Malcolm: I can't start without first of all saying that one person you've left out, Lee, is yourself. I think it's quite remarkable; I've had the privilege of just being one of your band. I've not done much. I've watched you work tirelessly. I don't know how you have the room and the space to live as well, but I think we all say thank you to you. You've done something very special. (applause)
I want to talk about this. How many of you read the welcome note that Lee wrote on your little bracelet or on the web, I thought it was very aposite. I thought that was very helpful. Hopefully, today, we can have a little look at this. Because since the beginning of time, the human spirit has been thriving on being able to exchange ideas, emotions, and information, creative output, and freely formed relationships with other people. We call it conversation.
Obviously, we have to invent something very special to call it, but it's basically conversation and it lies at the very heart of what it means to be a human. It's independent of any technology, face-to-face, early simple smoke signals. It doesn't matter; it's conversation. Whether or not it's technology in the earliest form of the telephone, or as we've got now, obviously these wonderful wireless; it's conversation.
On that day in 10th of March, 1876, when the great Alexander Graham Bell uttered those first famous words down the telephone, at the end of the day, he sat in his bedroom and he wrote to his father and he said, "Dear Papa, I feel that I've at last found the solution of a great problem, and the day is coming when telegraph wires will be laid into houses just like water or gas is, and friends will converse with each other without leaving homes."
He understood that conversation was at the heart of what he created. Of course, for a hundred years, the whole of the telephone network ran off user-created content. There was no provider of content; we were all both creators and consumers of content. It was conversation.
Conversation, I think you would recognize, requires an open, unmediated, and symmetrical connectivity. It's what I think we now refer to as network neutrality. I want to suggest to you that conversation is most relevant and meaningful when it happens in the context of community. As individuals, I would suggest to you that by-and-large, over time, we've all lived in four community domains.
There is the private "me," there is the intimacy of my family and my workplace. There is the city or the village in which I live, and of course, there is the world beyond that. It remains very much the same today. I have a personal, private interest, I have a home and work community, and I have a community in which I live, a city. Of course, I have the rest of the world, which for most of us nowadays involves the whole of the planet.
I have a private network, a family and a work network, and a community in which I operate. I have a physical social network, and of course, virtual social networks that transcend the whole of the world. These are not discreet; they obviously overlap and communicate with each other. These aren't islands, but let's look at them and see some of the characteristics.
Let's take a private network. I've now got around me masses of intelligent bits of kit. In fact, I'm so old, that I'm told that what I carry in my briefcase is more intelligent stuff than existed on the whole of the planet on the day that I was born. This stuff is able to communicate with each other on whatever way, across an unmediated, edge-to-edge communication, unmetered, undifferentiated, and symmetrical by and large. It's nonproprietary on an open access basis. It has a net neutrality.
I enjoy net neutrality when I'm syncing my phone to my laptop, or I'm changing my channel on my TV set. That happens in the home, too, irrespective of what technology is; we enjoy the same end-to-end neutrality in the same manner. We call it net neutrality, and of course, what we've all come to understand is the same experience in the office environment. Basically, we can send stuff around the office to the extent that the office operator allows us. There is a degree of network neutrality in that, as well.
If I look at the world beyond, of course, we enjoy the conversation now, on a net neutral basis in the Internet, something we've got to fight to preserve, of course. There is one issue here. There is the question of who pays for the bits that create the network.
In the home network, how do you pay for the hub and the cable? How do you pay for the wireless router? It's the same in the office. There are several ways in which we could approach this, obviously. We could each buy a piece of the cable and share the costs of the intelligent router. The family or the company could buy it and own it outright, or we could go and get somebody to finance it, a third party to provide it.
Whichever way we choose, there are not ongoing restrictions on how we use it. The last thing I would suggest to you we ought to do is to let a third party buy it all, own it, control it, and then offer it as a service based on charging us as much as they can for using it, but only in a way that they are happy with.
