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This article is a great read to expand the mind a little
further, enjoy.
A Most
Disruptive Technology
by John Mauldin
May 11, 2007
"What we call here a
Black Swan (and capitalize it) is an event with the following three attributes.
"First, it is an outlier, as it lies outside the realm of regular
expectations, because nothing in the past can convincingly point to its
possibility. Second, it carries an extreme impact. Third, in spite of its
outlier status, human nature makes us concoct explanations for its occurrence
after the fact, making it explainable and predictable."
- Nicholas Nassim Taleb
In Taleb's world, Black Swans are not just events like 9/11 or
the crash of '87. They can be positive events like the introduction of a new
technology which changes everything. It is now easy to see the affect of the
Internet, but not many saw it in 1987, and those who did were few and considered
kind of strange. The steam engine changed a world, slowly at first, but it was a
major Black Swan.
This week we look at what I think will be another Black Swan with the potential
to be one of the most disruptive introductions of technology in the last 20
years. In one sense, it is entirely predictable. On the other hand, it will
fundamentally alter the economic equations of the telecommunications world, as
well as spawn whole new enterprises and enable radical new ancillary
technologies.
What happens if you add 3 billion new people (in a very short time) to the
internet, and increase the bandwidth available to everyone by a factor of 20
today with a potential for a factor of 100 in the near future? Let's look at the
implications of a new technology that holds the promise of inexpensive broadband
coming not only to your backyard, but to the backyards of an entire world. This
is the beginning of a revolution that will sweep throughout the world faster
than the adoption of any previous technology. Cellular technology was just
beginning 20 years ago. This is going to be cellular on steroids. That is a bold
statement, but I think when you read this week's letter you will at least
understand the basis for my contention.
For most of us, it will mean better access to the internet, cheaper phones and
entertainment, and a wide new variety of experiences all at prices much lower
than what we are paying today. Towns and communities, indeed whole nations, that
for whatever reasons have not had access to high speed broadband will now be
able to make sure that everyone gets that "last mile" ( to your door)
connection. For some of us, it will be an investment opportunity with
considerable long term implications. While this letter is somewhat longer than
usual, I think you will find it very interesting. (Warning: this is partly about
a new technology with which I am involved financially, so there may be some
investor enthusiasm. That being said, I will try and hold it in check.)
The World Is Rather
Bumpy
Tom Friedman tells us that the internet, global outsourcing and a lowering of
trade barriers all have increased competition and global trade to the point
where the world is flat. I would contend that the world is still rather bumpy,
but will soon be getting much flatter than Friedman or almost anyone today can
imagine.
Following the "world is flat" analogy, for much of human history, the world was
quite mountainous. There were significant barriers to trade. Not just mountains,
but oceans and politics impeded trade. Trade was limited to what could be
carried on the back of pack animals or in the holds of small ships. As time went
on, and the technology of boats and sailing improved, so did trade. By the dawn
of the industrial revolution, trade allowed different regions to produce and
sell a limited number of products far from the immediate area.
Then along came trains, and commerce began to explode. Trains were a giant
hammer, so to speak, which flattened some of the mountains that were the
barriers to trade. Since the beginning of the 19th century, there have been
numerous hammers (innovations) which have helped flatten parts of the world such
as the dramatic and ubiquitous use of computers in every facet of our life. One
of the largest and most recent hammers has been the ability to communicate over
the internet.
But as influential as the internet has become, the large majority of the world
does not have access to the internet, and an even larger majority does not have
"broadband" access, or access that is faster than dial-up connections. Thus, my
contention that the world is still bumpy in many places, even in major segments
of the US, and quite mountainous in Africa and much of the developing world.
While there may be high speed communications in the industrial parks of Mumbai,
the vast majority of citizens have spotty, and slow, access when they go home.
