way of doing business inhibits innovation. The winner applications, the applications that we all know and love and depend on in our daily lives were not invented by telephone companies. These include e-mail, the Web, audio-on-demand, instant messaging, Internet telephony - - you know many of them; you probably are dependent on many more.

There are some important exceptions, of course. DoCoMo is a telephone company, and they invented what rightly, in this country anyway, deserved to be called a "killer app." And, of course, telephony itself, the ability to pick up an instrument and call somebody and talk to them. Those are important applications of the specialized non-end-to-end network, the network with intelligence in the middle.

But in each of those cases the critical factor is that the telephone company provided communications capability and then stepped out of the way. But, for every one of those exceptions, I can show you that the telephone company tried to add value to a network that fell on their face. ISDN, for example; Mini-Tel was successful for a while; Picture phone which they have been trying to reinvent since 1964, and it has been a market non-starter. We now have a picture phone on "keitai," and we will see if that actually succeeds in stimulating the market place -- I don't know.

New Business Models to Support Innovation

In the end-to-end best network context we need new business models to support innovation. I think the telephone company will have a very difficult transition from the vertical network that they are used to, where they sell voice and the network layer supports the voice and is subsidized by the voice, and the physical layer supports the voice and is subsidized by the voice. We will find that model will face increasing difficulty in the future; we already see the telephone companies struggling to maintain the value in the face of the Internet.

Regarding cable companies, in the United States we have cable TV companies and they are very successful at bringing residential broadband via cable modem service. But cable modem service is a half way measure. It doesn't deliver the kind of bandwidth that we know is possible by fiber to the home. It perhaps is not as flexible as wireless technologies and I think it is going to be very difficult for the cable companies to give up their old video entertainment business model.

There may be other models. Municipalities provide some form of open networks, primarily fiber networks. But they don't need a rigorous business model or an early return on investment. They are not doing a business case. They are just installing the network to benefit their city's infrastructure. Utilities have one key advantage in that they have a right of access to most homes and most businesses. But utilities are notoriously non-innovators, so there is some issue there.

New kinds of companies are coming along. There is a company in Stockholm, that is a city-chartered company, STOKAB.SE. They built 96 fibers to every block in the city of Stockholm in approximately three years. And then in year five they started to turn a profit already. So it is a profitable company that sells dark fiber to carriers. There are 40 carriers in Stockholm, ISPs, wireline, wireless, cable TV, etc. And it is a very vibrant networked economy.

Customers are actually building and owing their own networks. Most of these networks are just elaborations of a simple local area network technology. And we know that customers can install local area networks. So when local area networks become any distance area networks, why not customers?

Wireless: the thin Edge of the Wedge

Now, wireless is the thin edge of the wedge. I believe that wireless, because it has multi-megabit capability, would be able to increase the penetration and increase the breath of the business models made available. We are already seeing unlicensed spectrum is creating new opportunities for this best network to expand into new places, and is disruptive to carriers.

The United States FCC has a spectrum policy task force that just made its report on November 7th and the spectrum policy task force said, in addition to regulating spectrum as it has been regulated since 1909 and 1934 by frequency and usage, also by power and place of transmitter and so on, we are recommend that the FCC also regulate spectrum by time. So when spectrum is unused for purpose A, it can be used for purpose B. In addition, the report recommended that, instead of the command and control style of regulation, that is, licensee must use this piece of spectrum for this purpose, there should be two other models. The first one is called the private property model, where they say "ok, that spectrum is yours but within certain fairly broad limit we do not care about you do with that spectrum." The second is called the commons model, where spectrum is public property and anybody can use it, again for any purpose, within some reasonably wisely defined limits.

Now these would make important new opportunities that are just as important for innovation as the currently unlicensed spectrum is today. One of the big opportunities is multi-hop (mesh) networks, which has nice scaling properties, as customers own the network infrastructure without carriers and each new customer adds redundancy and throughput.

And the end result of all this would be intelligence at the edge. I hear broadband telephony is of extremely good quality with very low delay, and no telephone company involved, just software, just a stupid network connecting to general purpose devices. So in closing let me say that most of the important future communications applications have not been discovered yet. The best network will help us discover them. Thank you.