Tag Archives: Bret Swanson

Mobile traffic grew 159% in 2010 . . . Tablets giving big boost

Among other findings in the latest version of Cisco’s always useful Internet traffic updates:

  • Mobile data traffic was even higher in 2010 than Cisco had projected in last year’s report. Actual growth was 159% (2.6x) versus projected growth of 149% (2.5x).
  • By 2015, we should see one mobile device per capita . . . worldwide. That means around 7.1 billion mobile devices compared to 7.2 billion people.
  • Mobile tablets (e.g., iPads) are likely to generate as much data traffic in 2015 as all mobile devices worldwide did in 2010.
  • Mobile traffic should grow at an annual compound rate of 92% through 2015. That would mean 26-fold growth between 2010 and 2015.

An Exa-Prize for “Masters of Light”

Holy Swedish silica/on. It’s an exa-prize!

Calling them “Masters of Light,” the Royal Swedish Academy awarded the 2009 Nobel Prize in Physics to Charles Kao, for discoveries central to the development of optical fiber, and to Willard Boyle and George Smith of Bell Labs, for the invention of the charge-coupled device (CCD) digital imager.

Perhaps more than any two discoveries, these technologies are responsible for our current era of dramatically expanding cultural content and commercial opportunities across the Internet. I call this torrent of largely visual data gushing around the Web the “exaflood.” Exa means 1018, and today monthly Internet traffic in the U.S. tops two exabytes. For all of 2009, global Internet traffic should reach 100 exabytes, equal to the contents of around 5,000,000 Libraries of Congress. By 2015, the U.S. might transmit 1,000 exabytes, the equivalent of two Libraries of Congress every second for the entire year.

Almost all this content is transmitted via fiber optics, where laser light pulsing billions of times a second carries information thousands of miles through astoundingly pure glass (silica). And much of this content is created using CCD imagers, the silicon microchips that turn photons into electrons in your digital cameras, camcorders, mobile phones, and medical devices. The basic science of the breakthroughs involves mastering the delicate but powerful reflective, refractive, and quantum photoelectric properties of both light and one of the world’s simplest and most abundant materials — sand. Also known in different forms as silica and silicon.

The innovations derived from Kao, Boyle, and Smith’s discoveries will continue cascading through global society for decades to come.

Neutrality for thee, but not for me

In Monday’s Wall Street Journal, I address the once-again raging topic of “net neutrality” regulation of the Web. On September 21, new FCC chair Julius Genachowski proposed more formal neutrality regulations. Then on September 25, AT&T accused Google of violating the very neutrality rules the search company has sought for others. The gist of the complaint was that the new Google Voice service does not connect all phone calls the way other phone companies are required to do. Not an earthshaking matter in itself, but a good example of the perils of neutrality regulation.

As the Journal wrote in its own editorial on Saturday:

Our own view is that the rules requiring traditional phone companies to connect these calls should be scrapped for everyone rather than extended to Google. In today’s telecom marketplace, where the overwhelming majority of phone customers have multiple carriers to choose from, these regulations are obsolete. But Google has set itself up for this political blowback.

Last week FCC Chairman Julius Genachowski proposed new rules for regulating Internet operators and gave assurances that “this is not about government regulation of the Internet.” But this dispute highlights the regulatory creep that net neutrality mandates make inevitable. Content providers like Google want to dabble in the phone business, while the phone companies want to sell services and applications.

The coming convergence will make it increasingly difficult to distinguish among providers of broadband pipes, network services and applications. Once net neutrality is unleashed, it’s hard to see how anything connected with the Internet will be safe from regulation.

Several years ago, all sides agreed to broad principles that prohibit blocking Web sites or applications. But I have argued that more detailed and formal regulations governing such a dynamic arena of technology and changing business models would stifle innovation.

Broadband to the home, office, and to a growing array of diverse mobile devices has been a rare bright spot in this dismal economy. Since net neutrality regulation was first proposed in early 2004, consumer bandwidth per capita in the U.S. grew to 3 megabits per second from just 262 kilobits per second, and monthly U.S. Internet traffic increased to two billion gigabytes from 170 million gigabytes — both 10-fold leaps. New wired and wireless innovations and services are booming.