Much of the problem is the same one faced by Samuel Morse when deploying the
telegraph: telegraph poles don't "scale." They don't get significantly cheaper
the more you make them. It takes a certain amount of labor to install a
telegraph pole. No matter how much you improve the technology of telegraphy, you
still have to get someone to put up a pole.
Backhoes Don't
Scale
The same for telephones and for cable or fiber optics. Someone has to dig a
trench or string a wire. While the cost of computers and routers and switches
keep dropping as their performance improves, the cost of the last mile does not.
Backhoes don't scale. The cost of everything else associated with
telecommunications keeps dropping, but the cost of connecting that last mile is
essentially the same as it was 15 years ago.
And the process is expensive. You only pull that fiber or wire in places where
you can see enough demand to make it economically feasible. That means mostly
urban and suburban areas, and mostly only upscale neighborhoods, especially in
developing countries. There are tens of millions of people even in the US who do
not have access to high speed internet and are limited to dial-up speeds.
There is wireless, of course, based on cellular technology, but it is expensive
and still relatively slow, with speeds in the real world rarely over 400 TO
500Kbps, and most often much slower. You are not going to be doing a lot of web
searching on your computer, V/IP (Voice over Internet Phone) calling let alone
streaming video over a cellular connection. Soon, you will be able to stream
video on a tiny screen with lots of artifacts on your cell phone. Not much of an
entertainment revolution. You can do text email and some browsing, but it makes
you wish for your high speed connection back at the home or office. You can find
a hotspot in a local coffee shop, but the speed is limited to their connection
and the bandwidth must be shared with everyone else. I can tell you, getting
online at airports can be slow, and you can get bumped off a lot.
What the world needs now is fast, cheap bandwidth. And it is going to get it and
faster than anyone can now imagine.
The Most Disruptive
Technology
Would you like to know what the future will look like? Think it will make
investing easier? Professor Vernor Vinge of the University of California at San
Diego (UCSD) is a very famous science fiction author as well as mathematician
and futurist. Last year he wrote a book called Rainbow's End about how the world
will look in 2025. Whether or not you like science fiction (and Vernor does it
as well as anyone, with a shelf full of awards), you should read it to see what
one of the true experts in the futurist field thinks about what type of
technologies will be available in less than 20 years.
One of the things that stands out (at least to me) was the ubiquity of wireless
communication in his future. Everything and everyone was instantly connected.
Whole worlds became virtual. In his future, your wireless communications with
someone becomes visual and three dimensional in character. Your inputs come from
multiple sources. You will need that quasi-intelligent interface to keep up with
the input.
But much of Vernor's vision, and the vision of a generation of futurist and
science fiction writers depends on cheap wireless bandwidth. Frankly, it will
need bandwidth that will be several orders of magnitude more than we have
available today.
The table below is from a recent issue of The Economist. It shows how the
efficiencies of wireless communications (in terms of data processing power) have
increased by a factor of one trillion since the invention of the radio 110 years
ago. They expect that to improve by roughly another 10,000 times in less than 20
years. Interesting, they assume that WiMax will be a big part of the increase in
efficiency and the decrease in cost.
While WiMax technology is interesting and possibly useful in certain
applications such as very rural areas it is limited by the laws of physics when
compared with the efficiency and costs of a competing standard called "mesh
technology." In an urban and suburban/small city environment, mesh has lower
cost of deployment and higher potential speed per dollar invested, as well as an
absolute speed advantage.
WiMax and cellular technology systems are based on the single cell tower system.
Mesh uses small radios or access points which are much cheaper to deploy and
which connect to each other with many possible routes, passing information up
and down the system.
A Brief
Introduction to Wireless Mesh Technology
Wireless mesh technology was developed for the US Defense Department. Basically,
it was a way for tanks on the battle field to communicate with one another and a
central system. Each tank was an access point (AP). An AP would talk to its
nearest AP who would relay the messages to another close AP, passing messages up
and down the line. The network was "smart" in that you could take out one tank
and it would "heal" itself, finding the shortest way back to the central command
center.