This principle that once you've found a means of financing the bits of hardware, the bits of software go free; I think it is a very significant, fundamental fact in the digital world and it's a business model which can be scaled without limit - the principle of network neutrality.
We've got these three domains in which I live, communities in which I experience my life, and there is a fourth of course, the city. This is what I wanted to touch on because this is the final chain that shackles us from having end-to-end net neutrality.
We all live in cities. 50% of the world last year, for the first time ever, lives in major cities. Basically, the rest of the world live as hermits; they live in communities, little village, smaller towns, small gatherings. One or two people do live in an extraordinary way, but there are not many of them. I'm not going to address their specific interests, this morning.
Let's look at one of those. Let's look at the single city. From Mr. Bell's invention, there were two telephone wires that went from every house, every building, to a central office, the PTT (Post Telegram and Telegraph). There were a small number of wires that went from that to the city, the telecom's operator in the next city, the central office in the next city. Dumb customer premise equipment, intelligence sitting usually as an operator and obviously, mechanized and digitized in the central office and scarce capacity in the main network.
If you look at four cities, and look at my simple map of the telephone network in the world, two people who want to have a conversation across that; the first person picks up a dumb signaling to the intelligence in the local exchange, pays some money, gets transferred to another intelligence center, the International trunk exchange, a circuit is set up there to another local exchange, and the connection is made.
A dedicated dumb instrument, accessing routing intelligence within the network in order to allocate scarce network capacity, to enable conversation; I know I'm not telling you anything new, but I'm refreshing your mind as we start this conference, about this fundamental business model.
The telephone operators' business model, which came out of that technology and which has persisted for a hundred years, and I think largely persists today, is generating revenue by, on the one hand, charging users for exclusive access to some local connectivity and copper wires, maybe some CP equipment. Secondly, the orderly allocation of scarcity in the trunk network, and finally, developing and trying to sell network embedded services.
A vertically integrated service provider business model - infrastructure plus the operation of the network, plus services on top; and that's a multi-trillion dollar industry.
The three great seminal technologies of the second half of the 20th Century, I would suggest, were the silicon chip - silicon fiber, optical fiber, and spread spectrum - Hedy Lamarr there, with her boyfriend came up with this idea of software controlling or at least allocating spectrum.
1984 is a seminal year, I think, if we are going to understand why we are where we are. What happened in 1984, apart from the prediction by George Orwell, that there was going to be a terrible nemisis for the whole of humankind. In that year, two things happened. One was that the political drive for privatization, competition, and regulation started. Ma Bell was privatized, BT was privatized, and other telcos. It was also the year that there was a sort of lift off in each of us getting digital equipment in our own hands.
Let's look at it first. What happened, if you look at the history of the telephone, was that each city had its own telephone company, its own telephone network. There was a degree, and looking at this in the U.K was a degree of merger and acquisition. By 1912, the heavy hand of the state came in and nationalized the lot and put it in something called the general post office. Come 1984, when it was the fashion for privatization, they privatized that vertically integrated the monopoly.
That's basically what happened around the world. Nations ended up with privatized former monopolies. In Great Britain now, local access through wherever you are, is for a single, formerly nationalized monopoly carrier. You've got no choice. It's the same, of course, in France, Italy, Germany, Brazil; it doesn't matter where you go. Instead of what in 1984, allowing the digital disruptive technologies that I've looked at, to be deployed by communities, by their city communities, in a way that they felt benefited their own citizens, we had this terrible dead hand of duplicating vertically integrated, artificially created service provider monopolies. Of course, we had to have a regulator. Now, it's called Ofcom in the United Kingdom, to regulate it.
I suggest to you that that is terrible. That was a collision between this disruptive technology, which had tremendous power, and has tremendous power to transform our lives in ways we cannot imagine, being deployed at the hands of vested interests.
What happens is the Ofcom looks at the technology and says, "We've got to consult the industry," so they consult the industry and the industry says, "Oh yes, very good technologies; we know how to deploy these," and you get them doing it. Vested interests were handed power in 1984, by the state, to tame disruptive technologies against our interests, I would claim.