All without net neutrality regulation.

The proposed FCC regulations could go well beyond the existing (and uncontroversial) non-blocking principles. A new “Fifth Principle,” if codified, could prohibit “discrimination” not just among applications and services but even at the level of data packets traversing the Net. But traffic management of packets is used across the Web to ensure robust service and security.

As network traffic, content, and outlets proliferate and diversify, Washington wants to apply rigid, top-down rules. But the network requirements of email and high-definition video are very different. Real time video conferencing requires more network rigor than stored content like YouTube videos. Wireless traffic patterns are more unpredictable than residential networks because cellphone users are, well, mobile. And the next generation of video cloud computing — what I call the exacloud — will impose the most severe constraints yet on network capacity and packet delay.

Or if you think entertainment unimportant, consider the implications for cybersecurity. The very network technologies that ensure a rich video experience are used to kill dangerous “botnets” and combat cybercrime.

And what about low-income consumers? If network service providers can’t partner with content companies, offer value-added services, or charge high-end users more money for consuming more bandwidth, low-end consumers will be forced to pay higher prices. Net neutrality would thus frustrate the Administration’s goal of 100% broadband.

Health care, energy, jobs, debt, and economic growth are rightly earning most of the policy attention these days. But regulation of the Net would undermine the key global platform that underlay better performance on each of these crucial economic matters. Washington may be bailing out every industry that doesn’t work, but that’s no reason to add new constraints to one that manifestly does.

— Bret Swanson

Does Google Voice violate neutrality?

This is the ironic but very legitimate question AT&T is asking.

As Adam Thierer writes,

Whatever you think about this messy dispute between AT&T and Google about how to classify web-based telephony apps for regulatory purposes — in this case, Google Voice — the key issue not to lose site of here is that we are inching ever closer to FCC regulation of web-based apps!  Again, this is the point we have stressed here again and again and again and again when opposing Net neutrality mandates: If you open the door to regulation on one layer of the Net, you open up the door to the eventual regulation of all layers of the Net.

George Gilder and I made this point in Senate testimony five and a half years ago. Advocates of big new regulations on the Internet should be careful for what they wish.

End-to-end? Or end to innovation?

In what is sure to be a substantial contribution to both the technical and policy debates over Net Neutrality, Richard Bennett of the Information Technology and Innovation Foundation has written a terrific piece of technology history and forward-looking analysis. In “Designed for Change: End-to-End Arguments, Internet Innovation, and the Net Neutrality Debate,” Bennett concludes:

Arguments for freezing the Internet into a simplistic regulatory straightjacket often have a distinctly emotional character that frequently borders on manipulation.

The Internet is a wonderful system. It represents a new standard of global cooperation and enables forms of interaction never before possible. Thanks to the Internet, societies around the world reap the benefits of access to information, opportunities for collaboration, and modes of communication that weren’t conceivable to the public a few years ago. It’s such a wonderful system that we have to strive very hard not to make it into a fetish object, imbued with magical powers and beyond the realm of dispassionate analysis, criticism, and improvement.

At the end of the day, the Internet is simply a machine. It was built the way it was largely by a series of accidents, and it could easily have evolved along completely different lines with no loss of value to the public. Instead of separating TCP from IP in the way that they did, the academics in Palo Alto who adapted the CYCLADES architecture to the ARPANET infrastructure could have taken a different tack: They could have left them combined as a single architectural unit providing different retransmission policies (a reliable TCP-like policy and an unreliable UDP-like policy) or they could have chosen a different protocol such as Watson’s Delta-t or Pouzin’s CYCLADES TS. Had the academics gone in either of these directions, we could still have a World Wide Web and all the social networks it enables, perhaps with greater resiliency.

The glue that holds the Internet together is not any particular protocol or software implementation: first and foremost, it’s the agreements between operators of Autonomous Systems to meet and share packets at Internet Exchange Centers and their willingness to work together. These agreements are slowly evolving from a blanket pact to cross boundaries with no particular regard for QoS into a richer system that may someday preserve delivery requirements on a large scale. Such agreements are entirely consistent with the structure of the IP packet, the needs of new applications, user empowerment, and “tussle.”

