Fractals of Change

Nothing to Fear But Fear Mongers Themselves

Tom Evslin — Wed, 19 Nov 2008 09:14:51 PST

Have we been talked into a recession? There's little question that's where the economy is now and it seems to be spiraling deeper by the day as we anxiously cut back on almost everything and, in the process, help make our worst economic fears come true.

Did it have to be this way?

Just a few months ago we had mainly a severe problem with mortgages that should never have been written. The people who shouldn't have had the mortgages were losing their homes (or speculative investments); the people who shouldn't have bought the mortgages, including the companies that shouldn't have written the mortgages and the companies that shouldn't have securitized the mortgages, were in a lot of trouble.

But, other than housing prices which were arguably too high anyway, the real economy seemed to be doing pretty well. This being an election year there was a healthy dose of "stimulus" from Washington. Many more dollars than were in the stimulus program were saved by drivers who went on partial strike and helped drive the prices of gasoline and oil back to less than they were a year ago. Most of these were dollars that otherwise would have left the US economy so that was pretty much all gain.

So why are we having a recession? At least partially because we were talked into it. But who would want to do that? Who would want to spread so much fear that the mighty US consumer put his or her credit card under the mattress?

Bankers who wanted a bailout (and got it)
An administration that needed to justify bailing out the bankers
A Treasury Secretary with a bankerish POV
A Fed chief whose academic specialty was the Great Depression
The Democratic Party which wanted to show how bad things had gotten on the Republican watch
The McCain campaign which wanted to show it wasn't four more years of W
Those who would like to regulate everything in sight (forgetting that regulated Fannie Mae and Freddie Mac were among the worst offenders)
Those in Congress who didn't want the blame for pushing Freddie Mac and Fannie Mae to make worse and worse mortgages
Everybody else who wants a bailout and has seen that the threat of bankruptcy is the best way to get one
A press which is largely economically illiterate but can tell scary and sad stories well

Turns out there was almost a perfect storm of fear mongering and we got scared. Now there is a recession. Recessions happen when money stops moving (more on that here).

The consumer price index has fallen by a record amount month over month led by fuel and housing but other stuff is getting cheaper as well. The post-Christmas sales have started before Thanksgiving this year. Consumption has gone out of style – bad timing that.

If you're in debt, it IS a good time to cut back. Cash is king and we are at least partly in a deflationary time. But, if you have some money, it's not a bad time to go shopping both because you'll get good prices and because the economy needs you not to hoard. Want to be socially responsible, buy your family a fuel efficient car, furnace, or solar something or other. Good time to hire some people to do some work around the house you've been putting off. Good time to give to your favorite charity which is probably hurting.

Scary as it is, it's a good time to invest as well. We're somewhere between the end of the last bubble and the beginning of the next one. More fortunes'll be made by investing now and waiting patiently for returns than waiting for a safe time to invest.

Some ideas on how companies should invest are here.

It's also a good time for leadership – away from fear. Here's hoping we'll get that.

Technorati Tags: bailouts, deflation, fear mongering, recession

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No More Landlines - Discussion

Tom Evslin — Tue, 18 Nov 2008 13:58:56 PST

"Don't hold your breath," says Ted Wallingford in his post replying to my assertion that there won't be any more copper landlines by the end of Obama's first term as President. Ted continues:

"I can easily counterpredict that there will be plenty of landlines left in the country by the end of Obama's term, and if he goes eight years, there will still be plenty of good old copper dial tone…

"There are several more reasons why. First, reliable and abundant FAX-over-IP is still a dream that hasn't been standardized to the point where consumers have a consistent manner in which to use it. So those pesky FAX lines will be with us for some time. Second, digital last mile services like PRI are still too expensive for the majority of subscribers, even medium-sized business with 6 - 8 phone lines, in many cases. Third, lots of monitoring equipment, like that used by fire and security systems, still requires the use of copper dial-tone because its modems are too sensitive to the use of jittery VoIP…"

Everything that Ted says in the second paragraph is true; but IMHO his counter-prediction is dead wrong. However, I don't think I was clear enough in my initial post on why copper-based POTS (Plain Old Telephone Service) will be gone before January of 2013 (to be honest, I once predicted it would be gone by the end of 2010 – now I'm hedging my bet a little).

