Month / November 1999

by Clay Shirky

ATT and Cable Internet Access

ATT’s attempt to buy itself a new monopoly.

11/4/1999

When is a cable not a cable? This is the question working its way through the Ninth
Circuit Court right now, courtesy of AT&T and the good people of Portland, Oregon. When the city of Portland and surrounding Multnomah County passed a regulation requiring AT&T to open its newly acquired cable lines to other internet service providers, such as AOL and GTE, the rumble over high-speed internet access began. In one corner was the City of Portland, weighing in on the side of competition, open access, and consumer choice. In the other corner stood AT&T, championing legal continuity: When AT&T made plans to buy MediaOne, the company was a local monopoly, and AT&T wants it to stay that way. It looked to be a clean fight. And yet, on Monday, one of the three appellate judges, Edward Leavy, threw in a twist: He asked whether there is really any such thing as the cable industry anymore. The answer to Judge Leavy’s simple question has the potential to radically alter the landscape of American media.

AT&T has not invested $100 billion in refashioning itself as a cable giant because it’s
committed to offering its customers high-speed internet access. Rather, AT&T has invested that money to buy back what it really wants: a national monopoly. Indeed, AT&T has been dreaming of regaining its monopoly status ever since the company was broken up into AT&T and the Baby Bells, back in 1984. With cable internet access, AT&T sees its opportunity. In an operation that would have made all the King’s horses and all the King’s men gasp in awe, AT&T is stitching a national monopoly back together out of the fragments of the local cable monopolies. If it can buy up enough cable outlets, it could become the sole provider for high-speed internet access for a sizable chunk of the country.

Cable is attractive to the internet industry because the cable industry has what internet service providers have wanted for years: a way to make money off content. By creating artificial scarcity — we’ll define this channel as basic, that channel as premium, this event is free, that one is pay-per-view — the cable industry has used its monopoly over the wires to derive profits from the content that travels over those wires. So, if you think about it, what AT&T is really buying is not infrastructure but control: By using those same television wires for internet access, they will be able to affect the net content its users can and can’t see (you can bet they will restrict access to Time-Warner’s offerings, for example), bringing pay-per-view economics to the internet.

In this environment, the stakes for the continued monopoly of the cable market couldn’t be higher, which is what makes Judge Leavy’s speculation about the cable industry so radical. Obviously frustrated with the debate, the Judge interjected that, “It strikes me that everybody is trying to dance around the issue of whether we’re talking about a telecommunications service.” His logic seems straightforward enough. If the internet is a telecommunications service, and cable is a way to get internet access, then surely cable is a telecommunications service. Despite the soundness of this logic, however, neither AT&T nor Portland was ready for it, because beneath its simplicity is a much more extreme notion: If the Judge is right, and anyone who provides internet access is a telecommunications company, then the entire legal structure on which the cable industry is based — monopolies and service contracts negotiated city by city — will be destroyed, and cable will be regulated by the FCC on a national level. By declaring that regulations should cover how a medium is used and not merely who owns it, Judge Leavy will be moving the internet to another level of the American media pecking-order. If monopolies really aren’t portable from industry to industry — if owning the wire doesn’t mean owning the customer — then this latest attempt to turn the internet into a walled garden will be turned back.

by Clay Shirky

The WTO and the Seattle Protests

How the Seattle protests may end up strengthening the WTO.

First published in FEED, 11/99.

What do the United Auto Workers, the Sierra Club, and nameless vandals in black ski masks have in common? Not much, actually, which is why it’s surprising to see them all together protesting the current round of World Trade Organization talks in Seattle. The amassed protestors represent a broad spectrum of views: The WTO should be given the power to enforce labor issues; it should have its power to lower tariffs stripped away; it should be made more transparent; it should be abolished. The central fact currently uniting these incongruent positions is the WTO’s secrecy and lack of accountability. And yet, if the protestors manage to force the WTO to become more accountable to the citizens of the countries it represents, two things will happen: The WTO will become more a part of the emerging world government, not less; and the differences between the protestors who want to improve the WTO and the protestors who
want to destroy it will break out into the open. Both of these things would strengthen, rather than weaken, the WTO.