Today, mesh has evolved. Most mesh technologies still use a single radio for
sending the information up and down the network as well as connect with a
customer device like a phone or internet connection. In practical terms, this
limits the speed (bandwidth) of the network, and also means that the system can
go no further than 3 hops before it needs to find a connection into the internet
fiber "backbone" as a single radio system loses, on an average, about two thirds
of its speed over three hops. This drawback also means that wi-fi enabled phones
have trouble working as there is the old problem of latency. Remember the
earliest cell phones where you would have to wait for the other person to finish
talking before you could start because there was a lag in the system? That is
latency.
From time to time, some company announces that it is going to build a wireless
mesh system on the public wi-fi spectrum in a certain city. Then nothing much
happens. The problem is that at the current state of development, mesh does not
deliver enough bandwidth to the end user to get people to want to pay real money
to subscribe to the system. It is not economically viable, and in many cases
after a great deal of money is spent, the system does not work as advertised.
That is getting ready to change. There is a new company with a new approach to
mesh that changes the economics of wireless technology and offers speeds much
faster than your DSL and cable.
I recently had lunch with Vernor Vinge. As I described what the new mesh
technology will be able to do, you could see his eyes light up. This would help
make the world he envisioned come into reality. "This," he said, "is the most
disruptive technology to come along in some time."
How I (hopefully luckily) stumbled onto this company and the technology needs a
brief set-up.
In late 2005, my publisher for this letter, Mike Casson, called me to introduce
me to a reader he had met and who had asked to meet with me. Mike said he
thought Jack Harrod and I would hit it off. We met for a one hour lunch and
three hours later finished. As it turns, out, we had a lot of interests in
common. Our Dallas Mavericks tickets were only ten feet apart. Jack is a former
executive vice-president for Texas Instruments and ran a major part of their
defense business before it was sold. He then led the development and took to
production their Digital Light Processor business from scratch before retiring.
He has since spent his time on various technology companies, often as an angel
investor. As readers know, I am fascinated by new technologies, and enjoyed
hearing from a real insider what was transpiring in his world.
At one of our lunches, he asked me where I lived and I said Colleyville, which
is a small suburb in the Dallas area. He then said he was investing in a company
that had developed a new wireless "mesh" network technology that was being
deployed in operational form for Colleyville's First Responders (police,
firemen, ambulance, etc). Long and short, I spent a great deal of time looking
at the company, and decided to invest alongside. It was (and is) quite risky, as
the radically new technology was just being deployed for the first time in a
real operational environmental. It had yet to be brought on line and turned over
to the city to operate.
Now, over a year later, the firm has developed and deployed yet a third
generation mesh network leaping far over the technology in the market today or
what they had even one year ago. It has been retrofitted into the Colleyville
site and is operating as expected with vastly superior performance over
potential competing systems. And this week, we received a contract to install an
expanded version of this high speed, wireless broadband system in Richardson,
Texas. This system will be the first of its kind anywhere. This, gentle reader,
is not your father's Oldsmobile.
Caveat: I am now on the board of directors for the private firm which is called
MeshLinx and a minority shareholder. So my view point does have a bias. That
being said, while we think we have a several year lead on the technology I will
describe in a minute, it is highly likely that competitors will have similar
systems within a few years. We can see a pathway to significant improvements to
stay in the lead for a period of time and have no doubt our competitors will
over time move in our direction as well.
So, while I hope that the growing little company I have invested in is able to
keep a lead and get some healthy percentage of what will be a monster market,
from a consumer standpoint it makes little difference which of several companies
(and there will clearly be more than one) will succeed. Within a few years, the
world is going to be much flatter than we can imagine.
So, let's cut to the chase. What is MeshLinx going to do in Richardson? (A
little background. Richardson is a city of 100,000 people covering 27 square
miles, with a mix of high rise offices and commercial businesses as well as
homes and apartments. It was recently named as the third most technologically
advanced city of its size in the US. The University of Texas at Dallas is in the
city, where one of the most important nanotechnology research centers in the
country resides. It is home to some of the country's leading technology firms.
