More on convergence

I noted recently the references to convergence between computers and communications dating from 1972. I was wondering what the earliest sources are on convergence and media.

The first identified source according to many authors is Nicholas Neproponte. In the International Handbook of Internet Research Anders Fagerjord notes in a footnote that "Stuart Brand reports that Negroponte used it in 1973" citing (I think) Brand's book The Media Lab. (I haven't seen the book to be able to check).

Negroponte's provenance is also asserted by Rich Gordon's Convergence Defined in USC Annenburg Online Journalism Review of 2003. He writes;

And as early as 1979, Nicholas Negroponte of the Massachusetts Institute of Technology (MIT) was using three overlapping circles in discussions with business executives he hoped would fund his research. His three circles were labeled "Broadcast and Motion Picture Industry," "Computer Industry" and "Print and Publishing Industry." He predicted that the overlap between the three circles would become almost total by 2000. The executives he addressed found it a compelling vision. He won millions of dollars in financial support from them, enabling MIT to open its celebrated Media Lab in 1985.

Rich also credits Ithiel de Sola Pool with the term "convergence of modes" in his 1983 book The Technologies of Freedom.

Writing a World Newspaper Association report Convergence: Fact or Fiction in 2001, Martha Stone also credited Negroponte for the use of the term.

Since the concept of media convergence was introduced in the early 1990s by Nicholas Neproponte, author of the 1995 digital revolution forecast Being Digital convergence has taken on a variety of of meanings: convergence of media types, of media company departments, and of content. For Negroponte, convergence starts with "bits", or the digital DNA of information. Converged bits become multimedia. The digitization of information has created the convergence revolution.

Negroponte is better known by some for the "Negroponte Switch" which states "that wired technologies such as telephones will ultimately become unwired by using airwaves instead of wires or fiber optics, and that unwired technologies such as televisions will become wired" Perhaps worthwhile for review by those talking about new access technologies. (Evidently Negroponte called it "trading places", George Gilder gave it its current title)

So I think we now have a claim of 1973 in the name of Negroponte. Any advance on that?

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The NBN and the ACCC

In an iTnews column in March I commented on the NBN PoI decision and the fact that ACCC acceptance of the NBN Co special access undertaking shouldn't be considered a foregone conclusion.

Today new ACCC Chair Rod Sims has been reported as saying the NBN is not something to be regulated "in a light-handed way", noting;

I'm someone who thinks that if you have a monopoly you have to regulate it. If it's a monopoly -- and I don't mean a duopoly -- a straight-out monopoly, you have to regulate it. Any monopoly needs regulations, whether it is in communications, electricity, gas or whatever.

There is a whole essay potentially inherent in this and it is a subject to which I will return both here and in the working papers I publish on the DigEcon Research site. The observation to make here is the three step process Australia has taken to traditional "utility regulation" of telecommunications.

Up until 1988 the PMG and Telecom were under direct Government control on prices, resulting in prices that were variously perceived as being excessively high to achieve dividends (or reduce capital costs) or excessively low to curry political favour in the regions. The reality was a bit of both - high metro prices and low regional - at least when compared to cost.

Ultimately the call for competition was driven by two things. The first was the general idea that prices should be "cost reflective" to generate "efficiency" (using the flawed economic definition). The second was the tension between telcos and computer companies as convergence was first discussed.

The second phase followed corporatisation in 1988 and was based on the then new idea (from Littlechild I believe) of "incentive based" regulation. This was a concept designed to replace pre-existing Rate of Return regulation as was current in the US at the time. The idea was a global cap on a weighted index of retail prices, the cap being CPI - X where X was a forward estimate of Total Factor Productivity (whereas CPI was the actual CPI).

This was still the main element of price control up to 1997 - while there were infrastructure access prices from 1991 to 1997 the model in the fixed duopoloy/mobile triopoly really was based on infrastructure competition - a probably naive expectation that competition could develop this way.

The 1997 reforms signalled an even greater faith, they were premised on the idea that there were sufficient competing networks that there was potential for a market to develop in interconnection services, and hence the "negotiate/arbitrate" model was introduced. The model failed for a host of reasons, not least the fact that there was an asymmetry between the regulation of the fixed and mobile networks so that interconnection negotiations between these networks never looked like a two-way access negotiation. More generally access pricing didn't distinguish between one-way access (where a long distance provider buys both PSTN originating and terminating access from the fixed network operator) and two-way access in which two networks of directly connected customers interconnect. The latter was the market of PSTN termination on non-Telstra networks and of mobile-fixed interconnection both ways.

