Moore's Law Matters for Rural Internet Access

At some point, Moore’s Law matters for rural internet access supply and costs. The reason is that communication networks serving low-density areas are expensive, but Moore’s Law materially reduces such costs by constantly increasing the power of computing solutions and slashing the cost of such capabilities. 

That can be seen in the cost of a transistor over time, which allows the cost of computing to decline in half every 18 months to 24 months. 

The reason we are able to use millimeter waves commercially for consumer communications is Moore’s Law, which reduced the cost of applying sophisticated signal processing so much that the formerly-unusable millimeter wave spectrum now can be used even for consumer communications and access networks. 

The Tennessee Advisory Commission on Intergovernmental Relations estimated in a 2017 report that connecting 160,000 unserved homes in areas of the state ineligible for funding through the FCC’s Connect America Fund would cost $125 million to $799 million. That works out to about $78,125 per location. Other estimates place network costs at $33,000 per customer even at 70-percent take rates. Lower take rates raise the cost per customer. 

No consumer-reaching commercial network could ever hope to break even on a network with such high costs, as even networks costing $2,500 per location often face challenging economics. 

source: NTCA

But Moore’s Law, applied to space-based network launch costs, for example, has reduced costs for low earth orbit satellites by 20-fold over the last decade. 

Moore’s Law also allows us to do sophisticated spectrum sharing and spectrum aggregation, again improving our ability to supply connectivity services at lower costs than was possible in the past. 

Moore’s Law also powers the increasing bandwidth of optical fiber and hybrid fiber coax, enables the application of artificial intelligence to voice processing and pattern recognition, all of which mean e-commerce insights and customer service capabilities grow more powerful over time. 

Moore’s Law underpins our ability to create virtualized networks that cost less to build and operate, as well. 

That is not to underestimate the importance of financial subsidies or human agency,, as in many rural areas even the most-efficient platform might fail to generate sufficient revenues to sustain operations and service. 

Lower costs per bit for mobile bandwidth as well as fixed network  capacity have been the trend for decades. Slowly, those advantages will accrue in rural areas, even if the bandwidth gap between urban and rural areas does not completely close.

Non-Linear Development and Even Near-Zero Pricing are Normal for Chip-Based Products

It is clear enough that Moore’s Law played a foundational role in the founding of Netflix, indirectly led to Microsoft and underpins the development of all things related to use of the internet and its lead applications. 

All consumer electronics, including smartphones, automotive features, GPS, location services; all leading apps, including  social media, search, shopping, video and audio entertainment; cloud computing, artificial intelligence and the internet of things are built on the foundation of ever-more-capable and cheaper computing, communications and storage costs. 

For connectivity service providers, the implications are similar to the questions others have asked. Reed Hastings asked whether enough home broadband speed would exist, and when, to allow Netflix to build a video streaming business. 

Microsoft essentially asked itself whether dramatically-lower hardware costs would create a new software business that did not formerly exist. 

In each case, the question is what business is possible if a key constraint is removed. For software, assume hardware is nearly free, or so affordable it poses no barrier to software use. For applications or computing instances, remove the cost of wide area network connections. For artificial intelligence, remove the cost of computing cycles.

In almost every case, Moore’s Law removes barriers to commercial use of technology and different business models. The fact that we now use millimeter wave radio spectrum to support 5G is precisely because cheap signal processing allows us to do so. We could not previously make use of radio signals that dropped to almost nothing after traveling less than a hundred feet. 

Reed Hastings, Netflix founder, based the viability of video streaming on Moore’s Law. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

The point is that Moore’s Law enabled a product and a business model  that was not possible earlier, simply because computation and communications capabilities had not developed. 

Likewise, Microsoft was founded with an indirect reliance on what Moore’s Law meant for computing power. 

“As early as 1971, Paul (Allen) and I had talked about the microprocessor,” Bill Gates said in a 1993 interview for the Smithsonian Institution, in terms of what it would mean for the cost of computing. "Oh, exponential phenomena are pretty rare, pretty dramatic,” Gates recalls saying. 

“Are you serious about this? Because this means, in effect, we can think of computing as free," Gates recalled. 

That would have been an otherwise ludicrous assumption upon which to build a business. Back in 1970 a “computer” would have cost millions of dollars. 

source: AEI 

The original insight for Microsoft was essentially the answer to the question "What if computing were free?". Recall that Micro-Soft (later changed to MicroSoft before becoming today’s Microsoft) was founded in 1975, not long after Gates apparently began to ponder the question. 

Whether that was a formal acknowledgement about Moore’s Law or not is a question I’ve never been able to firmly pin down, but the salient point is that the microprocessor meant “personal” computing and computers were possible. 