It is known for its "telecom corridor" because many of the manufacturers of
telecommunications equipment have their US headquarters in Richardson. In short,
this is a forward looking city with a number of engineers and tech savvy people
on its city council, and a mayor who "gets it.")
Within 10 months, Richardson will have the most advanced wireless broadband
system in the world, what we think of as a third generation mesh system. Over
this time, the company will be installing approximately 700 basketball-sized
access points (APs) throughout the city on light poles, buildings and other
infrastructure. This will lay a very dense high speed wireless broadband blanket
over the entire city. Each access point has six radios in it. For the
technically minded, this is a single silicon tunable chip, radio mesh network
digitally interfacing with every network layer and able to automatically adjust
in real time.
This is the first of its kind in the world. I smile when I think that one of our
major competitors produced a white paper about a year ago detailing why such a
multi-radio system could not work, even as we deployed our initial three radio
system, which has been successfully working (through Texas summers, winters and
tornadoes) for over a year. We will look at more about the technology of the
system in a minute but let's look at what it can do.
First and foremost, it delivers bandwidth on the public wi-fi spectrum to the
end user, the so-called last mile, at a speed unrivalled by its wire bound
brethren. And at the end of the day, that is what consumers really want: high
speed bandwidth. They really are agnostic as to how they get it. Just serve it
up, as fast as you can and easy to use. Oh, and can you please make it cheap?
Every citizen in the City of Richardson will be able to access 756 Kbps of
internet connectivity for free, from anywhere in the city. They will be able to
access the internet from their homes, schools, restaurants and parks using
standard wi-fi connections which are now installed on almost every notebook
computer. That is almost as fast as many so-called high speed broadband
connections that one pays dearly for today, and several times faster than the
various hotspots at your local coffee shops. And I should note that the
tax-payers of the City of Richardson are not paying one penny for this, and in
fact are going to see additional revenues as a benefit.
But once the infrastructure is built, it can do so much more. For those who want
higher speeds, they will be able to buy up to 20 megabits of bandwidth (upload
and download) for quite modest expense when compared to what they
are paying today. That is up to 10 times or more faster than what we currently
think of as "high speed broadband." Faster than your T-1, DSL, cable or cellular
3G. You will pay less and get more.
Your information upload and download will be symmetrical and far faster than
anything your experience today. You will be able to download streaming high
definition video in real time. As such service becomes widespread, and it will,
whole new industries and methodologies for the delivery of entertainment over
the internet will develop. In the very near future, you will be able to quickly
access high quality programming from hundreds of channels, picking and choosing
your own special programming package from off the internet. Your choices are
going to expand beyond our current imagination. (Today, you can download
streaming video while driving down the street in Colleyville, Texas.)
You will be able to videoconference with a far greater clarity and quality than
today's systems, and at a cost that will be minimal. The day will soon come when
you will be able to sit at your computer or TV and hold a conversation without
the annoying jerkiness you experience today. The video telephone that we were
promised as kids at Disneyworld is getting ready to become a reality, except
that it will be a computer. And the cost? Simply the cost of your internet
connection and some ever cheaper and higher quality cameras.
With high definition cameras becoming ever less expensive by the quarter, the
quality of your picture will become very high. This is important. We humans have
a need to look at the people we are talking with to get a "feel" for what they
are saying. When you're talking with them and they are on a large screen, the
ability to communicate will be significantly enhanced. It will also mean that
you will soon be able to communicate with someone (family, friends and business
associates) almost anywhere in the world at a very high quality level. Think the
world is flat today? Wait five years.
