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Overview: "The End of Stovepiping"
William J. Raduchel
Ruckus Network
Dr. Raduchel recalled that he had joined the STEP Board around the time of
the first of the workshops on Measuring and Sustaining the New Economy and
noted his pleasure at watching the Board's journey down the path that
Dr. Jorgenson had described as it tried to increase its understanding of the forces
shaping the economy.
To get his talk under way, he called attention to a recent agreement between
Twentieth Century Fox and Vodaphone under which the studio would develop
one-minute original episodes of the television show 24 for distribution beginning
in 2005 over cell phone handsets in the U.K. He expressed doubt that, 5 years
before, many people would have imagined themselves watching an episode of a
television show that was not going to be available via television, let alone that
there would be a major new form of entertainment having mobile handsets as its
platform. He said he expected these one-minute episodes, which in and of them-
selves he found mind-boggling, would be available on Verizon Wireless in the
United States later in 2005. With others working on all sorts of things to distribute
via mobile phones, he said, it was a question as to what the real market would turn
out to be. Citing the Fox-Vodaphone deal as an example of "the ultimate in how
convergence is happening," he underlined the difficulty of predicting "what's
going to drive the world going forward."
31
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32 THE TELECOMMUNICATIONS CHALLENGE
TECHNOLOGY: SIX MAJOR THEMES
Dr. Raduchel briefly introduced the six themes that he would address in his
presentation:
· Innovation happens when it can, which means that if technology enables
it, someone is going to do it--a fact that, he said, "people who study technology
really do understand."
· Digital sampling and packet switching are fundamental changes, and
a new wave that would bring the latest of their many impacts was just becoming
visible.
· Technology change is not over, as Dr. Jorgenson's words had just
evidenced.
· All networks collapse to one set of interconnected webs, as he had
observed on a recent visit to South Korea. That country was on course to be
entirely lit by 2006, so that the user would be able to go seamlessly from EVDO1
to a specifically Korean WiMax standard that was evolving. "If you're Korean
and you have the right gear," he remarked, "you will be online everywhere you
go in the country."
· Convergence is coming.
· Regulation is going to be very challenging.
Innovation Happens When it Can
Among practical examples of what science has enabled have been telephony,
records, radio, TV, mobile telephony, CDs, and DVDs. Students of information
technology understand that specialized solutions are possible years or decades
before generalized solutions, Dr. Raduchel observed, so that applications will
always emerge "in a way that looks unique in the beginning but over time becomes
blended in with the overall theme of information technology." Because analog
solutions (which was all that existed until the 1980s except in some limited fields
of computing) were available before digital solutions, each developed into a sepa-
rate industry. In truth, however, they are not separate.
Digital Sampling
To evoke this phenomenon, Dr. Raduchel harked back to high school math
class, when students learn to approximate a curve by placing rectangles under-
neath it. If the rectangles used are sufficiently narrow, the approximation can be
so close that its difference from the actual curve is negligible. The principle in
1EVDO or Evolution Data Only or Evolution Data Optimized is a fast wireless broadband access
(3G) without needing a WiFi hotspot. For additional information, access .
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OVERVIEW: "THE END OF STOVEPIPING" 33
digital sampling is similar: Instead of trying to keep track of a curve of, say,
sound or video, one approximates it. As computer speed increases, the approxi-
mation improves to the point that the reproduction attains the same quality, and--
something very important from the viewpoint of the consumer--it tends to be
error free.
Unanticipated Consequences of Change
Such advances can have unanticipated consequences that many have diffi-
culty perceiving except in retrospect. Drawing an illustration from the recording
industry, Dr. Raduchel recalled inviting friends over to hear the "virgin play" of a
new vinyl record, which could be 20 to 40 percent better than any subsequent
play, depending on the quality of the phonograph. "Music was a form of primary
entertainment," he said, "because people would get together and listen, since that
first play was so special." But the one-hundredth play of a CD is the same as the
first, so it no longer matters whether one is hearing it the first time, or the
hundredth time, or the twentieth time. He speculated that recorded music has lost
its place as a primary source of entertainment because, through a change in tech-
nology, the special appeal of listening to it the first time has disappeared.
Packet Switching
This technology, the foundation of the Internet, applies the same basic idea.
A signal is transmitted over the air or through a wire as small packets that are then
reassembled at their destination. This process commoditizes information, since
all forms of it are turned into packets and each packet resembles the next. All that
is done by this huge worldwide network, the Internet, is to move the packets
around without distinction as to what they are. "They can be radio, television,
classified information, piracy, maps, anything," Dr. Raduchel stated, adding that
"everything is just bits" in the world that has resulted from this "very profound
technology change."