Ultimately the policy makers have recognised the failure of the theory of infrastructure based competition for the fixed network, a failure that is not only clear in the pseudo facilities based model of naked DSL, but was also apparent in the contending views on FttN.

What this has been matched with is really a version of "rate of return" regulation. This is how the new mandated pricing structure for access to the Telstra network works, and will be the basis for NBN Co regulation. It is, however, a forward looking version of RoR regulation.

The weakness is that such price calculation becomes incredibly sensitive to the demand forecasts in the pricing model.

I happen to believe that there are other market mimicking ways to price that generate the kind of information exchange for which we really should value markets.

I just don't think I can convince the policy makers, the regulators or the commercial firms.





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Digital Economy Round-Up - Issue 1

This will be an occasional series on the blog - starting now. It should be considered a contribution under my DigEcon Research brand. It picks up the fact that Digital Economy thinking and strategising has been revived throughout the (developed) world - not just Australia.

I'm going to start with two pieces from national regulators on convergence. "Convergence" has re-entered the policy discussion in conjunction with Digital Economy thinking because the regulation of telcos, media and ICT plays an important part in how successfully these services can be (positively) deployed for economic change.

Konrad von Fickenstein, Chair of Canada's CRTC gave an address last week which could have been from here - starting as it did with digital switchover and 700MHz and 2.5 GHz auction news.

We are in a new digital world now [in which] the Commission's ability to regulate through control of access is very much reduced.

I believe we need a conceptual rethink of the whole regulatory system....to be embodied in a single comprehensive Act to govern all communications.

The aim of the new legislation would be to create a structure for optimal regulation of the transportation of bits, whether by wireline or wireless technology, and whether they are carrying voice, video or data. This structure would support the development of a flexible, competitive and innovative system providing access for all Canadians to their choice of fast and efficient digital resources.

Here are some of the key points that might be included:
* A statement of objectives for the system—economic, social and cultural.
* A clear distinction between the broad policy choices to be made by the government and the powers to be assigned to an independent regulator in all areas of communication, including broadcasting, telecom and spectrum management.
Specific provisions on timelines and on regulatory tools, such as AMPs (Administrative Monetary Penalties), mandatory adoption of codes, and the power to impose arbitration.
* A coherent scheme for the support of Canadian content. This could include subsidies, or incentives in the form of regulatory exemptions and exceptions, or a mix of all of these methods.
* The responsibilities and governance of the public broadcaster, defining its special role in reflecting Canada's unique culture and values.

We should also consider a rationalization of our institutional framework. ... Should the powers of ex ante regulation be curtailed, while ex post powers of enforcement are increased? The aim should be to favour competition, with intervention limited to cases of market failure.

Should the relationship between the CRTC and the Competition Bureau be more clearly defined? What about the CRTC and the Copyright Board?

The industry must act

...

The kind of fundamental reform I'm talking about can only be realized through action by the government. The government, however, is unlikely to take action unless the industry itself is pushing for it. It is therefore up to you to organize yourselves and make sure the message gets out loud and clear.

Earlier in his speech he'd referred to an interesting initiative on "terms of trade" between increasingly large and powerful producers and broadcasters - an interesting initiative that he claims "will bring clarity and certainty to broadcasters and producers. They will also help to bring Canadians a steady supply of high-quality Canadian programming available on a variety of platforms."

The four dot points could work very well as framing points for our own Convergence Review, and the institutional question is equally valid.

On the industry point the Chair was particularly addressing the broadcasters. In Australia a similar position can be advanced about the telcos (but that is another topic).

The Chair of our own regulator, Chris Chapman, addressed CAMLA on the topic of convergence from a regulator's perspective a few weeks ago.

He noted;

Put simply, convergence is an everyday issue … the indisputable fact [is] that developments in communications technology are outpacing what was thought of as possible just five years ago, let alone what legislative frameworks considered would be required more than 10 years ago. Many of the controls on content and the provision of telecommunications services will need revision and adaptation for today’s reality and for the emerging digital economy.

He looked at the issues through separate timelines on devices, content, networks and services, usefully highlighting that "convergence" is an issue across each of these domains. Added to this he introduced the issues affecting consumers and citizens. He did not in this address highlight the important difference between the two words and the need to focus policy on the impact on individuals as both consumers and citizens.

