Every Ash Cloud Has a Silver Lining (for some)

April 18th, 2010

Love to fly.

We have enjoyed a perfectly sunny weekend in Northern Germany – not a cloud in the sky, not even a contrail.  Obviously, all commercial air traffic in the region has been grounded due to the eruption of Iceland’s Eyjafjallajokull volcano.  The only air traffic near us includes some low-flying, single-engine planes flying VFR in the Rhine river corridor, a few gliders kettling over Oberkassel, and a hot air balloon soaring over Mehlem.  Deutsche Bahn is running the ICE (the 300 kmh train) down the regional lines to add rail capacity to move people around during the crisis.

As I am sitting in my yard and looking toward the jet-plane-free sky, I am wondering what the long-term implications might be if Eyjafjallajokull continues to spew volcanic ash into the sky for the next few weeks or, worse, if it continues to erupt sporadically over the coming months and years.  It could make air travel intermittent and unpredictable in Europe.

This could be potentially damning for the airlines lines, but a boon to telecommunications infrastructure providers, video conferencing firms, and high speed rail which could see demand for their products and services take off (pun not intended).

Don’t get me wrong, I love planes and I love flying (see the picture), but I am also a big fan of both high-speed rail and telecommunications.  So, I am not rejoicing in this.  If people cannot get to where they need to go to conduct their business by air, they will have to find other means or even substitutes.  Most of Western Europe is crisscrossed with high speed rail links.  Many of these trains are capable of speeds which are nearly half that a jet aircraft.  On trips of less than 500-600 km, it is actually faster and easier to take the train because one does not have to arrive two hours before departure and deal with getting through security.  If one cannot get where he needs to go, video conferencing is the only option.  Companies like Cisco and Skype have already made ventures into high-definition, mass market video conferencing solutions.  An essential ingredient for these solutions to work is ultra-broadband access networks.

Insight:  The eruption of Eyjafjallajokull could provide the impetus for further investment in communications infrastructure and high-speed rail in Europe.  The downside of this fact for the US is that it will significantly harder to stay competitive in these crucial infrastructure areas.

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Keeping up with the Jitsuzumis

April 10th, 2010

The first goal of the FCC’s recent National Broadband Plan is to ensure at least 100 million US homes have access to Internet connections with download speeds of at least 100 Mbps by the end of the decade (the year 2020).  This goal strikes me as not being a terribly ambitious.  I only have a single data point to support that conclusion, which is typically referred as an anecdote.

Prof. Jitsuzumi's Class

One of these is not like the others.

During a business trip to Japan last year, I traveled to Fukuoka to visit my good friend Prof. Toshiya Jitsuzumi.  (According to Wikipedia Fukuoka is Japan’s eighth most populous city and its second youngest).  Prof. Jitsuzumi invited me to give two talks: one to Kyushu University’s Faculty of Economics and one to his undergraduate students in communications economics.  To the undergraduates, I gave a lecture about the policy and economics of Next Generation Access Networks in the European Union.  I found Prof. Jitsuzumi’s students to be bright and engaging.  In the middle of the lecture, the students had some trouble understanding one of my stats on the number of homes passed by fibre optic access networks in the EU.  At first, I thought the confusion was due to my weak Japanese language skills.  After a bit of back and forth, I discovered the source of the confusion.  Prof Jitsuzumi’s students all have fibre optic connections to their homes.  I was the only one in the room who did not have a fibre optic Internet connection to his home (NB: I live in a suburb of Bonn, Germany).  The source of the confusion was that they were questioning why one would want to count homes passed.  This is not obvious if you and all your classmates  already has a fibre optic connection.

Insight: Granted Prof. Jitsuzumi’s class is not a representative sample set, but I can’t help feeling that the FCC is trying to catch the US up in ten years to where Japan is now.  From what I have been reading on the listservs, given current pace of deployment of FiOS and DOCSIS 3.0, the market will accomplish this goal on its own.  This fact begs the question what is need for governmental intervention.  Instead, the FCC should propose a more ambitious goal (one that might have a higher risk of failure) and devise a road map necessary for achieving that goal.  Perhaps this will come out in follow on work to National Broadband Plan.

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Broadband is an Adjective

March 27th, 2010

Over the past two weeks, I have heard people talk and read people’s blogs about the FCC’s National Broadband Plan.  One of the things which troubles me is the use of the term “broadband.”  An illustrative comments might be, “we have to ensure rapid deployment of broadband.”