I want you to imagine; let's just look back. Imagine if that had happened at an earlier age, 1759, Francis Egerton goes with his girlfriend to France. He owns some coalmines. He takes her on a visit to France. He sees that they've got a canal that takes the coal from the coalmines to the market. He thinks, "I could go home and I'll build one of those in Manchester; that could be useful." He does that and it's a fantastic success. Everybody benefits and over the next fifty years, there is an explosion of canal building. It's an absolute rage, such that by 1825, there are 4,500 miles of canal.
In 1829, what happens? Unforeseen, unplanned, out of nowhere comes a little piece of disruptive technology. Of course, if we had then what we have now, there would have been an office of canal operations and management, obviously Ofcom, not to be confused with this one. Ofcom, what would it have done? It would have gone out, consulted the industry, and come up with this wonderful report "steaming ahead with Britain." It would have said, "Of course we know how to deploy the technology. We'll put railway lines up the sides of the canals, and we will enable those to be used to pull the barges and get higher throughput."
If you looked at it, you would have said, "That's wonderful, isn't it. What a brilliant idea; faster moving the coal and other materials, greater utilization of canal capacity, no public risk because it's a regulated industry, a birth of new engine manufacturing industry, massive growth steel output and rail output, and even very happy horses." We didn't do that. What actually happened? The canal industry withered and lay dormant within twenty years, for a century.
Disruptive technology plus free markets of end users, without sector specific regulation delivers what I would call a golden age of social and economic prosperity. I haven't time to go into what happened as a result of the railways because it was totally unforeseen and unpredicted. It changed the world.
Take a moment; if you haven't read Carlota Perez's book, I urge you to do that. She looks back, as a Venezuelan economist, at five of the earlier technological revolutions. There is the 1771, the Revolution in England; the age of railway in 1829; these are the ways she categorizes them. The age of steel and electricity in 1875; 1908 is the age of the automobile; and of course the one we are in now in, the age of information technology.
She says that the key to each of those and the incredible world changing, socioeconomic transformational impact that they all had on our society, underpinning each of them was new infrastructure, new specific infrastructure.
When I first heard this I found it very empowering. If you read the book you will find it persuasive, as well. It caused me to ask the question and a simple question; in no previous industrial revolution was the infrastructural network that enabled the next one ever derived by or evolved from the one that was dominant in the preceding age.
What was the philosophical, political, or economic rationale for regulating to do that, in 1984? That is exactly what we did. Here we are and of course, everybody says, "Oh great. We got faster download speeds, increased ISP competition, lower end users. The popular and political view is that we're making progress.
But I tell you; where we are and where we're going is never going to deliver that golden age of transformation. Public policy formulation through consultation of self-appointed stakeholders inhibits progress and works against innovation and against the interests of you, me, and society at large.
How then were these technologies deployed? Well, let's just look and refresh our mind. That's the typography that we had; what did they do? The first thing phone companies did was to put a massive amount of fiber between the telephone exchanges, eliminating that scarce resource. They also put computers, obviously, into the exchanges. I suspect; they probably listened to Ken Olson, who if you remember, made that terrible prediction. They got that wrong because now we all have masses of intelligent kit around ourself, around our homes, and offices.
We now have the intelligence. We have a restricted access locally. We have dumb routers in the network and abundant network capacity. The world has literally been turned upside down.
What do they do? Looking at one city, they put fiber from the city to other cities. The capacity effectively became infinite. We had these dumb routers in there and the government legislated to promote competition by allowing other ISPs to cluster around that business model and around that central office. The intelligence was with us, but we are network captive in every city, I would suggest to you; no local P2P connectivity. An asymmetrical topography implicit in the technology of ADSL, primary value still sucked out by this vertically integrated cluster of service providers, and closed metered pipes.