You will be able to use your wi-fi enabled Voice over Internet Protocol (V/IP)
phone in the City of Richardson. Your long distance calls will be made over the
internet. Your "long distance" service provider may be Skype or any of its
competitors. And because of the unique system designed by Meshlinx, your wi-fi/cell
phone (which are already being made by multiple vendors) will be mobile, so you
will be able to use it anywhere in the city. Calls will pass seamlessly from
access point to access point, just as your cell phone passes your calls from
cell tower to tower today. And yes, this means that your phone service will get
cheaper. A lot cheaper. And not limited to where you can pull a wire or a plug.
And an added bonus for the city? One of the six radios embedded in each access
point will be dedicated to first responders, operating simultaneously with the
wi-fi frequency, on a special frequency set aside for them. In disasters, the
entire network can be instantaneously tuned to the first responder network.
But once you have the infrastructure in place, there is so much more that you
can do. Let's list just a few of the possibilities.
Do you feel a need for a little more security? You can place a wi-fi enabled
camera anywhere and review it real time from anywhere. Such a camera in the
microphone on the policeman's shoulder would allow fellow officers to see what
the problem is in real time as they respond to a call for help. Inside an
ambulance, emergency room workers could see the patient as he is on the way to
the hospital. A fire captain could see what his firemen were seeing and doing
inside the building and monitor their vital signs.
Neighborhood security? Simply place relatively cheap cameras at strategic
locations and police or security services could monitor far more places in real
time and respond far more quickly to suspicious activity. You could place a
camera in your nursery and using your phone you could see how your baby was
doing while you are away. Parents could see how their teenagers were doing in
their cars real time. My grandkids (if I ever get them) are going to hate this,
but their parents will love it.
We are all aware of the great tragedy that recently took place at Virginia Tech.
One of the problems was that students were not aware of the problem early
enough. What if there were cameras which were placed all around the public areas
of any campus? If you made the cameras available to the student population
(through passwords), and in combination with true connectivity, students could
easily see and share about problems in real time. Rather than a few campus
police who cannot be everywhere, now you have a thousand eyes and ears.
(The debates about privacy in the future that have largely been confined to
academic and futurist societies? They will be coming soon to a city near you.)
Where is the most sophisticated phone banking system in the world? In the Congo
in Africa. There mobile telephone users see a product they want to buy, send a
coded text message with an amount in it to the business owner, and the money is
transferred immediately from one bank account to another. While that might not
mean much in the developed world, as credit cards and their infrastructure are
already in place, as wireless mesh systems are deployed around the developing
world, it will enable all sorts of new commerce as the benefits of access to our
capital with our credit cards that we all enjoy in the developed world will come
to a developing world.
As the system will not be used very much between 1 and 5 am, it is likely that
very cheap back-up services for computers will develop to access cheap bandwidth
at that time. Of course, automatic water and electric meter reading would be
possible. There are a lot of options once you have the infrastructure.
What about the lag I mentioned earlier with mesh technologies? MeshLinx solves
the problem by using a multiple radio system. One radio moves data up the system
and another moves it down, with the rest of the radios assigned to customer
access or looking for interfering signals. MeshLinx currently uses a six radio
configuration as its standard configuration, but could use a 3 radio set up for
less demanding applications or put up to 12 per AP. (The reason to add radios
would be because of dense customer demand in an area.) It is no mean
technological feat to put multiple radios in the same pod and keep them from
interfering with one another. As I mentioned earlier, one of the main equipment
competitors released a white paper last year "proving" that a multiple radio
system would not work.
The multiple radio configuration employed by MeshLinx allows the data to go at
least over nine hops and only lose about 1% of the speed per hop, so there are
no latency issues. That also means you only have to have 10% of the number of
expensive direct connections into the fiber backbone of the internet.
How many access points do you need per square mile? We have 12 APs covering five
square miles in Colleyville, but the system is currently only used by city
employees. The amount of APs needed is primarily a function of customer usage
(streaming video, Voice/IP, etc), density of homes and businesses, demand and
the environment (trees, buildings, etc.) in which the network is sited. An area
that has numerous high rises or multi-story office buildings would need a lot
more, whereas a rural city with a less dense population might need a lot less
per square mile. We expect to deploy over 20 APs per square mile in Richardson.