A computer “in every house” meant appliances costing not millions of dollars but only thousands. So three orders of magnitude price improvements were required, in less than half a decade to a decade. 

“Paul had talked about the microprocessor and where that would go and so we had formulated this idea that everybody would have kind of a computer as a tool somehow,” said Gates.

Exponential change dramatically extends the possible pace of development of any technology trend. 

Each deployed use case, capability or function creates a greater surface for additional innovations. Futurist Ray Kurzweil called this the law of accelerating returns. Rates of change are not linear because positive feedback loops exist.

source: Ray Kurzweil  

Each innovation leads to further innovations and the cumulative effect is exponential. 

Think about ecosystems and network effects. Each new applied innovation becomes a new participant in an ecosystem. And as the number of participants grows, so do the possible interconnections between the discrete nodes.  

source: Linked Stars Blog 

 

So network effects underpin the difference in growth rates or cost reduction we tend to see in technology products over time, and make linear projections unreliable.

Bandwidth Growth: Nearly What One Would Expect from Moore's Law

If you believe consumer demand for bandwidth is going to slow down, you might not worry so much about creating more Internet access supply.

But it would take a brave forecaster indeed to argue that bandwidth growth will not continue at substantial rates, for the foreseeable future.

If current trends continue, people will need, and use, connections of a gigabit per second by 2020.

That might seem wild. It is not, and simply reflects a continuation of existing trends.

This really should shock you: consumer Internet access bandwidth has grown about as fast as Moore’s Law would suggest, according to Jakob Nielsen, Professor Rod Tucker and Phil Edholm, former Nortel's CTO.

Consider a 2004 prediction (remember that in 2000 most U.S. Internet users were on dial-up connections). 

“Edholm's Law says that in about five years (that would have been 2009) 3G (third-generation) wireless will routinely deliver 1 Mbps, Wi-Fi will bring nomadic access to 10 Mbps, and office desktops will connect at a standard of 1 gigabit per second.”

History has shown that prediction to be about right for mobile, possibly too conservative for Wi-Fi, while too optimistic about desktop connections.

Consider improvements in backhaul network bandwidth since about 1950, and especially since the advent of optical fiber. Backhaul bandwidth grows at a 30 percent annual rate, compared to the 50 percent a year rate of Moore’s Law processes.

    Historic Growth of Internet Access Bandwidth, Microwave Journal

Between 1984 and 2013, fixed network speeds have grown nearly as fast as Moore’s Law would suggest, as crazy as that sounds, knowing the physical nature of access networks, which are construction projects, not software apps.

Still, the data is stubborn and clear: Internet access bandwidth has grown about 50 percent annually since 1984.

Nielsen's Law is similar to Moore's Law. You might predict that computing capabilities would increase faster than access bandwidth, simply because access networks are construction intensive. 

Moore's Law suggests that computers double in capabilities every 18 months, corresponding to about 60 percent annual growth. Nielsen’s Law predicts bandwidth will grow at about 50 percent a year.

It isn't clear how ISPs in rural and remote areas will keep up. It certainly will not be easy. Still, history suggests that speeds, affordability and coverage will continue to progress in tough-to-reach areas, even if not fully at the pace of the urban areas where supplying bandwidth is easiest.

source: IEEE

Comcast Boosts Home Broadband Speeds, Has Been Doing So at Moore's Law Rates for Two Decades

It should come as no surprise that Comcast is activating home broadband speed increases this week across its entire footprint. Comcast has increased home broadband speeds at Moore’s Law rates--doubling about every 18 months--for two decades.  

“Comcast has increased speeds 17 times in 17 years and has doubled the capacity of its broadband network every 18 to 24 months,” Comcast says. 

That is one reason why cable operators continue to hold between 65 percent and 70 percent share of the installed base of home broadband accounts in the United States. Telcos have simply not been able to increase bandwidth at Moore’s Law rates, though that should change as more of the network is converted to optical fiber access. 

The original insight for Microsoft was the answer to the question "What if computing were free?" Keep in mind the audacious assumption Gates made. In 1970 a computer cost about $4.6 million each. Recall that Micro-Soft (later changed to Microsoft) was founded in 1975. 

source: AEI 

The assumption that computing hardware was going to be “free” would have appeared insane to most observers. In 1982 Gates did not seem to go out of his way to argue that hardware would be free, but he did argue it would be cheaper and far less interesting than software. 

 Gates made the argument in 1994. Gates was still saying it in 2004.  

The point is that the assumption by Gates that computing operations would be so cheap was an astounding leap. But my guess is that Gates understood Moore’s Law in a way that the rest of us did not.

Reed Hastings, Netflix founder, apparently made a similar decision. For Bill Gates, the insight that free computing would be a reality meant he should build his business on software used by computers.

