The Death of Distance.pdf

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Frances CairncrossofThe Economist

Harvard Business School Press

Boston, Massachusetts

The Death of Distance

How the Communications Revolution Will Change Our Lives


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Copyright 1997 Frances Cairncross

The Author hereby asserts her moral rights to be identified as the Author of the work.

First published in the United States by Harvard Business School Press, 1997. This edition by

arrangement with The Orion Publishing Group Limited.

First published in Great Britain byThe Orion Publishing Group Limited

Orion House

5 Upper St. Martins Lane

London WC2H 9EA, United Kingdom

Printed in the United States of America

01 00 99 98 97 5 4 3 2 1

Library of Congress Cataloging-in-Publication Data

Cairncross, Frances.

The death of distance : how the communications revolution will

change our lives / Frances Cairncross.

p. cm.

Includes bibliographical references and index.

ISBN 0-87584-806-0

1. Telecommunication. 2. Telecommunication--Social aspects.

3. Telecommunication--Forecasting. I. Title.

HE7631.C34 1997

303.4833--dc21 97-17612

CIP

The paper used in this publication meets the requirements of the American National Standard

for Permanence of Paper for Printed Library Materials Z39.49-1984.


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Preface vii

The Trendspotters Guide to New Communications xi

1 The Communications Revolution 1

2 The Telephone 27

3 The Television 59

4 The Internet 87

5 Commerce and Companies 119

6 Competition, Concentration, and Monopoly 155

7 Policing the Electronic World 179

8 The Economy 209

9 Society, Culture, and the Individual 233

10 Government and the Nation State 257

Notes 281

Index 295About the Author 303

v

Contents


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1

Ifthe miles separate you from those you love, take heart. On MothersDa y, when Americans make more long-distance calls than on any

other day of the year, MCI, the countrys second-largest long-distance

telephone company, likes to give its regular customers a treat: in 1995

and again in 1996, their calls to one another were free. In time, every

day will be Mothers Day, everywhere. It will be no more expensive to

telephone someone on the other side of the world than to talk to some-

one in the house across the street. In fact, it will be just like having

your mother next door.

The death of distance as a determinant of the cost of communi-

cating will probably be the single most important force shaping soci-

ety in the first half of the next century. Technological change has the

power to revolutionize the way people live, and this one will be no

e xception. It will alter, in ways that are only dimly imaginable, deci-

sions about where people work and what kind of work they do,concepts of national borders and sovereignty, and patterns of inter-

national trade. Its effects may well be as pervasive as those of the

discovery of electricity, which led in time to the creation of the sky-

scraper cities of Manhattan and Hong Kong and transformed labor

productivity in the home.

But the death of distance is only one of the astonishing changes tak-

ing place as communications and computers are combined in new

ways. Fiber-optic networks and digital compression will allow manyfamilies, sometime in the first decade of the next century, to receive a

personalized television channel that makes available tens of thou-

sands of films and programs. Networks are being developed that are

(a) like the telephone, switched so that they can be used by many

1

The Communications Revolution


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place called high school? Will the personalization of communications

go hand-in-hand with social fragmentation? Undoubtedly, govern-

ments will find that national legislation is no longer adequate to regu-late a global flow of information, even if some of that information is

criminal or subversive. Companies will become looser structures, held

together mainly by their cultures and their communications networks.

For individuals, the lines between work and leisure will grow less dis-

tinct. The design of the office and of the home will alter to accommo-

date the changing patterns of this communications-driven life.

For many people, this prospective new world is frightening. Change

is always unsettling, and we are now seeing the fastest technologicalchange the world has ever known. But at the heart of the communica-

tions revolution lies something that will, in the main, benefit human-

ity: global diffusion of knowledge. Information once available only to

the few will be available to the many, instantly and (in terms of distri-

bution costs) inexpensively.

As a result, new ideas will spread faster, leaping borders. Poor coun-

tries will have immediate access to information that was once restricted

to the industrial world and traveled only slowly, if at all, beyond it.

Entire electorates will learn things that once only a few bureaucrats

knew. Small companies will offer services that previously only giants

could provide. In all these ways, the communications revolution is pro-

foundly democratic and liberating, leveling the imbalance between

large and small, rich and poor. The death of distance, overall, should be

welcomed and enjoyed.

