Articles by Bret Swanson

Bret Swanson is president of Entropy Economics, a research firm focused on technology and the global economy, and of Entropy Capital, a venture firm that invests in early-stage technology companies. For eight years he advised technology investors as executive editor of the Gilder Technology Report and later was a senior fellow at The Progress & Freedom Foundation. Today Swanson presents his “exaflood” research across the globe, writes a column for Forbes, and contributes to the editorial page of The Wall Street Journal on topics ranging from communications bandwidth to monetary policy. He studies innovation, globalization, China, Internet traffic, information theory, the stock market, and entrepreneurial economics. He is guided by the Laws of Say, Metcalfe, and Moore, the Theorem of Shannon, and the Curve of Laffer. His most pioneering and speculative research, however, concerns forces even more powerful and enigmatic — his four children nine and under.


Have we technophiles utterly deluded ourselves? Worse, instead of enjoying an Age of Innovation, are we actually stuck in a technological Dark Age? One that explains our stagnating living standards and general economic “disarray”? This is the possibility economist Tyler Cowen (George Mason, Marginal Rev, Mercatus) raises in The Great Stagnation, a pithy and provocative  new e-book essay. Here is my Forbes column on the topic: “Tyler Cowen’s Techno Slump.” I don’t know how much I agree with Cowen, but I think he’s given a big boost to an important conversation.

See my new commentary at CircleID — “How to Manage Internet Abundance”:

The Internet has two billion global users, and the developing world is just hitting its growth phase. Mobile data traffic is doubling every year, and soon all four billion mobile phones will access the Net. In 2008, according to a new UC-San Diego study, Americans consumed over 3,600 exabytes of information, or an average of 34 gigabytes per person per day. Microsoft researchers argue in a new book, “The Fourth Paradigm,” that an “exaflood” of real-world and experimental data is changing the very nature of science itself. We need completely new strategies, they write, to “capture, curate, and analyze” these unimaginably large waves of information.

As the Internet expands, deepens, and thrives—growing in complexity and importance—managing this dynamic arena becomes an ever bigger challenge. Iran severs access to Twitter and Gmail. China dramatically restricts individual access to new domain names. The U.S. considers new Net Neutrality regulation. Global bureaucrats seek new power to allocate the Internet address space. All the while, dangerous “botnets” roam the Web’s wild west. Before we grab, restrict, and possibly fragment a unified Web, however, we should stop and think. About the Internet’s pace of growth. About our mostly successful existing model. And about the security and stability of this supreme global resource.

Continue reading →

This morning, the Technology Committee of the New York City Council convened a large hearing on a resolution urging Congress to pass a robust Net Neutrality law. I was supposed to testify, but our narrowband transportation system prevented me from getting to New York. Here, however, is the testimony I prepared. It focuses on investment, innovation, and the impact Net Neutrality would have on both.

“Net Neutrality’s Impact on Internet Innovation” – by Bret Swanson – 11.20.09

As you’ve no doubt heard, Washington D.C. is angling for a takeover of the . . . U.S. telecom industry?!

That’s right: broadband, routers, switches, data centers, software apps, Web video, mobile phones, the Internet. As if its agenda weren’t full enough, the government is preparing a dramatic centralization of authority over our healthiest, most dynamic, high-growth industry.

Two weeks ago, FCC chairman Julius Genachowski proposed new “net neutrality” regulations, which he will detail on October 22. Then on Friday, Yochai Benkler of Harvard’s Berkman Center published an FCC-commissioned report on international broadband comparisons. The voluminous survey serves up data from around the world on broadband penetration rates, speeds, and prices. But the real purpose of the report is to make a single point: foreign “open access” broadband regulation, good; American broadband competition, bad. These two tracks — “net neutrality” and “open access,” combined with a review of the U.S. wireless industry and other investigations — lead straight to an unprecedented government intrusion of America’s vibrant Internet industry.

Benkler and his team of investigators can be commended for the effort that went into what was no doubt a substantial undertaking. The report, however,

  • misses all kinds of important distinctions among national broadband markets, histories, and evolutions;
  • uses lots of suspect data;
  • underplays caveats and ignores some important statistical problems;
  • focuses too much on some metrics, not enough on others;
  • completely bungles America’s own broadband policy history; and
  • draws broad and overly-certain policy conclusions about a still-young, dynamic, complex Internet ecosystem.

The gaping, jaw-dropping irony of the report was its failure even to mention the chief outcome of America’s previous open-access regime: the telecom/tech crash of 2000-02. We tried this before. And it didn’t work! The Great Telecom Crash of 2000-02 was the equivalent for that industry what the Great Panic of 2008 was to the financial industry. A deeply painful and historic plunge. In the case of the Great Telecom Crash, U.S. tech and telecom companies lost some $3 trillion in market value and one million jobs. The harsh open access policies (mandated network sharing, price controls) that Benkler lauds in his new report were a main culprit. But in Benkler’s 231-page report on open access policies, there is no mention of the Great Crash. Continue reading →

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. Continue reading →

Leviathan Spam

by on September 23, 2009 · 18 comments

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
Stop!
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 Continue reading →

There are two key mistakes in the public policy arena that we don’t talk enough about. They are two apparently opposite sides of the same fallacious coin.