Copper-POTS won't disappear because the last user voluntarily stopped faxing. People still will have alarm systems that they'll want to connect via copper because they weren't built with IP technology in mind. Plenty of people would be happy continuing to make their voice calls over copper pairs; worse, people in some parts of the country still may not have either good Internet access or cellphone coverage so they won't even have a ready substitute for POTS. That makes it all the more serious that copper-POTS won't be available then.

The reason copper-POTS will disappear is simple. Use of POTS landlines are declining. Worse, the most lucrative voice customers are the first to drop their landlines in favor of VoIP (often from cable companies) or just simply to do their calling and receive their calls on their mobile phones. This paragraph from at&t's last quarterly report is telling:

"AT&T's third-quarter wireline voice revenues, which include retail local voice and long distance as well as wholesale voice, totaled $9.5 billion, representing a decline of 8.1 percent versus results for the third quarter of 2007. These results continue trends in recent quarters, reflecting the industrywide migration of voice usage from wired to wireless platforms, customer transitions to broadband and VoIP services and increased local voice competition."

Verizon reports that it lost over 2.5 MILLION access lines in the last year, over a million of which were primary residence lines. Verizon is gaining FiOS (fiber) customers but at the expense of its copper network.

These losses of copper-POTS revenue may accelerate as the economy turns down. Strapped consumers at this point are more likely to give up their landlines than their cellphones. But the cost of maintaining the copper network WON'T go down nearly as fast as the revenue which supports it. Each span of the aging copper network must be repaired each time it fails or is tree-crushed even if very few of the pairs in the network are producing revenue. There are lots of tree-prone miles out there.

Within a year or two medium-sized phone companies (there are some) may well not be able to pay to keep the copper running. Small rural companies will need larger and larger subsidies to replace the lost revenue. Verizon and at&t will announce that they too must have huge subsidies in order to keep their copper networks running for the few remaining users; they will say that they can't continue to subsidize this legacy service with their revenue from wireless and fiber – particularly as prices for those two services begin to decline.

From a public policy view we can do nothing and then pay larger and larger subsidies for the few remaining copper customers – who will be real people in real need. Or we can assure now that either cellular or broadband service – preferably both – is available everywhere POTS service is now available BEFORE the copper network becomes financially unviable. We can invest private and public money in preparing for the future or we can waste public money in subsidizing the past.

Reader Bill is a pessimist. He comments that the subsidies will keep copper alive. I'm an optimist; I think we'll future-proof. Oh yeah, IP converters for alarm systems'll cost about $10 then and everyone'll have learned to scan and email rather than faxing. More important, people everywhere in the country will have an affordable alternative to POTS.

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Imbedded Social Networking

Tom Evslin — Mon, 17 Nov 2008 15:15:05 PST

The Facebook/MySpace model is wrong for most groups, we all agreed; it's inside out. We is VC and blogger Fred Wilson, FeedBlitz CEO Phil Hollows, Return Path CEO Matt Blumberg, and me. The venue is a panel at a Return Path sponsored event at the Museum of Natural History in NYC.

Phil Hollows took our conclusion to heart. He went home and changed the FeedBlitz interaction with readers so that interaction occurs inside the context of the publisher's site rather than on the FeedBlitz site. FeedBlitz (which I'm an investor in) turns blogs and online newsletters into double opt-in email and tweets and other things; the email gets through spam filters. FeedBlitz is part of how publishers communicate with readers so it make sense that it appear on the publisher's site rather than lead readers away. Here's what Phil wrote on his blog:

"One of the challenges of using third party services on your site is that when a visitor needs to have a meaningful interaction with that service, they're transported away from your site and onto that service's site. Often the point of adding a third party service, widget or script is to add value to your own offering, but all too often the first thing these services want to do is take those visitors (and their advertising revenue potential) and park those visitors where the plug-in vendor's value is increased, not yours. Great for them, but for you? Not so much…

"So I'm delighted to announce an API-free embedded email subscription form that allows you to keep your subscribers on your site while they go through the initial subscription forms…"

Granted that we want the users of our service or the readers of our blog to form a community which interacts around the service or the content of the blog. We want and they demand that their interaction be horizontal as well as vertical – with each other as well as with the service provider or the author. In fact customer and prospect events in the real world. like the Return Path one we were speaking at, have long provided a forum for such interaction. But, in the online world, we send our customers to Facebook or MySpace to interact around OUR service; we send them away from our website; we fragment them according to what social network they happen to belong to. That's nuts! The fact that companies DO send their customers off to Facebook is evidence of how important the social networking function is – and of the fact that there is no good alternative.

