This Week’s Clue: Taking It to the Streets

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Over the last few years, while America has been obsessed with politics and war, Moore’s Law has remained in the background, working its magic. (To the left is Mr. Moore, enjoying his well-earned retirement.)

Chips are getting faster. Radios are getting better. Optical fiber and disks get more powerful. Hard drives get bigger, the cost of storage continuing to plunge.

Thanks to open source we’re even starting to see some progress on software. Not that software is any easier to write. But by making their development process transparent, open source companies can produce new, well-tested versions more quickly than their closed-source rivals, who have to rely on a beta test and QA process.

The chief bottleneck in this whole virtuous system remains the duopoly
of cable and telephony. AT&T and Comcast continue to raise prices
for the same services, using that money to buy other companies and pay
down debt, rather than increase their Internet bandwidth. Instead, they
hoard that bandwidth, define it as "services," (TV, telephony) and keep
squeezing – in Washington, in state capitols, in municipalities – to
maintain that shared monopoly.

Thanks to the Bush Administration they have been remarkably
successful in this. Some states have even passed laws banning
municipalities from competing with the duopoly,
from delivering to citizens the bandwidth they need to grow. We’re now
down to 3 Bells, with the pending gobbling-up of BellSouth, and
wireless spectrum is still being auctioned off into the same small number of hands, which can reduce that number further by simply buying one another with monopoly profits.

Yet Moore’s Law survives. It thrives. It moves forward, maybe not here, in our telecommunications market. But it thrives.

Eurotelcom reports on something amazing happening in the little town of Hillegom, in the Netherlands. (Live music there a week from Saturday!) A company called Lijbrandt,
owned by construction magnate Dik Wessels, has been digging up streets
and laying fiber directly to homes for 1,200 Euros/home – about $1,500.

Think about that a moment. At $100/month for a package of TV,
telephony and fast broadband services, you can pay off that investment
in under two years, even if you get yourself a big office with a
gorgeous secretary who can’t type and lets you smoke fat cigars. (I
presently pay $150/month for a poor imitation of those services.)
Forget the services, you can easily get $100/month for 20 Mbps
symmetric bandwidth, from home consumers, who can then use it to create
their own cable and telephony, customized to their individual tastes.
And with fiber, you can increase that speed at a stroke.

Once Lijbrandt lays this fiber, it offers a better deal than incumbent
telcos and cable operators on the same bundle of services. This
"overbuilding" has a market share in Hillegom of 73%, according to the Dutch paper Trouw,
which headlines this as "the Waterloo of KPN," the local equivalent of
AT&T. Wessels, meanwhile, is expanding his operations, and looking
leery at a KPN come-on to partner-up. Since they want a fortune to put
the streets back together he suspects a rat (quite rightly).

This is a technology story. This is a business story. Most important,
it’s a story that can be replicated anywhere. I don’t know exactly what
Wessels is doing to keep his costs down (a recent network there sold
for 1,700 Euros per home, about 50% more than it costs him to build).
The point is that technology breakthroughs aren’t always where you
expect them to be. They’re not just in the fiber. The benefits of
increased computer capacity can be used to create breakthroughs in
other areas, like construction.

This too is a virtuous cycle. More bandwidth, more computing
capacity, means breakthroughs in every direction, even in areas where
you thought progress was settled.

Just look around you. Breakthroughs are coming to market all the time. Magic Erasers. Four-headed shavers. Higher-mileage, cheap-to-make cars like my Toyota Scion.

The cost of failing to keep up technologically does not just mean
losing share in technology. It means fewer breakthroughs in all areas.

But breakthroughs can be imported, not just exported. There is nothing
to stop someone from licensing Wessels’ technology and bringing the
benefits of his cheaper Fiber To The Home solution here, overbuilding
(as the term goes) a network where the duopoly now operate, taking
their customers away, creating real competition.

Given America’s longer
distances, I can easily see  Wessels’ cheaper fiber build technology
used first to extend fiber just into neighborhoods, with final service
provided by 802.11n gear, at speeds to 100 Mbps, and that revenue
paying for the rest of the build. I can also see someone looking at
what Wessels is doing and going him one-better, lowering costs still
further.

Competition is coming, in other words. It can’t be stopped. Moore’s Law guarantees it. And with
it, so will die the current bottlenecks on change. Without politics. 

Boy, do I want to stop writing about politics.