The Internet’s fundamental vibrancy is the sandbox created by the designers of the first datagram networks that permitted network service enhancements to be built and tested without destabilizing the network or exposing it to unnecessary hazards. We don’t fully utilize the potential of the network to rise to new challenges if we confine innovations to the sandbox instead of moving them to the parts of the network infrastructure where they can do the most good once they’re proven. The real meaning of end-to-end lies in the dynamism it bestows on the Internet by supporting innovation not just in applications but in fundamental network services. The Internet was designed for continual improvement: There is no reason not to continue down that path.

Leviathan Spam

Leviathan Spam

Send the bits with lasers and chips
See the bytes with LED lights

Wireless, optical, bandwidth boom
A flood of info, a global zoom

Now comes Lessig
Now comes Wu
To tell us what we cannot do

The Net, they say,
Is under attack
Before we can’t turn back

They know best
These coder kings
So they prohibit a billion things

What is on their list of don’ts?
Most everything we need the most

To make the Web work
We parse and label
We tag the bits to keep the Net stable

The cloud is not magic
It’s routers and switches
It takes a machine to move exadigits

Now Lessig tells us to route is illegal
To manage Net traffic, Wu’s ultimate evil (more…)

A New Leash on the Net?

Today, FCC chairman Julius Genachowski proposed new regulations on communications networks. We were among the very first opponents of these so-called “net neutrality” rules when they were first proposed in concept back in 2004. Here are a number of our relevant articles over the past few years:

Romer’s transformative “Charter Cities”

Stanford economist Paul Romer has had lots of good ideas over the years. Particularly his ideas about the importance of ideas in the economy. But his “Charter City” idea explored at the recent TED conference is one of the best yet.

Maybe I like it so much because it so closely tracks the concepts offered in my long paper of last August called “Entrepreneurship and Innovation in China – 1978-2008 – Thirty Years of Decentralized Economic Growth”, a follow-on article in The Wall Street Journal, and a previous essay “Breaking Metcalfe’s Law” on the economic importance of the exchange of ideas.

Romer uses China’s “free zones” envisioned by Deng Xiaoping and initially implemented by one Jiang Zemin as the chief example of how his charter cities would work in practice. He explains how they might cut the political-economic Gordian knot of societies too stuck in the past to make obviously needed rule changes that open the floodgates of ideas and entrepreneurship. These were the key themes of my paper.

Also check out this working paper by Romer that surveys the economic growth literature (hat tip: Growthology).

The Real China Story

The New York Times, in its series on the origins of the financial crisis it calls “The Reckoning,” pins our housing and credit bubbles on Chinese savings and the U.S.-China trade gap. This is basically the view of Alan Greenspan and Ben Bernanke. We were helpless. Monetary policy had become ineffective. The New York Times also says the U.S. failed to react to the China-U.S. “imbalances” soon enough, that we took a “passive” approach. 

In fact, most of this is backward. We did not under-react to China. We overreacted. The U.S. weak-dollar policy — a combination of historically low Fed interest rates and a Treasury calling for a cheaper currency — was a direct and violent reaction to the trade gap. A series of Treasury secretaries and top U.S. economists, from John Snow and Hank Paulson to John Taylor and Martin Feldstein, explicitly backed this policy as a way to “correct” these “imbalances.” This weak-dollar policy was designed to reduce the trade gap but in fact boosted it by pushing oil and other commodity prices through the roof. It also created and pushed excess dollars into other hard assets like real estate, resulting in the housing boom and then bust.

America’s overreaction to China’s rise in particular and our misunderstanding of global trade and finance in general was thus, I believe, the chief source of our current predicament. The Fed and Treasury failed to grasp the truly global nature of the economy and the centrality of the dollar around the world. I tell the story of Chinese-U.S. interaction in this long paper, “Entrepreneurship and Innovation in China: 1978-2008.”

When Nerds Attack!

Yesterday’s Wall Street Journal story on the supposed softening of Google’s “net neutrality” policy stance, which I posted about here, predictably got all the nerds talking. 

