Telecom/1996-04-telecom-walnutcreek.iso/george.gilder.essays/angst.and.awe.on.internet

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From [e-mail]  Fri Dec 29 03:01:02 1995
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Date: Fri, 29 Dec 1995 03:01:02 -0500 (EST)
From: [e-mail] (Patrick A. Townson)
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Subject: Angst and Awe on the Internet - George Gilder Essay


We have always been very fortunate to count George Gilder among the
regular reader/contributors to TELECOM Digest. We've also been
very fortunate that his publisher has kindly permitted his essays
to appear here and remain as permanent exhibits in the Telecom
Archives.

If what you read in this file is your first aquaintence with George
Gilder, and you like what you are reading, then you may want to
read many of his earlier essays in the Telecom Archives, where they
are housed in their own sub-directory. To use the Telecom Archives
with anonymous FTP, you would connect with ftp.lcs.mit.edu. Upon
connection, login anonymous, using your name@site as password. You
would then 'cd telecom-archives/george.gilder.essays'.  There you
will find thirteen other essays written over the past two or three
years, and two files containing dialog which has appeared in the
Digest discussing his work.

This is an excellent way to end one year and begin another, and I
hope you will enjoy reading it as much as I did. Naturally if you
want to take time over the holiday to watch Northwestern win in
the Rose Bowl I won't object ... but if you can, spend some time
reading this and meditating on the presentation. As always, Gordon
Jacobson will introduce the text.

Happy New Year, Netters!

PAT

Date: Wed, 27 Dec 1995 22:45:16 -0500
From: Gordon Jacobson <[e-mail]>
Subject: Gilder's 14th Telecosm Article - Angst And Awe On The Internet

     This series of articles by George Gilder provide some
interesting technological and cultural background that helps
prepare readers to better understand and place in proper
perspective the events relative to the National Data Super
Highway, which are unfolding almost daily in the national
press.  I contacted the author and Forbes and as the preface
below indicates obtained permission to post on the Internet.
Please note that the preface must be included when cross
posting or uploading this article.

The following article, ANGST AND AWE ON THE INTERNET, was first
published in Forbes ASAP, December 4, 1995.  It is a portion of George
Gilder's book, Telecosm, which will be published in 1996 by Simon &
Schuster, as a sequel to Microcosm, published in 1989 and Life After
Television published by Norton in 1992.  Subsequent chapters of
Telecosm will be serialized in Forbes ASAP.<P>

               ANGST AND AWE ON THE INTERNET
                            BY
                      GEORGE GILDER

       IN 1995, INTERNET STORIES TRUMPED EVEN O. J.
         THE NET WILL HAVE A FAR HAPPIER ENDING.

     Well, it had to happen.  As the Internet emerges as the central
nervous system of global capitalism, the Luddite left is bursting into
"flames" against the microcosm and telecosm, against interlinked
computers and the global radiance of electromagnetic communications.

     This rising resistance resonates with the press coverage that has
long lavished attention on the excesses of the Net.  Richard Shaffer
of the Computer Letter counts 39,158 Internet stories during the first
three quarters of 1995, beating O. J. by some 15,000 citations.  Much
of the coverage has been lurid.  For psychedelic visions of virtual
reality, the media have exalted Jaron Lanier in dreadlocks and
bankruptcy above Bob Metcalfe, creator of Ethernet, or Gordon Moore,
inventor of IC processing, or Charles Kao, father of fiber optics, all
of whom reshaped the boundaries of human possibility.  Computer
viruses and Net porn win headlines and magazine covers that elude the
creators of vast new computer powers, such as RSA encryption or the
World Wide Web or new tools of chip fabrication at the quarter-micron
level.  Last August, Windows 95, a modest advance in operating
systems, exploded across the press and the airwaves as if the entire
media had been preempted for a Microsoft infomercial.  No wonder
befuddled academics, politicians and book publishers gain a
grotesquely distorted view of the industry.

     In Tom Peters's first Forbes ASAP interview (March 29, 1993), he
predicted that the '90s would see a fabulous unfolding of new
technology, accompanied with increasing outbreaks of technophobia,
Ludditism and Marxism.  Alvin Toffler greeted the initial readers of
Wired with a similar dual prophecy of networked marvels, foiled by a
multifront war against the Third Wave.  Once again, Peters and Toffler
may well be right, as from Hollywood to Harvard, America's brainlords
rebel against computer technology.

     In his pungent new book War of the Worlds, Mark Slouka joins the
rising chorus of resistance.  Slouka finds it all a "kind of lie."
Like a "speech of Ronald Reagan" or a spiritual vision from the
"religious right," the virtual world is increasingly usurping reality
and identity itself.  "Rather than doing away with the couch potato,
the telecomputer has actually created a new, more tenacious variety of
tuber: the individual who swivels from the television screen to
computer monitor without missing a beat. . . ."

     Today, Sandra Bullock writhes in anguish in the sinister clutches
of The Net, with a blond, predatory, arachnoid Bill Gates (using
"Gateway" software) masterminding the Web.  Similar chimeras recur in
antitech crusades.  Bathed in the ultraviolet frequencies of sunlight,
humans throughout the history of the species have raced through a
planetary magnetic field of half a gauss in power on a terrestrial
sphere charged by worldwide lightning strikes a hundred times a second
to a capacitive level of 100 volts per meter of height.  Yet Paul
Brodeur and other electro-phobes panic at power lines, power plants,
cathode- ray tubes, microprocessors, cellular antennas and other high-
tech oscillators with an impact on humans measurable only in
millionths of a gauss.  They defy the fact that around the world use
of electricity correlates almost perfectly with greater longevity.

     Meanwhile, despite the higher longevity and the globally
spreading jobs and riches springing from high technology,
pseudoeconomists prattle endlessly about the growing gap between the
"information rich" and the "information poor." Publishers sign up
other disgruntled nerds to write hymns to noble savagery and
gardening.  And from the fever swamps, a Marxist enrage posts bombs
through the mail and addled editors detonate them in the pages of the
Washington Post.