Broadband is an adjective, not a noun.  It refers to the available frequencies in a given communications channel to transmit information.  Further, networks are not “fast”.  Signals in an electronic communications network travel at the speed of light for the given medium, no faster or slower.  The only thing that changes is the width of the band of frequencies used which has a direct impact on data transfer rate – the time it takes to transfer a file of a certain size between two points on the network.

So, to be precise, we want to ensure rapid and widespread deployment of broadband networks.

Insight:  I do not drone on about this just to be a smartass.  Communications networks and policy are extremely complicated matters.  In this arena, it is really hard to get things “right”.  It is therefore very important that we use language with precision.  There is, of course, this creative use of the broadband as a noun from former-FCC Chairman Kevin Martin.*

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The Uncommon Unlicensed – A Licensed Commons

March 24th, 2010
My Marriage License

I received a license, and my property rights all turned to commons.

I recently read Kevin Werbach’s excellent article on the TV white spaces, The Wasteland (not to be confused with T.S. Eliot’s The Waste Land).   I shared some of my ideas on his article with Kevin, and after an email exchange I came to the conclusion that there is a significant challenge to the successful opening up of the TV white spaces.

Under the White Spaces order, any unlicensed device which will operate in the band has to query a database and obtain permission before it can start transmitting.  Kevin argues that the white spaces database is independent of spectrum policy.  While that might be true, the imposition of the database will certainly hold implications for spectrum policy.  When a white spaces device has to query a database and obtain permission before it can operate, it is, by definition, no longer an unlicensed device.  Rather, the regime is a licensed commons.  This grant of permission is in fact a form of a license, albeit a light one.

Let me digress for a second.  A license is a grant of permission to do something.  It affords the right to “verb a noun”.  With a license one may: drive a car, own a dog, (try to) catch a fish, marry the woman of his (or her, depending on the state) dreams, or emit radio energy into the ether.  A spectrum license is usually coupled with some expectation of interference protection, but not always. The FCC already has utilized a myriad of different license types, including license-by-rule, operator, class, station, and geographic.  (I detail several different license types in my 2004 TPRC paper, at pp. 9-16.)

In my 2006 law review on Personal Communications Services (PCS), I examine both the licensed and unlicensed version of PCS.   The licensed commons is one of the factors which killed the unlicensed version PCS.  For unlicensed PCS, the FCC created a regime under which unlicensed users had to get permission from a non-profit firm called UTAM before they could start using their unlicensed PCS devices.  In doing so, the FCC inadvertently delegated to UTAM the power to grant licenses.

Think of the poster child for the unlicensed regime – Wi-Fi.  I can turn on my Wi-Fi anytime, anywhere, and leave it on until Ron Coase’s cows come home from grazing on the commons.  No grant of permission is required to access the spectrum (emit RF energy).  Now, consider a white spaces device.  When it turns on, it has to access a database somewhere and get the Okay to start emitting RF energy.  This is a grant of permission and is a form of a license, although the FCC has made Google or whoever is running the database is now the de facto licensor.

A licensed commons can be a very good thing.  Ham radio and the interstate highway system are both licensed commons and have both been very successful.  So, this type of arrangement can work in practice; however, when the alternative is less restrictive, the licensed system will not be desirable.  The FCC’s Part 15 rules are the international gold standard for unlicensed (and licensed-exempt) operation.  They are the one area where U.S. communications policy still clearly stands head and shoulders above the rest of the world.  The reason the Part 15 rules work so well is that it is spectrum policy without the spectrum (mathematically, spectrum policy – spectrum = Part 15).  The rules simply consider what is the maximum amount of irradiated power which can be emitted by a device without an unacceptable probability of causing harmful interference.  It is a classic efficiency approach and should be the basis of all radio operations.

In order for the White Spaces Order to be successful must offer device manufacturer and device users more benefit than they could achieve by using the existing Part 15 rules.  Device manufacturers can make devices to operate under the less restrictive parts of the Part 15 rules (the U-NII and spread spectrum rules).  So, they never made any successful products for U-PCS.   The same will be true for the White Space rules.  In order for the White Space database system to work, it will have to offer greater flexibility, more power, wider tuning ranges, more suitable frequency bands, etc. than the current Part 15 rules allow.

Insight:  Should the band not deliver on its promise punditocracy on the ‘property rights’ side of the spectrum policy debate will say: “I told you so – unlicensed never works.”  The sad irony is that if the White Spaces rules fail to deliver, it will not be because it is an unlicensed regime, but because it is truly a licensed regime.  I told you so, first.

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Wi-Fi? Wi-Not?

February 18th, 2010

In the past several weeks, there have been several news articles and blog posts about the possibility of Wi-Fi being a solution to congested mobile networks.  There was a piece in Total Telecom, one by Maggie Reardon, and one by Stephen Rayment for the FT.

