Re: cr> Speculations re/ Cyberpace Inc economics


Sender: •••@••.••• (David S. Bennahum)


Your distinction about consumer-hours being the only scarce resournce
online and that therefore controlling access to the home is a natural
monopolistic objective makes sense.  There is, however, another essential
variable in the equation that's missing, which acts as a bulwark against
monopoly control, and that's ownership of the "network operating system."
The core reason the Interent grew as it did is because no corporate entity
owns the following protocols: TCP/IP, SMTP, HTTP, FTP.  These act as a
neutral foundation, owned by none, on which higher-value applications rest.
The new generation of Net protocols: Java, Shockwave, RealAudio, etc. no
longer fit this mold.  Instead, they are owned by corporations.  With this
in mind, for a corporation to monopolize cyberspace, control of the "local
loop", or access to the consumer, is not enough.  The corporation must also
control the standard for multimedia communications itself.  This gnawing
fear we have is, for instance, that if we all embrace Java, to the point
where it is deeply intertwined with the future Net, it becomes a kind of
Trojan Horse.  Free at first...but leading to monopoly of data-transmission
protocols later...and then what is the cost?

So, sadly, here is the bad news.  Corporations know this.  For instance, in
conjunciton with an article I wrote for New York magazine on AT&T, I was
sent a confidential internal document, titled "Target: Growth 2005,
Creating a New Future."  My highly credible source explained that Alex
Mandl, COO of AT&T, expected to become CEO after Bob Allen retires,
authored it. The board of directors approved this document, sometime around
last September, and it was distributed to AT&T supervisors to explain the
pos-breakup world of communications. To summarize, Mandl predict every form
of communication will go digital in the next decade, and that the world
will be connected through what he calls a "network utility," a kind of
descendant of the Net.  In this new world, Mandl acknowledges that
long-distance is headed for obsolescene (thanks to the equivalent of
"NetPhones."), and that AT&T must totally revamp for the change.  One
central conclusion Mandl reaches, and I quote verbatim:

"CSG [a division of AT&T] will set the standards for the network's
operating system.  We will partner with others to design an open operating
system that will allow the entire software and hardware industries to
develop applications for our network.  This network operating system will
be to the information and communications industry what MS-DOS is to the
personal computer business.  This open environment is key to building
high-value applications, both inside and outside the company, for our

Just as Bill Gates, through Windows, created an "open" system for the PC,
so too does AT&T hope to create an "open" system for multimedia
communications of the future.  When I asked Tom Esvlin, former Microsoft
employee, and now in charge of AT&T's WorldNet service what this meant, he
(after first refusing to confirm or deny the document I had exists) agreed
with the MS-DOS analogy, pointing out that it was "open" compared to
Apple's strategy, which is "closed" because Apple controls both the
hardware and software running Macintoshes.

The point is, in plain English, that at least AT&T understands how
important it is to own the basic protocols of the future "network utility."
As consumers, and Net users, one obvious antidote is to create
non-governmental organizations to produce future multimedia protocols, much
as Tim Berners-Lee did with CERN in 1989 with the HTTP protocol.  We must
begin to organize, tapping the computing skills of the non-profit community
(academia, for instance) to keep producing truly "open" standards -- i.e.
standards whose source code and copyright are not exclusively owned by a
corporation.  This is an immediate, and essential antidote to the very
real, non-hypothetical, threat of a return to monopoly, a la Bill Gates, in
network communications.


  David S. Bennahum
  632 Broadway, 6th Floor
  New York, NY 10012
  Voice: 212-674-8107
  Fax  : 212-505-8520
 New York Magazine * Wired * The New York Times
         The Economist * Harper's Bazaar

(David also let me know that the article he sent us recently appeared
as "Tolling the Bell" in New York magazine, p. 22, March 18, 1996.--Andy)

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