     SUCH FEARS AND FANTASIES have always afflicted the course of
human innovation and progress.  With life expectancies rising eight
years in the developed countries and 22 years in the Third World since
1950, people have more time to lash out at industrial benefactors who
gain wealth and create it from sources hard to comprehend.

     Misconceptions about the Internet, however, also abound in more
savvy circles.  From Stewart Alsop's Agenda conference to the Internet
Society, serious critics are emerging to predict that the network
itself will bog down and degrade, jammed by traffic and trivia.  Often
unconsciously, these critics feed upon a spurious vision of capitalist
ecology.  Constantly recycling Garrett Hardin's "The Tragedy of the
Commons" as a theory of the Internet, writers such as Clifford Stoll
in Silicon Snake Oil, and others from publications such as the New
York Times to the National Review and the Atlantic, predict that the
Web, as a public good, will be overgrazed, like the commonly owned
fields of feudal Britain.  Each herdsman or entrepreneur gains from
adding to his herd or bandwidth, beating rivals to the remaining grass
or spectrum, until congestion sins the common space.

     As the epitome of a capitalist commons, the Internet, according
to the critics' predictions, will collapse under the impact of this
law, clogged with traffic and polluted with porn and violence.  As a
precursor, the same writers cite citizens band radio, an earlier fad
that rose meteorically and collapsed ignominiously when, as they see
it, millions of middle- and lower-class hoi polloi rushed in and
polluted the bandwidth without renewing it.

     Overall, the resistance converges many streams of reaction.  In
general, the "humanist" opponents mistake the Internet for a
continuation of television technology.  Thus they ascribe to the
Internet the very flaws that they find in TV -- crudeness, violence,
porn, entertainment for "diverting ourselves to death" -- and extend
to the computer the old and mostly valid arguments of Neil Postman and
Jerry Mander against the idiot box.  Some of the other critics of the
Internet benefit from TV and fear the Web will replace their familiar
tube.  The executives of media companies are mostly baffled by the new
technology.  Paralyzed by market research, as Jim Barksdale, CEO of
Netscape puts it, "They are trying to build bridges by counting the
swimmers." A Washington lobbyist for a long-distance carrier wonders
poignantly if "America is ready for all this bandwidth."  Baby Bells
spurn the Internet to fund Hollywood films and TV.

     Blinded by the robber-baron image assigned in U.S. history
courses to the heroic builders of American capitalism, many critics
see Bill Gates as a menacing monopolist.  They mistake for greed the
gargantuan tenacity of Microsoft as it struggles to assure the
compatibility of its standard with tens of thousands of applications
and peripherals over generations of dynamically changing technology
(avoiding the dialectical babel of the more open Unix, for example).
They see the Internet as another arena likely to be dominated by
Microsoft and a few giant media companies, increasing the wealth of
Wall Street at the expense of the stultified masses of consumers and
opening an ever greater gap between the "information rich" and the
"information poor."

     Focused on the summits of the industry -- CEO seances among media
conglomerates and software kings -- all the critics can foster the
impression that the Internet is a questionable, unpromising venue,
vulnerable to monopoly and trash, thereby vindicating the Luddites and
the Cassandras.  From the beginning of its civilian eruption, however
(see Forbes ASAP, "The Issaquah Miracle," June 7, 1993), the Net has
risen from the bottom up rather than from the top down; by nature, it
is a heterarchy rather than a hierarchy.

     To get a view of the future of the Net, let us turn aside from
Herb Allen's golfing groves and Bill Gates's mansion and Louis
Gerstner's "net-centric" revelation, and visit some of the fertile
bottomlands where the Web is growing fastest.  Here no robber barons
or monopolists come into view and there are no signs at all of an
impending slide toward tragedy and decline.  Here the negative
externalities of the degraded commons fall before the huge positive
externalities of Moore's Law and Metcalfe's Law, the microcosm and the
telecosm, where smaller transistors yield exponentially more efficient
machines and the value of networks rises by the square of the power of
all the computers attached to them.  Governing the positive
externalities of the Internet is the convergence of these forces,
compounded by the creativity of entrepreneurs.

     PERHAPS SUCH a combinatorial explosion explains the mind of Avi
Freedman of Net Access.  Among the vanguard of the armies of the
Internet, Freedman is a classic American entrepreneur, entirely alien
to the megalithic visions of the critics.  As an Internet service
provider (ISP), Freedman supplies the Philadelphia area with access to
the goods and services of this global ganglion of networks at a flat
rate of between $12.50 and $20 per month, depending on the services
chosen.

     Net Access still operates chiefly out of his cellar in a
marginally middle-class suburb of Wyndmoor.  The street bristles with
wires, transformer nodes, terminal boxes and power lines, many of them
converging on the duplex red-brick bungalow where Freedman lives with
his wife in an apartment, above a basement crammed floor-to-ceiling
with multiplying racks of electromagnetic conversion and processing
gear for computers and telecom.  These technologies are all
oscillating and radiating like crazy in the spirit of their
hyperkinetic owner, who is multiplexing Internet insights between his
cellular phone and an attentive audience of aspiring ISPs from western
Pennsylvania and geek students visiting from the University of
Pennsylvania, gathered at his door next to the power-line link.

     Is this an entrepreneurial dream, or a carcinogenic nightmare out
of the muddled pages of Paul Brodeur?  Avi is too busy to give the
issue much thought.  Extending business service to New York City,
Washington, D.C., and Chicago, over-flowing his basement, he is now
moving his operations to a collocation cage at the Philadelphia
central office of MFS (Metropolitan Fiber Systems) where he has just
turned up a T-3 fiber circuit (45 megabits per second) direct to MAE
East, the major East Coast Internet exchange point.  From Seattle to
San Jose, top companies are besieging him with multimillion-dollar
buyout offers, but looking to the future and its promise, Freedman
calculates that he can't afford to sell.

     With only 4,000 customers, however, Net Access hardly seems to
pose a threat to such local colossi as Bell Atlantic and Comcast, now
searching the world for "content" opportunities and looming ever
larger on Rodeo Drive.  Yet Ray Smith and Brian Roberts should pay
attention to what is going on in Freedman's teeming mind and basement.
Millions of PC owners may well become part-time Internet service
providers in the future -- as their home and small-business PCs supply
content for others, perhaps beginning with teleconferencing and
telecommuting activities that will soon dwarf Hollywood in volume.