The Roots of Revolution. . . . .

It is easy to forget how recently the communications revolution began.

All three of todays fast-changing communications technologies have

existed for more than half a century: the telephone was invented in

1876; the first television transmission was in 1926; and the electroniccomputer was invented in the mid-1940s.3 For much of that time,

change has been slow, but, in each case, a revolution has taken place

since the late 1980s. In order to approach the future, we need first to

ask why the really big changes have been so recent and so far-reaching.

4 T he Death of Distanc e

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The telephone

Since the 1980s, the oldest of the three technologies has undergone twobig transformationsan astonishing increase in the carrying capacity

of much of the long-distance network and the development of mobility.

They result, in the first case, from the use of glass fibers to carry digital

signals, and, in the second, from the steep fall in the cost of computing

power.

For much of its existence, the telephone network has had the least

capacity for its most useful service: long-distance communication. A

cross-Atlantic telephone service existed early on: indeed, by the 1930s,J. Paul Getty could run his California oil empire by telephone from Euro-

pean hotels, in which he chose to live because their switchboard opera-

tors could make the connections he needed.4 But even in 1956, when the

first transatlantic telephone cable went on-line, it had capacity for only

eighty-nine simultaneous conversations between all of Europe and all of

North America.5 Walter Wriston, former chairman of Citibank, recalls

the way it felt to be an international banker in the 1950s and 1960s: It

could take a day or more to get a circuit. Once a connection was made,

people in the branch would stay on the phone reading books and news-

papers all day just to keep the line open until it was needed.6

Since the late 1980s, capacity on the main long-distance routes has

grown so fast that, by the start of 1996, there was an immense and

increasing glut, with only 30 to 35 percent of capacity in use.7 The main

reason for this breathtaking transformation was the development of

fiber-optic cables, made of glass so pure that a sheet seventy miles thickwould be as clear as a windowpane. The first transatlantic fiber-optic

cable, with capacity to carry nearly forty thousand conversations, went

on-line only in 1988. The cables that will be laid at the turn of the cen-

tury will carry more than three million conversations on a few strands

of fiber, each the width of a human hair.

Meanwhile, new cables are being laid; new satellites, which carry

telephone traffic on less popular routes, are due to be launched; and a

range of low-orbiting satellites may eventually carry international traf-fic between mobile telephones. In addition, new techniques are starting

to allow many more calls to travel on the same fiber. It is as though an

already rapidly expanding fleet of trucks could suddenly pack several

times as many products into the same amount of space as before.

T he Commu n ic a t io ns Rev ol ut io n 5

. . . . .


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nious technologies to compress signals will continue to push prices

down, until it costs no more to telephone from New York to London

than to the house next door.While capacity has been increasing, the telephone has become

mobile. Cellular communication, which dates back to the period imme-

diately following World War II, became commercially viable only in the

early 1980s, when the collapse in the cost of computing made it possi-

ble to provide the necessary processing power at a low enough cost.

Now, the mobile telephone may arguably be the most successful new

way of communicating that the world has ever seenalready, more

than one telephone subscription in seven is to a mobile service. Mobiletelephonys share will continue to rise: in 1996, it accounted for 47 per-

cent of all new telephone subscriptions.8 For conversations, people will

come to use mobile telephones almost exclusively.

They will be able to communicate from every corner of the globe: in

the course of 1996, two stranded climbers on Mount Everest used

mobile telephones to call their wives. One wife, two thousand miles

away in Hong Kong, was able to arrange her husbands rescue; the

other, sadly, could merely say a last farewell.9

The mobile telephone also allows better use of the most underused

chunk of time in many peoples lives: traveling time. People will use

their commuting time more fully, but other benefits may be even

greater: passengers can be checked in for flights during the bus ride to

the airport, for example, and maintenance staff can schedule visits

more effic ien tl y, knowing exactly when equipment in transit will

arrive. The mobile telephone thus raises productivity by using previ-ously idle time.