Many large sites do support their own bulletin boards and chat services; this is particularly true where tech support is involved. My prediction is that these capabilities will end up imbedded in medium and small sites, even blogs, and that these services will usually be provided via third parties like FeedBlitz who understand that their brand is NOT the one that comes first for your users. Social networking will be in the context of sites and services, not the other way around.

Of course I have to take my own advice so I implemented FeedBlitz' new capability on Fractals of Change – it took about five minutes. When people click on the "subscribe me!" button at the top of the left sidebar of my site, they get the FeedBlitz signup form between MY sidebars -see below or click here for an example.

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No More Landlines – Comm Forecast #1

Tom Evslin — Sun, 16 Nov 2008 16:07:17 PST

By the end of President Obama's first term, there won't be any more copper landlines left in the country. One of the challenges facing the Federal Communications Commission and the new administration is how to deal with the fallout from the end of this venerable technology. It's gonna get ugly for some people – people who can't afford to do without communication – unless we're proactive about this problem.

Here's what's happening as you probably know. Young people don't bother with landlines (unless they live beyond cell coverage); they just use their mobile phones or Skype for voice communication. The slightly older set are buying cable's bundle of entertainment, Internet access, and VoIP. They cancel their landlines. People who have broadband access don't need the extra line they used to rent for their dial-up Internet access.

Verizon simply sold all of its copper plant in the three northern New England States to FairPoint. Verizon hadn't been investing in this plant and didn't want to put any more money in going forward. FairPoint, like Verizon and at&t, is losing access lines. In its latest financial results, it reported that access line equivalents are down 9.2% over the past year; total revenue is down as well.

In prime markets Verizon is replacing its copper infrastructure with fiber – one customer at a time; first are the most valuable customers but Verizon will move steadily down-market with its FiOS offer. FairPoint is making an impressive effort to add broadband access to areas where Verizon had not invested enough to make DSL work. FairPoint has also shown commendable willingness to move beyond traditional copper and use wireless to reach customers out of range of DSL. To compete with Cable's triple play, FairPoint has a loose bundle with DirecTV.

So look through the data points above to the trends. Revenue from POTS (Plain Old Telephone Service) is simply disappearing. The copper network is generating increasing revenue from DSL BUT cable appears to be winning the bandwidth war for Internet access and snaring the voice customers as well. Barring a technical breakthrough in the use of the copper infrastructure (one should NEVER bar a technical breakthrough), there are going to be less and less copper access lines in use. In the long term, this isn't a problem because there are better ways to communicate than over fixed copper wire. But we live now, not in the long term.

There are several public policy problems stemming from the decline of the copper network:

At some point the carriers starting with some of the medium sized ones like FairPoint aren't going to be able to afford to maintain these networks with too few users. Network maintenance costs don't go down nearly as fast as the number of lines since you can't abandon any trunks as long as there are any customers attached to them. You still have to fix the lines when a tree falls on them even if most of the copper pairs in them are not in use. That's a big deal.
Revenue for the Universal Service Fund is still predicated on the good old days when everyone used a landline. Cellular customers get a break. VoIP is a grey area. The USF will run out of money at a time when it may be getting more expensive to provide basic service to people in rural areas. The small rural carriers survive because of subsidies from both the USF and termination charges (which disappear when people don't use their landline phones).
The USF mainly funds POTS. If POTS is kaput, there's nothing to subsidize.

All of these problems can be solved IFF they're recognized in time and if there's the political will-power to overcome the interests of those who have a stake in prolonging the declining status quo and postponing the future. For example, small rural telcos like the subsidies they get today and are not in as much immediate danger as their less-subsidized mid-sized brethren; they have substantial political clout with state and federal regulators. The duopoly of one large telco and one large cableco serving each area has resulted in some competition but not enough to stop Americans from having less bandwidth available at a higher price than most other developed countries. The duopoly has lobbyists to put it mildly.