What we want, what our cities want, I suggest is something like what we've got at home. We want to have abundant fiber flowing around the city. We want to all be able to connect to it. We want to be able to allow anybody to connect it, service providers, doesn't matter who. We can of course, hopefully have the PTT itself connecting to it. We can extend it out to allow private developers to put their own fiber in and connect to it. But, have a network that's running there for the public benefit, the community benefit, like the roads. Of course, people can come and hang other services on it, that again, will transform the life of that city.
I suggest to you that the mother of all battles is sort of beginning and it's well in place in some places and certainly is running in a city near you. The issue is this; the dual dire issues are who will control local connectivity within that city that I live in? Will it be the telco or cable co or will it be citizens?
Put it another way; will our devices remain free to communicate directly with each other, or will they be forced to go through some vertically integrated toll extracting toll booth of a service provider? Will we be able to have conversation with anyone other than the telco? Will we have network neutrality or will we be network captive in our cities? You know this phrase very well. I'm afraid the telcos, when they look at it and see what we're trying to do in the cities, realize there is another implication for it.
I make this bold statement and that is, from the work that I've been doing, my professional opinion now is that the blind perpetuation by the incumbent telcos and cable companies of the vertically integrated service provider model in the local community business model is recklessly destroying their own shareholder value.
We've got the passive network. We've got the active layer and the applications running on top. This is the way that the industry likes to structure itself, at the moment. Yet, if you look at the difference in terms of investment requirements, they're massive. All the high value and the high risk are at the top in the applications. Somebody living in some bedroom five yards from here is going to create the next Google.
If you look along a various number of criteria, you will see, and I can't go into this but you can pick it up on the version that will be on the web; you can see that there are vastly different characteristics. How do we get from here to here? I think there are three necessary and sufficient components to do it, and they're tough. I've really learnt this over the years, in a very hard way.
You need to have a development partner with a sound, strategic understanding, and I suggest that the foundation which I've founded and the Open Planet, which is the operating arm of it; we do have some understanding. I'm not alone in this. Anybody can take the ideas. There is nothing proprietary about this. This is about liberating cities and citizens.
The second is that there should be local, political vision and commitment.
Third, I believe the local telco incumbent needs to be a strategic partner. Let's briefly look at this for a moment. There is a new generation of enlightened politicians growing up. Lynden Johnson built his political career, I understand, on realizing that there were votes at the ballot box by taking electricity to remote homesteads in the southern states of America.
There is a new group of politicians that I recognize, young digitally savvy politicians who are saying, "What if my city or local community could have an open, public, local access network which would not only massively save costs but would allow us and our citizens to do things that we can't even dream of, and to benefit in order that we can compete against other cities in this global economy? What if we had this open access infrastructure here? They're waking up to the fact, of what you and I know, that the last thing they ought to be doing in their city is allowing some third party to own this strategic community asset, in order to offer a service based on charging as much as it can and restricting how it's used.
Here we have the Deputy Mayor of Amsterdam, desperate to compete for inward investment in the knowledge economy, with every other city in the world. He says, "We make a big step towards the deployment of a citywide, open access fiber network and the reason; to enable our city to compete with other European cities," one we've worked Eindooven exactly the same. We believe that the development of an open, public, open access network to serve the community is vital to it remaining globally competitive in the 21st Century. It's the same here in Athens, dear Panayiotis Tzanikos, his English isn't very good. He says, "We need to have this open access infrastructure in order to compete." Here, counselor in Jull, John Robinson, "It's essential that the city of Hull has an open, public, local access network if it is to solve its social and economic problems resulting from other industries like fishing being replaced in the knowledge economy."
There is a political will. That's one. You have to have a city led by democratic leadership that says, "We want this. I, as a political leader, want to liberate my citizens and allow them to converse and to send massive amounts, on high capacity bandwidth, around the city in ways that's not for me to control, but it's for them to discover."
The second thing I would suggest is that you really need to have the telco. There are two ways to get an open, public, local access network. One strategy is to do an overlay network and that's the one that is favored at the moment. Most cities are doing that. Amsterdam is doing it. Most of them are doing it, simply because to-date, there has been no appetite.