Turning to regulation he noted;

As a result, in our view the Australian communications legislative landscape now resembles a patchwork quilt. It is fragmented and characterised by legislative ‘band-aid’ solutions that lack an overarching strategy, narrative or coordinated approach to regulating communications and media in a digital economy. Regulatory pressure has bitten into core legislative concepts and definitions, creating these strained or ‘broken concepts’. Ultimately, their ‘elasticity’ will expire at which time they will no longer function efficiently or effectively in a converged environment.

We at the ACMA have consistently documented and indicated our preparedness to grapple with the regulatory implications of convergence. ‘Broken concepts’ is a reasonably provocative phrase we have used to highlight the notion that legacy legislation, the rules for the communications sector that used to work nicely 20 years ago, now don’t entirely fit the circumstances we have to embrace now, let alone over the next 20 years.

Unfortunately he seemed good on diagnosis but limited in solutions;

The ACMA maintains an active review program to effectively and efficiently manage our response to convergence impacts on regulatory and co-regulatory arrangements for communications and media services. In this program, my staff have examined the convergence status of 40 or so key concepts in Australian communications legislation, and found that many of these are broken or straining in relevance. I will go into a little detail below on some specific examples to highlight the depth of the issue.

For convenience, will do so under the headings of the ‘four worlds’ that the ACMA regulates—telecommunications, broadcasting, radiocommunications, and the internet. Each of these ‘worlds’ had its genesis in a traditional, often physically defined analogue world, but they are all now trending towards that converging centre point. A common denominator across all of these is an evident need for much greater consistency in approach to definitions, concepts, regulatory policy, structures and approaches as well as compliance measures, available enforcement powers and actions.

What followed was a sample of his list of 40 broken concepts. He offered some further diagnosis of what is broken.

As I see it, there are actually three problems, which can be synthesised into an overarching meta-problem, which is what faces this Convergence Review:

1) Digitalisation broke the nexus between the shape of content and the container which carried it – ...This meant that regulation constructed on the premise that content could be controlled by how it is delivered has increasingly lost its force, both in logic and in practice. This problem began to be recognised as one of ‘convergence’ as far back as the end of the 1980s9; however, legislative response has been sporadic.

2) Based on digital content and carriage, IP networks have come to play an ever more important role. This has meant content has become increasingly non-linear, interlinked and ‘uncontained’ while people increasingly expect to connect and communicate seamlessly – anywhere, anyhow, anytime.

3) But here’s a curve-ball for you: the playing out of virtualization. maybe even then it’s not safe to go back into the water because, looking into the next decade and towards 2025 it seems plausible that we are moving towards a communications world of ‘virtualisation’, where network elements can and will be emulated in software, which will lead to an ever more intricate and subtle interconnection between networks, services and content as those very layers themselves become diffused as a consequence. So my initial provocation is this: even legislation and regulation possibly based on that radical horizontal (i.e. the layers model), and not based on the vertical, is itself likely to be challenged in a future environment.

The last point is indeed the one worth playing with - the horizontal model is one I favour but each element of the stack can emulate another raising the question of what's what.

He went on with some useful discussion about regulatory tools but these should wait for a different discussion (let me just say I disagree).

The final interesting development is an initiative in Coffs Harbour. As a second release site for the NBN they have advertised a series of workshops designed to ensure the region gets the most of its opportunity. Hopefully every LGA in a second release site will do this and not wait for the Feds "Digital Communities"and "Digital Enterprise" initiatives from the DE strategy.


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Convergence - nearly forty years old and counting

Many thanks to Michael Gordon-Smith who responded to my tweeting of my blog post on convergence.

In my tweet I asked for earlier references to "convergence" than 1977. He offered me two.

The first is from New Scientist 15 November 1973 P. 471. It reads in part;

After six years of steady sniping by the computer specialists at the telecommunications engineers over their failure to rise to the challenge of computing, the counter-attack by the telecommunications engineers has started. The computermen have long alleged that the telecommunications designers were incapable of providing the needs for communicating between computers, and that the role of the computer within the telecommunications system itself was being belittled. However, times are changing. Recently the Chairman's address to the electronics division of the Institution of Electrical Engineers tackled the subject. His address to a London audience was entitled: "Computers and Communications - convergence or conflict?"

The speech is reported to have defended the highly standardised telco industry against the then highly chaotic computing industry. The speaker argued the conflict between the two camps stemmed from the fact "that the injudicious injection of computer technology into telecommunications may also inject the incompatibility which is so much a feature of many present-day computers."