Technology Change is Not Over
Dr. Raduchel noted that Intel had recently made public its engineers' predic-
tion that the minimum 30 percent annual rate of improvement sustained by semi-
conductor performance for the previous two decades would remain a constant for
at least 10 and, possibly, 20 more years--that is, that Moore's Law would con-
tinue in force. The result of maintaining this rate of improvement, which equates
to 97 percent per decade, is that "the most powerful personal computer that's on
your desk today is going to be in your cell phone in 20 years." And recalling
presentations at an earlier symposium in the current series, "Deconstructing the
Computer," he said that display, storage, and transmission could be expected to
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34 THE TELECOMMUNICATIONS CHALLENGE
show even more rapid improvement, although their rates of improvement were
likely to abate sooner than that of semiconductors themselves. "In general," he
stated, "we will probably see a two-order-of-magnitude drop using conventional
technology in computing, transmission, and storage."
Innovations that were in the offing for the following 3 years would prove
both interesting and disruptive. For ultrawideband wireless, familiar to technology
watchers as USB/1394, standards had been agreed, and products would hit the
market the following year. These technologies were described by Dr. Raduchel as
"a way of going from your personal computer to your TV set seamlessly,
wirelessly, instantly." Also coming was wireless broadband beyond WiMax, "one
of the most fascinating developments" and among the topics to be addressed by
another of the day's speakers, Dave Lippke of HighSpeed America. WiMax itself
was capable of speeds up to 250 Mbit per second--"really high-speed transmis-
sion," he observed, "lighting the whole country."
Storage Capability Skyrocketing
The advances in storage would be as large as those in any other technology.
The capacity of the serial ATA disk drive, representing the newest generation of
that product, would grow to approach terabytes in size over the following 5 years.
Because the price of a disk drive had frozen at around $80, producers competed
through growth in speed and capacity. It was for this reason, Dr. Raduchel pointed
out, that the music industry was so nervous. "The personal computer you buy in
3 years will be able to hold every song ever made," he predicted, "and still have a
lot of room left on its disk drive." Meanwhile, hard drives would appear that were
small enough to fit into cell phones but could store gigabytes of data.
Dr. Raduchel then turned to silicon tuners, which he said provide the ability
to tune television signals off a satellite, over the air, or over cable. Noting that
these devices become cheaper as they are moved into small computers, he said it
would soon be possible to record 16 channels simultaneously. "Those of you with
TiVos," he advised, "think `TiVo on steroids.'"
With these changes, the cost per bit keeps dropping. An e-mail is, in general,
a few thousand bytes; a song, about 4 megabytes; a DVD movie, about 5,000
megabytes; and an HD movie, about 50,000 megabytes. That, for instance, the
HD movie is 10 times the bytes of a DVD movie--but is still a movie--indicates
that the value per bit being transmitted has, with the move into entertainment,
declined massively from where it was when the Internet started.
All Networks Collapse to One Set of Interconnected Webs
The Internet itself is two things, a physical set of networks and a protocol
known as TCP/IP, both of which were designed mainly for e-mail. While the
Internet was workable for movies at low volumes, it was "not yet cost-effective
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OVERVIEW: "THE END OF STOVEPIPING" 35
over the long haul"--although, Dr. Raduchel noted, "that could change." Broad-
cast remained very efficient as a means of delivering large volumes of bits and,
combined with large numbers of hard drives, "they begin again to approximate
the same thing. That's one of the battles you're going to see in the next 5 years."
The strength of Internet protocols, however, is that they make all networks look
the same and allow interoperability, and it was for this reason that the tele-
communications world could be expected to move to one set of interconnected
webs. "Five to 10 years from now," he predicted, "we will be online all the time."
Voice providers understood that their industry was on the verge of becoming
a feature, something not without precedent in the technology sector. "If you're in
the industry," Dr. Raduchel stated, becoming a feature "is not good." By way of
illustration, he pointed to Skype, a company employing eight programmers in
Estonia that had become a provider of international telecommunication services
and had grown to the point that it was disrupting the industry in the United States.
And on the way was a generation of phones that would allow users to roam to
802.11b or 802.11g networks, the wireless networking, or WiFi, that had become
common in hotels, offices, and homes.
Days Numbered for Landlines?
