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The Death of Distance: How the Communications Revolution Is Changing Our Lives - Distance Isn't What It Used To Be

5/14/2001
Though The Death of Distance 2.0 began as a simple update of the 1997 edition, it quickly became evident that a major renovation was in order to reflect the speed of technological change in Internet and wireless usage. Says Cairncross: "It soon became clear that so much of what had been prediction was now fact that a completely new text was needed."

The Death of Distance: How the Communications Revolution Is Changing Our Lives

Never has any new invention shot from obscurity to global fame in quite this way. In 1990, only a few academics had heard of the Internet. Even In 1997, when France's President Jacques Chirac opened his country's new national library and was shown a computer "mouse," he gazed at the curiosity in wonder. Yet by 2000, perhaps 385 million people around the world had acquired a new way to communicate, and a new global source on information on a giant scale. 1

In addition, the Internet has also created a host of new businesses (some of them evanescent) with exotic names such as Flyswat, Mambo, Egg, Google; an army of new millionaires (some of them temporary); a stock market boom (and bust); and, above all, the most concentrated burst of innovation the world has ever seen. Many of the astonishing torrent of ideas and business plans unleashed by the Internet will turn out to be junk. But others will transform communications, commerce, and companies. Never in history have so many entrepreneurs attempted, in so short a time, to develop uses for an innovation.

The Internet is thus a global laboratory, allowing individuals as well as the marketing departments of multinationals and academics in top universities to pioneer uses for communications technology. All sorts of experiments, carried out on the Internet, will feed through into other media, changing and developing them. The Internet thus functions as both a prototype and a testing ground for the future of communications. Watching its evolution, we can catch a glimpse of what lies ahead.

The Internet has benefited from the technological revolutions that have slashed the cost of delivering telephone calls and television programs and multiplied the capacity of both types of network. Unlike the telephone and television, however, the Internet has no established principal use. Instead, it has many uses, including carrying telephone calls and television programs. An open conduit, it is capable of transmitting anything that can be put into digital form.

It offers a peek at the communications future: a world in which transmitting information costs almost nothing, in which distance is irrelevant, and in which any amount of content is instantly accessible--but only a peek, for the Internet is merely a prototype for something more sophisticated. As uses for the Internet multiply, two issues matter. One is how to pay for it and the services it offers. The other is how it will be reached and where the main power to deliver services will reside. The next few years will show the extent to which the answers to these questions can emerge without diminishing the Internet's original exuberance. For the Internet to reach maturity, it must be as accessible to a grandmother as to a geek. It must combine the quality of service of the telephone with the fun of television, at prices that rival those of both. Above all, until people cease to be aware of it as something special and complicated, it will not have found its fortune…

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Why the Internet Matters

The Internet is, in one sense, merely an enormously efficient way to transport digital data around the world. In another, it is a laboratory for communications in the future. It has, however, three particularly important characteristics.

A global span

"There has never been a commercial technology like this in the history of the world, whereby from the minute you adopt it, it forces you to think and act globally," says Robert Hormats, deputy chairman of Goldman Sachs International. 26

This extraordinary quality will grow more important as the rest of the world starts to catch up with the United States. At the start of the new century, more than half the Internet's users were already outside the United States, but America still had by far the largest number of users as a share of regional population. This imbalance between America and the rest of the world means that the Internet's potential role as a global medium was barely apparent. The telephone still connects continents more effectively. But that will change. Thanks mainly to the convergence of the Internet and the mobile telephone, use outside the United States will soar in the coming decade.

Among the winners, developing countries will be especially important, for they will enjoy new freedoms: a way around overpriced international telephone and postal services, for instance, and a short-cut to information that may not be available locally, such as scientific articles and uncensored local news.

Once it has true global reach, the Internet may become the main platform for international contact. It provides a shop window in which a company can display its wares to a world market. It offers a chance for people from different countries to swap information and ideas. It provides the means for people who are cut off from the world by censors and oppressive governments to tell their stories. No other innovation has ever had quite such earth-shrinking potential.

Quotation
For the Internet to reach maturity, it must be as accessible to a grandmother as to a geek.
Quotation
—Frances Cairncross

Convergence

The Internet will change electronic products of all kinds, from television and the telephone to games and cameras. In the case of the telephone, its most dramatic impact will be on rates. "I'm not sure what the Internet is good for," said Bill Gates during its earlier days, "but I don't know why you would want to be in the long-distance market with that thing out there." A number of companies offer telephone calls over the Internet and, while the sound quality is often no better than could be had from tying two cans together with a piece of string, the prices are low enough to drag down long-distance charges. In addition, the Internet provides a way to try out new kinds of service, such as the videophone (long predicted, finally affordable, thanks to the Webcam).

In the case of television, the Internet offers a bridge between the continuous flow of information (the television model) and the focused search for facts (the Web site model). The Internet will drive uses of radio and television in the work place, something that big broadcasters have never cared about.

Above all, the Internet will be integrated into other products. It will be part of the telephone service, part of the way a television works, part of a games console. It will connect things and people and animals and companies. People will stop thinking of the Internet as a separate entity and be aware only of the services it delivers, not of the network itself.

Innovation

Above all, the Internet has become the most powerful driver of innovation the world has seen. Because of its open, flexible protocol, thousands of companies, founded by the best-educated bunch of entrepreneurs ever to blitz a business, are making (and, periodically, losing) huge sums of money developing new ways to use it.

One result has been to change the structure of the communications industry, shifting the focus of innovation away from the old giants and toward these young hothouses. Another has been to drive forward communications technology at a formidable pace. Through the Internet, new products can be developed and launched relatively inexpensively, potential customers and investors can be targeted, and markets can be quickly identified and tested. No other mechanism provides such instant links between investors and their customers.

The host of Internet start-ups that are sprinkled around Silicon Valley, through San Francisco's North Beach, in Munich's periphery in Southern Germany, and in the Cambridge heartland in the East of England, form a vast R&D laboratory. They bet their future and their employees' share options on a single bright idea. Driven by ample supplies of venture capital and staffed by bright graduates or ex-employees of larger firms, a few will come with ideas that work. Often these will be snapped up by the bigger high-tech companies, such as Microsoft, Intel and AOL, which can roll out products swiftly to a mass market.

That, above all, is why the Internet matters. It makes the market system—since the collapse of communism the dominant method of allocating resources around the world—work better. Those parts of the world that embrace the Internet will find themselves better able to compete than those who lag behind.

Excerpted with permission from The Death of Distance: How the Communications Revolution Is Changing Our Lives, Harvard Business School Press, 2001.

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Frances Cairncross is a journalist with The Economist.

1. No standard definition exists of the number of Internet users. Like the number of telephone users, it is anybody's guess. At the end of 1999, the OECD calculates that there were 120 million Internet subscribers in the OECD countries. But one firm or family may have several users. In addition, frequency and type of use may vary. Estimates for developing countries are particularly unreliable. A study of America's 199 million adults (at www.thestandard.com) found that eighty-six million had used the Internet in the previous thirty days. Of those, forty-six million had used it from home only; twenty-one million from work only, and the rest from more than one location.

The Computer Industry Almanac estimates that there were 259 million users worldwide at the end of 1999 and forecast 374 million at the end of 2000. NUA, an Irish consultancy, produces a global estimate from an amalgamation of other estimates. At the end of June 2000, this produced a total of 330 million. This book sticks, for the sake of simplicity, with an estimate by the International Telecommunications Union (ITU) of 385 million users in 2000.

26. Quoted by Thomas L. Friedman in "Internet Entrepreneur: Act Small, Think Global," International Herald Tribune, 10 March 1999.