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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.