They say there is a glut of backbone bandwidth in the world due to an over-provisioning of optical bandwidth in the past few years, and I believe that to be true.  Due to this glut, carriers have significantly reduced their expenditures related to expanding their backbone networks.  This has had tremendous implications on the prospects for telecommunications and networking vendors who serve the carriers, and components suppliers who in turn serve them.  Basically, the product and money flow has almost completely jammed up. 

But you know, there is an even bigger glut of bandwidth in the world.  Due to the rapid development of Ethernet switching and IP routing technologies and faster Ethernet standards, enterprise networks have been able to massively over-provision bandwidth just because it doesn’t cost much.  They are still waiting for applications that drive the need for such bandwidth.  But while they wait they are happily enjoying networks that are operating at 1-2% utilization at many points in the network, with higher utilization at a few key points of traffic aggregation.   If you added up all of the extra bandwidth at all of the enterprise sites in the world and compared it to the carrier capacity glut, it would look like the San Francisco 49ers offensive line piled on each others shoulders, standing next to Michelle Kwan. 

So there are really two bandwidth gluts in the world, one that is talked about a lot and an even bigger glut that is generally not talked about so much.   And these gluts exist in a time when enterprise packet networks are moving from being oriented towards internal traffic to ones that support a large component of external traffic.  E-mail, instant messaging, supply-chain management, e-call centers, automated customer service, web-based marketing and e-commerce, long distance VoIP, distance learning, telecommuting, co-location, disaster recovery, and application outsourcing all create situations where a packet put onto an enterprise network wire needs to travel over an external (usually service provider) network at some point. 

So why do we have all this extra bandwidth within both enterprise networks and carrier networks if so much traffic needs to pass between both?  The reason is that there is not a glut of access bandwidth.  In general, most enterprises still access external networks via T-1 or Fractional T-1 links.   There are some T-3 tail circuits in the world and even some OC-3, but the numbers of each of these are quite modest in the grand scheme of things.  So our two oceans of underutilized bandwidth – enterprise and carrier – are connected together via small little fissures that barely drip traffic between them.  As long as this situation exists, enterprise customers are forced to utilize WAN access bandwidth carefully and manage it closely, which dramatically slows down their pace of embracing new ways of doing business and interacting with customers, partners, and employees.  Meanwhile, the carriers wonder why when built, they didn’t come. 

I strongly believe that if low cost, reliable, and readily available WAN access bandwidth was available to every business in the country, there would be a huge ripple effect on the industry and on the country’s economy as a whole.  What I’m looking for is a base service available to any business in a reasonably dense population area that supports 20-50 Mbps guaranteed with peaks up to 100 Mbps, and which can support all the requisite services (voice, e-mail, internal access, VPN, video conferencing, instant messaging, etc.), for a cost of less than $1,000/month.  If such bandwidth and related services were available at this cost, huge amounts of traffic previously bottled up in the corporate networks would be unleashed and come crashing down on the carrier backbones. 

With such bandwidth available cost effectively, enterprises would see their return-on-investment shorten for embracing networked applications of various types, which would free up additional budget for more such projects.   What we thought of as a glut would rapidly shift to being tremendously scarce and there would be a race to build out networks even faster.  Enterprises would flow dollars to equipment vendors and service providers, who would in turn flow dollars to equipment vendors, who then would flow dollars to component vendors.  All of these entities would find themselves shorthanded in terms of human resources and recruiting would take on a fast and furious tone. 

In short, the financials of the entire high tech industry segment will come roaring back and once again become the darling of Wall Street.

That alone is probably enough motivation to do something to make access bandwidth more readily available and cheap, cheap, cheap.  But I think it goes even farther than that.  If I’m right, and the enterprises that leverage such technology find that it truly does make them more efficient (as was experienced in the early-to-mid 90’s) then the economy as a whole would benefit.  Goodbye recession, hello exuberance. 

If you buy into all of this, then you have to ask – why isn’t it happening?  It doesn’t seem to be a technical problem.  Plenty of technologies and products existing today provide higher speed WAN access for a reasonable cost (although possibly not as low a cost target as I am shooting for yet, but on the right trajectory).  In my mind, the best example of this is Ethernet access over first-mile copper.  But I’m not technologically religious.  It could be DS-3 or OC-3 over copper, Ethernet over broadband wireless, PON, free-space optics, dirt cheap SONET-over-fiber, 802.11 mesh networks, whatever.  There are a lot of good ideas out there and under normal circumstances; the market would quickly sort it out.  But that’s the problem.  There is no market available to sort it out.  At least in the US, there are no entities capable of taking these technologies and building out the infrastructure required to economically connect the glut of enterprise bandwidth to the glut of carrier bandwidth.  The reason is it takes a lot of up-front money to put such an infrastructure in place.  It costs a lot of money to lay fiber.  Even if you find a way to bypass the need for last mile fiber, it takes equipment on each end of the link to drive the lines.  Then you need infrastructure behind that to handle all of the traffic, direct it to long haul links, meter it, bill for it, etc.  And it takes people trained in all facets of service definition, service selling, service and equipment provisioning, and daily operations.  So there is a big up front investment required to service the first few customers.  And with the goal being cheap bandwidth, you can’t charge the early customers a high premium.  So the payoff on this investment does not come quickly.  It could take many years, possibly a decade.  So someone needs to have deep pockets and a lot of patience. 