The WTO has consistently maintained that it is not part of a world government, but that claim is just an expedient fiction. Cross-border trade is a classic governmental issue, and an organization with the power to set and enforce rules on world trade is a de facto governing body. Like the European Union and the International Olympic Committee, both of which endured crises this year occaisioned by their back-room dealings, the WTO has a crisis of legitimacy on its hands. It began life as GATT, the
General Agreement on Trade and Tariffs, with a mandate to set rules but no enforcement powers. (Unsurprisingly, laws with no cops didn’t make for much of a system.) In response, the WTO was formed, giving it both the ability to make rules and some ability to enforce them, though without any real transparency. This may be an efficient way to proceed, but of course efficiency without oversight is a recipe for pure self-interest
to carry the day. The challenge now presented in Seattle is to open the process to input from the people whose lives will be affected.

But democratizing the WTO will not provide all the protestors what they want, because they want such different things. Reformers only make common cause with revolutionaries when things are so bad that the differences between their position are blurred, and if the WTO addresses the protestors’ demands, it will quickly become clear that the central difference between the groups in Seattle is between those who accept that globalization is not going away and those who don’t. Globalization is not a program being advanced by a cabal but a by-product of changing costs. When shipping costs fall in a manufacturing economy, international trade rises because the number of suppliers is less bounded by geography; when communications costs fall in an information economy,
international trade rises even faster because geography becomes even less important. The WTO did not start this process, it does not control it, and it could not end it even if it wanted to.

International trade can only be shaped — not stopped — and arguing about what that shape should be is a task of Solomonic complexity. The protestors who want to improve the lives of Honduran workers making sneakers bound for the US are not likely to find common cause with labor unions who don’t want US sneakers (or steel, or cars) made outside the US at all. Environmental groups might not like increased popular input
into the WTO’s decisions, because most of the people affected by the WTO care more about raising wages than drowning turtles. The people talking of abolishing the WTO will be least happy of all, since reform and compromise are the enemies of revolution. The WTO is at a crossroads: If it does not open up, the rising tide of protest will strip it of its legitimacy and perhaps derail the current Millennium Round. However, if they don’t panic in the face of public expression of real grievances, and if they
find some way to give the protestors a seat at the table, the WTO will enter the Millennium Round as a strengthened institution rather than a weakened one.

by Clay Shirky

Internet World ’00: A View From the Floor

What the ’00 Internet World says about the state of the industry.

First published in SAR, 11/99.

Just got back from Internet World 2K in New York. I have gone to every Internet World in New York since 1993, and my approach is always the same – skip the conference and the keynotes and go straight to the trade floor, and then walk every aisle and look (briefly) at every booth. Today was several hundred booths, and took 7 hours, because the show not only filled the Javits end-to-end, but spilled over into a temporary structure erected north of the Javits to take the overflow.

I do this because it doesn’t matter to me when one company thinks they have a good idea, but when I see three companies with the same idea, then I start to take notice. As such, this write-up isn’t about individual companies so much as about industry themes.

In addition, the floor of Internet World is a good proxy for the marketplace: if a company can’t make its business proposition clear to the person passing by their booth, they aren’t going to be able to make it clear in the market either. Most memorable tag line this year: “Web Experience Management Solutions for Organizations that must deliver successful web interactions.” Oh good, my boss was just asking for that. Another goodie: “It begins with ‘e'” (for a company called eon). That probably tested great with the focus groups, but to my eye it looks like a commentary on how predictable naming strategies for internet businesses have become. Herewith my impressions of the IW2K zeitgeist:

What is Internet World for?

In years past, Internet World has had an identity crisis, as a tradeshow for everyone from router engineers to media buyers to end users. That is over now — INterent World, at least in NY, is now a tradeshow for companies that provides goods and services to companies using the internet for their business.

There were only a handful of booths for sites for end users — Atomfilms, MyFamily.com — and they looked completely out of place amidst the content syndicators, web site audit tools, multi-lingual translation services and HR services. Internet World has become a strictly b2b affair.

The New New Thing…

…didn’t show up. I didn’t see anything really new at the show, for either or hardware or software. There were lots of new products and services, of course, and lots of new companies, but no new ideas and no new categories.

Internet World is now a trade show for a maturing industry, where the emphasis is not on creating new kinds of functions but in making improvements on existing ones — CRM, ASP, content management, hosting, et al.