The argument is that the widespread adoption of smart phones and mobile Internet has congested mobile wireless networks to the breaking point.  In order to alleviate congestion on their 3G or 4G network, carriers could offload traffic onto Wi-Fi networks (including those of other operators).  This would free up the carriers’ limited spectrum resources which they obtained at auction through the licensing process.  And, it could be done more cheaply than upgrading existing cell sites. (Dana Blankenhorn at ZDNet correctly points out the inconsistency of giving more spectrum to wireless carriers if unlicensed operation is the solution. It was not so long ago that wireless carriers were crying foul that all Wi-Fi networks such as the now defunct Cometa presented unfair competition because they had not spent billions to acquire their licenses at auction.)

Insight:  Integrating mobile networks with Wi-Fi is a good idea.  It is, however, not a new one.  At a conference nearly eight years ago at Columbia University and in the ensuing paper, I suggested that wireless carriers consider incorporating Wi-Fi into their networks.  My reasoning was not so much about load balancing as it was about market segmentation.  Complementing existing 3G networks with Wi-Fi would enable carriers to offer tiered services – a best efforts service and a better than best efforts service – charging different prices for both and increasing profitability.  I also suggested it would be possible to use spectrum not licensed to the carrier such as the spectrum which has been allocated to CB Radio,  GMRS, or FRS.  A 2003 FCC rule change would allow handsets cable of operating both on mobile networks and in these bands. In this way, carriers could offer services like push-to-talk or walkie-talkies without encumbering their already burdened spectrum and networks. Users would be able to speak directly to others in their area, even users on other carriers’ networks.  Alas, there was not much economic incentive for carriers to sell such handsets because it would reduce the mobile termination revenues which carriers charge one another (and eventually their subscribers) for completing calls over their networks.  However, with the balance of market power tipping away from networks and in favor of handset providers recently, it might be possible that we would see such enabled handsets in the next few years.

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Network Neutrality and the Samurai

January 10th, 2010

The ITU Association of Japan just published my September keynote on Network Neutrality in the Highlights section of its January 2010 ITU AJ Journal.  The article is password protected, but if you are a member of the Association, you can get it from the website. (The article is in Japanese).

One of the points I made in the keynote (which is not in the brief article), was an analogy of Network Neutrality issues to Edō Period Japan.  The sankin kōtai laws of the Tokugawa Shogunate imposed a rule of prioritization on the Tokaido and Nakaseido roads between Edō (now, Tokyo) and Kyoto, as well as on other “kaido” emanating from the capital.  Access to Japanese roads was prioritized by social status, with only the Samurai class having access to the center of the road as their procession called a daimyo gyoretsu passed.  Lower classes were required to clear the road kneel down and bow as the Samurai passed.  Punishment for failing to clear the road was possible decapitation.

The concept of prioritization is not new, but it is universal.  It expresses fundamental and competing notions of fairness versus economic efficiency.  We think it is unfair to give preferential treatment to certain customers (those who are willing to pay more or have higher social status).  At the same time, we also think it is economically inefficient to mandate a single (or limited set of) Internet access options for everyone, including those who are willing to pay more for premium services.  When the network (or Tokkaido Road) is congested, prioritization can make users better off.  Prioritization can be accomplished based on economic characteristics, arrival order, processing load, urgency, or even social status.

Insight: Since all messages on an IP-based network travel at the same speed (the speed of light), in discussions of Network Neutrality, it is never who gets to go faster, rather which packet, or which samurai, gets to go first.  Such prioritization must be done in a way which is socially permissible and economically desirable.  Given that the penalty for breaching a classes of service restrains in Edo Japan was capital, I think I would rather get a reset packet.

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Next Generation Spectrum Regulation

December 9th, 2009
Spectrum band plan created by price-guided mechanisms

Spectrum band plan created by price-guided mechanisms

Winston Churchill famously said, “democracy is the worst form of government except all the others that have been tried.”  Perhaps the same can be said of spectrum auctions.  Auction mechanisms have been used starting in New Zealand in 1994 to award spectrum licenses to those who have the highest monetary value. Spectrum auctions have generally been highly effective, with the occasional failure.

Despite their success, auctions have some notable drawbacks such as the so-called winners curse and the fact the up-front license fees require spectrum users to raise capital beyond the princely sums necessary to build a wireless network – a barrier to entry.  However, auctions are far better than the administrative processes which have been used for nearly a century to determine spectrum assignments.  Administrative decisions tend not to be economically efficient because the regulator has limited access to information which market participants would be more able to amass and utilize. There are also problems of political independence and of regulatory capture.