Reed Hastings came to the same conclusion as he looked at bandwidth trends in terms both of capacity and prices. At a time when dial-up modems were running at 56 kbps, Hastings extrapolated from Moore's Law to understand where bandwidth would be in the future, not where it was “right now.”

“We took out our spreadsheets and we figured we’d get 14 megabits per second to the home by 2012, which turns out is about what we will get,” says Reed Hastings, Netflix CEO. “If you drag it out to 2021, we will all have a gigabit to the home." So far, internet access speeds have increased at just about those rates.

Both supply and demand are part of the equation, however. Perhaps the driver of supply is Moore’s Law. 

But the fundamental driver of bandwidth demand  is multiple users and multiple devices, more than the bandwidth required by any single app, any single user or device, even if some apps--such as video--increase bandwidth demand by at least two or three orders of magnitude compared to narrowband apps. 

The point is that home broadband bandwidth now is shared by multiple users, apps and devices. And that is why bandwidth demand keeps growing, aside from the use of more bandwidth-intensive apps and devices. 

“The number of devices connected in Xfinity households has skyrocketed 12 times since 2018, and the need for fast, reliable, and secure Internet will continue to grow,” said Bill Connors, President of Xfinity, Comcast Cable. 

The net effect is that every household now acts as a “multi-user” location. And that matters because any amount of bandwidth X is divided by the number of users, connected devices and apps in simultaneous use. In principle, that means Comcast customers require an amount of bandwidth that is X/12. 

source: Comcast 

We should look for continued increases in capacity, at about a Moore’s Law pace, for the indefinite future.

Thinking the Unthinkable: What if "Cars" Were Free? What does the Business Model Look Like?

source: NBN

source: Wikipedia

It is terribly difficult to imagine your own business operating under conditions of absolute abundance, when the key inputs are relatively scarce, and therefore, costly.

Unthinkably large and important businesses have been built on apparently crazy assumptions, the most important of which turns out to be the assumption that key enabling inputs, though hugely expensive and highly limited in performance, eventually, because of Moore's Law, be rendered very cheap.

So cheap that the phrase "computing wants to be free" or "bandwidth wants to be free" actually make sense, in terms of performance-cost relationships.

It can be argued that Microsoft’s business model, and that of Netflix, were based on astounding assumptions, namely that, as Moore’s Law continued to operate, Microsoft could assume the cost of computing would be very low, to free.

Likewise, Netflix assumed that Moore’s Law, applied to bandwidth, meant that, eventually, bandwidth sufficient to support a video streaming service would be possible, and virtually free.

But if one understands the arguments that “computing will be nearly free,” or that “bandwidth will be nearly free,” then you will understand the argument that “cars will be nearly free.”

Yes, assume your business (even as a auto manufacturer) model has to assume that vehicles themselves will be “nearly free” in terms of cost. That might sound crazy, but Microsoft and Netflix both based their business models on “near zero pricing” of a key input and enabler.

Will automobiles of the future become “mobile real estate, a data pipe, equivalent to telecom spectrum,” asks Morgan Stanley auto and mobility analyst Adam Jonas. To be clear, Jonas does not mean “pipe” as in “access pipe.”

He means a platform for data harvesting, machine learning and content delivery. In other words, autos as data repositories that can be mined, using artificial intelligence, to glean insights useful to third parties that will pay for access to those data stores.

“In the Auto 2.0 business model, we see 100 percent of the revenue and profit eventually coming from the operation of vehicles in a network,” said Jonas.

That might sound crazy, but it is the sort of analysis that underpinned the business models adopted by Microsoft, Netflix and arguably most other “digital” businesses such as Uber, Amazon, Facebook or Airbnb.

It is easy to understand the phrase “connected car,” and try to envision what that means, in terms of increased computing content.

It is quite a bit harder to understand the implications of Moore’s Law for many physical products, or services based on physical products, when there is so much surplus capacity built into the use models. Some estimate that the typical vehicle sits unused 95 percent of the time. That is the inefficiency Uber exploited.

Ability to monetize assets that formerly could not be monetized (spare rooms, spare cottages, spare apartment capacity) was what made Airbnb possible.

Assuming “autos” eventually will cost nearly nothing might make sense if one also assumes “individuals” will not be owning those vehicles. It is a huge leap. It might be wrong. It might not be possible to apply Moore’s Law in such a way to a “physical product” such as an auto.

Traditionally, Moore’s Law has been disruptive mostly to businesses whose “product” is virtual, or can be made virtual (content, transactions). Not to the same extent, but significantly, Moore’s Law has lead to major cost reduction for computing products (all machines that are computational intense).