The only really new thing at IW was Groove, Ray Ozzie’s audacious attempt at living up to the dream of the two-way web, and Ray was holding court in meeting rooms off to the side — Groove wasn’t even on the show floor.

I lost count of the number of times companies told me they were the leading this or the leading that in their space. No one, in 7 hours and many conversations, ever told me that their offering was unique, or that they had no competition — everyone wanted to be part of a well-defined sector, and then to be the leading company in that sector. I detect novelty fatigue, and a sense that its safer to be in a validated business sector than to be pioneering a new one.

No big theme jumped out this year either. In other years, there’s been Java, or push, or some other bandwagon people were eager to jump on or distance themselves from. This year though, the only broad theme I could detect was fairly broad, and which I would call “Anxiety Alleviation”.

Gone are the days when convicing businesses to go online in the first place was the mission of IW: to a first approximation, every business is now using the net. Many of the exhibitors in this show were linked by trying to provide these businesses not great new opportunities, but trying instead to solve particularly thorny problems, like –

“How can I manage all this content?”

Content management is back as a category. As the home grown solutions groan under the weight of constant updates, and more businesses have to move to dynamic content in order to be able to update the site without breaking it, the competition for web publishing/content management systems is heating up again, with Allaire introducing its first offering in this space, and Vignette, the clear leader in high-end web publishing, trying to outpace the competition by re-positioning itself as an ‘ebusiness solution’, instead of merely being a content tool.

– “How can I let my employees publish to the web while bypassing those recalcitrant sysadmins?”

Lots of competitors to Microsoft’s FrontPage as well, but designed specifically for business environments. These products are more workflow systems than full content management solutions, and are more positioned around the idea that a companies Web site can’t be allowed to suffer from the bottleneck of an organizations IT group. The general solution for this class of products is to allow certain employees the ability to change web content, and then to give them tools to let them update pages without requiring them to know HTML.

– “How can I use the Web for groups of employees?”

Many offerings for intranet/groupware, designed to “enable collaborative workgroups” or “capture group intelligence.” The days when internet use was a largely personal affair seem to be ending, at least for businesses, as concern for creating shared Web environments grows. (The aforementioned groove.net is in this space as well.)

Another concern here was in “knowledge management”, companies offering ways to capture the collective wisdom of a sales force or work group.

– “How can I talk to/interact with my customers?”

Lots of companies offering to answer this question. Of all the “Anxiety Alleviators” of the show, this was the category with the most obvious anxiety around it: why are so few of the visitors to my site buying anything? There were lots of related solutions here — CRM, internet call centers, real time chat with customers onsite — and it is all targetted at raising the the number of people who buy and number of people who return to ecommerce web sites.

– “How can I get them this Zirconium ring they just bought?”

There were several companies offering to help with shipping and tracking, from a start-up that is taking a page from Kozmo and building package dropoffs in grocery stores, to UPS, who is trying to make up for the ground it lost in letting FedEx become the ecommerce shipper of choice for several high profile brands.

– “How can I monitor my customer base?”

The anxiety in the executive suites about how little they know about how customers are using their web site was also in full flower. WebTrends was there, of course, but most of the offerings weren’t stand-alone log file analysis but full-on suties of “ebusiness intelligence monitoring” — customer experience audits, site performance analysis, data mining. All these businesses share an idea that by their behaviors, customers are trying to tell you something, and if you listen, you will be able to improve their experinece and your bottom line.

– “How can I get a kicker on ecommerce revenues?”

I was amused to see several companies offering customized wrapping paper, logo printing, and other ways to generate an extra $1 on ecommerce transactions. Look for a lot of this sort of novelty/one off upsell this Christmas.

– “What if I get sued?”

There were several insurance companies, a category I haven’t even been aware of in previous Internet Worlds. How’s that for the net going mainstream?

– “How can I make my site more responsive?”

Many products or services designed to speed up the responsiveness of a web site, by caching, streaming, or optimizing the way it is served. Akamai has clearly raised the standards for web site responsiveness, and in light of the slow roll-out of broadband, there are a number of companies rushing into the breach.

– “How can I keep my servers running?”