     One of the students hanging on Freedman's words, for example, is
Meng-Weng Wong, whose personal Web page at Penn attracts some 35,000
hits a week with its restaurant reviews, film criticisms, Philadelphia
maps, technology insights and other delectations.  Drawing wide media
attention, from Forbes ASAP to Scandinavian TV (a crew is visiting
this very day from the Netherlands), Wong has now established a server
at Net Access, pobox.com, which supplies his clients with a permanent
Internet address wherever they may go, and he is developing a Web-page
design business.

     Responding to the onrush of innovative customers like Wong, the
configuration of Freedman's bottom-up operations offers clues to the
future shape of the industry.  A portly, perspiring, blond, balding
geek-genius bursting with monologic humor and street smarts -- hardly
full-duplex (scant signs of upstream flow) -- Freedman has just
hustled past his 26th birthday.  He has been deep in computers since
age eight, when a prescient uncle gave him a book on the Basic
programming language at a Seder.  Within months he was entrenched
among the information rich, opening an unbridgeable gap in computer
savvy between himself and nearly all of the other five billion
inhabitants of the planet.  If you think you are going to catch up,
forget it.  By the age of 12, in 1982, he was an active user of e-mail
and Usenet news and familiar with the abstruse command codes of the
Unix operating system that ran on his father's DEC PDP-11.  Freedman
senior, a pulmonary physician, inherited the machine indirectly from
Bell Labs, where it had been employed as a Usenet news hub until
displaced by a VAX.

     In 1986, still a teenager, Freedman began exploring the uses of
Unix machines for commercial databases and discovered to his surprise
that serious businessmen would give him gouts of money to get help
with their computers.  Eventually, he was earning "lawyers' rates"
(his mother is a Philadelphia tax attorney) for work he found
"amazingly routine" and "even fun." Nonetheless, after high school,
his parents sent him off to college in Massachusetts, where his
computer skills were under appreciated.  He returned after a few weeks
to get a job at the National Software Testing Labs in the Philadelphia
suburb of Conshohocken before enlisting at nearby Temple University,
which he chose because it offered more freedom for computer
experiments and consulting work than the more prestigious Penn a few
miles away.

     After arriving, he discovered that Temple's computer lab also
commanded a superb resource: bandwidth, in the form of a nearly empty
T-1 line linking to the Internet at 1.544 megabits per second.
Already computer rich, he was becoming communications rich as well.
In Avi Freedman, Temple's department of computer science got rather
more than it bargained for.  Realizing that the available PCs were
network hostile and the lab's MicroVAXes ran VMS rather than Unix,
Freedman used his savings to buy five secondhand Sun 3 workstations
for $600 apiece.

     In short order, Freedman began his career as an Internet service
provider and "professional geek," albeit unpaid.  Soon he had some 100
students as users, mostly cavorting through games of Multiuser
Dungeons (MUD).  Temple's address, supplied by Freedman --
bigboy.cis.temple.edu -- became known far and wide as a hive of MUD
activity.  Temple's computer science professors began to rebel at this
untoward distinction, particularly when they found that lost in the
crypts and catacombs of the Net, their charges were virtually
unreachable for assignments in higher-level languages.  Freedman was
forced to close down local access to the game portions of the server
during daytime hours.

     Freedman has given some thought to the problem of "how to
civilize young, intelligent teenage males." He concludes, "You have
got to get them interested." He says the students playing MUD at least
were learning Unix commands, "a better way to get a job than mastering
the Pascal programming language," which was then being taught in the
regular classes.

     As a student, working with Prof. Yuan Shi and other Temple
professors, Freedman developed a toolkit for distributed processing on
Suns and presented a paper in London in 1989 at a conference on
computer-aided software engineering.  As his time at Temple drew to a
close, he began contemplating graduate school.  "Everyone was very
surprised that anyone who could do anything on the outside was going
to graduate school," he says, "but Stony Brook on Long Island offered
me a nice job as a research assistant in the lab and I went up there."

     After graduating from Temple, Freedman also encountered the harsh
facts of life in the world beyond college computer laboratories.  With
their local-area networks and T-1 links to the Internet, universities
offered a revel for budding cybernauts.  Marc Andreessen of Netscape
discovered a similar disjunction between college lab and residential
communications.  At LAN's end was a communications cliff and a
bandwidth scandal.  Most homes and offices connected to the world only
through twisted-pair, four-kilohertz, copper telephone wires.

     In October of 1992, Freedman became an ISP chiefly to continue
his college revels by chasing bandwidth.  Twenty-three at the time
and engaged, he could still recall his days in high school and
remembered how much he had learned from the Internet through his
father's PDP-11.  He began to fill up his basement with second-hand
Suns.  Since that time, Freedman has purchased scores of Sun machines,
mostly at prices well below new Pentium levels, all using Berkeley
Unix, equipped by Bill Joy with fast TCP/IP (Transmission Control
Protocol/ Internet Protocol) for Internet access.

     Beginning with 40 customers from local bulletin board systems,
Freedman provided access through the serial ports of a single
SPARCstation IPC with a 200-megabyte hard drive and 12 megabytes of
memory that he purchased secondhand for $1,500.  The serial ports ran
up to 38.4 kilobits per second, linked to 14.4-kilobit-per-second Zoom
and Supra modems connected to POTS (plain old telephone service)
outside lines running from the phone company's central office.
Costing a total of some $4,000, the system worked well enough until
his clientele began to multiply and the modems balked at continual
resetting.  In April 1992, he bought a 16-port Iolan terminal server
that answered the phones and connected subscribers to the Sun servers,
which supplied e-mail, Usenet news, Gopher searches, Telnet and file
transfer services in a Unix environment.

     In June of 1992 emerged the menace of competition.  A local
entrepreneur launched Voicenet by simply linking a 386 PC with a modem
to each phone line through a terminal server.  Charging fees several
times higher than Net Access's, Voicenet thrived through the device of
hiring two full-time people to scan in pictures from porno magazines
for what Freedman describes as the "sticky keyboard set."  Eventually
the "adult" bulletin board service enlisted some 5,000 members paying
$4 per hour to peruse images.  Nonetheless, Voicenet protested what it
called Net Access's predatory low pricing, a $12.50 to $20 flat rate
per month with no full-time employees to pay.