The solution – at a high level – is breathtakingly simple. By the end of Obama's first term everyone in the US who has phone service today needs to have both an inexpensive mobile phone and broadband access (in some cases that'll be through the same device). The USF needs to shift its mission from subsidizing POTS to subsidizing connectivity. USF subsidies should go to consumers who are unable to pay for basic connectivity; not to telecommunications providers (rich people with homes in rural areas don't need an indirect subsidy; poor consumers should be able to choose which service provider to give their subsidy to). The revenue source for the USF either needs to move to the general tax base (good policy but bad politics) or at least be broadly-based across telecommunications services. There will need to be public investment in telecom infrastructure in rural areas but that may well be fundable by revenue bonds that get repaid from use rather than taxes; that's what we're planning in Vermont.

Do all that and the telecommunications future'll be bright. The cost of providing telecommunications is gonna come down very fast. More on that in an upcoming post.

Update: some smart people think my prediction about the death of the copper-POTS network is premature. Debate here.

Technorati Tags: FairPoint, FCC, landlines, POTS, Verizon

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DISQUS for discussions

Tom Evslin — Sat, 15 Nov 2008 10:26:20 PST

Lately the comments and replies on Fractals of Change have gotten a lot more intense and interesting, maybe because these are interesting times.

Typepad comment handling is pretty primitive so I've switched to DISQUS starting with this post. DISQUS supports threaded comments, has a more powerful profile system for commenters across blogs which use DISQUS, lets you (and me) get email notification of replies to comments and even lets us reply to comments with comments by reply email. Should be neat; let me know what you think.

For testing purposes, I'll be making the first comment on this post.

Full disclosure: I'm an indirect investor in DISQUS through Union Square Ventures.

Technorati Tags: blog comments, DISQUS

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Yes We Can

Tom Evslin — Thu, 13 Nov 2008 04:49:33 PST

In a comment on yesterday's post recommending that the US government as buyer of last resort order up a new fleet of non-gasoline cars for itself and partly prepay to finance the retooling, martin writes "If all manufacturers were allowed bid for this tender, then the US auto industry is unlikely to win."

Steve says "…the US lacks enough seasoned engineers who can build cars."

Dave comments "Why saddle the US government with inferior American cars? They should be buying Japanese or European. I don't think it's a good idea to keep the US auto industry alive."

Given all the whining from Detroit, it's easy to understand the pessimism. But the US car industry is much more than just the rusted giants of Michigan. Cars made by American workers in America and sold under Japanese and German nameplates are as good as any in the world. These plants are efficient; sometimes their product are even exported from the US. These mostly non-union workers are productive. These are American car makers regardless of brand.

Even the US-branded manufacturers have improved quality and efficiency. Ford and GM trucks are as good as any made anywhere and are in use around the world. Sure, it was dumb to make just trucks – especially toy trucks for urban cowboys; but, despite an outraged editorial in the NY Times criticizing Ford for selling enough of its new F-150 to recall a thousand furloughed workers, trucks are needed and Ford ought to make what it excels at. Maybe its next specialty should be hybrid trucks with torque. Of course if it wants to be more than a niche player, it'll have to learn how to make sellable cars again as well.

Point is that we can rise to a challenge to do something. That's why I recommended that the government order itself a new fleet of plug in hybrids, hybrids, and natural gas vehicles to be delivered over the next four years rather than just pouring cash into companies whose products don't currently have buyers.

Some commenters point out that it takes more than three years just to plan a new car and retool the factories. They're certainly right that's how long it USUALLY takes. But these aren't usual times. Once the US entered World War II, we retooled our civilian manufacturing to war material in just over a year (the first rifle I had in the National Guard was made by IBM). Idle factories can be retooled much more quickly than productive ones. Many machine tools and robots can simply be reprogrammed for a new task.

If we have bailout after bailout, we'll all sit on the curb with our begging cups; the ambitious'll hire lobbyists to beg for them. IFF we have a huge challenge, we will succeed.

Yes we can.

The original post is here.