But the line of reasoning at least suggests ways to think about what one’s business might look like if you make the “wild” assumption (as did Bill Gates and Reed Hastings) that a key input to your business--though prohibitively expensive and underpowered at the moment--eventually will become so affordable that they are not constraints to your planned business.

It might seem crazy to assume that a large physical product such as an automobile could actually become "free." There are lots of caveats, most importantly that the manufacturing of the product will not become "costless." 

But the business model? That is where some big leaps could happen. 

Why Content Prices Rarely, If Ever, Drop

Telcos getting into the media business, despite the significant investments to do so, might enjoy the extreme differences between retail pricing dynamics seen in media as compared to communications. To wit, prices in the media world rarely, if ever, drop. In large measure, the reason is simply that costs in the media business are driven by content creation, and content creation is affected only marginally by Moore's Law, which operates to push down retail prices in the communications and computing space. There are, in short, some businesses that simply are resistant to operating cost reductions propelled by normal advances in chip technology, and the rapidly declining costs of processing and storage that result from such advances.

Not that media is the only endeavor that is not seriously aided by Moore's Law. To be sure, content creation is supported by Moore's Law. It's just that such costs are a small fraction of the total cost of producing content good enough to create an advertising, subscription or on-demand business model. Education is another business whose costs are marginally affected by Moore's Law, because production of the service ("teaching," for example)tends not to be scalable. To add another couple of classes at a college, one pretty much has to hire another teacher. Sure, you can grow class size, but at some point the "buyer" logically assumes that "quality" is destroyed as the scale increases. That's why small graduate seminars are generally considered "higher quality" than undergraduate "101" courses. We can argue about whether this is really a measure of quality or not, but the fact remains that most buyers of higher education seem to buy into the notion.

Content production tends to operate in much the same way. Digital special effects can apply Moore's Law in very compelling ways. But digital effects don't seem capable of replacing the very analog and non-scaling efforts of writers, directors, actors and producers, simply because the "product" is so wildly dependent to the particular skill some people seem to have in these areas. So, to an extent not seen in communications, where Moore's Law attacks the cost structure of a key input, digital technologies do not aid us as much in the creation of media products. Again, one can argue about how user-generated content might affect the model.

But experience suggests that we will see the same sort of "quality filtering" emerge in virtually all user-generated content as well. Most of it will not be broadly appealing, even in the niches for which it is created, for all sorts of reasons, just as the vast majority of "professionally produced" content these days, and the huge number of projects that never are produced or distributed widely, are filtered as well.

The upshot is that video services will not materially be subject to Moore's Law, and ever-decreasing retail prices. Producers and distributors are going to love that aspect of the business.

50th Anniversary of Moore's Law (Which Shockingly Applies to Internet Access Bandwidth)

April 19, 2015 is the 50th anniversary of the publication of an article by Gordon Moore about chip densities that later became what we call “Moore's Law.”

Roughly, the principle has been that chip densities double about every 18 months to 24 months. That has meant the cost of any fixed amount of computing or storage declines by roughly half over that same period of time.

Little noticed, by most aside from Reed Hastings, Netflix CEO, is that Internet access speeds follow a development curve nearly as robust as Moore’s Law does in the computing appliance and processor space.

In other words, access bandwidth nearly doubles about every 24 months.

Logic seemingly would suggest that is unlikely. Communications networks--especially those of the fixed variety--are expensive construction projects.

Such networks also are subject to local, state and national regulations, interest rates, economic conditions, changes in tax laws and changes in demand curves, all of which should slow rates of change, compared to rates of change for semiconductor products that follow Moore’s Law.

Shockingly, then, some studies have shown that even on twisted-pair copper telephone networks, speed doubled about every 1.9 years.

Other studies show similar results: some say an Edholm's Law shows that Internet access bandwidth does increase as Moore’s Law would predict.

That rate of increase of Internet access bandwidth is why some of us have been sure that consumer access bandwidths in the U.S. market, for example, would reach gigabit speeds, widely, by perhaps 2020.

That is a simple extrapolation of trends that have been in place for decades.

To reemphasize the point, between 1984 and 2013, fixed access network speeds have grown nearly as fast as Moore’s Law would suggest, as crazy as that sounds, knowing the physical nature of access networks, which are construction projects, not software apps.

Some might argue that mobile bandwidth will not scale as fast as fixed network bandwidth. Some of us believe that is wrong, and that mobile bandwidth has, an will, increase at the fixed network rates.

Consider that the coming fifth generation mobile network standard calls for 10 Gbps per end user. At that point, mobile networks will for the first time be functionally the equivalent of fixed networks, in terms of peak speed or average speed.

Still, the data is stubborn and clear: Internet access bandwidth has grown about 50 percent annually since 1984.