The radios themselves are quite advanced having been redesigned into a silicon
chip with total digital control. We refer to this as a Software Configureable
Radio. For the engineering types, the access points are then capable of
interfacing with all the MAC (Media Access Control) layers of the network.
The radios are placed three to a mini PCI board and plugged into the processor
board. The radios are fully programmable which means that, as an example, the
channels and center frequencies can be changed in milliseconds to avoid
interfering signals or tuning all radios to the Public Safety frequency. While
we currently use public spectrum wi-fi channels (802.11) and a public safety
band, there is no reason in principle we could not switch one or more of the
radios if another frequency (say Wi-Max, if they ever get it figured out) has
enough demand.
In the current configuration, we will provide one channel for public safety
staff (police, fire and emergency) to be able to communicate with each other. In
a real emergency, one or more of the public channels could be instantaneously
switched to the public safety frequency, providing more back up.
The access points come with a two to three hour back up battery supply in case
the access point loses power. As an option, one can put a two or three day
battery back-up into each AP, making sure they stay up during an emergency or
when there is a total power outage. And the APs are smart enough to notify the
system when they are having problems. If an AP goes down, the system
automatically reconfigures itself.
The entire system can be run from a laptop. You can see every node, connection
and radio. The network itself is a very smart system. Of course, there is
tremendous security built into the system, as the chief designer started out
from a public safety perspective where security was paramount. So, nobody is
going to be able to browse your computer through the system.
I Feel the Need for
Speed
Much of Vernor's vision of the future mentioned earlier depends on cheap
bandwidth. Frankly, in that future we will need bandwidth that will be several
orders of magnitude faster than what even MeshLinx can provide today. Our
current system delivers a net payload of 60 Mbps (the real speed after the
overhead and other non-contributing bandwidth factors are taken out).
In ten years, we will think of the 20 Mbps we will be offering in the same way
that we think of dial-up today. Fortunately, we believe we see a clear pathway
to 2 Gbps (gigabits per second) of system speed, or almost 40 times faster than
we are running today. We believe we have the talent at MeshLinx to develop this
new technology within a relatively short time. It would not surprise us to see
another factor of five achieved within the next five years. And as I noted, if
we can do it, it is safe to say that others will eventually be able to do so.
Does 10 gig of speed sound like overkill? Think back to the early 90s and the
speed of your computers and internet connections. The applications we need and
demand today simply would not work in such an environment. The applications on
the drawing board today that we will want to use in just 10 years will make
gigabit speeds necessary.
The Fastest Rollout
of any Technology Ever
At the beginning of this letter, I suggested that this would be one of the
fastest worldwide rollouts of a technology ever seen. It was just 20 years ago
that the first cellular systems were being built. The rollout for mesh wireless
systems is going to make that look slow.
There are several reasons I make this assertion. But they all center on the
facts that installing mesh systems will be cheaper and easier than any previous
system and the economics in both the developed and especially the developing
world will be so radically compelling. Throw in the fact the any astute
politician will want to be at the front of this parade (They will all want to
say, "I was the man who helped bring free internet to everyone!") and the
groundwork is laid for rapid deployment.
In Richardson and elsewhere, MeshLinx is offering the basic infrastructure for
free. This avoids all the time consuming, political budget battles in the
cities. When a service is offered for free, much of the mandated competitive
process is eliminated.
Next is the low cost of installation of the system. As noted above, Richardson
is a city of roughly 100,000 people living in 27.4 square miles. It will "only"
cost about $2,000,000 today to lay the wireless blanket I mentioned above. It
will cost a great deal less in the future, as MeshLinx is building the pods at a
pace of 100 a month today. The maximum output of the US pilot assembly line is
500 a month. When the demand exceeds this (and it will in a very short time)
discussions have been held to move volume production to China. Of course, the
world will need tens of millions of pods. The cost for a pod will be a fraction
of today's cost, with that installation number for a city like Richardson soon
being half (or less) the cost of today.