     IN THE EARLY YEARS of the Net's development, the late '80s, the
Internet business outside campuses and corporations was a small-time
and sometimes tacky trade.  In 1992, the entire Net comprised a
million linked computers, many of them in university and government
labs.  It wasn't until November 1993 that Net Access acquired a
dedicated 56-kilobit line for direct connection to an official
network access point.  Costing $400 per month, it multiplexed 22
dial-up modems among 250 users.  With the Mosaic World Wide Web
browser yet to catch on outside the universities, Net Access did not
even have to supply SLIP (serial line interface protocol) or PPP
(point-to-point protocol) accounts, which shield the user from the
details of Unix.

     Freedman, however, saw the need for new technology to link people
to the full resources of the Net without having to know abstruse Unix
commands.  "As a professional geek, writing code is my true calling,"
he says, adding that he threw himself into this work.  Although the
program was eclipsed by Mosaic, Lynx and other approaches, he still
believes that his software provided easier access to the Internet,
complete with the ability to trace routes and "ping" remote machines.
Enabling users to log in to the program in 1992, he put Net Access on
the technological forefront of ISPs.

     The largest challenge for an ISP, then and now, is managing the
floods of bits engulfing a Usenet news server at a rate of some 500
megabytes per day, five news articles per second, each with a unique
identification that has to be scanned to assure that the news is fresh
and not duplicated.  The heart of the Internet until the arrival of
the World Wide Web -- and still cherished more than the Web by many
Internet veterans -- Usenet is the huge collection of textual bulletin
boards and other information troves and exchanges from which the
communities of the Net exfoliate.  As Steve Willens of Livingston
Enterprises puts it: "This is the real source of the Internet as we
know it and the challenge that forced the development of technology
specialized for the Net" -notably Livingston communications servers
that linked modems to the Net through fast comports functioning with
compression at 115.2 kilobits per second.

     In 1994, Freedman recognized he had a major business on his
hands.  He decided to lease a T-1 line from PREP-NET (Pennsylvania
Research and Economic Partnership Network), which required a
prepayment of $1,000 per month.  With 50 phone lines and modems and
500 users, he broke all ties with Stony Brook and began hiring people
to handle a rising tide of traffic and a surging demand for technical
support.

     That summer, he had three full-time people: "Myself, my wife,
Gail, and my 20-year-old brother, Noam.  Working with him made me
realize why people pay me so much money as a consultant [up to $150 an
hour].  He served as a kind of Avi echo, intuitively knowing what I
wanted and when." A student in computer science at the University of
Chicago, Noam is in the process of extending the business to that
city, while Avi has established points of presence in New York and
Washington, D.C.  He has hired five Net Access customers, none with
college degrees, to provide technical support full time as the number
of users has climbed at a pace of some 15% per month since the end of
1994.

     For the links to other cities, Freedman relied on advice from
telecommunications consultant Gordon Jacobson, a Penn alumnus who
maintains close links to the Penn School of Engineering, where his
father graduated.  With Jacobson's help, Freedman is ending 1995 with
a fiber circuit connecting him to MAE East at 45 megabits a second, a
10- megabit-per-second link to Sprint's network-access point, and more
than half a dozen point-to-point T-1 lines, all for well under half of
the normally tariffed prices for these services.  With increasing
broadband connectivity, Net Access commands more than half as much
bandwidth at the nerve centers of the Net as Netcom, which has 50
times more customers.

     Though indispensable, technology alone cannot sustain a
successful ISP.  It is people that make the vital difference.  If
Freedman had originally hired people to perform the work that he did
himself part-time -- "keeping the machines running, maintaining
software, recovering from disasters, installing and tuning equipment
and circuits" -- he would have incurred expenses of some $100,000 per
year and his financial model would have collapsed.  The reason many
corporations are so slow to develop Internet programs is not the lack
of equipment but the dearth of personnel.  The large companies
pursuing Net Access did not care about Freedman's rooms full of gear.
They were after Freedman himself.

     FREEDMAN'S ENTREPRENEURSHIP and technology ride on a tide of
other enterprise by the suppliers of Internet gear.  These, too, are
not huge telephone company equipment manufacturers or rising software
monopolists but mostly small or medium-size companies, led by young
entrepreneurs, fighting to survive in the most intensely competitive
arena of the world economy.

     An Internet service provider must begin by supplying modems
through which the outside world can connect to his offerings.  With
millions of home customers who dwarf the ISP modem volumes, U.S.
Robotics is currently ascendant in most ISPs, but Freedman spurns them
for cheaper devices from Multi-Tech.  These modems connect to a
Xylogics terminal server that authenticates the name and password
combination entered by the user and validates the caller as
legitimate.  Then the customer enters Net Access's local-area network
linking a set of Sun Microsystems servers that supply World Wide Web,
Gopher, Usenet, e-mail, file transfer, Telnet and other Internet
services.

     Net Access is unusual for an ISP, since few use Xylogics
equipment.  Recently bought out by Bay Networks, Xylogics supplied
nearly all the terminal servers for the university market, and it
still shies away from the tumultuous world of ISPs.  These customers
mostly use Livingston products that run a security protocol named
Radius (remote authentication dial-in user services).  Channeling the
bits around the ISP's internal net and on to other networks are banks
of routers, also often built by Cisco or Livingston (although Freedman
originally chose Morningstar because it was cheaper).  Linking a
particular ISP to other ISPs and network access points are T-1 cables
running at 1.544 megabits per second through multiplexing and
demultiplexing and conditioning equipment.  These functions are
performed by DSU-CSUs (data service units - channel service units) made
by such companies as TxPort, Adtran, General DataComm and ADC Kentrox.