While auctions have been used to determine who gets spectrum rights, they have not really been used to determine the contours of those rights.  These contours are still determined through administrative decisions.

I have just completed a major study on next generation spectrum regulation which can serve as the basis for removing certain barriers to spectrum access, allowing more effective sharing and efficient allocations.

I can think of no reason why a properly designed auction could not determine not only who gets the spectrum rights, but what those rights are.  (Think of it this way: an auction on eBay for a car could determine not just who gets the car, but the color of the car and whether it comes with, say, leather seats or alloy wheels.)  I built a mathematical model of a next-generation spectrum auction using the Shannon-Hartley Theorem as a means modeling behavior by valuing the spectrum when considering the actions of other would-be users.  In my model bidders could express their demands for not just bandwidth, but power, modulation, underlay/interference, and other characteristics.  When I ran an MS Excel-based version of the model, the result was a mix of high and low power uses in the winning bids.  The low power bidders (similar to UWB spectral densities) could in a second round be aggregated into some form of licensed commons with the coordination protocol determined in that part of the auction.  The outcome would resemble a shared use or common arrangement where no one party controlled the spectrum.  However, the most interesting thing was that because bidders could obtain spectrum allocations that more closely fit their needs, more than 40% of the spectrum bandwidth available in the auction was left unsold.  This spectrum was valued by the market to be best allocated to either public sector use or even low- to mid-power unlicensed use.

Insight:  You cannot see, touch, taste, smell, or hear radio spectrum.  Spectrum is not a thing; it is an idea – a legal and engineering construct that explains a physical phenomenon and helps us arrange our behavior accordingly.  That fundamental physical phenomenon is the fact that when electromagnetic waves are: (1) harmonic in frequency; (2) incident in time; and (3) alight on the same reception device, the ability of those waves to be used as information carriers is degraded.  This deleterious effect is known to us as interference.  Without some form of intervention, it is impossible to exclude or limit the use of a common resource such as spectrum. Without exclusion, users consume the spectrum without regard to fact that their usage causes the deleterious effect of interference for other would-be users.  Policies which help to mitigate inference with the least amount of effort will be the most socially beneficial.

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Japan Communications’ New Business Model

October 28th, 2009

On my October business trip to Tokyo, I took time to meet with Japan Communications‘ CEO Frank Sanda.  I know Frank from my work on the Eamon Ryan’s Advisory Forum on Broadband.  I wanted to see Frank and his team because they just launched a new product for Hewlett-Packard.  HP will now sell netbooks in Japan which come with 100 minutes of mobile wireless connectivity. Consumers can buy connectivity on a pay-as-you-go basis from Japan Communications, but branded as an HP service.

Japan Communications built a really cool billing system to handle payment and authentication.  But, Japan Communications does not have a wireless network.  That it gets from the leading carrier NTT DoCoMo. Japan Communications leases capacity on DoCoMo’s network nationwide, and has the ability to purchase more capacity as this business grows. HP gets to determine which devices are sold and can sell the connectivity as its own.  Furthermore, Japan Communications could set up such a system to sell anyone else’s networked devices.  Say, how about a Carterfone?

While Japan Communications negotiated with DoCoMo to get on its network, it was able to do so because the Japanese Ministry for Communications and Information created which rules opened the networks of three largest wireless operators DoCoMo, KDDI, and SoftBank to wholesale. There was apparently a three-year battle at the Ministry in which Japan Communications was at the center. Japan’s policy to require wholesale access to wireless networks goes further than the US FCC’s rules for its 700 MHz auction which mandated these open these networks to foreign devices and handsets.

Insight: This seems like a really cool business model with implications for carriers, devices manufacturers, and application service providers around the world. I have said in a previous Cool Stuff, it is not a question of whether wireless networks should be open or closed. Rather, there is some optimal level of openness which will maximize the carrier’s return.  A privately determined level of openness will no doubt diverge from a level of openness which represents a public optimal. However, this begs the question whether opening networks to wholesale in this way is good policy and whether the Europe and the US should follow suit.  The answer is far more complex than can be addressed in a humble blog entry.  Nonetheless, I am curious see how this market will develop.

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Cool Cube

October 24th, 2009
C is for CUBE

C is for CUBE. The School has its own hand sign.

On my trip to Japan earlier this month, I was invited by my good friend Prof. Harumasa Sato to speak to his undergraduate students at the Konan University in Kobe.  Prof. Sato did not ask me to talk about spectrum, Net Neutrality, interconnection, or some other issue in communications.  Rather, he asked me to speak to his students about my life and international career experience.  Since this is the inaugural year for the school, so I was delighted to address the students.