A related post suggesting the government put money in the bottom of the car market by buying and junking cars over 10 years is here.

Technorati Tags: automobile bailout

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Saving US Auto Manufacturing

Tom Evslin — Wed, 12 Nov 2008 05:25:39 PST

If people don't buy cars, there is no amount of bailout that will save the millions of US jobs in and related to car manufacturing. If they're not making cars, the manufacturers won't recall workers or order from their suppliers. It's as simple as that.

But there's a pretty simple solution as well. The US government should order a complete replacement for its vehicle fleet to be delivered over the next four years. The new vehicles must be either plugin electric hybrid, pure electric, or possibly natural gas. Obviously retooling both at the manufacturers and suppliers is required to deliver this order so the government should be willing to prepay a significant part of it as it does for new weapons systems. That gets money into the system fast and creates/saves jobs almost immediately. It lets the suppliers retool as well as the final assemblers.

Ideally all auto companies ought to be able to bid. Maybe we only offer prepayment when there is a certain percentage American content although I hate be even that protectionist. Certainly the companies with Japanese names that build cars using American labor in the US ought to be on an equal footing with Detroit. American jobs are American jobs whether unionized or not.

Some infrastructure money needs to go into recharging stations. Good project to be doing as well. Also the electric grid needs work.

The objective is not to assure that no auto company goes bankrupt; the objective IS to keep Americans working on making America a better place. The manufacturers and their suppliers that win the bids to supply the US government with a green, fuel-efficient fleet, will then be well-positioned and retooled so that they can sell these products to the rest of us and the rest of the world once we start buying cars again.

If we simply shovel money into the weakest companies like Chrysler and GM, we'll have to also bail out relatively strong Ford to keep it from being disadvantaged. If we subsidize our car industry, the rest of the world will respond with competitive subsidies. The net effect will be something less than zero, especially if no one is buying cars. But, if the rest of the governments emulate us and order new green fleets for themselves, the world'll be a better place.

Yes We Can is a debate over whether Americans can build cars to meet this goal is here.

A related post suggesting the government put money in the bottom of the car market by buying and junking cars over 10 years is here.

Technorati Tags: auto bailout, energy independence, plugin electric hybrids

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The Importance of the FCC

Tom Evslin — Tue, 11 Nov 2008 06:12:01 PST

My friend Om Malik, dean of the telecom bloggers and author of Broadbandits: Inside the $750 Billion Telecom Heist, posted on the importance of the Federal Communications Commission Chair appointment Obama will make as President:

"The decision as to who will be appointed FCC Chair is a critical one, for in coming years the country faces some major issues that will need to be addressed head on — not from a corporate, but from a citizen perspective, including Network Neutrality, the availability of broadband, telecom competition and privacy….

"…President-elect Obama should look outside the beltway and find someone who truly represents the taxpayers.

"Tom Evslin, who is a retired telecom executive, is the kind of person I would expect to be in the FCC. He knows the machinations of the big companies and at the same time is an Internet liberal who can keep broadband providers and their anti-consumer tricks under check."

Needless to say I'm flattered although neither a likely choice (that's an understatement) nor a candidate. However, Om is dead on about the importance of this appointment. Decisions made by the five member FCC commission have had and will have an enormous effect not only on the tech sector but on the entire US and even the global economy.

Under Chairman Reed Hundt the FCC maintained a policy of benign neutrality and non-regulation towards the infant consumer Internet. They resisted congressional pressure to allow local telcos to throttle dialup Internet access with excessive fees. The access business grew and flourished and the WorldWideWeb and email changed all of our lives – usually for the better. US businesses had a headstart in this environment and benefitted from the growth of the Internet worldwide; for years almost all international Internet traffic was routed thorough the US.

Under Chairman Bill Kennard, the FCC encouraged the growth of VoIP and again had to resist congressional attempts, especially from Senator Stevens, to protect the profits of the telcos. I had a good view and some input into this discussion as chair of the policy committee of the VON (Voice on the Net) coalition. The FCC's good example was followed worldwide, especially in developing countries. The price of most international calls has gone down more than 90% as a result. China and India probably benefitted the most from affordable communication but America's leadership aided by the FCC created an opportunity for American companies including ITXC which Mary and I founded.