Call the first fallacy “innovation blindness.” In this case, policy makers can’t see the way new technologies or ideas might affect, say, the future cost of health care, or the environment. The result is a narrow focus on today’s problems rather than tomorrow’s opportunities. The orientation toward the problem often exacerbates it by closing off innovations that could transcend the issue altogether.

The second fallacy is “innovation assumption.” Here, the mistake is taking innovation for granted. Assume the new technology will come along even if we block experimentation. Assume the entrepreneur will start the new business, build the new facility, launch the new product, or hire new people even if we make it impossibly expensive or risky for her to do so. Assume the other guy’s business is a utility while you are the one innovating, so he should give you his product at cost — or for free — while you need profits to reinvest and grow.

Reversing these two mistakes yields the more fruitful path. We should base policy on the likely scenario of future innovation and growth. But then we have to actually allow and encourage the innovation to occur.

All this sprung to mind as I read Andy Kessler’s article, “Why AT&T Killed Google Voice.” For one thing, Google Voice isn’t dead . . . but let’s start at the beginning. Continue reading →

See my new Forbes.com commentary on the Microsoft-Yahoo search partnership:

Ballmer appears now to get it. “The more searches, the more you learn,” he says. “Scale drives knowledge, which can turn around and drive innovation and relevance.”

Microsoft decided in 2008 to build 20 new data centers at a cost of $1 billion each. This was a dramatic commitment to the cloud. Conceived by Bill Gates’s successor, Ray Ozzie, the global platform would serve up a new generation of Web-based Office applications dubbed Azure. It would connect video gamers on its Xbox Live network. And it would host Microsoft’s Hotmail and search applications.

The new Bing search engine earned quick acclaim for relevant searches and better-than-Google pre-packaged details about popular health, transportation, location and news items. But with just 8.4% of the market, Microsoft’s $20 billion infrastructure commitment would be massively underutilized. Meanwhile, Yahoo, which still leads in news, sports and finance content, could not remotely afford to build a similar new search infrastructure to compete with Google and Microsoft. Thus, the combination. Yahoo and Microsoft can share Ballmer’s new global infrastructure.

US Wireless Bandwidth per capita 2000-08Over the July 4 weekend, relatives and friends kept asking me: Which mobile phone should I buy? There are so many choices.

I told them I love my iPhone, but all kinds of new devices from BlackBerries and Samsungs to Palm’s new Pre make strong showings, and the less well-known HTC, one of the biggest innovators of the last couple years, is churning out cool phones across the price-point and capability spectrum. Several days before, on Wednesday, July 1, I had made a mid-afternoon stop at the local Apple store. It was packed. A short line formed at the entrance where a salesperson was taking names on a clipboard. After 15 minutes of browsing, it was my turn to talk to a salesman, and I asked: “Why is the store so crowded? Some special event?”

“Nope,” he answered. “This is pretty normal for a Wednesday afternoon, especially since the iPhone 3G S release.”

So, to set the scene: The retail stores of Apple Inc., a company not even in the mobile phone business two short years ago, are jammed with people craving iPhones and other networked computing devices. And competing choices from a dozen other major mobile device companies are proliferating and leapfrogging each other technologically so fast as to give consumers headaches. Continue reading →

The supposed top finding of a new report commissioned by the British telecom regulator Ofcom is that we won’t need any QoS (quality of service) or traffic management to accommodate next generation video services, which are driving Internet traffic at consistently high annual growth rates of between 50% and 60%. TelecomTV One headlined, “Much ado about nothing: Internet CAN take video strain says UK study.”

But the content of the Analysys Mason (AM) study, entitled “Delivering High Quality Video Services Online,” does not support either (1) the media headline — “Much ado about nothing,” which implies next generation services and brisk traffic growth don’t require much in the way of new technology or new investment to accommodate them — or (2) its own “finding” that QoS and traffic management aren’t needed to deliver these next generation content and services.

For example, AM acknowledges in one of its five key findings in the Executive Summary:

innovative business models might be limited by regulation: if the ability to develop and deploy novel approaches was limited by new regulation, this might limit the potential for growth in online video services.

In fact, the very first key finding says:

A delay in the migration to [British Telecom's next generation] 21CN-based bitstream products may have a negative impact on service providers that use current bitstream products, as growth in consumption of video services could be held back due to the prohibitive costs of backhaul capacity to support them on the legacy core network. We believe that the timely migration to 21CN will be important in enabling significant take-up of online video services at prices that are reasonable for consumers.

So very large investments in new technologies and platforms are needed, and new regulations that discourage this investment could delay crucial innovations on the edge. Sounds like much ado about something, something very big. Continue reading →