Message: 39
Date: 9.1.96
From: <nicholas@media.mit.edu>
To: <lr@wired.com>

The Future of Phone Companies

Shipping bits will be a crummy business. Transporting voice will be even worse. By 2020, there will be so many broadband paths into and out of your home that competition will render bandwidth a commodity of the worst kind, with no margins and no real basis for charging anything. Fiber, satellites (both stationary and orbiting), and all sorts of terrestrial wireless systems will pour bits galore into your home. Each channel will have so much spare capacity that measuring available bandwidth will make as much sense as counting photons passing through a window.

Scarcity creates value. Since fiber (including transducers) now costs less than copper (except for the shortest lengths), we will be installing fiber even if we do not need the bandwidth it provides. POTS, plain old telephone service, is better served and more inexpensively installed and maintained using fiber. Japan will have it in every home by 2015. There will be such a glut of bit-transportation capacity that vendors will be giving it away to get you to buy something or just to look at advertising. And we will soon be exchanging bits among ourselves that represent almost anything but real-time voice traffic.

Voiceless telephony
Today, the telephone companies take the phone in their name far too seriously. For example, they worry about Internet-based telephony without realizing that their real problem will be the reduction of real-time voice traffic in the digital age. Our great-grandchildren will be astonished and amused when they recall the waste and financial loss incurred at the end of the 20th century playing telephone tag. Their telecommunications world will be far more asynchronous than ours and will be based mostly in ASCII, not in audio or graphic renditions of it.

"Hello?" The word is with us thanks to the telephone. Early telephone operators were called hello girls. While we have no hello girls today asking, "Are you finished?" we still use hello far too often. In fact, you never really want to say hello all by itself on the telephone. It is fine for face-to-face greetings, but said on the phone, it means you don't know who is calling, or why they are calling in the first place. That makes no sense. Your digital butler should say hello, not you.

Furthermore, why call at all? Sure, it may be important for many purposes, often for emotive reasons. Yet consider the alternatives now available. Federal Express's Web site is a nice example. Until recently, I would call an 800 number to ask a human if the 10-digit domestic or 12-digit foreign waybill number could be traced, then I would hear typing in the background. Now, I click a few times on the company's Web site and am much more satisfied with the quick, direct reply. The Relais & Chateaux hotels have been on the Web for more than a year and a half, so I have stopped calling them.

Just think: all of these transactions and many more once required phone calls. In fact, this extends to people. If your circle of acquaintances are online, you call them much less. In my own case, I place less than five calls a day and receive as few. With my mother online, we call each other less but communicate almost daily.

Don't sell your phone stock yet
While I may not expect to pay anyone for moving my bits, I am prepared to pay handsomely for value added to them. By this I mean any of the following: filtering, prioritizing, sanitizing, authenticating, encrypting, storing, translating, or personalizing, to name a few. My colleagues will argue about where such value should be added; in the network or at the periphery? As an extreme decentralist, I will argue that as much as possible should be done at the periphery. But then, I look at it this way; if I am on the periphery, the "center" looks exactly the same to me as others on the periphery. For example, I can perform operations locally or remotely. Once I go remote, there is no difference - the network, switches, servers, and other's personal computers all look the same. They are the "elsewhere."

This is important because whoever has the pulse of the network may be in the best "elsewhere" position, as more and more gets pushed into the network for one reason or another. Today, so-called network computers are being advocated to lower the cost at the periphery. Video-on-demand is attractive just to be rid of the VCR and the clutter of videocassettes. I would instantly push my alarm clock into the network, where it could have access to weather, airline delays, traffic reports, snow cancellations, and any other kind of information that could affect the time I should get up. Yes, I would pay the phone company some money to wake me up, and a lot more not to wake me up, when possible. That's added value.

Mouse potatoes
I truly believe that during prime time in 2005, more Americans will be on the Net than will watch network television. NBC, CBS, ABC, Fox, and CNN could by then be doing more business on the Web than via broadcast. Under these conditions, a telephone company stands to profit handsomely. And it does not have to own content - a common belief just five years ago.

CNN does not want to personalize the news. It has enough trouble gathering it from around the world - and you don't necessarily want to limit your input solely to theirs. One hundred million news-reading and news-watching Americans will soon realize the possibilities that can be derived from looking at 100 million different editions of the news - something the phone company could make possible. In fact, content providers are not well suited to deliver tailored news, as they are per force focused on their own. I bet you would pay your phone company a few dollars a day for a news service, perhaps print in the morning and video in the evening, whose stories combined headline news and items of personal interest. In fact, this could be an ironic example of added value: I would pay my telephone company more to give me fewer bits, but the right bits. Wouldn't you?

Next Issue: Electronic Word of Mouth

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