This would not be as minor a change as it might seem, for it would improve
cell phone service significantly in suburbs, where resistance to the placing of cell
towers had been common. The many people who had been holding onto landlines
because their cell phones did not work well in their homes would suddenly be
able to roam to a broadband connection and have their cell phones work per-
fectly. He called this prospective development "a major threat to the established
telecoms" because, as he said: "If your cell phone works perfectly, why do you
use anything else?" And every major player had entered the market for another
form of very cheap telephony, voice over IP, or VoIP. They were not sure how
they were going to make money, but they were sure that they'd better be there.
Speakers from both Verizon and Vonage were to address the subject later in
the day.
Dr. Raduchel's current professional activity involves serving college students,
who represent the next generation of technology users. "They live on their PC
and their cell phone," he said, explaining that their primary music and video
device is the former, and that their main communication takes place via instant
messaging and cell phone. The students spend about 6 hours a day online as
opposed to less than 6 hours a week watching television in the traditional sense;
live sports account for half of that viewing time. They almost never pay for media.
"They see everything as a victimless crime and don't worry about it," he observed,
noting that "darknet copying abounds: inside the dorms, where you have very
high speed network connections, these kids copy everything and copy it a lot."
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36 THE TELECOMMUNICATIONS CHALLENGE
Convergence is Coming
Dr. Raduchel stated that mobile phones would be "the first truly converged
devices." It is expected that, as of 2006, one-third of cell phones in South Korea
would be able to receive 13 video channels, 25 audio channels, and 3 data
channels via direct-to-mobile broadcasting (DMB). Broadcasting would be from
s-band satellites, employed in the United States by XM and Sirius, to cell phones
in cars. Soccer was to be among the offerings on the video channels, but other-
wise programming had not yet been set. In addition, SIM cards like those used in
GSM phones were expected to be made available to cell phone users by South
Korean banks; installing the card would equip a phone with a fingerprint reader
linked to the bank, thereby turning it into a banking terminal. "The mobile phone
will begin to become the dominant way of conducting transactions," he asserted,
"because it will be more secure, more reliable, and easier to use than anything
else out there."
Consumer broadband would follow the cell phone as a vehicle of conver-
gence; and, in fact, this process had already gotten under way with voice over IP.
In television, the newest competitors were Dell and Hewlett-Packard, which were
accustomed to coping with much thinner margins than, and were able to produce
in high volume better than, consumer electronics companies. "There is no differ-
ence between a flat-panel television and a PC except the packaging and the soft-
ware," said Dr. Raduchel, "so Dell and HP represent major threats to these
industries." He again pointed to the entry of Skype into competition for global
long-distance services.
Public Policy Issues Straightforward
The public policy issues looming over the landscape of convergence,
Dr. Raduchel said, were relatively straightforward:
· The speed of change was such that the economy was unable to adjust
to it readily. "You can't have this much change in this little time without having
lots of disruption," he opined.
· Increased options for consumers were being traded off against the
loss of capital and jobs. The outstanding fixed debt of telecommunications firms,
he said, had reached around $60 billion or $70 billion worldwide.
· Intellectual property rights (IPR) were a widening concern. While
music and films were in the spotlight, the challenge to IPR had reached every-
thing that could be copied.
· Growing complexity had its cost to the economy. Pain was a related
issue, he said, pointing to a Wall Street Journal column in which Walt Mossberg
explained why the PC is the consumer device on which we are most dependent
and that we most hate.
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OVERVIEW: "THE END OF STOVEPIPING" 37
· Security and reliability, while they might seem far-fetched concerns,
were very real. That consumer PCs connected to broadband could be turned, by
an attacker unleashing them all simultaneously, into a massive weapon against
the U.S. economy was "a doomsday scenario [but] not an implausible doomsday
scenario." Dr. Raduchel recalled that the counterterrorism expert Richard Clarke,
while working for the U.S. government, had been "passionate" about the risk that
a so-called distributed denial of service attack might pose. This prospect, which
casts "Microsoft Windows as the greatest threat to national security that exists
today because of the degree of vulnerability in it," was the source of great worry
among experts, he said, adding: "I don't know what we can do about it."
Regulation Is Going to Be Very Challenging
The questions of how these industries-turned-features were to be regulated,
and of who would do it, were very profound.
As was typical of the STEP symposia on Measuring and Sustaining the New
Economy, Dr. Raduchel reflected, there was virtually no possibility of resolving
all the issues aired, but there was an opportunity to do a good job of beginning to
frame the questions that should be asked about them. Then, thanking the audience,
he turned the podium back to Dr. Jorgenson.
Remarking that Dr. Raduchel's presentation had set the stage for a discus-
sion of policy, Dr. Jorgenson proposed leaving comments and questions until
after the following speaker, Peter Tenhula of the Federal Communications
Commission.
Representative terms from entire chapter:
cell phones