Chairman Michael Powell pushed hard for the principles of net neutrality. However, Powell had a hard time getting a majority of his fellow commissioners to go along with most of his initiatives. The commission at full strength consists of three members of the party which controls the White House and two from the other party. Although they are presidential appointees, they do NOT serve at the pleasure of the President and tend to be quite independent.

The current Chair Kevin Martin has been relatively unapproachable from a high tech point of view. Under him the commission has approved mega-mergers in telecom without (IMHO) adequate safeguards against monopoly behavior. However, the decision last week to free up the TV white spaces for open unlicensed access is an enormous achievement which will prove of huge benefit to the US economy and all of us who use the Internet (more here).

The most important task immediate facing the next Chair will be to assure that telcos and the broadcasters do not manage to undo this decision in Congress or in the courts. Speedy procedures will need to be established for testing new radios and other devices invented to use these white spaces. More work is needed to safely increase the power limits allowed to devices in this part of the spectrum.

Om is right; this is a very, very important decision and a fulcrum for change we can believe in.

Technorati Tags: FCC, Kevin Martin, Michael Powell, Om Malik, Reed Hundt, William Kennard

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Maybe We Don’t Need So Much Credit

Tom Evslin — Sat, 08 Nov 2008 12:40:26 PST

A friend of ours has started a "new economy" business; she makes delicious Vermont brownies and sells them online at vermontbrowniecompany.com.

Lots of brownies made with good Vermont ingredients are rolling out of South Hero to the brownie-starved world. The bad economy doesn't seem to have hurt demand. Equally important, the poor credit environment isn't likely to stifle Vermont Brownie Company's growth. There's an important lesson here for entrepreneurs and for those who shouldn't be trying to rebuild the twentieth century's banking system.

When you order from Vermont Brownie Company (or Amazon.com, for that matter), you give your credit card. New economy companies DO depend on the fact that people have credit or debit cards. When the founders of Vermont Brownie Company go their company kitchen to make brownies, they're not guessing what the demand is and building an inventory that has to be financed. They already know how many orders they've got and for what varieties; they know what fresh ingredients they need (so can buy fresh); they know how much to bake of each (so can ship fresh); and they don't need to finance their receivables: you already paid.

Sure, someday they'll invest in a bigger kitchen and/or shipping facility. They won't have to buy a bigger server for orders, though; they use Yahoo's shopping cart. And they won't have to worry about financing huge inventories of product that may go out of style or be stale. If they decide to pay per click to advertise, they'll know quickly whether their ad cost is higher than the net return – and cash from orders'll pay for the ads. Won't need bank debt for that, either.

The need for capital hasn't disappeared from the economy, of course all us capitalists know that; but a surprising percentage of new companies can start on a small amount of invested equity and lots of hard work and can grow on cash flow generated from operations. Information flow and just-in-time manufacturing can reduce the need for financing directly. Information-based products like software and search, of course, have low cash needs so that's why companies like Microsoft and Google flourish atop mountains of cash rather than flounder in seas of debt. But even very tangible - and tasty – products like brownies can use a virtual store and preordering to reduce if not eliminate the need for debt to fund growth.

Debt financing and outside equity are going to be hard to get for a while. If you're starting a new business, it's worth seeing if you can build a plan whose growth is cash-flow funded.

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The White Space Opportunity - Priceless

Tom Evslin — Thu, 06 Nov 2008 06:22:18 PST

"Priceless" is not an overstatement of the value of the radio spectrum opened for free, unlicensed use by the Federal Communications Commission order on TV white spaces. Literally, this spectrum is priceless because no one has to buy a license to use it – just like the spectrum we all use for WiFi today. Figuratively, this spectrum is priceless because it's impossible to calculate the innovation which will result from making the spectrum available WITHOUT specifying either the technology to use it (other than non-interference with licensed use and power limitations) or the applications which can be built here. Voice? Data? Entertainment? Power management? Who knows? Stuff we never even though of; you can count on that.

Priceless or not, some numbers help with appreciating the size of the opportunity.