     Freedman insists on the Law of the Microcosm in choosing all his
equipment and in making all his projects for expansion.  Since his
study of distributed computing at Temple, he has everywhere cherished
duplication and redundancy and cheap components over centralization
and scale economies.  He at first bought a nine-gigabyte drive from
Micropolis.  Now he regrets the decision and is replacing it with five
two-gigabyte drives (more I/O [input/output], redundancy and
reliability).  "The more spindles the better," he says.  He buys lots
of cheap secondhand Suns rather than one powerful server.  He
criticizes some of the larger ISPs, such as Netcom, for centralizing
their servers and technical support.  It causes bottlenecks and
delays, he says, and opens the system to crashes if any of the
communication lines go down.

     Freedman's rule is to provide service as locally as possible.  He
believes ISPs with fully equipped local network sites, rather than
mere communications nodes like Netcom's, will prevail.  Like most
small ISPs, Freedman is wedded to flat-rate pricing, though his
accounts of altercations with customers who want to resell or
overgraze his commons may undermine confidence that this pricing
regime can survive into the future.  But managing flat-rate prices is
a core competence of the ISPs.  Believing that bits will flee toward
flat rates, Freedman says MCI will fail in its plans to transform
Internet pricing models by adding some as yet unannounced scale of
measured usage based on time, packets or both.

     Is Freedman's model scaleable, or is it doomed as he grows?
Could Freedman be displaced by MCI or Sprint-Comcast or Bell Atlantic
or Microsoft-UUNet or AT&T in a siege of merger-monopolization?  He
believes that up until a threshold of some 25,000 to 50,000 customers,
meaning revenues of between $5 million and $10 million net of more
lucrative business clients, his economic and technical model can trump
all comers.  At that point, he will face the usual entrepreneurial
crisis of transition: Freedman will need business partners, routinized
technology management schemes and expensive accounting to maintain
operations as Net Access spreads across the country.

     But he does not fear competition.  His problems, he says, are
servicing the flood of new customers and anticipating the depredations
of "Congresscritters" who want to make him liable for any vagrant
flasher who strays onto one of his hard drives.

     Still a small force in the global matrix of telecommunications,
Freedman now dreams of exploiting available resources of fiber, dark
and lit, to acquire major new bandwidth, linking cities up and down
the East Coast and across the U.S. Helping Freedman move this project
toward reality is his telecom guru Jacobson, an entrepreneurial
dervish from Portman Communications.  With financiers on the line to
supply some $5 million in startup capital, Jacobson is planning to
launch a national IRamp network.  The service will ultimately open
fully staffed Internet access facilities in 30 cities nationwide,
linked everywhere by fiber, at a cost of some $1 million per site.

     Such investment looms large compared to the rock-bottom base of
Freedman's operation, and easily eclipses a national ISP's
point-of-presence facility that can cost upwards of $70,000.  But
David Farber, gigabit-testbed guru, recently told a New York audience
at the Penn Club that, spurred by business needs, the marketplace is
seeking higher-end, stable-broadband ISP services that can handle
millions of hits a day at a Web site with no access delays or
congestion and that provide local access and custom software
configuration.  For these high-end customers, the SPARC 20 servers and
T-1 and 56-kilobit links of the many small ISPs will no longer
suffice.

     Pioneering the kind of broadband channels that will eventually
become ubiquitous on the Net, IRamp's planned facilities will command
OC-3 fiber (155 megabits per second) links to a national network of
both dark and lit fiber, available from utilities, pipelines and other
unusual sources.  Such bypass strategies will become increasingly
common in coming years.  The 10 million miles of fiber currently
installed in the U.S., after all, is exploited to approximately
one-millionth of its potential capacity -- and much of it is unused
"dark fiber."

     For key ISP server and security functions, Jacobson plans to use
fully fault-tolerant Tandem S4000 servers running the new ServerNet
multibus scheme.  It was conceived by venerable Tandem designer Robert
Horst as a new- generation architecture explicitly optimized to
substitute bandwidth for switching speeds.  Fully scaleable, ServerNet
was licensed in October by Compaq, yet it commands a theoretical
throughput limit of an unprecedented petabit per second (a million
billion bits).  For graphics-intensive applications, Jacobson
envisages Silicon Graphics WebForce Challenge S servers using Irix
software.  Even with as few as 5,000 subscribers per site paying a
competitive non-usage based rate, Jacobson projects a high rate of
return.

     Meanwhile, at Netcom, the nation's largest ISP, David Garrison,
the CEO, is undergoing the stresses that Freedman foresees for himself
as he expands his business.  During his previous stint at the helm of
the meteoric paging company, SkyTel, Garrison, a rangy dark-haired
entrepreneur with a slight uneasiness in his ready smile of
prosperity, thought he had approached the ultimate in entrepreneurial
excitement.  But nothing in his career in the wireless industry
prepared him for his first nine months as head of Netcom.

     Here is a company that during the last three quarters grew from
400 to 1,200 employees, from 58 to 201 points of presence, from 72,000
to more than 200,000 customers, and from revenues of $12.4 million in
1994 to a $50 million run rate in 1995 and to a market cap of some
$400 million, while the traffic in bits grows at an even faster pace
 -- impelled by the graphic demands of the World Wide Web, itself
expanding at the rate of more than 1,000 new servers per week.

     Netcom pares down its points of presence to simple communications
nodes and handles all the technical support and Internet services for
them at the company's headquarters.  This operation fills up a
high-rise in San Jose.  Some floors teem with desks manned by earnest
engineers in jeans, many of them Asian, working the phones.  Other
floors are replete with row upon row of racks filled wall-to-wall with
Cisco routers, Sun servers, Livingston PortMasters, Ascend ISDN
pipelines, Cascade edge switches and U.S. Robotics modems.  Walking
through these ever-expanding mazes of machinery, Garrison's
entrepreneurial smile at times moves from the ready to the giddy.

     IN THIS ENVIRONMENT OF RIOTOUS GROWTH, the telcos move their slow
thighs like trolls under the bridges and routers of the Internet.
Currently commanding perhaps 2% of the traffic, AT&T, for example, has
declared its ambition to capture 60% of the Internet business over the
next two years.  But Garrison demurs: "From the Olympian perspective
of a McKinsey & Co. consultant, AT&T could take over any business.
They have one of the greatest brand names in the world, they've got
more money than God, a billing relationship with some 40 million
people, a global network and alliances and consortia, Internet pioneer
Bolt, Beranek & Newman in their fold, and they have perhaps the
world's largest internal World Wide Web on their own Unix servers
among their 300,000 employees."