The television

At the end of the Second World War, a mere eight thousand homes

worldwide had a television set. By 1996, that number had risen to more

than 840 milliontwo-thirds of the worlds households.10 The basictechnology of television sets has not changed over those fifty years, but

the transmission of programs has been revolutionized by the develop-

ment of communications satellites. Now another revolutionin chan-

nel capacityhas begun.

T he Co mmu n ic a t io ns Rev ol utio n 7

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In fall 1963, people around the world witnessed for the first time an

important but distant political event as it was taking place. The 1962

launch of Telstar, the first private communications satellite, had madepossible the live global transmission of the funeral of President John F.

Kennedy.11 The psychological impact was huge: this unprecedented

new link among countries would change perceptions of the world, cre-

ating the sense that the worlds peoples belonged to a global, not

merely local or national, community.

The 1988 launch by PanAmSat of the first privately owned commercial

international (as opposed to domestic) satellite, constituted another

milestone, cutting the cost of transmitting live television material aroundthe world. As recently as the 1970s, more than half of all television news

was at least a day old. Today, almost all news is broadcast on the day it

occurs.12 Big eventsthe fall of the Berlin Wall, the Gulf War, the O. J.

Simpson trial verdictgo out to billions of viewers as they happen.

Until recently, most television viewers around the world have had

access to perhaps half a dozen television channels at mostand often

to only two or three. The main reason is purely physical: analogue tele-

vision signals are greedy users of spectrum. Only in the United States

and a handful of other countries, and mainly only since the 1980s, have

cable-television networksless constrained by the limits of spec-

trumbrought people real viewing choice.

Now choice is expanding with breathtaking speed. Toward the end of

the 1980s, communications satellites began to broadcast directly to a

small dish attached to peoples homes, thus inexpensively distributing

multichannel television. Suddenly, more viewers had more choice thanever before.

In the mid-1990s came another revolutionary change: broadcasters

began to transmit television in digital, not analogue, form, allowing the

signal to be compressed and, consequently, far more channels to be

transmitted, whether from satellite, through cable, or even over the air.

Like the long-distance parts of the telephone network, a service that

had been constrained by capacity shortage for most of its existence has

suddenly begun to build more capacity than it knows what to do with.The result will be a revolution in the nature of television. For those

who want it (most of us), the old passive medium will remain, a relax-

ing way to pass the evening after a day spent at work. But television

the business of transmitting moving pictureswill develop many more

8 T he Death of Dist anc e

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functions, including new roles in business. The finances of television

will also change, and in a way that many viewers will resent. The

scarcest thing in television is not transmission capacity, but desirableprograms, especially live programming. In the future, these will rarely

be available at no cost to viewers. Increasingly, viewers will pay directly

for what they most want to watch.

The networked computer

The newest of the three building blocks of the communications revolu-tion, the electronic computer, has evolved fastest. In 1943 Thomas Wat-

son, founder of IBM, thought that the world market had room for

about five computers.13 As recently as 1967, a state-of-the-art IBM,

costing $167,500, could hold a mere thirteen pages of text.14

Two key changes have altered this picture. First, computing power

has grown dramatically. As a result, the computer can be miniaturized

and has become a consumer durable, with computing power embedded

in everything from automobiles to childrens toys. The main processor

on Apollo 13 contained less computing power than does a modern

Ni ntendo games machine.15 Second, computers are increasingly con-

nected to each other. The Internet, essentially a means of connecting the

worlds computers, makes apparent the spectacular power of such net-

worked computers.

The increase in computing power has followed a principle known as

Moores Law, after Gordon Moore, co-founder of Intel, now theworlds leading maker of computer chips, the brains of the modern

c o mp u t e r. In 1965, Moore forecast that computing power would dou-

ble every eighteen months to two years. So it has done for three

decades, as engineers have found ways to squeeze ever more inte-

grated circuits of transistors onto chipssmall wafers of silicon. A 486

chip, standard in a computer bought around 1994, could perform up to

fif ty-four million numerical calculations per second. A Pentium chip,

the standard three years later, could perform up to two hundred mil-lion calculations per second. And Moores law continues to apply. By

2006, according to Intel forecasts, chips will be one thousand times as

powerful and will cost one-tenth as much as they did in 1996.1 6 (S e e

F igur e 1-3.)

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