In the recent auction of comparable spectrum for LICENSED use, Verizon paid over $4.7 billion dollars for exclusive rights to 22Mhz nationwide. This is roughly four television channels – these channels are 6Mhz each. The total TV space consists of almost 50 channels – just under 300Mhz altogether. In rural areas where there are few-over-the-air TV stations, most of that will now be available for unlicensed use! The chart below from dailywireless.org shows some examples:

The 39 channels (234Mhz) available in Burlington, Vermont COULD provide mobile Internet access to everybody in and around the city at speeds better than 10Mbps (with the usual caveat that not everybody uses all of the service all the time) and that access could include all the talking and texting and picture sharing these people now do on their cell phones. It is highly likely that such services will be offered using this spectrum both by local entrepreneurs and national networks. Since the service providers don't have to pay for this spectrum and since they will be competing with each other, it is likely that the services will be very cheap not only compared to mobile data and voice today but also to the current price of cable and DSL access. See why I'm excited?

Even if the spectrum is free, radios aren't. Cellphones have radios in them, obviously; So do WiFi cards and WiFi transmitters and Bluetooth earbuds. Experience shows us that the price of radios serving huge markets in UNLICENSED spectrum quickly falls. Think how cheap WiFi and especially Bluetooth devices are; they operate in tiny relatively undesirable scraps of spectrum compared to the about-to-be-free white spaces. In an excellent comment filed with the FCC by a number of organizations including The Consumer Federation of America and Common Cause, the chart below shows how innovation has flourished since frequencies have been opened up for unlicensed use:

Note the flat line of devices being invented to use the licensed frequencies vs. the explosion of devices including WiFi, Bluetooth, and many other technologies we now take for granted in the unlicensed space.

The innovation leads not only to new devices but also very low prices and brand new services and products like WiFi hotspots and Bluetooth cars.

The need for over-the-air broadband and expanded cell service is greatest in rural areas where there also happens to be the greatest amount of unused former TV spectrum. But there is a significant amount of white space available in every market including major cities – note the 22 channels in LA. That's important because it means that devices and services designed for the white spaces will have a national market which includes urban areas.

If Horace Greeley were alive today, he'd say "Go unlicensed, young people, go unlicensed." The opportunity is priceless.

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Election Congratulations

Tom Evslin — Wed, 05 Nov 2008 04:57:20 PST

Barack Obama ran two back-to-back sensational campaigns. Although I didn't vote for him, I'd be very happy to be proven wrong. We need a successful President. He has many attributes like intelligence, eloquence, and calm which could be ingredients for that success; he inspires enthusiasm. He has a majority which makes very clear whom Americans intended to elect. He does face tough times but there have been worse. Anyway, we're all in this together so congratulations and good luck to President-elect Obama.

Also congratulations to Vermont's Republican Governor Jim Douglas who has apparently gotten well over the required 50% of the vote in this bluest of states despite running against both a Democrat and a surprisingly strong independent. Vermont's electoral votes were the first three awarded to Obama by CNN's computers; but independent Vermonters rewarded Douglas' calm and achievements despite the nationally sullied Republican brand.

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FCC Vote Results – We The People Won

Tom Evslin — Tue, 04 Nov 2008 14:30:34 PST

The Federal Communications Commission has just voted to open up the so called TV Whitespaces for UNLICENSED use (FCC press release here). This is incredibly good news for rural America in particular but actually for all of America. It's not as important as the election the rest of us in the US voted in today – but this action is a very, very big deal.

Just a few of the benefits:

Within a year there could be new, cheap radios and commercial services that make mobile broadband available with greater bandwidth than cable offers today AND at lower prices.
Mobile phones on these frequencies will be much cheaper to use AND will have much better data capability than they have today.
Since the US is the first country to make so much desirable spectrum available for open unlicensed use, the door is open for a wave of innovation here and the invention of products and services which will eventually be used around the world.
Much of the concerns many of us have had about tollgates on the Internet and an end to open interconnection will evaporate since the barrier to providing Internet access will be much lower and the power of the existing cable-telco duopoly diluted.

This is very, very good spectrum. That's why it's been used for TV. It goes through walls and leaves; it goes long distances.

Unfortunately, those opposed to opening up this spectrum – established broadcasters who fear the competition that a much more powerful Internet will bring and telcos who would like to preserve their domination of Internet access and mobile service - have threatened legal action to slow this innovation and competitive threat.