     But like most of the telcos, AT&T lacks focus.  As Netcom
marketing chief John Zeisler explains: "Phone companies have their 700
numbers, 800 numbers, corporate customers, their Hollywood links,
their leased lines, their frame relay, their ADSL (asymmetric digital
subscriber line), their cable aspirations, their huge wireless
opportunities, their bureaucracy, their regulatory tariffs, their
pricing confusions.  Should voice be priced as data or should data be
priced as voice?  They are great at laying fiber and wire, connecting
it to switches and bringing signals to the central office and to the
curb.  But the Internet is a second thought, just another business to
them."

     As in the PC industry, focus and agility are crucial.  In an
arena where the technologies ride a remorseless onrush of exponential
changes, no prolonged bureaucratic process can succeed.  Even the maps
and schematics of rapid convergence among media industries miss the
point.  Dominating this arena is the computer industry -- with its
millions of piranha processors and entrepreneurs -- and it doesn't
converge with anything; it eats everything in its path.

     Now ascendant is the Internet computer industry.  Most of these
new companies, from Livingston to Netscape, focus on the Internet.
Using personal computer components to reduce the price of ISP
infrastructure far below the price of telco installations, these
companies endow the ISPs with a further advantage in a dynamic
industry.

     Livingston Enterprises epitomizes the success of the new
companies creating this new industry.  Secreted in Pleasanton, Calif.,
and financed by corporate cash flow, Livingston has grown up with the
Internet at a pace not far in the wake of its more illustrious rival,
Cisco Systems.  Livingston PortMasters crowd Netcom's headquarters, as
they do most of the other ISPs.

     Launched in 1989 under the leadership of Steven Willens, then a
manager of multiprocessors at Sun Microsystems, Livingston's
networking drive began by creating a cheap router and communications
server based on a new operating system, ComOS, specifically developed
to help ISPs meet their Usenet burdens.  Livingston quickly became a
dominant force in Internet terminal servers and routers, and grew at a
pace of more than 50% per year until engulfed by an explosion of
demand in 1995.  In August of this year, Livingston launched cheap
low-end routers to serve both ends of an Internet connection: a $1,395
two-port PortMaster to link small offices to the Net at up to 230.4
kilobits per second and a sleek space-saving $3,495 PortMaster with 24
ports for ISPs.  In October, Livingston announced a series of ISDN
remote-access machines that will compete with the currently dominant
Ascend ISDN pipeline system, if ISDN becomes the preferred mode of
Internet access.

     Now everywhere in the Internet industry companies are resigning
themselves to ISDN as the next "modem" (though, in fact it just brings
into home and office the 64Kbps digital channels long used by the
telcos between central offices).  The scandal of U.S.  telecom,
however, is that the telcos could just as easily be bringing video
capable T-1 service (1.544 megabits per second of bandwidth,
equivalent to CD- ROMs) to homes if regulations permitted a reasonable
tariff structure.

     Moreover, new access technologies are emerging, such as cable
modems and AT&T's new SDSL (symmetrical digital subscriber loop).
Available this year and under test by Bell Atlantic, SDSL modems
promise to bring T-1-line capability to homes on twisted-pair copper
wires for about $10 a month.  SDSL follows many such copper
prosthetics announced over the years (notably HDSL [high bit rate
digital subscriber line] from Level One, PairGain, Brooktree and
others), all largely spurned by the telcos on pricing grounds, but
capable of transforming the entire world of Internet access before
ISDN's niggardly pipes catch on with the public.

     While Internet hardware rushes ahead, Netscape, Sun and other
providers of Internet software make the ISP a fast and elusively
moving target for the telcos that wish to compete.  With eight million
browsers in the field, all upgradeable to the new 2.0 system -- with
the Java interpreter and Java multimedia programming language and
toolkit -- Netscape expects to attract some 100,000 software
developers to its platform over the next year.  There are already some
400 Java applications available, including word processors,
spreadsheets and games that can play on any machine with a browser
running a Java interpreter, regardless of operating system or
microprocessor instruction set.

     Netscape's expected army of 100,000 developers compares with some
10,000 developers for Apple's Macintosh and perhaps 3,000 for
Microsoft's network, MSN.  Emerging from a company that did not even
exist two years ago, such a juggernaut will further empower the ISPs
in their competition with the large invaders of the territory -- not
only the telcos but also the on-line services such as America Online
and MSN.

     The ISPs, however, are not usually in direct competition with the
large phone companies.  ISPs bring them new customers and new business
users, and the ISPs also depend on them for home connections and for
potential fiber- retaking services.  The American telcos are currently
laying some 1,300 miles of fiber-optic line every day.  Moreover,
beginning with TCI's and Kleiner Perkins' at home system, which
functions with cable modems and new software from Netscape, the ISPs
also may end up using cable plant.  As cable modems become available,
cable companies will likely turn to the ISPs to supply Internet
services, local content, technical support and point-of-presence
technology.

     In the midst of these whitewater torrents of change, the some
4,000 ISPs and their increasing armies of supporters represent a
serious threat to many of the established empires of telecom.  Not
only can they move much faster and more resourcefully, but they also
have the key advantage of having bet exclusively on the PC and the
Internet as the platforms of the future.  However smart and powerful,
Ray Smith, Mike Ovitz of Disney, Gerald Levin and Ted Turner, Sumner
Redstone and other aspiring Kings of the Road still entertain
crippling sessions of set-top boxes and interactive TV sets.

     Andrew Grove of Intel had the last word for these efforts when he
told Forbes ASAP last year: "By the time the set-top people reach the
price points and form factors of consumer electronics and penetrate
30% of homes, the personal computer will be everywhere, controlling
the TV like a minor peripheral." Bill Joy elaborated on this point in
the October issue of Red Herring: "By the time [they] bring digital TV
to the home, you will be able to take your Super Netscape version 4.0
Web browser with Super-Ultra- HotJava-Burners, and that will be your
animated user interface.  [The TV people tried, but] it's like the
Internet happened in the meantime.  Right?"