What does that $1 or 2 million get you? The infrastructure to be an internet
connection, telephone, security, entertainment provider and a whole lot more
company. As noted, it will get cheaper as the number of pods being made each
month rises, thus lowering their costs dramatically. This technology does have
scale. The cost of physically putting up a pod is not a large part of the
equation, as you simply need to run a power line, attach a few bolts to a mount
on the side of a building or light pole and then off to the next point.
Think about the 40,000 homes and businesses in Richardson. If and (hopefully)
over time when 10% decide to pay $50 a month for 10-20 Mbps high speed internet
access you could see a revenue of $2.5 million a year just from internet access.
Now add in all the other income possibilities (phone, entertainment, security
and don't forget advertising revenue on the free service!).
Think about your town or country. What would service like this be worth? If you
are a small city that does not have high speed connections available, how many
businesses that could bring jobs do not come your way because they need reliable
communications for their work and their employees? If you are in a developing
country, where internet access is difficult and expensive, it will open whole
new vistas. Couple that with the various programs which want to give cheap
laptops to kids in poor countries, and you could see significant social progress
in a generation.
Part of the cost of Richardson is because you have to create a dense network.
Where demand would be less, costs would be lower per square mile, and vice
versa. But whatever the local cost, it will be a small fraction of pulling cable
or fiber optic.
When I was looking at making my initial investment, I talked with Jack and the
team about creating a new business model other than that of equipment seller. I
felt that this was perfect for creating a business that builds and operates
networks.
And rather than having to raise money for each city, county or country, why not
use a joint venture model? Part of the important and time consuming initial work
is getting the approval from the local authorities at whatever level granting
access to light poles and other infrastructure. Ramping up to do the local
political leg work would be a huge investment in manpower and money for any
company.
Why not partner with local firms, whether large or small, who know the local
political landscape and can get the appropriate permissions and contracts (with
our assistance)? These partners will also find the needed capital for their
market (and in some instances we can help them find the needed money) and then
we would sell them equipment on a much reduced price basis and then share in the
business and operations. Yes, this means we give up a big slice of each area,
but we will have the opportunity to get a much larger "footprint" in terms of
areas served when working with multiple partners.
This allows for rapid expansion as more than a few areas can be brought online
at the same time. In fact, there is no reason in principle that a hundred areas
(or more) could not be in the process at the same time, and we expect that will
be what in fact happens within just a few years.
There are any number of skilled technicians around the world who can be taught
to do the site locations for the access point pods. Sales and marketing will
have similarities so that training is made easier, with each market also having
a local flavor. And each joint venture partner benefits in the early stages from
the experiences of the fellow partners. It is my personal bet that the several
"killer aps" (applications) will come from one of the partners showing
entrepreneurial drive to come up with ways to use the wireless infrastructure
that we have not yet thought of.
After a few cities and counties are completed world wide, and it is clear even
to technological curmudgeons that the technology works, private equity financing
will become easy to obtain. For large venture capital and private equity funds,
this makes perfect sense. Put in some capital, and you become part of the
telecommunications infrastructure in any given area. For entrepreneurs who can
figure out how to get the local access rights, they will become part of a
dynamic new business.
Let me state that it is not quite as easy as I make it sound, or everyone would
already be doing it. There are technological challenges, and to get connected
their must be access to the "backbone" of the internet. But these problems can
be solved. Governments the world over are going to see the compelling story and
know that they must provide access if their citizens are to compete in
tomorrow's world. Some will take longer than others, of course, but eventually
they will move.
So What Really
Changes?