Making sure we all get the benefits of this FCC decision will be an early task for the new administration. It won't be an easy one but it's important and it's a real test of willingness to stand up to special interests who want to monopolize public assets like the airwaves.

A note of caution: the actual FCC ruling is not posted anywhere I can find it; I just managed to catch the vote at the end of the webcast of the FCC meeting. There could be gotchas in there but I know enough to be reasonably confident that this decision is the second most momentous thing that will happen today.

Special thanks to all of you who e-filed in support of this action.

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Why I’m Voting for McCain

Tom Evslin — Mon, 03 Nov 2008 13:43:43 PST

My vote doesn't count, of course; Vermont's three electoral votes will go to Obama. Even so, it isn't an easy decision: Obama has some real positives, McCain his share of negatives.

Deciding Factors for McCain

Foreign Policy/use of force. McCain was right about the surge at a time when all the polls would have told him to go the opposite way so he gets extra credit for not being political on this. I agree with Joe Biden that Obama is likely to be tested more than McCain – especially by Putin who I fear greatly. Obama's faith in negotiations as a way to end Iran's nuclear program is touching but not convincing.

Globalization. It's real and it's here. McCain is a free-trader even in states like Ohio and Pennsylvania which have seen jobs move offshore. Obama's talked about forcibly renegotiating NAFTA.

Education. I don't think either candidate knows how to reform our appalling public education system. But I think Obama's allegiance to and debt to the teachers' union will make it impossible for him to implement any meaningful reform.

Energy. McCain's been clear that nuclear energy, offshore drilling, and coal are part of America becoming energy independent. Obama's not clearly for any of the above which means continued dependence on imported oil for the foreseeable future.

Obama Positives

He's articulate! It would be great to have a President who can speak English as well as he does; we're going to need a lot of convincing to make some of the hard choices ahead of us. Elocution IS part of leadership.

Race. It's not just that Obama is partly black; it's that he's set an example of going beyond the grievance and entitlement issues which have helped polarize us. Maybe, if he is elected, we can stop using the Nazi racial definition that anyone with any black blood is "black" and only those with purely white blood are "white".

Manner. Obama has a nice calm manner, a good thing in a leader. He was excellent on the subject of Palin's daughter's pregnancy.

His campaign. From primary to general election, he's done an excellent job putting together his campaign and choosing the people to run it. That's a big job and he did it superbly. Some of these skills are directly applicable to the President's job.

Excitement. He's bought people into the process who were hostile or apathetic before.

McCain Negatives

Economics. Other than support for free trade, he's made even less sense on the current economic "crisis" than Obama. I'd give Obama a zero and McCain minus twenty on the market meltdown and proper remedies. I easily could have changed my vote had one of them stood out on this issue.

McCain's proposal for a federal tax holiday on gas tax. This was pretty dumb. Obama didn't pander on this one.

He's a Republican. So am I much of the time but I'm not proud of the incompetence of the administration I voted for twice. All else being equal, this would be time for a change.

Lack of executive experience. There's a reason why we don't usually elect senators as President.

Choice of Palin. I'm not as negative on this as many of my friends; she's inexperienced - except when you compare her to Obama. She did fight the Republican establishment in Alaska. Religious fundamentalism scares me (so maybe I'm an East Coast liberal after all). I'd hoped that McCain's primary win would greatly diminish the influence of the religious right on the Republican party so I'm not wild about the comfort this choice gave them. Most importantly, though, McCain seemed to lose control of the message in his campaign once he chose Palin and that's his responsibility.

His campaign. I don't think McCain has made nearly as strong a case for electing him as he could have or should have. The intra-campaign sniping about Palin is appalling. Obviously a campaign is a test and I don't give him a good grade on this.

Obama Negatives

See above on foreign affairs, globalization, education and energy.

Reverend Wright and Bill Ayers. Everyone has some bad associates somewhere but he's been given too much of a hall pass on these two; they're each despicable.

Campaign finance flip-flop. He really did agree to be part of the public financing system and changed his mind when he saw how much money he could raise. Another hall pass.

Lack of a legislative record in either Illinois or Washington.

The possibility of either party having both a super-majority in Congress and the Presidency is frightening

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