As uptime becomes a mainstream business issue, it is driving growth in the number of companies offering remote monitoring, testing, and reporting on network health and web site responsiveness/uptime.

If they pay for you, they own you.

The only big surprise to me this year was the explosion of partner pavilions. I have always been suspicious of partner pavilions, since the real beneficiary is the sponsor, often at the expense of the nominal partner: “BEHOLD THE MAJESTY THAT IS ORACLE!!! (and here’s our partner, MumbleCo….)”.

The real effect of the Partner Pavilions is chest-beating. Companies that sell services or solutions (Oracle, MS, Real) use the size of their Partner Pavilion to signal how wide industry adoption of their offering is. As a result, I found it impossible to take any of the actual partenrs in the booths seriously — they are the corporate equivalent of booth babes. The bigger message, however, is that the giants we have now are largely going to be the giants we have in the future, and for smaller companies, their affilaitions with these giants are going to become increasingly critical.

Even odder are the country pavilions, the “Made In Israel/Germany/ Sweden” booths with companies from their respective countries. These companies are likewise impossible to take seriously, because the message behind this supposed show of national pride is “Not Good Enough.”

Not good enough to make it to Internet World on their own, that is, a suspicion heightened when you see how many companies on the show floor have dual headquarters in the US and Tel Aviv, or Berlin, or Hong Kong without needing any help from their respective governments.

If a country really wants to spend its tax dollars helping local businesses join the internet economy, it should buy 3 or 4 separate spots on the show floor and give them to the companies, without the self-defeating “Made in Sweden” label.

The power of the hosting providers

Hosting providers, those unsexy businesses that build network centers and buy bandwidth, are suddenly the industry’s new power brokers. Globix, Global Center, and Genuity all had mammoth booths.

Because hosting providers have long term relationships with their clients, unlike ad agencies and consultants, and because they get a monthly check, unlike product vendors, and because they are the only third party who has access behind the firewall, they have emereged as the ideal broker of additinal services to companies that already use them.

The global internet and the local internet

Geography has arrived as a major force. Language translation is everywhere as a service, as the days of the purely American-centric internet wane.

There are also a surprising number of services offering to aggregate content by local area, from a mapping company, to a search engine that maps URLs to geography to a company that aggregates news/weather/etc and lets you pick content modules for your website, tailored to your area. The web is increasingly being mapped, literally and figuratively, to the real world.

Content syndication

Many companies are offering content syndication tools, where they provide some sort of dynamic service — news, calendaring, “browser buddy” navigation tools — which you license for your website.

Along with the content management tools and template-driven publishing tools, the push towards syndicated contetn is all part of the general anxiety over managing a dynamic and constnatly updated web site without having to become a publishing company.

Mobile

Mobile has arrived, of course. The bad news for WAP is that everyone is selling “Mobile Solutions”, of which WAP is presented as a sub-set. WAP had hoped to become synonymous with the mobile internet, and that didn’t happen.

In particular, Palm is emerging as the alternate platform of choice, a move further dramatized by the side-by-side positioning of the packed Palm pavilion and the relatively sparsely attended WAP pavilion. Because Palm is a real OS, several companies are offering Palm browsers (YadaYada) or Palm servers (Thin Air) to extend Palm’s functions as a mobile device.

Talk is back

Voice over the intenet is back in another incarnation. Last year, there was lots of internet telephony — that was all but gone this year, to be replaced by several companies offering talk as a service to increase customer retention and loyalty, whether through sales agents, pre-recorded messages, or help functions.

VR/3D is back, with a vengeance.

Another hardy perennial is the idea of 3D shopping, sometimes with a 3D avatar, sometimes just to look at the product.

This has always seemed to me like the Videophone of the Web, an idea that is always being pushed by technologists but never adopted by users. In keeping with this year’s theme of Anxiety Alleviation, however, 3D is no longer being sold as a way to make a cool web site, but as just the ticket for closing sales and encouraging customer loyalty.

I’m not holding my breath.

Ontology is back, and so are search engines

After a few years in which AI and agents were largely ignored as impractical, and in which a few major portals had the search space locked up, specialized search engines, especially ones armed with “inference engines” (sets of rules about which words mean what and are related to which other words) or geared to smaller than Web-wide searches (only industry veritcals, or corporate intranets, or in geographic areas. Google proved that as the amount of data on the Web continues to explode, new search solutions can find a market.

