Tuesday, June 23, 2009

Returning from the new Digital City State

I'm on a train returning to London from Manchester, where I was very kindly invited by the Manchester Digital Development Agency to give the opening presentation at the NextGen event. For those who didn't catch the live stream yesterday, I think there is going to be a replay, or perhaps an edited highlights version, or both, available after the conference closes today (I hope so, because all the presentations were of a very high caliber). I will post my presentation slides, once I'm on something better than a temperamental HSPA connection. (UPDATE: The slides are now up.)

Without getting too self-indulgent (now apparently my hallmark) or boring anyone, here were the main points I sought to address:
  • The current crisis is a very deep hole, from which we will need a lot of time to extract ourselves.
  • Ironically, this gives us greater license to consider strategies which might have been dismissed previously, in the interest of gaining some control over the direction of our future.
  • However, history has proven that the future is hard to predict, particularly when pundits have attempted to dismiss new ideas or to predict that certain innovations have no application. Some of my examples are found here. In almost every example I cited, the pundit in question was a genuinely respected and successful leader in his field - but dead wrong about where things were headed.
  • More frustratingly, some innovations end up being used in a dramatically different way than was originally intended (Warfarin, nitroglycerine, SMS, email), with profound consequences.
  • Other innovations arise prematurely, only to die (or be killed in this instance) and be revived later.
  • Expedient, commonsense decisions can often be completely wrong, and sometimes historical revenue models which should be obvious for new businesses (in this case sender-pays data, which commercial broadcasting had used for 60+ years) are initially missed.
  • So we must be very careful when today we hear that there are no visible applications which could really put 100Mbps symmetrical connections through their paces. Beyond being short-sighted, the Ford vs. Ferrari comparison in the UK is a canard for the ordinary consumer. Your choices are a blue Ford (various shades available, fifth gear often disabled), a red Ford, or staying home.
  • The process of electrification in the US poses some interesting questions. Here I reproduced a chart from a 1980s study (Tim - this has proven to be the gift which keeps on giving, thanks!) which shows average electricity consumption doubling between 1950 and 1960, and again between 1960 and 1970, though what's really interesting to me in the chart is that sub-categories of consumption increase dramatically over that period. What this really reflects is that entirely new categories of appliance were being created, each with its own parts supply chain, assembly infrastructure, sales, distribution, maintenance, insurance and finance functions - in short, a proliferation of ancillary functions and jobs which made these appliances affordable and mainstream. There is no doubt in my mind that the original architects of universal electrification didn't envisage this happening, nor could they imagine what came after 1970 (set-top boxes, VCRs, DVD players, PCs, portable media players, cellular phones, broadband modems, WiFi routers, game consoles, ad nauseum). We're lucky that they didn't try to plan for the impossible, and I don't seem to be alone in thinking so. Certainly, it would be hard to find many in the industrialized world who would argue that we should have planned our grids not to scale beyond the consumption patterns of 1950.
  • Thus, the option value of fiber will only be demonstrated definitively after it is in place. Prior to its arrival, it's easy to dismiss its contribution and utility, because it doesn't exist. As any dealer of exclusively red and blue Fords will tell you, no one ever comes in the dealership asking for a Ferrari.
  • However, I would stop well short of characterizing fiber as a "faith-based initiative" - connectivity policy alone is not enough, as has been demonstrated in more advanced markets (see the postscript [in red] to this post).
This final point is what intrigues me about what is happening in Manchester and a number of other northern English cities/regions, representatives of many of which were in attendance at the conference. It is clear that superior connectivity is a key issue in attracting and retaining new economic activity and creating sustainable employment, but it is far from the only one. Public transport, amenities, law & order, educational strategy, tax policy, culture, regulation and the built environment are also important factors which would be among any business' decision criteria. It also helps if there are positive externalities to add to the momentum, in this case the relocation of BBC functions to nearby Salford.

I think the people involved in these cities genuinely "get it," but once again the range of factors at work here is infinitely more complex than the range of issues a telco is interested/experienced in, and the potential benefits to be captured are also well beyond its scope. Which calls for a different framework and approach, and probably leads to misunderstanding and conflict in the short term. Afterall, what we've really got developing here is the new Devolved Digital City States, competing aggressively for new skilled residents, businesses, and an enhanced tax base. Broadband can't be the sole ingredient of the answer, but it will be a significant one. In the Q&A I cited a case study I saw several years ago dealing with St. Louis and Chicago, and the fact that the former was hostile to railway development in order to protect the vested interests in river transport, while the latter became the focus of investment and subsequently reaped the rewards. I like both cities, but there is no comparison between them today. We underestimate and underinvest in the option value of infrastructure at our peril.


Messi said...

I chanced upon to view your blog and found it very interesting. Great ... Keep it up!

Ignition said...

James, how did Lord Carter's video address go? I so wish I'd been there to boo Lord PR, even a video of him, as he recited the spiel of his political and corporate masters.

James Enck said...

I wasn't there for the second day, unfortunately. I assume there were a great many rolls of eyes and outright guffaws - how could it have been otherwise?

Ignition said...

Quite James - I wish I'd been there to see it, it would have been most amusing.

Well done on resisting the temptation to discuss the Digital Britain report. I was considering it but a long disdainful rant would have just not been cool.