The only entities I know who could potentially finance such an undertaking are the ILECs.  But these are slow moving beasts that have to worry about quarter-by-quarter earnings and possible cannibalization of present services and pricing structures.  They are so huge, it is difficult for them to get their arms around all of the possible issues and therefore they tend towards the safest course of action, which is to either do nothing or to figure out how to re-create the pre-divestiture AT&T.  And as long as there is no impact to them from doing nothing, the situation will continue. 

What is needed is a threat to the ILECs, or the re-creation of the so-called Competitive Local Exchange Carriers (CLECs).   The only reason we have any DSL in the US at all is because of the efforts of the previous generation of CLECs such as Covad, Netrhythms, and Northpoint.  But Netrhythms and Northpoint are resting in peace while Covad valiantly fights the good fight.  More recently, Ethernet-oriented CLECs such as Yipes have joined the game.  But these entities have found out just how much money it takes to gain critical mass as a service provider, especially when your do-nothing competition has a variety of ways to slow you down, trip you up, and generally frustrate you.  But even though the experience of the last generation of CLECs and other similar entities (called different things in the past, e.g. Competitive Access Providers) has not been good from a financial point of view, I believe we need to keep banging on this until we get it right. 

I don’t expect the Venture Capitalist or equity financing community in general to finance the creation of a new generation of CLECs.  These are smart people and the situation is such that CLECs probably are not financially attractive, especially if you need to see a return in a matter of years rather than decades.  The numbers just don’t add up by normal investment standards. 

Usually, in a situation like this, my republican brain would say “then that’s that, the market has spoken.”  But I believe that the stakes are so high here – that the US economy can be put back into a virtuous cycle through the successful deployment of cheap access bandwidth, and that if we don’t do it and others do we run the risk of becoming a 2^nd rate economic power with all of the associated compromises of freedoms and quality-of-life – that we need to subvert the normal market process through (and we should all gag as I say this) federal government intervention. 

So I call upon the government to initiate an initiative to catalyze the creation of cheap access bandwidth.  There are a variety of ways this could be accomplished.  My least favorite choices are ones that would make government bureaucrats the stewards of the next generation of CLECs, or ones that try to accomplish the goal by subsidizing the ILECs.  Instead, I’d like to see the government tip the financial scales enough in the favor of the traditional high tech financing community so that they could see potential reward that offsets certain risk.  Some ideas, for instance:

·         Provide a dollar-for-dollar match to any entity that helps finance a broadband access CLEC, with no ownership tied to the matching funds.

·         Create an insurance fund to guarantee that at least 67% of the value of any investment in a broadband access CLEC will be returned to the investor even if the CLEC fails.

·         Subsidize, through cheap loans or outright grants, equipment and other up-front “priming the pump” costs that normally saddle CLECs with such debt they can never work their way out of it.

·         Provide real and enforceable “unfair advantage” rules for CLECs over the ILECs that only kick in if the CLEC pricing is below a set threshold (we’re looking for cheap bandwidth) and if the CLEC offerings provide sufficient coverage (we’re not looking to finance cream-skimming businesses here).  Such rules could include a transfer of ownership of subscriber loop copper and fiber assets from ILECs to qualified CLECs to eliminate the ILEC stranglehold on that critical asset.  If that’s too radical, then maybe a rule that gives the CLECs access rights so that they can lay down new fiber or copper, with cheap financing to allow them to do so. 

I’m no expert on how to create or oversee such initiatives.  Normally I would be dead set against government intervention.  But every once in a while, Washington has to take the lead to make big things happen that just can’t happen in a grass roots fashion.  Programs to get children immunized against polio, the race to put the first man on the moon, guaranteed healthcare for the elderly – things like these require centralized planning and financial backing.  I put the creation of cheap access bandwidth into this same category because the benefit to the country is on the same order of magnitude as these other initiatives, and because I don’t think it will happen naturally – at least not quickly enough to suit me. 

So, ask not what Metro Ethernet can do for you, but what you can do for Metro Ethernet.