Prof. Sato is the Dean of the new business school and spent the past three years setting it up. And, what can I say for his efforts?  It’s totally fucking cool.  The school is referred to as “CUBE”, aptly named for the building cube-like shape.  Prof. Sato roams the halls speaking to his students. (When I was in business school, and the students saw the Dean coming, they went the other way).  Inside, the building is a fantastic mix of high-tech classrooms, work spaces, meeting spaces, and offices. The main lounge is an English-only “O-Zone” so that the students can practice their business English.  The TV in the lounge is not a TV, it’s a Mac streaming YouTube.  Everything is wireless, including room lighting controls, projection monitors, and the contactless RFID security passes, which are in cell phones. Students use their cell phones not only as security cards to gain entrance to certain areas of the building, but to buy drinks from the vending machines.

Insight:  Kids today, I tell you.  They don’t know how cool they’ve got it.  My time at CUBE got me thinking about my own undergraduate experience.  As a college student, I spent Spring and Summer semesters junior year studying in Japan.  I cannot imagine how different my education would have been had we had these technologies and the wide-spread adoption of the Internet.

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Volts for Clunkers

August 7th, 2009
Source: Coneee, flickr.com, used under creative commons.

Source: Coneee, flickr.com, used under creative commons.

In the past week, there has been a lot of talk about the US federal government’s “Cash for Clunkers” program.  By most accounts, the program has been quite popular.  Indeed, the program’s original $1 billion in funding was exhausted in about two weeks, prompting Congress to vote another $2 billion for the program this past week.

Under the program, consumers can trade-in an old car which gets less than 18 MPG towards the purchase of a new car.  The consumer gets a credit equal to the scrap value of the car, plus $3,500 to $4,500.  The car dealership then takes the traded-in car, pours solvent into the engine to ruin the lubricating oil, and runs it until the engine seizes.  The car is then junked for scrap.  More than 230,000 cars have been traded in under the program so far.

Insight:  In junking the clunker cars, we are about to throw a whole bunch of babies out the bath water.  It consumes a tremendous about of  natural resources to produce an automobile.  So, while it is good to get a quarter million 18-MPG or less motors off of the road, it does not make sense to crush all of those cars to leave them to rust in a junk yard.  In fact, it is a bit of an environmental nightmare.

I suggest that the Cash for Clunkers Program consider a plan which permits rolling-up the clunkers, removing their seized engines, and converting the cars to electric vehciles.

Internal combustion engines have had their day, but sooner or later they will have to give way to a more efficient system.  Because of the ability to quickly replenish the vehicle’s energy supply with cheap oil, internal combustion engines are convenient, but they are truly wasteful. Internal combustion engines are perpetually trying to tear themselves apart from the inside and turn most of their chemical and kinetic energy to heat.

So, in light of not having to produce more steal and generate more waste in the production, the electrification of existing vehicles makes some sense. To electrify the cars, requires removing the internal combustion engine and the fuel system and replacing them with an electric motor and battery system.  Pretty much everything else in the cars stays.  The conversion to electric is not all that hard to do.  In fact, DIYers are already doing conversions in their garages – takes about 40 to 100 hours and good set of tools.  Nearly all electric cars are already conversions.  Even the macdaddy of electric vehicles – the Telsa Roadster – is just a pumped up Lotus Elise with better aerodynamics and giant cordless phone battery.  And, despite the fact that the clunkers used cars, they are still attractive for conversion.  Since an electric motor has a single moving part, a well-done electric conversion can be expected to last for over 1 million miles.  Further, used cars have already gone through a break-in period so there is a lot less friction in the bearings and drivetrains.

As a threshold problem, one would need to determine statistically which makes and models are being traded in as clunkers.  Further, one would have to determine, from an engineering stand point, which of the most makes and models could be converted to electric cars.  Finally, a business case would have to be completed in order to determine whether conversions of these vehicles could be done at minimum viable scale.

We can do this.  After all, we already own GM and it is idling factories and laying-off workers.

The electrified clunkers could then be sold a low cost to be used as daily commuter cars.  This would have a multiplier effect for both the economic and environmental dimensions of the program.

NB:  I do not argue that electric cars are an environmental panacea.  First, the electricity used to charge the cars has to be generated in a carbon-neutral way. Second, more than 90% the alloys need to make high efficiency electric motors comes from China.  This would have the effect of changing geopolitical power from oil-exporting countries to a single nation.  However, the present situation is unsustainable.

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