     Distracting most of the large companies (seen by the Internet's
critics as impending monopolists), the pursuit of the set-top not only
misses the point and begs the question but it also blows the key new
hardware opportunity of the epoch.  Although the PC will not be
dislodged for most office applications, there is a real and rare
chance today to create a new home architecture and software optimized
for bandwidth rather than for installed base.  Together with the Java
language, the Web browser breakthrough allows creation of new network
PC and software architectures at price points that take advantage of
the "hollowing out of the computer" caused by the impact of the
Internet.  Sun, Apple, Oracle and Jean-Louis Gassee's BeBox are all
focusing on this target today.  All are trying to take advantage of
the elusive opportunity of creating cheap machines optimized for
bandwidth and graphics rather than for legacy software baggage (the
storage can be supplied on the Net).  That opportunity follows the PC
and Internet model -- the microcosm and the telecosm -- into the
cornucopian digital future of the information age, with the old analog
TV and telephone left far behind.

     AMID ALL THESE TORRENTS of futuristic technology and prophecies
of a tragic denouement in a wasted commons, it is comforting to return
to the man who began it all, Vinton Cerf of MCI.  Coinventor of the
Internet protocol TCP/IP, developer of the once-pioneering MCI Mail
service, and both a poet and a philosopher of the Net, he is now in
charge of MCI's data network, which includes MCI's Internet backbone
network.  A rare combination of technical grit and visionary
enthusiasm, he faces resistance from forces within the company that
still lust for the glamour of Hollywood and see the Internet as the CB
radio of the 1990s.  Nonetheless, Cerf at 52 is leading MCI toward a
new Internet-centric strategy that is more likely than the MCI
lobbyists to save the company from the grave perils of long-distance
deregulation.  The company is already creating a new backbone for the
National Science Foundation part of the Internet, connecting
supercomputer centers and other high-bandwidth applications at speeds
of up to 622 megabits per second.  MCI also is a major supplier of
Internet bandwidth.  Its network connects to all six NAPs (national
access points) through which the ISPs link to one another.

     Cerf observes that the national phone network grew at a similar
pace through much of its history and regularly met every challenge.
The telcos, for instance, surmounted the predicted crisis Of the NAPs
early this year, when -- following the withdrawal of government funds
 -- the network was expected to collapse under galloping increases in
traffic.  But the NAPs, despite unsuccessful struggles with the
remaining instabilities of ATM (asynchronous transfer mode),
ultimately rose to the challenge, saving the Net by using fiber optics
and digitization, as well as transparent silicon and opaque silicon.

     Today, new entrepreneurs are rising up to shape the future of
broadband networks and possibly seize the market from the incumbent
backbone suppliers.  Silicon, both see-through and solid, remains at
the heart of the solution.  One of the ways MCI is meeting the
challenge of the future is by purchasing eight "gigarouters" from
NetStar, a startup in Minneapolis that is exploiting Moore's Law to
bring IP (Internet Protocol) switching and router technology into the
microcosm.

     Launched five years ago by a group of veterans of the Minneapolis
supercomputer scene -- Lee Data, Cray and other companies -- NetStar
went public this fall at a $83 million valuation.  It is pioneering an
elegant routing architecture that gets eight times the throughput of a
Cisco 7500 at a 20% lower price.  While existing routers run bits down
shared backplane buses, NetStar's IP router reserves a full one
gigabit per each of up to 16 media cards attached to a single-chip
TriQuint 16 gigabit-crossbar switch.

     Ubiquitous on the Internet, Cisco remains an imperial force.  But
as the microcosm advances, it too faces threats.  Not only can it not
compete with NetStar at the top of the line but it also faces
Livingston, Ascend and possibly even Compaq at the bottom.

     Critics of the Internet have long predicted that as
ever-more-turbulent floods of broadband data and Web images crowd the
commons, the Net will no longer be able to bear the load.  The routers
in the NAPs and other critical paths will jam up and crash.  But the
microcosm enables a constant stream of exponentially more powerful new
architectures as functions that were once spread out across entire
boards collapse into single chips and multichip modules.

     For 1995 and beyond, MCI has bet on NetStar's feats of microchip
integration to countervail every population explosion across the
network commons.  Following the laws of the telecosm rather than the
megalithic visions of the critics, the fast new networks are becoming
constantly dumber and more entrepreneurial.  Ciena Corp., a small,
venture-funded vendor of optical networks, is now supplying the next
generation of backbone gear, a system that can carry 16 separate
bitstreams on every fiber thread.  The first application of the new
all-optical technology in public networks, Ciena's innovation is a
precursor of the terabit (trillion-bit throughput) networks that will
be filled with video teleconferencing, video on demand, virtual
reality, and other bit-thronging and polygon-shuffling applications of
the future.

     Only one competitor, Northern Telecom, might challenge NetStar
and the others providing the new superswitches dumb enough to prevail
at the top of the line.  In early October, Northern's BNR lab
exhibited a terabitswitch architecture at the Telecom 95 show in
Geneva.  This machine, once again, illustrates the triumph of dumb
networks.  The dumb terminals of the past, whether POTS phones or
mainframe 3270 panels, required smart networks, with central-office
switches from Northern and AT&T containing no fewer than 26 million
lines of software code.  But the new Northern terabit uses passive
optical components and virtually no software at all.  It points to the
evolution of a fibersphere for broadband wire traffic that will
function like the atmosphere for wireless traffic.  (See Forbes ASAP,
"Into the Fibersphere," December 7, 1992.)

     While the critics of the new technology fix on the foibles of
television and the monolithic aggregations of old media, the Internet
is emerging as an entrepreneurial efflorescence.  Comparing the Net to
the decline of CB radio and the tragedy of the commons misses the
providential convergence of the laws espoused by Moore and Metcalfe,
with thousands of entrepreneurs in tow, exponentially expanding the
commons with streams of new invention in a creative spiral of growth
and opportunity.  In seeing the technology as a killer of jobs and
family life and a polarizer of opportunities between rich and poor,
they miss the most radically egalitarian force in the history of the
world economy.