Here was my attempt, over at the Technology Liberation Front, to put this topic in perspective:


Bandwidth, Storewidth, and Net Neutrality

Very happy to see the discussion over The Wall Street Journal‘s Google/net neutrality story. Always good to see holes poked and the truth set free.

But let’s not allow the eruptions, backlashes, recriminations, and “debunkings” — This topic has been debunked. End of story. Over. Sit down! — obscure the still-fundamental issues. This is a terrific starting point for debate, not an end.

Content delivery networks (CDNs) and caching have always been a part of my analysis of the net neutrality debate. Here was testimony that George Gilder and I prepared for a Senate Commerce Committee hearing almost five years ago, in April 2004, where we predicted that a somewhat obscure new MCI “network layers” proposal, as it was then called, would be the next big communications policy issue. (At about the same time, my now-colleague Adam Thierer was also identifying this as an emerging issue/threat.)

Gilder and I tried to make the point that this “layers” — or network neutrality — proposal would, even if attractive in theory, be very difficult to define or implement. Networks are a dynamic realm of ever-shifting bottlenecks, where bandwidth, storage, caching, and peering, in the core, edge, and access, in the data center, on end-user devices, from the heavens and under the seas, constantly require new architectures, upgrades, and investments, thus triggering further cascades of hardware, software, and protocol changes elsewhere in this growing global web. It seemed to us at the time, ill-defined as it was, that this new policy proposal was probably a weapon for one group of Internet companies, with one type of business model, to bludgeon another set of Internet companies with a different business model. 

We wrote extensively about storage, caching, and content delivery networks in the pages of the Gilder Technology Report, first laying out the big conceptual issues in a 1999 article, “The Antediluvian Paradigm.” [Correction: “The Post-Diluvian Paradigm”] Gilder coined a word for this nexus of storage and bandwidth: Storewidth. Gilder and I even hosted a conference, also dubbed “Storewidth,” dedicated to these storage, memory, and content delivery network technologies. See, for instance, this press release for the 2001 conference with all the big players in the field, including Akamai, EMC, Network Appliance, Mirror Image, and one Eric Schmidt, chief executive officer of . . . Novell. In 2002, Google’s Larry Page spoke, as did Jay Adelson, founder of the big data-center-network-peering company Equinix, Yahoo!, and many of the big network and content companies. (more…)

Hey, Sergey and Larry, thanks

As perhaps the earliest opponent of “net neutrality” regulation, it feels good to know I’m no longer “evil.”

Net Neutrality forever! Wait, never mind…

When you’ve written as much as I have about the weird Web topic known as “network neutrality,” this is big news indeed.

The celebrated openness of the Internet — network providers are not supposed to give preferential treatment to any traffic — is quietly losing powerful defenders.

Google Inc. has approached major cable and phone companies that carry Internet traffic with a proposal to create a fast lane for its own content, according to documents reviewed by The Wall Street Journal. Google has traditionally been one of the loudest advocates of equal network access for all content providers.

What some innocuously call “equal network access,” others call meddlesome regulation. Net neutrality could potentially provide a platform for Congress and the FCC to micromanage everything on the Net, from wires and switches to applications and services to the bits and bytes themselves. It is a potentially monstrous threat to dynamic innovation on the fast-growing Net, where experimentation still reigns. 

But now Google, a newly powerful force in Washington and Obamaland, may be reversing course 180-degrees. The regulatory threat level may have just dropped from orange to yellow.

Update: Richard Bennett expertly comments here.

Technology: 2008 vs. 1992

See my comparison of the state of technology in 2008 versus 1992, when the last Democratic presidential transition took place. 

Today, an average consumer can buy a terabyte hard drive (1 million megabytes), on which she might store her family photos, videos and other digital documents for as little as $109.99. In 1992, a terabyte drive, if such a thing had existed, would have cost $5 million.

Go to Forbes.com for the full article: “How Techno-creativity Will Save Us.”

Have the dollar devaluationists learned nothing?

Treasury Secretary Hank Paulson is back at it. Having presided over the debasement of the U.S. dollar, he is once again cajoling the Chinese over the value of its currency, the renminbi (or yuan). Paulson earns a few points for his semiannual Special Economic Dialogue that has facilitated U.S.-Chinese cooperation on some fronts and helped defuse some of the worst protectionist policy on both sides. But the Greenspan-Snow-Bernanke-Paulson weak dollar policy — which was in itself deeply protectionist, and ultimately highly self-destructive — utterly swamped any of Paulson’s good intentions vis-à-vis China.

