Published January 10, 2000
This year of 2001, the Internet will become the computer. Distributed and Grid Computing are Venture Capitalists’ expectations for using the Internet to increase processing power and storage. Countless computers linked together is said to simplify the users drudgery and amplify their functionality. It’s called Peer to Peer (P2P).
Idle computing time is harnessed and large files like music can be stored in pieces on hundred of separate computers on the network across the globe. Industries requiring massive data crunching, like weather forecasting, feature film animation, protein modeling, and genome-related research, benefit from this. Many companies in this way avert the need to buy their own in-house supercomputer.
Distributed information across the Internet is the logical next step. Traditional networking processes are about to change. Instead of wrestling with large hunks of data in a serial way, the same data is distributed in small segments to be manipulated in parallel by hundreds or thousands of computers and then the results returned and reassembled. New software companies are addressing the challenges enabling this to happen.
Intellectual property is increasingly difficult to protect on the Internet. Illegal swapping of files is regarded as piracy and lawsuits for copyright violations will intensify against the most significant violators. AOL’s proposed merger with Time Warner typifies the gathering of the wagons to mutually protect the content and the provider. Layering encryption may help slow enterprise software and operating systems file swapping. But the costs for protecting a single song are prohibitively high to implement.
Sharing of files is unstoppable, and thus unenforceable. It is not illegal to copy for personal use provided the copy is not sold. Few public companies will risk the massive public outcry from heavy-handed legal reaction or deliberate blocking. Decentralized open-source processes like FreeNet and Gnutella distribute their files from everywhere on the Net, so that files cannot be blocked.
We should remember that the structure of the Internet is designed this way, to treat censorship as an error and route around it. The rest of the world continues to think and operate from the central-control model. The coexistence of the real world and cyberspace is a dichotomy of dissimilar interests.
Although the music industry claims to have lost $350M in 18 months due to songs freely acquired over the Internet, they are shy to admit their own figures that reveal CD sales have increased by $509M in just the first half of year 2000. Critics argue that there is a beneficial synergy at work.
Venture Capitalists (VC) in 2001 will constrict their prior flamboyant investments in dot-coms. Investors are expected to redirect their cash to only very meritorious projects. The former collective arrogance, self-promotion and inflated sense of self-worth will be replaced by prudence.
Venture One reports that 725 VC firms operate in America, up 43% in the last 3 years. Annual returns for VCs of 100-400% were common in 2000. A return to the respectable earnings of a decade earlier (about 25%/year) is anticipated.
The Public Market of the 1790s consisted of brokers gathered round a Buttonwood Tree shouting their orders to one another. Today, electronic order books called Electronic Communications Networks (ECNs) are used for accuracy and speed. However, collusion among brokers for manipulation of the bid-ask spreads on stocks have been uncovered by the Security and Exchange Commission.
The problem is that ECNs do not interact with each other. A proposal to consolidate the Nasdaq and NYSE would list competing buy-sell stock prices, reducing the unnatural spreads. The investing public would be ill-served, say the analysts, by such a consortium of brokers and traders owning the only book, the same folks who abused central power in the first place.
A wireless technology called Bluetooth has assembled 2,040 companies, in the last 30 months, devoting 300 engineers at $50M a year. They are developing remote medical monitoring devices and network interconnections replacing cable.
The originators, Ericsson, IBM, Intel, Nokia and Toshiba, joined to create a transmission standard for data. The unusual name is in honor of Harald Bluetooth, a 10th Century Viking king who united Nordic nations under one religion.
Bluetooth is competing with an existing wireless protocol called 802.11. Both are used as wireless local area networks for interconnection of computers and other instruments. They also share the same segment of the unregulated 2.4GHz radio frequency band, so these devices will interfere with each other. Allied Business Intelligence estimates 2.2 million new 802.11-devices and 152 million Bluetooth-devices will be manufactured this year.
The Bluetooth advantage is mainly cost and low battery power consumption for cellphones and handheld Personal Data Assistants (PDAs). The 802.11 wireless will transmit data 100 times further and 15 times faster. The two methods of data transmission may prove to be complementary.
See part 2 next week of Trends 2001.