All of the above begs a few questions. First, how will this affect the big
telecom and cable companies? The answer is unclear. Just as cellular started
small and is now a large part of the telecom world (in less than 20 years), it
is mostly owned by the big telecom companies themselves (with a few exceptions).
This technology will start small and grow rapidly. Will the telecoms (in
countries both large and small at all levels of development) try and compete
head to head or use their cash flows to buy access? Perhaps. That being said,
the arrival of advanced wireless mesh (irrespective of which firm makes the
equipment) in an area will mean a drop in prices of the various services, as the
cost of the infrastructure is a fraction of the wire bound legacy technologies.
I doubt there will be much change for the next 3 to 5 years, but then the small
incremental changes will start to add up. Telecom companies are going to have to
adapt to the new technology or lose major market share and revenue. There is
nothing to prevent a large multi-billion organization from becoming a full blown
telecommunications company in any given area. And there are scores of
multi-billion dollar companies with large cash hordes looking to do something
with it. Google keeps talking about wanting to put a wi-fi system in San
Francisco and then going from there. Now they could. But then anyone with a few
million in spare cash could do the same.
This will make getting your entertainment over the internet possible. Content
companies will love it. Cable companies may not like the new world order. They
will have to adapt. Someone will offer a new wireless "cable box" to sit on your
TV (or in your computer) connected through your local mesh network. Will it be
the local cable company or their competitors or any of a horde of new start-ups?
Will there be some political battles over this? You bet. Count on the lawyers
getting involved. But denying a city or country access to last mile connections
will mean the citizens will suffer. Politicians are pretty good about counting
votes.
Right now there are a projected 4 billion people who will have a cellular phone
with four years. By 2020 those 4 billion and a few billion more will have access
to the internet and wi-fi phones, with technology that sounds like science
fiction today.
This will re-make education in many developing countries, as kids who had no
chance at higher education will be able to get that education for little or no
costs. The millions of brilliant minds who never had a chance to give the world
their invention will now be able to have a chance.
This will certainly make the world flatter. The internet access that is limited
to internet cafes in much of the developing world will suddenly explode in
country after country. The economics are such that it is financially viable in
most countries and cities, as long as they have a connection to the internet
backbone somewhere. If your job can be done over the internet, you are going to
get a lot more competition than ever. It also means that you will be able to do
your job from a lot more places. Companies are going to go "virtual" at an ever
faster pace.
This will also mean that it is going to get a whole lot more difficult for
certain developing countries to control the information their people get. Of
course, they could simply not install a mesh system, but then they fall even
further behind. This is going to force political change as information becomes
more readily available. It is one thing to control local media. It is another
thing altogether to control information in the internet.
(As an aside, there is a lot of "dark" (unused) fiber in the world. It is going
to get used and we will need much more. The guys at Global Crossing were right
in their projections about the need for fiber. They were just really wrong about
the timing. I am grateful that so many were willing to lose so much so that we
could have cheap fiber access today.)
How can you participate? For most readers, there is not much to do but sit and
wait. You might want to show the leaders in your city (or country) who are
responsible for seeing their area advance technologically a copy of this letter
and suggest they consider contacting MeshLinx or starting a study group to
explore the directions they should take.
For others, we are clearly looking for joint venture partners. If you have the
ability to acquire the rights to a particular city, county, country or other
political area, we would like to help you do so. Our model is one where the
joint venture partner brings the financing to the table and we sell the
equipment at a much reduced rate, although in some circumstances we can find
financing.
And of course there will be opportunities for private equity funds to underwrite
the cost of building certain regions and countries and participating in the
revenue streams. This is a way for non-telecom companies and funds to muscle in
on a world-wide multi-hundred billion dollar business
This is going to be a lot of fun. For more information you can contact Jack
Harrod the CEO at MeshLinx at
harrod@airmail.net or drop me a note and I will get him (or someone from the
company) in touch with you. You can also call MeshLinx offices at 972-943-4878.
The phone is answered 24 hours a day.
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