     The critics seem oblivious to the most basic realities of the
U.S. job miracle.  While the U.S. deployed three times as much
computer power per capita as any other industrial region, this country
created some 45 million jobs in 25 years at rising, real incomes.  Not
only was the U.S. a world leader in the proportion of its working-age
population with jobs, but it also created employment for some 12
million immigrants, while its corporations endowed new work for people
around the globe.

     At the same time, a billion people, mostly Third World Asians,
used the technology to leap into Third Wave riches without ever having
to endure a heavy industrial phase.  Gaps between the rich and the
poor collapsed everywhere that the networks reached, as former
peasants around the world -- from Bangalore to Los Angeles -- gained
new freedom and opportunity from the information economy.

     The Internet creates jobs by making workers more productive, and
thus more employable, regardless of where they live.  By engendering
more investable wealth, it endows new work, providing the key remedy
for the job displacement entailed by all human progress.  By
aggregating distant markets, the Internet enables more specialization,
and more productivity and excellence.  It will help all people, but
most particularly the poor, who always comprise the largest untapped
market for enterprise.  And the Internet will continue to grow,
transforming the global economy with its power and building a new
industry even larger than the PC's.

     FUELING THE TRANSFORMATION are the laws of the telecosm.  They
begin with Metcalfe's Law: The power of computers on a network rises
with the square of the total power of computers attached to it.  Every
new computer, therefore, both uses the Net as a resource and adds
resources to the Net in a spiral of increasing value and choice.  This
means that any limited, exclusive or proprietary network will tend to
lose business to a more open, accessible and widely connected network.
Metcalfe's Law dooms all the dreams of the Time Warners of the world
to create exclusive and proprietary combinations of content and
conduit.

     As a further rule, networks prevail to the extent that they feed
on the invention and creativity of their users, since the power of the
computers on the edge of the network will increasingly dwarf the
intelligence of the network fabric itself.  For example, a 5ESS
central-office switch from AT&T, commanding some 10 MIPS (millions of
instructions per second) and linking some 110,000 lines, once
represented the most powerful computer in a local phone network.
Today those 10 MIPS are infinitesimal compared to the collective
computer power of the tens of thousands of personal computers, each
commanding 20 to 100 MIPS, linked by modems to the switch.

     Lacking an entrepreneurial environment of inventive users, the
government-run PTTs (Post Telegraph and Telephone) of Europe have been
rapidly losing ground to the U.S.'s more rivalrous RBOCs (regional
Bell operating companies) and long-distance carriers, and all have
been losing ground to the explosion of interconnected private nets.
The U.S. has some 700,000 private networks compared to just 14,000 in
Europe and some 75,000 in Japan.  Private nets that feed on the
creativity of their users will always tend to prevail over public
nets, such as France's Minitel or America's interactive TV projects,
that try to supply their entire system from a central office.

     Eric Schmidt of Sun offers a true parable of the Net.  Back when
the Internet was the ARPAnet, two routers were added to the system,
but the routers' hopping ratio (the number of hops to any destination)
got stuck at zero.  Because traffic always seeks out the optimal path,
most of the traffic on the Net rushed to these two machines, since
they promised instant transmission.  Until the settings were
corrected, the system was swamped.

     On the Net, traffic will always gravitate to the most efficient
broadband channels.  If the telcos and software monopolists attempt to
gouge customers in a badly designed and costly "top-down" network,
traffic will migrate rapidly toward the freedom and bandwidth of a
bottom-up solution.  In the emerging global Internet, these channels
could emerge among bypass suppliers using dark fiber; among low-earth-
orbit satellite systems, such as Teledesic and GlobalStar; among cable
companies and renegade long-distance suppliers; or among companies as
yet unknown.

     Guided by the valuations of the market, capital follows a similar
rule: It is routed rapidly to the channels where it can be used most
productively.  At present, afflicted by perverse regulations that bar
phone and cable companies from collaborating in the same region,
valuations of these companies are low.  Meanwhile, analysts complain
of the excessive valuations for ISPs, such as Netcom, and their
suppliers, such as Cisco, 3Com and Netscape.  Not only traffic but
also investment flows to the least regulated and most entrepreneurial
arena.

     A further law of the telecosm ordains that, in an age of dumb
terminals and phones, traffic flows to smart networks full of
intricate software.  In an age of ever-multiplying computer power,
impelled by Metcalfe's Law, traffic flows to the dumbest networks that
gain their intelligence from the variety of powerful machines attached
to them.  A corollary is that, along with traffic, capital flows to
the dumbest and most broadband nets with the most computer
intelligence on their edges.

     Perhaps most important of all is the cultural law of the
telecosm.  Networks promote choice, choice enhances quality and
quality favors morality.  Television is culturally erosive because its
small range of offerings requires a broad, lowest-common-denominator
appeal.  Linking to millions of cultural sources, global networks
provide a cornucopia of choices, like a Library of Congress at your
fingertips.  On the Net, as at a giant bookstore, you always get your
first choice rather than a lowest-common-denominator choice.  A
culture of first choices creates a bias toward excellence and virtue.

     The critics of the Internet are mostly skeptical about the value
of choice.  But choice validates freedom and substantiates
individuality.  Choice accords with the inexorable genetic diversity
of humans.  It makes possible individual aspiration and creativity.
It is the lowest-common-denominator offerings of mass-broadcast media
that lower humans to the animal level, eclipsing the differences that
make us human, cutting off the higher aspirations and inspirations
that elevate us beyond our appetites, reducing us to an impressionable
crowd, zapping through the channels looking for a splash of blood or
flash of nudity or demagogic spiel of hate.

     In prophesying centralization and tyranny, the Cassandras miss
the centrifugal force of the Law of the Microcosm, overthrowing all
monopolies, hierarchies, pyramids and power grids of established
industrial society and endowing individuals with the power to be
transcendent and free.

                           #####


Regards, - GAJ
Home Page: http://www.seas.upenn.edu/~gaj1/home.html

                  --------------------------------

[TELECOM Digest Editor's Note: Thank you very much George for sharing,
and thank you Gordon for remembering the TELECOM Digest readers in your
distribution on the net.  Happy New Year to everyone!       PAT]