The dogs that didn’t bark in the night.

– Digital Signatures. There were few companies trying to take advantage of the new Digitial Signature Act. By next year, expect services offering electronically enforceable signatures to be legion.

– E-books. There was only one standalone “ebook” product I saw. This is probably because ebooks don’t (yet) have any b2b applications.

– Peer-to-peer. Softwax was the only peer-to-peer company there, and no one was touting their peer-to-peer solutions. By next year this meme will either be ubiquitous or gone.

– Linux. Only one company specifically touting Linux. When it comes to operating systems, the concerns represented at the show were much more about uptime, remote management, and reporting, rather than being about which operating system to use.

– Napster, and the Entertainment Industry. Not a peep, except Atom Film and one lonely NAPTE booth in the North PAvilion. The entertainment industry’s issues with the internet are being aired elsewhere.

– Likewise, there were very few companies offering employee monitoring/copyright compliance software to companies, or Digital Rights Management services to producers of content.

Other random notes.

– Two years ago, ‘IP’ at Internet World stopped meaning ‘Internet Protocol’ and started meaning ‘Intellectual Property.’ This year, ‘POP’ stopped meaning ‘Post Office Protocol’ and started meaning ‘Point of Presence’ marketing.

– Lots of job recruitment sites and outsourced business solutions for tech employees this year. Despite the layoffs in recent months, the need for skilled labor is still strong.

– Magazines are a trailing indicator of a business sector. There were lots of magazines there, presumably hoping to validate themselves as good places to do all that spending on ads dot coms do. Even the NY Times got into the act, publishing a gratuitious “Ecommerce’ section on the first day of the trade show, featuring not a single article that wouldn’t have been at home in the ‘Circuits’ section.

Expect this to contract this year. As a trailing indicator, its will soon be the magazine world’s turn to get big, get niche, or get out.

– Associations are a trailing indicator as well. There were lots of associations you could join this year, whch blur in my mind into a “Worldwide Consortium of Affiliated Web Managers and Marketers Society”. This presumably is occaisioned by the desire to keep a new crop of upstarts from displacing us, the old crop of upstarts.

– AOL metamorphosis into an internet company is complete. The AOL booth, complete with partner pavilion, and the ads for AOL6.0 and AOL anywhere, put it at the center of the action.

– XML is no longer a service, now its a feature. Last year there were several companies offering to help you with your XML needs. This year, XML is simply a check-off on many products and services.

Like Java, XML won’t live up to the hype, but like Java, once its been widely enough adopted, it will find its niche and occupy it.

– The ASP model is now the norm. I had several conversations with companies selling standalone corporate software products, but almost all of them assured me they had an ASP alternative in the works. This is related to the new power of the hosting providers, who have the leverage to hasten adoption of ASP services.

– I did see two services that took bits of old models to make a new thing. The first was Navixo, which is taking the “Yahoo Browser Bar” idea, but allowing companies to populate it differently when users come to their sites. Its a way, in other words, to add real pull-down menus to site navigation, an idea that never really caught on with the launch of DHTML.

The other was a company called Enkia, which uses its own database to build “Find more like this…” features for sites using an ASP model, rather than requiring those sites to install local software on their database.

– The personal computer was nowhere to be seen. PCs are now as taken for granted as routers, and while Compaq and IBM were there, they weren’t showing PCs, while the pure PC manufacturers like Toshiba and Gateway weren’t there at all.

– Ominously for Apple, the iMac, last year’s booth acoutrement of choice, was also nowhere to be seen. – In general, this show was the most characterless Internet World I’ve been to. You would never know, walking the trade floor, that this industry had ever been considered threatening to corporate America, since by now it largely is corporate America. I saw one head of purple hair, but otherwise there was almost no one there who would be unwelcome in the halls of General Electric.

As if to underline the point, as I was leaving I ran into Ugly George, the Flying Dutchman of New York’s Internet Industry, lugging his albatross of a web cam with him, and not only did he seem bizarrely out of place, even his identity had been corporatized, as his access pass read “George Ugly”. Glad thats over. See you next year. -clay