There has been fierce opposition in fact, from the local incumbent, and it proved pretty powerful. It's really very debilitating because it results, first of all, in that local economy financing two networks. That puts it, at the start, at a disadvantage to any city that has a single infrastructure. If we allow Toyota and Ford to compete by laying their own road networks, that city would have a very high tax taken, I'm sure.
There is a low penetration. You've got both networks with less than ubiquitous penetration, which for the public sector, is useless. They want to talk to everybody. It's divisive. It's a very expensive solution, too. 25% of laying a brand new access network in an urban environment consists of civil engineering.
What about converting and upgrading the existing local, copper incumbent network? It would deliver near ubiquity. That would be great. It would avoid wasteful duplication and over capacity. It's a massive 25% CapEx savings, obviously, as I suggested, but of course, the problem is that these national carriers have no appetite to abandon their vertically integrated business model, which seeks to capture maximized end-user value.
Due to the earlier nationalization that we touched on, if I in one city want to have a talk with the incumbent, who do I talk to? I talk to the national incumbent and he's not going to break his business model in one city, only for it to be replicated elsewhere.
I've learned that with great hardship, I must say. I put my thinking cap on and I tried to find and look for cities that have their own dedicated incumbent. I looked very hard; I haven't travelled the whole world, but basically, there are four. There are four cities on this globe that have a dedicated local incumbent. We're working in one of them - oops, I hope that's not prophetic. That goes down two minutes before, doesn't it?
There are four cities on the globe that have their own incumbent and we're working on that; I profoundly believe that an exemplar is what is needed. If we do it in one city, it's like the Stockton to Darlington Railway. If we provide the citizens of one city with an open access network, then they, the citizens, will deliver such sensational use of it that every other city will say, "What's going on there? We want it," and that will force our political leaders and the regulators to take a fresh look.
Going down to lobby in Washington, or in London, to try and get different political opinions or public policy in place is a dead duck. I don't have a strong voice at British Telecom. We want to go to that and deliver that.
I simply say to you; you're invited to come along. This is a big task. I don't know anybody who can come and kick tires with us, or if we get there - we're not there yet, but if we manage to get and acquire this incumbent, and break it up, and end up with a passive piece of physical infrastructure, owned for the benefit of the community and structured in that way; please, we need anybody in this room who has any idea of how to help that community, either to use it themselves, or you've got a service to deliver into it. If you can bring anything to it, you can be sure I will not say it's not invented here. You're very welcome.
Lee, I close with simply saying conversation is what this is about. Walter Litman, the great journalist said, "The role of the press is to keep a community in conversation with itself." I would suggest to you that in the digital age, the role of an open, public, local access network is to keep a community in conversation with itself. Thank you very much. You've stayed awake. If you've got any questions, I'd be very pleased. [applause]
Brought: What are the four cities or the five - your slide said five and you said four? Could you name them?
Malcolm: [laugher[ If you don't mind; I won't tell you specifically. I can tell you one of them is Vatican City. I don't have much influence there. [laughter] The reason I'm not mentioning them is not for anything. I will one-to-one, until I know why you want to know. I can tell you there are people who would be very keen on making sure this doesn't happen.
Lee: I think we have one minute. Please note; there are two ladies walking about with microphones. If you have a question, just put your hand up.
Audience: You seem to put a lot of emphasis on where the fiber - you seem to be putting a lot of emphasis on where the fiber is running. What do I care about where the fiber is going if I can connect cheaply through the cloud? I'm sort of missing the - there is a logical leap here.
Malcolm: Just as in my home, I want to send stuff, for security reasons and other reasons, to the bedroom next door. A city might not want to have to go onto the public Internet and make sure a massive file gets on the other side of the world before it comes back to go to the next door neighbor. I think it is important.
Audience: I understand if you said you don't want ...
Lee: It's strict timing.