Digging through some old files, I found a May 13, 2006, e-mail I wrote to a senior White House economic official, warning of the certain harmful effects of its weak-dollar policy. (I had, six months prior, met with the official in the West Wing to discuss the matter.) The morning of my e-mail, The Wall Street Journal, citing top Administration officials making clear their weak-dollar preference, had published a major story: “U.S. Goes Along With Dollar’s Fall to Ease Trade Gap,” with the subhed, “Quiet Acquiescence Holds Possible Risks for Economy; Surge in Exports in March.”

The previous week economist John Taylor, just off his post as Treasury Undersecretary, had, in another Wall Street Journal article, dismissed the views of Nobel laureate Robert Mundell and Stanford economist Ronald McKinnon. Mundell and McKinnon had been arguing against dollar weakness and urging dollar-yuan stability. Taylor’s offensive, moreover, had been previewed by yet another two articles, one from Martin Feldstein and another from Lawrence Lindsey, arguing for a “more competitive” dollar. That’s a euphemism for weak, as in competitive devaluation. (See, not supposed to happen in America).

Written in the heat of battle, I think my e-mail memo holds up pretty well:

From: Bret Swanson <bret.swanson@********.com>
Date: Sat, May 13, 2006 at 1:38 PM
Subject: stunning protectionist mercantilism
To: [senior White House official]

*** Warning: Blunt Statements to Follow ***

[senior White House official],

Even considering Treasury’s misguided currency stance these past few years, today’s news in the Journal that the White House approves of the further weakening of an already too-weak dollar is stunning and alarming. 

Using monetary policy to target the trade deficit instead of using monetary policy for its only legitimate purpose of price stability and currency stability, is massively irresponsible. The trade deficit is a mostly meaningless accounting number that if anything demonstrates the strength of the American economy, not its weakness. “Competitive devaluation” is what Third World nations did for decades. It’s what helped keep them poor. It’s what we did in the 1970s, a lost decade of malaise. In an era of globalization, currency devaluation is more damaging than ever when there is more cross-border trade and investment and a larger proportion of inputs into our final products and services come from abroad.

An already inflationary dollar will become more inflationary. Oil prices will rise further. Recession in 2007 now becomes a real possibility because the Fed will likely now overshoot on interest rates to combat inflation that they and Treasury created but which they never see until it’s too late. Why are we risking ruin of a robust economy?

The best economists I know are alarmed at the Fed’s lack of vigilance and the deepening of Treasury’s weak-dollar policy. Having now lost faith in the Fed and Treasury, these economists have changed their outlooks for the  U.S. economy from positive to negative.

Lindsey and Feldstein are 180-degrees wrong on monetary/currency/trade policy. Clearly their recent Journal articles were a set-up for this potentially disastrous currency move. John Taylor’s statements last week pooh-poohing Mundell and McKinnon — who are absolutely right on China — were equally discouraging. Not since Richard Nixon have Republicans stood for debasing the currency. It’s painful to agree with those who say this may be the most protectionist Administration since Herbert Hoover.

The U.S. Auto Companies and manufacturers want a weaker dollar — manufacturers always do — but the dominance of the Japanese auto makers is not a currency issue. Japan has just come out of a decade of deflation — the yen was way too strong, not artificially weak — exactly the opposite of what the auto makers say. Manufacturers in general face a huge challenge from China, but not because of the yuan, which is exactly in line with the dollar. The China challenge is real, not monetary. The U.S. must become more competitive via lower tax rates and less regulation. Currency is nothing but a scapegoat, and focusing on it reduces the chances we can solve our real competitive disadvantages on taxes and regulations. Because changing the unit of account cannot change the terms of trade, debasing the dollar does not make us more competitive; it makes us less competitive because it fosters inflation and possibly recession.

Furthermore, autos and manufacturing are a shrinking portion of our economy, and this misguided protectionist policy at their behest is highly damaging to the real, growing, leading edge sources of American wealth and power: our prowess in technology, finance, and entrepreneurship.