The article itself goes on to describe current circumstances (in 1973) saying;

For several years many UK computer users have used packet switching as a hefty stick with which to beat the Post Office. The technique uses intermediate storage of data travelling between two computers. .... Endless papers have been written about the virtues of packet switching and the Post Office will shortly set up an experimental service.

The most lauded example of packet switching in use is the ARPA network which serves research computers across the United States and in a few places in Europe.

The article went on with a bit of discussion of the telco engineering side denigrating packet switching as a long term solution. (The conflict side of this resulted in the great coalitions for changes in regulation of telecommunications - but that is another story.)

Of course we now know that the packet switching brigade won, and the ARPAnet evolved into the Internet.

The second example was a book from 1972, Government Regulation of the Computer Industry which at four places between pages 70 and 82 refers to the "growing convergence of computing and communications."

This is interesting as it explicitly in a policy setting. They are, of course, only references to part of the convergence discussion, and don't otherwise address the telecommunications/media convergence that is more the focus of our "convergence review".


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Convergence and the Digital Economy

I managed on Friday to get a submission in to the Convergence Review Framing Paper. The submission only goes to the language of markets, competition and regulation; arguing that now is a good time to get greater clarity and accuracy into terms that have been hollowed out.

The Convergence Review comes as the Government is ramping up its "Digital Economy" rhetoric. Indeed the two pieces of work are technically housed in the same Branch of the Department. This is unsurprising as they are ultimately related.

But they also have equally long histories.

Going through some old papers yesterday (I was only moving them from place A to place B) one caught my eye, titled The convergence of technology: impact on telecommunications, broadcasting and television. The author is listed as an Australian lawyer, who starts;

In introducing this topic - the convergence of technology - one could not do better than quote another Australian [names the Chair of an Australian regulator];

"The lines between historically well defined industries have been blurring as the potential in new computing and communications technologies is exploited globally".

The consequence of this blurring on regulatory regimes ... will be addressed a little later. First I will describe what this convergence is and touch on the plethora of new services which it has brought forth.

After describing the new services he goes on;

The basic policy question which is confronting (or has recently confronted) nations is whether this current building of a more advanced communications network is most effectively done within established regulatory constraints or whether there is a need for restructuring those constraints in order to maximize benefits of the convergence of technology. Internationally, competition is the fashion and every nation will feel its effects. ...

In Australia the regulatory regimes, and the traditional regulatory regime in particular, are being re-affirmed in an effort to deal with the new technologies of telecommunications and computers, and to provide communications services to all Australians equally.

The passages quoted could well describe the current Australian situation. We have the "Convergence Review" grappling with these constructs while the telecommunications policy regime is delivering the NBN and a revamped USO framework to deliver on the goal of services to all Australians.

Yet the author was J. Kench addressing the 1985 World Telecommunications Forum, the regulator was David Jones from the Australian Broadcasting Tribunal who uttered his words addressing the same forum in 1983. The new services catalogued were things like teletext and e-mail (X.400 based), the converging telecommunications technology was the ISDN. The article was really a peon to competition in telecommunications - coming as it did post Davidson and pre the 1988, 1991 and 1997 telco reforms.

The interesting thing is that all the major legislation under consideration by the "Convergence Review" was created after the article. It poses the first question for the review - given that convergence is an ongoing process how do you craft the regulatory structure to sustain the further challenges that will occur over the next twenty-five to thirty years?

The second question is really what do we mean by "convergence". A very good paper by Jonas Lind, Convergence: History of term usage and lessons for firm strategists, from 2004 tracks the use of the word "convergence". He first finds that the usage matches the Gartner group concept of A Hype Cycle, reaching its first peak in 1994 (the Peak of Inflated Expectations) before crashing to the Trough of Disillusionment in about 1997 before going to a Plateau of Productivity since. The second finding is that the term is very indistinct in meaning. Lind's focus is on the use of the term as a motivator of corporate strategy. However the statement is just as true for public policy.

One other service Lind does is trace the history of the term - he credits it to a fascinating article "The Convergence of Computing and Telecommunications Systems" by Farber and Baran from an "Electronics Issue" of Science in March 1977. The issue as a whole is worth a read nearly thirty-five years later.

(Note: Kench's speech was published in the Telecommunications Journal Vol 53 No 8 1986. Interestingly it doesn't appear to exist in an electronic resource. That Journal was published by the ITU, starting as the Telegraph Journal in 1869, becoming the Telecommunications Journal in 1934 and now published as ITU News since 1999.)

(As a complete aside Lind has blogged about telco customer support issues in Sewden. Sounds just the same as Oz - then again the case is a global brand that is present here).


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