Please forgive my blunt statements. I make them with respect and concern for the success of this White House. I know you can’t comment on currency matters, but if I am overreacting or wrong on my interpretation of what appears to be happening, please let me know.

Very best,


I then sent the following warning to a number of friends at the U.S. Chamber of Commerce, who had been seeking my views:

From: Bret Swanson <bret.swanson@*******.com>
Date: Sat, May 13, 2006 at 2:26 PM
Subject: ALERT: stunning protectionist mercantilism
To: [U.S. Chamber officials]


I believe the outlook for the U.S. economy could be shifting. An article in this morning’s Wall Street Journal makes clear that instead of reversing the dollar’s decline and inflationary pressures, the White House and the Fed are actually encouraging a further fall of the dollar. Amazing. This means more inflation, a potential Fed overshoot on interest rates, and a slow-down and possible recession in 2007. None of this was necessary. We’ve had a very robust economy since mid-2003, and it could have easily continued. Debasing the dollar in a misguided protectionist attempt to reduce the trade deficit is hugely counterproductive. I warned of this possibility in my February memo but held out hope that the Fed and Treasury would reverse its inflationary/weak-dollar course in time to blunt these effects. No such luck.

What this means: The Chamber should prepare for a slow-down/recession in 2007-08. We should prepare for an inflationary environment. This policy means gas prices will probably stay high or go HIGHER. Some auto and manufacturing companies could benefit in the very short term, but overall this is bad for the larger economy, especially for technology and financial firms and for entrepreneurs. When the Fed figures out what’s going on, it will have to raise interest rates more than if it had gotten ahead of the curve in 2004-05. Commodity based businesses will continue to do well for a while, with intellectual property based businesses being hit the hardest. Eventually a recession would hurt everyone.

Currency volatility will also discourage international trade and investment, which could lead to slower global growth.

I’ll continue to think about what this means and how the Chamber should prepare.



Most of this scenario came to pass. Oil and commodity prices rocketed. Subprime loans, fueled by easy weak-dollar credit, kept flowing through 2006 and 2007. And the U.S., we now know, hit recession in “2007-08.”

Only the mechanism was a bit off. With elevated inflation, real interest rates never got very high — certainly not to the point that normally causes recessions. But the bursting of the adjustable-rate housing bubble, enabled by weak-dollar easy money, and the ensuing credit crisis had the same effect as a high real Fed Funds rate.

Many of the easy money mistakes had already been made by the Fed in 2003-2005. But this crucial period in 2006, when the U.S. government doubled down on a misguided weak-dollar strategy, told foreign capital to stay away, directly devalued all dollar assets, accelerated the financial collapse, and destabilized the globe. 

Please, Mr. Paulson, enough with the currency lectures.

(You can find a much more detailed history of the whole era within this longish economic history of China (1978-2008) or this shorter article.)

Obama’s Entrepreneurial Lesson

From my article in Friday’s Wall Street Journal:

If Barack Obama ran for president by calling for a heavier hand of government, he also won by running one of the most entrepreneurial campaigns in history.

Will he now grasp the lesson his campaign offers as he crafts policies aimed at reigniting the national economy? Amid a recession, two wars, and a global financial crisis, will he come to see that unleashing the entrepreneur is the best way to raise the revenue he needs for his lofty priorities?

Read the whole op-ed here, and listen to a brief radio interview here.

Good News, Sorta

Economist Mike Darda:

There’s nothing like a credit crisis to stop inflation in its tracks.

Headline inflation will fall markedly over the coming year as energy and food prices fall from the previous spike. But inflation could later resume when the panic-induced plunge in velocity picks up. The Fed more than doubled its balance sheet to more than $2 trillion in the last two months, and it will have to be vigilant to pare liquidity as panic hoarding goes away. An inflationary weak-dollar Fed caused most of the credit crisis in the first place as it juiced the oil, housing, credit, and foreign reserve markets. Today’s crisis, which happens to be temporarily disinflationary, is not an especially pleasant trade-off to bring down the price index. Better just to keep the dollar sound in the first place.